[Rev. 1/15/2009 5:11:25 PM]
CHAPTER 104 - UNIFORM COMMERCIAL CODE—ORIGINAL ARTICLES
ARTICLE 1
GENERAL PROVISIONS
Part 1
Short Titles, Scope, Construction, Severability and Electronic Signatures and Delivery
NRS 104.1101 Short titles.
NRS 104.1102 Scope of Article 1.
NRS 104.1103 Construction of Uniform Commercial Code to promote underlying purposes and policies; applicability of supplemental principles of law.
NRS 104.1104 Construction against implied repeal.
NRS 104.1105 Severability.
NRS 104.1106 Use of singular and plural; gender.
NRS 104.1108 Relation to Electronic Signatures in Global and National Commerce Act.
Part 2
General Definitions and Principles of Interpretation
NRS 104.1201 General definitions.
NRS 104.1202 Notice; knowledge.
NRS 104.1203 Lease distinguished from security interest.
NRS 104.1204 Value.
NRS 104.1205 Reasonable time; seasonableness.
NRS 104.1206 Presumptions.
Part 3
Territorial Applicability and General Rules
NRS 104.1301 Territorial applicability; parties’ power to choose applicable law.
NRS 104.1302 Variation by agreement.
NRS 104.1303 Course of performance, course of dealing and usage of trade.
NRS 104.1304 Obligation of good faith.
NRS 104.1305 Remedies to be liberally administered.
NRS 104.1306 Waiver or renunciation of claim or right after breach.
NRS 104.1307 Prima facie evidence by third-party documents.
NRS 104.1308 Performance or acceptance under reservation of rights.
NRS 104.1309 Option to accelerate at will.
NRS 104.1310 Subordinated obligations.
ARTICLE 2
SALES
Part 1
Short Title, General Construction and Subject Matter
NRS 104.2101 Short title.
NRS 104.2102 Scope; certain security and other transactions excluded from this article.
NRS 104.2103 Definitions and index of definitions.
NRS 104.2104 Definitions: “Merchant”; “between merchants”; “financing agency.”
NRS 104.2105 Definitions: Transferability; “goods”; “future” goods; “lot”; “commercial unit.”
NRS 104.2106 Definitions: “Contract”; “agreement”; “contract for sale”; “sale”; “present sale”; “conforming” to contract; “termination”; “cancellation.”
NRS 104.2107 Goods to be severed from realty: Recording.
Part 2
Form, Formation and Readjustment of Contract
NRS 104.2201 Formal requirements; statute of frauds.
NRS 104.2202 Final written expression: Parol or extrinsic evidence.
NRS 104.2203 Seals inoperative.
NRS 104.2204 Formation in general.
NRS 104.2205 Firm offers.
NRS 104.2206 Offer and acceptance in formation of contract.
NRS 104.2207 Additional terms in acceptance or confirmation.
NRS 104.2209 Modification, rescission and waiver.
NRS 104.2210 Delegation of performance; assignment of rights.
Part 3
General Obligation and Construction of Contract
NRS 104.2301 General obligations of parties.
NRS 104.2302 Unconscionable contract or clause.
NRS 104.2303 Allocation or division of risks.
NRS 104.2304 Price payable in money, goods, realty or otherwise.
NRS 104.2305 Open price term.
NRS 104.2306 Output, requirements and exclusive dealings.
NRS 104.2307 Delivery in single lot or several lots.
NRS 104.2308 Absence of specified place for delivery.
NRS 104.2309 Absence of specific time for action or duration of contract; notice of termination.
NRS 104.2310 Open time for payment or running of credit; authority to ship under reservation.
NRS 104.2311 Options and cooperation respecting performance.
NRS 104.2312 Warranty of title and against infringement; buyer’s obligation against infringement.
NRS 104.2313 Express warranties by affirmation, promise, description or sample.
NRS 104.2314 Implied warranty: Merchantability; usage of trade.
NRS 104.2315 Implied warranty: Fitness for particular purpose.
NRS 104.2316 Exclusion or modification of warranties.
NRS 104.2317 Cumulation and conflict of warranties express or implied.
NRS 104.2318 Third-party beneficiaries of warranties express or implied.
NRS 104.2319 F.O.B. and F.A.S. terms.
NRS 104.2320 C.I.F. and C. & F. terms.
NRS 104.2321 C.I.F. or C. & F.: “Net landed weights”; “payment on arrival”; warranty of condition on arrival.
NRS 104.2322 Delivery “ex-ship.”
NRS 104.2323 Form of bill of lading required in overseas shipment; “overseas.”
NRS 104.2324 “No arrival, no sale” term.
NRS 104.2325 “Letter of credit” term; “confirmed credit.”
NRS 104.2326 Sale on approval and sale or return; rights of creditors.
NRS 104.2327 Special incidents of sale on approval and sale or return.
NRS 104.2328 Sale by auction.
Part 4
Title, Creditors and Good Faith Purchasers
NRS 104.2401 Passing of title; reservation for security; limited application of this section.
NRS 104.2402 Rights of seller’s creditors against sold goods.
NRS 104.2403 Power to transfer; good faith purchase of goods; “entrusting.”
Part 5
Performance
NRS 104.2501 Insurable interest in goods; manner of identification of goods.
NRS 104.2502 Buyer’s right to goods on seller’s repudiation, failure to deliver or insolvency.
NRS 104.2503 Manner of seller’s tender of delivery.
NRS 104.2504 Shipment by seller.
NRS 104.2505 Seller’s shipment under reservation.
NRS 104.2506 Rights of financing agency.
NRS 104.2507 Effect of seller’s tender; delivery on condition.
NRS 104.2508 Cure by seller of improper tender or delivery; replacement.
NRS 104.2509 Risk of loss in the absence of breach.
NRS 104.2510 Effect of breach on risk of loss.
NRS 104.2511 Tender of payment by buyer; payment by check.
NRS 104.2512 Payment by buyer before inspection.
NRS 104.2513 Buyer’s right to inspection of goods.
NRS 104.2514 When documents deliverable on acceptance; when on payment.
NRS 104.2515 Preserving evidence of goods in dispute.
Part 6
Breach, Repudiation and Excuse
NRS 104.2601 Buyer’s rights on improper delivery.
NRS 104.2602 Manner and effect of rightful rejection.
NRS 104.2603 Merchant buyer’s duties as to rightfully rejected goods.
NRS 104.2604 Buyer’s options as to salvage of rightfully rejected goods.
NRS 104.2605 Waiver of buyer’s objections by failure to particularize.
NRS 104.2606 What constitutes acceptance of goods.
NRS 104.2607 Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.
NRS 104.2608 Revocation of acceptance in whole or in part.
NRS 104.2609 Right to adequate assurance of performance.
NRS 104.2610 Anticipatory repudiation.
NRS 104.2611 Retraction of anticipatory repudiation.
NRS 104.2612 “Installment contract”; breach.
NRS 104.2613 Casualty to identified goods.
NRS 104.2614 Substituted performance.
NRS 104.2615 Excuse by failure of presupposed conditions.
NRS 104.2616 Procedure on notice claiming excuse.
Part 7
Remedies
NRS 104.2701 Remedies for breach of collateral contracts not impaired.
NRS 104.2702 Seller’s remedies on discovery of buyer’s insolvency.
NRS 104.2703 Seller’s remedies in general.
NRS 104.2704 Seller’s right to identify goods to contract notwithstanding breach or to salvage unfinished goods.
NRS 104.2705 Seller’s stoppage of delivery in transit or otherwise.
NRS 104.2706 Seller’s resale including contract for resale.
NRS 104.2707 “Person in the position of a seller.”
NRS 104.2708 Seller’s damages for nonacceptance or repudiation.
NRS 104.2709 Action for price.
NRS 104.2710 Seller’s incidental damages.
NRS 104.2711 Buyer’s remedies in general; buyer’s security interest in rejected goods.
NRS 104.2712 “Cover”; buyer’s procurement of substitute goods.
NRS 104.2713 Buyer’s damages for nondelivery or repudiation.
NRS 104.2714 Buyer’s damages for breach in regard to accepted goods.
NRS 104.2715 Buyer’s incidental and consequential damages.
NRS 104.2716 Buyer’s right to specific performance or replevin.
NRS 104.2717 Deduction of damages from the price.
NRS 104.2718 Liquidation or limitation of damages; deposits.
NRS 104.2719 Contractual modification or limitation of remedy.
NRS 104.2720 Effect of “cancellation” or “rescission” on claims for antecedent breach.
NRS 104.2721 Remedies for fraud.
NRS 104.2722 Who can sue third parties for injury to goods.
NRS 104.2723 Proof of market price: Time and place.
NRS 104.2724 Admissibility of market quotations.
NRS 104.2725 Statute of limitations in contracts for sale.
ARTICLE 3
NEGOTIABLE INSTRUMENTS
Part 1
General Provisions and Definitions
NRS 104.3101 Short title.
NRS 104.3102 Subject matter.
NRS 104.3103 Definitions.
NRS 104.3104 Negotiable instrument.
NRS 104.3105 Issue of instrument.
NRS 104.3106 Unconditional promise or order.
NRS 104.3107 Instrument payable in foreign money.
NRS 104.3108 Payable on demand or at definite time.
NRS 104.3109 Payable to bearer or to order.
NRS 104.3110 Identification of person to whom instrument is payable.
NRS 104.3111 Place of payment.
NRS 104.3112 Interest.
NRS 104.3113 Date of instrument.
NRS 104.3114 Contradictory terms of instrument.
NRS 104.3115 Incomplete instruments.
NRS 104.3116 Joint and several liability; contribution.
NRS 104.3117 Other agreements affecting instrument.
NRS 104.3118 Statute of limitations.
NRS 104.3119 Notice of right to defend action.
Part 2
Negotiation, Transfer and Endorsement
NRS 104.3201 Negotiation.
NRS 104.3202 Negotiation subject to rescission.
NRS 104.3203 Transfer of instrument; rights acquired by transfer.
NRS 104.3204 Endorsement.
NRS 104.3205 Special endorsement; blank endorsement; anomalous endorsement.
NRS 104.3206 Restrictive endorsement.
NRS 104.3207 Reacquisition.
Part 3
Enforcement of Instruments
NRS 104.3301 Person entitled to enforce instrument.
NRS 104.3302 Holder in due course.
NRS 104.3303 Value and consideration.
NRS 104.3304 Overdue instrument.
NRS 104.3305 Defenses and claims in recoupment.
NRS 104.3306 Claims to an instrument.
NRS 104.3307 Notice of breach of fiduciary duty.
NRS 104.3308 Proof of signatures and status as holder in due course.
NRS 104.3309 Enforcement of lost, destroyed or stolen instrument.
NRS 104.3310 Effect of instrument on obligation for which taken.
NRS 104.3311 Accord and satisfaction by use of instrument.
NRS 104.3312 Lost, destroyed or stolen cashier’s check, teller’s check or certified check.
Part 4
Liability of Parties
NRS 104.3401 Signature.
NRS 104.3402 Signature by representative.
NRS 104.3403 Unauthorized signature.
NRS 104.3404 Impostors; fictitious payees.
NRS 104.3405 Employer’s responsibility for fraudulent endorsement by employee.
NRS 104.3406 Negligence contributing to forged signature or alteration of instrument.
NRS 104.3407 Alteration.
NRS 104.3408 Drawee not liable on unaccepted draft.
NRS 104.3409 Acceptance of draft; certified check.
NRS 104.3410 Acceptance varying draft.
NRS 104.3411 Refusal to pay cashier’s checks, teller’s checks and certified checks.
NRS 104.3412 Obligation of issuer of note or cashier’s check.
NRS 104.3413 Obligation of acceptor.
NRS 104.3414 Obligation of drawer.
NRS 104.3415 Obligation of endorser.
NRS 104.3416 Transfer warranties.
NRS 104.3417 Presentment warranties.
NRS 104.3418 Payment or acceptance by mistake.
NRS 104.3419 Instruments signed for accommodation.
NRS 104.3420 Conversion of instrument.
Part 5
Dishonor
NRS 104.3501 Presentment.
NRS 104.3502 Dishonor.
NRS 104.3503 Notice of dishonor.
NRS 104.3504 Excused presentment and notice of dishonor.
NRS 104.3505 Evidence of dishonor.
Part 6
Discharge and Payment
NRS 104.3601 Discharge and effect of discharge.
NRS 104.3602 Payment.
NRS 104.3603 Tender of payment.
NRS 104.3604 Discharge by cancellation or renunciation.
NRS 104.3605 Discharge of endorsers and accommodation parties.
ARTICLE 4
BANK DEPOSITS AND COLLECTIONS
Part 1
General Provisions and Definitions
NRS 104.4101 Short title.
NRS 104.4102 Applicability.
NRS 104.4103 Variation by agreement; measure of damages; action constituting ordinary care.
NRS 104.4104 Definitions and index of definitions.
NRS 104.4105 “Depositary bank”; “payor bank”; “intermediary bank”; “collecting bank”; “presenting bank.”
NRS 104.4106 Payable through or payable at bank.
NRS 104.4107 Separate office of bank.
NRS 104.4108 Time of receipt of items.
NRS 104.4109 Delays.
NRS 104.4110 Electronic presentment.
NRS 104.4111 Statute of limitations.
Part 2
Collection of Items: Depositary and Collecting Banks
NRS 104.4201 Status of collecting bank as agent and provisional status of credits; item endorsed “pay any bank.”
NRS 104.4202 Responsibility for collection or return; when action timely.
NRS 104.4203 Effect of instructions.
NRS 104.4204 Methods of sending and presenting; sending directly to payor bank.
NRS 104.4205 Depository bank holder of unendorsed item.
NRS 104.4206 Transfer between banks.
NRS 104.4207 Transfer warranties.
NRS 104.4208 Presentment warranties.
NRS 104.4209 Encoding and retention warranties.
NRS 104.4210 Security interest of collecting bank in items, accompanying documents and proceeds.
NRS 104.4211 When bank gives value for purposes of holder in due course.
NRS 104.4212 Presentment by notice of item not payable by, through or at bank; liability of drawer or endorser.
NRS 104.4213 Medium and time of settlement by bank.
NRS 104.4214 Right of charge-back or refund; liability of collecting bank; return of item.
NRS 104.4215 Final payment of item by payor bank; when provisional debits and credits become final; when certain credits become available for withdrawal.
NRS 104.4216 Insolvency and preference.
Part 3
Collection of Items: Payor Banks
NRS 104.4301 Deferred posting; recovery of payment by return of items; time of dishonor; return of items by payor bank.
NRS 104.4302 Payor bank’s responsibility for late return of item.
NRS 104.4303 When items subject to notice, stop-payment order, legal process or setoff; order in which items may be charged or certified.
Part 4
Relationship Between Payor Bank and its Customer
NRS 104.4401 When bank may charge customer’s account.
NRS 104.4402 Bank’s liability to customer for wrongful dishonor; time of determining insufficiency of account.
NRS 104.4403 Customer’s right to stop payment; burden of proof of loss.
NRS 104.4404 Bank not obligated to pay check more than 6 months old.
NRS 104.4405 Death or incompetence of customer.
NRS 104.4406 Customer’s duty to discover or report unauthorized signature or alteration.
NRS 104.4407 Payor bank’s right to subrogation on improper payment.
Part 5
Collection of Documentary Drafts
NRS 104.4501 Handling of documentary drafts; duty to send for presentment and to notify customer of dishonor.
NRS 104.4502 Presentment of “on arrival” drafts.
NRS 104.4503 Responsibility of presenting bank for documents and goods; report of reasons for dishonor; referee in case of need.
NRS 104.4504 Privilege of presenting bank to deal with goods; security interest for expenses.
ARTICLE 5
LETTERS OF CREDIT
NRS 104.5101 Short title.
NRS 104.5102 Definitions.
NRS 104.5103 Scope.
NRS 104.5104 Formal requirements.
NRS 104.5105 Consideration.
NRS 104.5106 Issuance, amendment, cancellation and duration.
NRS 104.5107 Confirmer, nominated person and adviser.
NRS 104.5108 Issuer’s rights and obligations.
NRS 104.5109 Fraud and forgery.
NRS 104.5110 Warranties.
NRS 104.5111 Remedies.
NRS 104.5112 Transfer of letter of credit.
NRS 104.5113 Transfer by operation of law.
NRS 104.5114 Assignment of proceeds.
NRS 104.5115 Statute of limitations.
NRS 104.5116 Choice of law and forum.
NRS 104.5117 Subrogation of issuer, applicant and nominated person.
NRS 104.5118 Security interest of issuer or nominated person.
ARTICLE 7
WAREHOUSE RECEIPTS, BILLS OF LADING AND OTHER DOCUMENTS OF TITLE
Part 1
General
NRS 104.7101 Short title.
NRS 104.7102 Definitions and index of definitions.
NRS 104.7103 Relation of Article to treaty or statute.
NRS 104.7104 Negotiable and nonnegotiable document of title.
NRS 104.7105 Reissuance in alternative medium.
NRS 104.7106 Control of electronic document of title.
Part 2
Warehouse Receipts: Special Provisions
NRS 104.7201 Person that may issue warehouse receipt; storage under bond.
NRS 104.7202 Form of warehouse receipt; effect of omission.
NRS 104.7203 Liability for nonreceipt or misdescription.
NRS 104.7204 Duty of care; contractual limitation of warehouse’s liability.
NRS 104.7205 Title under warehouse receipt defeated in certain cases.
NRS 104.7206 Termination of storage at warehouse’s option.
NRS 104.7207 Goods must be kept separate; fungible goods.
NRS 104.7208 Altered warehouse receipts.
NRS 104.7209 Lien of warehouse.
NRS 104.7210 Enforcement of warehouse’s lien.
Part 3
Bills of Lading: Special Provisions
NRS 104.7301 Liability for nonreceipt or misdescription; “said to contain”; “shipper’s weight, load and count”; improper handling.
NRS 104.7302 Through bills of lading and similar documents of title.
NRS 104.7303 Diversion; reconsignment; change of instructions.
NRS 104.7304 Tangible bills of lading in set.
NRS 104.7305 Destination bills.
NRS 104.7306 Altered bills of lading.
NRS 104.7307 Lien of carrier.
NRS 104.7308 Enforcement of carrier’s lien.
NRS 104.7309 Duty of care; contractual limitation of carrier’s liability.
Part 4
Warehouse Receipts and Bills of Lading: General Obligations
NRS 104.7401 Irregularities in issue of receipt or bill or conduct of issuer.
NRS 104.7402 Duplicate document of title; overissue.
NRS 104.7403 Obligation of bailee to deliver; excuse.
NRS 104.7404 No liability for good-faith delivery pursuant to document of title.
Part 5
Warehouse Receipts and Bills of Lading: Negotiation and Transfers
NRS 104.7501 Form of negotiation and requirements of due negotiation.
NRS 104.7502 Rights acquired by due negotiation.
NRS 104.7503 Document of title to goods defeated in certain cases.
NRS 104.7504 Rights acquired in absence of due negotiation; effect of diversion; stoppage of delivery.
NRS 104.7505 Endorser not guarantor for other parties.
NRS 104.7506 Delivery without endorsement; right to compel endorsement.
NRS 104.7507 Warranties on negotiation or delivery of document of title.
NRS 104.7508 Warranties of collecting bank as to documents of title.
NRS 104.7509 Adequate compliance with commercial contract.
Part 6
Warehouse Receipts and Bills of Lading: Miscellaneous Provisions
NRS 104.7601 Lost, stolen or destroyed documents of title.
NRS 104.7602 Judicial process against goods covered by negotiable document of title.
NRS 104.7603 Conflicting claims; interpleader.
ARTICLE 8
INVESTMENT SECURITIES
Part 1
Short Title and General Matters
NRS 104.8101 Short title.
NRS 104.8102 Definitions.
NRS 104.8103 Rules for determining whether certain obligations and interests are securities or financial assets.
NRS 104.8104 Acquisition of security or financial asset or interest therein.
NRS 104.8105 Notice of adverse claim.
NRS 104.8106 Control.
NRS 104.8107 Whether endorsement, instruction or entitlement order is effective.
NRS 104.8108 Warranties in direct holding.
NRS 104.8109 Warranties in indirect holding.
NRS 104.8110 Applicability; choice of law.
NRS 104.8111 Rules of clearing corporation.
NRS 104.8112 Creditor’s legal process.
NRS 104.8113 Statute of frauds inapplicable.
NRS 104.8114 Evidentiary rules concerning certificated securities.
NRS 104.8115 Securities intermediary and others not liable to adverse claimant.
NRS 104.8116 Securities intermediary as purchaser for value.
Part 2
Issue and Issuer
NRS 104.8201 “Issuer.”
NRS 104.8202 Issuer’s responsibility and defenses; notice of defect or defense.
NRS 104.8203 Staleness as notice of defect or defense.
NRS 104.8204 Effect of issuer’s restriction on transfer.
NRS 104.8205 Effect of unauthorized signature on security certificate.
NRS 104.8206 Completion or alteration of security certificate.
NRS 104.8207 Rights and duties of issuer with respect to registered owners.
NRS 104.8208 Effect of signature of authenticating trustee, registrar or transfer agent.
NRS 104.8209 Issuer’s lien.
NRS 104.8210 Overissue.
Part 3
Transfer of Certificated and Uncertificated Securities
NRS 104.8301 Delivery.
NRS 104.8302 Rights of purchaser.
NRS 104.8303 Protected purchaser.
NRS 104.8304 Endorsement.
NRS 104.8305 Instruction.
NRS 104.8306 Effect of guaranteeing signature, endorsement or instruction.
NRS 104.8307 Purchaser’s right to requisites for registration of transfer.
Part 4
Registration
NRS 104.8401 Duty of issuer to register transfer.
NRS 104.8402 Assurance that endorsement or instruction is effective.
NRS 104.8403 Demand that issuer not register transfer.
NRS 104.8404 Wrongful registration.
NRS 104.8405 Replacement of lost, destroyed or wrongfully taken security certificate.
NRS 104.8406 Obligation to notify issuer of lost, destroyed or wrongfully taken security certificate.
NRS 104.8407 Authenticating trustee, transfer agent and registrar.
Part 5
Security Entitlements
NRS 104.8501 Securities account; acquisition of security entitlement from securities intermediary.
NRS 104.8502 Assertion of adverse claim against entitlement holder.
NRS 104.8503 Property interest of entitlement holder in financial asset held by securities intermediary.
NRS 104.8504 Duty of securities intermediary to maintain financial asset.
NRS 104.8505 Duty of securities intermediary with respect to payments and distributions.
NRS 104.8506 Duty of securities intermediary to exercise rights as directed by entitlement holder.
NRS 104.8507 Duty of securities intermediary to comply with entitlement order.
NRS 104.8508 Duty of securities intermediary to change entitlement holder’s position to other form of security holding.
NRS 104.8509 Specification of duties of securities intermediary by other statute or regulation; manner of performance of duties of securities intermediary and exercise of rights of entitlement holder.
NRS 104.8510 Rights of purchaser of security entitlement from entitlement holder.
NRS 104.8511 Priority among security interests and entitlement holders.
ARTICLE 9
SECURED TRANSACTIONS
Part 1
General Provisions
NRS 104.9101 Short title.
NRS 104.9102 Definitions and index of definitions.
NRS 104.9103 Purchase-money security interest: Circumstances of existence; applicability of payments; burden of establishing.
NRS 104.9104 Control of deposit account.
NRS 104.9105 Control of electronic chattel paper.
NRS 104.9106 Control of investment property.
NRS 104.9107 Control of letter-of-credit right.
NRS 104.9108 Sufficiency of descriptions.
NRS 104.9109 Scope of applicability.
NRS 104.9110 Applicability to security interests arising under Article 2 or 2A.
Part 2
Effectiveness of Security Agreement; Attachment of Security Interest; Rights of Parties to Security Agreement
NRS 104.9201 General effectiveness of security agreement.
NRS 104.9202 Title to collateral immaterial.
NRS 104.9203 Attachment and enforceability of security interest; proceeds; formal requisites; supporting obligations.
NRS 104.9204 After-acquired property; future advances.
NRS 104.9205 Use or disposition of collateral permissible.
NRS 104.9206 Security interest arising in purchase or delivery of financial asset.
NRS 104.9207 Rights and duties of secured party having possession or control of collateral.
NRS 104.9208 Additional duties of secured party having control of collateral.
NRS 104.9209 Duties of secured party if account debtor has been notified of assignment.
NRS 104.9210 Request for accounting; request regarding list of collateral or statement of account.
Part 3
Perfection and Priority
NRS 104.9301 Determination of law governing perfection and priority of security interests.
NRS 104.9302 Determination of law governing perfection and priority of agricultural liens.
NRS 104.9303 Determination of law governing perfection and priority of security interests in goods covered by certificate of title.
NRS 104.9304 Determination of law governing perfection and priority of security interests in deposit accounts.
NRS 104.9305 Determination of law governing perfection and priority of security interests in investment property.
NRS 104.9306 Determination of law governing perfection and priority of security interests in letter-of-credit rights.
NRS 104.9307 Location of debtor.
NRS 104.9308 When security interest or agricultural lien is perfected; continuity of perfection.
NRS 104.9309 Security interest perfected upon attachment.
NRS 104.9310 When filing required to perfect security interest or agricultural lien; security interests and agricultural liens to which filing provisions do not apply.
NRS 104.9311 Perfection of security interests in property subject to certain statutes, regulations and treaties.
NRS 104.9312 Perfection of security interests in chattel paper, deposit accounts, documents, goods covered by documents, instruments, investment property, letter-of-credit rights and money; perfection by permissive filing; temporary perfection without filing or transfer of possession.
NRS 104.9313 When possession by or delivery to secured party perfects security interest without filing.
NRS 104.9314 Perfection by control.
NRS 104.9315 Secured party’s rights on disposition of collateral and in proceeds.
NRS 104.9316 Continued perfection of security interest following change in governing law.
NRS 104.9317 Interests that take priority over or take free of unperfected security interest or agricultural lien.
NRS 104.9318 No interest retained in right to payment that is sold; rights and title of seller of account or chattel paper with respect to creditors and purchasers.
NRS 104.9319 Rights and title of consignee with respect to creditors and purchasers.
NRS 104.9320 Protection of certain buyers of goods.
NRS 104.9321 Protection of licensee of general intangible and lessee of goods in ordinary course of business.
NRS 104.9322 Priorities among conflicting security interests in and agricultural liens on same collateral.
NRS 104.9323 Future advances.
NRS 104.9324 Priority of purchase-money security interests.
NRS 104.9325 Priority of security interests in transferred collateral.
NRS 104.9326 Priority of security interests created by new debtor.
NRS 104.9327 Priority among conflicting security interests in same deposit account.
NRS 104.9328 Priority among conflicting security interests in same investment property.
NRS 104.9329 Priority among conflicting security interests in same letter-of-credit right.
NRS 104.9330 Priority of purchaser of chattel paper or instrument.
NRS 104.9331 Priority of rights of purchasers of instruments, documents and securities under other articles; priority of interests in financial assets and security entitlements under article 8.
NRS 104.9332 Effect of transfer of money; effect of transfer of funds from deposit account.
NRS 104.9333 Priority of certain possessory liens arising by operation of law.
NRS 104.9334 Priority of security interests in fixtures and crops.
NRS 104.9335 Accessions.
NRS 104.9336 Commingled goods.
NRS 104.9337 Priority of security interests in goods covered by certificate of title.
NRS 104.9338 Priority of security interest or agricultural lien perfected by filed financing statement providing certain incorrect information.
NRS 104.9339 Priority subject to subordination by agreement.
NRS 104.9340 Effectiveness of right of recoupment or setoff against deposit account.
NRS 104.9341 Bank’s rights and duties with respect to deposit account.
NRS 104.9342 Bank’s right to refuse to enter into or disclose existence of control agreement.
Part 4
Rights of Third Parties
NRS 104.9401 Alienability of debtor’s rights.
NRS 104.9402 Secured party not obligated in contract of debtor or in tort.
NRS 104.9403 Agreement not to assert defenses against assignee.
NRS 104.9404 Rights acquired by assignee; claims and defenses against assignee.
NRS 104.9405 Modification of or substitution for assigned contract.
NRS 104.9406 Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles and promissory notes ineffective.
NRS 104.9407 Restrictions on assignment, transfer, creation or enforcement of security interest in leasehold interest or in lessor’s residual interest.
NRS 104.9408 Restrictions on assignment or transfer of promissory notes, health-care insurance receivables and certain general intangibles ineffective.
NRS 104.9409 Restrictions on assignment of letter-of-credit rights ineffective.
Part 5
Filing
NRS 104.9501 Filing office.
NRS 104.9502 Contents of financing statement; record of mortgage as financing statement; time of filing financing statement.
NRS 104.9503 Name of debtor and secured party provided in financing statement.
NRS 104.9504 Indication of collateral in financing statement.
NRS 104.9505 Filing of financing statement in compliance with other statutes and treaties for consignments, leases, other bailments and other transactions.
NRS 104.9506 Effect of errors or omissions in financing statement.
NRS 104.9507 Effect of certain events on effectiveness of financing statement.
NRS 104.9508 Effectiveness of financing statement if new debtor becomes bound by security agreement.
NRS 104.9509 Persons entitled to file record.
NRS 104.9510 Effectiveness of filed record.
NRS 104.9511 Secured party of record.
NRS 104.9512 Amendment of financing statement.
NRS 104.9513 Termination statement.
NRS 104.9514 Assignment of certain powers of secured party of record.
NRS 104.9515 Duration and effectiveness of financing statement; effect of lapsed financing statement.
NRS 104.9516 What constitutes filing; effectiveness of filing.
NRS 104.9517 Effect of indexing errors.
NRS 104.9518 Claim concerning inaccurate or wrongfully filed record: Filing of correction statement.
NRS 104.9519 Numbering, maintaining and indexing records; communicating information provided in records.
NRS 104.9520 Acceptance and refusal to accept record.
NRS 104.9521 Acceptance of certain written records including initial financing statements by filing office; format of written records.
NRS 104.9522 Maintenance and destruction of records.
NRS 104.9523 Information from filing office; sale or license of records.
NRS 104.9524 Excused delay by filing office.
NRS 104.9525 Fees.
NRS 104.9526 Filing-office rules.
NRS 104.9527 Duty of Secretary of State to report.
Part 6
Default
NRS 104.9601 Rights after default; judicial enforcement; effect on consignor or buyer of accounts, chattel paper, payment intangibles or promissory notes.
NRS 104.9602 Waiver and variance of rights and duties of debtor and obligor.
NRS 104.9603 Agreement on standards concerning rights and duties of parties.
NRS 104.9604 Procedure if security agreement covers real property or fixtures.
NRS 104.9605 Duty to unknown debtor or secondary obligor.
NRS 104.9606 Time of default for agricultural lien.
NRS 104.9607 Collection and enforcement by secured party.
NRS 104.9608 Application of proceeds of collection or enforcement; liability for deficiency and right to surplus.
NRS 104.9609 Secured party’s right to take possession or dispose of collateral after default.
NRS 104.9610 Disposition of collateral after default.
NRS 104.9611 Notification before disposition of collateral.
NRS 104.9612 Timeliness of notification before disposition of collateral.
NRS 104.9613 Contents and form of notification before disposition of collateral: General.
NRS 104.9614 Contents and form of notification before disposition of collateral: Consumer-goods transaction.
NRS 104.9615 Application of proceeds of disposition; liability for deficiency and right to surplus.
NRS 104.9616 Explanation of calculation of surplus or deficiency.
NRS 104.9617 Effect of disposition of collateral by secured party after default; rights of transferee regarding collateral.
NRS 104.9618 Rights and duties of certain secondary obligors.
NRS 104.9619 Transfer of record or legal title.
NRS 104.9620 Acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral.
NRS 104.9621 Notification of proposal to accept collateral in satisfaction of obligation.
NRS 104.9622 Effect of acceptance of collateral in satisfaction of obligation.
NRS 104.9623 Redemption of collateral.
NRS 104.9624 Waiver of right to notification of disposition of collateral; waiver of right to redeem collateral.
NRS 104.9625 Remedies for secured party’s failure to comply with article.
NRS 104.9626 Action in which deficiency or surplus is in issue.
NRS 104.9627 Determination of whether conduct was commercially reasonable.
NRS 104.9628 Nonliability and limitation on liability of secured party; liability of secondary obligor.
Part 7
Transitional Provisions Regarding 2001 Amendments
NRS 104.9702 Applicability of amendatory provisions to preexisting transactions, liens, actions, cases and proceedings.
NRS 104.9703 Security interest perfected before July 1, 2001.
NRS 104.9704 Security interest unperfected before July 1, 2001.
NRS 104.9705 Effectiveness of action taken before July 1, 2001.
NRS 104.9706 When initial financing statement suffices to continue effectiveness of financing statement filed before July 1, 2001.
NRS 104.9707 Persons entitled to file initial financing statement or continuation statement.
NRS 104.9708 Determination of priority of conflicting claims to collateral.
NRS 104.9709 Effectiveness, amendment and termination of financing statement filed before July 1, 2001.
_________
ARTICLE 1
GENERAL PROVISIONS
Part 1
Short Titles, Scope, Construction, Severability and Electronic Signatures and Delivery
1. This chapter, together with chapter 104A of NRS, may be cited as the Uniform Commercial Code.
2. This Article may be cited as the Uniform Commercial Code—General Provisions.
(Added to NRS by 2005, 824)
NRS 104.1102 Scope of Article 1. This Article applies to a transaction to the extent that it is governed by another Article of the Uniform Commercial Code.
(Added to NRS by 2005, 824)
NRS 104.1103 Construction of Uniform Commercial Code to promote underlying purposes and policies; applicability of supplemental principles of law.
1. The Uniform Commercial Code must be liberally construed and applied to promote its underlying purposes and policies, which are:
(a) To simplify, clarify and modernize the law governing commercial transactions;
(b) To permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and
(c) To make uniform the law among the various jurisdictions.
2. Unless displaced by the particular provisions of the Uniform Commercial Code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.
(Added to NRS by 2005, 824)
NRS 104.1104 Construction against implied repeal. The Uniform Commercial 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.
(Added to NRS by 2005, 825)
NRS 104.1105 Severability. If any provision or clause of the Uniform Commercial Code or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Uniform Commercial Code which can be given effect without the invalid provision or application, and to this end the provisions of the Uniform Commercial Code are severable.
(Added to NRS by 2005, 825)
NRS 104.1106 Use of singular and plural; gender. In the Uniform Commercial Code, unless the statutory context otherwise requires:
1. Words in the singular number include the plural, and those in the plural include the singular; and
2. Words of any gender also refer to any other gender.
(Added to NRS by 2005, 825)
NRS 104.1108 Relation to Electronic Signatures in Global and National Commerce Act. This Article modifies, limits and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§ 7001 et seq., but does not modify, limit or supersede Section 101(c) of that act, 15 U.S.C. § 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. § 7003(b).
(Added to NRS by 2005, 825)
Part 2
General Definitions and Principles of Interpretation
NRS 104.1201 General definitions.
1. Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other Articles of the Uniform Commercial Code that apply to particular Articles or parts thereof, have the meanings stated.
2. Subject to definitions contained in other Articles of the Uniform Commercial Code that apply to particular Articles or parts thereof:
(a) “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, set off, suit in equity and any other proceeding in which rights are determined.
(b) “Aggrieved party” means a party entitled to pursue a remedy.
(c) “Agreement,” as distinguished from “contract,” means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in NRS 104.1303.
(d) “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union and trust company.
(e) “Bearer” means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title or certificated security that is payable to bearer or endorsed in blank.
(f) “Bill of lading” means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt.
(g) “Branch” includes a separately incorporated foreign branch of a bank.
(h) “Burden of establishing” a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.
(i) “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. A person that sells oil, gas or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Article 2 may be a buyer in ordinary course of business. “Buyer in ordinary course of business” does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
(j) “Conspicuous,” with reference to a term, means so written, displayed or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court. Conspicuous terms include the following:
(1) A heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font or color to the surrounding text of the same or lesser size; and
(2) Language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.
(k) “Consumer” means a natural person who enters into a transaction primarily for personal, family or household purposes.
(l) “Contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties’ agreement as determined by the Uniform Commercial Code as supplemented by any other applicable laws.
(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 counterclaim, cross-claim or third-party claim.
(o) “Delivery,” with respect to an electronic document of title means voluntary transfer of control and with respect to an instrument, a tangible document of title or chattel paper, means voluntary transfer of possession.
(p) “Document of title” means a record:
(1) That in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold and dispose of the record and the goods the record covers; and
(2) That purports to be issued by or addressed to a bailee and to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass.
Ê The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt and order for delivery of goods. An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium. A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium.
(q) “Fault” means a default, breach or wrongful act or omission.
(r) “Fungible goods” means:
(1) Goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or
(2) Goods that by agreement are treated as equivalent.
(s) “Genuine” means free of forgery or counterfeiting.
(t) “Good faith,” except as otherwise provided in Article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(u) “Holder” means:
(1) The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession;
(2) The person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or
(3) The person in control of a negotiable electronic document of title.
(v) “Insolvency proceeding” includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.
(w) “Insolvent” means:
(1) Having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;
(2) Being unable to pay debts as they become due; or
(3) Being insolvent within the meaning of federal bankruptcy law.
(x) “Money” means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.
(y) “Organization” means a person other than a natural person.
(z) “Party,” as distinguished from “third party,” means a person that has engaged in a transaction or made an agreement subject to the Uniform Commercial Code.
(aa) “Person” means a natural person, corporation, business trust, estate, trust, partnership, limited-liability company, association, joint venture, government, governmental subdivision, agency or instrumentality, public corporation, or any other legal or commercial entity.
(bb) “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.
(cc) “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift or any other voluntary transaction creating an interest in property.
(dd) “Purchaser” means a person that takes by purchase.
(ee) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(ff) “Remedy” means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.
(gg) “Representative” means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor or administrator of an estate.
(hh) “Right” includes remedy.
(ii) “Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. “Security interest” includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible or a promissory note in a transaction that is subject to Article 9. “Security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under NRS 104.2401, but a buyer may also acquire a “security interest” by complying with Article 9. Except as otherwise provided in NRS 104.2505, the right of a seller or lessor of goods under Article 2 or 2A to retain or acquire possession of the goods is not a “security interest,” but a seller or lessor may also acquire a “security interest” by complying with Article 9. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under NRS 104.2401 is limited in effect to a reservation of a “security interest.” Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to NRS 104.1203.
(jj) “Send” in connection with a writing, record or notice means:
(1) 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; or
(2) In any other way to cause to be received any record or notice within the time it would have arrived if properly sent.
(kk) “Signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing.
(ll) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
(mm) “Surety” includes a guarantor or other secondary obligor.
(nn) “Term” means a portion of an agreement that relates to a particular matter.
(oo) “Unauthorized signature” means a signature made without actual, implied or apparent authority. The term includes a forgery.
(pp) “Warehouse receipt” means a document of title issued by a person engaged in the business of storing goods for hire.
(qq) “Writing” includes printing, typewriting or any other intentional reduction to tangible form. “Written” has a corresponding meaning.
(Added to NRS by 2005, 825)
NRS 104.1202 Notice; knowledge.
1. Subject to subsection 6, a person has “notice” of a fact if the person:
(a) Has actual knowledge of it;
(b) Has received a notice or notification of it; or
(c) From all the facts and circumstances known to the person at the time in question, has reason to know that it exists.
2. “Knowledge” means actual knowledge. “Knows” has a corresponding meaning.
3. “Discover,” “learn” or words of similar import refer to knowledge rather than to reason to know.
4. A person “notifies” or “gives” a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.
5. Subject to subsection 6, a person “receives” a notice or notification when:
(a) It comes to that person’s attention; or
(b) It is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.
6. Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the natural person conducting that transaction and, in any event, from the time it would have been brought to the natural person’s attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require a natural person acting for the organization to communicate information unless the communication is part of the natural person’s regular duties or the natural person has reason to know of the transaction and that the transaction would be materially affected by the information.
(Added to NRS by 2005, 829)
NRS 104.1203 Lease distinguished from security interest.
1. Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.
2. A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:
(a) The original term of the lease is equal to or greater than the remaining economic life of the goods;
(b) The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
(c) The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or
(d) The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.
3. A transaction in the form of a lease does not create a security interest merely because:
(a) The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;
(b) The lessee assumes risk of loss of the goods;
(c) The lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording or registration fees, or service or maintenance costs;
(d) The lessee has an option to renew the lease or to become the owner of the goods;
(e) The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or
(f) The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.
4. Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:
(a) When the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or
(b) When the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.
5. The “remaining economic life of the goods” and “reasonably predictable” fair market rent, fair market value or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into.
(Added to NRS by 2005, 829)
NRS 104.1204 Value. Except as otherwise provided in Articles 3, 4, and 5, a person gives value for rights if the person acquires them:
1. In return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;
2. As security for, or in total or partial satisfaction of, a preexisting claim;
3. By accepting delivery under a preexisting contract for purchase; or
4. In return for any consideration sufficient to support a simple contract.
(Added to NRS by 2005, 830)
NRS 104.1205 Reasonable time; seasonableness.
1. Whether a time for taking an action required by the Uniform Commercial Code is reasonable depends on the nature, purpose and circumstances of the action.
2. An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.
(Added to NRS by 2005, 830)
NRS 104.1206 Presumptions. Whenever the Uniform Commercial Code creates a “presumption” with respect to a fact, or provides that a fact is “presumed,” the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.
(Added to NRS by 2005, 830)
Part 3
Territorial Applicability and General Rules
NRS 104.1301 Territorial applicability; parties’ power to choose applicable law.
1. Except as otherwise provided in this section, when a transaction bears a reasonable relation to this State and also to another state or nation the parties may agree that the law either of this State or of such other state or nation shall govern their rights and duties.
2. In the absence of an agreement effective under subsection 1, and except as otherwise provided in subsection 3, the Uniform Commercial Code applies to transactions bearing an appropriate relation to this State.
3. If one of the following provisions of the Uniform Commercial Code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:
(a) NRS 104.2402;
(b) NRS 104.4102;
(c) NRS 104.5116;
(d) NRS 104.8110;
(e) NRS 104.9301 to 104.9307, inclusive;
(f) NRS 104A.2105 and 104A.2106; and
(g) NRS 104A.4507.
(Added to NRS by 2005, 831)
NRS 104.1302 Variation by agreement.
1. Except as otherwise provided in subsection 2 or elsewhere in the Uniform Commercial Code, the effect of provisions of the Uniform Commercial Code may be varied by agreement.
2. The obligations of good faith, diligence, reasonableness and care prescribed by the Uniform Commercial Code may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever the Uniform Commercial Code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.
3. The presence in certain provisions of the Uniform Commercial Code of the phrase “unless otherwise agreed,” or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.
(Added to NRS by 2005, 831)
NRS 104.1303 Course of performance, course of dealing and usage of trade.
1. A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if:
(a) The agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and
(b) The other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.
2. A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
3. 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 must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.
4. A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
5. Except as otherwise provided in subsection 6, the express terms of an agreement and any applicable course of performance, course of dealing or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:
(a) Express terms prevail over course of performance, course of dealing and usage of trade;
(b) Course of performance prevails over course of dealing and usage of trade; and
(c) Course of dealing prevails over usage of trade.
6. Subject to NRS 104.2209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.
7. Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.
(Added to NRS by 2005, 831)
NRS 104.1304 Obligation of good faith. Every contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement.
(Added to NRS by 2005, 832)
NRS 104.1305 Remedies to be liberally administered.
1. The remedies provided by the Uniform Commercial Code must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in the Uniform Commercial Code or by other rule of law.
2. Any right or obligation declared by the Uniform Commercial Code is enforceable by action unless the provision declaring it specifies a different and limited effect.
(Added to NRS by 2005, 832)
NRS 104.1306 Waiver or renunciation of claim or right after breach. A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.
(Added to NRS by 2005, 832)
NRS 104.1307 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 is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.
(Added to NRS by 2005, 832)
NRS 104.1308 Performance or acceptance under reservation of rights.
1. A party that 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.
2. Subsection 1 does not apply to an accord and satisfaction.
(Added to NRS by 2005, 832)
NRS 104.1309 Option to accelerate at will. A term providing that one party or that party’s successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or when the party “deems itself insecure,” or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against which the power has been exercised.
(Added to NRS by 2005, 832)
NRS 104.1310 Subordinated obligations. An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated. Subordination does not create a security interest as against either the common debtor or a subordinated creditor.
(Added to NRS by 2005, 833)
ARTICLE 2
SALES
Part 1
Short Title, General Construction and Subject Matter
NRS 104.2101 Short title. This article shall be known and may be cited as Uniform Commercial Code—Sales.
(Added to NRS by 1965, 784)
NRS 104.2102 Scope; certain security and other transactions excluded from this article. 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 sales 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.
(Added to NRS by 1965, 784)
NRS 104.2103 Definitions and index of definitions.
1. In this Article unless the context otherwise requires:
(a) “Buyer” means a person who buys or contracts to buy goods.
(b) “Receipt” of goods means taking physical possession of them.
(c) “Seller” means a person who sells or contracts to sell goods.
2. Other definitions applying to this Article or to specified parts thereof, and the sections in which they appear are:
“Acceptance.” NRS 104.2606.
“Banker’s credit.” NRS 104.2325.
“Between merchants.” NRS 104.2104.
“Cancellation.” Subsection 4 of NRS 104.2106.
“Commercial unit.” NRS 104.2105.
“Confirmed credit.” NRS 104.2325.
“Conforming to contract.” NRS 104.2106.
“Contract for sale.” NRS 104.2106.
“Cover.” NRS 104.2712.
“Entrusting.” NRS 104.2403.
“Financing agency.” NRS 104.2104.
“Future goods.” NRS 104.2105.
“Goods.” NRS 104.2105.
“Identification.” NRS 104.2501.
“Installment contract.” NRS 104.2612.
“Letter of credit.” NRS 104.2325.
“Lot.” NRS 104.2105.
“Merchant.” NRS 104.2104.
“Overseas.” NRS 104.2323.
“Person in position of seller.” NRS 104.2707.
“Present sale.” NRS 104.2106.
“Sale.” NRS 104.2106.
“Sale on approval.” NRS 104.2326.
“Sale or return.” NRS 104.2326.
“Termination.” NRS 104.2106.
3. “Control” as provided in NRS 104.7106 and the following definitions in other Articles apply to this Article:
“Check.” NRS 104.3104.
“Consignee.” NRS 104.7102.
“Consignor.” NRS 104.7102.
“Consumer goods.” NRS 104.9102.
“Draft.” NRS 104.3104.
4. In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.
(Added to NRS by 1965, 784; A 1999, 372; 2005, 847)
NRS 104.2104 Definitions: “Merchant”; “between merchants”; “financing agency.”
1. “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 may be 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.
2. “Financing agency” means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller’s draft or making advances against it or by merely taking it for collection whether or not documents of title accompany or are associated with the draft. “Financing agency” includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (NRS 104.2707).
3. “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.
(Added to NRS by 1965, 785; A 2005, 848)
NRS 104.2105 Definitions: Transferability; “goods”; “future” goods; “lot”; “commercial unit.”
1. “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 (Article 8) 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 (NRS 104.2107).
2. 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.
3. There may be a sale of a part interest in existing identified goods.
4. 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.
5. “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.
6. “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single Article (as a machine) or a set of Articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross or carload) or any other unit treated in use or in the relevant market as a single whole.
(Added to NRS by 1965, 785)
NRS 104.2106 Definitions: “Contract”; “agreement”; “contract for sale”; “sale”; “present sale”; “conforming” to contract; “termination”; “cancellation.”
1. 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 (NRS 104.2401). A “present sale” means a sale which is accomplished by the making of the contract.
2. 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.
3. “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.
4. “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.
(Added to NRS by 1965, 786)
NRS 104.2107 Goods to be severed from realty: Recording.
1. 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.
2. 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 1 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.
3. The provisions of this section are subject to any third party rights provided by the law relating to realty records, and 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.
(Added to NRS by 1965, 786; A 1973, 933)
Part 2
Form, Formation and Readjustment of Contract
NRS 104.2201 Formal requirements; statute of frauds.
1. Except as otherwise provided in this section a contract for the sale of goods for the price of $500 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 subsection beyond the quantity of goods shown in such writing.
2. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection 1 against such party unless written notice of objection to its contents is given within 10 days after it is received.
3. A contract which does not satisfy the requirements of subsection 1 but which is valid in other respects is enforceable:
(a) 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
(b) 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
(c) With respect to goods for which payment has been made and accepted or which have been received and accepted (NRS 104.2606).
(Added to NRS by 1965, 787)
NRS 104.2202 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 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:
1. By course of performance, course of dealing or usage of trade (NRS 104.1303); and
2. By evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.
(Added to NRS by 1965, 787; A 2005, 849)
NRS 104.2203 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 contract or offer.
(Added to NRS by 1965, 787)
NRS 104.2204 Formation in general.
1. A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
2. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
3. 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 a reasonably certain basis for giving an appropriate remedy.
(Added to NRS by 1965, 788)
NRS 104.2205 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 stated for a reasonable time, but in no event may such period of irrevocability exceed 3 months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
(Added to NRS by 1965, 788)
NRS 104.2206 Offer and acceptance in formation of contract.
1. Unless otherwise unambiguously indicated by the language or circumstances:
(a) An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.
(b) An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
2. Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
(Added to NRS by 1965, 788)
NRS 104.2207 Additional terms in acceptance or confirmation.
1. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
2. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
(a) The offer expressly limits acceptance to the terms of the offer;
(b) They materially alter it; or
(c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
3. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this chapter.
(Added to NRS by 1965, 788)
NRS 104.2209 Modification, rescission and waiver.
1. An agreement modifying a contract within this Article needs no consideration to be binding.
2. A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
3. The requirements of the statute of frauds section of this Article (NRS 104.2201) must be satisfied if the contract as modified is within its provisions.
4. Although an attempt at modification or rescission does not satisfy the requirements of subsection 2 or 3 it can operate as a waiver.
5. A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.
(Added to NRS by 1965, 789)
NRS 104.2210 Delegation of performance; assignment of rights.
1. A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.
2. Except as otherwise provided in NRS 104.9406, unless otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor’s due performance of his entire obligation can be assigned despite agreement otherwise.
3. Unless the circumstances indicate the contrary a prohibition of assignment of “the contract” is to be construed as barring only the delegation to the assignee of the assignor’s performance.
4. An assignment of “the contract” or of “all my rights under the contract” or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.
5. The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (NRS 104.2609).
(Added to NRS by 1965, 789; A 1999, 373)
Part 3
General Obligation and Construction of Contract
NRS 104.2301 General obligations of parties. The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.
(Added to NRS by 1965, 790)
NRS 104.2302 Unconscionable contract or clause.
1. If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
2. When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
(Added to NRS by 1965, 790)
NRS 104.2303 Allocation or division of risks. Where this article allocates a risk or a burden as between the parties “unless otherwise agreed,” the agreement may not only shift the allocation but may also divide the risk or burden.
(Added to NRS by 1965, 790)
NRS 104.2304 Price payable in money, goods, realty or otherwise.
1. The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.
2. Even though all or part of the price is payable in an interest in realty the transfer of the goods and the seller’s obligations with reference to them are subject to this Article, but not the transfer of the interest in realty or the transferor’s obligations in connection therewith.
(Added to NRS by 1965, 790)
1. The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if:
(a) Nothing is said as to price; or
(b) The price is left to be agreed by the parties and they fail to agree; or
(c) The price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
2. A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
3. When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.
4. Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.
(Added to NRS by 1965, 790)
NRS 104.2306 Output, requirements and exclusive dealings.
1. A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
2. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
(Added to NRS by 1965, 791)
NRS 104.2307 Delivery in single lot or several lots. Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot.
(Added to NRS by 1965, 791)
NRS 104.2308 Absence of specified place for delivery. Unless otherwise agreed:
1. The place for delivery of goods is the seller’s place of business or if he has none his residence;
2. In a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and
3. Documents of title may be delivered through customary banking channels.
(Added to NRS by 1965, 791)
NRS 104.2309 Absence of specific time for action or duration of contract; notice of termination.
1. The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time.
2. Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.
3. Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.
(Added to NRS by 1965, 791)
NRS 104.2310 Open time for payment or running of credit; authority to ship under reservation. Unless otherwise agreed:
1. Payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and
2. If the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (NRS 104.2513); and
3. If delivery is authorized and made by way of documents of title otherwise than by subsection 2 then payment is due regardless of where the goods are to be received:
(a) At the time and place at which the buyer is to receive delivery of the tangible documents; or
(b) At the time the buyer is to receive delivery of the electronic documents and at the seller’s place of business or if none, the seller’s residence; and
4. Where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but postdating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.
(Added to NRS by 1965, 791; A 2005, 849)
NRS 104.2311 Options and cooperation respecting performance.
1. An agreement for sale which is otherwise sufficiently definite (subsection 3 of NRS 104.2204) to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness.
2. Unless otherwise agreed specifications relating to assortment of the goods are at the buyer’s option and except as otherwise provided in paragraph (c) of subsection 1 and subsection 3 of NRS 104.2319 specifications or arrangements relating to shipment are at the seller’s option.
3. Where such specification would materially affect the other party’s performance but is not seasonably made or where one party’s cooperation is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies:
(a) Is excused for any resulting delay in his own performance; and
(b) May also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.
(Added to NRS by 1965, 792)
NRS 104.2312 Warranty of title and against infringement; buyer’s obligation against infringement.
1. Subject to subsection 2 there is in a contract for sale a warranty by the seller that:
(a) The title conveyed shall be good, and its transfer rightful; and
(b) The goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.
2. A warranty under subsection 1 will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.
3. Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.
(Added to NRS by 1965, 792)
NRS 104.2313 Express warranties by affirmation, promise, description or sample.
1. Express warranties by the seller are created as follows:
(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
2. It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.
(Added to NRS by 1965, 792)
NRS 104.2314 Implied warranty: Merchantability; usage of trade.
1. Unless excluded or modified (NRS 104.2316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
2. Goods to be merchantable must be at least such as:
(a) Pass without objection in the trade under the contract description; and
(b) In the case of fungible goods, are of fair average quality within the description; and
(c) Are fit for the ordinary purposes for which such goods are used; and
(d) Run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) Are adequately contained, packaged and labeled as the agreement may require; and
(f) Conform to the promises or affirmations of fact made on the container or label if any.
3. Unless excluded or modified (NRS 104.2316) other implied warranties may arise from course of dealing or usage of trade.
(Added to NRS by 1965, 793)
NRS 104.2315 Implied warranty: Fitness for particular purpose. Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.
(Added to NRS by 1965, 793)
NRS 104.2316 Exclusion or modification of warranties.
1. Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (NRS 104.2202) negation or limitation is inoperative to the extent that such construction is unreasonable.
2. Subject to subsection 3, to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.”
3. Notwithstanding subsection 2:
(a) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and
(b) When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
(c) An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
4. Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (NRS 104.2718 and 104.2719).
(Added to NRS by 1965, 793)
NRS 104.2317 Cumulation and conflict of warranties express or implied. Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:
1. Exact or technical specifications displace an inconsistent sample or model or general language of description.
2. A sample from an existing bulk displaces inconsistent general language of description.
3. Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.
(Added to NRS by 1965, 794)
NRS 104.2318 Third-party beneficiaries of warranties express or implied. A seller’s warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.
(Added to NRS by 1965, 794)
NRS 104.2319 F.O.B. and F.A.S. terms.
1. Unless otherwise agreed the term F.O.B. (which means “free on board”) at a named place, even though used only in connection with the stated price, is a delivery term under which:
(a) When the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this article (NRS 104.2504) and bear the expense and risk of putting them into the possession of the carrier; or
(b) When the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this article (NRS 104.2503);
(c) When under either paragraph (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this article on the form of bill of lading (NRS 104.2323).
2. Unless otherwise agreed the term F.A.S. vessel (which means “free alongside”) at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must:
(a) At his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and
(b) Obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.
3. Unless otherwise agreed in any case falling within paragraph (a) or (c) of subsection 1 or subsection 2 the buyer must seasonably give any needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this article (NRS 104.2311). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment.
4. Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.
(Added to NRS by 1965, 794)
NRS 104.2320 C.I.F. and C. & F. terms.
1. The term C.I.F. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. The term C. & F. or C.F. means that the price so includes cost and freight to the named destination.
2. Unless otherwise agreed and even though used only in connection with the stated price and destination, the term C.I.F. destination or its equivalent requires the seller at his own expense and risk to:
(a) Put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination; and
(b) Load the goods and obtain a receipt from the carrier (which may be contained in the bill of lading) showing that the freight has been paid or provided for; and
(c) Obtain a policy or certificate of insurance, including any war risk insurance, of a kind and on terms then current at the port of shipment in the usual amount, in the currency of the contract, shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern; but the seller may add to the price the amount of the premium for any such war risk insurance; and
(d) Prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; and
(e) Forward and tender with commercial promptness all the documents in due form and with any endorsement necessary to perfect the buyer’s rights.
3. Unless otherwise agreed the term C. & F. or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a C.I.F. term except the obligation as to insurance.
4. Under the term C.I.F. or C. & F. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.
(Added to NRS by 1965, 795)
NRS 104.2321 C.I.F. or C. & F.: “Net landed weights”; “payment on arrival”; warranty of condition on arrival. Under a contract containing a term C.I.F. or C. & F.:
1. Where the price is based on or is to be adjusted according to “net landed weights,” “delivered weights,” “out turn” quantity or quality or the like, unless otherwise agreed the seller must reasonably estimate the price. The payment due on tender of the documents called for by the contract is the amount so estimated, but after final adjustment of the price a settlement must be made with commercial promptness.
2. An agreement described in subsection 1 or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage and the like in transportation but has no effect on the place or time of identification to the contract for sale or delivery or on the passing of the risk of loss.
3. Unless otherwise agreed where the contract provides for payment on or after arrival of the goods the seller must before payment allow such preliminary inspection as is feasible; but if the goods are lost delivery of the documents and payment are due when the goods should have arrived.
(Added to NRS by 1965, 796)
NRS 104.2322 Delivery “ex-ship.”
1. Unless otherwise agreed a term for delivery of goods “ex-ship” (which means from the carrying vessel) or in equivalent language is not restricted to a particular ship and requires delivery from a ship which has reached a place at the named port of destination where goods of the kind are usually discharged.
2. Under such a term unless otherwise agreed:
(a) The seller must discharge all liens arising out of the carriage and furnish the buyer with a direction which puts the carrier under a duty to deliver the goods; and
(b) The risk of loss does not pass to the buyer until the goods leave the ship’s tackle or are otherwise properly unloaded.
(Added to NRS by 1965, 796)
NRS 104.2323 Form of bill of lading required in overseas shipment; “overseas.”
1. Where the contract contemplates overseas shipment and contains a term C.I.F. or C. & F. or F.O.B. vessel, the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. & F., received for shipment.
2. Where in a case within subsection 1 a tangible bill of lading has been issued in a set of parts, unless otherwise agreed if the documents are not to be sent from abroad the buyer may demand tender of the full set; otherwise only one part of the bill of lading need be tendered. Even if the agreement expressly requires a full set:
(a) Due tender of a single part is acceptable within the provisions of this Article on cure of improper delivery (subsection 1 of NRS 104.2508); and
(b) Even though the full set is demanded, if the documents are sent from abroad the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity which the buyer in good faith deems adequate.
3. A shipment by water or by air or a contract contemplating such shipment is “overseas” insofar as by usage of trade or agreement it is subject to the commercial, financing or shipping practices characteristic of international deep water commerce.
(Added to NRS by 1965, 796; A 2005, 849)
NRS 104.2324 “No arrival, no sale” term. Under a term “no arrival, no sale” or terms of like meaning, unless otherwise agreed:
1. The seller must properly ship conforming goods and if they arrive by any means he must tender them on arrival but he assumes no obligation that the goods will arrive unless he has caused the nonarrival; and
2. Where without fault of the seller the goods are in part lost or have so deteriorated as no longer to conform to the contract or arrive after the contract time, the buyer may proceed as if there had been casualty to identified goods (NRS 104.2613).
(Added to NRS by 1965, 797)
NRS 104.2325 “Letter of credit” term; “confirmed credit.”
1. Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.
2. The delivery to seller of a proper letter of credit suspends the buyer’s obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from him.
3. Unless otherwise agreed the term “letter of credit” or “banker’s credit” in a contract for sale means an irrevocable credit issued by a financing agency of good repute and, where the shipment is overseas, of good international repute. The term “confirmed credit” means that the credit must also carry the direct obligation of such an agency which does business in the seller’s financial market.
(Added to NRS by 1965, 797)
NRS 104.2326 Sale on approval and sale or return; rights of creditors.
1. Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is:
(a) A “sale on approval” if the goods are delivered primarily for use; and
(b) A “sale or return” if the goods are delivered primarily for resale.
2. Goods held on approval are not subject to the claims of the buyer’s creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer’s possession.
3. Any “or return” term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section of this Article (NRS 104.2201) and as contradicting the sale aspect of the contract within the provisions of this Article on parol or extrinsic evidence (NRS 104.2202).
(Added to NRS by 1965, 797; A 1999, 373)
NRS 104.2327 Special incidents of sale on approval and sale or return.
1. Under a sale on approval unless otherwise agreed:
(a) Although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance; and
(b) Use of the goods consistent with the purpose of trial is not acceptance but failure seasonably to notify the seller of election to return the goods is acceptance, and if the goods conform to the contract acceptance of any part is acceptance of the whole; and
(c) After due notification of election to return, the return is at the seller’s risk and expense but a merchant buyer must follow any reasonable instructions.
2. Under a sale or return unless otherwise agreed:
(a) The option to return extends to the whole or any commercial unit of the goods while in substantially their original condition, but must be exercised seasonably; and
(b) The return is at the buyer’s risk and expense.
(Added to NRS by 1965, 798)
1. In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.
2. A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.
3. Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an Article or lot, that Article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract his bid until the auctioneer’s announcement of completion of the sale, but a bidder’s retraction does not revive any previous bid.
4. If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.
(Added to NRS by 1965, 798)
Part 4
Title, Creditors and Good Faith Purchasers
NRS 104.2401 Passing of title; reservation for security; limited application of this section. Each provision of this Article with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this Article and matters concerning title become material the following rules apply:
1. Title to goods cannot pass under a contract for sale prior to their identification to the contract (NRS 104.2501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this chapter. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the Article on secured transactions (Article 9), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.
2. Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading:
(a) If the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment; but
(b) If the contract requires delivery at destination, title passes on tender there.
3. Unless otherwise explicitly agreed where delivery is to be made without moving the goods:
(a) If the seller is to deliver a tangible document of title, title passes at the time when and the place where he delivers such documents and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or
(b) If the goods are at the time of contracting already identified and no documents of title are to be delivered, title passes at the time and place of contracting.
4. A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a “sale.”
(Added to NRS by 1965, 798; A 2005, 850)
NRS 104.2402 Rights of seller’s creditors against sold goods.
1. Except as provided in subsections 2 and 3, rights of unsecured creditors of the seller with respect to goods which have been identified to a contract for sale are subject to the buyer’s rights to recover the goods under this Article (NRS 104.2502 and 104.2716).
2. A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against him a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are situated, except that retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent.
3. Nothing in this Article shall be deemed to impair the rights of creditors of the seller:
(a) Under the provisions of the Article on secured transactions (Article 9); or
(b) Where identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like and is made under circumstances which under any rule of law of the state where the goods are situated would apart from this Article constitute the transaction a fraudulent transfer or voidable preference.
(Added to NRS by 1965, 799)
NRS 104.2403 Power to transfer; good faith purchase of goods; “entrusting.”
1. A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though:
(a) The transferor was deceived as to the identity of the purchaser;
(b) The delivery was in exchange for a check which is later dishonored;
(c) It was agreed that the transaction was to be a “cash sale”; or
(d) The delivery was procured through fraud punishable as larcenous under the criminal law.
2. Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.
3. “Entrusting” includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor’s disposition of the goods have been such as to be larcenous under the criminal law.
4. The rights of other purchasers of goods and of lien creditors are governed by the articles on secured transactions (article 9) and documents of title (article 7).
(Added to NRS by 1965, 800; A 1991, 412)
Part 5
Performance
NRS 104.2501 Insurable interest in goods; manner of identification of goods.
1. The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and he has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs:
(a) When the contract is made if it is for the sale of goods already existing and identified.
(b) If the contract is for the sale of future goods other than those described in paragraph (c), when goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers.
(c) When the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within 12 months after contracting or for the sale of crops to be harvested within 12 months or the next normal harvest season after contracting, whichever is longer.
2. The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him and where the identification is by the seller alone he may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified.
3. Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.
(Added to NRS by 1965, 800)
NRS 104.2502 Buyer’s right to goods on seller’s repudiation, failure to deliver or insolvency.
1. Subject to subsections 2 and 3, and even though the goods have not been shipped, a buyer who has paid a part or all of the price of goods in which he has a special property under the provisions of the immediately preceding section may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:
(a) In the case of goods bought for personal, family or household purposes, the seller repudiates or fails to deliver as required by the contract; or
(b) In all cases, the seller becomes insolvent within 10 days after receipt of the first installment on their price.
2. The right of the buyer to recover the goods under subsection 1 vests upon acquisition of a special property even if the seller has not then repudiated or failed to deliver.
3. If the identification creating his special property has been made by the buyer he acquires the right to recover the goods only if they conform to the contract for sale.
(Added to NRS by 1965, 801; A 1999, 374; 2001, 709)
NRS 104.2503 Manner of seller’s tender of delivery.
1. Tender of delivery requires that the seller put and hold conforming goods at the buyer’s disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this Article, and in particular:
(a) Tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but
(b) Unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.
2. Where the case is within the next section respecting shipment tender requires that the seller comply with its provisions.
3. Where the seller is required to deliver at a particular destination tender requires that he comply with subsection 1 and also in any appropriate case tender documents as described in subsections 4 and 5 of this section.
4. Where goods are in the possession of a bailee and are to be delivered without being moved:
(a) Tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer’s right to possession of the goods; but
(b) Tender to the buyer of a nonnegotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in Article 9, receipt by the bailee of notification of the buyer’s rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the nonnegotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.
5. Where the contract requires the seller to deliver documents:
(a) He must tender all such documents in correct form, except as provided in this Article with respect to bills of lading in a set (subsection 2 of NRS 104.2323); and
(b) Tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes nonacceptance or rejection.
(Added to NRS by 1965, 801; A 2005, 850)
NRS 104.2504 Shipment by seller. Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must:
1. Put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and
2. Obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and
3. Promptly notify the buyer of the shipment.
Ê Failure to notify the buyer under subsection 3 or to make a proper contract under subsection 1 is a ground for rejection only if material delay or loss ensues.
(Added to NRS by 1965, 802)
NRS 104.2505 Seller’s shipment under reservation.
1. Where the seller has identified goods to the contract by or before shipment:
(a) His procurement of a negotiable bill of lading to his own order or otherwise reserves in him a security interest in the goods. His procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the seller’s expectation of transferring that interest to the person named.
(b) A nonnegotiable bill of lading to himself or his nominee reserves possession of the goods as security but except in a case of conditional delivery (subsection 2 of NRS 104.2507) a nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.
2. When shipment by the seller with reservation of a security interest is in violation of the contract for sale it constitutes an improper contract for transportation within the preceding section but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the seller’s powers as a holder of a negotiable document of title.
(Added to NRS by 1965, 802; A 2005, 851)
NRS 104.2506 Rights of financing agency.
1. A financing agency by paying or purchasing for value a draft which relates to a shipment of goods acquires to the extent of the payment or purchase and in addition to its own rights under the draft and any document of title securing it any rights of the shipper in the goods including the right to stop delivery and the shipper’s right to have the draft honored by the buyer.
2. The right to reimbursement of a financing agency which has in good faith honored or purchased the draft under commitment to or authority from the buyer is not impaired by subsequent discovery of defects with reference to any relevant document which was apparently regular.
(Added to NRS by 1965, 802; A 2005, 851)
NRS 104.2507 Effect of seller’s tender; delivery on condition.
1. Tender of delivery is a condition to the buyer’s duty to accept the goods and, unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.
2. Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due.
(Added to NRS by 1965, 802)
NRS 104.2508 Cure by seller of improper tender or delivery; replacement.
1. Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.
2. Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.
(Added to NRS by 1965, 803)
NRS 104.2509 Risk of loss in the absence of breach.
1. Where the contract requires or authorizes the seller to ship the goods by carrier:
(a) If it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (NRS 104.2505); but
(b) If it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.
2. Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer:
(a) On his receipt of possession or control of a negotiable document of title covering the goods; or
(b) On acknowledgment by the bailee of the buyer’s right to possession of the goods; or
(c) After his receipt of possession or control of a nonnegotiable document of title or other direction to deliver in a record, as provided in paragraph (b) of subsection 4 of NRS 104.2503.
3. In any case not within subsection 1 or 2, the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.
4. The provisions of this section are subject to contrary agreement of the parties and to the provisions of this Article on sale on approval (NRS 104.2327) and on effect of breach on risk of loss (NRS 104.2510).
(Added to NRS by 1965, 803; A 2005, 852)
NRS 104.2510 Effect of breach on risk of loss.
1. Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.
2. Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.
3. Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.
(Added to NRS by 1965, 803)
NRS 104.2511 Tender of payment by buyer; payment by check.
1. Unless otherwise agreed tender of payment is a condition to the seller’s duty to tender and complete any delivery.
2. Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.
3. Payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.
(Added to NRS by 1965, 804; A 1993, 1255)
NRS 104.2512 Payment by buyer before inspection.
1. Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless:
(a) The nonconformity appears without inspection; or
(b) Despite tender of the required documents the circumstances would justify injunction against honor under the provisions of this chapter.
2. Payment pursuant to subsection 1 does not constitute an acceptance of goods or impair the buyer’s right to inspect or any of his remedies.
(Added to NRS by 1965, 804; A 1997, 374)
NRS 104.2513 Buyer’s right to inspection of goods.
1. Unless otherwise agreed and subject to subsection 3, where goods are tendered or delivered or identified to the contract for sale, the buyer has a right before payment or acceptance to inspect them at any reasonable place and time and in any reasonable manner. When the seller is required or authorized to send the goods to the buyer, the inspection may be after their arrival.
2. Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.
3. Unless otherwise agreed and subject to the provisions of this article on C.I.F. contracts (subsection 3 of NRS 104.2321), the buyer is not entitled to inspect the goods before payment of the price when the contract provides:
(a) For delivery “C.O.D.” or on other like terms; or
(b) For payment against documents of title, except where such payment is due only after the goods are to become available for inspection.
4. A place or method of inspection fixed by the parties is presumed to be exclusive but unless otherwise expressly agreed it does not postpone identification or shift the place for delivery or for passing the risk of loss. If compliance becomes impossible, inspection shall be as provided in this section unless the place or method fixed was clearly intended as an indispensable condition failure of which avoids the contract.
(Added to NRS by 1965, 804)
NRS 104.2514 When documents deliverable on acceptance; when on payment. Unless otherwise agreed documents against which a draft is drawn are to be delivered to the drawee on acceptance of the draft if it is payable more than 3 days after presentment; otherwise, only on payment.
(Added to NRS by 1965, 804)
NRS 104.2515 Preserving evidence of goods in dispute. In furtherance of the adjustment of any claim or dispute:
1. Either party on reasonable notification to the other and for the purpose of ascertaining the facts and preserving evidence has the right to inspect, test and sample the goods, including such of them as may be in the possession or control of the other; and
2. The parties may agree to a third party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in any subsequent litigation or adjustment.
(Added to NRS by 1965, 804)
Part 6
Breach, Repudiation and Excuse
NRS 104.2601 Buyer’s rights on improper delivery. Subject to the provisions of this article on breach in installment contracts (NRS 104.2612) and unless otherwise agreed under the sections on contractual limitations of remedy (NRS 104.2718 and 104.2719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:
1. Reject the whole; or
2. Accept the whole; or
3. Accept any commercial unit or units and reject the rest.
(Added to NRS by 1965, 805)
NRS 104.2602 Manner and effect of rightful rejection.
1. Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.
2. Subject to the provisions of the two following sections on rejected goods (NRS 104.2603 and 104.2604):
(a) After rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and
(b) If the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this Article (subsection 3 of NRS 104.2711), he is under a duty after rejection to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; but
(c) The buyer has no further obligations with regard to goods rightfully rejected.
3. The seller’s rights with respect to goods wrongfully rejected are governed by the provisions of this Article on seller’s remedies in general (NRS 104.2703).
(Added to NRS by 1965, 805)
NRS 104.2603 Merchant buyer’s duties as to rightfully rejected goods.
1. Subject to any security interest in the buyer (subsection 3 of NRS 104.2711), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller’s account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.
2. When the buyer sells goods under subsection 1, he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding 10 percent on the gross proceeds.
3. In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.
(Added to NRS by 1965, 805)
NRS 104.2604 Buyer’s options as to salvage of rightfully rejected goods. Subject to the provisions of the immediately preceding section on perishables if the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller’s account or reship them to him or resell them for the seller’s account with reimbursement as provided in the preceding section. Such action is not acceptance or conversion.
(Added to NRS by 1965, 806)
NRS 104.2605 Waiver of buyer’s objections by failure to particularize.
1. The buyer’s failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach:
(a) Where the seller could have cured it if stated seasonably; or
(b) Between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.
2. Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.
(Added to NRS by 1965, 806; A 2005, 852)
NRS 104.2606 What constitutes acceptance of goods.
1. Acceptance of goods occurs when the buyer:
(a) After a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or
(b) Fails to make an effective rejection (subsection 1 of NRS 104.2602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or
(c) Does any act inconsistent with the seller’s ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.
2. Acceptance of a part of any commercial unit is acceptance of that entire unit.
(Added to NRS by 1965, 806)
NRS 104.2607 Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.
1. The buyer must pay at the contract rate for any goods accepted.
2. Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this Article for nonconformity.
3. Where a tender has been accepted:
(a) The buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and
(b) If the claim is one for infringement or the like (subsection 3 of NRS 104.2312) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.
4. The burden is on the buyer to establish any breach with respect to the goods accepted.
5. Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over:
(a) He may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.
(b) If the claim is one for infringement or the like (subsection 3 of NRS 104.2312) the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.
6. The provisions of subsections 3, 4 and 5 apply to any obligation of a buyer to hold the seller harmless against infringement or the like (subsection 3 of NRS 104.2312).
(Added to NRS by 1965, 806)
NRS 104.2608 Revocation of acceptance in whole or in part.
1. The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it:
(a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
(b) Without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.
2. Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.
3. A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.
(Added to NRS by 1965, 807)
NRS 104.2609 Right to adequate assurance of performance.
1. A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.
2. Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.
3. Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.
4. After receipt of a justified demand failure to provide within a reasonable time not exceeding 30 days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.
(Added to NRS by 1965, 807)
NRS 104.2610 Anticipatory repudiation. When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may:
1. For a commercially reasonable time await performance by the repudiating party; or
2. Resort to any remedy for breach (NRS 104.2703 or 104.2711), even though he has notified the repudiating party that he would await the latter’s performance and has urged retraction; and
3. In either case suspend his own performance or proceeding in accordance with the provisions of this Article on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (NRS 104.2704).
(Added to NRS by 1965, 808)
NRS 104.2611 Retraction of anticipatory repudiation.
1. Until the repudiating party’s next performance is due he can retract his repudiation unless the aggrieved party has since the repudiation cancelled or materially changed his position or otherwise indicated that he considers the repudiation final.
2. Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of this Article (NRS 104.2609).
3. Retraction reinstates the repudiating party’s rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.
(Added to NRS by 1965, 808)
NRS 104.2612 “Installment contract”; breach.
1. An “installment contract” is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent.
2. The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection 3 and the seller gives adequate assurance of its cure the buyer must accept that installment.
3. Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.
(Added to NRS by 1965, 808)
NRS 104.2613 Casualty to identified goods. Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a “no arrival, no sale” term (NRS 104.2324) then:
1. If the loss is total the contract is avoided; and
2. If the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.
(Added to NRS by 1965, 808)
NRS 104.2614 Substituted performance.
1. Where without fault of either party the agreed berthing, loading or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.
2. If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer’s obligation unless the regulation is discriminatory, oppressive or predatory.
(Added to NRS by 1965, 809)
NRS 104.2615 Excuse by failure of presupposed conditions. Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
1. Delay in delivery or nondelivery in whole or in part by a seller who complies with subsections 2 and 3 is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
2. Where the causes mentioned in subsection 1 affect only a part of the seller’s capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
3. The seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under subsection 2, of the estimated quota thus made available for the buyer.
(Added to NRS by 1965, 809)
NRS 104.2616 Procedure on notice claiming excuse.
1. Where the buyer receives notification of a material or indefinite delay or an allocation justified under the preceding section he may by written notification to the seller as to any delivery concerned, and where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this Article relating to breach of installment contracts (NRS 104.2612), then also as to the whole:
(a) Terminate and thereby discharge any unexecuted portion of the contract; or
(b) Modify the contract by agreeing to take his available quota in substitution.
2. If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding 30 days the contract lapses with respect to any deliveries affected.
3. The provisions of this section may not be negated by agreement except insofar as the seller has assumed a greater obligation under the preceding section.
(Added to NRS by 1965, 809)
Part 7
Remedies
NRS 104.2701 Remedies for breach of collateral contracts not impaired. Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this article.
(Added to NRS by 1965, 810)
NRS 104.2702 Seller’s remedies on discovery of buyer’s insolvency.
1. Where the seller discovers the buyer to be insolvent he may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this Article (NRS 104.2705).
2. Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within 10 days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within 3 months before delivery the 10-day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer’s fraudulent or innocent misrepresentation of solvency or of intent to pay.
3. The seller’s right to reclaim under subsection 2 is subject to the rights of a buyer in ordinary course or other good faith purchaser or lien creditor under this Article (NRS 104.2403). Successful reclamation of goods excludes all other remedies with respect to them.
(Added to NRS by 1965, 810)
NRS 104.2703 Seller’s remedies in general. Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (NRS 104.2612), then also with respect to the whole undelivered balance, the aggrieved seller may:
1. Withhold delivery of such goods.
2. Stop delivery by any bailee as hereafter provided (NRS 104.2705).
3. Proceed under the next section respecting goods still unidentified to the contract.
4. Resell and recover damages as hereafter provided (NRS 104.2706).
5. Recover damages for nonacceptance (NRS 104.2708) or in a proper case the price (NRS 104.2709).
6. Cancel.
(Added to NRS by 1965, 810)
NRS 104.2704 Seller’s right to identify goods to contract notwithstanding breach or to salvage unfinished goods.
1. An aggrieved seller under the preceding section may:
(a) Identify to the contract conforming goods not already identified if at the time he learned of the breach they are in his possession or control.
(b) Treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.
2. Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.
(Added to NRS by 1965, 810)
NRS 104.2705 Seller’s stoppage of delivery in transit or otherwise.
1. The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (NRS 104.2702) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.
2. As against such buyer the seller may stop delivery until:
(a) Receipt of the goods by the buyer; or
(b) Acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or
(c) Such acknowledgment to the buyer by a carrier by reshipment or as a warehouse; or
(d) Negotiation to the buyer of any negotiable document of title covering the goods.
3. To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods. After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages. If a negotiable document of title has been issued for goods the bailee is not obligated to obey a notification to stop until surrender of possession or control of the document. A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
(Added to NRS by 1965, 811; A 2005, 852)
NRS 104.2706 Seller’s resale including contract for resale.
1. Under the conditions stated in NRS 104.2703 on seller’s remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this Article (NRS 104.2710), but less expenses saved in consequence of the buyer’s breach.
2. Except as otherwise provided in subsection 3 or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.
3. Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.
4. Where the resale is at public sale:
(a) Only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and
(b) It must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and
(c) If the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and
(d) The seller may buy.
5. A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section.
6. The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (NRS 104.2707) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as hereinafter defined (subsection 3 of NRS 104.2711).
(Added to NRS by 1965, 811)
NRS 104.2707 “Person in the position of a seller.”
1. A “person in the position of a seller” includes as against a principal an agent who has paid or become responsible for the price of goods on behalf of his principal or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.
2. A person in the position of a seller may as provided in this Article withhold or stop delivery (NRS 104.2705) and resell (NRS 104.2706) and recover incidental damages (NRS 104.2710).
(Added to NRS by 1965, 812)
NRS 104.2708 Seller’s damages for nonacceptance or repudiation.
1. Subject to subsection 2 and to the provisions of this Article with respect to proof of market price (NRS 104.2723), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this Article (NRS 104.2710), but less expenses saved in consequence of the buyer’s breach.
2. If the measure of damages provided in subsection 1 is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article (NRS 104.2710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.
(Added to NRS by 1965, 812)
NRS 104.2709 Action for price.
1. When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price:
(a) Of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and
(b) Of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.
2. Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.
3. After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (NRS 104.2610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for nonacceptance under the preceding section.
(Added to NRS by 1965, 812)
NRS 104.2710 Seller’s incidental damages. Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer’s breach, in connection with return or resale of the goods or otherwise resulting from the breach.
(Added to NRS by 1965, 813)
NRS 104.2711 Buyer’s remedies in general; buyer’s security interest in rejected goods.
1. Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (NRS 104.2612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid:
(a) “Cover” and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or
(b) Recover damages for nondelivery as provided in this Article (NRS 104.2713).
2. Where the seller fails to deliver or repudiates the buyer may also:
(a) If the goods have been identified recover them as provided in this Article (NRS 104.2502); or
(b) In a proper case obtain specific performance or replevy the goods as provided in this Article (NRS 104.2716).
3. On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (NRS 104.2706).
(Added to NRS by 1965, 813)
NRS 104.2712 “Cover”; buyer’s procurement of substitute goods.
1. After a breach within the preceding section the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
2. The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (NRS 104.2715), but less expenses saved in consequence of the seller’s breach.
3. Failure of the buyer to effect cover within this section does not bar him from any other remedy.
(Added to NRS by 1965, 813)
NRS 104.2713 Buyer’s damages for nondelivery or repudiation.
1. Subject to the provisions of this Article with respect to proof of market price (NRS 104.2723), the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (NRS 104.2715), but less expenses saved in consequence of the seller’s breach.
2. Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
(Added to NRS by 1965, 813)
NRS 104.2714 Buyer’s damages for breach in regard to accepted goods.
1. Where the buyer has accepted goods and given notification (subsection 3 of NRS 104.2607) he may recover as damages for any nonconformity of tender the loss resulting in the ordinary course of events from the seller’s breach as determined in any manner which is reasonable.
2. The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
3. In a proper case any incidental and consequential damages under the next section may also be recovered.
(Added to NRS by 1965, 814)
NRS 104.2715 Buyer’s incidental and consequential damages.
1. Incidental damages resulting from the seller’s breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
2. Consequential damages resulting from the seller’s breach include:
(a) Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
(b) Injury to person or property proximately resulting from any breach of warranty.
(Added to NRS by 1965, 814)
NRS 104.2716 Buyer’s right to specific performance or replevin.
1. Specific performance may be decreed where the goods are unique or in other proper circumstances.
2. The decree for specific performance may include such terms and conditions as to payment of the price, damages or other relief as the court may deem just.
3. The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family or household purposes, the buyer’s right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
(Added to NRS by 1965, 814; A 1999, 374)
NRS 104.2717 Deduction of damages from the price. The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.
(Added to NRS by 1965, 814)
NRS 104.2718 Liquidation or limitation of damages; deposits.
1. Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
2. Where the seller justifiably withholds delivery of goods because of the buyer’s breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds:
(a) The amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in accordance with subsection 1; or
(b) In the absence of such terms, 20 percent of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.
3. The buyer’s right to restitution under subsection 2 is subject to offset to the extent that the seller establishes:
(a) A right to recover damages under the provisions of this Article other than subsection 1; and
(b) The amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.
4. Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection 2; but if the seller has notice of the buyer’s breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this Article on resale by an aggrieved seller (NRS 104.2706).
(Added to NRS by 1965, 814)
NRS 104.2719 Contractual modification or limitation of remedy.
1. Subject to the provisions of subsections 2 and 3 of this section and of the preceding section on liquidation and limitation of damages:
(a) The agreement may provide for remedies in addition to or in substitution for those provided in this article and may limit or alter the measure of damages recoverable under this article, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and
(b) Resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
2. Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this chapter.
3. Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.
(Added to NRS by 1965, 815)
NRS 104.2720 Effect of “cancellation” or “rescission” on claims for antecedent breach. Unless the contrary intention clearly appears, expressions of “cancellation” or “rescission” of the contract or the like shall not be construed as a renunciation or discharge of any claim in damages for an antecedent breach.
(Added to NRS by 1965, 815)
NRS 104.2721 Remedies for fraud. Remedies for material misrepresentation or fraud include all remedies available under this article for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy.
(Added to NRS by 1965, 815)
NRS 104.2722 Who can sue third parties for injury to goods. Where a third party so deals with goods which have been identified to a contract for sale as to cause actionable injury to a party to that contract:
1. A right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods; and if the goods have been destroyed or converted a right of action is also in the party who either bore the risk of loss under the contract for sale or has since the injury assumed that risk as against the other.
2. If at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the contract for sale and there is no arrangement between them for disposition of the recovery, his suit or settlement is, subject to his own interest, as a fiduciary for the other party to the contract.
3. Either party may with the consent of the other sue for the benefit of whom it may concern.
(Added to NRS by 1965, 816)
NRS 104.2723 Proof of market price: Time and place.
1. If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, any damages based on market price (NRS 104.2708 or 104.2713) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.
2. If evidence of a price prevailing at the times or places described in this Article is not readily available the price prevailing within any reasonable time before or after the time described or at any other place which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the cost of transporting the goods to or from such other place.
3. Evidence of a relevant price prevailing at a time or place other than the one described in this Article 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.
(Added to NRS by 1965, 816)
NRS 104.2724 Admissibility of market quotations. Whenever the prevailing price or value of any goods regularly bought and sold in any established commodity market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of such market shall be admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility.
(Added to NRS by 1965, 816)
NRS 104.2725 Statute of limitations in contracts for sale.
1. An action for breach of any contract for sale must be commenced within 4 years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than 1 year but may not extend it.
2. A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
3. Where an action commenced within the time limited by subsection 1 is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within 6 months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.
4. This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this chapter becomes effective.
(Added to NRS by 1965, 816)
ARTICLE 3
NEGOTIABLE INSTRUMENTS
Part 1
General Provisions and Definitions
NRS 104.3101 Short title. This article may be cited as Uniform Commercial Code—Negotiable Instruments.
(Added to NRS by 1965, 817; A 1993, 1255; 1995, 1074)
1. This article applies to negotiable instruments. It does not apply to money, to payment orders governed by article 4A, or to securities governed by article 8.
2. If there is conflict between this article and article 4 or 9, articles 4 and 9 govern.
3. Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve banks supersede any inconsistent provision of this article to the extent of the inconsistency.
(Added to NRS by 1965, 818; A 1993, 1257)—(Substituted in revision for NRS 104.3103)
1. In this Article:
(a) “Acceptor” means a drawee who has accepted a draft.
(b) “Drawee” means a person ordered in a draft to make payment.
(c) “Drawer” means a person who signs or is identified in a draft as a person ordering payment.
(d) “Maker” means a person who signs or is identified in a note as a person undertaking to pay.
(e) “Order” means a written instruction to pay money signed by the person giving the instruction. The instruction may be addressed to any person, including the person giving the instruction, or to one or more persons jointly or in the alternative but not in succession. An authorization to pay is not an order unless the person authorized to pay is also instructed to pay.
(f) “Ordinary care” in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which he is located, with respect to the business in which he is engaged. In the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate its prescribed procedures and its procedures do not vary unreasonably from general banking usage not disapproved by this Article or Article 4.
(g) “Party” means a party to an instrument.
(h) “Promise” means a written undertaking to pay money signed by the person undertaking to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation.
(i) “Prove” with respect to a fact means to meet the burden of establishing the fact (paragraph (h) of subsection 2 of NRS 104.1201).
(j) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(k) “Remitter” means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.
(l) “Remotely-created item” means an item drawn on an account, which is not created by the payor bank and does not bear a signature purporting to be the signature of the drawer.
2. Other definitions applying to this Article and the sections in which they appear are:
“Acceptance.” NRS 104.3409.
“Accommodated party.” NRS 104.3419.
“Accommodation party.” NRS 104.3419.
“Account.” NRS 104.4104.
“Alteration.” NRS 104.3407.
“Anomalous endorsement.” NRS 104.3205.
“Blank endorsement.” NRS 104.3205.
“Cashier’s check.” NRS 104.3104.
“Certificate of deposit.” NRS 104.3104.
“Certified check.” NRS 104.3409.
“Check.” NRS 104.3104.
“Consideration.” NRS 104.3303.
“Draft.” NRS 104.3104.
“Endorsement.” NRS 104.3204.
“Endorser.” NRS 104.3204.
“Holder in due course.” NRS 104.3302.
“Incomplete instrument.” NRS 104.3115.
“Instrument.” NRS 104.3104.
“Issue.” NRS 104.3105.
“Issuer.” NRS 104.3105.
“Negotiable instrument.” NRS 104.3104.
“Negotiation.” NRS 104.3201.
“Note.” NRS 104.3104.
“Payable at a definite time.” NRS 104.3108.
“Payable on demand.” NRS 104.3108.
“Payable to bearer.” NRS 104.3109.
“Payable to order.” NRS 104.3109.
“Payment.” NRS 104.3602.
“Person entitled to enforce.” NRS 104.3301.
“Presentment.” NRS 104.3501.
“Reacquisition.” NRS 104.3207.
“Special endorsement.” NRS 104.3205.
“Teller’s check.” NRS 104.3104.
“Transfer of instrument.” NRS 104.3203.
“Traveler’s check.” NRS 104.3104.
“Value.” NRS 104.3303.
3. The following definitions in other Articles apply to this Article:
“Bank.” NRS 104.4105.
“Banking day.” NRS 104.4104.
“Clearinghouse.” NRS 104.4104.
“Collecting bank.” NRS 104.4105.
“Customer.” NRS 104.4104.
“Depositary bank.” NRS 104.4105.
“Documentary draft.” NRS 104.4104.
“Intermediary bank.” NRS 104.4105.
“Item.” NRS 104.4104.
“Payor bank.” NRS 104.4105.
“Suspends payments.” NRS 104.4104.
4. In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.
(Added to NRS by 1965, 817; A 1993, 1255; 2005, 853, 1995)
NRS 104.3104 Negotiable instrument.
1. Except as otherwise provided in subsections 3 and 4, “negotiable instrument” means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:
(a) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
(b) Is payable on demand or at a definite time; and
(c) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain:
(1) An undertaking or power to give, maintain or protect collateral to secure payment;
(2) An authorization or power to the holder to confess judgment or realize on or dispose of collateral; or
(3) A waiver of the benefit of any law intended for the advantage or protection of an obligor.
2. “Instrument” means a negotiable instrument.
3. An order that meets all of the requirements of subsection 1, except paragraph (a), and otherwise falls within the definition of “check” in subsection 6 is a negotiable instrument and a check.
4. A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this article.
5. An instrument is a “note” if it is a promise and is a “draft” if it is an order. If an instrument falls within the definition of both “note” and “draft,” a person entitled to enforce the instrument may treat it as either.
6. “Check” means:
(a) A draft, other than a documentary draft, payable on demand and drawn on a bank; or
(b) A cashier’s check or teller’s check.
Ê An instrument may be a check even though it is described on its face by another term, such as “money order.”
7. “Cashier’s check” means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.
8. “Teller’s check” means a draft drawn by a bank:
(a) On another bank; or
(b) Payable at or through a bank.
9. “Traveler’s check” means an instrument that:
(a) Is payable on demand;
(b) Is drawn on or payable at or through a bank;
(c) Is designated by the term “traveler’s check” or by a substantially similar term; and
(d) Requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.
10. “Certificate of deposit” means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.
(Added to NRS by 1965, 818; A 1993, 1257)
NRS 104.3105 Issue of instrument.
1. “Issue” means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.
2. An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.
3. “Issuer” applies to issued and unissued instruments and means a maker or drawer of an instrument.
(Added to NRS by 1965, 819; A 1989, 610; 1993, 1260)—(Substituted in revision for NRS 104.3106)
NRS 104.3106 Unconditional promise or order.
1. Except as otherwise provided in this section, for the purposes of subsection 1 of NRS 104.3104, a promise or order is unconditional unless it states:
(a) An express condition to payment;
(b) That the promise or order is subject to or governed by another record; or
(c) That rights or obligations with respect to the promise or order are stated in another record.
Ê A reference to another record does not of itself make the promise or order conditional.
2. A promise or order is not made conditional by a reference to another record for a statement of rights with respect to collateral, prepayment or acceleration, or because payment is limited to resort to a particular fund or source.
3. If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of subsection 1 of NRS 104.3104. If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.
4. If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of subsection 1 of NRS 104.3104; but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.
(Added to NRS by 1965, 818; A 1993, 1259; 2005, 1997)
NRS 104.3107 Instrument payable in foreign money. Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.
(Added to NRS by 1965, 819; A 1993, 1261)
NRS 104.3108 Payable on demand or at definite time.
1. A promise or order is “payable on demand” if it:
(a) States that it is payable on demand or at sight;
(b) Otherwise indicates that it is payable at the will of the holder; or
(c) Does not state any time of payment.
2. A promise or order is “payable at a definite time” if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of prepayment, acceleration, extension at the option of the holder or extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.
3. If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.
(Added to NRS by 1965, 819; A 1993, 1261)
NRS 104.3109 Payable to bearer or to order.
1. A promise or order is payable to bearer if it:
(a) States that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;
(b) Does not state a payee; or
(c) States that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.
2. A promise or order that is not payable to bearer is payable to order if it is payable to the order of an identified person or to an identified person or order. A promise or order that is payable to order is payable to the identified person.
3. An instrument payable to bearer may become payable to an identified person if it is specially endorsed pursuant to subsection 1 of NRS 104.3205. An instrument payable to an identified person may become payable to bearer if it is endorsed in blank pursuant to subsection 2 of NRS 104.3205.
(Added to NRS by 1965, 820; A 1993, 1262)—(Substituted in revision for NRS 104.3110)
NRS 104.3110 Identification of person to whom instrument is payable.
1. The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer even if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one person signs in the name or behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one or more of the signers.
2. If the signature of the issuer of an instrument is made by automated means, such as a check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.
3. A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office or account number. For the purpose of determining the holder of an instrument, the following rules apply:
(a) If an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable. If an instrument is payable to an account identified by number and by the name of a person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number.
(b) If an instrument is payable to:
(1) A trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named;
(2) A person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative or a successor of the representative;
(3) A fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or
(4) An office or to a person described as holding an office, the instrument is payable to the named person, the incumbent of the office or a successor to the incumbent.
4. If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.
(Added to NRS by 1965, 819; A 1993, 1261)—(Substituted in revision for NRS 104.3109)
NRS 104.3111 Place of payment. Except as otherwise provided for items in article 4, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the drawee or maker stated in the instrument. If no address is stated, the place of payment is the place of business of the drawee or maker. If a drawee or maker has more than one place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument. If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker.
(Added to NRS by 1965, 820; A 1993, 1263)
1. Unless otherwise provided in the instrument:
(a) An instrument is not payable with interest; and
(b) Interest on an interest-bearing instrument is payable from the date of the instrument.
2. Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.
(Added to NRS by 1965, 820; A 1993, 1263)
NRS 104.3113 Date of instrument.
1. An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after date. Except as otherwise provided in subsection 3 of NRS 104.4401, an instrument payable on demand is not payable before the date of the instrument.
2. If an instrument is undated, its date is the date of its issue or, in the case of an unissued instrument, the date it first comes into possession of a holder.
(Added to NRS by 1965, 821; A 1993, 1264)—(Substituted in revision for NRS 104.3114)
NRS 104.3114 Contradictory terms of instrument. If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.
(Added to NRS by 1965, 821; A 1993, 1264)—(Substituted in revision for NRS 104.3113)
NRS 104.3115 Incomplete instruments.
1. “Incomplete instrument” means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.
2. Except as otherwise provided in subsection 3, if an incomplete instrument is an instrument under NRS 104.3104, it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under NRS 104.3104, but, after completion, the requirements of NRS 104.3104 are met, the instrument may be enforced according to its terms as augmented by completion.
3. If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under NRS 104.3407.
4. The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority.
(Added to NRS by 1965, 821; A 1993, 1264)
NRS 104.3116 Joint and several liability; contribution.
1. Except as otherwise provided in the instrument, two or more persons who have the same liability on an instrument as makers, drawers, acceptors, endorsers who endorse as joint payees, or anomalous endorsers are jointly and severally liable in the capacity in which they sign.
2. Except as otherwise provided in subsection 6 of NRS 104.3419 or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive from any party having the same joint and several liability contribution in accordance with applicable law.
3. Discharge of one party having joint and several liability by a person entitled to enforce the instrument does not affect the right under subsection 2 of a party having the same joint and several liability to receive contribution from the party discharged.
(Added to NRS by 1965, 821; A 1993, 1265; 2005, 1997)
NRS 104.3117 Other agreements affecting instrument. Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented or nullified by an agreement under this section, the agreement is a defense to the obligation.
(Added to NRS by 1965, 822; A 1993, 1267)—(Substituted in revision for NRS 104.3119)
NRS 104.3118 Statute of limitations.
1. Except as otherwise provided in subsection 5, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within 6 years after the due date or dates stated in the note or, if a due date is accelerated, within 6 years after the accelerated due date.
2. Except as otherwise provided in subsection 4 or 5, if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within 6 years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of 10 years.
3. Except as otherwise provided in subsection 4, an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within 3 years after dishonor of the draft or 10 years after the date of the draft, whichever period expires first.
4. An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller’s check, cashier’s check or traveler’s check must be commenced within 3 years after demand for payment is made to the acceptor or issuer, as the case may be.
5. An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within 6 years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the 6-year period begins when a demand for payment is in effect and the due date has passed.
6. An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced:
(a) Within 6 years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time; or
(b) Within 6 years after the date of the acceptance if the obligation of the acceptor is payable on demand.
7. Unless governed by other law regarding claims for indemnity or contribution, an action for conversion of an instrument, for money had and received, or like action based on conversion, for breach of warranty, or to enforce an obligation, duty or right arising under this article and not governed by this section must be commenced within 3 years after the cause of action accrues.
(Added to NRS by 1965, 821; A 1993, 1265)—(Substituted in revision for NRS 104.3117)
NRS 104.3119 Notice of right to defend action. In an action for breach of an obligation for which a third person is answerable over pursuant to this Article or Article 4, the defendant may give the third person notice of the litigation in a record, and the person notified may then give similar notice to any other person who is answerable over. If the notice states that the person notified may come in and defend and that failure to do so will bind the person notified in an action later brought by the person giving the notice as to any determination of fact common to the two litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend.
(Added to NRS by 1965, 821; A 1993, 1266; 2005, 1998)
Part 2
Negotiation, Transfer and Endorsement
1. “Negotiation” means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.
2. Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its endorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
(Added to NRS by 1965, 823; A 1993, 1268)—(Substituted in revision for NRS 104.3202)
NRS 104.3202 Negotiation subject to rescission.
1. Negotiation is effective even if obtained:
(a) From an infant, a corporation exceeding its powers or a person without capacity;
(b) By fraud, duress or mistake; or
(c) In breach of duty or as part of an illegal transaction.
2. To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy.
(Added to NRS by 1965, 824; A 1993, 1271)—(Substituted in revision for NRS 104.3207)
NRS 104.3203 Transfer of instrument; rights acquired by transfer.
1. An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.
2. Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.
3. Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of endorsement by the transferor, the transferee has a specifically enforceable right to the unqualified endorsement of the transferor, but negotiation of the instrument does not occur until the endorsement is made.
4. If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this article and has only the rights of a partial assignee.
(Added to NRS by 1965, 823; A 1993, 1267)—(Substituted in revision for NRS 104.3201)
1. “Endorsement” means a signature, other than that of a signer as maker, drawer or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of negotiating the instrument, restricting payment of the instrument, or incurring endorser’s liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words are an endorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than endorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.
2. “Endorser” means a person who makes an endorsement.
3. For the purpose of determining whether the transferee of an instrument is a holder, an endorsement that transfers a security interest in the instrument is effective as an unqualified endorsement of the instrument.
4. If an instrument is payable to a holder under a name that is not his own, endorsement may be made by the holder in the name stated in the instrument or in his own name, or both, but signature in both names may be required by a person paying or taking the instrument for value or collection.
(Added to NRS by 1965, 823; A 1993, 1268)—(Substituted in revision for NRS 104.3203)
NRS 104.3205 Special endorsement; blank endorsement; anomalous endorsement.
1. If an endorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the endorsement identifies a person to whom it makes the instrument payable, it is a “special endorsement.” When specially endorsed, an instrument becomes payable to the identified person and may be negotiated only by the endorsement of that person. The principles stated in NRS 104.3110 apply to special endorsements.
2. If an endorsement is made by the holder of an instrument and it is not a special endorsement, it is a “blank endorsement.” When endorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially endorsed.
3. The holder may convert a blank endorsement that consists only of a signature into a special endorsement by writing, above the signature of the endorser, words identifying the person to whom the instrument is made payable.
4. “Anomalous endorsement” means an endorsement made by a person who is not the holder of the instrument. An anomalous endorsement does not affect the manner in which the instrument may be negotiated.
(Added to NRS by 1965, 823; A 1993, 1269)—(Substituted in revision for NRS 104.3204)
NRS 104.3206 Restrictive endorsement.
1. An endorsement limiting payment to a particular person or otherwise prohibiting further transfer or negotiation of the instrument is not effective to prevent further transfer or negotiation of the instrument.
2. An endorsement stating a condition to the right of the endorsee to receive payment does not affect the right of the endorsee to enforce the instrument. A person paying the instrument or taking it for value or collection may disregard the condition, and the rights and liabilities of that person are not affected by whether the condition has been fulfilled.
3. If an instrument bears an endorsement described in subsection 2 of NRS 104.4201 or in blank or to a particular bank using the words “for deposit,” “for collection,” or other words indicating a purpose of having the instrument collected by a bank for the endorser or for a particular account, the following rules apply:
(a) A person, other than a bank, who purchases the instrument when so endorsed converts the instrument unless the amount paid for the instrument is received by the endorser or applied consistently with the endorsement.
(b) A depositary bank that purchases the instrument or takes it for collection when so endorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the endorser or applied consistently with the endorsement.
(c) A payor bank that is also the depositary bank or that takes the instrument for immediate payment over the counter from a person other than a collecting bank converts the instrument unless the proceeds of the instrument are received by the endorser or applied consistently with the endorsement.
(d) Except as otherwise provided in paragraph (c), a payor bank or intermediary bank may disregard the endorsement and is not liable if the proceeds of the instrument are not received by the endorser or applied consistently with the endorsement.
4. Except for an endorsement covered by subsection 3, if an instrument bears an endorsement using words to the effect that payment is to be made to the endorsee as agent, trustee or other fiduciary for the benefit of the endorser or another person, the following rules apply:
(a) Unless there is notice of breach of fiduciary duty as provided in NRS 104.3307, a person who purchases the instrument from the endorsee or takes the instrument from the endorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the endorsee without regard to whether the endorsee violates a fiduciary duty to the endorser.
(b) A subsequent transferee of the instrument or person who pays the instrument is neither given notice nor otherwise affected by the restriction in the endorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.
5. The presence of an instrument of an endorsement to which this section applies does not prevent a purchaser of the instrument from becoming a holder in due course of the instrument unless the purchaser is a converter under subsection 3 or has notice or knowledge of breach of fiduciary duty as stated in subsection 4.
6. In an action to enforce the obligation of a party to pay the instrument, the obligor has a defense if payment would violate an endorsement to which this section applies and the payment is not permitted by this section.
(Added to NRS by 1965, 823; A 1993, 1269)—(Substituted in revision for NRS 104.3205)
NRS 104.3207 Reacquisition. Reacquisition of an instrument occurs if it is transferred to a former holder, by negotiation or otherwise. A former holder who reacquires the instrument may cancel endorsements made after the reacquirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reacquirer or to bearer, the reacquirer may negotiate the instrument. An endorser whose endorsement is cancelled is discharged, and the discharge is effective against any subsequent holder.
(Added to NRS by 1965, 824; A 1993, 1270)—(Substituted in revision for NRS 104.3206)
Part 3
Enforcement of Instruments
NRS 104.3301 Person entitled to enforce instrument.
1. “Person entitled to enforce” an instrument means:
(a) The holder of the instrument;
(b) A nonholder in possession of the instrument who has the rights of a holder; or
(c) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to NRS 104.3309 or subsection 4 of NRS 104.3418.
2. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
(Added to NRS by 1965, 825; A 1993, 1272)
NRS 104.3302 Holder in due course.
1. Except as otherwise provided in subsection 3 of this section and subsection 4 of NRS 104.3106, “holder in due course” means the holder of an instrument if:
(a) The instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and
(b) The holder took the instrument:
(1) For value;
(2) In good faith;
(3) Without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series;
(4) Without notice that the instrument contains an unauthorized signature or has been altered;
(5) Without notice of any claim to the instrument described in NRS 104.3306; and
(6) Without notice that any party has a defense or claim in recoupment described in subsection 1 of NRS 104.3305.
2. Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection 1, but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment or claim to the instrument.
3. Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken:
(a) By legal process or by purchase in an execution, bankruptcy, or creditor’s sale or similar proceeding;
(b) By purchase as part of a bulk transaction not in ordinary course of business of the transferor; or
(c) As the successor in interest to an estate or other organization.
4. If, under paragraph (a) of subsection 1 of NRS 104.3303, the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.
5. If the person entitled to enforce an instrument has only a security interest in the instrument and the person obliged to pay the instrument has a defense, claim in recoupment or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
6. To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.
7. This section is subject to any law limiting status as a holder in due course in particular classes of transactions.
(Added to NRS by 1965, 825; A 1993, 1272)
NRS 104.3303 Value and consideration.
1. An instrument is issued or transferred for value if:
(a) The instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;
(b) The transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;
(c) The instrument is issued or transferred as payment of, or as security for, an antecedent claim against any person, whether or not the claim is due;
(d) The instrument is issued or transferred in exchange for a negotiable instrument; or
(e) The instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument.
2. “Consideration” means any consideration sufficient to support a simple contract. The drawer or maker of an instrument has a defense if the instrument is issued without consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the extent performance of the promise is due and the promise has not been performed. If an instrument is issued for value as stated in subsection 1, the instrument is also issued for consideration.
(Added to NRS by 1965, 825; A 1993, 1273)
NRS 104.3304 Overdue instrument.
1. An instrument payable on demand becomes overdue at the earliest of the following times:
(a) On the day after the day demand for payment is duly made;
(b) If the instrument is a check, 90 days after its date; or
(c) If the instrument is not a check, when the instrument has been outstanding for a period of time after its date which is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.
2. With respect to an instrument payable at a definite time the following rules apply:
(a) If the principal is payable in installments and a due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured.
(b) If the principal is not payable in installments and the due date has not been accelerated, the instrument becomes overdue on the day after the due date.
(c) If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.
3. Unless the due date of principal has been accelerated, an instrument does not become overdue if there is default in payment of interest but no default in payment of principal.
(Added to NRS by 1965, 825; A 1993, 1274)
NRS 104.3305 Defenses and claims in recoupment.
1. Except as otherwise provided in this section, the right to enforce the obligation of a party to pay an instrument is subject to the following:
(a) A defense of the obligor based on:
(1) Infancy of the obligor to the extent it is a defense to a simple contract;
(2) Duress, lack of legal capacity or illegality of the transaction which, under other law, nullifies the obligation of the obligor;
(3) Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms; or
(4) Discharge of the obligor in insolvency proceedings;
(b) A defense of the obligor stated in another section of this Article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and
(c) A claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.
2. The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in paragraph (a) of subsection 1, but is not subject to defenses of the obligor stated in paragraph (b) of subsection 1 or claims in recoupment stated in paragraph (c) of subsection 1 against a person other than the holder.
3. Except as otherwise provided in subsection 4, in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment or claim to the instrument (NRS 104.3306) of another person, but the other person’s claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.
4. In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection 1 that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy and lack of legal capacity.
(Added to NRS by 1965, 826; A 1993, 1275; 2005, 1998)
NRS 104.3306 Claims to an instrument. A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.
(Added to NRS by 1965, 826; A 1993, 1276)
NRS 104.3307 Notice of breach of fiduciary duty.
1. In this section:
(a) “Fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument.
(b) “Represented person” means the principal, beneficiary, partnership, corporation or other person to whom the duty stated in paragraph (a) is owed.
2. If an instrument is taken from a fiduciary for payment or collection or for value, the taker has knowledge of the fiduciary status of the fiduciary, and the represented person makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:
(a) Notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person.
(b) In the case of an instrument payable to the represented person or the fiduciary as such, the taker has notice of the breach of fiduciary duty if the instrument is:
(1) Taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary;
(2) Taken in a transaction known by the taker to be for the personal benefit of the fiduciary; or
(3) Deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.
(c) If an instrument is issued by the represented person or the fiduciary as such, and made payable to the fiduciary personally, the taker does not have notice of the breach of fiduciary duty unless the taker knows of the breach of fiduciary duty.
(d) If an instrument is issued by the represented person or the fiduciary as such, to the taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is:
(1) Taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary;
(2) Taken in a transaction known by the taker to be for the personal benefit of the fiduciary; or
(3) Deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.
(Added to NRS by 1993, 1243)
NRS 104.3308 Proof of signatures and status as holder in due course.
1. In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under subsection 1 of NRS 104.3402.
2. If the validity of signatures is admitted or proved and there is compliance with subsection 1, a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under NRS 104.3301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that he has rights of a holder in due course which are not subject to the defense or claim.
(Added to NRS by 1965, 827; A 1993, 1276)—(Substituted in revision for NRS 104.3307)
NRS 104.3309 Enforcement of lost, destroyed or stolen instrument.
1. A person not in possession of an instrument is entitled to enforce the instrument if:
(a) The person seeking to enforce the instrument:
(1) Was entitled to enforce the instrument when loss of possession occurred; or
(2) Has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;
(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and
(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
2. A person seeking enforcement of an instrument under subsection 1 must prove the terms of the instrument and his right to enforce the instrument. If that proof is made, NRS 104.3308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.
(Added to NRS by 1993, 1244; A 2005, 1999)
NRS 104.3310 Effect of instrument on obligation for which taken.
1. Unless otherwise agreed, if a certified check, cashier’s check or teller’s check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an endorser of the instrument.
2. Unless otherwise agreed and except as otherwise provided in subsection 1, if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:
(a) In the case of an uncertified check, suspension of the obligation continues until dishonor of the check or until it is paid or certified. Payment or certification of the check results in discharge of the obligation to the extent of the amount of the check.
(b) In the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in discharge of the obligation to the extent of the payment.
(c) Except as otherwise provided in paragraph (d), if the check or note is dishonored and the obligee of the obligation for which the instrument was taken is the person entitled to enforce the instrument, the obligee may enforce either the instrument or the obligation. In the case of an instrument of a third person which is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation.
(d) If the person entitled to enforce the instrument taken for an obligation is a person other than the obligee, the obligee may not enforce the obligation to the extent the obligation is suspended. If the obligee is the person entitled to enforce the instrument but no longer has possession of it because it was lost, stolen or destroyed, the obligation may not be enforced to the extent of the amount payable on the instrument, and to that extent the obligee’s rights against the obligor are limited to enforcement of the instrument.
3. If an instrument other than one described in subsection 1 or 2 is taken for an obligation, the effect is:
(a) That stated in subsection 1 if the instrument is one on which a bank is liable as maker or acceptor; or
(b) That stated in subsection 2 in any other case.
(Added to NRS by 1993, 1245)
NRS 104.3311 Accord and satisfaction by use of instrument.
1. If a person against whom a claim is asserted proves that he in good faith tendered an instrument to the claimant as full satisfaction of the claim, the amount of the claim was unliquidated or subject to a bona fide dispute, and the claimant obtained payment of the instrument, subsections 2, 3 and 4 apply.
2. Unless subsection 3 applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
3. Except as otherwise provided in subsection 4, a claim is not discharged under subsection 2 if either of the following applies:
(a) The claimant, if an organization, proves that:
(1) Within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office or place; and
(2) The instrument or accompanying communication was not received by that designated person, office or place.
(b) The claimant, whether or not an organization, proves that within 90 days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with subparagraph (1) of paragraph (a).
4. A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.
(Added to NRS by 1993, 1245)
NRS 104.3312 Lost, destroyed or stolen cashier’s check, teller’s check or certified check.
1. In this section:
(a) “Check” means a cashier’s check, teller’s check or certified check.
(b) “Claimant” means a person who claims the right to receive the amount of a cashier’s check, teller’s check or certified check that was lost, destroyed or stolen.
(c) “Declaration of loss” means a statement, made in a record under penalty of perjury, to the effect that:
(1) The declarer lost possession of a check;
(2) The declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier’s check or teller’s check;
(3) The loss of possession was not the result of a transfer by the declarer or a lawful seizure; and
(4) The declarer cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(d) “Obligated bank” means the issuer of a cashier’s check or teller’s check or the acceptor of a certified check.
2. A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check, if:
(a) The claimant is the drawer or payee of a certified check or the remitter or payee of a cashier’s check or teller’s check;
(b) The communication contains or is accompanied by a declaration of loss of the claimant with respect to the check;
(c) The communication is received at a time and in a manner affording the bank a reasonable time to act on it before the check is paid; and
(d) The claimant provides reasonable identification if requested by the obligated bank.
3. Delivery of a declaration of loss is a warranty of the truth of the statements made in the declaration. If a claim is asserted in compliance with this subsection, the following rules apply:
(a) The claim becomes enforceable at the later of:
(1) The time the claim is asserted; or
(2) The 90th day following the date of the check, in the case of a cashier’s check or teller’s check, or the 90th day following the date of the acceptance, in the case of a certified check.
(b) Until the claim becomes enforceable, it has no legal effect and the obligated bank may pay the check or, in the case of a teller’s check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check.
(c) If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check.
(d) When the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check. Subject to paragraph (a) of subsection 1 of NRS 104.4302, payment to the claimant discharges all liability of the obligated bank with respect to the check.
4. If the obligated bank pays the amount of a check to a claimant under paragraph (d) of subsection 2 and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to refund the payment to the obligated bank if the check is paid, or pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.
5. If a claimant has the right to assert a claim under subsection 2 and is also a person entitled to enforce a cashier’s check, teller’s check or certified check which is lost, destroyed or stolen, the claimant may assert rights with respect to the check either under this section or NRS 104.3309.
(Added to NRS by 1993, 1247; A 2005, 1999)
Part 4
Liability of Parties
1. A person is not liable on an instrument unless:
(a) He signed the instrument; or
(b) He is represented by an agent or representative who signed the instrument and the signature is binding on him under NRS 104.3402.
2. A signature may be made manually or by means of a device or machine, and by the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.
(Added to NRS by 1965, 827; A 1993, 1277)
NRS 104.3402 Signature by representative.
1. If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent he would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the “authorized signature of the represented person” and the represented person is liable on the instrument, whether or not identified in the instrument.
2. If a representative signs his own name to an instrument and the signature is an authorized signature of the represented person, the following rules apply:
(a) If the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument.
(b) Except as otherwise provided in subsection 3, if the form of the signature does not show unambiguously that the signature is made in a representative capacity or the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument. With respect to any other person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.
3. If a representative signs his own name as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.
(Added to NRS by 1965, 827; A 1993, 1278)—(Substituted in revision for NRS 104.3403)
NRS 104.3403 Unauthorized signature.
1. Unless otherwise provided in this article or article 4, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this article.
2. If the signature of more than one person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one of the required signatures is lacking.
3. The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this article which makes the unauthorized signature effective for the purposes of this article.
(Added to NRS by 1965, 827; A 1993, 1279)—(Substituted in revision for NRS 104.3404)
NRS 104.3404 Impostors; fictitious payees.
1. If an impostor, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the impostor, or to a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an endorsement of the instrument by any person in the name of the payee is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
2. If a person whose intent determines to whom an instrument is payable (subsection 1 or 2 of NRS 104.3110) does not intend the person identified as payee to have any interest in the instrument, or the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special endorsement:
(a) Any person in possession of the instrument is its holder.
(b) An endorsement by any person in the name of the payee stated in the instrument is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
3. Under subsection 1 or 2, an endorsement is made in the name of a payee if it is made in a name substantially similar to that of the payee or the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.
4. With respect to an instrument to which subsection 1 or 2 applies, if a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
(Added to NRS by 1965, 828; A 1993, 1280)—(Substituted in revision for NRS 104.3405)
NRS 104.3405 Employer’s responsibility for fraudulent endorsement by employee.
1. In this section:
(a) “Employee” includes an independent contractor and employee of an independent contractor retained by the employer.
(b) “Fraudulent endorsement” means:
(1) In the case of an instrument payable to the employer, a forged endorsement purporting to be that of the employer; or
(2) In the case of an instrument with respect to which the employer is the issuer, a forged endorsement purporting to be that of the person identified as payee.
(c) “Responsibility” with respect to instruments means authority:
(1) To sign or endorse instruments on behalf of the employer;
(2) To act upon instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition;
(3) To prepare or act upon instruments for issue in the name of the employer;
(4) To supply information determining the names or addresses of payees of instruments to be issued in the name of the employer;
(5) To control the disposition of instruments to be issued in the name of the employer; or
(6) To act otherwise with respect to instruments in a responsible capacity.
Ê “Responsibility” does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.
2. For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent endorsement of the instrument, the endorsement is effective as the endorsement of the person to whom the instrument is payable if it is made in the name of that person. If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
3. Under subsection 2, an endorsement is made in the name of the person to whom an instrument is payable if:
(a) It is made in a name substantially similar to the name of that person; or
(b) The instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.
(Added to NRS by 1965, 827; A 1993, 1277)—(Substituted in revision for NRS 104.3402)
NRS 104.3406 Negligence contributing to forged signature or alteration of instrument.
1. A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.
2. Under subsection 1, if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.
3. Under subsection 1, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection 2, the burden of proving failure to exercise ordinary care is on the person precluded.
(Added to NRS by 1965, 828; A 1993, 1280)
1. “Alteration” means an unauthorized:
(a) Change in an instrument that purports to modify in any respect the obligation of a party; or
(b) Addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.
2. Except as otherwise provided in subsection 3, an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.
3. A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith, and without notice of the alteration, may enforce rights with respect to the instrument:
(a) According to its original terms; or
(b) In the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.
(Added to NRS by 1965, 828; A 1993, 1281)
NRS 104.3408 Drawee not liable on unaccepted draft. A check or other draft does not of itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts it.
(Added to NRS by 1965, 829; A 1993, 1282)—(Substituted in revision for NRS 104.3409)
NRS 104.3409 Acceptance of draft; certified check.
1. “Acceptance” means the drawee’s signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee’s signature alone. Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.
2. A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue or has been dishonored.
3. If a draft is payable at a fixed period after sight and the acceptor fails to date the acceptance, the holder may complete the acceptance by supplying a date in good faith.
4. “Certified check” means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in subsection 1 or by a writing on the check which indicates that the check is certified. The drawee of a check has no obligation to certify the check, and refusal to certify is not dishonor of the check.
(Added to NRS by 1965, 829; A 1993, 1282)—(Substituted in revision for NRS 104.3410)
NRS 104.3410 Acceptance varying draft.
1. If the terms of a drawee’s acceptance vary from the terms of the draft as presented, the holder may refuse the acceptance and treat the draft as dishonored. In that case, the drawee may cancel the acceptance.
2. The terms of a draft are not varied by an acceptance to pay at a particular bank or place in the United States, unless the acceptance states that the draft is to be paid only at that bank or place.
3. If the holder assents to an acceptance varying the terms of a draft, the obligation of each drawer and endorser that does not expressly assent to the acceptance is discharged.
(Added to NRS by 1965, 829; A 1993, 1283)—(Substituted in revision for NRS 104.3412)
NRS 104.3411 Refusal to pay cashier’s checks, teller’s checks and certified checks.
1. In this section, “obligated bank” means the acceptor of a certified check or the issuer of a cashier’s check or teller’s check bought from the issuer.
2. If the obligated bank wrongfully refuses to pay a cashier’s check or certified check, stops payment of a teller’s check, or refuses to pay a dishonored teller’s check, the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular circumstances giving rise to the damages.
3. Expenses or consequential damages under subsection 2 are not recoverable if the refusal of the obligated bank to pay occurs because:
(a) The bank suspends payments;
(b) The obligated bank asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument;
(c) The obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument; or
(d) Payment is prohibited by law.
(Added to NRS by 1965, 828; A 1993, 1281)—(Substituted in revision for NRS 104.3408)
NRS 104.3412 Obligation of issuer of note or cashier’s check.
1. The issuer of a note or cashier’s check or other draft drawn on the drawer is obliged to pay the instrument:
(a) According to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder; or
(b) If the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in NRS 104.3115 and 104.3407.
2. The obligation is owed to a person entitled to enforce the instrument or to an endorser who paid the instrument under NRS 104.3415.
(Added to NRS by 1965, 829; A 1993, 1283)—(Substituted in revision for NRS 104.3411)
NRS 104.3413 Obligation of acceptor.
1. The acceptor of a draft is obliged to pay the draft:
(a) According to its terms at the time it was accepted, even though the acceptance states that the draft is payable “as originally drawn” or equivalent terms;
(b) If the acceptance varies the terms of the draft, according to the terms of the draft as varied; or
(c) If the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in NRS 104.3115 and 104.3407.
Ê The obligation is owed to a person entitled to enforce the draft or to the drawer or an endorser who paid the draft under NRS 104.3414 or 104.3415.
2. If the certification of a check or other acceptance of a draft states the amount certified or accepted, the obligation of the acceptor is that amount. If the certification or acceptance does not state an amount, the amount of the instrument is subsequently raised, and the instrument is then negotiated to a holder in due course, the obligation of the acceptor is the amount of the instrument at the time it was taken by the holder in due course.
(Added to NRS by 1965, 829; A 1993, 1283)
NRS 104.3414 Obligation of drawer.
1. This section does not apply to cashier’s checks or other drafts drawn on the drawer.
2. If an unaccepted draft is dishonored, the drawer is obliged to pay the draft:
(a) According to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder; or
(b) If the drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in NRS 104.3115 and 104.3407.
Ê The obligation is owed to a person entitled to enforce the draft or to an endorser who paid the draft under NRS 104.3415.
3. If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.
4. If a draft is accepted and the acceptor is not a bank, the obligation of the drawer to pay the draft if the draft is dishonored by the acceptor is the same as the obligation of an endorser under subsections 1 and 3 of NRS 104.3415.
5. If a draft states that it is drawn “without recourse” or otherwise disclaims liability of the drawer to pay the draft, the drawer is not liable under subsection 2 to pay the draft if the draft is not a check. A disclaimer of the liability stated in subsection 2 is not effective if the draft is a check.
6. If a check is not presented for payment or given to a depositary bank for collection within 30 days after its date, the drawee suspends payments after expiration of the 30-day period without paying the check, and because of the suspension of payments, the drawer is deprived of funds maintained with the drawee to cover payment of the check, the drawer to the extent deprived of funds may discharge his obligation to pay the check by assigning to the person entitled to enforce the check his rights against the drawee with respect to the funds.
(Added to NRS by 1993, 1246)
NRS 104.3415 Obligation of endorser.
1. Except as otherwise provided in subsections 2, 3 and 4 of this section and in subsection 4 of NRS 104.3419, if an instrument is dishonored, an endorser is obliged to pay the amount due on the instrument according to the terms of the instrument at the time it was endorsed, or if the endorser endorsed an incomplete instrument, according to its terms when completed, to the extent stated in NRS 104.3115 and 104.3407. The obligation of the endorser is owed to a person entitled to enforce the instrument or to a subsequent endorser who paid the instrument under this section.
2. If an endorsement states that it is made “without recourse” or otherwise disclaims liability of the endorser, the endorser is not liable under subsection 1 to pay the instrument.
3. If notice of dishonor of an instrument is required by NRS 104.3503 and notice of dishonor complying with that section is not given to an endorser, the liability of the endorser under subsection 1 is discharged.
4. If a draft is accepted by a bank after an endorsement is made, the liability of the endorser under subsection 1 is discharged.
5. If an endorser of a check is liable under subsection 1 and the check is not presented for payment, or given to a depositary bank for collection, within 30 days after the day the endorsement was made, the liability of the endorser under subsection 1 is discharged.
(Added to NRS by 1965, 829; A 1993, 1284)—(Substituted in revision for NRS 104.3414)
NRS 104.3416 Transfer warranties.
1. A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by endorsement, to any subsequent transferee that:
(a) The warrantor is a person entitled to enforce the instrument;
(b) All signatures on the instrument are authentic and authorized;
(c) The instrument has not been altered;
(d) The instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor;
(e) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
(f) With respect to a remotely-created item, that the person on whose account the item is drawn authorized the issuance of the item in the amount for which the item is drawn.
2. A person to whom the warranties under subsection 1 are made and who took the instrument in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach.
3. The warranties stated in subsection 1 cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection 2 is discharged to the extent of any loss caused by the delay in giving notice of the claim.
4. A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
5. No claim for breach of warranty in paragraph (f) of subsection 1 is available against a person to which an item was transferred to the extent that under applicable law, including the applicable choice-of-law principles, the person that transferred the item did not make the warranty in paragraph (f) of subsection 1.
(Added to NRS by 1965, 830; A 1993, 1287; 2005, 2000)
NRS 104.3417 Presentment warranties.
1. If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that:
(a) The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
(b) The draft has not been altered;
(c) The warrantor has no knowledge that the signature of the drawer of the draft is unauthorized; and
(d) With respect to a remotely-created item, that the person on whose account the item is drawn authorized the issuance of the item in the amount for which the item is drawn.
2. A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor. If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection.
3. If a drawee asserts a claim for breach of warranty under subsection 1 based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under NRS 104.3404 or 104.3405 or the drawer is precluded under NRS 104.3406 or 104.4406 from asserting against the drawee the unauthorized endorsement or alteration.
4. If a dishonored draft is presented for payment to the drawer or an endorser or any other instrument is presented for payment to a party obliged to pay the instrument, and payment is received, the following rules apply:
(a) The person obtaining payment and a prior transferor of the instrument warrant to the person making payment in good faith that the warrantor is, or was at the time he transferred the instrument, a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument.
(b) The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
5. The warranties stated in subsections 1 and 4 cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection 2 or 4 is discharged to the extent of any loss caused by the delay in giving notice of the claim.
6. A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
7. No claim for breach of warranty in paragraph (d) of subsection 1 is available against a person to which an item was transferred to the extent that under applicable law, including the applicable choice-of-law principles, the person that transferred the item did not make the warranty in paragraph (d) of subsection 1.
(Added to NRS by 1965, 830; A 1993, 1286; 2005, 2001)
NRS 104.3418 Payment or acceptance by mistake.
1. Except as otherwise provided in subsection 3, if the drawee of a draft pays or accepts the draft and he acted on the mistaken belief that payment of the draft had not been stopped pursuant to NRS 104.4403 or the signature of the drawer of the draft was authorized, he may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance. Rights of the drawee under this subsection are not affected by his failure to exercise ordinary care in paying or accepting the draft.
2. Except as otherwise provided in subsection 3, if an instrument has been paid or accepted by mistake and the case is not covered by subsection 1, the person paying or accepting may, to the extent permitted by the law governing mistake and restitution:
(a) Recover the payment from the person to whom or for whose benefit payment was made; or
(b) In the case of acceptance, may revoke the acceptance.
3. The remedies provided by subsection 1 or 2 may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided by NRS 104.3417 or 104.4407.
4. If an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under subsection 1 or 2, the instrument is deemed not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.
(Added to NRS by 1965, 831; A 1993, 1288)
NRS 104.3419 Instruments signed for accommodation.
1. If an instrument is issued for value given for the benefit of a party to the instrument (“accommodated party”) and another party to the instrument (“accommodation party”) signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party “for accommodation.”
2. An accommodation party may sign the instrument as maker, drawer, acceptor or endorser and, subject to subsection 4, is obliged to pay the instrument in the capacity in which he signs. The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not he receives consideration for the accommodation.
3. A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous endorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument. Except as otherwise provided in NRS 104.3605, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken by that person that the accommodation party signed the instrument for accommodation.
4. If the signature of a party to an instrument is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if:
(a) Execution of judgment against the other party has been returned unsatisfied;
(b) The other party is insolvent or in an insolvency proceeding;
(c) The other party cannot be served with process; or
(d) It is otherwise apparent that payment cannot be obtained from the other party.
5. If the signature of a party to an instrument is accompanied by words indicating that the party guarantees payment or the signer signs the instrument as an accommodation party in some other manner that does not unambiguously indicate an intention to guarantee collection rather than payment, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument in the same circumstances as the accommodated party would be obliged, without prior resort to the accommodated party by the person entitled to enforce the instrument.
6. An accommodation party that pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. In proper circumstances, an accommodation party may obtain relief that requires the accommodated party to perform its obligations on the instrument. An accommodated party that pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.
(Added to NRS by 1965, 830; A 1993, 1285; 2005, 2002)
NRS 104.3420 Conversion of instrument.
1. The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by the issuer or acceptor of the instrument or a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.
2. In an action under subsection 1, the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff’s interest in the instrument.
3. A representative, other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.
(Added to NRS by 1965, 831; A 1993, 1289)—(Substituted in revision for NRS 104.3419)
Part 5
Dishonor
1. “Presentment” means a demand made by or on behalf of a person entitled to enforce an instrument:
(a) To pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank; or
(b) To accept a draft made to the drawee.
2. The following rules are subject to article 4, agreement of the parties, and clearinghouse rules and the like:
(a) Presentment:
(1) May be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States;
(2) May be made by any commercially reasonable means, including an oral, written or electronic communication;
(3) Is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and
(4) Is effective if made to any one of two or more makers, acceptors, drawees or other payors.
(b) Upon demand of the person to whom presentment is made, the person making presentment must:
(1) Exhibit the instrument;
(2) Give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so; and
(3) Sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.
(c) Without dishonoring the instrument, the party to whom presentment is made may:
(1) Return the instrument for lack of a necessary endorsement; or
(2) Refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties or other applicable law or rule.
(d) The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if he has established a cutoff hour not earlier than 2 p.m. for the receipt and action upon instruments presented for payment or acceptance and presentment is made after the cutoff hour.
(Added to NRS by 1965, 833; A 1993, 1290)—(Substituted in revision for NRS 104.3504)
1. Dishonor of a note is governed by the following rules:
(a) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment.
(b) If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later.
(c) If the note is not payable on demand and paragraph (b) does not apply, the note is dishonored if it is not paid on the day it becomes payable.
2. Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:
(a) If a check is duly presented for payment to the payor bank otherwise than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under NRS 104.4301 or 104.4302, or becomes accountable for the amount of the check under NRS 104.4302.
(b) If a draft is payable on demand and paragraph (a) does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment.
(c) If a draft is payable on a date stated in the draft, the draft is dishonored if:
(1) Presentment for payment is duly made to the drawee and payment is not made on the day the draft becomes payable or the day of presentment, whichever is later; or
(2) Presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment.
(d) If a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.
3. Dishonor of an unaccepted documentary draft occurs according to the rules stated in paragraphs (b), (c) and (d) of subsection 2, except that payment or acceptance may be delayed without dishonor until no later than the close of the third business day of the drawee following the day on which payment or acceptance is required by those paragraphs.
4. Dishonor of an accepted draft is governed by the following rules:
(a) If the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment.
(b) If the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day it becomes payable or the day of presentment, whichever is later.
5. In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under NRS 104.3504, dishonor occurs without presentment if the instrument is not duly accepted or paid.
6. If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.
(Added to NRS by 1965, 834; A 1993, 1291)—(Substituted in revision for NRS 104.3507)
NRS 104.3503 Notice of dishonor.
1. The obligation of an endorser stated in subsection 1 of NRS 104.3415 and the obligation of a drawer stated in subsection 4 of NRS 104.3414 may not be enforced unless:
(a) The endorser or drawer is given notice of dishonor of the instrument complying with this section; or
(b) Notice of dishonor is excused under subsection 2 of NRS 104.3504.
2. Notice of dishonor:
(a) May be given by any person;
(b) May be given by any commercially reasonable means, including an oral, written or electronic communication; and
(c) Is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted.
Ê Return of an instrument given to a bank for collection is sufficient notice of dishonor.
3. Subject to subsection 3 of NRS 104.3504, with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given by the bank before midnight of the next banking day following the banking day on which it receives notice of dishonor of the instrument, or by any other person within 30 days following the day on which he receives notice of dishonor. With respect to any other instrument, notice of dishonor must be given within 30 days following the day on which dishonor occurs.
(Added to NRS by 1965, 835; A 1993, 1292)—(Substituted in revision for NRS 104.3508)
NRS 104.3504 Excused presentment and notice of dishonor.
1. Presentment for payment or acceptance of an instrument is excused if:
(a) The person entitled to present the instrument cannot with reasonable diligence make presentment;
(b) The maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings;
(c) By the terms of the instrument presentment is not necessary to enforce the obligation of endorsers or the drawer;
(d) The drawer or endorser whose obligation is being enforced has waived presentment or otherwise has no reason to expect or right to require that the instrument be paid or accepted; or
(e) The drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.
2. Notice of dishonor is excused if by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.
3. Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.
(Added to NRS by 1965, 836; A 1993, 1294)—(Substituted in revision for NRS 104.3511)
NRS 104.3505 Evidence of dishonor.
1. The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:
(a) A document regular in form as provided in subsection 2 which purports to be a protest.
(b) A purported stamp or writing of the drawee, payor bank or presenting bank on the instrument or accompanying it stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor.
(c) A book or record of the drawee, payor bank, or collecting bank kept in the usual course of business which shows dishonor, even though there is no evidence of who made the entry.
2. A protest is a certificate of dishonor made by a United States consul or vice consul, or a notarial officer or other person authorized to administer oaths by the law of the place where dishonor occurs. It may be made upon information satisfactory to him. The protest must identify the instrument and certify either that presentment has been made or, if not made, the reason why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been given to some or all parties.
(Added to NRS by 1965, 835; A 1993, 1293)—(Substituted in revision for NRS 104.3510)
Part 6
Discharge and Payment
NRS 104.3601 Discharge and effect of discharge.
1. The obligation of a party to pay the instrument is discharged as stated in this article or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.
2. Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.
(Added to NRS by 1965, 836; A 1993, 1295)
1. Subject to subsection 5, an instrument is paid to the extent payment is made by or on behalf of a party obliged to pay the instrument, and to a person entitled to enforce the instrument.
2. Subject to subsection 5, a note is paid to the extent payment is made by or on behalf of a party obliged to pay the note to a person who formerly was entitled to enforce the note only if at the time of the payment the party obliged to pay has not received adequate notification that the note has been transferred and that payment is to be made to the transferee. A notification is adequate only if it:
(a) Is signed by the transferor or the transferee;
(b) Reasonably identifies the transferred note; and
(c) Provides an address at which payments subsequently are to be made.
Ê Upon request, a transferee shall seasonably furnish reasonable proof that the note has been transferred. Unless the transferee complies with the request, a payment to the person that formerly was entitled to enforce the note is effective for purposes of subsection 3 even if the party obliged to pay the note has received a notification under this subsection.
3. Subject to subsection 5, to the extent of a payment under subsections 1 and 2, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under NRS 104.3306 by another person.
4. Subject to subsection 5, a transferee, or any party that has acquired rights in the instrument directly or indirectly from a transferee, including any such party that has rights as a holder in due course, is deemed to have notice of any payment that is made under subsection 2 after the date that the note is transferred to the transferee but before the party obliged to pay the note receives adequate notification of the transfer.
5. The obligation of a party to pay the instrument is not discharged under subsections 1 to 4, inclusive, if:
(a) A claim to the instrument under NRS 104.3306 is enforceable against the party receiving payment and:
(1) Payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction; or
(2) In the case of an instrument other than a cashier’s check, teller’s check or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument; or
(b) The person making payment knows that the instrument is a stolen instrument and pays a person he knows is in wrongful possession of the instrument.
6. As used in this section, “signed,” with respect to a record that is not a writing, includes the attachment to or logical association with the record of an electronic symbol, sound, or process with the present intent to adopt or accept the record.
(Added to NRS by 1965, 837; A 1993, 1297; 2005, 2003)
NRS 104.3603 Tender of payment.
1. If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.
2. If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an endorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.
3. If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.
(Added to NRS by 1965, 837; A 1993, 1297)—(Substituted in revision for NRS 104.3604)
NRS 104.3604 Discharge by cancellation or renunciation.
1. A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument:
(a) By an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation or cancellation of the instrument, cancellation or striking out of the party’s signature, or the addition of words to the instrument indicating discharge; or
(b) By agreeing not to sue or otherwise renouncing rights against the party by a signed record.
2. Cancellation or striking out of an endorsement pursuant to subsection 1 does not affect the status and rights of a party derived from the endorsement.
3. As used in this section, “signed,” with respect to a record that is not a writing, includes the attachment to or logical association with the record of an electronic symbol, sound, or process with the present intent to adopt or accept the record.
(Added to NRS by 1965, 837; A 1993, 1298; 2005, 2004)
NRS 104.3605 Discharge of endorsers and accommodation parties.
1. In this section, the term “endorser” includes a drawer having the obligation described in subsection 4 of NRS 104.3414.
2. Discharge, under NRS 104.3604, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having a right of recourse against the discharged party.
3. If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an endorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent the endorser or accommodation party proves that the extension caused loss to him with respect to the right of recourse.
4. If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an endorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent the modification causes loss to the endorser or accommodation party with respect to the right of recourse. The loss suffered by the endorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.
5. If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an endorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.
6. If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of any party who is jointly and severally liable with respect to the secured obligation is discharged to the extent the impairment causes the party asserting discharge to pay more than he would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under subsection 5, he is deemed to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.
7. Under subsection 5 or 6, impairing value of an interest in collateral includes:
(a) Failure to obtain or maintain perfection or recordation of the interest in collateral;
(b) Release of collateral without substitution of collateral of equal value;
(c) Failure to perform a duty to preserve the value of collateral owed under Article 9 or other law to a debtor or surety or other person secondarily liable; or
(d) Failure to comply with applicable law in disposing of collateral.
8. An accommodation party is not discharged under subsection 3, 4 or 5 unless the person entitled to enforce the instrument knows of the accommodation or has notice under subsection 3 of NRS 104.3419 that the instrument was signed for accommodation.
9. A party is not discharged under this section if:
(a) The party asserting discharge consents to the event or conduct that is the basis of the discharge; or
(b) The instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral.
(Added to NRS by 1965, 837; A 1993, 1295)—(Substituted in revision for NRS 104.3602)
ARTICLE 4
BANK DEPOSITS AND COLLECTIONS
Part 1
General Provisions and Definitions
NRS 104.4101 Short title. This article may be cited as Uniform Commercial Code—Bank Deposits and Collections.
(Added to NRS by 1965, 840; A 1993, 1298)
1. To the extent that items within this article are also within articles 3 and 8, they are subject to those articles. If there is a conflict, this article governs article 3 but article 8 governs this article.
2. The liability of a bank for action or nonaction with respect to an item handled by it for purposes of presentment, payment or collection is governed by the law of the place where the bank is located. In the case of action or nonaction by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located.
(Added to NRS by 1965, 840; A 1993, 1298)
NRS 104.4103 Variation by agreement; measure of damages; action constituting ordinary care.
1. The effect of the provisions of this article may be varied by agreement, but the parties to the agreement cannot disclaim a bank’s responsibility for its own lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank’s responsibility is to be measured if those standards are not manifestly unreasonable.
2. Federal Reserve regulations and operating circulars, clearinghouse rules, and the like have the effect of agreements under subsection 1, whether or not specifically assented to by all parties interested in items handled.
3. Action or nonaction approved by this article or pursuant to Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with clearinghouse rules and the like or with a general banking usage not disapproved by this article, is prima facie the exercise of ordinary care.
4. The specification or approval of certain procedures by this article is not disapproval of other procedures that may be reasonable under the circumstances.
5. The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith, it includes other damages the party suffered as a proximate consequence.
(Added to NRS by 1965, 840; A 1993, 1299)
NRS 104.4104 Definitions and index of definitions.
1. In this Article, unless the context otherwise requires:
(a) “Account” means any deposit or credit account with a bank including a demand, time, savings, passbook, share draft or like account, other than an account evidenced by a certificate of deposit.
(b) “Afternoon” means the period of a day between noon and midnight.
(c) “Banking day” means that part of any day on which a bank is open to the public for carrying on substantially all of its banking functions.
(d) “Clearinghouse” means any association of banks or other payors regularly clearing items.
(e) “Customer” means any person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank.
(f) “Documentary draft” means a draft to be presented for acceptance or payment if specified documents, certificated securities or instructions for uncertificated securities, or other certificates, statements or the like are to be received by the drawee or other payor before acceptance or payment of the draft.
(g) “Draft” means a draft as defined in NRS 104.3104 or an item, other than an instrument, that is an order.
(h) “Drawee” means a person ordered in a draft to make payment.
(i) “Item” means an instrument or a promise or order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by Article 4A or a credit or debit card slip.
(j) “Midnight deadline” with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later.
(k) “Settle” means to pay in cash, by clearinghouse settlement, in a charge or credit or by remittance, or otherwise as instructed. A settlement may be either provisional or final.
(l) “Suspends payments” with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary course of business.
2. Other definitions applying to this Article and the sections in which they appear are:
“Agreement for electronic presentment.” NRS 104.4110.
“Collecting bank.” NRS 104.4105.
“Depositary bank.” NRS 104.4105.
“Intermediary bank.” NRS 104.4105.
“Payor bank.” NRS 104.4105.
“Presenting bank.” NRS 104.4105.
“Presentment notice.” NRS 104.4110.
3. “Control” as provided in NRS 104.7106 and the following definitions in other Articles apply to this Article:
“Acceptance.” NRS 104.3409.
“Alteration.” NRS 104.3407.
“Cashier’s check.” NRS 104.3104.
“Certificate of deposit.” NRS 104.3104.
“Certified check.” NRS 104.3409.
“Check.” NRS 104.3104.
“Holder in due course.” NRS 104.3302.
“Instrument.” NRS 104.3104.
“Notice of dishonor.” NRS 104.3503.
“Order.” NRS 104.3103.
“Ordinary care.” NRS 104.3103.
“Person entitled to enforce.” NRS 104.3301.
“Presentment.” NRS 104.3501.
“Promise.” NRS 104.3103.
“Prove.” NRS 104.3103.
“Record.” NRS 104.3103.
“Remotely-created item.” NRS 104.3103.
“Teller’s check.” NRS 104.3104.
“Unauthorized signature.” NRS 104.3403.
4. In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.
(Added to NRS by 1965, 841; A 1993, 1299; 1997, 374; 2005, 855, 2004)
NRS 104.4105 “Depositary bank”; “payor bank”; “intermediary bank”; “collecting bank”; “presenting bank.” In this Article:
1. “Depositary bank” means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter.
2. “Payor bank” means a bank that is the drawee of a draft.
3. “Intermediary bank” means any bank to which an item is transferred in course of collection except the depositary or payor bank.
4. “Collecting bank” means any bank handling the item for collection except the payor bank.
5. “Presenting bank” means any bank presenting an item except a payor bank.
(Added to NRS by 1965, 842; A 1993, 1301)
NRS 104.4106 Payable through or payable at bank.
1. If an item states that it is “payable through” a bank identified in the item:
(a) The item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item; and
(b) The item may be presented for payment only by or through the bank.
2. If an item states that it is “payable at” a bank identified in the item, the item is equivalent to a draft drawn on the bank.
(Added to NRS by 1993, 1248)
NRS 104.4107 Separate office of bank. A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notices or orders must be given under this article and under article 3.
(Added to NRS by 1965, 842; A 1993, 1301)—(Substituted in revision for NRS 104.4106)
NRS 104.4108 Time of receipt of items.
1. For the purpose of allowing time to process items, prove balances and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of 2 p.m. or later as a cutoff hour for the handling of money and items and the making of entries on its books.
2. Any item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.
(Added to NRS by 1965, 842)—(Substituted in revision for NRS 104.4107)
1. Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of any person involved, may waive, modify or extend time limits imposed or permitted by this chapter for a period not exceeding two additional banking days without discharge of drawers or endorsers or liability to its transferor or a prior party.
2. Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this chapter or by instructions is excused if:
(a) The delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment or other circumstances beyond the control of the bank; and
(b) The bank exercises such diligence as the circumstances require.
(Added to NRS by 1965, 842; A 1993, 1301)—(Substituted in revision for NRS 104.4108)
NRS 104.4110 Electronic presentment.
1. “Agreement for electronic presentment” means an agreement, clearing-house rule or Federal Reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item (“presentment notice”) rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor and other matters concerning items subject to the agreement.
2. Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received.
3. If presentment is made by presentment notice, a reference to “item” or “check” in this article means the presentment notice unless the context otherwise indicates.
(Added to NRS by 1993, 1248)
NRS 104.4111 Statute of limitations. An action to enforce an obligation, duty or right arising under this article must be commenced within three years after the cause of action accrues.
(Added to NRS by 1993, 1248)
Part 2
Collection of Items: Depositary and Collecting Banks
NRS 104.4201 Status of collecting bank as agent and provisional status of credits; item endorsed “pay any bank.”
1. Unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or subagent of the owner of the item and any settlement given for the item is provisional. This provision applies regardless of the form of endorsement or lack of endorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner to proceeds of the item are subject to rights of a collecting bank such as those resulting from outstanding advances on the item and rights of recoupment or setoff. If an item is handled by banks for purposes of presentment, payment, collection or return, the relevant provisions of this article apply even though action of the parties clearly establishes that a particular bank has purchased the item and is the owner of it.
2. After an item has been endorsed with the words “pay any bank” or the like, only a bank may acquire the rights of a holder until the item has been:
(a) Returned to the customer initiating collection; or
(b) Specially endorsed by a bank to a person who is not a bank.
(Added to NRS by 1965, 843; A 1993, 1302)
NRS 104.4202 Responsibility for collection or return; when action timely.
1. A collecting bank must exercise ordinary care in:
(a) Presenting an item or sending it for presentment;
(b) Sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank’s transferor after learning that the item has not been paid or accepted, as the case may be;
(c) Settling for an item when the bank receives final settlement; and
(d) Notifying its transferor of any loss or delay in transit within a reasonable time after discovery thereof.
2. A collecting bank exercises ordinary care under subsection 1 by taking proper action before its midnight deadline following receipt of an item, notice or settlement. Taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.
3. Subject to paragraph (a) of subsection 1, a bank is not liable for the insolvency, neglect, misconduct, mistake or default of another bank or person or for loss or destruction of or inability to obtain repossession of an item in the possession of others or in transit.
(Added to NRS by 1965, 843; A 1985, 18; 1993, 1302)
NRS 104.4203 Effect of instructions. Subject to the provisions of article 3 concerning conversion of instruments (NRS 104.3420) and restrictive endorsements (NRS 104.3206), only a collecting bank’s transferor can give instructions that affect the bank or constitute notice to it, and a collecting bank is not liable to prior parties for any action taken pursuant to the instructions or in accordance with any agreement with its transferor.
(Added to NRS by 1965, 843; A 1993, 1303)
NRS 104.4204 Methods of sending and presenting; sending directly to payor bank.
1. A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of such items on hand, the cost of collection involved, and the method generally used by it or others to present such items.
2. A collecting bank may send:
(a) An item directly to the payor bank;
(b) An item to a nonbank payor if authorized by its transferor; and
(c) An item other than documentary drafts to a nonbank payor, if authorized by Federal Reserve regulation or operating circular, clearinghouse rule or the like.
3. Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.
(Added to NRS by 1965, 844; A 1993, 1303)
NRS 104.4205 Depository bank holder of unendorsed item. If a customer delivers an item to a depositary bank for collection:
1. The depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer endorses the item, and, if the bank satisfies the other requirements of NRS 104.3302, it is a holder in due course; and
2. The depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer’s account.
(Added to NRS by 1965, 844; A 1993, 1303)
NRS 104.4206 Transfer between banks. Any agreed method which identifies the transferor bank is sufficient for the item’s further transfer to another bank.
(Added to NRS by 1965, 844)
NRS 104.4207 Transfer warranties.
1. A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:
(a) The warrantor is a person entitled to enforce the item;
(b) All signatures on the item are authentic and authorized;
(c) The item has not been altered;
(d) The item is not subject to a defense or claim in recoupment (subsection 1 of NRS 104.3305) of any party that can be asserted against the warrantor;
(e) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
(f) With respect to a remotely-created item, that the person on whose account the item is drawn authorized the issuance of the item in the amount for which the item is drawn.
2. If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item according to the terms of the item at the time it was transferred, or if the transfer was of an incomplete item, according to its terms when completed as stated in NRS 104.3115 and 104.3407. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection by an endorsement stating that it is made “without recourse” or otherwise disclaiming liability.
3. A person to whom the warranties under subsection 1 are made and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the item plus expenses and loss of interest incurred as a result of the breach.
4. The warranties stated in subsection 1 cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
5. A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
6. No claim for breach of warranty in paragraph (f) of subsection 1 is available against a person to which an item was transferred to the extent that under applicable law, including the applicable choice-of-law principles, the person that transferred the item did not make the warranty in paragraph (f) of subsection 1.
(Added to NRS by 1965, 844; A 1993, 1304; 2005, 2006)
NRS 104.4208 Presentment warranties.
1. If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that:
(a) The warrantor is, or was at the time he transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
(b) The draft has not been altered;
(c) The warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized; and
(d) With respect to a remotely-created item, that the person on whose account the item is drawn authorized the issuance of the item in the amount for which the item is drawn.
2. A drawee making payment may recover from a warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft:
(a) Breach of warranty is a defense to the obligation of the acceptor; and
(b) If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.
3. If a drawee asserts a claim for breach of warranty under subsection 1 based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under NRS 104.3404 or 104.3405 or the drawer is precluded under NRS 104.3406 or 104.4406 from asserting against the drawee the unauthorized endorsement or alteration.
4. If a dishonored draft is presented for payment to the drawer or an endorser, or any other item is presented for payment to a party obliged to pay the item, and the item is paid, the person obtaining payment and a prior transferor of the item warrant to the person making payment in good faith that the warrantor is, or was at the time he transferred the item, a person entitled to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the item. The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
5. The warranties stated in subsections 1 and 4 cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
6. A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
7. No claim for breach of warranty in paragraph (d) of subsection 1 is available against a person to which an item was transferred to the extent that under applicable law, including the applicable choice-of-law principles, the person that transferred the item did not make the warranty in paragraph (d) of subsection 1.
(Added to NRS by 1993, 1248; A 2005, 2006)
NRS 104.4209 Encoding and retention warranties.
1. A person who encodes information on or with respect to an item after issue, warrants to any subsequent collecting bank and to the payor bank or other payor that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.
2. A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payor bank or other payor that retention and presentment of the item comply with the agreement. If a customer of a depositary bank undertakes to retain an item, that bank also makes this warranty.
3. A person to whom warranties are made under this section and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, plus expenses and loss of interest incurred as a result of the breach.
(Added to NRS by 1993, 1249)
NRS 104.4210 Security interest of collecting bank in items, accompanying documents and proceeds.
1. A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either:
(a) In case of an item deposited in an account to the extent to which credit given for the item has been withdrawn or applied;
(b) In case of an item for which it has given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or
(c) If it makes an advance on or against the item.
2. If credit given for several items received at one time or pursuant to a single agreement is withdrawn or applied in part the security interest remains upon all the items, any accompanying documents or the proceeds of either. For the purpose of this section, credits first given are first withdrawn.
3. Receipt by a collecting bank of a final settlement for an item is a realization on its security interest in the item, accompanying documents, and proceeds. To the extent and so long as the bank does not receive final settlement for the item or give up possession of the item or possession or control of the accompanying documents for purposes other than collection, the security interest continues and is subject to the provisions of Article 9 except that:
(a) No security agreement is necessary to make the security interest enforceable (subparagraph (1) of paragraph (c) of subsection 2 of NRS 104.9203);
(b) No filing is required to perfect the security interest; and
(c) The security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.
(Added to NRS by 1965, 845; A 1993, 1305; 1999, 375; 2005, 856)
NRS 104.4211 When bank gives value for purposes of holder in due course. For purposes of determining its status as a holder in due course, a bank has given value to the extent that it has a security interest in an item if the bank otherwise complies with the requirements of NRS 104.3302 on what constitutes a holder in due course.
(Added to NRS by 1965, 846; A 1993, 1306)—(Substituted in revision for NRS 104.4209)
NRS 104.4212 Presentment by notice of item not payable by, through or at bank; liability of drawer or endorser.
1. Unless otherwise instructed, a collecting bank may present an item not payable by, through or at a bank by sending to the party to accept or pay a record providing notice that the bank holds the item for acceptance or payment. The notice must be sent in time to be received on or before the day when presentment is due and the bank must meet any requirement of the party to accept or pay under NRS 104.3501 by the close of the bank’s next banking day after it knows of the requirement.
2. If presentment is made by notice and payment, acceptance or request for compliance with a requirement under NRS 104.3501 is not received by the close of business on the day after maturity or in the case of demand items by the close of business on the third banking day after notice was sent, the presenting bank may treat the item as dishonored and charge any drawer or endorser by sending him notice of the facts.
(Added to NRS by 1965, 846; A 1993, 1306; 2005, 2007)
NRS 104.4213 Medium and time of settlement by bank.
1. With respect to settlement by a bank, the medium and time of settlement may be prescribed by Federal Reserve regulations or circulars, clearinghouse rules, and the like, or agreement. In the absence of such prescription:
(a) The medium of settlement is cash or credit to an account in a Federal Reserve bank of or specified by the person to receive settlement; and
(b) The time of settlement is:
(1) With respect to tender of settlement by cash, a cashier’s check or teller’s check, when the cash or check is sent or delivered;
(2) With respect to tender of settlement by credit in an account in a Federal Reserve bank, when the credit is made;
(3) With respect to tender of settlement by a credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or
(4) With respect to tender of settlement by a funds transfer, when payment is made pursuant to subsection 1 of NRS 104A.4406, to the person receiving settlement.
2. If the tender of settlement is not by a medium authorized by subsection 1 or the time of settlement is not fixed by subsection 1, no settlement occurs until the tender of settlement is accepted by the person receiving settlement.
3. If settlement for an item is made by cashier’s check or teller’s check and the person receiving settlement, before its midnight deadline:
(a) Presents or forwards the check for collection, settlement is final when the check is finally paid; or
(b) Fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.
4. If settlement for an item is made by giving authority to charge the account of the bank giving settlement in the bank receiving settlement, settlement is final when the charge is made by the bank receiving settlement if there are funds available in the account for the amount of the item.
(Added to NRS by 1965, 846; A 1991, 412; 1993, 1306)—(Substituted in revision for NRS 104.4211)
NRS 104.4214 Right of charge-back or refund; liability of collecting bank; return of item.
1. If a collecting bank has made provisional settlement with its customer for an item and fails by reason of dishonor, suspension of payments by a bank, or otherwise to receive a settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer’s account, or obtain refund from its customer, whether or not it is able to return the item, if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. If the return or notice is delayed beyond the bank’s midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay. These rights to revoke, charge back and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final.
2. A collecting bank returns an item when it is sent or delivered to the bank’s customer or transferor or pursuant to its instructions.
3. A depositary bank that is also the payor may charge back the amount of an item to its customer’s account or obtain refund in accordance with the section governing return of an item received by a payor bank for credit on its books (NRS 104.4301).
4. The right to charge back is not affected by:
(a) Previous use of the credit given for the item; or
(b) Failure by any bank to exercise ordinary care with respect to the item but a bank so failing remains liable.
5. A failure to charge back or claim refund does not affect other rights of the bank against the customer or any other party.
6. If credit is given in dollars as the equivalent of the value of an item payable in foreign money, the dollar amount of any charge back or refund must be calculated on the basis of the bank-offered spot rate for the foreign money prevailing on the day when the person entitled to the charge back or refund learns that it will not receive payment in ordinary course. If the return or notice is delayed beyond the bank’s midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay.
(Added to NRS by 1965, 847; A 1967, 117; 1985, 18; 1993, 1308)—(Substituted in revision for NRS 104.4212)
NRS 104.4215 Final payment of item by payor bank; when provisional debits and credits become final; when certain credits become available for withdrawal.
1. Except as otherwise provided in NRS 104.3418, an item is finally paid by a payor bank when the bank has first done any of the following:
(a) Paid the item in cash;
(b) Settled for the item without having a right to revoke settlement under statute, clearinghouse rule, or agreement; or
(c) Made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearinghouse rule, or agreement.
2. If provisional settlement for an item does not become final, the item is not finally paid.
3. If provisional settlement for an item between the presenting and payor banks is made through a clearing house or by debits or credits in an account between them, then to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor banks or between the presenting and successive prior collecting banks seriatim, they become final upon final payment of the item by the payor bank.
4. If a collecting bank receives a settlement for an item which is or becomes final, the bank is accountable to its customer for the amount of the item and any provisional credit given for the item in an account with its customer becomes final.
5. Subject to applicable law stating a time for availability of funds and any right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in an account with its customer becomes available for withdrawal as of right:
(a) If the bank has received a provisional settlement for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time;
(b) If the bank is both a depositary bank and a payor bank and the item is finally paid, at the opening of the bank’s second banking day following receipt of the item.
6. Subject to applicable law stating a time for availability of funds and any right of the bank to apply the deposit to an obligation of the customer, the deposit becomes available for withdrawal as of right at the opening of the bank’s next banking day after receipt of the deposit.
(Added to NRS by 1965, 848; A 1993, 1309)—(Substituted in revision for NRS 104.4213)
NRS 104.4216 Insolvency and preference.
1. If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid the item must be returned by the receiver, trustee or agent in charge of the closed bank to the presenting bank or the closed bank’s customer.
2. If a payor bank finally pays an item and suspends payments without making a settlement for the item with its customer or the presenting bank which settlement is or becomes final, the owner of the item has a preferred claim against the payor bank.
3. If a payor bank gives or a collecting bank gives or receives a provisional settlement for an item and thereafter suspends payments, the suspension does not prevent or interfere with the settlement’s becoming final if the finality occurs automatically upon the lapse of certain time or the happening of certain events.
4. If a collecting bank receives from subsequent parties settlement for an item, the settlement is or becomes final, and the bank suspends payments without making a settlement for the item with its customer which is or becomes final, the owner of the item has a preferred claim against the collecting bank.
(Added to NRS by 1965, 848; A 1993, 1310)—(Substituted in revision for NRS 104.4214)
Part 3
Collection of Items: Payor Banks
NRS 104.4301 Deferred posting; recovery of payment by return of items; time of dishonor; return of items by payor bank.
1. If a payor bank settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt the payor bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it:
(a) Returns the item;
(b) Returns an image of the item, if the party to which the return is made has entered into an agreement to accept an image as a return of the item and the image is returned in accordance with that agreement; or
(c) Sends a record providing notice of dishonor or nonpayment if the item is unavailable for return.
2. If a demand item is received by a payor bank for credit on its books it may return the item or send notice of dishonor and may revoke any credit given or recover the amount thereof withdrawn by its customer, if it acts within the time limit and in the manner specified in subsection 1.
3. Unless previous notice of dishonor has been sent an item is dishonored at the time when for purposes of dishonor it is returned or notice sent in accordance with this section.
4. An item is returned:
(a) As to an item presented through a clearinghouse, when it is delivered to the presenting or last collecting bank or to the clearinghouse or is sent or delivered in accordance with clearinghouse rules; or
(b) In all other cases, when it is sent or delivered to the bank’s customer or transferor or pursuant to his instructions.
(Added to NRS by 1965, 849; A 1993, 1310; 2005, 2008)
NRS 104.4302 Payor bank’s responsibility for late return of item.
1. If an item is presented to and received by a payor bank, the bank is accountable for the amount of:
(a) A demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case where it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; or
(b) Any other properly payable item unless, within the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.
2. The liability of a payor bank to pay an item pursuant to subsection 1 is subject to defenses based on breach of a presentment warranty (NRS 104.4208) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.
(Added to NRS by 1965, 849; A 1993, 1311)
NRS 104.4303 When items subject to notice, stop-payment order, legal process or setoff; order in which items may be charged or certified.
1. Any knowledge, notice or stop-payment order received by, legal process served upon, or setoff exercised by a payor bank comes too late to terminate, suspend or modify the bank’s right or duty to pay an item or to charge its customer’s account for the item if the knowledge, notice, stop-payment order or legal process is received or served and a reasonable time for the bank to act thereon expires or the setoff is exercised after the earliest of the following:
(a) The bank accepts or certifies the item;
(b) The bank pays the item in cash;
(c) The bank settles for the item without having a right to revoke the settlement under statute, clearinghouse rule, or agreement;
(d) The bank becomes accountable for the amount of the item under NRS 104.4302 dealing with the payor bank’s responsibility for late return of items; or
(e) With respect to checks, a cutoff hour no earlier than 1 hour after the opening of the next banking day after the banking day on which the bank received the check and no later than the close of that next banking day or, if no cutoff hour is fixed, the close of the next banking day after the banking day on which the bank received the check.
2. Subject to the provisions of subsection 1 items may be accepted, paid, certified or charged to the indicated account of its customer in any order.
(Added to NRS by 1965, 850; A 1993, 1311)
Part 4
Relationship Between Payor Bank and its Customer
NRS 104.4401 When bank may charge customer’s account.
1. A bank may charge against the account of a customer any item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.
2. A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.
3. A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. The notice is effective for the period stated in subsection 2 of NRS 104.4403 for stop-payment orders, and must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it before the bank takes any action with respect to t