# 0020 Titles 5A to 12 (2010)

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## Record

- **Collection:** Tribal code
- **Document type:** Tribal code

## Text

0020 Titles 5A to 12 (2010)
NAVAJO NATION CODE ANNOTATED

Title 5A
Navajo Uniform Commercial Code

Note.
The numbering of Navajo Uniform Commercial Code sections remains as
close to the original Uniform Commercial Code as possible to maintain the
principle of uniformity.

Description of Articles
Article 1
Article 1 of the UCC is a general article which defines terms which are
used throughout the UCC.
(This section of the Navajo UCC has been
substantially unchanged with the exception of the addition of § 1–110 which
excludes certain types of barter transactions from the Navajo UCC.)
Article 2
Article 2 of the UCC governs the sale of personal property ("goods").
Goods means all things which are moveable at the time of their identification
in the contract of sale.
Goods do not include:
(i) intangibles, such as
patent rights; (ii) real property, such as houses and land; or (iii) services
such as legal or accounting work.
Article 2 codifies contract law as applied to the sales of personal
property.
It deals with the four basic questions of contract law:
(1) Is
there sufficient agreement to be a contract?; (2) What are the terms of the
contract?;
(3) Have the parties properly performed their duties under the
contract?; and (4) What are the remedies for breach of those duties? Although
Article 2 establishes some rules which apply to all sales contracts, for the
most part the rules in Articles 2 apply only where the parties themselves have
not made their intentions clear. For example, one rule which applies to all
contracts under Article 2 is that contracts for goods valued at more than five
hundred dollars ($500.00) must be in writing to be enforceable (the Navajo UCC
exempts certain barter transactions from this requirement under § 1–110).
Article 2 governs the formation of the contract, such as when an offer to
sell or purchase has been made, how to change such an offer and how to accept
it. For example, if a business makes an offer by mail to sell shoes and does
not specify how the offer can be accepted, the offer can be accepted by any
"reasonable means".
Thus, the offer could be accepted by mail, telegram or
even a telephone call if those methods were found to be reasonable.
Article 2 governs certain of the terms in a contract if the parties have
not agreed on that term or have failed to provide for a situation. These terms

include price, time of delivery, the point at which the risk of loss passes,
warranties concerning the goods and remedies for failure to perform.
For
example, if the parties fail to agree upon or forget to include the place and
time of delivery for the goods, the UCC states that the goods will be delivered
at the seller's place of business and the time allowed for delivery will be "a
reasonable time" as determined by prior dealings between the parties and
industry custom.
Article 2 also governs the performance of the obligations under the
contract.
The questions which arise in this area concern the seller's
obligation to deliver "conforming" goods, the buyer's obligation to accept
"conforming" goods, the buyer's right to inspect the goods and the buyer's
obligation to pay for the goods.
For example, unless the parties agree
otherwise, the buyer is obligated to pay for the goods at the time and place
the goods are received.
Finally, Article 2 sets out the remedies for either party upon the
failure of the other party to adequately perform its obligations. The remedies
must deal with situations, for the seller, in which the buyer refuses to accept
delivery, cancels the order, refuses to pay or becomes insolvent.
For the
buyer, these situations include those in which the seller has failed to
deliver, has delivered "non-conforming" goods, or has delivered goods which
causes an injury.
For example, unless otherwise agreed by the parties, if
during the course of several shipments the buyer refuses to make a payment when
due:
(i) the seller may withhold future delivery;
(ii) may resell the
remaining goods and sue to recover damages; or (iii) may sue to recover the
full purchase price.
Article 3
Article 3 of the UCC deals with negotiable instruments, which include
drafts, business and personal checks, certificates of deposits and promissory
notes.
Article 3 does not apply to money, documents of title or investment
securities such as stocks and bonds. Commercial paper is frequently used as a
cash substitute. Thus, a check could be used as a medium of payment instead of
cash or a note maybe used as a deferred methods of payment.
Article 3 sets out the obligations and liabilities of the persons who
issue negotiable instruments and those who are involved in their transfer. In
the case of a check, they would include the person who writes the check, his
bank, the banks who process the check, the bank which finally accepts the check
and the person or company to whom the check is written. The type of situations
for which Article 3 sets out rules include those in which the check is drawn on
insufficient funds or the signature is forged.
Article 9
Article 9 of the UCC governs the creation and enforcement of security
interests.
A security interest is an interest of a creditor in specific
property ("collateral") owned by a debtor.
A security interest permits the
secured creditor after default to sell particular collateral and to apply the
proceeds of its sales to the payment of his secured debt.
In contrast to a
secured creditor, an "unsecured" creditor (i.e., a creditor without a security
interest) has only general rights against the property of the debtor after the

secured creditors have been paid, and an unsecured creditor has no rights
against any particular property of a debtor.
The most common examples of a
security interest arise from the purchase of a vehicle such as a car or tractor
by an individual. However, security interests are very important for business
in financing the acquisition of capital equipment, such as machines, as well as
the purchasing of inventory and selling goods on credit.
Article 9 facilitates the purchase of goods by improving the chances of a
creditor's being repaid and thus encouraging him to sell goods on credit or, in
the case of a bank, to lend money.
It represents a comprehensive scheme of
regulation of security interests in personal property.
Article 9 does not
regulate transactions in land or improvements.
The Article establishes a
central filing system so that creditors can determine the extent of the
obligations of a debtor to other creditors and establishes procedures for a
creditor to enforce a security interest in the case of a debtor's failure to
pay. (The enactment of this article does not affect Navajo repossession law.)
A large part of Article 9 is concerned with establishing the priority of
secured parties against each other or other creditors of the debtor.
For
example, if two creditors are depending on the same "collateral" of the debtor
to "secure" their loans, then, generally, the first creditor to "file" a notice
of his interest will have the right to have his loan repaid first from the sale
of the collateral. However, Article 9 establishes special priority rules for
secured parties who loan the money to "purchase" the collateral.
This rule
encourages the purchase of capital equipment by giving priority protection to
loans or credit extended for the initial purchase of goods.
History
CJA–1–86 January 29, 1986.
Note. A "Background and Executive Summary of the Proposed NUCC" which included
"The NUCC Development Process" and "The Purpose of the NUCC" was incorporated
in CJA–1–86.
However, for codification purposes, only the "Description of
Articles 1, 2, 3 and 9" has been provided.

Article 1. General Provisions
Part 1. Short Title, Construction, Application, and Subject Matter of
the Code
§ 1–101. Short title
This Navajo Uniform Commercial Code (5A N.N.C. § 1–101 et seq.) shall be
known and may be cited as the "Navajo Uniform Commercial Code".
History
CJA–1–86, January 29, 1986.
Official Comment
Changes.

The Code makes no substantive change to this section except deleting

references to Articles not adopted by the Navajo Nation.
Commentary. Each Article of the Code (except this article) may also be cited
by its own short title. See §§ 2–101, 3–101 and 9–101.
Special Plain Language Comment
This provision provides a method
Commercial Code (the "Code").
§ 1–102. Purposes;

of

naming

rules of construction;

parts

of

the

Navajo

Uniform

variation by agreement

A. The Code shall be liberally construed and applied to promote its
underlying purposes and policies.
B. Underlying purposes and policies of the Code are:
1. To simplify, clarify and modernize the law governing commercial
transactions;
2. To permit the continued expansion of commercial
through custom, usage and agreement of the parties; and

practices

3. To make uniform the law of commercial transactions throughout
the Navajo Nation.
C. The effect of provisions of this Code may be varied by agreement,
except as otherwise provided in this Code and except that the obligations of
good faith, diligence, reasonableness and care prescribed by this Code may not
be disclaimed by agreement, but the parties may by agreement determine the
standards by which the performance of such obligations is to be measured if
such standards are not manifestly unreasonable.
D. The presence in certain provisions of this Code of the words "unless
otherwise agreed" or words of similar import does not imply that the effect of
other provisions may not be varied by agreement under Subsection (C).
E. In this Code unless the context otherwise requires:
1. Words in the singular number include the plural, and in the
plural include the singular; and
2. Words of the masculine gender include the feminine and the
neuter, and when the sense so indicates words of the neuter gender may
refer to any gender.
F. The "Official Comments" and the "Special Plain Language Comments" are
informational only and not binding on the courts, since they do not purport to
be comprehensive statements of the meaning and effect of the statute to which
they refer.
History
CJA–1–86, January 29, 1986.

Official Comment
Changes.
The Code adds a new section, "Special Plain Language Comments", to
facilitate use of the Code, but new Subsection (F) makes clear that such
comments and the Official Comments are not the law.
Commentary.

1.

Subsections (A) and (B) are intended to make it clear that:

This Code is drawn to provide flexibility so that, since it is intended to be a
semi-permanent piece of legislation, it will provide its own machinery for
expansion of commercial practices. It is intended to make it possible for the
law embodied in this Code to be developed by the courts in the light of
unforeseen and new circumstances and practices.
However, the proper
construction of the Code requires that its interpretation and application be
limited to its reason.
The Code should be construed in accordance with its underlying purposes and
policies. The text of each section should be read in the light of the purpose
and policy of the rule or principle in question, as well as of the Code as a
whole, and the application of the language should be construed narrowly or
broadly, as the case may be, in conformity with the purposes and policies
involved.
2. Subsection (C) states affirmatively at the outset that freedom of contract
is a principle of the Code: "the effect" of its provisions may be varied by
"agreement".
The meaning of the statute itself must be found in its text,
including its definitions, and in appropriate extrinsic aids;
it cannot be
varied by agreement. But the Code seeks to avoid the type of interference with
evolutionary growth found in Manhattan Co. v. Morgan, 242 N.Y. 38, 150 N.E. 594
(1926). Thus, private parties cannot make an instrument negotiable within the
meaning of Article 3 except as provided in § 3–104; nor can they change the
meaning of such terms as "bona fide purchaser", "holder in due course", or "due
negotiation", as used in this Code.
But an agreement can change the legal
consequences which would otherwise flow from the provisions of the Code.
"Agreement" here includes the effect given to course of dealing, usage of trade
and course of performance by §§ 1–201, 1–205 and 2–208;
the effect of an
agreement on the rights of third parties is left to specific provisions of this
Code and to supplementary principles applicable under the next section.
The
rights of third parties under § 9–301 when a security interest is unperfected,
for example, cannot be destroyed by a clause in the security agreement.
This principle of freedom of contract is subject to specific exceptions found
elsewhere in the Code and to the general exception stated here. The specific
exceptions vary in explicitness: the Statute of Frauds found in § 2–201, for
example, does not explicitly include oral waiver of the requirement of a
writing, but a fair reading denies enforcement to such a waiver as part of the
"contract" made unenforceable;
§ 9–501(C), on the other hand, is quite
explicit. Under the exception for "the obligations of good faith, diligence,
reasonableness and care prescribed by this Code", provisions of the Code
prescribing such obligations are not to be disclaimed.
However, the section
also recognizes the prevailing practice of having agreements set forth
standards by which due diligence is measured and explicitly provides that, in
the absence of a showing that the standards manifestly are unreasonable, the

agreement controls.
In this connection, § 1–205 incorporating into the
agreement prior course of dealing and usages of trade is of particular
importance.
3. Subsection (D) is intended to make it clear that, as a matter of drafting,
words such as "unless otherwise agreed" have been used to avoid controversy as
to whether the subject matter of a particular Section does or does not fall
within the exceptions to Subsection (C), but absence of such words contains no
negative implications since under Subsection (C) the general and residual rule
is that the effect of all provisions of the Code may be varied by agreement,
subject to the prior comments.
4. Subsection (F) is intended to clarify the status of the "Special Plain
Language Comments". These comments are only to assist the lay reader and are
not to be used by parties to interpret the Code. The Official Comments have
been adapted from the "Official Comments" of the Commissioners On Uniform State
Laws to the corresponding sections of the Uniform Commercial Code as adopted by
the States. The Official Comments to this Code do not attempt to describe the
respects in which they depart from those other "Official Comments".
Special Plain Language Comment
This section describes the basic principles of the Code and how it relates to
other laws. The section also describes generally the extent to which the Code
may be varied by agreement by the parties to a contract.
Cross References
N.U.C.C. § 1–110.
§ 1–103. Supplementary general principles of law applicable
Unless displaced by the particular provisions of this Code or other
applicable Navajo law, 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 or
other validating or invalidating cause shall supplement its provisions.
The
adoption of the Code does not preempt the consumer protection laws of the
states which continue to apply to appropriate transactions pursuant to 7 N.N.C.
§ 204 to the extent that such laws would be applicable.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. Except as stated in this paragraph, this section is intended to have
the same meaning and effect as § 1–103 of the Uniform Commercial Code as
adopted by the states.
In addition, since the Uniform Sales Code was never
adopted by the Navajo Nation, the Navajo Nation has adopted certain statutory
provisions regarding capacity to contract. The final sentence has been added
to clarify the status of consumer protection laws after the adoption of the
Code.

Commentary.
1. This section indicates the continued applicability to
commercial contracts of all supplemental bodies of law except insofar as they
are explicitly displaced by this Code.
2. The general law of capacity will be limited by any Navajo statute or
ordinance which limits the capacity of a non-complying person to sue.
These
limits are equally applicable to contracts of sale to which such person is a
party.
3. The listing given in this section is merely illustrative; no listing could
be exhaustive. Nor is the fact that in some sections particular circumstances
have led to express reference to other fields of law intended at any time to
suggest the negation of the general application of the principles of this
section.
4. Except as provided in § 1–110, the Code does not preempt the consumer
protection laws of the states which apply to a transaction pursuant to 7 N.N.C
§ 204. However, the application of such state laws to transactions governed by
this Code may be varied or preempted by subsequent Navajo legislation.
Special Plain Language Comment
The Code does not settle all questions in commercial law. A person or a court
must depend on other bodies of law to aid in the interpretation of its
provisions.
§ 1–104. Construction against implicit repeal
This Code being a general act intended as a unified coverage of its
subject matter, no part of it shall be deemed to be impliedly repealed by
subsequent legislation if such construction can reasonably be avoided.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
104 of the Uniform Commercial Code as adopted by the states.
Commentary. This section is intended to express the policy that no Code which
bears evidence of carefully considered permanent regulative intention should
lightly be regarded as impliedly repealed by subsequent legislation.
This
Code, carefully integrated and intended as a uniform codification of permanent
character covering an entire "field" of law, is to be regarded as particularly
resistant to implied repeal.
Special Plain Language Comment
The Code should not be considered repealed by later laws unless no other
interpretation is possible.

§ 1–105. Territorial
applicable law

application

of

the

Code:

parties'

power

to

choose

A. Except as provided hereafter in this section, when a transaction bears
a reasonable relation to the Navajo Nation and also to another state or nation,
the parties may agree that the law either of the Navajo Nation or of such state
or nation shall govern their rights and duties. Failing such agreement, this
Code applies to transactions bearing an appropriate relation to the Navajo
Nation.
B. Where one of the following provisions of this Code specifies the
applicable law, that provision governs and a contrary agreement is effective
only to the extent permitted by the law (including the conflict of laws rules)
so specified:
Rights of creditors against sold goods.
Section 2–402.
Perfection provisions of the Article on Secured Transactions. Section 9–103.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
105 of the Uniform Commercial Code as adopted by the states, except that
deletions were made to conform the Code to the legal status of the Navajo
Nation.
Commentary. 1. Subsection (A) states affirmatively the right of the parties to
a multi-jurisdiction transaction or a transaction involving foreign trade to
choose their own law. That right is subject to the firm rules stated in the
sections listed in Subsection (B), and is limited to jurisdictions to which the
transaction bears a "reasonable relation". In general, the test of "reasonable
relation" is similar to that laid down by the Supreme Court in Seeman v.
Philadelphia Warehouse Co., 274 U.S. 403, 47 S.Ct. 626, 71 L.Ed. 1123 (1927).
Ordinarily, the law chosen must be that of a jurisdiction where a significant
enough portion of the making or performance of the contract is to occur or
occurs. But an agreement as to choice of law may sometimes take effect as a
short-hand expression of the intent of the parties as to matters governed by
their agreement, even though the transaction has no significant contact with
the jurisdiction chosen.
2. Where there is no agreement as to the governing law, the Code is applicable
to any transaction having an "appropriate" relation to the Navajo Nation. Of
course, the Code applies to any transaction which takes place in its entirety
in the Navajo Nation.
But the mere fact that suit is brought in the Navajo
Nation does not make it appropriate to apply the substantive law of the Navajo
Nation.
Cases where a relation to the Navajo Nation is not "appropriate"
include, for example, those where the parties have clearly contracted on the
basis of some other law, as where the law of the place of contracting and the
law of the place of contemplated performance are the same and are contrary to
the law under the Code.
3. Where a transaction has significant contacts with the Navajo Nation and also
with other jurisdictions, the question what relation is "appropriate" is left

to judicial decision.
In deciding that question, the court is not strictly
bound by precedents established in other contexts.
Thus, a conflict-of-laws
decision refusing to apply a purely local statute or rule of law to a
particular multi-jurisdiction transaction may not be valid precedent for
refusal to apply the Code in an analogous situation. Application of the Code
in such circumstances may be justified by its comprehensiveness, by the policy
of uniformity, and by the fact that it is in large part a reformulation and
restatement of the law merchant and of the understanding of a business
community which transcends Navajo Nation, state and even national boundaries.
(Compare Global Commerce Corp. v. Clark–Babbitt Industries, Inc., 239 F.2d 716,
719 (2d Cir. 1956).) In particular, where a transaction is governed in large
part by the Code, application of another law to some detail of performance
because of an accident of geography may violate the commercial understanding of
the parties.
4. Choice of law decisions often appropriately rest on policies of giving
effect to agreements and of uniformity of result, regardless of where suit is
brought. To the extent that such policies prevail, the relevant considerations
are similar in such a court to those outlined above.
5. Subsection (B) spells out essential limitations on the parties' right to
choose the applicable law. Especially in Article 9, parties taking a security
interest or asked to extend credit which may be subject to a security interest
must have sure ways to find out whether and where to file and where to look for
possible existing filing.
6. Section 9–103 should be consulted as to the rules for perfection of security
interests and the effects of perfection and non-perfection.
Special Plain Language Comment
Persons who make a commercial agreement may choose the law of either the Navajo
Nation or another state or nation if their agreement has sufficient connection
to the place they choose. Where the parties do not choose which law to use,
the Code will apply if the transaction has enough contacts with the Navajo
Nation.

What constitutes "reasonable" or "appropriate" relation to a transaction within
the meaning of Uniform Commercial Code § 1–105(1), 63 A.L.R.3d 341 (1975).
§ 1–106. Remedies to be liberally administered
A. The remedies provided by this Code shall be liberally administered to
the end that the aggrieved party may be put in as good a position as if the
other party had fully performed, but neither consequential nor special nor
penal damages may be had except as specifically provided in this Code or by
other rule of law.
B. Any right or obligation declared by this Code is enforceable by action
unless the provision declaring it specifies a different and limited effect.
History

CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
106 of the Uniform Commercial Code as adopted by the states.
Commentary.

Subsection (A) is intended to effect three things:

1. First, to negate the unduly narrow or technical interpretation of some
remedial provisions of prior commercial statutes in other States by providing
that the remedies in this Code are to be liberally administered to the end
stated in the section. Second, to make it clear that compensatory damages are
limited to compensation. They do not include consequential or special damages,
or penal damages; and the Code elsewhere makes it clear that damages must be
minimized.
Cf. §§ 1–203, 2–706(A), and 2–217(B).
The third purpose of
Subsection (A) is to reject any doctrine that damages must be calculable with
mathematical accuracy.
Compensatory damages are often at best approximate:
they have to be proved with whatever definiteness and accuracy the facts
permit, but no more. Cf. § 2–204(C).
2. Under Subsection (B) any right or obligation described in this Code is
enforceable by court action, even though no remedy may be expressly provided,
unless a particular provision specifies a different and limited effect.
Whether specific performance or other equitable relief is available is
determined not by this section but by specific provisions and by supplementary
principles. Cf. §§ 1–103, 2–716.
3. "Consequential" or "special" damages and "penal" damages are not defined
terms in the Code, but are used in the sense given them by the leading cases on
the subject.
Cross References
5A N.N.C. §§ 1–103, 1–203, 2–204(C), 2–701, 2–706(A), 2–712(B), and 2–716.
Definitional Cross References
"Action".

Section 1–201.

"Aggrieved party".

Section 1–201.

"Party".

Section 1–201.

"Remedy".

Section 1–201.

"Rights".

Section 1–201.
Special Plain Language Comment

Remedies for breaking an agreement or failing to perform a promise under the
Code should be applied in a way which puts both parties, as much as possible,
in the same position as they would have been if the agreement had not been

breached.
loss.

The Code also limits the ability to recover damages greater than the

§ 1–107. Waiver or renunciation of claim or right after breach
Any claim or right arising out of an alleged breach can be discharged in
whole or in part without consideration by a written waiver or renunciation
signed and delivered by the aggrieved party.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
107 of the Uniform Commercial Code as adopted by the states.
Commentary.
This section makes consideration unnecessary to the effective
renunciation or waiver of rights or claims arising out of an alleged breach of
a commercial contract where such renunciation is in writing and signed and
delivered by the aggrieved party.
Its provisions, however, must be read in
conjunction with the section imposing an obligation of good faith (§ 1–203).
There may, of course, also be an oral renunciation or waiver sustained by
consideration but subject to Statute of Frauds provisions and to the section of
Article 2 on Sales dealing with the modification of signed writings (§ 2–209).
As is made express in the latter Section, this Code fully recognizes the
effectiveness of waiver and estoppel.
Cross References
5A N.N.C.

§§ 1–203, 2–201 and 2–209.

And see 5A N.N.C. § 2–719.

Definitional Cross References
"Aggrieved party".

Section 1–201.

"Rights".

Section 1–201.

"Signed".

Section 1–201.

"Written".

Section 1–201.

§ 1–108. Severability
If any provision or clause of this Code or application thereof to any
person or circumstances is held invalid, such invalidity shall not affect other
provisions or applications of the Code which can be given effect without the
invalid provision or application, and to this end the provisions of this Code
are declared to be severable.
History
CJA–1–86, January 29, 1986.

Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
108 of the Uniform Commercial Code adopted by the states.
Commentary. This is the model severability section recommended by the National
Conference of Commissioners on Uniform State Laws for inclusion in all acts of
extensive scope.
Definitional Cross References
"Person".

Section 1–201

§ 1–109. Section captions
Section captions are parts of the Code.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
109 of the Uniform Commercial Code adopted by the states.
Commentary. To make explicit in all jurisdictions that section captions are a
part of the text of this Code and not mere surplusage.
§ 1–110. Special limitations on application of Code
Notwithstanding any other provision of this Code to the contrary, this
Code shall not apply to any exclusively barter transaction in which the
aggregate market value of all the goods and services involved in the
transaction does not exceed ten thousand dollars ($10,000) at the time of the
transaction. Such transactions shall be governed by the customs and usages of
the Navajo Nation.
History
CJA–1–86 January 29, 1986.
Official Comment
Changes.
This section does not appear in the Uniform Commercial Code as
adopted by the states.
It has been added in order to prevent the Code from
interfering in the types of transactions found in the traditional Navajo
economy. This section preempts state law, including state consumer protection
statutes, for these transactions which will be governed solely by the customs
and usages of the Navajo Nation. See § 1–103, Comment 4.
Special Plain Language Comment

This section exempts certain transactions in the traditional Navajo economy
from the Code.
§ 1–111. Administration of the NUCC;

regulations

A. The Department of Commerce within the Division of Economic
Development, or its designated successor, shall be charged with the
administration of this Code.
Said Department is authorized to employ such
personnel as may be necessary for the administration of this Code.
B. The Department of Commerce within the Division of Economic
Development, or its designated successor, is authorized to promulgate, upon the
review and approval of the Attorney General and the Economic Development
Committee of the Navajo Nation Council, regulations regarding those matters
designated to be set by regulation herein. Provided, the Department shall set
forth in such regulations the specific section herein to which they relate.
History
CD–61–86, December 11, 1986.
Note.

Slightly reworded for purposes of statutory form.

Part 2. General Definitions and Principles of Interpretation
§ 1–201. General definitions
Subject to additional definitions contained in the subsequent Articles of
this Code which are applicable to specific Articles or Parts thereof, and
unless the context otherwise requires, in this Code:
A. "Action" in the sense of a judicial proceeding including recoupment,
counterclaim, set-off, suit in equity and any other proceedings in which rights
are determined.
B. "Aggrieved party" means a party entitled to resort to a remedy.
C. "Agreement" means the bargain of the parties in fact as found in their
language or by implication from other circumstances including course of dealing
or usage of trade or course of performance as provided in this Code (§§ 1–205
and 2–208). Whether an agreement has legal consequences is determined by the
provisions of this Code, if applicable; otherwise by the law of contracts (§
1–103). (Compare "Contract".)
D. "Bank" means any person engaged in the business of banking.
E. "Barter" means to exchange goods without exchanging money.
F. "Bearer" means the person in possession of an instrument, document of
title, or certificated security payable to bearer or indorsed in blank.
G. "Bill of lading" means a document evidencing the receipt of goods for
shipment issued by a person engaged in the business of transporting or

forwarding goods, and includes an airbill. "Airbill" means a document serving
for air transportation as a bill of lading does for marine or rail
transportation, and includes an air consignment note or air way bill.
H. "Branch" includes a separately incorporated foreign branch of a bank.
I. "Burden of establishing" a fact means the burden of persuading the
triers of fact that the existence of the fact is more probable than its
non-existence.
J. "Buyer in ordinary course of business" means a person who in good
faith and without knowledge that the sale to him is in violation of the
ownership rights or security 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. All persons who sell minerals or the like
(including oil and gas) at wellhead or minehead shall be deemed to be persons
in the business of selling goods of that kind. "Buying" may be for cash or by
exchange of other property or on secured or unsecured credit and includes
receiving goods or documents of title under a pre-existing 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.
K. "Conspicuous": A term or clause is conspicuous when it is so written
that a reasonable person against whom it is to operate ought to have noticed
it.
A printed heading in capitals (as:
NON–NEGOTIABLE BILL OF LADING) is
conspicuous.
Language in the body of a form is "conspicuous" if it is in
larger or other contrasting type or color. But in a telegram any stated term
is "conspicuous".
Whether a term or clause is "conspicuous" or not is for
decision by the court.
L. "Contract" means the total legal obligation which results from the
parties' agreement as affected by this Code and any other applicable rules of
law. (Compare "Agreement".)
M. "Creditor" includes a general creditor, a secured creditor, a lien
creditor and any representative of creditors, including an assignee for the
benefit of creditors, a trustee in bankruptcy, a receiver in equity and an
executor or administrator of an insolvent debtor's or assignor's estate.
N. "Defendant" includes a person in the position of defendant in a
cross-action or counterclaim.
O. "Delivery" with respect to instruments, documents of title, chattel
paper, or certificated securities means voluntary transfer of possession.
P. "Document of title" includes bill of lading, dock warrant, dock
receipt, warehouse receipt or order for the delivery of goods, and also any
other document which in the regular course of business or financing is treated
as adequately evidencing that the person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
To be a
document of title a document must purport to be issued by or addressed to a
bailee and purport to cover goods in the bailee's possession which are either
identified or are fungible portions of an identified mass.

Q. "Fault" means wrongful act, omission or breach.
R. "Fungible" with respect to goods or securities means goods or
securities of which any unit is, by nature or usage of trade, the equivalent of
any other like unit. Goods which are not fungible shall be deemed fungible for
the purposes of this Code to the extent that under a particular agreement or
document unlike units are treated as equivalents.
S. "Genuine" means free of forgery or counterfeiting.
T. "Good faith" means honesty in fact in the conduct or transaction
concerned.
U. "Holder" means a person who is in possession of a document of title or
an instrument or a certificated investment security drawn, issued, or indorsed
to him or his order or to bearer or in blank.
V. To "honor" is to pay or to accept and pay, or where a credit so
engages to purchase or discount a draft complying with the terms of the credit.
W. "Insolvency proceedings" includes any assignment for the benefit of
creditors or other proceedings intended to liquidate or rehabilitate the estate
of the person involved.
X. A person is "insolvent" who either has ceased to pay his debts in the
ordinary course of business or cannot pay his debts as they become due or is
insolvent within the meaning of the federal bankruptcy law.
Y. "Money" means a medium of exchange authorized or adopted by a domestic
or foreign government as a part of its currency.
Z. "Navajo Indian Country" means the territory defined in 7 N.N.C. § 254.
Certain communities within the exterior boundaries of "Navajo Indian Country"
are excepted from the definition of "Navajo Indian Country" if they are
predominantly non-Indian in character. 7 N.N.C. § 254(D).
AA. A person has "notice" of a fact when:
1. He has actual knowledge of it;

or

2. He has received a notice or notification of it;

or

3. From all the facts and circumstances known to him at the time in
question he has reason to know that it exists.
A person "knows" or has "knowledge" of a fact when he has actual
knowledge of it. "Discover" or "learn" or a word or phrase of similar import
refers to knowledge rather than to reason to know. The time and circumstances
under which a notice or notification may cease to be effective are not
determined by this Code.
BB. A person "notifies" or "gives" a notice or notification to another by
taking such steps as may be reasonably required to inform the other in ordinary
course whether or not such other actually comes to know of it.
A person

"receives" a notice or notification when:
1. It comes to his attention;

or

2. It is duly delivered at the place of business through which the
contract was made or at any other place held out by him as the place for
receipt of such communications.
CC. Notice, knowledge or a notice of notification received by an
organization is effective for a particular transaction from the time when it is
brought to the attention of the individual conducting that transaction, and in
any event from the time when it would have been brought to his attention if the
organization had exercised due diligence.
An organization exercises due
diligence if it maintains reasonable routines for communicating significant
information to the person conducting the transaction and there is reasonable
compliance with the routines.
Due diligence does not require an individual
acting for the organization to communicate information unless he has reason to
know of the transaction and that the transaction would be materially affected
by the information.
DD. "Organization" includes a corporation, government or governmental
subdivision, agency or tribal enterprise, business trust, estate, trust,
partnership or association, two or more persons having a joint or common
interest, or any other legal or commercial entity.
EE. "Party", as distinct from "third party", means a person who has
engaged in a transaction or made an agreement within this Code.
FF. "Person" includes an individual or an organization (see § 1–102).
GG. "Presumption" or "presumed" means that the trier of fact must find
the existence of the fact presumed unless and until evidence is introduced
which would support a finding of its non-existence.
HH. "Purchase" includes taking by sale, barter, discount, negotiation,
mortgage, pledge, lien, issue or re-issue, gift or any other voluntary
transaction creating an interest in property.
II. "Purchaser" means a person who takes by purchase.
JJ. "Remedy" means any remedial right to which an aggrieved party is
entitled with or without resort to a tribunal.
KK. "Representative" includes an agent, an officer of a corporation or
association, and a trustee, executor or administrator of an estate, or any
other person empowered to act for another.
LL. "Rights" includes remedies.
MM. "Security interest" means an interest in personal property or
fixtures which secures payment or performance of an obligation. The retention
or reservation of title by a seller of goods notwithstanding shipment or
delivery to the buyer (§ 2–401) is limited in effect to a reservation of a
"security interest".
The term also includes any interest of a buyer of

accounts or chattel paper which is subject to Article 9. The special property
interest of a buyer of goods on identification of such goods to a contract for
sale under § 2–401 is not a "security interest", but a buyer may also acquire a
"security interest" by complying with Article 9. Unless a lease or consignment
is intended as security, reservation of title thereunder is not a "security
interest" but a consignment is in any event subject to the provisions on
consignment sales (§ 2–326). Whether a lease is intended as security is to be
determined by the facts of each case; however, (1) the inclusion of an option
to purchase does not of itself make the lease one intended for security, and
(2) an agreement that upon compliance with the terms of the lease the lessee
shall become or has the option to become the owner of the property for no
additional consideration or for a nominal consideration does make the lease one
intended for security.
NN. "Send" in connection with any writing or notice means to deposit in
the mail or deliver for transmission by any other usual means of communication
with postage or cost of transmission provided for and properly addressed and in
the case of an instrument to an address specified thereon or otherwise agreed,
or if there be none to any address reasonable under the circumstances.
The
receipt of any writing or notice within the time at which it would have arrived
if properly sent has the effect of a proper sending.
OO. "Signed" includes any symbol executed or adopted by a party with
present intention to authenticate a writing.
PP. "Surety" includes guarantor.
QQ. "Telegram" includes a message transmitted by radio, teletype, cable,
any mechanical method of transmission, or the like.
RR. "Term" means
particular matter.

that

portion

of

an

agreement

which

SS. "Unauthorized" signature or indorsement means
actual, implied or apparent authority and includes forgery.

one

relates

made

to

a

without

TT. "Value".
Except as otherwise provided with respect to negotiable
instruments (§ 3–303), a person gives "value" for rights if he acquires them:
1. In return for a binding commitment to extend credit or for the
extension of immediately available credit whether or not drawn upon and
whether or not a charge-back is provided for in the event of difficulties
in collection; or
2. As security for
pre-existing claim: or

or

in

total

or

partial

satisfaction

of

a

3. By accepting delivery pursuant to a pre-existing contract for
purchase; or
4. Generally, in return for any consideration sufficient to support
a simple contract.
UU. "Warehouse receipt" means a receipt issued by a person engaged in the

business of storing goods for hire.
VV. "Written" or "writing" includes printing, typewriting or any other
intentional reduction to tangible form.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. Except as stated in this paragraph, this section is intended to have
the same meaning and effect as § 1–201 of the Uniform Commercial Code as
adopted by the states. The phrase "tribal enterprise" has been added to the
definition of "Organization".
The word "barter" has been added to the
definition of "Purchase".
The definitions of the words "Barter" and "Navajo
Indian Country" have been added.
Commentary.

A–B.

[Omitted]

C. "Agreement".
As used in this Code the word is intended to include full
recognition of usage of trade, course of dealing, course of performance and the
surrounding circumstances as effective parts thereof, and of any agreement
permitted under the provisions of the Code to displace a stated rule of law.
D–I. [Omitted]
J. "Buyer in ordinary course of business". The definition clarifies the type
of person protected.
Its major significance lies in § 2–403 and in the
Articles on Secured Transactions (Article 9).
The reference to minerals and the like makes clear that a buyer in ordinary
course buying minerals under the circumstances described takes free of a prior
mortgage created by the sellers. See Comment to § 9–103.
A pawnbroker cannot be a buyer in ordinary course of business because the
person from whom he buys goods (or acquires ownership after foreclosing an
initial pledge) is typically an ordinary user and not a person engaged in
selling goods of that kind.
K. "Conspicuous". This is intended to indicate some of the methods of making a
term attention-calling.
But the test is whether attention can reasonably be
expected to be called to it.
L–N. [Omitted]
O. "Delivery" refers to physical possession.
P. "Document of title".
By making it explicit that the obligation of
designation of a third party as "bailee" is essential to a document of title,
this definition clearly rejects any such result which treats a conditional
sales contract as a document of title.
Also the definition is left open so
that new types of documents may be included.
It is unforeseeable what
documents may one (1) day serve the essential purpose now filled by warehouse

receipts and bills of lading. Truck transport has already opened up problems
which do not fit the patterns of practice resting upon the assumption that a
draft can move through banking channels faster than the goods themselves can
reach their destination. There lie ahead air transport and such probabilities
as teletype transmission of what may some day be regarded commercially as
"Documents of Title". The definition is stated in terms of the function of the
documents with the intention that any document which gains commercial
recognition as accomplishing the desired result shall be included within its
scope.
Fungible goods are adequately identified within the language of the
definition by identification of the mass of which they are a part.
The goods must be "described", but the description may be by marks or labels
and may be qualified in such a way as to disclaim personal knowledge of the
issuer regarding contents or condition. However, baggage and parcel checks and
similar "tokens" of storage which identify stored goods only as those received
in exchange for the token are not covered by this article.
The definition is broad enough to include an airway bill.
Q. [Omitted]
R. "Fungible".
and accuracy.

Fungibility of goods "by agreement" has been added for clarity

S. [Omitted]
T. "Good faith". "Good faith", whenever it is used in the Code, means at least
what is here stated.
In certain Articles, by specific provision, additional
requirements are made applicable. See, e.g., § 2–103(A)(2). To illustrate, in
the Article on Sales, § 2–103, good faith is expressly defined as including in
the case of a merchant observance of reasonable commercial standards of fair
dealing in the trade, so that throughout that Article wherever a merchant
appears in the case an inquiry into his observance of such standards is
necessary to determine his good faith.
U–W. [Omitted]
X. "Insolvent". The three tests of insolvency—"ceased to pay his debts in the
ordinary course of business", "cannot pay his debts as they become due", and
"insolvent within the meaning of the federal bankruptcy law"—are expressly set
up as alternative tests and must be approached from a commercial standpoint.
Y. "Money".
The test adopted is that of sanction of government, whether by
authorization before issue or adoption afterward, which recognizes the
circulating medium as a part of the official currency of that government. The
narrow view that money is limited to legal tender is rejected.
Z. "Navajo Indian Country".
the Code.

This definition was added to clarify the scope of

AA. "Notice". Under the definition a person has notice when he has received a
notification of the fact in question. But by the last sentence the Code leaves
open the time and circumstances under which notice or notification may cease to
be effective. Therefore, such cases as Graham v. White–Phillips Co., 296 U.S.

27, 56 S.Ct. 21, 80 LEd. 20 (1935), are not overruled.
BB. "Notifies". This is the word used when the essential fact is the proper
dispatch of the notice, not its receipt. Compare "Send". When the essential
fact is the other party's receipt of the notice, that is stated. The second
sentence states when a notification is received.
CC. This makes clear that reason to know, knowledge, or a notification,
although "received" for instance by a clerk in Department A of an organization,
is effective for a transaction conducted in Department P only from the time
when it was or should have been communicated to the individual conducting that
transaction.
DD. "Organization".
This is the definition of every type of entity or
association, excluding an individual, acting as such.
The definition of
"organization" given here includes a number of entities or associations not
specifically mentioned in prior definition of "person", namely, government,
governmental subdivision (including tribal enterprise) or agency, business
trust, trust and estate.
EE. "Party". Mention of a party includes, of course, a person acting through
an agent.
However, where an agent comes into opposition or contrast to his
principal, particular account is taken of that situation.
FF. "Person". See Comment to definition of "Organization".
1–102 is to Subsection (E) of that section.

The reference to §

GG. [Omitted]
HH. "Purchase" includes acquisition of property by barter. Barter transfers of
property within the "traditional economy" of the Navajo People are purchases
under this Code. See also § 1–110.
II. [Omitted]
JJ. "Remedy". The purpose is to make it clear that both remedy and rights (as
defined) include those remedial rights of "self help" which are among the most
important bodies of rights under this Code, remedial rights being those to
which an aggrieved party can resort on his own motion.
KK. [Omitted]
LL. "Rights".

See Comment to "Remedy".

MM. "Security Interest".
The present definition is elaborated, in view
especially of the complete coverage of the subject in Article 9. Notice that
in view of the Article the term includes the interest of certain outright
buyers of certain kinds of property. The last two sentences give guidance on
the question whether reservation of title under a particular lease of personal
property is or is not a security interest.
NN. "Send".

Compare "notifies".

OO. "Signed".

The inclusion of authentication in the definition of "signed" is

to make clear that as the term is used in this Code a complete signature is not
necessary.
Authentication maybe printed, stamped or written;
it maybe by
initials or by thumbprint.
It may be on any part of the document and in
appropriate cases may be found in a billhead or letterhead.
No catalog of
possible authentications can be complete and the court must use common sense
and commercial experience in passing upon these matters. The question always
is whether the symbol was executed or adopted by the party with present
intention to authenticate the writing.
PP–RR. [Omitted]
SS. "Value". Commercial usage has tended to define value as any consideration
sufficient to support a simple contract, including the taking of property in
satisfaction of or as security for a pre-existing claim. Subsections (A), (B)
and (D) in substance continue the definitions of "value" in such commercial
usage.
Subsection (C) makes explicit that "value" is also given in a third
situation:
where a buyer by taking delivery under a pre-existing contract
converts a contingency into a fixed obligation.
This definition is not applicable to Article 3.
A bank or other financing
agency which in good faith makes advances against property held as collateral
becomes a bona fide purchaser of that property even though provision may be
made for charge-back in case of trouble.
Checking credit is "immediately
available" within the meaning of this section if the bank would be subject to
an action for slander of credit in case checks drawn against the credit were
dishonored, and when a charge-back is not discretionary with the bank, but may
only be made when difficulties in collection arise in connection with the
specific transaction involved.
TT. "Warehouse receipt".
Receipts issued by a field warehouse are included,
provided the warehouseman and the depositor of the goods are different persons.
Special Plain Language Comment
When reading any sections in this Code, it is very important to check to see if
any of the terms are defined and to read the definitions of those terms.
Unless one reads the definitions, the full meaning of a statute may not be
understood.
§ 1–202. Prima facie evidence by third party documents
A document in due form purporting to be a bill of lading, policy or
certificate of insurance, official weigher's or inspector's certificate,
consular invoice, or any other document authorized or required by the contract
to be issued by a third party shall be prima facie evidence of its own
authenticity and genuineness and of the facts stated in the document by the
third party.
History
CJA–1–86, January 29, 1986.
Official Comment

Changes. This section is intended to have the same meaning and effect as § 1–
202 of the Uniform Commercial Code as adopted by the states.
Commentary.
1. This section is designed to supply judicial recognition for
documents which have traditionally been relied upon as trustworthy by
participants in commercial dealings.
2. This section is concerned only with documents which have been given a
preferred status by the parties themselves, who have required their procurement
in the agreement, and for this reason the applicability of the section is
limited to actions arising out of the contract which authorized or required the
document.
The documents listed are intended to be illustrative and not all
inclusive.
3. The provisions of this section go no further than establishing the documents
in question as prima facie evidence and leave to the court the ultimate
determination of the facts where the accuracy or authenticity of the documents
is questioned.
In this connection the section calls for a commercially
reasonable interpretation.
Definitional Cross References
"Bill of lading".

Section 1–201.

"Contract".

Section 1–201.

"Genuine".

Section 1–201.
Special Plain Language Comment

Certain types of documents have special meaning and are presumed to be what
they look like.
Reliance on such documents is generally presumed to be
reasonable.
§ 1–203. Obligation of good faith
Every contract or duty within this Code imposes an obligation of good
faith in its performance or enforcement.
History
CJA–1–86 January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
203 of the Uniform Commercial Code as adopted by the states.
Commentary. This section sets forth a basic principle running throughout this
Code. The principle involved is that in commercial transactions good faith is
required in the performance and enforcement of all agreements or duties.
Particular applications of this general principle appear in specific provisions
of the Code such as the option to accelerate at will (§ 1–208), the right to
cure a defective delivery of goods (§ 2–508), the duty of a merchant buyer who

has rejected goods to effect salvage operations (§ 2–603), substituted
performance (§ 2–614), and failure of presupposed conditions (§ 2–615).
The
concept, however, is broader then any of these illustrations and applies
generally, as stated in this section, to the performance or enforcement of
every contract or duty within this Code. It is further implemented by § 1–205
on course of dealing and usage of trade.
It is to be noted that under the Sales Article definition of good faith (§ 2–
103), contracts made by a merchant have incorporated in them the explicit
standard not only of honesty in fact (§ 1–201), but also of observance by the
merchant of reasonable commercial standards of fair dealing in the trade.
Cross References
Sections 1–201,

1–205,

1–208,

2–103,

2–508,

2–603,

2–614, and 2–615.

Definitional Cross References
"Contract".

Section 1–201.

"Good faith".

Section 1–201;

2–103.

§ 1–204. Time;

reasonable time;

"seasonably"

A. Whenever this Code requires any action to be taken within a reasonable
time, any time which is not manifestly unreasonable maybe fixed by agreement.
B. What is a reasonable time for taking any action depends on the nature,
purpose and circumstances of such action.
C. An action is taken "seasonably" when it is taken at or within the time
agreed or if no time is agreed at or within a reasonable time.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
204 of the Uniform Commercial Code as adopted by the states.
Commentary. 1. Subsection (A) recognizes that nothing is stronger evidence of
a reasonable time than the fixing of such time by a fair agreement between the
parties. However, provision is made for disregarding a clause which whether by
inadvertence or overreaching fixes a time so unreasonable that it amounts to
eliminating all remedy under the contract. The parties are not required to fix
the most reasonable time but may fix any time which is not obviously unfair as
judged by the time of contracting.
2. Under the section, the agreement which fixes the time need not be part of
the main agreement, but may occur separately.
Notice also that under the
definition of "agreement" (§ 1–201) the circumstances of the transaction,
including course of dealing or usages of trade or course of performance may be

material. On the question what is a reasonable time these matters will often
be important.
Definitional Cross References
"Agreement".

Section 1–201.

§ 1–205. Course of dealing and usage of trade
A. A course of dealing is a sequence of previous conduct between the
parties to a particular transaction which is fairly to be regarded as
establishing a common basis of understanding for interpreting their expressions
and other conduct.
B. A usage of trade is any practice or method of dealing having such
regularity of observance in a place, vocation or trade as to justify an
expectation that it will be observed with respect to the transaction in
question. The existence and scope of such a usage are to be proved as facts.
If it is established that such a usage is embodied in a written trade code or
similar writing, the interpretation of the writing is for the court.
C. A course of dealing between parties and any usage of trade in the
vocation or trade in which they are engaged or of which they are or should be
aware give particular meaning to and supplement or qualify terms of an
agreement.
D. The express terms of an agreement and an applicable course of dealing
or usage of trade shall be construed wherever reasonable as consistent with
each other, but when such construction is unreasonable express terms control
both course of dealing and usage of trade and course of dealing controls usage
of trade.
E. An applicable usage of trade in the place where any part of
performance is to occur shall be used in interpreting the agreement as to that
part of the performance.
F. Evidence of a relevant usage of trade offered by one party is not
admissible unless and until he has given the other party such notice as the
court finds sufficient to prevent unfair surprise to the latter.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
205 of the Uniform Commercial Code as adopted by the states.
Commentary.
1. This Code rejects both the "lay-dictionary" and the
"conveyancer's" reading of a commercial agreement. Instead, the meaning of the
agreement of the parties is to be determined by the language used by them and
by their action, read and interpreted in the light of commercial practices and
other surrounding circumstances. The measure and background for interpretation

are set by the commercial context, which may explain and supplement even the
language of a formal or final writing.
2. Course of dealing under Subsection (A) is restricted, literally, to a
sequence of conduct between the parties previous to the agreement.
However,
the provisions of the Code on course of performance make it clear that a
sequence of conduct after or under the agreement may have equivalent meaning (§
2–208).
3. "Course of dealing" may enter the agreement either by explicit provisions of
the agreement or by tacit recognition.
4. This Code deals with "usage of trade" as a factor in reading the commercial
meaning of the agreement which the parties have made. The language used is to
be interpreted as meaning what it may fairly be expected to mean to parties
involved in the particular commercial transaction in a given locality or in a
given vocation or trade. By adopting in this context the term "usage of trade'
" this Code expresses its intent to reject those cases which see evidence of
"custom" as representing an effort to displace or negate "established rules of
law". A distinction is to be drawn between mandatory rules of law such as the
Statute of Frauds provisions of Article 2 on Sales whose very office is to
control and restrict the actions of the parties, and which cannot be abrogated
by agreement, or by a usage of trade, and those rules of law (such as those in
Part 3 of Article 2 on Sales) which fill in points which the parties have not
considered and in fact agreed upon.
The latter rules hold "unless otherwise
agreed" but yield to the contrary agreement of the parties.
Part of the
agreement of the parties to which such rules yield is to be sought for in the
usages of trade which furnish the background and give particular meaning to the
language used, and are the framework of common understanding controlling any
general rules of law which hold only when there is no such understanding.
5. A usage of trade under Subsection (B) must have the "regularity of
observance" specified. The ancient English tests for "custom" are abandoned in
this connection.
Therefore, it is not required that a usage of trade be
"ancient or immemorial", "universal" or the like.
Under the requirement of
Subsection (B), full recognition is thus available for new usages and for
usages currently observed by the great majority of decent dealers, even though
dissidents ready to cut corners do not agree. There is room also for proper
recognition of usage agreed upon by merchants in trade codes.
6. The policy of this Code controlling explicit unconscionable contracts and
clauses (§§ 1–203, 2–302) applies to implicit clauses which rest on usage of
trade and carries forward the policy underlying the ancient requirement that a
custom or usage must be "reasonable". However, the emphasis is shifted. The
very fact of commercial acceptance makes out a prima facie case that the usage
is reasonable, and the burden is no longer on the usage to establish itself as
being reasonable.
But the anciently established policing of usage by the
courts is continued to the extent necessary to cope with the situation arising
if an unconscionable or dishonest practice should become standard.
7. Subsection (C), giving the prescribed effect to usages of which the parties
"are or should be aware", reinforces the provision of Subsection (B) requiring
not universality but only the described "regularity of observance" of the
practice or method.
This Subsection also reinforces the point of Subsection

(B) that such usages may be either general to trade or particular to a special
branch of trade.
8. Although the terms in which this Code defines "agreement" include the
elements of course of dealing and usage of trade, the fact that express
reference is made in some sections to those elements is not to be construed as
carrying a contrary intent or implication elsewhere. Compare § 1–102(D).
9. In cases of a well established line of usage varying from the general rules
of this Code where the precise amount of the variation has not been worked out
into a single standard, the party relying on the usage is entitled, in any
event, to the minimum variation demonstrated.
The whole is not to be
disregarded because no particular line of detail has been established. In case
a dominant pattern has been fairly evidenced, the party relying on the usage is
entitled under this section to go to the trier of fact on the question of
whether such dominant pattern has been incorporated into the agreement.
10. Subsection (F) is intended to insure that this Code's liberal recognition
of the needs of commerce in regard to usage of trade shall not be made into an
instrument of abuse.
Cross References
Point 1:

Sections 1–203, 2–104 and 2–202.

Point 2:

Section 2–208.

Point 4:

Section 2–201 and Part 3 of Article 2.

Point 6:

Sections 1–203 and 2–302.

Point 8:

Sections 1–102 and 1–201.

Point 9:

Section 2–204(C).
Definitional Cross References

"Agreement".

Section 1–201.

"Contract".

Section 1–201.

"Party".

Section 1–201.

"Term".

Section 1–201.
Special Plain Language Comment

This section recognizes that words in a contract acquire meaning from the way
the parties have acted toward each other as well as by how people in that type
of situation usually deal with each other.
§ 1–206. Statute of Frauds for kinds of personal property not otherwise covered
A. Except in the cases described in Subsection (B) of this section, a

contract for the sale of personal property is not enforceable by way of action
or defense beyond five thousand dollars ($5,000) in amount or value of remedy
unless there is some writing which indicates that a contract for sale has been
made between the parties at a defined or stated price, reasonably identifies
the subject matter, and is signed by the party against whom enforcement is
sought or by his authorized agent.
B. Subsection (A) of this section does not apply to contracts for the
sale of goods (§ 2–201) nor to security agreements (§ 9–203).
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
206 of the Uniform Commercial Code as adopted by the states.
Commentary. To fill the gap left by the Statute of Frauds provisions for goods
(§ 2–201) and security interests (§ 9–203). The principal gap relates to sale
of the "general intangibles" defined in Article 9 (§ 9–106) and to transactions
excluded from Article 9 by § 9–104.
Typical are the sale of bilateral
contracts, royalty rights or the like.
The informality normal to such
transactions is recognized by lifting the limit for oral transactions to five
thousand dollars ($5,000). In such transactions there is often no standard of
practice by which to judge, and values can rise or drop without warning;
troubling abuses are avoided when the dollar limit is exceeded by requiring
that the subject matter be reasonably identified in a signed writing which
indicates that a contract for sale has been made at a defined or stated price.
Definitional Cross References
"Action".

Section 1–201.

"Agreement".

Section 1–201.

"Contract".

Section 1–201.

"Contract for sale".

Section 2–106.

"Goods".

Section 2–105.

"Party".

Section 1–201.

"Sale".

Section 2–106.

"Signed".

Section 1–201.

"Writing".

Section 1–201.

§ 1–207. Performance or acceptance under reservation of rights
A party who with explicit reservation of rights performs or promises

performance or assents to performance in a manner demanded or offered by the
other party does not thereby prejudice the rights reserved.
Such words as
"without prejudice", "under protest" or the like are sufficient.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
207 of the Uniform Commercial Code as adopted by the states.
Commentary.
1. This section provides machinery for the continuation of
performance along the lines contemplated by the contract despite a pending
dispute, by adopting the mercantile device of going ahead with delivery,
acceptance, or payment "without prejudice", "under protest", "under reserve",
"with reservation of all our rights", and the like.
All of these phrases
completely reserve all rights within the meaning of this section. The section
therefore contemplates that limited as well as general reservations and
acceptance by a party may be made "subject to satisfaction of our purchaser",
"subject to acceptance by our customers", or the like.
2. This section does not add any new requirement of language of reservation
where not already required by law, but merely provides a specific measure on
which a party can rely as he makes or concurs in any interim adjustment in the
course of performance.
It does not affect or impair the provisions of this
Code such as those under which the buyer's remedies for defect survive
acceptance without being expressly claimed if notice of the defects is given
within a reasonable time. Nor does it disturb the policy of those cases which
restrict the effect of a waiver of a defect to reasonable limits under the
circumstances, even though no such reservation is expressed.
The section is not addressed to the creation or loss of remedies in the
ordinary course of performance but rather to a method of procedure where one
party is claiming as of right something which the other feels to be
unwarranted.
Cross References
Section 2–607.
Definitional Cross References
"Party".

Section 1–201.

"Rights".

Section 1–201.
Special Plain Language Comment

If there is a dispute about a deal, the person who wants to object will not
lose the right to do so, if he states that he makes payment or otherwise
performs "without prejudice" or "under protest".

§ 1–208. Option to accelerate at will
A term providing that one party or his successor in interest may
accelerate payment or performance or require collateral or additional
collateral "at will" or "when he deems himself insecure" or in words of similar
import shall be construed to mean that he shall have power to do so only if he
in good faith believes that the prospect of payment or performance is impaired.
The burden of establishing lack of good faith is on the party against whom the
power has been exercised.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
208 of the Uniform Commercial Code as adopted by the states.
Commentary.
The increased use of acceleration clauses either in the case of
sales on credit or in time paper or in security transactions has led to some
confusion in the cases as to the effect to be given to a clause which seemingly
grants the power of an acceleration at the whim and caprice of the party. This
section is intended to make clear that despite language which can be so
construed and which further might be held to make the agreement void as against
public policy or to make the contract illusory or too indefinite for
enforcement, the clause means that the option is to be exercised only in the
good faith belief that the prospect of payment or performance is impaired.
Obviously, this section has no application to demand instruments or obligations
whose very nature permits call at any time with or without reason.
This
section applies only to an agreement or to paper which in the first instance is
payable at a future date.
Definitional Cross References
"Burden of establishing".
"Good faith".

Section 1–201.

Section 1–201.

"Party".

Section 1–201.

"Term".

Section 1–201.
Special Plain Language Comment

Some contract forms provide that one party has the power to demand that the
other act or pay quicker than normally contemplated, relying upon words like
those used in the statute. This section somewhat limits that right to avoid
abuse of that power.
§ 1–209. Subordinated obligations
An

obligation

may

be

issued

as

subordinated

to

payment

of

another

obligation of the person obligated, or a creditor may subordinate his right to
payment of an obligation by agreement with either the person obligated or
another creditor of the person obligated. Such a subordination does not create
a security interest as against either the common debtor or a subordinated
creditor. This section shall be construed as declaring the law as it existed
prior to the enactment of this section and not as modifying it.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 1–
209 of the Uniform Commercial Code as adopted by the states.
Commentary. 1. Billions of dollars of subordinated debt are held by the public
and by institutional investors.
Commonly, the subordinated debt is
subordinated on issue or acquisition and is evidenced by an investment security
or by a negotiable or non-negotiable note. Debt is also sometimes subordinated
after it arises, either by agreement between the subordinating creditor and the
debtor, by agreement between two creditors of the same debtor, or by agreement
of all three parties. The subordinated creditor may be a stockholder or other
"insider" interested in the common debtor; the subordinated debt may consist
of accounts or other rights to payment not evidenced by any instrument. All
such
cases
are
included
in
the
terms
"subordinated
obligation",
"subordination", and "subordinated creditor".
2. Subordination agreements are enforceable between the parties as contracts;
and in the bankruptcy of the common debtor dividends otherwise payable to the
subordinated creditor are turned over to the superior creditor.
This
"turn-over" practice has on occasion been explained in terms of "equitable
lien", "equitable assignment", or "constructive trust", but whatever the label
the practice is essentially an equitable remedy and does not mean that there is
a transaction "intended to create a security interest", a "sale of accounts,
contract rights or chattel paper", or a "security interest credit by contract",
within the meaning of § 9–102.
On the other hand, nothing in this section
prevents one creditor from assigning his rights to another creditor of the same
debtor in such a way as to create a security interest within Article 9, where
the parties so intend.
3. The last sentence of this section is intended to negate any implication that
the section changes the law. It is intended to be declaratory of pre-existing
law. Both the history and the test of Article 9 make it clear that it was not
intended to cover subordination agreements.
The provisions of § 9–203 for
signature by the "debtor" would be entirely unworkable if read to require
signature by public holders of subordinated investment securities.
The
priorities, filing provisions and remedies on default provided by Article 9
would also be largely inappropriate in many situations.
The precautionary
language § 9–316 preserving subordination of priority by agreement between
secured parties points to the conclusion that similar arrangements among
unsecured lenders are not covered unless otherwise within the scope of the
Article.

4. The enforcement of subordination agreements is largely left to supplementary
principles under § 1–103.
If the fact of subordination is noted on a
negotiable instrument, a holder under §§ 3–302 and 3–306 is subject to the term
because notice precludes him from taking free of the subordination. Section 3–
302(C)(1) and 3–306 severely limit the rights of levying creditors of a
subordinated creditor in such cases.
Definitional Cross References
"Agreement".

Sections 1–201.

"Creditor".

Section 1–201.

"Debtor".

Section 9–105.

"Person".

Section 1–201.

"Rights".

Section 1–201.

"Security interest".

Section 1–201.
Special Plain Language Comment

This section recognizes that two or more creditors may agree among themselves
who should be paid first, who has first rights to collateral, and who should
have the greatest risk of loss, if the debtor is unable to pay all of them.
Such agreements are not subject to regulation under Article 9 as security
interests.

Article 2. Sales
Part 1. Short Title, General Construction, and Subject Matter
§ 2–101. Short title
This article shall be known and may be cited as the Navajo Uniform
Commercial Code—Sales.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
101 of the Uniform Commercial Code adopted by the states.
Commentary. The arrangement of the present Article is in terms of contract for
sale and the various steps of its performance.
The legal consequences are
stated as following directly from the contract and action taken under it
without resorting to the idea of when property or title passed or was to pass
as being the determining factor.
The purpose is to avoid making practical
issues between practical men and women turn upon the location of an intangible

something, the passing of which no man or woman can prove by evidence and to
substitute for such abstractions proof of words and actions of a tangible
character.
§ 2–102. Scope;
article

certain security and other transactions excluded from this

Unless the context otherwise requires, this article applies to
transactions in goods; it does not apply to any transaction which 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 article impair or repeal
any statute regulating sales to consumers, farmers or other specified classes
of buyers.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
102 of the Uniform Commercial Code adopted by the states. Certain federal and
Navajo statutes regulating trade with Indians should be reviewed to determine
their applicability.
Transactions with Indians or Indian tribes may also
require approval under certain federal and tribal statutes. See 25 U.S.C. §§
81, 196, 261, 396 et seq. (1976); 25 C.F.R. § 162 (1984); 7 N.N.C. § 204;
and titles 3, 5, 18, and 24 of the Navajo Nation Code. "Security transaction"
is used in the same sense as in the Article on Secured Transactions (Article
9).
Cross References
NUCC, Article 9.
Definitional Cross References
"Contract".

Section 1–201.

"Contract for sale".
"Present sale".
"Sale".

Section 2–106.

Section 2–106.

Section 2–106.
Special Plain Language Comment

This section limits the scope of this article to transactions in "goods" (see §
2–105 for the definition of "goods") and distinguishes it from Article 9 which
governs "secured transactions" or contracts for services.
It also clearly
states that special statutes relating to consumers and other groups are not
repealed by the Code although the Code may effect such transactions governed by
such statutes in areas not regulated by specific statutes.
§ 2–103. Definitions and index of definitions

A. In this article unless the context otherwise requires:
1. "Buyer" means a person who buys or contracts to buy goods.
2. "Good faith" in the case of a merchant means honesty in fact and
the observance of reasonable commercial standards of fair dealing in the
trade.
3. "Receipt" of goods means taking physical possession of them.
4. "Seller" means a person who sells or contracts to sell goods.
5. "Consignee" means the person named in a bill to whom or to whose
order the bill promises delivery.
6. "Consignor" means the person named in a bill as the person from
whom the goods have been received for shipment.
B. Other definitions applying to this article or to specified parts
thereof, and the sections in which they appear are:
"Acceptance".

Section 2–606.

"Banker's credit".

Section 2–325.

"Between merchants".
"Cancellation".

Section 2–104.

Section 2–106(D).

"Commercial unit".

Section 2–105.

"Confirmed credit".

Section 2–325.

"Conforming to contract".
"Contract for sale".
"Cover".

Section 2–106.

Section 2–712.

"Entrusting".

Section 2–403.

"Financing agency".
"Future goods".
"Goods".

Section 2–106.

Section 2–104.

Section 2–105.

Section 2–105.

"Identification".

Section 2–501.

"Installment contract".
"Letter of Credit".

Section 2–612.

Section 2–325.

"Lot".

Section 2–105.

"Merchant".

Section 2–104.

"Overseas".

Section 2–323.

"Person in position of seller".
"Present sale".
"Sale".

Section 2–707.

Section 2–106.

Section 2–106.

"Sale on approval".
"Sale or return".
"Termination".

Section 2–326.
Section 2–326.

Section 2–106.

C. The following definitions in other Articles apply to this article:
"Check".

Section 3–104.

"Consumer goods".
"Dishonor".
"Draft".

Section 9–109.

Section 3–507.

Section 3–104.

D. In addition, Article 1 contains general definitions and principles of
construction and interpretation applicable throughout this article.
History
CJA-1–86, January 29, 1986.
Official Comment
Changes. The Definitions of "consignee" and "consignor" have been added to the
definitions in this section since they are used in Article 2, but normally
defined in Article 7 of the Uniform Commercial Code which has not been adopted
by the Navajo Nation.
Commentary. 1. The phrase "any legal successor in interest of such person" is
not included in the definition of buyer and seller since § 2–210 of this
article, which limits some types of delegation of performance on assignment of
a sales contract, makes it clear that not every such successor can be safely
included in the definition. In every ordinary case, however, such successors
are as of course included.
2. "Receipt" must be distinguished from delivery particularly in regard to the
problems arising out of shipment of goods, whether or not the contract calls
for making delivery by way of documents of title, since the seller may
frequently fulfill his obligations to "deliver" even though the buyer may never
"receive" the goods. Delivery with respect to documents of title is defined in

Article 1 and requires transfer of physical delivery.
Otherwise the many
divergent incidents of delivery are handled incident by incident.
Cross References
Point 1:

See Section 2–210 and Comment thereon.

Point 2:

Section 1–201.
Definitional Cross References

"Person".

Section 1–201.

§ 2–104. Definitions:

"merchant";

"between merchants";

"financing agency"

A. "Merchant" means a person who deals in goods of the kind or otherwise
by his occupation holds himself out as having knowledge or skill peculiar to
the practices or goods involved in the transaction or to whom such knowledge or
skill maybe attributed by his employment of an agent or broker or other
intermediary who by his occupation holds himself out as having such knowledge
or skill. The definition of merchant shall not include individual artists.
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 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 (§ 2–707).
C. "Between merchants" means in any transaction with respect to which
both parties are chargeable with the knowledge or skill of merchants.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
104 of the Uniform Commercial Code adopted by the states except that individual
artists are not considered merchants.
The official comments establish
standards for determining whether a farmer or rancher is a merchant.
Commentary. 1. This article assumes that transactions between professionals in
a given field require special and clear rules which may not apply to a casual
or inexperienced seller or buyer. It thus adopts a policy of expressly stating
rules applicable "between merchants" and "as against a merchant", wherever they
are needed instead of making them depend upon the circumstances of each case as
in the statutes cited above. This section lays the foundation of this Policy
by defining those who are to be regarded as professionals or "merchants" and by
stating when a transaction is deemed to be "between merchants".

2. The term "merchant" as defined here roots in the "law merchant" concept of a
professional in business. The professional status under the definition may be
based upon specialized knowledge as to the goods, specialized knowledge as to
business practices, or specialized knowledge as to both and which kind of
specialized knowledge may be sufficient to establish the merchant status is
indicated by the nature of the provisions.
The special provisions as to merchants appear only in this article and they are
of three kinds.
Sections 2–201(B), 2–205, 2–207 and 2–209 dealing with the
Statute of Frauds, firm offers, confirmatory memoranda and modification rest on
normal business practices which are or ought to be typical of and familiar to
any person in business. For purposes of these sections almost every person in
business would, therefore, be deemed to be a "merchant" under the language,
"who ...
by his occupation holds himself out as having knowledge or skill
peculiar to the practices ... involved in the transaction ... ", since the
practices involved in the transaction are non-specialized business practices
such as answering mail. In this type of provision, banks or even universities,
for example, well may be "merchants". But even these sections only apply to a
merchant in his mercantile capacity; a lawyer or bank president buying fishing
tackle for his own use is not a merchant.
On the other hand, in § 2–314 on the warranty of merchantability, such warranty
is implied only "if the seller is a merchant with respect to goods of that
kind". Obviously this qualification restricts the implied warranty to a much
smaller group than everyone who is engaged in business and requires a
professional status as to particular kinds of goods. Similarly in § 2–312(C)
the warranty that the goods are delivered free of any rightful claim of a third
party is limited to those who are dealing in the goods of that kind.
The
exception in § 2–402(B) for retention of possession by a merchant-seller falls
in the same class;
as does § 2–403(B) on entrusting of possession to a
merchant "who deals in goods of that kind".
A third group of sections includes § 2–103(A)(2), which provides that in the
case of a merchant, "good faith" includes observance of reasonable commercial
standards of fair dealing in the trade;
§§ 2–327(A)(3), 2–603 and 2–605,
dealing with responsibilities of merchant buyers to
follow seller's
instructions, etc.; 2–509 on risk of loss, and 2–609 on adequate assurance of
performance. This group of sections applies to persons who are merchants under
either the "practices" or the "goods" aspect of the definition of merchant.
3. Individual artists generally do not have the familiarity with business
customs such as firm offer (§ 2–205) and confirmatory memorandum (§ 2–207)
which is assumed by § 2–104(A).
Accordingly, individual artists are not
considered merchants.
The determination of whether a farmer (or a rancher) is a merchant under the
Code should consider the following factors: quantity and dollar amount of the
transactions, the frequency and length of time which the farmer (or rancher)
had engaged in selling the crops (or livestock) in the transaction, whether it
was his principal crop (or type of livestock), and the farmer's (or rancher's)
familiarity with the market in which the crop (or livestock) is sold. A farmer
(or rancher) shall not be considered a merchant under the Code if the
transaction involves the isolated sale of his own crops (or livestock).
See

Fear Ranches, Inc. v. Berry, 470 F.2d 905 (10th Cir. 1972).
4. The "or to whom such knowledge or skill may be attributed by his employment
of an agent or broker ... " clause of the definition of merchant means that
even persons such as universities, for example, can come within the definition
of merchant if they have regular purchasing departments or business personnel
who are familiar with business practices and who are equipped to take any
action required.
Cross References
Point 1:

See Sections 1–102 and 1–203.

Point 2: See Sections 2–314, 2–315 and 2–320 to 2–325, of this article, and
Article 9.
Definitional Cross References
"Bank".

Section 1–201.

"Buyer".

Section 2–103.

"Contract for sale".

Section 2–106.

"Document of title".

Section 1–201.

"Draft".

Section 3–104.

"Goods".

Section 2–105.

"Person".

Section 1–201.

"Purchase".
"Seller".

Section 1–201.

Section 2–103.
Special Plain Language Comment

This section defines merchants as those who are either:
(i) familiar with
general business practices;
or (ii) familiar with a particular good because
they deal in it regularly. Merchants are generally held to higher standards of
conduct. A person's status as a merchant depends on the type of transaction
and the goods involved.
§ 2–105. Definitions:
"commercial unit"

"transferability";

"goods";

"future goods";

"lot";

A. "Goods" means all things (including specially manufactured goods)
which are movable at the time of identification to the contract for sale other
than the money in which the price is to be paid, investment securities 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 (§ 2–107).

B. Goods must be both existing and identified before any interest in them
can pass. Goods which are not both existing and identified are "future" goods.
A purported present sale of future goods or of any interest therein operates as
a contract to sell.
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 such a bulk or any quantity thereof
agreed upon by number, weight or other measure may to the extent of the
seller's interest in the bulk be sold to the buyer who then becomes an owner in
common.
E. "Lot" means a parcel or a single article which is the subject matter
of a separate sale or delivery, whether or not it is sufficient to perform the
contract.
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 maybe 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.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
105 of the Uniform Commercial Code adopted by the states.
In certain
circumstances goods attached to the land may be considered trust property and
thus subject to certain trusteeship obligations of the federal government.
Commentary.
1. The definition of "goods" is based on the concept of
movability.
It is not intended to deal with things which are not fairly
identifiable as moveables before the contract is performed.
Growing crops are included within the definition of goods since they are
frequently intended for sale. The young of animals are also included expressly
in this definition since they, too, are frequently intended for sale and may be
contracted for before birth.
The period of gestation of domestic animals is
such that the provisions of the section of identification can apply as in the
case of crops to be planted. The reason for this definition also leads to the
inclusion of a wool crop or the like as "goods" subject to identification under
this article.
The exclusion of "money in which the price is to be paid" from the definition
of goods does not mean that foreign currency which is included in the
definition of money may not be the subject matter of a sales transaction.
Goods is intended to cover the sale of money when money is being treated as a
commodity but not to include it when money is the medium of payment.

As to contracts to sell timber, minerals, or structures to be removed from the
land § 2–107(A) controls.
The use of the word "fixtures" is avoided in view of the diversity of
definitions of that term. This article in including within its scope "things
attached to realty" adds the further test that they must be capable of
severance without material harm thereto. As between the parties any identified
things which fall within that definition become "goods" upon the making of the
contract for sale.
"Things attached to realty" may be considered, in some
instances, trust property and thus subject to certain limitations on transfer
by the federal government. See 25 U.S.C. §§ 81, 196, 261, 396, 406, 407, 635,
2101 (1984) See also F. Cohen, Handbook of federal Indian Law (1982).
"Investment securities" are expressly excluded from the coverage of this
article.
It is not intended by this exclusion, however, to prevent the
application of a particular section of this article by analogy to securities
when the reason of that section makes such application sensible and the
situation is not governed by Article 8 of the Uniform Commercial Code (Article
8 of the Uniform Commercial Code has not been adopted by the Navajo Nation);
the rights of parties which would be governed under Article 8 are governed by
Navajo law pursuant to 7 N.N.C. § 204.
2. References to the fact that a contract for sale can extend to future or
contingent goods and that ownership in common follows the sale of apart
interest have been omitted here as obvious without need for expression; hence
no inference to negate these principles should be drawn from their omission.
3. Subsection (D) does not touch the question of how far an appropriation of a
bulk of fungible goods may or may not satisfy the contract for sale.
4. Subsections (E) and (F) on "lot" and "commercial unit" are introduced to aid
in the phrasing of later Sections.
5. The question of when an identification of goods takes place is determined by
the provisions of § 2–501 and all that this section says is what kinds of goods
may be the subject of a sale.
Cross References
Point 1:

Section 2–107, 2–201 and 2–501.

Point 5:

Section 2–501.

See also Section 1–201.
Definitional Cross References
"Buyer".

Section 2–103.

"Contract".

Section 1–201.

"Contract for sale".

Section 2–106.

"Fungible".
"Money".

Section 1–201.

Section 1–201.

"Present sale".
"Sale".

Section 2–106.

Section 2–106.

"Seller".

Section 2–103.
Special Plain Language Comment

This section defines "goods", which are the subject of Article 2.
The
definition is based on the "movability" of the goods. The Code distinguishes
between goods presently in existence and identifiable and those either not
presently in existence or not identifiable;
the latter, "future" goods, are
not insurable and may not be claimed by the buyer upon the seller's insolvency.
§ 2–106. Definitions: "contract"; "agreement"; "contract for sale"; "sale";
"present sale"; "conforming to contract"; "termination"; "cancellation"
A. In this article, 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 (§ 2–401).
A "present sale"
means a sale which 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 pursuant to a power created by
agreement or law puts an end to the contract otherwise than for its breach. On
"termination" all obligations which are still executory on both sides are
discharged but any right based on prior breach or performance survives.
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 any unperformed balance.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
106 of the Uniform Commercial Code adopted by the states.
Commentary.
1. Subsection (A):
"Contract for sale" is used as a general
concept throughout this article, but the rights of the parties do not vary
according to whether the transaction is a present sale or a contract to sell

unless the Article expressly so provides.

See § 2–501.

2. Subsection (B):
It is in general intended to continue the policy of
requiring exact performance by the seller of his obligations as a condition to
his right to require acceptance.
However, the seller is in part safeguarded
against surprise as a result of sudden technicality on the buyer's part by the
provisions of § 2–508 on seller's cure of improper tender or delivery.
Moreover usage of trade frequently permits commercial leeway in performance and
the language of the agreement itself must be read in the light of such custom
or usage and also, prior course of dealing, and in a long term contract, the
course of performance.
3. Subsections (C) and (D): These Subsections are intended to make clear the
distinction carried forward throughout this article between termination and
cancellation.
Cross References
Point 2:

Sections 1–203, 1–205, 2–208 and 2–508.
Definitional Cross References

"Agreement".
"Buyer".

Section 1–201.

Section 2–103.

"Contract".

Section 1–201.

"Goods".

Section 2–105.

"Party".

Section 1–201.

"Remedy".

Section 1–201.

"Rights".

Section 1–201.

"Seller".

Section 2–103.
Special Plain Language Comment

The definition of agreement and contract limit the application of Article 2 to
contracts involving goods, rather than all contracts.
The next definition,
"conforming goods", expresses the rule that sellers must provide the goods
exactly as ordered (although certain exceptions are later found in the Code).
§ 2–107. 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 article if they are to be severed by the
seller but until severance, a purported present sale thereof which is not
effective as a transfer of an interest in land is effective only as a contract
to sell.

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
thereto but not described in Subsection (A) or of timber to be cut is a
contract for the sale of goods within this article 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. The provisions of this section are subject to the trust
responsibilities of the federal government. The provisions of this section are
also subject to any 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 and shall then constitute notice to third
parties of the buyer's rights under the contract for sale.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
107 of the Uniform Commercial Code adopted by the states. Contracts relating
to this type of goods may require approval by the federal government as part
its trust responsibilities.
Commentary.
1. Notice that Subsection (A) applies only if the minerals or
structures "are to be severed by the seller". If the buyer is to sever, such
transactions are considered contracts affecting land and all problems of the
Statute of Frauds and of land rights apply to them. Therefore, the Statute of
Frauds section of this article does not apply to such contracts though they
must conform to the Statute of Frauds affecting the transfer of interests in
land.
2. "Things attached" to the realty which can be severed without material harm
are goods within this article regardless of who is to effect the severance.
The word "fixtures" has been avoided because of the diverse definitions of this
term, the test of "severance without material harm" being substituted. In some
cases fixtures may be considered trust property and, thus, subject to the trust
obligation and regulations of the federal government. The federal government
may have to approve certain contracts relating to such goods.
(For minerals
see 25 U.S.C. §§ 396–400a, 635 and 2101 et seq., and 18 N.N.C. § 1 et seq.;
for timber see 25 U.S.C. §§ 196, 406 and 407) See generally 25 U.S.C. §§ 81,
261 (1976) See also § 9–313 and F. Cohen, Handbook of federal Indian Law
(1982).
The provision in Subsection (C) for recording such contracts is within the
purview of this article since it is a means of preserving the buyer's rights
under the contract of sale.
3. The security phases of things attached to or to become attached to realty
are dealt with in the Article on Secured Transactions (Article 9) and it is to
be noted that the definition of goods in that Article differs from the
definition of goods in this article.
However, both Articles treat as goods

growing crops and also timber to be cut under a contract of severance.
Cross References
Point 1:

Section 2–201.

Point 2:

Section 2–105.

Point 3:

Articles 9 and 9–105.
Definitional Cross References

"Buyer".

Section 2–103.

"Contract".

Section 1–201.

"Contract for sale".

Section 2–106.

"Goods".

Section 2–105.

"Party".

Section 1–201.

"Present sale".

Section 2–106.

"Rights".

Section 1–201.

"Seller".

Section 2–103.
Special Plain Language Comment

This section provides that only minerals severed by the seller are subject to
this article, but that timber and growing crops are subject to this article
whether severed by the seller or buyer.

Part 2. Form, Formation and Readjustment of Contract
§ 2–201. Formal requirements;

Statute of Frauds

A. Except as otherwise provided in this section a contract for sale of
goods for the price of five hundred dollars ($500.00) or more is not
enforceable by way of action or defense unless there is some 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 his authorized
agent or broker. A writing is not insufficient because it omits or incorrectly
states a term agreed upon, but the contract is not enforceable under this
paragraph beyond the quantity of goods shown in such writing.
B. Between merchants if within 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
Subsection (A) against such party unless written notice of objection to its
contents is given within 10 days after it is received ..

C. A contract which does not satisfy the requirements of Subsection (A)
but which 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 which reasonably indicate that the goods
are for the buyer, has made either a substantial beginning of their
manufacture or commitments for their procurement; or
2. If the party against whom enforcement is sought admits in his
pleading, testimony or otherwise in court that a contract for sale was
made, but the contract is not enforceable under this provision beyond the
quantity of goods admitted; or
3. With respect to goods for which payment has been made and
accepted or which have been received and accepted (§ 2–606).
D. This section does not apply to certain types of transactions involving
solely barter (see § 1–110).
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
201 of the Uniform Commercial Code adopted by the states.
Commentary. 1. The required writing need not contain all the material terms of
the contract and such materials terms as are stated need not be precisely
stated. All that is required is that the writing afford a basis for believing
that the offered oral evidence rests on a real transaction. It may be written
in lead pencil on a scratch pad. It need not indicate which party is the buyer
and which the seller.
The only term which must appear is the quantity term
which need not be accurately stated but recovery is limited to the amount
stated. The price, time and place of payment or delivery, the general quality
of the goods, or any particular warranties may all be omitted.
Special emphasis must be placed on the permissibility of omitting the price
term in view of the insistence of some courts on the express inclusion of this
term even where the parties have contracted on the basis of a published price
list. In many valid contracts for sale the parties do not mention the price in
express terms, the buyer being bound to pay and the seller to accept a
reasonable price which the trier of fact may well be trusted to determine.
Again, frequently the price is not mentioned since the parties have based their
agreement on a price list or catalogue known to both of them and this list
serves as an efficient safeguard against perjury. Finally, "market" prices and
valuations that are current in the vicinity constitute a similar check. Thus
if the price is not stated in the memorandum it can normally be supplied
without danger of fraud.
Of course if the "price" consists of goods rather
than money the quantity of goods must be stated.

Only three definite and invariable requirements as to the memorandum are made
by this Subsection. First, it must evidence a contract for the sale of goods;
second, it must be "signed", a word which includes any authentication which
identifies that party to be charged; and third, it must specify a quantity.
2. "Partial performance" as a substitute for the required memorandum can
validate the contract only for the goods which have been accepted or for which
payment has been made and accepted.
Receipt and acceptance either of goods or of the price constitutes an
unambiguous overt admission by both parties that a contract actually exists.
If the court can make a just apportionment, therefore, the agreed price of any
goods actually delivered can be recovered without a writing or, if the price
has been paid, the seller can be forced to deliver an apportionable part of the
goods. The overt actions of the parties make admissible evidence of the other
terms of the contract necessary to a just apportionment.
This is true even
though the actions of the parties are not in themselves inconsistent with a
different transaction such as a consignment for resale or a mere loan of money.
Part performance by the buyer requires the delivery of something by him that is
accepted by the seller as such performance. Thus, part payment may be made by
money or check, accepted by the seller. If the agreed price consists of goods
or services, then they must also have been delivered and accepted.
3. Between merchants, failure to answer a written confirmation of a contract
within 10 days of receipt is tantamount to a writing under Subsection (B) and
is sufficient against both parties under Subsection (A).
The only effect,
however, is to take away from the party who fails to answer the defense of the
Statute of Frauds; the burden of persuading the trier of fact that a contract
was in fact made orally prior to the written confirmation is unaffected.
Compare the effect of a failure to reply under § 2–207.
4. Failure to satisfy the requirements of this section does not render the
contract void for all purposes, but merely prevents it from being judicially
enforced in favor of a party to the contract. For example, a buyer who takes
possession of goods as provided in an oral contract which the seller has not
meanwhile repudiated is not a trespasser.
Nor would the Statute of Frauds
provisions of this section be a defense to a third person who wrongfully
induces a party to refuse to perform an oral contract, even though the injured
party cannot maintain an action for damages against the party so refusing to
perform.
5. The requirement of "signing" is discussed in the comment to § 1–201.
6. It is not necessary that the writing be delivered to anybody. It need not
be signed or authenticated by both parties but it is, of course, not sufficient
against one who has not signed it.
Prior to a dispute no one can determine
which party's signing of the memorandum may be necessary but from the time of
contracting each party should be aware that to him it is signing by the other
which is important.
7. If the making of a contract is admitted in court, either in a written
pleading, by stipulation or by oral statement before the court, no additional
writing is necessary for protection against fraud. Under this section it is no

longer possible to admit the contract in court and still treat the statute as a
defense.
However, the contract is not thus conclusively established.
The
admission so made by a party is itself evidential against him of the truth of
the facts so admitted and of nothing more; as against the other party, it is
not evidential at all.
8. Most transactions within the traditional Navajo culture are based on oral
agreements.
To maintain this tradition, certain barter transactions are
exempted from the Code.
Cross References
See Sections 1–201, 2–202, 2–207, 2–209 and 2–304.
Definitional Cross References
"Action".

Section 1–201.

"Between merchants".
"Buyer ".

Section 2–104.

Section 2–103.

"Contract".

Section 1–201.

"Contract for sale".

Section 2–106.

"Goods".

Section 2–105.

"Notice".

Section 1–201.

"Party".

Section 1–201.

"Reasonable time".
"Sale".

Section 1–204.

Section 2–106.

"Seller".

Section 2–103.
Special Plain Language Comment

This section is meant to reduce disputes over the existence of oral agreements
by requiring that certain types of agreements be in writing to be enforceable
in court. All contracts for the sale of goods with a price greater than five
hundred dollars ($500.00) must have three characteristics to be enforceable in
court:
(1) they must be in writing, (2) they must be signed by the party
against whom enforcement is sought, and (3) they must include the quantity of
goods sold. The section also sets up a special rule to confirm transactions
between merchants and two exceptions to the requirement of writing: (1) where
there is partial performance of the contract and, (2) where goods have been
"specially manufactured". Because of the oral traditions of the Navajo Nation,
transactions involving only barter are not subject to this restriction.
§ 2–202. Final written expression:

parol or extrinsic evidence

Terms with respect to which the confirmatory memoranda of the parties
agree or which are otherwise set forth in a writing intended by the parties as
a final expression of their agreement with respect to such terms as are
included therein may not be contradicted by evidence of any prior agreement or
of a contemporaneous oral agreement but may be explained or supplemented:
A. By course of dealing or usage of trade (§ 1–205) or by course of
performance (§ 2–208); and
B. 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.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
202 of the Uniform Commercial Code adopted by the states.
Commentary.

1. This section definitely rejects:

A. Any assumption that because a writing has been worked out which is final on
some matters, it is to be taken as including all the matters agreed upon;
B. The premise that the language used has the meaning attributable to such
language by rules of construction existing in the law rather than the meaning
which arises out of the commercial context in which it was used; and
C. The requirement that a condition precedent to the admissibility of the type
of evidence specified in Subsection (A) is an original determination by the
court that the language used is ambiguous.
2. Subsection (A) makes admissible evidence of course of dealing, usage of
trade and course of performance to explain or supplement the terms of any
writing stating the agreement of the parties in order that the true
understanding of the parties as to the agreement may be reached. Such writings
are to be read on the assumption that the course of prior dealings between the
parties and the usages of trade were taken for granted when the document was
phrased. Unless carefully negated they have become an element of the meaning
of the words used. Similarly, the course of actual performance by the parties
is considered the best indication of what they intended the writing to mean.
3. Under Subsection (B), consistent additional terms not reduced to writing may
be proved unless the court finds that the writing was intended by both parties
as a complete and exclusive statement of all the terms.
If the additional
terms are such that, if agreed upon, they would certainly have been included in
the document in the view of the court, then evidence of their alleged making
must be kept from the trier of fact.
Cross References

Point 3:

Sections 1–205, 2–207, 2–302 and 2–316.
Definitional Cross References

"Agreed" and "agreement".
"Course of dealing".
"Parties".
"Term".

Section 1–201.

Section 1–205.

Section 1–201.

Section 1–201.

"Usage of trade".

Section 1–205.

"Written" and "writing".

Section 1–201.
Special Plain Language Comment

A written agreement which is agreed to be "final" will supersede any evidence
of simultaneous oral agreements.
This section also provides that written
contracts will be interpreted in light of the customs or practices of the
particular industry.
§ 2–203. 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 constitute the writing a sealed instrument
and the law with respect to sealed instruments does not apply to such a
contract or offer.
History
CJA–1–86, January 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
203 of the Uniform Commercial Code adopted by the states.
Commentary. 1. This section makes it clear that every effect of the seal which
relates to "sealed instruments" as such is wiped out insofar as contracts for
sale are concerned.
However, the substantial effects of a seal, except
extension of the period of limitations, may be had by appropriate drafting as
in the case of firm offers (see § 2–205).
2. This section leaves untouched any aspects of a seal which relate merely to
signatures or to authentication of execution and the like.
Thus, a statute
providing that a purported signature gives prima facie evidence of its own
authenticity or that a signature gives prima facie evidence of consideration is
still applicable to sales transactions even though a seal may be held to be a
signature within the meaning of such a statute.
Similarly, the authorized
affixing of a corporate seal bearing the corporate name to a contractual
writing purporting to be made by the corporation may have effect as a signature
without any reference to the law of sealed instrument.

Cross References
Point 1:

Section 2–205.
Definitional Cross References

"Contract for sale".
"Goods".

Section 2–106.

Section 2–105.

"Writing".

Section 1–201.

§ 2–204. Formation in general
A. A contract for sale of goods maybe made in any manner sufficient to
show agreement, including conduct by both parties which recognizes the
existence of such a contract.
B. An agreement sufficient to constitute 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 have intended to make a contract and
there is reasonably certain basis for giving an appropriate remedy.
History
CJA–1–86, January 29, 1986.
Official Comment
Changes. This section is intended to have the same meaning and effect as § 2–
204 of the Uniform Commercial Code adopted by the states.
Commentary.
1. Subsection (A) continues without change the basic policy of
recognizing any manner of expression of agreement, oral, written or otherwise.
The legal effect of such an agreement is, of course, qualified by other
provisions of this article.
2. Under Subsection (A) appropriate conduct by the parties may be sufficient to
establish an agreement. Subsection (B) is directed primarily to the situation
where the interchanged correspondence does not disclose the exact point at
which the deal was closed, but the actions of the parties indicate that a
binding obligation has been undertaken.
3. Subsection (C) states the principle as to "open terms" underlying later
Sections of the Article.
If the parties intend to enter into a binding
agreement, this Subsection recognizes that agreement as valid in law, despite
missing terms, if there is any reasonably certain basis for granting a remedy.
The test is not certainty as to what the parties were to do nor as to the exact
amount of damages due the plaintiff. Nor is the fact that one or more terms
are left to be agreed upon enough in itself to defeat an otherwise adequate
agreement. Rather, commercial standards on the point of "indefiniteness" are

intended to be applied, this Code making provision elsewhere for missing terms
needed for performance, open price, remedies and the like.
4. The more terms the parties leave open, the less likely it is that they have
intended to conclude a binding agreement, but their actions may be frequently
conclusive on the matter despite the omissions.
Cross References
Subsection (A):

Sections 1–103, 2–201 and 2–302.

Subsection (B):

Sections 2–205 through 2–209.

Subsection (C):

See Part 3.
Definitional Cross References

"Agreement".

Section 1–201.

"Contract".

Section 1–201.

"Contract for Sale".

Section 2–106.

"Goods".

Section 2–105.

"Party".

Section 1–201.

"Remedy".

Section 1–201.

"Term".

Section 1–201.
Special Plain Language Comment

This section emphasizes that two parties may demonstrate an agreement in a
variety of ways and that once an "agreement" is found to have been made the
Code will attempt to resolve any unclear terms.
§ 2–205. Firm offers
An offer by a merchant to buy or sell goods in a signed writing which by
its terms gives assurance that it will be held open is not revocable, for lack
of consideration, during the time stated or if no time is st

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/tribal%3Anavajo_nation%3A7b043bcb646b58a9. Public record. Not legal advice.