BUSINESS & COMMERCE CODE
TITLE 1. UNIFORM COMMERCIAL CODE
CHAPTER 1. GENERAL PROVISIONS
SUBCHAPTER A. GENERAL PROVISIONS
§ 1.101. SHORT TITLES. (a) This title may be cited as
the Uniform Commercial Code.
(b) This chapter may be cited as Uniform Commercial
Code--General Provisions.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.102. SCOPE OF CHAPTER. This chapter applies to a
transaction to the extent that it is governed by another chapter of
this title.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.103. CONSTRUCTION OF TITLE TO PROMOTE ITS PURPOSES
AND POLICIES; APPLICABILITY OF SUPPLEMENTAL PRINCIPLES OF
LAW. (a) This title must be liberally construed and applied to
promote its underlying purposes and policies, which are:
(1) to simplify, clarify and modernize the law
governing commercial transactions;
(2) to permit the continued expansion of commercial
practices through custom, usage and agreement of the parties; and
(3) to make uniform the law among the various
jurisdictions.
(b) Unless displaced by the particular provisions of this
title, the principles of law and equity, including the law merchant
and the law relative to capacity to contract, principal and agent,
estoppel, fraud, misrepresentation, duress, coercion, mistake,
bankruptcy, or other validating or invalidating cause shall
supplement its provisions.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.104. CONSTRUCTION AGAINST IMPLIED REPEAL. This
title 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repealed by subsequent legislation if such construction can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.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.105. SEVERABILITY. If any provision or clause of
this title or its application to any person or circumstance is held
invalid, the invalidity does not affect other provisions or
applications of this title which can be given effect without the
invalid provision or application, and to this end the provisions of
this title are severable.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.106. USE OF SINGULAR AND PLURAL; GENDER. In this
title, 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.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.107. SECTION CAPTIONS. Section captions are parts
of this title.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.108. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND
NATIONAL COMMERCE ACT. This title modifies, limits, and
supersedes the federal Electronic Signatures in Global and National
Commerce Act (15 U.S.C. Section 7001 et seq.) but does not modify,
limit, or supersede Section 101(c) of that Act (15 U.S.C. Section
7001(c)) or authorize electronic delivery of any of the notices
described in Section 103(b) of that Act (15 U.S.C. Section
7003(b)).
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
SUBCHAPTER B. GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
§ 1.201. GENERAL DEFINITIONS. (a) Unless the context
otherwise requires, words or phrases defined in this section, or in
the additional definitions contained in other chapters of this
title that apply to particular chapters or parts thereof, have the
meanings stated.
(b) Subject to definitions contained in other chapters of
this title that apply to particular chapters or parts thereof:
(1) "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.
(2) "Aggrieved party" means a party entitled to pursue
a remedy.
(3) "Agreement," as distinguished from "contract,"
means the bargain of the parties in fact, as found in their language
or inferred from other circumstances, including course of
performance, course of dealing, or usage of trade as provided in
Section 1.303.
(4) "Bank" means a person engaged in the business of
banking and includes a savings bank, savings and loan association,
credit union, and trust company.
(5) "Bearer" means a person in possession of a
negotiable instrument, document of title, or certificated security
that is payable to bearer or indorsed in blank.
(6) "Bill of lading" means a document evidencing the
receipt of goods for shipment issued by a person engaged in the
business of transporting or forwarding goods.
(7) "Branch" includes a separately incorporated
foreign branch of a bank.
(8) "Burden of establishing" a fact means the burden
of persuading the trier of fact that the existence of the fact is
more probable than its nonexistence.
(9) "Buyer in ordinary course of business" means a
person 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 Chapter 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.
(10) "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:
(A) a heading in capitals equal to or greater in
size than the surrounding text, or in contrasting type, font, or
color to the surrounding text of the same or lesser size; and
(B) language in the body of a record or display in
larger type than the surrounding text, or in contrasting type,
font, or color to the surrounding text of the same size, or set off
from surrounding text of the same size by symbols or other marks
that call attention to the language.
(11) "Consumer" means an individual who enters into a
transaction primarily for personal, family, or household purposes.
(12) "Contract," as distinguished from "agreement,"
means the total legal obligation that results from the parties'
agreement as determined by this title as supplemented by any other
applicable laws.
(13) "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.
(14) "Defendant" includes a person in the position of
defendant in a counterclaim, cross-claim, or third-party claim.
(15) "Delivery," with respect to an instrument,
document of title, or chattel paper, means voluntary transfer of
possession.
(16) "Document of title" includes bill of lading, dock
warrant, dock receipt, warehouse receipt or order for the delivery
of goods, and also any other document which in the regular course of
business or financing is treated as adequately evidencing that the
person in possession of it is entitled to receive, hold and dispose
of the document and the goods it covers. To be a document of title a
document must purport to be issued by or addressed to a bailee and
purport to cover goods in the bailee's possession which are either
identified or are fungible portions of an identified mass.
(17) "Fault" means a default, breach, or wrongful act
or omission.
(18) "Fungible goods" means:
(A) goods of which any unit, by nature or usage of
trade, is the equivalent of any other like unit; or
(B) goods that by agreement are treated as
equivalent.
(19) "Genuine" means free of forgery or
counterfeiting.
(20) "Good faith," except as otherwise provided in
Chapter 5, means honesty in fact and the observance of reasonable
commercial standards of fair dealing.
(21) "Holder" means:
(A) 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; or
(B) the person in possession of a document of
title if the goods are deliverable either to bearer or to the order
of the person in possession.
(22) "Insolvency proceeding " includes an assignment
for the benefit of creditors or other proceeding intended to
liquidate or rehabilitate the estate of the person involved.
(23) "Insolvent" means:
(A) having generally ceased to pay debts in the
ordinary course of business other than as a result of a bona fide
dispute;
(B) being unable to pay debts as they become due;
or
(C) being insolvent within the meaning of the
federal bankruptcy law.
(24) "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.
(25) "Organization" means a person other than an
individual.
(26) "Party," as distinguished from "third party,"
means a person that has engaged in a transaction or made an
agreement subject to this title.
(27) "Person" means an individual, corporation,
business trust, estate, trust, partnership, limited liability
company, association, joint venture, government, governmental
subdivision, agency, or instrumentality, public corporation, or
any other legal or commercial entity.
(28) "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.
(29) "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.
(30) "Purchaser" means a person that takes by
purchase.
(31) "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.
(32) "Remedy" means any remedial right to which an
aggrieved party is entitled with or without resort to a tribunal.
(33) "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.
(34) "Right" includes remedy.
(35) "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
Chapter 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 Section 2.401, but a buyer may
also acquire a "security interest" by complying with Chapter 9.
Except as otherwise provided in Section 2.505, the right of a seller
or lessor of goods under Chapter 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
Chapter 9. The retention or reservation of title by a seller of
goods notwithstanding shipment or delivery to the buyer under
Section 2.401 is limited in effect to a reservation of a "security
interest." Whether a transaction in the form of a lease creates a
security interest is determined pursuant to Section 1.203.
(36) "Send" in connection with a writing, record, or
notice means:
(A) 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
(B) in any other way cause to be received any
record or notice within the time at which it would have arrived if
properly sent.
(37) "Signed" includes using any symbol executed or
adopted with present intention to adopt or accept a writing.
(38) "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.
(39) "Surety" includes a guarantor or other secondary
obligor.
(40) "Term" means a portion of an agreement that
relates to a particular matter.
(41) "Unauthorized signature" means a signature made
without actual, implied, or apparent authority. The term includes
a forgery.
(42) "Warehouse receipt" means a receipt issued by a
person engaged in the business of storing goods for hire.
(43) "Writing" includes printing, typewriting, or any
other intentional reduction to tangible form. "Written" has a
corresponding meaning.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1973, 63rd Leg., p. 997, ch. 400, § 2, Jan. 1,
1974; Acts 1983, 68th Leg., p. 1535, ch. 290, § 12, eff. Aug. 29,
1983; Acts 1983, 68th Leg., p. 2575, ch. 442, § 12, eff. Sept. 1,
1983; Acts 1989, 71st Leg., ch. 846, § 1, eff. Sept. 1, 1989;
Acts 1995, 74th Leg., ch. 921, § 2, eff. Jan. 1, 1996; Acts 1999,
76th Leg., ch. 414, § 2.12, 2.13, eff. July 1, 2001; Acts 2003,
78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.202. NOTICE; KNOWLEDGE. (a) Subject to
Subsection (f), a person has "notice" of a fact if the person:
(1) has actual knowledge of it;
(2) has received a notice or notification of it; or
(3) from all the facts and circumstances known to the
person at the time in question, has reason to know that it exists.
(b) "Knowledge" means actual knowledge. "Knows" has a
corresponding meaning.
(c) "Discover," "learn," or words of similar import refer to
knowledge rather than to reason to know.
(d) A person "notifies" or "gives" a notice or notification
to another person by taking 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.
(e) Subject to Subsection (f), a person "receives" a notice
or notification when:
(1) it comes to that person's attention; or
(2) 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.
(f) Notice, knowledge, or a notice or notification received
by an organization is effective for a particular transaction from
the time it is brought to the attention of the individual conducting
that transaction and, in any event, from the time it would have been
brought to the individual's attention if the organization had
exercised due diligence. An organization exercises due diligence
if it maintains reasonable routines for communicating significant
information to the person conducting the transaction and there is
reasonable compliance with the routines. Due diligence does not
require an individual acting for the organization to communicate
information unless the communication is part of the individual's
regular duties or the individual has reason to know of the
transaction and that the transaction would be materially affected
by the information.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.203. LEASE DISTINGUISHED FROM SECURITY
INTEREST. (a) Whether a transaction in the form of a lease
creates a lease or security interest is determined by the facts of
each case.
(b) A transaction in the form of a lease creates a security
interest if the consideration that the lessee is to pay the lessor
for the right to possession and use of the goods is an obligation
for the term of the lease and is not subject to termination by the
lessee, and:
(1) the original term of the lease is equal to or
greater than the remaining economic life of the goods;
(2) 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;
(3) 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
(4) 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.
(c) A transaction in the form of a lease does not create a
security interest merely because:
(1) 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;
(2) the lessee assumes risk of loss of the goods;
(3) the lessee agrees to pay, with respect to the
goods, taxes, insurance, filing, recording, or registration fees,
or service or maintenance costs;
(4) the lessee has an option to renew the lease or to
become the owner of the goods;
(5) 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
(6) 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.
(d) Additional consideration is nominal if it is less than
the lessee's reasonably predictable cost of performing under the
lease agreement if the option is not exercised. Additional
consideration is not nominal if:
(1) 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
(2) 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.
(e) The "remaining economic life of the goods" and
"reasonably predictable" fair market rent, fair market value, or
cost of performing under the lease agreement must be determined
with reference to the facts and circumstances at the time the
transaction is entered into.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.204. VALUE. Except as otherwise provided in
Chapters 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.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.205. REASONABLE TIME;
SEASONABLENESS. (a) Whether a time for taking an action required
by this title is reasonable depends on the nature, purpose, and
circumstances of the action.
(b) An action is taken seasonably if it is taken at or within
the time agreed or, if no time is agreed, at or within a reasonable
time.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
§ 1.206. PRESUMPTIONS. Whenever this title 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.
Amended by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1,
2003.
SUBCHAPTER C. TERRITORIAL APPLICABILITY AND GENERAL RULES
§ 1.301. TERRITORIAL APPLICATION OF THE TITLE; PARTIES'
POWER TO CHOOSE APPLICABLE LAW. (a) Except as provided hereafter
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. Failing such agreement this
title applies to transactions bearing an appropriate relation to
this state.
(b) Where one of the following provisions of this title
specifies the applicable law, that provision governs and a contrary
agreement is effective only to the extent permitted by the law
(including the conflict of laws rules) so specified:
Rights of creditors against sold goods. Section 2.402.
Applicability of the chapter on Leases. Sections 2A.105 and
2A.106.
Applicability of the chapter on Bank Deposits and
Collections. Section 4.102.
Governing law in the chapter on Funds Transfers. Section
4A.507.
Letters of Credit. Section 5.116.
Applicability of the chapter on Investment Securities.
Section 8.110.
Law governing perfection, the effect of perfection or
nonperfection, and the priority of security interests and
agricultural liens. Sections 9.301-9.307.
(c) If a transaction that is subject to this title is a
"qualified transaction," as defined in Section 35.51 of this code,
then except as provided in Subsection (b) of this section, Section
35.51 governs the effect of an agreement by the parties that the law
of a particular jurisdiction governs an issue relating to the
transaction or that the law of a particular jurisdiction governs
the interpretation or construction of an agreement relating to the
transaction or a provision of the agreement.
Added by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.302. VARIATION BY AGREEMENT. (a) Except as
otherwise provided in Subsection (b) or elsewhere in this title,
the effect of provisions of this title may be varied by agreement.
(b) The obligations of good faith, diligence,
reasonableness, and care prescribed by this title 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 this title requires an action to be taken within a
reasonable time, a time that is not manifestly unreasonable may be
fixed by agreement.
(c) The presence in certain provisions of this title 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 by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.303. COURSE OF PERFORMANCE, COURSE OF DEALING, AND
USAGE OF TRADE. (a) A "course of performance" is a sequence of
conduct between the parties to a particular transaction that exists
if:
(1) the agreement of the parties with respect to the
transaction involves repeated occasions for performance by a party;
and
(2) 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.
(b) A course of dealing is a sequence of conduct concerning
previous transactions between the parties to a particular
transaction that is fairly to be regarded as establishing a common
basis of understanding for interpreting their expressions and other
conduct.
(c) 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.
(d) A course of performance or course of dealing between the
parties or usage of trade in the vocation or trade in which they are
engaged or of which they are or should be aware is relevant in
ascertaining the meaning of the parties' agreement, may give
particular meaning to specific terms of the agreement, and may
supplement or qualify the terms of the agreement. A usage of trade
applicable in the place in which part of the performance under the
agreement is to occur may be so utilized as to that part of the
performance.
(e) Except as otherwise provided in Subsection (f), 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:
(1) express terms prevail over course of performance,
course of dealing, and usage of trade;
(2) course of performance prevails over course of
dealing and usage of trade; and
(3) course of dealing prevails over usage of trade.
(f) Subject to Section 2.209, a course of performance is
relevant to show a waiver or modification of any term inconsistent
with the course of performance.
(g) Evidence of a relevant usage of trade offered by one
party is not admissible unless that party has given the other party
notice that the court finds sufficient to prevent unfair surprise
to the other party.
Added by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.304. OBLIGATION OF GOOD FAITH. Every contract or
duty within this title imposes an obligation of good faith in its
performance and enforcement.
Added by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.305. REMEDIES TO BE LIBERALLY
ADMINISTERED. (a) The remedies provided by this title 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 this title or by other
rule of law.
(b) Any right or obligation declared by this title is
enforceable by action unless the provision declaring it specifies a
different and limited effect.
Added by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.306. WAIVER OF 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 by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.307. PRIMA FACIE EVIDENCE BY THIRD-PARTY
DOCUMENTS. A document in due form purporting to be a bill of
lading, policy or certificate of insurance, official weigher's or
inspector's certificate, consular invoice, or 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 by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.308. PERFORMANCE OR ACCEPTANCE UNDER RESERVATION OF
RIGHTS. (a) 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.
(b) Subsection (a) does not apply to an accord and
satisfaction.
Added by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.309. OPTION TO ACCELERATE AT WILL. A term providing
that one party or that party's successor in interest may accelerate
payment or performance or require collateral or additional
collateral "at will" or when the party "deems itself insecure," or
words of similar import, means that the party has power to 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 by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
§ 1.310. SUBORDINATED OBLIGATIONS. An obligation may
be issued as subordinated to performance of another obligation of
the person obligated, or a creditor may subordinate its right to
performance of an obligation by agreement with either the person
obligated or another creditor of the person obligated.
Subordination does not create a security interest as against either
the common debtor or a subordinated creditor.
Added by Acts 2003, 78th Leg., ch. 542, § 1, eff. Sept. 1, 2003.
