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.

History: 1953 Comp., § 50A-1-108, enacted by Laws 1961, ch. 96, § 1-108; 1978 Comp., § 55-1-108; recompiled by compiler as NMSA 1978, § 55-1-105; Laws 2005, ch. 144, § 5.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

Source. — Former Section 1-108 [55-1-108 NMSA 1978].

Changes from former law. — Except for changing the form of reference to the Uniform Commercial Code, this section is identical to former Section 1-108 [55-1-108 NMSA 1978].

This is the model severability section recommended by the National Conference of Commissioners on Uniform State Laws for inclusion in all acts of extensive scope.

Definitional cross references. — "Person". Section 1-201.

Prior uniform statutory provision. — None.

1. Subsection (1) states affirmatively the right of the parties to a multi-state transaction or a transaction involving foreign trade to choose their own law. That right is subject to the firm rules stated in the five sections listed in Subsection (2), and is limited to jurisdictions to which the transaction bears a "reasonable relation." In general, the test of "reasonable relation" is similar to that laid down by the Supreme Court in Seeman v. Philadelphia Warehouse Co., 274 U.S. 403, 47 S. Ct. 626, 71 L. Ed. 1123 (1927). Ordinarily the law chosen must be that of a jurisdiction where a significant enough portion of the making or performance of the contract is to occur or occurs. But an agreement as to choice of law may sometimes take effect as a short hand expression of the intent of the parties as to matters governed by their agreement, even though the transaction has no significant contact with the jurisdiction chosen.

2. Where there is no agreement as to the governing law, the act is applicable to any transaction having an "appropriate" relation to any state which enacts it. Of course, the act applies to any transaction which takes place in its entirety in a state which has enacted the act. But the mere fact that suit is brought in a state does not make it appropriate to apply the substantive law of that state. Cases where a relation to the enacting state is not "appropriate" include, for example, those where the parties have clearly contracted on the basis of some other law, as where the law of the place of contracting and the law of the place of contemplated performance are the same and are contrary to the law under the code.

3. Where a transaction has significant contacts with a state which has enacted the act and also with other jurisdictions, the question of what relation is "appropriate" is left to judicial decision. In deciding that question, the court is not strictly bound by precedents established in other contexts. Thus a conflict-of-laws decision refusing to apply a purely local statute or rule of law to a particular multi-state transaction may not be valid precedent for refusal to apply the code in an analogous situation. Application of the code in such circumstances may be justified by its comprehensiveness, by the policy of uniformity, and by the fact that it is in large part a reformulation and restatement of the law merchant and of the understanding of a business community which transcends state and even national boundaries. Compare Global Commerce Corp. v. Clark-Babbitt Industries, Inc., 239 F.2d 716, 719 (2d Cir. 1956). In particular, where a transaction is governed in large part by the code, application of another law to some detail of performance because of an accident of geography may violate the commercial understanding of the parties.

4. The act does not attempt to prescribe choice-of-law rules for states which do not enact it, but this section does not prevent application of the act in a court of such a state. Common law choice of law often rests on policies of giving effect to agreements and of uniformity of result regardless of where suit is brought. To the extent that such policies prevail, the relevant considerations are similar in such a court to those outlined above.

5. Subsection (2) spells out essential limitations on the parties' right to choose the applicable law. Especially in Article 9 parties taking a security interest or asked to extend credit which may be subject to a security interest must have sure ways to find out whether and where to file and where to look for possible existing filings.

6. Section 9-103 should be consulted as to the rules for perfection of security interests and the effects of perfection and nonperfection.

Repeals and reenactments. — Laws 2005, ch. 144, § 5, effective January 1, 2006, repealed former 55-1-105 NMSA 1978 as enacted by Laws 1961, ch. 96, § 1-105, as amended, and enacted a new 55-1-105 NMSA 1978. The substance of former 55-1-105 NMSA 1978 has been enacted as a new 55-1-301 NMSA 1978 by Laws 2005, ch. 144, § 15. For provisions of former 55-1-105 NMSA 1978, see the 2004 NMSA 1978 on NMOneSource.com.

Laws 2005, ch. 144, § 8 repealed former 55-1-108 NMSA 1978, relating to severability, and enacted a new 55-1-108 NMSA 1978. The compiler has recompiled former 55-1-108 NMSA 1978 as 55-1-105 NMSA 1978 as the former section 55-1-108 NMSA 1978 is substantially the same as the section published above.

The 2001 amendment, effective July 1, 2001, substituted the present last paragraph for "perfection provisions of the article on secured transactions. Section 55-9-103 NMSA 1978".

The 1997 amendment, effective July 1, 1997, inserted "letters of credit. Section 55-5-116 NMSA 1978;" in Subsection (2).

The 1996 amendment, effective May 15, 1996, in Subsection (2), substituted "Section 55-8-110" for "Section 55-8-105" and made a minor stylistic change.

The 1992 amendment, effective July 1, 1992, made section reference substitutions throughout the section; and, in Subsection (2), added the provisions relating to applicability of the article on leases and to governing law in the article on fund transfers, and deleted a former provision relating to the article on bulk transfers.

The 1985 amendment deleted "of" following "the law either of this state or" near the middle of Subsection (1), substituted "Perfection provisions of the article" for "policy and scope of the article" and "Section 9-103" for "Sections 9-102 and 9-103" near the end of Subsection (2) and made minor grammatical changes.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 11 Am. Jur. 2d Bills and Notes § 100; 15A Am. Jur. 2d Commercial Code §§ 11, 13, 44; 68A Am. Jur. 2d Secured Transactions § 8 et seq.

17 C.J.S. Contracts § 12.