Alabama Senate Bill SB231 Latest Draft

                            SB231INTRODUCED
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0ZXNCC-1
By Senator Smitherman
RFD: Judiciary
First Read: 20-Apr-23
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5 0ZXNCC-1 04/19/2023 CMH (L) bm 2023-1649
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SYNOPSIS: 
This bill would provide a substantial revision
to the Uniform Commercial Code (UCC) by adopting the 
Uniform Commercial Code Amendments (2022), which
includes a new UCC article that governs the transfer of
property rights in certain intangible digital assets
(controllable electronic records), including electronic
rights to payment, and would provide for a manner to
establish control of those assets, provide a mechanism
for evidencing certain rights of payment, and adopt
special rules with regard to the payment obligations
and conditions of discharge of account debtors on
controllable accounts and controllable payment
obligations.
This bill would provide extensive amendments to
Article 9 of the UCC to address security interests in
controllable electronic records and the rights to
payment for those records, including controllable
accounts and controllable payment intangibles, and that
a security interest in these assets may be perfected by
a secured party obtaining control of the asset or by
filing a financing statement.
This bill would also provide transitional
provisions for the Uniform Commercial Code Amendments
(2022).
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A BILL
TO BE ENACTED
AN ACT
Relating to the Uniform Commercial Code; to add
Article 12 to the Uniform Commercial Code to govern the
property rights of certain intangible digital assets
(controllable electronic records), including electronic rights
to payment, to provide for a manner to establish the transfer
and control of those assets, to provide a mechanism for
evidencing certain rights of payment, and to adopt special
rules with regard to the payment obligations and conditions of
discharge of account debtors on controllable accounts and
controllable payment intangibles; to amend Sections 7-1-201,
7-1-204, 7-1-301, 7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202,
7-2-203, 7-2-205, 7-2-209, 7-2A-102, 7-2A-103, 7-2A-107,
7-2A-201, 7-2A-202, 7-2A-203, 7-2A-205, 7-2A-208, 7-3-104,
7-3-105, 7-3-401, 7-3-604, 7-4A-103, 7-4A-201, 7-4A-202,
7-4A-203, 7-4A-207, 7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305,
7-5-104, 7-5-116, 7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106,
7-8-110, 7-8-303, 7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203,
7-9A-204, 7-9A-207, 7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301,
7-9A-304, 7-9A-305, 7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314,
7-9A-316, 7-9A-317, 7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331,
7-9A-332, 7-9A-334, 7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408,
7-9A-509, 7-9A-513, 7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611,
7-9A-613, 7-9A-614, 7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620,
7-9A-621, 7-9A-624, and 7-9A-628, Code of Alabama 1975, and to
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add Sections 7-9A-107A, 7-9A-107B, 7-9A-306A, 7-9A-306B,
7-9A-314A, and 7-9A-326A to the Code of Alabama 1975, to
provide a substantial revision to the Uniform Commercial Code
in conformity with a substantial portion of the Uniform
Commercial Code Amendments (2022), to clarify the meaning of
the term chattel paper and other definitions, to define and
provide for hybrid transactions, and to provide extensive
amendments to the Uniform Commercial Code providing for the
perfection of security interests in controllable electronic
records, documents of title, chattel paper, and other assets;
and to add Article 12A to the Uniform Commercial Code to
provide transitional provisions for the Uniform Commercial
Code Amendments (2022).Relating to the Uniform Commercial
Code; to add Article 12 to the Uniform Commercial Code to
govern the property rights of certain intangible digital
assets (controllable electronic records), including electronic
rights to payment, to provide for a manner to establish the
transfer and control of those assets, to provide a mechanism
for evidencing certain rights of payment, and to adopt special
rules with regard to the payment obligations and conditions of
discharge of account debtors on controllable accounts and
controllable payment intangibles; to amend Sections 7-1-201,
7-1-204, 7-1-301, 7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202,
7-2-203, 7-2-205, 7-2-209, 7-2A-102, 7-2A-103, 7-2A-107,
7-2A-201, 7-2A-202, 7-2A-203, 7-2A-205, 7-2A-208, 7-3-104,
7-3-105, 7-3-401, 7-3-604, 7-4A-103, 7-4A-201, 7-4A-202,
7-4A-203, 7-4A-207, 7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305,
7-5-104, 7-5-116, 7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106,
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7-8-110, 7-8-303, 7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203,
7-9A-204, 7-9A-207, 7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301,
7-9A-304, 7-9A-305, 7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314,
7-9A-316, 7-9A-317, 7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331,
7-9A-332, 7-9A-334, 7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408,
7-9A-509, 7-9A-513, 7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611,
7-9A-613, 7-9A-614, 7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620,
7-9A-621, 7-9A-624, and 7-9A-628, Code of Alabama 1975, and to
add Sections 7-9A-107A, 7-9A-107B, 7-9A-306A, 7-9A-306B,
7-9A-314A, and 7-9A-326A to the Code of Alabama 1975, to
provide a substantial revision to the Uniform Commercial Code
in conformity with a substantial portion of the Uniform
Commercial Code Amendments (2022), to clarify the meaning of
the term chattel paper and other definitions, to define and
provide for hybrid transactions, and to provide extensive
amendments to the Uniform Commercial Code providing for the
perfection of security interests in controllable electronic
records, documents of title, chattel paper, and other assets;
and to add Article 12A to the Uniform Commercial Code to
provide transitional provisions for the Uniform Commercial
Code Amendments (2022).
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 7-1-201, 7-1-204, 7-1-301,
7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202, 7-2-203, 7-2-205,
7-2-209, 7-2A-102, 7-2A-103, 7-2A-107, 7-2A-201, 7-2A-202,
7-2A-203, 7-2A-205, 7-2A-208, 7-3-104, 7-3-105, 7-3-401,
7-3-604, 7-4A-103, 7-4A-201, 7-4A-202, 7-4A-203, 7-4A-207,
7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305, 7-5-104, 7-5-116,
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7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106, 7-8-110, 7-8-303,
7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203, 7-9A-204, 7-9A-207,
7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301, 7-9A-304, 7-9A-305,
7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314, 7-9A-316, 7-9A-317,
7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331, 7-9A-332, 7-9A-334,
7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408, 7-9A-509, 7-9A-513,
7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611, 7-9A-613, 7-9A-614,
7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620, 7-9A-621, 7-9A-624,
and 7-9A-628, Code of Alabama 1975, are amended to read as
follows:
"§7-1-201.General definitions.
(a) [Reserved].
(b) Subject to additional definitions contained in the
subsequent other articles of this title the Uniform Commercial
Codewhich are applicable that apply to specific particular
articles or parts thereof , and unless the context otherwise
requires, in this title :
(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 7-1-303.
(4) "Bank" means a person engaged in the business of
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banking and includes a savings bank, savings and loan
association, credit union, and trust company.
(5) "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 indorsed
in blank.
(6) "Bill of lading" means a document of title
evidencing the receipt of goods for shipment issued by a
person engaged in the business of transporting or forwarding
goods. The term does not include a warehouse receipt.
(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 mine 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
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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.
(10) "Conspicuous," with reference to a term, means so
written, displayed, or presented that , based on the totality
of the circumstances, 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 as a matter
of law. 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
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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,
electronic document of title, or chattel paper, means
voluntary transfer of possession control and, with respect to
an instrument, a tangible document of title, or an
authoritative tangible copy of record evidencing chattel
paper, means voluntary transfer of possession .
(16) "Document of title" means a record (i) 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 (ii)
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 identifiable mass.
The term includes bill of lading, transport documents, dock
warrant, dock receipt, warehouse receipt or, and order for the
delivery of goods ., and also any other document which in the
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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. 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.
(16A) "Electronic" means relating to technology having
electrical, digital, magnetic, wireless, optical,
electromagnetic, or similar capabilities.
(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" means honesty in fact in the conduct
or transaction concerned.
(21) "Holder" means:
(A) Thethe 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
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(B) Thethe 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
(C) the person in control, other than pursuant to
Section 7-7-106(g), of a negotiable electronic document of
title.
(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 bona
fide dispute;
(B) Being unable to pay debts as they become due; or
(C) Being insolvent within the meaning of federal
bankruptcy law.
(24) "Money" means a medium of exchange that is
currently authorized or adopted by a domestic or foreign
government and is not in an electronic form . The term includes
a monetary unit of account established by an intergovernmental
organization or by pursuant to an 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,
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business trust, estate, trust, partnership, limited liability
company, association, joint venture, public corporation,
government, governmental subdivision, agency, or
instrumentality, or any other legal or commercial entity. The
term includes a series or a protected series, however
denominated, of any entity if the series or protected series
is established under law other than the Uniform Commercial
Code that limits, or limits if conditions specified under the
law are satisfied, the ability of a creditor of the entity or
of any other series or protected series of the entity to
satisfy a claim from assets of the series or protected series.
(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
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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 Article 9A. "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 7-2-401, but a buyer may also acquire a "security
interest" by complying with Article 9A. Except as otherwise
provided in Section 7-2-505, 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 9A. The retention or reservation of title by a
seller of goods notwithstanding shipment or delivery to the
buyer under Section 7-2-401 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 7-1-203.
(36) "Send," in connection with a writing, record, or
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notice notification, means:
(A) Toto deposit in the mail , or deliver for
transmission, or transmit 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 addressed to any address reasonable under the
circumstances; or
(B) In any other way to cause to be received any record
or notice within the time it would have arrived if properly
sent. to cause the record or notification to be received
within the time it would have been received if properly sent
under subparagraph (A).
(37) "Signed" includes using any symbol executed or
adopted with present intention to adopt or accept a writing.
"Sign" means, with present intent to authenticate or adopt a
record, to:
(A) execute or adopt a tangible symbol; or
(B) attach to or logically associate with the record an
electronic symbol, sound, or process. 
"Signed," "signing," and "signature" have corresponding
meanings.
(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.
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(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."
"§7-1-204. Value.
Except as otherwise provided in Articles 3, 4, and 5,
and 12, 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."
"§7-1-301. Territorial applicability; parties' power to
choose applicable law.
(a) Except as otherwise provided in this section, when
a transaction bears a reasonable relation to this state and
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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.
(b) In the absence of an agreement effective under
subsection (a), and except as provided in subsection (c), this
title the Uniform Commercial Code applies to transactions
bearing an appropriate relation to this state.
(c) If one of the following provisions of this title
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:
(1) Section 7-2-402;
(2) Sections 7-2A-105 and 7-2A-106;
(3) Section 7-4-102;
(4) Section 7-4A-507;
(5) Section 7-5-116;
(6) [Reserved.]
(6)(7) Section 7-8-110;
(7)(8) Sections 7-9A-301 through 7-9A-307 ;
(9) Section 7-12-107 .
"§7-1-306. 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 a signed
record.
"§7-2-102. Scope; certain security and other
transactions excluded from this article.
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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 sale 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.
(1) Unless the context otherwise requires, and except
as provided in subsection (3), this article applies to
transactions in goods and, in the case of a hybrid
transaction, it applies to the extent provided in subsection
(2).
(2) In a hybrid transaction:
(a) If the sale-of-goods aspects do not predominate,
only the provisions of this article which relate primarily to
the sale-of-goods aspects of the transaction apply, and the
provisions that relate primarily to the transaction as a whole
do not apply.
(b) If the sale-of-goods aspects predominate, this
article applies to the transaction but does not preclude
application in appropriate circumstances of other law to
aspects of the transaction which do not relate to the sale of
goods.
(3) This article does not:
(a) apply to a transaction that, even though in the
form of an unconditional contract to sell or present sale,
operates only to create a security interest; or
(b) impair or repeal any statute regulating sales to
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consumers, farmers, or other specified classes of buyers.
"§7-2-106. Definitions: "Contract"; "agreement";
"contract for sale"; "sale"; "present sale"; "conforming" to
contract; "termination"; "cancellation "; "hybrid
transaction"."
(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 (Section
7-2-401). 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 of 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.
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(5) "Hybrid transaction" means a single transaction
involving a sale of goods and:
(a) the provision of services;
(b) a lease of other goods; or
(c) a sale, lease, or license of property other than
goods.
"§7-2-201. Formal requirements; statute of frauds.
(1) Except as otherwise provided in this section , a
contract for the sale of goods for the price of $500five
hundred dollars ($500) or more is not enforceable by way of
action or defense unless there is some writinga record
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 the party's authorized agent
or broker. A writing record is not insufficient because it
omits or incorrectly states a term agreed upon, but the
contract is not enforceable under this paragraphsubsection
beyond the quantity of goods shown in such writingthe record.
(2) Between merchants if within a reasonable time a
writingrecord 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 the party unless notice in a
recordwritten 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:
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(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 histhe party's 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
(Section 7-2-606)."
"§7-2-202. 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 a
writing record 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:
(a) Bybycourse of performance, course of dealing , or
usage of trade (Section 7-1-303); and
(b) Byby evidence of consistent additional terms unless
the court finds the writing record to have been intended also
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as a complete and exclusive statement of the terms of the
agreement."
"§7-2-203. Seals inoperative.
The affixing of a seal to a writing record evidencing a
contract for sale or an offer to buy or sell goods does not
constitute the writing record a sealed instrument, and the law
with respect to sealed instruments does not apply to such a
contract or offer."
"§7-2-205. Firm offers.
An offer by a merchant to buy or sell goods in a signed
writing record 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 three months; but any such term of
assurance on a form supplied by the offeree must be separately
signed by the offeror."
"§7-2-209. 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 or other signed record
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 (Section 7-2-201) must be satisfied if the
contract as modified is within its provisions.
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(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.
"§7-2A-102. Scope.
This article applies to any transaction, regardless of
form, that creates a lease, as defined in Section
7-2A-103(1)(j).
(1) This article applies to any transaction, regardless
of form, that creates a lease and, in the case of a hybrid
lease, it applies to the extent provided in subsection (2).
(2) In a hybrid lease:
(a) if the lease-of-goods aspects do not predominate:
(i) only the provisions of this article which relate
primarily to the lease-of-goods aspect of the transaction
apply, and the provisions that relate primarily to the
transaction as a whole do not apply;
(ii) Section 7-2A-209 applies if the lease is a finance
lease; and
(iii) Section 7-2A-407 applies to the promise of the
lessee in a finance lease to the extent the promises are
consideration for the right to possession and use of the
leased goods; and
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(b) if the lease-of-goods aspects predominate, this
article applies to the transaction, but does not preclude
application in appropriate circumstances of other law to
aspects of the lease which do not relate to the lease of
goods.
"§7-2A-103. Definitions and index of definitions.
(1) In this article unless the context otherwise
requires:
(a) "Buyer in ordinary course of business" means a
person who in good faith and without knowledge that the sale
to him or her is in violation of the ownership rights or
security interest or leasehold interest of a third party in
the goods, buys in ordinary course from a person in the
business of selling goods of that kind but does not include a
pawnbroker. "Buying" may be for cash or by exchange of other
property or on secured or unsecured credit and includes
receiving goods or documents of title under a pre-existing
contract for sale but does not include a transfer in bulk or
as security for or in total or partial satisfaction of a money
debt.
(b) "Cancellation" occurs when either party puts an end
to the lease contract for default by the other party.
(c) "Commercial unit" means such a unit of goods as by
commercial usage is a single whole for purposes of lease 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 a line of machinery, or a quantity, as a gross or
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carload, or any other unit treated in use or in the relevant
market as a single whole.
(d) "Conforming" goods or performance under a lease
contract means goods or performance that are in accordance
with the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor
regularly engaged in the business of leasing or selling makes
to a lessee who is an individual and who takes under the lease
primarily for a personal, family, or household purpose, if the
total payments to be made under the lease contract, excluding
payments for options to renew or buy, do not exceed
$100,000one hundred thousand dollars ($100,000) .
(f) "Fault" means wrongful act, omission, breach, or
default.
(g) "Finance lease" means a lease with respect to
which:
(i) the lessor does not select, manufacture, or supply
the goods;
(ii) the lessor acquires the goods or the right to
possession and use of the goods in connection with the lease;
and
(iii) one of the following occurs:
(A) the lessee receives a copy of the contract by which
the lessor acquired the goods or the right to possession and
use of the goods before signing the lease contract;
(B) the lessee's approval of the contract by which the
lessor acquired the goods or the right to possession and use
of the goods is a condition to effectiveness of the lease
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contract;
(C) the lease contract or a separate accurate and
complete statement delivered to the lessee discloses in
writing (a) all express warranties and other rights provided
to the lessee by the lessor and the supplier in connection
with the lease contract (b) that there are no other express
warranties or rights provided to the lessee by the lessor or
the supplier in connection with the lease contract, and (c) in
a consumer lease, any waiver, disclaimer, or other negation of
express or implied warranties and any limitation or
modification of remedy or liquidation of damages for breach of
those warranties or other rights of the lessee in a manner as
provided in this article or in Article 2, as applicable; or
(D) the lessor, before the lessee signs the lease
contract, informs the lessee in writing (a) of the identity of
the supplier, unless the lessee has selected the supplier and
directed the lessor to purchase the goods from the supplier,
(b) that the lessee is entitled under this article to all
warranties and other rights provided to the lessee by the
supplier in connection with the lease contract, and (c) to
contact the supplier to receive an accurate and complete
statement from the supplier of any such express warranties and
other rights and any disclaimers or limitations of them or of
remedies.
(h) "Goods" means all things that are movable at the
time of identification to the lease contract, or are fixtures
(Section 7-2A-309), but the term does not include money,
documents, instruments, accounts, chattel paper, general
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intangibles, or minerals or the like, including oil and gas,
before extraction. The term also includes the unborn young of
animals.
(h.1) "Hybrid lease" means a single transaction
involving a lease of goods and:
(i) the provision of services;
(ii) a sale of other goods; or
(iii) a sale, lease, or license of property other than
goods.
(i) "Installment lease contract" means a lease contract
that authorizes or requires the delivery of goods in separate
lots to be separately accepted, even though the lease contract
contains a clause "each delivery is a separate lease" or its
equivalent.
(j) "Lease" means a transfer of the right to possession
and use of goods for a term in return for consideration, but a
sale, including a sale on approval or a sale or return, or
retention or creation of a security interest is not a lease.
Unless the context clearly indicates otherwise, the term
includes a sublease.
(k) "Lease agreement" means the bargain, with respect
to the lease, of the lessor and the lessee in fact as found in
their language or by implication from other circumstances
including course of dealing or usage of trade or course of
performance as provided in this article. Unless the context
clearly indicates otherwise, the term includes a sublease
agreement.
(l) "Lease contract" means the total legal obligation
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that results from the lease agreement as affected by this
article and any other applicable rules of law. Unless the
context clearly indicates otherwise, the term includes a
sublease contract.
(m) "Leasehold interest" means the interest of the
lessor or the lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a
person who in good faith and without knowledge that the lease
to him or her is in violation of the ownership rights or
security interest or leasehold interest of a third party in
the goods leases in ordinary course from a person in the
business of selling or leasing goods of that kind but does not
include a pawnbroker. "Leasing" may be for cash or by exchange
of other property or on secured or unsecured credit and
includes acquiring goods or documents of title under a
preexisting lease contract but does not include a transfer in
bulk or as security for or in total or partial satisfaction of
a money debt.
(p) "Lessor" means a person who transfers the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's
interest in the goods after expiration, termination, or
cancellation of the lease contract.
(r) "Lien" means a charge against or interest in goods
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to secure payment of a debt or performance of an obligation,
but the term does not include a security interest.
(s) "Lot" means a parcel or a single article that is
the subject matter of a separate lease or delivery, whether or
not it is sufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant
with respect to goods of the kind subject to the lease.
(u) "Present value" means the amount as of a date
certain of one or more sums payable in the future, discounted
to the date certain. The discount is determined by the
interest rate specified by the parties if the rate was not
manifestly unreasonable at the time the transaction was
entered into; otherwise, the discount is determined by the
court as a matter of law as a commercially reasonable rate
that takes into account the facts and circumstances of each
case at the time the transaction was entered into.
(v) "Purchase" includes taking by sale, lease,
mortgage, security interest, pledge, gift, or any other
voluntary transaction creating an interest in goods.
(w) "Sublease" means a lease of goods the right to
possession and use of which was acquired by the lessor as a
lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor buys
or leases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which a
lessor buys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant to
a power created by agreement or law puts an end to the lease
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contract otherwise than for default.
(2) Other definitions applying to this article and the
sections in which they appear are:
"Accessions." Section 7-2A-310(1).
"Construction mortgage." Section 7-2A-309(1)(d).
"Encumbrance." Section 7-2A-309(1)(e).
"Fixtures." Section 7-2A-309(1)(a).
"Fixture filing." Section 7-2A-309(1)(b).
"Purchase money lease." Section 7-2A-309(1)(c).
(3) The following definitions in sections of the Code
of Alabama 1975, apply to this article:
"Account." Section 7-9A-102(a)(2).
"Between merchants." Section 7-2-104(3).
"Buyer." Section 7-2-103(1)(a).
"Chattel paper." Section 7-9A-102(a)(11).
"Consumer goods." Section 7-9A-102(a)(23).
"Document." Section 7-9A-102(a)(30).
"Entrusting." Section 7-2-403(3).
"General intangible." Section 7-9A-102(a)(42).
"Good faith." Section 7-2-103(1)(b).
"Instrument." Section 7-9A-102(a)(47).
"Merchant." Section 7-2-104(1).
"Mortgage." Section 7-9A-102(a)(55).
"Pursuant to commitment." Section 7-9A-102(a)(68).
"Receipt." Section 7-2-103(1)(c).
"Sale." Section 7-2-106(1).
"Sale on approval." Section 7-2-326.
"Sale or return." Section 7-2-326.
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"Seller." Section 7-2-103(1)(d).
(4) In addition, Section 7-1-201 contains general
definitions and principles of construction and interpretation
applicable throughout this article."
"§7-2A-107. Waiver or renunciation of claim or right
after default.
Any claim or right arising out of an alleged default or
breach of warranty may be discharged in whole or in part
without consideration by a written waiver or renunciation in a
signed and record delivered by the aggrieved party."
"§7-2A-201. Statute of frauds.
(1) A lease contract is not enforceable by way of
action or defense unless:
(a) the total payments to be made under the lease
contract, excluding payments for options to renew or buy, are
less than $1,000;one thousand dollars ($1,000)tangible or
(b) there is a writing record, signed by the party
against whom enforcement is sought or by that party's
authorized agent, sufficient to indicate that a lease contract
has been made between the parties and to describe the goods
leased and the lease term.
(2) Any description of leased goods or of the lease
term is sufficient and satisfies subsection (1)(b), whether or
not it is specific, if it reasonably identifies what is
described.
(3) A writing record is not insufficient because it
omits or incorrectly states a term agreed upon, but the lease
contract is not enforceable under subsection (1)(b) beyond the
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lease term and the quantity of goods shown in the writing
record.
(4) A lease contract that 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 or
obtained for the lessee and are not suitable for lease or sale
to others in the ordinary course of the lessor's business, and
the lessor, before notice of repudiation is received and under
circumstances that reasonably indicate that the goods are for
the lessee, has made either a substantial beginning of their
manufacture or commitments for their procurement;
(b) if the party against whom enforcement is sought
admits in that party's pleading, testimony, or otherwise in
court that a lease contract was made, but the lease contract
is not enforceable under this provision beyond the quantity of
goods admitted; or
(c) with respect to goods that have been received and
accepted by the lessee.
(5) The lease term under a lease contract referred to
in subsection (4) is:
(a) if there is a writing record signed by the party
against whom enforcement is sought or by that party's
authorized agent specifying the lease term, the term so
specified;
(b) if the party against whom enforcement is sought
admits in that party's pleading, testimony, or otherwise in
court a lease term, the term so admitted; or
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(c) a reasonable lease term."
"§7-2A-202. 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 a
writing record 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:
(a) by course of dealing or usage of trade or by course
of performance; and
(b) by evidence of consistent additional terms unless
the court finds the writingrecord to have been intended also
as a complete and exclusive statement of the terms of the
agreement."
"§7-2A-203. Seals inoperative.
The affixing of a seal to a writing record evidencing a
lease contract or an offer to enter into a lease contract does
not render the writing record a sealed instrument and the law
with respect to sealed instruments does not apply to the lease
contract or offer."
"§7-2A-205. Firm offers.
An offer by a merchant to lease goods to or from
another person in a signed writing record that by its terms
gives assurance 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 the
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period of irrevocability exceed 3 three months. Any such term
of assurance on a form supplied by the offeree must be
separately signed by the offeror."
"§7-2A-208. Modification, rescission and waiver.
(1) An agreement modifying a lease contract needs no
consideration to be binding.
(2) A signed lease agreement that excludes modification
or rescission except by a signed writing record may not be
otherwise modified or rescinded, but, except as between
merchants, such a requirement on a form supplied by a merchant
must be separately signed by the other party.
(3) The requirements of the statute of frauds section
of this article (Section 7-2A-201) 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), it may
operate as a waiver.
(5) A party who has made a waiver affecting an
executory portion of a lease 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.
"§7-3-104. Negotiable instrument.
(a) Except as provided in subsections (c) and (d),
"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:
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(1) Isis payable to bearer or to order at the time it
is issued or first comes into possession of a holder;
(2) Isis payable on demand or at a definite time; and
(3) Doesdoes 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 (i) an undertaking or power to give,
maintain, or protect collateral to secure payment, (ii) an
authorization or power to the holder to confess judgment or
realize on or dispose of collateral, or (iii) a waiver of the
benefit of any law intended for the advantage or protection of
an obligor, (iv) a term that specifies the law that governs
the promise or order, or (v) an undertaking to resolve in a
specified forum a dispute concerning the promise or order	.
(b) "Instrument" means a negotiable instrument.
(c) An order that meets all of the requirements of
subsection (a), except subdivision (1), and otherwise falls
within the definition of "check" in subsection (f) is a
negotiable instrument and a check.
(d) 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.
(e) 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
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enforce the instrument may treat it as either.
(f) "Check" means (i) a draft, other than a documentary
draft, payable on demand and drawn on a bank or (ii) a
cashier's check or teller's check. An instrument may be a
check even though it is described on its face by another term,
such as "money order."
(g) "Cashier's check" means a draft with respect to
which the drawer and drawee are the same bank or branches of
the same bank.
(h) "Teller's check" means a draft drawn by a bank (i)
on another bank, or (ii) payable at or through a bank.
(i) "Traveler's check" means an instrument that (i) is
payable on demand, (ii) is drawn on or payable at or through a
bank, (iii) is designated by the term "traveler's check" or by
a substantially similar term, and (iv) requires, as a
condition to payment, a countersignature by a person whose
specimen signature appears on the instrument.
(j) "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."
"§7-3-105. Issue of instrument.
(a) "Issue" means :
(1) 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 .; or
(2) if agreed by the payee, the first transmission by
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the drawer to the payee of an image of an item and information
derived from the item that enables the depository bank to
collect the item by transferring or presenting under federal
law an electronic check.
(b) 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.
(c) "Issuer" applies to issued and unissued instruments
and means a maker or drawer of an instrument."
"§7-3-401. Signature necessary for liability on
instrument.
(a) A person is not liable on an instrument unless (i)
the person signed the instrument, or (ii) the person is
represented by an agent or representative who signed the
instrument and the signature is binding on the represented
person under Section 7-3-402.
(b) A signature may be made (i) manually or by means of
a device or machine, and (ii) 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. "
"§7-3-604. Discharge by cancellation or renunciation.
(a) A person entitled to enforce an instrument, with or
without consideration, may discharge the obligation of a party
to pay the instrument (i) by an intentional voluntary act,
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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 (ii) by
agreeing not to sue or otherwise renouncing rights against the
party by a signed writing record. The obligation of a party to
pay a check is not discharged solely by destruction of the
check in connection with a process in which information is
extracted from the check and an image of the check is made
and, subsequently, the information and image are transmitted
for payment.
(b) Cancellation or striking out of an indorsement
pursuant to subsection (a) does not affect the status and
rights of a party derived from the indorsement."
"§7-4A-103. Payment order - Definitions.
(a) In this article:
(1) "Payment order" means an instruction of a sender to
a receiving bank, transmitted orally , electronically, or in
writing or in a record, to pay, or to cause another bank to
pay, a fixed or determinable amount of money to a beneficiary
if:
(i) the instruction does not state a condition to
payment to the beneficiary other than time of payment,
(ii) the receiving bank is to be reimbursed by debiting
an account of, or otherwise receiving payment from, the
sender, and
(iii) the instruction is transmitted by the sender
directly to the receiving bank or to an agent, funds-transfer
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system, or communication system for transmittal to the
receiving bank.
(2) "Beneficiary" means the person to be paid by the
beneficiary's bank.
(3) "Beneficiary's bank" means the bank identified in a
payment order in which an account of the beneficiary is to be
credited pursuant to the order or which otherwise is to make
payment to the beneficiary if the order does not provide for
payment to an account.
(4) "Receiving bank" means the bank to which the
sender's instruction is addressed.
(5) "Sender" means the person giving the instruction to
the receiving bank.
(b) If an instruction complying with subsection (a)(1)
is to make more than one payment to a beneficiary, the
instruction is a separate payment order with respect to each
payment.
(c) A payment order is issued when it is sent to the
receiving bank."
"§7-4A-201. Security procedure.
"Security procedure" means a procedure established by
agreement of a customer and a receiving bank for the purpose
of (i) verifying that a payment order or communication
amending or cancelling a payment order is that of the
customer, or (ii) detecting error in the transmission or the
content of the payment order or communication. A security
procedure may impose an obligation on the receiving bank or
the customer and may require the use of algorithms or other
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codes, identifying words , or numbers, symbols, sounds,
biometrics, encryption, callback procedures, or similar
security devices. Comparison of a signature on a payment order
or communication with an authorized specimen signature of the
customer or requiring a payment order to be sent from a known
email address, IP address, or telephone number is not by
itself a security procedure."
"§7-4A-202. Authorized and verified payment orders.
(a) A payment order received by the receiving bank is
the authorized order of the person identified as sender if
that person authorized the order or is otherwise bound by it
under the law of agency.
(b) If a bank and its customer have agreed that the
authenticity of payment orders issued to the bank in the name
of the customer as sender will be verified pursuant to a
security procedure, a payment order received by the receiving
bank is effective as the order of the customer, whether or not
authorized, if (i) the security procedure is a commercially
reasonable method of providing security against unauthorized
payment orders, and (ii) the bank proves that it accepted the
payment order in good faith and in compliance with the bank's
obligations under the security procedure and any written
agreement or instruction of the customer , evidenced by a
record, restricting acceptance of payment orders issued in the
name of the customer. The bank is not required to follow an
instruction that violates a written an agreement with the
customer, evidenced by a record, with the customer or notice
of which is not received at a time and in a manner affording
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the bank a reasonable opportunity to act on it before the
payment order is accepted.
(c) Commercial reasonableness of a security procedure
is a question of law to be determined by considering the
wishes of the customer expressed to the bank, the
circumstances of the customer known to the bank, including the
size, type, and frequency of payment orders normally issued by
the customer to the bank, alternative security procedures
offered to the customer, and security procedures in general
use by customers and receiving banks similarly situated. A
security procedure is deemed to be commercially reasonable if
(i) the security procedure was chosen by the customer after
the bank offered, and the customer refused, a security
procedure that was commercially reasonable for that customer,
and (ii) the customer expressly agreed in writing a record to
be bound by any payment order, whether or not authorized,
issued in its name, and accepted by the bank in compliance
with the bank's obligations under the security procedure
chosen by the customer.
(d) The term "sender" in this article includes the
customer in whose name a payment order is issued if the order
is the authorized order of the customer under subsection (a),
or it is effective as the order of the customer under
subsection (b).
(e) This section applies to amendments and
cancellations of payment orders to the same extent it applies
to payment orders.
(f) Except as provided in this section and in Section
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7-4A-203(a)(1), rights and obligations arising under this
section or Section 7-4A-203 may not be varied by agreement."
"§7-4A-203. Unenforceability of certain verified
payment orders.
(a) If an accepted payment order is not, under Section
7-4A-202(a), an authorized order of a customer identified as
sender, but is effective as an order of the customer pursuant
to Section 7-4A-202(b), the following rules apply:
(1) By express written agreement evidenced by a record ,
the receiving bank may limit the extent to which it is
entitled to enforce or retain payment of the payment order.
(2) The receiving bank is not entitled to enforce or
retain payment of the payment order if the customer proves
that the order was not caused, directly or indirectly, by a
person (i) entrusted at any time with duties to act for the
customer with respect to payment orders or the security
procedure, or (ii) who obtained access to transmitting
facilities of the customer or who obtained, from a source
controlled by the customer and without authority of the
receiving bank, information facilitating breach of the
security procedure, regardless of how the information was
obtained or whether the customer was at fault. Information
includes any access device, computer software, or the like.
(b) This section applies to amendments of payment
orders to the same extent it applies to payment orders."
"§7-4A-207. Misdescription of beneficiary.
(a) Subject to subsection (b), if, in a payment order
received by the beneficiary's bank, the name, bank account
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number, or other identification of the beneficiary refers to a
nonexistent or unidentifiable person or account, no person has
rights as a beneficiary of the order and acceptance of the
order cannot occur.
(b) If a payment order received by the beneficiary's
bank identifies the beneficiary both by name and by an
identifying or bank account number and the name and number
identify different persons, the following rules apply:
(1) Except as otherwise provided in subsection (c), if
the beneficiary's bank does not know that the name and number
refer to different persons, it may rely on the number as the
proper identification of the beneficiary of the order. The
beneficiary's bank need not determine whether the name and
number refer to the same person.
(2) If the beneficiary's bank pays the person
identified by name or knows that the name and number identify
different persons, no person has rights as beneficiary except
the person paid by the beneficiary's bank if that person was
entitled to receive payment from the originator of the funds
transfer. If no person has rights as beneficiary, acceptance
of the order cannot occur.
(c) If (i) a payment order described in subsection (b)
is accepted, (ii) the originator's payment order described the
beneficiary inconsistently by name and number, and (iii) the
beneficiary's bank pays the person identified by number as
permitted by subsection (b)(1), the following rules apply:
(1) If the originator is a bank, the originator is
obliged to pay its order.
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(2) If the originator is not a bank and proves that the
person identified by number was not entitled to receive
payment from the originator, the originator is not obliged to
pay its order unless the originator's bank proves that the
originator, before acceptance of the originator's order, had
notice that payment of a payment order issued by the
originator might be made by the beneficiary's bank on the
basis of an identifying or bank account number even if it
identifies a person different from the named beneficiary.
Proof of notice may be made by any admissible evidence. The
originator's bank satisfies the burden of proof if it proves
that the originator, before the payment order was accepted,
signed a writing record stating the information to which the
notice relates.
(d) In a case governed by subsection (b)(1), if the
beneficiary's bank rightfully pays the person identified by
number and that person was not entitled to receive payment
from the originator, the amount paid may be recovered from
that person to the extent allowed by the law governing mistake
and restitution as follows:
(1) If the originator is obliged to pay its payment
order as stated in subsection (c), the originator has the
right to recover.
(2) If the originator is not a bank and is not obliged
to pay its payment order, the originator's bank has the right
to recover."
"§7-4A-208. Misdescription of intermediary bank or
beneficiary's bank.
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(a) This subsection applies to a payment order
identifying an intermediary bank or the beneficiary's bank
only by an identifying number.
(1) The receiving bank may rely on the number as the
proper identification of the intermediary or beneficiary's
bank and need not determine whether the number identifies a
bank.
(2) The sender is obliged to compensate the receiving
bank for any loss and expenses incurred by the receiving bank
as a result of its reliance on the number in executing or
attempting to execute the order.
(b) This subsection applies to a payment order
identifying an intermediary bank or the beneficiary's bank
both by name and an identifying number if the name and number
identify different persons.
(1) If the sender is a bank, the receiving bank may
rely on the number as the proper identification of the
intermediary or beneficiary's bank if the receiving bank, when
it executes the sender's order, does not know that the name
and number identify different persons. The receiving bank need
not determine whether the name and number refer to the same
person or whether the number refers to a bank. The sender is
obliged to compensate the receiving bank for any loss and
expenses incurred by the receiving bank as a result of its
reliance on the number in executing or attempting to execute
the order.
(2) If the sender is not a bank and the receiving bank
proves that the sender, before the payment order was accepted,
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had notice that the receiving bank might rely on the number as
the proper identification of the intermediary or beneficiary's
bank even if it identifies a person different from the bank
identified by name, the rights and obligations of the sender
and the receiving bank are governed by subsection (b)(1), as
though the sender were a bank. Proof of notice may be made by
any admissible evidence. The receiving bank satisfies the
burden of proof if it proves that the sender, before the
payment order was accepted, signed a writing record stating
the information to which the notice relates.
(3) Regardless of whether the sender is a bank, the
receiving bank may rely on the name as the proper
identification of the intermediary or beneficiary's bank if
the receiving bank, at the time it executes the sender's
order, does not know that the name and number identify
different persons. The receiving bank need not determine
whether the name and number refer to the same person.
(4) If the receiving bank knows that the name and
number identify different persons, reliance on either the name
or the number in executing the sender's payment order is a
breach of the obligation stated in Section 7-4A-302(a)(1)."
"§7-4A-210. Rejection of payment order.
(a) A payment order is rejected by the receiving bank
by a notice of rejection transmitted to the sender orally	,
electronically, or in writing a record. A notice of rejection
need not use any particular words and is sufficient if it
indicates that the receiving bank is rejecting the order or
will not execute or pay the order. Rejection is effective when
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the notice is given if transmission is by a means that is
reasonable in the circumstances. If notice of rejection is
given by a means that is not reasonable, rejection is
effective when the notice is received. If an agreement of the
sender and receiving bank establishes the means to be used to
reject a payment order, (i) any means complying with the
agreement is reasonable, and (ii) any means not complying is
not reasonable unless no significant delay in receipt of the
notice resulted from the use of the noncomplying means.
(b) This subsection applies if a receiving bank other
than the beneficiary's bank fails to execute a payment order
despite the existence on the execution date of a withdrawable
credit balance in an authorized account of the sender
sufficient to cover the order. If the sender does not receive
notice of rejection of the order on the execution date and the
authorized account of the sender does not bear interest, the
bank is obliged to pay interest to the sender on the amount of
the order for the number of days elapsing after the execution
date to the earlier of the day the order is canceled pursuant
to Section 7-4A-211(d) or the day the sender receives notice
or learns that the order was not executed, counting the final
day of the period as an elapsed day. If the withdrawable
credit balance during that period falls below the amount of
the order, the amount of interest is reduced accordingly.
(c) If a receiving bank suspends payments, all
unaccepted payment orders issued to it are deemed rejected at
the time the bank suspends payments.
(d) Acceptance of a payment order precludes a later
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rejection of the order. Rejection of a payment order precludes
a later acceptance of the order."
"§7-4A-211. Cancellation and amendment of payment
order.
(a) A communication of the sender of a payment order
cancelling or amending the order may be transmitted to the
receiving bank orally , electronically, or in writing a record.
If a security procedure is in effect between the sender and
the receiving bank, the communication is not effective to
cancel or amend the order unless the communication is verified
pursuant to the security procedure or the bank agrees to the
cancellation or amendment.
(b) Subject to subsection (a), a communication by the
sender cancelling or amending a payment order is effective to
cancel or amend the order if notice of the communication is
received at a time and in a manner affording the receiving
bank a reasonable opportunity to act on the communication
before the bank accepts the payment order.
(c) After a payment order has been accepted,
cancellation or amendment of the order is not effective unless
the receiving bank agrees or a funds-transfer system rule
allows cancellation or amendment without agreement of the
bank.
(1) With respect to a payment order accepted by a
receiving bank other than the beneficiary's bank, cancellation
or amendment is not effective unless a conforming cancellation
or amendment of the payment order issued by the receiving bank
is also made.
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(2) With respect to a payment order accepted by the
beneficiary's bank, cancellation or amendment is not effective
unless the order was issued in execution of an unauthorized
payment order, or because of a mistake by a sender in the
funds transfer which resulted in the issuance of a payment
order (i) that is a duplicate of a payment order previously
issued by the sender, (ii) that orders payment to a
beneficiary not entitled to receive payment from the
originator, or (iii) that orders payment in an amount greater
than the amount the beneficiary was entitled to receive from
the originator. If the payment order is canceled or amended,
the beneficiary's bank is entitled to recover from the
beneficiary any amount paid to the beneficiary to the extent
allowed by the law governing mistake and restitution.
(d) An unaccepted payment order is canceled by
operation of law at the close of the fifth funds-transfer
business day of the receiving bank after the execution date or
payment date of the order.
(e) A canceled payment order cannot be accepted. If an
accepted payment order is canceled, the acceptance is
nullified and no person has any right or obligation based on
the acceptance. Amendment of a payment order is deemed to be
cancellation of the original order at the time of amendment
and issue of a new payment order in the amended form at the
same time.
(f) Unless otherwise provided in an agreement of the
parties or in a funds-transfer system rule, if the receiving
bank, after accepting a payment order agrees to cancellation
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or amendment of the order by the sender or is bound by a
funds-transfer system rule allowing cancellation or amendment
without the bank's agreement, the sender, whether or not
cancellation or amendment is effective, is liable to the bank
for any loss and expenses, including reasonable attorney's
fees, incurred by the bank as a result of the cancellation or
amendment or attempted cancellation or amendment.
(g) A payment order is not revoked by the death or
legal incapacity of the sender unless the receiving bank knows
of the death or of an adjudication of incapacity by a court of
competent jurisdiction and has reasonable opportunity to act
before acceptance of the order.
(h) A funds-transfer system rule is not effective to
the extent it conflicts with subsection (c)(2)."
"§7-4A-305. Liability for late or improper execution or
failure to execute payment order.
(a) If a funds transfer is completed but execution of a
payment order by the receiving bank in breach of Section
7-4A-302 results in delay in payment to the beneficiary, the
bank is obliged to pay interest to either the originator or
the beneficiary of the funds transfer for the period of delay
caused by the improper execution. Except as provided in
subsection (c), additional damages are not recoverable.
(b) If execution of a payment order by a receiving bank
in breach of Section 7-4A-302 results in (i) noncompletion of
the funds transfer, (ii) failure to use an intermediary bank
designated by the originator, or (iii) issuance of a payment
order that does not comply with the terms of the payment order
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of the originator, the bank is liable to the originator for
its expenses in the funds transfer and for incidental expenses
and interest losses, to the extent not covered by subsection
(a), resulting from the improper execution. Except as provided
in subsection (c), additional damages are not recoverable.
(c) In addition to the amounts payable under
subsections (a) and (b), damages, including consequential
damages, are recoverable to the extent provided in an express
written agreement of the receiving bank , evidenced by a
record.
(d) If a receiving bank fails to execute a payment
order it was obliged by express agreement to execute, the
receiving bank is liable to the sender for its expenses in the
transaction and for incidental expenses and interest losses
resulting from the failure to execute. Additional damages,
including consequential damages, are recoverable to the extent
provided in an express written agreement of the receiving
bank, evidenced by a record, but are not otherwise
recoverable.
(e) Reasonable attorney's fees are recoverable if
demand for compensation under subsection (a) or (b) is made
and refused before an action is brought on the claim. If a
claim is made for breach of an agreement under subsection (d)
and the agreement does not provide for damages, reasonable
attorney's fees are recoverable if demand for compensation
under subsection (d) is made and refused before an action is
brought on the claim.
(f) Except as stated in this section, the liability of a
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receiving bank under subsections (a) and (b) may not be varied
by agreement."
"§7-5-104. Formal requirements.
A letter of credit, confirmation, advice, transfer,
amendment, or cancellation may be issued in any form that is a
signed record and is authenticated (i) by a signature or (ii)
in accordance with the agreement of the parties or the
standard practice referred to in Section 7-5-108(e) ."
"§7-5-116. Choice of law and forum.
(a) The liability of an issuer, nominated person, or
adviser for action or omission is governed by the law of the
jurisdiction chosen by an agreement in the form of a record
signed or otherwise authenticated by the affected parties in
the manner provided in Section 7-5-104 or by a provision in
the person's letter of credit, confirmation, or other
undertaking. The jurisdiction whose law is chosen need not
bear any relation to the transaction.
(b) Unless subsection (a) applies, the liability of an
issuer, nominated person, or adviser for action or omission is
governed by the law of the jurisdiction in which the person is
located. The person is considered to be located at the address
indicated in the person's undertaking. If more than one
address is indicated, the person is considered to be located
at the address from which the person's undertaking was issued.
(c) For the purpose of jurisdiction, choice of law, and
recognition of interbranch letters of credit, but not
enforcement of a judgment, all branches of a bank are
considered separate juridical entities and a bank is
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considered to be located at the place where its relevant
branch is considered to be located under this subsection (d).
(d) A branch of a bank is considered to be located at
the address indicated in the branch's undertaking. If more
than one address is indicated, the branch is considered to be
located at the address from which the undertaking was issued.
(c)(e) Except as otherwise provided in this subsection,
the liability of an issuer, nominated person, or adviser is
 governed by any rules of custom or practice, such as the
Uniform Customs and Practice for Documentary Credits, to which
the letter of credit, confirmation, or other undertaking is
expressly made subject. If (i) this article would govern the
liability of an issuer, nominated person, or adviser under
subsection (a) or (b), (ii) the relevant undertaking
incorporates rules of custom or practice, and (iii) there is
conflict between this article and those rules as applied to
that undertaking, those rules govern except to the extent of
any conflict with the nonvariable provisions specified in
Section 7-5-103(c).
(d)(f) If there is conflict between this article and
Article 3, 4, 4A, or 9, this article governs.
(e)(g) The forum for settling disputes arising out of
an undertaking within this article may be chosen in the manner
and with the binding effect that governing law may be chosen
in accordance with subsection (a)."
"§7-7-102. Definitions and index of definitions.
(a) In this article, unless the context otherwise
requires:
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(1) "Bailee" means a person that by a warehouse
receipt, bill of lading, or other document of title
acknowledges possession of goods and contracts to deliver
them.
(2) A "carrier" means a person that issues a bill of
lading.
(3) "Consignee" means a person named in a bill of
lading to which or to whose order the bill promises delivery.
(4) "Consignor" means a person named in a bill of
lading as the person from which the goods have been received
for shipment.
(5) "Delivery order" means a record that contains an
order to deliver goods directed to a warehouse, carrier, or
other person that in the ordinary course of business issues
warehouse receipts or bills of lading.
(6) "Good faith" means honesty in fact in the conduct
or transaction concerned.
(7) "Goods" means all things that are treated as
movable for the purposes of a contract for storage or
transportation.
(8) "Issuer" means a bailee that issues a document of
title or, in the case of an unaccepted delivery order, the
person that orders the possessor of goods to deliver. The term
includes a person for which an agent or employee purports to
act in issuing a document if the agent or employee has real or
apparent authority to issue documents, even if the issuer did
not receive any goods, the goods were misdescribed, or in any
other respect the agent or employee violated the issuer's
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instructions.
(9) "Person entitled under the document" means the
holder, in the case of a negotiable document of title, or the
person to which delivery of the goods is to be made by the
terms of, or pursuant to instructions in a record under, a
nonnegotiable document of title.
(10) "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. [Reserved].
(11) "Sign" means, with present intent to authenticate
or adopt a record:
(A) To execute or adopt a tangible symbol; or
(B) To attach to or logically associate with the record
an electronic sound, symbol, or process. [Reserved].
(12) "Shipper" means a person that enters into a
contract of transportation with a carrier.
(13) "Warehouse" means a person engaged in the business
of storing goods for hire.
(b) Definitions in other articles applying to this
article and the sections in which they appear are:
(1) "Contract for sale," Section 7-2-106.
(2) "Lessee in ordinary course," Section 7-2A-103.
(3) "Receipt" of goods, Section 7-2-103.
(c) In addition, Article 1 contains general definitions
and principles of construction and interpretation applicable
throughout this article."
"§7-7-106. Control of electronic document of title.
(a) A person has control of an electronic document of
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title if a system employed for evidencing the transfer of
interests in the electronic document reliably establishes that
person as the person to which the electronic document was
issued or transferred.
(b) A system satisfies subsection (a), and a person is
deemed to have has control of an electronic document of title,
if the document is created, stored, and assigned transferred
in such a manner that:
(1) Aa single authoritative copy of the document exists
which is unique, identifiable, and, except as otherwise
provided in subdivisions (4), (5), and (6), unalterable;
(2) Thethe authoritative copy identifies the person
asserting control as:
a. Thethe person to which the document was issued; or
b. Ifif the authoritative copy indicates that the
document has been transferred, the person to which the
document was most recently transferred;
(3) Thethe authoritative copy is communicated to and
maintained by the person asserting control or its designated
custodian;
(4) Copiescopies or amendments that add or change an
identified assigneetransferee of the authoritative copy can be
made only with the consent of the person asserting control;
(5) Eacheach copy of the authoritative copy and any
copy of a copy is readily identifiable as a copy that is not
the authoritative copy; and
(6) Anyany amendment of the authoritative copy is
readily identifiable as authorized or unauthorized.
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(c) A system satisfies subsection (a) and a person has
control of an electronic document of title, if an
authoritative electronic copy of the document, a record
attached to or logically associated with the electronic copy,
or a system in which the electronic copy is recorded:
(1) enables the person readily to identify each
electronic copy as either an authoritative copy or a
nonauthoritative copy;
(2) enables the person readily to identify itself in
any way, including by name, identifying number, cryptographic
key, office, or account number, as the person to which each
authoritative electronic copy was issued or transferred; and
(3) gives the person exclusive power, subject to
subsection (d), to:
(A) prevent others from adding or changing the person
to which each authoritative electronic copy has been issued or
transferred; and
(B) transfer control of each authoritative electronic
copy.
(d) Subject to subsection (e), a power is exclusive
under subsection (c)(3)(A) and (B), even if:
(1) the authoritative electronic copy, a record
attached to or logically associated with the authoritative
electronic copy, or a system in which the authoritative
electronic copy is recorded limits the use of the document of
title or has a protocol that is programmed to cause a change,
including a transfer or loss of control; or
(2) the power is shared with another person.
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(e) A power of a person is not shared with another
person under subsection (d)(2) and the person's power is not
exclusive if:
(1) the person can exercise the power only if the power
also is exercised by the other person; and
(2) the other person:
(A) can exercise the power without exercise of the
power by the person; or
(B) is the transferor to the person of an interest in
the document of title.
(f) If a person has the powers specified in subsection
(c)(3)(A) and (B), the powers are presumed to be exclusive.
(g) A person has control of an electronic document of
title if another person, other than the transferor to the
person of an interest in the document:
(1) has control of the document and acknowledges that
it has control on behalf of the person; or
(2) obtains control of the document after having
acknowledged that it will obtain control of the document on
behalf of the person.
(h) A person that has control under this section is not
required to acknowledge that it has control on behalf of
another person.
(i) If a person acknowledges that it has or will obtain
control on behalf of another person, unless the person
otherwise agrees or law other than this article or Article 9A
otherwise provides, the person does not owe any duty to the
other person and is not required to confirm the acknowledgment
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to any other person. "
"§7-8-102. Definitions and index of definitions .
(a) In this article:
(1) "Adverse claim" means a claim that a claimant has a
property interest in a financial asset and that it is a
violation of the rights of the claimant for another person to
hold, transfer, or deal with the financial asset.
(2) "Bearer form," as applied to a certificated
security, means a form in which the security is payable to the
bearer of the security certificate according to its terms but
not by reason of an indorsement.
(3) "Broker" means a person defined as a broker or
dealer under the federal securities laws, but without
excluding a bank acting in that capacity.
(4) "Certificated security" means a security that is
represented by a certificate.
(5) "Clearing corporation" means:
(i) a person that is registered as a "clearing agency"
under the federal securities laws;
(ii) a federal reserve bank; or
(iii) any other person that provides clearance or
settlement services with respect to financial assets that
would require it to register as a clearing agency under the
federal securities laws but for an exclusion or exemption from
the registration requirement, if its activities as a clearing
corporation, including promulgationadoption of rules, are
subject to regulation by a federal or state governmental
authority.
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(6) "Communicate" means to:
(i) send a signed writing record; or
(ii) transmit information by any mechanism agreed upon
by the persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in
the records of a securities intermediary as the person having
a security entitlement against the securities intermediary. If
a person acquires a security entitlement by virtue of Section
7-8-501(b)(2) or (3), that person is the entitlement holder.
(8) "Entitlement order" means a notification
communicated to a securities intermediary directing transfer
or redemption of a financial asset to which the entitlement
holder has a security entitlement.
(9) "Financial asset," except as otherwise provided in
Section 7-8-103, means:
(i) a security;
(ii) an obligation of a person or a share,
participation, or other interest in a person or in property or
an enterprise of a person, which is, or is of a type, dealt in
or traded on financial markets, or which is recognized in any
area in which it is issued or dealt in as a medium for
investment; or
(iii) any property that is held by a securities
intermediary for another person in a securities account if the
securities intermediary has expressly agreed with the other
person that the property is to be treated as a financial asset
under this article. As the context requires, the term means
either the interest itself or the means by which a person's
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claim to it is evidenced, including a certificated or
uncertificated security, a security certificate, or a security
entitlement.
(10) "Good faith," for purposes of the obligation of
good faith in the performance or enforcement of contracts or
duties within this article, means honesty in fact and the
observance of reasonable commercial standards of fair dealing.
(11) "Indorsement" means a signature that alone or
accompanied by other words is made on a security certificate
in registered form or on a separate document for the purpose
of assigning, transferring, or redeeming the security or
granting a power to assign, transfer, or redeem it.
(12) "Instruction" means a notification communicated to
the issuer of an uncertificated security which directs that
the transfer of the security be registered or that the
security be redeemed.
(13) "Registered form," as applied to a certificated
security, means a form in which:
(i) the security certificate specifies a person
entitled to the security; and
(ii) a transfer of the security may be registered upon
books maintained for that purpose by or on behalf of the
issuer, or the security certificate so states.
(14) "Securities intermediary" means:
(i) a clearing corporation; or
(ii) a person, including a bank or broker, that in the
ordinary course of its business maintains securities accounts
for others and is acting in that capacity.
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(15) "Security," except as otherwise provided in
Section 7-8-103, means an obligation of an issuer or a share,
participation, or other interest in an issuer or in property
or an enterprise of an issuer:
(i) which is represented by a security certificate in
bearer or registered form, or the transfer of which may be
registered upon books maintained for that purpose by or on
behalf of the issuer;
(ii) which is one of a class or series or by its terms
is divisible into a class or series of shares, participations,
interests, or obligations; and
(iii) which:
(A) is, or is of a type, dealt in or traded on
securities exchanges or securities markets; or
(B) is a medium for investment and by its terms
expressly provides that it is a security governed by this
article.
(16) "Security certificate" means a certificate
representing a security.
(17) "Security entitlement" means the rights and
property interest of an entitlement holder with respect to a
financial asset specified in Part 5.
(18) "Uncertificated security" means a security that is
not represented by a certificate.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Appropriate person." Section 7-8-107 .
"Control." Section 7-8-106 .
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"Delivery." Section 7-8-301 .
"Investment company security." Section 7-8-103 .
"Issuer." Section 7-8-201 .
"Overissue." Section 7-8-210 .
"Protected purchaser." Section 7-8-303 .
"Securities account." Section 7-8-501 .
(b.1) The following definitions in this article and
other articles apply to this article:
"Controllable account." Section 7-9A-102.
"Controllable electronic record." Section 7-12-102.
"Controllable payment intangible." Section 7-9A-102.
(c) In addition, Article 1 contains general definitions
and principles of construction and interpretation applicable
throughout this article.
(d) The characterization of a person, business, or
transaction for purposes of this article does not determine
the characterization of the person, business, or transaction
for purposes of any other law, regulation, or rule."
"§7-8-103. Rules for determining whether certain
obligations and interests are securities or financial assets.
(a) A share or similar equity interest issued by a
corporation, business trust, joint stock company, or similar
entity is a security.
(b) An "investment company security" is a security.
"Investment company security" means a share or similar equity
interest issued by an entity that is registered as an
investment company under the federal investment company laws,
an interest in a unit investment trust that is so registered,
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or a face-amount certificate issued by a face-amount
certificate company that is so registered. Investment company
security does not include an insurance policy or endowment
policy or annuity contract issued by an insurance company.
(c) An interest in a partnership or limited liability
company is not a security unless it is dealt in or traded on
securities exchanges or in securities markets, its terms
expressly provide that it is a security governed by this
article, or it is an investment company security. However, an
interest in a partnership or limited liability company is a
financial asset if it is held in a securities account.
(d) A writing that is a security certificate is
governed by this article and not by Article 3, even though it
also meets the requirements of that article. However, a
negotiable instrument governed by Article 3 is a financial
asset if it is held in a securities account.
(e) An option or similar obligation issued by a
clearing corporation to its participants is not a security,
but is a financial asset.
(f) A commodity contract, as defined in Section
7-9A-102(a)(15), is not a security or a financial asset.
(g) A document of title is not a financial asset unless
Section 7-8-102(a)(9)(iii) applies.
(h) A controllable account, controllable electronic
record, or controllable payment intangible is not a financial
asset unless Section 7-8-102(a)(9)(iii) applies. "
"§7-8-106. Control.
(a) A purchaser has "control" of a certificated
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security in bearer form if the certificated security is
delivered to the purchaser.
(b) A purchaser has "control" of a certificated
security in registered form if the certificated security is
delivered to the purchaser, and:
(1) the certificate is indorsed to the purchaser or in
blank by an effective indorsement; or
(2) the certificate is registered in the name of the
purchaser, upon original issue or registration of transfer by
the issuer.
(c) A purchaser has "control" of an uncertificated
security if:
(1) the uncertificated security is delivered to the
purchaser; or
(2) the issuer has agreed that it will comply with
instructions originated by the purchaser without further
consent by the registered owner.
(d) A purchaser has "control" of a security entitlement
if:
(1) the purchaser becomes the entitlement holder;
(2) the securities intermediary has agreed that it will
comply with entitlement orders originated by the purchaser
without further consent by the entitlement holder; or
(3) another person has control of the security
entitlement on behalf of the purchaser or, having previously
acquired control of the security entitlement, acknowledges
that it has control on behalf of the purchaser. person, other
than the transferor to the purchaser of an interest in the
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security entitlement:
(A) has control of the security entitlement and
acknowledges that it has control on behalf of the purchaser;
or
(B) obtains control of the security entitlement after
having acknowledged that it will obtain control of the
security entitlement on behalf of the purchaser.
(e) If an interest in a security entitlement is granted
by the entitlement holder to the entitlement holder's own
securities intermediary, the securities intermediary has
control.
(f) A purchaser who has satisfied the requirements of
subsection (c) or (d) has control, even if the registered
owner in the case of subsection (c) or the entitlement holder
in the case of subsection (d) retains the right to make
substitutions for the uncertificated security or security
entitlement, to originate instructions or entitlement orders
to the issuer or securities intermediary, or otherwise to deal
with the uncertificated security or security entitlement.
(g) An issuer or a securities intermediary may not
enter into an agreement of the kind described in subsection
(c)(2) or (d)(2) without the consent of the registered owner
or entitlement holder, but an issuer or a securities
intermediary is not required to enter into such an agreement
even though the registered owner or entitlement holder so
directs. An issuer or securities intermediary that has entered
into such an agreement is not required to confirm the
existence of the agreement to another party unless requested
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to do so by the registered owner or entitlement holder.
(h) A person that has control under this section is not
required to acknowledge that it has control on behalf of a
purchaser.
(i) If a person acknowledges that it has or will obtain
control on behalf of a purchaser, unless the person otherwise
agrees or law other than this article or Article 9A otherwise
provides, the person does not owe any duty to the purchaser
and is not required to confirm the acknowledgement to any
other person."
"§7-8-110. Applicability; choice of law.
(a) The local law of the issuer's jurisdiction, as
specified in subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with respect to
registration of transfer;
(3) the effectiveness of registration of transfer by
the issuer;
(4) whether the issuer owes any duties to an adverse
claimant to a security; and
(5) whether an adverse claim can be asserted against a
person to whom transfer of a certificated or uncertificated
security is registered or a person who obtains control of an
uncertificated security.
(b) The local law of the securities intermediary's
jurisdiction, as specified in subsection (e), governs:
(1) acquisition of a security entitlement from the
securities intermediary;
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(2) the rights and duties of the securities
intermediary and entitlement holder arising out of a security
entitlement;
(3) whether the securities intermediary owes any duties
to an adverse claimant to a security entitlement; and
(4) whether an adverse claim can be asserted against a
person who acquires a security entitlement from the securities
intermediary or a person who purchases a security entitlement
or interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a
security certificate is located at the time of delivery
governs whether an adverse claim can be asserted against a
person to whom the security certificate is delivered.
(d) "Issuer's jurisdiction" means the jurisdiction
under which the issuer of the security is organized or, if
permitted by the law of that jurisdiction, the law of another
jurisdiction specified by the issuer. An issuer organized
under the law of this state may specify the law of another
jurisdiction as the law governing the matters specified in
subsection (a)(2) through (5).
(e) The following rules determine a "securities
intermediary's jurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary
and its entitlement holder governing the securities account
expressly provides that a particular jurisdiction is the
securities intermediary's jurisdiction for purposes of this
part, this article, or this title, that jurisdiction is the
securities intermediary's jurisdiction.
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(2) If paragraph (1) does not apply and an agreement
between the securities intermediary and its entitlement holder
governing the securities account expressly provides that the
agreement is governed by the law of a particular jurisdiction,
that jurisdiction is the securities intermediary's
jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies
and an agreement between the securities intermediary and its
entitlement holder governing the securities account expressly
provides that the securities account is maintained at an
office in a particular jurisdiction, that jurisdiction is the
securities intermediary's jurisdiction.
(4) If none of the preceding paragraphs applies, the
securities intermediary's jurisdiction is the jurisdiction in
which the office identified in an account statement as the
office serving the entitlement holder's account is located.
(5) If none of the preceding paragraphs applies, the
securities intermediary's jurisdiction is the jurisdiction in
which the chief executive office of the securities
intermediary is located.
(f) A securities intermediary's jurisdiction is not
determined by the physical location of certificates
representing financial assets, or by the jurisdiction in which
is organized the issuer of the financial asset with respect to
which an entitlement holder has a security entitlement, or by
the location of facilities for data processing or other record
keeping concerning the account.
(g) The local law of the issuer's jurisdiction or the
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securities intermediary's jurisdiction governs a matter or
transaction specified in subsection (a) or (b) even if the
matter or transaction does not bear any relation to that
jurisdiction."
"§7-8-303. Protected purchaser.
(a) "Protected purchaser" means a purchaser of a
certificated or uncertificated security, or of an interest
therein, who:
(1) gives value;
(2) does not have notice of any adverse claim to the
security; and
(3) obtains control of the certificated or
uncertificated security.
(b) In addition to acquiring the rights of a purchaser,
a A protected purchaser also acquires its interest in the
security free of any adverse claim.
"§7-9A-102. Definitions and index of definitions.
(a) Article 9A definitions. In this article:
(1) "Accession" means goods that are physically united
with other goods in such a manner that the identity of the
original goods is not lost.
(2) "Account," except as used in "account for,"
"account statement," "account to," "commodity account" in
paragraph (14), "customer's account," "deposit account" in
paragraph (29), "on account of," and "statement of account,"
means a right to payment of a monetary obligation, whether or
not earned by performance, (i) for property that has been or
is to be sold, leased, licensed, assigned, or otherwise
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disposed of, (ii) for services rendered or to be rendered,
(iii) for a policy of insurance issued or to be issued, (iv)
for a secondary obligation incurred or to be incurred, (v) for
energy provided or to be provided, (vi) for the use or hire of
a vessel under a charter or other contract, (vii) arising out
of the use of a credit or charge card or information contained
on or for use with the card, or (viii) as winnings in a
lottery or other game of chance operated or sponsored by a
State, governmental unit of a State, or person licensed or
authorized to operate the game by a State or governmental unit
of a State. The term includes controllable accounts and
health-care-insurance receivables. The term does not include
(i) rights to payment evidenced by chattel paper or an
instrumentchattel paper, (ii) commercial tort claims, (iii)
deposit accounts, (iv) investment property, (v)
letter-of-credit rights or letters of credit, or (vi) rights
to payment for money or funds advanced or sold, other than
rights arising out of the use of a credit or charge card or
information contained on or for use with the card , or (vii)
rights to payment evidenced by an instrument .
(3) "Account debtor" means a person obligated on an
account, chattel paper, or general intangible. The term does
not include persons obligated to pay a negotiable instrument,
even if the negotiable instrument constitutes part of
evidences chattel paper.
(4) "Accounting," except as used in "accounting for,"
means a record:
(A) authenticated signed by a secured party;
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(B) indicating the aggregate unpaid secured obligations
as of a date not more than 35 days earlier or 35 days later
than the date of the record; and
(C) identifying the components of the obligations in
reasonable detail.
(5) "Agricultural lien" means an interest, other than a
security interest, in farm products:
(A) which secures payment or performance of an
obligation for:
(i) goods or services furnished in connection with a
debtor's farming operation; or
(ii) rent on real property leased by a debtor in
connection with its farming operation;
(B) which is created by statute in favor of a person
that:
(i) in the ordinary course of its business furnished
goods or services to a debtor in connection with a debtor's
farming operation; or
(ii) leased real property to a debtor in connection
with the debtor's farming operation; and
(C) whose effectiveness does not depend on the person's
possession of the personal property.
(6) "As-extracted collateral" means:
(A) oil, gas, or other minerals that are subject to a
security interest that:
(i) is created by a debtor having an interest in the
minerals before extraction; and
(ii) attaches to the minerals as extracted; or
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(B) accounts arising out of the sale at the wellhead or
mine of oil, gas, or other minerals in which the debtor had an
interest before extraction.
(7) [Reserved]."Authenticate" means:
(A) to sign; or
(B) with present intent to adopt or accept a record, to
attach to or logically associate with the record an electronic
sound, symbol, or process.
(7A) "Assignee," except as used in "assignee for
benefit of creditors," means a person (i) in whose favor a
security interest that secures an obligation is created or
provided for under a security agreement, whether or not the
obligation is outstanding or (ii) to which an account, chattel
paper, payment intangible, or promissory note has been sold.
The term includes a person to which a security interest has
been transferred by a secured party.
(7B) "Assignor" means a person that (i) under a
security agreement creates or provides for a security interest
that secures an obligation or (ii) sells an account, chattel
paper, payment intangible, or promissory note. The term
includes a secured party that has transferred a security
interest to another person.
(8) "Bank" means an organization that is engaged in the
business of banking. The term includes savings banks, savings
and loan associations, credit unions, and trust companies.
(9) "Cash proceeds" means proceeds that are money,
checks, deposit accounts, or the like.
(10) "Certificate of title" means a certificate of
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title with respect to which a statute provides for the
security interest in question to be indicated on the
certificate as a condition or result of the security
interest's obtaining priority over the rights of a lien
creditor with respect to the collateral. The term includes
another record maintained as an alternative to a certificate
of title by the governmental unit that issues certificates of
title if a statute permits the security interest in question
to be indicated on the record as a condition or result of the
security interest's obtaining priority over the rights of a
lien creditor with respect to the collateral.
(11) "Chattel paper" means a record or records that
evidence both a monetary obligation and a security interest in
specific goods, a security interest in specific goods and
software used in the goods, a security interest in specific
goods and license of software used in the goods, a lease of
specific goods, or a lease of specific goods and license of
software used in the goods. In this paragraph, "monetary
obligation" means a monetary obligation secured by the goods
or owed under a lease of the goods and includes a monetary
obligation with respect to software used in the goods. The
term does not include (i) charters or other contracts
involving the use or hire of a vessel or (ii) records that
evidence a right to payment arising out of the use of a credit
or charge card or information contained on or for use with the
card. If a transaction is evidenced by records that include an
instrument or series of instruments, the group of records
taken together constitutes chattel paper.
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(11) "Chattel paper" means:
(A) a right to payment of a monetary obligation secured
by specific goods, if the right to payment and security
agreement are evidenced by a record; or
(B) a right to payment of a monetary obligation owed by
a lessee under a lease agreement with respect to specific
goods and a monetary obligation owed by the lessee in
connection with the transaction giving rise to the lease, if:
(i) the right to payment and lease agreement are
evidenced by a record; and
(ii) the predominant purpose of the transaction giving
rise to the lease was to give the lessee the right to
possession and use of the goods.
The term does not include a right to payment arising
out of a charter or other contract involving the use or hire
of a vessel or a right to payment arising out of the use of a
credit or charge card or information contained on or for use
with the card.
(12) "Collateral" means the property subject to a
security interest or agricultural lien. The term includes:
(A) proceeds to which a security interest attaches;
(B) accounts, chattel paper, payment intangibles, and
promissory notes that have been sold; and
(C) goods that are the subject of a consignment.
(13) "Commercial tort claim" means a claim arising in
tort with respect to which:
(A) the claimant is an organization; or
(B) the claimant is an individual and the claim:
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(i) arose in the course of the claimant's business or
profession; and
(ii) does not include damages arising out of personal
injury to or the death of an individual.
(14) "Commodity account" means an account maintained by
a commodity intermediary in which a commodity contract is
carried for a commodity customer.
(15) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a
commodity option, or another contract if the contract or
option is:
(A) traded on or subject to the rules of a board of
trade that has been designated as a contract market for such a
contract pursuant to federal commodities laws; or
(B) traded on a foreign commodity board of trade,
exchange, or market, and is carried on the books of a
commodity intermediary for a commodity customer.
(16) "Commodity customer" means a person for which a
commodity intermediary carries a commodity contract on its
books.
(17) "Commodity intermediary" means a person that:
(A) is registered as a futures commission merchant
under federal commodities law; or
(B) in the ordinary course of its business provides
clearance or settlement services for a board of trade that has
been designated as a contract market pursuant to federal
commodities law.
(18) "Communicate" means:
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(A) to send a written or other tangible record;
(B) to transmit a record by any means agreed upon by
the persons sending and receiving the record; or
(C) in the case of transmission of a record to or by a
filing office, to transmit a record by any means prescribed by
filing-office rule.
(19) "Consignee" means a merchant to which goods are
delivered in a consignment.
(20) "Consignment" means a transaction, regardless of
its form, in which a person delivers goods to a merchant for
the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a name other than
the name of the person making delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its creditors to be
substantially engaged in selling the goods of others;
(B) with respect to each delivery, the aggregate value
of the goods is $1,000one thousand dollars ($1,000) or more at
the time of delivery;
(C) the goods are not consumer goods immediately before
delivery; and
(D) the transaction does not create a security interest
that secures an obligation.
(21) "Consignor" means a person that delivers goods to
a consignee in a consignment.
(22) "Consumer debtor" means a debtor in a consumer
transaction.
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(23) "Consumer goods" means goods that are used or
bought for use primarily for personal, family, or household
purposes.
(24) "Consumer-goods transaction" means a consumer
transaction in which:
(A) an individual incurs an obligation primarily for
personal, family, or household purposes; and
(B) a security interest in consumer goods secures the
obligation.
(25) "Consumer obligor" means an obligor who is an
individual and who incurred the obligation as part of a
transaction entered into primarily for personal, family, or
household purposes.
(26) "Consumer transaction" means a transaction in
which (i) an individual incurs an obligation primarily for
personal, family, or household purposes, (ii) a security
interest secures the obligation, and (iii) the collateral is
held or acquired primarily for personal, family, or household
purposes. The term includes consumer-goods transactions.
(27) "Continuation statement" means an amendment of a
financing statement which:
(A) identifies, by its file number, the initial
financing statement to which it relates; and
(B) indicates that it is a continuation statement for,
or that it is filed to continue the effectiveness of, the
identified financing statement.
(27A) "Controllable account" means an account evidenced
by a controllable electronic record that provides that the
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account debtor undertakes to pay the person that has control
under Section 7-12-105 of the controllable electronic record.
(27B) "Controllable payment intangible" means a payment
intangible evidenced by a controllable electronic record that
provides that the account debtor undertakes to pay the person
that has control under Section 7-12-105 of the controllable
electronic record.
(28) "Debtor" means:
(A) a person having an interest, other than a security
interest or other lien, in the collateral, whether or not the
person is an obligor;
(B) a seller of accounts, chattel paper, payment
intangibles, or promissory notes; or
(C) a consignee.
(29) "Deposit account" means a demand, time, savings,
passbook, or similar account maintained with a bank. The term
does not include investment property or accounts evidenced by
an instrument.
(30) "Document" means a document of title or a receipt
of the type described in Section 7-7-201(b).
(31) "Electronic chattel paper" means chattel paper
evidenced by a record or records consisting of information
stored in an electronic medium. [Reserved].
(32) "Encumbrance" means a right, other than an
ownership interest, in real property. The term includes
mortgages and other liens on real property.
(33) "Equipment" means goods other than inventory, farm
products, or consumer goods.
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(34) "Farm products" means goods, other than standing
timber, with respect to which the debtor is engaged in a
farming operation and which are:
(A) crops grown, growing, or to be grown, including:
(i) crops produced on trees, vines, and bushes; and
(ii) aquatic goods produced in aquacultural operations;
(B) livestock, born or unborn, including aquatic goods
produced in aquacultural operations;
(C) supplies used or produced in a farming operation;
or
(D) products of crops or livestock in their
unmanufactured states.
(35) "Farming operation" means raising, cultivating,
propagating, fattening, grazing, or any other farming,
livestock, or aquacultural operation.
(36) "File number" means the number assigned to an
initial financing statement pursuant to Section 7-9A-519(a).
(37) "Filing office" means an office designated in
Section 7-9A-501 as the place to file a financing statement.
(38) "Filing-office rule" means a rule adopted pursuant
to Section 7-9A-526.
(39) "Financing statement" means a record or records
composed of an initial financing statement and any filed
record relating to the initial financing statement.
(40) "Fixture filing" means the filing of a financing
statement covering goods that are or are to become fixtures
and satisfying Section 7-9A-502(a) and (b). The term includes
the filing of a financing statement covering goods of a
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transmitting utility which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related
to particular real property that an interest in them arises
under real property law.
(42) "General intangible" means any personal property,
including things in action, other than accounts, chattel
paper, commercial tort claims, deposit accounts, documents,
goods, instruments, investment property, letter-of-credit
rights, letters of credit, money, and oil, gas, or other
minerals before extraction. The term includes controllable
electronic records, payment intangibles , and software.
(43) "Good faith" means honesty in fact in the conduct
or transaction concerned.
(44) "Goods" means all things that are movable when a
security interest attaches. The term includes (i) fixtures,
(ii) standing timber that is to be cut and removed under a
conveyance or contract for sale, to the extent such standing
timber and cutting rights with respect thereto are considered
as chattels under Section 35-4-363, (iii) the unborn young of
animals, (iv) crops grown, growing, or to be grown, even if
the crops are produced on trees, vines, or bushes, and (v)
manufactured homes. The term also includes a computer program
embedded in goods and any supporting information provided in
connection with a transaction relating to the program if (i)
the program is associated with the goods in such a manner that
it customarily is considered part of the goods, or (ii) by
becoming the owner of the goods, a person acquires a right to
use the program in connection with the goods. The term does
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not include a computer program embedded in goods that consist
solely of the medium in which the program is embedded. The
term also does not include accounts, chattel paper, commercial
tort claims, deposit accounts, documents, general intangibles,
instruments, investment property, letter-of-credit rights,
letters of credit, money, or oil, gas, or other minerals
before extraction.
(45) "Governmental unit" means a subdivision, agency,
department, county, parish, municipality, or other unit of the
government of the United States, a state, or a foreign
country. The term includes an organization having a separate
corporate existence if the organization is eligible to issue
debt on which interest is exempt from income taxation under
the laws of the United States.
(46) "Health-care-insurance receivable" means an
interest in or claim under a policy of insurance which is a
right to payment of a monetary obligation for health-care
goods or services provided.
(47) "Instrument" means a negotiable instrument or any
other writing that evidences a right to the payment of a
monetary obligation, is not itself a security agreement or
lease, and is of a type that in ordinary course of business is
transferred by delivery with any necessary indorsement or
assignment. The term does not include (i) investment property,
(ii) letters of credit, or (iii) writings that evidence a
right to payment arising out of the use of a credit or charge
card or information contained on or for use with the card	, or
(iv) writings that evidence chattel paper .
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(48) "Inventory" means goods, other than farm products,
which:
(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or to be
furnished under a contract of service;
(C) are furnished by a person under a contract of
service; or
(D) consist of raw materials, work in process, or
materials used or consumed in a business.
(49) "Investment property" means a security, whether
certificated or uncertificated, security entitlement,
securities account, commodity contract, or commodity account.
(50) "Jurisdiction of organization," with respect to a
registered organization, means the jurisdiction under whose
law the organization is formed or organized.
(51) "Letter-of-credit right" means a right to payment
or performance under a letter of credit, whether or not the
beneficiary has demanded or is at the time entitled to demand
payment or performance. The term does not include the right of
a beneficiary to demand payment or performance under a letter
of credit.
(52) "Lien creditor" means:
(A) a creditor that has acquired a lien on the property
involved by attachment, levy, or the like;
(B) an assignee for benefit of creditors from the time
of assignment;
(C) a trustee in bankruptcy from the date of the filing
of the petition; or
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(D) a receiver in equity from the time of appointment.
(53) "Manufactured home" means a structure defined as a
"manufactured home" in Section 32-8-2.
(54) "Manufactured-home transaction" means a secured
transaction:
(A) that creates a purchase-money security interest in
a manufactured home, other than a manufactured home held as
inventory; or
(B) in which a manufactured home, other than a
manufactured home held as inventory, is the primary
collateral.
(54A) "Money" has the meaning as in Section
7-1-201(b)(24), but does not include a deposit account.
(55) "Mortgage" means a consensual interest in real
property, including fixtures, which secures payment or
performance of an obligation.
(56) "New debtor" means a person that becomes bound as
debtor under Section 7-9A-203(d) by a security agreement
previously entered into by another person.
(57) "New value" means (i) money, (ii) money's worth in
property, services, or new credit, or (iii) release by a
transferee of an interest in property previously transferred
to the transferee. The term does not include an obligation
substituted for another obligation.
(58) "Noncash proceeds" means proceeds other than cash
proceeds.
(59) "Obligor" means a person that, with respect to an
obligation secured by a security interest in or an
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agricultural lien on the collateral, (i) owes payment or other
performance of the obligation, (ii) has provided property
other than the collateral to secure payment or other
performance of the obligation, or (iii) is otherwise
accountable in whole or in part for payment or other
performance of the obligation. The term does not include
issuers or nominated persons under a letter of credit.
(60) "Original debtor," except as used in Section
7-9A-310(c), means a person that, as debtor, entered into a
security agreement to which a new debtor has become bound
under Section 7-9A-203(d).
(61) "Payment intangible" means a general intangible
under which the account debtor's principal obligation is a
monetary obligation. The term includes a controllable payment
intangible.
(62) "Person related to," with respect to an
individual, means:
(A) the spouse of the individual;
(B) a brother, brother-in-law, sister, or sister-in-law
of the individual;
(C) an ancestor or lineal descendant of the individual
or the individual's spouse; or
(D) any other relative, by blood or marriage, of the
individual or the individual's spouse who shares the same home
with the individual.
(63) "Person related to," with respect to an
organization, means:
(A) a person directly or indirectly controlling,
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controlled by, or under common control with the organization;
(B) an officer or director of, or a person performing
similar functions with respect to, the organization;
(C) an officer or director of, or a person performing
similar functions with respect to, a person described in
subparagraph (A);
(D) the spouse of an individual described in
subparagraph (A), (B), or (C); or
(E) an individual who is related by blood or marriage
to an individual described in subparagraph (A), (B), (C), or
(D) and shares the same home with the individual.
(64) "Proceeds," except as used in Section 7-9A-609(b),
means the following property:
(A) whatever is acquired upon the sale, lease, license,
exchange, or other disposition of collateral;
(B) whatever is collected on, or distributed on account
of, collateral;
(C) rights arising out of collateral;
(D) to the extent of the value of collateral, claims
arising out of the loss, nonconformity, or interference with
the use of, defects or infringement of rights in, or damage
to, the collateral; or
(E) to the extent of the value of collateral and to the
extent payable to the debtor or the secured party, insurance
payable by reason of the loss or nonconformity of, defects or
infringement of rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that
evidences a promise to pay a monetary obligation, does not
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evidence an order to pay, and does not contain an
acknowledgment by a bank that the bank has received for
deposit a sum of money or funds.
(66) "Proposal" means a record authenticated signed by
a secured party which includes the terms on which the secured
party is willing to accept collateral in full or partial
satisfaction of the obligation it secures pursuant to Sections
7-9A-620, 7-9A-621, and 7-9A-622.
(67) Omitted.
(68) "Public organic record" means a record that is
available to the public for inspection and that is:
(A) a record consisting of the record initially filed
with or issued by a state or the United States to form or
organize an organization and any record filed with or issued
by the state or the United States which amends or restates the
initial record;
(B) an organic record of a business trust consisting of
the record initially filed with a state and any record filed
with the state which amends or restates the initial record, if
a statute of the state governing business trusts requires that
the record be filed with the state; or
(C) a record consisting of legislation enacted by the
legislature of a state or the Congress of the United States
which forms or organizes an organization, any record amending
the legislation, and any record filed with or issued by the
state or United States which amends or restates the name of
the organization.
For purposes of this definition and the definition of
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registered organization, a certificate of formation filed with
a judge of probate pursuant to Section 10A-1-4.02(a) is filed
with the state.
(69) "Pursuant to commitment," with respect to an
advance made or other value given by a secured party, means
pursuant to the secured party's obligation, whether or not a
subsequent event of default or other event not within the
secured party's control has relieved or may relieve the
secured party from its obligation.
(70) "Record," except as used in "for record," "of
record," "record or legal title," and "record owner," means
information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in
perceivable form.
(71) "Registered organization" means an organization
formed or organized solely under the law of a single State or
the United States by the filing of a public organic record
with, the issuance of a public organic record by, or the
enactment of legislation by the state or the United States.
The term incudes includes a business trust that is formed or
organized under the law of a single state if a statute of the
state governing business trusts requires that the business
trust's organic record be filed with the state.
(72) "Secondary obligor" means an obligor to the extent
that:
(A) the obligor's obligation is secondary; or
(B) the obligor has a right of recourse with respect to
an obligation secured by collateral against the debtor,
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another obligor, or property of either.
(73) "Secured party" means:
(A) a person in whose favor a security interest is
created or provided for under a security agreement, whether or
not any obligation to be secured is outstanding;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper, payment
intangibles, or promissory notes have been sold;
(E) a trustee, indenture trustee, agent, collateral
agent, or other representative in whose favor a security
interest or agricultural lien is created or provided for; or
(F) a person that holds a security interest arising
under Section 7-2-401, 7-2-505, 7-2-711(3), 7-2A-508(5),
7-4-210, or 7-5-118.
(74) "Security agreement" means an agreement that
creates or provides for a security interest.
(75) "Send," in connection with a record or
notification, means:
(A) to deposit in the mail, deliver for transmission,
or transmit by any other usual means of communication, with
postage or cost of transmission provided for, addressed to any
address reasonable under the circumstances; or
(B) to cause the record or notification to be received
within the time that it would have been received if properly
sent under subparagraph (A). [Reserved.]
(76) "Software" means a computer program and any
supporting information provided in connection with a
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transaction relating to the program. The term does not include
a computer program that is included in the definition of
goods.
(77) "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.
(78) "Supporting obligation" means a letter-of-credit
right or secondary obligation that supports the payment or
performance of an account, chattel paper, a document, a
general intangible, an instrument, or investment property.
(79) "Tangible chattel paper" means chattel paper
evidenced by a record or records consisting of information
that is inscribed on a tangible medium. [Reserved.]
(80) "Termination statement" means an amendment of a
financing statement which:
(A) identifies, by its file number, the initial
financing statement to which it relates; and
(B) indicates either that it is a termination statement
or that the identified financing statement is no longer
effective.
(81) "Transmitting utility" means a person primarily
engaged in the business of:
(A) operating a railroad, subway, street railway, or
trolley bus;
(B) transmitting communications electrically,
electromagnetically, or by light;
(C) transmitting goods by pipeline or sewer;
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(D) transmitting or producing or distributing
electricity, steam, gas, or water; or
(E) owning, operating, leasing or controlling a
"utility" as defined in Section 37-1-30.
(b) Definitions in other articles. "Control" as
provided in Section 7-7-106 and the following definitions in
other articles of this title apply to this article:
"Applicant." Section 7-5-102.
"Beneficiary." Section 7-5-102.
"Broker." Section 7-8-102.
"Certificated security ." Section 7-8-102.
"Check." Section 7-3-104.
"Clearing corporation ." Section 7-8-102.
"Contract for sale ." Section 7-2-106.
"Controllable electronic record." Section 7-12-102.
"Customer." Section 7-4-104.
"Entitlement holder ." Section 7-8-102.
"Financial asset ." Section 7-8-102.
"Holder in due course ." Section 7-3-302.
"Issuer" (with respect to a letter of credit or
letter-of-credit right) . Section 7-5-102.
"Issuer" (with respect to a security) . Section 7-8-201.
"Issuer" (with respect to documents of title) . Section
7-7-102.
"Lease." Section 7-2A-103.
"Lease agreement ." Section 7-2A-103.
"Lease contract." Section 7-2A-103.
"Leasehold interest ." Section 7-2A-103.
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"Lessee." Section 7-2A-103.
"Lessee in ordinary course of business ." Section
7-2A-103.
"Lessor." Section 7-2A-103.
"Lessor's residual interest ." Section 7-2A-103.
"Letter of credit ." Section 7-5-102.
"Merchant." Section 7-2-104.
"Negotiable instrument ." Section 7-3-104.
"Nominated person ." Section 7-5-102.
"Note." Section 7-3-104.
"Proceeds of a letter of credit ." Section 7-5-114.
"Protected purchaser." Section 7-8-303.
"Prove." Section 7-3-103.
"Qualifying purchaser." Section 7-12-102.
"Sale." Section 7-2-106.
"Securities account ." Section 7-8-501.
"Securities intermediary ." Section 7-8-102.
"Security." Section 7-8-102.
"Security certificate ." Section 7-8-102.
"Security entitlement ." Section 7-8-102.
"Uncertificated security ." Section 7-8-102.
(c) Article 1 definitions and principles. Article 1
contains general definitions and principles of construction
and interpretation applicable throughout this article."
"§7-9A-104. Control of deposit account.
(a) Requirements for control. A secured party has
control of a deposit account if:
(1) the secured party is the bank with which the
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deposit account is maintained;
(2) the debtor, secured party, and bank have agreed in
an authenticated a signed record that the bank will comply
with instructions originated by the secured party directing
disposition of the funds in the deposit account without
further consent by the debtor; or
(3) the secured party becomes the bank's customer with
respect to the deposit account .; or
(4) another person, other than the debtor:
(A) has control of the deposit account and acknowledges
that it has control on behalf of the secured party; or
(B) obtains control of the deposit account after having
acknowledged that it will obtain control of the deposit
account on behalf of the secured party.
(b) Debtor's right to direct disposition. A secured
party that has satisfied subsection (a) has control, even if
the debtor retains the right to direct the disposition of
funds from the deposit account."
"§7-9A-105. Control of electronic copy of record
evidencing chattel paper.
(a) General rule: control of electronic chattel paper.
A secured party has control of electronic chattel paper if a
system employed for evidencing the transfer of interests in
the chattel paper reliably establishes the secured party as
the person to which the chattel paper was assigned.
(b) Specific facts giving control. A system satisfies
subsection (a) and a secured party has control of electronic
chattel paper if the record or records comprising the chattel
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paper are created, stored, and assigned in such a manner that:
(1) a single authoritative copy of the record or
records exists which is unique, identifiable and, except as
otherwise provided in paragraphs (4), (5), and (6),
unalterable;
(2) the authoritative copy identifies the secured party
as the assignee of the record or records;
(3) the authoritative copy is communicated to and
maintained by the secured party or its designated custodian;
(4) copies or amendments that add or change an
identified assignee of the authoritative copy can be made only
with the consent of the secured party;
(5) each copy of the authoritative copy and any copy of
a copy is readily identifiable as a copy that is not the
authoritative copy; and
(6) any amendment of the authoritative copy is readily
identifiable as authorized or unauthorized.
(a) General Rule: control of electronic copy of record
evidencing chattel paper. A purchaser has control of an
authoritative electronic copy of a record evidencing chattel
paper if a system employed for evidencing the assignment of
interests in the chattel paper reliably establishes the
purchaser as the person to which the authoritative electronic
copy was assigned.
(b) Single authoritative copy. A system satisfies
subsection (a) if the record or records evidencing chattel
paper are created, stored, and assigned in a manner that:
(1) a single authoritative copy of the record or
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records exists which is unique, identifiable, and, except as
otherwise provided in paragraphs (4), (5), and (6),
unalterable;
(2) the authoritative copy identifies the purchaser as
the assignee of the record or records;
(3) the authoritative copy is communicated to and
maintained by the purchaser or its designated custodian;
(4) copies or amendments that add or change an
identified assignee of the authoritative copy can be made only
with the consent of the purchaser;
(5) each copy of the authoritative copy and any copy of
a copy is readily identifiable as a copy that is not the
authoritative copy; and
(6) any amendment of the authoritative copy is readily
identifiable as authorized or unauthorized.
(c) One or more authoritative copies. A system
satisfies subsection (a), and a purchaser has control of an
authoritative electronic copy of a record evidencing chattel
paper, if the electronic copy, a record attached to or
logically associated with the electronic copy, or a system in
which the electronic copy is recorded:
(1) enables the purchaser readily to identify each
electronic copy as either an authoritative copy or a
nonauthoritative copy;
(2) enables the purchaser readily to identify itself in
any way, including by name, identifying number, cryptographic
key, office, or account number, as the assignee of the
authoritative electronic copy; and
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(3) gives the purchaser exclusive power, subject to
subsection (d), to:
(A) prevent others from adding or changing an
identified assignee of the authoritative electronic copy; and
(B) transfer control of the authoritative electronic
copy.
(d) Meaning of exclusive. Subject to subsection (e), a
power is exclusive under subsection (c)(3)(A) and (B) even if:
(1) the authoritative electronic copy, a record
attached to or logically associated with the authoritative
electronic copy, or a system in which the authoritative
electronic copy is recorded limits the use of the
authoritative electronic copy or has a protocol programmed to
cause a change, including a transfer or loss of control; or
(2) the power is shared with another person.
(e) When power not shared with another person. A power
of a purchaser is not shared with another person under
subsection (d)(2) and the purchaser's power is not exclusive
if:
(1) the purchaser can exercise the power only if the
power also is exercised by the other person; and
(2) the other person:
(A) can exercise the power without exercise of the
power by the purchaser; or
(B) is the transferor to the purchaser of an interest
in the chattel paper.
(f) Presumption of exclusivity of certain powers. If a
purchaser has the powers specified in subsection (c)(3)(A) and
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(B), the powers are presumed to be exclusive.
(g) Obtaining control through another person. A
purchaser has control of an authoritative electronic copy of a
record evidencing chattel paper if another person, other than
the transferor to the purchaser of an interest in the chattel
paper:
(1) has control of the authoritative electronic copy
and acknowledges that it has control on behalf of the
purchaser; or
(2) obtains control of the authoritative electronic
copy after having acknowledged that it will obtain control of
the electronic copy on behalf of the purchaser. "
"§7-9A-203. Attachment and enforceability of security
interest; proceeds; supporting obligations; formal requisites.
(a) Attachment. A security interest attaches to
collateral when it becomes enforceable against the debtor with
respect to the collateral, unless an agreement expressly
postpones the time of attachment.
(b) Enforceability. Except as otherwise provided in
subsections (c) through (i), a security interest is
enforceable against the debtor and third parties with respect
to the collateral only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the
power to transfer rights in the collateral to a secured party;
and
(3) one of the following conditions is met:
(A) the debtor has authenticatedsigned a security
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agreement that provides a description of the collateral and,
if the security interest covers timber to be cut, a
description of the land concerned;
(B) the collateral is not a certificated security and
is in the possession of the secured party under Section
7-9A-313 pursuant to the debtor's security agreement;
(C) the collateral is a certificated security in
registered form and the security certificate has been
delivered to the secured party under Section 7-8-301 pursuant
to the debtor's security agreement; or
(D) the collateral is controllable accounts,
controllable electronic records, controllable payment
intangibles, deposit accounts, electronic chattel paper,
electronic documents, investment property, or letter-of-credit
rights, and the secured party has control under Section
7-7-106, 7-9A-104, 7-9A-105, 7-9A-106, or 7-9A-107, or
7-9A-107A, pursuant to the debtor's security agreement .; or
(E) the collateral is chattel paper and the secured
party has possession and control under Section 7-9A-314A
pursuant to the debtor's security agreement.
(c) Other UCC provisions. Subsection (b) is subject to
Section 7-4-210 on the security interest of a collecting bank,
Section 7-5-118 on the security interest of a letter-of-credit
issuer or nominated person, Section 7-9A-110 on a security
interest arising under Article 2 or 2A, and Section 7-9A-206
on security interests in investment property.
(d) When person becomes bound by another person's
security agreement. A person becomes bound as debtor by a
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security agreement entered into by another person if, by
operation of law other than this article or by contract:
(1) the security agreement becomes effective to create
a security interest in the person's property; or
(2) the person becomes generally obligated for the
obligations of the other person, including the obligation
secured under the security agreement, and acquires or succeeds
to all or substantially all of the assets of the other person.
(e) Effect of new debtor becoming bound. If a new
debtor becomes bound as debtor by a security agreement entered
into by another person:
(1) the agreement satisfies subsection (b)(3) with
respect to existing or after-acquired property of the new
debtor to the extent the property is described in the
agreement; and
(2) another agreement is not necessary to make a
security interest in the property enforceable.
(f) Proceeds and supporting obligations. The attachment
of a security interest in collateral gives the secured party
the rights to proceeds provided by Section 7-9A-315 and is
also attachment of a security interest in a supporting
obligation for the collateral.
(g) Lien securing right to payment. The attachment of a
security interest in a right to payment or performance secured
by a security interest or other lien on personal or real
property is also attachment of a security interest in the
security interest, mortgage, or other lien.
(h) Security entitlement carried in securities account.
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The attachment of a security interest in a securities account
is also attachment of a security interest in the security
entitlements carried in the securities account.
(i) Commodity contracts carried in commodity account.
The attachment of a security interest in a commodity account
is also attachment of a security interest in the commodity
contracts carried in the commodity account."
"§7-9A-204. After-acquired property; future advances.
(a) After-acquired collateral. Except as otherwise
provided in subsection (b), a security agreement may create or
provide for a security interest in after-acquired collateral.
(b) When after-acquired property clause not effective.
A Subject to subsection (b.1), a security interest does not
attach under a term constituting an after-acquired property
clause to:
(1) consumer goods, other than an accession when given
as additional security, unless the debtor acquires rights in
them within 10 days after the secured party gives value; or
(2) a commercial tort claim.
(b.1) Limitation on subsection (b). Subsection (b) does
not prevent a security interest from attaching:
(1) to consumer goods as proceeds under Section
7-9A-315(a) or commingled goods under Section 7-9A-336(c);
(2) to a commercial tort claim as proceeds under
Section 7-9A-315(a); or
(3) under an after-acquired property clause to property
that is proceeds of consumer goods or a commercial tort claim.
(c) Future advances and other value. A security
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agreement may provide that collateral secures, or that
accounts, chattel paper, payment intangibles, or promissory
notes are sold in connection with, future advances or other
value, whether or not the advances or value are given pursuant
to commitment."
"§7-9A-207. Rights and duties of secured party having
possession or control of collateral.
(a) Duty of care when secured party in possession.
Except as otherwise provided in subsection (d), a secured
party shall use reasonable care in the custody and
preservation of collateral in the secured party's possession.
In the case of chattel paper or an instrument, reasonable care
includes taking necessary steps to preserve rights against
prior parties unless otherwise agreed.
(b) Expenses, risks, duties, and rights when secured
party in possession. Except as otherwise provided in
subsection (d), if a secured party has possession of
collateral:
(1) reasonable expenses, including the cost of
insurance and payment of taxes or other charges, incurred in
the custody, preservation, use, or operation of the collateral
are chargeable to the debtor and are secured by the
collateral;
(2) the risk of accidental loss or damage is on the
debtor to the extent of a deficiency in any effective
insurance coverage;
(3) the secured party shall keep the collateral
identifiable, but fungible collateral may be commingled; and
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(4) the secured party may use or operate the
collateral:
(A) for the purpose of preserving the collateral or its
value;
(B) as permitted by an order of a court having
competent jurisdiction; or
(C) except in the case of consumer goods, in the manner
and to the extent agreed by the debtor.
(c) Duties and rights when secured party in possession
or control. Except as otherwise provided in subsection (d), a
secured party having possession of collateral or control of
collateral under Section 7-7-106, 7-9A-104, 7-9A-105,
7-9A-106, or 7-9A-107, or 7-9A-107A:
(1) may hold as additional security any proceeds,
except money or funds, received from the collateral;
(2) shall apply money or funds received from the
collateral to reduce the secured obligation, unless remitted
to the debtor; and
(3) may create a security interest in the collateral.
(d) Buyer of certain rights to payment. If the secured
party is a buyer of accounts, chattel paper, payment
intangibles, or promissory notes or a consignor:
(1) subsection (a) does not apply unless the secured
party is entitled under an agreement:
(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse against the
debtor or a secondary obligor based on the nonpayment or other
default of an account debtor or other obligor on the
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collateral; and
(2) subsections (b) and (c) do not apply."
"§7-9A-208. Additional duties of secured party having
control of collateral.
(a) Applicability of section. This section applies to
cases in which there is no outstanding secured obligation and
the secured party is not committed to make advances, incur
obligations, or otherwise give value.
(b) Duties of secured party after receiving demand from
debtor. Within 10 days after receiving an authenticated a
signed demand by the debtor:
(1) a secured party having control of a deposit account
under Section 7-9A-104(a)(2) shall send to the bank with which
the deposit account is maintained an authenticated a signed
record statement that releases the bank from any further
obligation to comply with instructions originated by the
secured party;
(2) a secured party having control of a deposit account
under Section 7-9A-104(a)(3) shall:
(A) pay the debtor the balance on deposit in the
deposit account; or
(B) transfer the balance on deposit into a deposit
account in the debtor's name;
(3) a secured party, other than a buyer, having control
of electronic chattel paper under Section 7-9A-105 of an
authoritative electronic copy of a record evidencing chattel
paper shall transfer control of the electronic copy to the
debtor or a person designated by the debtor; shall:
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(A) communicate the authoritative copy of the
electronic chattel paper to the debtor or its designated
custodian;
(B) if the debtor designates a custodian that is the
designated custodian with which the authoritative copy of the
electronic chattel paper is maintained for the secured party,
communicate to the custodian an authenticated record releasing
the designated custodian from any further obligation to comply
with instructions originated by the secured party and
instructing the custodian to comply with instructions
originated by the debtor; and
(C) take appropriate action to enable the debtor or its
designated custodian to make copies of or revisions to the
authoritative copy which add or change an identified assignee
of the authoritative copy without the consent of the secured
party;
(4) a secured party having control of investment
property under Section 7-8-106(d)(2) or 7-9A-106(b) shall send
to the securities intermediary or commodity intermediary with
which the security entitlement or commodity contract is
maintained an authenticated a signed record that releases the
securities intermediary or commodity intermediary from any
further obligation to comply with entitlement orders or
directions originated by the secured party;
(5) a secured party having control of a
letter-of-credit right under Section 7-9A-107 shall send to
each person having an unfulfilled obligation to pay or deliver
proceeds of the letter of credit to the secured party an
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authenticated a signed release from any further obligation to
pay or deliver proceeds of the letter of credit to the secured
party.;
(6) a secured party having control of an electronic
document shall:
a. Give control of the electronic document to the
debtor or its designated custodian;
b. If the debtor designates a custodian that is the
designated custodian with which the authoritative copy of the
electronic document is maintained for the secured party,
communicate to the custodian an authenticated record releasing
the designated custodian from any further obligation to comply
with instructions originated by the secured party and
instructing the custodian to comply with instructions
originated by the debtor; and
c. Take appropriate action to enable the debtor or its
designated custodian to make copies of or revisions to the
authoritative copy which add or change an identified assignee
of the authoritative copy without the consent of the secured
party.
(6) a secured party having control under Section
7-7-106 of an authoritative electronic copy of an electronic
document shall transfer control of the electronic copy to the
debtor or a person designated by the debtor; and
(7) a secured party having control under Section
7-12-105 of a controllable electronic record, other than a
buyer of a controllable account or controllable payment
intangible evidenced by the controllable electronic record,
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shall transfer control of the controllable electronic record
to the debtor or a person designated by the debtor.
(c) Authenticated Signed demand. In this section,
"authenticated signed demand" means a record authenticated
signed by the debtor demanding that the secured party take one
or more of the specific actions described in subsection (b)
and reasonably identifying the collateral that is the subject
of the demand. The secured party may designate in a record
sent to the debtor or as to which the debtor has notice an
address to which such demands must be sent. A demand sent to
another address of the secured party will be effective, but
the 10-day period for action by the secured party does not
begin until the person or department at the address specified
by the secured party has notice of the demand."
"§7-9A-209. Duties of secured party if account debtor
has been notified of assignment.
(a) Applicability of section. Except as otherwise
provided in subsection (c), this section applies if:
(1) there is no outstanding secured obligation; and
(2) the secured party is not committed to make
advances, incur obligations, or otherwise give value.
(b) Duties of secured party after receiving demand from
debtor. Within 10 days after receiving an authenticated a
signed demand by the debtor, a secured party shall send to an
account debtor that has received notification , under Section
7-9A-406(a) or 7-12-106(b), of an assignment to the secured
party as assignee under Section 7-9A-406(a) an authenticated a
signed record that releases the account debtor from any
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further obligation to the secured party.
(c) Inapplicability to sales. This section does not
apply to an assignment constituting the sale of an account,
chattel paper, or payment intangible.
(d) Authenticated Signed demand. In this section,
"authenticated signed demand" means a record signed
authenticated by the debtor demanding that the secured party
take the action described in subsection (b). The secured party
may designate in a record sent to the debtor or as to which
the debtor has notice an address to which such demand must be
sent. A demand sent to another address of the secured party
will be effective, but the 10-day period for action by the
secured party does not begin until the person or department at
the address specified by the secured party has notice of the
demand."
"§7-9A-210. Request for accounting; request regarding
list of collateral or statement of account.
(a) Definitions. In this section:
(1) "Request" means a record of a type described in
paragraph (2), (3), or (4).
(2) "Request for an accounting" means a record
authenticated signed by a debtor requesting that the recipient
provide an accounting of the unpaid obligations secured by
collateral and reasonably identifying the transaction or
relationship that is the subject of the request.
(3) "Request regarding a list of collateral" means a
record authenticated signed by a debtor requesting that the
recipient approve or correct a list of what the debtor
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believes to be the collateral securing an obligation and
reasonably identifying the transaction or relationship that is
the subject of the request.
(4) "Request regarding a statement of account" means a
record authenticated signed by a debtor requesting that the
recipient approve or correct a statement indicating what the
debtor believes to be the aggregate amount of unpaid
obligations secured by collateral as of a specified date and
reasonably identifying the transaction or relationship that is
the subject of the request.
(b) Duty to respond to requests. Subject to subsections
(c), (d), (e), and (f), a secured party, other than a buyer of
accounts, chattel paper, payment intangibles, or promissory
notes or a consignor, shall comply with a request within 14
days after receipt:
(1) in the case of a request for an accounting, by
authenticating signing and sending to the debtor an
accounting; and
(2) in the case of a request regarding a list of
collateral or a request regarding a statement of account, by
authenticating signing and sending to the debtor an approval
or correction.
(c) Request regarding list of collateral; statement
concerning type of collateral. A secured party that claims a
security interest in all of a particular type of collateral
owned by the debtor may comply with a request regarding a list
of collateral by sending to the debtor an authenticated a
signed record including a statement to that effect within 14
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days after receipt.
(d) Request regarding list of collateral; no interest
claimed. A person that receives a request regarding a list of
collateral, claims no interest in the collateral when it
receives the request, and claimed an interest in the
collateral at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an
authenticated a signed record:
(1) disclaiming any interest in the collateral; and
(2) if known to the recipient, providing the name and
mailing address of any assignee of or successor to the
recipient's interest in the collateral.
(e) Request for accounting or regarding statement of
account; no interest in obligation claimed. A person that
receives a request for an accounting or a request regarding a
statement of account, claims no interest in the obligations
when it receives the request, and claimed an interest in the
obligations at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an
authenticated  a signed record:
(1) disclaiming any interest in the obligations; and
(2) if known to the recipient, providing the name and
mailing address of any assignee of or successor to the
recipient's interest in the obligations.
(f) Charges for responses. A debtor is entitled without
charge to one response to a request under this section during
any six-month period. The secured party may require payment of
a charge not exceeding $25twenty-five dollars ($25) for each
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additional response.
(g) Designation of address for request. The secured
party may designate in a record sent to the debtor,
authenticated signed by the debtor, or, as to which the debtor
has notice, an address to which a request under this section
must be sent. A request sent to another address of the secured
party will be effective, but the 14-day period for action by
the secured party does not begin until the person or
department at the address specified by the secured party has
notice of the request."
"§7-9A-301. Law governing perfection and priority of
security interests.
Except as otherwise provided in Sections 7-9A-303
through 7-9A-306 7-9A-306B, the following rules determine the
law governing perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral:
(1) Except as otherwise provided in this section, while
a debtor is located in a jurisdiction, the local law of that
jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral.
(2) While collateral is located in a jurisdiction, the
local law of that jurisdiction governs perfection, the effect
of perfection or nonperfection, and the priority of a
possessory security interest in that collateral.
(3) Except as otherwise provided in paragraph (4),
while tangible negotiable tangible documents, goods,
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instruments, or money, or tangible chattel paper is located in
a jurisdiction, the local law of that jurisdiction governs:
(A) perfection of a security interest in the goods by
filing a fixture filing;
(B) perfection of a security interest in timber to be
cut; and
(C) the effect of perfection or nonperfection and the
priority of a nonpossessory security interest in the
collateral.
(4) The local law of the jurisdiction in which the
wellhead or mine is located governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in as-extracted collateral."
"§7-9A-304. Law governing perfection and priority of
security interests in deposit accounts.
(a) Law of bank's jurisdiction governs. The local law
of a bank's jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in a deposit account maintained with that bank even
if the transaction does not bear any relation to the bank's
jurisdiction.
(b) Bank's jurisdiction. The following rules determine
a bank's jurisdiction for purposes of this part:
(1) If an agreement between the bank and the debtor
governing the deposit account expressly provides that a
particular jurisdiction is the bank's jurisdiction for
purposes of this part, this article, or the Uniform Commercial
Code, that jurisdiction is the bank's jurisdiction.
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(2) If paragraph (1) does not apply and an agreement
between the bank and its customer governing the deposit
account expressly provides that the agreement is governed by
the law of a particular jurisdiction, that jurisdiction is the
bank's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies
and an agreement between the bank and its customer governing
the deposit account expressly provides that the deposit
account is maintained at an office in a particular
jurisdiction, that jurisdiction is the bank's jurisdiction.
(4) If none of the preceding paragraphs applies, the
bank's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the
customer's account is located.
(5) If none of the preceding paragraphs applies, the
bank's jurisdiction is the jurisdiction in which the chief
executive office of the bank is located."
"§7-9A-305. Law governing perfection and priority of
security interests in investment property.
(a) Governing law: General rules. Except as otherwise
provided in subsection (c), the following rules apply:
(1) While a security certificate is located in a
jurisdiction, the local law of that jurisdiction governs
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in the certificated security
represented thereby.
(2) The local law of the issuer's jurisdiction as
specified in Section 7-8-110(d) governs perfection, the effect
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of perfection or nonperfection, and the priority of a security
interest in an uncertificated security.
(3) The local law of the securities intermediary's
jurisdiction as specified in Section 7-8-110(e) governs
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in a security entitlement or
securities account.
(4) The local law of the commodity intermediary's
jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in a
commodity contract or commodity account.
(5) Paragraphs (2), (3), and (4) apply even if the
transaction does not bear any relation to the jurisdiction.
(b) Commodity intermediary's jurisdiction. The
following rules determine a commodity intermediary's
jurisdiction for purposes of this part:
(1) If an agreement between the commodity intermediary
and commodity customer governing the commodity account
expressly provides that a particular jurisdiction is the
commodity intermediary's jurisdiction for purposes of this
part, this article, or the Uniform Commercial Code, that
jurisdiction is the commodity intermediary's jurisdiction.
(2) If paragraph (1) does not apply and an agreement
between the commodity intermediary and commodity customer
governing the commodity account expressly provides that the
agreement is governed by the law of a particular jurisdiction,
that jurisdiction is the commodity intermediary's
jurisdiction.
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(3) If neither paragraph (1) nor paragraph (2) applies
and an agreement between the commodity intermediary and
commodity customer governing the commodity account expressly
provides that the commodity account is maintained at an office
in a particular jurisdiction, that jurisdiction is the
commodity intermediary's jurisdiction.
(4) If none of the preceding paragraphs applies, the
commodity intermediary's jurisdiction is the jurisdiction in
which the office identified in an account statement as the
office serving the commodity customer's account is located.
(5) If none of the preceding paragraphs applies, the
commodity intermediary's jurisdiction is the jurisdiction in
which the chief executive office of the commodity intermediary
is located.
(c) When perfection governed by law of jurisdiction
where debtor located. The local law of the jurisdiction in
which the debtor is located governs:
(1) perfection of a security interest in investment
property by filing;
(2) automatic perfection of a security interest in
investment property created by a broker or securities
intermediary; and
(3) automatic perfection of a security interest in a
commodity contract or commodity account created by a commodity
intermediary."
"§7-9A-310. When filing required to perfect security
interest or agricultural lien; security interests and
agricultural liens to which filing provisions do not apply.
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(a) General rule: Perfection by filing. Except as
otherwise provided in subsection (b) and Section 7-9A-312(b),
a financing statement must be filed to perfect all security
interests and agricultural liens.
(b) Exceptions: Filing not necessary. The filing of a
financing statement is not necessary to perfect a security
interest:
(1) that is perfected under Section 7-9A-308(d), (e),
(f), or (g);
(2) that is perfected under Section 7-9A-309 when it
attaches;
(3) in property subject to a statute, regulation, or
treaty described in Section 7-9A-311(a);
(4) in goods in possession of a bailee which is
perfected under Section 7-9A-312(d)(1) or (2);
(5) in certificated securities, documents, goods, or
instruments which is perfected without filing, control, or
possession under Section 7-9A-312(e), (f), or (g);
(6) in collateral in the secured party's possession
under Section 7-9A-313;
(7) in a certificated security which is perfected by
delivery of the security certificate to the secured party
under Section 7-9A-313;
(8) in controllable accounts, controllable electronic
records, controllable payment intangibles, deposit accounts,
electronic documents, electronic chattel paper, investment
property, or letter-of-credit rights which is perfected by
control under Section 7-9A-314;
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(8A) in chattel paper which is perfected by possession
and control under Section 7-9A-314A;
(9) in proceeds which is perfected under Section
7-9A-315; or
(10) that is perfected under Section 7-9A-316.
(c) Assignment of perfected security interest. If a
secured party assigns a perfected security interest or
agricultural lien, a filing under this article is not required
to continue the perfected status of the security interest
against creditors of and transferees from the original debtor.
"§7-9A-312. Perfection of certain security interests by
filing; temporary perfection Perfection of security interests
in chattel paper, controllable accounts, controllable
electronic records, controllable payment intangibles, deposit
accounts, negotiable documents, goods covered by documents,
instruments, investment property, letter-of-credit rights, and
money; perfection by permissive filing; temporary without
filing or transfer of possession .
(a) Perfection by filing permitted. A security interest
in chattel paper, controllable accounts, controllable
electronic records, controllable payment intangibles,
negotiable documents, instruments, or investment property , or
negotiable documents may be perfected by filing.
(b) Control or possession of certain collateral. Except
as otherwise provided in Section 7-9A-315(c) and (d) for
proceeds:
(1) a security interest in a deposit account may be
perfected only by control under Section 7-9A-314;
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(2) and except as otherwise provided in Section
7-9A-308(d), a security interest in a letter-of-credit right
may be perfected only by control under Section 7-9A-314; and
(3) a security interest in money may be perfected only
by the secured party's taking possession under Section
7-9A-313.
(c) Goods covered by negotiable document. While goods
are in the possession of a bailee that has issued a negotiable
document covering the goods:
(1) a security interest in the goods may be perfected
by perfecting a security interest in the document; and
(2) a security interest perfected in the document has
priority over any security interest that becomes perfected in
the goods by another method during that time.
(d) Goods covered by nonnegotiable document. While
goods are in the possession of a bailee that has issued a
nonnegotiable document covering the goods, a security interest
in the goods may be perfected by:
(1) issuance of a document in the name of the secured
party;
(2) the bailee's receipt of notification of the secured
party's interest; or
(3) filing as to the goods.
(e) Temporary perfection: New value. A security
interest in certificated securities, negotiable documents, or
instruments is perfected without filing or the taking of
possession or control for a period of 20 days from the time it
attaches to the extent that it arises for new value given
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under an authenticated a signed security agreement.
(f) Temporary perfection: Goods or documents made
available to debtor. A perfected security interest in a
negotiable document or goods in possession of a bailee, other
than one that has issued a negotiable document for the goods,
remains perfected for 20 days without filing if the secured
party makes available to the debtor the goods or documents
representing the goods for the purpose of:
(1) ultimate sale or exchange; or
(2) loading, unloading, storing, shipping,
transshipping, manufacturing, processing, or otherwise dealing
with them in a manner preliminary to their sale or exchange.
(g) Temporary perfection: Delivery of security
certificate or instrument to debtor. A perfected security
interest in a certificated security or instrument remains
perfected for 20 days without filing if the secured party
delivers the security certificate or instrument to the debtor
for the purpose of:
(1) ultimate sale or exchange; or
(2) presentation, collection, enforcement, renewal, or
registration of transfer.
(h) Expiration of temporary perfection. After the
20-day period specified in subsection (e), (f), or (g)
expires, perfection depends upon compliance with this
article."
"§7-9A-313. When possession by or delivery to secured
party perfects security interest without filing.
(a) Perfection by possession or delivery. Except as
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otherwise provided in subsection (b), a secured party may
perfect a security interest in tangible negotiable documents,
goods, instruments, negotiable tangible documents, or money,
or tangible chattel paper by taking possession of the
collateral. A secured party may perfect a security interest in
certificated securities by taking delivery of the certificated
securities under Section 7-8-301.
(b) Goods covered by certificate of title. With respect
to goods covered by a certificate of title issued by this
State, a secured party may perfect a security interest in the
goods by taking possession of the goods only in the
circumstances described in Section 7-9A-316(d).
(c) Collateral in possession of person other than
debtor. With respect to collateral other than certificated
securities and goods covered by a document, a secured party
takes possession of collateral in the possession of a person
other than the debtor, the secured party, or a lessee of the
collateral from the debtor in the ordinary course of the
debtor's business, when:
(1) the person in possession authenticates signs a
record acknowledging that it holds possession of the
collateral for the secured party's benefit; or
(2) the person takes possession of the collateral after
having authenticated signed a record acknowledging that it
will hold possession of the collateral for the secured party's
benefit.
(d) Time of perfection by possession; continuation of
perfection. If perfection of a security interest depends upon
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possession of the collateral by a secured party, perfection
occurs no not earlier than the time the secured party takes
possession and continues only while the secured party retains
possession.
(e) Time of perfection by delivery; continuation of
perfection. A security interest in a certificated security in
registered form is perfected by delivery when delivery of the
certificated security occurs under Section 7-8-301 and remains
perfected by delivery until the debtor obtains possession of
the security certificate.
(f) Acknowledgment not required. A person in possession
of collateral is not required to acknowledge that it holds
possession for a secured party's benefit.
(g) Effectiveness of acknowledgment; no duties or
confirmation. If a person acknowledges that it holds
possession for the secured party's benefit:
(1) the acknowledgment is effective under subsection
(c) or Section 7-8-301(a), even if the acknowledgment violates
the rights of a debtor; and
(2) unless the person otherwise agrees or law other
than this article otherwise provides, the person does not owe
any duty to the secured party and is not required to confirm
the acknowledgment to another person.
(h) Secured party's delivery to person other than
debtor. A secured party having possession of collateral does
not relinquish possession by delivering the collateral to a
person other than the debtor or a lessee of the collateral
from the debtor in the ordinary course of the debtor's
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business if the person was instructed before the delivery or
is instructed contemporaneously with the delivery:
(1) to hold possession of the collateral for the
secured party's benefit; or
(2) to redeliver the collateral to the secured party.
(i) Effect of delivery under subsection (h); no duties
or confirmation. A secured party does not relinquish
possession, even if a delivery under subsection (h) violates
the rights of a debtor. A person to which collateral is
delivered under subsection (h) does not owe any duty to the
secured party and is not required to confirm the delivery to
another person unless the person otherwise agrees or law other
than this article otherwise provides."
"§7-9A-314. Perfection by control.
(a) Perfection by control. A security interest in
investment property, deposit accounts, letter-of-credit
rights, electronic chattel paper, or electronic documents
controllable accounts, controllable electronic records,
controllable payment intangibles, deposit accounts, electronic
documents, investment property, or letter-of-credit rights may
be perfected by control of the collateral under Section
7-7-106, 7-9A-104, 7-9A-105, 7-9A-106, or 7-9A-107, or
7-9A-107A.
(b) Specified collateral: Time of perfection by
control; continuation of perfection. A security interest in
deposit accounts, electronic chattel paper, letter-of-credit
rights, or electronic documents controllable accounts,
controllable electronic records, controllable payment
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intangibles, deposit accounts, electronic documents, or
letter-of-credit rights is perfected by control under Section
7-7-106, 7-9A-104, 7-9A-105, or 7-9A-107, or 7-9A-107A when 
not earlier than the time the secured party obtains control
and remains perfected by control only while the secured party
retains control.
(c) Investment property: Time of perfection by control;
continuation of perfection. A security interest in investment
property is perfected by control under Section 7-9A-106 from
not earlier than the time the secured party obtains control
and remains perfected by control until:
(1) the secured party does not have control; and
(2) one of the following occurs:
(A) if the collateral is a certificated security, the
debtor has or acquires possession of the security certificate;
(B) if the collateral is an uncertificated security,
the issuer has registered or registers the debtor as the
registered owner; or
(C) if the collateral is a security entitlement, the
debtor is or becomes the entitlement holder.
"§7-9A-316. Effect of Continued perfection of security
interest following change in governing law.
(a) General rule: Effect on change in governing law
existing.perfection of change in governing law. A security
interest perfected pursuant to the law of the jurisdiction
designated in Section 7-9A-301(1) ,or 7-9A-305(c),
7-9A-306A(d), or 7-9A-306B(b) remains perfected until the
earliest of:
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(1) the time perfection would have ceased under the law
of that jurisdiction;
(2) the expiration of four months after a change of the
debtor's location to another jurisdiction; or
(3) the expiration of one year after a transfer of
collateral to a person that thereby becomes a debtor and is
located in another jurisdiction.
(b) Security interest perfected or unperfected under
law of new jurisdiction. If a security interest described in
subsection (a) becomes perfected under the law of the other
jurisdiction before the earliest time or event described in
that subsection, it remains perfected thereafter. If the
security interest does not become perfected under the law of
the other jurisdiction before the earliest time or event, it
becomes unperfected and is deemed never to have been perfected
as against a purchaser of the collateral for value.
(c) Possessory security interest in collateral moved to
new jurisdiction. A possessory security interest in
collateral, other than goods covered by a certificate of title
and as-extracted collateral consisting of goods, remains
continuously perfected if:
(1) the collateral is located in one jurisdiction and
subject to a security interest perfected under the law of that
jurisdiction;
(2) thereafter the collateral is brought into another
jurisdiction; and
(3) upon entry into the other jurisdiction, the
security interest is perfected under the law of the other
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jurisdiction.
(d) Goods covered by certificate of title from this
State. Except as otherwise provided in subsection (e), a
security interest in goods covered by a certificate of title
which is perfected by any method under the law of another
jurisdiction when the goods become covered by a certificate of
title from this State remains perfected until the security
interest would have become unperfected under the law of the
other jurisdiction had the goods not become so covered.
(e) When subsection (d) security interest becomes
unperfected against purchasers. A security interest described
in subsection (d) becomes unperfected as against a purchaser
of the goods for value and is deemed never to have been
perfected as against a purchaser of the goods for value if the
applicable requirements for perfection under Section
7-9A-311(b) or 7-9A-313 are not satisfied before the earlier
of:
(1) the time the security interest would have become
unperfected under the law of the other jurisdiction had the
goods not become covered by a certificate of title from this
State; or
(2) the expiration of four months after the goods had
become so covered.
(f) Change in jurisdiction of bank, issuer, nominated
person, securities intermediary, or commodity
intermediary.Change in jurisdiction of chattel paper,
controllable electronic record, bank, issuer, nominated
person, securities intermediary, or commodity intermediary. A
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security interest in chattel paper, controllable accounts,
controllable electronic accounts, controllable payment
intangibles, deposit accounts, letter-of-credit rights, or
investment property which is perfected under the law of the
chattel paper's jurisdiction, the controllable electronic
record's jurisdiction, the bank's jurisdiction, the issuer's
jurisdiction, a nominated person's jurisdiction, the
securities intermediary's jurisdiction, or the commodity
intermediary's jurisdiction, as applicable, remains perfected
until the earlier of:
(1) the time the security interest would have become
unperfected under the law of that jurisdiction; or
(2) the expiration of four months after a change of the
applicable jurisdiction to another jurisdiction.
(g) Subsection (f) security interest perfected or
unperfected under law of new jurisdiction. If a security
interest described in subsection (f) becomes perfected under
the law of the other jurisdiction before the earlier of the
time or the end of the period described in that subsection, it
remains perfected thereafter. If the security interest does
not become perfected under the law of the other jurisdiction
before the earlier of that time or the end of that period, it
becomes unperfected and is deemed never to have been perfected
as against a purchaser of the collateral for value.
(h) Effect on filed financing statement of change in
governing law. The following rules apply to collateral to
which a security interest attaches within four months after
the debtor changes its location to another jurisdiction:
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(1) A financing statement filed before the change
pursuant to the law of the jurisdiction designated in Section
7-9A-301(1) or 7-9A-305(c) is effective to perfect a security
interest in the collateral if the financing statement would
have been effective to perfect a security interest in the
collateral if the debtor had not changed its location.
(2) If a security interest that is perfected by a
financing statement that is effective under paragraph (1)
becomes perfected under the law of the other jurisdiction
before the earlier of the time the financing statement would
have become ineffective under the law of the jurisdiction
designated in Section 7-9A-301(1) or 7-9A-305(c) or the
expiration of the four-month period, it remains perfected
thereafter. If the security interest does not become perfected
under the law of the other jurisdiction before the earlier
time or event, it becomes unperfected and is deemed never to
have been perfected as against a purchaser of the collateral
for value.
(i) Effect of change in governing law on financing
statement filed against original debtor. If a financing
statement naming an original debtor is filed pursuant to the
law of the jurisdiction designated in Section 7-9A-301(1) or
7-9A-305(c) and the new debtor is located in another
jurisdiction, the following rules apply:
(1) The financing statement is effective to perfect a
security interest in collateral acquired by the new debtor
before, and within four months after, the new debtor becomes
bound under Section 7-9A-203(d), if the financing statement
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would have been effective to perfect a security interest in
the collateral if the collateral had been acquired by the
original debtor.
(2) A security interest that is perfected by the
financing statement and which becomes perfected under the law
of the other jurisdiction before the earlier of the expiration
of the four-month period or the time the financing statement
would have become ineffective under the law of the
jurisdiction designated in Section 7-9A-301(1) or 7-9A-305(c)
remains perfected thereafter. A security interest that is
perfected by the financing statement but which does not become
perfected under the law of the other jurisdiction before the
earlier time or event becomes unperfected and is deemed never
to have been perfected as against a purchaser of the
collateral for value."
"§7-9A-317. Interests that take priority over or take
free of security interest or agricultural lien.
(a) Conflicting security interests and rights of lien
creditors. A security interest or agricultural lien is
subordinate to the rights of:
(1) a person entitled to priority under Section
7-9A-322; and
(2) except as otherwise provided in subsection (e), a
person that becomes a lien creditor before the earlier of the
time:
(A) the security interest or agricultural lien is
perfected; or
(B) one of the conditions specified in Section
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7-9A-203(b)(3) is met and a financing statement covering the
collateral is filed.
(b) Buyers that receive delivery. Except as otherwise
provided in subsection (e), a buyer, other than a secured
party, of tangible chattel paper, tangible documents, of
goods, instruments, tangible documents, or a certificated
security takes free of a security interest or agricultural
lien if the buyer gives value and receives delivery of the
collateral without knowledge of the security interest or
agricultural lien and before it is perfected.
(c) Lessees that receive delivery. Except as otherwise
provided in subsection (e), a lessee of goods takes free of a
security interest or agricultural lien if the lessee gives
value and receives delivery of the collateral without
knowledge of the security interest or agricultural lien and
before it is perfected.
(d) Licensees and buyers of certain collateral. A
Subject to subsections (f) through (i), a licensee of a
general intangible or a buyer, other than a secured party, of
collateral other than tangible chattel paper , tangible
documents, goods, instruments, tangible documents, or a
certificated security takes free of a security interest if the
licensee or buyer gives value without knowledge of the
security interest and before it is perfected.
(e) Purchase-money security interest. Except as
otherwise provided in Sections 7-9A-320 and 7-9A-321, if a
person files a financing statement with respect to a
purchase-money security interest before or within 20 days
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after the debtor receives delivery of the collateral, the
security interest takes priority over the rights of a buyer,
lessee, or lien creditor which arise between the time the
security interest attaches and the time of filing.
(f) Buyers of chattel paper. A buyer, other than a
secured party, of chattel paper takes free of a security
interest if, without knowledge of the security interest and
before it is perfected, the buyer gives value and:
(1) receives delivery of each authoritative tangible
copy of the record evidencing the chattel paper; and
(2) if each authoritative electronic copy of the record
evidencing the chattel paper can be subjected to control under
Section 7-9A-105, obtains control of each authoritative
electronic copy.
(g) Buyers of electronic documents. A buyer of an
electronic document takes free of a security interest if,
without knowledge of the security interest and before it is
perfected, the buyer gives value and, if each authoritative
electronic copy of the document can be subjected to control
under Section 7-7-106, obtains control of each authoritative
electronic copy.
(h) Buyers of controllable electronic records. A buyer
of a controllable electronic record takes free of a security
interest if, without knowledge of the security interest and
before it is perfected, the buyer gives value and obtains
control of the controllable electronic record.
(i) Buyers of controllable accounts and controllable
payment intangibles. A buyer, other than a secured party, of a
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controllable account or a controllable payment intangible
takes free of a security interest if, without knowledge of the
security interest and before it is perfected, the buyer gives
value and obtains control of the controllable account or
controllable payment intangible. "
"§7-9A-323. Future advances.
(a) When priority based on time of advance. Except as
otherwise provided in subsection (c), for purposes of
determining the priority of a perfected security interest
under Section 7-9A-322(a)(1), perfection of the security
interest dates from the time an advance is made to the extent
that the security interest secures an advance that:
(1) is made while the security interest is perfected
only:
(A) under Section 7-9A-309 when it attaches; or
(B) temporarily under Section 7-9A-312(e), (f), or (g);
and
(2) is not made pursuant to a commitment entered into
before or while the security interest is perfected by a method
other than under Section 7-9A-309 or 7-9A-312(e), (f), or (g).
(b) Lien creditor. Except as otherwise provided in
subsection (c), a security interest is subordinate to the
rights of a person that becomes a lien creditor to the extent
that the security interest secures an advance made more than
45 days after the person becomes a lien creditor unless the
advance is made:
(1) without knowledge of the lien; or
(2) pursuant to a commitment entered into without
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knowledge of the lien.
(c) Buyer of receivables. Subsections (a) and (b) do
not apply to a security interest held by a secured party that
is a buyer of accounts, chattel paper, payment intangibles, or
promissory notes or a consignor.
(d) Buyer of goods. Except as otherwise provided in
subsection (e), a buyer of goods other than a buyer in
ordinary course of business takes free of a security interest
to the extent that it secures advances made after the earlier
of:
(1) the time the secured party acquires knowledge of
the buyer's purchase; or
(2) 45 days after the purchase.
(e) Advances made pursuant to commitment: Priority of
buyer of goods. Subsection (d) does not apply if the advance
is made pursuant to a commitment entered into without
knowledge of the buyer's purchase and before the expiration of
the 45-day period.
(f) Lessee of goods. Except as otherwise provided in
subsection (g), a lessee of goods , other than a lessee in
ordinary course of business, takes the leasehold interest free
of a security interest to the extent that it secures advances
made after the earlier of:
(1) the time the secured party acquires knowledge of
the lease; or
(2) 45 days after the lease contract becomes
enforceable.
(g) Advances made pursuant to commitment: Priority of
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lessee of goods. Subsection (f) does not apply if the advance
is made pursuant to a commitment entered into without
knowledge of the lease and before the expiration of the 45-day
period."
"§7-9A-324. Priority of purchase-money security
interests.
(a) General rule: Purchase-money priority. Except as
otherwise provided in subsection (g), a perfected
purchase-money security interest in goods other than inventory
or livestock has priority over a conflicting security interest
in the same goods, and, except as otherwise provided in
Section 7-9A-327, a perfected security interest in its
identifiable proceeds also has priority, if the purchase-money
security interest is perfected when the debtor receives
possession of the collateral or within 20 days thereafter.
(b) Inventory purchase-money priority. Subject to
subsection (c) and except as otherwise provided in subsection
(g), a perfected purchase-money security interest in inventory
has priority over a conflicting security interest in the same
inventory, has priority over a conflicting security interest
in chattel paper or an instrument constituting proceeds of the
inventory and in proceeds of the chattel paper, if so provided
in Section 7-9A-330, and, except as otherwise provided in
Section 7-9A-327, also has priority in identifiable cash
proceeds of the inventory to the extent the identifiable cash
proceeds are received on or before the delivery of the
inventory to a buyer, if:
(1) the purchase-money security interest is perfected
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when the debtor receives possession of the inventory;
(2) the purchase-money secured party sends an
authenticated a signed notification to the holder of the
conflicting security interest;
(3) the holder of the conflicting security interest
receives the notification within five years before the debtor
receives possession of the inventory; and
(4) the notification states that the person sending the
notification has or expects to acquire a purchase-money
security interest in inventory of the debtor and describes the
inventory.
(c) Holders of conflicting inventory security interests
to be notified. Subsections (b)(2) through (4) apply only if
the holder of the conflicting security interest had filed a
financing statement covering the same types of inventory:
(1) if the purchase-money security interest is
perfected by filing, before the date of the filing; or
(2) if the purchase-money security interest is
temporarily perfected without filing or possession under
Section 7-9A-312(f), before the beginning of the 20-day period
thereunder.
(d) Livestock purchase-money priority. Subject to
subsection (e) and except as otherwise provided in subsection
(g), a perfected purchase-money security interest in livestock
that are farm products has priority over a conflicting
security interest in the same livestock, and, except as
otherwise provided in Section 7-9A-327, a perfected security
interest in their identifiable proceeds and identifiable
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products in their unmanufactured states also has priority, if:
(1) the purchase-money security interest is perfected
when the debtor receives possession of the livestock;
(2) the purchase-money secured party sends an
authenticated a signed notification to the holder of the
conflicting security interest;
(3) the holder of the conflicting security interest
receives the notification within six months before the debtor
receives possession of the livestock; and
(4) the notification states that the person sending the
notification has or expects to acquire a purchase-money
security interest in livestock of the debtor and describes the
livestock.
(e) Holders of conflicting livestock security interests
to be notified. Subsections (d)(2) through (4) apply only if
the holder of the conflicting security interest had filed a
financing statement covering the same types of livestock:
(1) if the purchase-money security interest is
perfected by filing, before the date of the filing; or
(2) if the purchase-money security interest is
temporarily perfected without filing or possession under
Section 7-9A-312(f), before the beginning of the 20-day period
thereunder.
(f) Software purchase-money priority. Except as
otherwise provided in subsection (g), a perfected
purchase-money security interest in software has priority over
a conflicting security interest in the same collateral, and,
except as otherwise provided in Section 7-9A-327, a perfected
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security interest in its identifiable proceeds also has
priority, to the extent that the purchase-money security
interest in the goods in which the software was acquired for
use has priority in the goods and proceeds of the goods under
this section.
(g) Conflicting purchase-money security interests. If
more than one security interest qualifies for priority in the
same collateral under subsection (a), (b), (d), or (f):
(1) a security interest securing an obligation incurred
as all or part of the price of the collateral has priority
over a security interest securing an obligation incurred for
value given to enable the debtor to acquire rights in or the
use of collateral; and
(2) in all other cases, Section 7-9A-322(a) applies to
the qualifying security interests.
"§7-9A-330. Priority of purchaser of chattel paper or
instrument.
(a) Purchaser's priority: Security interest claimed
merely as proceeds. A purchaser of chattel paper has priority
over a security interest in the chattel paper which is claimed
merely as proceeds of inventory subject to a security interest
if:
(1) in good faith and in the ordinary course of the
purchaser's business, the purchaser gives new value and takes
possession of each authoritative tangible copy of the record
evidencing the chattel paper , or and obtains control under
Section 7-9A-105 of each authoritative electronic copy of the
record evidencing of the chattel paper under Section 7-9A-105 ;
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and
(2) the chattel paper does authoritative copies of the
record evidencing the chattel paper do not indicate that it
the chattel paper has been assigned to an identified assignee
other than the purchaser.
(b) Purchaser's priority: Other security interests. A
purchaser of chattel paper has priority over a security
interest in the chattel paper which is claimed other than
merely as proceeds of inventory subject to a security interest
if the purchaser gives new value and takes possession of 	each
authoritative tangible copy of the record evidencing the
chattel paper or and obtains control of under Section 7-9A-105
of each authoritative electronic copy of the record evidencing
the chattel paper under Section 7-9A-105 in good faith, in the
ordinary course of the purchaser's business, and without
knowledge that the purchase violates the rights of the secured
party.
(c) Chattel paper purchaser's priority in proceeds.
Except as otherwise provided in Section 7-9A-327, a purchaser
having priority in chattel paper under subsection (a) or (b)
also has priority in proceeds of the chattel paper to the
extent that:
(1) Section 7-9A-322 provides for priority in the
proceeds; or
(2) the proceeds consist of the specific goods covered
by the chattel paper or cash proceeds of the specific goods,
even if the purchaser's security interest in the proceeds is
unperfected.
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(d) Instrument purchaser's priority. Except as
otherwise provided in Section 7-9A-331(a), a purchaser of an
instrument has priority over a security interest in the
instrument perfected by a method other than possession if the
purchaser gives value and takes possession of the instrument
in good faith and without knowledge that the purchase violates
the rights of the secured party.
(e) Holder of purchase-money security interest gives
new value. For purposes of subsections (a) and (b), the holder
of a purchase-money security interest in inventory gives new
value for chattel paper constituting proceeds of the
inventory.
(f) Indication of assignment gives knowledge. For
purposes of subsections (b) and (d), if the authoritative
copies of the record evidencing chattel paper or an instrument
indicates  indicate that it the chattel paper or instrument
has been assigned to an identified secured party other than
the purchaser, a purchaser of the chattel paper or instrument
has knowledge that the purchase violates the rights of the
secured party."
"§7-9A-331. Priority of rights of purchasers of
controllable accounts, controllable electronic records,
controllable payments intangibles, instruments, documents, and
securities under other articles; priority of interests in
financial assets and security entitlements and protection
against assertion of claim under Articles 8 and 12.
(a) Rights under Articles 3, 7, and 8, and 12 not
limited. This article does not limit the rights of a holder in
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due course of a negotiable instrument, a holder to which a
negotiable document of title has been duly negotiated, or a
protected purchaser of a security ., or a qualifying purchaser
of a controllable account, controllable electronic record, or
controllable payment intangible. These holders or purchasers
take priority over an earlier security interest, even if
perfected, to the extent provided in Articles 3, 7, and 8, and
12.
(b) Protection under ArticleArticles 8 and 12. This
article does not limit the rights of or impose liability on a
person to the extent that the person is protected against the
assertion of a claim under ArticleArticles 8 or 12.
(c) Filing not notice. Filing under this article does
not constitute notice of a claim or defense to the holders, or
purchasers, or persons described in subsections (a) and (b)."
"§7-9A-332. Transfer of money; transfer of funds from
deposit account.
(a) Transferee of money. A transferee of money takes
the money free of a security interest unless the transferee
acts if the transferee receives possession of the money
without acting in collusion with the debtor in violating the
rights of the secured party.
(b) Transferee of funds from deposit account. A
transferee of funds from a deposit account takes the funds
free of a security interest in the deposit account unless the
transferee acts if the transferee receives possession of the
money without acting in collusion with the debtor in violating
the rights of the secured party."
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"§7-9A-334. Priority of security interests in fixtures
and crops.
(a) Security interest in fixtures under this article. A
security interest under this article may be created in goods
that are fixtures or may continue in goods that become
fixtures. A security interest does not exist under this
article in ordinary building materials incorporated into an
improvement on land.
(b) Security interest in fixtures under real-property
law. This article does not prevent creation of an encumbrance
upon fixtures under real property law.
(c) General rule: Subordination of security interest in
fixtures. In cases not governed by subsections (d) through
(h), a security interest in fixtures is subordinate to a
conflicting interest of an encumbrancer or owner of the
related real property other than the debtor.
(d) Fixtures purchase-money priority. Except as
otherwise provided in subsection (h), a perfected security
interest in fixtures has priority over a conflicting interest
of an encumbrancer or owner of the real property if the debtor
has an interest of record in or is in possession of the real
property and:
(1) the security interest is a purchase-money security
interest;
(2) the interest of the encumbrancer or owner arises
before the goods become fixtures; and
(3) the security interest is perfected by a fixture
filing before the goods become fixtures or within 20 days
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thereafter.
(e) Priority of security interest in fixtures over
interests in real property. A perfected security interest in
fixtures has priority over a conflicting interest of an
encumbrancer or owner of the real property if:
(1) the debtor has an interest of record in the real
property or is in possession of the real property and the
security interest:
(A) is perfected by a fixture filing before the
interest of the encumbrancer or owner is of record; and
(B) has priority over any conflicting interest of a
predecessor in title of the encumbrancer or owner;
(2) before the goods become fixtures, the security
interest is perfected by any method permitted by this article
and the fixtures are readily removable:
(A) factory or office machines;
(B) equipment that is not primarily used or leased for
use in the operation of the real property; or
(C) replacements of domestic appliances that are
consumer goods;
(3) the conflicting interest is a lien on the real
property obtained by legal or equitable proceedings after the
security interest was perfected by any method permitted by
this article; or
(4) the security interest is:
(A) created in a manufactured home in a
manufactured-home transaction; and
(B) perfected pursuant to a statute described in
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Section 7-9A-311(a)(2).
(f) Priority based on consent, disclaimer, or right to
remove. A security interest in fixtures, whether or not
perfected, has priority over a conflicting interest of an
encumbrancer or owner of the real property if:
(1) the encumbrancer or owner has, in an authenticated
a signed record, consented to the security interest or
disclaimed an interest in the goods as fixtures; or
(2) the debtor has a right to remove the goods as
against the encumbrancer or owner.
(g) Continuation of paragraph (f)(2) priority. The
priority of the security interest under paragraph (f)(2)
continues for a reasonable time if the debtor's right to
remove the goods as against the encumbrancer or owner
terminates.
(h) Priority of construction mortgage. A mortgage is a
construction mortgage to the extent that it secures an
obligation incurred for the construction of an improvement on
land, including the acquisition cost of the land, if a
recorded record of the mortgage so indicates. Except as
otherwise provided in subsections (e) and (f), a security
interest in fixtures is subordinate to a construction mortgage
if a record of the mortgage is recorded before the goods
become fixtures and the goods become fixtures before the
completion of the construction. A mortgage has this priority
to the same extent as a construction mortgage to the extent
that it is given to refinance a construction mortgage.
(i) Priority of security interest in crops. A perfected
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security interest in crops growing on real property has
priority over a conflicting interest of an encumbrancer or
owner of the real property if the debtor has an interest of
record in or is in possession of the real property.
(j) Subsection (i) prevails over inconsistent law.
Subsection (i) prevails over any inconsistent provision of an
existing or future statute, rule, or regulation of this State
unless the provision is contained in a statute of this State,
refers expressly to subsection (i), and states that the
provision prevails over subsection (i)."
"§7-9A-341. Bank's rights and duties with respect to
deposit account.
Except as otherwise provided in Section 7-9A-340(c),
and unless the bank otherwise agrees in an authenticated a
signed record, a bank's rights and duties with respect to a
deposit account maintained with the bank are not terminated,
suspended, or modified by:
(1) the creation, attachment, or perfection of a
security interest in the deposit account;
(2) the bank's knowledge of the security interest; or
(3) the bank's receipt of instructions from the secured
party."
"§7-9A-404. Rights acquired by assignee; claims and
defenses against assignee.
(a) Assignee's rights subject to terms, claims, and
defenses; exceptions. Unless an account debtor has made an
enforceable agreement not to assert defenses or claims, and
subject to subsections (b) through (e), the rights of an
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assignee are subject to:
(1) all terms of the agreement between the account
debtor and assignor and any defense or claim in recoupment
arising from the transaction that gave rise to the contract;
and
(2) any other defense or claim of the account debtor
against the assignor which accrues before the account debtor
receives a notification of the assignment authenticated signed
by the assignor or the assignee.
(b) Account debtor's claim reduces amount owed to
assignee. Subject to subsection (c) and except as otherwise
provided in subsection (d), the claim of an account debtor
against an assignor may be asserted against an assignee under
subsection (a) only to reduce the amount the account debtor
owes.
(c) Rule for individual under other law. This section
is subject to law other than this article which establishes a
different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family, or
household purposes.
(d) Omission of required statement in consumer
transaction. In a consumer transaction, if a record evidences
the account debtor's obligation, if law other than this
article requires that the record include a statement to the
effect that the account debtor's recovery against an assignee
with respect to claims and defenses against the assignor may
not exceed amounts paid by the account debtor under the
record, and if the record does not include such a statement,
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the extent to which a claim of an account debtor against the
assignor may be asserted against an assignee is determined as
if the record included such a statement.
(e) Inapplicability to health-care-insurance
receivable. This section does not apply to an assignment of a
health-care-insurance receivable."
"§7-9A-406. 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.
(a) Discharge of account debtor; effect of
notification. Subject to subsections (b) through (i) and
subsection (l), an account debtor on an account, chattel
paper, or a payment intangible may discharge its obligation by
paying the assignor until, but not after, the account debtor
receives a notification, authenticated signed by the assignor
or the assignee, that the amount due or to become due has been
assigned and that payment is to be made to the assignee. After
receipt of the notification, the account debtor may discharge
its obligation by paying the assignee and may not discharge
the obligation by paying the assignor.
(b) When notification ineffective. Subject to
subsection subsections (h) and (l), notification is
ineffective under subsection (a):
(1) if it does not reasonably identify the rights
assigned;
(2) to the extent that an agreement between an account
debtor and a seller of a payment intangible limits the account
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debtor's duty to pay a person other than the seller and the
limitation is effective under law other than this article; or
(3) at the option of an account debtor, if the
notification notifies the account debtor to make less than the
full amount of any installment or other periodic payment to
the assignee, even if:
(A) only a portion of the account, chattel paper, or
payment intangible has been assigned to that assignee;
(B) a portion has been assigned to another assignee; or
(C) the account debtor knows that the assignment to
that assignee is limited.
(c) Proof of assignment. Subject to subsection
subsections (h) and (l), if requested by the account debtor,
an assignee shall seasonably furnish reasonable proof that the
assignment has been made. Unless the assignee complies, the
account debtor may discharge its obligation by paying the
assignor, even if the account debtor has received a
notification under subsection (a).
(d) Term restricting assignment generally ineffective.
In this subsection, "promissory note" includes a negotiable
instrument that evidences chattel paper. Except as otherwise
provided in subsection (e) and Sections 7-2A-303 and 7-9A-407,
and subject to subsection (h), a term in an agreement between
an account debtor and an assignor or in a promissory note is
ineffective to the extent that it:
(1) prohibits, restricts, or requires the consent of
the account debtor or person obligated on the promissory note
to the assignment or transfer of, or the creation, attachment,
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perfection, or enforcement of a security interest in, the
account, chattel paper, payment intangible, or promissory
note; or
(2) provides that the assignment or transfer or the
creation, attachment, perfection, or enforcement of the
security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination,
or remedy under the account, chattel paper, payment
intangible, or promissory note.
(e) Inapplicability of subsection (d) to certain sales.
Subsection (d) does not apply to the sale of a payment
intangible or promissory note, other than a sale pursuant to a
disposition under Section 7-9A-610 or an acceptance of
collateral under Section 7-9A-620.
(f) Legal restrictions on assignment generally
ineffective. Except as otherwise provided in Sections 7-2A-303
and 7-9A-407 and subject to subsections (h) and (i), a rule of
law, statute, or regulation that prohibits, restricts, or
requires the consent of a government, governmental body or
official, or account debtor to the assignment or transfer of,
or creation of a security interest in, an account or chattel
paper is ineffective to the extent that the rule of law,
statute, or regulation:
(1) prohibits, restricts, or requires the consent of
the government, governmental body or official, or account
debtor to the assignment or transfer of, or the creation,
attachment, perfection, or enforcement of a security interest
in the account or chattel paper; or
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(2) provides that the assignment or transfer or the
creation, attachment, perfection, or enforcement of the
security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination,
or remedy under the account or chattel paper.
(g) Subsection (b)(3) not waivable. Subject to
subsection subsections (h) and (l), an account debtor may not
waive or vary its option under subsection (b)(3).
(h) Rule for individual under other law. This section
is subject to law other than this article which establishes a
different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family, or
household purposes.
(i) Inapplicability to health-care-insurance
receivable. This section does not apply to an assignment of a
health-care-insurance receivable.
(j) Section prevails over inconsistent law. This
section prevails over any inconsistent provision of an
existing or future statute, rule, or regulation of this State
unless the provision is contained in a statute of this State,
refers expressly to this section, and states that the
provision prevails over this section.
(k) [Reserved].
(l) Inapplicability of certain subsections. Subsections
(a), (b), (c), and (g) do not apply to a controllable account
or controllable payment intangible.
"§7-9A-408. Restrictions on assignment of promissory
notes, health-care-insurance receivables, and certain general
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intangibles ineffective.
(a) Term restricting assignment generally ineffective.
Except as otherwise provided in subsection (b), a term in a
promissory note or in an agreement between an account debtor
and a debtor which relates to a health-care-insurance
receivable or a general intangible, including a contract,
permit, license, or franchise, and which term prohibits,
restricts, or requires the consent of the person obligated on
the promissory note or the account debtor to, the assignment
or transfer of, or creation, attachment, or perfection of a
security interest in, the promissory note,
health-care-insurance receivable, or general intangible, is
ineffective to the extent that the term:
(1) would impair the creation, attachment, or
perfection of a security interest; or
(2) provides that the assignment or transfer or the
creation, attachment, or perfection of the security interest
may give rise to a default, breach, right of recoupment,
claim, defense, termination, right of termination, or remedy
under the promissory note, health-care-insurance receivable,
or general intangible.
(b) Applicability of subsection (a) to sales of certain
rights to payment. Subsection (a) applies to a security
interest in a payment intangible or promissory note only if
the security interest arises out of a sale of the payment
intangible or promissory note, other than a sale pursuant to a
disposition under Section 7-9A-610 or an acceptance of
collateral under Section 7-9A-620.
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(c) Legal restrictions on assignment generally
ineffective. A rule of law, statute, or regulation that
prohibits, restricts, or requires the consent of a government,
governmental body or official, person obligated on a
promissory note, or account debtor to the assignment or
transfer of, or creation of a security interest in, a
promissory note, health-care-insurance receivable, or general
intangible, including a contract, permit, license, or
franchise between an account debtor and a debtor, is
ineffective to the extent that the rule of law, statute, or
regulation:
(1) would impair the creation, attachment, or
perfection of a security interest; or
(2) provides that the assignment or transfer or the
creation, attachment, or perfection of the security interest
may give rise to a default, breach, right of recoupment,
claim, defense, termination, right of termination, or remedy
under the promissory note, health-care-insurance receivable,
or general intangible.
(d) Limitation on ineffectiveness under subsections (a)
and (c). To the extent that a term in a promissory note or in
an agreement between an account debtor and a debtor which
relates to a health-care-insurance receivable or general
intangible or a rule of law, statute, or regulation described
in subsection (c) would be effective under law other than this
article but is ineffective under subsection (a) or (c), the
creation, attachment, or perfection of a security interest in
the promissory note, health-care-insurance receivable, or
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general intangible:
(1) is not enforceable against the person obligated on
the promissory note or the account debtor;
(2) does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor;
(3) does not require the person obligated on the
promissory note or the account debtor to recognize the
security interest, pay or render performance to the secured
party, or accept payment or performance from the secured
party;
(4) does not entitle the secured party to use or assign
the debtor's rights under the promissory note,
health-care-insurance receivable, or general intangible,
including any related information or materials furnished to
the debtor in the transaction giving rise to the promissory
note, health-care-insurance receivable, or general intangible;
(5) does not entitle the secured party to use, assign,
possess, or have access to any trade secrets or confidential
information of the person obligated on the promissory note or
the account debtor; and
(6) does not entitle the secured party to enforce the
security interest in the promissory note,
health-care-insurance receivable, or general intangible.
(e) Section prevails over inconsistent law. This
section prevails over any inconsistent provision of an
existing or future statute, rule, or regulation of this State
unless the provision is contained in a statute of this State,
refers expressly to this section, and states that the
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provision prevails over this section.
(f) [Reserved.]
(g) "Promissory note." In this section, "promissory
note" includes a negotiable instrument that evidences chattel
paper.
"§7-9A-509. Persons entitled to file a record.
(a) Person entitled to file record. A person may file
an initial financing statement, amendment that adds collateral
covered by a financing statement, or amendment that adds a
debtor to a financing statement only if:
(1) the debtor authorizes the filing in an
authenticated a signed record or pursuant to subsection (b) or
(c); or
(2) the person holds an agricultural lien that has
become effective at the time of filing and the financing
statement covers only collateral in which the person holds an
agricultural lien.
(b) Security agreement as authorization. By
authenticating signing or becoming bound as debtor by a
security agreement, a debtor or new debtor authorizes the
filing of an initial financing statement, and an amendment,
covering:
(1) the collateral described in the security agreement;
and
(2) property that becomes collateral under Section
7-9A-315(a)(2), whether or not the security agreement
expressly covers proceeds.
(c) Acquisition of collateral as authorization. By
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acquiring collateral in which a security interest or
agricultural lien continues under Section 7-9A-315(a)(1), a
debtor authorizes the filing of an initial financing
statement, and an amendment, covering the collateral and
property that becomes collateral under Section 7-9A-315(a)(2).
(d) Person entitled to file certain amendments. A
person may file an amendment other than an amendment that adds
collateral covered by a financing statement or an amendment
that adds a debtor to a financing statement only if:
(1) the secured party of record authorizes the filing;
or
(2) the amendment is a termination statement for a
financing statement as to which the secured party of record
has failed to file or send a termination statement as required
by Section 7-9A-513(a) or (c), the debtor authorizes the
filing, and the termination statement indicates that the
debtor authorized it to be filed.
(e) Multiple secured parties of record. If there is
more than one secured party of record for a financing
statement, each secured party of record may authorize the
filing of an amendment under subsection (d)."
"§7-9A-513. Termination statement.
(a) Consumer goods. A secured party shall cause the
secured party of record for a financing statement to file a
termination statement for the financing statement if the
financing statement covers consumer goods and:
(1) there is no obligation secured by the collateral
covered by the financing statement and no commitment to make
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an advance, incur an obligation, or otherwise give value; or
(2) the debtor did not authorize the filing of the
initial financing statement.
(b) Time for compliance with subsection (a). To comply
with subsection (a), a secured party shall cause the secured
party of record to file the termination statement:
(1) within one month after there is no obligation
secured by the collateral covered by the financing statement
and no commitment to make an advance, incur an obligation, or
otherwise give value; or
(2) if earlier, within 20 days after the secured party
receives an authenticated a signed demand from a debtor.
(c) Other collateral. In cases not governed by
subsection (a), within 20 days after a secured party receives
an authenticated a signed demand from a debtor, the secured
party shall cause the secured party of record for a financing
statement to send to the debtor a termination statement for
the financing statement or file the termination statement in
the filing office if:
(1) except in the case of a financing statement
covering accounts or chattel paper that has been sold or goods
that are the subject of a consignment, there is no obligation
secured by the collateral covered by the financing statement
and no commitment to make an advance, incur an obligation, or
otherwise give value;
(2) the financing statement covers accounts or chattel
paper that has been sold but as to which the account debtor or
other person obligated has discharged its obligation;
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(3) the financing statement covers goods that were the
subject of a consignment to the debtor but are not in the
debtor's possession; or
(4) the debtor did not authorize the filing of the
initial financing statement.
(d) Effect of filing termination statement. Except as
otherwise provided in Section 7-9A-510, upon the filing of a
termination statement with the filing office, the financing
statement to which the termination statement relates ceases to
be effective. Except as otherwise provided in Section
7-9A-510, for purposes of Sections 7-9A-519(g), 7-9A-522(a),
and 7-9A-523(c), the filing with the filing office of a
termination statement relating to a financing statement that
indicates that the debtor is a transmitting utility also
causes the effectiveness of the financing statement to lapse."
"§7-9A-601. Rights after default; judicial enforcement;
consignor or buyer of accounts, chattel paper, payment
intangibles, or promissory notes.
(a) Rights of secured party after default. After
default, a secured party has the rights provided in this part
and, except as otherwise provided in Section 7-9A-602, those
provided by agreement of the parties. A secured party:
(1) may reduce a claim to judgment, foreclose, or
otherwise enforce the claim, security interest, or
agricultural lien by any available judicial procedure; and
(2) if the collateral is documents, may proceed either
as to the documents or as to the goods they cover.
(b) Rights and duties of secured party in possession or
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4256 SB231 INTRODUCEDSB231 INTRODUCED
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control. A secured party in possession of collateral or
control of collateral under Section 7-7-106, 7-9A-104,
7-9A-105, 7-9A-106, or 7-9A-107, or 7-9A-107A has the rights
and duties provided in Section 7-9A-207.
(c) Rights cumulative; simultaneous exercise. The
rights under subsections (a) and (b) are cumulative and may be
exercised simultaneously.
(d) Rights of debtor and obligor. Except as otherwise
provided in subsection (g) and Section 7-9A-605, after
default, a debtor and an obligor have the rights provided in
this part and by agreement of the parties.
(e) Lien of levy after judgment. If a secured party has
reduced its claim to judgment, the lien of any levy that may
be made upon the collateral by virtue of an execution based
upon the judgment relates back to the earliest of:
(1) the date of perfection of the security interest or
agricultural lien in the collateral;
(2) the date of filing a financing statement covering
the collateral; or
(3) any date specified in a statute under which the
agricultural lien was created.
(f) Execution sale. A sale pursuant to an execution is
a foreclosure of the security interest or agricultural lien by
judicial procedure within the meaning of this section. A
secured party may purchase at the sale and thereafter hold the
collateral free of any other requirements of this article.
(g) Consignor or buyer of certain rights to payment.
Except as otherwise provided in Section 7-9A-607(c), this part
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4284 SB231 INTRODUCEDSB231 INTRODUCED
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imposes no duties upon a secured party that is a consignor or
is a buyer of accounts, chattel paper, payment intangibles, or
promissory notes."
"§7-9A-605. Unknown debtor or secondary obligor.
A(a) In general: No duty owed by secured party. Except
as provided in subsection (b), a secured party does not owe a
duty based on its status as secured party:
(1) to a person that is a debtor or obligor, unless the
secured party knows:
(A) that the person is a debtor or obligor;
(B) the identity of the person; and
(C) how to communicate with the person; or
(2) to a secured party or lienholder that has filed a
financing statement against a person, unless the secured party
knows:
(A) that the person is a debtor; and
(B) the identity of the person.
(b) Exception: Secured party owes duty to debtor or
obligor. A secured party owes a duty based on its status as a
secured party to a person if, at the time the secured party
obtains control of collateral that is a controllable account,
controllable electronic record, or controllable payment
intangible or at the time the security interest attaches to
the collateral, whichever is later:
(1) the person is a debtor or obligor; and
(2) the secured party knows that the information in
subsection (a)(1)(A), (B), or (C) relating to the person is
not provided by the collateral, a record attached to or
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4312 SB231 INTRODUCEDSB231 INTRODUCED
Page 155
logically associated with the collateral, or the system in
which the collateral is recorded. "
"§7-9A-608. Application of proceeds of collection or
enforcement; liability for deficiency and right to surplus.
(a) Application of proceeds, surplus, and deficiency if
obligation secured. If a security interest or agricultural
lien secures payment or performance of an obligation, the
following rules apply:
(1) A secured party shall apply or pay over for
application the cash proceeds of collection or enforcement
under Section 7-9A-607 in the following order to:
(A) the reasonable expenses of collection and
enforcement and, to the extent provided for by agreement and
not prohibited by law, reasonable attorney's fees and legal
expenses incurred by the secured party;
(B) the satisfaction of obligations secured by the
security interest or agricultural lien under which the
collection or enforcement is made; and
(C) the satisfaction of obligations secured by any
subordinate security interest in or other lien on the
collateral subject to the security interest or agricultural
lien under which the collection or enforcement is made if the
secured party receives an authenticated a signed demand for
proceeds before distribution of the proceeds is completed.
(2) If requested by a secured party, a holder of a
subordinate security interest or other lien shall furnish
reasonable proof of the interest or lien within a reasonable
time. Unless the holder complies, the secured party need not
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4340 SB231 INTRODUCEDSB231 INTRODUCED
Page 156
comply with the holder's demand under paragraph (1)(C).
(3) A secured party need not apply or pay over for
application noncash proceeds of collection and enforcement
under Section 7-9A-607 unless the failure to do so would be
commercially unreasonable. A secured party that applies or
pays over for application noncash proceeds shall do so in a
commercially reasonable manner.
(4) A secured party shall account to and pay a debtor
for any surplus, and the obligor is liable for any deficiency.
(b) No surplus or deficiency in sales of certain rights
to payment. If the underlying transaction is a sale of
accounts, chattel paper, payment intangibles, or promissory
notes, the debtor is not entitled to any surplus, and the
obligor is not liable for any deficiency."
"§7-9A-611. Notification before disposition of
collateral.
(a) "Notification date." In this section, "notification
date" means the earlier of the date on which:
(1) a secured party sends to the debtor and any
secondary obligor an authenticated a signed notification of
disposition; or
(2) the debtor and any secondary obligor waive the
right to notification.
(b) Notification of disposition required. Except as
otherwise provided in subsection (d), a secured party that
disposes of collateral under Section 7-9A-610 shall send to
the persons specified in subsection (c) a reasonable
authenticated signed notification of disposition.
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4368 SB231 INTRODUCEDSB231 INTRODUCED
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(c) Persons to be notified. To comply with subsection
(b), the secured party shall send an authenticated a signed
notification of disposition to:
(1) the debtor;
(2) any secondary obligor; and
(3) if the collateral is other than consumer goods:
(A) any other person from which the secured party has
received, before the notification date, an authenticated a
signed notification of a claim of an interest in the
collateral;
(B) any other secured party or lienholder that, 10 days
before the notification date, held a security interest in or
other lien on the collateral perfected by the filing of a
financing statement that:
(i) identified the collateral;
(ii) was indexed under the debtor's name as of that
date; and
(iii) was filed in the office in which to file a
financing statement against the debtor covering the collateral
as of that date; and
(C) any other secured party that, 10 days before the
notification date, held a security interest in the collateral
perfected by compliance with a statute, regulation, or treaty
described in Section 7-9A-311(a).
(d) Subsection (b) inapplicable: Perishable collateral;
recognized market. Subsection (b) does not apply if the
collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market.
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4396 SB231 INTRODUCEDSB231 INTRODUCED
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(e) Compliance with subsection (c)(3)(B). A secured
party complies with the requirement for notification
prescribed by subsection (c)(3)(B) if:
(1) not later than 20 days or earlier than 30 days
before the notification date, the secured party requests, in a
commercially reasonable manner, information concerning
financing statements indexed under the debtor's name in the
office indicated in subsection (c)(3)(B); and
(2) before the notification date, the secured party:
(A) did not receive a response to the request for
information; or
(B) received a response to the request for information
and sent an authenticated a signed notification of disposition
to each secured party or other lienholder named in that
response whose financing statement covered the collateral."
"§7-9A-613. Contents and form of notification before
disposition of collateral: general.
(a) Content and form of notification. Except in a
consumer-goods transaction, the following rules apply:
(1) The contents of a notification of disposition are
sufficient if the notification:
(A) describes the debtor and the secured party;
(B) describes the collateral that is the subject of the
intended disposition;
(C) states the method of intended disposition;
(D) states that the debtor is entitled to an accounting
of the unpaid indebtedness and states the charge, if any, for
an accounting; and
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4424 SB231 INTRODUCEDSB231 INTRODUCED
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(E) states the time and place of a public disposition
or the time after which any other disposition is to be made.
(2) Whether the contents of a notification that lacks
any of the information specified in paragraph (1) are
nevertheless sufficient is a question of fact.
(3) The contents of a notification providing
substantially the information specified in paragraph (1) are
sufficient, even if the notification includes:
(A) information not specified by that paragraph; or
(B) minor errors that are not seriously misleading.
(4) A particular phrasing of the notification is not
required.
(5) The following form of notification and the form
appearing in Section 7-9A-614 (a)(3), when completed in
accordance with the instructions in subsection (b) and Section
7-9A-614(b), each provides sufficient information:
NOTIFICATION OF DISPOSITION OF COLLATERAL
To: _______________ (Name of debtor, obligor, or other
person to which the notification is sent)
From: __________ (Name, address, and telephone number
of secured party)
Name of Debtor(s): _________ (Include only if debtor(s)
are not an addressee)
For a public disposition:
We will sell or lease or license, as applicable, the
________ (describe collateral) to the highest qualified bidder
in public as follows:
Day and Date:
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4452 SB231 INTRODUCEDSB231 INTRODUCED
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Time:
Place:
For a private disposition:
We will sell or lease or license, as applicable, the
________ (describe collateral) privately some time after
________ (day and date).
You are entitled to an accounting of the unpaid
indebtedness secured by the property that we intend to sell or
lease or license, as applicable, for a charge of $____. You
may request an accounting by calling us at _______ (telephone
number).
[End of Form]
NOTIFICATION OF DISPOSITION OF COLLATERAL
To: (Name of debtor, obligor, or other person to which
the notification is sent)
From: (Name, address, and telephone number of secured
party)
{1} Name of any debtor that is not an addressee: (name
of each debtor)
{2} We will sell (describe collateral) (to the highest
qualified bidder) at public sale. A sale could include a lease
or license. The sale will be held as follows:
(Date)
(Time)
(Place)
{3} We will sell (describe collateral) at private sale
sometime after (date). A sale could include a lease or
license.
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4480 SB231 INTRODUCEDSB231 INTRODUCED
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{4} You are entitled to an accounting of the unpaid
indebtedness secured by the property that we intend to sell
or, as applicable, lease or license.
{5} If you request an accounting you must pay a charge
of $ (amount).
{6} You may request an accounting by calling us at
(telephone number).
[End of Form]
(b) Instructions for form of notification. The
following instructions apply to the form of notification in
subsection (a)(5):
(1) The instructions in this subsection refer to the
numbers in braces before items in the form of notification in
subsection (a)(5). Do not include the numbers or braces in the
notification. The numbers and braces are used only for the
purpose of these instructions.
(2) Include and complete item {1} only if there is a
debtor that is not an addressee of the notification and list
the name or names.
(3) Include and complete either item {2}, if the
notification relates to a public disposition of the
collateral, or item {3}, if the notification relates to a
private disposition of the collateral. If item {2} is
included, include the words "to the highest qualified bidder"
only if applicable.
(4) Include and complete items {4} and {6}.
(5) Include and complete item {5} only if the sender
will charge the recipient for an accounting. "
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4508 SB231 INTRODUCEDSB231 INTRODUCED
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"§7-9A-614. Contents and form of notification before
disposition of collateral: consumer-goods transaction.
(a) Content and form of notification. In a
consumer-goods transaction, the following rules apply:
(1) A notification of disposition must provide the
following information:
(A) the information specified in Section
7-9A-613(a)(1);
(B) a description of any liability for a deficiency of
the person to which the notification is sent;
(C) a telephone number from which the amount that must
be paid to the secured party to redeem the collateral under
Section 7-9A-623 is available; and
(D) a telephone number or mailing address from which
additional information concerning the disposition and the
obligation secured is available.
(2) A particular phrasing of the notification is not
required.
(3) The following form of notification, when completed
in accordance with instructions in subsection (b) , provides
sufficient information:
Name and address of secured party
Date
NOTICE OF OUR PLAN TO SELL PROPERTY
Name and address of any obligor who is also a debtor
Subject: __________ (Identification of Transaction)
We have your ___________ (describe collateral), because
you broke promises in our agreement.
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4536 SB231 INTRODUCEDSB231 INTRODUCED
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For a public disposition:
We will sell _____________ (describe collateral) at
public sale. A sale could include a lease or license. The sale
will be held as follows:
Date:
Time:
Place:
You may attend the sale and bring bidders if you want.
For a private disposition:
We will sell _________ (describe collateral) at private
sale some time after ______ (date). A sale could include a
lease or license.
The money that we get from the sale (after paying our
costs) will reduce the amount you owe. If we get less money
than you owe, you ________________ (will or will not, as
applicable) still owe us the difference. If we get more money
than you owe, you will get the extra money, unless we must pay
it to someone else.
You can get the property back at any time before we
sell it by paying us the full amount you owe (not just the
past due payments), including our expenses. To learn the exact
amount you must pay, call us at _________ (telephone number).
If you want us to explain to you in writing how we have
figured the amount that you owe us, you may call us at
_________ (telephone number) or write us at ___________
(secured party's address) and request a written explanation.
We will charge you $ ____ for the explanation if we sent you
another written explanation of the amount you owe us within
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4564 SB231 INTRODUCEDSB231 INTRODUCED
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the last six months.
If you need more information about the sale call us at
________ (telephone number) or write us at _____________
(secured party's address).
We are sending this notice to the following other
people who have an interest in _________ (describe collateral)
or who owe money under your agreement:
______________ (Names of all other debtors and
obligors, if any)
[End of Form]
(Name and address of secured party)
(Date)
NOTICE OF OUR PLAN TO SELL PROPERTY
(Name and address of any obligor who is also a debtor)
Subject: (Identify transaction)
We have your (describe collateral) because you broke
promises in our agreement.
{1} We will sell (describe collateral) at public sale.
A sale could include a lease or license. The sale will be held
as follows:
(Date)
(Time)
(Place)
You may attend the sale and bring bidders if you want.
{2} We will sell (describe collateral) at private sale
sometime after (date). A sale could include a lease or
license.
{3} The money that we get from the sale, after paying
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4592 SB231 INTRODUCEDSB231 INTRODUCED
Page 165
our costs, will reduce the amount you owe. If we get less
money than you owe, you (will or will not, as applicable) owe
us the difference. If we get more money than you owe, you will
get the extra money, unless we must pay it to someone else.
{4} You can get the property back at any time before we
sell it by paying us the full amount you owe, not just the
past due payments, including our expenses. To learn the exact
amount you must pay, call us at (telephone number).
{5} If you want us to explain to you in (writing)
(writing or in (description of electronic record))
(description of electronic record) how we have figured the
amount that you owe us, {6} call us at (telephone number) (or)
(write us at (secured party's address)) (or contact us by
(description of electronic communication method)) {7} and
request (a written explanation) (a written explanation or an
explanation in (description of electronic record)) (an
explanation in (description of electronic record)).
{8} We will charge you $ (amount) for the explanation
if we sent you another written explanation of the amount you
owe us within the last six months.
{9} If you need more information about the sale, (call
us at (telephone number) (or) (write us at (secured party's
address)) (or contact us by (description of electronic
communication method)).
{10} We are sending this notice to the following other
people who have an interest in (describe collateral) or who
owe money under your agreement:
(Names of all other debtors and obligors, if any)
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4603
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[End of Form]
(4) A notification in the form of paragraph (3) is
sufficient, even if additional information appears at the end
of the form.
(5) A notification in the form of paragraph (3) is
sufficient, even if it includes errors in information not
required by paragraph (1), unless the error is misleading with
respect to rights arising under this article.
(6) If a notification under this section is not in the
form of paragraph (3), law other than this article determines
the effect of including information not required by paragraph
(1).
(b) Instructions for form of notification. The
following instructions apply to the form of notification in
subsection (a)(3):
(1) The instructions in this subsection refer to the
numbers in braces before items in the form of notification in
subsection (a)(3). Do not include the numbers or braces in the
notification. The numbers and braces are used only for the
purpose of these instructions.
(2) Include and complete either item {1}, if the
notification relates to a public disposition of the
collateral, or item {2}, if the notification relates to a
private disposition of the collateral.
(3) Include and complete items {3}, {4}, {5}, {6}, and
{7}.
(4) In item {5}, include and complete any one of the
three alternative methods for the explanation: writing,
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writing or electronic record, or electronic record.
(5) In item {6}, include the telephone number. In
addition, the sender may include and complete either or both
of the two additional alternative methods of communication,
writing or electronic communication, for the recipient of the
notification to communicate with the sender. Neither of the
two additional methods of communication are required to be
included.
(6) In item {7}, include and complete the method or
methods for the explanation, writing, writing or electronic
record, or electronic record, which are included in item {5}.
(7) Include and complete item {8} only if a written
explanation is included in item {5} as a method for
communicating the explanation and the sender will charge the
recipient for another written explanation.
(8) In item {9}, include either the telephone number or
the address or both the telephone number and the address. In
addition, the sender may include and complete the additional
method of communication--electronic communication--for the
recipient of the notification to communicate with the sender.
The additional method of electronic communication is not
required to be included.
(9) If item {10} does not apply, insert "None" after
"agreement:"."
"§7-9A-615. Application of proceeds of disposition;
liability for deficiency and right to surplus.
(a) Application of proceeds. A secured party shall
apply or pay over for application the cash proceeds of
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disposition under Section 7-9A-610 in the following order to:
(1) the reasonable expenses of retaking, holding,
preparing for disposition, processing, and disposing, and, to
the extent provided for by agreement and not prohibited by
law, reasonable attorney's fees and legal expenses incurred by
the secured party;
(2) the satisfaction of obligations secured by the
security interest or agricultural lien under which the
disposition is made;
(3) the satisfaction of obligations secured by any
subordinate security interest in or other subordinate lien on
the collateral if:
(A) the secured party receives from the holder of the
subordinate security interest or other lien an authenticated a
signed demand for proceeds before distribution of the proceeds
is completed; and
(B) in a case in which a consignor has an interest in
the collateral, the subordinate security interest or other
lien is senior to the interest of the consignor; and
(4) a secured party that is a consignor of the
collateral if the secured party receives from the consignor an
authenticated a signed demand for proceeds before distribution
of the proceeds is completed.
(b) Proof of subordinate interest. If requested by a
secured party, a holder of a subordinate security interest or
other lien shall furnish reasonable proof of the interest or
lien within a reasonable time. Unless the holder does so, the
secured party need not comply with the holder's demand under
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subsection (a)(3).
(c) Application of noncash proceeds. A secured party
need not apply or pay over for application noncash proceeds of
disposition under Section 7-9A-610 unless the failure to do so
would be commercially unreasonable. A secured party that
applies or pays over for application noncash proceeds shall do
so in a commercially reasonable manner.
(d) Surplus or deficiency if obligation secured. If the
security interest under which a disposition is made secures
payment or performance of an obligation, after making the
payments and applications required by subsection (a) and
permitted by subsection (c):
(1) unless subsection (a)(4) requires the secured party
to apply or pay over cash proceeds to a consignor, the secured
party shall account to and pay a debtor for any surplus; and
(2) the obligor is liable for any deficiency.
(e) No surplus or deficiency in sales of certain rights
to payment. If the underlying transaction is a sale of
accounts, chattel paper, payment intangibles, or promissory
notes:
(1) the debtor is not entitled to any surplus; and
(2) the obligor is not liable for any deficiency.
(f) Calculation of surplus or deficiency in disposition
to person related to secured party. The surplus or deficiency
following a disposition is calculated based on the amount of
proceeds that would have been realized in a disposition
complying with this part to a transferee other than the
secured party, a person related to the secured party, or a
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secondary obligor if:
(1) the transferee in the disposition is the secured
party, a person related to the secured party, or a secondary
obligor; and
(2) the amount of proceeds of the disposition is
significantly below the range of proceeds that a complying
disposition to a person other than the secured party, a person
related to the secured party, or a secondary obligor would
have brought.
(g) Cash proceeds received by junior secured party. A
secured party that receives cash proceeds of a disposition in
good faith and without knowledge that the receipt violates the
rights of the holder of a security interest or other lien that
is not subordinate to the security interest or agricultural
lien under which the disposition is made:
(1) takes the cash proceeds free of the security
interest or other lien;
(2) is not obligated to apply the proceeds of the
disposition to the satisfaction of obligations secured by the
security interest or other lien; and
(3) is not obligated to account to or pay the holder of
the security interest or other lien for any surplus."
"§7-9A-616. Explanation of calculation of surplus or
deficiency.
(a) Definitions. In this section:
(1) "Explanation" means a writing record that:
(A) states the amount of the surplus or deficiency;
(B) provides an explanation in accordance with
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subsection (c) of how the secured party calculated the surplus
or deficiency;
(C) states, if applicable, that future debits, credits,
charges, including additional credit service charges or
interest, rebates, and expenses may affect the amount of the
surplus or deficiency; and
(D) provides a telephone number or mailing address from
which additional information concerning the transaction is
available.
(2) "Request" means a record:
(A) authenticated signed by a debtor or consumer
obligor;
(B) requesting that the recipient provide an
explanation; and
(C) sent after disposition of the collateral under
Section 7-9A-610.
(b) Explanation of calculation. In a consumer-goods
transaction in which the debtor is entitled to a surplus or a
consumer obligor is liable for a deficiency under Section
7-9A-615, the secured party shall:
(1) send an explanation to the debtor or consumer
obligor, as applicable, after the disposition and:
(A) before or when the secured party accounts to the
debtor and pays any surplus or first makes written demand in a
record on the consumer obligor after the disposition for
payment of the deficiency; and
(B) within 14 days after receipt of a request; or
(2) in the case of a consumer obligor who is liable for
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4788 SB231 INTRODUCEDSB231 INTRODUCED
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a deficiency, within 14 days after receipt of a request, send
to the consumer obligor a record waiving the secured party's
right to a deficiency.
(c) Required information. To comply with subsection
(a)(1)(B), a writing an explanation must provide the following
information in the following order:
(1) the aggregate amount of obligations secured by the
security interest under which the disposition was made, and,
if the amount reflects a rebate of unearned interest or credit
service charge, an indication of that fact, calculated as of a
specified date:
(A) if the secured party takes or receives possession
of the collateral after default, not more than 35 days before
the secured party takes or receives possession; or
(B) if the secured party takes or receives possession
of the collateral before default or does not take possession
of the collateral, not more than 35 days before the
disposition;
(2) the amount of proceeds of the disposition;
(3) the aggregate amount of the obligations after
deducting the amount of proceeds;
(4) the amount, in the aggregate or by type, and types
of expenses, including expenses of retaking, holding,
preparing for disposition, processing, and disposing of the
collateral, and attorney's fees secured by the collateral
which are known to the secured party and relate to the current
disposition;
(5) the amount, in the aggregate or by type, and types
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4816 SB231 INTRODUCEDSB231 INTRODUCED
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of credits, including rebates of interest or credit service
charges, to which the obligor is known to be entitled and
which are not reflected in the amount in paragraph (1); and
(6) the amount of the surplus or deficiency.
(d) Substantial compliance. A particular phrasing of
the explanation is not required. An explanation complying
substantially with the requirements of subsection (a) is
sufficient, even if it includes minor errors that are not
seriously misleading.
(e) Charges for responses. A debtor or consumer obligor
is entitled without charge to one response to a request under
this section during any six-month period in which the secured
party did not send to the debtor or consumer obligor an
explanation pursuant to subsection (b)(1). The secured party
may require payment of a charge not exceeding $25twenty-five
dollars ($25) for each additional response."
"§7-9A-619. Transfer of record or legal title.
(a) "Transfer statement." In this section, "transfer
statement" means a record authenticated signed by a secured
party stating:
(1) that the debtor has defaulted in connection with an
obligation secured by specified collateral;
(2) that the secured party has exercised its
post-default remedies with respect to the collateral;
(3) that, by reason of the exercise, a transferee has
acquired the rights of the debtor in the collateral; and
(4) the name and mailing address of the secured party,
debtor, and transferee.
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(b) Effect of transfer statement. A transfer statement
entitles the transferee to the transfer of record of all
rights of the debtor in the collateral specified in the
statement in any official filing, recording, registration, or
certificate-of-title system covering the collateral. If a
transfer statement is presented with the applicable fee and
request form to the official or office responsible for
maintaining the system, the official or office shall:
(1) accept the transfer statement;
(2) promptly amend its records to reflect the transfer;
and
(3) if applicable, issue a new appropriate certificate
of title in the name of the transferee.
(c) Transfer not a disposition; no relief of secured
party's duties. A transfer of the record or legal title to
collateral to a secured party under subsection (b) or
otherwise is not of itself a disposition of collateral under
this article and does not of itself relieve the secured party
of its duties under this article."
"§7-9A-620. Acceptance of collateral in full or partial
satisfaction of obligation; compulsory disposition of
collateral.
(a) Conditions to acceptance in satisfaction. Except as
otherwise provided in subsection (g), a secured party may
accept collateral in full or partial satisfaction of the
obligation it secures only if:
(1) the debtor consents to the acceptance under
subsection (c);
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(2) the secured party does not receive, within the time
set forth in subsection (d), a notification of objection to
the proposal authenticated signed by:
(A) a person to which the secured party was required to
send a proposal under Section 7-9A-621; or
(B) any other person, other than the debtor, holding an
interest in the collateral subordinate to the security
interest that is the subject of the proposal;
(3) if the collateral is consumer goods, the collateral
is not in the possession of the debtor when the debtor
consents to the acceptance; and
(4) subsection (e) does not require the secured party
to dispose of the collateral or the debtor waives the
requirement pursuant to Section 7-9A-624.
(b) Purported acceptance ineffective. A purported or
apparent acceptance of collateral under this section is
ineffective unless:
(1) the secured party consents to the acceptance in an
authenticated a signed record or sends a proposal to the
debtor; and
(2) the conditions of subsection (a) are met.
(c) Debtor's consent. For purposes of this section:
(1) a debtor consents to an acceptance of collateral in
partial satisfaction of the obligation it secures only if the
debtor agrees to the terms of the acceptance in a record
authenticated signed after default; and
(2) a debtor consents to an acceptance of collateral in
full satisfaction of the obligation it secures only if the
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debtor agrees to the terms of the acceptance in a record
authenticated signed after default or the secured party:
(A) sends to the debtor after default a proposal that
is unconditional or subject only to a condition that
collateral not in the possession of the secured party be
preserved or maintained;
(B) in the proposal, proposes to accept collateral in
full satisfaction of the obligation it secures; and
(C) does not receive a notification of objection
authenticated signed by the debtor within 20 days after the
proposal is sent.
(d) Effectiveness of notification. To be effective
under subsection (a)(2), a notification of objection must be
received by the secured party:
(1) in the case of a person to which the proposal was
sent pursuant to Section 7-9A-621, within 20 days after
notification was sent to that person; and
(2) in other cases:
(A) within 20 days after the last notification was sent
pursuant to Section 7-9A-621; or
(B) if a notification was not sent, before the debtor
consents to the acceptance under subsection (c).
(e) Mandatory disposition of consumer goods. A secured
party that has taken possession of collateral shall dispose of
the collateral pursuant to Section 7-9A-610 within the time
specified in subsection (f) if:
(1) 60 percent of the cash price has been paid in the
case of a purchase-money security interest in consumer goods;
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4928 SB231 INTRODUCEDSB231 INTRODUCED
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or
(2) 60 percent of the principal amount of the
obligation secured has been paid in the case of a
non-purchase-money security interest in consumer goods.
(f) Compliance with mandatory disposition requirement.
To comply with subsection (e), the secured party shall dispose
of the collateral:
(1) within 90 days after taking possession; or
(2) within any longer period to which the debtor and
all secondary obligors have agreed in an agreement to that
effect entered into and authenticated signed after default.
(g) No partial satisfaction in consumer transaction. In
a consumer transaction, a secured party may not accept
collateral in partial satisfaction of the obligation it
secures."
"§7-9A-621. Notification of proposal to accept
collateral.
(a) Persons to which proposal to be sent. A secured
party that desires to accept collateral in full or partial
satisfaction of the obligation it secures shall send its
proposal to:
(1) any person from which the secured party has
received, before the debtor consented to the acceptance, an
authenticated a signed notification of a claim of an interest
in the collateral;
(2) any other secured party or lienholder that, 10 days
before the debtor consented to the acceptance, held a security
interest in or other lien on the collateral perfected by the
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filing of a financing statement that:
(A) identified the collateral;
(B) was indexed under the debtor's name as of that
date; and
(C) was filed in the office or offices in which to file
a financing statement against the debtor covering the
collateral as of that date; and
(3) any other secured party that, 10 days before the
debtor consented to the acceptance, held a security interest
in the collateral perfected by compliance with a statute,
regulation, or treaty described in Section 7-9A-311(a).
(b) Proposal to be sent to secondary obligor in partial
satisfaction. A secured party that desires to accept
collateral in partial satisfaction of the obligation it
secures shall send its proposal to any secondary obligor in
addition to the persons described in subsection (a)."
"§7-9A-624. Waiver.
(a) Waiver of disposition notification. A debtor or
secondary obligor may waive the right to notification of
disposition of collateral under Section 7-9A-611 only by an
agreement to that effect entered into and authenticated signed
after default.
(b) Waiver of mandatory disposition. A debtor may waive
the right to require disposition of collateral under Section
7-9A-620(e) only by an agreement to that effect entered into
and authenticated signed after default.
(c) Waiver of redemption right. Except in a
consumer-goods transaction, a debtor or secondary obligor may
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4984 SB231 INTRODUCEDSB231 INTRODUCED
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waive the right to redeem collateral under Section 7-9A-623
only by an agreement to that effect entered into and
authenticated signed after default."
"§7-9A-628. Nonliability and limitation on liability of
secured party; liability of secondary obligor.
(a) Limitation of liability of secured party for
noncompliance with article. Unless Subject to subsection (f),
unless a secured party knows that a person is a debtor or
obligor, knows the identity of the person, and knows how to
communicate with the person:
(1) the secured party is not liable to the person, or
to a secured party or lienholder that has filed a financing
statement against the person, for failure to comply with this
article; and
(2) the secured party's failure to comply with this
article does not affect the liability of the person for a
deficiency.
(b) Limitation of liability based on status as secured
party. Subject to subsection (f), a A secured party is not
liable because of its status as secured party:
(1) to a person that is a debtor or obligor, unless the
secured party knows:
(A) that the person is a debtor or obligor;
(B) the identity of the person; and
(C) how to communicate with the person; or
(2) to a secured party or lienholder that has filed a
financing statement against a person, unless the secured party
knows:
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5012 SB231 INTRODUCEDSB231 INTRODUCED
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(A) that the person is a debtor; and
(B) the identity of the person.
(c) Limitation of liability if reasonable belief that
transaction not a consumer-goods transaction or consumer
transaction. A secured party is not liable to any person, and
a person's liability for a deficiency is not affected, because
of any act or omission arising out of the secured party's
reasonable belief that a transaction is not a consumer-goods
transaction or a consumer transaction or that goods are not
consumer goods, if the secured party's belief is based on its
reasonable reliance on:
(1) a debtor's representation concerning the purpose
for which collateral was to be used, acquired, or held; or
(2) an obligor's representation concerning the purpose
for which a secured obligation was incurred.
(d) Limitation of liability for statutory damages. A
secured party is not liable to any person under Section
7-9A-625(c)(2) for its failure to comply with Section
7-9A-616.
(e) Limitation of multiple liability for statutory
damages. A secured party is not liable under Section
7-9A-625(c)(2) more than once with respect to any one secured
obligation.
(f) Exception: Limitation of liability under
subsections (a) and (b) does not apply. Subsections (a) and
(b) do not apply to limit the liability of a secured party to
a person if, at the time the secured party obtains control of
collateral that is a controllable account, controllable
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electronic record, or controllable payment intangible or at
the time the security interest attaches to the collateral,
whichever is later:
(1) the person is a debtor or obligor; and
(2) the secured party knows that the information in
subsection (b)(1)(A), (B), or (C) relating to the person is
not provided by the collateral, a record attached to or
logically associated with the collateral, or the system in
which the collateral is recorded.
Section 2. Sections 7-9A-107A, 7-9A-107B, 7-9A-306A,
7-9A-306B, 7-9A-314A, and 7-9A-326A are added to the Code of
Alabama 1975, to read as follows:
§7-9A-107A. Control of controllable electronic record,
controllable account, or controllable payment intangible.
(a) Control under Section 7-12-105. A secured party has
control of a controllable electronic record as provided in
Section 7-12-105.
(b) Control of controllable account and controllable
payment intangible. A secured party has control of a
controllable account or controllable payment intangible if the
secured party has control of the controllable electronic
record that evidences the controllable account or controllable
payment intangible.
§7-9A-107B. No requirement to acknowledge or confirm;
no duties.
(a) No requirement to acknowledge. A person that has
control under Section 7-9A-104, or 7-9A-105, is not required
to acknowledge that it has control on behalf of another
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person.
(b) No duties or confirmation. If a person acknowledges
that it has or will obtain control on behalf of another
person, unless the person otherwise agrees or law other than
this article otherwise provides, the person does not owe any
duty to the other person and is not required to confirm the
acknowledgment to any other person.
§7-9A-306A. Law governing perfection and priority of
security interests in chattel paper.
(a) Chattel paper evidenced by authoritative electronic
copy. Except as provided in subsection (d), if chattel paper
is evidenced only by an authoritative electronic copy of the
chattel paper or is evidenced by an authoritative electronic
copy and an authoritative tangible copy, the local law of the
chattel paper's jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in the chattel paper, even if the transaction does
not bear any relation to the chattel paper's jurisdiction. 
(b) Chattel paper's jurisdiction. The following rules
determine the chattel paper's jurisdiction under this section:
(1) If the authoritative electronic copy of the record
evidencing chattel paper, or a record attached to or logically
associated with the electronic copy and readily available for
review, expressly provides that a particular jurisdiction is
the chattel paper's jurisdiction for purposes of this part,
this article, or the Uniform Commercial Code, that
jurisdiction is the chattel paper's jurisdiction.
(2) If paragraph (1) does not apply and the rules of
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the system in which the authoritative electronic copy is
recorded are readily available for review and expressly
provide that a particular jurisdiction is the chattel paper's
jurisdiction for purposes of this part, this article, or the
Uniform Commercial Code, that jurisdiction is the chattel
paper's jurisdiction.
(3) If paragraphs (1) and (2) do not apply and the
authoritative electronic copy, or a record attached to or
logically associated with the electronic copy and readily
available for review, expressly provides that the chattel
paper is governed by the law of a particular jurisdiction,
that jurisdiction is the chattel paper's jurisdiction.
(4) If paragraphs (1), (2), and (3) do not apply and
the rules of the system in which the authoritative electronic
copy is recorded are readily available for review and
expressly provide that the chattel paper or the system is
governed by the law of a particular jurisdiction, that
jurisdiction is the chattel paper's jurisdiction.
(5) If paragraphs (1) through (4) do not apply, the
chattel paper's jurisdiction is the jurisdiction in which the
debtor is located.
(c) Chattel paper evidenced by authoritative tangible
copy. If an authoritative tangible copy of a record evidences
chattel paper and the chattel paper is not evidenced by an
authoritative electronic copy, while the authoritative
tangible copy of the record evidencing chattel paper is
located in a jurisdiction, the local law of that jurisdiction
governs:
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(1) perfection of a security interest in the chattel
paper by possession under Section 7-9A-314A; and
(2) the effect of perfection or nonperfection and the
priority of a security interest in the chattel paper.
(d) When perfection governed by law of jurisdiction
where debtor located. The local law of the jurisdiction in
which the debtor is located governs perfection of a security
interest in chattel paper by filing."
§7-9A-306B. Law governing perfection and priority of
security interests in controllable accounts, controllable
electronic records, and controllable payment intangibles.
(a) Governing law: general rules. Except as provided in
subsection (b), the local law of the controllable electronic
record's jurisdiction specified in Section 7-12-107(c) and (d)
governs perfection, the effect of perfection or nonperfection,
and the priority of a security interest in a controllable
electronic record and a security interest in a controllable
account or controllable payment intangible evidenced by the
controllable electronic record.
(b) When perfection governed by law of jurisdiction
where the debtor is located. The local law of the jurisdiction
in which the debtor is located governs:
(1) perfection of a security interest in a controllable
account, controllable electronic record, or controllable
payment intangible by filing; and
(2) automatic perfection of a security interest in a
controllable payment intangible created by a sale of the
controllable payment intangible.
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§7-9A-314A. Perfection by possession and control of
chattel paper.
(a) Perfection by possession and control. A secured
party may perfect a security interest in chattel paper by
taking possession of each authoritative tangible copy of the
record evidencing the chattel paper and obtaining control of
each authoritative electronic copy of the electronic record
evidencing the chattel paper.
(b) Time of perfection; continuation of perfection. A
security interest is perfected under subsection (a) not
earlier than the time the secured party takes possession and
obtains control and remains perfected under subsection (a)
only while the secured party retains possession and control.
(c) Application of Section 7-9A-313 to perfection by
possession of chattel paper. Subsections (c) and (f) through
(i) of Section 7-9A-313 apply to perfection by possession of
an authoritative tangible copy of a record evidencing chattel
paper.
§7-9A-326A. Priority of security interest in
controllable account, controllable electronic record, and
controllable payment intangible.
A security interest in a controllable account,
controllable electronic record, or controllable payment
intangible held by a secured party having control of the
account, electronic record, or payment intangible has priority
over a conflicting security interest held by a secured party
that does not have control.
Section 3. Article 12 is added to Title 7 of the Code
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of Alabama 1975, to read as follows:
ARTICLE 12
CONTROLLABLE ELECTRONIC RECORDS
§7-12-101. Short title.
This article may be cited as Uniform Commercial
Code—Controllable Electronic Records.
§7-12-102. Definitions.
(a) Article 12 definitions. In this article:
(1) "Controllable electronic record" means a record
stored in an electronic medium that can be subjected to
control under Section 7-12-105. The term does not include a
controllable account, a controllable payment intangible, a
deposit account, an electronic copy of a record evidencing
chattel paper, an electronic document of title, investment
property, a transferable record, or an electronic record that
is currently authorized or adopted by a domestic or foreign
government and is not a medium of exchange that was recorded
and transferable in a system that existed and operated for the
medium of exchange before the medium of exchange was
authorized or adopted by a government.
(2) "Qualifying purchaser" means a purchaser of a
controllable electronic record or an interest in a
controllable electronic record that obtains control of the
controllable electronic record for value, in good faith, and
without notice of a claim of a property right in the
controllable electronic record.
(3) "Transferable record" has the meaning provided for
that term in:
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(A) Section 201(a)(1) of the Electronic Signatures in
Global and National Commerce Act, 15 U.S.C. § 7021(a)(1), as
amended; or
(B) Section 8-1A-16(a).
(4) "Value" has the meaning provided in Section
7-3-303(a), as if references in that subsection to an
"instrument" were references to a controllable account,
controllable electronic record, or controllable payment
intangible.
(b) Definitions in Article 9A. The definitions in
Article 9A of "account debtor," "controllable account,"
"controllable payment intangible," "chattel paper," "deposit
account," and "investment property" apply to this article.
(c) Article 1 definitions and principles. Article 1
contains general definitions and principles of construction
and interpretation applicable throughout this article.
§7-12-103. Relation to Article 9A and consumer laws.
(a) Article 9A governs in case of conflict. If there is
conflict between this article and Article 9A, Article 9A
governs.
(b) Applicable consumer law and other laws. A
transaction subject to this article is subject to any
applicable rule of law that establishes a different rule for
consumers and to (i) any other statute or regulation that
regulates the rates, charges, agreements, and practices for
loans, credit sales, or other extensions of credit and (ii)
any consumer-protection statute or regulation.
§7-12-104. Rights in controllable account, controllable
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electronic record, and controllable payment intangible.
(a) Applicability of section to controllable account
and controllable payment intangible. This section applies to
the acquisition and purchase of rights in a controllable
account or controllable payment intangible, including the
rights and benefits under subsections (c), (d), (e), (g), and
(h) of a purchaser and qualifying purchaser, in the same
manner this section applies to a controllable electronic
record. 
(b) Control of controllable account and controllable
payment intangible. To determine whether a purchaser of a
controllable account or a controllable payment intangible is a
qualifying purchaser, the purchaser obtains control of the
account or payment intangible if it obtains control of the
controllable electronic record that evidences the account or
payment intangible.
(c) Applicability of other law to acquisition of
rights. Except as provided in this section, law other than
this article determines whether a person acquires a right in a
controllable electronic record and the right the person
acquires.
(d) Shelter principle and purchase of limited interest.
A purchaser of a controllable electronic record acquires all
rights in the controllable electronic record that the
transferor had or had power to transfer, except that a
purchaser of a limited interest in a controllable electronic
record acquires rights only to the extent of the interest
purchased.
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(e) Rights of qualifying purchaser. A qualifying
purchaser acquires its rights in the controllable electronic
record free of a claim of a property right in the controllable
electronic record.
(f) Limitation of rights of qualifying purchaser in
other property. Except as provided in subsections (a) and (e)
for a controllable account and a controllable payment
intangible or law other than this article, a qualifying
purchaser takes a right to payment, right to performance, or
other interest in property evidenced by the controllable
electronic record subject to a claim of a property right in
the right to payment, right to performance, or other interest
in property.
(g) No-action protection for qualifying purchaser. An
action may not be asserted against a qualifying purchaser
based on both a purchase by the qualifying purchaser of a
controllable electronic record and a claim of a property right
in another controllable electronic record, whether the action
is framed in conversion, replevin, constructive trust,
equitable lien, or other theory.
(h) Filing not notice. Filing of a financing statement
under Article 9A is not notice of a claim of a property right
in a controllable electronic record.
§7-12-105. Control of controllable electronic record.
(a) General rule: control of controllable electronic
record. A person has control of a controllable electronic
record if the electronic record, a record attached to or
logically associated with the electronic record, or a system
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in which the electronic record is recorded:
(1) gives the person:
(A) power to avail itself of substantially all the
benefits from the electronic record; and
(B) exclusive power, subject to subsection (b), to:
(i) prevent others from availing themselves of
substantially all the benefits from the electronic record; and
(ii) transfer control of the electronic record to
another person or cause another person to obtain control of
another controllable electronic record as a result of the
transfer of the electronic record; and
(2) enables the person readily to identify itself in
any way, including by name, identifying number, cryptographic
key, office, or account number, as having the powers specified
in paragraph (1).
(b) Meaning of exclusive. Subject to subsection (c), a
power is exclusive under subsection (a)(1)(B)(i) and (ii) even
if:
(1) the controllable electronic record, a record
attached to or logically associated with the electronic
record, or a system in which the electronic record is recorded
limits the use of the electronic record or has a protocol
programmed to cause a change, including a transfer or loss of
control or a modification of benefits afforded by the
electronic record; or
(2) the power is shared with another person.
(c) When power not shared with another person. A power
of a person is not shared with another person under subsection
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(b)(2) and the person's power is not exclusive if:
(1) the person can exercise the power only if the power
also is exercised by the other person; and
(2) the other person:
(A) can exercise the power without exercise of the
power by the person; or
(B) is the transferor to the person of an interest in
the controllable electronic record or a controllable account
or controllable payment intangible evidenced by the
controllable electronic record.
(d) Presumption of exclusivity of certain powers. If a
person has the powers specified in subsection (a)(1)(B)(i) and
(ii), the powers are presumed to be exclusive.
(e) Control through another person. A person has
control of a controllable electronic record if another person,
other than the transferor to the person of an interest in the
controllable electronic record or a controllable account or
controllable payment intangible evidenced by the controllable
electronic record:
(1) has control of the electronic record and
acknowledges that it has control on behalf of the person; or
(2) obtains control of the electronic record after
having acknowledged that it will obtain control of the
electronic record on behalf of the person.
(f) No requirement to acknowledge. A person that has
control under this section is not required to acknowledge that
it has control on behalf of another person.
(g) No duties or confirmation. If a person acknowledges
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that it has or will obtain control on behalf of another
person, unless the person otherwise agrees or law other than
this article or Article 9A otherwise provides, the person does
not owe any duty to the other person and is not required to
confirm the acknowledgment to any other person.
§7-12-106. Discharge of account debtor on controllable
account or controllable payment intangible.
(a) Discharge of account debtor. An account debtor on a
controllable account or controllable payment intangible may
discharge its obligation by paying:
(1) the person having control of the controllable
electronic record that evidences the controllable account or
controllable payment intangible; or
(2) except as provided in subsection (b), a person that
formerly had control of the controllable electronic record.
(b) Content and effect of notification. Subject to
subsection (d), the account debtor may not discharge its
obligation by paying a person that formerly had control of the
controllable electronic record if the account debtor receives
a notification that:
(1) is signed by a person that formerly had control or
the person to which control was transferred;
(2) reasonably identifies the controllable account or
controllable payment intangible;
(3) notifies the account debtor that control of the
controllable electronic record that evidences the controllable
account or controllable payment intangible was transferred;
(4) identifies the transferee, in any reasonable way,
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including by name, identifying number, cryptographic key,
office, or account number; and
(5) provides a commercially reasonable method by which
the account debtor is to pay the transferee.
(c) Discharge following effective notification. After
receipt of a notification that complies with subsection (b),
the account debtor may discharge its obligation by paying in
accordance with the notification and may not discharge the
obligation by paying a person that formerly had control.
(d) When notification ineffective. Subject to
subsection (h), notification is ineffective under subsection
(b):
(1) unless, before the notification is sent, the
account debtor and the person that, at that time, had control
of the controllable electronic record that evidences the
controllable account or controllable payment intangible agree
in a signed record to a commercially reasonable method by
which a person may furnish reasonable proof that control has
been transferred;
(2) to the extent an agreement between the account
debtor and seller of a payment intangible limits the account
debtor's duty to pay a person other than the seller and the
limitation is effective under law other than this article; or
(3) at the option of the account debtor, if the
notification notifies the account debtor to:
(A) divide a payment;
(B) make less than the full amount of an installment or
other periodic payment; or
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(C) pay any part of a payment by more than one method
or to more than one person.
(e) Proof of transfer of control. Subject to subsection
(h), if requested by the account debtor, the person giving the
notification under subsection (b) seasonably shall furnish
reasonable proof, using the method in the agreement referred
to in subsection (d)(1), that control of the controllable
electronic record has been transferred. Unless the person
complies with the request, the account debtor may discharge
its obligation by paying a person that formerly had control,
even if the account debtor has received a notification under
subsection (b).
(f) What constitutes reasonable proof. A person
furnishes reasonable proof under subsection (e) that control
has been transferred if the person demonstrates, using the
method in the agreement referred to in subsection (d)(1), that
the transferee has the power to:
(1) avail itself of substantially all the benefits from
the controllable electronic record;
(2) prevent others from availing themselves of
substantially all the benefits from the controllable
electronic record; and
(3) transfer the powers specified in paragraphs (1) and
(2) to another person.
(g) Rights not waivable. Subject to subsection (h), an
account debtor may not waive or vary its rights under
subsections (d)(1) and (e) or its option under subsection
(d)(3).
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(h) Rule for individual under other law. This section
is subject to law other than this article which establishes a
different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family, or
household purposes.
§7-12-107. Governing law.
(a) Governing law: general rule. Except as provided in
subsection (b), the local law of a controllable electronic
record's jurisdiction governs a matter covered by this
article.
(b) Governing law: Section 7-12-106. For a controllable
electronic record that evidences a controllable account or
controllable payment intangible, the local law of the
controllable electronic record's jurisdiction governs a matter
covered by Section 7-12-106 unless an effective agreement
determines that the local law of another jurisdiction governs.
(c) Controllable electronic record's jurisdiction. The
following rules determine a controllable electronic record's
jurisdiction under this section:
(1) If the controllable electronic record, or a record
attached to or logically associated with the controllable
electronic record and readily available for review, expressly
provides that a particular jurisdiction is the controllable
electronic record's jurisdiction for purposes of this article
or the Uniform Commercial Code, that jurisdiction is the
controllable electronic record's jurisdiction.
(2) If paragraph (1) does not apply and the rules of
the system in which the controllable electronic record is
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recorded are readily available for review and expressly
provide that a particular jurisdiction is the controllable
electronic record's jurisdiction for purposes of this article
or the Uniform Commercial Code, that jurisdiction is the
controllable electronic record's jurisdiction.
(3) If paragraphs (1) and (2) do not apply and the
controllable electronic record, or a record attached to or
logically associated with the controllable electronic record
and readily available for review, expressly provides that the
controllable electronic record is governed by the law of a
particular jurisdiction, that jurisdiction is the controllable
electronic record's jurisdiction.
(4) If paragraphs (1), (2), and (3) do not apply and
the rules of the system in which the controllable electronic
record is recorded are readily available for review and
expressly provide that the controllable electronic record or
the system is governed by the law of a particular
jurisdiction, that jurisdiction is the controllable electronic
record's jurisdiction.
(5) If paragraphs (1) through (4) do not apply, the
controllable electronic record's jurisdiction is the District
of Columbia.
(d) Applicability of Article 12. If subsection (c)(5)
applies and Article 12 is not in effect in the District of
Columbia without material modification, the governing law for
a matter covered by this article is the law of the District of
Columbia as though Article 12 were in effect in the District
of Columbia without material modification. In this subsection,
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"Article 12" means Article 12 of Uniform Commercial Code
Amendments (2022).
(e) Relation of matter or transaction to controllable
electronic record's jurisdiction not necessary. To the extent
subsections (a) and (b) provide that the local law of the
controllable electronic record's jurisdiction governs a matter
covered by this article, that law governs even if the matter
or a transaction to which the matter relates does not bear any
relation to the controllable electronic record's jurisdiction.
(f) Rights of purchasers determined at time of
purchase. The rights acquired under Section 7-12-104 by a
purchaser or qualifying purchaser are governed by the law
applicable under this section at the time of purchase.
Section 4. Article 12A is added to Title 7, Code of
Alabama 1975, to read as follows:
Article 12A. Transitional Provisions for Uniform
Commercial Code Amendments (2022).
Part 1. General Provisions and Definitions.
Section 7-12A-101. Short Title. 
This article may be cited as Transitional Provisions
for Uniform Commercial Code Amendments (2022).
Section 7-12A-102. Definitions.
(a) Article 12A Definitions. In this article:
(1) "Adjustment date" means July 1, 2025, or the date
that is one year after the effective date of this act,
whichever is later.
(2) "Article 12" means Article 12 of the Uniform
Commercial Code.
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(3) "Article 12 property" means a controllable account,
controllable electronic record, or controllable payment
intangible.
(4) "Article 9A" means Article 9A of the Uniform
Commercial Code.
(b) Definitions in other articles. The following
definitions in other articles of the Uniform Commercial Code
apply to this article:
"Controllable account." Section 7-9A-102.
"Controllable electronic record." Section 7-12-102.
"Controllable payment intangible." Section 7-9A-102.
"Financing statement." Section 7-9A-102.
(c) Article 1 definitions and principles. Article 1 of
the Uniform Commercial Code contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Part 2. General Transitional Provision.
Section 7-12A-201. Saving Clause.
Except as provided in Part 3, a transaction validly
entered into before the effective date of this act and the
rights, duties, and interests flowing from the transaction
remain valid thereafter and may be terminated, completed,
consummated, or enforced as required or permitted by law other
than the Uniform Commercial Code or, if applicable, the
Uniform Commercial Code, as though this act had not taken
effect.
Part 3. Transitional Provisions for Articles 9A and 12.
Section 7-12A-301. Saving Clause.
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(a) Pre-effective date transaction, lien, or interest.
Except as provided in this part, Article 9A as amended by this
act and Article 12 apply to a transaction, lien, or other
interest in property, even if the transaction, lien, or
interest was entered into, created, or acquired before the
effective date of this act.
(b) Continuing validity. Except as provided in
subsection (c) and Sections 7-12A-302 through 7-12A-306:
(1) a transaction, lien, or interest in property that
was validly entered into, created, or transferred before the
effective date of this act and was not governed by the Uniform
Commercial Code, but would be subject to Article 9A as amended
by this act or Article 12 if it had been entered into,
created, or transferred on or after the effective date of this
act, including the rights, duties, and interests flowing from
the transaction, lien, or interest, remains valid on and after
the effective date of this act; and
(2) the transaction, lien, or interest may be
terminated, completed, consummated, and enforced as required
or permitted by this act or by the law that would apply if
this act had not taken effect.
(c) Pre-effective date proceeding. This act does not
affect an action, case, or proceeding commenced before the
effective date of this act.
Section 7-12A-302. Security Interest Perfected Before
Effective Date. 
(a) Continuing perfection: perfection requirements
satisfied. A security interest that is enforceable and
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perfected immediately before the effective date of this act is
a perfected security interest under this act if, on the
effective date of this act, the requirements for
enforceability and perfection under this act are satisfied
without further action. 
(b) Continuing perfection: enforceability or perfection
requirements not satisfied. If a security interest is
enforceable and perfected immediately before the effective
date of this act, but the requirements for enforceability or
perfection under this act are not satisfied on the effective
date of this act, the security interest:
(1) is a perfected security interest until the earlier
of the time perfection would have ceased under the law in
effect immediately before the effective date of this act or
the adjustment date;
(2) remains enforceable thereafter only if the security
interest satisfies the requirements for enforceability under
Section 7-9A-203, as amended by this act, before the
adjustment date; and
(3) remains perfected thereafter only if the
requirements for perfection under this act are satisfied
before the time specified in paragraph (1).
Section 7-12A-303. Security Interest Unperfected Before
Effective Date. 
A security interest that is enforceable immediately
before the effective date of this act but is unperfected at
that time:
(1) remains an enforceable security interest until the
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adjustment date;
(2) remains enforceable thereafter if the security
interest becomes enforceable under Section 7-9A-203, as
amended by this act, on the effective date of this act or
before the adjustment date; and
(3) becomes perfected:
(A) without further action, on the effective date of
this act if the requirements for perfection under this act are
satisfied before or at that time; or
(B) when the requirements for perfection are satisfied
if the requirements are satisfied after that time.
Section 7-12A-304. Effectiveness of Actions Taken
Before Effective Date. 
(a) Pre-effective-date action; attachment and
perfection before adjustment date. If action, other than the
filing of a financing statement, is taken before the effective
date of this act and the action would have resulted in
perfection of the security interest had the security interest
become enforceable before the effective date of this act, the
action is effective to perfect a security interest that
attaches under this act before the adjustment date. An
attached security interest becomes unperfected on the
adjustment date unless the security interest becomes a
perfected security interest under this act before the
adjustment date.
(b) Pre-effective-date filing. The filing of a
financing statement before the effective date of this act is
effective to perfect a security interest on the effective date
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of this act to the extent the filing would satisfy the
requirements for perfection under this act.
(c) Pre-effective-date enforceability action. The
taking of an action before the effective date of this act is
sufficient for the enforceability of a security interest on
the effective date of this act if the action would satisfy the
requirements for enforceability under this act.
Section 7-12A-305. Priority. 
(a) Determination of priority. Subject to subsections
(b) and (c), this act determines the priority of conflicting
claims to collateral.
(b) Established priorities. Subject to subsection (c),
if the priorities of claims to collateral were established
before the effective date of this act, Article 9A as in effect
before the effective date of this act determines priority.
(c) Determination of certain priorities on adjustment
date. On the adjustment date, to the extent the priorities
determined by Article 9A as amended by this act modify the
priorities established before the effective date of this act,
the priorities of claims to Article 12 property established
before the effective date of this act cease to apply. 
Section 7-12A-306. Priority of Claims When Priority
Rules of Article 9A Do Not Apply.
(a) Determination of priority. Subject to subsections
(b) and (c), Article 12 determines the priority of conflicting
claims to Article 12 property when the priority rules of
Article 9A as amended by this act do not apply.
(b) Established priorities. Subject to subsection (c),
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when the priority rules of Article 9A as amended by this act
do not apply and the priorities of claims to Article 12
property were established before the effective date of this
act, law other than Article 12 determines priority.
(c) Determination of certain priorities on adjustment
date. When the priority rules of Article 9A as amended by this
act do not apply, to the extent the priorities determined by
this act modify the priorities established before the
effective date of this act, the priorities of claims to
Article 12 property established before the effective date of
this act cease to apply on the adjustment date. 
Section 5. This act shall become effective January 1,
2024, following its passage and approval by the Governor, or
its otherwise becoming law.
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