Title 5, Uniform Commercial Code

Rights of a Holder in Due Course. To the extent that a holder is a holder in due course he takes the instrument free from: (1) All claims to it on the part of any person; and (2) All defenses of any party to the instrument with whom the holder has not dealt except: (a) Infancy, t…

Rights of One Not Holder in Due Course. Unless he has the rights of a holder in due course any person takes the instrument subject to: (a) All valid claims to it on the part of any person; and (b) All defenses of any party which would be available in an action on a simple contrac…

Burden of Establishing Signatures, Defenses and Due Course. (1) Unless specifically denied in the pleadings each signature on an instrument is admitted. When the effectiveness of a signature is put in issue: (a) The burden of establishing it is on the party claiming under the sig…

Deferred Posting; Recovery of Payment by Return of Items; Time of Dishonor. (1) Where an authorized settlement for a demand item (other than a documentary draft) received by a payor bank otherwise than for immediate payment over the counter has been made before midnight of the ba…

Payor Bank’s Responsibility for Late Return of Item. In the absence of a valid defense such as breach of a presentment warranty (5 CMC § 4207(1)), settlement effected or the like, if an item is presented on and received by a payor bank the bank is accountable for the amount of: (…

When Items Subject to Notice, Stop-Order, Legal Process or Setoff; Order in Which Items May Be Charged or Certified. (1) Any knowledge, notice or stop-order received by, legal process served upon or setoff exercised by a payor bank, whether or not effective under other rules of l…

Liability for Non-Receipt or Misdescription; “Said to Contain”; “Shipper’s Load and Count”; Improper Handling. (1) A consignee of a non-negotiable bill who has been given value in good faith or a holder to whom a negotiable bill has been duly negotiated relying in either case upo…

Through Bills of Lading and Similar Documents. (1) The issuer of a through bill of lading or other document embodying an undertaking to be performed in part by persons acting as its agents or by connecting carriers is liable to anyone entitled to recover on the document for any b…

Diversion; Reconsignment; Change of Instructions. (1) Unless the bill of lading otherwise provides, the carrier may deliver the goods to a person or destination other than that stated in the bill or may otherwise dispose of the goods on instructions from: (a) The holder of a nego…

Bills of Lading in a Set. (1) Except where customary in overseas transportation, a bill of lading must not be issued in a set of parts. The issuer is liable for damages caused by violation of this subsection. (2) Where a bill of lading is lawfully drawn in a set of parts, each of…

Destination Bills. (1) Instead of issuing a bill of lading to the consignor at the place of shipment a carrier may at the request of the consignor procure the bill to be issued at destination or at any other place designated in the request. (2) Upon request of anyone entitled as …

Altered Bills of Lading. An unauthorized alteration or filling in of a blank in a bill of lading leaves the bill enforceable according to its original tenor. Source: PL 3-56, § 1 (§ 7306).

Lien of Carrier. (1) A carrier has a lien on the goods covered by a bill of lading for charges subsequent to the date of its receipt of the goods for storage or transportation (including demurrage and terminal charges) and for expenses necessary for preservation of the goods inci…

Enforcement of Carrier’s Lien. (1) A carrier’s lien may be enforced by public or private sale of the goods, in block or in parcels, at any time or place and on any terms which are commercially reasonable, after notifying all persons known to claim an interest in the goods. Such n…

Duty of Care; Contractual Limitation of Carrier’s Liability. (1) A carrier who issues a bill of lading whether negotiable or non-negotiable must exercise the degree of care in relation to the goods which a reasonably careful man would exercise under like circumstances. This subse…

Rights Acquired by Purchaser. (1) Upon transfer of a security to a purchaser (5 CMC § 8313), the purchaser acquires the rights in the security which his transferor had or had actual authority to convey unless the purchaser’s rights are limited by 5 CMC § 8302(4). (2) A transferee…

“Bona Fide Purchaser”; “Adverse Claim”; Title Acquired by Bona Fide Purchaser. (1) A “bona fide purchaser” is a purchaser for value in good faith and without notice of any adverse claim: (a) Who takes delivery of a certificated security in bearer form or in registered form, issue…

“Broker.” “Broker” means a person engaged for all or part of his time in the business of buying and selling securities, who in the transaction concerned acts for, buys a security from, or sells a security to, a customer. Nothing in this division determines the capacity in which a…

Notice to Purchaser of Adverse Claims. (1) A purchaser (including a broker for the seller or buyer, but excluding an intermediary bank) of a certificated security is charged with notice of adverse claims if: (a) The security, whether in bearer or registered form, has been indorse…

Staleness as Notice of Adverse Clams. An act or event that creates a right to immediate performance of the principal obligation represented by a certificated security or sets a date on or after which a certificated security is to be presented or surrendered for redemption or exch…

Warranties on Presentment and Transfer of Certificated Securities; Warranties of Originators of Instructions. (1) A person who presents a certificated security for registration of transfer or for payment or exchange warrants to the issuer that he is entitled to the registration, …

Effect of Delivery Without Indorsement; Right to Compel Indorsement. If a certificated security in registered form has been delivered to a purchaser without a necessary indorsement he may become a bona fide purchaser only as of the time the indorsement is supplied; but against th…

Indorsement; Instructions. (1) An indorsement of a certificated security in registered form is made when an appropriate person signs on it or on a separate document an assignment or transfer of the security or a power to assign or transfer it or his signature is written without m…

Effect of Indorsement Without Delivery. An indorsement of a certificated security, whether special or in blank, does not constitute a transfer until delivery of the certificated security on which it appears or, if the indorsement is on a separate document, until delivery of both …

Indorsement of Certificated Security in Bearer Form. An indorsement of a certificated security in bearer form may give notice of adverse claims (5 CMC § 8304) but does not otherwise affect any right to registration the holder possesses. Source: PL 3-56, § 1 (§ 8310).

Effect of Unauthorized Indorsement or Instruction. Unless the owner or pledgee has ratified an unauthorized indorsement or instruction or is otherwise precluded from asserting its ineffectiveness: (a) He may assert its ineffectiveness against the issuer or any purchaser, other th…

Effect of Guaranteeing Signature, Indorsement or Instruction. (1) Any person guaranteeing a signature of an indorser of a certificated security warrants that at the time of signing: (a) The signature was genuine; (b) The signer was an appropriate person to indorse (5 CMC § 8308);…

When Transfer to Purchaser Occurs; Financial Intermediary as Bona Fide Purchaser; “Financial Intermediary.” (1) Transfer of a security or a limited interest (including a security interest) therein to a purchaser occurs only: (a) At the time he or a person designated by him acquir…

Duty to Transfer, When Completed. (1) Unless otherwise agreed, if a sale of a security is made on an exchange or otherwise through brokers: (a) The selling customer fulfills his duty to transfer at the time he: (i) Places a certificated security in the possession of the selling b…

Action Against Transferee Based Upon Wrongful Transfer. (1) Any person against whom the transfer of a security is wrongful for any reason, including his incapacity, as against anyone except a bona fide purchaser, may: (a) Reclaim possession of the certificated security wrongfully…

Purchaser’s Right to Requisites for Registration of Transfer, Pledge, or Release on Books. Unless otherwise agreed, the transferor of a certificated security or the transferor, pledgor, or pledgee of an uncertificated security on due demand must supply his purchaser with any proo…

Creditors’ Rights. (1) Subject to the exceptions in subsections (3) and (4) of this section, no attachment or levy upon a certificated security or any share or other interest represented thereby which is outstanding is valid until the security is actually seized by the officer ma…

No Conversion by Good Faith Conduct. An agent or bailee who in good faith (including observance of reasonable commercial standards if he is in the business of buying, selling, or otherwise dealing with securities) has received certificated securities and sold, pledged, or deliver…

Statute of Frauds. A contract for the sale of securities is not enforceable by way of action or defense unless: (a) There is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker, sufficient to indicate that a contract has been m…

Transfer or Pledge Within Central Depository System. (1) In addition to other methods, a transfer, pledge, or release of a security or any interest therein may be effected by the making of appropriate entries on the books of a clearing corporation reducing the account of the tran…

Enforceability, Attachment, Perfection and Termination of Security Interests. (1) A security interest in a security is enforceable and can attach only if it is transferred to the secured party or a person designated by him pursuant to a provision of 5 CMC § 8313(1). (2) A securit…

Persons Who Take Priority Over Unperfected Security Interests; Rights of “Lien Creditor.” (1) Except as otherwise provided in subsection (2) of this section, an unperfected security interest is subordinate to the rights of: (a) Persons entitled to priority under 5 CMC § 9312; (b)…

When Filing Is Required to Perfect Security Interest; Security Interests to Which Filing Provisions of This Division Do Not Apply. (1) A financing statement must be filed to perfect all security interests except the following: (a) A security interest in collateral in possession o…

When Security Interest Is Perfected; Continuity of Perfection. (1) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in 5 CMC § 9302, 9304, 9305 and 9306. If such steps are …

Perfection of Security Interest in Instruments, Documents, and Goods Covered by Documents; Perfection by Permissive Filing; Temporary Perfection Without Filing or Transfer of Possession. (1) A security interest in chattel paper or negotiable documents may be perfected by filing. …

When Possession by Secured Party Perfects Security Interest Without Filing. A security interest in letters of credit and advices of credit (5 CMC § 5116(2)(a)), goods, instruments (other than certificated securities), money, negotiable documents, or chattel paper may be perfected…

“Proceeds”; Secured Party’s Rights on Disposition of Collateral. (1) “Proceeds” includes whatever is received upon the sale, exchange, collection or other disposition of collateral or proceeds. Insurance payable by reason of loss or damage to the collateral is proceeds, except to…

Protection of Buyers of Goods. (1) A buyer in ordinary course of business (5 CMC § 1201(9)) other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by his seller even though the security interest is perfected …

Purchase of Chattel Paper and Instruments. A purchaser of chattel paper or an instrument who gives new value and takes possession of it in the ordinary course of his business has priority over a security interest in the chattel paper or instrument: (a) Which is perfected under 5 …

Protection of Purchasers of Instruments, Documents and Securities. Nothing in this division limits the rights of a holder in due course of a negotiable instrument (5 CMC § 3302) or a holder to whom a negotiable document of title has been duly negotiated (5 CMC § 7501) or a bona f…

Priority of Certain Liens Arising by Operation of Law. When a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for…