Title 5, Uniform Commercial Code

Formal Requirements; Signing. (1) Except as otherwise required in 5 CMC § 5102(1)(c) on scope, no particular form of phrasing is required for a credit. A credit must be in writing and signed by the issuer and a confirmation must be in writing and signed by the confirming bank. A …

Consideration. No consideration is necessary to establish a credit or to enlarge or otherwise modify its terms. Source: PL 3-56, § 1 (§ 5105).

Time and Effect of Establishment of Credit. (1) Unless otherwise agreed a credit is established: (a) As regards the customer as soon as a letter of credit is sent to him or the letter of credit or an authorized written advice of its issuance is sent to the beneficiary; and (b) As…

Advice of Credit; Confirmation; Error in Statement of Terms. (1) Unless otherwise specified an advising bank by advising a credit issued by another bank does not assume any obligation to honor drafts drawn or demands for payment made under the credit but it does assume obligation…

“Notation Credit”; Exhaustion of Credit. (1) A credit which specifies that any person purchasing or paying drafts drawn or demands for payments made under it must note the amount of the draft or demand on the letter or advice of credit is a “notation credit.” (2) Under a notation…

Issuer’s Obligation to Its Customer. (1) An issuer’s obligation to its customer includes good faith and observance of any general banking usage but unless otherwise agreed does not include liability or responsibility: (a) For performance of the underlying contract for sale or oth…

Availability of Credit in Portions; Presenter’s Reservation of Lien or Claim. (1) Unless otherwise specified a credit may be used in portions in the discretion of the beneficiary. (2) Unless otherwise specified a person by presenting a documentary draft or demand for payment unde…

Warranties on Transfer and Presentment. (1) Unless otherwise agreed the beneficiary by transferring or presenting a documentary draft or demand for payment warrants to all interested parties that the necessary conditions of the credit have been complied with. This is in addition …

Time Allowed for Honor or Rejection; Withholding Honor or Rejection by Consent; “Presenter.” (1) A bank to which a documentary draft or demand for payment is presented under a credit may without dishonor of the draft, demand or credit: (a) Defer honor until the close of the third…

Indemnities. (1) A bank seeking to obtain (whether for itself or another) honor, negotiation or reimbursement under a credit may give an indemnity to induce such honor, negotiation or reimbursement. (2) An indemnity agreement inducing honor, negotiation or reimbursement: (a) Unle…

Issuer’s Duty and Privilege to Honor; Right to Reimbursement. (1) An issuer must honor a draft or demand for payment which complies with the terms of the relevant credit regardless of whether the goods or documents conform to the underlying contract for sale or other contract bet…

Remedy for Improper Dishonor or Anticipatory Repudiation. (1) When an issuer wrongfully dishonors a draft or demand for payment presented under a credit the person entitled to honor has with respect to any documents the rights of a person in the position of a seller (5 CMC § 2707…

Transfer and Assignment. (1) The right to draw under a credit can be transferred or assigned only when the credit is expressly designated as transferable or assignable. (2) Even though the credit specifically states that it is nontransferable or nonassignable the beneficiary may …

Insolvency of Bank Holding Funds for Documentary Credit. (1) Where an issuer or an advising or confirming bank or a bank which has for a customer procured issuance of a credit by another bank becomes insolvent before final payment under the credit and the credit is one to which t…

Short Title. This division may be cited as Uniform Commercial Code—Bulk Transfers. Source: PL 3-56, § 1 (§ 6101).

“Bulk Transfers”; Transfers of Equipment; Enterprises Subject to This Division; Bulk Transfers Subject to This Division. (1) A “bulk transfer” is any transfer in bulk and not in the ordinary course of the transferor’s business of a major part of the materials, supplies, merchandi…

Transfers Excepted From This Division. The following transfers are not subject to this division: (1) Those made to give security for the performance of an obligation; (2) General assignments for the benefit of all the creditors of the transferor, and subsequent transfers by the a…

Schedule of Property, List of Creditors. (1) Except as provided with respect to auction sales (5 CMC § 6108), a bulk transfer subject to this division is ineffective against any creditor of the transferor unless: (a) The transferee requires the transferor to furnish a list of his…

Notice to Creditors. In addition to the requirements of 5 CMC § 6104, any bulk transfer subject to this division except one made by auction sale (5 CMC § 6108) is ineffective against any creditor of the transferor unless at least 10 days before he takes possession of the goods or…

The Notice. (1) The notice to creditors (5 CMC § 6105) shall state: (a) That a bulk transfer is about to be made; and (b) The names and business addresses of the transferor and transferee, and all other business names and addresses used by the transferor within three years last p…

Auction Sales; “Auctioneer.” (1) A bulk transfer is subject to this division even though it is by sale at auction, but only in the manner and with the results stated in this section. (2) The transferor shall furnish a list of his creditors and assist in the preparation of a sched…

What Creditors Protected. The creditors of the transferor mentioned in this division are those holding claims based on transactions or events occurring before the bulk transfer, but creditors who become such after notice to creditors is given (5 CMC §§ 6105 and 6107) are not enti…

Subsequent Transfers. When the title of a transferee to property is subject to a defect by reason of his non-compliance with the requirements of this division, then: (1) A purchaser of any of such property from such transferee who pays no value or who takes with notice of such no…

Limitation of Actions and Levies. No action under this division shall be brought nor levy made more than six months after the date on which the transferee took possession of the goods unless the transfer has been concealed. If the transfer has been concealed, actions may be broug…

Short Title. This division may be cited as Uniform Commercial Code—Documents of Title. Source: PL 3-56, § 1 (§ 7101).

Definitions and Index of Definitions. (1) In this division, unless the context otherwise requires: (a) “Bailee” means the person who by a warehouse receipt, bill of lading or other document of title acknowledges possession of goods and contracts to deliver them. (b) “Consignee” m…

Relation of Division to Treaty, Statute, Tariff, Classification or Regulation. To the extent that any treaty or statute of the United States, regulatory statute of this Commonwealth or tariff, classification or regulation filed or issued pursuant thereto is applicable, the provis…

Negotiable and Non-Negotiable Warehouse Receipt, Bill of Lading or other Document of Title. (1) A warehouse receipt, bill of lading or other document of title is negotiable: (a) If by its terms the goods are to be delivered to bearer or to the order of a named person; or (b) Wher…

Construction Against Negative Implication. The omission from either chapter 2 [5 CMC § 7201 et seq.] or chapter 3 [5 CMC § 7301 et seq.] of this division of a provision corresponding to a provision made in the other chapter does not imply that a corresponding rule of law is not a…

Short Title. This division may be cited as Uniform Commercial Code—Investment Securities. Source: PL 3-56, § 1 (§ 8101).

Definitions and Index of Definitions. (1) In this division, unless the context otherwise requires: (a) A “certificated security” is a share, participation, or other interest in property of or an enterprise of the issuer or an obligation of the issuer which is: (i) Represented by …

Issuer’s Lien. A lien upon a security in favor of an issuer thereof is valid against a purchaser only if: (a) The security is certificated and the right of the issuer to the lien is noted conspicuously thereon; or (b) The security is uncertificated and a notation of the right of …

Effect of Overissue; “Overissue.” (1) The provisions of this division which validate a security or compel its issue or reissue do not apply to the extent that validation, issue, or reissue would result in overissue; but if: (a) An identical security which does not constitute an o…

Certificate Securities Negotiable; Statements and Instructions Not Negotiable; Presumptions. (1) Certificated securities governed by this division are negotiable instruments. (2) Statements (5 CMC § 8408), notices, or the like, sent by the issuer of uncertificated securities and …

Applicability. The law (including the conflict of laws rules) of the jurisdiction of organization of the issuer governs the validity of a security, the effectiveness of registration by the issuer, and the rights and duties of the issuer with respect to: (a) Registration of transf…

Securities Transferable; Action for Price. (1) Unless otherwise agreed and subject to any applicable law or regulation respecting short sales, a person obligated to transfer securities may transfer any certificated security of the specified issue in bearer form or registered in t…

Registration of Pledge and Release of Uncertificated Securities. A security interest in an uncertificated security may be evidenced by the registration of pledge to the secured party or a person designated by him. There can be no more than one registered pledge of an uncertificat…

Short Title. This division may be cited as Uniform Commercial Code—Secured Transactions. Source: PL 3-56, § 1 (§ 9101).

Policy and Subject Matter of Division. (1) Except as otherwise provided in 5 CMC § 9104 on excluded transactions, this division applies: (a) To any transaction (regardless of its form) which is intended to create a security interest in personal property or fixtures including good…

Perfection of Security Interest in Multiple State Transactions. (1) Documents, Instruments and Ordinary Goods. (a) This subsection applies to documents and instruments and to goods other than those covered by a certificate of title described in subsection (2) of this section, mob…

Transactions Excluded From Division. This division does not apply: (a) To a security interest subject to any statute of the United States, to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of property; …

Definitions and Index of Definitions. (1) In this division unless the context otherwise requires: (a) “Account debtor” means the person who is obligated on an account, chattel paper or general intangible; (b) “Chattel paper” means a writing or writings which evidence both a monet…

Definitions: “Account”; “General Intangibles.” “Account” means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance. “General intangibles” means any person…

Definitions: “Purchase Money Security Interest.” A security interest is a “purchase money security interest” to the extent that it is: (a) Taken or retained by the seller of the collateral to secure all or part of its price; or (b) Taken by a person who by making advances or incu…

When After-Acquired Collateral Not Security for Antecedent Debt. Where a secured party makes an advance, incurs an obligation, releases a perfected security interest, or otherwise gives new value which is to be secured in whole or in part by after-acquired property his security i…

Classification of Goods; “Consumer Goods”; “Equipment”; “Farm Products”; “Inventory.” Goods are: (1) “Consumer goods” if they are used or bought for use primarily for personal, family or household purposes; (2) “Equipment” if they are used or bought for use primarily in business …