Title 45. Trade and Commerce.

Chapter 01. General Provisions.

Article 1. Short Title, Construction, Application, and Subject Matter of Act.


Secs. 45.01.101 — 45.01.109. Short title, construction, application, and subject matter of act. [Repealed, § 113 ch 44 SLA 2009.]
Sec. 45.01.111. Short titles.
 (a) AS 45.01 — AS 45.08, AS 45.12, AS 45.14, and AS 45.29 may be cited as the Uniform Commercial Code.

 (b) This chapter may be cited as the Uniform Commercial Code — General Provisions.




Sec. 45.01.112. Scope of chapter.
This chapter applies to a transaction to the extent that the transaction is governed by another chapter of the code.


Sec. 45.01.113. Construction of code to promote its purposes and policies; applicability of supplemental principles of law.
 (a) The code shall be liberally construed and applied to promote the code’s underlying purposes and policies, which are to
     (1) simplify, clarify, and modernize the law governing commercial transactions;

     (2) permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and

     (3) make uniform the law among the various jurisdictions.

 (b) Unless displaced by the particular provisions of the 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 the code’s provisions.




Sec. 45.01.114. Construction against implied repeal.
The code being a general act intended as a unified coverage of its subject matter, no part of it may be considered to be impliedly repealed by subsequent legislation if that construction can reasonably be avoided.


Sec. 45.01.115. Severability.
If a provision or clause of the code or application of the clause or provision to a person or circumstances is held invalid, the invalidity does not affect other provisions or applications of the code that can be given effect without the invalid provision or application, and, to this end, the provisions of the code are severable.


Sec. 45.01.116. Use of singular and plural; gender.
In the code, the rules of construction in AS 01.10.050(b) and (c) apply, unless the statutory context otherwise requires.


Sec. 45.01.117. Section captions.
Notwithstanding AS 01.05.006 and 01.05.031(b)(2), section captions are part of the code.


Sec. 45.01.118. Relation to Electronic Signatures in Global and National Commerce Act.
The code modifies, limits, and supersedes 15 U.S.C. 7001 — 7031 (Electronic Signatures in Global and National Commerce Act) but does not modify, limit, or supersede 15 U.S.C. 7001(c) or authorize electronic delivery of a notice described in 15 U.S.C. 7003(b).


Article 2. General Definitions and Principles of Interpretation.


Secs. 45.01.201 — 45.01.208. General definitions and principles of interpretation. [Repealed, § 113 ch 44 SLA 2009.]
Sec. 45.01.211. General definitions.
 (a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other chapters of the code that apply to particular chapters or articles of the code, have the meanings stated.

 (b) Subject to definitions contained in other chapters of the code that apply to particular chapters or articles of the code,
     (1) “action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and another 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 AS 45.01.303;

     (4) “bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company;

     (5) “bearer” means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or endorsed in blank;

     (6) “bill of lading” means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods; “bill of lading” does not include a warehouse receipt;

     (7) “branch” includes a separately incorporated foreign branch of a bank;

     (8) “burden of establishing” a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence;

     (9) “buyer in ordinary course of business” means a person who 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 who 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 who takes possession of the goods or has a right to recover the goods from the seller under AS 45.02 may be a buyer in ordinary course of business; “buyer in ordinary course of business” does not include a person who acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt;

     (10) “code” means AS 45.01 — AS 45.08, AS 45.12, AS 45.14, and AS 45.29;

     (11) “conspicuous,” with reference to a term, means written, displayed, or presented in a way that 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; conspicuous terms include
          (A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and

          (B) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language;

     (12) “consumer” means an individual who enters into a transaction primarily for personal, family, or household purposes;

     (13) “contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties’ agreement as determined by the code as supplemented by other applicable laws;

     (14) “creditor” includes a general creditor, a secured creditor, a lien creditor, and a 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;

     (15) “defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim;

     (16) “delivery,” with respect to an electronic document of title, means voluntary transfer of control and, with respect to an instrument, a tangible document of title, or chattel paper, means voluntary transfer of possession;

     (17) “document of title”
          (A) means a record that
               (i) in the regular course of business or financing, is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers; and

               (ii) purports to be issued by or addressed to a bailee and to cover goods in the bailee’s possession that are either identified or are fungible portions of an identified mass;

          (B) includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods;

     (18) “electronic document of title” means a document of title evidenced by a record consisting of information stored in an electronic medium;

     (19) “fault” means a default, breach, or wrongful act or omission;

     (20) “fungible goods” means goods
          (A) of which a unit, by nature or usage of trade, is the equivalent of another like unit; or

          (B) that, by agreement, are treated as equivalent;

     (21) “genuine” means free of forgery or counterfeiting;

     (22) “good faith,” except as otherwise provided in AS 45.05, means honesty in fact and the observance of reasonable commercial standards of fair dealing;

     (23) “holder” means the person in
          (A) possession of a negotiable instrument that is payable either to bearer or to an identified person who is the person in possession;

          (B) possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or

          (C) control of a negotiable electronic document of title;

     (24) “insolvency proceeding” includes an assignment for the benefit of creditors or another proceeding intended to liquidate or rehabilitate the estate of the person involved;

     (25) “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;

     (26) “money” means a medium of exchange currently authorized or adopted by a domestic or foreign government, and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries;

     (27) “organization” means a person other than an individual;

     (28) “party,” as distinguished from “third party,” means a person who has engaged in a transaction or made an agreement subject to the code;

     (29) “pawnbroker” has the meaning given in AS 08.76.590;

     (30) “person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or another legal or commercial entity;

     (31) “present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain
          (A) by use of an interest rate that is specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into; or

          (B) if an interest rate is not determined under (A) of this paragraph, by use of a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into;

     (32) “purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or another voluntary transaction creating an interest in property;

     (33) “purchaser” means a person who takes by purchase;

     (34) “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;

     (35) “remedy” means a remedial right to which an aggrieved party is entitled with or without resort to a tribunal;

     (36) “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;

     (37) “right” includes remedy;

     (38) “security interest” means an interest in personal property or fixtures that secures payment or performance of an obligation; “security interest” includes an 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 AS 45.29; “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 AS 45.02.401, but a buyer may also acquire a security interest by complying with AS 45.29; except as otherwise provided in AS 45.02.505, the right of a seller or lessor of goods under AS 45.02 or AS 45.12 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 AS 45.29; the retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under AS 45.02.401 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 under AS 45.01.213;

     (39) “send,” in connection with a writing, record, or notice, means
          (A) to deposit in the mail or deliver for transmission by a 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 on the instrument or otherwise agreed on, or, if an address is not specified on the instrument or otherwise agreed on, to an address reasonable under the circumstances; or

          (B) in another way to cause to be received a record or notice within the time it would have arrived if properly sent;

     (40) “signed” includes using a symbol executed or adopted with present intention to adopt or accept a writing;

     (41) “state” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or a territory or insular possession subject to the jurisdiction of the United States;

     (42) “surety” includes a guarantor or other secondary obligor;

     (43) “tangible document of title” means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium;

     (44) “term” means a portion of an agreement that relates to a particular matter;

     (45) “unauthorized signature” means a signature made without actual, implied, or apparent authority, and includes a forgery;

     (46) “warehouse receipt” means a document of title issued by a warehouse; in this paragraph, “warehouse” has the meaning given in AS 45.07.112(a);

     (47) “writing” includes printing, typewriting, or another intentional reduction to tangible form; “written” has a corresponding meaning.




Sec. 45.01.212. Notice; knowledge.
 (a) Subject to (f) of this section, a person has “notice” of a fact if the person
     (1) has actual knowledge of it;

     (2) has received a notice or notification of it; or

     (3) from all the facts and circumstances known to the person at the time in question, has reason to know that it exists.

 (b) “Knowledge” means actual knowledge. “Knows” has a corresponding meaning.

 (c) “Discover,” “learn,” or words of similar import refer to knowledge rather than to reason to know.

 (d) A person “notifies” or “gives” a notice or notification to another person by taking those steps that 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 (f) of this section, a person “receives” a notice or notification when it
     (1) comes to that person’s attention; or

     (2) 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 that type of communication.

 (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.




Sec. 45.01.213. Lease distinguished from security interest.
 (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 the
     (1) original term of the lease is equal to or greater than the remaining economic life of the goods;

     (2) 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) 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) lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration on compliance with the lease agreement.

 (c) A transaction in the form of a lease does not create a security interest merely because the
     (1) 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 greater than the fair market value of the goods at the time the lease is entered into;

     (2) lessee assumes risk of loss of the goods;

     (3) lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;

     (4) lessee has an option to renew the lease or to become the owner of the goods;

     (5) 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) lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.

 (d) Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if, when the option to
     (1) 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) 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.




Sec. 45.01.214. Value.
Except as otherwise provided in AS 45.03, AS 45.04, and AS 45.05, a person gives value for rights if the person acquires them
     (1) in return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;

     (2) as security for, or in total or partial satisfaction of, a preexisting claim;

     (3) by accepting delivery under a preexisting contract for purchase; or

     (4) in return for consideration sufficient to support a simple contract.




Sec. 45.01.215. Reasonable time; seasonableness.
 (a) Whether a time for taking an action required by the 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 on or, if no time is agreed on, at or within a reasonable time.




Sec. 45.01.216. Presumptions.
Whenever the 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 the nonexistence of the fact.


Article 3. Territorial Applicability and General Rules.


Sec. 45.01.301. Territorial applicability; parties’ power to choose applicable law.
 (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 of this state or of the other state or nation shall govern the parties’ rights and duties.

 (b) In the absence of an agreement effective under (a) of this section, and except as provided in (c) of this section, the code applies to transactions bearing an appropriate relation to this state.

 (c) If one of the following provisions of the code specifies the applicable law, that provision governs, and a contrary agreement is effective only to the extent permitted by the applicable law specified by that provision:
     (1) AS 45.02.402;

     (2) AS 45.04.102;

     (3) AS 45.05.116;

     (4) AS 45.08.110;

     (5) AS 45.12.105 and 45.12.106;

     (6) AS 45.14.507;

     (7) AS 45.29.301 — 45.29.307.




Sec. 45.01.302. Variation by agreement.
 (a) Except as otherwise provided in (b) of this section or elsewhere in the code, the effect of provisions of the code may be varied by agreement.

 (b) The obligations of good faith, diligence, reasonableness, and care prescribed by the code may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever the code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.

 (c) The presence in certain provisions of the 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.




Sec. 45.01.303. Course of performance, course of dealing, and usage of trade.
 (a) A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if the
     (1) agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and

     (2) 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 the parties’ expressions and other conduct.

 (c) A “usage of trade” is a practice or method of dealing having the 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 a usage of trade must be proved as facts. If it is established that a usage of trade 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 used as indicated in the previous sentence as to that part of the performance.

 (e) Except as otherwise provided in (f) of this section, the express terms of an agreement and an applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If this construction is unreasonable,
     (1) express terms prevail over course of performance, course of dealing, and usage of trade;

     (2) course of performance prevails over course of dealing and usage of trade; and

     (3) course of dealing prevails over usage of trade.

 (f) Subject to AS 45.02.209, a course of performance is relevant to show a waiver or modification of a 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.




Sec. 45.01.304. Obligation of good faith.
Every contract or duty within the code imposes an obligation of good faith in its performance and enforcement.


Sec. 45.01.305. Remedies to be liberally administered.
 (a) The remedies provided by the code must 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 the code or by other rule of law.

 (b) A right or obligation declared by the code is enforceable by action unless the provision declaring it specifies a different and limited effect.




Sec. 45.01.306. Waiver or renunciation of claim or right after breach.
A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.


Sec. 45.01.307. 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 another document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.


Sec. 45.01.308. Performance or acceptance under reservation of rights.
 (a) 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 by the performance, promise, or assent prejudice the rights reserved. The words, “without prejudice,” “under protest,” or the like are sufficient.

 (b) The provisions of (a) of this section do not apply to an accord and satisfaction.




Sec. 45.01.309. Option to accelerate at will.
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 make the acceleration or requirement 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 whom the power has been exercised.


Sec. 45.01.310. Subordinated obligations.
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.


Article 1. Short Title, General Construction, and Subject Matter.


Chapter 02. Sales.

Sec. 45.02.101. Short title.
This chapter shall be known and may be cited as Uniform Commercial Code — Sales.


Sec. 45.02.102. Scope; certain security and other transactions excluded.
Unless the context otherwise requires, this chapter applies to transactions in goods; it does not apply to a transaction that, although in the form of an unconditional contract to sell or present sale, is intended to operate only as a security transaction, nor does this chapter impair or repeal any statute regulating sales to consumers, farmers, or other specified class of buyers.


Sec. 45.02.103. Definitions and index of definitions.
 (a) In this chapter, unless the context otherwise requires,
     (1) “buyer” means a person who buys or contracts to buy goods;

     (2) [Repealed, § 113 ch 44 SLA 2009.]
     (3) “receipt” of goods means taking physical possession of them;

     (4) “seller” means a person who sells or contracts to sell goods.

 (b) Other definitions applying to this chapter and the sections in which they appear are
     (1) “acceptance” (AS 45.02.606);

     (2) “banker’s credit” (AS 45.02.325);

     (3) “between merchants” (AS 45.02.104);

     (4) “cancellation” (AS 45.02.106(d));

     (5) “commercial unit” (AS 45.02.105);

     (6) “confirmed credit” (AS 45.02.325);

     (7) “conforming to contract” (AS 45.02.106);

     (8) “contract for sale” (AS 45.02.106);

     (9) “cover” (AS 45.02.712);

     (10) “entrusting” (AS 45.02.403);

     (11) “financing agency” (AS 45.02.104);

     (12) “future goods” (AS 45.02.105);

     (13) “goods” (AS 45.02.105);

     (14) “identification” (AS 45.02.501);

     (15) “installment contract” (AS 45.02.612);

     (16) “letter of credit” (AS 45.02.325);

     (17) “lot” (AS 45.02.105);

     (18) “merchant” (AS 45.02.104);

     (19) “overseas” (AS 45.02.323);

     (20) “person in position of seller” (AS 45.02.707);

     (21) “present sale” (AS 45.02.106);

     (22) “sale” (AS 45.02.106);

     (23) “sale or return” (AS 45.02.326);

     (24) “termination” (AS 45.02.106).

 (c) The following definitions in other chapters apply to this chapter:
     (1) “check” (AS 45.03.104);

     (2) “consignee” (AS 45.07.112);

     (3) “consignor” (AS 45.07.112);

     (4) “consumer goods” (AS 45.29.102);

     (5) “control” (AS 45.07.116);

     (6) “dishonor” (AS 45.03.502);

     (7) “draft” (AS 45.03.104).

 (d) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.02.104. Definitions: “merchant”; “between merchants”; “financing agency.”
 (a) “Merchant” means a person who deals in goods of the kind or otherwise by occupation holds oneself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom this knowledge or skill may be attributed by the person’s employment of an agent or broker or other intermediary who by occupation holds oneself out as having this knowledge or skill.

 (b) “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 (AS 45.02.707).

 (c) “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.




Sec. 45.02.105. Definitions: transferability; “goods”; “future” goods; “lot”; “commercial unit.”
 (a) “Goods” means all things, including specially manufactured goods, that 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 (AS 45.08), 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 (AS 45.02.107).

 (b) Goods must be both existing and identified before an interest in them can pass. Goods that are not both existing and identified are “future” goods. A purported present sale of future goods or of an interest in future goods operates as a contract to sell.

 (c) There may be a sale of a part interest in existing identified goods.

 (d) 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 the bulk or a quantity of the bulk 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.

 (e) “Lot” means a parcel or a single article that is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.

 (f) “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.




Sec. 45.02.106. Definitions: “contract”; “agreement”; “contract for sale”; “sale”; “present sale”; “conforming” to contract; “termination”; “cancellation.”
 (a) In this chapter, unless the context otherwise requires, “contract” and “agreement” are limited to those relating to the present or future sale of goods. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing of title from the seller to the buyer for a price (AS 45.02.401). A “present sale” means a sale that is accomplished by the making of the contract.

 (b) 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.

 (c) “Termination” occurs when either party, under a power created by agreement or law, puts an end to the contract otherwise than for its breach. On “termination” all obligations that are still executory on both sides are discharged, but a right based on a prior breach of performance survives.

 (d) “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 an unperformed balance.




Sec. 45.02.107. Goods to be severed from realty; recording.
 (a) A contract for the sale of minerals or the like, including oil and gas, or a structure or its materials to be removed from realty is a contract for the sale of goods within this chapter if they are to be severed by the seller, but until severance a purported present sale that is not effective as a transfer of an interest in land is effective only as a contract to sell.

 (b) 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 to them but not described in (a) of this section or of timber to be cut is a contract for the sale of goods within this chapter, whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.

 (c) This section is subject to third party rights provided by the law relating to realty records. The contract for sale may be executed and recorded as a document transferring an interest in land. It then constitutes notice to third parties of the buyer’s rights under the contract for sale.




Article 2. Form, Formation, and Readjustment of Contract.


Sec. 45.02.201. Formal requirements; statute of frauds.
 (a) Except as otherwise provided in this section a contract for the sale of goods, including the sale or transfer of a boat or vessel, for the price of $500 or more is not enforceable by action or defense unless there is a writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by an authorized agent or broker of that party. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subsection beyond the quantity of goods shown in such writing.

 (b) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of (a) of this section against the party unless written notice of objection to its contents is given within 10 days after it is received.

 (c) A contract that does not satisfy the requirements of (a) of this section but that is valid in other respects is enforceable
     (1) 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 that reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement;

     (2) if the party against whom enforcement is sought admits in a pleading, in testimony, or 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

     (3) with respect to goods for which payment has been made and accepted or that have been received and accepted (AS 45.02.606).




Sec. 45.02.202. Final written expression; parol or extrinsic evidence.
Terms with respect to which the confirmatory memoranda of the parties agree, or that are otherwise set out in a writing intended by the parties as a final expression of their agreement with respect to the terms included in the writing, may not be contradicted by evidence of a prior agreement or of a contemporaneous oral agreement, but may be explained or supplemented
     (1) by course of performance, course of dealing, or usage of trade (AS 45.01.303); and

     (2) by evidence of consistent additional terms unless the court finds the writing was intended also as a complete and exclusive statement of the terms of the agreement.




Sec. 45.02.203. Seals inoperative.
The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not make the writing a sealed instrument and the law with respect to sealed instruments does not apply to the contract or offer.


Sec. 45.02.204. Formation in general.
 (a) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of the contract.

 (b) An agreement sufficient to be a contract for sale may be found even though the moment of its making is undetermined.

 (c) Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.




Sec. 45.02.205. Firm offers.
An offer by a merchant to buy or sell goods in a signed writing that 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 the period or irrevocability exceed three months. A term of assurance on a form supplied by the offeree must be separately signed by the offeror.


Sec. 45.02.206. Offer and acceptance in formation of contract.
 (a) Unless otherwise unambiguously indicated by the language or circumstances
     (1) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;

     (2) 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 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.

 (b) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.




Sec. 45.02.207. Additional terms in acceptance or confirmation.
 (a) A definite and seasonable expression of acceptance or a written confirmation that 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.

 (b) The additional terms are to be construed as proposals for addition to the contract. Between merchants these terms become part of the contract unless
     (1) the offer expressly limits acceptance to the terms of the offer;

     (2) they materially alter it; or

     (3) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

 (c) Conduct by both parties that 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 this case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with supplementary terms incorporated under other provisions of the code.




Sec. 45.02.208. Course of performance or practical construction. [Repealed, § 113 ch 44 SLA 2009.]
Sec. 45.02.209. Modification, rescission, and waiver.
 (a) An agreement modifying a contract within this chapter needs no consideration to be binding.

 (b) A signed agreement that excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

 (c) The requirements of the statute of frauds section (AS 45.02.201) must be satisfied if the contract as modified is within its provision.

 (d) Although an attempt at modification or rescission does not satisfy the requirements of (b) or (c) of this section it can operate as a waiver.

 (e) 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.




Sec. 45.02.210. Delegation of performance; assignment of rights.
 (a) A party may perform the party’s duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having the original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of a duty to perform or a liability for breach.

 (b) 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, increase materially the burden or risk imposed on the other party by the contract, or impair materially the 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 the entire obligation can be assigned despite agreement otherwise.

 (c) 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 (b) of this section unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the seller; even in that event, the creation, attachment, perfection, and enforcement of the security interest remain effective, but
     (1) 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

     (2) 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.

 (d) 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.

 (e) An assignment of “the contract” or “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 the assignee to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.

 (f) The other party may treat an assignment that delegates performance as creating reasonable grounds for insecurity and may, without prejudice to the party’s rights against the assignor, demand assurances from the assignee (AS 45.02.609).




Article 3. General Obligation and Construction of Contract.


Sec. 45.02.301. General obligations of parties.
The obligation of the seller is to transfer and deliver, and that of the buyer to accept and pay, in accordance with the contract.


Sec. 45.02.302. Unconscionable contract or clause.
 (a) If the court as a matter of law finds the contract or a clause of the contract was unconscionable at the time it was made, the court may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or so limit the application of an unconscionable clause as to avoid an unconscionable result.

 (b) If it is claimed or appears to the court that the contract or any clause of the contract may be unconscionable, the parties shall be given a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.




Sec. 45.02.303. Allocation or division of risks.
Where this chapter allocates a risk or a burden as between the parties “unless otherwise agreed,” the agreement may not only shift the allocation but may also divide the risk or burden.


Sec. 45.02.304. Price payable in money, goods, realty, or otherwise.
 (a) 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 that the party is to transfer.

 (b) Even though all or part of the price is payable in an interest in realty, the transfer of the goods and the seller’s obligations with reference to them are subject to this chapter but not the transfer of the interest in realty or the transferor’s obligations in connection with the transfer of the real interest.




Sec. 45.02.305. Open price term.
 (a) The parties if they so intend can conclude a contract for sale even though the price is not settled. In this case the price is a reasonable price at the time for delivery if
     (1) nothing is said as to price;

     (2) the price is left to be agreed by the parties and they fail to agree; or

     (3) the price is to be fixed in terms of an agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.

 (b) A price to be fixed by the seller or by the buyer means a price for the party to fix in good faith.

 (c) If a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party, the other party has the option to treat the contract as cancelled or fix a reasonable price.

 (d) If, however, the parties intend not to be bound unless the price is fixed or agreed and it is not fixed or agreed, there is no contract. In this case the buyer must return 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.




Sec. 45.02.306. Output, requirements, and exclusive dealings.
 (a) A term that 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 a stated estimate or, in the absence of a stated estimate, to a normal or otherwise comparable prior output or requirements may be tendered or demanded.

 (b) 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.




Sec. 45.02.307. Delivery in single lot or several lots.
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 this 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.


Sec. 45.02.308. Absence of specified place for delivery.
Unless otherwise agreed
     (1) the place for delivery of goods is the seller’s place of business or if the seller has none the seller’s residence; but

     (2) in a contract for sale of identified goods that 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

     (3) documents of title may be delivered through customary banking channels.




Sec. 45.02.309. Absence of specific time provisions; notice of termination.
 (a) The time for shipment or delivery or any other action under a contract if not provided in this chapter or agreed upon is a reasonable time.

 (b) If 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.

 (c) 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. An agreement dispensing with notification is invalid if its operation would be unconscionable.




Sec. 45.02.310. Open time for payment or running of credit; authority to ship under reservation.
Unless otherwise agreed,
     (1) 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;

     (2) if the seller is authorized to send the goods, the seller 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 inspection is inconsistent with the terms of the contract (AS 45.02.513);

     (3) if delivery is authorized and made by way of documents of title other than by (2) of this section, then payment is due, regardless of where the goods are to be received, at the time
          (A) and place at which the buyer is to receive delivery of the tangible documents; or

          (B) the buyer is to receive delivery of the electronic documents and at the seller’s place of business or, if the seller does not have a place of business, the seller’s residence; and

     (4) if 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 correspondingly delays the starting of the credit period.




Sec. 45.02.311. Options and cooperation respecting performance.
 (a) An agreement for sale that is otherwise sufficiently definite (AS 45.02.204(c)) 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. The specification must be made in good faith and within limits set by commercial reasonableness.

 (b) Unless otherwise agreed, specifications relating to assortment of the goods are at the buyer’s option and, except as otherwise provided in AS 45.02.319(a)(3) and (c), specifications or arrangements relating to shipment are at the seller’s option.

 (c) If the specification would materially affect the other party’s performance but is not seasonably made or if one party’s cooperation is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies
     (1) is excused for a resulting delay in the party’s own performance; and

     (2) may either proceed to perform in a reasonable manner or, after the time for a material part of the party’s own performance, treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.




Sec. 45.02.312. Warranty of title and against infringement; buyer’s obligation against infringement.
 (a) Subject to (b) of this section there is in a contract for sale a warranty by the seller that
     (1) the title conveyed shall be good, and its transfer rightful; and

     (2) the goods shall be delivered free from a security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.

 (b) A warranty under (a) of this section will be excluded or modified only by specific language or by circumstances that give the buyer reason to know that the person selling does not claim title in the seller or that the person is purporting to sell only such right or title as the person selling or a third person may have.

 (c) 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 a 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 that arises out of compliance with the specifications.




Sec. 45.02.313. Express warranties by affirmation, promise, description, sample.
 (a) Express warranties by the seller are created as follows:
     (1) an affirmation of fact or promise made by the seller to the buyer that 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;

     (2) a description of the goods that is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description;

     (3) a sample or model that 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.

 (b) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that the seller 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 of commendation of the goods does not create a warranty.




Sec. 45.02.314. Implied warranty: Merchantability; usage of trade.
 (a) Unless excluded or modified (AS 45.02.316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

 (b) Goods to be merchantable must at least
     (1) pass without objection in the trade under the contract description;

     (2) in the case of fungible goods, be of fair average quality within the description;

     (3) be fit for the ordinary purposes for which the goods are used;

     (4) run, within the variations permitted by the agreement, of even kind, quality, and quantity within each unit and among all units involved;

     (5) be adequately contained, packaged, and labeled as the agreement requires; and

     (6) conform to the promises or affirmations of fact made on the container or label.

 (c) Unless excluded or modified (AS 45.02.316), other implied warranties may arise from course of dealing or usage of trade.




Sec. 45.02.315. Implied warranty: Fitness for particular purpose.
If the seller at the time of contracting has reason to know a particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is, unless excluded or modified under AS 45.02.316, an implied warranty that the goods shall be fit for that purpose.


Sec. 45.02.316. Exclusion or modification of warranties.
 (a) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed where reasonable as consistent with each other; but, subject to the provisions on parol or extrinsic evidence (AS 45.02.202), negation or limitation is inoperative to the extent that such construction is unreasonable.

 (b) Subject to (c) of this section, to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify an implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face of this instrument.”

 (c) Notwithstanding (b) of this section,
     (1) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” “with all faults,” or other language that in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and

     (2) when the buyer, before entering into the contract, has examined the goods or the sample or model as fully as the buyer desired or has refused to examine the goods, there is no implied warranty with regard to defects that an examination ought in the circumstances to have revealed to the buyer; and

     (3) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

 (d) Remedies for breach of warranty can be limited in accordance with the provisions on liquidation or limitation of damages and on contractual modification of remedy (AS 45.02.718 and 45.02.719).

 (e) Implied warranties of merchantability and fitness are not applicable to a contract for the sale of human blood, blood plasma or other human tissue or organs from a blood bank or reservoir of tissue or organs. The blood, blood plasma, tissue, or organs may not, for the purposes of this chapter, be considered commodities subject to sale or barter, but shall be considered medical services.




Sec. 45.02.317. Cumulation and conflict of warranties express or implied.
Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if that construction is unreasonable the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply:
     (1) exact or technical specifications displace an inconsistent sample or model or general language of description;

     (2) a sample from an existing bulk displaces inconsistent general language of description;

     (3) an express warranty displaces an inconsistent implied warranty other than an implied warranty of fitness for a particular purpose.




Sec. 45.02.318. Third-party beneficiaries of warranties express or implied.
A seller’s warranty whether express or implied extends to a natural person who is in the family or household of the buyer or who is a guest in the buyer’s home if it is reasonable to expect that the person may use, consume, or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.


Sec. 45.02.319. F.O.B. and F.A.S. terms.
 (a) Unless otherwise agreed, the term F.O.B., which means “free on board”, at a named place, even though used only in connection with the stated price, is a delivery term under which,
     (1) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in AS 45.02.504 and bear the expense and risk of putting them into the possession of the carrier; or

     (2) when the term is F.O.B. the place of destination, the seller must, at the expense and risk of the seller, transport the goods to that place and there tender delivery of them in the manner provided in AS 45.02.503;

     (3) when under either (1) or (2) of this subsection the term is also F.O.B. vessel, car, or other vehicle, the seller must in addition, at the expense and risk of the seller, load the goods on board; if the term is F.O.B. vessel, the buyer must name the vessel and in an appropriate case the seller must comply with the provisions on the form of bill of lading (AS 45.02.323).

 (b) Unless otherwise agreed, the term F.A.S. vessel (which means “free alongside”) at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must
     (1) at the expense and risk of the seller deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and

     (2) obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.

 (c) Unless otherwise agreed, in a case falling within (a)(1) or (3) or (b) of this section, the buyer must seasonably give needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under AS 45.02.311. The seller also has the option to move the goods in a reasonable manner preparatory to delivery or shipment.

 (d) Under the term F.O.B. vessel or F.A.S., unless otherwise agreed, the buyer must make payment against tender of the required documents and the seller may not tender or the buyer demand delivery of the goods in substitution for the documents.




Sec. 45.02.320. C.I.F. and C. & F. terms.
 (a) The term C.I.F. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. The term C. & F. or C.F. means that the price so includes cost and freight to the named destination.

 (b) Unless otherwise agreed and even though used only in connection with the stated price and destination, the term C.I.F. destination or its equivalent requires the seller at the expense and risk of the seller to
     (1) put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination; and

     (2) load the goods and obtain a receipt from the carrier, which may be contained in the bill of lading, showing that the freight has been paid or provided for; and

     (3) obtain a policy or certificate of insurance, including war risk insurance, of a kind and on terms then current at the port of shipment in the usual amount, in the currency of the contract, shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern; but the seller may add to the price the amount of the premium for war risk insurance; and

     (4) prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; and

     (5) forward and tender with commercial promptness all the documents in due form and with the endorsement necessary to perfect the buyer’s rights.

 (c) Unless otherwise agreed, the term C. & F. or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a C.I.F. term except the obligation as to insurance.

 (d) Under the term C.I.F. or C. & F., unless otherwise agreed, the buyer must make payment against tender of the required documents and the seller may not tender or the buyer demand delivery of the goods in substitution for the documents.




Sec. 45.02.321. C.I.F. or C. & F.: “Net landed weights”; “payment on arrival”; warranty of conditions on arrival.
Under a contract containing a term C.I.F. or C. & F.,
     (1) if the price is based on or is to be adjusted according to “net landed weights,” “delivered weights,” “out turn” quantity or quality, or the like, unless otherwise agreed, the seller must reasonably estimate the price; the payment due on tender of the documents called for by the contract is the amount so estimated, but after final adjustment of the price a settlement must be made with commercial promptness;

     (2) an agreement described in (1) of this section, or a warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage, and the like in transportation, but has no effect on the place or time of identification to the contract for sale or delivery or on the passing of the risk of loss;

     (3) unless otherwise agreed, if the contract provides for payment on or after arrival of the goods, the seller must before payment allow such preliminary inspection as is feasible; but if the goods are lost, delivery of the documents and payment are due when the goods should have arrived.




Sec. 45.02.322. Delivery “ex-ship.”
 (a) Unless otherwise agreed, a term for delivery of goods “ex-ship”, which means from the carrying vessel, or in equivalent language is not restricted to a particular ship and requires delivery from a ship that has reached a place at the named port of destination where goods of the kind are usually discharged.

 (b) Under such a term, unless otherwise agreed,
     (1) the seller must discharge all liens arising out of the carriage and furnish the buyer with a direction that puts the carrier under a duty to deliver the goods; and

     (2) the risk of loss does not pass to the buyer until the goods leave the ship’s tackle or are otherwise properly unloaded.




Sec. 45.02.323. Form of bill of lading required in overseas shipment; “overseas.”
 (a) Where the contract contemplates overseas shipment and contains a term C.I.F. or C. & F. or F.O.B. vessel, the seller, unless otherwise agreed, must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. &. F., received for shipment.

 (b) Where, in a case within (a) of this section, a tangible bill of lading has been issued in a set of parts, unless otherwise agreed, if the documents are not to be sent from abroad, the buyer may demand tender of the full set; otherwise only one part of the bill of lading need be tendered. Even if the agreement expressly requires a full set,
     (1) due tender of a single part is acceptable within the provisions on cure of improper delivery (AS 45.02.508(a)); and

     (2) even though the full set is demanded, if the documents are sent from abroad, the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity that the buyer in good faith considers adequate.

 (c) A shipment by water or by air or a contract contemplating the shipment is “overseas” insofar as by usage of trade or agreement it is subject to the commercial, financing, or shipping practices characteristic of international deep water commerce.




Sec. 45.02.324. “No arrival, no sale” term.
Under a term “no arrival, no sale” or terms of like meaning, unless otherwise agreed,
     (1) the seller must properly ship conforming goods and if they arrive by any means the seller must tender them on arrival, but the seller assumes no obligation that the goods will arrive unless the seller has caused the nonarrival; and

     (2) if without fault of the seller the goods are in part lost or have so deteriorated as no longer to conform to the contract or arrive after the contract time, the buyer may proceed as if there had been casualty to identified goods (AS 45.02.613).




Sec. 45.02.325. “Letter of credit” term; “confirmed credit.”
 (a) Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.

 (b) The delivery to seller of a proper letter of credit suspends the buyer’s obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from the buyer.

 (c) Unless otherwise agreed, the term “letter of credit” or “banker’s credit” in a contract for sale means an irrevocable credit issued by a financing agency of good repute and, if the shipment is overseas, of good international repute. The term “confirmed credit” means that the credit must also carry the direct obligation of such an agency that does business in the seller’s financial market.




Sec. 45.02.326. Sale on approval and sale or return; rights of creditors.
 (a) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is
     (1) a “sale on approval” if the goods are delivered primarily for use; and

     (2) a “sale or return” if the goods are delivered primarily for resale.

 (b) Goods held on approval are not subject to the claims of the buyer’s creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer’s possession.

 (c) An “or return” term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section (AS 45.02.201), and as contradicting the sale aspect of the contract within the provisions on parol or extrinsic evidence (AS 45.02.202).

 (d) Whenever an artist delivers or causes to be delivered a work of fine art of the artist’s creation to an art dealer for the purpose of sale, or exhibition and sale to the public on a commission or fee or other basis of compensation, the work of fine art is not subject to the claims of the art dealer’s creditors. For the purposes of this subsection,
     (1) “art dealer” means a person other than a public auctioneer engaged in the business of selling works of fine art;

     (2) “artist” means the creator of a work of fine art;

     (3) “fine art” includes a painting, sculpture, drawing, photograph, or work of graphic art.




Sec. 45.02.327. Special incidents of sale on approval and sale or return.
 (a) Under a sale on approval, unless otherwise agreed,
     (1) although the goods are identified to the contract, the risk of loss and the title do not pass to the buyer until acceptance;

     (2) use of the goods consistent with the purpose of trial is not acceptance, but failure seasonably to notify the seller of election to return the goods is acceptance, and, if the goods conform to the contract, acceptance of any part is acceptance of the whole; and

     (3) after due notification of election to return, the return is at the seller’s risk and expense but a merchant buyer must follow reasonable instructions.

 (b) Under a sale or return, unless otherwise agreed,
     (1) the option to return extends to the whole or a commercial unit of the goods while in substantially their original condition, but must be exercised seasonably; and

     (2) the return is at the buyer’s risk and expense.




Sec. 45.02.328. Sale by auction.
 (a) In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.

 (b) A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid, the auctioneer has discretion to reopen the bidding or declare the goods sold under the bid on which the hammer was falling.

 (c) A sale by auction is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve, the auctioneer may withdraw the goods at any time until the auctioneer announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract a bid until the auctioneer’s announcement of completion of the sale, but a bidder’s retraction does not revive any previous bid.

 (d) If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for the bidding is reserved, the buyer has the option to avoid the sale or take the goods at the price of the last good faith bid before the completion of the sale. This subsection does not apply to a bid at a forced sale.




Sec. 45.02.350. Sale by door-to-door solicitation.
 (a) A contract for the purchase of goods or services in the amount of $10 or more from a person soliciting a door-to-door sale shall require, as a condition of taking effect, that the purchaser may revoke the offer to buy within five business days of entering into the contract, and that the seller, at the time of the sale, give the purchaser written notice of the right to revoke. Revocation is effective either upon the tender of the rejected goods to the seller or an agent of the seller, or upon the posting of a registered letter (marked Deliver to Addressee Only, Return Receipt) of rejection to the seller or an agent of the seller.

 (b) The cost of returning rejected goods shall be borne by the seller.

 (c) A “door-to-door sale” occurs when the seller, or a representative of the seller, personally solicits the sale and the purchaser’s agreement or offer to purchase is made at a place other than the place of business of the seller. The term “door-to-door sale” does not include a transaction
     (1) made under prior negotiations in the course of a visit by the buyer to a retail business establishment having a fixed permanent location where the goods are exhibited or the services are offered for sale on a continuing basis;

     (2) in which the buyer has initiated the contact and the goods or services are needed to meet a bona fide immediate personal emergency of the buyer;

     (3) conducted and consummated entirely by mail;

     (4) in which the buyer has initiated the contact and specifically requested the seller to visit the buyer’s home for the purpose of repairing or performing maintenance upon the buyer’s personal property; or

     (5) conducted at the purchaser’s place of business.

 (d) As used in (c) of this section, “personally” means in person or by telephone.




Article 4. Title, Creditors, and Good Faith Purchasers.


Sec. 45.02.401. Passing of title; reservation for security; limited application of this section.
Each provision of this chapter with regard to the rights, obligations, and remedies of the seller, the buyer, purchasers, or other third parties applies irrespective of title to the goods except where the provision refers to the title. Insofar as situations are not covered by the other provisions of this chapter and matters concerning title become material, the following rules apply:
     (1) title to goods cannot pass under a contract for sale before their identification to the contract (AS 45.02.501), and, unless otherwise explicitly agreed, the buyer acquires by their identification a special property as limited by the code; a retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest; subject to these provisions and to the provisions of AS 45.29, title to goods passes from the seller to the buyer in the manner and on the conditions explicitly agreed on by the parties;

     (2) unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes performance with reference to the physical delivery of the goods, despite a reservation of a security interest and even though a document of title is to be delivered at a different time or place; in particular and despite a reservation of a security interest by the bill of lading,
          (A) if the contract requires or authorizes the seller to send the goods to the buyer but does not require the seller to deliver them at destination, title passes to the buyer at the time and place of shipment; but

          (B) if the contract requires delivery at destination, title passes on tender there;

     (3) unless otherwise explicitly agreed, where delivery is to be made without moving the goods,
          (A) if the seller is to deliver a tangible document of title, title passes at the time and place the seller delivers the document, and, if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or

          (B) if the goods are, at the time of contracting, already identified and no documents of title are to be delivered, title passes at the time and place of contracting;

     (4) a rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller; this revesting occurs by operation of law and is not a “sale.”




Sec. 45.02.402. Rights of seller’s creditors against sold goods.
 (a) Except as provided in (b) and (c) of this section, rights of unsecured creditors of the seller with respect to goods that have been identified to a contract for sale are subject to the buyer’s rights to recover the goods under AS 45.02.502 and 45.02.716.

 (b) A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are located, except that retention of possession in good faith and current course of trade by a merchant seller for a commercially reasonable time after a sale or identification is not fraudulent.

 (c) Nothing in this chapter may be considered to impair the rights of creditors of the seller
     (1) under the provisions of AS 45.29; or

     (2) if identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a pre-existing claim for money, security, or the like and is made under circumstances that under any rule of law of the state where the goods are located would, apart from this chapter, constitute the transaction of a fraudulent transfer or voidable preference.




Sec. 45.02.403. Power to transfer; good faith purchase of goods; “entrusting.”
 (a) A purchaser of goods acquires all title that the transferor had or had power to transfer, except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase, the purchaser has such power even though
     (1) the transferor was deceived as to the identity of the purchaser;

     (2) the delivery was in exchange for a check that was later dishonored;

     (3) it was agreed that the transaction was to be a “cash sale”; or

     (4) the delivery was procured through fraud punishable as larcenous under the criminal law.

 (b) An entrusting of possession of goods to a merchant who deals in goods of that kind gives the merchant power to transfer all rights of the entruster to a buyer in ordinary course of business.

 (c) “Entrusting” includes a delivery and an acquiescence in retention of possession regardless of a condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor’s disposition of the goods is larcenous under the criminal law.

 (d) The rights of other purchasers of goods and of lien creditors are governed by AS 45.07 and AS 45.29.




Article 5. Performance.


Sec. 45.02.501. Insurable interest in goods; manner of identification of goods.
 (a) The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and the buyer has an option to return or reject them. Identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification occurs
     (1) when the contract is made if it is for the sale of goods already existing and identified;

     (2) if the contract is for the sale of future goods other than those described in (3) of this subsection, when goods are shipped, marked, or otherwise designated by the seller as goods to which the contract refers;

     (3) when the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within 12 months after contracting or for the sale of crops to be harvested within 12 months or the next normal harvest season after contracting, whichever is longer.

 (b) The seller retains an insurable interest in the goods as long as title to or a security interest in the goods remains in the seller and, if the identification is by the seller alone, the seller may, until default or insolvency or notification to the buyer that the identification is final, substitute other goods for those identified.

 (c) Nothing in this section impairs an insurable interest recognized under another statute or rule of law.




Sec. 45.02.502. Buyer’s right to goods on seller’s repudiation, failure to deliver, or insolvency.
 (a) Subject to (b) and (c) of this section and even though the goods have not been shipped, a buyer who has paid a part or all of the price of goods in which the buyer has a special property under the provisions of AS 45.02.501 may, on making and keeping good a tender of an unpaid portion of their price, recover them from the seller if
     (1) in the case of goods bought for personal, family, or household purposes, the seller repudiates or fails to deliver as required by the contract; or

     (2) in all cases, the seller becomes insolvent within 10 days after receipt of the first installment on their price.

 (b) The buyer’s right to recover the goods under (a)(1) of this section vests upon acquisition of a special property even if the seller had not then repudiated or failed to deliver.

 (c) If the identification creating the buyer’s special property has been made by the buyer, the buyer acquires the right to recover the goods only if they conform to the contract for sale.




Sec. 45.02.503. Manner of seller’s tender of delivery.
 (a) Tender of delivery requires that the seller put and hold conforming goods at the buyer’s disposition and give the buyer any notification reasonably necessary to enable the buyer to take delivery. The manner, time, and place for tender are determined by the agreement and this chapter, and, in particular,
     (1) tender must be at a reasonable hour and, if it is of goods, they must be kept available for the period reasonably necessary to enable the buyer to take possession; but

     (2) unless otherwise agreed, the buyer must furnish facilities reasonably suited to the receipt of the goods.

 (b) If the case is within AS 45.02.504 respecting shipment, tender requires that the seller comply with its provisions.

 (c) If the seller is required to deliver at a particular destination, tender requires that the seller comply with (a) of this section and also in an appropriate case tender documents as described in (d) and (e) of this section.

 (d) If goods are in the possession of a bailee and are to be delivered without being moved,
     (1) tender requires that the seller either tender a negotiable document of title covering the goods or procure acknowledgment by the bailee of the buyer’s right to possession of the goods; but

     (2) tender to the buyer of a nonnegotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and, except as otherwise provided in AS 45.29, receipt by the bailee of notification of the buyer’s rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of a failure by the bailee to honor the nonnegotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.

 (e) If the contract requires the seller to deliver documents,
     (1) the seller must tender all such documents in correct form except as provided in AS 45.02.323(b) with respect to bills of lading in a set; and

     (2) tender through customary banking channels is sufficient, and dishonor of a draft accompanying or associated with the documents constitutes nonacceptance or rejection.




Sec. 45.02.504. Shipment by seller.
 (a) If the seller is required or authorized to send the goods to the buyer and the contract does not require the seller to deliver them at a particular destination, then, unless otherwise agreed, the seller must
     (1) put the goods in the possession of such a carrier and make such a contract for their transportation as is reasonable, having regard to the nature of the goods and other circumstances of the case;

     (2) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and

     (3) promptly notify the buyer of the shipment.

 (b) Failure to notify the buyer under (a)(3) of this section or to make a proper contract under (a)(1) of this section is a ground for rejection only if material delay or loss ensues.




Sec. 45.02.505. Seller’s shipment under reservation.
 (a) If the seller has identified goods to the contract by or before shipment,
     (1) the seller’s procurement of a negotiable bill of lading to the seller’s order or otherwise reserves in the seller a security interest in the goods; the seller’s procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the seller’s expectation of transferring that interest to the person named;

     (2) a nonnegotiable bill of lading to the seller or the nominee of the seller reserves possession of the goods as security, but, except in a case of conditional delivery (AS 45.02.507(b)), a nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.

 (b) If shipment by the seller with reservation of a security interest is in violation of the contract for sale, it constitutes an improper contract for transportation within AS 45.02.504 but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the seller’s powers as a holder of a negotiable document of title.




Sec. 45.02.506. Rights of financing agency.
 (a) A financing agency by paying or purchasing for value a draft that relates to a shipment of goods acquires to the extent of the payment or purchase and in addition to its own rights under the draft and a document of title securing it any rights of the shipper in the goods including the right to stop delivery and the shipper’s right to have the draft honored by the buyer.

 (b) The right to reimbursement of a financing agency that has in good faith honored or purchased the draft under commitment to or authority from the buyer is not impaired by subsequent discovery of defects with reference to a relevant document that was apparently regular.




Sec. 45.02.507. Effect of seller’s tender; delivery on condition.
 (a) Tender of delivery is a condition to the buyer’s duty to accept the goods and, unless otherwise agreed, to the buyer’s duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.

 (b) If payment is due and demanded on the delivery to the buyer of goods or documents of title, the buyer’s right as against the seller to retain or dispose of them is conditional upon the buyer’s making the payment due.




Sec. 45.02.508. Cure by seller of improper tender or delivery; replacement.
 (a) If a tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of the intent of the seller to cure and may then, within the contract time, make a conforming delivery.

 (b) If the buyer rejects a nonconforming tender that the seller had reasonable grounds to believe would be acceptable with or without money allowance, the seller may, if the seller seasonably notified the buyer, have a further reasonable time to substitute a conforming tender.




Sec. 45.02.509. Risk of loss in the absence of breach.
 (a) Where the contract requires or authorizes the seller to ship the goods by carrier,
     (1) if it does not require the seller to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (AS 45.02.505); but

     (2) if it does require the seller to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.

 (b) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer
     (1) on the buyer’s receipt of possession or control of a negotiable document of title covering the goods;

     (2) on acknowledgment by the bailee of the buyer’s right to possession of the goods; or

     (3) after the buyer’s receipt of possession or control of a nonnegotiable document of title or other direction to deliver in a record, as provided in AS 45.02.503(d)(2).

 (c) In any case not within (a) or (b) of this section, the risk of loss passes to the buyer on the buyer’s receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.

 (d) This section is subject to contrary agreement of the parties and to the provisions on sale on approval (AS 45.02.327), and on effect of breach on risk of loss (AS 45.02.510).




Sec. 45.02.510. Effect of breach on risk of loss.
 (a) If a tender or delivery of goods so fails to conform to the contract as to give a right of rejection, the risk of their loss remains on the seller until cure or acceptance.

 (b) If the buyer rightfully revokes acceptance, the buyer may, to the extent of a deficiency in the buyer’s effective insurance coverage, treat the risk of loss as having rested on the seller from the beginning.

 (c) If the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to the buyer, the seller may, to the extent of a deficiency in the seller’s effective insurance coverage, treat the risk of loss as resting on the buyer for a commercially reasonable time.




Sec. 45.02.511. Tender of payment by buyer; payment by check.
 (a) Unless otherwise agreed, tender of payment is a condition to the seller’s duty to tender and complete a delivery.

 (b) Tender of payment is sufficient when made by a means or in a manner current in the ordinary course of business unless the seller demands payment in legal tender and gives an extension of time reasonably necessary to procure it.

 (c) Subject to the provisions of the code on the effect of an instrument on an obligation (AS 45.03.310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.




Sec. 45.02.512. Payment by buyer before inspection.
 (a) If the contract requires payment before inspection, nonconformity of the goods does not excuse the buyer from so making payment unless
     (1) the nonconformity appears without inspection; or

     (2) despite tender of the required documents, the circumstances would justify injunction against honor under AS 45.05.109(b).

 (b) Payment under (a) of this section does not constitute an acceptance of goods or impair the buyer’s right to inspect or any of the buyer’s remedies.




Sec. 45.02.513. Buyer’s right to inspection of goods.
 (a) Unless otherwise agreed and subject to (c) of this section, if goods are tendered, delivered or identified to the contract for sale, the buyer may before payment or acceptance inspect them at a reasonable place and time and in a reasonable manner. If the seller is required or authorized to send the goods to the buyer, the inspection may be after their arrival.

 (b) Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.

 (c) Unless otherwise agreed and subject to the provisions on C.I.F. contracts (AS 45.02.321), the buyer is not entitled to inspect the goods before payment of the price if the contract provides
     (1) for delivery “C.O.D.” or on other like terms; or

     (2) for payment against documents of title, except where the payment is due only after the goods are to become available for inspection.

 (d) A place or method of inspection fixed by the parties is presumed to be exclusive but, unless otherwise expressly agreed, it does not postpone identification or shift the place for delivery or for passing the risk of loss. If compliance becomes impossible, inspection is as provided in this section unless the place or method fixed was clearly intended as an indispensable condition, failure of which avoids the contract.




Sec. 45.02.514. When documents deliverable on acceptance; when on payment.
Unless otherwise agreed, documents against which a draft is drawn are to be delivered to the drawee on acceptance of the draft if it is payable more than three days after presentment; otherwise, only on payment.


Sec. 45.02.515. Preserving evidence of goods in dispute.
In furtherance of the adjustment of a claim or dispute,
     (1) either party, on reasonable notification to the other and to ascertain the facts and preserve evidence, may inspect, test, and sample the goods, including the goods in the possession or control of the other; and

     (2) the parties may agree to a third party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in a subsequent litigation or adjustment.




Article 6. Breach, Repudiation, and Excuse.


Sec. 45.02.601. Buyer’s rights on improper delivery.
Subject to the provisions on breach in installment contracts (AS 45.02.612) and unless otherwise agreed under the sections on contractual limitations of remedy (AS 45.02.718 and 45.02.719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may
     (1) reject the whole;

     (2) accept the whole; or

     (3) accept any commercial unit and reject the rest.




Sec. 45.02.602. Manner and effect of rightful rejection.
 (a) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

 (b) Subject to the provisions of AS 45.02.603 and 45.02.604 on rejected goods,
     (1) after rejection, an exercise of ownership by the buyer with respect to a commercial unit is wrongful as against the seller; and

     (2) if the buyer has, before rejection, taken physical possession of goods in which the buyer does not have a security interest under AS 45.02.711(c), the buyer is under a duty after rejection to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; but

     (3) the buyer has no further obligations with regard to goods rightfully rejected.

 (c) The seller’s rights with respect to goods wrongfully rejected are governed by the provisions on seller’s remedies in general (AS 45.02.703).




Sec. 45.02.603. Merchant buyer’s duties as to rightfully rejected goods.
 (a) Subject to a security interest in the buyer (AS 45.02.711(c)), if the seller has no agent or place of business at the market of rejection, a merchant buyer is under a duty after rejection of goods in the buyer’s possession or control to follow reasonable instructions received from the seller with respect to the goods and, in the absence of the instructions, to make reasonable efforts to sell them for the seller’s account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.

 (b) If the buyer sells goods under (a) of this section, the buyer is entitled to reimbursement from the seller, or out of the proceeds, for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding 10 percent on the gross proceeds.

 (c) In complying with this section, the buyer is held only to good faith, and good faith conduct here is not acceptance, conversion, or the basis of an action for damages.




Sec. 45.02.604. Buyer’s options as to salvage of rightfully rejected goods.
Subject to the provisions of AS 45.02.603 on perishables, if the seller gives no instructions within a reasonable time after notification of rejection, the buyer may store the rejected goods for the seller’s account or reship them to the seller or resell them for the seller’s account with reimbursement as provided in AS 45.02.603. This action is not acceptance or conversion.


Sec. 45.02.605. Waiver of buyer’s objections by failure to particularize.
 (a) The buyer’s failure to state in connection with rejection a particular defect that is ascertainable by reasonable inspection precludes the buyer from relying on the unstated defect to justify rejection or to establish breach
     (1) if the seller could have cured it if stated seasonably; or

     (2) between merchants if the seller has, after rejection, made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.

 (b) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.




Sec. 45.02.606. What constitutes acceptance of goods.
 (a) Acceptance of goods occurs when the buyer,
     (1) after a reasonable opportunity to inspect the goods, signifies to the seller that the goods are conforming or that the buyer will take or retain them in spite of their nonconformity;

     (2) fails to make an effective rejection (AS 45.02.602), but this acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or

     (3) does an act inconsistent with the seller’s ownership; but if this act is wrongful as against the seller it is an acceptance only if ratified by the seller.

 (b) Acceptance of a part of a commercial unit is acceptance of that entire unit.




Sec. 45.02.607. Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.
 (a) The buyer must pay at the contract rate for any goods accepted.

 (b) Acceptance of goods by the buyer precludes rejection of the goods accepted and, if made with knowledge of a nonconformity, cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured, but acceptance does not of itself impair any other remedy provided by this chapter for nonconformity.

 (c) If a tender has been accepted,
     (1) the buyer must, within a reasonable time after the buyer discovers or should have discovered a breach, notify the seller of the breach or be barred from any remedy; and

     (2) if the claim is one for infringement or the like (AS 45.02.312(c)) and the buyer is sued as a result of such a breach, the buyer must so notify the seller within a reasonable time after the buyer receives notice of the litigation or be barred from any remedy over for liability established by the litigation.

 (d) The burden is on the buyer to establish a breach with respect to the goods accepted.

 (e) If the buyer is sued for breach of a warranty or other obligation for which the buyer’s seller is answerable over,
     (1) the buyer may give the seller written notice of the litigation; if the notice states that the seller may come in and defend and that if the seller does not do so the seller will be bound in an action against the seller by the seller’s buyer by a determination of fact common to the two litigations, then, unless the seller, after seasonable receipt of the notice, does come in and defend, the seller is so bound;

     (2) if the claim is one for infringement or the like (AS 45.02.312(c)), the original seller may demand in writing that the seller’s buyer turn over to the seller control of the litigation including settlement or else be barred from any remedy over, and if the seller also agrees to bear all expense and to satisfy an adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.

 (f) The provisions of (c) — (e) of this section apply to an obligation of a buyer to hold the seller harmless against infringement or the like (AS 45.02.312(c)).




Sec. 45.02.608. Revocation of acceptance in whole or in part.
 (a) The buyer may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the buyer if the buyer has accepted it
     (1) on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

     (2) without discovery of the nonconformity if the buyer’s acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.

 (b) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before a substantial change in condition of the goods that is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

 (c) A buyer who so revokes has the same rights and duties with regard to the goods involved as if the buyer had rejected them.




Sec. 45.02.609. Right to adequate assurance of performance.
 (a) A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. If reasonable grounds for insecurity arise with respect to the performance of either party, the other may in writing demand adequate assurance of due performance and, until the party receives this assurance, may, if commercially reasonable, suspend any performance for which the party has not already received the agreed return.

 (b) Between merchants the reasonableness of grounds for insecurity and the adequacy of an assurance offered shall be determined according to commercial standards.

 (c) Acceptance of an improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.

 (d) After receipt of a justified demand, failure to provide, within a reasonable time not exceeding 30 days, such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.




Sec. 45.02.610. Anticipatory repudiation.
When either party repudiates the contract with respect to a performance not yet due, the loss of which will substantially impair the value of the contract to the other, the aggrieved party may
     (1) for a commercially reasonable time await performance by the repudiating party; or

     (2) resort to any remedy for breach (AS 45.02.703 or 45.02.711), even though the aggrieved party has notified the repudiating party that the former would await the latter’s performance and has urged retraction; and

     (3) in either case suspend the aggrieved party’s own performance or proceed in accordance with the provisions of this chapter on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (AS 45.02.704).




Sec. 45.02.611. Retraction of anticipatory repudiation.
 (a) Until the repudiating party’s next performance is due, that party can retract the repudiation unless the aggrieved party has, since the repudiation, cancelled or materially changed the aggrieved party’s position or otherwise indicated that the aggrieved party considers the repudiation final.

 (b) Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of AS 45.02.609.

 (c) Retraction reinstates the repudiating party’s right under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.




Sec. 45.02.612. “Installment contract”; breach.
 (a) An “installment contract” is one that requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause, “each delivery is a separate contract,” or its equivalent.

 (b) The buyer may reject an installment that is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within (c) of this section and the seller gives adequate assurance of its cure, the buyer must accept that installment.

 (c) If nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract, there is a breach of the whole. But the aggrieved party reinstates the contract if the party accepts a nonconforming installment without seasonably notifying of cancellation or if the party brings an action with respect only to past installments or demands performance as to future installments.




Sec. 45.02.613. Casualty to identified goods.
If the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a “no arrival, no sale” term (AS 45.02.324), then (1) if the loss is total, the contract is avoided, and (2) if the loss is partial or the goods have so deteriorated as no longer to conform to the contract, the buyer may nevertheless demand inspection and at the buyer’s option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.


Sec. 45.02.614. Substituted performance.
 (a) If without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted.

 (b) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment that is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer’s obligation unless the regulation is discriminatory, oppressive, or predatory.




Sec. 45.02.615. Excuse by failure of presupposed conditions.
Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance,
     (1) delay in delivery or nondelivery in whole or in part by a seller who complies with (2) and (3) of this section is not a breach of the seller’s duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency, the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with an applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid;

     (2) if the causes mentioned in (1) of this section affect only a part of the seller’s capacity to perform, the seller must allocate production and deliveries among the seller’s customers, but may at the seller’s option include regular customers not then under contract as well as the seller’s own requirements for further manufacture; the seller may so allocate in a manner that is fair and reasonable;

     (3) the seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under (2) of this section, of the estimated quota thus made available for the buyer.




Sec. 45.02.616. Procedure on notice claiming excuse.
 (a) If the buyer receives notification of a material or indefinite delay or an allocation justified under AS 45.02.615, the buyer may by written notification to the seller as to any delivery concerned and if the prospective deficiency substantially impairs the value of the whole contract under the provisions relating to breach of installment contracts, AS 45.02.612, then also as to the whole,
     (1) terminate and thereby discharge any unexecuted portion of the contract; or

     (2) modify the contract by agreeing to take the buyer’s available quota in substitution.

 (b) If, after receipt of the notification from the seller, the buyer fails so to modify the contract within a reasonable time not exceeding 30 days, the contract lapses with respect to deliveries affected.

 (c) This section may not be negated by agreement except insofar as the seller has assumed a greater obligation under AS 45.02.615.




Article 7. Remedies.


Sec. 45.02.701. Remedies for breach of collateral contracts not impaired.
Remedies for breach of an obligation or promise collateral or ancillary to a contract for sale are not impaired by this chapter.


Sec. 45.02.702. Seller’s remedies on discovery of buyer’s insolvency.
 (a) If the seller discovers the buyer is insolvent, the seller may refuse delivery except for cash including payment for all goods previously delivered under the contract, and stop delivery under AS 45.02.705.

 (b) If the seller discovers that the buyer has received goods on credit while insolvent, the seller may reclaim the goods upon demand made within 10 days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery the 10-day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer’s fraudulent or innocent misrepresentation of solvency or of intent to pay.

 (c) The seller’s right to reclaim under (b) of this section is subject to the rights of a buyer in ordinary course or other good faith purchaser or lien creditor under AS 45.02.403. Successful reclamation of goods excludes all other remedies with respect to them.




Sec. 45.02.703. Seller’s remedies in general.
If the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to goods directly affected and, if the breach is of the whole contract (AS 45.02.612), then also with respect to the whole undelivered balance, the aggrieved seller may
     (1) withhold delivery of the goods;

     (2) stop delivery by a bailee as provided in AS 45.02.705;

     (3) proceed under AS 45.02.704 respecting goods still unidentified to the contract;

     (4) resell and recover damages as provided in AS 45.02.706;

     (5) recover damages for nonacceptance (AS 45.02.708) or in a proper case the price (AS 45.02.709);

     (6) cancel.




Sec. 45.02.704. Seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods.
 (a) An aggrieved seller under AS 45.02.703 may
     (1) identify to the contract conforming goods not already identified if at the time the seller learned of the breach they are in the seller’s possession or control;

     (2) treat as the subject of resale goods that have demonstrably been intended for the particular contract even though those goods are unfinished.

 (b) Where the goods are unfinished, an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.




Sec. 45.02.705. Seller’s stoppage of delivery in transit or otherwise.
 (a) The seller may stop delivery of goods in the possession of a carrier or other bailee when the seller discovers the buyer to be insolvent (AS 45.02.702) and may stop delivery of carload, truckload, planeload, or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.

 (b) As against the buyer, the seller may stop delivery until
     (1) receipt of the goods by the buyer;

     (2) acknowledgment to the buyer by a bailee of the goods, except a carrier, that the bailee holds the goods for the buyer;

     (3) an acknowledgment to the buyer under (1) or (2) of this subsection by a carrier by reshipment or as a warehouse; or

     (4) negotiation to the buyer of a negotiable document of title covering the goods.

 (c) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.

 (d) After that notification the bailee must hold and deliver the goods according to the direction of the seller, but the seller is liable to the bailee for any ensuing charges or damages.

 (e) If a negotiable document of title has been issued for goods, the bailee is not obliged to obey a notification to stop until surrender of possession or control of the document.

 (f) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.




Sec. 45.02.706. Seller’s resale including contract for resale.
 (a) Under the conditions stated in AS 45.02.703 on seller’s remedies, the seller may resell the goods concerned or the undelivered balance of the goods. If the resale is made in good faith and in a commercially reasonable manner, the seller may recover the difference between the resale price and the contract price together with incidental damages allowed under AS 45.02.710, but less expenses saved in consequence of the buyer’s breach.

 (b) Except as otherwise provided in (c) of this section or unless otherwise agreed, resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms, but every aspect of the sale including the method, manner, time, place, and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.

 (c) If the resale is at private sale, the seller must give the buyer reasonable notification of the intention to resell.

 (d) If the resale is at public sale,
     (1) only identified goods can be sold unless there is a recognized market for a public sale of futures in goods of the kind;

     (2) it must be made at a usual place or market for public sale if one is reasonably available, and, except in the case of goods that are perishable or threaten to decline in value speedily, the seller must give the buyer reasonable notice of the time and place of the resale;

     (3) if the goods are not to be within the view of those attending the sale, the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and

     (4) the seller may buy.

 (e) A purchaser who buys in good faith at a resale takes the goods free of rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section.

 (f) The seller is not accountable to the buyer for a profit made on a resale. A person in the position of a seller (AS 45.02.707), or a buyer who has rightfully rejected or justifiably revoked acceptance must account for an excess over the amount of the person’s security interest, as defined in AS 45.02.711(c).




Sec. 45.02.707. Person in the position of a seller.
 (a) A person in the position of a seller includes, as against a principal, an agent who has paid or become responsible for the price of goods on behalf of the principal or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.

 (b) A person in the position of a seller may withhold or stop delivery (AS 45.02.705) and resell (AS 45.02.706) and recover incidental damages (AS 45.02.710).




Sec. 45.02.708. Seller’s damages for nonacceptance or repudiation.
 (a) Subject to (b) of this section and to the provisions with respect to proof of market price (AS 45.02.723), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in AS 45.02.710, but less expenses saved in consequence of the buyer’s breach.

 (b) If the measure of damages provided in (a) of this section is inadequate to put the seller in as good a position as performance would have done, then the measure of damages is the profit, including reasonable overhead, that the seller would have made from full performance by the buyer, together with any incidental damages provided in AS 45.02.710, due allowance for costs reasonably incurred, and due credit for payments or proceeds of resale.




Sec. 45.02.709. Action for the price.
 (a) If the buyer fails to pay the price as it becomes due, the seller may recover, together with any incidental damages under AS 45.02.710, the price
     (1) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and

     (2) of goods identified to the contract if the seller is unable, after reasonable effort, to resell them at a reasonable price or the circumstances reasonably indicate that a reasonable effort will be unavailing.

 (b) If the seller sues for the price, the seller must hold for the buyer goods that have been identified to the contract and are still in the control of the seller, except that if resale becomes possible the seller may resell them at any time before the collection of the judgment. The net proceeds of this resale must be credited to the buyer and payment of the judgment entitles the buyer to goods not resold.

 (c) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (AS 45.02.610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for nonacceptance under AS 45.02.708.




Sec. 45.02.710. Seller’s incidental damages.
Incidental damages to an aggrieved seller include commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care, and custody of goods after the buyer’s breach, in connection with return or resale of the goods or otherwise resulting from the breach.


Sec. 45.02.711. Buyer’s remedies in general; buyer’s security interest in rejected goods.
 (a) If the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance, then, with respect to goods involved and with respect to the whole if the breach goes to the whole contract (AS 45.02.612), the buyer may cancel and, whether or not the buyer has done so, may, in addition to recovering so much of the price as has been paid,
     (1) “cover” and have damages under AS 45.02.712 as to all the goods affected, whether or not they have been identified to the contract; or

     (2) recover damages for nondelivery as provided in AS 45.02.713.

 (b) If the seller fails to deliver or repudiates, the buyer may also
     (1) if the goods have been identified, recover them as provided in AS 45.02.502; or

     (2) in a proper case obtain specific performance or replevy the goods as provided in AS 45.02.716.

 (c) On rightful rejection or justifiable revocation of acceptance, a buyer has a security interest in goods in the possession or control of the buyer for payments made on their price and expenses reasonably incurred in their inspection, receipt, transportation, care, and custody and may hold the goods and resell them in like manner as an aggrieved seller (AS 45.02.706).




Sec. 45.02.712. “Cover”; buyer’s procurement of substitute goods.
 (a) After a breach within AS 45.02.711, the buyer may “cover” by making in good faith and without unreasonable delay a reasonable purchase of or contract to purchase goods in substitution for those due from the seller.

 (b) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as defined in AS 45.02.715, but less expenses saved in consequence of the seller’s breach.

 (c) Failure of the buyer to effect cover within this section does not bar the buyer from any other remedy.




Sec. 45.02.713. Buyer’s damages for nondelivery or repudiation.
 (a) Subject to the provisions with respect to proof of market price (AS 45.02.723), the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in AS 45.02.715, but less expenses saved in consequence of the seller’s breach.

 (b) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.




Sec. 45.02.714. Buyer’s damages for breach in regard to accepted goods.
 (a) If the buyer has accepted goods and given notification (AS 45.02.607(c)), the buyer may recover as damages for a nonconformity of tender the loss resulting in the ordinary course of events from the seller’s breach as determined in a reasonable manner.

 (b) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

 (c) In a proper case any incidental and consequential damages under AS 45.02.715 may also be recovered.




Sec. 45.02.715. Buyer’s incidental and consequential damages.
 (a) Incidental damages resulting from the seller’s breach include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses, or commissions in connection with effecting cover and other reasonable expense incident to the delay or other breach.

 (b) Consequential damages resulting from the seller’s breach include
     (1) loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and that could not reasonably be prevented by cover or otherwise; and

     (2) injury to person or property proximately resulting from a breach of warranty.




Sec. 45.02.716. Buyer’s right to specific performance or replevin.
 (a) Specific performance may be decreed where the goods are unique or in other proper circumstances.

 (b) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court considers just.

 (c) The buyer has a right of replevin for goods identified to the contract if after reasonable effort the buyer is unable to effect cover for the goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer’s right of replevin vests upon acquisition of a special property even if the seller had not then repudiated or failed to deliver.




Sec. 45.02.717. Deduction of damages from the price.
The buyer on notifying the seller of the intention to do so may deduct all or any part of the damages resulting from a breach of the contract from any part of the price still due under the same contract.


Sec. 45.02.718. Liquidation or limitation of damages; deposits.
 (a) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.

 (b) If the seller justifiably withholds delivery of goods because of the buyer’s breach, the buyer is entitled to restitution of an amount by which the sum of the buyer’s payments exceeds
     (1) the amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in accordance with (a) of this section, or

     (2) in the absence of those terms, 20 percent of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.

 (c) The buyer’s right to restitution under (b) of this section is subject to offset to the extent that the seller establishes
     (1) a right to recover damages under this chapter other than (a) of this section, and

     (2) the amount or value of benefits received by the buyer directly or indirectly by reason of the contract.

 (d) If a seller has received payment in goods, their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of (b) of this section; but, if the seller has notice of the buyer’s breach before reselling goods received in part performance, the resale is subject to the conditions laid down on resale by an aggrieved seller (AS 45.02.706).




Sec. 45.02.719. Contractual modification or limitation of remedy.
 (a) Subject to (b) and (c) of this section and AS 45.02.718 on liquidation and limitation of damages,
     (1) the agreement may provide for remedies in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and

     (2) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

 (b) If circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in the code.

 (c) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable, but limitation of damages where the loss is commercial is not.




Sec. 45.02.720. Effect of cancellation or rescission on claims for antecedent breach.
Unless the contrary intention clearly appears, expressions of cancellation or rescission of the contract or the like shall not be construed as a renunciation or discharge of a claim in damages for an antecedent breach.


Sec. 45.02.721. Remedies for fraud.
Remedies for material misrepresentation or fraud include all remedies available under this chapter for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods bars or is inconsistent with a claim for damages or other remedy.


Sec. 45.02.722. Who can sue third parties for injury to goods.
If a third party so deals with goods that have been identified to a contract for sale as to cause actionable injury to a party to that contract,
     (1) a right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods; and, if the goods have been destroyed or converted, a right of action is also in the party who either bore the risk of loss under the contract for sale or has since the injury assumed that risk as against the other;

     (2) if at the time of the injury the party plaintiff did not fear the risk of loss as against the other party to the contract for sale and there is no arrangement between them for disposition of the recovery, the party plaintiff’s suit or settlement is, subject to the party’s own interest, as a fiduciary for the other party to the contract;

     (3) either party may with the consent of the other sue for the benefit of whom it may concern.




Sec. 45.02.723. Proof of market price; time and place.
 (a) If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, damages based on market price (AS 45.02.708 or 45.02.713) shall be determined according to the price of the goods prevailing at the time the aggrieved party learned of the repudiation.

 (b) If evidence of a price prevailing at the times or places described in this chapter is not readily available, the price prevailing within a reasonable time before or after the time described or at any other place that in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making a proper allowance for the cost of transporting the goods to or from the other place.

 (c) Evidence of a relevant price prevailing at a time or place other than the one described in this chapter offered by one party is not admissible until the party has given the other party notice the court finds sufficient to prevent unfair surprise.




Sec. 45.02.724. Admissibility of market quotations.
When the prevailing price or value of goods regularly bought and sold in an established commodity market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of the market are admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility.


Sec. 45.02.725. Statute of limitations in contracts for sale.
 (a) An action for breach of a contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.

 (b) A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that, if a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of performance, the cause of action accrues when the breach is or should have been discovered.

 (c) If an action commenced within the time limited by (a) of this section is so terminated as to leave available a remedy by another action for the same breach, the other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.

 (d) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action that accrue before midnight, December 31, 1962.




Article 1. Short Title, Form, and Interpretation.


Chapter 03. Negotiable Instruments.

Sec. 45.03.101. Short title.
This chapter may be cited as the Uniform Commercial Code — Negotiable Instruments.


Sec. 45.03.102. Subject matter.
 (a) This chapter applies to negotiable instruments. It does not apply to money or to securities governed by AS 45.08.

 (b) If there is conflict between this chapter and AS 45.04 or AS 45.29, AS 45.04 and AS 45.29 govern.

 (c) Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this chapter to the extent of the inconsistency.




Sec. 45.03.103. Definitions.
 (a) In this chapter,
     (1) “acceptor” means a drawee who has accepted a draft;

     (2) “drawee” means a person ordered in a draft to make payment;

     (3) “drawer” means a person who signs or is identified in a draft as a person ordering payment;

     (4) [Repealed, § 113 ch 44 SLA 2009.]
     (5) “maker” means a person who signs or is identified in a note as a person undertaking to pay;

     (6) “order” means a written instruction to pay money signed by the person giving the instruction; the instruction may be addressed to any person, including the person giving the instruction, or to one or more persons jointly or in the alternative but not in succession; an authorization to pay is not an order unless the person authorized to pay is also instructed to pay;

     (7) “ordinary care” in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged; in the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate the bank’s prescribed procedures and the bank’s procedures do not vary unreasonably from general banking usage not disapproved by this chapter or AS 45.04;

     (8) “party” means a party to an instrument;

     (9) “promise” means a written undertaking to pay money signed by the person undertaking to pay; an acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation;

     (10) “prove,” with respect to a fact, means to meet the burden of establishing the fact (AS 45.01.211);

     (11) “remitter” means a person who purchases an instrument from the issuer of the instrument if the instrument is payable to an identified person other than the purchaser.

 (b) Other definitions applying to this chapter, and the sections in which they appear, are
     (1) “acceptance” in AS 45.03.409;

     (2) “accommodated party” in AS 45.03.419;

     (3) “accommodation party” in AS 45.03.419;

     (4) “alteration” in AS 45.03.407;

     (5) “anomalous endorsement” in AS 45.03.205;

     (6) “blank endorsement” in AS 45.03.205;

     (7) “cashier’s check” in AS 45.03.104;

     (8) “certificate of deposit” in AS 45.03.104;

     (9) “certified check” in AS 45.03.409;

     (10) “check” in AS 45.03.104;

     (11) “consideration” in AS 45.03.303;

     (12) “draft” in AS 45.03.104;

     (13) “endorsement” in AS 45.03.204;

     (14) “endorser” in AS 45.03.204;

     (15) “holder in due course” in AS 45.03.302;

     (16) “incomplete instrument” in AS 45.03.115;

     (17) “instrument” in AS 45.03.104;

     (18) “issue” in AS 45.03.105;

     (19) “issuer” in AS 45.03.105;

     (20) “negotiable instrument” in AS 45.03.104;

     (21) “negotiation” in AS 45.03.201;

     (22) “note” in AS 45.03.104;

     (23) “payable at a definite time” in AS 45.03.108;

     (24) “payable on demand” in AS 45.03.108;

     (25) “payable to bearer” in AS 45.03.109;

     (26) “payable to order” in AS 45.03.109;

     (27) “payment” in AS 45.03.602;

     (28) “person entitled to enforce” in AS 45.03.301;

     (29) “presentment” in AS 45.03.501;

     (30) “reacquisition” in AS 45.03.207;

     (31) “special endorsement” in AS 45.03.205;

     (32) “teller’s check” in AS 45.03.104;

     (33) “transfer of instrument” in AS 45.03.203;

     (34) “traveler’s check” in AS 45.03.104;

     (35) “value” in AS 45.03.303.

 (c) The following definitions in AS 45.04 apply to this chapter:
     (1) “bank” (AS 45.04.105);

     (2) “banking day” (AS 45.04.104);

     (3) “clearinghouse” (AS 45.04.104);

     (4) “collecting bank” (AS 45.04.105);

     (5) “depositary bank” (AS 45.04.105);

     (6) “documentary draft” (AS 45.04.104);

     (7) “intermediary bank” (AS 45.04.105);

     (8) “item” (AS 45.04.104);

     (9) “payor bank” (AS 45.04.105);

     (10) “suspends payments” (AS 45.04.104).

 (d) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.03.104. Negotiable instrument.
 (a) Except as provided in (c) — (d) of this section, “negotiable instrument” means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if the unconditional promise or order
     (1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

     (2) is payable on demand or at a definite time; and

     (3) does not state any other undertaking or instruction by the person promising or ordering payment to do an act in addition to the payment of money, but the promise or order may contain an undertaking or power to give, maintain, or protect collateral to secure payment, an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or a waiver of the benefit of a law intended for the advantage or protection of an obligor.

 (b) “Instrument” means a negotiable instrument.

 (c) An order that meets all of the requirements of (a)(2) — (3) of this section, and otherwise falls within the definition of “check” in (f) of this section, is a negotiable instrument and a check.

 (d) A promise or order other than a check is not an instrument if, at the time the promise or order is issued or first comes into possession of a holder, the promise or order contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this chapter.

 (e) An instrument is a “note” if the instrument is a promise and a “draft” if the instrument is an order. If an instrument falls within the definition of both “note” and “draft,” a person entitled to enforce the instrument may treat the instrument as either.

 (f) “Check” means a draft, other than a documentary draft, payable on demand and drawn on a bank, or a cashier’s check or teller’s check. An instrument may be a check even though the instrument is described on its face by another term, such as “money order.”

 (g) “Cashier’s check” means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.

 (h) “Teller’s check” means a draft drawn by a bank
     (1) on another bank; or

     (2) payable at or through a bank.

 (i) “Traveler’s check” means an instrument that
     (1) is payable on demand;

     (2) is drawn on or payable at or through a bank;

     (3) is designated by the term “traveler’s check” or by a substantially similar term; and

     (4) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.

 (j) “Certificate of deposit” means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.




Sec. 45.03.105. Issue of instrument.
 (a) “Issue” means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.

 (b) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.

 (c) “Issuer” applies to issued and unissued instruments and means a maker or drawer of an instrument.




Sec. 45.03.106. Unconditional promise or order.
 (a) Except as provided in this section, for the purposes of AS 45.03.104(a), a promise or order is unconditional unless it states an express condition to payment, that the promise or order is subject to or governed by another writing, or that rights or obligations with respect to the promise or order are stated in another writing. A reference to another writing does not of itself make a promise or order conditional.

 (b) A promise or order is not made conditional
     (1) by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration; or

     (2) because payment is limited to resort to a particular fund or source.

 (c) If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of AS 45.03.104(a). If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.

 (d) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of AS 45.03.104(a), but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.




Sec. 45.03.107. Instrument payable in foreign money.
Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.


Sec. 45.03.108. Payable on demand or at definite time.
 (a) A promise or order is payable on demand if it
     (1) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder; or

     (2) does not state a time of payment.

 (b) A promise or order is payable at a definite time if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of
     (1) prepayment;

     (2) acceleration;

     (3) extension at the option of the holder; or

     (4) extension to a further definite time at the option of the maker or acceptor, or automatically on or after a specified act or event.

 (c) If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.




Sec. 45.03.109. Payable to bearer or to order.
 (a) A promise or order is payable to bearer if it
     (1) states that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;

     (2) does not state a payee; or

     (3) states that it is payable to or to the order of cash, or otherwise indicates that it is not payable to an identified person.

 (b) A promise or order that is not payable to bearer is payable to order if it is payable to the order of an identified person, or to an identified person or order. A promise or order that is payable to order is payable to the identified person.

 (c) An instrument payable to bearer may become payable to an identified person if it is specially endorsed under AS 45.03.205(a). An instrument payable to an identified person may become payable to bearer if it is endorsed in blank under AS 45.03.205(b).




Sec. 45.03.110. Identification of person to whom instrument is payable.
 (a) The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or on the behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer even if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one person signs in the name or on the behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one or more of the signers.

 (b) If the signature of the issuer of an instrument is made by automated means, such as a check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.

 (c) A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office, or account number. For the purpose of determining the holder of an instrument, the following rules apply:
     (1) if an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable. If an instrument is payable to an account identified by number and by the name of a person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number;

     (2) if an instrument is payable to
          (A) a trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named;

          (B) a person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative;

          (C) a fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or

          (D) an office or a person described as holding an office, the instrument is payable to the named person, the incumbent of the office, or a successor to the incumbent.

 (d) If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.




Sec. 45.03.111. Place of payment.
Except as otherwise provided for items in AS 45.04, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the drawee or maker stated in the instrument. If no address is stated, the place of payment is the place of business of the drawee or maker. If a drawee or maker has more than one place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument. If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker.


Sec. 45.03.112. Interest.
 (a) Unless otherwise provided in the instrument, an instrument is not payable with interest, and interest on an interest-bearing instrument is payable from the date of the instrument.

 (b) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.




Sec. 45.03.113. Date of instrument.
 (a) An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after the date. Except as provided in AS 45.04.401(c), an instrument payable on demand is not payable before the date of the instrument.

 (b) If an instrument is undated, the date of the instrument is the date of the instrument’s issue or, in the case of an unissued instrument, the date the instrument first comes into possession of a holder.




Sec. 45.03.114. Contradictory terms of instrument.
If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.


Sec. 45.03.115. Incomplete instrument.
 (a) “Incomplete instrument” means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.

 (b) Subject to (c) of this section, if an incomplete instrument is an instrument under AS 45.03.104, it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under AS 45.03.104 but, after completion, the requirements of AS 45.03.104 are met, the instrument may be enforced according to its terms as augmented by completion.

 (c) If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under AS 45.03.407.

 (d) The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority.




Sec. 45.03.116. Joint and several liability; contribution.
 (a) Except as otherwise provided in the instrument, two or more persons who have the same liability on an instrument as makers, drawers, acceptors, endorsers who endorse as joint payees, or anomalous endorsers are jointly and severally liable in the capacity in which they sign.

 (b) Except as provided in AS 45.03.419(e), or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive from any party having the same joint and several liability contribution in accordance with applicable law.

 (c) Discharge of one party having joint and several liability by a person entitled to enforce the instrument does not affect the right under (b) of this section of a party having the same joint and several liability to receive contribution from the party discharged.




Sec. 45.03.117. Other agreements affecting instrument.
Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented, or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or a part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented, or nullified by an agreement under this section, the agreement is a defense to the obligation.


Sec. 45.03.118. Statute of limitations.
 (a) Except as provided in (e) of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.

 (b) Except as provided in (d) or (e) of this section, if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of 10 years.

 (c) Except as provided in (d) of this section, an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three years after dishonor of the draft or 10 years after the date of the draft, whichever period expires first.

 (d) An action to enforce the obligation of the acceptor of a certified check, or the issuer of a teller’s check, cashier’s check, or traveler’s check, must be commenced within three years after demand for payment is made to the acceptor or issuer.

 (e) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the six-year period begins when a demand for payment is in effect and the due date has passed.

 (f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced
     (1) within six years after the due date stated in the draft or acceptance, if the obligation of the acceptor is payable at a definite time; or

     (2) within six years after the date of the acceptance, if the obligation of the acceptor is payable on demand.

 (g) Unless governed by other law regarding claims for indemnity or contribution, an action for conversion of an instrument, for money had and received, or like action based on conversion, for breach of warranty, or to enforce an obligation, duty, or right arising under this chapter and not governed by this section, must be commenced within three years after the cause of action accrues.




Sec. 45.03.119. Notice of right to defend action.
In an action for breach of an obligation for which a third person is answerable over under this chapter or AS 45.04, the defendant may give the third person written notice of the litigation, and the person notified may then give similar notice to any other person who is answerable over. If the notice states that the person notified may come in and defend and that failure to do so will bind the person notified in an action later brought by the person giving the notice as to any determination of fact common to the two litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend.


Secs. 45.03.120 — 45.03.122. Instruments payable through bank; instruments payable at bank; accrual of cause of action. [Repealed, § 127 ch 35 SLA 1993.]

Article 2. Transfer and Negotiation.


Sec. 45.03.201. Negotiation.
 (a) “Negotiation” means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes the holder of the instrument.

 (b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its endorsement by the holder. If an instrument is payable to bearer, the instrument may be negotiated by transfer of possession alone.




Sec. 45.03.202. Negotiation subject to rescission.
 (a) Negotiation is effective even if obtained
     (1) from an infant, a corporation exceeding its powers, or a person without capacity;

     (2) by fraud, duress, or mistake; or

     (3) in breach of duty or as part of an illegal transaction.

 (b) To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy.




Sec. 45.03.203. Transfer of instrument; rights acquired by transfer.
 (a) An instrument is transferred when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.

 (b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.

 (c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of endorsement by the transferor, the transferee has a specifically enforceable right to the unqualified endorsement of the transferor, but negotiation of the instrument does not occur until the endorsement is made.

 (d) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur, and the transferee obtains no rights under this chapter and has only the rights of a partial assignee.




Sec. 45.03.204. Endorsement.
 (a) “Endorsement” means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of negotiating the instrument, restricting payment of the instrument, or incurring endorser’s liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words are an endorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than endorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.

 (b) “Endorser” means a person who makes an endorsement.

 (c) For the purpose of determining whether the transferee of an instrument is a holder, an endorsement that transfers a security interest in the instrument is effective as an unqualified endorsement of the instrument.

 (d) If an instrument is payable to a holder under a name that is not the name of the holder, endorsement may be made by the holder in the name stated in the instrument or in the holder’s name or both, but signature in both names may be required by a person paying or taking the instrument for value or collection.




Sec. 45.03.205. Special endorsement; blank endorsement; anomalous endorsement.
 (a) If an endorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the endorsement identifies a person to whom it makes the instrument payable, it is a “special endorsement.” When specially endorsed, an instrument becomes payable to the identified person and may be negotiated only by the endorsement of that person. The principles stated in AS 45.03.110 apply to special endorsements.

 (b) If an endorsement is made by the holder of an instrument and it is not a special endorsement, it is a “blank endorsement.” When endorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially endorsed.

 (c) The holder may convert a blank endorsement that consists only of a signature into a special endorsement by writing, above the signature of the endorser, words identifying the person to whom the instrument is made payable.

 (d) “Anomalous endorsement” means an endorsement made by a person who is not the holder of the instrument. An anomalous endorsement does not affect the manner in which the instrument may be negotiated.




Sec. 45.03.206. Restrictive endorsement.
 (a) An endorsement limiting payment to a particular person or otherwise prohibiting further transfer or negotiation of the instrument is not effective to prevent further transfer or negotiation of the instrument.

 (b) An endorsement stating a condition to the right of the endorsee to receive payment does not affect the right of the endorsee to enforce the instrument. A person paying the instrument or taking it for value or collection may disregard the condition, and the rights and liabilities of that person are not affected by whether the condition has been fulfilled.

 (c) If an instrument bears an endorsement described in AS 45.04.201(b), or an endorsement in blank or to a particular bank using the words “for deposit,” “for collection,” or other words indicating a purpose of having the instrument collected by a bank for the endorser or for a particular account, the following rules apply:
     (1) a person, other than a bank, who purchases the instrument when so endorsed converts the instrument unless the amount paid for the instrument is received by the endorser or applied consistently with the endorsement;

     (2) a depositary bank that purchases the instrument or takes it for collection when so endorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the endorser or applied consistently with the endorsement;

     (3) a payor bank that is also the depositary bank or that takes the instrument for immediate payment over the counter from a person other than a collecting bank converts the instrument unless the proceeds of the instrument are received by the endorser or applied consistently with the endorsement; and

     (4) except as otherwise provided in (3) of this subsection, a payor bank or intermediary bank may disregard the endorsement and is not liable if the proceeds of the instrument are not received by the endorser or applied consistently with the endorsement.

 (d) Except for an endorsement covered by (c) of this section, if an instrument bears an endorsement using words to the effect that payment is to be made to the endorsee as agent, trustee, or other fiduciary for the benefit of the endorser or another person, the following rules apply:
     (1) unless there is notice of breach of fiduciary duty as provided in AS 45.03.307, a person who purchases the instrument from the endorsee or takes the instrument from the endorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the endorsee without regard to whether the endorsee violates a fiduciary duty to the endorser; and

     (2) a subsequent transferee of the instrument or person who pays the instrument is neither given notice nor otherwise affected by the restriction in the endorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of a fiduciary duty.

 (e) The presence on an instrument of an endorsement to which this section applies does not prevent a purchaser of the instrument from becoming a holder in due course of the instrument unless the purchaser is a converter under (c) of this section or has notice or knowledge of breach of fiduciary duty as stated in (d) of this section.

 (f) In an action to enforce the obligation of a party to pay the instrument, the obligor has a defense if payment would violate an endorsement to which this section applies and the payment is not permitted by this section.




Sec. 45.03.207. Reacquisition.
Reacquisition of an instrument occurs if it is transferred to a former holder, by negotiation or otherwise. A former holder who reacquires the instrument may cancel endorsements made after the reacquirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reacquirer or to bearer, the reacquirer may negotiate the instrument. An endorser whose endorsement is canceled is discharged, and the discharge is effective against a subsequent holder.


Sec. 45.03.208. Reacquisition. [Repealed, § 127 ch 35 SLA 1993.]

Article 3. Rights of a Holder.


Sec. 45.03.301. Person entitled to enforce instrument.
A person entitled to enforce an instrument is the holder of the instrument, a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument under AS 45.03.309 or 45.03.418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.


Sec. 45.03.302. Holder in due course.
 (a) Subject to (c) of this section and AS 45.03.106(d), “holder in due course” means the holder of an instrument, if
     (1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and

     (2) the holder took the instrument
          (A) for value;

          (B) in good faith;

          (C) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series;

          (D) without notice that the instrument contains an unauthorized signature or has been altered;

          (E) without notice of any claim to the instrument described in AS 45.03.306; and

          (F) without notice that any party has a defense or claim in recoupment described in AS 45.03.305(a).

 (b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under (a) of this section, but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment, or claim to the instrument.

 (c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken by legal process or by purchase in an execution, bankruptcy, or creditor’s sale or similar proceeding, by purchase as part of a bulk transaction not in the ordinary course of business of the transferor, or as the successor in interest to an estate or other organization.

 (d) If, under AS 45.03.303(a)(1), the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.

 (e) If the person entitled to enforce an instrument has only a security interest in the instrument and the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument that, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.

 (f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.

 (g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.




Sec. 45.03.303. Value and consideration.
 (a) An instrument is issued or transferred for value if
     (1) the instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;

     (2) the transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;

     (3) the instrument is issued or transferred as payment of, or as security for, an antecedent claim against a person, whether or not the claim is due;

     (4) the instrument is issued or transferred in exchange for a negotiable instrument; or

     (5) the instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument.

 (b) “Consideration” means any consideration sufficient to support a simple contract. The drawer or maker of an instrument has a defense if the instrument is issued without consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the extent performance of the promise is due and the promise has not been performed. If an instrument is issued for value as stated in (a) of this section, the instrument is also issued for consideration.




Sec. 45.03.304. Overdue instrument.
 (a) An instrument payable on demand becomes overdue at the earliest of the following times:
     (1) on the day after the day demand for payment is duly made;

     (2) if the instrument is a check, 90 days after its date; or

     (3) if the instrument is not a check, when the instrument has been outstanding for a period of time after the instrument’s date that is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.

 (b) With respect to an instrument payable at a definite time, the following rules apply:
     (1) if the principal is payable in installments and a due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured;

     (2) if the principal is not payable in installments and the due date has not been accelerated, the instrument becomes overdue on the day after the due date; and

     (3) if a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.

 (c) Unless the due date of principal has been accelerated, an instrument does not become overdue if there is default in payment of interest but no default in payment of principal.




Sec. 45.03.305. Defenses and claims in recoupment.
 (a) Except as stated in (b) of this section, the right to enforce the obligation of a party to pay an instrument is subject to the following:
     (1) a defense of the obligor based on
          (A) infancy of the obligor, to the extent it is a defense to a simple contract;

          (B) duress, lack of legal capacity, or illegality of the transaction that, under other law, nullifies the obligation of the obligor;

          (C) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms; or

          (D) discharge of the obligor in insolvency proceedings;

     (2) a defense of the obligor stated in another section of this chapter or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and

     (3) a claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument, but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing in the instrument at the time the action is brought.

 (b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in (a)(1) of this section, but is not subject to defenses of the obligor stated in (a)(2) of this section or claims in recoupment stated in (a)(3) of this section against a person other than the holder.

 (c) Except as stated in (d) of this section, in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument under AS 45.03.306 of another person, but the other person’s claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.

 (d) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under (a) of this section that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.




Sec. 45.03.306. Claims to an instrument.
A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.


Sec. 45.03.307. Notice of breach of fiduciary duty.
 (a) If an instrument is taken from a fiduciary for payment or collection or for value, the taker has knowledge of the fiduciary status of the fiduciary, and the represented person makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:
     (1) notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person;

     (2) in the case of an instrument payable to the represented person or the fiduciary as such, the taker has notice of the breach of fiduciary duty if the instrument is
          (A) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary;

          (B) taken in a transaction known by the taker to be for the personal benefit of the fiduciary; or

          (C) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person;

     (3) if an instrument is issued by the represented person or the fiduciary as such, and made payable to the fiduciary personally, the taker does not have notice of the breach of fiduciary duty unless the taker knows of the breach of fiduciary duty; and

     (4) if an instrument is issued by the represented person or the fiduciary as such, to the taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is
          (A) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary;

          (B) taken in a transaction known by the taker to be for the personal benefit of the fiduciary; or

          (C) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.

 (b) In this section,
     (1) “fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument;

     (2) “represented person” means the principal, beneficiary, partnership, corporation, or other person to whom a fiduciary duty with respect to an instrument is owed.




Sec. 45.03.308. Proof of signatures and status as holder in due course.
 (a) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings to which a responsive pleading is required. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized, unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under AS 45.03.402(a).

 (b) If the validity of signatures is admitted or proved and there is compliance with (a) of this section, a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under AS 45.03.301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.




Sec. 45.03.309. Enforcement of lost, destroyed, or stolen instrument.
 (a) A person not in possession of an instrument is entitled to enforce the instrument if
     (1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred;

     (2) the loss of possession was not the result of a transfer by the person or a lawful seizure; and

     (3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person who cannot be found or is not amenable to service of process.

 (b) A person seeking enforcement of an instrument under (a) of this section must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, AS 45.03.308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.




Sec. 45.03.310. Effect of instrument on obligation for which taken.
 (a) Unless otherwise agreed, if a certified check, cashier’s check, or teller’s check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an endorser of the instrument.

 (b) Unless otherwise agreed and except as provided in (a) of this section, if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:
     (1) in the case of an uncertified check, suspension of the obligation continues until dishonor of the check or until it is paid or certified; payment or certification of the check results in discharge of the obligation to the extent of the amount of the check;

     (2) in the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid; payment of the note results in discharge of the obligation to the extent of the payment;

     (3) except as provided in (4) of this subsection, if the check or note is dishonored and the obligee of the obligation for which the instrument was taken is the person entitled to enforce the instrument, the obligee may enforce either the instrument or the obligation; in the case of an instrument of a third person that is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation; and

     (4) if the person entitled to enforce the instrument taken for an obligation is a person other than the obligee, the obligee may not enforce the obligation to the extent the obligation is suspended; if the obligee is the person entitled to enforce the instrument but no longer has possession of it because it was lost, stolen, or destroyed, the obligation may not be enforced to the extent of the amount payable on the instrument, and to that extent the obligee’s rights against the obligor are limited to enforcement of the instrument.

 (c) If an instrument other than one described in (a) or (b) of this section is taken for an obligation, the effect is that stated in (a) if the instrument is one on which a bank is liable as maker or acceptor, or that stated in (b) in any other case.




Sec. 45.03.311. Accord and satisfaction by use of instrument.
 (a) The provisions of this section apply if a person against whom a claim is asserted proves that
     (1) the person in good faith tendered an instrument to the claimant as full satisfaction on the claim;

     (2) the amount of the claim was unliquidated or subject to a bona fide dispute; and

     (3) the claimant obtained payment of the instrument.

 (b) Unless (c) of this section applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

 (c) Subject to (d) of this section, a claim is not discharged under (b) of this section if either of the following applies:
     (1) the claimant, if an organization, proves that
          (A) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place; and

          (B) the instrument or accompanying communication was not received by that designated person, office, or place; or

     (2) the claimant, whether or not an organization, proves that within 90 days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted, unless the claimant is an organization that sent a statement complying with (1)(A) of this subsection.

 (d) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.




Sec. 45.03.312. Lost, destroyed, or stolen cashier’s check, teller’s check, or certified check.
 (a) A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check, if
     (1) the claimant is the drawer or payee of a certified check or the remitter or payee of a cashier’s check or teller’s check;

     (2) the communication contains or is accompanied by a declaration of loss of the claimant with respect to the check;

     (3) the communication is received at a time and in a manner affording the bank a reasonable time to act on it before the check is paid; and

     (4) the claimant provides reasonable identification if requested by the obligated bank.

 (b) Delivery of a declaration of loss under (a)(2) of this section is a warranty of the truth of the statements made in the declaration.

 (c) If a claim is asserted in compliance with (a) of this section, the following rules apply:
     (1) the claim becomes enforceable at the later of
          (A) the time the claim is asserted; or

          (B) the 90th day following the date of the check, in the case of a cashier’s check or teller’s check, or the 90th day following the date of the acceptance, in the case of a certified check;

     (2) until the claim becomes enforceable, it does not have legal effect and the obligated bank may pay the check or, in the case of a teller’s check, may permit the drawee to pay the check; payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check;

     (3) if the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check;

     (4) when the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check; subject to AS 45.04.302(a)(1), payment to the claimant discharges all liability of the obligated bank with respect to the check.

 (d) If the obligated bank pays the amount of a check to a claimant under (c)(4) of this section and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to
     (1) refund the payment to the obligated bank if the check is paid; or

     (2) pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.

 (e) If a claimant has the right to assert a claim under (a) — (c) of this section and is also a person entitled to enforce a cashier’s check, teller’s check, or certified check that is lost, destroyed, or stolen, the claimant may assert rights with respect to the check either under this section or AS 45.03.309.

 (f) In this section,
     (1) “check” means a cashier’s check, teller’s check, or certified check;

     (2) “claimant” means a person who claims the right to receive the amount of a cashier’s check, teller’s check, or certified check that was lost, destroyed, or stolen;

     (3) “declaration of loss” means a written statement, made under penalty of perjury, to the effect that
          (A) the declarer lost possession of a check;

          (B) the declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier’s check or teller’s check;

          (C) the loss of possession was not the result of a transfer by the declarer or a lawful seizure; and

          (D) the declarer cannot reasonably obtain possession of the check because the check was destroyed, the check’s whereabouts cannot be determined, or the check is in the wrongful possession of an unknown person or a person who cannot be found or is not amenable to service of process;

     (4) “obligated bank” means the issuer of a cashier’s check or teller’s check or the acceptor of a certified check.




Article 4. Liability of Parties.


Sec. 45.03.401. Signature.
 (a) A person is not liable on an instrument unless
     (1) the person signed the instrument; or

     (2) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under AS 45.03.402.

 (b) A signature may be made manually or by means of a device or machine, and by the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.




Sec. 45.03.402. Signature by representative.
 (a) If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the authorized signature of the represented person and the represented person is liable on the instrument, whether or not identified in the instrument.

 (b) If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, the following rules apply:
     (1) if the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument; and

     (2) subject to (c) of this section, if the form of the signature does not show unambiguously that the signature is made in a representative capacity or the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument; with respect to another person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.

 (c) If a representative signs the name of the representative as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.




Sec. 45.03.403. Unauthorized signature.
 (a) Unless otherwise provided in this chapter or AS 45.04, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this chapter.

 (b) If the signature of more than one person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one of the required signatures is lacking.

 (c) The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this chapter that makes the unauthorized signature effective for the purposes of this chapter.




Sec. 45.03.404. Impostors; fictitious payees.
 (a) If an impostor, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the impostor or a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an endorsement of the instrument by any person in the name of the payee is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.

 (b) If a person whose intent determines to whom an instrument is payable (AS 45.03.110(a) or (b)) does not intend the person identified as payee to have an interest in the instrument, or if the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special endorsement:
     (1) any person in possession of the instrument is the holder of the instrument; and

     (2) an endorsement by any person in the name of the payee stated in the instrument is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.

 (c) Under (a) or (b) of this section, an endorsement is made in the name of a payee if
     (1) it is made in a name substantially similar to that of the payee; or

     (2) the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.

 (d) With respect to an instrument to which (a) or (b) of this section applies, if a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.




Sec. 45.03.405. Employer’s responsibility for fraudulent endorsement by employee.
 (a) For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent endorsement of the instrument, the endorsement is effective as the endorsement of the person to whom the instrument is payable if it is made in the name of that person. If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.

 (b) Under (a) of this section, an endorsement is made in the name of the person to whom an instrument is payable if
     (1) it is made in a name substantially similar to the name of that person; or

     (2) the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.

 (c) In this section,
     (1) “employee” includes an independent contractor and an employee of an independent contractor retained by the employer;

     (2) “fraudulent endorsement” means
          (A) in the case of an instrument payable to the employer, a forged endorsement purporting to be that of the employer; or

          (B) in the case of an instrument with respect to which the employer is the issuer, a forged endorsement purporting to be that of the person identified as payee;

     (3) “responsibility” with respect to instruments means authority to sign or endorse instruments on behalf of the employer; to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition; to prepare or process instruments for issue in the name of the employer; to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer; to control the disposition of instruments to be issued in the name of the employer; or to act otherwise with respect to instruments in a responsible capacity; “responsibility” does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.




Sec. 45.03.406. Negligence contributing to forged signature or alteration of instrument.
 (a) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.

 (b) Under (a) of this section, if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.

 (c) Under (a) of this section, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under (b) of this section, the burden of proving failure to exercise ordinary care is on the person precluded.




Sec. 45.03.407. Alteration.
 (a) Except as provided in (b) of this section, an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. Another alteration does not discharge a party, and the instrument may be enforced according to its original terms.

 (b) A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument according to its original terms or, in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.

 (c) “Alteration” means
     (1) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party; or

     (2) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.




Sec. 45.03.408. Drawee not liable on unaccepted draft.
A check or other draft does not of itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts the instrument.


Sec. 45.03.409. Acceptance of draft; certified check.
 (a) “Acceptance” means the drawee’s signed agreement to pay a draft as presented. Acceptance must be written on the draft and may consist of the drawee’s signature alone. Acceptance may be made at any time and becomes effective when notification in accordance with instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.

 (b) A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.

 (c) If a draft is payable at a fixed period after sight and the acceptor fails to date the acceptance, the holder may complete the acceptance by supplying a date in good faith.

 (d) “Certified check” means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in (a) of this section or by a writing on the check that indicates that the check is certified. The drawee of a check does not have an obligation to certify the check, and refusal to certify is not dishonor of the check.




Sec. 45.03.410. Acceptance varying draft.
 (a) If the terms of a drawee’s acceptance vary from the terms of the draft as presented, the holder may refuse the acceptance and treat the draft as dishonored. In that case, the drawee may cancel the acceptance.

 (b) The terms of a draft are not varied by an acceptance to pay at a particular bank or place in the United States, unless the acceptance states that the draft is to be paid only at that bank or place.

 (c) If the holder assents to an acceptance varying the terms of a draft, the obligation of each drawer and endorser that does not expressly assent to the acceptance is discharged.




Sec. 45.03.411. Refusal to pay cashier’s checks, teller’s checks, and certified checks.
 (a) If the obligated bank wrongfully refuses to pay a cashier’s check or certified check, stops payment of a teller’s check, or refuses to pay a dishonored teller’s check, the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular circumstances giving rise to the damages.

 (b) Expenses or consequential damages under (a) of this section are not recoverable if
     (1) the refusal of the obligated bank to pay occurs because the bank suspends payments;

     (2) the obligated bank asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument;

     (3) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument; or

     (4) payment is prohibited by law.

 (c) In this section, “obligated bank” means the acceptor of a certified check or the issuer of a cashier’s check or teller’s check bought from the issuer.




Sec. 45.03.412. Obligation of issuer of note or cashier’s check.
The issuer of a note, cashier’s check, or other draft drawn on the drawer is obliged to pay the instrument according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder; if the issuer signed an incomplete instrument, the issuer is obligated to pay the instrument according to its terms when completed, to the extent stated in AS 45.03.115 and 45.03.407. The obligation is owed to a person entitled to enforce the instrument or to an endorser who paid the instrument under AS 45.03.415.


Sec. 45.03.413. Obligation of acceptor.
 (a) The acceptor of a draft is obliged to pay the draft according to its terms at the time it was accepted, even though the acceptance states that the draft is payable “as originally drawn” or equivalent terms; if the acceptance varies the terms of the draft, the acceptor is obliged to pay the draft according to the terms of the draft as varied; if the acceptance is of a draft that is an incomplete instrument, the acceptor is obliged to pay the draft according to its terms when completed, to the extent stated in AS 45.03.115 and 45.03.407. The obligation is owed to a person entitled to enforce the draft or to the drawer or an endorser who paid the draft under AS 45.03.414 — 45.03.415.

 (b) If the certification of a check or other acceptance of a draft states the amount certified or accepted, the obligation of the acceptor is that amount. If the certification or acceptance does not state an amount, the amount of the instrument is subsequently raised, and the instrument is then negotiated to a holder in due course, the obligation of the acceptor is the amount of the instrument at the time it was taken by the holder in due course.




Sec. 45.03.414. Obligation of drawer.
 (a) This section does not apply to cashier’s checks or other drafts drawn on the drawer.

 (b) If an unaccepted draft is dishonored, the drawer is obliged to pay the draft according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder. If the drawer signed an incomplete instrument, the drawer is obliged to pay the draft according to its terms when completed, to the extent stated in AS 45.03.115 and 45.03.407. The obligation is owed to a person entitled to enforce the draft or to an endorser who paid the draft under AS 45.03.415.

 (c) If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.

 (d) If a draft is accepted and the acceptor is not a bank, the obligation of the drawer to pay the draft, if the draft is dishonored by the acceptor, is the same as the obligation of an endorser under AS 45.03.415(a) and (c).

 (e) If a draft states that it is drawn “without recourse” or otherwise disclaims liability of the drawer to pay the draft, the drawer is not liable under (b) of this section to pay the draft if the draft is not a check. A disclaimer of the liability stated in (b) of this section is not effective if the draft is a check.

 (f) If a check is not presented for payment or given to a depositary bank for collection within 30 days after its date and the drawee suspends payments after expiration of the 30-day period without paying the check and, because of the suspension of payments, the drawer is deprived of funds maintained with the drawee to cover payment of the check, the drawer to the extent deprived of funds may discharge its obligation to pay the check by assigning to the person entitled to enforce the check the rights of the drawer against the drawee with respect to the funds.




Sec. 45.03.415. Obligation of endorser.
 (a) Subject to (b) — (e) of this section and AS 45.03.419(d), if an instrument is dishonored an endorser is obliged to pay the amount due on the instrument according to the terms of the instrument at the time it was endorsed or, if the endorser endorsed an incomplete instrument, according to its terms when completed to the extent stated in AS 45.03.115 and 45.03.407. The obligation of the endorser is owed to a person entitled to enforce the instrument or to a subsequent endorser who paid the instrument under this section.

 (b) If an endorsement states that it is made “without recourse” or otherwise disclaims liability of the endorser, the endorser is not liable under (a) of this section to pay the instrument.

 (c) If notice of dishonor of an instrument is required by AS 45.03.503 and notice of dishonor complying with that section is not given to an endorser, the liability of the endorser under (a) of this section is discharged.

 (d) If a draft is accepted by a bank after an endorsement is made, the liability of the endorser under (a) of this section is discharged.

 (e) If an endorser of a check is liable under (a) of this section and the check is not presented for payment or given to a depositary bank for collection within 30 days after the date the endorsement was made, the liability of the endorser under (a) of this section is discharged.




Sec. 45.03.416. Transfer warranties.
 (a) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by endorsement, to any subsequent transferee that
     (1) the warrantor is a person entitled to enforce the instrument;

     (2) all signatures on the instrument are authentic and authorized;

     (3) the instrument has not been altered;

     (4) the instrument is not subject to a defense or claim in recoupment of any party that can be asserted against the warrantor; and

     (5) the warrantor does not know of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.

 (b) A person to whom the warranties under (a) of this section are made and who took the instrument in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach.

 (c) The warranties stated in (a) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under (b) of this section is discharged to the extent of any loss caused by the delay in giving notice of the claim.

 (d) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.




Sec. 45.03.417. Presentment warranties.
 (a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that
     (1) the warrantor is, or was at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;

     (2) the draft has not been altered; and

     (3) the warrantor does not know that the signature of the drawer of the draft is unauthorized.

 (b) A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor. If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection.

 (c) If a drawee asserts a claim for breach of warranty under (a) of this section based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under AS 45.03.404 or 45.03.405, or that the drawer is precluded under AS 45.03.406 or AS 45.04.406 from asserting against the drawee the unauthorized endorsement or alteration.

 (d) If a dishonored draft is presented for payment to the drawer or an endorser, or if any other instrument is presented for payment to a party obliged to pay the instrument, and payment is received, the following rules apply:
     (1) the person obtaining payment and a prior transferor of the instrument warrant to the person making payment in good faith that the warrantor is, or was at the time the warrantor transferred the instrument, a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument;

     (2) the person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.

 (e) The warranties stated in (a) and (d) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under (b) or (d) of this section is discharged to the extent of any loss caused by the delay in giving notice of the claim.

 (f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.




Sec. 45.03.418. Payment or acceptance by mistake.
 (a) Except as provided in (c) of this section, if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that payment of the draft had not been stopped under AS 45.04.403 or that the signature of the drawer of the draft was authorized, the drawee may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance. Rights of the drawee under this subsection are not affected by failure of the drawee to exercise ordinary care in paying or accepting the draft.

 (b) Except as provided in (c) of this section, if an instrument has been paid or accepted by mistake and the case is not covered by (a) of this section, the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, recover the payment from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance.

 (c) The remedies provided by (a) or (b) of this section may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided by AS 45.03.407 or AS 45.04.407.

 (d) Notwithstanding AS 45.04.215, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under (a) or (b) of this section, the instrument is considered not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.




Sec. 45.03.419. Instruments signed for accommodation.
 (a) If an instrument is issued for value given for the benefit of a party to the instrument, the “accommodated party,” and another party to the instrument, the “accommodation party,” signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party “for accommodation.”

 (b) An accommodation party may sign the instrument as maker, drawer, acceptor, or endorser and, subject to (d) of this section, is obliged to pay the instrument in the capacity in which the accommodation party signs. The obligation of an accommodation party may be enforced notwithstanding a statute of frauds and whether or not the accommodation party receives consideration for the accommodation.

 (c) If the signature is an anomalous endorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to an instrument, a person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation. Except as provided in AS 45.03.605, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken by that person that the accommodation party signed the instrument for accommodation.

 (d) If the signature of a party to an instrument is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if
     (1) execution of judgment against the other party has been returned unsatisfied;

     (2) the other party is insolvent or in an insolvency proceeding;

     (3) the other party cannot be served with process; or

     (4) it is otherwise apparent that payment cannot be obtained from the other party.

 (e) An accommodation party who pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. An accommodated party who pays the instrument does not have a right of recourse against, and is not entitled to contribution from, an accommodation party.




Sec. 45.03.420. Conversion of instrument.
 (a) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument, or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by the issuer or acceptor of the instrument, or by a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.

 (b) In an action under (a) of this section, the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff’s interest in the instrument.

 (c) A representative, other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.




Article 5. Presentment, Notice of Dishonor, and Protest.


Sec. 45.03.501. Presentment.
 (a) “Presentment” means a demand made by or on behalf of a person entitled to enforce an instrument
     (1) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank; or

     (2) to accept a draft made to the drawee.

 (b) The following rules are subject to AS 45.04, agreement of the parties, and clearinghouse rules and the like:
     (1) presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written, or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one of two or more makers, acceptors, drawees, or other payors;

     (2) upon demand of the person to whom presentment is made, the person making presentment must
          (A) exhibit the instrument;

          (B) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so; and

          (C) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made;

     (3) without dishonoring the instrument, the party to whom presentment is made may
          (A) return the instrument for lack of a necessary endorsement; or

          (B) refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule; and

     (4) the party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment, if the party to whom presentment is made has established a cut-off hour not earlier than two o’clock in the afternoon for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cut-off hour.




Sec. 45.03.502. Dishonor.
 (a) Dishonor of a note is governed by the following rules:
     (1) if the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment;

     (2) if the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later; and

     (3) if the note is not payable on demand and (2) of this subsection does not apply, the note is dishonored if it is not paid on the day it becomes payable.

 (b) Dishonor of an unaccepted draft, other than a documentary draft, is governed by the following rules:
     (1) if a check is duly presented for payment to the payor bank other than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under AS 45.04.301 — 45.04.302, or becomes accountable for the amount of the check under AS 45.04.302;

     (2) if a draft is payable on demand and (1) of this subsection does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment;

     (3) if a draft is payable on a date stated in the draft, the draft is dishonored if presentment for
          (A) payment is duly made to the drawee and payment is not made on the day the draft becomes payable or the day of presentment, whichever is later; or

          (B) acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment; and

     (4) if a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.

 (c) Dishonor of an unaccepted documentary draft occurs according to the rules stated in (b)(2) — (4) of this section, except that payment or acceptance may be delayed without dishonor until no later than the close of the third business day of the drawee following the day on which payment or acceptance is required by (b)(2) — (4) of this section.

 (d) Dishonor of an accepted draft is governed by the following rules:
     (1) if the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment; and

     (2) if the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day it becomes payable or the day of presentment, whichever is later.

 (e) In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under AS 45.03.504, dishonor occurs without presentment if the instrument is not duly accepted or paid.

 (f) If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.




Sec. 45.03.503. Notice of dishonor.
 (a) The obligation of an endorser stated in AS 45.03.415(a) and the obligation of a drawer stated in AS 45.03.414(d) may not be enforced unless the endorser or drawer is given notice of dishonor of the instrument complying with this section or notice of dishonor is excused under AS 45.03.504(b).

 (b) Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written, or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor.

 (c) Subject to AS 45.03.504(c) with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument, or by another person within 30 days following the day on which the person receives notice of dishonor. With respect to other instruments, notice of dishonor must be given within 30 days following the day on which dishonor occurs.




Sec. 45.03.504. Excused presentment and notice of dishonor.
 (a) Presentment for payment or acceptance of an instrument is excused if
     (1) the person entitled to present the instrument cannot with reasonable diligence make presentment;

     (2) the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings;

     (3) by the terms of the instrument presentment is not necessary to enforce the obligation of endorsers or the drawer;

     (4) the drawer or endorser whose obligation is being enforced has waived presentment or otherwise does not have a reason to expect or a right to require that the instrument be paid or accepted; or

     (5) the drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.

 (b) Notice of dishonor is excused if by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.

 (c) Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.




Sec. 45.03.505. Evidence of dishonor.
 (a) The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:
     (1) a document regular in form as provided in (b) of this section that purports to be a protest;

     (2) a purported stamp or writing of the drawee, payor bank, or presenting bank on or accompanying the instrument stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor; or

     (3) a book or record of the drawee, payor bank, or collecting bank, kept in the usual course of business, that shows dishonor, even if there is no evidence of who made the entry.

 (b) A protest is a certificate of dishonor made by a United States consul or vice-consul or a notary public or other person authorized to administer oaths by the law of the place where dishonor occurs. The protest may be made upon information satisfactory to that person. The protest must identify the instrument and certify either that presentment has been made or, if not made, the reason why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been given to some or all parties.




Secs. 45.03.506 — 45.03.511. Time for acceptance or payment; dishonor; protest; waiver or excuse. [Repealed, § 127 ch 35 SLA 1993.]

Article 6. Discharge.


Sec. 45.03.601. Discharge and effect of discharge.
 (a) The obligation of a party to pay the instrument is discharged as stated in this chapter or by an act or agreement with the party that would discharge an obligation to pay money under a simple contract.

 (b) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.




Sec. 45.03.602. Payment.
 (a) Subject to (b) of this section, an instrument is paid to the extent payment is made by or on behalf of a party obliged to pay the instrument and to a person entitled to enforce the instrument. To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under AS 45.03.306 by another person.

 (b) The obligation of a party to pay the instrument is not discharged under (a) of this section if
     (1) a claim to the instrument under AS 45.03.306 is enforceable against the party receiving payment and
          (A) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction; or

          (B) in the case of an instrument other than a cashier’s check, teller’s check, or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument; or

     (2) the person making payment knows that the instrument is a stolen instrument and pays a person it knows is in wrongful possession of the instrument.




Sec. 45.03.603. Tender of payment.
 (a) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.

 (b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an endorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.

 (c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.




Sec. 45.03.604. Discharge by cancellation or renunciation.
 (a) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument
     (1) by an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party’s signature, or the addition of words to the instrument indicating discharge; or

     (2) by agreeing not to sue or otherwise renouncing rights against the party by a signed writing.

 (b) Cancellation or striking out of an endorsement under (a) of this section does not affect the status and rights of a party derived from the endorsement.




Sec. 45.03.605. Discharge of endorsers and accommodation parties.
 (a) Discharge, under AS 45.03.604, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having a right of recourse against the discharged party.

 (b) If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an endorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent the endorser or accommodation party proves that the extension caused loss to the endorser or accommodation party with respect to the right of recourse.

 (c) If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an endorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent the modification causes loss to the endorser or accommodation party with respect to the right of recourse. The loss suffered by the endorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.

 (d) If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an endorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or to the extent the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.

 (e) If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of a party who is jointly and severally liable with respect to the secured obligation is discharged to the extent the impairment causes the party asserting discharge to pay more than that party would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under (d) of this section, the party is considered to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.

 (f) Under (d) or (e) of this section, impairing value of an interest in collateral includes
     (1) failure to obtain or maintain perfection or recordation of the interest in collateral;

     (2) release of collateral without substitution of collateral of equal value;

     (3) failure to perform a duty to preserve the value of collateral owed, under AS 45.29 or other law, to a debtor or surety or other person secondarily liable; or

     (4) failure to comply with applicable law in disposing of collateral.

 (g) An accommodation party is not discharged under (b), (c), or (d) of this section unless the person entitled to enforce the instrument knows of the accommodation or has notice under AS 45.03.419(c) that the instrument was signed for accommodation.

 (h) A party is not discharged under this section if
     (1) the party asserting discharge consents to the event or conduct that is the basis of the discharge; or

     (2) the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral.

 (i) In this section, the term “endorser” includes a drawer having the obligation described in AS 45.03.414(d).




Secs. 45.03.606 — 45.03.805. Impairment of recourse or collateral; advice of international sight draft; miscellaneous provisions. [Repealed, § 127 ch 35 SLA 1993.]

Article 1. General Provisions and Definitions.


Chapter 04. Bank Deposits and Collections.

Sec. 45.04.101. Short title.
This chapter may be cited as Uniform Commercial Code — Bank Deposits and Collections.


Sec. 45.04.102. Applicability.
 (a) To the extent that items within this chapter are also within AS 45.03 and 45.08, they are subject to those chapters. If there is conflict, this chapter governs AS 45.03, but AS 45.08 governs this chapter.

 (b) The liability of a bank for action or nonaction with respect to an item handled by it for purposes of presentment, payment, or collection is governed by the law of the place where the bank is located. In the case of action or nonaction by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located.




Sec. 45.04.103. Variation by agreement; measure of damages; certain action constituting ordinary care.
 (a) The effect of this chapter may be varied by agreement, but the parties to the agreement may not disclaim a bank’s responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank’s responsibility is to be measured if the standards are not manifestly unreasonable.

 (b) Federal Reserve regulations and operating circulars, clearinghouse rules, and the like have the effect of agreements under (a) of this section, whether or not specifically assented to by all parties interested in items handled.

 (c) Action or nonaction approved by this chapter or under Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with clearinghouse rules and the like or with a general banking usage not disapproved by this chapter is prima facie the exercise of ordinary care.

 (d) The specification or approval of certain procedures by this chapter is not disapproval of other procedures that may be reasonable under the circumstances.

 (e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care, and if there is also bad faith it includes any other damages the party suffered as a proximate consequence.




Sec. 45.04.104. Definitions and index of definitions.
 (a) In this chapter, unless the context otherwise requires,
     (1) “account” means a deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;

     (2) “afternoon” means the period of a day between noon and midnight;

     (3) “banking day” means that part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;

     (4) “clearinghouse” means an association of banks or other payors regularly clearing items;

     (5) “customer” means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;

     (6) “documentary draft” means a draft to be presented for acceptance or payment if specified documents, certificated securities under AS 45.08.102, instructions for uncertificated securities under AS 45.08.102, or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;

     (7) “draft” means a draft as defined in AS 45.03.104 or an item, other than an instrument, that is an order;

     (8) “drawee” means a person ordered in a draft to make payment;

     (9) “item” means an instrument or a promise or order to pay money handled by a bank for collection or payment; the term does not include a credit or debit card slip;

     (10) “midnight deadline” with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice, or from which the time for taking action commences to run, whichever is later;

     (11) “settle” means to pay in cash, by clearinghouse settlement, in a charge or credit or by remittance, or otherwise as agreed; a settlement may be either provisional or final;

     (12) “suspends payments” with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over, or that it ceases or refuses to make payments in the ordinary course of business.

 (b) Other definitions applying to this chapter and the sections in which the definitions appear are:
     (1) “agreement for electronic presentment” in AS 45.04.110;

     (2) “bank” in AS 45.04.105;

     (3) “collecting bank” in AS 45.04.105;

     (4) “depositary bank” in AS 45.04.105;

     (5) “intermediary bank” in AS 45.04.105;

     (6) “payor bank” in AS 45.04.105;

     (7) “presenting bank” in AS 45.04.105;

     (8) “presentment notice” in AS 45.04.110.

 (c) The following definitions in AS 45.03 apply to this chapter:
     (1) “acceptance” (AS 45.03.409);

     (2) “alteration” (AS 45.03.407);

     (3) “cashier’s check” (AS 45.03.104);

     (4) “certificate of deposit” (AS 45.03.104);

     (5) “certified check” (AS 45.03.409);

     (6) “check” (AS 45.03.104);

     (7) “control” (AS 45.07.116);

     (8) [Repealed, § 113 ch 44 SLA 2009.]
     (9) “holder in due course” (AS 45.03.302);

     (10) “instrument” (AS 45.03.104);

     (11) “notice of dishonor” (AS 45.03.503);

     (12) “order” (AS 45.03.103);

     (13) “ordinary care” (AS 45.03.103);

     (14) “person entitled to enforce” (AS 45.03.301);

     (15) “presentment” (AS 45.03.501);

     (16) “promise” (AS 45.03.103);

     (17) “prove” (AS 45.03.103);

     (18) “teller’s check” (AS 45.03.104);

     (19) “unauthorized signature” (AS 45.03.403).

 (d) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.04.105. “Bank”; “depositary bank”; “intermediary bank”; “collecting bank”; “payor bank”; “presenting bank.”
In this chapter,
     (1) “bank” means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company;

     (2) “collecting bank” means a bank handling an item for collection except the payor bank;

     (3) “depositary bank” means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter;

     (4) “intermediary bank” means a bank to which an item is transferred in course of collection except the depositary or payor bank;

     (5) “payor bank” means a bank that is the drawee of a draft;

     (6) “presenting bank” means a bank presenting an item except a payor bank.




Sec. 45.04.106. Payable through or payable at bank; collecting bank.
 (a) If an item states that it is “payable through” a bank identified in the item, the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and the item may be presented for payment only by or through the bank.

 (b) If an item states that it is “payable at” a bank identified in the item, the item is equivalent to a draft drawn on the bank.

 (c) If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a co-drawee or a collecting bank, the bank is a collecting bank.




Sec. 45.04.107. Separate office of a bank.
A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notices or orders must be given under this chapter and under AS 45.03.


Sec. 45.04.108. Time of receipt of items.
 (a) To allow time to process items, prove balances, and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of two o’clock in the afternoon or later as a cutoff hour for the handling of money and items and the making of entries on the books of the bank.

 (b) An item or deposit of money received on a day after a cutoff hour so fixed or after the close of the banking day may be treated as received at the opening of the next banking day.




Sec. 45.04.109. Delays.
 (a) Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of a person involved, may waive, modify, or extend time limits imposed or permitted by the code for a period not exceeding two additional banking days without discharge of drawers or endorsers or liability to its transferor or a prior party.

 (b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by the code or by instructions is excused if the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment, or other circumstances beyond the control of the bank, and if the bank exercises the diligence circumstances require.




Sec. 45.04.110. Electronic presentment.
 (a) “Agreement for electronic presentment” means an agreement, clearinghouse rule, or Federal Reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item, a “presentment notice,” rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor, and other matters concerning items subject to the agreement.

 (b) Presentment of an item under an agreement for presentment is made when the presentment notice is received.

 (c) If presentment is made by presentment notice, a reference to “item” or “check” in this chapter means the presentment notice unless the context otherwise indicates.




Sec. 45.04.111. Statute of limitations.
An action to enforce an obligation, duty, or right arising under this chapter must be commenced within three years after the cause of action accrues.


Article 2. Collection of Items: Depositary and Collecting Banks.


Sec. 45.04.201. Status of collecting bank as agent and provisional status of credits; applicability; item endorsed “pay any bank”.
 (a) Unless a contrary intent clearly appears and before a settlement given by a collecting bank for an item becomes final, the bank, with respect to the item, is an agent or subagent of the owner of the item and a settlement given for the item is provisional. This provision applies regardless of the form of endorsement or lack of endorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and the rights of the owner to proceeds of the item are subject to rights of a collecting bank such as those resulting from outstanding advances on the item and rights of recoupment or setoff. If an item is handled by banks for purposes of presentment, payment, collection, or return, the relevant provisions of this chapter apply even though action of the parties clearly establishes that a particular bank has purchased the item and is the owner of it.

 (b) After an item has been endorsed with the words “pay any bank” or the like, only a bank may acquire the rights of a holder until the item has been
     (1) returned to the customer initiating collection; or

     (2) specially endorsed by a bank to a person who is not a bank.




Sec. 45.04.202. Responsibility for collection or return; when action timely.
 (a) A collecting bank must exercise ordinary care in
     (1) presenting an item or sending it for presentment;

     (2) sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank’s transferor after learning that the item has not been paid or accepted, as the case may be;

     (3) settling for an item when the bank receives final settlement; and

     (4) notifying its transferor of a loss or delay in transit within a reasonable time after discovery of the loss or delay.

 (b) A collecting bank exercises ordinary care under (a) of this section by taking proper action before its midnight deadline following receipt of an item, notice, or settlement; taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.

 (c) Subject to (a)(1) of this section, a bank is not liable for the insolvency, neglect, misconduct, mistake, or default of another bank or person or for loss or destruction of an item in the possession of others or in transit.




Sec. 45.04.203. Effect of instructions.
Subject to the provisions concerning conversion of instruments (AS 45.03.420) and restrictive endorsements (AS 45.03.206), only a collecting bank’s transferor can give instructions that affect the bank or constitute notice to it, and a collecting bank is not liable to prior parties for an action taken under these instructions or in accordance with an agreement with its transferor.


Sec. 45.04.204. Methods of sending and presenting; sending directly to payor bank.
 (a) A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of the items on hand, the cost of collection involved, and the method generally used by it or others to present the items.

 (b) A collecting bank may send an item
     (1) directly to the payor bank;

     (2) to a nonbank payor if authorized by its transferor; and

     (3) other than documentary drafts to a nonbank payor, if authorized by federal reserve regulation or operating circular, clearinghouse rule, or the like.

 (c) Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.




Sec. 45.04.205. Depositary bank holder of unendorsed item.
If a customer delivers an item to a depositary bank for collection
     (1) the depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer endorses the item, and, if the bank satisfies the other requirements of AS 45.03.302, it is a holder in due course; and

     (2) the depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer’s account.




Sec. 45.04.206. Transfer between banks.
Any agreed method that identifies the transferor bank is sufficient for the item’s further transfer to another bank.


Sec. 45.04.207. Transfer warranties.
 (a) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that
     (1) the warrantor is a person entitled to enforce the item;

     (2) all signatures on the item are authentic and authorized;

     (3) the item has not been altered;

     (4) the item is not subject to a defense or claim in recoupment under AS 45.03.305(a) of any party that can be asserted against the warrantor; and

     (5) the warrantor does not have knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.

 (b) If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item according to the terms of the item at the time it was transferred, or, if the transfer was of an incomplete item, according to its terms when completed as stated in AS 45.03.115 and 45.03.407. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection by an endorsement stating that it is made “without recourse” or otherwise disclaiming liability.

 (c) A person to whom the warranties under (a) of this section are made and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the item plus expenses and loss of interest incurred as a result of the breach.

 (d) The warranties stated in (a) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.

 (e) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.




Sec. 45.04.208. Presentment warranties.
 (a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that
     (1) the warrantor is, or was at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;

     (2) the draft has not been altered; and

     (3) the warrantor does not have knowledge that the signature of the purported drawer of the draft is unauthorized.

 (b) A drawee making payment may recover from a warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by a failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor, and if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.

 (c) If a drawee asserts a claim for breach of warranty under (a) of this section based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under AS 45.03.404 or 45.03.405 or the drawer is precluded under AS 45.03.406 or AS 45.04.406 from asserting against the drawee the unauthorized endorsement or alteration.

 (d) If a dishonored draft is presented for payment to the drawer or an endorser, or if any other item is presented for payment to a party obliged to pay the item, and the item is paid, the person obtaining payment and a prior transferor of the item warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the item, a person entitled to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the item. The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.

 (e) The warranties stated in (a) and (d) of this section may not be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.

 (f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.




Sec. 45.04.209. Encoding and retention warranties.
 (a) A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payor bank or other payor that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.

 (b) A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payor bank or other payor that retention and presentment of the item comply with the agreement. If a customer of a depositary bank undertakes to retain an item, that bank also makes this warranty.

 (c) A person to whom warranties are made under this section and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, plus expenses and loss of interest incurred as a result of the breach.




Sec. 45.04.210. Security interest of collecting bank in items, accompanying documents, and proceeds.
 (a) A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either
     (1) in case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied;

     (2) in case of an item for which it has given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or

     (3) if it makes an advance on or against the item.

 (b) If credit given for several items received at one time or under a single agreement is withdrawn or applied in part, the security interest remains upon all the items, accompanying documents, or the proceeds of either. For the purpose of this section, credits first given are first withdrawn.

 (c) Receipt by a collecting bank of a final settlement for an item is a realization on its security interest in the item, accompanying documents, and proceeds. So long as the bank does not receive final settlement for the item or give up possession of the item or possession or control of the accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to AS 45.29, but
     (1) a security agreement is not necessary to make the security interest enforceable (AS 45.29.203(b)(3)(A));

     (2) filing is not required to perfect the security interest; and

     (3) the security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.




Sec. 45.04.211. When bank gives value for purposes of holder in due course.
To determine its status as a holder in due course, a bank has given value to the extent it has a security interest in an item, if the bank otherwise complies with the requirements of AS 45.03.302 on what constitutes a holder in due course.


Sec. 45.04.212. Presentment by notice of item not payable by, through, or at a bank; liability of drawer or endorser.
 (a) Unless otherwise instructed, a collecting bank may present an item not payable by, through, or at a bank by sending to the party to accept or pay a written notice that the bank holds the item for acceptance or payment. The notice must be sent in time to be received on or before the day when presentment is due and the bank must meet any requirement of the party to accept or pay under AS 45.03.501 by the close of the bank’s next banking day after it knows of the requirement.

 (b) If presentment is made by notice, and payment, acceptance, or request for compliance with a requirement under AS 45.03.501 is not received by the close of business on the day after maturity or, in the case of demand items, by the close of business on the third banking day after notice was sent, the presenting bank may treat the item as dishonored and charge a drawer or endorser by sending the drawer or endorser notice of the facts.




Sec. 45.04.213. Medium and time of settlement by bank.
 (a) With respect to settlement by a bank, the medium and time of settlement may be prescribed by Federal Reserve regulations or circulars, clearinghouse rules, and the like, or by agreement. In the absence of a prescription
     (1) the medium of settlement is cash or credit to an account in a Federal Reserve Bank of or specified by the person to receive settlement; and

     (2) the time of settlement is with respect to tender of settlement
          (A) by cash, a cashier’s check, or teller’s check, when the cash or check is sent or delivered;

          (B) by credit in an account in a Federal Reserve Bank, when the credit is made;

          (C) by a credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or

          (D) by a funds transfer, when payment is made to the person receiving settlement.

 (b) If the tender of settlement is not by a medium authorized by (a) of this section or the time of settlement is not fixed by (a) of this section, settlement does not occur until the tender of settlement is accepted by the person receiving settlement.

 (c) If settlement for an item is made by cashier’s check or teller’s check and the person receiving settlement, before its midnight deadline,
     (1) presents or forwards the check for collection, settlement is final when the check is finally paid; or

     (2) fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.

 (d) If settlement for an item is made by giving authority to charge the account of the bank giving settlement in the bank receiving settlement, settlement is final when the charge is made by the bank receiving settlement if there are funds available in the account for the amount of the item.




Sec. 45.04.214. Right of charge back or refund; liability of collecting bank; return of item.
 (a) If a collecting bank has made provisional settlement with its customer for an item and fails, by reason of dishonor, suspension of payments by a bank, or otherwise, to receive a settlement for the item that is or becomes final, the bank may revoke the settlement given by it, charge back the amount of a credit given for the item to its customer’s account, or obtain refund from its customer, whether or not it is able to return the items, if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. If the return or notice is delayed beyond the bank’s midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay. These rights to revoke, charge back, and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final.

 (b) A collecting bank returns an item when it is sent or delivered to the bank’s customer or transferor or according to its instructions.

 (c) A depositary bank that is also the payor may charge back the amount of an item to its customer’s account or obtain refund in accordance with AS 45.04.301, the section governing return of an item received by a payor bank for credit on its books.

 (d) The right to charge back is not affected by
     (1) previous use of a credit given for the item; or

     (2) failure by a bank to exercise ordinary care with respect to the item, but a bank so failing remains liable.

 (e) A failure to charge back or claim refund does not affect other rights of the bank against the customer or another party.

 (f) If credit is given in dollars as the equivalent of the value of an item payable in foreign money, the dollar amount of a charge back or refund must be calculated on the basis of the bank offered spot rate for the foreign money prevailing on the day when the person entitled to the charge back or refund learns that it will not receive payment in ordinary course.




Sec. 45.04.215. Final payment of item by payor bank; when provisional debits and credits become final; when certain credits become available for withdrawal.
 (a) An item is finally paid by a payor bank when the bank has first
     (1) paid the item in cash;

     (2) settled for the item without having a right to revoke the settlement under statute, clearinghouse rule, or agreement; or

     (3) made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearinghouse rule, or agreement.

 (b) If provisional settlement for an item does not become final, the item is not finally paid.

 (c) If provisional settlement for an item between the presenting and payor banks is made through a clearinghouse or by debits or credits in an account between them, then, to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor banks or between the presenting and successive prior collecting banks seriatim, they become final upon final payment of the item by the payor bank.

 (d) If a collecting bank receives a settlement for an item that is or becomes final, the bank is accountable to its customer for the amount of the item and a provisional credit given for the item in an account with its customer becomes final.

 (e) Subject to applicable law stating a time for availability of funds and a right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in a customer’s account becomes available for withdrawal as of right if the bank
     (1) has received a provisional settlement for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time;

     (2) is both the depositary bank and the payor bank, and the item is finally paid, at the opening of the bank’s second banking day following receipt of the item.

 (f) Subject to applicable law stating a time for availability of funds and a right of a bank to apply a deposit to an obligation of the depositor, a deposit of money becomes available for withdrawal as of right at the opening of the bank’s next banking day after receipt of the deposit.




Sec. 45.04.216. Insolvency and preference.
 (a) If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid, the item shall be returned by the receiver, trustee, or agent in charge of the closed bank to the presenting bank or the closed bank’s customer.

 (b) If a payor bank finally pays an item and suspends payments without making a settlement for the item with its customer or the presenting bank, which settlement is or becomes final, the owner of the item has a preferred claim against the payor bank.

 (c) If a payor bank gives or a collecting bank gives or receives a provisional settlement for an item and later suspends payments, the suspension does not prevent or interfere with the settlement’s becoming final if the finality occurs automatically upon the lapse of certain time or the happening of certain events.

 (d) If a collecting bank receives from subsequent parties settlement for an item, which settlement is or becomes final and the bank suspends payments without making a settlement for the item with its customer, which settlement is or becomes final, the owner of the item has a preferred claim against the collecting bank.




Article 3. Collection of Items: Payor Banks.


Sec. 45.04.301. Deferred posting; recovery of payment by return of items; time of dishonor; return of items by payor bank.
 (a) If a payor bank settles for a demand item other than a documentary draft presented other than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it
     (1) returns the item; or

     (2) sends written notice of dishonor or nonpayment if the item is unavailable for return.

 (b) If a demand item is received by a payor bank for credit on its books, it may return the item or send notice of dishonor and may revoke a credit given or recover the amount of the credit withdrawn by its customer if it acts within the time limit and in the manner specified in (a) of this section.

 (c) Unless previous notice of dishonor has been sent, an item is dishonored at the time when, for purposes of dishonor, it is returned or notice is sent in accordance with this section.

 (d) An item is returned
     (1) as to an item presented through a clearinghouse, when it is delivered to the presenting or last collecting bank or to the clearinghouse or is sent or delivered in accordance with clearinghouse rules; or

     (2) in all other cases, when it is sent or delivered to the bank’s customer or transferor or under the instructions of the customer or transferor.




Sec. 45.04.302. Payor bank’s responsibility for late return of item.
 (a) If an item is presented to and received by a payor bank, the bank is accountable for the amount of
     (1) a demand item, other than a documentary draft, whether properly payable or not, if the bank,
          (A) in any case in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it; or

          (B) whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; or

     (2) any other properly payable item unless, within the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.

 (b) The liability of a payor bank to pay an item under (a) of this section is subject to defenses based on breach of a presentment warranty under AS 45.04.208 or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.




Sec. 45.04.303. When items subject to notice, stop-payment order, legal process, or setoff; order in which items may be charged or certified.
 (a) Any knowledge, notice, or stop-payment order received by, legal process served upon, or setoff exercised by a payor bank is too late to terminate, suspend, or modify the bank’s right or duty to pay an item or to charge its customer’s account for the item if the knowledge, notice, stop-payment order, or legal process is received or served and a reasonable time for the bank to act on it expires or the setoff is exercised after the earliest of the following:
     (1) the bank accepts or certifies the item;

     (2) the bank pays the item in cash;

     (3) the bank settles for the item without having a right to revoke the settlement under statute, clearinghouse rule, or agreement;

     (4) the bank becomes accountable for the amount of the item under AS 45.04.302, which deals with the payor bank’s responsibility for late return of items; or

     (5) with respect to checks, a cutoff hour no earlier than one hour after the opening of the next banking day after the banking day on which the bank received the check and no later than the close of that next banking day or, if a cutoff hour is not fixed, the close of the next banking day after the banking day on which the bank received the check.

 (b) Subject to (a) of this section, items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.




Article 4. Relationship Between Payor Bank and Its Customer.


Sec. 45.04.401. When bank may charge customer’s account.
 (a) A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and the bank.

 (b) A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.

 (c) A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. The notice is effective for the period stated in AS 45.04.403(b) for stop-payment orders, and must be received at a time and in a manner that afford the bank a reasonable opportunity to act on it before the bank takes any action with respect to the check described in AS 45.04.303. If a bank charges against the account of a customer a check before the date stated in the notice of postdating, the bank is liable for damages for the loss resulting from its act. The loss may include damages for dishonor of subsequent items under AS 45.04.402.

 (d) A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to
     (1) the original terms of the altered item; or

     (2) the terms of the completed item, even though the bank knows the item has been completed, unless the bank has notice that the completion was improper.




Sec. 45.04.402. Bank’s liability to customer for wrongful dishonor; time of determining insufficiency of account.
 (a) Except as otherwise provided in this chapter, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.

 (b) A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. Liability is limited to actual damages proved and may include damages for an arrest or prosecution of the customer or other consequential damages. Whether any consequential damages are proximately caused by the wrongful dishonor is a question of fact to be determined in each case.

 (c) A payor bank’s determination of the customer’s account balance on which a decision to dishonor for insufficiency of available funds is based may be made at any time between the time the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and the bank does not need to make more than one determination. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluating the bank’s decision to dishonor the item, the account balance at that time is determinative of whether a dishonor for insufficiency of available funds is wrongful.




Sec. 45.04.403. Customer’s right to stop payment; burden of proof of loss.
 (a) A customer, or any person authorized to draw on the account if there is more than one person, may stop payment of any item drawn on the customer’s account or close the account by an order to the bank describing the item or account with reasonable certainty, received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in AS 45.04.303. If the signature of more than one person is required to draw on an account, any of these persons may stop payment or close the account.

 (b) A stop-payment order is effective for six months, but it lapses after 14 calendar days if the original order was oral and was not confirmed in writing within that period. A stop-payment order may be renewed for additional six-month periods by a writing given to the bank within a period during which the stop-payment order is effective.

 (c) The burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a stop-payment order or order to close an account is on the customer. The loss from payment of an item contrary to a stop-payment order may include damages for dishonor of subsequent items under AS 45.04.402.




Sec. 45.04.404. Bank not obligated to pay check more than six months old.
A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, that is presented more than six months after its date, but it may charge its customer’s account for a payment made later in good faith.


Sec. 45.04.405. Death or incompetence of a customer.
 (a) A payor or collecting bank’s authority to accept, pay, or collect an item or to account for proceeds of its collection if otherwise effective is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is undertaken if the bank does not know of an adjudication of incompetence. Neither death nor incompetence of a customer revokes this authority to accept, pay, collect, or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.

 (b) Even with knowledge a bank may, for 10 days after the date of death, pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.




Sec. 45.04.406. Customer’s duty to discover and report unauthorized signature or alteration.
 (a) A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonably to identify the items paid. The statement of account provides sufficient information if the item is described by item number, amount, and date of payment.

 (b) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of seven years after receipt of the items. A customer may request an item from the bank that paid the item, and that bank must provide in a reasonable time either the item or, if the item has been destroyed or is not otherwise obtainable, a legible copy of the item.

 (c) If a bank sends or makes available a statement of account or items under (a) of this section, the customer must exercise reasonable promptness in examining the statement or the items to determine whether a payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.

 (d) If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by (c) of this section, the customer is precluded from asserting against the bank the customer’s unauthorized signature or
     (1) any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and

     (2) alteration by the same wrongdoer on any other item paid in good faith by the bank, if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account and notify the bank.

 (e) If (d) of this section applies and the customer proves that the bank failed to exercise ordinary care in paying the item and that the failure substantially contributed to loss, the loss is allocated between the customer precluded and the bank asserting the preclusion according to the extent to which the failure of the customer to comply with (c) of this section and the failure of the bank to exercise ordinary care contributed to the loss. If the customer proves that the bank did not pay the item in good faith, the preclusion under (d) of this section does not apply.

 (f) Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer under (a) of this section discover and report the customer’s unauthorized signature on or an alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration. If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under AS 45.04.208 with respect to the unauthorized signature or alteration to which the preclusion applies.




Sec. 45.04.407. Payor bank’s right to subrogation on improper payment.
If a payor bank has paid an item over the order of the drawer or maker to stop payment, or after an account has been closed, or otherwise under circumstances giving a basis for objection by the drawer or maker, to prevent unjust enrichment and only to the extent necessary to prevent loss to the bank by reason of its payment of the item, the payor bank is subrogated to the rights
     (1) of a holder in due course on the item against the drawer or maker;

     (2) of the payee or any other holder of the item against the drawer or maker either on the item or under the transaction out of which the item arose; and

     (3) of the drawer or maker against the payee or another holder of the item with respect to the transaction out of which the item arose.




Article 5. Collection of Documentary Drafts.


Sec. 45.04.501. Handling of documentary drafts; duty to send for presentment and to notify customer of dishonor.
A bank that takes a documentary draft for collection must present or send the draft and accompanying documents for presentment and, upon learning that the draft has not been paid or accepted in due course, must seasonably notify its customer of this fact even though it may have discounted or bought the draft or extended credit available for withdrawal as of right.


Sec. 45.04.502. Presentment of “on arrival” drafts.
If a draft or the relevant instructions require presentment “on arrival,” “when goods arrive,” or the like, the collecting bank need not present until in its judgment a reasonable time for arrival of the goods has expired. Refusal to pay or accept because the goods have not arrived is not dishonor; the bank must notify its transferor of this refusal, but need not present the draft again until it is instructed to do so or learns of the arrival of the goods.


Sec. 45.04.503. Responsibility of presenting bank for documents and goods; report of reasons for dishonor; referee in case of need.
 (a) Unless otherwise instructed and except as provided in AS 45.05, a bank presenting a documentary draft
     (1) must deliver the documents to the drawee on acceptance of the draft if it is payable more than three days after presentment; otherwise, only on payment; and

     (2) upon dishonor, either in the case of presentment for acceptance or presentment for payment, may seek and follow instructions from a referee in case of need designated in the draft or, if the presenting bank does not choose to use a referee’s services, it must use diligence and good faith to ascertain the reason for dishonor, must notify its transferor of the dishonor and of the results of its effort to ascertain the reasons for dishonor, and must request instructions.

 (b) A presenting bank is under no obligation with respect to goods represented by the documents except to follow reasonable instructions seasonably received; it has a right to reimbursement for expenses incurred in following instructions and to prepayment of or indemnity for these expenses.




Sec. 45.04.504. Privilege of presenting bank to deal with goods; security interest for expenses.
 (a) A presenting bank that, following the dishonor of a documentary draft, seasonably requests instructions but does not receive them within a reasonable time, may store, sell, or otherwise deal with the goods in a reasonable manner.

 (b) For its reasonable expenses incurred by action under (a) of this section, the presenting bank has a lien upon the goods or their proceeds, which may be foreclosed in the same manner as an unpaid seller’s lien.




Chapter 05. Letters of Credit.

Secs. 45.05.002 — 45.05.018. [Renumbered as AS 45.01.101 — 45.01.109.]
Secs. 45.05.020 — 45.05.034. [Renumbered as AS 45.01.201 — 45.01.208.]
Secs. 45.05.036 — 45.05.048. [Renumbered as AS 45.02.101 — 45.02.107.]
Secs. 45.05.050 — 45.05.068. [Renumbered as AS 45.02.201 — 45.02.210.]
Secs. 45.05.070 — 45.05.100. [Renumbered as AS 45.02.301 — 45.02.316.]
Sec. 45.05.101. Short title.
This chapter shall be known and may be cited as Uniform Commercial Code — Letters of Credit.


Sec. 45.05.102. Definitions.
 (a) In this chapter,
     (1) “adviser” means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been issued, confirmed, or amended;

     (2) “applicant” means a person at whose request or for whose account a letter of credit is issued; “applicant” includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer;

     (3) “beneficiary” means a person who under the terms of a letter of credit is entitled to have the letter of credit’s complying presentation honored; “beneficiary” includes a person to whom drawing rights have been transferred under a transferable letter of credit;

     (4) “confirmer” means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another;

     (5) “dishonor” of a letter of credit means the failure timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit;

     (6) “document” means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion that is
          (A) presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in AS 45.05.108(e);

          (B) capable of being examined for compliance with the terms and conditions of the letter of credit; and

          (C) not oral;

     (7) “good faith” means honesty in fact in the conduct or transaction concerned;

     (8) “honor” of a letter of credit means performance of the issuer’s undertaking in the letter of credit to pay or deliver an item of value; unless the letter of credit provides otherwise, “honor” occurs
          (A) upon payment;

          (B) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment; or

          (C) if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance;

     (9) “issuer” means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes;

     (10) “letter of credit” means a definite undertaking that satisfies the requirements of AS 45.05.104 by an issuer to a beneficiary at the request or for the account of an applicant, or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value;

     (11) “nominated person” means a person whom the issuer
          (A) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit; and

          (B) undertakes by agreement or custom and practice to reimburse;

     (12) “presentation” means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit;

     (13) “presenter” means a person making a presentation as or on behalf of a beneficiary or nominated person;

     (14) “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;

     (15) “successor of a beneficiary” means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, an executor, a personal representative, a trustee in bankruptcy, a debtor in possession, a liquidator, and a receiver.

 (b) The following definitions that apply to this chapter and the sections in which they appear are
     (1) “accept” or “acceptance” (AS 45.03.409);

     (2) “value” (AS 45.03.303 and AS 45.04.211).

 (c) AS 45.01 contains certain additional general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.05.103. Scope.
 (a) This chapter applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.

 (b) The statement of a rule in this chapter does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this chapter.

 (c) With the exception of this subsection, (a) and (d) of this section, AS 45.05.102(a)(9) and (10), 45.05.106(d), and 45.05.114(d), and except to the extent prohibited in AS 45.01.302 and AS 45.05.117(d), the effect of this chapter may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this chapter.

 (d) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or that underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.




Sec. 45.05.104. Formal requirements.
A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated
     (1) by a signature; or

     (2) under the agreement of the parties or the standard practice referred to in AS 45.05.108(e).




Sec. 45.05.105. Consideration.
Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.


Sec. 45.05.106. Issuance, amendment, cancellation, and duration.
 (a) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it provides that it is revocable.

 (b) After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmer, and issuer are not affected by an amendment or cancellation to which the beneficiary, applicant, confirmer, or issuer has not consented, except to the extent the letter of credit provides that the letter of credit is revocable or that the issuer may amend or cancel the letter of credit without the consent.

 (c) If there is no stated expiration date or other provision that determines the letter of credit’s duration, a letter of credit expires one year after its stated date of issuance or, if a date of issuance is not stated, after the date on which the letter of credit is issued.

 (d) A letter of credit that states that it is perpetual expires five years after its stated date of issuance or, if a date of issuance is not stated, after the date on which the letter of credit is issued.




Sec. 45.05.107. Confirmer, nominated person, and adviser.
 (a) A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of the confirmer’s confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at the request and for the account of the issuer.

 (b) A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.

 (c) A person requested to advise may decline to act as an adviser. An adviser that is not a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to the issuer and to the beneficiary to advise accurately as to the terms of the letter of credit, confirmation, amendment, or advice received by the person requested to advise, and undertakes to the beneficiary to check the apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit, confirmation, or amendment is enforceable as issued.

 (d) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under (c) of this section. The terms in the notice to the transferee beneficiary may differ from the terms in a notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who notifies the transferee beneficiary.




Sec. 45.05.108. Issuer’s rights and obligations.
 (a) Except as otherwise provided in AS 45.05.109, an issuer shall honor a presentation that, as determined by the standard practice referred to in (e) of this section, appears on its face to comply strictly with the terms and conditions of the letter of credit. Except as otherwise provided in AS 45.05.113 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.

 (b) An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of the issuer’s receipt of documents,
     (1) to honor the presentation;

     (2) if the letter of credit provides for honor to be completed more than seven business days after presentation, to accept a draft or incur a deferred obligation; or

     (3) to give notice to the presenter of discrepancies in the presentation.

 (c) Except as otherwise provided in (d) of this section, an issuer is precluded from asserting a discrepancy as a basis for dishonor if
     (1) timely notice is not given; or

     (2) the discrepancy is not stated in the notice, if timely notice is given.

 (d) Failure to give the notice specified in (b) of this section or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in AS 45.05.109(a) or expiration of the letter of credit before presentation.

 (e) An issuer shall observe the standard practice of financial institutions that regularly issue letters of credit. A determination of the issuer’s observance of the standard practice is a matter of interpretation for a court. A court shall offer the parties a reasonable opportunity to present evidence of the standard practice.

 (f) An issuer is not responsible for
     (1) the performance or nonperformance of the underlying contract, arrangement, or transaction;

     (2) an act or omission of others; or

     (3) observance or knowledge of the usage of a particular trade, other than the standard practice referred to in (e) of this section.

 (g) If an undertaking constituting a letter of credit under AS 45.05.102(a)(10) contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.

 (h) An issuer that dishonors a presentation shall return the documents or hold them at the disposal of, and send advice to that effect to, the presenter.

 (i) An issuer that honors a presentation as permitted or required by this chapter
     (1) is entitled to be reimbursed by the applicant in immediately available funds not later than the date of the payment of funds;

     (2) takes the documents free of claims of the beneficiary or presenter;

     (3) is precluded from asserting a right of recourse on a draft under AS 45.03.414 — 45.03.415;

     (4) except as otherwise provided in AS 45.05.110 and 45.05.117, is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender that are apparent on the face of the presentation; and

     (5) is discharged to the extent of the issuer’s performance under the letter of credit unless the issuer honored a presentation in which a required signature of a beneficiary was forged.




Sec. 45.05.109. Fraud and forgery.
 (a) If a presentation is made that appears on its face to comply strictly with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, the issuer
     (1) shall honor the presentation, if honor is demanded by
          (A) a nominated person that has given value in good faith and without notice of forgery or material fraud;

          (B) a confirmer that has honored its confirmation in good faith;

          (C) a holder in due course of a draft that was drawn under the letter of credit and that was taken after acceptance by the issuer or nominated person; or

          (D) an assignee of the issuer’s or nominated person’s deferred obligation if the obligation was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and

     (2) acting in good faith, may honor or dishonor the presentation in a case not covered by (1) of this subsection.

 (b) If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that
     (1) the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer;

     (2) a beneficiary, issuer, or nominated person who may be adversely affected is adequately protected against loss that the beneficiary, issuer, or nominated person may suffer because the relief is granted;

     (3) all of the conditions that entitle a person to the relief under the law of this state are met; and

     (4) on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material fraud, and the person demanding honor does not qualify for protection under (a)(1) of this section.




Sec. 45.05.110. Warranties.
 (a) If its presentation is honored, the beneficiary warrants to
     (1) the issuer, another person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in AS 45.05.109(a); and

     (2) the applicant that the drawing does not violate an agreement between the applicant and beneficiary or another agreement intended by them to be augmented by the letter of credit.

 (b) The warranties in (a) of this section are in addition to warranties arising under AS 45.03, AS 45.04, AS 45.07, and AS 45.08 because of the presentation or transfer of documents covered by those chapters.




Sec. 45.05.111. Remedies.
 (a) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation. If the issuer’s obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant’s election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant’s recovery from the issuer is reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation, the claimant does not need to present a document.

 (b) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of the issuer’s obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach.

 (c) If an adviser or nominated person other than a confirmer breaches an obligation under this chapter or an issuer breaches an obligation not covered in (a) or (b) of this section, a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and in (a) and (b) of this section.

 (d) An issuer, nominated person, or adviser who is found liable under (a) — (c) of this section shall pay interest on the amount owed under the liability from the date of wrongful dishonor or other appropriate date.

 (e) Attorney fees and costs shall be awarded under Rules 79 and 82, Alaska Rules of Civil Procedure, to the prevailing party in an action in which a remedy is sought under this chapter.

 (f) Damages that would otherwise be payable by a party for breach of an obligation under this chapter may be liquidated by agreement or undertaking, but only in an amount or by a formula that is reasonable in light of the harm anticipated.




Sec. 45.05.112. Transfer of letter of credit.
 (a) Except as otherwise provided in AS 45.05.113, unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred.

 (b) Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if
     (1) the transfer would violate applicable law; or

     (2) the transferor or transferee has failed to comply with a requirement stated in the letter of credit, or with another requirement that
          (A) relates to transfer imposed by the issuer; and

          (B) is within the standard practice referred to in AS 45.05.108(e) or is otherwise reasonable under the circumstances.




Sec. 45.05.113. Transfer by operation of law.
 (a) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor.

 (b) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in its own name as the disclosed successor of the beneficiary. Except as otherwise provided in (e) of this section, an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for the successor’s predecessor upon compliance with
     (1) the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the standard practice in AS 45.05.108(e); or

     (2) in the absence of the standard practice referred to in AS 45.05.108(e), other reasonable procedures sufficient to protect the issuer.

 (c) An issuer is not obliged to determine whether a purported successor is a successor of a beneficiary or whether the signature of a purported successor is genuine or authorized.

 (d) Honor of a purported successor’s apparently complying presentation under (a) or (b) of this section has the consequences specified in AS 45.05.108(i) even if the purported successor is not the successor of a beneficiary. Documents signed in the name of the beneficiary or of a disclosed successor by a person who is not the beneficiary or the successor of the beneficiary are forged documents for the purposes of AS 45.05.109.

 (e) An issuer whose rights of reimbursement are not covered by (d) of this section, or by substantially similar law, and any confirmer or nominated person may decline to recognize a presentation under (b) of this section.

 (f) A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this section.




Sec. 45.05.114. Assignment of proceeds.
 (a) In this section, “proceeds of a letter of credit” means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or a nominated person under the letter of credit. The term does not include a beneficiary’s drawing rights or documents presented by the beneficiary.

 (b) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The beneficiary may do so before presentation as a present assignment of the beneficiary’s right to receive proceeds contingent upon the beneficiary’s compliance with the terms and conditions of the letter of credit.

 (c) An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until the issuer or nominated person consents to the assignment.

 (d) An issuer or nominated person does not have an obligation to give or withhold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and if presentation of the letter of credit is a condition to honor.

 (e) Rights of a transferee beneficiary or nominated person are independent of the beneficiary’s assignment of the proceeds of a letter of credit and are superior to the assignee’s right to the proceeds.

 (f) Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer’s or nominated person’s payment of proceeds to an assignee or a third person affect the rights between the assignee and a person other than the issuer, transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary’s rights to proceeds is governed by AS 45.29 or other law. As against a person other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising on the creation of a security interest and its perfection, or other assignment of a beneficiary’s rights to proceeds, are governed by AS 45.29 or other law.




Sec. 45.05.115. Statute of limitations.
An action to enforce a right or obligation arising under this chapter must be commenced within one year after the expiration date of the relevant letter of credit or one year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach.


Sec. 45.05.116. Choice of law and forum.
 (a) The liability of an issuer, nominated person, or adviser for an action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in the manner provided in AS 45.05.104 or by a provision in the letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen does not need to bear a relation to the transaction.

 (b) Unless (a) of this section applies, the liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction in which the issuer, nominated person, or adviser is located. The issuer, nominated person, or adviser is considered to be located at the address indicated in the undertaking of the issuer, nominated person, or adviser. If more than one address is indicated, the issuer, nominated person, or adviser is considered to be located at the address from which the undertaking of the issuer, nominated person, or adviser was issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities, and a bank is considered to be located at the place where the bank’s relevant branch is considered to be located under this subsection.

 (c) Except as otherwise provided in this subsection, the liability of an issuer, nominated person, or adviser is governed by rules of custom or practice, such as the Uniform Customs and Practice for Documentary Credits, to which the letter of credit, confirmation, or other undertaking is expressly made subject. If this chapter would govern the liability of an issuer, nominated person, or adviser under (a) or (b) of this section, if the relevant undertaking incorporates rules of custom or practice, and if there is conflict between this chapter and those rules as applied to that undertaking, those rules govern except to the extent of a conflict with the nonvariable provisions specified in AS 45.05.103(c).

 (d) If there is conflict between this chapter and AS 45.03, AS 45.04, AS 45.14, or AS 45.29 this chapter governs.

 (e) The forum for settling disputes arising out of an undertaking within this chapter may be chosen in the manner and with the binding effect that governing law may be chosen under (a) of this section.




Sec. 45.05.117. Subrogation of issuer, applicant, and nominated person.
 (a) An issuer who honors a beneficiary’s presentation is subrogated to the rights of
     (1) the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary; and

     (2) the applicant to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.

 (b) An applicant that reimburses an issuer is subrogated to the rights of the issuer against a beneficiary, presenter, or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer, and the applicant has the rights of subrogation of the issuer to the rights of the beneficiary stated in (a) of this section.

 (c) A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of
     (1) the issuer against the applicant to the same extent as if the nominated person were a secondary obligor of the obligation owed to the issuer by the applicant;

     (2) the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and

     (3) the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.

 (d) Notwithstanding an agreement or term to the contrary, the rights of subrogation stated in (a) and (b) of this section do not arise until the issuer honors the letter of credit or otherwise pays, and the rights of subrogation stated in (c) of this section do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person, and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense, or excuse.




Sec. 45.05.118. Security interest of issuer or nominated person.
 (a) An issuer or nominated person has a security interest in a document presented under a letter of credit to the extent that the issuer or nominated person honors or gives value for the presentation.

 (b) So long as and to the extent that an issuer or nominated person has not been reimbursed or has not otherwise recovered the value given with respect to a security interest in a document under (a) of this section, the security interest continues and is subject to AS 45.29, but
     (1) a security agreement is not necessary to make the security interest enforceable under AS 45.29.203(b)(3);

     (2) if the document is presented in a medium other than a written or other tangible medium, the security interest is perfected; and

     (3) if the document is presented in a written or other tangible medium and is not a certificated security, chattel paper, a document of title, an instrument, or a letter of credit, the security interest is perfected and has priority over a conflicting security interest in the document so long as the debtor does not have possession of the document.




Secs. 45.05.120 — 45.05.124. [Renumbered as AS 45.02.326 — 45.02.328.]
Sec. 45.05.125. [Renumbered as AS 45.02.350.]
Secs. 45.05.126 — 45.05.130. [Renumbered as AS 45.02.401 — 45.02.403.]
Secs. 45.05.132 — 45.05.160. [Renumbered as AS 45.02.501 — 45.02.515.]
Secs. 45.05.162 — 45.05.192. [Renumbered as AS 45.02.601 — 45.02.616.]
Secs. 45.05.194 — 45.05.242. [Renumbered as AS 45.02.701 — 45.02.725.]
Secs. 45.05.246 — 45.05.288. [Renumbered as AS 45.03.101 — 45.03.122.]
Secs. 45.05.290 — 45.05.304. [Renumbered as AS 45.03.201 — 45.03.208.]
Secs. 45.05.306 — 45.05.318. [Renumbered as AS 45.03.301 — 45.03.307.]
Secs. 45.05.320 — 45.05.356. [Renumbered as AS 45.03.401 — 45.03.419.]
Secs. 45.05.358 — 45.05.378. [Renumbered as AS 45.03.501 — 45.03.511.]
Secs. 45.05.380 — 45.05.390. [Renumbered as AS 45.03.601 — 45.03.606.]
Sec. 45.05.392. [Renumbered as AS 45.03.701.]
Secs. 45.05.394 — 45.05.402. [Renumbered as AS 45.03.801 — 45.03.805.]
Secs. 45.05.404 — 45.05.418. [Renumbered as AS 45.04.101 — 45.04.108.]
Secs. 45.05.420 — 45.05.446. [Renumbered as AS 45.04.201 — 45.04.214.]
Secs. 45.05.448 — 45.05.452. [Renumbered as AS 45.04.301 — 45.04.303.]
Secs. 45.05.454 — 45.05.468. [Renumbered as AS 45.04.401 — 45.04.408.]
Secs. 45.05.470 — 45.05.474. [Renumbered as AS 45.04.502 — 45.04.504.]
Secs. 45.05.476 — 45.05.508. [Renumbered as AS 45.05.101 — 45.05.117.]
Secs. 45.05.510 — 45.05.530. [Renumbered as AS 45.06.101 — 45.06.111.]
Secs. 45.05.532 — 45.05.540. [Renumbered as AS 45.07.101 — 45.07.105.]
Secs. 45.05.542 — 45.05.560. [Renumbered as AS 45.07.201 — 45.07.210.]
Secs. 45.05.562 — 45.05.578. [Renumbered as AS 45.07.301 — 45.07.309.]
Secs. 45.05.580 — 45.05.586. [Renumbered as AS 45.07.401 — 45.07.404.]
Secs. 45.05.588 — 45.05.604. [Renumbered as AS 45.07.501 — 45.07.509.]
Secs. 45.05.606 — 45.05.610. [Renumbered as AS 45.07.601 — 45.07.603.]
Sec. 45.05.611. [Renumbered as AS 45.07.650.]
Secs. 45.05.612 — 45.05.622. [Renumbered as AS 45.08.101 — 45.08.106.]
Secs. 45.05.624 — 45.05.638. [Renumbered as AS 45.08.201 — 45.08.208.]
Secs. 45.05.640 — 45.05.677. [Renumbered as AS 45.08.301 — 45.08.320.]
Secs. 45.05.678 — 45.05.688. [Renumbered as AS 45.08.401 — 45.08.406.]
Secs. 45.05.690 — 45.05.714. [Renumbered as AS 45.09.101 — 45.09.113.]
Secs. 45.05.716 — 45.05.730. [Renumbered as AS 45.09.201 — 45.09.208.]
Secs. 45.05.732 — 45.05.766. [Renumbered as AS 45.09.301 — 45.09.318.]
Secs. 45.05.768 — 45.05.780. [Renumbered as AS 45.09.401 — 45.09.407.]
Secs. 45.05.782 — 45.05.794. [Renumbered as AS 45.09.501 — 45.09.507.]

Chapter 06. Bulk Transfers.

[Repealed, § 127 ch 35 SLA 1993.]

Article 1. General.


Chapter 07. Warehouse Receipts, Bills of Lading, and Other Documents of Title.

Secs. 45.07.101 — 45.07.105. Short title; definitions and index of definitions; relation of sections to treaty, statute, tariff, classification, or regulation; negotiable and nonnegotiable warehouse receipt, bill of lading, or other document of title; construction against negative implication. [Repealed, § 113 ch. 44 SLA 2009.]
Sec. 45.07.111. Short title.
This chapter may be cited as the Uniform Commercial Code — Documents of Title.


Sec. 45.07.112. Definitions and index of definitions.
 (a) In this chapter, unless the context otherwise requires,
     (1) “bailee” means a person who, by a warehouse receipt, bill of lading, or other document of title, acknowledges possession of goods and contracts to deliver them;

     (2) “carrier” means a person who issues a bill of lading;

     (3) “consignee” means a person named in a bill of lading to whom or to whose order the bill promises delivery;

     (4) “consignor” means a person named in a bill of lading as the person from whom the goods have been received for shipment;

     (5) “delivery order” means a record that contains an order to deliver goods directed to a warehouse, carrier, or other person who, in the ordinary course of business, issues warehouse receipts or bills of lading;

     (6) “goods” means all things that are treated as movable for the purposes of a contract for storage or transportation;

     (7) “issuer” means a bailee who issues a document of title or, in the case of an unaccepted delivery order, the person who orders the possessor of goods to deliver; “issuer” includes a person for whom an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, even if the issuer did not receive the goods, the goods were misdescribed, or in another respect the agent or employee violated the issuer’s instructions;

     (8) “person entitled under the document” means the holder, in the case of a negotiable document of title, or the person to whom delivery of the goods is to be made by the terms of, or under instructions in a record under, a nonnegotiable document of title;

     (9) “shipper” means a person who enters into a contract of transportation with a carrier;

     (10) “sign” means, with present intent to authenticate or adopt a record, to
          (A) execute or adopt a tangible symbol; or

          (B) attach to or logically associate with the record an electronic sound, symbol, or process;

     (11) “warehouse” means a person engaged in the business of storing goods for hire.

 (b) Definitions in other chapters applying to this chapter and the sections in which the definitions appear are
     (1) “contract for sale” (AS 45.02.106);

     (2) “lessee in ordinary course of business” (AS 45.12.103);

     (3) “receipt” of goods (AS 45.02.103).

 (c) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.07.113. Relation of chapter to treaty or statute.
 (a) This chapter is subject to a treaty or statute of the United States or regulatory statute of this state to the extent the treaty, statute, or regulatory statute is applicable.

 (b) This chapter does not modify or repeal a law prescribing the form or content of a document of title or the services or facilities to be afforded by a bailee, or otherwise regulating a bailee’s business in respects not specifically treated in this chapter. However, violation of a law described under the previous sentence does not affect the status of a document of title that otherwise is within the definition of a document of title.

 (c) To the extent there is a conflict between AS 09.80 and this chapter, this chapter governs.




Sec. 45.07.114. Negotiable and nonnegotiable document of title.
 (a) Except as otherwise provided in (c) of this section, a document of title is negotiable if by its terms the goods are to be delivered to bearer or to the order of a named person.

 (b) A document of title other than one described in (a) of this section is nonnegotiable. A bill of lading that states that the goods are consigned to a named person is not made negotiable by a provision that the goods are to be delivered only against an order in a record signed by the same or another named person.

 (c) A document of title is nonnegotiable if, at the time it is issued, the document has a conspicuous legend, however expressed, that it is nonnegotiable.




Sec. 45.07.115. Reissuance in alternative medium.
 (a) On request of a person entitled under an electronic document of title, the issuer of the electronic document may issue a tangible document of title as a substitute for the electronic document if
     (1) the person entitled under the electronic document surrenders control of the document to the issuer; and

     (2) the tangible document when issued contains a statement that it is issued in substitution for the electronic document.

 (b) Upon issuance of a tangible document of title in substitution for an electronic document of title under (a) of this section,
     (1) the electronic document ceases to have effect or validity; and

     (2) the person who procured issuance of the tangible document warrants to all subsequent persons entitled under the tangible document that the warrantor was a person entitled under the electronic document when the warrantor surrendered control of the electronic document to the issuer.

 (c) On request of a person entitled under a tangible document of title, the issuer of the tangible document may issue an electronic document of title as a substitute for the tangible document if
     (1) the person entitled under the tangible document surrenders possession of the document to the issuer; and

     (2) the electronic document when issued contains a statement that it is issued in substitution for the tangible document.

 (d) On issuance of an electronic document of title in substitution for a tangible document of title under (c) of this section,
     (1) the tangible document ceases to have effect or validity; and

     (2) the person who procured issuance of the electronic document warrants to all subsequent persons entitled under the electronic document that the warrantor was a person entitled under the tangible document when the warrantor surrendered possession of the tangible document to the issuer.




Sec. 45.07.116. Control of electronic document of title.
 (a) A person has control of an electronic document of title if a system employed for evidencing the transfer of interests in the electronic document reliably establishes that person as the person to whom the electronic document was issued or transferred.

 (b) A system satisfies (a) of this section, and a person is considered to have control of an electronic document of title, if the document is created, stored, and assigned in a manner by which
     (1) a single authoritative copy of the document exists that is unique, identifiable, and, except as otherwise provided in (4), (5), and (6) of this subsection, unalterable;

     (2) the authoritative copy identifies the person asserting control as
          (A) the person to whom the document was issued; or

          (B) if the authoritative copy indicates that the document has been transferred, the person to whom the document was most recently transferred;

     (3) the authoritative copy is communicated to and maintained by the person asserting control or the person’s designated custodian;

     (4) copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;

     (5) each copy of the authoritative copy and a copy of a copy are readily identifiable as a copy that is not the authoritative copy; and

     (6) an amendment of the authoritative copy is readily identifiable as authorized or unauthorized.




Article 2. Warehouse Receipts: Special Provisions.


Sec. 45.07.201. Person who may issue a warehouse receipt; storage under bond.
 (a) A warehouse receipt may be issued by a warehouse.

 (b) If goods, including distilled spirits and agricultural commodities, are stored under a statute requiring a bond against withdrawal or a license for the issuance of receipts in the nature of warehouse receipts, a receipt issued for the goods is considered to be a warehouse receipt even if issued by a person who is the owner of the goods and is not a warehouse.




Sec. 45.07.202. Form of warehouse receipt; effect of omission.
 (a) A warehouse receipt need not be in a particular form.

 (b) Unless a warehouse receipt provides for each of the following, the warehouse is liable for damages caused to a person injured by its omission:
     (1) a statement of the location of the warehouse facility where the goods are stored;

     (2) the date of issue of the receipt;

     (3) the unique identification code of the receipt;

     (4) a statement whether the goods received will be delivered to the bearer, to a named person, or to a named person or the named person’s order;

     (5) the rate of storage and handling charges, unless goods are stored under a field warehousing arrangement, in which case a statement of that fact is sufficient on a nonnegotiable receipt;

     (6) a description of the goods or the packages containing them;

     (7) the signature of the warehouse or its agent;

     (8) if the receipt is issued for goods that the warehouse owns, solely, jointly, or in common with others, a statement of that ownership; and

     (9) a statement of the amount of advances made and of liabilities incurred for which the warehouse claims a lien or security interest, unless the precise amount of advances made or liabilities incurred, at the time of the issue of the receipt, is unknown to the warehouse or to its agent who issued the receipt, in which case, a statement of the fact that advances have been made or liabilities incurred and the purpose of the advances or liabilities is sufficient.

 (c) A warehouse may insert in its receipt terms that are not contrary to the code and do not impair its obligation of delivery under AS 45.07.403 or its duty of care under AS 45.07.204. A contrary provision is ineffective.




Sec. 45.07.203. Liability for nonreceipt or misdescription.
A party to or purchaser for value in good faith of a document of title, other than a bill of lading, that relies on the description of the goods in the document may recover from the issuer damages caused by the nonreceipt or misdescription of the goods, except to the extent that
     (1) the document conspicuously indicates that the issuer does not know whether all or part of the goods in fact were received or conform to the description, as in the case where the description is in terms of marks or labels or kind, quantity, or condition, or the receipt or description is qualified by “contents, condition, and quality unknown,” “said to contain,” or words of similar import, if this indication is true; or

     (2) the party or purchaser otherwise has notice of the nonreceipt or misdescription.




Sec. 45.07.204. Duty of care; contractual limitation of warehouse’s liability.
 (a) A warehouse is liable for damages for loss of or injury to the goods caused by the warehouse’s failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of this care.

 (b) Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable. The limitation is not effective with respect to the warehouse’s liability for conversion to its own use. On request of the bailor in a record at the time of signing the storage agreement, or within a reasonable time after receipt of the warehouse receipt, the warehouse’s liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods.

 (c) Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the bailment may be included in the warehouse receipt or storage agreement.




Sec. 45.07.205. Title under warehouse receipt defeated in certain cases.
A buyer in ordinary course of business of fungible goods sold and delivered by a warehouse that is also in the business of buying and selling those goods takes the goods free of any claim under a warehouse receipt even if the receipt is negotiable and has been duly negotiated.


Sec. 45.07.206. Termination of storage at warehouse’s option.
 (a) A warehouse may, by giving notice to the person on whose account the goods are held and other persons known to claim an interest in the goods, require payment of any charges and removal of the goods from the warehouse at the termination of the period of storage fixed by the document of title, or, if a period is not fixed, within a stated period not less than 30 days after the warehouse gives notice. If the goods are not removed before the date specified in the notice, the warehouse may sell them under AS 45.07.210.

 (b) If a warehouse in good faith believes that goods are about to deteriorate or decline in value to less than the amount of its lien within the time provided in (a) of this section and AS 45.07.210, the warehouse may specify in the notice given under (a) of this section a reasonable shorter time for removal of the goods and, if the goods are not removed, may sell them at public sale held not less than one week after a single advertisement or posting.

 (c) If, as a result of a quality or condition of the goods of which the warehouse did not have notice at the time of deposit, the goods are a hazard to other property, the warehouse facilities, or other persons, the warehouse may sell the goods at public or private sale without advertisement or posting on reasonable notification to all persons known to claim an interest in the goods. If the warehouse, after a reasonable effort, is unable to sell the goods, the warehouse may dispose of them in a lawful manner and does not incur liability by reason of this disposition.

 (d) A warehouse shall deliver the goods to a person entitled to them under this chapter on due demand made at any time before sale or other disposition under this section.

 (e) A warehouse may satisfy the warehouse’s lien from the proceeds of a sale or disposition under this section, but shall hold the balance for delivery on the demand of a person to whom the warehouse would have been bound to deliver the goods.




Sec. 45.07.207. Goods must be kept separate; fungible goods.
 (a) Unless the warehouse receipt provides otherwise, a warehouse shall keep separate the goods covered by each receipt so as to permit at all times identification and delivery of those goods. However, different lots of fungible goods may be commingled.

 (b) If different lots of fungible goods are commingled, the goods are owned in common by the persons entitled to them, and the warehouse is severally liable to each owner for that owner’s share. If, because of overissue, a mass of fungible goods is insufficient to meet all the receipts that the warehouse has issued against it, the persons entitled include all holders to whom overissued receipts have been duly negotiated.




Sec. 45.07.208. Altered warehouse receipts.
If a blank in a negotiable warehouse receipt has been filled in without authority, a good faith purchaser for value and without notice of the lack of authority may treat the insertion as authorized. Any other unauthorized alteration leaves a tangible or electronic warehouse receipt enforceable against the issuer according to its original tenor.


Sec. 45.07.209. Lien of warehouse.
 (a) A warehouse has a lien against the bailor on the goods covered by a warehouse receipt or storage agreement or on the proceeds of the goods in the warehouse’s possession for charges for storage or transportation, including demurrage and terminal charges, insurance, labor, or other charges, present or future, in relation to the goods, and for expenses necessary for preservation of the goods or reasonably incurred in their sale under law. If the person on whose account the goods are held is liable for similar charges or expenses in relation to other goods whenever deposited and it is stated in the warehouse receipt or storage agreement that a lien is claimed for charges and expenses in relation to other goods, the warehouse also has a lien against the goods covered by the warehouse receipt or storage agreement or on the proceeds of the goods in its possession for these charges and expenses, whether or not the other goods have been delivered by the warehouse. However, as against a person to whom a negotiable warehouse receipt is duly negotiated, a warehouse’s lien is limited to charges in an amount or at a rate specified in the warehouse receipt or, if no charges are specified, then to a reasonable charge for storage of the specific goods covered by the receipt after the date of the receipt.

 (b) A warehouse may also reserve a security interest against the bailor for the maximum amount specified on the receipt for charges other than those specified in (a) of this section, such as for money advanced and interest. The security interest is governed by AS 45.29.

 (c) A warehouse’s lien for charges and expenses under (a) of this section or a security interest under (b) of this section is also effective against a person who entrusted the bailor with possession of the goods to the extent that a pledge of them by the bailor to a good faith purchaser for value would have been valid. However, the lien or security interest is not effective against a person who, before issuance of a document of title, had a legal interest or a perfected security interest in the goods and did not
     (1) deliver or entrust the goods or a document of title covering the goods to the bailor or the bailor’s nominee with
          (A) actual or apparent authority to ship, store, or sell;

          (B) power to obtain delivery under AS 45.07.403; or

          (C) power of disposition under AS 45.02.403, AS 45.12.304(b), 45.12.305(b), AS 45.29.320, 45.29.321(c), or other statute or rule of law; or

     (2) acquiesce in the procurement by the bailor or its nominee of a document.

 (d) A warehouse loses its lien on any goods that the warehouse voluntarily delivers or unjustifiably refuses to deliver.

 (e) A warehouse’s lien on household goods for charges and expenses in relation to the goods under (a) of this section is also effective against all persons if the depositor was the legal possessor of the goods at the time of deposit. In this subsection, “household goods” means furniture, furnishings, or personal effects used by the depositor in a dwelling.




Sec. 45.07.210. Enforcement of warehouse’s lien.
 (a) Except as otherwise provided in (b) of this section, a warehouse’s lien may be enforced by public or private sale of the goods, in block or in packages, at any time or place, and on any terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. This notification must include a statement of the amount due, the nature of the proposed sale, and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or in a method different from that selected by the warehouse is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The warehouse sells in a commercially reasonable manner if the warehouse sells the goods in the usual manner in a recognized market for the goods, sells at the price current in the market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable, except in cases covered by the preceding sentence.

 (b) A warehouse may enforce its lien on goods, other than goods stored by a merchant in the course of the merchant’s business, only if the following requirements are satisfied:
     (1) all persons known to claim an interest in the goods must have been notified;

     (2) the notification must include an itemized statement of the claim, a description of the goods subject to the lien, a demand for payment within a specified time not less than 10 days after receipt of the notification, and a conspicuous statement that, unless the claim is paid within that time, the goods will be advertised for sale and sold by auction at a specified time and place;

     (3) the sale must conform to the terms of the notification;

     (4) the sale must be held at the nearest suitable place to where the goods are held or stored;

     (5) after the expiration of the time given in the notification, an advertisement of the sale must be published once a week for two weeks consecutively in a newspaper of general circulation where the sale is to be held; the advertisement must include a description of the goods, the name of the person on whose account the goods are being held, and the time and place of the sale; the sale must take place at least 15 days after the first publication; if there is no newspaper of general circulation where the sale is to be held, the advertisement must be posted at least 10 days before the sale in not fewer than three conspicuous places in the neighborhood of the proposed sale.

 (c) Before a sale under this section, a person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in complying with this section. In that event, the goods may not be sold, but must be retained by the warehouse subject to the terms of the receipt and this chapter.

 (d) A warehouse may buy at a public sale held under this section.

 (e) A purchaser in good faith of goods sold to enforce a warehouse’s lien takes the goods free of the rights of persons against whom the lien was valid, despite the warehouse’s noncompliance with this section.

 (f) A warehouse may satisfy its lien from the proceeds of a sale under this section, but shall hold the balance, if any, for delivery on demand to a person to whom the warehouse would have been bound to deliver the goods.

 (g) The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor, including the remedies available under AS 34.35.225.

 (h) If a lien is on goods stored by a merchant in the course of the merchant’s business, the lien may be enforced in accordance with either (a) or (b) of this section.

 (i) A warehouse is liable for damages caused by failure to comply with the requirements for sale under this section and, in case of wilful violation, is liable for conversion.




Article 3. Bills of Lading: Special Provisions.


Sec. 45.07.301. Liability for nonreceipt or misdescription; “said to contain”; “shipper’s weight, load, and count”; improper handling.
 (a) A consignee of a nonnegotiable bill of lading who has given value in good faith, or a holder to whom a negotiable bill has been duly negotiated, relying on the description in the bill of the goods or on the date shown in the bill, may recover from the issuer damages caused by the misdating of the bill or the nonreceipt or misdescription of the goods, except to the extent that the bill indicates that the issuer does not know whether a part or all of the goods in fact were received or conform to the description, as where the description is in terms of marks or labels or kind, quantity, or condition or the receipt or description is qualified by “contents or condition of contents of packages unknown,” “said to contain,” “shipper’s weight, load, and count,” or words of similar import, if this indication is true.

 (b) If goods are loaded by the issuer of a bill of lading,
     (1) the issuer shall count the packages of goods if shipped in packages and ascertain the kind and quantity if shipped in bulk; and

     (2) the words, “shipper’s weight, load, and count,” or other words of similar import indicating that the description was made by the shipper are ineffective except as to goods concealed in packages.

 (c) If bulk goods are loaded by a shipper who makes available to the issuer of a bill of lading adequate facilities for weighing those goods, the issuer shall ascertain the kind and quantity within a reasonable time after receiving the shipper’s request in a record to ascertain the kind and quantity. In this case, “shipper’s weight” or other words of similar import are ineffective.

 (d) The issuer of a bill of lading, by including in the bill the words “shipper’s weight, load, and count” or words of similar import, may indicate that the goods were loaded by the shipper, and, if the statement is true, the issuer is not liable for damages caused by the improper loading. However, omission of these words does not imply liability for damages by improper loading.

 (e) A shipper guarantees to an issuer the accuracy at the time of shipment of the description, marks, labels, number, kind, quantity, condition, and weight as furnished by the shipper, and the shipper shall indemnify the issuer against damage caused by inaccuracies in these particulars. This right of indemnity does not limit the issuer’s responsibility or liability under the contract of carriage to a person other than the shipper.




Sec. 45.07.302. Through bills of lading and similar documents of title.
 (a) The issuer of a through bill of lading, or other document of title embodying an undertaking to be performed in part by a person acting as the issuer’s agent or by a performing carrier, is liable to a person entitled to recover on the bill or other document for a breach by the other person or the performing carrier of its obligation under the bill or other document. However, this liability for breach by the other person or the performing carrier may be varied by agreement of the parties, except to the extent other law prohibits variation of the liability by agreement.

 (b) If goods covered by a through bill of lading or other document of title embodying an undertaking to be performed in part by a person other than the issuer are received by the other person, the person is subject, with respect to its own performance while the goods are in its possession, to the obligation of the issuer. The person’s obligation is discharged by delivery of the goods to another person under the bill or other document, and does not include liability for breach by another person or by the issuer.

 (c) The issuer of a through bill of lading or other document of title described in (a) of this section may recover from the performing carrier, or other person in possession of the goods when the breach of the obligation under the bill occurred, the amount
     (1) the issuer may be required to pay to a person entitled to recover on the bill or other document for the breach, as may be evidenced by a receipt, judgment, or transcript of judgment; and

     (2) of an expense reasonably incurred by the issuer in defending an action commenced by a person entitled to recover on the bill or other document for the breach.




Sec. 45.07.303. Diversion; reconsignment; change of instructions.
 (a) Unless the bill of lading otherwise provides, a carrier may deliver the goods to a person or destination other than that stated in the bill or may otherwise dispose of the goods, without liability for misdelivery, on instructions from
     (1) the holder of a negotiable bill;

     (2) the consignor on a nonnegotiable bill, even if the consignee has given contrary instructions;

     (3) the consignee on a nonnegotiable bill in the absence of contrary instructions from the consignor, if the goods have arrived at the billed destination or if the consignee is in possession of the tangible bill or in control of the electronic bill; or

     (4) the consignee on a nonnegotiable bill, if the consignee is entitled as against the consignor to dispose of the goods.

 (b) Unless instructions described in (a) of this section are included in a negotiable bill of lading, a person to whom the bill is duly negotiated may hold the bailee according to the original terms.




Sec. 45.07.304. Tangible bills of lading in a set.
 (a) Except as customary in international transportation, a tangible bill of lading may not be issued in a set of parts. The issuer is liable for damages caused by violation of this subsection.

 (b) If a tangible bill of lading is lawfully issued in a set of parts, each of which contains an identification code and is expressed to be valid only if the goods have not been delivered against another part, the whole of the parts constitutes one bill.

 (c) If a tangible negotiable bill of lading is lawfully issued in a set of parts and different parts are negotiated to different persons, the title of the holder to whom the first due negotiation is made prevails as to both the document of title and the goods even if a later holder may have received the goods from the carrier in good faith and discharged the carrier’s obligation by surrendering its part.

 (d) A person who negotiates or transfers a single part of a tangible bill of lading issued in a set is liable to holders of that part as if it were the whole set.

 (e) The bailee shall deliver in accordance with AS 45.07.401 — 45.07.404 against the first presented part of a tangible bill of lading lawfully issued in a set. Delivery in this manner discharges the bailee’s obligation on the whole bill.




Sec. 45.07.305. Destination bills.
 (a) Instead of issuing a bill of lading to the consignor at the place of shipment, a carrier may, at the request of the consignor, procure the bill to be issued at destination or at any other place designated in the request.

 (b) Upon request of a person entitled as against a carrier to control the goods while in transit and on surrender of possession or control of an outstanding bill of lading or other receipt covering the goods, the issuer, subject to AS 45.07.115, may procure a substitute bill to be issued at a place designated in the request.




Sec. 45.07.306. Altered bills of lading.
An unauthorized alteration or filling in of a blank in a bill of lading leaves the bill enforceable according to its original tenor.


Sec. 45.07.307. Lien of carrier.
 (a) A carrier has a lien on the goods covered by a bill of lading or on the proceeds of the goods in its possession for charges after the date of the carrier’s receipt of the goods for storage or transportation, including demurrage and terminal charges, and for expenses necessary for preservation of the goods incident to their transportation or reasonably incurred in their sale under law. However, against a purchaser for value of a negotiable bill of lading, a carrier’s lien is limited to charges stated in the bill or the applicable tariffs, or, if no charges are stated, to a reasonable charge.

 (b) A lien for charges and expenses under (a) of this section on goods that the carrier was required by law to receive for transportation is effective against the consignor or a person entitled to the goods unless the carrier had notice that the consignor lacked authority to subject the goods to the charges and expenses. Another lien under (a) of this section is effective against the consignor and a person who permitted the bailor to have control or possession of the goods unless the carrier had notice that the bailor lacked authority.

 (c) A carrier loses its lien on goods that the carrier voluntarily delivers or unjustifiably refuses to deliver.




Sec. 45.07.308. Enforcement of carrier’s lien.
 (a) A carrier’s lien on goods may be enforced by public or private sale of the goods, in bulk or in packages, at any time or place, and on terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. The notification must include a statement of the amount due, the nature of the proposed sale, and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or by a method different from that selected by the carrier is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The carrier sells goods in a commercially reasonable manner if the carrier sells the goods in the usual manner in a recognized market for them, sells at the price current in that market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable except in cases covered by the preceding sentence.

 (b) Before a sale under this section, a person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in complying with this section. In that event, the goods may not be sold but must be retained by the carrier, subject to the terms of the bill of lading and this chapter.

 (c) A carrier may buy at a public sale under this section.

 (d) A purchaser in good faith of goods sold to enforce a carrier’s lien takes the goods free of the rights of persons against whom the lien was valid, despite the carrier’s noncompliance with this section.

 (e) A carrier may satisfy the carrier’s lien from the proceeds of a sale under this section, but shall hold the balance, if any, for delivery on demand to a person to whom the carrier would have been bound to deliver the goods.

 (f) The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor.

 (g) A carrier’s lien may be enforced in accordance with either (a) of this section or the procedure set out in AS 45.07.210(b).

 (h) A carrier is liable for damages caused by failure to comply with the requirements for sale under this section and, in case of wilful violation, is liable for conversion.




Sec. 45.07.309. Duty of care; contractual limitation of carrier’s liability.
 (a) A carrier who issues a bill of lading, whether negotiable or nonnegotiable, shall exercise the degree of care in relation to the goods that a reasonably careful person would exercise under similar circumstances. This subsection does not affect a statute, regulation, or rule of law that imposes liability on a common carrier for damages not caused by its negligence.

 (b) Damages may be limited by a term in the bill of lading or in a transportation agreement that the carrier’s liability may not exceed a value stated in the bill or transportation agreement if the carrier’s rates are dependent on value and the consignor is afforded an opportunity to declare a higher value and the consigner is advised of this opportunity. However, the limitation is not effective with respect to the carrier’s liability for conversion to its own use.

 (c) Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the shipment may be included in a bill of lading or a transportation agreement.




Article 4. Warehouse Receipts and Bills of Lading: General Obligations.


Sec. 45.07.401. Irregularities in issue of receipt or bill or conduct of issuer.
The obligations imposed by this chapter on an issuer apply to a document of title even if
     (1) the document does not comply with the requirements of this chapter or another statute, a regulation, or another rule of law regarding its issuance, form, or content;

     (2) the issuer violated laws regulating the conduct of the issuer’s business;

     (3) the goods covered by the document were owned by the bailee when the document was issued; or

     (4) the person issuing the document is not a warehouse but the document purports to be a warehouse receipt.




Sec. 45.07.402. Duplicate document of title; overissue.
A duplicate or another document of title purporting to cover goods already represented by an outstanding document of the same issuer does not confer a right in the goods, except as provided in the case of tangible bills of lading in a set of parts, overissue of documents for fungible goods, substitutes for lost, stolen, or destroyed documents, or substitute documents issued under AS 45.07.115. The issuer is liable for damages caused by the issuer’s overissue or failure to identify a duplicate document by a conspicuous notation.


Sec. 45.07.403. Obligation of bailee to deliver; excuse.
 (a) A bailee shall deliver the goods to a person entitled under a document of title if the person complies with (b) and (c) of this section, unless and to the extent that the bailee establishes any of the following:
     (1) delivery of the goods to a person whose receipt was rightful as against the claimant;

     (2) damage to or delay, loss, or destruction of the goods for which the bailee is not liable;

     (3) previous sale or other disposition of the goods in lawful enforcement of a lien or on a warehouse’s lawful termination of storage;

     (4) the exercise by a seller of its right to stop delivery under AS 45.02.705 or by a lessor of its right to stop delivery under AS 45.12.526;

     (5) a diversion, reconsignment, or other disposition under AS 45.07.303;

     (6) release, satisfaction, or another personal defense against the claimant; or

     (7) another lawful excuse.

 (b) A person claiming goods covered by a document of title shall satisfy the bailee’s lien if the bailee requests the person to satisfy the lien or if the bailee is prohibited by law from delivering the goods until the charges are paid.

 (c) Unless the person claiming the goods is a person against whom the document of title does not confer a right under AS 45.07.503(a),
     (1) the person claiming under a document shall surrender possession or control of an outstanding negotiable document covering the goods for cancellation or indication of partial deliveries; and

     (2) the bailee shall cancel the document or conspicuously indicate in the document the partial delivery, or the bailee is liable to a person to whom the document is duly negotiated.

 (d) [Repealed, § 113 ch 44 SLA 2009.]




Sec. 45.07.404. No liability for good faith delivery under document of title.
A bailee who, in good faith, has received goods and delivered or otherwise disposed of the goods according to the terms of a document of title or under this chapter is not liable for the goods even if the person
     (1) from whom the bailee received the goods did not have authority to procure the document or to dispose of the goods; or

     (2) to whom the bailee delivered the goods did not have authority to receive the goods.




Article 5. Warehouse Receipts and Bills of Lading: Negotiation and Transfer.


Sec. 45.07.501. Form of negotiation and requirements of due negotiation.
 (a) The following rules apply to a negotiable tangible document of title:
     (1) if the document’s original terms run to the order of a named person, the document is negotiated by the named person’s endorsement and delivery; after the named person’s endorsement in blank or to bearer, a person may negotiate the document by delivery alone;

     (2) if the document’s original terms run to bearer, it is negotiated by delivery alone;

     (3) if the document’s original terms run to the order of a named person and it is delivered to the named person, the effect is the same as if the document had been negotiated;

     (4) negotiation of the document after it has been endorsed to a named person requires endorsement by the named person and delivery;

     (5) a document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder who purchases it in good faith, without notice of a defense against or claim to it on the part of a person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a monetary obligation.

 (b) The following rules apply to a negotiable electronic document of title:
     (1) if the document’s original terms run to the order of a named person or to bearer, the document is negotiated by delivery of the document to another person; endorsement by the named person is not required to negotiate the document;

     (2) if the document’s original terms run to the order of a named person and the named person has control of the document, the effect is the same as if the document had been negotiated;

     (3) a document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder who purchases it in good faith, without notice of a defense against or claim to it on the part of a person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves taking delivery of the document in settlement or payment of a monetary obligation.

 (c) Endorsement of a nonnegotiable document of title does not make it negotiable or add to the transferee’s rights.

 (d) The naming in a negotiable bill of lading of a person to be notified of the arrival of the goods does not limit the negotiability of the bill or constitute notice to a purchaser of the bill of an interest of that person in the goods.




Sec. 45.07.502. Rights acquired by due negotiation.
 (a) Subject to AS 45.07.205 and 45.07.503, a holder to whom a negotiable document of title has been duly negotiated acquires by the due negotiation
     (1) title to the document;

     (2) title to the goods;

     (3) all rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and

     (4) the direct obligation of the issuer to hold or deliver the goods according to the terms of the document free of a defense or claim by the issuer except those arising under the terms of the document or under this chapter, but, in the case of a delivery order, the bailee’s obligation accrues only upon the bailee’s acceptance of the delivery order, and the obligation acquired by the holder is that the issuer and any endorser will procure the acceptance of the bailee.

 (b) Subject to AS 45.07.503, title and rights acquired by due negotiation are not defeated by a stoppage of the goods represented by the document of title or by surrender of the goods by the bailee and are not impaired even if
     (1) the due negotiation or a prior due negotiation constituted a breach of duty;

     (2) a person has been deprived of possession of a negotiable tangible document or control of a negotiable electronic document by misrepresentation, fraud, accident, mistake, duress, loss, theft, or conversion; or

     (3) a previous sale or other transfer of the goods or document has been made to a third person.




Sec. 45.07.503. Document of title to goods defeated in certain cases.
 (a) A document of title confers no right in goods against a person who, before issuance of the document, had a legal interest or a perfected security interest in the goods and who did not
     (1) deliver or entrust the goods or a document of title covering the goods to the bailor or the bailor’s nominee with
          (A) actual or apparent authority to ship, store, or sell;

          (B) power to obtain delivery under AS 45.07.403; or

          (C) power of disposition under AS 45.02.403, AS 45.12.304(b), 45.12.305(b), AS 45.29.320, 45.29.321(c) or other statute or rule of law; or

     (2) acquiesce in the procurement by the bailor or its nominee of a document.

 (b) Title to goods based upon an unaccepted delivery order is subject to the rights of a person to whom a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. That title may be defeated under AS 45.07.504 to the same extent as the rights of the issuer or a transferee from the issuer.

 (c) Title to goods based upon a bill of lading issued to a freight forwarder is subject to the rights of a person to whom a bill issued by the freight forwarder is duly negotiated. However, delivery by the carrier in accordance with AS 45.07.401 — 45.07.404 under its own bill of lading discharges the carrier’s obligation to deliver.




Sec. 45.07.504. Rights acquired in absence of due negotiation; effect of diversion; stoppage of delivery.
 (a) A transferee of a document of title, whether negotiable or nonnegotiable, to whom the document has been delivered but not duly negotiated, acquires the title and rights that the transferor had or had actual authority to convey.

 (b) In the case of a transfer of a nonnegotiable document of title, until, but not after, the bailee receives notice of the transfer, the rights of the transferee may be defeated
     (1) by those creditors of the transferor who could treat the transfer as void under AS 45.02.402 or AS 45.12.308;

     (2) by a buyer from the transferor in ordinary course of business if the bailee has delivered the goods to the buyer or received notification of the buyer’s rights;

     (3) by a lessee from the transferor in ordinary course of business if the bailee has delivered the goods to the lessee or received notification of the lessee’s rights; or

     (4) as against the bailee, by good faith dealings of the bailee with the transferor.

 (c) A diversion or other change of shipping instructions by the consignor in a nonnegotiable bill of lading that causes the bailee not to deliver the goods to the consignee defeats the consignee’s title to the goods if the goods have been delivered to a buyer in ordinary course of business or a lessee in ordinary course of business and, in any event, defeats the consignee’s rights against the bailee.

 (d) Delivery of the goods under a nonnegotiable document of title may be stopped by a seller under AS 45.02.705 or a lessor under AS 45.12.526, subject to the requirement of due notification in those sections. A bailee who honors the seller’s or lessor’s instructions is entitled to be indemnified by the seller or lessor against a resulting loss or expense.




Sec. 45.07.505. Endorser not guarantor for other parties.
The endorsement of a tangible document of title issued by a bailee does not make the endorser liable for a default by the bailee or previous endorsers.


Sec. 45.07.506. Delivery without endorsement; right to compel endorsement.
The transferee of a negotiable tangible document of title has a specifically enforceable right to have its transferor supply a necessary endorsement, but the transfer becomes a negotiation only as of the time the endorsement is supplied.


Sec. 45.07.507. Warranties on negotiation or delivery of document of title.
If a person negotiates or delivers a document of title for value, other than as a mere intermediary under AS 45.07.508, unless otherwise agreed, the transferor, in addition to any warranty made in selling or leasing the goods, warrants to its immediate purchaser only that
     (1) the document is genuine;

     (2) the transferor does not have knowledge of a fact that would impair the document’s validity or worth; and

     (3) the negotiation or delivery is rightful and fully effective with respect to the title to the document and the goods it represents.




Sec. 45.07.508. Warranties of collecting bank as to documents of title.
A collecting bank or other intermediary known to be entrusted with documents of title on behalf of another or with collection of a draft or other claim against delivery of documents warrants by the delivery of the documents only its own good faith and authority even if the collecting bank or other intermediary has purchased or made advances against the claim or draft to be collected.


Sec. 45.07.509. Adequate compliance with commercial contract.
Whether a document of title is adequate to fulfill the obligations of a contract for sale or a contract for lease or the conditions of a letter of credit is determined by AS 45.02, AS 45.05, or AS 45.12.


Article 6. Warehouse Receipts and Bills of Lading: Miscellaneous Provisions.


Sec. 45.07.601. Lost, stolen, or destroyed documents of title.
 (a) If a document of title is lost, stolen, or destroyed, a court may order delivery of the goods or issuance of a substitute document, and the bailee may, without liability to any person, comply with the order. If the document was negotiable, a court may not order delivery of the goods or issuance of a substitute document without the claimant’s posting security unless the court finds that any person who may suffer loss as a result of nonsurrender of possession or control of the document is adequately protected against the loss. If the document was nonnegotiable, the court may require security.

 (b) A bailee who, without a court order, delivers goods to a person claiming under a missing negotiable document of title is liable to a person injured by the delivery. If the delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith is not conversion if the claimant posts security with the bailee in an amount at least double the value of the goods at the time of posting to indemnify a person injured by the delivery who files a notice of claim within one year after the delivery.




Sec. 45.07.602. Judicial process against goods covered by negotiable document of title.
Unless a document of title was originally issued upon delivery of the goods by a person who did not have power to dispose of them, a lien does not attach by virtue of a judicial process to goods in the possession of a bailee for which a negotiable document of title is outstanding unless possession or control of the document is first surrendered to the bailee or negotiation of the document is enjoined. The bailee may not be compelled to deliver the goods under process until possession or control of the document is surrendered to the bailee or to the court. A purchaser of the document for value without notice of the process or injunction takes free of the lien imposed by judicial process.


Sec. 45.07.603. Conflicting claims; interpleader.
If more than one person claims title to or possession of the goods, the bailee is excused from delivery until the bailee has a reasonable time to ascertain the validity of the adverse claims or to commence an action for interpleader. The bailee may assert an interpleader either in defending an action for nondelivery of the goods or by original action.


Sec. 45.07.650. Laws not repealed by this chapter. [Repealed, § 113 ch 44 SLA 2009.]

Article 1. Short Title and General Matters.


Chapter 08. Investment Securities.

Sec. 45.08.101. Short title.
This chapter may be cited as Uniform Commercial Code — Investment Securities.


Sec. 45.08.102. Definitions.
 (a) In this chapter,
     (1) “adverse claim” means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or deal with the financial asset;

     (2) “bearer form,” as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an endorsement;

     (3) “broker” means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity;

     (4) “certificated security” means a security that is represented by a certificate;

     (5) “clearing corporation” means
          (A) a person who is registered as a “clearing agency” under the federal securities laws;

          (B) a federal reserve bank; or

          (C) any other person who provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority;

     (6) “communicate” means to
          (A) send a signed writing; or

          (B) transmit information by any mechanism agreed upon by the persons transmitting and receiving the information;

     (7) “endorsement” means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring, or redeeming the security or granting a power to assign, transfer, or redeem it;

     (8) “entitlement holder” means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary; if a person acquires a security entitlement by virtue of AS 45.08.501(a)(2) or (3), that person is the entitlement holder;

     (9) “entitlement order” means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement;

     (10) “financial asset,” except as otherwise provided in AS 45.08.103, means
          (A) a security;

          (B) an obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, that is, or is of a type, dealt in or traded on financial markets, or that is recognized in any area in which it is issued or dealt in as a medium for investment; or

          (C) any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this chapter; as context requires, the term means either the interest itself or the means by which a person’s claim to it is evidenced, including a certificated or uncertificated security, a security certificate, or a security entitlement;

     (11) [Repealed, § 113 ch 44 SLA 2009.]
     (12) “instruction” means a notification communicated to the issuer of an uncertificated security that directs that the transfer of the security be registered or that the security be redeemed;

     (13) “registered form,” as applied to a certificated security, means a form in which
          (A) the security certificate specifies a person entitled to the security; and

          (B) a transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer, or the security certificate states that a transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer;

     (14) “securities intermediary” means
          (A) a clearing corporation; or

          (B) a person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity;

     (15) “security,” except as otherwise provided in AS 45.08.103, means an obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer, if the obligation, share, participation, or interest
          (A) is represented by a security certificate in bearer or registered form, or if the transfer of the obligation, share, participation, or interest may be registered upon books maintained for that purpose by or on behalf of the issuer;

          (B) is one of a class or series or by its terms is divisible into a class or series of shares, participations, obligations, or interests; and

          (C) is, or is of a type, dealt in or traded on securities exchanges or securities markets, or is a medium for investment and the terms of the obligation, share, participation, or interest expressly provide that the obligation, share, participation, or interest is a security governed by this chapter;

     (16) “security certificate” means a certificate representing a security;

     (17) “security entitlement” means the rights and property interest of an entitlement holder with respect to a financial asset specified in AS 45.08.501 — 45.08.511;

     (18) “uncertificated security” means a security that is not represented by a certificate.

 (b) Other definitions applying to this chapter and the sections in which they appear are
     (1) “appropriate person” (AS 45.08.107);

     (2) “control” (AS 45.08.106);

     (3) “delivery” (AS 45.08.301);

     (4) “investment company security” (AS 45.08.103);

     (5) “issuer” (AS 45.08.201);

     (6) “overissue” (AS 45.08.210);

     (7) “protected purchaser” (AS 45.08.303);

     (8) “securities account” (AS 45.08.501).

 (c) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.

 (d) The characterization of a person, business, or transaction for purposes of this chapter does not determine the characterization of the person, business, or transaction for purposes of another law, regulation, or rule.




Sec. 45.08.103. Rules for determining whether certain obligations and interests are securities or financial assets.
 (a) A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security.

 (b) An investment company security is a security.

 (c) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this chapter, or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.

 (d) A writing that is a security certificate is governed by this chapter and not by AS 45.03, even though it also meets the requirements of AS 45.03. However, a negotiable instrument governed by AS 45.03 is a financial asset if it is held in a securities account.

 (e) An option or similar obligation issued by a clearing corporation to its participants is not a security but is a financial asset.

 (f) A commodity contract, as defined in AS 45.29.102(a), is not a security or a financial asset.

 (g) A document of title is not a financial asset unless AS 45.08.102(a)(10)(C) applies.

 (h) In this section, “investment company security” means a share or similar equity interest issued by an entity that is registered as an investment company under federal investment company laws, an interest in a unit investment trust that is registered as an investment company under federal investment company laws, or a face-amount certificate issued by a face-amount certificate company that is registered as an investment company under federal investment company laws; “investment company security” does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.




Sec. 45.08.104. Acquisition of security or financial asset or interest in security or financial asset.
 (a) A person acquires a security or an interest in a security under this chapter if the person
     (1) is a purchaser to whom a security is delivered under AS 45.08.301; or

     (2) acquires a security entitlement to the security under AS 45.08.501.

 (b) A person acquires a financial asset other than a security or an interest in a financial asset other than a security, under this chapter if the person acquires a security entitlement to the financial asset.

 (c) A person who acquires a security entitlement to a security or other financial asset has the rights specified in AS 45.08.501 — 45.08.511, but is a purchaser of a security, security entitlement, or other financial asset held by the securities intermediary only to the extent provided in AS 45.08.503.

 (d) Unless the context shows that a different meaning is intended, a person who is required by other law, regulation, rule, or agreement to transfer, deliver, present, surrender, exchange, or otherwise put in the possession of another person a security or financial asset satisfies that requirement by causing the other person to acquire an interest in the security or financial asset under (a) or (b) of this section.




Sec. 45.08.105. Notice of adverse claim.
 (a) A person has notice of an adverse claim if
     (1) the person knows of the adverse claim;

     (2) the person is aware of facts sufficient to indicate that there is a significant probability that the adverse claim exists and deliberately avoids information that would establish the existence of the adverse claim; or

     (3) the person has a duty, imposed by statute or regulation, to investigate whether an adverse claim exists, and the investigation required would establish the existence of the adverse claim.

 (b) Having knowledge that a financial asset or interest in a financial asset is or has been transferred by a representative does not impose a duty of inquiry into the rightfulness of a transaction and is not notice of an adverse claim. However, a person who knows that a representative has transferred a financial asset or interest in a financial asset in a transaction that is, or whose proceeds are being used, for the individual benefit of the representative or otherwise in breach of duty has notice of an adverse claim.

 (c) An act or event that creates a right to immediate performance of the principal obligation represented by a security certificate or sets a date on or after which the certificate is to be presented or surrendered for redemption or exchange does not itself constitute notice of an adverse claim except in the case of a transfer more than
     (1) one year after a date set for presentment or surrender for redemption or exchange; or

     (2) six months after a date set for payment of money against presentation or surrender of the certificate, if money was available for payment on that date.

 (d) A purchaser of a certificated security has notice of an adverse claim if the security certificate
     (1) whether in bearer or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer; or

     (2) is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate does not constitute this statement.

 (e) Filing of a financing statement under AS 45.29 is not notice of an adverse claim to a financial asset.




Sec. 45.08.106. Control.
 (a) A purchaser has control of a certificated security in bearer form if the certificated security is delivered to the purchaser.

 (b) A purchaser has control of a certificated security in registered form if the certificated security is delivered to the purchaser, and the certificate is
     (1) endorsed to the purchaser or in blank by an effective endorsement; or

     (2) registered in the name of the purchaser, upon original issue or registration of transfer by the issuer.

 (c) A purchaser has control of an uncertificated security if
     (1) the uncertificated security is delivered to the purchaser; or

     (2) the issuer has agreed that the issuer will comply with instructions originated by the purchaser without further consent by the registered owner.

 (d) A purchaser has control of a security entitlement if
     (1) the purchaser becomes the entitlement holder;

     (2) the securities intermediary has agreed that the securities intermediary will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder; or

     (3) another person has control of the security entitlement on behalf of the purchaser or, having previously acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser.

 (e) If an interest in a security entitlement is granted by the entitlement holder to the entitlement holder’s own securities intermediary, the securities intermediary has control.

 (f) A purchaser who has satisfied the requirements of (c) or (d) of this section has control even if the registered owner in the case of (c) of this section or the entitlement holder in the case of (d) of this section retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary, or otherwise to deal with the uncertificated security or security entitlement.

 (g) An issuer or a securities intermediary may not enter into an agreement described in (c)(2) or (d)(2) of this section without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into an agreement even though the registered owner or entitlement holder directs the issuer or securities intermediary to enter into the agreement. An issuer or securities intermediary that has entered into an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder. In this subsection, “agreement” means an agreement described in (c)(2) or (d)(2) of this section.




Sec. 45.08.107. Whether endorsement, instruction, or entitlement order is effective.
 (a) An endorsement, instruction, or entitlement order is effective if
     (1) it is made by the appropriate person;

     (2) it is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of the appropriate person, including, in the case of an instruction or entitlement order, a person who has control under AS 45.08.106(c)(2) or (d)(2); or

     (3) the appropriate person has ratified it or is otherwise precluded from asserting its ineffectiveness.

 (b) An endorsement, instruction, or entitlement order made by a representative is effective even if
     (1) the representative has failed to comply with a controlling instrument or with the law of the state having jurisdiction of the representative relationship, including a law requiring the representative to obtain court approval of the transaction; or

     (2) the representative’s action in making the endorsement, instruction, or entitlement order or using the proceeds of the transaction is otherwise a breach of duty.

 (c) If a security is registered in the name of or specially endorsed to a person described as a representative, or if a securities account is maintained in the name of a person described as a representative, an endorsement, instruction, or entitlement order made by the person is effective even though the person no longer serves in the described capacity.

 (d) Effectiveness of an endorsement, instruction, or entitlement order is determined as of the date the endorsement, instruction, or entitlement order is made, and an endorsement, instruction, or entitlement order does not become ineffective by reason of any later change of circumstances.

 (e) In this chapter, “appropriate person” means
     (1) with respect to an endorsement, the person specified by a security certificate or by an effective special endorsement to be entitled to the security;

     (2) with respect to an instruction, the registered owner of an uncertificated security;

     (3) with respect to an entitlement order, the entitlement holder;

     (4) if the person designated in (1), (2), or (3) of this subsection is deceased, the designated person’s successor taking under other law or the designated person’s personal representative acting for the estate of the decedent; or

     (5) if the person designated in (1), (2), or (3) of this subsection lacks capacity, the designated person’s guardian, conservator, or other similar representative who has power under other law to transfer the security or financial asset.




Sec. 45.08.108. Warranties in direct holding.
 (a) A person who transfers a certificated security to a purchaser for value warrants to the purchaser, and an endorser, if the transfer is by endorsement, warrants to any subsequent purchaser, that
     (1) the certificate is genuine and has not been materially altered;

     (2) the transferor or endorser does not know of a fact that might impair the validity of the security;

     (3) there is no adverse claim to the security;

     (4) the transfer does not violate any restriction on transfer;

     (5) if the transfer is by endorsement, the endorsement is made by an appropriate person, or if the endorsement is by an agent, the agent has actual authority to act on behalf of the appropriate person; and

     (6) the transfer is otherwise effective and rightful.

 (b) A person who originates an instruction for registration of transfer of an uncertificated security to a purchaser for value warrants to the purchaser that
     (1) the instruction is made by an appropriate person, or if the instruction is by an agent, the agent has actual authority to act on behalf of the appropriate person;

     (2) the security is valid;

     (3) there is no adverse claim to the security; and

     (4) at the time the instruction is presented to the issuer;
          (A) the purchaser will be entitled to the registration of transfer;

          (B) the transfer will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction;

          (C) the transfer will not violate any restriction on transfer; and

          (D) the requested transfer will otherwise be effective and rightful.

 (c) A person who transfers an uncertificated security to a purchaser for value and does not originate an instruction in connection with the transfer warrants that
     (1) the uncertificated security is valid;

     (2) there is no adverse claim to the security;

     (3) the transfer does not violate any restriction on transfer; and

     (4) the transfer is otherwise effective and rightful.

 (d) A person who endorses a security certificate warrants to the issuer that
     (1) there is no adverse claim to the security; and

     (2) the endorsement is effective.

 (e) A person who originates an instruction for registration of transfer of an uncertificated security warrants to the issuer that
     (1) the instruction is effective; and

     (2) at the time the instruction is presented to the issuer, the purchaser will be entitled to the registration of transfer.

 (f) A person who presents a certificated security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment, or exchange, but a purchaser for value and without notice of adverse claims to whom transfer is registered warrants only that the person does not have knowledge of an unauthorized signature in a necessary endorsement.

 (g) If a person acts as agent of another in delivering a certificated security to a purchaser, the identity of the principal was known to the person to whom the certificate was delivered, and the certificate delivered by the agent was received by the agent from the principal or received by the agent from another person at the direction of the principal, the person delivering the security certificate warrants only that the delivering person has authority to act for the principal and does not know of an adverse claim to the certificated security.

 (h) A secured party who redelivers a security certificate received, or after payment and on order of the debtor delivers the security certificate to another person, makes only the warranties of an agent under (g) of this section.

 (i) Except as otherwise provided in (g) of this section, a broker acting for a customer makes to the issuer and a purchaser the warranties provided in (a) — (f) of this section. A broker that delivers a security certificate to its customer, or causes its customer to be registered as the owner of an uncertificated security, makes to the customer the warranties provided in (a) or (b) of this section, and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker acting as an agent are in addition to applicable warranties given by and in favor of the customer.




Sec. 45.08.109. Warranties in indirect holding.
 (a) A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that
     (1) the entitlement order is made by an appropriate person, or if the entitlement order is by an agent, the agent has actual authority to act on behalf of the appropriate person; and

     (2) there is no adverse claim to the security entitlement.

 (b) A person who delivers a security certificate to a securities intermediary for credit to a securities account or originates an instruction with respect to an uncertificated security directing that the uncertificated security be credited to a securities account makes to the securities intermediary the warranties specified in AS 45.08.108(a) or (b).

 (c) If a securities intermediary delivers a security certificate to its entitlement holder or causes its entitlement holder to be registered as the owner of an uncertificated security, the securities intermediary makes to the entitlement holder the warranties specified in AS 45.08.108(a) or (b).




Sec. 45.08.110. Applicability; choice of law.
 (a) The local law of the issuer’s jurisdiction, as specified in (f) of this section, governs
     (1) the validity of a security;

     (2) the rights and duties of the issuer with respect to registration of transfer;

     (3) the effectiveness of registration of transfer by the issuer;

     (4) whether the issuer owes a duty to an adverse claimant to a security; and

     (5) whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.

 (b) The local law of the securities intermediary’s jurisdiction, as specified in (e) of this section, governs
     (1) acquisition of a security entitlement from the securities intermediary;

     (2) the rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement;

     (3) whether the securities intermediary owes a duty to an adverse claimant to a security entitlement; and

     (4) whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a person who purchases a security entitlement or interest in a security entitlement from an entitlement holder.

 (c) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered.

 (d) The following rules determine a securities intermediary’s jurisdiction for purposes of this section:
     (1) if an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the securities intermediary’s jurisdiction for purposes of AS 45.08.101 — 45.08.116, this chapter, or this code, that jurisdiction is the securities intermediary’s jurisdiction;

     (2) if (1) of this subsection does not apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction;

     (3) if neither (1) nor (2) of this subsection applies and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction;

     (4) if none of the preceding paragraphs of this subsection applies, the securities intermediary’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder’s account is located;

     (5) if none of the preceding paragraphs of this subsection applies, the securities intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located.

 (e) A securities intermediary’s jurisdiction is not determined by the physical location of certificates representing financial assets, by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other record keeping concerning the account.

 (f) In this chapter, “issuer’s jurisdiction” means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in (a)(2) — (5) of this section.




Sec. 45.08.111. Clearing corporation rules.
A rule adopted by a clearing corporation governing rights and obligations among the clearing corporation and its participants in the clearing corporation is effective even if the rule conflicts with this chapter and affects another party who does not consent to the rule.


Sec. 45.08.112. Creditor’s legal process.
 (a) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in (d) of this section. However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.

 (b) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in (d) of this section.

 (c) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor’s securities account is maintained, except as otherwise provided in (d) of this section.

 (d) The interest of a debtor in a certificated security for which the certificate is in the possession of a secured party, or in an uncertificated security registered in the name of a secured party, or a security entitlement maintained in the name of a secured party, may be reached by a creditor by legal process upon the secured party.

 (e) A creditor whose debtor is the owner of a certificated security, uncertificated security, or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security, or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process.




Sec. 45.08.113. Statute of frauds inapplicable.
A contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one year of its making.


Sec. 45.08.114. Evidentiary rules concerning certificated securities.
The following rules apply in an action on a certificated security against the issuer:
     (1) unless specifically denied in the pleadings, each signature on a security certificate or in a necessary endorsement is admitted;

     (2) if the effectiveness of a signature is put in issue, the burden of establishing effectiveness is on the party claiming under the signature, but the signature is presumed to be genuine or authorized;

     (3) if signatures on a security certificate are admitted or established, production of the certificate entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security;

     (4) if it is shown that a defense or defect exists, the plaintiff has the burden of establishing that the plaintiff or some person under whom the plaintiff claims is a person against whom the defense or defect cannot be asserted.




Sec. 45.08.115. Securities intermediary and others not liable to adverse claimant.
A securities intermediary that has transferred a financial asset under an effective entitlement order, or a broker or other agent or bailee that has dealt with a financial asset at the direction of its customer or principal, is not liable to a person having an adverse claim to the financial asset, unless the securities intermediary, broker, other agent, or bailee
     (1) took the action after it had been served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order, or other legal process;

     (2) acted in collusion with the wrongdoer in violating the rights of the adverse claimant; or

     (3) in the case of a security certificate that has been stolen, acted with notice of the adverse claim.




Sec. 45.08.116. Securities intermediary as purchaser for value.
A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of the financial asset. A securities intermediary that acquires a security entitlement to a financial asset from another securities intermediary acquires the security entitlement for value if the securities intermediary acquiring the security entitlement establishes a security entitlement to the financial asset in favor of an entitlement holder.


Article 2. Issue — Issuer.


Sec. 45.08.201. “Issuer”.
 (a) With respect to obligations on or defenses to a security, “issuer” includes a person who
     (1) places or authorizes the placing of the person’s name on a security certificate, other than as authenticating trustee, registrar, transfer agent, or the like, to evidence a share, participation, or other interest in the person’s property or in an enterprise, or to evidence the person’s duty to perform an obligation represented by the certificate;

     (2) creates shares, participations, or other interests in that person’s property or in an enterprise, or undertakes obligations, if the shares, participations, interests, or obligations are uncertificated securities;

     (3) directly or indirectly creates fractional interests in the person’s rights or property, if the fractional interests are represented by security certificates; or

     (4) becomes responsible for, or in place of, another person described as an issuer in this section.

 (b) With respect to obligations on or defenses to a security, a guarantor is an issuer to the extent of the guarantor’s guarantee, whether or not the guarantor’s obligation is noted on a security certificate.

 (c) With respect to registration of a transfer, “issuer” means a person on whose behalf transfer books are maintained.




Sec. 45.08.202. Issuer’s responsibility and defenses; notice of defect or defense.
 (a) Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture, or document or to a constitution, statute, ordinance, rule, regulation, order, or the like, to the extent the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in an instrument, indenture, or document or in a constitution, statute, ordinance, rule, regulation, order, or the like, under which the security is issued.

 (b) The following rules apply if an issuer asserts that a security is not valid:
     (1) a security other than one issued by a government or governmental subdivision, agency, or instrumentality, even though issued with a defect going to its validity, is valid in the hands of a purchaser for value and without notice of the particular defect unless the defect involves a violation of a constitutional provision; in that case, the security is valid in the hands of a purchaser for value and without notice of the defect, other than one who takes by original issue;

     (2) paragraph (1) of this subsection applies to an issuer that is a government or governmental subdivision, agency, or instrumentality only if there has been substantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security.

 (c) Except as otherwise provided in AS 45.08.205, lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice.

 (d) All other defenses of the issuer of a security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken the certificated security without notice of the particular defense.

 (e) This section does not affect the right of a party to cancel a contract for a security “when, as, and if issued” or a “when distributed” in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement under which the security is to be issued or distributed.

 (f) If a security is held by a securities intermediary against whom an entitlement holder has a security entitlement with respect to the security, the issuer may not assert a defense that the issuer could not assert if the entitlement holder held the security directly.




Sec. 45.08.203. Staleness as notice of defects or defenses.
 (a) After an act or event, other than a call that has been revoked, creating a right to immediate performance of the principal obligation represented by a certificated security or setting a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in the security’s issue or defense of the issuer, if the act or event
     (1) requires the payment of money, the delivery of certificated securities, the registration of transfer of uncertificated securities, or any of these on presentation or surrender of the security certificate, the money or securities are available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date; or

     (2) is not covered by (1) of this subsection and the purchaser takes the security more than two years after the date set for surrender or presentation or the date on which performance became due.

 (b) [Repealed, § 68 ch 17 SLA 1996.]




Sec. 45.08.204. Effect of issuer’s restriction on transfer.
A restriction on transfer of a security imposed by the issuer, even though otherwise lawful, is ineffective against a person without knowledge of the restriction unless the security
     (1) is certificated and the restriction is noted conspicuously on the security certificate; or

     (2) is uncertificated and the registered owner has been notified of the restriction.




Sec. 45.08.205. Effect of unauthorized signature on security certificate.
An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the signature is effective in favor of a purchaser for value of the certificated security if the purchaser is without notice of the lack of authority and the signing has been done by
     (1) an authenticating trustee, registrar, transfer agent, or other person entrusted by the issuer with the signing of the security certificate or of similar security certificates, or the immediate preparation for signing of any of them; or

     (2) an employee of the issuer, or of a person listed in (1) of this section, entrusted with responsible handling of the security certificate.




Sec. 45.08.206. Completion or alteration of certificated security.
 (a) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in another respect,
     (1) a person may complete it by filling in the blanks as authorized; and

     (2) even if the blanks are incorrectly filled in, the security certificate as completed is enforceable by a purchaser who takes it for value and without notice of the incorrectness.

 (b) A complete security certificate that has been improperly altered, even if fraudulently, remains enforceable, but only according to its original terms.

 (c) [Repealed, § 68 ch 17 SLA 1996.]
 (d) [Repealed, § 68 ch 17 SLA 1996.]




Sec. 45.08.207. Rights and duties of issuer with respect to registered owners and registered pledgees.
 (a) Before due presentment for registration of transfer of a certificated security in registered form or of an instruction requesting registration of transfer of an uncertificated security, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner.

 (b) [Repealed, § 68 ch 17 SLA 1996.]
 (c) [Repealed, § 68 ch 17 SLA 1996.]
 (d) [Repealed, § 68 ch 17 SLA 1996.]
 (e) [Repealed, § 68 ch 17 SLA 1996.]
 (f) [Repealed, § 68 ch 17 SLA 1996.]
 (g) This chapter does not affect the liability of the registered owner of a security for calls, assessments, or the like.




Sec. 45.08.208. Effect of signature of authenticating trustee, registrar, or transfer agent.
 (a) A person signing a security certificate as authenticating trustee, registrar, transfer agent, or the like, warrants to a purchaser for value of the certificated security, if the purchaser is without notice of the particular defect, that
     (1) the certificate is genuine;

     (2) the person’s own participation in the issue of the security is within the person’s capacity and within the scope of the authority received by the person from the issuer; and

     (3) the person has reasonable grounds to believe that the certificated security is in the form and within the amount the issuer is authorized to issue.

 (b) Unless otherwise agreed, a person signing under (a) of this section does not assume responsibility for the validity of the security in other respects.




Sec. 45.08.209. Issuer’s lien.
A lien in favor of an issuer upon a certificated security is valid against a purchaser only if the right of the issuer to the lien is noted conspicuously on the security certificate.


Sec. 45.08.210. Overissue.
 (a) Except as otherwise provided in (b) and (c) of this section, the provisions of AS 45.08.201 — 45.08.210 that validate a security or compel its issue or reissue do not apply to the extent that validation, issue, or reissue would result in overissue.

 (b) If an identical security not constituting an overissue is reasonably available for purchase, a person entitled to issue or validation may compel the issuer to purchase the security and deliver it if certificated or register its transfer if uncertificated, against surrender of any security certificate the person holds.

 (c) If a security is not reasonably available for purchase, a person entitled to issue or validation may recover from the issuer the price the person or the last purchaser for value paid for it with interest from the date of the person’s demand.

 (d) In this section, “overissue” means the issue of securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue.




Article 3. Purchase.


Sec. 45.08.301. Delivery.
 (a) Delivery of a certificated security to a purchaser occurs when
     (1) the purchaser acquires possession of the security certificate;

     (2) another person, other than a securities intermediary, either acquires possession of the security certificate on behalf of the purchaser or, having previously acquired possession of the certificate, acknowledges that it holds for the purchaser; or

     (3) a securities intermediary acting on behalf of the purchaser acquires possession of the security certificate, only if the certificate is in registered form and is
          (A) registered in the name of the purchaser;

          (B) payable to the order of the purchaser; or

          (C) specially endorsed to the purchaser by an effective endorsement and has not been endorsed to the securities intermediary or in blank.

 (b) Delivery of an uncertificated security to a purchaser occurs when
     (1) the issuer registers the purchaser as the registered owner, upon original issue or registration of transfer; or

     (2) another person, other than a securities intermediary, either becomes the registered owner of the uncertificated security on behalf of the purchaser or, having previously become the registered owner, acknowledges that it holds for the purchaser.




Sec. 45.08.302. Rights of purchaser.
 (a) Except as otherwise provided in (b) and (c) of this section, a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer.

 (b) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

 (c) A purchaser of a certificated security who as a previous holder had notice of an adverse claim does not improve its position by taking from a protected purchaser.




Sec. 45.08.303. Protected purchaser.
 (a) In this chapter, “protected purchaser” means a purchaser of a certificated or uncertificated security, or of an interest in the security, who gives value, does not have notice of an adverse claim to the security, and obtains control of the certificated or uncertificated security.

 (b) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires the interest in the security free of any adverse claim.




Sec. 45.08.304. Endorsement.
 (a) An endorsement may be in blank or special. An endorsement in blank includes an endorsement to bearer. A special endorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank endorsement to a special endorsement.

 (b) An endorsement purporting to be only of part of a security certificate representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.

 (c) An endorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on which it appears or, if the endorsement is on a separate document, until delivery of both the document and the certificate.

 (d) If a security certificate in registered form has been delivered to a purchaser without a necessary endorsement, the purchaser may become a protected purchaser only when the endorsement is supplied. However, against a transferor, a transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.

 (e) An endorsement of a security certificate in bearer form may give notice of an adverse claim to the certificate, but it does not otherwise affect a right to registration that the holder possesses.

 (f) Unless otherwise agreed, a person making an endorsement assumes only the obligations provided in AS 45.08.108 and not an obligation that the security will be honored by the issuer.




Sec. 45.08.305. Instruction.
 (a) If an instruction has been originated by an appropriate person but is incomplete in another respect, any person may complete the instruction as authorized and the issuer may rely on the instruction as completed, even though the instruction has been completed incorrectly.

 (b) Unless otherwise agreed, a person initiating an instruction assumes only the obligations imposed by AS 45.08.108 and not an obligation that the security will be honored by the issuer.




Sec. 45.08.306. Effect of guaranteeing signature, endorsement, or instruction.
 (a) A person who guarantees a signature of an endorser of a security certificate warrants that at the time of signing
     (1) the signature was genuine;

     (2) the signer was an appropriate person to endorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and

     (3) the signer had legal capacity to sign.

 (b) A person who guarantees a signature of the originator of an instruction warrants that at the time of signing
     (1) the signature was genuine;

     (2) the signer was an appropriate person to originate the instruction, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person, if the person specified in the instruction as the registered owner was, in fact, the registered owner, but the signature guarantor does not make a warranty that the person specified in the instruction as the registered owner was, in fact, the registered owner; and

     (3) the signer had legal capacity to sign.

 (c) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under (b) of this section and also warrants that at the time the instruction is presented to the issuer
     (1) the person specified in the instruction as the registered owner of the uncertificated security will be the registered owner; and

     (2) the transfer of the uncertificated security requested in the instruction will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction.

 (d) A guarantor under (a) and (b) of this section or a special guarantor under (c) of this section does not otherwise warrant the rightfulness of the transfer.

 (e) A person who guarantees an endorsement of a security certificate makes the warranties of a signature guarantor under (a) of this section and also warrants the rightfulness of the transfer in all respects.

 (f) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under (c) of this section and also warrants the rightfulness of the transfer in all respects.

 (g) An issuer may not require a special guarantee of signature, a guarantee of endorsement, or a guarantee of instruction as a condition to registration of transfer.

 (h) The warranties under this section are made to a person taking or dealing with the security in reliance on the guarantee, and the guarantor is liable to the person for loss resulting from their breach. An endorser or originator of an instruction whose signature, endorsement, or instruction has been guaranteed is liable to a guarantor for loss suffered by the guarantor as a result of breach of the warranties of the guarantor.




Sec. 45.08.307. Purchaser’s right to requisites for registration of transfer.
Unless otherwise agreed, the transferor of a security on due demand shall supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer of the security, but if the transfer is not for value, a transferor does not need to comply unless the purchaser pays the necessary expenses. If the transferor fails within a reasonable time to comply with the demand, the purchaser may reject or rescind the transfer.


Secs. 45.08.308 — 45.08.321. [Repealed, § 68 ch 17 SLA 1996.]

Article 4. Registration.


Sec. 45.08.401. Duty of issuer to register transfer.
 (a) If a certificated security in registered form is presented to the issuer with a request to register transfer or an instruction is presented to the issuer with a request to register transfer of an uncertificated security, the issuer shall register the transfer as requested if
     (1) under the terms of the security the person seeking registration of transfer is eligible to have the security registered in the person’s name;

     (2) the endorsement or instruction is made by the appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;

     (3) reasonable assurance is given under AS 45.08.402 that the endorsement or instruction is genuine and authorized;

     (4) applicable law relating to the collection of taxes has been complied with;

     (5) the transfer does not violate a restriction on transfer imposed by the issuer under AS 45.08.204;

     (6) a demand that the issuer not register transfer has not become effective under AS 45.08.403, or the issuer has complied with AS 45.08.403(b) but legal process or indemnity bond is not obtained under AS 45.08.403(d); and

     (7) the transfer is in fact rightful or is to a protected purchaser.

 (b) If an issuer is under a duty to register a transfer of a security, the issuer is liable to a person presenting a certificated security or an instruction for registration or to the person’s principal for loss resulting from an unreasonable delay in registration or failure or refusal to register the transfer.




Sec. 45.08.402. Assurance that endorsements and instructions are effective.
 (a) An issuer may require the following assurance that each necessary endorsement or each instruction is genuine and authorized:
     (1) in all cases, a guarantee of the signature of the person making an endorsement or originating an instruction including, in the case of an instruction, reasonable assurance of identity;

     (2) if the endorsement is made or the instruction is originated by an agent, appropriate assurance of actual authority to sign;

     (3) if the endorsement is made or the instruction is originated by a fiduciary under AS 45.08.107(e)(4) or (5), appropriate evidence of appointment or incumbency;

     (4) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and

     (5) if the endorsement is made or the instruction is originated by a person not covered by another provision of this subsection, assurance appropriate to the case corresponding as nearly as may be to the provisions of this subsection.

 (b) [Repealed, § 68 ch 17 SLA 1996.]
 (c) In this section,
     (1) “appropriate evidence of appointment or incumbency” means
          (A) in the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of the court or an officer of the court and dated within 60 days before the date of presentation for transfer; or

          (B) in any other case, a copy of a document showing the appointment or a certificate issued by or on behalf of a person reasonably believed by the issuer to be responsible or, in the absence of that document or certificate, other evidence the issuer reasonably considers to be appropriate;

     (2) “guarantee of the signature” means a guarantee signed by or on behalf of a person reasonably believed by the issuer to be responsible; an issuer may adopt standards with respect to responsibility if the standards are not manifestly unreasonable.

 (d) An issuer may elect to require reasonable assurance beyond that specified in this section.




Sec. 45.08.403. Demand that issuer not register transfer.
 (a) A person who is an appropriate person to make an endorsement or originate an instruction may demand that the issuer not register transfer of a security by communicating to the issuer a notification that identifies the registered owner and the issue of which the security is a part and provides an address for communications directed to the person making the demand. The demand is effective only if it is received by the issuer at a time and in a manner affording the issuer reasonable opportunity to act on it.

 (b) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security after a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to the person who initiated the demand at the address provided in the demand and to the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer a notification stating that
     (1) the certificated security has been presented for registration of transfer or the instruction for registration of transfer of the uncertificated security has been received;

     (2) a demand that the issuer not register transfer had previously been received; and

     (3) the issuer will withhold registration of transfer for a period of time stated in the notification in order to provide the person who initiated the demand an opportunity to obtain legal process or an indemnity bond.

 (c) The period described in (b)(3) of this section may not exceed 30 days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable.

 (d) An issuer is not liable to a person who initiated a demand that the issuer not register transfer for loss the person suffers as a result of registration of a transfer under an effective endorsement or instruction if the person who initiated the demand does not, within the time stated in the issuer’s communication, either
     (1) obtain an appropriate restraining order, injunction, or other process from a court of competent jurisdiction enjoining the issuer from registering the transfer; or

     (2) file with the issuer an indemnity bond, sufficient in the issuer’s judgment to protect the issuer and any transfer agent, registrar, or other agent of the issuer involved from a loss the issuer, transfer agent, registrar, or other agent of the issuer may suffer by refusing to register the transfer.

 (e) This section does not relieve an issuer from liability for registering transfer under an endorsement or instruction that was not effective.




Sec. 45.08.404. Wrongful registration.
 (a) Except as otherwise provided in AS 45.08.406, an issuer is liable for wrongful registration of transfer if the issuer has registered a transfer of a security to a person not entitled to the security and the transfer was registered
     (1) under an ineffective endorsement or instruction;

     (2) after a demand that the issuer not register transfer became effective under AS 45.08.403(a) and the issuer did not comply with AS 45.08.403(b);

     (3) after the issuer had been served with an injunction, restraining order, or other legal process enjoining it from registering the transfer, issued by a court of competent jurisdiction, and the issuer had a reasonable opportunity to act on the injunction, restraining order, or other legal process; or

     (4) by an issuer acting in collusion with the wrongdoer.

 (b) An issuer that is liable for wrongful registration of transfer under (a) of this section on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and payments or distributions that the person did not receive as a result of the wrongful registration. If an overissue would result, the issuer’s liability to provide the person with a like security is governed by AS 45.08.210.

 (c) Except as otherwise provided in (a) of this section or in a law relating to the collection of taxes, an issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a security if registration was made under an effective endorsement or instruction.




Sec. 45.08.405. Lost, destroyed, and stolen certificated securities.
 (a) [Repealed, § 68 ch 17 SLA 1996.]
 (b) If the owner of a certificated security, whether in registered or bearer form, claims that the certificate has been lost, destroyed, or wrongfully taken, the issuer shall issue a new certificate if the owner
     (1) so requests before the issuer has notice that the certificate has been acquired by a protected purchaser;

     (2) files with the issuer a sufficient indemnity bond; and

     (3) satisfies other reasonable requirements imposed by the issuer.

 (c) If, after the issue of a new security certificate, a protected purchaser of the original certificate presents the original certificate for registration of transfer, the issuer shall register the transfer unless an overissue would result. In that case, the issuer’s liability is governed by AS 45.08.210. In addition to rights on the indemnity bond, an issuer may recover the new certificate from a person to whom it was issued or a person taking under that person, except a protected purchaser.




Sec. 45.08.406. Obligation to notify issuer of lost, destroyed, or wrongfully taken security certificate.
If a security certificate has been lost, apparently destroyed, or wrongfully taken, the owner fails to notify the issuer of the loss, destruction, or taking within a reasonable time after the owner has notice of the loss, destruction, or taking, and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for registering the transfer under AS 45.08.404 or a claim to a new security certificate under AS 45.08.405.


Sec. 45.08.407. Authenticating trustee, transfer agent, and registrar.
A person acting as authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the issuer has in regard to those functions.


Sec. 45.08.408. Statements of uncertificated securities. [Repealed, § 68 ch 17 SLA 1996.]

Article 5. Security Entitlements.


Sec. 45.08.501. Acquisition of security entitlement from securities intermediary; securities account.
 (a) Except as otherwise provided in (b) and (c) of this section, a person acquires a security entitlement if a securities intermediary
     (1) indicates by book entry that a financial asset has been credited to the person’s securities account;

     (2) receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts the asset for credit to the person’s securities account; or

     (3) becomes obligated under another law, regulation, or rule to credit a financial asset to the person’s securities account.

 (b) If a condition of (a) of this section has been met, a person has a security entitlement even if the securities intermediary does not itself hold the financial asset.

 (c) If a securities intermediary holds a financial asset for another person, and the financial asset is registered in the name of, payable to the order of, or specially endorsed to the other person, and has not been endorsed to the securities intermediary or in blank, the other person is treated as holding the financial asset directly rather than as having a security entitlement with respect to the financial asset.

 (d) Issuance of a security is not establishment of a security entitlement.

 (e) In this chapter, “securities account” means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.




Sec. 45.08.502. Assertion of adverse claim against entitlement holder.
An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who acquires a security entitlement under AS 45.08.501 for value and without notice of the adverse claim.


Sec. 45.08.503. Property interest of entitlement holder in financial asset held by securities intermediary.
 (a) To the extent necessary for a securities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in AS 45.08.511.

 (b) An entitlement holder’s property interest with respect to a particular financial asset under (a) of this section is a pro rata property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset.

 (c) An entitlement holder’s property interest with respect to a particular financial asset under (a) of this section may not be enforced against the securities intermediary unless the interest is enforced by exercising the entitlement holder’s rights under AS 45.08.505 — 45.08.508.

 (d) An entitlement holder’s property interest with respect to a particular financial asset under (a) of this section may not be enforced against a purchaser of the financial asset or of an interest in the financial asset, unless
     (1) insolvency proceedings have been initiated by or against the securities intermediary;

     (2) the securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of the intermediary’s entitlement holders to that financial asset;

     (3) the securities intermediary violated the intermediary’s obligations under AS 45.08.504 by transferring the financial asset or interest in the financial asset to the purchaser; and

     (4) the purchaser is not protected under (f) of this section.

 (e) Under (d) of this section, the trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or the interest in the financial asset, from the purchaser; if the trustee or other liquidator elects not to pursue this right of recovery, an entitlement holder whose security entitlement remains unsatisfied has the right to recover the entitlement holder’s interest in the financial asset from the purchaser.

 (f) An action based on the entitlement holder’s property interest with respect to a particular financial asset under (a) of this section, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a purchaser of a financial asset or an interest in a financial asset who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary’s obligations under AS 45.08.504.




Sec. 45.08.504. Duty of securities intermediary to maintain financial asset.
 (a) A securities intermediary shall promptly obtain and maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements the securities intermediary has established in favor of the securities intermediary’s entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets directly or through one or more other securities intermediaries.

 (b) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant a security interest in a financial asset the securities intermediary is obligated to maintain under (a) of this section.

 (c) A securities intermediary satisfies the duty in (a) of this section if
     (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

     (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to obtain and maintain the financial asset.

 (d) This section does not apply to a clearing corporation if the clearing corporation is the obligor of an option or similar obligation to which the entitlement holders of the clearing corporation have security entitlements.




Sec. 45.08.505. Duty of securities intermediary with respect to payments and distributions.
 (a) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if
     (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

     (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to attempt to obtain the payment or distribution.

 (b) A securities intermediary is obligated to the securities intermediary’s entitlement holder for a payment or distribution made by the issuer of a financial asset if the payment or distribution is received by the securities intermediary.




Sec. 45.08.506. Duty of securities intermediary to exercise rights as directed by entitlement holder.
A securities intermediary shall exercise rights with respect to a financial asset if directed by an entitlement holder to exercise the rights. A securities intermediary satisfies the duty if
     (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

     (2) in the absence of agreement, the securities intermediary either places the entitlement holder in a position to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.




Sec. 45.08.507. Duty of securities intermediary to comply with entitlement order.
 (a) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportunity to comply with the entitlement order. A securities intermediary satisfies the duty if
     (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or

     (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to comply with the entitlement order.

 (b) If a securities intermediary transfers a financial asset under an ineffective entitlement order, the securities intermediary shall reestablish a security entitlement in favor of the person entitled to the entitlement order, and pay or credit payments or distributions that the person did not receive as a result of the wrongful transfer. If the securities intermediary does not reestablish a security entitlement, the securities intermediary is liable to the entitlement holder for damages.




Sec. 45.08.508. Duty of securities intermediary to change entitlement holder’s position to other form of security holding.
A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if
     (1) the securities intermediary acts as agreed upon by the entitlement holder and the securities intermediary; or

     (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.




Sec. 45.08.509. Specification of duties of securities intermediary by other statute, regulation, or rule; manner of performance of duties of securities intermediary and exercise of rights of entitlement holder.
 (a) If the substance of a duty imposed upon a securities intermediary by AS 45.08.504 — 45.08.508 is the subject of other statute, regulation, or rule, compliance with that statute, regulation, or rule satisfies the duty.

 (b) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation, or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform the duties of the securities intermediary and the entitlement holder shall exercise the rights of the entitlement holder in a commercially reasonable manner.

 (c) The obligation of a securities intermediary to perform the duties imposed by AS 45.08.504 — 45.08.508 is subject to the rights of the securities intermediary
     (1) arising out of a security interest under a security agreement with the entitlement holder or otherwise; and

     (2) under other law, regulation, rule, or agreement to withhold performance of the duties of the securities intermediary as a result of unfulfilled obligations of the entitlement holder to the securities intermediary.

 (d) AS 45.08.504 — 45.08.508 do not require a securities intermediary to take action that is prohibited by other statute, regulation, or rule.




Sec. 45.08.510. Rights of purchaser of security entitlement from entitlement holder.
 (a) In a case not covered by the priority rules in AS 45.29 or the rules stated in (c) of this section, an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest in a security entitlement, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.

 (b) If an adverse claim could not have been asserted against an entitlement holder under AS 45.08.502, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest in a security entitlement, from the entitlement holder.

 (c) In a case not covered by the priority rules in AS 45.29, a purchaser for value of a security entitlement, or an interest in a security entitlement, who obtains control has priority over a purchaser of a security entitlement, or an interest in a security entitlement, who does not obtain control. Except as otherwise provided in (d) of this section, purchasers who have control rank according to priority in time of
     (1) the purchaser’s becoming the person for whom the securities account in which the security entitlement is carried is maintained, if the purchaser obtained control under AS 45.08.106(d)(1);

     (2) the securities intermediary’s agreement to comply with the purchaser’s entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried if the purchaser obtained control under AS 45.08.106(d)(2); or

     (3) if the purchaser obtained control through another person under AS 45.08.106(d)(3), the time on which priority would be based under this subsection if the other person were the secured party.

 (d) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.




Sec. 45.08.511. Priority among security interests and entitlement holders.
 (a) Except as otherwise provided in (b) and (c) of this section, if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both the securities intermediary’s obligations to entitlement holders who have security entitlements to that financial asset and the securities intermediary’s obligation to a creditor of the securities intermediary who has a security interest in the financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.

 (b) A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary’s entitlement holders who have security entitlements with respect to the financial asset if the creditor has control over the financial asset.

 (c) If a clearing corporation does not have sufficient financial assets to satisfy both the clearing corporation’s obligations to entitlement holders who have security entitlements with respect to a financial asset and the clearing corporation’s obligation to a creditor of the clearing corporation who has a security interest in the financial asset, the claim of the creditor has priority over the claims of entitlement holders.




Chapter 09. Secured Transactions; Sales of Accounts, Contract Rights, and Chattel Paper.

[Repealed, § 31 ch 113 SLA 2000. For current law, see AS 45.29.]

Chapter 10. Alaska Retail Installment Sales Act.

Sec. 45.10.010. The contract document.
 (a) A retail installment contract must be contained in a single document. The document must contain the entire agreement of the parties including promissory notes and other evidences of indebtedness between the parties relating to the transaction, except as provided in AS 45.10.040, 45.10.050, and 45.10.100.

 (b) If the buyer’s obligation to pay the time balance is represented by a promissory note secured by a chattel mortgage, a provision of the mortgage by which the buyer undertakes to do something besides pay a sum certain in money is considered to be contained in a separate document for the purpose of determining the negotiability of the note unless the provision is expressly incorporated in the note by reference to the provision of the mortgage.

 (c) The contract must be dated, signed by the retail buyer, and completed as to all essential provisions, except as otherwise provided in AS 45.10.050 and 45.10.060.




Sec. 45.10.020. Buyer’s copy.
The retail seller shall deliver to the retail buyer, or mail to the buyer at the address shown on the retail installment contract, a copy of the contract as accepted by the seller. Until the seller does so, the buyer is obligated to pay only the cash sale price. An acknowledgment by the buyer of delivery of a copy of the contract must appear directly above the buyer’s signature.


Sec. 45.10.030. Contents of contract.
 (a) The retail installment contract must contain the names of the seller and the buyer, the place of business of the seller, the residence or other address of the buyer as named by the buyer, and a description or identification of the goods sold or to be sold or services furnished or rendered or to be furnished or rendered. The contract must also contain the following items:
     (1) the cash sale price of each item of goods or services;

     (2) the amount of the buyer’s down payment, identifying the amounts paid in money and allowed for goods traded in;

     (3) the difference between items (1) and (2);

     (4) the aggregate amount included for insurance, if a separate identified charge is made for insurance, specifying the types of insurance and the terms of coverage;

     (5) the aggregate amount of official fees;

     (6) the principal balance, which is the sum of items (3), (4), (5), and (11);

     (7) the amount or rate of the service charge;

     (8) any other charges;

     (9) the amount of the time balance owed by the buyer to the seller, which is the sum of items (6), (7), if (7) is stated in a dollar amount, (8), and (11);

     (10) except as provided in (c) of this section, the maximum number of installment payments required and the amount of each installment and the due date of each payment necessary to pay the balance;

     (11) if the retail installment contract is for the sale of a motor vehicle, the amount, if any, that the seller agrees to pay to discharge an outstanding obligation of the buyer under an existing motor vehicle agreement, loan, installment sales contract, or lease.

 (b) Additional items may be included to explain the calculations involved in determining the balance to be paid by the buyer.

 (c) If the installment payments other than the final payment are stated as a series of equal scheduled amounts and if the amount of the final installment payment does not substantially exceed the scheduled amount of each preceding installment payment, the maximum number of payments and the amount and due date of each payment need not be separately stated, and the amount of the scheduled final installment payment may be stated as the remaining unpaid balance. The due date of the first installment payment may be fixed by a day or date or may be fixed by reference to the date of the contract or to the time of delivery or installation.

 (d) The contract is not required to state the items in (a) of this section in the order stated in (a) of this section.




Sec. 45.10.040. Other documents.
 (a) A retail installment contract may be contained in more than one document, if one is an original document signed by the retail buyer stated to be applicable to purchase of goods or services to be made by the retail buyer from time to time. In this case the document, together with the sales slip, account book, or other written statement relating to each purchase, must set out all of the information required by AS 45.10.030 and constitute the retail installment contract for each purchase.

 (b) On each succeeding purchase under the original document, the sales slip, account book, or other written statement may at the option of the seller constitute the memorandum required by AS 45.10.100.




Sec. 45.10.050. Catalog or printed solicitation.
 (a) A retail installment contract, or retail charge agreement, negotiated and entered into by mail or telephone without personal solicitation by a salesman or representative of the seller and based upon a catalog of the seller or other printed solicitation of business, if the catalog or other printed solicitation clearly sets out the cash sale prices and other terms of sales to be made through this medium, shall be made as provided in this section. The provisions of this chapter with respect to retail installment contracts and retail charge agreements are applicable to these sales, except that the retail installment contract when completed by the buyer need not contain the items required by AS 45.10.030.

 (b) When the retail installment contract is received from the retail buyer, the seller shall prepare a written memorandum containing all of the information required by AS 45.10.030 to be included in a retail installment contract. Instead of delivering a copy of the contract to the retail buyer as provided in AS 45.10.020, the seller shall deliver to the buyer a copy of the memorandum before the due date of the first installment payable under the contract. If the catalog or other printed solicitation does not set out all of the other terms of sales in addition to the cash sales prices, the memorandum shall be delivered to the buyer before or at the time of delivery of the goods or services.




Sec. 45.10.060. Signing of incomplete contracts.
The seller may not obtain the signature of the buyer to a contract if it contains blank spaces of items that are essential provisions of the transaction, except as provided in AS 45.10.050. However, if delivery of the goods is not made at the time of the execution of the contract, the identifying numbers or marks of the goods or similar information and the due date of the first installment may be inserted by the seller in the seller’s counterpart of the contract after it has been signed by the buyer.


Sec. 45.10.070. Prepayment.
 (a) A retail installment contract must contain a statement that the buyer may pay the total unpaid balance on the contract at any time. A buyer who prepays in full the unpaid balance at any time before its final due date shall, if the contract is not in default more than two months, receive a refund credit of the unearned portion of the service charge for the prepayment.

 (b) Except when the service charge is computed on an add-on or simple interest basis, the amount of the refund credit shall be computed according to the “rule of 78ths”; that is, it shall represent at least as great a proportion of the original service charge over $25 in case of a retail installment sale of a motor vehicle, or $10 in case of a retail installment sales of goods other than a motor vehicle, as (1) the sum of the monthly or other periodic unpaid balances under the schedule of payments in the contract beginning as of the date after the prepayment that is the next succeeding monthly or other periodic anniversary date of the due date of the first installment under the contract, or, if the prepayment is before the due date of the first installment under the contract, then as of the date after the prepayment that is the next succeeding monthly or other periodic anniversary date of the date of the contract bears to (2) the sum of all the monthly or other periodic unpaid balances under the schedule of installment payments in the contract.

 (c) If the amount of refund credit is less than $1, no refund credit need be made.




Sec. 45.10.080. Delinquency, collection, and other charges; other contract provisions.
 (a) If authority to do so is contained in the contract or agreement, the holder of a retail installment contract or retail charge agreement may collect any delinquency, collection or dishonored check charges, attorney fees, court costs, and disbursements. In this case, the charge must be reasonable, and no attorney fee may be recovered unless the contract is referred for collection to an attorney not a salaried employee of the holder.

 (b) The contract may contain other provisions not inconsistent with the purposes of this chapter.




Sec. 45.10.090. Receipts and requests for statements.
 (a) A buyer shall be given a written receipt for any payment when made in cash.

 (b) Upon written request of the buyer, the holder of a retail installment contract shall give or forward to the buyer a written statement of the dates and amounts of payments and the total amount unpaid under the contract. This statement shall be given the buyer once without charge; if an additional statement is requested by the buyer, it shall be supplied by the holder at a charge not in excess of $1 for each additional statement supplied.




Sec. 45.10.100. Consolidation of contracts.
 (a) If, in a retail installment transaction, a retail buyer makes a purchase of goods or services from a retail seller from whom the buyer has previously purchased goods or services under a retail installment contract, and the amount under the previous contract has not been fully paid, the subsequent purchase may, at the seller’s option, be included in and consolidated with the previous contract. This chapter, with respect to a retail installment contract, is applicable to the subsequent purchase. In the event of consolidation, the seller shall furnish to the buyer, before the due date of the first installment of the consolidated contract, the items of information under AS 45.10.030 or 45.10.040 and a memorandum setting out
     (1) the outstanding balance of the previous contract or contracts;

     (2) the amount of the time balance owed by the buyer to the seller for the subsequent purchase;

     (3) the consolidated time balance; and

     (4) the revised installments applicable to the consolidated time balance.

 (b) The seller shall deliver a copy of the memorandum to the buyer before the due date of the first installment of the consolidated contract.

 (c) When the subsequent purchase is made, if the seller has retained title or taken a lien or other security interest in any of the goods purchased under one of the contracts included in the consolidation,
     (1) the entire amount of all payments made before the subsequent purchase is considered to have been applied on the previous purchase;

     (2) if the amount of each installment payment is not increased in connection with the subsequent purchase, the subsequent payments are considered to be allocated first to the previous purchase;

     (3) if the amount of each installment payment is increased in connection with the subsequent purchase, an amount equal to the original periodic payment is allocated first to the previous purchase, and the amount of the increase may, at the seller’s option, be considered to be allocated to the subsequent purchase;

     (4) the amount of a down payment on the subsequent purchase is allocated in its entirety to the subsequent purchase.

 (d) The provisions of (c) of this section do not apply to a case where the previous and subsequent purchases involve equipment, parts, or other goods attached or affixed to goods previously purchased and not fully paid, or to services in connection with goods previously purchased and not fully paid, rendered by the seller at the buyer’s request.




Sec. 45.10.110. Notice of service charge and monthly statement.
 (a) At or before the time a retail charge agreement is made, the seller shall advise the buyer in writing on the application form or otherwise, or orally that a service charge will be computed on the outstanding balance for each month, which need not be a calendar month, or other regular period agreed upon, the schedule or rate by which the service charge will be computed, and that the buyer may pay the total unpaid balance at any time. If this information is given orally, the seller shall, upon approval of the buyer’s credit, deliver to the buyer or mail to the buyer at the buyer’s address a memorandum setting out this information.

 (b) The seller or holder of a retail charge agreement shall promptly supply the buyer with a statement as of the end of each monthly period, which need not be a calendar month, or other regular period agreed upon in which there is an unpaid balance. The statement must include the unpaid balance under the retail charge agreement and the amount of a service charge for the period.




Sec. 45.10.120. Extent of service charge.
 (a) Notwithstanding any other law, the service charge included in a retail installment contract, retail charge agreement, revolving charge agreement, or other retail charge agreement must be at the rate agreed upon by the retail seller and the buyer.

 (b) This section does not limit or restrict the method of computing the service charge, whether by way of add-on, simple interest, or otherwise, so long as that method is disclosed in the contract and agreed upon by the retail seller and the buyer.




Sec. 45.10.130. Insurance.
If the cost of insurance is included in the retail installment contract or retail charge agreement and a separate charge is made to the buyer for the insurance,
     (1) the contract or agreement must state the nature, purpose, and amount of the insurance, and in connection with the sale of a motor vehicle, the contract must state that the insurance coverage ordered under the terms of this contract does or does not include “bodily injury liability,” “public liability,” and “property damage liability” coverage, as applicable;

     (2) the contract or agreement must state whether the insurance is to be procured by the buyer or the seller;

     (3) the amount included for the insurance may not exceed the premiums chargeable in accordance with the rate fixed for the insurance by the insurer except where the amount is less than $1; and if the insurance is cancelled or terminated for any reason, the refund for unearned insurance premiums received by the seller or an assignee of the seller, together with the unearned portion of the service charge applicable to the insurance, shall be credited to the final maturing installments of the retail installment contract or retail charge agreement, and the remaining balance of the unearned insurance premiums shall be refunded to the buyer; however, no cash refund is required if the amount is less than $1;

     (4) if the insurance is to be procured by the seller or holder, the seller or holder shall, within 45 days after delivery of the goods or furnishing of the services under the contract, deliver, mail, or cause to be mailed to the buyer at the address as specified in the contract a notice that the insurance is procured, a copy of the policy or policies of insurance, or a certificate of the insurance so procured.




Sec. 45.10.140. Agreement not to assert claim or defense.
A provision of a retail installment contract or retail charge agreement by which the buyer agrees not to assert a claim or defense arising out of the sale against the seller or an assignee is invalid.


Sec. 45.10.150. Nonwaiver of chapter.
No act or agreement of the retail buyer before or at the time of the making of a retail installment contract, retail charge agreement, or purchases under the contract or agreement constitutes a valid waiver of any of the provisions of this chapter or of any remedies granted to the buyer by law.


Sec. 45.10.160. Contracts and agreements executed before 1963.
This chapter does not invalidate or make unlawful a retail installment contract or retail charge agreement executed before January 1, 1963.


Sec. 45.10.170. Action by attorney general.
The attorney general may bring an action in the name of the state against a person to restrain and prevent a violation of this chapter.


Sec. 45.10.180. Assurance of discontinuance.
 (a) In the enforcement of this chapter, the attorney general may accept an assurance of discontinuance of an act or practice considered in violation of this chapter from a person engaging in or who has engaged in the act or practice. The assurance shall be in writing and be filed with and subject to the approval of the superior court of the district in which the alleged violator resides or in which the principal place of business of the alleged violator is located.

 (b) Failure to perform the terms of the assurance is prima facie proof of a violation of this chapter for the purpose of securing an injunction as provided in AS 45.10.170, and for the purposes of AS 45.10.190.




Sec. 45.10.190. Barring recovery for noncompliance.
A seller who enters into a contract or agreement that does not comply with the provisions of this chapter or who violates a provision of this chapter except as a result of an accident or bona fide error may not recover a service charge, official fee, or a delinquency or collection charge under or in connection with the related retail installment contract or purchases under a retail charge agreement. The seller or holder may nevertheless recover from the buyer an amount equal to the cash price of the goods or services and the cost to the seller or holder of insurance included in the transaction.


Sec. 45.10.200. Penalty for violation of order or injunction.
A person who violates an order or injunction issued under this chapter is punishable by a fine of not more than $1,000, or by imprisonment for not more than six months, or by both.


Sec. 45.10.210. Penalty for violation of chapter.
A person who wilfully and intentionally violates a provision of this chapter is guilty of a misdemeanor and, upon conviction, is punishable by a fine of not more than $1,000, or by imprisonment for not more than six months, or by both.


Sec. 45.10.215. Applicability of chapter.
For the purposes of this chapter, a retail installment contract or retail charge agreement is entered into in this state, and is therefore subject to the provisions of this chapter, if either the seller offers or agrees to sell to a resident buyer in this state or if a resident buyer in this state accepts the offer to sell or makes the offer to buy in this state, regardless of any specification in the contract as to its situs.


Sec. 45.10.220. Definitions.
In this chapter, unless the context otherwise requires,
     (1) “cash sale price” means the price for which the seller would have sold or furnished to the buyer and the buyer would have bought or obtained from the seller the goods or services that are the subject matter of a retail installment transaction if the sale had been a sale for cash; the cash sale price may include taxes and charges for transferring vehicle titles, delivery, installation, servicing, repairs, alterations, or improvements;

     (2) “goods” means personal chattels purchased primarily for personal, family, or household use and not for commercial or business use, but does not include money or, except as provided in the next phrase, chose in action; “goods” includes merchandise certificates or coupons issued by a retail seller to be used in their face amount instead of cash in exchange for goods or services sold by the seller and goods, including a manufactured home, that, at the time of sale or subsequently, are to be so affixed to real property as to become a part of it, whether or not severable from it; in this paragraph, “manufactured home” has the meaning given in AS 45.29.102;

     (3) “official fees” means the amount of the fees set by law for filing, recording, or otherwise perfecting and releasing or satisfying a retained title, lien, or other security interest created by a retail installment transaction or premiums payable for insurance in lieu of perfecting a security interest if the premiums do not exceed the fees that would otherwise normally be incurred for perfecting, filing, recording, or otherwise perfecting and releasing or satisfying a retained title, lien, or other security interest;

     (4) “person” means an individual, partnership, joint venture, corporation, association, or any other group, however organized;

     (5) “principal balance” means the cash sale price of the goods or services that are the subject matter of a retail installment contract less the amount of the buyer’s down payment in money or goods or both, plus
          (A) the amounts for insurance and official fees included in the contract if a separate identified charge is made and stated in the contract for insurance and official fees; and

          (B) if the retail installment contract is for the sale of a motor vehicle, the amount, if any, that the seller agrees to pay to discharge an outstanding obligation of the buyer under an existing motor vehicle agreement, loan, installment sales contract, or lease;

     (6) “rate” means the percentage that, when multiplied by the outstanding balance for each month or other installment period, yields the amount of the service charge for the month or period;

     (7) “retail buyer” or “buyer” means a person who buys or agrees to buy goods or obtain services or agrees to have services rendered or furnished from a retail seller;

     (8) “retail charge agreement,” “revolving charge agreement,” or “charge agreement” means an instrument
          (A) entered into or performed in the state that sets out the terms of retail installment transactions that may be made under the agreement from time to time; and

          (B) under the terms of which a service charge is to be computed from time to time in relation to the buyer’s unpaid balance;

     (9) “retail installment contract” or “contract” means a contract, other than a retail charge agreement or an instrument reflecting a sale price made under a retail charge agreement, entered into or performed in the state for a retail installment transaction; “retail installment contract” includes
          (A) a chattel mortgage;

          (B) a conditional sale contract; and

          (C) a contract in the form of a bailment or a lease if the bailee or lessee contracts to pay a sum substantially equivalent to or in excess of the value of the goods sold as compensation for their use and if it is agreed that the bailee or lessee is bound to become, or for no other or a merely nominal consideration, has the option of becoming the owner of the goods upon full compliance with the provisions of the bailment or lease;

     (10) “retail installment transaction” means a transaction in which a retail buyer purchases goods or services from a retail seller under a retail installment contract or a retail charge agreement that provides for a service charge under which the buyer agrees to pay the unpaid balance in one or more installments;

     (11) “retail seller” or “seller” means a person engaged in the business of selling goods or services to retail buyers;

     (12) “service charge,” however denominated or expressed, means the amount that is paid or payable for the privilege of purchasing goods or services to be paid for by the buyer in installments over a period of time; “service charge” does not include the amount charged for insurance premiums, delinquency charges, attorney fees, court costs, or official fees;

     (13) “services” means work, labor, or services of any kind purchased primarily for personal, family, or household use and not for commercial or business use, whether or not furnished in connection with the delivery, installation, servicing, repair, or improvement of goods; “services” includes repairs, alterations, or improvements upon or in connection with real property, but does not include the services of a professional person licensed by the state, or services for which the price charged is required by law to be determined or approved by or to be filed, subject to approval or disapproval, with the United States or a state or a department, division, agency, officer, or official of either as in the case of transportation services;

     (14) “time balance” means the principal balance plus the service charge.




Sec. 45.10.230. Short title.
This chapter may be cited as the Alaska Retail Installment Sales Act.


Article 1. General Provisions.


Chapter 12. Leases.

Sec. 45.12.101. Short title.
This chapter may be cited as the Uniform Commercial Code — Leases.


Sec. 45.12.102. Scope.
This chapter applies to any transaction, regardless of form, that creates a lease.


Sec. 45.12.103. Definitions and index of definitions.
 (a) In this chapter, unless the context otherwise requires,
     (1) “buyer in ordinary course of business” means a person who, in good faith and without knowledge that the sale to that person is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind, but does not include a pawnbroker; “buying” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale, but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt;

     (2) “cancellation” occurs when either party puts an end to the lease contract for default by the other party;

     (3) “commercial unit” means a unit of goods that by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use; a commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole;

     (4) “conforming” goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract;

     (5) “consumer lease” means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for personal, family, or household purposes;

     (6) “fault” means wrongful act, omission, breach, or default;

     (7) “finance lease” means a lease with respect to which
          (A) the lessor does not select, manufacture, or supply the goods;

          (B) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and

          (C) one of the following occurs:
               (i) the lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;

               (ii) the lessee’s approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract;

               (iii) the lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or

               (iv) if the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person; that the lessee is entitled under this chapter to the promises and warranties, including those of a third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; and that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies;

     (8) “goods” means all things that are movable at the time of identification to the lease contract, or are fixtures under AS 45.12.309, but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction; the term also includes the unborn young of animals;

     (9) “installment lease contract” means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains the clause “each delivery is a separate lease” or its equivalent;

     (10) “lease” means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease; unless the context clearly indicates otherwise, the term includes a sublease;

     (11) “lease agreement” means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this chapter; unless the context clearly indicates otherwise, the term includes a sublease agreement;

     (12) “lease contract” means the total legal obligation that results from the lease agreement as affected by this chapter and other applicable rules of law; unless the context clearly indicates otherwise, the term includes a sublease contract;

     (13) “leasehold interest” means the interest of the lessor or the lessee under a lease contract;

     (14) “lessee” means a person who acquires the right to possession and use of goods under a lease; unless the context clearly indicates otherwise, the term includes a sublessee;

     (15) “lessee in ordinary course of business” means a person who, in good faith and without knowledge that the lease to that person is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, leases in ordinary course from a person in the business of selling or leasing goods of that kind, but does not include a pawnbroker; “leasing” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract, but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt;

     (16) “lessor” means a person who transfers the right to possession and use of goods under a lease; unless the context clearly indicates otherwise, the term includes a sublessor;

     (17) “lessor’s residual interest” means the lessor’s interest in the goods after expiration, termination, or cancellation of the lease contract;

     (18) “lien” means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest;

     (19) “lot” means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract;

     (20) “merchant lessee” means a lessee who is a merchant with respect to goods of the kind subject to the lease;

     (21) “present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain; the discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into;

     (22) “purchase” includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods;

     (23) “sublease” means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease;

     (24) “supplier” means a person from whom a lessor buys or leases goods to be leased under a finance lease;

     (25) “supply contract” means a contract under which a lessor buys or leases goods to be leased;

     (26) “termination” occurs when either party under a power created by agreement or law puts an end to the lease contract otherwise than for default.

 (b) Other definitions applying to this chapter and the sections in which they appear are:
     (1) “accessions” in AS 45.12.310(a);

     (2) “construction mortgage” in AS 45.12.309(j)(5);

     (3) “encumbrance” in AS 45.12.309(j)(1);

     (4) “fixture filing” in AS 45.12.309(j)(2);

     (5) “fixtures” in AS 45.12.309(j)(3);

     (6) “purchase money lease” in AS 45.12.309(j)(4).

 (c) The following definitions in AS 45.02 and AS 45.29 apply to this chapter:
     (1) “account” (AS 45.29.102(a));

     (2) “between merchants” (AS 45.02.104(c));

     (3) “buyer” (AS 45.02.103(a)(1));

     (4) “chattel paper” (AS 45.29.102(a));

     (5) “consumer goods” (AS 45.29.102(a));

     (6) “document” (AS 45.29.102(a));

     (7) “entrusting” (AS 45.02.403(c));

     (8) “general intangible” (AS 45.29.102(a));

     (9) [Repealed, § 113 ch 44 SLA 2009.]
     (10) “instrument” (AS 45.29.102(a));

     (11) “merchant” (AS 45.02.104(a));

     (12) “mortgage” (AS 45.29.102(a));

     (13) “pursuant to a commitment” (AS 45.29.102(a));

     (14) “receipt” (AS 45.02.103(a)(3));

     (15) “sale” (AS 45.02.106(a));

     (16) “sale on approval” (AS 45.02.326);

     (17) “sale or return” (AS 45.02.326);

     (18) “seller” (AS 45.02.103(a)(4)).

 (d) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.12.104. Leases subject to other law.
 (a) A lease, although subject to this chapter, is also subject to an applicable
     (1) certificate of title statute of this state, including AS 28.10.201;

     (2) certificate of title statute of another jurisdiction as provided in AS 45.12.105;

     (3) consumer protection statute of this state, or final consumer protection decision of a court of this state existing on January 1, 1994; or

     (4) provision of AS 36.30 (State Procurement Code).

 (b) In case of conflict between this chapter, other than AS 45.12.105, 45.12.304(c), and 45.12.305(c), and a statute or decision referred to in (a) of this section, the statute or decision controls.

 (c) Failure to comply with an applicable law has only the effect specified in it.




Sec. 45.12.105. Territorial application of article to goods covered by certificate of title.
Subject to the provisions of AS 45.12.304(c) and 45.12.305(c), with respect to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title statute are governed by the law, including the conflict of laws rules, of the jurisdiction issuing the certificate until the earlier of
     (1) surrender of the certificate; or

     (2) four months after the goods are removed from that jurisdiction and after that date until a new certificate of title is issued by another jurisdiction.




Sec. 45.12.106. Limitation on power of parties to consumer lease to choose applicable law and judicial forum.
 (a) If the law chosen by the parties to a consumer lease is that of a jurisdiction other than a jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within 30 days after that date or in which the goods are to be used, the choice is not enforceable.

 (b) If the judicial forum chosen by the parties to a consumer lease is a forum that would not otherwise have jurisdiction over the lessee, the choice is not enforceable.




Sec. 45.12.107. Waiver or renunciation of claim or right after default or breach.
A claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.


Sec. 45.12.108. Unconscionability.
 (a) If the court as a matter of law finds a lease contract or a clause of a lease contract to have been unconscionable at the time it was made, the court may refuse to enforce the lease contract, or it may enforce the remainder of the lease contract without the unconscionable clause, or it may so limit the application of an unconscionable clause as to avoid an unconscionable result.

 (b) With respect to a consumer lease, if the court as a matter of law finds that a lease contract or a clause of a lease contract has been induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from a lease contract, the court may grant appropriate relief.

 (c) Before making a finding of unconscionability under (a) or (b) of this section, the court, on its own motion or that of a party, shall afford the parties a reasonable opportunity to present evidence as to the setting, purpose, and effect of the lease contract or clause of the contract, or of the conduct.

 (d) Notwithstanding Rule 82, Alaska Rules of Civil Procedure, in an action in which the lessee claims unconscionability with respect to a consumer lease
     (1) if the court finds unconscionability under (a) or (b) of this section, the court shall award reasonable attorney fees to the lessee;

     (2) if the court does not find unconscionability and the lessee claiming unconscionability has brought or maintained an action the lessee knew to be groundless, the court shall award reasonable attorney fees to the party against whom the claim is made;

     (3) in determining attorney fees, the amount of the recovery on behalf of the claimant under (a) and (b) of this section is not controlling.




Sec. 45.12.109. Option to accelerate at will.
 (a) A term providing that one party or the party’s successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or “when the party considers itself insecure,” or in words of similar import, shall be construed to mean that the party has power to do so only if the party in good faith believes that the prospect of payment or performance is impaired.

 (b) With respect to a consumer lease, the burden of establishing good faith under (a) of this section is on the party who exercised the power; otherwise the burden of establishing lack of good faith is on the party against whom the power has been exercised.




Article 2. Formation and Construction of Lease Contract.


Sec. 45.12.201. Statute of frauds.
 (a) A lease contract is not enforceable by way of action or defense unless
     (1) the total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than $1,000; or

     (2) there is a writing, signed by the party against whom enforcement is sought or by that party’s authorized agent, sufficient to indicate that a lease contract has been made between the parties and to describe the goods leased and the lease term.

 (b) A description of leased goods or of the lease term is sufficient and satisfies (a)(2) of this section, whether or not it is specific, if it reasonably identifies what is described.

 (c) A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under (a)(2) of this section beyond the lease term and the quantity of goods shown in the writing.

 (d) A lease contract that does not satisfy the requirements of (a) of this section, but that is valid in other respects, is enforceable
     (1) if the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale to others in the ordinary course of the lessor’s business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement;

     (2) if the party against whom enforcement is sought admits in that party’s pleading, testimony, or otherwise in court that a lease contract was made, but the lease contract is not enforceable under this paragraph beyond the quantity of goods admitted; or

     (3) with respect to goods that have been received and accepted by the lessee.

 (e) The lease term under a lease contract referred to in (d) of this section is
     (1) if there is a writing signed by the party against whom enforcement is sought or by that party’s authorized agent specifying the lease term, the term specified;

     (2) if the party against whom enforcement is sought admits in that party’s pleading, testimony, or otherwise in court a lease term, the term admitted; or

     (3) a reasonable lease term.




Sec. 45.12.202. Final written expression: parol or extrinsic evidence.
Terms with respect to which the confirmatory memoranda of the parties agree or that are otherwise set out in a writing intended by the parties as a final expression of their agreement with respect to the terms that are included in the memoranda or other writing may not be contradicted by evidence of a prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
     (1) by course of dealing or usage of trade or by course of performance; and

     (2) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.




Sec. 45.12.203. Seals inoperative.
The affixing of a seal to a writing evidencing a lease contract or an offer to enter into a lease contract does not render the writing a sealed instrument, and the law with respect to sealed instruments does not apply to the lease contract or offer.


Sec. 45.12.204. Formation in general.
 (a) A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of a lease contract.

 (b) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.

 (c) Although one or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy.




Sec. 45.12.205. Firm offers.
An offer by a merchant to lease goods to or from another person in a signed writing that 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; however, in no event may the period of irrevocability exceed three months. A term of assurance under this section on a form supplied by the offeree shall be separately signed by the offeror.


Sec. 45.12.206. Offer and acceptance in formation of lease contract.
 (a) Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a lease contract must be construed as inviting acceptance in any manner and by any medium reasonable under the circumstances.

 (b) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.




Sec. 45.12.207. Course of performance or practical construction. [Repealed, § 113 ch 44 SLA 2009.]
Sec. 45.12.208. Modification, rescission, and waiver.
 (a) An agreement modifying a lease contract does not need consideration to be binding.

 (b) A signed lease agreement that excludes modification or rescission except by a signed writing may not be otherwise modified or rescinded, but, except as between merchants, such a requirement on a form supplied by a merchant must be separately signed by the other party.

 (c) Although an attempt at modification or rescission does not satisfy the requirements of (b) of this section, it may operate as a waiver.

 (d) A party who has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.




Sec. 45.12.209. Lessee under finance lease as beneficiary of supply contract.
 (a) The benefit of a supplier’s promises to the lessor under the supply contract and of all warranties, whether express or implied, including those of a third party provided in connection with or as part of the supply contract, extends to the lessee to the extent of the lessee’s leasehold interest under a finance lease related to the supply contract, but is subject to the terms of the warranty and of the supply contract and all defenses or claims arising from the warranty or supply contract.

 (b) The extension of the benefit of a supplier’s promises and of warranties to the lessee under (a) of this section does not
     (1) modify the rights and obligations of the parties to the supply contract, whether arising from it or otherwise; or

     (2) impose a duty or liability under the supply contract on the lessee.

 (c) A modification or rescission of the supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor is considered to have assumed, in addition to the obligations of the lessor under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission.

 (d) In addition to the extension of the benefit of the supplier’s promises and of warranties to the lessee under (a) of this section, the lessee retains all rights that the lessee may have against the supplier that arise from an agreement between the lessee and the supplier or under other law.




Sec. 45.12.210. Express warranties.
 (a) Express warranties by the lessor are created as follows:
     (1) an affirmation of fact or promise made by the lessor to the lessee that relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise;

     (2) a description of the goods that is made part of the basis of the bargain creates an express warranty that the goods will conform to the description;

     (3) a sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model.

 (b) It is not necessary to the creation of an express warranty that the lessor use formal words, such as “warrant” or “guarantee,” or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor’s opinion or commendation of the goods does not create a warranty.




Sec. 45.12.211. Warranties against interference and against infringement; lessee’s obligation against infringement.
 (a) There is in a lease contract a warranty that for the lease term a person does not hold a claim to or interest in the goods that arose from an act or omission of the lessor, other than a claim by way of infringement or the like, that will interfere with the lessee’s enjoyment of its leasehold interest.

 (b) Except in a finance lease, there is in a lease contract by a lessor who is a merchant regularly dealing in goods of the kind a warranty that the goods are delivered free of the rightful claim of any person by way of infringement or the like.

 (c) A lessee who furnishes specifications to a lessor or a supplier shall hold the lessor and the supplier harmless against any claim by way of infringement or the like that arises out of compliance with the specifications.




Sec. 45.12.212. Implied warranty of merchantability.
 (a) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind.

 (b) Goods to be merchantable must be at least goods that
     (1) pass without objection in the trade under the description in the lease agreement;

     (2) in the case of fungible goods, are of fair average quality within the description;

     (3) are fit for the ordinary purposes for which goods of that type are used;

     (4) run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;

     (5) are adequately contained, packaged, and labeled as the lease agreement may require; and

     (6) conform to any promises or affirmations of fact made on the container or label.

 (c) Other implied warranties may arise from course of dealing or usage of trade.




Sec. 45.12.213. Implied warranty of fitness for particular purpose.
Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of a particular purpose for which the goods are required and that the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose.


Sec. 45.12.214. Exclusion or modification of warranties.
 (a) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit a warranty shall be construed wherever reasonable as consistent with each other; but, subject to the provisions of AS 45.12.202 on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable.

 (b) Subject to (c) of this section, to exclude or modify the implied warranty of merchantability or a part of it the language must mention “merchantability,” be by a writing, and be conspicuous. Subject to (c) of this section, to exclude or modify an implied warranty of fitness the exclusion must be by a writing and be conspicuous. Language to exclude all implied warranties of fitness is sufficient if it is in writing, is conspicuous, and states, for example, “There is no warranty that the goods will be fit for a particular purpose.”

 (c) Notwithstanding (b) of this section, but subject to (d) of this section,
     (1) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” or “with all fault,” or by other language that in common understanding calls the lessee’s attention to the exclusion of warranties and makes plain that there is no implied warranty, if in writing and conspicuous;

     (2) if the lessee before entering into the lease contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods, there is no implied warranty with regard to defects that an examination ought in the circumstances to have revealed; and

     (3) an implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade.

 (d) To exclude or modify a warranty against interference or against infringement described in AS 45.12.211 or a part of the warranty, the language must be specific, be by a writing, and be conspicuous, unless the circumstances, including course of performance, course of dealing, or usage of trade, give the lessee reason to know that the goods are being leased subject to a claim or interest of any person.




Sec. 45.12.215. Cumulation and conflict of warranties express or implied.
Warranties, whether express or implied, shall be construed as consistent with each other and as cumulative, but if that construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply:
     (1) exact or technical specifications displace an inconsistent sample or model or general language of description;

     (2) a sample from an existing bulk displaces inconsistent general language of description;

     (3) express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.




Sec. 45.12.216. Third-party beneficiaries of express and implied warranties.
A warranty to or for the benefit of a lessee under this chapter, whether express or implied, extends to any natural person who may reasonably be expected to use, consume, or be affected by the goods and who is injured in person by breach of the warranty. This section does not displace principles of law and equity that extend a warranty to or for the benefit of a lessee to other persons. The operation of this section may not be excluded, modified, or limited, but an exclusion, modification, or limitation of the warranty, including an exclusion, a modification, or a limitation with respect to rights and remedies, effective against the lessee is also effective against the beneficiary designated under this section.


Sec. 45.12.217. Identification.
Identification of goods as goods to which a lease contract refers may be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification occurs
     (1) when the lease contract is made if the lease contract is for a lease of goods that are existing and identified;

     (2) when the goods are shipped, marked, or otherwise designated by the lessor as goods to which the lease contract refers if the lease contract is for a lease of goods that are not existing and identified; or

     (3) when the young are conceived if the lease contract is for a lease of unborn young of animals.




Sec. 45.12.218. Insurance and proceeds.
 (a) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them.

 (b) If a lessee has an insurable interest only by reason of the lessor’s identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified.

 (c) Notwithstanding a lessee’s insurable interest under (a) — (b) of this section, the lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee.

 (d) This section does not impair an insurable interest recognized under another statute or rule of law.

 (e) The parties by agreement may determine that one or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance.




Sec. 45.12.219. Risk of loss.
 (a) Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee.

 (b) Subject to the provisions of AS 45.12.220 on the effect of default on risk of loss, if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply:
     (1) if the lease contract requires or authorizes the goods to be shipped by carrier
          (A) and it does not require delivery at a particular destination, the risk of loss passes to the lessee when the goods are duly delivered to the carrier; but

          (B) if it does require delivery at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the lessee when the goods are there duly so tendered as to enable the lessee to take delivery;

     (2) if the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the lessee on acknowledgment by the bailee of the lessee’s right to possession of the goods;

     (3) in a case not covered in (1) or (2) of this subsection, the risk of loss passes to the lessee on the lessee’s receipt of the goods if the lessor, or, in the case of a finance lease, the supplier, is a merchant; otherwise the risk passes to the lessee on tender of delivery.




Sec. 45.12.220. Effect of default on risk of loss.
 (a) Where risk of loss is to pass to the lessee and the time of passage is not stated
     (1) if a tender or delivery of goods so fails to conform to the lease contract as to give a right of rejection, the risk of their loss remains with the lessor, or, in the case of a finance lease, the supplier, until cure or acceptance;

     (2) if the lessee rightfully revokes acceptance, the lessee, to the extent of a deficiency in the lessee’s effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning.

 (b) Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming goods already identified to a lease contract repudiates or is otherwise in default under the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the extent of a deficiency in the lessor’s or supplier’s effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time.




Sec. 45.12.221. Casualty to identified goods.
If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor, or the supplier before delivery, or the goods suffer casualty before risk of loss passes to the lessee under the lease agreement or AS 45.12.219 then, if the loss is
     (1) total, the lease contract is avoided; and

     (2) partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at the lessee’s option either treat the lease contract as avoided or, except in a finance lease that is not a consumer lease, accept the goods with due allowance from the rent payable for the balance of the lease term for the deterioration or the deficiency in quantity but without further right against the lessor.




Article 3. Effect of Lease Contract.


Sec. 45.12.301. Enforceability of lease contract.
Except as otherwise provided in this chapter, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods, and against creditors of the parties.


Sec. 45.12.302. Title to and possession of goods.
Except as otherwise provided in this chapter, each provision of this chapter applies whether the lessor or a third party has title to the goods, and whether the lessor, the lessee, or a third party has possession of the goods, notwithstanding a statute or rule of law that possession or the absence of possession is fraudulent.


Sec. 45.12.303. Alienability of party’s interest under lease contract or of lessor’s residual interest in goods; delegation of performance; transfer of rights.
 (a) Except as provided in (d) of this section and AS 45.29.407, a provision in a lease agreement that does either of the following gives rise to the rights and remedies provided in (e) of this section, but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective:
     (1) prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of
          (A) an interest of a party under the lease contract; or

          (B) the lessor’s residual interest in the goods; or

     (2) makes a transfer under (1) of this subsection an event of default.

 (b) [Repealed, § 31 ch 113 SLA 2000.]
 (c) [Repealed, § 31 ch 113 SLA 2000.]
 (d) A provision in a lease agreement that does either of the following is not enforceable, and the transfer is not a transfer that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract within the purview of (e) of this section:
     (1) prohibits a transfer of a right to damages for default with respect to the whole lease contract or of a right to payment arising out of the transferor’s due performance of the transferor’s entire obligation; or

     (2) makes a transfer under (1) of this subsection an event of default.

 (e) Subject to (d) of this section and AS 45.29.407,
     (1) if a transfer is made that is made an event of default under a lease agreement, the party to the lease contract not making the transfer, unless that party waives the default or otherwise agrees, has the rights and remedies under AS 45.12.501(b);

     (2) if (1) of this subsection is not applicable and if a transfer is made that is prohibited under a lease agreement or that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract, unless the party not making the transfer agrees at any time to the transfer in the lease contract or otherwise, then, except as limited by contract, the transferor is liable to the party not making the transfer for damages caused by the transfer to the extent that the damages could not reasonably be prevented by the party not making the transfer, and a court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer.

 (f) A transfer of “the lease” or of “all my rights under the lease,” or a transfer in similar general terms, is a transfer of rights, and, unless the language or the circumstances, as in a transfer for security, indicate the contrary, the transfer is a delegation of duties by the transferor to the transferee. Acceptance by the transferee constitutes a promise by the transferee to perform those duties. The promise is enforceable by either the transferor or the other party to the lease contract.

 (g) Unless otherwise agreed by the lessor and the lessee, a delegation of performance does not relieve the transferor as against the other party of any duty to perform or any liability for default.

 (h) In a consumer lease, to prohibit the transfer of an interest of a party under the lease contract or to make a transfer an event of default, the language must be specific, by a writing, and conspicuous.

 (i) In this section, “creation of a security interest” includes the sale of a lease contract that is subject to AS 45.29, on secured transactions, by reason of AS 45.29.109(a)(3).




Sec. 45.12.304. Subsequent lease of goods by lessor.
 (a) Subject to AS 45.12.303, a subsequent lessee from a lessor of goods under an existing lease contract obtains, to the extent of the leasehold interest transferred, the leasehold interest in the goods that the lessor had or had power to transfer, and except as provided in (b) of this section and AS 45.12.527(d), takes subject to the existing lease contract. A lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, but only to the extent set out in the preceding sentence. If goods have been delivered under a transaction of purchase, the lessor has that power even though
     (1) the lessor’s transferor was deceived as to the identity of the lessor;

     (2) the delivery was in exchange for a check that is later dishonored;

     (3) it was agreed that the transaction was to be a “cash sale”; or

     (4) the delivery was procured through fraud punishable as larcenous under criminal law.

 (b) A subsequent lessee in ordinary course of business from a lessor who is a merchant dealing in goods of that kind to whom the goods were entrusted by the existing lessee of that lessor before the interest of the subsequent lessee became enforceable against that lessor obtains, to the extent of the leasehold interest transferred, all of that lessor’s and the existing lessee’s rights to the goods, and takes free of the existing lease contract.

 (c) A subsequent lessee from the lessor of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction does not take greater rights than those provided both by this section and by the certificate of title statute. If the certificate of title statute is silent on the issue of transfer, this section controls.




Sec. 45.12.305. Sale or sublease of goods by lessee.
 (a) Subject to the provisions of AS 45.12.303, a buyer or sublessee from the lessee of goods under an existing lease contract obtains, to the extent of the interest transferred, the leasehold interest in the goods that the lessee had or had power to transfer, and except as provided in (b) of this section and AS 45.12.511(d), takes subject to the existing lease contract. A lessee with a voidable leasehold interest has power to transfer a good leasehold interest to a good faith buyer for value or a good faith sublessee for value, but only to the extent set out in the preceding sentence. If goods have been delivered under a transaction of lease, the lessee has that power even though
     (1) the lessor was deceived as to the identity of the lessee;

     (2) the delivery was in exchange for a check that is later dishonored; or

     (3) the delivery was procured through fraud punishable as larcenous under criminal law.

 (b) A buyer in ordinary course of business or a sublessee in ordinary course of business from a lessee who is a merchant dealing in goods of that kind to whom the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the lessor’s and lessee’s rights to the goods, and takes free of the existing lease contract.

 (c) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction does not take greater rights than those provided both by this section and by the certificate of title statute.




Sec. 45.12.306. Priority of certain liens arising by operation of law.
If a person in the ordinary course of the person’s business furnishes services or materials with respect to goods subject to a lease contract, a lien upon those goods in the possession of that person given by statute or rule of law for those materials or services takes priority over any interest of the lessor or lessee under the lease contract or this chapter unless the lien is created by statute and the statute provides otherwise or unless the lien is created by rule of law and the rule of law provides otherwise.


Sec. 45.12.307. Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.
 (a) Except as otherwise provided in AS 45.12.306, a creditor of a lessee takes subject to the lease contract.

 (b) Except as otherwise provided in (c) of this section and in AS 45.12.306 and 45.12.308, a creditor of a lessor takes subject to the lease contract unless the creditor holds a lien that attached to the goods before the lease contract became enforceable.

 (c) Except as otherwise provided in AS 45.29.317, 45.29.321, and 45.29.323, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.

 (d) [Repealed, § 31 ch 113 SLA 2000.]




Sec. 45.12.308. Special rights of creditors.
 (a) A creditor of a lessor in possession of goods subject to a lease contract may treat the lease contract as void if as against the creditor retention of possession by the lessor is fraudulent, but retention of possession in good faith and current course of trade by the lessor for a commercially reasonable time after the lease contract becomes enforceable is not fraudulent.

 (b) Nothing in this chapter impairs the rights of creditors of a lessor if the lease contract
     (1) becomes enforceable, not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security, or the like; and

     (2) is made under circumstances that under law apart from this chapter would constitute the transaction a fraudulent transfer or voidable preference.

 (c) A creditor of a seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor retention of possession by the seller is fraudulent but retention of possession of the goods under a lease contract entered into by the seller as lessee and the buyer as lessor in connection with the sale or identification of the goods is not fraudulent if the buyer bought for value and in good faith.




Sec. 45.12.309. Lessor’s and lessee’s rights when goods become fixtures.
 (a) Under this chapter a lease may be of goods that are fixtures or may continue in goods that become fixtures, but a lease does not exist under this chapter of ordinary building materials incorporated into an improvement on land.

 (b) This chapter does not prevent creation of a lease of fixtures under real estate law.

 (c) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if
     (1) the lease is a purchase money lease, the conflicting interest of the encumbrancer or owner arises before the goods become fixtures, the interest of the lessor is perfected by a fixture filing before the goods become fixtures or within 10 days after becoming fixtures, and the lessee has an interest of record in the real estate or is in possession of the real estate; or

     (2) the interest of the lessor is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the lessor’s interest has priority over a conflicting interest of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real estate or is in possession of the real estate.

 (d) The interest of a lessor of fixtures, whether or not perfected, has priority over the conflicting interest of an encumbrancer or owner of the real estate if
     (1) the fixtures are readily removable factory or office machines, readily removable equipment that is not primarily used or leased for use in the operation of the real estate, or readily removable replacements of domestic appliances that are goods subject to a consumer lease, and before the goods become fixtures the lease contract is enforceable;

     (2) the conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable;

     (3) the encumbrancer or owner has consented in writing to the lease or has disclaimed an interest in the goods as fixtures; or

     (4) the lessee has a right to remove the goods as against the encumbrancer or owner; if the lessee’s right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.

 (e) Notwithstanding (c)(1) of this section but otherwise subject to (c) and (d) of this section, the interest of a lessor of fixtures, including the lessor’s residual interest, is subordinate to the conflicting interest of an encumbrancer of the real estate under a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent given to refinance a construction mortgage, the conflicting interest of an encumbrancer of the real estate under a mortgage has this priority to the same extent as the encumbrancer of the real estate under the construction mortgage.

 (f) In cases not within (a) — (e) of this section, priority between the interest of a lessor of fixtures, including the lessor’s residual interest, and the conflicting interest of an encumbrancer or owner of the real estate who is not the lessee is determined by the priority rules governing conflicting interests in real estate.

 (g) Subject to (h) of this section, if the interest of a lessor of fixtures, including the lessor’s residual interest, has priority over all conflicting interests of all owners and encumbrances of the real estate, the lessor or the lessee may remove the goods from the real estate, free and clear of all conflicting interests of all owners and encumbrancers of the real estate, but the lessor or the lessee must reimburse an encumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreed, for the cost of repair of physical injury, but not for a diminution in value of the real estate caused by the absence of the goods removed or by a necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.

 (h) The lessor or the lessee may remove the goods under (g) of this section
     (1) on default, expiration, termination, or cancellation of the lease agreement but subject to the lease agreement and this chapter; or

     (2) if necessary to enforce other rights and remedies of the lessor or the lessee under this chapter.

 (i) Even though the lease agreement does not create a security interest, the interest of a lessor of fixtures, including the lessor’s residual interest, is perfected by recording a financing statement as a fixture filing for leased goods that are or are to become fixtures under the relevant provisions of AS 45.29 on secured transactions.

 (j) In this section,
     (1) “encumbrance” includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests;

     (2) a “fixture filing” is the recording, in the office where a mortgage on the real estate would be recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of AS 45.29.502(a) and (b);

     (3) “fixtures” means goods that become so related to particular real estate that an interest in them arises under real estate law;

     (4) a lease is a “purchase money lease” unless the lessee has possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable; and

     (5) a mortgage is a “construction mortgage” to the extent that it secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land if the recorded writing indicates.




Sec. 45.12.310. Lessor’s and lessee’s rights when goods become accessions.
 (a) “Accessions” means goods when they are installed in or affixed to other goods.

 (b) The interest of a lessor or a lessee under a lease contract entered into before the goods became accessions is superior to all interests in the whole except as stated in (d) of this section.

 (c) The interest of a lessor or a lessee under a lease contract entered into at the time or after the goods became accessions is superior to all subsequently acquired interests in the whole except as stated in (d) of this section but is subordinate to interests in the whole existing at the time the lease contract was made unless the holders of those interests in the whole have in writing consented to the lease or disclaimed an interest in the goods as part of the whole.

 (d) The interest of a lessor or a lessee under a lease contract described in (b) or (c) of this section is subordinate to the interest of
     (1) a buyer in ordinary course of business or a lessee in ordinary course of business of an interest in the whole acquired after the goods became accessions; or

     (2) a creditor with a security interest in the whole perfected before the lease contract was made to the extent that the creditor makes subsequent advances without knowledge of the lease contract.

 (e) When under (b) or (c), and (d) of this section, and subject to (f) of this section, a lessor or a lessee of accessions holds an interest that is superior to all interests in the whole, the lessor or the lessee may remove the goods from the whole, free and clear of all interests in the whole, but the lessor or lessee must reimburse a holder of an interest in the whole who is not the lessee and who has not otherwise agreed, for the cost of repair of physical injury but not for a diminution in value of the whole caused by the absence of the goods removed or by a necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.

 (f) The lessor or the lessee may remove the goods under (e) of this section
     (1) on default, expiration, termination, or cancellation of the lease contract by the other party but subject to the provisions of the lease contract and this chapter; or

     (2) if necessary to enforce other rights and remedies of the lessor or lessee under this chapter.




Sec. 45.12.311. Priority subject to subordination.
Nothing in this chapter prevents subordination by agreement by a person entitled to priority.


Article 4. Performance of Lease Contract.


Sec. 45.12.401. Insecurity: adequate assurance of performance.
 (a) A lease contract imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired.

 (b) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable, the insecure party may suspend any performance for which the insecure party has not already received the agreed return.

 (c) A repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed 30 days after receipt of a demand by the other party.

 (d) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered must be determined according to commercial standards.

 (e) Acceptance of nonconforming delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.




Sec. 45.12.402. Anticipatory repudiation.
 (a) If either party repudiates a lease contract with respect to a performance not yet due under the lease contract, the loss of which performance will substantially impair the value of the lease contract to the other, the aggrieved party may
     (1) for a commercially reasonable time, await retraction of repudiation and performance by the repudiating party;

     (2) make demand under AS 45.12.401 and await assurance of future performance adequate under the circumstances of the particular case; or

     (3) resort to any right or remedy upon default under the lease contract or this chapter, even though the aggrieved party has notified the repudiating party that the aggrieved party would await the repudiating party’s performance and assurance and has urged retraction.

 (b) In addition to pursuing the remedies in (a) of this section and whether or not the aggrieved party is pursuing one of the foregoing remedies, the aggrieved party may suspend performance or, if the aggrieved party is the lessor, proceed under the provisions of this chapter on the lessor’s right to identify goods to the lease contract notwithstanding default or to salvage unfinished goods under AS 45.12.524.




Sec. 45.12.403. Retraction of anticipatory repudiation.
 (a) Until the repudiating party’s next performance is due, the repudiating party can retract the repudiation unless, since the repudiation, the aggrieved party has cancelled the lease contract or materially changed the aggrieved party’s position or otherwise indicated that the aggrieved party considers the repudiation final.

 (b) Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform under the lease contract and includes any assurance demanded under AS 45.12.401.

 (c) Retraction reinstates a repudiating party’s rights under a lease contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.




Sec. 45.12.404. Substituted performance.
 (a) If without fault of the lessee, the lessor, and the supplier, the agreed berthing, loading, or unloading facilities fail or the agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable, but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted.

 (b) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation
     (1) the lessor may withhold or stop delivery or cause the supplier to withhold or stop delivery unless the lessee provides a means or manner of payment that is commercially a substantial equivalent; and

     (2) if delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the lessee’s obligation unless the regulation is discriminatory, oppressive, or predatory.




Sec. 45.12.405. Excused performance.
Subject to AS 45.12.404 on substituted performance, the following rules apply:
     (1) delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with (2) and (3) of this section is not a default under the lease contract if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the lease contract was made or by compliance in good faith with an applicable foreign or domestic governmental regulation or order, whether or not the regulation or order later proves to be invalid;

     (2) if the causes mentioned in (1) of this section affect only part of the lessor’s or the supplier’s capacity to perform, the lessor or supplier shall allocate production and deliveries among the customers of the lessor or supplier but at the option of the lessor or supplier may include regular customers not then under contract for sale or lease as well as the requirements of the lessor or supplier for further manufacture; the lessor or supplier may allocate under this paragraph in a manner that is fair and reasonable;

     (3) the lessor seasonably shall notify the lessee and in the case of a finance lease the supplier seasonably shall notify the lessor and the lessee, if known, that there will be delay or nondelivery and, if allocation is required under (2) of this section, of the estimated quota made available for the lessee.




Sec. 45.12.406. Procedure on excused performance.
 (a) If the lessee receives notification of a material or indefinite delay or an allocation justified under AS 45.12.405, the lessee may by written notification to the lessor as to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired under AS 45.12.510,
     (1) terminate the lease contract (AS 45.12.505(b)); or

     (2) except in a finance lease that is not a consumer lease, modify the lease contract by accepting the available quota in substitution, with due allowance from the rent payable for the balance of the lease term for the deficiency but without further right against the lessor.

 (b) If, after receipt of a notification from the lessor under AS 45.12.405, the lessee fails to modify the lease agreement as provided in (a)(2) of this section within a reasonable time not exceeding 30 days, the lease contract lapses with respect to deliveries affected.




Sec. 45.12.407. Irrevocable promises: finance leases.
 (a) In the case of a finance lease that is not a consumer lease, the lessee’s promises under the lease contract become irrevocable and independent upon the lessee’s acceptance of the goods.

 (b) A promise that has become irrevocable and independent under (a) of this section
     (1) is effective and enforceable between the parties, and by or against the third parties including assignees of the parties; and

     (2) is not subject to cancellation, termination, modification, repudiation, excuse, or substitution without the consent of the party to whom the promise runs.

 (c) This section does not affect the validity, under another law, of a covenant in a lease contract making the lessee’s promises irrevocable and independent upon the lessee’s acceptance of the goods.




Article 5. Default.


Sec. 45.12.501. Default: procedure.
 (a) Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this chapter.

 (b) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement has rights and remedies as provided in this chapter and, except as limited by this chapter, as provided in the lease agreement.

 (c) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement may reduce the party’s claim to judgment, or otherwise enforce the lease contract by self-help or any available judicial procedure or nonjudicial procedure, including administrative proceeding, arbitration, or the like, under this chapter.

 (d) Except as otherwise provided in AS 45.01.305(a) or this chapter or the lease agreement, the rights and remedies referred to in (b) and (c) of this section are cumulative.

 (e) If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under AS 45.12.501 — 45.12.532 as to the goods, or under other applicable law as to both the real property and the goods in accordance with that party’s rights and remedies in respect of the real property, in which case AS 45.12.501 — 45.12.532 do not apply.




Sec. 45.12.502. Notice after default.
Except as otherwise provided in this chapter or the lease agreement, the lessor or lessee in default under the lease contract is not entitled to notice of default or notice of enforcement from the other party to the lease agreement.


Sec. 45.12.503. Modification or impairment of rights and remedies.
 (a) Except as otherwise provided in this chapter, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter.

 (b) Resort to a remedy provided under this chapter or in the lease agreement is optional unless the remedy is expressly agreed to be exclusive. If circumstances cause an exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive remedy is unconscionable, remedy may be had as provided in this chapter.

 (c) Consequential damages may be liquidated under AS 45.12.504, or may otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion is unconscionable. Limitation, alteration, or exclusion of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation, alteration, or exclusion of damages where the loss is commercial is not prima facie unconscionable.

 (d) Rights and remedies on default by the lessor or the lessee with respect to an obligation or a promise collateral or ancillary to the lease contract are not impaired by this chapter.




Sec. 45.12.504. Liquidation of damages.
 (a) Damages payable by either party for default, or another act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor’s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.

 (b) If the lease agreement provides for liquidation of damages, and the provision does not comply with (a) of this section, or the provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this chapter.

 (c) If the lessor justifiably withholds or stops delivery of goods under AS 45.12.525 or 45.12.526 because of the lessee’s default or insolvency, the lessee is entitled to restitution of any amount by which the sum of the lessee’s payments exceeds
     (1) the amount to which the lessor is entitled by virtue of terms liquidating the lessor’s damages under (a) of this section; or

     (2) in the absence of the terms under (1) of this subsection, 20 percent of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of that amount or $500.

 (d) A lessee’s right to restitution under (c) of this section is subject to offset to the extent the lessor establishes
     (1) a right to recover damages under the provisions of this chapter other than (a) of this section; and

     (2) the amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.




Sec. 45.12.505. Cancellation and termination, and effect of cancellation, termination, rescission, or fraud on rights and remedies.
 (a) On cancellation of the lease contract, all obligations that are still executory on both sides are discharged, but any right based on prior default or performance survives, and the canceling party also retains a remedy for default of the whole lease contract or an unperformed balance.

 (b) On termination of the lease contract, all obligations that are still executory on both sides are discharged but a right based on prior default or performance survives.

 (c) Unless the contrary intention clearly appears, expressions of “cancellation,” “rescission,” or the like of the lease contract may not be construed as a renunciation or discharge of a claim in damages for an antecedent default.

 (d) Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this chapter for default.

 (e) Neither rescission nor a claim for rescission of the lease contract nor rejection or return of the goods bars or is inconsistent with a claim for damages or other right or remedy.




Sec. 45.12.506. Statute of limitations.
 (a) An action for default under a lease contract, including breach of warranty or indemnity, must be commenced within four years after the cause of action accrued. By the original lease contract the parties may reduce the period of limitation to not less than one year.

 (b) A cause of action for default accrues when the act or omission on which the default or breach of warranty is based is or should have been discovered by the aggrieved party, or when the default occurs, whichever is later. A cause of action for indemnity accrues when the act or omission on which the claim for indemnity is based is or should have been discovered by the indemnified party, whichever is later.

 (c) If an action commenced within the time limited by (a) of this section is so terminated as to leave available a remedy by another action for the same default or breach of warranty or indemnity, the other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.

 (d) This section does not alter the law on tolling of the statute of limitations.




Sec. 45.12.507. Proof of market rent: time and place.
 (a) Damages based on market rent under AS 45.12.519 or 45.12.528 are determined according to the rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times specified in AS 45.12.519 or 45.12.528, as appropriate.

 (b) If evidence of rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times or places described in this chapter is not readily available, the rent prevailing within any reasonable time before or after the time described or at any other place or for a different lease term that in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making proper allowance for the difference, including the cost of transporting the goods to or from the other place.

 (c) Evidence of a relevant rent prevailing at a time or place or for a lease term other than the one described in this chapter offered by one party is not admissible until the party has given the other party notice the court finds sufficient to prevent unfair surprise.

 (d) If the prevailing rent or value of goods regularly leased in an established market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of that market are admissible in evidence. The circumstances of the preparation of the report may be shown to affect its weight but not its admissibility.




Sec. 45.12.508. Lessee’s remedies.
 (a) If a lessor fails to deliver the goods in conformity with the lease contract (AS 45.12.509) or repudiates the lease contract (AS 45.12.402), or a lessee rightfully rejects the goods (AS 45.12.509) or justifiably revokes acceptance of the goods under AS 45.12.517, then with respect to the goods involved, and with respect to all of the goods if under an installment lease contract, the value of the whole lease contract is substantially impaired (AS 45.12.510), the lessor is in default under the lease contract and the lessee may
     (1) cancel the lease contract under AS 45.12.505(a);

     (2) recover as much of the rent and security as has been paid and as is just under the circumstances;

     (3) cover and recover damages under AS 45.12.518 and 45.12.520 as to all goods affected whether or not they have been identified to the lease contract, or recover damages for nondelivery under AS 45.12.519 and 45.12.520;

     (4) exercise other rights or pursue other remedies provided in the lease contract.

 (b) If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also
     (1) if the goods have been identified, recover them under AS 45.12.522; or

     (2) in a proper case, obtain specific performance or replevy the goods under AS 45.12.521.

 (c) If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease, and AS 45.12.519(c).

 (d) If a lessor has breached a warranty, whether express or implied, the lessee may recover damages under AS 45.12.519(d).

 (e) On rightful rejection or justifiable revocation of acceptance, a lessee has a security interest in goods in the lessee’s possession or control for any rent and security that has been paid and any expenses reasonably incurred in their inspection, receipt, transportation, and care and custody, and may hold those goods and dispose of them in good faith and in a commercially reasonable manner, subject to AS 45.12.527(e).

 (f) Subject to AS 45.12.407, a lessee, on notifying the lessor of the lessee’s intention to do so, may deduct all or part of the damages resulting from a default under the lease contract from a part of the rent still due under the same lease contract.




Sec. 45.12.509. Lessee’s rights on improper delivery; rightful rejection.
 (a) Subject to the provisions of AS 45.12.510 on default in installment lease contracts, if the goods or the tender or delivery fail in any respect to conform to the lease contract, the lessee may reject or accept the goods or accept any commercial unit or units and reject the rest of the goods.

 (b) Rejection of goods is ineffective unless it is within a reasonable time after tender or delivery of the goods and the lessee seasonably notifies the lessor.




Sec. 45.12.510. Installment lease contracts: rejection and default.
 (a) Under an installment lease contract a lessee may reject a delivery that is nonconforming if the nonconformity substantially impairs the value of that delivery and cannot be cured or the nonconformity is a defect in the required documents; but if the nonconformity does not fall within (b) of this section and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.

 (b) If nonconformity or default with respect to one or more deliveries substantially impairs the value of the installment lease contract as a whole, there is a default with respect to the whole. The aggrieved party reinstates the installment lease contract as a whole if the aggrieved party accepts a nonconforming delivery without seasonably notifying of cancellation or brings an action with respect only to past deliveries or demands performance as to future deliveries.




Sec. 45.12.511. Merchant lessee’s duties as to rightfully rejected goods.
 (a) Subject to a security interest of a lessee under AS 45.12.508(e), if a lessor or a supplier does not have an agent or place of business at the market of rejection, a merchant lessee, after rejection of goods in the lessee’s possession or control, shall follow any reasonable instructions received from the lessor or the supplier with respect to the goods. In the absence of those instructions, a merchant lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods for the lessor’s account if they threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.

 (b) If a merchant lessee under (a) of this section or another lessee disposes of goods under AS 45.12.512, the lessee is entitled to reimbursement either from the lessor or the supplier or out of the proceeds for reasonable expenses of caring for and disposing of the goods and, if the expenses do not include a disposition commission, to the commission as is usual in the trade, or if there is none, to a reasonable sum not exceeding 10 percent of the gross proceeds.

 (c) In complying with this section or AS 45.12.512, the lessee is held only to good faith. Good faith conduct under this provision is neither acceptance or conversion nor the basis of an action for damages.

 (d) A purchaser who purchases in good faith from a lessee under this section or AS 45.12.512 takes the goods free of any rights of the lessor and the supplier even though the lessee fails to comply with one or more of the requirements of this chapter.




Sec. 45.12.512. Lessee’s duties as to rightfully rejected goods.
 (a) Except as otherwise provided under AS 45.12.511, with respect to goods that threaten to decline in value speedily and subject to a security interest of a lessee under AS 45.12.508(e),
     (1) the lessee, after rejection of goods in the lessee’s possession, shall hold them with reasonable care at the lessor’s or the supplier’s disposition for a reasonable time after the lessee’s seasonable notification of rejection;

     (2) if the lessor or the supplier does not give instructions within a reasonable time after notification of rejection, the lessee may store the rejected goods for the lessor’s or the supplier’s account or ship them to the lessor or the supplier or dispose of them for the lessor’s or the supplier’s account with reimbursement in the manner provided in AS 45.12.511; but

     (3) the lessee does not have further obligations with regard to goods rightfully rejected.

 (b) Action by the lessee under (a) of this section is not acceptance or conversion.




Sec. 45.12.513. Cure by lessor of improper tender or delivery; replacement.
 (a) If a tender or delivery by the lessor or the supplier is rejected because it is nonconforming and the time for performance has not yet expired, the lessor or the supplier may seasonably notify the lessee of the lessor’s or the supplier’s intention to cure and may then make a conforming delivery within the time provided in the lease contract.

 (b) If the lessee rejects a nonconforming tender that the lessor or the supplier had reasonable grounds to believe would be acceptable with or without money allowance, the lessor or the supplier may have a further reasonable time to substitute a conforming tender if the lessor or supplier seasonably notifies the lessee.




Sec. 45.12.514. Waiver of lessee’s objections.
 (a) In rejecting goods, a lessee’s failure to state a particular defect that is ascertainable by reasonable inspection precludes the lessee from relying on the defect to justify rejection or to establish default
     (1) if, stated seasonably, the lessor or the supplier could have cured it under AS 45.12.513; or

     (2) between merchants if the lessor or the supplier after rejection has made a request in writing for a full and final written statement of all defects on which the lessee proposes to rely.

 (b) A lessee’s failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent in the documents.




Sec. 45.12.515. Acceptance of goods.
 (a) Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and
     (1) the lessee signifies or acts with respect to the goods in a manner that signifies to the lessor or the supplier that the goods are conforming or that the lessee will take or retain them in spite of their nonconformity; or

     (2) the lessee fails to make an effective rejection of the goods under AS 45.12.509(b).

 (b) Acceptance of a part of a commercial unit is acceptance of that entire unit.




Sec. 45.12.516. Effect of acceptance of goods; notice of default; burden of establishing default after acceptance; notice of claim or litigation to person answerable over.
 (a) A lessee must pay rent for goods accepted in accordance with the lease contract, with due allowance for goods rightfully rejected or not delivered.

 (b) A lessee’s acceptance of goods precludes rejection of the goods accepted. In the case of a finance lease, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it. In any other case, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. Acceptance does not of itself impair another remedy provided by this chapter or the lease agreement for nonconformity.

 (c) If a tender has been accepted
     (1) within a reasonable time after the lessee discovers or should have discovered a default, the lessee shall notify the lessor and the supplier, if any, or be barred from a remedy against the party not notified;

     (2) except in the case of a consumer lease, within a reasonable time after the lessee receives notice of litigation for infringement or the like under AS 45.12.211 the lessee shall notify the lessor or be barred from a remedy over for liability established by the litigation; and

     (3) the burden is on the lessee to establish a default.

 (d) If a lessee is sued for breach of a warranty or other obligation for which a lessor or a supplier is answerable over, the following apply:
     (1) the lessee may give the lessor or the supplier, or both, written notice of the litigation; if the notice states that the person notified may come in and defend and that if the person notified does not do so that person will be bound in an action against that person by the lessee by a determination of fact common to the two litigations, then unless the person notified after seasonable receipt of the notice does come in and defend that person is so bound;

     (2) the lessor or the supplier may demand in writing that the lessee turn over control of the litigation including settlement if the claim is one for infringement or the like under AS 45.12.211 or else be barred from a remedy over; if the demand states that the lessor or the supplier agrees to bear all expense and to satisfy an adverse judgment, then, unless the lessee after seasonable receipt of the demand does turn over control, the lessee is so barred.

 (e) Subsections (c) and (d) of this section apply to an obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like under AS 45.12.211.




Sec. 45.12.517. Revocation of acceptance of goods.
 (a) A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if the lessee has accepted it,
     (1) except in the case of a finance lease, on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

     (2) without discovery of the nonconformity if the lessee’s acceptance was reasonably induced either by the lessor’s assurances or, except in the case of a finance lease, by the difficulty of discovery before acceptance.

 (b) Except in the case of a finance lease that is not a consumer lease, a lessee may revoke acceptance of a lot or commercial unit if the lessor defaults under the lease contract and the default substantially impairs the value of that lot or commercial unit to the lessee.

 (c) If the lease agreement provides, the lessee may revoke acceptance of a lot or commercial unit because of other defaults by the lessor.

 (d) Revocation of acceptance must occur within a reasonable time after the lessee discovers or should have discovered the ground for it and before a substantial change in condition of the goods that is not caused by the nonconformity. Revocation is not effective until the lessee notifies the lessor.

 (e) A lessee who revokes under this section has the same rights and duties with regard to the goods involved as if the lessee had rejected them.




Sec. 45.12.518. Cover; substitute goods.
 (a) After a default, by a lessor under the lease contract, of the type described in AS 45.12.508(a), or, if agreed, after other default by the lessor, the lessee may cover by making a purchase or lease of or contract to purchase or lease goods in substitution for those due from the lessor.

 (b) Except as otherwise provided under AS 45.12.504 with respect to damages liquidated in the lease agreement or otherwise determined under agreement of the parties under AS 45.01.302 and AS 45.12.503, if a lessee’s cover is by lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages
     (1) the present value, as of the date of the commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period of the new lease term that is comparable to the then remaining term of the original lease agreement minus the present value as of the same date of the total rent for the then remaining lease term of the original lease agreement; and

     (2) incidental or consequential damages, less expenses saved in consequence of the lessor’s default.

 (c) If a lessee’s cover is by lease agreement that for any reason does not qualify for treatment under (b) of this section, or is by purchase or otherwise, the lessee may recover from the lessor as if the lessee had elected not to cover and AS 45.12.519 governs.




Sec. 45.12.519. Lessee’s damages for nondelivery, repudiation, default, and breach of warranty in regard to accepted goods.
 (a) Except as otherwise provided under AS 45.12.504 with respect to damages liquidated in the lease agreement or otherwise determined under agreement of the parties under AS 45.01.302 and AS 45.12.503, if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under AS 45.12.518(b), or is by purchase or otherwise, the measure of damages for nondelivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default, of the then market rent minus the present value as of the same date of the original rent, computed for the remaining lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default.

 (b) Market rent is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

 (c) Except as otherwise agreed, if the lessee has accepted goods and given notification under AS 45.12.516(c), the measure of damages for non-conforming tender or delivery or other default by a lessor is the loss resulting in the ordinary course of events from the lessor’s default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default.

 (d) Except as otherwise agreed, the measure of damages for breach of warranty is the present value at the time and place of acceptance of the difference between the value of the use of the goods accepted and the value if they had been as warranted for the lease term, unless special circumstances show proximate damages of a different amount, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default or breach of warranty.




Sec. 45.12.520. Lessee’s incidental and consequential damages.
 (a) Incidental damages resulting from a lessor’s default include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of goods rightfully rejected or goods the acceptance of which is justifiably revoked, any commercially reasonable charges, expenses, or commissions in connection with effecting cover, and any other reasonable expense incident to the default.

 (b) Consequential damages resulting from a lessor’s default include
     (1) any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and that could not reasonably be prevented by cover or otherwise; and

     (2) injury to person or property proximately resulting from a breach of warranty.




Sec. 45.12.521. Lessee’s right to specific performance or replevin.
 (a) Specific performance may be decreed if the goods are unique or in other proper circumstances.

 (b) A decree for specific performance may include any terms and conditions as to payment of the rent, damages, or other relief that the court considers just.

 (c) A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like for goods identified to the lease contract if after reasonable effort the lessee is unable to effect cover for those goods or the circumstances reasonably indicate that the effort will be unavailing.




Sec. 45.12.522. Lessee’s right to goods on lessor’s insolvency.
 (a) Subject to (b) of this section and even though the goods have not been shipped, a lessee who has paid a part or all of the rent and security for goods identified to a lease contract under AS 45.12.217 on making and keeping good a tender of any unpaid portion of the rent and security due under the lease contract may recover the goods identified from the lessor if the lessor becomes insolvent within 10 days after receipt of the first installment of rent and security.

 (b) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.




Sec. 45.12.523. Lessor’s remedies.
 (a) If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a payment when due or repudiates with respect to a part or the whole, then, with respect to the goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (AS 45.12.510), the lessee is in default under the lease contract and the lessor may
     (1) cancel the lease contract (AS 45.12.505(a));

     (2) proceed respecting goods not identified to the lease contract under AS 45.12.524;

     (3) withhold delivery of the goods and under AS 45.12.525 take possession of goods previously delivered;

     (4) stop delivery of the goods by a bailee under AS 45.12.526;

     (5) dispose of the goods under AS 45.12.527 and recover damages, or retain the goods and recover damages under AS 45.12.528, or in a proper case recover rent under AS 45.12.529;

     (6) exercise any other rights or pursue any other remedies provided in the lease contract.

 (b) If a lessor does not fully exercise a right or obtain a remedy to which the lessor is entitled under (a) of this section, the lessor may recover the loss resulting in the ordinary course of events from the lessee’s default as determined in any reasonable manner, together with incidental damages, less expenses saved in consequence of the lessee’s default.

 (c) If a lessee is otherwise in default under a lease contract, the lessor may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease. In addition, unless otherwise provided in the lease contract,
     (1) if the default substantially impairs the value of the lease contract to the lessor, the lessor may exercise the rights and pursue the remedies provided in (a) or (b) of this section; or

     (2) if the default does not substantially impair the value of the lease contract to the lessor, the lessor may recover as provided in (b) of this section.




Sec. 45.12.524. Lessor’s right to identify goods to lease contract.
 (a) After default, by the lessee under the lease contract, of the type described in AS 45.12.523(a) or (c)(1) or, if agreed, after other default by the lessee, the lessor may
     (1) identify to the lease contract conforming goods not already identified if at the time the lessor learned of the default they were in the lessor’s or the supplier’s possession or control; and

     (2) dispose of goods under AS 45.12.527(a) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.

 (b) If the goods are unfinished, in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization, an aggrieved lessor or the supplier may either complete manufacture and wholly identify the goods to the lease contract or cease manufacture and lease, sell, or otherwise dispose of the goods for scrap or salvage value or proceed in another reasonable manner.




Sec. 45.12.525. Lessor’s right to possession of goods.
 (a) If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.

 (b) After a default, by the lessee under the lease contract, of the type described in AS 45.12.523(a) or (c)(1), or, if agreed, after other default by the lessee, the lessor has the right to take possession of the goods. If the lease contract provides, the lessor may require the lessee to assemble the goods and make them available to the lessor at a place to be designated by the lessor that is reasonably convenient to both parties. Without removal, the lessor may render unusable any goods employed in trade or business, and may dispose of goods on the lessee’s premises under AS 45.12.527.

 (c) The lessor may proceed under (b) of this section without judicial process if it can be done without breach of the peace, or the lessor may proceed by action.




Sec. 45.12.526. Lessor’s stoppage of delivery in transit or otherwise.
 (a) A lessor may stop delivery of goods in the possession of a carrier or other bailee if the lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload, planeload, or larger shipments of express or freight if the lessee repudiates or fails to make a payment due before delivery, whether for rent, security, or otherwise under the lease contract, or for any other reason the lessor has a right to withhold or take possession of the goods.

 (b) In pursuing its remedies under (a) of this section, the lessor may stop delivery until
     (1) receipt of the goods by the lessee;

     (2) acknowledgment to the lessee by a bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or

     (3) an acknowledgment to the lessee under (1) or (2) of this subsection by a carrier by reshipment or as a warehouse.

 (c) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.

 (d) After notification, the bailee shall hold and deliver the goods according to the directions of the lessor, but the lessor is liable to the bailee for any ensuing charges or damages.

 (e) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.




Sec. 45.12.527. Lessor’s rights to dispose of goods.
 (a) After a default, by a lessee under the lease contract, of the type described in AS 45.12.523(a) or (c)(1) or after the lessor refuses to deliver or takes possession of goods under AS 45.12.525 or 45.12.526, or, if agreed, after other default by a lessee, the lessor may dispose of the goods concerned or the undelivered balance of them by lease, sale, or otherwise.

 (b) Except as otherwise provided with respect to damages liquidated in the lease agreement under AS 45.12.504 or otherwise determined under agreement of the parties under AS 45.01.302 and AS 45.12.503, if the disposition is by lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages
     (1) accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement;

     (2) the present value, as of the same date, of the total rent for the then remaining lease term of the original lease agreement minus the present value, as of the same date, of the rent under the new lease agreement applicable to that period of the new lease term that is comparable to the then remaining term of the original lease agreement; and

     (3) incidental damages allowed under AS 45.12.530, less expenses saved in consequence of the lessee’s default.

 (c) If the lessor’s disposition is by lease agreement that for any reason does not qualify for treatment under (b) of this section, or is by sale or otherwise, the lessor may recover from the lessee as if the lessor had elected not to dispose of the goods and AS 45.12.528 governs.

 (d) A subsequent buyer or lessee who buys or leases from the lessor in good faith for value as a result of a disposition under this section takes the goods free of the original lease contract and any rights of the original lessee even though the lessor fails to comply with one or more of the requirements of this chapter.

 (e) The lessor is not accountable to the lessee for profit made on a disposition. A lessee who has rightfully rejected or justifiably revoked acceptance shall account to the lessor for any excess over the amount of the lessee’s security interest under AS 45.12.508(e).




Sec. 45.12.528. Lessor’s damages for nonacceptance, failure to pay, repudiation, or other default.
 (a) Except as otherwise provided with respect to damages liquidated in the lease agreement under AS 45.12.504 or otherwise determined under agreement of the parties under AS 45.01.302 and AS 45.12.503, if a lessor elects to retain the goods or a lessor elects to dispose of the goods and the disposition is by lease agreement that for any reason does not qualify for treatment under AS 45.12.527(b), or is by sale or otherwise, the lessor may recover from the lessee as damages for a default described in AS 45.12.523(a) or (c)(1), or, if agreed, for other default of the lessee
     (1) accrued and unpaid rent as of the date of default if the lessee has never taken possession of the goods, or, if the lessee has taken possession of the goods, as of the date the lessor repossesses the goods or an earlier date on which the lessee makes a tender of the goods to the lessor;

     (2) the present value as of the date determined under (1) of this subsection of the total rent for the then remaining lease term of the original lease agreement minus the present value as of the same date of the market rent at the place where the goods are located, computed for the same lease term; and

     (3) incidental damages allowed under AS 45.12.530, less expenses saved in consequence of the lessee’s default.

 (b) If the measure of damages provided in (a) of this section is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under AS 45.12.530, due allowance for costs reasonably incurred, and due credit for payments or proceeds of disposition.




Sec. 45.12.529. Lessor’s action for the rent.
 (a) After default, by the lessee under the lease contract, of the type described in AS 45.12.523(a) or (c)(1) or, if agreed, after other default by the lessee, if the lessor complies with (b) of this section, the lessor may recover from the lessee as damages
     (1) for goods accepted by the lessee and not repossessed by or tendered to the lessor, and for conforming goods lost or damaged within a commercially reasonable time after risk of loss passes to the lessee under AS 45.12.219
          (A) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor;

          (B) the present value as of the same date of the rent for the then remaining lease term of the lease agreement; and

          (C) any incidental damages allowed under AS 45.12.530, less expenses saved in consequence of the lessee’s default; and

     (2) for goods identified to the lease contract if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that effort will be unavailing
          (A) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor;

          (B) the present value as of the same date of the rent for the then remaining lease term of the lease agreement; and

          (C) any incidental damages allowed under AS 45.12.530, less expenses saved in consequence of the lessee’s default.

 (b) Except as provided in (c) of this section, the lessor shall hold for the lessee for the remaining lease term of the lease agreement any goods that have been identified to the lease contract and are in the lessor’s control.

 (c) The lessor may dispose of the goods at any time before collection of the judgment for damages obtained under (a) of this section. If the disposition is before the end of the remaining lease term of the lease agreement, the lessor’s recovery against the lessee for damages will be governed by AS 45.12.527 or 45.12.528, and the lessor will cause an appropriate credit to be provided against a judgment for damages to the extent that the amount of the judgment exceeds the recovery available under AS 45.12.527 or 45.12.528.

 (d) Payment of the judgment for damages obtained under (a) of this section entitles the lessee to the use and possession of the goods not then disposed of for the remaining lease term of and in accordance with the lease agreement.

 (e) After default, by the lessee under the lease contract, of the type described in AS 45.12.523(a) or (c)(1) or, if agreed, after other default by the lessee, a lessor who is held not entitled to rent under this section shall nevertheless be awarded damages for nonacceptance under AS 45.12.527 or 45.12.528.




Sec. 45.12.530. Lessor’s incidental damages.
Incidental damages to an aggrieved lessor include commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care, and custody of goods after the lessee’s default, in connection with return or disposition of the goods, or otherwise resulting from the default.


Sec. 45.12.531. Standing to sue third parties for injury to goods.
 (a) If a third party so deals with goods that have been identified to a lease contract as to cause actionable injury to a party to the lease contract
     (1) the lessor has a right of action against the third party; and

     (2) the lessee also has a right of action against the third party if the lessee
          (A) has a security interest in the goods;

          (B) has an insurable interest in the goods; or

          (C) bears the risk of loss under the lease contract or has since the injury assumed that risk as against the lessor and the goods have been converted or destroyed.

 (b) If at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the lease contract and there is no arrangement between them for disposition of the recovery, the plaintiff’s suit or settlement, subject to the plaintiff’s own interest, is as a fiduciary for the other party to the lease contract.

 (c) Either party with the consent of the other may sue for the benefit of whom it may concern.




Sec. 45.12.532. Lessor’s rights regarding residual interest.
In addition to any other recovery permitted by this chapter or other law, the lessor may recover from the lessee an amount that will fully compensate the lessor for any loss of or damage to the lessor’s residual interest in the goods caused by the default of the lessee.


Article 1. Subject Matter and Definitions.


Chapter 14. Funds Transfers.

Sec. 45.14.101. Short title.
This chapter may be cited as Uniform Commercial Code — Funds Transfers.


Sec. 45.14.102. Subject matter.
Except as otherwise provided in AS 45.14.108, this chapter applies to funds transfers defined in AS 45.14.104.


Sec. 45.14.103. Payment order; definitions.
 (a) In this chapter,
     (1) “payment order” means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if
          (A) the instruction does not state a condition to payment to the beneficiary other than time of payment;

          (B) the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender; and

          (C) the instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank;

     (2) “beneficiary” means the person to be paid by the beneficiary’s bank;

     (3) “beneficiary’s bank” means the bank that is identified in a payment order in which an account of the beneficiary is to be credited under an order, or that otherwise is to make payment to the beneficiary if the order does not provide for payment to an account;

     (4) “receiving bank” means the bank to which the sender’s instruction is addressed;

     (5) “sender” means the person giving the instruction to the receiving bank.

 (b) If an instruction complying with (a)(1) of this section is to make more than one payment to a beneficiary, the instruction is a separate payment order with respect to each payment.

 (c) A payment order is issued when it is sent to the receiving bank.




Sec. 45.14.104. Funds transfer; definitions.
In this chapter,
     (1) “funds transfer” means the series of transactions, beginning with the originator’s payment order, made for the purpose of making payment to the beneficiary of the order; the term includes any payment order issued by the originator’s bank or an intermediary bank intended to carry out the originator’s payment order; a funds transfer is completed by acceptance by the beneficiary’s bank of a payment order for the benefit of the beneficiary of the originator’s payment order;

     (2) “intermediary bank” means a receiving bank other than the originator’s bank or the beneficiary’s bank;

     (3) “originator” means the sender of the first payment order in a funds transfer;

     (4) “originator’s bank” means
          (A) the receiving bank to which the payment order of the originator is issued if the originator is not a bank; or

          (B) the originator if the originator is a bank.




Sec. 45.14.105. Other definitions.
 (a) In this chapter,
     (1) “authorized account” means a deposit account of a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank; if a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account;

     (2) “bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company; a branch or separate office of a bank is a separate bank for purposes of this chapter;

     (3) “customer” means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders;

     (4) “funds-transfer business day” of a receiving bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders;

     (5) “funds-transfer system” means a wire transfer network, automated clearinghouse, or other communication system of a clearinghouse or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed;

     (6) [Repealed, § 113 ch 44 SLA 2009.]
     (7) “prove,” with respect to a fact, means to meet the burden of establishing the fact; “burden of establishing” has the meaning given in AS 45.01.211.

 (b) Other definitions applying to this chapter and the sections in which they appear are
     (1) “acceptance” in AS 45.14.209;

     (2) “executed” in AS 45.14.301;

     (3) “execution date” in AS 45.14.301;

     (4) “funds-transfer system rule” in AS 45.14.501;

     (5) “payment by beneficiary’s bank to beneficiary” in AS 45.14.405;

     (6) “payment by originator to beneficiary” in AS 45.14.406;

     (7) “payment by sender to receiving bank” in AS 45.14.403;

     (8) “payment date” in AS 45.14.401;

     (9) “security procedure” in AS 45.14.201.

 (c) The following definitions in AS 45.04.104 apply to this chapter:
     (1) “clearinghouse”;

     (2) “item”;

     (3) “suspends payments”.

 (d) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.14.106. Time payment order is received.
 (a) The time of receipt of a payment order or communication canceling or amending a payment order is determined by the rules applicable to receipt of a notice stated in AS 45.01.212. A receiving bank may fix a cut-off time or times on a funds-transfer business day for the receipt and processing of payment orders and communications cancelling or amending payment orders. Different cut-off times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cut-off time may apply to senders generally, or different cut-off times may apply to different senders or categories of payment orders. If a payment order or communication cancelling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cut-off time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day.

 (b) If this chapter refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in this chapter.




Sec. 45.14.107. Federal reserve regulations and operating circulars.
Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the federal reserve banks supersede an inconsistent provision of this chapter to the extent of the inconsistency.


Sec. 45.14.108. Relationship to federal law.
 (a) Except as provided in (b) of this section, this chapter does not apply to a funds transfer if a part of the funds transfer is governed by 15 U.S.C. 1693 — 1693r (Electronic Fund Transfer Act of 1978), as amended from time to time.

 (b) This chapter applies to a funds transfer that is a remittance transfer as defined in 15 U.S.C. 1693o-1, as amended from time to time, unless the remittance transfer is an electronic fund transfer as defined in 15 U.S.C. 1693a, as amended from time to time.

 (c) In a funds transfer to which this chapter applies, in the event of an inconsistency between an applicable provision of this chapter and an applicable provision of 15 U.S.C. 1693 — 1693r, the provision of 15 U.S.C. 1693 — 1693r governs to the extent of the inconsistency.




Article 2. Issue and Acceptance of Payment Order.


Sec. 45.14.201. Security procedure.
 (a) In this chapter, “security procedure” means a procedure established by agreement of a customer and a receiving bank for the purpose of
     (1) verifying that a payment order or communication amending or canceling a payment order is that of the customer; or

     (2) detecting error in the transmission or the content of the payment order or communication.

 (b) A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, call-back procedures, or similar security devices. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.




Sec. 45.14.202. Authorized and verified payment orders.
 (a) A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency.

 (b) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified under a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if
     (1) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders; and

     (2) the bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer; the bank is not required to follow an instruction that violates a written agreement with the customer or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted.

 (c) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security procedures in general use by customers and receiving banks similarly situated. A security procedure is considered to be commercially reasonable if
     (1) the security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer; and

     (2) the customer expressly agreed in writing to be bound by a payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the security procedure chosen by the customer.

 (d) This section applies to amendments and cancellations of payment orders to the same extent that it applies to payment orders.

 (e) Except as provided in this section and in AS 45.14.203(a)(1), rights and obligations arising under this section or AS 45.14.203 may not be varied by agreement.

 (f) In this chapter, “sender” includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under (a) of this section, or it is effective as the order of the customer under (b) of this section.




Sec. 45.14.203. Unenforceability of certain verified payment orders.
 (a) If an accepted payment order is not, under AS 45.14.202(a), an authorized order of a customer identified as sender, but is effective as an order of the customer under AS 45.14.202(b), the following rules apply:
     (1) by express written agreement, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order;

     (2) the receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was not caused, directly or indirectly, by a person
          (A) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure; or

          (B) who obtained access to transmitting facilities of the customer or who obtained, from a source controlled by the customer and without authority of the receiving bank, information facilitating breach of the security procedure, regardless of how the information was obtained or whether the customer was at fault; in this subparagraph, “information” includes any access device, computer software, or the like.

 (b) This section applies to amendments of payment orders to the same extent that it applies to payment orders.




Sec. 45.14.204. Refund of payment and duty of customer to report with respect to unauthorized payment order.
 (a) If a receiving bank accepts a payment order issued in the name of its customer as sender and if the payment order is not authorized and not effective as the order of the customer under AS 45.14.202, or not enforceable in whole or in part against the customer under AS 45.14.203, the bank shall refund payment of the payment order received from the customer to the extent that the bank is not entitled to enforce payment and shall pay interest on the refundable amount calculated from the date the bank received payment to the date of the refund. However, the customer is not entitled to interest from the bank on the amount to be refunded if the customer fails to exercise ordinary care to determine that the order was not authorized by the customer and to notify the bank of the relevant facts within a reasonable time not exceeding 90 days after the date the customer received notification from the bank that the order was accepted or that the customer’s account was debited with respect to the order. The bank is not entitled to recovery from the customer on account of a failure by the customer to give notification as stated in this section.

 (b) Reasonable time under (a) of this section may be fixed by agreement as stated in AS 45.01.302(b), but the obligation of a receiving bank to refund payment as stated in (a) of this section may not otherwise be varied by agreement.




Sec. 45.14.205. Erroneous payment orders.
 (a) If an accepted payment order was transmitted under a security procedure for the detection of error and the payment order was an erroneous payment order, the following rules apply:
     (1) if the sender proves that the sender or a person acting on behalf of the sender under AS 45.14.206 complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obliged to pay the order to the extent stated in (2) and (3) of this subsection;

     (2) if the funds transfer is completed on the basis of an erroneous payment order described in (d)(1) or (3) of this section, the sender is not obliged to pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution;

     (3) if the funds transfer is completed on the basis of an erroneous payment order described in (d)(2) of this section, the sender is not obliged to pay the order to the extent the amount received by the beneficiary is greater than the amount intended by the sender; in that case, the receiving bank is entitled to recover from the beneficiary the excess amount received to the extent allowed by the law governing mistake and restitution.

 (b) If the sender of an erroneous payment order is not obliged to pay all or part of the order, and if the sender receives notification from the receiving bank that the order was accepted by the bank or that the sender’s account was debited with respect to the order, the sender has a duty to exercise ordinary care, on the basis of information available to the sender, to discover the error with respect to the order and to advise the bank of the relevant facts within a reasonable time, not exceeding 90 days, after the bank’s notification was received by the sender. If the bank proves that the sender failed to perform that duty, the sender is liable to the bank for the loss the bank proves it incurred as a result of the failure, but the liability of the sender may not exceed the amount of the sender’s order.

 (c) This section applies to amendments to payment orders to the same extent it applies to payment orders.

 (d) In this section, “erroneous payment order” means a payment order that
     (1) erroneously instructed payment to a beneficiary not intended by the sender;

     (2) erroneously instructed payment in an amount greater than the amount intended by the sender; or

     (3) was an erroneously transmitted duplicate of a payment order previously sent by the sender.




Sec. 45.14.206. Transmission of payment order through funds-transfer or other communication system.
 (a) If a payment order addressed to a receiving bank is transmitted to a funds-transfer system or other third-party communication system for transmittal to the bank, the system is considered to be an agent of the sender for the purpose of transmitting the payment order to the bank. If there is a discrepancy between the terms of the payment order transmitted to the system and the terms of the payment order transmitted by the system to the bank, the terms of the payment order of the sender are those transmitted by the system. This section does not apply to a funds-transfer system of the federal reserve banks.

 (b) This section applies to cancellations and amendments of payment orders to the same extent that it applies to payment orders.




Sec. 45.14.207. Misdescription of beneficiary.
 (a) Subject to (b) of this section, if, in a payment order received by the beneficiary’s bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order, and acceptance of the order cannot occur.

 (b) If a payment order received by the beneficiary’s bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:
     (1) except as otherwise provided in (c) of this section, if the beneficiary’s bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order; the beneficiary’s bank does not need to determine whether the name and number refer to the same person;

     (2) if the beneficiary’s bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary’s bank if that person was entitled to receive payment from the originator of the funds transfer; if no person has rights as beneficiary, acceptance of the order cannot occur.

 (c) If a payment order described in (b) of this section is accepted, if the originator’s payment order described the beneficiary inconsistently by name and number, and if the beneficiary’s bank pays the person identified by number as permitted by (b)(1) of this section, the following rules apply:
     (1) if the originator is a bank, the originator is obliged to pay its order;

     (2) if the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator’s bank proves that the originator, before acceptance of the originator’s order, had notice that payment of a payment order issued by the originator might be made by the beneficiary’s bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary; proof of notice may be made by any admissible evidence; the originator’s bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a writing stating the information to which the notice relates.

 (d) In a case governed by (b)(1) of this section, if the beneficiary’s bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:
     (1) if the originator is obliged to pay its payment order as stated in (c) of this section, the originator has the right to recover;

     (2) if the originator is not a bank and is not obliged to pay its payment order, the originator’s bank has the right to recover.




Sec. 45.14.208. Misdescription of intermediary bank or beneficiary’s bank.
 (a) The following rules in this subsection apply to a payment order identifying an intermediary bank or the beneficiary’s bank only by an identifying number:
     (1) the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank and need not determine whether the number identifies a bank;

     (2) the sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.

 (b) The following rules in this subsection apply to a payment order identifying an intermediary bank or the beneficiary’s bank both by name and an identifying number if the name and number identify different persons:
     (1) if the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, when it executes the sender’s order, does not know that the name and number identify different persons; the receiving bank does not need to determine whether the name and number refer to the same person or whether the number refers to a bank; the sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order;

     (2) if the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary’s bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by (b)(1) of this section, as though the sender were a bank; proof of notice may be made by any admissible evidence; the receiving bank satisfies the burden of proof if it proves that the sender, before the payment order was accepted, signed a writing stating the information to which the notice relates;

     (3) regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, at the time it executes the sender’s order, does not know that the name and number identify different persons; the receiving bank does not need to determine whether the name and number refer to the same person;

     (4) if the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender’s payment order is a breach of the obligation stated in AS 45.14.302(a)(1).




Sec. 45.14.209. Acceptance of payment order.
 (a) Subject to (d) of this section, a receiving bank other than the beneficiary’s bank accepts a payment order when it executes the order.

 (b) Subject to (c) and (d) of this section, a beneficiary’s bank accepts a payment order at the earliest of the following times:
     (1) when the bank
          (A) pays the beneficiary as stated in AS 45.14.405(a) or (b); or

          (B) notifies the beneficiary of receipt of the order or that the account of the beneficiary has been credited with respect to the order unless the notice indicates that the bank is rejecting the order or that funds with respect to the order may not be withdrawn or used until receipt of payment from the sender of the order;

     (2) when the bank receives payment of the entire amount of the sender’s order under AS 45.14.403(a)(1) or (2); or

     (3) the opening of the next funds-transfer business day of the bank following the payment date of the order if, at the opening of the next funds-transfer business day, the amount of the sender’s order is fully covered by a withdrawable credit balance in an authorized account of the sender, or the bank has otherwise received full payment from the sender, unless the order was rejected before the opening of the next funds-transfer business day, is rejected within one hour after the opening of the next funds-transfer business day, or, if later, is rejected one hour after the opening of the next business day of the sender following the payment date; if notice of rejection is received by the sender after the payment date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the payment date to the day the sender receives notice or learns that the order was not accepted, counting that day as an elapsed day; if the withdrawable credit balance during that period falls below the amount of the order, the amount of interest payable is reduced accordingly.

 (c) Acceptance of a payment order may not occur before the order is received by the receiving bank. Acceptance does not occur under (b)(2) or (3) of this section if the beneficiary of the payment order does not have an account with the receiving bank, the account has been closed, or the receiving bank is not permitted by law to receive credits for the beneficiary’s account.

 (d) A payment order issued to the originator’s bank cannot be accepted until the payment date if the bank is the beneficiary’s bank, or the execution date if the bank is not the beneficiary’s bank. If the originator’s bank executes the originator’s payment order before the execution date or pays the beneficiary of the originator’s payment order before the payment date and the payment order is subsequently canceled under AS 45.14.211(b), the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution.




Sec. 45.14.210. Rejection of payment order.
 (a) A payment order is rejected by the receiving bank by a notice of rejection transmitted to the sender orally, electronically, or in writing. A notice of rejection does not need to use particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order. Rejection is effective when the notice is given if transmission is by a means that is reasonable in the circumstances. If notice of rejection is given by a means that is not reasonable, rejection is effective when the notice is received. If an agreement of the sender and receiving bank establishes the means to be used to reject a payment order, means
     (1) complying with the agreement are reasonable; and

     (2) not complying with the agreement are not reasonable unless significant delay in receipt of the notice did not result from the use of the noncomplying means.

 (b) This subsection applies if a receiving bank other than the beneficiary’s bank fails to execute a payment order despite the existence on the execution date of a withdrawable credit balance in an authorized account of the sender sufficient to cover the order. If the sender does not receive notice of rejection of the order on the execution date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the execution date to the earlier of the day the order is canceled under AS 45.14.211(e) or the day the sender receives notice or learns that the order was not executed, counting the final day of the period as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest is reduced accordingly.

 (c) If a receiving bank suspends payments, all unaccepted payment orders issued to it are considered rejected at the time the bank suspends payments.

 (d) Acceptance of a payment order precludes a later rejection of the order. Rejection of a payment order precludes a later acceptance of the order.




Sec. 45.14.211. Cancellation and amendment of payment order.
 (a) A communication of the sender of a payment order canceling or amending the order may be transmitted to the receiving bank orally, electronically, or in writing. If a security procedure is in effect between the sender and the receiving bank, the communication is not effective to cancel or amend the order unless the communication is verified under the security procedure or the bank agrees to the cancellation or amendment.

 (b) Subject to (a) of this section, a communication by the sender canceling or amending a payment order is effective to cancel or amend the order if notice of the communication is received at a time and in a manner affording the receiving bank a reasonable opportunity to act on the communication before the bank accepts the payment order.

 (c) After a payment order has been accepted, cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank. The following rules also apply:
     (1) with respect to a payment order accepted by a receiving bank other than the beneficiary’s bank, cancellation or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made;

     (2) with respect to a payment order accepted by the beneficiary’s bank, cancellation or amendment is not effective unless the order was issued in execution of an unauthorized payment order, or because of a mistake by a sender in the funds transfer, if the mistake resulted in the issuance of a payment order that
          (A) is a duplicate of a payment order previously issued by the sender;

          (B) orders payment to a beneficiary not entitled to receive payment from the originator; or

          (C) orders payment in an amount greater than the amount the beneficiary was entitled to receive from the originator.

 (d) Under (c)(2) of this section, if the payment order is canceled or amended, the beneficiary’s bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.

 (e) An unaccepted payment order is canceled by operation of law at the close of the fifth funds-transfer business day of the receiving bank after the execution date or payment date of the order.

 (f) A canceled payment order cannot be accepted. If an accepted payment order is canceled, the acceptance is nullified and no person has a right or obligation based on the acceptance. Amendment of a payment order is considered to be cancellation of the original order at the time of amendment and issue of a new payment order in the amended form at the same time.

 (g) Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the banks’ agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment.

 (h) A payment order is not revoked by the death or legal incapacity of the sender unless the receiving bank knows of the death or of an adjudication of incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance of the order.

 (i) A funds-transfer system rule is not effective to the extent that it conflicts with (c)(2) or (d) of this section.




Sec. 45.14.212. Liability and duty of receiving bank regarding unaccepted payment order.
If a receiving bank fails to accept a payment order that it is obliged by express agreement to accept, the bank is liable for breach of the agreement to the extent provided in the agreement or in this chapter, but does not otherwise have a duty to accept a payment order or, before acceptance, to take action, or refrain from taking action, with respect to the order except as provided in this chapter or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in AS 45.14.209, and liability is limited to liability provided in this chapter. A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of another party to the funds transfer, and the bank does not owe a duty to a party to the funds transfer except as provided in this chapter or by express agreement.


Article 3. Execution of Sender’s Payment Order by Receiving Bank.


Sec. 45.14.301. Execution and execution date.
 (a) A payment order is executed by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank. A payment order received by the beneficiary’s bank can be accepted but cannot be executed.

 (b) “Execution date” of a payment order means the day on which the receiving bank may properly issue a payment order in execution of the sender’s order. The execution date may be determined by instruction of the sender but cannot be earlier than the day the order is received and, unless otherwise determined, is the day the order is received. If the sender’s instruction states a payment date, the execution date is the payment date or an earlier date on which execution is reasonably necessary to allow payment to the beneficiary on the payment date.




Sec. 45.14.302. Obligations of receiving bank in execution of payment order.
 (a) Except as provided in (b) — (d) of this section, if the receiving bank accepts a payment order under AS 45.14.209(a), the bank has the following obligations in executing the order:
     (1) the receiving bank is obliged to issue, on the execution date, a payment order complying with the sender’s order and to follow the sender’s instructions concerning
          (A) an intermediary bank or funds-transfer system to be used in carrying out the funds transfer; or

          (B) the means by which payment orders are to be transmitted in the funds transfer; if the originator’s bank issues a payment order to an intermediary bank, the originator’s bank is obliged to instruct the intermediary bank according to the instruction of the originator; an intermediary bank in the funds transfer is similarly bound by an instruction given to it by the sender of the payment order it accepts;

     (2) if the sender’s instruction states that the funds transfer is to be carried out telephonically or by wire transfer or otherwise indicates that the funds transfer is to be carried out by the most expeditious means, the receiving bank is obliged to transmit its payment order by the most expeditious available means, and to instruct an intermediary bank accordingly; if a sender’s instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably necessary to allow payment to the beneficiary on the payment date or as soon after that date as is feasible.

 (b) Unless otherwise instructed, a receiving bank executing a payment order may
     (1) use any funds-transfer system if use of that system is reasonable in the circumstances; and

     (2) issue a payment order to the beneficiary’s bank or to an intermediary bank through which a payment order conforming to the sender’s order can expeditiously be issued to the beneficiary’s bank if the receiving bank exercises ordinary care in the selection of the intermediary bank; a receiving bank is not required to follow an instruction of the sender designating a funds-transfer system to be used in carrying out the funds transfer if the receiving bank, in good faith, determines that it is not feasible to follow the instruction or that following the instruction would unduly delay completion of the funds transfer.

 (c) Unless (a)(2) of this section applies or the receiving bank is otherwise instructed, the bank may execute a payment order by transmitting its payment order by first class mail or by any means reasonable in the circumstances. If the receiving bank is instructed to execute the sender’s order by transmitting its payment order by a particular means, the receiving bank may issue its payment order by the means stated or by means as expeditious as the means stated.

 (d) Unless instructed by the sender,
     (1) the receiving bank may not obtain payment of its charges for services and expenses in connection with the execution of the sender’s order by issuing a payment order in an amount equal to the amount of the sender’s order less the amount of the charges; and

     (2) may not instruct a subsequent receiving bank to obtain payment of its charges in the same manner.




Sec. 45.14.303. Erroneous execution of payment order.
 (a) If a receiving bank executes the payment order of the sender by issuing a payment order in an amount greater than the amount of the sender’s order, or if a receiving bank issues a payment order in execution of the sender’s order and then issues a duplicate order, the bank is entitled to payment of the amount of the sender’s order under AS 45.14.402(c) if that subsection is otherwise satisfied. The bank is entitled to recover from the beneficiary of the erroneous order the excess payment received to the extent allowed by the law governing mistake and restitution.

 (b) A receiving bank that executes the payment order of the sender by issuing a payment order in an amount less than the amount of the sender’s order is entitled to payment of the amount of the sender’s order under AS 45.14.402(c) if that subsection is otherwise satisfied and the bank corrects its mistake by issuing an additional payment order for the benefit of the beneficiary of the sender’s order. If the error is not corrected, the issuer of the erroneous order is entitled to receive or retain payment from the sender of the order it accepted only to the extent of the amount of the erroneous order. This subsection does not apply if the receiving bank executes the sender’s payment order by issuing a payment order in an amount less than the amount of the sender’s order for the purpose of obtaining payment of its charges for services and expenses pursuant to instruction of the sender.

 (c) If a receiving bank executes the payment order of the sender by issuing a payment order to a beneficiary different from the beneficiary of the sender’s order and the funds transfer is completed on the basis of that error, the sender of the payment order that was erroneously executed and all previous senders in the funds transfer are not obliged to pay the payment orders they issued. The issuer of the erroneous order is entitled to recover from the beneficiary of the order the payment received to the extent allowed by the law governing mistake and restitution.




Sec. 45.14.304. Duty of sender to report erroneously executed payment order.
If the sender of a payment order that is erroneously executed as stated in AS 45.14.303 receives notification from the receiving bank that the order was executed or that the sender’s account was debited with respect to the order, the sender has a duty to exercise ordinary care to determine, on the basis of information available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts within a reasonable time not exceeding 90 days after the notification from the bank was received by the sender. If the sender fails to perform that duty, the bank is not obliged to pay interest on any amount refundable to the sender under AS 45.14.402(d) for the period before the bank learns of the execution error. The bank is not entitled to any recovery from the sender on account of a failure by the sender to perform the duty stated in this section.


Sec. 45.14.305. Liability for late or improper execution or failure to execute payment order.
 (a) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of AS 45.14.302 results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds transfer for the period of delay caused by the improper execution. Except as provided in (c) of this section, additional damages are not recoverable.

 (b) If execution of a payment order by a receiving bank in breach of AS 45.14.302 results in noncompletion of the funds transfer, failure to use an intermediary bank designated by the originator, or issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by (a) of this section, resulting from the improper execution. Except as provided in (c) of this section, additional damages are not recoverable.

 (c) In addition to the amounts payable under (a) and (b) of this section, damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank.

 (d) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute. Additional damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank, but are not otherwise recoverable.

 (e) Reasonable attorney fees are recoverable if demand for compensation under (a) or (b) of this section is made and refused before an action is brought on the claim. If a claim is made for breach of an agreement under (d) of this section and the agreement does not provide for damages, reasonable attorney fees are recoverable if demand for compensation under (d) of this section is made and refused before an action is brought on the claim. Recovery of attorney fees under this subsection is an exception to the general provisions of Rule 82, Alaska Rules of Civil Procedure.

 (f) Except as stated in this section, the liability of a receiving bank under (a) and (b) of this section may not be varied by agreement.




Article 4. Payment.


Sec. 45.14.401. Payment date.
“Payment date” of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary’s bank. The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary’s bank and, unless otherwise determined, is the day the order is received by the beneficiary’s bank.


Sec. 45.14.402. Obligation of sender to pay receiving bank.
 (a) This section is subject to AS 45.14.205 and 45.14.207.

 (b) With respect to a payment order issued to the beneficiary’s bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order.

 (c) With respect to a payment order issued to a receiving bank other than the beneficiary’s bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender’s order. Payment by the sender is not due until the execution date of the sender’s order. The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary’s bank of a payment order instructing payment to the beneficiary of that sender’s payment order. This subsection is subject to (e) of this section and to AS 45.14.303.

 (d) If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay. Except as provided in AS 45.14.204 and 45.14.304, interest is payable on the refundable amount from the date of payment.

 (e) If a funds transfer is not completed as stated in (c) of this section and an intermediary bank is obliged to refund payment as stated in (d) of this section but is unable to do so because not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in AS 45.14.302(a)(1), to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted. The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in (d) of this section.

 (f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in (c) of this section or to receive refund under (d) of this section may not be varied by agreement.




Sec. 45.14.403. Payment by sender to receiving bank.
 (a) Payment of the sender’s obligation under AS 45.14.402 to pay the receiving bank occurs as follows:
     (1) if the sender is a bank, payment occurs when the receiving bank receives final settlement of the obligation through a federal reserve bank or through a funds-transfer system;

     (2) if the sender is a bank and the sender credited an account of the receiving bank with the sender or caused an account of the receiving bank in another bank to be credited, payment occurs when the credit is withdrawn or, if not withdrawn, at midnight of the day on which the credit is withdrawable and the receiving bank learns of that fact;

     (3) if the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent that the debit is covered by a withdrawable credit balance in the account.

 (b) If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system. The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender’s obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system. The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system. The aggregate balance is determined after the right of setoff stated in the second sentence of this subsection has been exercised.

 (c) If two banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under AS 45.14.402 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank. To the extent of the setoff, each bank has made payment to the other.

 (d) In a case not covered under (a) of this section, the time when payment of the sender’s obligation under AS 45.14.402(b) or (c) occurs is governed by applicable principles of law that determine when an obligation is satisfied.




Sec. 45.14.404. Obligation of beneficiary’s bank to pay and give notice to beneficiary.
 (a) Subject to AS 45.14.211(f) and 45.14.405(d) and (e), if a beneficiary’s bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day. If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent that the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment.

 (b) If a payment order accepted by the beneficiary’s bank instructs payment to an account of the beneficiary, the bank is obliged to notify the beneficiary of receipt of the order before midnight of the next funds-transfer business day following the payment date. If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order. Notice may be given by first class mail or other means reasonable in the circumstances. If the bank fails to give the required notice, the bank is obliged to pay interest to the beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank. Other damages are not recoverable. Notwithstanding Rule 82, Alaska Rules of Civil Procedure, reasonable attorney fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.

 (c) The right of a beneficiary to receive payment and damages as stated in (a) of this section may not be varied by agreement or a funds-transfer system rule. The right of a beneficiary to be notified as stated in (b) of this section may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer.




Sec. 45.14.405. Payment by beneficiary’s bank to beneficiary.
 (a) If the beneficiary’s bank credits an account of the beneficiary of a payment order, payment of the bank’s obligation under AS 45.14.404(a) occurs when and to the extent that
     (1) the beneficiary is notified of the right to withdraw the credit;

     (2) the bank lawfully applies the credit to a debt of the beneficiary; or

     (3) funds with respect to the order are otherwise made available to the beneficiary by the bank.

 (b) If the beneficiary’s bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank’s obligation under AS 45.14.404(a) occurs is governed by principles of law that determine when an obligation is satisfied.

 (c) Except as stated in (d) and (e) of this section, if the beneficiary’s bank pays the beneficiary of a payment order under a condition to payment or agreement of the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable.

 (d) A funds-transfer system rule may provide that payments made to beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary’s bank of the payment order it accepted. A beneficiary’s bank that makes a payment that is provisional under the rule is entitled to refund from the beneficiary if the rule requires that both the beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated, if the beneficiary, the beneficiary’s bank, and the originator’s bank agreed to be bound by the rule, and if the beneficiary’s bank did not receive payment of the payment order that it accepted. If the beneficiary is obliged to refund payment to the beneficiary’s bank, acceptance of the payment order by the beneficiary’s bank is nullified and a payment by the originator of the funds transfer to the beneficiary does not occur under AS 45.14.406.

 (e) This subsection applies to a funds transfer that includes a payment order transmitted over a funds-transfer system that nets obligations multilaterally among participants and has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one or more participants that do not meet their settlement obligations. If the beneficiary’s bank in the funds transfer accepts a payment order and the system fails to complete settlement under its rules with respect to any payment order in the funds transfer,
     (1) the acceptance by the beneficiary’s bank is nullified and no person has a right or obligation based on the acceptance;

     (2) the beneficiary’s bank is entitled to recover payment from the beneficiary;

     (3) payment by the originator to the beneficiary does not occur under AS 45.14.406; and

     (4) subject to AS 45.14.402(e), each sender in the funds transfer is excused from its obligation to pay its payment order under AS 45.14.402(c) because the funds transfer has not been completed.




Sec. 45.14.406. Payment by originator to beneficiary; discharge of underlying obligation.
 (a) Subject to AS 45.14.211(f) and 45.14.405(d) and (e), the originator of a funds transfer pays the beneficiary of the originator’s payment order
     (1) at the time a payment order for the benefit of the beneficiary is accepted by the beneficiary’s bank in the funds transfer; and

     (2) in an amount equal to the amount of the order accepted by the beneficiary’s bank, but not more than the amount of the originator’s order.

 (b) If payment under (a) of this section is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless
     (1) the payment under (a) of this section was made by a means prohibited by the contract of the beneficiary with respect to the obligation;

     (2) the beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary’s bank, notifies the originator of the beneficiary’s refusal of the payment;

     (3) funds with respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary; and

     (4) the beneficiary would suffer a loss that could reasonably have been avoided if payment had been made by a means complying with the contract.

 (c) If payment by the originator does not result in discharge under this section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary’s bank under AS 45.14.404(a).

 (d) For the purpose of determining whether discharge of an obligation occurs under (b) of this section, if the beneficiary’s bank accepts a payment order in an amount equal to the amount of the originator’s payment order less charges of one or more receiving banks in the funds transfer, payment to the beneficiary is considered to be in the amount of the originator’s order unless upon demand by the beneficiary the originator does not pay the beneficiary the amount of the deducted charges.

 (e) Rights of the originator or of the beneficiary of a funds transfer under this section may be varied only by agreement of the originator and the beneficiary.




Article 5. Miscellaneous Provisions.


Sec. 45.14.501. Variation by agreement and effect of funds-transfer system rule.
 (a) Except as otherwise provided in this chapter, the rights and obligations of a party to a funds transfer may be varied by agreement of the affected party.

 (b) Except as otherwise provided in this chapter, a funds-transfer system rule governing rights and obligations between participating banks using the system may be effective even if the rule conflicts with this chapter and indirectly affects another party to the funds transfer who does not consent to the rule. A funds-transfer system rule may also govern rights and obligations of parties other than participating banks using the system, to the extent stated in AS 45.14.404(c), 45.14.405(d), and 45.14.507(c) and (d). In this subsection, “funds-transfer system rule” means
     (1) a rule of an association of banks governing transmission of payment orders by means of a funds-transfer system of the association or rights and obligations with respect to those orders; or

     (2) a rule of an association of banks, to the extent the rule governs rights and obligations between banks that are parties to a funds transfer in which a federal reserve bank, acting as an intermediary bank, sends a payment order to the beneficiary’s bank.




Sec. 45.14.502. Creditor process served on receiving bank; setoff by beneficiary’s bank.
 (a) This subsection applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the creditor process, if the receiving bank accepts the payment order the balance in the authorized account is considered to be reduced by the amount of the payment order to the extent that the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.

 (b) If a beneficiary’s bank has received a payment order for payment to the beneficiary’s account in the bank, the following rules apply:
     (1) the bank may credit the beneficiary’s account; the amount credited may be set off against an obligation owed by the beneficiary to the bank or may be applied to satisfy creditor process served on the bank with respect to the account;

     (2) the bank may credit the beneficiary’s account and allow withdrawal of the amount credited unless creditor process with respect to the account is served at a time and in a manner affording the bank a reasonable opportunity to act to prevent withdrawal;

     (3) if creditor process with respect to the beneficiary’s account has been served and the bank has had a reasonable opportunity to act on it, the bank may not reject the payment order except for a reason unrelated to the service of process.

 (c) Creditor process with respect to a payment by the originator to the beneficiary in accordance with a funds transfer may be served only on the beneficiary’s bank with respect to the debt owed by that bank to the beneficiary. Another bank served with the creditor process is not obliged to act with respect to the process.

 (d) In this section, “creditor process” means levy, attachment, garnishment, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account.




Sec. 45.14.503. Injunction or restraining order with respect to funds transfer.
 (a) For proper cause and in compliance with applicable law, a court may restrain
     (1) a person from issuing a payment order to initiate a funds transfer;

     (2) an originator’s bank from executing the payment order of the originator; or

     (3) the beneficiary’s bank from releasing funds to the beneficiary or the beneficiary from withdrawing the funds.

 (b) Except as provided in (a) of this section, a court may not otherwise restrain a person from issuing a payment order, paying or receiving payment of a payment order, or otherwise acting with respect to a funds transfer.




Sec. 45.14.504. Order in which items and payment orders may be charged to account; order of withdrawals from account.
 (a) If a receiving bank has received more than one payment order of the sender or one or more payment orders and other items that are payable from the sender’s account, the bank may charge the sender’s account with respect to the various orders and items in any sequence.

 (b) In determining whether a credit to an account has been withdrawn by the holder of the account or applied to a debt of the holder of the account, credits first made to the account are first withdrawn or applied.




Sec. 45.14.505. Preclusion of objection to debit of customer’s account.
If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer’s objection to the payment within one year after the notification was received by the customer.


Sec. 45.14.506. Rate of interest.
 (a) If, under this chapter, a receiving bank is obliged to pay interest with respect to a payment order issued to the bank, the amount payable may be determined
     (1) by agreement of the sender and receiving bank; or

     (2) by a funds-transfer system rule if the payment order is transmitted through a funds-transfer system.

 (b) If the amount of interest is not determined by an agreement or rule as stated in (a) of this section, the amount is calculated by multiplying the applicable federal funds rate by the amount on which interest is payable, and then multiplying the product by the number of days for which interest is payable. The applicable federal funds rate is the average of the federal funds rates published by the Federal Reserve Bank of New York for each of the days for which interest is payable divided by 360. The federal funds rate for a day on which a published rate is not available is the same as the published rate for the next preceding day for which there is a published rate. If a receiving bank that accepted a payment order is required to refund payment to the sender of the order because the funds transfer was not completed, but the failure to complete was not due to any fault by the bank, the interest payable is reduced by a percentage equal to the reserve requirement on deposits of the receiving bank.




Sec. 45.14.507. Choice of law.
 (a) The following rules apply unless the affected parties otherwise agree or (c) — (d) of this section applies:
     (1) the rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located;

     (2) the rights and obligations between the beneficiary’s bank and the beneficiary are governed by the law of the jurisdiction in which the beneficiary’s bank is located;

     (3) the issue of when payment is made under a funds transfer by the originator to the beneficiary is governed by the law of the jurisdiction in which the beneficiary’s bank is located.

 (b) If the parties described in each paragraph of (a) of this section have made an agreement selecting the law of a particular jurisdiction to govern rights and obligations between each other, the law of that jurisdiction governs those rights and obligations, whether or not the payment order or the funds transfer bears a reasonable relation to that jurisdiction.

 (c) A funds-transfer system rule may select the law of a particular jurisdiction to govern
     (1) rights and obligations between participating banks with respect to payment orders transmitted or processed through the system; or

     (2) the rights and obligations of some or all parties to a funds transfer if a part of the funds transfer is carried out by means of the system.

 (d) A choice of law made under (c)(1) of this section is binding on participating banks. A choice of law made under (c)(2) of this section is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order. The beneficiary of a funds transfer is bound by the choice of law if, when the funds transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system. The law of a jurisdiction selected under this subsection or (c) of this section may govern, whether or not that law bears a reasonable relation to the matter in issue.

 (e) In the event of inconsistency between an agreement under (b) of this section and a choice-of-law rule under (c) — (d) of this section, the agreement under (b) of this section prevails.

 (f) If a funds transfer is made by use of more than one funds-transfer system and there is inconsistency between choice-of-law rules of the systems, the matter in issue is governed by the law of the selected jurisdiction that has the most significant relationship to the matter in issue.




Chapter 20. Purchase of Ore.

Sec. 45.20.010. Certain claimants in possession considered owner of ores.
A person in the actual and peaceable possession of a mining claim, under claim or color of title, and engaged in the mining, shipment and treatment, or sale of ore from it, shall, as to all persons purchasing the ore in good faith and without notice as provided in this chapter of the title or claim of title, or ownership of another person to it, be considered to be the lawful owner of the ore.


Sec. 45.20.020. When purchaser considered owner of ore; nonliability to person subsequently adjudged owner.
A person who in good faith and in the usual course of business and without notice, as provided in this chapter, purchases and obtains delivery of ore from a person in possession of the mines or mining claim from which the ore has been mined or extracted, shall be considered the owner of the ore except as provided in this chapter; and the purchaser is not liable to, or subject to an action at law or in equity, for the recovery of the ore or the value of it by a person who is later adjudged to be the owner of the mine, or mining claim.


Sec. 45.20.030. Notice to purchaser by claimant or owner out of possession; court action.
If a person is or claims to be the owner or entitled to the possession or enjoyment of a mine, mining claim, or premises, then in the possession of another, claiming to be the owner or entitled to the possession and mining, shipping or treating or selling the ore from it, the purchaser may, if the purchaser intends or desires to hold purchasers of or those intending to purchase the ore responsible for the value of the ore, serve upon the purchaser or intending purchaser a notice in writing, which contains the name of the mine, mining claim, or premises, the name of the person claiming or asserting ownership or right to the possession or enjoyment thereof, the name of the person in possession of and mining, shipping and selling ore from it, and warning the purchaser or intending purchaser that the purchaser or intending purchaser will be held liable and responsible for all ore purchased and delivered or to be purchased and delivered from the mine, mining claim, or premises by the person or the heirs, assigns or agents of that person subsequent to the service of the notice. Within 30 days from and after the service of the notice, the person serving it shall institute an action to enforce the person’s title against the person in possession of and mining and shipping ore from the mine, mines, mining claim, claims, or premises, and to enjoin the person in possession from the mining or shipment and sale of ores taken from them, pending the action, and at once notify the purchaser or intending purchaser of the ore of the pendency of the action. If the notice is served after the action is started, it is not necessary to begin another under this section.


Sec. 45.20.040. Failure to bring action.
If a person claiming the title to or right of possession of a mine, mining claim, or premises, not having before then brought action, serves notice upon a purchaser or intending purchaser of ore as provided in AS 45.20.030, and fails or neglects to begin an action as required in this chapter, the notice shall be considered to have been waived, and the party serving the notice is liable to the parties injured in full damages including costs, and the purchaser or intending purchaser is not bound by anything contained in it.


Sec. 45.20.050. Liability of purchaser to person adjudged owner or entitled to possession.
A purchaser of ore, who receives the notice provided for in this chapter, followed or preceded by the commencement of an action, as set out in this chapter, and who purchases or continues to purchase and receive ore taken from the mine, mining claim, or premises named in the notice, is liable and responsible for the value of it to the person who is ultimately adjudged to be the owner or entitled to the possession of it.


Article 1. Applicability; Jurisdiction; Venue; Corporate Affiliates.


Chapter 25. Motor Vehicle Transactions.

Sec. 45.25.010. Applicability.
AS 45.25.020 — 45.25.320 apply to franchise contracts between a manufacturer and its new motor vehicle dealers in this state.


Sec. 45.25.020. Jurisdiction; venue.
 (a) The courts of this state have jurisdiction over a legal dispute between a manufacturer located in or outside this state and a new motor vehicle dealer located in this state, and the dispute is governed by and interpreted and adjudicated under the law of this state.

 (b) Venue for a dispute under (a) of this section is in the judicial district of this state where the new motor vehicle dealer’s principal place of business is located.




Sec. 45.25.030. Corporate affiliates.
 (a) A manufacturer may not use a subsidiary corporation, affiliated corporation, partnership, association, or other person to accomplish what would be prohibited for the manufacturer under this chapter.

 (b) This section does not limit the right of a person included within the scope of this section to engage in reasonable and appropriate business practices consistent with an existing trade practice that is not prohibited by this chapter.




Article 2. Franchise Agreements.


Sec. 45.25.100. Consistency with state law.
The terms and conditions in an agreement between a manufacturer and a new motor vehicle dealer in this state, including a motor vehicle franchise agreement, that are inconsistent with the law of this state do not have any force or effect in this state.


Sec. 45.25.110. Termination of franchise agreements.
 (a) A manufacturer may not terminate a franchise with a new motor vehicle dealer unless
     (1) the manufacturer has
          (A) satisfied the notice requirements of this chapter;

          (B) shown that there is good cause for the termination of the franchise, and, if the reasons underlying the good cause can be corrected by the new motor vehicle dealer, the new motor vehicle dealer has failed for 60 days after delivery of the notice required by AS 45.25.120 to make the corrections; the circumstances identified under AS 45.25.120(a)(2) for which a 15-day notice of termination is required do not qualify as reasons for which correction is allowed under this paragraph; or

     (2) the new motor vehicle dealer has systematically engaged in fraud against consumers or the manufacturer or in the operation of the new motor vehicle dealership.

 (b) Notwithstanding (a)(1) of this section, a manufacturer may not terminate a franchise agreement with a new motor vehicle dealer because of the death or incapacity of an owner if the owner is not listed in the franchise as one on whose expertise and abilities the manufacturer relied in the granting of the franchise.

 (c) In this section, “good cause” includes when the new motor vehicle dealer fails to comply with or observe a material provision of the franchise agreement. For the purposes of determining good cause under this subsection, reasonable sales and service performance criteria and capital and facility requirements may be considered material provisions only if the criteria or requirements were communicated in writing to the new motor vehicle dealer within a reasonable period before the effective date of the termination or nonrenewal so that a reasonable opportunity was afforded over a period of not less than six months to comply with the criteria or requirements.




Sec. 45.25.120. Notice of termination.
 (a) A manufacturer shall furnish a notice of termination of a franchise agreement to a new motor vehicle dealer at least
     (1) 90 days before the effective date of a termination, except as required under (2) or (3) of this subsection;

     (2) 15 days before the effective date of a termination when the new motor vehicle dealer
          (A) is insolvent or is the subject of a bankruptcy or receivership proceeding;

          (B) has failed to conduct its customary sales and service operations during its customary business hours for seven consecutive business days; this subparagraph does not apply to closures due to acts of God or circumstances beyond the direct control of the new motor vehicle dealer; or

          (C) is convicted of a felony involving moral turpitude or fraud under the law of this state, another state, the federal government, a territory of the United States, or the District of Columbia;

     (3) 180 days before the effective date of the termination if the manufacturer or distributor is discontinuing the sale of the product line.

 (b) Notice required under (a) of this section must be in writing, shall be sent by certified mail or personally delivered to the new motor vehicle dealer, and must contain
     (1) a statement of intention to terminate the franchise;

     (2) a statement of the reasons for the termination; and

     (3) the date on which the termination takes effect.




Sec. 45.25.130. Threat of termination.
 (a) A manufacturer or manufacturer representative may not coerce or attempt to coerce a new motor vehicle dealer to enter into an agreement with the manufacturer or a subsidiary of the manufacturer, or to do any other act unfair to the new motor vehicle dealer, by threatening to terminate a franchise agreement between the manufacturer or subsidiary of the manufacturer and the new motor vehicle dealer.

 (b) This section does not prohibit a voluntary agreement between a manufacturer and a new motor vehicle dealer or between a distributor and a new motor vehicle dealer to settle legitimate disputes.




Sec. 45.25.140. Repurchase obligations on termination.
 (a) Upon the termination of a new motor vehicle dealer’s franchise agreement by the manufacturer or distributor, the manufacturer or distributor shall repurchase from the new motor vehicle dealer at
     (1) the new motor vehicle dealer’s net acquisition cost, if the motor vehicles have not been materially altered or damaged, all inventory consisting of unsold new motor vehicles that are current models and models that have been acquired from the manufacturer within the past two model years before receipt of the notice of termination;

     (2) the new motor vehicle dealer price listed in the current parts catalog, less applicable allowances, new unused undamaged parts in their original, unbroken packaging, listed in the current price catalog and acquired from the manufacturer or distributor;

     (3) fair market value, signs, equipment, and furnishings that bear a trademark or trade name, that have not been altered or damaged, and that were required by the manufacturer or distributor within five years preceding the notice of termination; and

     (4) the new motor vehicle dealer’s net acquisition cost, special tools that have not been altered or materially damaged that were purchased from the manufacturer or distributor within three years preceding the date of the termination.

 (b) Within 90 days after the effective date of the termination, the new motor vehicle dealer shall return the property required by (a) of this section to be repurchased to the manufacturer or distributor at the manufacturer’s or distributor’s expense. The manufacturer or distributor shall pay the compensation for the property within 60 days after the tender of inventory and other items if the new motor vehicle dealer has clear title to the property and is in a position to convey that title to the manufacturer or distributor. If the property is subject to a security interest, the manufacturer or distributor may make payment jointly to the new motor vehicle dealer and the holder of the security interest, and the manufacturer or distributor may offset these payments.




Sec. 45.25.150. Required compensation for new motor vehicle dealer facilities.
 (a) Upon termination by the manufacturer or distributor, the manufacturer or distributor shall compensate the new motor vehicle dealer for new motor vehicle dealer facilities a sum equivalent to the
     (1) rent for the unexpired term of the lease or 18 months, whichever period is shorter, if the new motor vehicle dealer is leasing the new motor vehicle dealership facilities from a lessor other than the manufacturer or distributor; or

     (2) reasonable rental value of the new motor vehicle dealership facilities for 18 months or until the facilities are leased or sold, whichever period is shorter, if the new motor vehicle dealer owns the new motor vehicle dealership facilities; the sum may be paid in monthly installments at the election of the manufacturer or distributor.

 (b) This section does not relieve a new motor vehicle dealer of the obligation to mitigate damages under a lease, prevent a manufacturer from occupying and using the new motor vehicle dealer’s facilities while paying rent, or preclude a manufacturer from negotiating a lease termination, sublease, or new lease.

 (c) This section does not apply to a termination for
     (1) insolvency of the new motor vehicle dealer or the filing of any petition by or against the new motor vehicle dealer under a bankruptcy or receivership law;

     (2) failure of the new motor vehicle dealer to conduct its customary sales and service operations during its customary business hours for seven consecutive business days;

     (3) conviction of the new motor vehicle dealer or its principal owners of a felony or a misdemeanor regardless of the punishment if the crime involves theft, dishonesty, or false statement;

     (4) revocation of a license required for the new motor vehicle dealer to operate; or

     (5) a fraudulent misrepresentation by the new motor vehicle dealer to the manufacturer or distributor that is material to the new motor vehicle dealer’s agreement.

 (d) The payment required under (a) of this section is only required to the extent that the facilities were used for activities under the franchise agreement and only to the extent the facilities were not leased for unrelated purposes.

 (e) If payment under (a) of this section is made, the manufacturer or distributor is entitled to possession and use of the new motor vehicle dealership facilities for the period for which the payment is paid.




Sec. 45.25.160. Prevention of or refusal to honor transfer of new motor vehicle dealership ownership.
A manufacturer may not unreasonably prevent or refuse to honor a transfer of ownership of a new motor vehicle dealership.


Sec. 45.25.170. Succession.
 (a) A manufacturer or distributor may not prevent or refuse to honor the succession to a new motor vehicle franchise of an heir or devisee under a will of a franchisee, under a written instrument filed with the manufacturer or distributor designating any person as the successor franchisee, or under AS 13.06 — AS 13.36 (Uniform Probate Code), except that
     (1) a designated successor must, within 60 days after the owner’s death or incapacity, give the manufacturer or distributor written notice of the intent to succeed, and the designee must agree to be bound by all the terms and conditions of the current franchise agreement;

     (2) the manufacturer or distributor may request from the designated successor personal and financial data that are reasonably necessary to determine the qualifications of the designated successor; the designated successor shall provide the information within 60 days after receiving the request;

     (3) the manufacturer or distributor may not unreasonably withhold approval of the succession; if the manufacturer or distributor refuses to honor the succession, the manufacturer or distributor shall send written notice to the proposed successor within 60 days after receiving the information requested in (2) of this subsection or within 60 days after receiving the notice of the proposed successor’s intent to succeed, whichever is later.

 (b) The notice required by (a)(3) of this section must state the specific grounds for not approving the proposed successor. Within 30 days after the proposed successor’s receipt of the notice, the proposed successor may file a protest with the superior court to determine whether the manufacturer or distributor has unreasonably withheld approval.

 (c) This section does not preclude the owner of a new motor vehicle dealership from filing with the manufacturer or distributor a written instrument designating any person as a successor. If there are competing successors, the written instrument governs who may submit a proposal as a successor.




Sec. 45.25.180. New dealerships.
 (a) Before a manufacturer or distributor enters into a franchise establishing or relocating a new motor vehicle dealer within a relevant market area where the same line make is represented, the manufacturer or distributor shall give 90 days’ written notice to each new motor vehicle dealer of the same line make in the relevant market area of the intention to establish an additional new motor vehicle dealer or to relocate an existing new motor vehicle dealer within that relevant market area.

 (b) Within 30 days after receiving the notice required under (a) of this section or within 30 days after the end of any appeal procedure provided by the manufacturer or distributor, a new motor vehicle dealer may bring a declaratory judgment action in the superior court of this state to determine whether good cause exists for the establishment or relocation of a proposed new motor vehicle dealer. If an action is filed, the manufacturer or distributor may not establish or relocate the proposed new motor vehicle dealer until the court has rendered a decision on the matter.

 (c) This section does not prohibit
     (1) the relocation of an existing new motor vehicle dealer to a new location not within four miles of an existing new motor vehicle dealer;

     (2) the appointment of a successor new motor vehicle dealer at the same location as its predecessor or within a two-mile radius from any boundary of the predecessor’s former location within two years from the date when the predecessor ceased operations or was terminated, whichever occurred later; or

     (3) the entering into of a renewal of, replacement of, or succeeding franchise agreement with an existing new motor vehicle dealer whose operations will continue at the existing new motor vehicle dealer’s current location.

 (d) When determining whether good cause exists for establishing or relocating an additional new motor vehicle dealer for the same line make, the superior court shall consider the existing circumstances, including
     (1) whether the establishment of an additional franchise or relocation of the existing new motor vehicle dealer appears to be warranted by economic and marketing conditions, including anticipated future changes;

     (2) the retail sales and service business transacted by the protesting new motor vehicle dealer and other new motor vehicle dealers of the same line make with a place of business in the relevant market area to be served by the additional franchise or proposed new location of an existing new motor vehicle dealer during the three-year period immediately preceding the notice;

     (3) the investment necessarily made and obligations incurred by the protesting new motor vehicle dealer to perform the protesting new motor vehicle dealer’s obligations under existing franchise agreements;

     (4) the permanency of the investment of the protesting new motor vehicle dealer; and

     (5) whether it is beneficial or injurious to the public welfare for an additional franchise to be established or for the existing new motor vehicle dealer to be relocated.

 (e) In this section,
     (1) “relevant market area” means the greater of the area
          (A) within a radius of 14 miles around an existing new motor vehicle dealer; or

          (B) of responsibility defined in a governing franchise agreement;

     (2) “relocate” and “relocation” do not include the relocation of a new motor vehicle dealer within two miles of the new motor vehicle dealer’s established place of business.




Sec. 45.25.190. Arbitration.
In a controversy between a manufacturer and a new motor vehicle dealer under AS 45.25.010 — 45.25.320, neither the manufacturer nor the new motor vehicle dealer is required to submit the controversy to arbitration. If both the manufacturer and the new motor vehicle dealer agree to submit a controversy under AS 45.25.010 — 45.25.320 to arbitration, the arbitration shall be conducted under AS 09.43.010 — 09.43.180 (Uniform Arbitration Act) or AS 09.43.300 — 09.43.595 (Revised Uniform Arbitration Act), as applicable, the manufacturer and the new motor vehicle dealer shall each select one arbitrator, and both the manufacturer and the new motor vehicle dealer shall select the third arbitrator.


Article 3. Manufacturer and Distributor Practices.


Sec. 45.25.300. New motor vehicle dealership location and facilities.
A manufacturer may not require, coerce, or attempt to coerce a new motor vehicle dealer to change the location of the new motor vehicle dealership or to make any substantial alterations to the new motor vehicle dealership premises or facilities if the change or alteration would be unreasonable or if there is not a sufficient supply of new motor vehicles to justify the expansion in light of the current market and economic conditions.


Sec. 45.25.310. Discrimination.
A manufacturer may not unfairly discriminate among new motor vehicle dealers with respect to warranty reimbursements or authority granted new motor vehicle dealers to make warranty adjustments with retail customers.


Sec. 45.25.320. Time limits on claim audits, claim denials, claim reductions, and charge backs.
 (a) A manufacturer or distributor may not audit a claim, deny a claim, reduce the amount of a claim to be reimbursed to a new motor vehicle dealer, or charge back a portion of the claim to a new motor vehicle dealer if 18 or more months have passed since the new motor vehicle dealer submitted the claim or if 18 or more months have passed from the end of a manufacturer-sponsored incentive program related to the claim, whichever 18-month period ends later.

 (b) The time restriction in (a) of this section does not apply if the manufacturer reasonably suspects that fraud is involved in the claim.

 (c) In this section, “claim” means a claim made by a new motor vehicle dealer for compensation by the manufacturer or distributor for sales incentives, warranty repairs, and service incentives.




Article 4. Dealer Practices.


Sec. 45.25.400. Prohibited use of advertising terms.
 (a) A motor vehicle dealer may not use the term “invoice,” “factory invoice,” “dealer invoice,” “dealer cost,” “wholesale price,” or any other term of similar meaning in an advertisement for the sale of a motor vehicle.

 (b) A motor vehicle dealer may use the term “manufacturer’s suggested retail price,” “MSRP,” or “list price” in an advertisement for the sale of a motor vehicle, subject to the restriction on price comparisons in AS 45.25.450 and the following:
     (1) the manufacturer’s suggested retail price or list price must reference the final price listed by the manufacturer on the Monroney sticker, including accessories and options physically attached to the vehicle at the time of delivery to the dealer, plus any transportation charges;

     (2) the manufacturer’s suggested retail price or the list price does not include charges added by the dealer or options added to the vehicle by the dealer; and

     (3) whenever using the term “manufacturer’s suggested retail price,” “MSRP,” or “list price,” the dealer may not represent that a buyer would save money by paying a price that is lower than the “manufacturer’s suggested retail price,” “MSRP,” or “list price” unless the representation refers to savings from the “manufacturer’s suggested retail price,” “MSRP,” or “list price.”




Sec. 45.25.410. Availability of advertised items.
A motor vehicle dealer may not advertise a new motor vehicle at a specified dealer price with the intent not to supply reasonably expected demand, unless the advertisement discloses the number of vehicles in stock at the advertised price.


Sec. 45.25.420. Display of motor vehicles.
A motor vehicle dealer shall display all vehicles advertised for sale for the duration of the sale period in a conspicuous and clearly visible location on the dealer’s premises. The advertised sale price for each vehicle must be clearly marked on the vehicle so the consumer can readily identify the advertised price for the vehicle.


Sec. 45.25.430. Refusal to sell on advertised terms and conditions.
A motor vehicle dealer may not refuse to sell a motor vehicle on the terms and conditions that the dealer has advertised. This section does not apply if
     (1) the dealer can document that the advertised term or condition was the result of an error on the part of the advertising medium or an outside advertising agent; or

     (2) the refusal is based on an error that was made in good faith by the dealer and was clearly and conspicuously a mistake, and the dealer corrected the error as soon as the dealer knew or reasonably should have known of the error.




Sec. 45.25.440. Advertised price.
A motor vehicle dealer’s advertised price for a motor vehicle must include all dealer fees and costs, except for fees, such as licensing fees, registration fees, title transfer fees, and sales taxes, actually paid to a government agency. In this section, “dealer fees and costs” includes dealer preparation fees, document preparation fees, surcharges, and other dealer-imposed fees and costs.


Sec. 45.25.450. Advertised price comparisons, reductions, and discounts.
 (a) A motor vehicle dealer may not make a price comparison, price reduction, or price discount in an advertisement unless the comparison, reduction, or discount complies with this section.

 (b) A motor vehicle dealer may advertise a price comparison for a new motor vehicle with the manufacturer’s suggested retail price only if
     (1) the dealer only uses the term “manufacturer’s suggested retail price,” “MSRP,” or “list price”;

     (2) the advertised price references the final price listed by the manufacturer on the Monroney sticker; and

     (3) the manufacturer’s suggested retail price, MSRP, or list price does not include charges added by the dealer or options added to the vehicle by the dealer.

 (c) A motor vehicle dealer may not use a competitor’s price as a reference price unless
     (1) the reference price is the competitor’s current, bona fide price in the trade area of the dealer making the comparison;

     (2) the comparison is to an identical or nearly identical vehicle that does not materially differ in model, style, design, name, brand, kind, or quality from the advertised product; and

     (3) the dealer includes in the advertised price all charges that the competitor includes in the competitor’s price.

 (d) A motor vehicle dealer shall be in possession of documents and all other information necessary to substantiate all reference price claims when the claims are made and shall maintain this information in a readily accessible place for two years after the time the reference price claims are made.

 (e) A motor vehicle dealer may advertise a price comparison for a used motor vehicle only if the reference price is the retail value of the vehicle as specified in the current edition of a nationally recognized valuation publication for used motor vehicles.

 (f) When advertising a price comparison for a used motor vehicle, the advertisement must identify the source of the reference price, and the motor vehicle dealer shall make this source available to a potential retail buyer on request.




Sec. 45.25.460. Advertising and selling practices generally.
 (a) In addition to the provisions of AS 45.50.471 and regulations adopted under AS 45.50.471, a motor vehicle dealer
     (1) may not represent the dealer document preparation fee as a government fee;

     (2) may not advertise a specific motor vehicle for sale unless the vehicle identification number, vehicle stocking number, or license number is disclosed in the advertisement or made available by the dealer on request of a retail buyer;

     (3) may not use the term “rebate,” “cash back,” or a similar term in advertising the sale of a motor vehicle unless the rebate is expressed in a specific dollar amount and is in fact a rebate offered by the vehicle manufacturer or distributor directly to the retail buyer of the vehicle;

     (4) may not require a person, in order to receive the advertised credit terms, to pay a higher price for a motor vehicle and any related goods or services than the cash price the same person would have to pay to purchase the same vehicle and related goods or services;

     (5) may not advertise a guaranteed trade-in allowance or range of allowances unless the guarantee is provided by the manufacturer or distributor;

     (6) may not affix to a new motor vehicle a supplemental price sticker containing a price that represents the dealer’s asking price if the supplemental price sticker exceeds the manufacturer’s suggested retail price, unless the supplemental sticker
          (A) clearly and conspicuously, in the largest print appearing on the sticker other than the print size used for the dealer’s name, discloses that the supplemental sticker price is the dealer’s asking price, or words of similar meaning, and is not the manufacturer’s suggested retail price;

          (B) clearly and conspicuously discloses the manufacturer’s suggested retail price; and

          (C) states, if the supplemental sticker price is greater than the sum of the manufacturer’s suggested retail price and the price of the items added by the dealer, the difference and describes it as additional dealer mark-up;

     (7) may not advertise or otherwise represent, or knowingly allow to be advertised or represented on behalf of the dealer, that a down payment is not required in connection with the sale of a motor vehicle when a down payment is in fact required;

     (8) may not advertise an offer for the sale, lease, or purchase of a motor vehicle that does not contain the name of the dealer;

     (9) may not represent and sell as a new motor vehicle a demonstrator vehicle or a motor vehicle that is a used motor vehicle; in this paragraph, “demonstrator vehicle”
          (A) means a motor vehicle
               (i) that has been assigned by a dealer for use by the dealership as an executive vehicle for promotional purposes, including being driven in the community;

               (ii) that has not been licensed by a retail buyer; and

               (iii) the title of which has not been transferred to a retail buyer;

          (B) does not include a motor vehicle that has only been driven to demonstrate the motor vehicle to a prospective buyer;

     (10) may not advertise that the dealer finances any person or does not reject any person’s credit, or make similar claims;

     (11) may not advertise or make a statement, declaration, or representation in an advertisement that cannot be substantiated in fact; the burden of proof of the factual basis for the statement, declaration, or representation is on the dealer.

 (b) [Repealed, § 9 ch 171 SLA 2004.]




Sec. 45.25.465. Sales of used motor vehicles; required disclosures.
 (a) Before the sale of a used motor vehicle, a motor vehicle dealer shall,
     (1) when obtaining a used motor vehicle from an individual consumer, make a reasonable inquiry of the seller into the condition of the vehicle, including the accident and repair history of the vehicle; the information shall be recorded in writing and signed by the seller; the dealer shall provide this information to a prospective purchaser of the vehicle;

     (2) when a motor vehicle dealer obtains a used motor vehicle from another motor vehicle dealer, a wholesaler, or an auction, disclose to a prospective purchaser of the vehicle that the vehicle was purchased from another dealer, a wholesaler, or an auction.

 (b) Nothing in this section creates an express warranty by the dealer.

 (c) [Repealed, § 1 ch 56 SLA 2008.]




Sec. 45.25.470. Sales of vehicles manufactured for sale in a foreign country.
Before sale, a motor vehicle dealer shall disclose in writing whether a motor vehicle was originally manufactured for sale in Canada or another foreign country.


Sec. 45.25.480. Identification number plates.
A motor vehicle dealer may not knowingly purchase or sell a vehicle that has an altered or removed vehicle identification number plate, or alter or remove a vehicle identification number plate.


Sec. 45.25.490. Required documentation.
A motor vehicle dealer may not enter into a contract to sell a motor vehicle unless the motor vehicle dealer holds a manufacturer’s statement of origin, a title, or another properly executed document reasonably necessary to obtain the statement of origin or title for transfer of the vehicle to the buyer.


Sec. 45.25.500. Trade-ins.
A motor vehicle dealer may not transfer title to a trade-in vehicle or perform any repairs or reconditioning on a trade-in vehicle before the completion of the sales transaction for which the vehicle is a trade-in.


Sec. 45.25.510. Disclosure of damages.
 (a) Before entering into a new motor vehicle sales contract, a new motor vehicle dealer shall disclose in writing to a buyer of the new motor vehicle any known damage and repair to the new motor vehicle if the damage exceeds five percent of the manufacturer’s suggested retail price as calculated at the dealer’s authorized warranty rate for labor and parts, or $1,000, whichever amount is greater. A new motor vehicle dealer is not required to disclose to a buyer that glass, tires, bumpers, or cosmetic parts of a new motor vehicle were damaged at any time if the damaged item has been replaced with original or comparable equipment. A replaced part is not part of the cumulative damage required to be disclosed under this subsection.

 (b) If disclosure is not required under this section, a buyer may not revoke or rescind a sales contract due to the fact that the new motor vehicle was damaged and repaired before completion of the sale.

 (c) In this section,
     (1) “cosmetic parts” means parts that are attached by and can be replaced in total through the use of screws, bolts, or other fasteners without the use of welding or thermal cutting and includes windshields, bumpers, hoods, or trim panels;

     (2) “manufacturer’s suggested retail price” means the retail price of the new motor vehicle suggested by the manufacturer and includes the retail delivered price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the new motor vehicle at the time of delivery to the new motor vehicle dealer that is not included within the retail price suggested by the manufacturer for the new motor vehicle.




Sec. 45.25.520. Form of disclosures.
Except as provided in AS 45.25.460(a)(6)(A), if a disclosure is required by this chapter with respect to a motor vehicle advertisement, the disclosure must be made in a clear and conspicuous manner.


Sec. 45.25.530. Disclosure regarding receipt of commissions.
If a motor vehicle dealer’s service operations employees receive a commission for the amount of work they perform, the motor vehicle dealer shall post a conspicuous sign that is visible to service customers that the dealer’s service operations employees work on commission.


Sec. 45.25.590. Definitions.
In AS 45.25.400 — 45.25.590,
     (1) “advertise,” “advertised,” “advertising,” and “advertisement” include representations, whether made on or off store premises, made to persons in the print media, in the broadcast media, on the computer, in a brochure, in a flyer, by direct mail, by sign, or on a tag;

     (2) “Monroney sticker” means the window sticker required by 15 U.S.C. 1231 — 1233 (Automobile Information Disclosure Act);

     (3) “motor vehicle,” notwithstanding the definition of “motor vehicle” in AS 45.25.990, means a vehicle, including a trailer, that is required to be registered under AS 28.10, but does not include a motorcycle;

     (4) “new motor vehicle,” notwithstanding the definition of “new motor vehicle” in AS 45.25.990, means a motor vehicle that has not been titled to anyone and still retains the original manufacturer’s certificate of origin.




Article 5. Sales and Service Contracts.


Sec. 45.25.600. Title transfer.
A motor vehicle dealer may not transfer the title for a motor vehicle to a buyer before all of the sale documents, including any finance contract arranged by the seller, are complete and executed in final form by all parties to the sale.


Sec. 45.25.610. Sales contracts.
 (a) A motor vehicle sales contract must be in writing, signed by both the seller and buyer, and completed as to all essential provisions before the signing of the contract by the buyer and before delivery of the vehicle to the buyer.

 (b) [Repealed, § 9 ch 171 SLA 2004.]
 (c) If a motor vehicle dealer arranges financing for a buyer, the motor vehicle dealer may deliver the motor vehicle to the buyer before final approval by the financing entity if
     (1) the buyer and seller sign an agreement separate from the motor vehicle installment contract on an 8 1/2 x 11 inch sheet of paper that clearly and conspicuously informs the buyer that final financing arrangements have not yet been approved and that clearly sets out the amount that will be financed, the annual percentage rate of the finance charge, the amount of the finance charge, the number and frequency of payments, and the amount of each payment;

     (2) the separate agreement clearly and conspicuously informs the buyer that accepting delivery of the vehicle before final financing approval obligates the buyer to terms of the motor vehicle sales contract if the terms on the separate agreement are identical to the terms finally approved by the financing entity; and

     (3) the separate agreement provides that the motor vehicle sales contract will be void if any of the terms contained in the separate agreement are changed by either the motor vehicle dealer or the financing institution as a condition of sale or final financing approval.

 (d) If a buyer’s final financing is not approved and, as a result, the transaction is not completed, and if the motor vehicle dealer has delivered the motor vehicle to the buyer, the buyer shall deliver the motor vehicle to the motor vehicle dealer, the motor vehicle dealer shall return the buyer’s entire down payment less any amount owed to the motor vehicle dealer under (e) and (f) of this section, and the buyer’s trade-in, if any, shall be returned to the buyer in the same condition and with not more than 100 miles accumulated on the odometer from when the trade-in motor vehicle was delivered to the motor vehicle dealer.

 (e) If a buyer’s final financing is not approved and the buyer has made an intentional misrepresentation in a credit application or other financial statement provided by the buyer to the motor vehicle dealer or to a financing institution, the buyer shall reimburse the motor vehicle dealer for the buyer’s use of the motor vehicle that exceeds 100 miles over the odometer reading on the motor vehicle on the date of the initial delivery, at a rate that is the greater of
     (1) the business use mileage rate that is applied by the federal Internal Revenue Service at the time the motor vehicle is returned to the motor vehicle dealer; or

     (2) $.45 a mile.

 (f) If a buyer’s financing is not approved and the buyer has made an intentional misrepresentation as described in (e) of this section, the buyer is responsible for damage to the motor vehicle that occurred while the motor vehicle was in the buyer’s possession and for parking tickets, towing fees, storage fees, impound fees, and other similar charges incurred by the buyer for the motor vehicle while the motor vehicle was in the buyer’s possession.

 (g) In this section, “sales contract” includes an installment sales contract, a short-term sales contract, and a single-payment contract.




Sec. 45.25.620. Service contracts.
 (a) A motor vehicle service contract must be in writing and contain all essential provisions regarding the administration of the contract.

 (b) If a service contract is included in a motor vehicle sale, the seller shall, before delivery of the motor vehicle, give to the buyer a written statement with all pertinent blank spaces filled in that shall be signed by both the buyer and seller and that clearly and conspicuously
     (1) explains the difference between a service contract and a warranty;

     (2) discloses the maker of or obligor on the service contract;

     (3) describes the relationship between the maker and the seller of the service contract;

     (4) for a vehicle that is a used vehicle, notifies the buyer that the seller may not disclaim implied warranties if the seller is the maker or obligor of the service contract; and

     (5) includes all other disclosures required by law.

 (c) A motor vehicle dealer may not disclaim or limit implied warranties for a motor vehicle for which the motor vehicle dealer is a maker of a service contract sold for that motor vehicle. However, a motor vehicle dealer may disclaim or limit implied warranties as otherwise allowed by law, regardless of the make or model of the motor vehicle, if the motor vehicle dealer is merely the seller, not the maker, of the service contract and does not otherwise extend any written warranties on the motor vehicle that is purchased.

 (d) In this section, “maker” means the person that makes, frames, and executes a service contract and assumes any obligation due to the buyer, but does not include a motor vehicle dealer who merely sells the service contract as the agent of a service contract company doing business in this state.




Sec. 45.25.630. Discharged amounts in motor vehicle leases.
 (a) Notwithstanding another provision of law to the contrary, if the amount to be paid by a lessee under a motor vehicle lease includes a discharged amount, the inclusion of the discharged amount in the amount to be paid under the lease is not a loan of the discharged amount and is not subject to any law that regulates the disclosure of interest, the charging of interest, the amount of interest rates, or the lending of money.

 (b) In this section, “discharged amount” means the amount, if any, that the lessor agrees to pay to discharge an outstanding obligation of the lessee under an existing motor vehicle agreement, loan, installment sales contract, or lease.




Article 6. General Provisions.


Sec. 45.25.900. Conflict with other law.
If a provision of this chapter conflicts with another provision of this title, this chapter controls.


Sec. 45.25.910. Remedial purpose.
The provisions of this chapter are remedial.


Sec. 45.25.990. Definitions.
In this chapter,
     (1) “dealer” means a new motor vehicle dealer or used motor vehicle dealer;

     (2) “dealership” means the business entity that is operated by a motor vehicle dealer;

     (3) “distributor” means a person or entity who sells or distributes new or used motor vehicles to motor vehicle dealers or who maintains or sends distributor representatives within or to this state to sell or distribute new or used motor vehicles to motor vehicle dealers in this state; in this paragraph, “distributor representative” means a representative employed by a distributor branch, distributor, or wholesaler who sells or distributes new or used motor vehicles to franchised motor vehicle dealers in this state;

     (4) “distributor branch” means a branch office maintained by a distributor or wholesaler who sells or distributes new or used motor vehicles to franchised motor vehicle dealers in this state;

     (5) “franchise” means a written arrangement for a definite or indefinite period in which a manufacturer, distributor, or motor vehicle wholesaler grants to a motor vehicle dealer a license, sales and service agreement, or contract of any kind to use a trade name, service mark, or related characteristic, and in which there is a community of interest in the wholesale or retail marketing of related motor vehicles or services;

     (6) “franchised” means having a franchise;

     (7) “fraud” includes a promise or representation not made honestly or in good faith, and an intentional failure to disclose a material fact;

     (8) “good faith” means honesty in fact and the observation of reasonable commercial standards of fair dealing in the trade;

     (9) “lease,” except in AS 45.25.150, means a contract by which a person owning a motor vehicle grants to another person the right to possess, use, and enjoy the motor vehicle for a specified period of time in exchange for periodic payment of a stipulated price and in which the use of the vehicle is granted for a period of 12 or more months;

     (10) “manufacturer” means a person or the person’s subsidiary who manufacturers, imports, distributes, or assembles new motor vehicles and includes an administrator, a distributor, a distributor branch, and a factory branch; in this paragraph, “factory branch” means a branch office maintained by a manufacturer for directing and supervising the representatives of the manufacturer;

     (11) “manufacturer representative” means any employee or agent of a manufacturer who engages in the business of contacting a manufacturer’s respective franchised dealers for the purpose of making or promoting the sale of the manufacturer’s vehicles, parts, accessories, or services;

     (12) “motor vehicle” means a motor vehicle that is required to be registered under AS 28.10, but does not include a motor home, a recreational vehicle, or a motorcycle; in this paragraph,
          (A) “all-terrain vehicle” has the meaning given in AS 45.27.390;

          (B) “recreational vehicle” includes an all-terrain vehicle and a snow machine;

          (C) “snow machine” has the meaning given in AS 45.27.390;

     (13) “motor vehicle dealer” has the meaning given in AS 08.66.350, except that, in this paragraph, notwithstanding the definition of “motor vehicle” given in AS 08.66.350, “motor vehicle” has the meaning given in this section;

     (14) [Repealed, § 61 ch 22 SLA 2015.]
     (15) “new motor vehicle” means a motor vehicle that has not been previously sold to and registered to a person except a distributor, wholesaler, or motor vehicle dealer for resale;

     (16) “new motor vehicle dealer” means a motor vehicle dealer for new motor vehicles or for new and used motor vehicles;

     (17) “sale” means the issuance, transfer, agreement for transfer, exchange, gift, pledge, hypothecation, or mortgage in any form, whether by transfer in trust or otherwise, of a motor vehicle, an interest in a motor vehicle, or a related franchise;

     (18) “service contract” means an optional agreement that is separate from a contract for the sale of a motor vehicle and that covers certain repair or maintenance functions beyond coverage provided by a warranty;

     (19) “terminate” includes nonrenewal or cancellation;

     (20) “used motor vehicle” means a motor vehicle that has been previously sold to and registered to a person other than a distributor, wholesaler, or motor vehicle dealer;

     (21) “used motor vehicle dealer” means a motor vehicle dealer for used motor vehicles.




Article 1. Agreement Practices of Product Manufacturers.


Chapter 27. Marine Products and Motorized Recreational Products.

Sec. 45.27.010. Consent to transfer of agreement.
A manufacturer may not unreasonably withhold consent to the sale or other transfer of a dealership agreement by an authorized dealer to a transferee if the transferee
     (1) meets the criteria generally applied by the manufacturer when approving new authorized dealers; and

     (2) agrees to be bound by all the terms and conditions of the standard form of the dealership agreement.




Sec. 45.27.020. Cancellation or nonrenewal of agreement.
 (a) A manufacturer may not cancel or decline to renew a dealership agreement with an authorized dealer unless
     (1) the manufacturer has
          (A) satisfied the notice requirements of this chapter; and

          (B) shown that there is good cause for the cancellation or nonrenewal of the dealership agreement, and, if the reasons underlying the good cause can be corrected by the authorized dealer, the authorized dealer has failed for 60 days after delivery of the notice required by AS 45.27.030 to make the corrections; the circumstances identified under AS 45.27.030(a)(2), for which a 15-day notice of cancellation or nonrenewal is required, do not qualify as reasons for which correction is allowed under this paragraph; or

     (2) the authorized dealer has engaged in fraud
          (A) against consumers or the manufacturer; or

          (B) in the operation of the authorized dealer’s dealership.

 (b) Under (a)(1)(B) of this section, an authorized dealer may not prevent a cancellation or nonrenewal of a dealership agreement more than two times by making corrections.

 (c) Notwithstanding (a)(1) of this section, a manufacturer may not cancel or decline to renew a dealership agreement with an authorized dealer because of the death or incapacity of an owner if the owner is not listed in the agreement as one on whose expertise and abilities the manufacturer relied in the granting of the agreement.

 (d) In this section, “good cause” includes circumstances in which the authorized dealer fails to comply with or observe a material provision of the dealership agreement with the authorized dealer. For the purpose of determining good cause under this subsection, reasonable sales and service performance criteria and capital and facility requirements may be considered material provisions only if the criteria or requirements were communicated in writing to the authorized dealer within a reasonable period of not less than six months before the effective date of the cancellation or nonrenewal, to afford the authorized dealer a reasonable opportunity to comply with the criteria or requirements.




Sec. 45.27.030. Notice of cancellation or nonrenewal.
 (a) A manufacturer shall furnish a notice of cancellation or nonrenewal of a dealership agreement with an authorized dealer to an authorized dealer at least
     (1) 90 days before the effective date of a cancellation or nonrenewal, except as provided under (2) of this subsection;

     (2) 15 days before the effective date of a cancellation or nonrenewal when the authorized dealer
          (A) is insolvent or is the subject of a bankruptcy or receivership proceeding;

          (B) is convicted of a felony involving moral turpitude or fraud under the law of this state, another state, the federal government, a territory of the United States, or the District of Columbia;

          (C) has violated a term of the dealership agreement with the manufacturer, the violation of which the manufacturer and the authorized dealer have agreed in the dealership agreement constitutes a basis for cancellation or nonrenewal.

 (b) Notice required under (a) of this section must be in writing, shall be sent by certified mail or personally delivered to the authorized dealer, and must contain
     (1) a statement of intention to cancel or not renew the dealership agreement;

     (2) a statement of the reasons for the cancellation or nonrenewal; and

     (3) the date on which the cancellation or nonrenewal takes effect.

 (c) In this section, “mail” means registered or certified mail, return receipt requested.




Sec. 45.27.040. Threat of cancellation or nonrenewal.
 (a) A manufacturer or manufacturer’s representative may not coerce or attempt to coerce an authorized dealer to enter into a dealership agreement with the manufacturer or a subsidiary of the manufacturer, or to perform any other act unfair to the authorized dealer, by threatening to terminate a dealership agreement between the manufacturer or subsidiary of the manufacturer and the authorized dealer.

 (b) This section does not prohibit a voluntary agreement between a manufacturer and an authorized dealer to settle legitimate disputes.

 (c) In this section, “manufacturer’s representative” means an employee or agent of a manufacturer who engages in the business of contacting a manufacturer’s authorized dealer for the purpose of making or promoting the sale of the manufacturer’s products or product parts.




Sec. 45.27.050. Repurchase obligations on cancellation or nonrenewal.
 (a) On the cancellation or nonrenewal of a dealership agreement by a manufacturer without satisfying the requirements under AS 45.27.020, the manufacturer shall repurchase from the authorized dealer’s inventory
     (1) each new and unused product of the manufacturer that is a current product model, or the product model from the previous year; and

     (2) each product part that
          (A) was purchased from the manufacturer by the authorized dealer;

          (B) is listed in the manufacturer’s parts price books in the previous two years; and

          (C) has not been damaged or substantially altered to the prejudice of the manufacturer while in the possession of the authorized dealer.

 (b) Within 90 days after the effective date of the cancellation or nonrenewal, the authorized dealer shall return the property required by (a) of this section to be repurchased to the manufacturer at the manufacturer’s expense. The manufacturer shall pay the compensation for the property within 60 days after the tender of inventory and other items if the authorized dealer has clear title to the property and is in a position to convey that title to the manufacturer. If the property is subject to a security interest, the manufacturer may make the payments jointly to the authorized dealer and the holder of the security interest, and the manufacturer may offset the payment.

 (c) The amount of a repurchase required by (a) of this section must be based on the authorized dealer’s landed cost, subject to adjustments to landed costs for quarterly or annual purchase rebates and credits given to the authorized dealer on the products or product parts.




Article 2. Product Warranties.


Sec. 45.27.100. Warranty provided.
A manufacturer shall provide, through the authorized dealer, to the product’s ultimate purchaser from an authorized dealer the manufacturer’s standard warranty, if any, that is in effect at the time of delivery of the product to the authorized dealer.


Sec. 45.27.110. Nonconforming products.
 (a) A manufacturer of a nonconforming product shall, during the original warranty period, pay an authorized dealer to complete factory-recommended warranty repairs, solutions, and procedures to cure factory warranty problems with a nonconforming product. The manufacturer shall make the payment in accordance with the standard warranty service claim procedures and methods of the industry and with AS 45.27.100 — 45.27.220.

 (b) If a part that is necessary to repair a nonconforming product of a nonconformity that is covered under a manufacturer’s warranty is not in an authorized dealer’s inventory when the nonconforming product is brought to the authorized dealer for repair, the manufacturer of the product shall provide the authorized dealer with the part. The manufacturer shall provide the part as soon as possible and may not charge for freight or handling. This subsection applies to a manufacturer whose products are sold in the state through an authorized dealer.

 (c) The manufacturer of a nonconforming product shall pay the cost for transporting a replacement for the nonconforming product from the manufacturer to the authorized dealer who sold the nonconforming product to the ultimate purchaser or the authorized dealer who is located nearest to the ultimate purchaser, whichever of the two authorized dealers the ultimate purchaser chooses. The manufacturer is not required to pay the transportation cost from the authorized dealer to the ultimate purchaser or from the ultimate purchaser to the authorized dealer.

 (d) In this section, “nonconforming product” means a product that has a nonconformity.




Sec. 45.27.120. Authorized dealer warranty representations.
An authorized dealer may not make a representation about the warranty that is not made by the manufacturer in the warranty. An authorized dealer shall deliver the manuals on the operation and maintenance of a product to an ultimate purchaser and make the manufacturer’s warranty known to the ultimate purchaser, including all disclaimers and limitations.


Sec. 45.27.130. Warranty service and claims.
 (a) An authorized dealer shall provide warranty service in accordance with the manufacturer’s applicable warranty on all of the manufacturer’s products sold by the authorized dealer.

 (b) An authorized dealer shall make all claims for warranty reimbursement in the manner established by the manufacturer.




Sec. 45.27.140. Warranty restrictions.
A manufacturer may not, by dealership agreement, by restrictions on reimbursement, or by another method, restrict the nature or extent of product parts provided or labor performed by an authorized dealer if the restriction impairs the authorized dealer’s ability to satisfy a warranty created by the manufacturer in accordance with generally accepted standards.


Sec. 45.27.150. Basis for reimbursements.
 (a) A manufacturer shall use the criteria established in this section to reimburse an authorized dealer for all approved warranty service work performed by the authorized dealer.

 (b) If the technician performing the warranty service work meets the certification standards in the dealership agreement, a manufacturer shall pay to a servicing authorized dealer warranty work labor rates that
     (1) are not less than the highest of the following:
          (A) the rate the authorized dealer customarily charges to a customer for nonwarranty service work;

          (B) the manufacturer’s printed flat rate; or

          (C) the rate established by a flat rate manual for dealers, if the manual is produced for dealers by a nationally respected industry consultant; and

     (2) include time for clean-up, preparation, diagnosis, disassembly, repair, assembly, testing, and final cleaning as needed to provide a quality result and customer satisfaction.

 (c) In addition to the payment under (b) of this section, the manufacturer shall reimburse an authorized dealer a minimum of one hour at the authorized dealer’s shop standard labor rate for the administration of each warranty claim.

 (d) A manufacturer shall reimburse the authorized dealer for product parts in the authorized dealer’s inventory at the current manufacturer’s full suggested retail price.




Sec. 45.27.160. Timely reimbursement for claims.
A manufacturer shall pay a properly submitted warranty claim of an authorized dealer within 30 days after receiving the claim from an authorized dealer. Unless a manufacturer issues a written notice of disapproval under AS 45.27.170 within the 30 days, if a manufacturer fails to pay a claim within 30 days after receipt, the failure is considered an acceptance of the claim as submitted, and the manufacturer shall pay the authorized dealer interest at the rate of 1.5 percent a month on the claim.


Sec. 45.27.170. Warranty claim disapproval.
If a manufacturer does not approve a claim submitted under AS 45.27.160, the manufacturer shall issue a written notice of disapproval to the authorized dealer within 30 days after the manufacturer receives the claim. The notice must contain the specific reasons for the disapproval.


Sec. 45.27.180. Repairs required.
If a product does not conform to a warranty that is applicable to it and the ultimate purchaser of the product reports the nonconformity to the manufacturer of the product or to the manufacturer’s authorized dealer during the term of the warranty, the manufacturer or authorized dealer shall make the necessary repairs to conform the product to the warranty.


Sec. 45.27.190. Replacement or refund.
 (a) If, during the term of a warranty or within one year after the date of the delivery of the product to the ultimate purchaser, whichever period of time terminates first, the manufacturer or authorized dealer is unable to conform a product to an applicable warranty after a reasonable number of attempts, the manufacturer shall accept the return of the nonconforming product, and, at the ultimate purchaser’s option, shall replace the nonconforming product with a new comparable product or refund the full purchase price to the owner after deducting a reasonable amount of money for the ultimate purchaser’s use of the product from the date the product was delivered to the ultimate purchaser.

 (b) The reasonable amount of money deducted under (a) of this section may not exceed an amount that is equal to the sum of
     (1) the amount of money that reflects the depreciation in value of the product for the period during which the product was available for use by the ultimate purchaser, as calculated by a straight line depreciation method over seven years; and

     (2) an amount of money that is equal to the depreciation in value of the product that was caused by
          (A) neglect or abuse by the ultimate purchaser; or

          (B) body damage that was not caused by the nonconformity.

 (c) The manufacturer shall make the refund required by this section
     (1) to the lienholder of record for the product, if any, to the extent of the lienholder’s interest, and, if there is a balance after satisfying the lienholder’s interest, to the ultimate purchaser; or

     (2) entirely to the ultimate purchaser, if there is no lienholder of record for the product.

 (d) In this section,
     (1) “costs” include original registration fees, transportation fees, authorized dealer’s preparation fees, and the cost of options installed by the authorized dealer;

     (2) “full purchase price” means the total price paid for a product by the ultimate purchaser, including any costs added to the retail price.




Sec. 45.27.200. Notice by ultimate purchaser.
 (a) To claim a refund or replacement under AS 45.27.190, an ultimate purchaser shall give written notice by certified mail to the manufacturer and its authorized dealer before 60 days have elapsed after the termination of whichever of the following periods of time terminates first:
     (1) the term of the warranty; or

     (2) one year after the date of delivery of the product to the ultimate purchaser.

 (b) The notice required by (a) of this section must
     (1) state that the product has a nonconformity;

     (2) provide a reasonable description of the nonconformity;

     (3) state that the manufacturer or authorized dealer has made a reasonable number of attempts to conform the product to the warranty; and

     (4) state that the ultimate purchaser demands that a refund or a replacement of the product be delivered on or before the 60th day after the mailing date of the written notice.

 (c) Within 30 days after receiving the notice required by this section, the manufacturer may make a final attempt to conform the product before the manufacturer is required to make a refund or replacement under AS 45.27.190.




Sec. 45.27.210. Exceptions.
An ultimate purchaser may not receive a refund for or replacement of a product under AS 45.27.190 — 45.27.220 if the manufacturer shows that the problem or condition because of which the ultimate purchaser is claiming a refund or a replacement
     (1) is not a nonconformity; or

     (2) is a nonconformity that resulted from
          (A) alteration of the product by the ultimate purchaser, or by a person who is not the authorized dealer or otherwise authorized by the manufacturer or distributor to make the alteration; or

          (B) abuse or neglect by the ultimate purchaser or another person other than the authorized dealer.




Sec. 45.27.220. Presumption.
A rebuttable presumption that a reasonable number of attempts have been made to conform a product to an applicable warranty is established if
     (1) the nonconformity continues to exist even though the same nonconformity has been subject to repair three or more times by the manufacturer or authorized dealer during the term of the warranty or the one-year period after the date of delivery of the product to the ultimate purchaser, whichever period of time terminates first; or

     (2) the product is out of service for repair for a total of 30 or more days on which the authorized dealer is open for business during the term of the warranty or during the one-year period after the date of delivery of the product to the ultimate purchaser, whichever period of time terminates first; a period of time during which repairs are not performed for reasons that are beyond the control of the manufacturer or authorized dealer is not included in satisfying the 30-day time period.




Article 3. Miscellaneous Business Practices.


Sec. 45.27.250. Required posting.
 (a) An authorized dealer shall post a notice of the authorized dealer’s retail labor rate in a place conspicuous to service customers. If the authorized dealer uses a factory-certified or factory-trained technician to perform warranty service work, the notice must also contain a statement that warranty service work completed by the authorized dealer is performed by a factory-certified or factory-trained technician.

 (b) If an authorized dealer’s service operations employees receive a commission for the amount of work they perform, the authorized dealer shall post a conspicuous sign that is visible to service customers that the authorized dealer’s service operations employees work on commission.




Sec. 45.27.260. Written estimates for repairs not covered by warranty.
 (a) Before beginning repair work on a product for a customer, an authorized dealer shall provide to the customer a written estimate listing the specific parts, labor, and cost of the repairs.

 (b) If additional repairs are determined to be necessary after the service employees begin repairing the product, the authorized dealer shall contact the customer and receive permission to do additional repairs not covered in the written estimate.

 (c) An authorized dealer shall post in a conspicuous place for service customers to view all charges for diagnostics, storage, and other incidentals not associated with the actual repair of a product.




Sec. 45.27.270. Content of factory recall notices.
A manufacturer shall include in a written factory recall notice to ultimate purchasers and authorized dealers the date by which the manufacturer expects that necessary parts and equipment will be available to the authorized dealer for the correction of the defect that is the subject of the recall.


Sec. 45.27.280. Resale without disclosure prohibited.
A manufacturer may not resell in the state a product returned under AS 45.27.190 unless the manufacturer fully discloses to the prospective buyer before the resale is concluded the reason why the product was returned.


Article 4. Miscellaneous Provisions.


Sec. 45.27.300. Other rights and remedies.
The provisions of this chapter do not limit other rights and remedies that may be available to the owner of a product under other provisions of law. This section does not create a new cause of action against an authorized dealer who sells or attempts to repair a product found to be nonconforming.


Sec. 45.27.310. Applicability.
The provisions of this chapter apply to a dealership agreement if the dealership agreement is between a manufacturer and an authorized dealer in this state.


Sec. 45.27.320. Jurisdiction; venue.
 (a) This state has jurisdiction over a legal dispute between a manufacturer located in or outside this state and an authorized dealer located in this state, and the dispute is governed by, interpreted, and adjudicated under the law of this state.

 (b) Venue for court action involving a dispute under (a) of this section is in the judicial district of this state in which the authorized dealer’s principal place of business is located.




Sec. 45.27.330. Corporate affiliates.
 (a) A manufacturer may not use a subsidiary corporation, affiliated corporation, partnership, association, or other person to do what the manufacturer is prohibited from doing under this chapter.

 (b) The provisions of (a) of this section do not limit the right of a person to engage in reasonable and appropriate business practices consistent with an existing trade practice that is not prohibited by this chapter.




Sec. 45.27.340. Unenforceable provisions.
If a provision in a dealership agreement violates this chapter, the provision is not enforceable.


Article 5. General Provisions.


Sec. 45.27.390. Definitions.
In this chapter, unless the context indicates otherwise,
     (1) “authorized dealer” means a person who has entered into a dealership agreement with a manufacturer;

     (2) “boat” means a marine product that is not equipped with a motor;

     (3) “dealership agreement” means an agreement between a person and a manufacturer of products for the person to engage in the retail sale and warranty repair of the manufacturer’s products in the state;

     (4) “distributor” means a person who is authorized by a manufacturer to engage in the wholesale distribution of the manufacturer’s products in the state;

     (5) “landed cost” means the sum of the price of the product and the transportation cost to the authorized dealer’s facility;

     (6) “manufacturer” means a person who
          (A) fabricates, manufactures, or assembles products; “manufacturer” includes a manufacturer branch and a manufacturer sales representative, but does not include a person who converts, modifies, or otherwise alters a product fabricated, manufactured, or assembled by another person; or

          (B) is a distribution entity that is
               (i) owned or controlled by a person described under (A) of this paragraph; and

               (ii) separate from a person described under (A) of this paragraph;

     (7) “marine product” means a new watercraft, boat, or gasoline motor designed for recreational or commercial use on water; “marine product” includes an outboard gasoline motor or boat with an attached gasoline motor, but does not include a watercraft designed or adapted to be powered only by an occupant’s energy;

     (8) “motorized recreational product” means an all-terrain vehicle, a marine gasoline motor, a boat, a boat package, a marine product, and a snow machine; in this paragraph,
          (A) “all-terrain vehicle” means a vehicle with three or more low-pressure, flotation-type tires, as designed by the manufacturer or altered, to be used as an off-road recreational vehicle;

          (B) “boat package” means a boat that is equipped and sold with a gasoline motor or another form of gasoline motorized propulsion;

          (C) “snow machine” means a motorized vehicle with a gross vehicle weight under 1,300 pounds propelled by a track system designed to move a person over snow or ice, and includes a snowmobile;

     (9) “nonconformity” means a defect or condition in a product that is caused by a manufacturer, distributor, or authorized dealer and that
          (A) substantially decreases the dollar value of a product to the owner when compared to the dollar value of a similar product that does not have the defect or condition; or

          (B) prevents a product from being operated or used or makes the product unsafe;

     (10) “part” includes an accessory;

     (11) “product” means a marine product or a motorized recreational product;

     (12) “ultimate purchaser” means
          (A) a purchaser, other than for resale, of a new product, if the new product is not subject to AS 28.10 or AS 28.39; or

          (B) a person to whom ownership of a new product is transferred under AS 28.10 or AS 28.39;

     (13) “warranty” means a written warranty provided by the manufacturer of a product.




Sec. 45.27.395. Short title.
This chapter may be cited as the Alaska Marine Product and Motorized Recreational Product Act.


Article 1. General Provisions.


Chapter 29. Secured Transactions.

Sec. 45.29.101. Short title.
This chapter may be cited as Uniform Commercial Code — Secured Transactions.


Sec. 45.29.102. Definitions.
 (a) In this chapter,
     (1) “accession” means goods that are physically united with other goods in a manner so that the identity of the original goods is not lost;

     (2) “account,” except as used in “account for,”
          (A) means a right to payment of a monetary obligation, whether or not earned by performance,
               (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;

               (ii) for services rendered or to be rendered;

               (iii) for a policy of insurance issued or to be issued;

               (iv) for a secondary obligation incurred or to be incurred;

               (v) for energy provided or to be provided;

               (vi) for the use or hire of a vessel under a charter or other contract;

               (vii) arising out of the use of a credit or charge card or information contained on or for use with the card; or

               (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, a governmental unit of a state, or a person licensed or authorized to operate the game by a state or a governmental unit of a state;

          (B) includes health care insurance receivables;

          (C) does not include rights to payment evidenced by chattel paper or by an instrument, commercial tort claims, deposit accounts, investment property, letter-of-credit rights or letters of credit, or rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card;

     (3) “account debtor” means a person obligated on an account, chattel paper, or general intangible, except that “account debtor” does not include persons obligated to pay a negotiable instrument even if the instrument constitutes part of chattel paper;

     (4) “accounting,” except as used in “accounting for,” means a record
          (A) authenticated by a secured party;

          (B) indicating the aggregate unpaid secured obligations as of a date not more than 35 days earlier or 35 days later than the date of the record; and

          (C) identifying the components of the obligations in reasonable detail;

     (5) “agricultural lien” means an interest, other than a security interest, in farm products
          (A) that secures payment or performance of an obligation for
               (i) goods or services furnished in connection with a debtor’s farming operation; or

               (ii) rent on real property leased by a debtor in connection with the debtor’s farming operation;

          (B) that is created by statute in favor of a person who
               (i) in the ordinary course of its business, furnished goods or services to a debtor in connection with the debtor’s farming operation; or

               (ii) leased real property to a debtor in connection with the debtor’s farming operation; and

          (C) whose effectiveness does not depend on the person’s possession of the personal property;

     (6) “applicant” has the meaning given in AS 45.05.102(a);

     (7) “as-extracted collateral” means
          (A) oil, gas, or other minerals that are subject to a security interest that
               (i) is created by a debtor having an interest in the minerals before extraction; and

               (ii) attaches to the minerals as extracted; or

          (B) accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction;

     (8) “authenticate” means
          (A) to sign; or

          (B) with present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process;

     (9) “bank” means an organization that is engaged in the business of banking, including a savings bank, savings and loan association, credit union, and trust company;

     (10) “beneficiary” has the meaning given in AS 45.05.102(a);

     (11) “broker” has the meaning given in AS 45.08.102(a);

     (12) “cash proceeds” means proceeds that are money, checks, deposit accounts, or the like;

     (13) “certificate of title” means
          (A) a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral;

          (B) a record, other than a certificate of title described in (A) of this paragraph, maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral;

     (14) “certificated security” has the meaning given in AS 45.08.102(a);

     (15) “chattel paper” means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods, except that “chattel paper” does not include charters or other contracts involving the use or hire of a vessel, or records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card; if a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper; in this paragraph, “monetary obligation” means a monetary obligation secured by the goods or owed under a lease of the goods, and includes a monetary obligation with respect to software used in the goods;

     (16) “check” has the meaning given in AS 45.03.104(f);

     (17) “collateral” means the property subject to a security interest or agricultural lien, including
          (A) proceeds to which a security interest attaches;

          (B) accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and

          (C) goods that are the subject of a consignment;

     (18) “commercial tort claim” means a claim arising in tort with respect to which the claimant is
          (A) an organization; or

          (B) an individual and the claim
               (i) arose in the course of the claimant’s business or profession; and

               (ii) does not include damages arising out of personal injury to or the death of an individual;

     (19) “commodity account” means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer;

     (20) “commodity contract” means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is traded on
          (A) or subject to the rules of a board of trade that has been designated as a contract market for the contract under federal commodities laws; or

          (B) a foreign commodity board of trade, exchange, or market and is carried on the books of a commodity intermediary for a commodity customer;

     (21) “commodity customer” means a person for whom a commodity intermediary carries a commodity contract on its books;

     (22) “commodity intermediary” means a person who
          (A) is registered as a futures commission merchant under federal commodities law; or

          (B) in the ordinary course of its business, provides clearance or settlement services for a board of trade that has been designated as a contract market under federal commodities laws;

     (23) “communicate” means
          (A) to send a written or other tangible record;

          (B) to transmit a record by any means agreed upon by the persons sending and receiving the record; or

          (C) in the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing office regulation;

     (24) “consignee” means a merchant to whom goods are delivered in a consignment;

     (25) “consignment” means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and
          (A) the merchant
               (i) deals in goods of that kind under a name other than the name of the person making delivery;

               (ii) is not an auctioneer; and

               (iii) is not generally known by the merchant’s creditors to be substantially engaged in selling the goods of others;

          (B) with respect to each delivery, the aggregate value of the goods is $1,000 or more at the time of delivery;

          (C) the goods are not consumer goods immediately before delivery; and

          (D) the transaction does not create a security interest that secures an obligation;

     (26) “consignor” means a person who delivers goods to a consignee in a consignment;

     (27) “consumer goods” means goods that are used or bought for use primarily for personal, family, or household purposes;

     (28) “consumer goods transaction” means a consumer transaction in which
          (A) an individual incurs an obligation primarily for personal, family, or household purposes; and

          (B) a security interest in consumer goods secures the obligation;

     (29) “consumer obligor” means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family, or household purposes;

     (30) “consumer transaction” means a transaction, including a consumer goods transaction, in which
          (A) an individual incurs an obligation primarily for personal, family, or household purposes;

          (B) a security interest secures the obligation; and

          (C) the collateral is held or acquired primarily for personal, family, or household purposes;

     (31) “continuation statement” means an amendment of a financing statement that
          (A) identifies, by its file number, the initial financing statement to which it relates; and

          (B) indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement;

     (32) “contract for sale” has the meaning given in AS 45.02.106(a);

     (33) “control” has the meaning given in AS 45.07.116;

     (34) “customer” has the meaning given in AS 45.04.104(a);

     (35) “debtor” means
          (A) a person having an interest, other than a security interest or other lien, in the collateral whether or not the person is an obligor;

          (B) a seller of accounts, chattel paper, payment intangibles, or promissory notes; or

          (C) a consignee;

     (36) “deposit account” means a demand, time, savings, passbook, or similar account maintained with a bank except that the term does not include investment property or accounts evidenced by an instrument;

     (37) “document” means a document of title or a receipt of the type described in AS 45.07.201(b);

     (38) “electronic chattel paper” means chattel paper evidenced by a record or records consisting of information stored in an electronic medium;

     (39) “encumbrance” means a right, other than an ownership interest, in real property, including mortgages and other liens on real property;

     (40) “entitlement holder” has the meaning given in AS 45.08.102(a);

     (41) “equipment” means goods other than inventory, farm products, or consumer goods;

     (42) “farm products” means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and that are
          (A) crops grown, growing, or to be grown, including
               (i) crops produced on trees, vines, and bushes; and

               (ii) aquatic goods produced in aquacultural operations;

          (B) livestock, born or unborn, including aquatic goods produced in aquacultural operations;

          (C) supplies used or produced in a farming operation; or

          (D) products of crops or livestock in their unmanufactured states;

     (43) “farming operation” means raising, cultivating, propagating, fattening, grazing, or other farming, livestock, or aquacultural operation;

     (44) “file number” means the number assigned to an initial financing statement under AS 45.29.519(a);

     (45) “filing office” means an office designated in AS 45.29.501 as the place to file a financing statement;

     (46) “filing office regulation” means a regulation adopted under AS 44.37.027;

     (47) “financial asset” has the meaning given in AS 45.08.102(a);

     (48) “financing statement” means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement;

     (49) “fixture filing” means the filing of a financing statement covering goods that are or are to become fixtures and satisfying AS 45.29.502(a) and (b), including the filing of a financing statement covering goods of a transmitting utility that are or are to become fixtures;

     (50) “fixtures” means goods that have become so related to particular real property that an interest in them arises under real property law;

     (51) “general intangible” means personal property, including payment intangibles, software, and things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and, before extraction, oil, gas, or other minerals;

     (52) [Repealed, § 113 ch 44 SLA 2009.]
     (53) “goods” means things that are movable when a security interest attaches; the term includes (A) fixtures; (B) standing timber that is to be cut and removed under a conveyance or contract for sale; (C) the unborn young of animals; (D) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes; and (E) manufactured homes; the term also includes a computer program embedded in goods and supporting information provided in connection with a transaction relating to the program if the program is associated with the goods in such a manner that it customarily is considered part of the goods or if, by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods; the term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded; the term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money, or, before extraction, oil, gas, or other minerals;

     (54) “governmental unit” means
          (A) a subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country;

          (B) an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States;

     (55) “health care insurance receivable” means an interest in or claim under a policy of insurance that is a right to payment of a monetary obligation for health-care goods or services provided;

     (56) “holder in due course” has the meaning given in AS 45.03.302;

     (57) “instrument” means a negotiable instrument or other writing that evidences a right to the payment of a monetary obligation and is not itself a security agreement or lease and is of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment; the term does not include
          (A) investment property;

          (B) letters of credit; or

          (C) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card;

     (58) “inventory” means goods, other than farm products, that
          (A) are leased by a person as lessor;

          (B) are held by a person for sale or lease or to be furnished under a contract of service;

          (C) are furnished by a person under a contract of service; or

          (D) consist of raw materials, work in process, or materials used or consumed in a business;

     (59) “investment property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account;

     (60) “issuer,” with respect to a
          (A) letter of credit or letter-of-credit right, has the meaning given in AS 45.05.102(a);

          (B) security, has the meaning given in AS 45.08.201;

          (C) document of title, has the meaning given in AS 45.07.112;

     (61) “jurisdiction of organization,” with respect to a registered organization, means the jurisdiction under whose law the organization is formed or organized;

     (62) “lease,” “lease agreement,” “lease contract,” “leasehold interest,” “lessee,” “lessee in ordinary course of business,” “lessor,” and “lessor’s residual interest” have the meanings given in AS 45.12.103(a);

     (63) “letter of credit” has the meaning given in AS 45.05.102(a);

     (64) “letter-of-credit right” means a right to payment or performance under a letter of credit whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance; the term does not include the right of a beneficiary to demand payment or performance under a letter of credit;

     (65) “lien creditor” means
          (A) a creditor who has acquired a lien on the property involved by attachment, levy, or the like;

          (B) an assignee for benefit of creditors from the time of assignment;

          (C) a trustee in bankruptcy from the date of the filing of the petition; or

          (D) a receiver in equity from the time of appointment;

     (66) “manufactured home” means a structure, transportable in one or more sections, that, in the traveling mode, is eight body feet or more in width or 40 body feet or more in length, or, when erected on site, is 320 or more square feet, and that is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained in the structure; the term includes a structure that meets all of the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States Secretary of Housing and Urban Development and complies with the standards established under 42 U.S.C.;

     (67) “manufactured home transaction” means a secured transaction
          (A) that creates a purchase money security interest in a manufactured home, other than a manufactured home held as inventory; or

          (B) in which a manufactured home, other than a manufactured home held as inventory, is the primary collateral;

     (68) “merchant” has the meaning given in AS 45.02.104(a);

     (69) “mortgage” means a consensual interest in real property, including fixtures, that secures payment or performance of an obligation;

     (70) “negotiable instrument” has the meaning given in AS 45.03.104;

     (71) “new debtor” means a person who becomes bound as debtor under AS 45.29.203(d) by a security agreement previously entered into by another person;

     (72) “new value” means (A) money; (B) money’s worth in property, services, or new credit; or (C) release by a transferee of an interest in property previously transferred to the transferee; the term does not include an obligation substituted for another obligation;

     (73) “nominated person” has the meaning given in AS 45.05.102(a);

     (74) “noncash proceeds” means proceeds other than cash proceeds;

     (75) “note” has the meaning given in AS 45.03.104;

     (76) “obligor” means a person who, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (A) owes payment or other performance of the obligation; (B) has provided property other than the collateral to secure payment or other performance of the obligation; or (C) is otherwise accountable in whole or in part for payment or other performance of the obligation; the term does not include issuers or nominated persons under a letter of credit;

     (77) “original debtor,” except as used in AS 45.29.310(c), means a person who, as debtor, entered into a security agreement to which a new debtor has become bound under AS 45.29.203(d);

     (78) “payment intangible” means a general intangible under which the account debtor’s principal obligation is a monetary obligation;

     (79) “person related to,” with respect to an
          (A) individual, means
               (i) the spouse of the individual;

               (ii) a brother, brother-in-law, sister, or sister-in-law of the individual;

               (iii) an ancestor or lineal descendant of the individual or the individual’s spouse; or

               (iv) another relative, by blood or marriage, of the individual or the individual’s spouse who shares the same home with the individual;

          (B) an organization, means
               (i) a person directly or indirectly controlling, controlled by, or under common control with the organization;

               (ii) an officer or director of, or a person performing similar functions with respect to, the organization;

               (iii) an officer or director of, or a person performing similar functions with respect to, a person described in (i) of this subparagraph;

               (iv) the spouse of an individual described in (i), (ii), or (iii) of this subparagraph; or

               (v) an individual who is related by blood or marriage to an individual described in (i), (ii), (iii), or (iv) of this subparagraph and shares the same home with the individual;

     (80) “proceeds,” except as used in AS 45.29.609(b), means the following property:
          (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;

          (B) whatever is collected on, or distributed on account of, collateral;

          (C) rights arising out of collateral;

          (D) to the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to the collateral; or

          (E) to the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to the collateral;

     (81) “proceeds of the letter of credit” has the meaning given “proceeds of a letter of credit” in AS 45.05.114(a);

     (82) “promissory note” means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds;

     (83) “proposal” means a record authenticated by a secured party that includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures under AS 45.29.620 — 45.29.622;

     (84) “prove” has the meaning given in AS 45.03.103(a);

     (85) “public organic record” means a record that is available to the public for inspection and that is
          (A) a record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and a record filed with or issued by the state or the United States that amends or restates the initial record;

          (B) an organic record of a business trust consisting of the record initially filed with a state and a record filed with the state that amends or restates the initial record if a statute of the state governing business trusts requires that the record be filed with the state; or

          (C) a record consisting of legislation enacted by the legislature of a state or the United States Congress that forms or organizes an organization, a record amending the legislation, and a record filed with or issued by the state or the United States that amends or restates the name of the organization;

     (86) “pursuant to a commitment,” with respect to an advance made or other value given by a secured party, means in accordance with a secured party’s obligation, whether or not a subsequent event of default or other event not within the secured party’s control has relieved or may relieve the secured party from its obligation;

     (87) “record,” except as used in “for record,” “of record,” “record or legal title,” and “record owner,” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;

     (88) “registered organization” means an organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or the United States, including a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust’s organic record be filed with the state;

     (89) “sale” has the meaning given in AS 45.02.106(a);

     (90) “secondary obligor” means an obligor to the extent that
          (A) the obligor’s obligation is secondary; or

          (B) the obligor has a right of recourse with respect to an obligation secured by collateral against the debtor or another obligor, or property of either;

     (91) “secured party” means
          (A) a person in whose favor a security interest is created or provided for under a security agreement, whether or not an obligation to be secured is outstanding;

          (B) a person who holds an agricultural lien;

          (C) a consignor;

          (D) a person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;

          (E) a trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for; or

          (F) a person who holds a security interest arising under AS 45.02.401, 45.02.505, 45.02.711(c), AS 45.04.210, AS 45.05.118, or AS 45.12.508(e);

     (92) “securities account” has the meaning given in AS 45.08.501(e);

     (93) “securities intermediary” has the meaning given in AS 45.08.102(a);

     (94) “security” has the meaning given in AS 45.08.102(a);

     (95) “security agreement” means an agreement that creates or provides for a security interest;

     (96) “security certificate” has the meaning given in AS 45.08.102(a);

     (97) “security entitlement” has the meaning given in AS 45.08.102(a);

     (98) “send,” in connection with a record or notification, means to
          (A) deposit in the mail, deliver for transmission, or transmit by another usual means of communication, with postage or cost of transmission provided for, addressed to an address reasonable under the circumstances; or

          (B) cause the record or notification to be received within the time that it would have been received if properly sent under (A) of this paragraph;

     (99) “software” means a computer program and supporting information provided in connection with a transaction relating to the program; the term does not include a computer program that is included in the definition of “goods”;

     (100) “state” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or a territory or insular possession subject to the jurisdiction of the United States;

     (101) “supporting obligation” means a letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property;

     (102) “tangible chattel paper” means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium;

     (103) “termination statement” means an amendment of a financing statement that
          (A) identifies by its file number the initial financing statement to which it relates; and

          (B) indicates either that it is a termination statement or that the identified financing statement is no longer effective;

     (104) “transmitting utility” means a person primarily engaged in the business of
          (A) operating a railroad, subway, street railway, or trolley bus;

          (B) transmitting communications electrically, electromagnetically, or by light;

          (C) transmitting goods by pipeline or sewer; or

          (D) transmitting or producing and transmitting electricity, steam, gas, or water;

     (105) “uncertificated security” has the meaning given in AS 45.08.102(a).

 (b) In addition, AS 45.01 contains general definitions and principles of construction and interpretation applicable throughout this chapter.




Sec. 45.29.103. Purchase money security interest; application of payments; burden of establishing.
 (a) In this section,
     (1) “purchase money collateral” means goods or software that secures a purchase money obligation incurred with respect to that collateral; and

     (2) “purchase money obligation” means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.

 (b) A security interest in goods is a purchase money security interest
     (1) to the extent that the goods are purchase money collateral with respect to that security interest;

     (2) if the security interest is in inventory that is or was purchase money collateral, to the extent that the security interest secures a purchase money obligation incurred with respect to other inventory in which the secured party holds or held a purchase money security interest; and

     (3) to the extent that the security interest secures a purchase money obligation incurred with respect to software in which the secured party holds or held a purchase money security interest.

 (c) A security interest in software is a purchase money security interest to the extent that the security interest also secures a purchase money obligation incurred with respect to goods in which the secured party holds or held a purchase money security interest if the debtor acquired its interest in the software
     (1) in an integrated transaction in which it acquired an interest in the goods; and

     (2) for the principal purpose of using the software in the goods.

 (d) The security interest of a consignor in goods that are the subject of a consignment is a purchase money security interest in inventory.

 (e) In a transaction other than a consumer goods transaction, if the extent to which a security interest is a purchase money security interest depends on the application of a payment to a particular obligation, the payment must be applied
     (1) in accordance with any reasonable method of application to which the parties agree;

     (2) in the absence of the parties’ agreement to a reasonable method, in accordance with an intention of the obligor manifested at or before the time of payment; or

     (3) in the absence of an agreement to a reasonable method and a timely manifestation of the obligor’s intention, in the following order:
          (A) to obligations that are not secured; and

          (B) if more than one obligation is secured, to obligations secured by purchase money security interests in the order in which those obligations were incurred.

 (f) In a transaction, other than a consumer goods transaction, a purchase money security interest does not lose its status as such even if
     (1) the purchase money collateral also secures an obligation that is not a purchase money obligation;

     (2) collateral that is not purchase money collateral also secures the purchase money obligation; or

     (3) the purchase money obligation has been renewed, refinanced, consolidated, or restructured.

 (g) In a transaction other than a consumer goods transaction, a secured party claiming a purchase money security interest has the burden of establishing the extent to which the security interest is a purchase money security interest.

 (h) The limitation of the rules in (e) — (g) of this section to transactions other than consumer goods transactions is intended to leave to the court the determination of the proper rules in consumer goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer goods transactions and may continue to apply established approaches.




Sec. 45.29.104. Control of deposit account.
 (a) A secured party has control of a deposit account if
     (1) the secured party is the bank with which the deposit account is maintained;

     (2) the debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or

     (3) the secured party becomes the bank’s customer with respect to the deposit account.

 (b) A secured party that has satisfied (a) of this section has control even if the debtor retains the right to direct the disposition of funds from the deposit account.




Sec. 45.29.105. Control of electronic chattel paper.
 (a) A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.

 (b) A system satisfies (a) of this section if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that
     (1) a single authoritative copy of the record or records exists that is unique, identifiable, and, except as otherwise provided in (4) — (6) of this subsection, unalterable;

     (2) the authoritative copy identifies the secured party as the assignee of the record or records;

     (3) the authoritative copy is communicated to and maintained by the secured party or its designated custodian;

     (4) copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the secured party;

     (5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and

     (6) any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.




Sec. 45.29.106. Control of investment property.
 (a) A person has control of a certificated security, uncertificated security, or security entitlement as provided in AS 45.08.106.

 (b) A secured party has control of a commodity contract if
     (1) the secured party is the commodity intermediary with which the commodity contract is carried; or

     (2) the commodity customer, secured party, and commodity intermediary have agreed that the commodity intermediary will apply any value distributed on account of the commodity contract as directed by the secured party without further consent by the commodity customer.

 (c) A secured party having control of all security entitlements or commodity contracts carried in a securities account or commodity account has control over the securities account or commodity account.




Sec. 45.29.107. Control of letter-of-credit right.
A secured party has control of a letter-of-credit right to the extent of any right to payment or performance by the issuer or a nominated person if the issuer or nominated person has consented to an assignment of proceeds of the letter of credit under AS 45.05.114(c) or otherwise applicable law or practice.


Sec. 45.29.108. Sufficiency of description.
 (a) Except as otherwise provided in (c) — (e) of this section, a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.

 (b) Except as otherwise provided in (d) of this section, a description of collateral reasonably identifies the collateral if it identifies the collateral by
     (1) specific listing;

     (2) category;

     (3) except as otherwise provided in (e) of this section, a type of collateral defined in the code;

     (4) quantity;

     (5) computational or allocational formula or procedure; or

     (6) except as otherwise provided in (c) of this section, another method if the identity of the collateral is objectively determinable.

 (c) A description of collateral as “all the debtor’s assets” or “all the debtor’s personal property” or using words of similar import does not reasonably identify the collateral.

 (d) Except as otherwise provided in (e) of this section, a description of a security entitlement, securities account, or commodity account is sufficient if it describes
     (1) the collateral by those terms or as investment property; or

     (2) the underlying financial asset or commodity contract.

 (e) A description only by type of collateral defined in the code is an insufficient description of
     (1) a commercial tort claim; or

     (2) in a consumer transaction, consumer goods, a security entitlement, a securities account, or a commodity account.




Sec. 45.29.109. Scope.
 (a) Except as otherwise provided in (c) and (d) of this section, this chapter applies to
     (1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;

     (2) an agricultural lien;

     (3) a sale of accounts, chattel paper, payment intangibles, or promissory notes;

     (4) a consignment;

     (5) a security interest arising under AS 45.02.401, 45.02.505, 45.02.711(c), or AS 45.12.508(e), as provided in AS 45.29.110; and

     (6) a security interest arising under AS 45.04.210 or AS 45.05.118.

 (b) The application of this chapter to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this chapter does not apply.

 (c) This chapter does not apply to the extent that
     (1) a statute, regulation, or treaty of the United States preempts this chapter;

     (2) another statute of this state expressly governs the creation, perfection, priority, or enforcement of a security interest created by this state or a governmental unit of this state;

     (3) a statute of another state, a foreign country, or a governmental unit of another state or a foreign country, other than a statute generally applicable to security interests, expressly governs creation, perfection, priority, or enforcement of a security interest created by the state, country, or governmental unit; or

     (4) the rights of a transferee beneficiary or nominated person under a letter of credit are independent and superior under AS 45.05.114.

 (d) This chapter does not apply to
     (1) a landlord’s lien, other than an agricultural lien;

     (2) a lien, other than an agricultural lien, given by statute or other rule of law for services or materials, but AS 45.29.333 applies with respect to priority of the lien;

     (3) an assignment of a claim for wages, salary, or other compensation of an employee;

     (4) a sale of accounts, chattel paper, payment intangibles, or promissory notes as part of a sale of the business out of which they arose;

     (5) an assignment of accounts, chattel paper, payment intangibles, or promissory notes that is for the purpose of collection only;

     (6) an assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract;

     (7) an assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness;

     (8) a transfer of an interest in or an assignment of a claim under a policy of insurance, other than an assignment by or to a health care provider of a health care insurance receivable and any subsequent assignment of the right to payment, but AS 45.29.315 and 45.29.322 apply with respect to proceeds and priorities in proceeds;

     (9) an assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral;

     (10) a right of recoupment or setoff, but
          (A) AS 45.29.340 applies with respect to the effectiveness of rights of recoupment or setoff against deposit accounts; and

          (B) AS 45.29.404 applies with respect to defenses or claims of an account debtor;

     (11) the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for
          (A) liens on real property in AS 45.29.203 and 45.29.308;

          (B) fixtures in AS 45.29.334;

          (C) fixture filings in AS 45.29.501, 45.29.502, 45.29.512, 45.29.516, and 45.29.519; and

          (D) security agreements covering personal and real property in AS 45.29.604;

     (12) an assignment of a claim arising in tort, other than a commercial tort claim, but AS 45.29.315 and 45.29.322 apply with respect to proceeds and priorities in proceeds;

     (13) an assignment of a deposit account in a consumer transaction, but AS 45.29.315 and 45.29.322 apply with respect to proceeds and priorities in proceeds; or

     (14) notwithstanding (c)(2) of this section, a transfer by a government or governmental subdivision or agency.




Sec. 45.29.110. Security interests arising under AS 45.02 or AS 45.12.
A security interest arising under AS 45.02.401, 45.02.505, 45.02.711(c), or AS 45.12.508(e) is subject to this chapter. However, until the debtor obtains possession of the goods,
     (1) the security interest is enforceable even if AS 45.29.203(b)(3) has not been satisfied;

     (2) filing is not required to perfect the security interest;

     (3) the rights of the secured party after default by the debtor are governed by AS 45.02 or AS 45.12; and

     (4) the security interest has priority over a conflicting security interest created by the debtor.




Article 2. Security Agreements; Security Interests.


Sec. 45.29.201. General effectiveness of security agreement.
 (a) Except as otherwise provided in the code, a security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors.

 (b) A transaction subject to this chapter is subject to
     (1) an applicable rule of law that establishes a different rule for consumers;

     (2) another statute or regulation that regulates the rates, charges, agreements, and practices for loans, credit sales, or other extensions of credit; and

     (3) consumer protection statutes or regulations.

 (c) In case of conflict between this chapter and a rule of law, statute, or regulation described in (b) of this section, the rule of law, statute, or regulation controls. Failure to comply with a statute or regulation described in (b) of this section has only the effect the statute or regulation specifies.

 (d) This chapter does not
     (1) validate a rate, charge, agreement, or practice that violates a rule of law, statute, or regulation described in (b) of this section; or

     (2) extend the application of the rule of law, statute, or regulation to a transaction not otherwise subject to it.




Sec. 45.29.202. Title to collateral immaterial.
Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles, or promissory notes, the provisions of this chapter with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.


Sec. 45.29.203. Attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites.
 (a) A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral unless an agreement expressly postpones the time of attachment.

 (b) Except as otherwise provided in (c) — (i) of this section, a security interest is enforceable against the debtor and third parties with respect to the collateral only if
     (1) value has been given;

     (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and

     (3) one of the following conditions is met:
          (A) the debtor has authenticated a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;

          (B) the collateral is not a certificated security and is in the possession of the secured party under AS 45.29.313 under the debtor’s security agreement;

          (C) the collateral is a certificated security in registered form, and the security certificate has been delivered to the secured party under AS 45.08.301 under the debtor’s security agreement; or

          (D) the collateral is deposit accounts, electronic chattel paper, investment property, letter-of-credit rights, or electronic documents, and the secured party has control under AS 45.07.116, AS 45.29.104, 45.29.105, 45.29.106, or 45.29.107 under the debtor’s security agreement.

 (c) The provisions of (b) of this section are subject to
     (1) AS 45.04.210 on the security interest of a collecting bank;

     (2) AS 45.05.118 on the security interest of a letter-of-credit issuer or nominated person;

     (3) AS 45.29.110 on a security interest arising under AS 45.02 or AS 45.12; and

     (4) AS 45.29.206 on security interests in investment property.

 (d) A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this chapter or by contract,
     (1) the security agreement becomes effective to create a security interest in the person’s property; or

     (2) the person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.

 (e) If a new debtor becomes bound as debtor by a security agreement entered into by another person,
     (1) the agreement satisfies (b)(3) of this section with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and

     (2) another agreement is not necessary to make a security interest in the property enforceable.

 (f) The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by AS 45.29.315 and is also attachment of a security interest in a supporting obligation for the collateral.

 (g) The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.

 (h) The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlement carried in the securities account.

 (i) The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.




Sec. 45.29.204. After-acquired property; future advances.
 (a) Except as otherwise provided in (b) of this section, a security agreement may create or provide for a security interest in after-acquired collateral.

 (b) A security interest does not attach under a term constituting an after-acquired property clause to
     (1) consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within 10 days after the secured party gives value; or

     (2) a commercial tort claim.

 (c) A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to a commitment.




Sec. 45.29.205. Use or disposition of collateral permissible.
 (a) A security interest is not invalid or fraudulent against creditors solely because
     (1) the debtor has the right or ability to
          (A) use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods;

          (B) collect, compromise, enforce, or otherwise deal with collateral;

          (C) accept the return of collateral or make repossessions; or

          (D) use, commingle, or dispose of proceeds; or

     (2) the secured party fails to require the debtor to account for proceeds or replace collateral.

 (b) This section does not relax the requirements of possession if attachment, perfection, or enforcement of a security interest depends upon possession of the collateral by the secured party.




Sec. 45.29.206. Security interest arising in purchase or delivery of financial asset.
 (a) A security interest in favor of a securities intermediary attaches to a person’s security entitlement if
     (1) the person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase; and

     (2) the securities intermediary credits the financial asset to the buyer’s securities account before the buyer pays the securities intermediary.

 (b) The security interest described in (a) of this section secures the person’s obligation to pay for the financial asset.

 (c) A security interest in favor of a person who delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if
     (1) the security or other financial asset
          (A) in the ordinary course of business, is transferred by delivery with any necessary endorsement or assignment; and

          (B) is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and

     (2) the agreement calls for delivery against payment.

 (d) The security interest described in (c) of this section secures the obligation to make payment for the delivery.




Sec. 45.29.207. Rights and duties of secured party having possession or control of collateral.
 (a) Except as otherwise provided in (d) of this section, a secured party shall use reasonable care in the custody and preservation of collateral in the secured party’s possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

 (b) Except as otherwise provided in (d) of this section, if a secured party has possession of collateral,
     (1) reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral;

     (2) the risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;

     (3) the secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and

     (4) the secured party may use or operate the collateral
          (A) for the purpose of preserving the collateral or its value;

          (B) as permitted by an order of a court having competent jurisdiction; or

          (C) except in the case of consumer goods, in the manner and to the extent agreed by the debtor.

 (c) Except as otherwise provided in (d) of this section, a secured party having possession of collateral or control of collateral under AS 45.07.116, AS 45.29.104, 45.29.105, 45.29.106, or 45.29.107
     (1) may hold as additional security any proceeds, except money or funds, received from the collateral;

     (2) shall apply money or funds received from the collateral to reduce the secured obligation unless remitted to the debtor; and

     (3) may create a security interest in the collateral.

 (d) If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor,
     (1) the provisions of (a) of this section do not apply unless the secured party is entitled under an agreement
          (A) to charge back uncollected collateral; or

          (B) otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and

     (2) the provisions of (b) and (c) of this section do not apply.




Sec. 45.29.208. Additional duties of secured party having control of collateral.
 (a) This section applies to a case in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.

 (b) Within 10 days after receiving an authenticated demand by the debtor, a secured party
     (1) having control of a deposit account under AS 45.29.104(a)(2) shall send to the bank with which the deposit account is maintained an authenticated statement that releases the bank from further obligation to comply with instructions originated by the secured party;

     (2) having control of a deposit account under AS 45.29.104(a)(3) shall
          (A) pay the debtor the balance on deposit in the deposit account; or

          (B) transfer the balance on deposit into a deposit account in the debtor’s name;

     (3) other than a buyer, having control of electronic chattel paper under AS 45.29.105 shall
          (A) communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;

          (B) if the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and

          (C) take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy that add or change an identified assignee of the authoritative copy without the consent of the secured party;

     (4) having control of investment property under AS 45.08.106(d)(2) or AS 45.29.106(b) shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated record that releases the securities intermediary or commodity intermediary from further obligation to comply with entitlement orders or directions originated by the secured party;

     (5) having control of a letter-of-credit right under AS 45.29.107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated release from further obligation to pay or deliver proceeds of the letter of credit to the secured party; and

     (6) having control of an electronic document shall
          (A) give control of the electronic document to the debtor or its designated custodian;

          (B) if the debtor designates a custodian who is the designated custodian with whom the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and

          (C) take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy that add or change an identified assignee of the authoritative copy without the consent of the secured party.




Sec. 45.29.209. Duties of secured party if account debtor has been notified of assignment.
 (a) Except as otherwise provided in (c) of this section, this section applies to a case in which
     (1) there is no outstanding secured obligation; and

     (2) the secured party is not committed to make advances, incur obligations, or otherwise give value.

 (b) Within 10 days after receiving an authenticated demand by the debtor, a secured party shall send to an account debtor that has received notification of an assignment to the secured party as assignee under AS 45.29.406(a) an authenticated record that releases the account debtor from further obligation to the secured party.

 (c) This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.




Sec. 45.29.210. Request for accounting; request regarding list of collateral or statement of account.
 (a) In this section,
     (1) “request” means a record of a type described in (2), (3), or (4) of this subsection;

     (2) “request for an accounting” means a record authenticated by a debtor requesting that the recipient provide an accounting of the unpaid obligations secured by collateral and reasonably identifying the transaction or relationship that is the subject of the request;

     (3) “request regarding a list of collateral” means a record authenticated by a debtor requesting that the recipient approve or correct a list of what the debtor believes to be the collateral securing an obligation and reasonably identifying the transaction or relationship that is the subject of the request;

     (4) “request regarding a statement of account” means a record authenticated by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.

 (b) Subject to (c) — (f) of this section, a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, shall comply with a request within 14 days after receipt
     (1) in the case of a request for an accounting, by authenticating and sending to the debtor an accounting; and

     (2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.

 (c) A secured party that claims a security interest in all of a particular type of collateral owned by the debtor may comply with a request regarding a list of collateral by sending to the debtor an authenticated record including a statement to that effect within 14 days after receipt.

 (d) A person who receives a request regarding a list of collateral, who claims no interest in the collateral when the person receives the request, and who claimed an interest in the collateral at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record
     (1) disclaiming interest in the collateral; and

     (2) if known to the recipient, providing the name and mailing address of an assignee of or successor to the recipient’s interest in the collateral.

 (e) A person who receives a request for an accounting or a request regarding a statement of account, who claims no interest in the obligations when the person receives the request, and who claimed an interest in the obligations at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record
     (1) disclaiming interest in the obligations; and

     (2) if known to the recipient, providing the name and mailing address of an assignee of or successor to the recipient’s interest in the obligations.

 (f) A debtor is entitled without charge to one response to a request under this section during a six-month period. The secured party may require payment of a charge not exceeding $25 for each additional response.




Article 3. Perfection and Priority.


Sec. 45.29.301. Law governing perfection and priority of security interests.
Except as otherwise provided in AS 45.29.303 — 45.29.306, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:
     (1) except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral;

     (2) while collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral;

     (3) except as otherwise provided in (4) of this section, while tangible negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs
          (A) perfection of a security interest in the goods by filing a fixture filing;

          (B) perfection of a security interest in timber to be cut; and

          (C) the effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral;

     (4) the local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as-extracted collateral.




Sec. 45.29.302. Law governing perfection and priority of agricultural liens.
While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products.


Sec. 45.29.303. Law governing perfection and priority of security interests in goods covered by a certificate of title.
 (a) This section applies to goods covered by a certificate of title even if there is no other relationship between the jurisdiction under whose certificate of title the goods are covered and the goods or the debtor.

 (b) Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority. Goods cease to be covered by a certificate of title at the earlier of the time
     (1) the certificate of title ceases to be effective under the law of the issuing jurisdiction; or

     (2) the goods become covered subsequently by a certificate of title issued by another jurisdiction.

 (c) The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title.




Sec. 45.29.304. Law governing perfection and priority of security interests in deposit accounts.
 (a) The local law of a bank’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a deposit account maintained with that bank.

 (b) The following rules determine a bank’s jurisdiction for purposes of AS 45.29.301 — 45.29.342:
     (1) if an agreement between the bank and the debtor governing the deposit account expressly provides that a particular jurisdiction is the bank’s jurisdiction for purposes of AS 45.29.301 — 45.29.342, this chapter, or the code, that jurisdiction is the bank’s jurisdiction;

     (2) if (1) of this subsection does not apply and an agreement between the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank’s jurisdiction;

     (3) if neither (1) nor (2) of this subsection applies and an agreement between the bank and its customer governing the deposit account expressly provides that the deposit account is maintained at an office in a particular jurisdiction, that jurisdiction is the bank’s jurisdiction;

     (4) if (1), (2), or (3) of this subsection does not apply, the bank’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer’s account is located;

     (5) if (1), (2), (3), or (4) of this subsection does not apply, the bank’s jurisdiction is the jurisdiction in which the chief executive office of the bank is located.




Sec. 45.29.305. Law governing perfection and priority of security interests in investment property.
 (a) Except as otherwise provided in (c) of this section, the following rules apply:
     (1) while a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented by the security certificate;

     (2) the local law of the issuer’s jurisdiction as specified in AS 45.08.110 governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security;

     (3) the local law of the securities intermediary’s jurisdiction as specified in AS 45.08.110(e) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account;

     (4) the local law of the commodity intermediary’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account.

 (b) The following rules determine a commodity intermediary’s jurisdiction for purposes of AS 45.29.301 — 45.29.342:
     (1) if an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that a particular jurisdiction is the commodity intermediary’s jurisdiction for purposes of AS 45.29.301 — 45.29.342, this chapter, or the code, that jurisdiction is the commodity intermediary’s jurisdiction;

     (2) if (1) of this subsection does not apply and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary’s jurisdiction;

     (3) if neither (1) nor (2) of this subsection applies and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary’s jurisdiction;

     (4) if (1), (2), or (3) of this subsection does not apply, the commodity intermediary’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer’s account is located;

     (5) if (1), (2), (3), or (4) of this subsection does not apply, the commodity intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.

 (c) The local law of the jurisdiction in which the debtor is located governs
     (1) perfection of a security interest in investment property by filing;

     (2) automatic perfection of a security interest in investment property created by a broker or securities intermediary; and

     (3) automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.




Sec. 45.29.306. Law governing perfection and priority of security interests in letter-of-credit rights.
 (a) Subject to (c) of this section, the local law of the issuer’s jurisdiction or a nominated person’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a letter-of-credit right if the issuer’s jurisdiction or nominated person’s jurisdiction is a state.

 (b) For purposes of AS 45.29.301 — 45.29.342, an issuer’s jurisdiction or nominated person’s jurisdiction is the jurisdiction whose law governs the liability of the issuer or nominated person with respect to the letter-of-credit right as provided in AS 45.05.116.

 (c) This section does not apply to a security interest that is perfected only under AS 45.29.308(d).




Sec. 45.29.307. Location of debtor.
 (a) In this section, “place of business” means a place where a debtor conducts its affairs.

 (b) Except as otherwise provided in this section, the following rules determine a debtor’s location:
     (1) a debtor who is an individual is located at the individual’s principal residence;

     (2) a debtor that is an organization and has only one place of business is located at its place of business;

     (3) a debtor that is an organization and has more than one place of business is located at its chief executive office.

 (c) The provisions of (b) of this section apply only if a debtor’s residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording, or registration system as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral. If (b) of this section does not apply, the debtor is located in the District of Columbia.

 (d) A person who ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by (b) and (c) of this section.

 (e) A registered organization that is organized under the law of a state is located in that state.

 (f) Except as otherwise provided in (i) of this section, a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a state are located
     (1) in the state that the law of the United States designates if the law designates a state of location;

     (2) in the state that the registered organization, branch, or agency designates if the law of the United States authorizes the registered organization, branch, or agency to designate its state of location, including by designating its main office, home office, or other comparable office; or

     (3) in the District of Columbia if neither (1) nor (2) of this subsection applies.

 (g) A registered organization continues to be located in the jurisdiction specified by (e) or (f) of this section notwithstanding
     (1) the suspension, revocation, forfeiture, or lapse of the registered organization’s status as such in its jurisdiction of organization; or

     (2) the dissolution, winding up, or cancellation of the existence of the registered organization.

 (h) The United States is located in the District of Columbia.

 (i) A branch or agency of a bank that is not organized under the law of the United States or a state is located in the state in which the branch or agency is licensed if all branches and agencies of the bank are licensed in only one state.

 (j) A foreign air carrier, under the Federal Aviation Act of 1958, as amended, is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.

 (k) This section applies only for purposes of AS 45.29.301 — 45.29.342.




Sec. 45.29.308. When security interest or agricultural lien is perfected; continuity of perfection.
 (a) Except as otherwise provided in this section and AS 45.29.309, a security interest is perfected if it has attached and all of the applicable requirements for perfection in AS 45.29.310 — 45.29.316 have been satisfied. A security interest is perfected when it attaches if the applicable requirements are satisfied before the security interest attaches.

 (b) An agricultural lien is perfected if it has become effective and all of the applicable requirements for perfection in AS 45.29.310 have been satisfied. An agricultural lien is perfected when it becomes effective if the applicable requirements are satisfied before the agricultural lien becomes effective.

 (c) A security interest or agricultural lien is perfected continuously if it is originally perfected by one method under this chapter and is later perfected by another method under this chapter, without an intermediate period when it was unperfected.

 (d) Perfection of a security interest in collateral also perfects a security interest in a supporting obligation for the collateral.

 (e) Perfection of a security interest in a right to payment or performance also perfects a security interest in a security interest, mortgage, or other lien on personal or real property securing the right.

 (f) Perfection of a security interest in a securities account also perfects a security interest in the security entitlements carried in the securities account.

 (g) Perfection of a security interest in a commodity account also perfects a security interest in the commodity contracts carried in the commodity account.




Sec. 45.29.309. Security interest perfected upon attachment.
The following security interests are perfected when they attach:
     (1) a purchase money security interest in consumer goods, except as otherwise provided in AS 45.29.311(b) with respect to consumer goods that are subject to a statute or treaty described in AS 45.29.311(a);

     (2) an assignment of accounts or payment intangibles that does not, by itself or in conjunction with other assignments to the same assignee, transfer a significant part of the assignor’s outstanding accounts or payment intangibles;

     (3) a sale of a payment intangible;

     (4) a sale of a promissory note;

     (5) a security interest created by the assignment of a health care insurance receivable to the provider of the health care goods or services;

     (6) a security interest arising under AS 45.02.401, 45.02.505, 45.02.711(c), or AS 45.12.508(e), until the debtor obtains possession of the collateral;

     (7) a security interest of a collecting bank arising under AS 45.04.210;

     (8) a security interest of an issuer or nominated person arising under AS 45.05.118;

     (9) a security interest arising in the delivery of a financial asset under AS 45.29.206(c);

     (10) a security interest in investment property created by a broker or securities intermediary;

     (11) a security interest in a commodity contract or a commodity account created by a commodity intermediary;

     (12) an assignment for the benefit of all creditors of the transferor and subsequent transfers by the assignee thereunder; and

     (13) a security interest created by an assignment of a beneficial interest in a decedent’s estate.




Sec. 45.29.310. When filing required to perfect security interest or agricultural lien; security interests and agricultural liens to which filing provisions do not apply.
 (a) Except as otherwise provided in (b) of this section and AS 45.29.312(b), a financing statement must be filed to perfect all security interests and agricultural liens.

 (b) The filing of a financing statement is not necessary to perfect a security interest
     (1) that is perfected under AS 45.29.308(d), (e), (f), or (g);

     (2) that is perfected under AS 45.29.309 when it attaches;

     (3) in property subject to a statute, regulation, or treaty described in AS 45.29.311(a);

     (4) in goods in possession of a bailee that is perfected under AS 45.29.312(d)(1) or (2);

     (5) in certificated securities, documents, goods, or instruments that is perfected without filing, control, or possession under AS 45.29.312(e), (f), or (g);

     (6) in collateral in the secured party’s possession under AS 45.29.313;

     (7) in a certificated security that is perfected by delivery of the security certificate to the secured party under AS 45.29.313;

     (8) in deposit accounts, electronic chattel paper, electronic documents, investment property, or letter-of-credit rights that is perfected by control under AS 45.29.314;

     (9) in proceeds that is perfected under AS 45.29.315; or

     (10) that is perfected under AS 45.29.316.

 (c) If a secured party assigns a perfected security interest or agricultural lien, a filing under this chapter is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.




Sec. 45.29.311. Perfection of security interests in property subject to certain statutes, regulations, and treaties.
 (a) Except as otherwise provided in (d) of this section, the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to
     (1) a statute, regulation, or treaty of the United States whose requirements for a security interest’s obtaining priority over the rights of a lien creditor with respect to the property preempt AS 45.29.310(a);

     (2) AS 28.10; however, during a period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of AS 45.29.501 — 45.29.525 apply to a security interest in that collateral created by that person as debtor; or

     (3) a statute of another jurisdiction that provides for a security interest to be indicated on a certificate of title as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the property.

 (b) Compliance with the requirements of a statute, regulation, or treaty described in (a) of this section for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under this chapter. Except as otherwise provided in (d) of this section, AS 45.29.313, and 45.29.316(d) and (e) for goods covered by a certificate of title, a security interest in property subject to a statute, regulation, or treaty described in (a) of this section may be perfected only by compliance with those requirements, and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of possession of the collateral.

 (c) Except as otherwise provided in (d) of this section and AS 45.29.316(d) and (e), duration and renewal of perfection of a security interest perfected by compliance with the requirements prescribed by a statute, regulation, or treaty described in (a) of this section are governed by the statute, regulation, or treaty. In other respects, the security interest is subject to this chapter.

 (d) During a period in which collateral subject to a statute specified in (a)(2) of this section is inventory held for sale or lease by a person or leased by that person as lessor and that person is in the business of selling goods of that kind, this section does not apply to a security interest in that collateral created by that person.




Sec. 45.29.312. Perfection of security interests in chattel paper, deposit accounts, documents, goods covered by documents, instruments, investment property, letter-of-credit rights, and money; perfection by permissive filing; temporary perfection without filing or transfer of possession.
 (a) A security interest in chattel paper, negotiable documents, instruments, or investment property may be perfected by filing.

 (b) Except as otherwise provided in AS 45.29.315(c) and (d) for proceeds,
     (1) a security interest in a deposit account may be perfected only by control under AS 45.29.314;

     (2) and except as otherwise provided in AS 45.29.308(d), a security interest in a letter-of-credit right may be perfected only by control under AS 45.29.314; and

     (3) a security interest in money may be perfected only by the secured party’s taking possession under AS 45.29.313.

 (c) While goods are in the possession of a bailee that has issued a negotiable document covering the goods, a security interest
     (1) in the goods may be perfected by perfecting a security interest in the document; and

     (2) perfected in the document has priority over a security interest that becomes perfected in the goods by another method during that time.

 (d) While goods are in the possession of a bailee that has issued a nonnegotiable document covering the goods, a security interest in the goods may be perfected by
     (1) issuance of a document in the name of the secured party;

     (2) the bailee’s receipt of notification of the secured party’s interest; or

     (3) filing as to the goods.

 (e) A security interest in certificated securities, negotiable documents, or instruments is perfected without filing or the taking of possession or control for a period of 20 days from the time the security interest attaches to the extent that it arises for new value given under an authenticated security agreement.

 (f) A perfected security interest in a negotiable document or goods in possession of a bailee, other than one that has issued a negotiable document for the goods, remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of
     (1) ultimate sale or exchange; or

     (2) loading, unloading, storing, shipping, transshipping, manufacturing, processing, or otherwise dealing with the goods or documents representing the goods in a manner preliminary to their sale or exchange.

 (g) A perfected security interest in a certificated security or instrument remains perfected for 20 days without filing if the secured party delivers the security certificate or instrument to the debtor for the purpose of
     (1) ultimate sale or exchange; or

     (2) presentation, collection, enforcement, renewal, or registration of transfer.

 (h) After the 20-day period specified in (e), (f), or (g) of this section expires, perfection depends upon compliance with this chapter.




Sec. 45.29.313. When possession by or delivery to secured party perfects security interest without filing.
 (a) Except as otherwise provided in (b) of this section, a secured party may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under AS 45.08.301.

 (b) With respect to goods covered by a certificate of title issued by this state, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in AS 45.29.316(d).

 (c) With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor’s business, when the person
     (1) in possession authenticates a record acknowledging that the person holds possession of the collateral for the secured party’s benefit; or

     (2) takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party’s benefit.

 (d) If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.

 (e) A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under AS 45.08.301 and remains perfected by delivery until the debtor obtains possession of the security certificate.

 (f) A person in possession of collateral is not required to acknowledge that it holds possession for a secured party’s benefit.

 (g) If a person acknowledges that it holds possession for the secured party’s benefit,
     (1) the acknowledgment is effective under (c) of this section or AS 45.08.301(a), even if the acknowledgment violates the rights of a debtor; and

     (2) unless the person otherwise agrees or law other than this chapter otherwise provides, the person does not owe a duty to the secured party and is not required to confirm the acknowledgment to another person.

 (h) A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor’s business if the person was instructed before the delivery or is instructed contemporaneously with the delivery to
     (1) hold possession of the collateral for the secured party’s benefit; or

     (2) redeliver the collateral to the secured party.

 (i) A secured party does not relinquish possession, even if a delivery under (h) of this section violates the rights of a debtor. A person to whom collateral is delivered under (h) of this section does not owe a duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this chapter otherwise provides.




Sec. 45.29.314. Perfection by control.
 (a) A security interest in deposit accounts, electronic chattel paper, investment property, letter-of-credit rights, or electronic documents may be perfected by control of the collateral under AS 45.07.116, AS 45.29.104, 45.29.105, 45.29.106, or 45.29.107.

 (b) A security interest in deposit accounts, electronic chattel paper, letter-of-credit rights, or electronic documents is perfected by control under AS 45.07.116, AS 45.29.104, 45.29.105, or 45.29.107 when the secured party obtains control and remains perfected by control only while the secured party retains control.

 (c) A security interest in investment property is perfected by control under AS 45.29.106 from the time the secured party obtains control and remains perfected by control until
     (1) the secured party does not have control; and

     (2) one of the following occurs:
          (A) if the collateral is a certificated security, the debtor has or acquires possession of the security certificate;

          (B) if the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner; or

          (C) if the collateral is a security entitlement, the debtor is or becomes the entitlement holder.




Sec. 45.29.315. Secured party’s rights on disposition of collateral and in proceeds.
 (a) Except as otherwise provided in this chapter,
     (1) a security interest or agricultural lien continues in collateral notwithstanding sale, lease, license, exchange, or other disposition of the security interest or agricultural lien unless the secured party authorized the disposition free of the security interest or agricultural lien; and

     (2) a security interest attaches to any identifiable proceeds of collateral.

 (b) Proceeds that are commingled with other property are identifiable proceeds if the proceeds
     (1) are goods, to the extent provided by AS 45.29.336; and

     (2) are not goods, to the extent that the secured party identifies the proceeds by a method of tracing, including application of equitable principles, that is permitted under law other than this chapter with respect to commingled property of the type involved.

 (c) A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected.

 (d) A perfected security interest in proceeds becomes unperfected on the 21st day after the security interest attaches to the proceeds unless
     (1) the following conditions are satisfied
          (A) a filed financing statement covers the original collateral;

          (B) the proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed; and

          (C) the proceeds are not acquired with cash proceeds;

     (2) the proceeds are identifiable cash proceeds; or

     (3) the security interest in the proceeds is perfected other than under (c) of this section when the security interest attaches to the proceeds or within 20 days thereafter.

 (e) If a filed financing statement covers the original collateral, a security interest in proceeds that remains perfected under (d)(1) of this section becomes unperfected at the later of
     (1) when the effectiveness of the filed financing statement lapses under AS 45.29.515 or is terminated under AS 45.29.513; or

     (2) the 21st day after the security interest attaches to the proceeds.




Sec. 45.29.316. Continued perfection of security interest following change in governing law.
 (a) A security interest perfected under the law of the jurisdiction designated in AS 45.29.301(1) or 45.29.305(c) remains perfected until the earliest of
     (1) the time perfection would have ceased under the law of that jurisdiction;

     (2) the expiration of four months after a change of the debtor’s location to another jurisdiction; or

     (3) the expiration of one year after a transfer of collateral to a person who thereby becomes a debtor and is located in another jurisdiction.

 (b) If a security interest described in (a) of this section becomes perfected under the law of the other jurisdiction before the earliest time or event described in (a) of this section, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it becomes unperfected and is considered never to have been perfected as against a purchaser of the collateral for value.

 (c) A possessory security interest in collateral, other than goods covered by a certificate of title and as-extracted collateral consisting of goods, remains continuously perfected if
     (1) the collateral is located in one jurisdiction and subject to a security interest perfected under the law of that jurisdiction;

     (2) after the event described in (1) of this subsection occurs, the collateral is brought into another jurisdiction; and

     (3) upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.

 (d) Except as otherwise provided in (e) of this section, a security interest in goods covered by a certificate of title that is perfected by a method under the law of another jurisdiction when the goods become covered by a certificate of title from this state remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.

 (e) A security interest described in (d) of this section becomes unperfected as against a purchaser of the goods for value and is considered never to have been perfected as against a purchaser of the goods for value if the applicable requirements for perfection under AS 45.29.311(b) or 45.29.313 are not satisfied before the earlier of
     (1) the time the security interest would have become unperfected under the law of the other jurisdiction had the goods not become covered by a certificate of title from this state; or

     (2) the expiration of four months after the goods had become so covered.

 (f) A security interest in deposit accounts, letter-of-credit rights, or investment property that is perfected under the law of the bank’s jurisdiction, the issuer’s jurisdiction, a nominated person’s jurisdiction, the securities intermediary’s jurisdiction, or the commodity intermediary’s jurisdiction, as applicable, remains perfected until the earlier of
     (1) the time the security interest would have become unperfected under the law of that jurisdiction; or

     (2) the expiration of four months after a change of the applicable jurisdiction to another jurisdiction.

 (g) If a security interest described in (f) of this section becomes perfected under the law of the other jurisdiction before the earlier of the time or the end of the period described in (f) of this section, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is considered never to have been perfected as against a purchaser of the collateral for value.

 (h) The following rules apply to collateral to which a security interest attaches within four months after the debtor changes its location to another jurisdiction:
     (1) a financing statement filed before the change under the law of the jurisdiction designated in AS 45.29.301(1) or 45.29.305(c) is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral had the debtor not changed its location;

     (2) if a security interest perfected by a financing statement that is effective under (1) of this subsection becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in AS 45.29.301(1) or 45.29.305(c) or the expiration of the four-month period, it remains perfected; if the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is considered never to have been perfected as against a purchaser of the collateral for value.

 (i) If a financing statement naming an original debtor is filed under the law of the jurisdiction designated in AS 45.29.301(1) or 45.29.305(c) and the new debtor is located in another jurisdiction, the following rules apply:
     (1) the financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four months after, the new debtor becomes bound under AS 45.29.203(d), if the financing statement would have been effective to perfect a security interest in the collateral had the collateral been acquired by the original debtor;

     (2) a security interest perfected by the financing statement and that becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in AS 45.29.301(1) or 45.29.305(c) or the expiration of the four-month period remains perfected; a security interest that is perfected by the financing statement but that does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is considered never to have been perfected as against a purchaser of the collateral for value.




Sec. 45.29.317. Interests that take priority over or take free of security interest or agricultural lien.
 (a) A security interest or agricultural lien is subordinate to the rights of a person
     (1) entitled to priority under AS 45.29.322; and

     (2) except as otherwise provided in (e) of this section, that becomes a lien creditor before the earlier of the time
          (A) the security interest or agricultural lien is perfected; or

          (B) a financing statement covering the collateral is filed.

 (b) Except as otherwise provided in (e) of this section, a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, or a certificated security takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

 (c) Except as otherwise provided in (e) of this section, a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

 (d) A licensee of a general intangible or a buyer, other than a secured party, of collateral other than tangible chattel paper, tangible documents, goods, instruments, or a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.

 (e) Except as otherwise provided in AS 45.29.320 and 45.29.321, if a person files a financing statement with respect to a purchase money security interest before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor that arise between the time the security interest attaches and the time of filing.




Sec. 45.29.318. No interest retained in right to payment that is sold; rights and title of seller of account or chattel paper with respect to creditors and purchasers.
 (a) A debtor that has sold an account, chattel paper, payment intangible, or promissory note does not retain a legal or equitable interest in the collateral sold.

 (b) For purposes of determining the rights of creditors of, and purchasers for value of an account or chattel paper from, a debtor that has sold an account or chattel paper, while the buyer’s security interest is unperfected, the debtor is considered to have rights and title to the account or chattel paper identical to those the debtor sold.




Sec. 45.29.319. Rights and title of consignee with respect to creditors and purchasers.
 (a) Except as otherwise provided in (b) of this section, for purposes of determining the rights of creditors of, and purchasers for value of goods from, a consignee, while the goods are in the possession of the consignee, the consignee is considered to have rights and title to the goods identical to those the consignor had or had power to transfer.

 (b) For purposes of determining the rights of a creditor of a consignee, law other than this chapter determines the rights and title of a consignee while goods are in the consignee’s possession if, under AS 45.29.301 — 45.29.342, a perfected security interest held by the consignor would have priority over the rights of the creditor.




Sec. 45.29.320. Buyer of goods.
 (a) Except as otherwise provided in (e) of this section, a buyer in ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.

 (b) Except as otherwise provided in (e) of this section, a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys
     (1) without knowledge of the security interest;

     (2) for value;

     (3) primarily for the buyer’s personal, family, or household purposes; and

     (4) before the filing of a financing statement covering the goods.

 (c) To the extent that it affects the priority of a security interest over a buyer of goods under (b) of this section, the period of effectiveness of a filing made in the jurisdiction in which the seller is located is governed by AS 45.29.316(a) and (b).

 (d) A buyer in ordinary course of business buying oil, gas, or other minerals at the wellhead or minehead or after extraction takes free of an interest arising out of an encumbrance.

 (e) The provisions of (a) and (b) of this section do not affect a security interest in goods in the possession of the secured party under AS 45.29.313.




Sec. 45.29.321. Licensee of general intangible and lessee of goods in ordinary course of business.
 (a) In this section, “licensee in ordinary course of business” means a person who becomes a licensee of a general intangible in good faith, without knowledge that the license violates the rights of another person in the general intangible, and in the ordinary course from a person in the business of licensing general intangibles of that kind. A person becomes a licensee in the ordinary course if the license to the person comports with the usual or customary practices in the kind of business in which the licensor is engaged or with the licensor’s own usual or customary practices.

 (b) A licensee in ordinary course of business takes its rights under a nonexclusive license free of a security interest in the general intangible created by the licensor even if the security interest is perfected and the licensee knows of its existence.

 (c) A lessee in ordinary course of business takes its leasehold interest free of a security interest in the goods created by the lessor even if the security interest is perfected and the lessee knows of its existence.




Sec. 45.29.322. Priorities among conflicting security interests in and agricultural liens on same collateral.
 (a) Except as otherwise provided in this section, priority among conflicting security interests and agricultural liens in the same collateral is determined according to the following rules:
     (1) conflicting perfected security interests and agricultural liens rank according to priority in time of filing or perfection; priority dates from the earlier of the time a filing covering the collateral is first made or the security interest or agricultural lien is first perfected if there is no period thereafter when there is neither filing nor perfection;

     (2) a perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien;

     (3) the first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.

 (b) For the purposes of (a)(1) of this section, the time of filing or perfection as to a security interest in collateral
     (1) is also the time of filing or perfection as to a security interest in proceeds; and

     (2) supported by a supporting obligation is also the time of filing or perfection as to a security interest in the supporting obligation.

 (c) Except as otherwise provided in (f) of this section, a security interest in collateral that qualifies for priority over a conflicting security interest under AS 45.29.327, 45.29.328, 45.29.329, 45.29.330, or 45.29.331 also has priority over a conflicting security interest in
     (1) supporting obligation for the collateral; and

     (2) proceeds of the collateral if
          (A) the security interest in proceeds is perfected;

          (B) the proceeds are cash proceeds or of the same type as the collateral; and

          (C) in the case of proceeds that are proceeds of proceeds, all intervening proceeds are cash proceeds, proceeds of the same type as the collateral, or an account relating to the collateral.

 (d) Subject to (e) of this section and except as otherwise provided in (f) of this section, if a security interest in chattel paper, deposit accounts, negotiable documents, instruments, investment property, or letter-of-credit rights is perfected by a method other than filing, conflicting perfected security interests in proceeds of the collateral rank according to priority in time of filing.

 (e) The provisions of (d) of this section apply only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property, or letter-of-credit rights.

 (f) The provisions of (a) — (e) of this section are subject to
     (1) the provisions of (g) of this section and the other provisions of AS 45.29.301 — 45.29.342;

     (2) AS 45.04.210 with respect to a security interest of a collecting bank;

     (3) AS 45.05.118 with respect to a security interest of an issuer or nominated person; and

     (4) AS 45.29.110 with respect to a security interest arising under AS 45.02 or AS 45.12.

 (g) A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.




Sec. 45.29.323. Future advances.
 (a) Except as otherwise provided in (c) of this section, for purposes of determining the priority of a perfected security interest under AS 45.29.322(a)(1), perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that
     (1) is made while the security interest is perfected only
          (A) under AS 45.29.309 when it attaches; or

          (B) temporarily under AS 45.29.312(e), (f), or (g); and

     (2) not made pursuant to a commitment entered into before or while the security interest is perfected by a method other than under AS 45.29.309 or 45.29.312(e), (f), or (g).

 (b) Except as otherwise provided in (c) of this section, a security interest is subordinate to the rights of a person who becomes a lien creditor to the extent that the security interest secures an advance made more than 45 days after the person becomes a lien creditor unless the advance is made
     (1) without knowledge of the lien; or

     (2) pursuant to a commitment entered into without knowledge of the lien.

 (c) The provisions of (a) and (b) of this section do not apply to a security interest held by a secured party that is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor.

 (d) Except as otherwise provided in (e) of this section, a buyer of goods other than a buyer in ordinary course of business takes free of a security interest to the extent that it secures advances made after the earlier of
     (1) the time the secured party acquires knowledge of the buyer’s purchase; or

     (2) 45 days after the purchase.

 (e) The provisions of (d) of this section do not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45-day period.

 (f) Except as otherwise provided in (g) of this section, a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of
     (1) the time the secured party acquires knowledge of the lease; or

     (2) 45 days after the lease contract becomes enforceable.

 (g) The provisions of (f) of this section do not apply if the advance is made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the 45-day period.




Sec. 45.29.324. Priority of purchase money security interests.
 (a) Except as otherwise provided in (g) of this section, a perfected purchase money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in AS 45.29.327, a perfected security interest in its identifiable proceeds also has priority if the purchase money security interest is perfected when the debtor receives possession of the collateral or within 20 days thereafter.

 (b) Subject to (c) of this section and except as otherwise provided in (g) of this section, a perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper if so provided in AS 45.29.330, and, except as otherwise provided in AS 45.29.327, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer if
     (1) the purchase money security interest is perfected when the debtor receives possession of the inventory;

     (2) the purchase money secured party sends an authenticated notification to the holder of the conflicting security interest;

     (3) the holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and

     (4) the notification states that the person sending the notification has or expects to acquire a purchase money security interest in inventory of the debtor and describes the inventory.

 (c) The provisions of (b)(2) — (4) of this section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory if the purchase money security interest is
     (1) perfected by filing, before the date of the filing; or

     (2) temporarily perfected without filing or possession under AS 45.29.312(f) before the beginning of the 20-day period under AS 45.29.312(f).

 (d) Subject to (e) of this section and except as otherwise provided in (g) of this section, a perfected purchase money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in AS 45.29.327, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority if
     (1) the purchase money security interest is perfected when the debtor receives possession of the livestock;

     (2) the purchase money secured party sends an authenticated notification to the holder of the conflicting security interest;

     (3) the holder of the conflicting security interest receives the notification within six months before the debtor receives possession of the livestock; and

     (4) the notification states that the person sending the notification has or expects to acquire a purchase money security interest in livestock of the debtor and describes the livestock.

 (e) The provisions of (d)(2) — (4) of this section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock if the purchase money security interest is
     (1) perfected by filing before the date of the filing; or

     (2) temporarily perfected without filing or possession under AS 45.29.312(f) before the beginning of the 20-day period under AS 45.29.312(f).

 (f) Except as otherwise provided in (g) of this section, a perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in AS 45.29.327, a perfected security interest in its identifiable proceeds also has priority to the extent that the purchase money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.

 (g) If more than one security interest qualifies for priority in the same collateral under (a), (b), (d), or (f) of this section,
     (1) a security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and

     (2) in all other cases, AS 45.29.322(a) applies to the qualifying security interests.




Sec. 45.29.325. Priority of security interests in transferred collateral.
 (a) Except as otherwise provided in (b) of this section, a security interest created by a debtor is subordinate to a security interest in the same collateral created by another person if
     (1) the debtor acquired the collateral subject to the security interest created by the other person;

     (2) the security interest created by the other person was perfected when the debtor acquired the collateral; and

     (3) there is no period after the events described in (1) and (2) of this subsection when the security interest is unperfected.

 (b) The provisions of (a) of this section subordinate a security interest only if the security interest
     (1) otherwise would have priority solely under AS 45.29.322(a) or 45.29.324; or

     (2) arose solely under AS 45.02.711(c) or AS 45.12.508(e).




Sec. 45.29.326. Priority of security interests created by new debtor.
 (a) Subject to (b) of this section, a security interest that is created by a new debtor in collateral in which the new debtor has or acquires rights and that is perfected solely by a filed financing statement that would be ineffective to perfect the security interest but for the application of AS 45.29.316(i)(1) or 45.29.508 is subordinate to a security interest in the same collateral that is perfected other than by a financing statement described in this subsection.

 (b) The other provisions of AS 45.29.301 — 45.29.342 determine the priority among conflicting security interests in the same collateral perfected by filed financing statements described in (a) of this section. However, if the security agreements to which a new debtor became bound as debtor were not entered into by the same original debtor, the conflicting security interests rank according to priority in time of the new debtor’s having become bound.




Sec. 45.29.327. Priority of security interests in deposit account.
The following rules govern priority among conflicting security interests in the same deposit account:
     (1) a security interest held by a secured party having control of the deposit account under AS 45.29.104 has priority over a conflicting security interest held by a secured party that does not have control;

     (2) except as otherwise provided in (3) and (4) of this section, security interests perfected by control under AS 45.29.314 rank according to priority in time of obtaining control;

     (3) except as otherwise provided in (4) of this section, a security interest held by the bank with which the deposit account is maintained has priority over a conflicting security interest held by another secured party;

     (4) a security interest perfected by control under AS 45.29.104(a)(3) has priority over a security interest held by the bank with which the deposit account is maintained.




Sec. 45.29.328. Priority of security interests in investment property.
The following rules govern priority among conflicting security interests in the same investment property:
     (1) a security interest held by a secured party having control of investment property under AS 45.29.106 has priority over a security interest held by a secured party that does not have control of the investment property;

     (2) except as otherwise provided in (3) and (4) of this section, conflicting security interests held by secured parties each of which has control under AS 45.29.106 rank according to priority in time, if the collateral is
          (A) a security, of obtaining control;

          (B) a security entitlement carried in a securities account and if the secured party obtained control
               (i) under AS 45.08.106(d)(1), of the secured party’s becoming the person for which the securities account is maintained;

               (ii) under AS 45.08.106(d)(2), of the securities intermediary’s agreement to comply with the secured party’s entitlement orders with respect to security entitlements carried or to be carried in the securities account; or

               (iii) through another person under AS 45.08.106(d)(3), of the time on which priority would be based under this paragraph if the other person were the secured party; or

          (C) a commodity contract carried with a commodity intermediary, of the satisfaction of the requirement for control specified in AS 45.29.106(b)(2) with respect to commodity contracts carried or to be carried with the commodity intermediary;

     (3) a security interest held by a securities intermediary in a security entitlement or a securities account maintained with the securities intermediary has priority over a conflicting security interest held by another secured party;

     (4) a security interest held by a commodity intermediary in a commodity contract or a commodity account maintained with the commodity intermediary has priority over a conflicting security interest held by another secured party;

     (5) a security interest in a certificated security in registered form that is perfected by taking delivery under AS 45.29.313(a) and not by control under AS 45.29.314 has priority over a conflicting security interest perfected by a method other than control;

     (6) conflicting security interests created by a broker, securities intermediary, or commodity intermediary that are perfected without control under AS 45.29.106 rank equally;

     (7) in all other cases, priority among conflicting security interests in investment property is governed by AS 45.29.322 and 45.29.323.




Sec. 45.29.329. Priority of security interests in letter-of-credit right.
The following rules govern priority among conflicting security interests in the same letter-of-credit right:
     (1) a security interest held by a secured party having control of the letter-of-credit right under AS 45.29.107 has priority to the extent of its control over a conflicting security interest held by a secured party that does not have control;

     (2) security interests perfected by control under AS 45.29.314 rank according to priority in time of obtaining control.




Sec. 45.29.330. Priority of purchaser of chattel paper or instrument.
 (a) A purchaser of chattel paper has priority over a security interest in the chattel paper that is claimed merely as proceeds of inventory subject to a security interest if
     (1) in good faith and in the ordinary course of the purchaser’s business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under AS 45.29.105; and

     (2) the chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.

 (b) A purchaser of chattel paper has priority over a security interest in the chattel paper that is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under AS 45.29.105 in good faith, in the ordinary course of the purchaser’s business, and without knowledge that the purchase violates the rights of the secured party.

 (c) Except as otherwise provided in AS 45.29.327, a purchaser having priority in chattel paper under (a) or (b) of this section also has priority in proceeds of the chattel paper to the extent that
     (1) AS 45.29.322 provides for priority in the proceeds; or

     (2) the proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods even if the purchaser’s security interest in the proceeds is unperfected.

 (d) Except as otherwise provided in AS 45.29.331(a), a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.

 (e) For purposes of (a) and (b) of this section, the holder of a purchase money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.

 (f) For purposes of (b) and (d) of this section, if chattel paper or an instrument indicates that it has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party.




Sec. 45.29.331. Priority of rights of purchasers of instruments, documents, and securities under other chapters; priority of interests in financial assets and security entitlements under AS 45.08.
 (a) This chapter does not limit the rights of a holder in due course of a negotiable instrument, a holder to which a negotiable document of title has been duly negotiated, or a protected purchaser of a security. These holders or purchasers take priority over an earlier security interest, even if perfected, to the extent provided in AS 45.03, AS 45.07, and AS 45.08.

 (b) This chapter does not limit the rights of or impose liability on a person to the extent that the person is protected against the assertion of a claim under AS 45.08.

 (c) Filing under this chapter does not constitute notice of a claim or defense to the holders, purchasers, or persons described in (a) and (b) of this section.




Sec. 45.29.332. Transfer of money; transfer of funds from deposit account.
 (a) A transferee of money takes the money free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of the secured party.

 (b) A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts in collusion with the debtor in violating the rights of the secured party.




Sec. 45.29.333. Priority of certain liens arising by operation of law.
 (a) In this section, “possessory lien” means an interest, other than a security interest or an agricultural lien,
     (1) that secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person’s business;

     (2) that is created by statute or rule of law in favor of the person; and

     (3) whose effectiveness depends on the person’s possession of the goods.

 (b) A possessory lien on goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise.




Sec. 45.29.334. Priority of security interests in fixtures and crops.
 (a) A security interest under this chapter may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this chapter in ordinary building materials incorporated into an improvement on land.

 (b) This chapter does not prevent creation of an encumbrance upon fixtures under real property law.

 (c) In cases not governed by (d) — (h) of this section, a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.

 (d) Except as otherwise provided in (h) of this section, a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and
     (1) the security interest is a purchase money security interest;

     (2) the interest of the encumbrancer or owner arises before the goods become fixtures; and

     (3) the security interest is perfected by a fixture filing before the goods become fixtures or within 20 days after the goods become fixtures.

 (e) A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if
     (1) the debtor has an interest of record in the real property or is in possession of the real property and the security interest
          (A) is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; and

          (B) has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;

     (2) before the goods become fixtures, the security interest is perfected by a method permitted by this chapter and the fixtures are readily removable
          (A) factory or office machines;

          (B) equipment that is not primarily used or leased for use in the operation of the real property; or

          (C) replacements of domestic appliances that are consumer goods;

     (3) the conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by a method permitted by this chapter; or

     (4) the security interest is
          (A) created in a manufactured home in a manufactured home transaction; and

          (B) perfected under a statute described in AS 45.29.311(a)(2).

 (f) A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if
     (1) the encumbrancer or owner has, in an authenticated record, consented to the security interest or disclaimed an interest in the goods as fixtures; or

     (2) the debtor has a right to remove the goods as against the encumbrancer or owner.

 (g) The priority of the security interest under (f)(2) of this section continues for a reasonable time if the debtor’s right to remove the goods as against the encumbrancer or owner terminates.

 (h) A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land if a recorded mortgage so indicates. Except as otherwise provided in (e) and (f) of this section, a security interest in fixtures is subordinate to a construction mortgage if the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.

 (i) A perfected security interest in crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property.

 (j) The provisions of (i) of this section prevail over an inconsistent statute unless that statute contains an exemption that refers specifically to this section.




Sec. 45.29.335. Accessions.
 (a) A security interest may be created in an accession and continues in collateral that becomes an accession.

 (b) If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.

 (c) Except as otherwise provided in (d) of this section, the other provisions of AS 45.29.301 — 45.29.342 determine the priority of a security interest in an accession.

 (d) A security interest in an accession is subordinate to a security interest in the whole that is perfected by compliance with the requirements of a certificate of title statute under AS 45.29.311(b).

 (e) After default, subject to AS 45.29.601 — 45.29.628, a secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole.

 (f) A secured party that removes an accession from other goods under (e) of this section shall promptly reimburse any holder of a security interest or other lien on, or owner of, the whole or of the other goods, other than the debtor, for the cost of repair of a physical injury to the whole or the other goods. The secured party need not reimburse the holder or owner for any diminution in value of the whole or the other goods caused by the absence of the accession removed or by any necessity for replacing it. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.




Sec. 45.29.336. Commingled goods.
 (a) In this section, “commingled goods” means goods that are physically united with other goods in a manner so that their identity is lost in a product or mass.

 (b) A security interest does not exist in commingled goods as such. However, a security interest may attach to a product or mass that results when goods become commingled goods.

 (c) If collateral becomes commingled goods, a security interest attaches to the product or mass.

 (d) If a security interest in collateral is perfected before the collateral becomes commingled goods, the security interest that attaches to the product or mass under (c) of this section is perfected.

 (e) Except as otherwise provided in (f) of this section, the other provisions of AS 45.29.301 — 45.29.342 determine the priority of a security interest that attaches to the product or mass under (c) of this section.

 (f) If more than one security interest attaches to the product or mass under (c) of this section, the following rules determine priority:
     (1) a security interest that is perfected under (d) of this section has priority over a security interest that is unperfected at the time the collateral becomes commingled goods;

     (2) if more than one security interest is perfected under (d) of this section, the security interests rank equally in proportion to the value of the collateral at the time it became commingled goods.




Sec. 45.29.337. Priority of security interests in goods covered by certificate of title.
If, while a security interest in goods is perfected by a method under the law of another jurisdiction, this state issues a certificate of title that does not show that the goods are subject to the security interest or contain a statement that the goods may be subject to security interests not shown on the certificate,
     (1) a buyer of the goods, other than a person in the business of selling goods of that kind, takes free of the security interest if the buyer gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest; and

     (2) the security interest is subordinate to a conflicting security interest in the goods that attaches, and is perfected under AS 45.29.311(b) after issuance of the certificate and without the conflicting secured party’s knowledge of the security interest.




Sec. 45.29.338. Priority of security interest or agricultural lien perfected by filed financing statement providing certain incorrect information.
If a security interest or agricultural lien is perfected by a filed financing statement providing information described in AS 45.29.516(b)(5) that is incorrect at the time the financing statement is filed,
     (1) the security interest or agricultural lien is subordinate to a conflicting perfected security interest in the collateral to the extent that the holder of the conflicting security interest gives value in reasonable reliance upon the incorrect information; and

     (2) a purchaser, other than a secured party, of the collateral takes free of the security interest or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the purchaser gives value and, in the case of tangible chattel paper, tangible documents, goods, instruments, or a security certificate, receives delivery of the collateral.




Sec. 45.29.339. Priority subject to subordination.
This chapter does not preclude subordination by agreement by a person entitled to priority.


Sec. 45.29.340. Effectiveness of right of recoupment or setoff against deposit account.
 (a) Except as otherwise provided in (c) of this section, a bank with which a deposit account is maintained may exercise a right of recoupment or setoff against a secured party that holds a security interest in the deposit account.

 (b) Except as otherwise provided in (c) of this section, the application of this chapter to a security interest in a deposit account does not affect a right of recoupment or setoff of the secured party as to a deposit account maintained with the secured party.

 (c) The exercise by a bank of a setoff against a deposit account is ineffective against a secured party that holds a security interest in the deposit account that is perfected by control under AS 45.29.104(a)(3) if the setoff is based on a claim against the debtor.




Sec. 45.29.341. Bank’s rights and duties with respect to deposit account.
Except as otherwise provided in AS 45.29.340(c), and unless the bank otherwise agrees in an authenticated record, a bank’s rights and duties with respect to a deposit account maintained with the bank are not terminated, suspended, or modified by
     (1) the creation, attachment, or perfection of a security interest in the deposit account;

     (2) the bank’s knowledge of the security interest; or

     (3) the bank’s receipt of instructions from the secured party.




Sec. 45.29.342. Bank’s right to refuse to enter into or disclose existence of control agreement.
This chapter does not require a bank to enter into an agreement of the kind described in AS 45.29.104(a)(2), even if its customer so requests or directs. A bank that has entered into such an agreement is not required to confirm the existence of the agreement to another person unless requested to do so by its customer.


Article 4. Rights of Third Parties.


Sec. 45.29.401. Alienability of debtor’s rights.
 (a) Except as otherwise provided in (b) of this section and AS 45.29.406 — 45.29.409, whether a debtor’s rights in collateral may be voluntarily or involuntarily transferred is governed by law other than this chapter.

 (b) An agreement between the debtor and secured party that prohibits a transfer of the debtor’s rights in collateral or makes the transfer a default does not prevent the transfer from taking effect.




Sec. 45.29.402. Secured party not obligated on contract of debtor or in tort.
The existence of a security interest, agricultural lien, or authority given to a debtor to dispose of or use collateral, without more, does not subject a secured party to liability in contract or tort for the debtor’s acts or omissions.


Sec. 45.29.403. Agreement not to assert defenses against assignee.
 (a) In this section, the issue of whether an assignment is taken for value is governed by the provisions of AS 45.03.303(a).

 (b) Except as otherwise provided in this section, an agreement between an account debtor and an assignor not to assert against an assignee a claim or defense that the account debtor may have against the assignor is enforceable by an assignee that takes an assignment
     (1) for value;

     (2) in good faith;

     (3) without notice of a claim of a property or possessory right to the property assigned; and

     (4) without notice of a defense or claim in recoupment of the type that may be asserted against a person entitled to enforce a negotiable instrument under AS 45.03.305(a).

 (c) The provisions of (b) of this section do not apply to defenses of a type that may be asserted against a holder in due course of a negotiable instrument under AS 45.03.305(b).

 (d) In a consumer transaction, if a record evidences the account debtor’s obligation, if law other than this chapter requires that the record include a statement to the effect that the rights of an assignee are subject to claims or defenses that the account debtor could assert against the original obligee, and if the record does not include the statement,
     (1) the record has the same effect as if the record included the statement; and

     (2) the account debtor may assert against an assignee the claims and defenses that would have been available if the record included the statement.

 (e) This section is subject to law other than this chapter that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

 (f) Except as otherwise provided in (d) of this section, this section does not displace law other than this chapter that gives effect to an agreement by an account debtor not to assert a claim or defense against an assignee.




Sec. 45.29.404. Rights acquired by assignee; claims and defenses against assignee.
 (a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to (b) — (e) of this section, the rights of an assignee are subject to
     (1) all terms of the agreement between the account debtor and assignor and a defense or claim in recoupment arising from the transaction that gave rise to the contract; and

     (2) any other defense or claim of the account debtor against the assignor that accrues before the account debtor receives a notification of the assignment authenticated by the assignor or the assignee.

 (b) Subject to (c) of this section and except as otherwise provided in (d) of this section, the claim of an account debtor against an assignor may be asserted against an assignee under (a) of this section only to reduce the amount the account debtor owes.

 (c) This section is subject to law other than this chapter that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

 (d) In a consumer transaction, if a record evidences the account debtor’s obligation, law other than this chapter requires that the record include a statement to the effect that the account debtor’s recovery against an assignee with respect to claims and defenses against the assignor may not exceed amounts paid by the account debtor under the record, and the record does not include the statement, the extent to which a claim of an account debtor against the assignor may be asserted against an assignee is determined as if the record included the statement.

 (e) This section does not apply to an assignment of a health care insurance receivable.




Sec. 45.29.405. Modification of assigned contract.
 (a) A modification of or substitution for an assigned contract is effective against an assignee if made in good faith. The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provi