Government of the District of Columbia
UNIFORM LAW COMMISSION
January 4, 2023
The Honorable Phil Mendelson
Chairman
Council of the District of Columbia
The John A. Wilson Building,
1350 Pennsylvania Avenue, NW
Washington, DC 20004
RE: Request for re introduction of Uniform Commercial Code Amendment Act of 2023
concerning transactions in digital assets based on emerging technologies.
Dear Chairman Mendelson:
Pursuant to Rule 401(b)(1) of the Rules of Organization and Procedure for the
Council, this is to request, on behalf of the District of Columbia Uniform Law
Commission, that you reintroduce the proposed “Uniform Commercial Code Amendment
Act of 2023.” The act was introduced at the end of Council Period 24 as Bill 24-1052,
soon after the amendments were finalized, but did not have time to be enacted before the
period ended. The National Conference of Commissioners on Uniform State Laws
(NCCUSL) recently completed these important amendments to the Uniform Commercial
Code to address commercial transactions involving digital assets based on emerging
technologies. These include cryptocurrency, non-fungible tokens, and electronic
promises to pay. The amendments are needed to ensure that these digital assets are
negotiable and to provide for the creation of security interests in them so that they may be
used as collateral for loans. The prompt enactment of these UCC Amendments by the
Council is especially important because the District of Columbia plays a critical national
role as the default filing jurisdiction for all commercial transactions in the country subject
to the UCC for which no jurisdiction’s law is specified to govern.
The UCC has been enacted in every jurisdiction of the United States in essentially
the same form and is the backbone of commerce in the country. Because of the unique
legal challenges posed by transactions involving digital assets based on emerging
technologies, NCCUSL undertook an extensive analysis of the law with the participation
of hundreds of stakeholders. The UCC Amendments are the result of this process. They
include a new Article 12 to the UCC, entitled “Controllable Electronic Records” and
conforming and related amendments to other articles of the UCC, including Article 9
— 2
Secured Transactions. To ensure that the UCC continues to remain relevant, controllable
electronic records are defined to include not only digital assets using today’s distributed
ledger or “blockchain” technology but also any assets that may function similarly using
future technologies. In addition, the bill contains a few important technical amendments
to Article 9 of the UCC that clarify that governance interests in partnerships and similar
entities may not be used as collateral for a secured transaction without the consent of the
other partners or co -owners.
A proposed “Uniform Commercial Code Amendment Act of 2023” containing
these amendments is being filed with this letter. In addition, the following documents
have been filed: (1) a short Overview of the UCC Amendments; (2) a more detailed
summary of the UCC Amendments; (3) a statement as to why the UCC Amendments
should be adopted; (4) the official version of the UCC amendments themselves with
detailed comments; and (5) a summary of the separate clarifying amendments to Article 9
of the UCC.
I would be pleased to answer any questions and to provide any additional
information requested.
Sincerely,
James C. McKay, Jr.
Chair
D.C. Uniform Law Commission
cc: Uniform Law Commissioners
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ChairmanPhilMendelsonattherequestofthe
DistrictofColumbiaUniformLawCommission
ABILL
INTHECOUNCILOFTHEDISTRICTOFCOLUMBIA
ToamendtheUniformCommercialCode,SubtitleIofTitle28oftheDistrictofColumbia
Code,toaddanewArticle12—ControllableElectronicRecords,toproviderulesfor
transactionsinvolvingdigitalassets,includingcryptocurrency,non-fungibletokens,and
electronicpromisestopay,andtoprovidefortheirnegotiabilityandtheirperfectionby
control;tomakeconformingandrelatedamendmentstoArticle|—GeneralProvisions,
Article2—Sales,Article2A—Leases,Article4A—FundsTransfers,Article5—Letters
ofCredit,Article7—DocumentsofTitle,Article8—InvestmentSecurities,andArticle
9—SecuredTransactions;toprovidetransitionrulestoprotecttheexpectationsofparties
toexistingtransactions;toamendprovisionsofPart4ofArticle9toclarifythat
governanceinterestsinpartnershipsandsimilarentitiesmaynotbeusedascollateral
withoutconsentoftheco-owners;andforotherpurposes.
BEITENACTEDBYTHECOUNCILOFTHEDISTRICTOFCOLUMBIA,Thatthis
actmaybecitedasthe“UniformCommercialCodeAmendmentActof2023”.
Sec.2.SubtitleIofTitle28oftheDistrictofColumbiaCodeisamendedasfollows:
(a)Thetableofcontentsisamendedasfollows:
(1)Thesectionheadingfor§28:2-106isamendedbystrikingtheperiodatthe
endandinsertingthephrase“;hybridtransaction.”initsplace.
(2)Thesectionheadingfor§28:2-202isamendedbystrikingtheword“written”.
(3)Thesectionheadingfor§28:2A-202isamendedbystrikingtheword
“written”,
(4)Thesectionheadingfor§28:9-105isamendedtoreadasfollows:
“Controlofelectroniccopyofrecordevidencingchattelpaper.” 2
(5) The following new section heading is added after the section heading for 37
§ 28:9- 105: 38
“28:9- 105A. Control of electronic money.” 39
(6) The following new section headings are added after the section heading for 40
§ 28:9- 107: 41
“28:9- 107A. Control of controllable electronic record, controllable account, or controllable 42
payment intangible. 43
“28:9- 107B. No Requirement to Acknowledge or Confirm; No Duties.” 44
(7) The following new section headings are added after the section heading for 45
§ 28:9- 306: 46
“28:9- 306A. Law governing perfection and priority of security interests in chattel paper. 47
“28:9-306B. Law governing perfection and priority of security interests in controllable accounts, 48
controllable electronic records, and controllable payment intangibles.” 49
(8) The section heading for § 28:9- 312 is amended by inserting after the phrase 50
“paper,” the phrase “controllable accounts, controllable electronic records, controllable payment 51
intangibles,”. 52
(9) The following new section heading is added after the section heading for 53
§ 28:9- 314: 54
“28:9- 314A. Perfection by possession and control of chattel paper.” 55
(10) The following new section heading is added after the section heading for 56
§ 28:9- 326: 57
“28:9- 326A. Priority of security interest in controllable account, controllable electronic record, 58
and controllable payment intangible.” 59 3
(11) The section heading for § 28:9- 331 is amended to read as follows: 60
“Priority of Rights of Purchasers of Controllable Accounts, Controllable Electronic Records, 61
Controllable Payment Intangibles, Documents, Instruments, and Securities Under Other Articles; 62
Priority of Interests in Financial Assets and Security Entitlements and Protection Against 63
Assertion of Claim Articles 8 and 12.” 64
(12) Headings for a new Article 12 are added at the end: 65
“Article 12. Controllable Electronic Records.” 66
“Part 1. General Provisions. 67
“28:12- 101. Title. 68
“28:12- 102. Definitions. 69
“28:12- 103. Relation to Article 9 and consumer laws. 70
“28:12- 104. Rights in controllable account, controllable electronic record, and controllable 71
payment intangible. 72
“28:12- 105. Control of controllable electronic record. 73
“28:12- 106. Discharge of account debtor on controllable account or controllable 74
payment intangible. 75
“28:12- 107. Governing law. 76
“Part 2. Transitional provisions for Articles 9 and 12.” 77
“28:12- 201. Definitions. 78
“28:12- 202. Saving clause. 79
“28:12- 204. Security interest perfected before effective date of 2022 Act. 80
“28:12- 205. Security interest unperfected before effective date of 2022 Act. 81
“28:12- 206. Effectiveness of actions taken before effective date of 2022 Act. 82 4
“28:12- 207. Priority. 83
“28:12- 208. Priority of claims when priority rules of Article 9 do not apply. 84
(b) Article 1 is amended as follows: 85
(1) § 28:1- 201(b) is amended as follows: 86
(A) Paragraph (10) is amended to read as follows: 87
“(10) “Conspicuous”, with reference to a term, means so written, displayed, or presented 88
that, based on the totality of the circumstances, a reasonable person against which it is to operate 89
ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court.” 90
(B) Paragraph (15) is amended to read as follows: 91
“(15) “Delivery”, with respect to an electronic document of title, means voluntary 92
transfer of control and, with respect to an instrument, a tangible document of title, or an 93
authoritative tangible copy of a record evidencing chattel paper, means voluntary 94
transfer of possession.” 95
(C) A new paragraph (16A) is inserted after paragraph (16): 96
“(16A) “Electronic” means relating to technology having electrical, digital, magnetic, 97
wireless, optical, electromagnetic, or similar capabilities.” 98
(D) Paragraph (21) is amended by amending subparagraph (C) by 99
inserting after the word “control” the phrase “other than pursuant to § 28:7- 106(g),”. 100
(E) Paragraph (24) is amended to read as follows: 101
“(24) “Money” means a medium of exchange that is currently authorized or adopted by a 102
domestic or foreign government. The term includes a monetary unit of account established by an 103
intergovernmental organization, or pursuant to an agreement between two or more countries. The 104
term does not include an electronic record that is a medium of exchange recorded and 105 5
transferable in a system that existed and operated for the medium of exchange before the 106
medium of exchange was authorized or adopted by the government.” 107
(F) Paragraph (27) is amended by to read as follows: 108
“(27) “Person” means an individual, estate, business or nonprofit entity, government or 109
governmental subdivision, agency, or instrumentality, or other legal entity. The term includes a 110
protected series, however denominated, of an entity if the protected series is established under 111
law other than this subtitle that limits, or limits if conditions specified under the law are satisfied, 112
the ability of a creditor of the entity or of any other protected series of the entity to satisfy a 113
claim from assets of the protected series.” 114
(G) Paragraph (36) is amended by to read as follows: 115
“(36) “Send”, in connection with a record, or notification means: 116
“(A) to deposit in the mail, or deliver for transmission, or transmit by any other 117
usual means of communication, with postage or cost of transmission provided for, addressed to 118
any address reasonable under the circumstances; or 119
“(B) to cause the record or notification to be received within the time it would 120
have been received if properly sent under subparagraph (A).” 121
(H) Paragraph (37) is amended by to read as follows: 122
“(37)(A) “Sign” means, with present intent to authenticate or adopt a record: 123
“(i) to execute or adopt a tangible symbol; or 124
“(ii) to attach to or logically associate with the record an electronic 125
symbol, sound, or process. 126
“(B) “Signed”, “signing”, and “signature” have corresponding meanings.” 127
(2) § 28:1- 204 is amended by deleting the phrase “Articles 3, 4, and 5” and 128 6
inserting the phrase “Articles 3, 4, 5, and 12” in its place. 129
(3) § 28:1- 301(c) is amended by: 130
(A) Striking the period after the word “9- 307” and adding a semicolon in 131
its place; and 132
(B) Inserting the following new paragraph after paragraph (8): 133
“(9) § 28:12- 107.” 134
(4) § 28:1- 306 is amended by striking the phrase “an authenticated” and inserting 135
the phrase “a signed” in its place. 136
(c) Article 2 is amended as follows: 137
(1) § 28:2- 102 is amended to read as follows: 138
Ҥ 28:2- 102. Scope; certain security and other transactions excluded from this article 139
“(a) Unless the context otherwise requires, and except as provided in subsection (c), this 140
Article applies to transactions in goods and, in the case of a hybrid transaction, it applies to the 141
extent provided in subsection (b). 142
“(b) In a hybrid transaction: 143
“(1) If the sale-of-goods aspects do not predominate, only the provisions of this 144
Article which relate primarily to the sale- of-goods aspects of the transaction apply, and the 145
provisions that relate primarily to the transaction as a whole do not apply. 146
“(1) If the sale-of-goods aspects predominate, this Article applies to the 147
transaction but does not preclude application in appropriate circumstances of other law to aspects 148
of the transaction which do not relate to the sale of goods. 149
“(c) This article does not: 150
“(1) Apply to a transaction that, even though in the form of an unconditional 151 7
contract to sell or present sale, operates only to create a security interest; or 152
“(2) Impair or repeal a statute regulating sales to consumers, farmers, or other 153
specified classes of buyers.” 154
(2) § 28:2- 106 is amended as follows: 155
(A) The section heading is amended by striking the period at the end and 156
inserting the phrase “; hybrid transaction.” in its place. 157
(B) The following new paragraph (5) is added after paragraph (4): 158
“(5) “Hybrid transaction” means a single transaction involving a sale of goods 159
and: 160
“(A) the provision of services; 161
“(B) a lease of other goods; or 162
“(C) a sale, lease, or license of property other than goods.” 163
(3) § 28:2- 201 is amended as follows: 164
(A) Paragraph (1) is amended to read as follows: 165
“(1) Except as otherwise provided in this section a contract for the sale of goods for the 166
price of $500 or more is not enforceable by way of action or defense unless there is a record 167
sufficient to indicate that a contract for sale has been made between the parties and signed by the 168
party against whom enforcement is sought or by the party’s authorized agent or broker. A record 169
is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not 170
enforceable under this subsection beyond the quantity of goods shown in the record.” 171
(B) Paragraph (2) is amended to read as follows: 172
“(2) Between merchants if within a reasonable time a record in confirmation of the 173
contract and sufficient against the sender is received and the party receiving it has reason to 174 8
know its contents, it satisfies the requirements of subsection (1) against the party unless notice in 175
a record of objection to its contents is given within 10 days after it is received.” 176
(4) § 28:2- 202 is amended as follows: 177
(A) The section heading is amended by striking the word “written”. 178
(B) Subsection (b) is amended by striking the word “writing” and inserting 179
the word “record” in its place. 180
(5) § 28:2- 203 is amended by striking the word “writing” both places it appears 181
and inserting the word “record” in its place. 182
(6) § 28:2- 205 is amended by striking the word “writing” and inserting the word 183
“record” in its place. 184
(7) § 28:209 is amended by amending paragraph (2) by inserting after the word 185
“writing” the phrase “or other signed record”. 186
(d) Article 2A is amended as follows: 187
(1) § 28:2A-102 is amended to read as follows: 188
“28:2A-102. Scope. 189
“(a) This article applies to any transaction, regardless of form, that creates a lease 190
and, in the case of a hybrid lease, it applies to the extent provided in subsection (b). 191
“(b) In a hybrid lease: 192
“(1) If the lease- of-goods aspects do not predominate: 193
“(A) Only the provisions of this Article which relate primarily to the 194
lease-of-goods aspects of the transaction apply, and the provisions that relate primarily to the 195
transaction as a whole do not apply; 196
“(B) § 28:2A-209 applies if the lease is a finance lease; and 197 9
“(C) §28:2A-407 applies to the promises of the lessee in a finance lease 198
to the extent the promises are consideration for the right to possession and use of the leased 199
goods; and 200
“(2) If the lease- of-goods aspects predominate, this article applies to the 201
transaction, but does not preclude application in appropriate circumstances of other law to 202
aspects of the lease which do not relate to the lease of goods.” 203
(2) § 28:2A-103 is amended by amending subsection (a) by inserting after 204
paragraph (8) the following new paragraph: 205
“(8A) “Hybrid lease” means a single transaction involving a lease of goods and: 206
“(A) The provision of services; 207
“(B) A sale of other goods; or 208
“(C) A sale, lease, or license of property other than goods.” 209
(3) § 28:2A-107 is amended by striking the phrase “written waiver or 210
renunciation signed and” and inserting the phrase “waiver or renun ciation in a signed record” 211
in its place. 212
(4) § 28:2A-201 is amended as follows: 213
(A) Subsection (a)(1) is amended by striking the word “writing” and 214
inserting the word “record” in its place.” 215
(B) Subsection (c) is amended by striking the word “writing” both time 216
it appears and inserting the word “record” in its place. 217
(C) Subsection (e)(1) is amended by striking the word “writing” and 218
inserting the word “record” in its place.” 219
(5) § 28:2A-202 is amended as follows: 220 10
(A) The section heading is amended by striking the word “written”. 221
(B) The lead-in sentence is amended by striking the word “writing” and 222
inserting the word “record” in its place. 223
(C) Paragraph (2) is amended by striking the word “writing” and 224
inserting the word “record” in its place. 225
(6) § 28:2A-203 is amended by striking the word “writing” both times it 226
appears and inserting the word “record” in its place. 227
(7) § 28:2A-205 is amended by striking the word “writing” both times it 228
appears and inserting the word “record” in its place. 229
(8) § 28:2A-208 is amended by amending subsection (b) by striking the word 230
“writing” and inserting the word “record” in its place. 231
(e) Article 3 is amended as follows: 232
(1) § 28:3- 104(a) is amended by amending paragraph (3) by deleting the word 233
“or” after the phrase “collateral,” and by striking the period and inserting the following 234
phrase in its place “(iv) a term that specifies the law that governs the promise or order, or (v) 235
an undertaking to resolve in a specified forum a dispute concerning the promise or order.” 236
(2) § 28:3- 105(a) is amended to read as follows: 237
“(a) “Issue” means: 238
(1) The first delivery of an instrument by the maker or drawer, whether to a 239
holder or non- holder, for the purpose of giving rights on the instrument to any person; or 240
“(2) If agreed by the payee, the first transmission by the drawer to the payee of 241
an image of an item and information derived from the item that enables the depositary bank 242
to collect the item by transferring or presenting under federal law an electronic check.” 243 11
(3) § 28:3- 401 is amended as follows: 244
(A) Subsection (a) is amended by deleting the subsection letter “(a)”. 245
(B) Subsection (b) is deleted. 246
(4) § 28:3- 604 is amended as follows: 247
(A) Subsection (a) is amended by adding the following sentence at the 248
end: “The obligation of a party to pay a check is not discharged solely by destruction of the 249
check in connection with a process in which information is extracted from the check and an 250
image of the check is made and, subsequently, the information and image are transmitted for 251
payment.” 252
(B) Subsection (c) is deleted. 253
(f) Article 4A is amended as follows: 254
(1) § 28:4A-103(a)(1) is amended by striking the phrase “, electronically, or in 255
writing” and inserting the phrase “or in a record” in its place. 256
(2) § 28:4A-201 is amended to read as follows: 257
“Section 4A-201. Security Procedure. 258
““Security procedure” means a procedure established by agreement of a customer and 259
a receiving bank for the purpose of (i) verifying that a payment order or communication 260
amending or cancelling a payment order is that of the customer, or (ii) detecting error in the 261
transmission or the content of the payment order or communication. A security procedure 262
may impose an obligation on the receiving bank or the customer and may require the use of 263
algorithms or other codes, identifying words, or numbers, symbols, sounds, biometrics, 264
encryption, callback procedures, or similar security devices. Comparison of a signature on a 265
payment order or communication with an authorized specimen signature of the customer or 266 12
requiring a payment order to be sent from a known email address, Internet Protocol address, 267
or telephone number is not by itself a security procedure.” 268
(3) § 28:4A-202 is amended as follows: 269
(A) Subsection (b) is amended to read as follows: 270
“(b) If a bank and its customer have agreed that the authenticity of payment orders 271
issued to the bank in the name of the customer as sender will be verified pursuant to a 272
security procedure, a payment order received by the receiving bank is effective as the order 273
of the customer, whether or not authorized, if (i) the security procedure is a commercially 274
reasonable method of providing security against unauthorized payment orders, and (ii) the 275
bank proves that it accepted the payment order in good faith and in compliance with the 276
bank’s obligations under the security procedure and any agreement or instruction of the 277
customer, evidenced by a record, restricting acceptance of payment orders issued in the name 278
of the customer. The bank is not required to follow an instruction that violates a an 279
agreement with the customer, evidenced by a record, or notice of which is not received at a 280
time and in a manner affording the bank a reasonable opportunity to act on it before the 281
payment order is accepted.” 282
(B) Subsection (c) is amended by amending the second sentence by: 283
(i) Striking the word “writing” and inserting the phrase “a 284
record” in its place; and 285
(ii) Inserting after the phrase “in compliance with” the phrase 286
“the bank’s security obligation under” 287
(4) § 28:4A-203(b)(1) is amended by striking the phrase “written agreement” 288
and inserting the phrase “agreement evidenced by a record” in its place. 289 13
(5) § 28:4A-207(c)(2) is amended by striking the word “writing” and inserting 290
the word “record” in its place. 291
(6) § 28:4A-208(b)(2) is amended by striking the word “writing” and inserting 292
the word “record” in its place. 293
(7) § 28:4A-210(1) is amended by striking the phrase “, electronically, or in 294
writing” and inserting the phrase “or in a record” in its place. 295
(8) § 28:4A-211(a) is amended by striking the phrase “, electronically, or in a 296
writing” and inserting the phrase “or in a record” in its place. 297
(9) § 28:4A-305 is amended as follows: 298
(A) Subsection (c) is amended by striking the phrase “written 299
agreement of the receiving bank” and inserting the phrase “agreement of the receiving bank, 300
evidenced by a record”. 301
(B) Subsection (d) is amended by striking the phrase “written 302
agreement of the receiving bank” and inserting the phrase “agreement of the receiving bank, 303
evidenced by a record”. 304
(g) Article 5 is amended as follows: 305
(1) § 28:5- 104 is amended by striking the phrase “signed record and is 306
authenticated (i) by a signature or (ii) in accordance with the agreement of the parties or the 307
standard practice referred to in Section 5-108(e)” and inserting the phrase “signed record” in 308
its place. 309
(2) § 28:5- 116 is amended as follows: 310
(A) Subsection (a) is amended by striking the phrase “or otherwise 311
authenticated by the affected parties in the manner provided in Section 5- 104” and inserting 312 14
the phrase “by the affected parties” in its place. 313
(B) Subsection (c) is redesignated as subsection (e). 314
(C) Subsection (d) is redesignated as subsection (f). 315
(D) Subsection (e) is redesignated as subsection ( g). 316
(E) Subsection (b) is amended by redesignating the fourth sentence as 317
a new subsection (c) to read as follows: 318
“(c) For the purpose of jurisdiction, choice of law, and recognition of interbranch 319
letters of credit, but not enforcement of a judgment, all branches of a bank are considered 320
separate juridical entities and a bank is considered to be located at the place where its 321
relevant branch is considered to be located under this subsection (d). 322
(F) The following new subsection (d) is added after subsection (c): 323
“(d) A branch of a bank is considered to be located at the address indicated in the 324
branch’s undertaking. If more than one address is indicated, the branch is considered to be 325
located at the address from which the undertaking was issued.” 326
(h) Article 7 is amended as follows: 327
(1) § 28:7- 102(a) is amended as follows: 328
(A) Paragraph (10) is repealed. 329
(B) Paragraph (11) is repealed. 330
(2) § 28:7- 106 is amended as follows: 331
(A) Subsection (b) is amended as follows: 332
(i) The lead-in language is amended by: 333
(I) Striking the phrase “is deemed to have” and inserting 334
the word “has” in its place; and 335 15
(II) striking the phrase ‘assigned in such” and inserting 336
the phrase “transferred in” in its place. 337
(B) The following new subs ections are added after subsection (b): 338
“(c) A system satisfies subsection (a), and a person has control of an electronic 339
document of title, if an authoritative electronic copy of the document, a record attached to or 340
logically associated with the electronic copy, or a system in which the electronic copy is 341
recorded: 342
“(1) Enables the person readily to identify each electronic copy as either an 343
authoritative copy or a non- authoritative copy; 344
“(2) Enables the person readily to identify itself in any way, including by 345
name, identifying number, cryptographic key, office, or account number, as the person to 346
which each authoritative electronic copy was issued or transferred; and 347
“(3) Gives the person exclusive power, subject to subsection (d), to: 348
“(A) Prevent others from adding or changing the person to which each 349
authoritative electronic copy has been issued or transferred; and 350
“(B) Transfer control of each authoritative electronic copy. 351
“(d) Subject to subsection (e), a power is exclusive under subsection (c)(3)(A) and (B) 352
even if: 353
“(1) The authoritative electronic copy, a record attached to or logically 354
associated with the authoritative electronic copy, or a system in which the authoritative 355
electronic copy is recorded limits the use of the document of title or has a protocol that is 356
programmed to cause a change, including a transfer or loss of control; or 357
“(2) The power is shared with another person. 358 16
“(e) A power of a person is not shared with another person under subsection (d)(2) 359
and the person’s power is not exclusive if: 360
“(1) The person can exercise the power only if the power also is exercised by 361
the other person; and 362
“(2) The other person: 363
“(A) Can exercise the power without exercise of the power by the 364
person; or 365
“(B) Is the transferor to the person of an interest in the document of 366
title. 367
“(f) If a person has the powers specified in subsection (c)(3)(A) and (B), the powers 368
are presumed to be exclusive. 369
“(g) A person has control of an electronic document of title if another person, other 370
than the transferor to the person of an interest in the document: 371
“(1) Has control of the document and acknowledges that it has control on 372
behalf of the person; or 373
“(2) Obtains control of the document after having acknowledged that it will 374
obtain control of the document on behalf of the person. 375
“(h) A person that has control under this section is not required to acknowledge that it 376
has control on behalf of another person. 377
“(i) If a person acknowledges that it has or will obtain control on behalf of another 378
person, unless the person otherwise agrees or law other than this article or Article 9 379
otherwise provides, the person does not owe any duty to the other person and is not required 380
to confirm the acknowledgment to any other person.” 381 17
(i) Article 8 is amended as follows: 382
(1) § 28:8- 102 is amended as follows: 383
(A) Subsection (a)(6)(A) is amended by striking the word “writing” and 384
inserting the word “record” in its place. 385
(B) Subsection (b) is amended as follows: 386
(i) The lead-in language is amended to read as follows: “The 387
following definitions in this article and other articles apply to this article:”. 388
(iii) Paragraph (3) is redesignated as paragraph (6). 389
(iv) Paragraph (4) is redesignated as paragraph (7). 390
(v) Paragraph (5) is redesignated as paragraph (8). 391
(vi) Paragraph (6) is redesignated as paragraph (9). 392
(vii) Paragraph (7) is redesignated as paragraph (10). 393
(viii) Paragraph (8) is redesignated as paragraph (11). 394
(ix) The following new paragraphs are inserted after paragraph 395
(2): 396
“(3) “Controllable account”. . . § 28:9- 102. 397
“(4) “Controllable electronic record”. . . § 28:12-102. 398
“(5) “Controllable payment intangible”. . . § 28:9-102.” 399
(2) § 28:8- 103 is amended by adding the following subsection after 400
subsection (g): 401
“(h) A controllable account, controllable electronic record, or controllable payment 402
intangible is not a financial asset unless § 28:8-102(a)(9)(iii) applies.” 403
(3) § 28:8- 106 is amended as follows: 404 18
(A) Subsection (d)(3) is amended to read as follows: 405
“(3) Another person, other than the transferor to the purchaser of an interest in 406
the security entitlement: 407
“(A) Has control of the security entitlement and acknowledges that it 408
has control on behalf of the purchaser; or 409
“(B) Obtains control of the security entitlement after having 410
acknowledged that it will obtain control of the security entitlement on behalf of the 411
purchaser.” 412
(4) § 28:8- 110 is amended by adding the following new subsection after 413
subsection (f): 414
“(g) The local law of the issuer’s jurisdiction or the securities intermediary’s 415
jurisdiction governs a matter or transaction specified in subsection (a) or (b) even if the 416
matter or transaction does not bear any relation to the jurisdiction.” 417
(5) § 28:8- 303(b) is amended by striking the phrase “In addition to acquiring 418
the rights of a purchaser, a” and inserting the word “A” in its place. 419
(j) Article 9 is amended as follows: 420
(1) § 28:9- 102 is amended as follows: 421
(A) Subsection (a) is amended as follows: 422
(i) Paragraph (2) is amended to read as follows: 423
“(2) “Account”, except as used in “account for”, “account statement”, 424
“account to”, “commodity account” in paragraph (14), “customer’s account”, “deposit 425
account” in paragraph (29), “on account of”, and “statement of account”, means a right to 426
payment of a monetary obligation, whether or not earned by performance, (i) for property 427 19
that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for 428
services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) 429
for a secondary obligation incurred or to be incurred, (v) for energy provided or to be 430
provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out 431
of the use of a credit or charge card or information contained on or for use with the card, or 432
(viii) as winnings in a lottery or other game of chance operated or sponsored by a State, 433
governmental unit of a State, or person licensed or authorized to operate the game by a State 434
or governmental unit of a State. The term includes controllable accounts and health- care-435
insurance receivables. The term does not include (I) chattel paper, (ii) commercial tort 436
claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of 437
credit, or (vi) rights to payment for money or funds advanced or sold, other than rights 438
arising out of the use of a credit or charge card or information contained on or for use with 439
the card, or (vii) rights to payment evidenced by an instrument.” 440
(ii) Paragraph (3) is amended by striking the phrase “instrument 441
constitutes part of” and inserting the phrase “negotiable instrument evidences” in its place. 442
(iii) Paragraph (4)(A) is amended by striking the word 443
“authenticated” and inserting the word “signed” in its place. 444
(iv) Paragraph (7) is repealed. 445
(v) The following new paragraphs are inserted after paragraph 446
(6): 447
“(7A) “Assignee”, except as used in “assignee for benefit of creditors”, means 448
a person (i) in whose favor a security interest that secures an obligation is created or 449
provided for under a security agreement, whether or not the obligation is outstanding or (ii) 450 20
to which an account, chattel paper, payment intangible, or promissory note has been sold. 451
The term includes a person to which a security interest has been transferred by a secured 452
party. 453
“(7B) “Assignor” means a person that (i) under a security agreement creates or 454
provides for a security interest that secures an obligation or (ii) sells an account, chattel 455
paper, payment intangible, or promissory note. The term includes a secured party that has 456
transferred a security interest to another person.” 457
(vi) Paragraph (11) is amended to read as follows: 458
“(11)(A) “Chattel paper” means: 459
“(i) A right to payment of a monetary obligation secured by specific 460
goods, if the right to payment and security agreement are evidenced by a record; or 461
“(ii) A right to payment of a monetary obligation owed by a lessee 462
under a lease agreement with respect to specific goods and a monetary obligation owed by 463
the lessee in connection with the transaction giving rise to the lease, if: 464
“(I) The right to payment and lease agreement are evidenced by 465
a record; and 466
“(II) The predominant purpose of the transaction giving rise to 467
the lease was to give the lessee the right to possession and use of the goods. 468
“(B) The term does not include a right to payment arising out of a 469
charter or other contract involving the use or hire of a vessel or a right to payment arising out 470
of the use of a credit or charge card or information contained on or for use with the card.” 471
(vii) The following new paragraphs are inserted after paragraph 472
(27): 473 21
“(27A) “Controllable account” means an account evidenced by a controllable 474
electronic record that provides that the account debtor undertakes to pay the person that has 475
control under § 28:12- 105 of the controllable electronic record. 476
“(27B) “Controllable payment intangible” means a payment intangible 477
evidenced by a controllable electronic record that provides that the account debtor undertakes 478
to pay the person that has control under §28:12- 105 of the controllable electronic record.” 479
(viii) Paragraph (31) is repealed. 480
(xi) The following new paragraph is inserted after paragraph 481
(30): 482
“(31A) “Electronic money” means money in an electronic form.” 483
(x) Paragraph (42) is amended by amending the second sentence 484
to read as follows: “The term includes controllable electronic records, payment intangibles, 485
and software.” 486
(xi) Paragraph (47) is amended by amending the second 487
sentence by striking the period and inserting the phrase “, or (iv) writings that evidence 488
chattel paper” in its place. 489
(xii) The following new paragraph is inserted after paragraph 490
(54): 491
“(54A) “Money” has the meaning in §28:1- 201(b)(24), but does not include (i) 492
a deposit account or (ii) money in an electronic form that cannot be subjected to control 493
under §28:9- 105A.” 494
(xiii) Paragraph (61) is amended by adding the following new 495
sentence at the end: “The term includes a controllable payment intangible.” 496 22
(xiv) Paragraph (66) is amended by striking the word 497
“authenticated” and inserting the word “signed” in its place. 498
(xv) Paragraph (75) is repealed. 499
(xvi) Paragraph (79) is repealed. 500
(xvii) The following new paragraph is inserted after paragraph 501
(78): 502
“(79A) “Tangible money” means money in a tangible form”. 503
(B) Subsection (b) is amended follows: 504
(i) The following paragraph is inserted after the paragraph for 505
“Contract of sale” . . § 28:2-106 : 506
“Controllable electronic record” . . . § 28:12- 102.” 507
(ii) The following paragraph is inserted after the paragraph for 508
“Proceeds of a letter of credit” . . § 28:5-114 : 509
“Protected purchaser” . . . § 28:8-303.” 510
(iii) The following paragraph is inserted after the paragraph for 511
“Prove” . . § 28:3- 103 : 512
“Qualifying purchaser” . . . § 28:12- 102.” 513
(2) § 28:9- 104(a) is amended as follows: 514
(A) Paragraph (2) is amended by: 515
(i) Striking the phrase “an authenticated” and inserting the 516
phrase “a signed” in its place; and 517
(ii) Striking the word “or”. 518
(B) Paragraph (3) is amended by striking the period and inserting the 519 23
phrase “; or” in its place. 520
(3) § 28:9- 105 is amended to read as follows: 521
Ҥ 28:9- 105. Control of electronic copy of record evidencing chattel paper. 522
“(a) A purchaser has control of an authoritative electronic copy of a record evidencing 523
chattel paper if a system employed for evidencing the assignment of interests in the chattel 524
paper reliably establishes the purchaser as the person to which the authoritative electronic 525
copy was assigned. 526
“(b) A system satisfies subsection (a) if the record or records evidencing the chattel 527
paper are created, stored, and assigned in a manner that: 528
“(1) A single authoritative copy of the record or records exists which is 529
unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), 530
unalterable; 531
“(2) The authoritative copy identifies the purchaser as the assignee of the 532
record or records; 533
“(3) The authoritative copy is communicated to and maintained by the 534
purchaser or its designated custodian; 535
“(4) Copies or amendments that add or change an identified assignee of the 536
authoritative copy can be made only with the consent of the purchaser; 537
“(5) Each copy of the authoritative copy and any copy of a copy is readily 538
identifiable as a copy that is not the authoritative copy; and 539
“(6) Any amendment of the authoritative copy is readily identifiable as 540
authorized or unauthorized. 541
“(c) A system satisfies subsection (a), and a purchaser has control of an authoritative 542 24
electronic copy of a record evidencing chattel paper, if the electronic copy, a record attached 543
to or logically associated with the electronic copy, or a system in which the electronic copy 544
is recorded: 545
“(1) Enables the purchaser readily to identify each electronic copy as either an 546
authoritative copy or a non- authoritative copy; 547
“(2) Enables the purchaser readily to identify itself in any way, including by 548
name, identifying number, cryptographic key, office, or account number, as the assignee of 549
the authoritative electronic copy; and 550
“(3) Gives the purchaser exclusive power, subject to subsection (d), to: 551
“(A) Prevent others from adding or changing an identified assignee of 552
the authoritative electronic copy; and 553
“(B) Transfer control of the authoritative electronic copy. 554
“(d) Subject to subsection (e), a power is exclusive under subsection (c)(3)(A) and (B) 555
even if: 556
“(1) The authoritative electronic copy, a record attached to or logically 557
associated with the authoritative electronic copy, or a system in which the authoritative 558
electronic copy is recorded limits the use of the authoritative electronic copy or has a 559
protocol programmed to cause a change, including a transfer or loss of control; or 560
“(2) The power is shared with another person. 561
“(e) A power of a purchaser is not shared with another person under subsection (d)(2) 562
and the purchaser’s power is not exclusive if: 563
“(1) The purchaser can exercise the power only if the power also is exercised 564
by the other person; and 565 25
“(2) The other person: 566
“(A) Can exercise the power without exercise of the power by the 567
purchaser; or 568
“(B) Is the transferor to the purchaser of an interest in the chattel paper. 569
“(f) If a purchaser has the powers specified in subsection (c)(3)(A) and (B), the 570
powers are presumed to be exclusive. 571
“(g) A purchaser has control of an authoritative electronic copy of a record 572
evidencing chattel paper if another person, other than the transferor to the purchaser of an 573
interest in the chattel paper: 574
“(1) Has control of the authoritative electronic copy and acknowledges that it 575
has control on behalf of the purchaser; or 576
“(2) Obtains control of the authoritative electronic copy after having 577
acknowledged that it will obtain control of the electronic copy on behalf of the purchaser.” 578
(4) The following new section is inserted after § 28:9-105: 579
Ҥ 28:9- 105A. 580
Ҥ 28:9- 105A. Control of electronic money. 581
“(a) A person has control of electronic money if: 582
“(1) The electronic money, a record attached to or logically associated with the 583
electronic money, or a system in which the electronic money is recorded gives the person: 584
“(A) Power to avail itself of substantially all the benefit from the 585
electronic money; and 586
“(B) Exclusive power, subject to subsection (b), to: 587
“(i) Prevent others from availing themselves of substantially all 588 26
the benefit from the electronic money; and 589
“(ii) Transfer control of the electronic money to another person 590
or cause another person to obtain control of other electronic money as a result of the transfer 591
of the electronic money; and 592
“(2) The electronic money, a record attached to or logically associated with the 593
electronic money, or a system in which the electronic money is recorded enables the person 594
readily to identify itself in any way, including by name, identifying number, cryptographic 595
key, office, or account number, as having the powers under paragraph (1). 596
“(b) Subject to subsection (c), a power is exclusive under subsection (a)(1)(B)(i) and 597
(ii) even if: 598
“(1) The electronic money, a record attached to or logically associated with the 599
electronic money, or a system in which the electronic money is recorded limits the use of the 600
electronic money or has a protocol programmed to cause a change, including a transfer or 601
loss of control; or 602
“(2) The power is shared with another person. 603
“(c) A power of a person is not shared with another person under subsection (b)(2) 604
and the person’s power is not exclusive if: 605
“(1) The person can exercise the power only if the power also is exercised by 606
the other person; and 607
“(2) The other person: 608
“(A) Can exercise the power without exercise of the power by the 609
person; or 610
“(B) Is the transferor to the person of an interest in the electronic 611 27
money. 612
“(d) If a person has the powers specified in subsection (a)(1)(B)(i) and (ii), the powers 613
are presumed to be exclusive. 614
“(e) A person has control of electronic money if another person, other than the 615
transferor to the person of an interest in the electronic money: 616
“(1) Has control of the electronic money and acknowledges that it has control 617
on behalf of the person; or 618
“(2) Obtains control of the electronic money after having acknowledged that it 619
will obtain control of the electronic money on behalf of the person.” 620
(5) The following new subsections are inserted after § 28:9-107: 621
Ҥ 28:9- 107A. Control of controllable electronic record, controllable account, or 622
controllable payment intangible. 623
“(a) A secured party has control of a controllable electronic record as provided in 624
§ 28:12-105. 625
“(b) A secured party has control of a controllable account or controllable payment 626
intangible if the secured party has control of the controllable electronic record that evidences 627
the controllable account or controllable payment intangible. 628
§ 28:9- 107B. No requirement to acknowledge or confirm; no duties. 629
“(a) A person that has control under § 28:9- 104, § 28:9- 105, or § 28:9- 105A is not 630
required to acknowledge that it has control on behalf of another person. 631
“(b) If a person acknowledges that it has or will obtain control on behalf of another 632
person, unless the person otherwise agrees or law other than this article otherwise provides, 633
the person does not owe any duty to the other person and is not required to confirm the 634 28
acknowledgment to any other person.” 635
(6) § 28:9- 203(b)(3) is amended as follows: 636
(A) Subparagraph (A) is amended by striking the word “authenticated” 637
and inserting the word “signed” in its place. 638
(B) Subparagraph (C) is amended by striking the word “or”. 639
(C) Subparagraph (D) is amended to read as follows: 640
“(D) the collateral is controllable accounts, controllable electronic 641
records, controllable payment intangibles, deposit accounts, electronic documents, electronic 642
money, investment property, or letter-of-credit rights, and the secured party has control under 643
§ 28:7-106, § 28:9-104, § 28:9-105A, § 28:9-106, § 28:9-107, or § 28:9-107A pursuant to the 644
debtor’s security agreement; or”. 645
(D) The following new subparagraph is added after subparagraph (D): 646
“(E) The collateral is chattel paper and the secured party has possession 647
and control under § 28:9-314A pursuant to the debtor’s security agreement.” 648
(7) § 28:9- 204 is amended as follows: 649
(A) Subparagraph (b) is amended by striking the word “A” the first 650
time it appears and inserting the phrase “Subject to subsection (b1) in its place. 651
(B) The following new subsection is inserted after subsection (b): 652
“(b1) Subsection (b) does not prevent a security interest from attaching: 653
“(1) To consumer goods as proceeds under § 28:9- 315(a) or commingled 654
goods under § 28:9- 336(c); 655
“(2) To a commercial tort claim as proceeds under § 28:9-315(a); or 656
“(3) Under an after-acquired property clause to property that is proceeds of 657 29
consumer goods or a commercial tort claim.” 658
(8) § 28:9- 207(c) is amended by striking the phrase “§ 28:7- 106, § 28:9- 104, 659
§ 28:9-105, § 28:9- 106, or § 28:9- 107” and inserting the phrase “§ 28:7- 106, § 28:9- 104, 660
§ 28:9-105, § 28:9- 105A, § 28:9- 106, § 28:9- 107, or § 28:9- 107A” in its place. 661
(9) § 28:9- 208(b) is amended as follows: 662
(A) The lead-in language is amended by striking the phrase “an 663
authenticated” and inserting the phrase “a signed” in its place. 664
(B) Paragraph (3) is amended to read as follows: 665
“(3) A secured party, other than a buyer, having control under § 28:9 -105 of an 666
authoritative electronic copy of a record evidencing chattel paper shall transfer control of the 667
electronic copy to the debtor or a person designated by the debtor;”. 668
(C) Paragraph (4) is amended by striking the phrase “an authenticated” 669
and inserting the phrase “a signed” in its place. 670
(D) Paragraph (5) is amended by: 671
(i) Striking the phrase “an authenticated” and inserting the 672
phrase “a signed” in its place; and 673
(ii) Striking the word “and”. 674
(E) Paragraph (6) is amended to read as follows: 675
“(6) A secured party having control under § 28:7- 106 of an authoritative 676
electronic copy of an electronic document of title shall transfer control of the electronic copy 677
to the debtor or a person designated by the debtor;”. 678
(F) The following new paragraphs are a dded after paragraph (6): 679
“(7) A secured party having control under § 28:9- 105A of electronic money 680 30
shall transfer control of the electronic money to the debtor or a person designated by the 681
debtor; and 682
“(8) A secured party having control under § 28:12- 105 of a controllable 683
electronic record, other than a buyer of a controllable account or controllable payment 684
intangible evidenced by the controllable electronic record, shall transfer control of the 685
controllable electronic record to the debtor or a person designated by the debtor.” 686
(10) § 28:9- 209(b) is amended to read as follows: 687
“(b) Within 10 days after receiving a signed demand by the debtor, a secured party 688
shall send to an account debtor that has received notification under § 28:9- 406(a) or § 28:12-689
106(b) of an assignment to the secured party as assignee a signed record that releases the 690
account debtor from any further obligation to the secured party.” 691
(11) § 28:9- 210 is amended as follows: 692
(A) Subsection (a) is amended as follows: 693
(i) Paragraph (2) is amended by striking the word 694
“authenticated” and inserting the word “signed” in its place. 695
(ii) Paragraph (3) is amended by striking the word 696
“authenticated” and inserting the word “signed” in its place. 697
(iii) Paragraph (4) is amended by striking the word 698
“authenticated” and inserting the word “signed” in its place. 699
(B) Subsection (b) is amended as follows: 700
(i) Paragraph (1) is amended by striking the word 701
“authenticating” and inserting the word “signing” in its place. 702
(ii) Paragraph (2) is amended by striking the word 703 31
“authenticating” and inserting the word “signing” in its place. 704
(C) Subsection (c) is amended by striking the phrase “an authenticated” 705
and inserting the phrase “a signed” in its place. 706
(D) Subsection (d) is amended by striking the phrase “an authenticated” 707
and inserting the phrase “a signed” in its place. 708
(E) Subsection (e) is amended by striking the phrase “an authenticated” 709
and inserting the phrase “a signed” in its place. 710
(12) § 28:9- 301 is amended as follows: 711
(A) The lead-in language is amended by striking the word “28:9- 306" 712
and inserting the word “28:9- 306B” in its place. 713
(B) Paragraph (3) is amended by striking the phrase “while negotiable 714
documents, goods, instruments, money, or tangible chattel paper” and inserting the phrase 715
“while negotiable tangible documents, goods, instruments, or tangible money” in its place. 716
(13) § 28:9- 304(a) is amended by striking the period and inserting the phrase 717
“even if the transaction does not bear any relation to the bank’s jurisdiction.” in its place. 718
(14) § 28:9- 305(a) is amended by adding the following new paragraph after 719
paragraph (4): 720
“(5) Paragraphs (2), (3), and (4) apply even if the transaction does not bear any 721
relation to the jurisdiction.” 722
(15) The following new sections are inserted after § 28:9- 306: 723
Ҥ 28:9- 306A. Law governing perfection and priority of security interests in chattel 724
paper. 725
“(a) Except as provided in subsection (d), if chattel paper is evidenced only by an 726 32
authoritative electronic copy of the chattel paper or is evidenced by an authoritative 727
electronic copy and an authoritative tangible copy, the local law of the chattel paper’s 728
jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a 729
security interest in the chattel paper, even if the transaction does not bear any relation to the 730
chattel paper’s jurisdiction. 731
“(b) The following rules determine the chattel paper’s jurisdiction under this section: 732
“(1) If the authoritative electronic copy of the record evidencing chattel paper, 733
or a record attached to or logically associated with the electronic copy and readily available 734
for review, expressly provides that a particular jurisdiction is the chattel paper’s jurisdiction 735
for purposes of this part, this article, or this subtitle, that jurisdiction is the chattel paper’s 736
jurisdiction. 737
“(2) If paragraph (1) does not apply and the rules of the system in which the 738
authoritative electronic copy is recorded are readily available for review and expressly 739
provide that a particular jurisdiction is the chattel paper’s jurisdiction for purposes of this 740
part, this article, or this subtitle, that jurisdiction is the chattel paper’s jurisdiction. 741
“(3) If paragraphs (1) and (2) do not apply and the authoritative electronic 742
copy, or a record attached to or logically associated with the electronic copy and readily 743
available for review, expressly provides that the chattel paper is governed by the law of a 744
particular jurisdiction, that jurisdiction is the chattel paper’s jurisdiction. 745
“(4) If paragraphs (1), (2), and (3) do not apply and the rules of the system in 746
which the authoritative electronic copy is recorded are readily available for review and 747
expressly provide that the chattel paper or the system is governed by the law of a particular 748
jurisdiction, that jurisdiction is the chattel paper’s jurisdiction. 749 33
“(5) If paragraphs (1) through (4) do not apply, the chattel paper’s jurisdiction 750
is the jurisdiction in which the debtor is located. 751
“(c) If an authoritative tangible copy of a record evidences chattel paper and the 752
chattel paper is not evidenced by an authoritative electronic copy, while the authoritative 753
tangible copy of the record evidencing chattel paper is located in a jurisdiction, the local law 754
of that jurisdiction governs: 755
“(1) Perfection of a security interest in the chattel paper by possession under 756
§ 28:9-314A; and 757
“(2) The effect of perfection or nonperfection and the priority of a security 758
interest in the chattel paper. 759
“(d) The local law of the jurisdiction in which the debtor is located governs perfection 760
of a security interest in chattel paper by filing. 761
Ҥ 28:9-306B. Law governing perfection and priority of security interests in 762
controllable accounts, controllable electronic records, and controllable payment intangibles. 763
“(a) Except as provided in subsection (b), the local law of the controllable electronic 764
record’s jurisdiction specified in § 28:12- 107(c) and (d) governs perfection, the effect of 765
perfection or nonperfection, and the priority of a security interest in a controllable electronic 766
record and a security interest in a controllable account or controllable payment intangible 767
evidenced by the controllable electronic record. 768
“(b) The local law of the jurisdiction in which the debtor is located governs: 769
“(1) Perfection of a security interest in a controllable account, controllable 770
electronic record, or controllable payment intangible by filing; and 771
“(2) Automatic perfection of a security interest in a controllable payment 772 34
intangible created by a sale of the controllable payment intangible.” 773
(16) § 28:9- 310(b) is amended as follows: 774
(A) Paragraph (8) is amended by striking the phrase “deposit accounts, 775
electronic chattel paper;” and inserting the phrase “controllable accounts, controllable 776
electronic records, controllable payment intangibles, deposit accounts,” in its place. 777
(B) The following new paragraph (8A) is inserted after paragraph (8): 778
“(8A) in chattel paper which is perfected by possession and control under 779
§ 28:9-314A;”. 780
(17) § 28:9- 312 is amended as follows: 781
(A) The section heading is amended by inserting after the phrase 782
“chattel paper,” the phrase “controllable accounts, controllable electronic records, 783
controllable payment intangibles,”. 784
(B) Subsection (a) is amended to read as follows: 785
“(a) A security interest in chattel paper, controllable accounts, controllable electronic 786
records, controllable payment intangibles, instruments, investment property, or negotiable 787
documents may be perfected by filing.” 788
(C) Subsection (b) is amended as follows: 789
(i) Paragraph (2) is amended by striking the word “and”. 790
(ii) Paragraph (3) is amended to read as follows: 791
“(3) a security interest in tangible money may be perfected only by the secured 792
party’s taking possession under § 28:9- 313; and”. 793
(iii) The following new paragraph is added after paragraph (3): 794
“(4) A security interest in electronic money may be perfected only by control 795 35
under § 28:9-314.”. 796
(D) Subsection (e) is amended by striking the phrase “an authenticated” 797
and inserting the phrase “a signed” in its place. 798
(18) § 28:9- 313 is amended as follows: 799
(A) Subsection (a) is amended by s triking the phase “in tangible 800
negotiable documents, goods, instruments, money, or tangible chattel paper” and inserting 801
the phrase “in goods, instruments, negotiable tangible documents, or tangible money” in its 802
place. 803
(B) Subsection (c)(1) is amended as follows: 804
(i) Paragraph (1) is amended by striking the word 805
“authenticates” and inserting the word “signs” in its place. 806
(ii) Paragraph (2) is amended by: 807
(I) Striking the word “authenticates” and inserting the 808
word “signs” in its place; and 809
(II) Striking the phrase “possession of collateral” and 810
inserting the phrase “possession of the collateral” in its place. 811
(C) Subsection (d) is amended by striking the word “no” and inserting 812
the word “not” in its place. 813
(19) § 28:9-314 is amended as follows: 814
(A) Subsection (a) is amended to read as follows: 815
“(a) A security interest in controllable accounts, controllable electronic records, 816
controllable payment intangibles, deposit accounts, electronic documents, electronic money, 817
investment property, or letter-of-credit rights may be perfected by control of the collateral 818 36
under § 28:7-106, § 28:9-104, § 28:9-105A, § 28:9-106, § 28:9-107, or § 28:9-107A.” 819
(B) Subsection (b) is amended to read as follows: 820
“(b) A security interest in controllable accounts, controllable electronic records, 821
controllable payment intangibles, deposit accounts, electronic documents, electronic money, 822
or letter-of-credit rights is perfected by control under § 28:7-106, § 28:9-104, § 28:9-105A, 823
§ 28:9-107, or § 28:9-107A not earlier than the time the secured party obtains control and 824
remains perfected by control only while the secured party retains control.” 825
(C) Subsection (c) is amended by striking the word “from” and 826
inserting the phrase “not earlier than” in its place. 827
(20) The following new section is inserted after § 28:9- 314: 828
§ 28:9- 314A. Perfection by possession and control of chattel paper. 829
“(a) A secured party may perfect a security interest in chattel paper by taking 830
possession of each authoritative tangible copy of the record evidencing the chattel paper and 831
obtaining control of each authoritative electronic copy of the electronic record evidencing the 832
chattel paper. 833
“(b) A security interest is perfected under subsection (a) not earlier than the time the 834
secured party takes possession and obtains control and remains perfected under subsection 835
(a) only while the secured party retains possession and control. 836
“(c) § 28:9-313(c) and (f) through (i) applies to perfection by possession of an 837
authoritative tangible copy of a record evidencing chattel paper.” 838
(21) § 28:9- 316 is amended as follows: 839
(A) Subsection (a) is amended by striking the phrase “, or § 28:9-840
305(c)” and inserting the phrase “§ 28:9- 305(c), § 28:9-306A(d), or § 28:9-306B(b)” in its 841 37
place. 842
(B) Subsection (f) is amended by amending the lead- in language to read 843
as follows: 844
“(f) A security interest in chattel paper, controllable accounts, controllable electronic 845
records, controllable payment intangibles, deposit accounts, letter -of-credit rights, or 846
investment property which is perfected under the law of the chattel paper’s jurisdiction, the 847
controllable electronic record’s jurisdiction, the bank’s jurisdiction, the issuer’s jurisdiction, 848
a nominated person’s jurisdiction, the securities intermediary’s jurisdiction, or the 849
commodity intermediary’s jurisdiction, as applicable, remains perfected until the earlier of:” 850
(22) § 28:9- 317 is amended as follows: 851
(A) Subsection (b) is amended by striking the phrase “of tangible 852
chattel paper, tangible documents, goods, instruments,” and inserting the phrase “of goods, 853
instruments, tangible documents,” in its place. 854
(B) Subsection (d) is amended to read as follows: 855
“(d) Subject to subsections (f) through (i), a licensee of a general intangible or a 856
buyer, other than a secured party, of collateral other than electronic money, goods, 857
instruments, tangible documents, or a certificated security takes free of a security interest if 858
the licensee or buyer gives value without knowledge of the security interest and before it is 859
perfected.” 860
(C) The following new subsections are added after subsection (e): 861
“(f) A buyer, other than a secured party, of chattel paper takes free of a security 862
interest if, without knowledge of the security interest and before it is perfected, the buyer 863
gives value and: 864 38
“(1) Receives delivery of each authoritative tangible copy of the record 865
evidencing the chattel paper; and 866
“(2) If each authoritative electronic copy of the record evidencing the chattel 867
paper can be subjected to control under § 28:9- 105, obtains control of each authoritative 868
electronic copy. 869
“(g) A buyer of an electronic document takes free of a security interest if, without 870
knowledge of the security interest and before it is perfected, the buyer gives value and, if 871
each authoritative electronic copy of the document can be subjected to control under § 28:7-872
106, obtains control of each authoritative electronic copy. 873
“(h) A buyer of a controllable electronic record takes free of a security interest if, 874
without knowledge of the security interest and before it is perfected, the buyer gives value 875
and obtains control of the controllable electronic record. 876
“(i) A buyer, other than a secured party, of a controllable account or a controllable 877
payment intangible takes free of a security interest if, without knowledge of the security 878
interest and before it is perfected, the buyer gives value and obtains control of the 879
controllable account or controllable payment intangible.” 880
(23) § 28:9- 323 is amended as follows: 881
(A) Subsection (d) is amended by striking the phrase “other than a 882
buyer in the ordinary course of business”. 883
(B) Subsection (f) is amended by striking the phrase “, other than a 884
buyer in the ordinary course of business”. 885
(24) § 28:9- 324 is amended as follows: 886
(A) Subsection (b)(2) is amended by striking the phrase “an 887 39
authenticated” and inserting the phrase “a signed” in its place. 888
(B) Subsection (d)(2) is amended by striking the phrase “an 889
authenticated” and inserting the phrase “a signed” in its place. 890
(25) The following new section is inserted after § 28:9- 326: 891
Ҥ 28:9- 326A. Priority of security interest in controllable account, controllable 892
electronic record, and controllable payment intangible. 893
“A security interest in a controllable account, controllable electronic record, or 894
controllable payment intangible held by a secured party having control of the account, 895
electronic record, or payment intangible has priority over a conflicting security interest held 896
by a secured party that does not have control.” 897
(26) § 28:9- 330 is amended as follows: 898
(A) Subsection (a) is amended as follows: 899
(i) Paragraph (1) is amended to read as follows: 900
“(1) in good faith and in the ordinary course of the purchaser’s business, the 901
purchaser gives new value, takes possession of each authoritative tangible copy of the record 902
evidencing the chattel paper, and obtains control under § 28:9- 105 of each authoritative 903
electronic copy of the record evidencing the chattel paper; and” 904
(ii) Paragraph (2) is amended to read as follows: 905
“(2) the authoritative copies of the record evidencing the chattel paper do not 906
indicate that it the chattel paper has been assigned to an identified assignee other than the 907
purchaser.” 908
(B) Subsection (b) is amended to read as follows: 909
“(b) A purchaser of chattel paper has priority over a security interest in the 910 40
chattel paper which is claimed other than merely as proceeds of inventory subject to a 911
security interest if the purchaser gives new value, takes possession of each authoritative 912
tangible copy of the record evidencing the chattel paper, and obtains control under § 28:9-913
105 of each authoritative electronic copy of the record evidencing the chattel paper in good 914
faith, in the ordinary course of the purchaser’s business, and without knowledge that the 915
purchase violates the rights of the secured party.” 916
(C) Subsection (f) is amended to read as follows: 917
“(f) For purposes of subsections (b) and (d), if the authoritative copies of the record 918
evidencing chattel paper or an instrument indicate that the chattel paper or instrument has 919
been assigned to an identified secured party other than the purchaser, a purchaser of the 920
chattel paper or instrument has knowledge that the purchase violates the rights of the secured 921
party.” 922
(27) § 28:9- 331 is amended as follows: 923
(A) The section heading is amended to read as follows: 924
Ҥ 28:9- 331. Priority of rights of purchasers of controllable accounts, controllable 925
electronic records, controllable payment intangibles, documents, instruments, and securities 926
under other articles; priority of interests in financial assets and security entitlements and 927
protection against assertion of claim under Articles 8 and 12 of this subtitle.” 928
(B) Subsection (a) is amended to read as follows: 929
“(a) This article does not limit the rights of a holder in due course of a negotiable 930
instrument, a holder to which a negotiable document of title has been duly negotiated, or a 931
protected purchaser of a security, or a qualifying purchaser of a controllable account, 932
controllable electronic record, or controllable payment intangible. These holders or 933 41
purchasers take priority over an earlier security interest, even if perfected, to the extent 934
provided in Articles 3, 7, 8, and 12 of this subtitle.” 935
(C) Subsection (b) is amended by: 936
(i) Striking the phrase “Article 8” and inserting the phrase 937
“Articles 8 and 12” in their place; and 938
(ii) Striking the period and inserting the phrase “or 12" in its 939
place. 940
(28) § 28:9- 332 is amended to read as follows: 941
Ҥ 28:9- 332. Transfer of money; transfer of funds from deposit account. 942
“(a) A transferee of tangible money takes the money free of a security interest if the 943
transferee receives possession of the money without acting in collusion with the debtor in 944
violating the rights of the secured party. 945
“(b) A transferee of funds from a deposit account takes the funds free of a security 946
interest in the deposit account if the transferee receives the funds without acting in collusion 947
with the debtor in violating the rights of the secured party. 948
“(c) A transferee of electronic money takes the money free of a security interest if the 949
transferee obtains control of the money without acting in collusion with the debtor in 950
violating the rights of the secured party.” 951
(29) § 28:9- 334(f)(1) is amended by striking the phrase “an authenticated” and 952
inserting the phrase “a signed” in its place. 953
(30) § 28:9- 341 is amended by striking the phrase “an authenticated” and 954
inserting the phrase “a signed” in its place. 955
(31) § 28:9- 404(a)(2) is amended by striking the phrase “an authenticated” and 956 42
inserting the phrase “a signed” in its place. 957
(32) § 28:9- 406 is amended as follows: 958
(A) Subsection (a) is amended by: 959
(i) Striking the phrase “subsection (b) through (i)” and inserting 960
the phrase “subsections (b) through (k)”; and 961
(ii) Striking the word “authenticated” and inserting the word 962
“signed” in its place. 963
(B) Subsection (b) is amended by striking the phrase “subsection (h)” 964
and inserting the phrase “subsections (h) and (k)” in its place. 965
(C) Subsection (c) is amended by striking the phrase “subsection (h)” 966
and inserting the phrase “subsection s (h) and (k)” in its place. 967
(D) Subsection (d) is amended by: 968
(i) Inserting at the beginning the sentence “In this subsection, 969
“promissory note” includes a negotiable instrument that evidences chattel paper.”; and 970
(ii) Striking the phrase “subsection (e)” and inserting the phrase 971
“subsections (e) and (j)” in its place. 972
(E) Subsection (f) is amended by inserting after the phrase “Except as 973
otherwise provided in” the phrase “subsection (j) and”. 974
(F) Subsection (g) is amended by striking the phrase “subsection (h)” 975
and inserting the phrase “subsections (h) and (k)” in its place. 976
(G) The following new subsections are added after subsection (i): 977
“(j) Subsections (d) and (e) do not apply to a security interest in an ownership interest 978
in a general partnership, limited partnership, or limited liability company.” 979 43
“(k) Subsections (a), (b), (c) and (g) do not apply to a controllable account or 980
controllable payment intangible.” 981
(33) § 28:9- 408 is amended as follows: 982
(A) Subsection (a) is amended by striking the phrase “subsection (b)” 983
and inserting the phrase “subsections (b) and (e)” in its place. 984
(B) Subsection (c) is amended by striking the word “A” the first time it 985
appears and inserting the phrase “Except as otherwise provided in subsection (e), a” in its 986
place. 987
(C) The following new subsection is added after subsection (d): 988
“(e) This section does not apply to a security interest in an ownership interest in a 989
general partnership, limited partnership, or limited liability company. 990
“(f) In this section, “promissory note” includes a negotiable instrument that evidences 991
chattel paper.” 992
(34) § 28:9- 509 is amended as followed: 993
(A) Subsection (a)(1) is amended by striking the phrase “an 994
authenticated” and inserting the phrase “a signed” in its place. 995
(B) Subsection (b) is amended by striking the word “authenticating” 996
and inserting the word “signing” in its place. 997
(35) § 28:9- 513 is amended as follows: 998
(A) Subsection (a)(2) is amended by striking the phrase “an 999
authenticated” and inserting the phrase “a signed” in its place. 1000
(B) Subsection (c) is amended by striking the phrase “an authenticated” 1001
and inserting the phrase “a signed” in its place. 1002 44
(36) § 28:9- 601(b) is amended by striking the phrase “28:7 -106, § 28:9- 104, 1003
§ 28:9-105, § 28:9- 107, or § 28:9- 107” and inserting the phrase “28:7- 106, § 28:9-104, 1004
§ 28:9-105, § 28:9-105A, § 28:9- 107, § 28:9- 107, or § 28:9-107A,” in its place. 1005
(37) § 28:9- 605 is amended as follows: 1006
(A) The lead-in language is amended to read as follows: 1007
“(a) Except as provided in subsection (b), a secured party does not owe a duty based 1008
on its status as a third party.” 1009
(B) The following new subsection is added after subs ection (a): 1010
“(b) A secured party owes a duty based on its status as a secured party to a person if, 1011
at the time the secured party obtains control of collateral that is a controllable account, 1012
controllable electronic record, or controllable payment intangible or at the time the security 1013
interest attaches to the collateral, whichever is later: 1014
“(1) The person is a debtor or obligor; and 1015
“(2) The secured party knows that the information in subsection (a)(1)(A), (B), 1016
or (C) relating to the person is not provided by the collateral, a record attached to or logically 1017
associated with the collateral, or the system in which the collateral is recorded.” 1018
(38) § 28:9- 608(a)(1)(C) is amended by striking the phrase “an authenticated”. 1019
(39) § 28:9- 611 is amended as follows: 1020
(A) Subsection (a)(1) is amended by striking the phrase “an 1021
authenticated” and inserting the phrase “a signed” in its place. 1022
(B) Subsection (b) is amended by striking the phrase “an authenticated” 1023
and inserting the phrase “a signed” in its place. 1024
(C) Subsection (c) is amended as follows: 1025 45
(i) The lead-in language is amended by striking the phrase “an 1026
authenticated” and inserting the phrase “a signed” in its place. 1027
(ii) Paragraph (3)(A) is amended by striking the phrase “an 1028
authenticated” and inserting the phrase “a signed” in its place. 1029
(D) Subsection (e)(2)(B) is amended by striking the phrase “an 1030
authenticated” and inserting the phrase “a signed” in its place. 1031
(40) § 28:9- 613 is amended as follows: 1032
(A) Subsection (a) is amended as follows: 1033
(i) The lead-in language is amended by inserting “(a)” at the 1034
beginning. 1035
(ii) Paragraph (5) is amended to read as follows: 1036
“(5) The following form of notification and the form appearing in § 28:9-1037
614(a)(3), when completed in accordance with the instructions in subsection (b) and § 28:9-1038
614(b), each provides sufficient information: 1039
“NOTIFICATION OF DISPOSITION OF COLLATERAL 1040
“To: (Name of debtor, obligor, or other person to which the notification is sent) 1041
“From: (Name, address, and telephone number of secured party) 1042
“(1) Name of any debtor that is not an addressee: (Name of each debtor) 1043
“(2) We will sell (describe collateral) (to the highest qualified bidder) at public sale. 1044
A sale could include a lease or license. The sale will be held as follows: 1045
“(Date) 1046
“(Time) 1047
“(Place) 1048 46
“(3) We will sell (describe collateral) at private sale sometime after (date). A sale 1049
could include a lease or license. 1050
“(4) You are entitled to an accounting of the unpaid indebtedness secured by the 1051
property that we intend to sell or, as applicable, lease or license. 1052
“(5) If you request an accounting you must pay a charge of $ (amount). 1053
“(6) You may request an accounting by calling us at (telephone number). 1054
“(End of Form) 1055
(B) The following new subsection is added after subsection (a): 1056
“(b) The following instructions apply to the form of notification in subsection (a)(5): 1057
“(1) The instructions in this subsection refer to the numbers in braces before 1058
items in the form of notification in subsection (a)(5). Do not include the numbers or braces in 1059
the notification. The numbers and braces are used only for the purpose of these instructions. 1060
“(2) Include and complete item {1) only if there is a debtor that is not an 1061
addressee of the notification and list the name or names. 1062
“(3) Include and complete either item {2), if the notification relates to a public 1063
disposition of the collateral, or item {3), if the notification relates to a private disposition of 1064
the collateral. If item {2) is included, include the words “to the highest qualified bidder” only 1065
if applicable. 1066
“(4) Include and complete items {4) and {6). 1067
“(5) Include and complete item {5) only if the sender will charge the recipient 1068
for an accounting.” 1069
(41) § 28:9- 614 is amended as follows: 1070
(A) The lead-in language is amended by inserting the word “(a)” at the 1071 47
beginning. 1072
(B) Subsection (a) is amended as follows: 1073
(i) Paragraph (1)(A) is amended by striking the phrase Ҥ 28:9-1074
613(1)” and inserting the phrase “§ 28:9- 613(a)(1)” in its place. 1075
(ii) Paragraph (3) is amended to read as follows: 1076
“(3) The following form of notification, when completed in accordance with 1077
the instructions in subsection (b), provides sufficient information: 1078
“(Name and address of secured party) 1079
“(Date) 1080
“NOTICE OF OUR PLAN TO SELL PROPERTY 1081
“(Name and address of any obligor who is also a debtor) 1082
“Subject: (Identify transaction) 1083
“We have your (describe collateral), because you broke promises in our agreement. 1084
“(1) We will sell (describe collateral) at public sale. A sale could include a lease or 1085
license. The sale will be held as follows: 1086
“(Date) 1087
“(Time) 1088
“(Place) 1089
“You may attend the sale and bring bidders if you want. 1090
“(2) We will sell (describe collateral) at private sale sometime after (date). A sale 1091
could include a lease or license. 1092
“(3) The money that we get from the sale, after paying our costs, will reduce the 1093
amount you owe. If we get less money than you owe, you (will or will not, as 1094 48
applicable) still owe us the difference. If we get more money than you owe, you will get the 1095
extra money, unless we must pay it to someone else. 1096
“(4) You can get the property back at any time before we sell it by paying us the full 1097
amount you owe, not just the past due payments, including our expenses. To learn the exact 1098
amount you must pay, call us at (telephone number). 1099
“(5) If you want us to explain to you in (writing) (writing or in (description of 1100
electronic record) (description of electronic record) how we have figured the amount that you 1101
owe us, 1102
“(6) call us at (telephone number) (or) (write us at (secured party’s address)) (or 1103
contact us by (description of electronic communication method)). 1104
“(7) and request (a written explanation) (a written explanation or an explanation in 1105
(description of electronic record)) (an explanation in (description of electronic record)). 1106
“(8) We will charge you $ (amount) for the explanation if we sent you another written 1107
explanation of the amount you owe us within the last six months. 1108
“(9) If you need more information about the sale (call us at (telephone number)) (or) 1109
(write us at (secured party’s address)) (or contact us by (description of electronic 1110
communication method)). 1111
“(10) We are sending this notice to the following other people who have an interest in 1112
(describe collateral) or who owe money under your agreement: 1113
“(Names of all other debtors and obligors, if any) 1114
“[End of Form]” 1115
(B) The following new subsection is added at after subsection (a): 1116
“(b) The following instructions apply to the form of notification in subsection (a)(3): 1117 49
“(1) The instructions in this subsection refer to the numbers in braces before 1118
items in the form of notification in subsection (a)(3). Do not include the numbers or braces in 1119
the notification. The numbers and braces are used only for the purpose of these instructions. 1120
“(2) Include and complete either item (1), if the notification relates to a public 1121
disposition of the collateral, or item (2), if the notification relates to a private disposition of 1122
the collateral. 1123
“(3) Include and complete items (3), (4), (5), (6), and (7). 1124
“(4) In item (5), include and complete any one of the three alternative methods 1125
for the explanation, writing, writing or electronic record, or electronic record. 1126
“(5) In item (6), include the telephone number. In addition, the sender may 1127
include and complete either or both of the two additional alternative methods of 1128
communication, writing or electronic communication, for the recipient of the notification to 1129
communicate with the sender. Neither of the two additional methods of communication is 1130
required to be included. 1131
“(6) In item (7), include and complete the method or methods for the 1132
explanation, writing, writing or electronic record, or electronic record, included in item (5). 1133
“(7) Include and complete item (8) only if a written explanation is included in 1134
item (5) as a method for communicating the explanation and the sender will charge the 1135
recipient for another written explanation. 1136
“(8) In item (9), include either the telephone number or the address or both the 1137
telephone number and the address. In addition, the sender may include and complete the 1138
additional method of communication, electronic communication, for the recipient of the 1139
notification to communicate with the sender. The additional method of electronic 1140 50
communication is not required to be included. 1141
“(9) If item (10) does not apply, insert “None” after “agreement:”. 1142
(42) § 28:9- 615(a) is amended as follows: 1143
(A) Paragraph (3)(A) is amended by striking the phrase “an 1144
authenticated” and inserting the phrase “a signed” in its place. 1145
(B) Paragraph (4) is amended by striking the phrase “an authenticated” 1146
and inserting the phrase “a signed” in its place. 1147
(43) § 28:9- 616 is amended as follows: 1148
(A) Subsection (a) is amended as follows: 1149
(i) Paragraph (1) is amended by striking the word “writing” and 1150
inserting the word “record” in its place. 1151
(ii) Paragraph (2)(A) is amended by striking the word 1152
“authenticated” and inserting the word “signed” in its place. 1153
(B) Subsection (b)(1)(A) is amended by striking the phrase “written 1154
demand” and inserting the phrase “demand in a record” in its place. 1155
(C) Subsection (c) is amended by striking the phrase “a writing” and 1156
inserting the phrase “an explanation” in its place. 1157
(44) § 28:9-619(a) is amended by striking the word “authenticated” and 1158
inserting the word “signed” in its place. 1159
(45) § 28:9- 620 is amended as follows: 1160
(A) Subsection (a)(2) is amended by striking the word “authenticated” 1161
and inserting the word “signed” in its place. 1162
(B) Subsection (b)(1) is amended by striking the phrase “an 1163 51
authenticated” and inserting the phrase “a signed” in its place. 1164
(C) Subsection (c) is amended as follows: 1165
(i) Paragraph (1) is amended by striking the word 1166
“authenticated” and inserting the word “signed” in its place. 1167
(ii) Paragraph (2) is amended as follows: 1168
(I) The lead-in language is amended by striking the word 1169
“authenticated” and inserting the word “signed’ in its place. 1170
(II) Subparagraph (C) is amended by striking the word 1171
“authenticated” and inserting the word “signed’ in its place. 1172
(D) Subsection (f)(2) is amended by striking the word “authenticated” 1173
and inserting the word “signed’ in its place. 1174
(46) § 28:9- 621(a)(1) is amended by striking the phase “an authenticated” and 1175
inserting the phrase “ a signed” in its place. 1176
(47) § 28:9- 624 is amended as follows: 1177
(A) Subsection (a) is amended by striking the word “authenticated” and 1178
inserting the word “signed’ in its place. 1179
(B) Subsection (b) is amended by striking the word “authenticated” and 1180
inserting the word “signed’ in its place. 1181
(C) Subsection (c) is amended by striking the word “authenticated” and 1182
inserting the word “signed’ in its place. 1183
(48) § 28:9- 628 is amended as follows: 1184
(A) Subsection (a) is amended by striking the word “A” and inserting 1185
the phrase “Subject to subsection (f), a” in its place. 1186 52
(B) The following new subsection is added after subjection (e): 1187
“(f) Subsections (a) and (b) do not apply to limit the liability of a secured party to a 1188
person if, at the time the secured party obtains control of collateral that is a controllable 1189
account, controllable electronic record, or controllable payment intangible or at the time the 1190
security interest attaches to the collateral, whichever is later: 1191
“(1) The person is a debtor or obligor; and 1192
“(2) The secured party knows that the information in subsection (b)(1)(A), (B), 1193
or (C) relating to the person is not provided by the collateral, a record attached to or logically 1194
associated with the collateral, or the system in which the collateral is recorded.” 1195
(k) The following new article is added after Article 11: 1196
“ARTICLE 12 1197
“CONTROLLABLE ELECTRONIC RECORDS 1198
“Part 1. General Provisions. 1199
Ҥ 28:12-101. Short title. 1200
“This article may be cited as “Uniform Commercial Code— Controllable Electronic 1201
Records.” 1202
Ҥ 28:12-102. Definitions. 1203
“(a) In this article: 1204
“(1) “Controllable electronic record” means a record stored in an electronic 1205
medium that can be subjected to control under § 28:12- 105. The term does not include a 1206
controllable account, a controllable payment intangible, a deposit account, an electronic copy 1207
of a record evidencing chattel paper, an electronic document of title, electronic money, 1208
investment property, or a transferable record. 1209 53
“(2) “Qualifying purchaser” means a purchaser of a controllable electronic 1210
record or an interest in a controllable electronic record that obtains control of the controllable 1211
electronic record for value, in good faith, and without notice of a claim of a property right in 1212
the controllable electronic record. 1213
“(3) “Transferable record” has the meaning provided for that term in: 1214
“(A) Section 201(a)(1) of the Electronic Signatures in Global and 1215
National Commerce Act, 15 U.S.C. § 7021(a)(1); or 1216
“(B) § 28-4915(a). 1217
“(4) “Value” has the meaning provided in § 28:3-303(a), as if references in 1218
that subsection to an “instrument” were references to a controllable account, controllable 1219
electronic record, or controllable payment intangible. 1220
“(b) The definitions in § 28:9- 102 of “account debtor”, “controllable account”, 1221
“controllable payment intangible”, “chattel paper”, “deposit account”, “electronic money”, 1222
and “investment property” apply to this article. 1223
“(c) Article 1 contains general definitions and principles of construction and 1224
interpretation applicable throughout this article. 1225
Ҥ 28:12-103. Relation to Article 9 and Consumer Laws. 1226
“(a) If there is conflict between this article and Article 9, Article 9 governs. 1227
“(b) A transaction subject to this article is subject to any applicable rule of law that 1228
establishes a different rule for consumers and §§ 28-3301 to 28- 3315. 1229
Ҥ 28:12-104. Rights in controllable account, controllable electronic record, and 1230
controllable payment intangible. 1231
“(a) This section applies to the acquisition and purchase of rights in a controllable 1232 54
account or controllable payment intangible, including the rights and benefits under 1233
subsections (c), (d), (e), (g), and (h) of a purchaser and qualifying purchaser, in the same 1234
manner this section applies to a controllable electronic record. 1235
“(b) To determine whether a purchaser of a controllable account or a controllable 1236
payment intangible is a qualifying purchaser, the purchaser obtains control of the account or 1237
payment intangible if it obtains control of the controllable electronic record that evidences 1238
the account or payment intangible. 1239
“(c) Except as provided in this section, law other than this article determines whether 1240
a person acquires a right in a controllable electronic record and the right the person acquires. 1241
“(d) A purchaser of a controllable electronic record acquires all rights in the 1242
controllable electronic record that the transferor had or had power to transfer, except that a 1243
purchaser of a limited interest in a controllable electronic record acquires rights only to the 1244
extent of the interest purchased. 1245
“(e) A qualifying purchaser acquires its rights in the controllable electronic record 1246
free of a claim of a property right in the controllable electronic record. 1247
“(f) Except as provided in subsections (a) and (e) for a controllable account and a 1248
controllable payment intangible or law other than this article, a qualifying purchaser takes a 1249
right to payment, right to performance, or other interest in property evidenced by the 1250
controllable electronic record subject to a claim of a property right in the right to payment, 1251
right to performance, or other interest in property. 1252
“(g) An action may not be asserted against a qualifying purchaser based on both a 1253
purchase by the qualifying purchaser of a controllable electronic record and a claim of a 1254
property right in another controllable electronic record, whether the action is framed in 1255 55
conversion, replevin, constructive trust, equitable lien, or other theory. 1256
“(h) Filing of a financing statement under Article 9 is not notice of a claim of a 1257
property right in a controllable electronic record. 1258
Ҥ 28:12-105. Control of controllable electronic record. 1259
“(a) A person has control of a controllable electronic record if the electronic record, a 1260
record attached to or logically associated with the electronic record, or a system in which the 1261
electronic record is recorded: 1262
“(1) Gives the person: 1263
“(A) Power to avail itself of substantially all the benefit from the 1264
electronic record; and 1265
“(B) Exclusive power, subject to subsection (b), to: 1266
“(i) Prevent others from availing themselves of substantially all 1267
the benefit from the electronic record; and 1268
“(ii) Transfer control of the electronic record to another person 1269
or cause another person to obtain control of another controllable electronic record as a result 1270
of the transfer of the electronic record; and 1271
“(2) Enables the person readily to identify itself in any way, including by 1272
name, identifying number, cryptographic key, office, or account number, as having the 1273
powers specified in paragraph (1). 1274
“(b) Subject to subsection (c), a power is exclusive under subsection (a)(1)(B)(i) and 1275
(ii) even if: 1276
“(1) The controllable electronic record, a record attached to or logically 1277
associated with the electronic record, or a system in which the electronic record is recorded 1278 56
limits the use of the electronic record or has a protocol programmed to cause a change, 1279
including a transfer or loss of control or a modification of benefits afforded by the electronic 1280
record; or 1281
“(2) The power is shared with another person. 1282
“(c) A power of a person is not shared with another person under subsection (b)(2) 1283
and the person’s power is not exclusive if: 1284
“(1) The person can exercise the power only if the power also is exercised by 1285
the other person; and 1286
“(2) The other person: 1287
“(A) Can exercise the power without exercise of the power by the 1288
person; or 1289
“(B) Is the transferor to the person of an interest in the controllable 1290
electronic record or a controllable account or controllable payment intangible evidenced by 1291
the controllable electronic record. 1292
“(d) If a person has the powers specified in subsection (a)(1)(B)(i) and (ii), the powers 1293
are presumed to be exclusive. 1294
“(e) A person has control of a controllable electronic record if another person, other 1295
than the transferor to the person of an interest in the controllable electronic record or a 1296
controllable account or controllable payment intangible evidenced by the controllable 1297
electronic record: 1298
“(1) Has control of the electronic record and acknowledges that it has control 1299
on behalf of the person; or 1300
“(2) Obtains control of the electronic record after having acknowledged that it 1301 57
will obtain control of the electronic record on behalf of the person. 1302
“(f) A person that has control under this section is not required to acknowledge that it 1303
has control on behalf of another person. 1304
“(g) If a person acknowledges that it has or will obtain control on behalf of another 1305
person, unless the person otherwise agrees or law other than this article or Article 9 1306
otherwise provides, the person does not owe any duty to the other person and is not required 1307
to confirm the acknowledgment to any other person. 1308
Ҥ 28:12-106. Discharge of account debtor on controllable account or controllable 1309
payment intangible. 1310
“(a) An account debtor on a controllable account or controllable payment intangible 1311
may discharge its obligation by paying: 1312
“(1) The person having control of the controllable electronic record that 1313
evidences the controllable account or controllable payment intangible; or 1314
“(2) Except as provided in subsection (b), a person that formerly had control of 1315
the controllable electronic record. 1316
“(b) Subject to subsection (d), the account debtor may not discharge its obligation by 1317
paying a person that formerly had control of the controllable electronic record if the account 1318
debtor receives a notification that: 1319
“(1) Is signed by a person that formerly had control or the person to which 1320
control was transferred; 1321
“(2) Reasonably identifies the controllable account or controllable payment 1322
intangible; 1323
“(3) Notifies the account debtor that control of the controllable electronic 1324 58
record that evidences the controllable account or controllable payment intangible was 1325
transferred; 1326
“(4) Identifies the transferee, in any reasonable way, including by name, 1327
identifying number, cryptographic key, office, or account number; and 1328
“(5) Provides a commercially reasonable method by which the account debtor 1329
is to pay the transferee. 1330
“(c) After receipt of a notification that complies with subsection (b), the account 1331
debtor may discharge its obligation by paying in accordance with the notification and may 1332
not discharge the obligation by paying a person that formerly had control. 1333
“(d) Subject to subsection (h), notification is ineffective under subsection (b): 1334
“(1) Unless, before the notification is sent, the account debtor and the person 1335
that, at that time, had control of the controllable electronic record that evidences the 1336
controllable account or controllable payment intangible agree in a signed record to a 1337
commercially reasonable method by which a person may furnish reasonable proof that 1338
control has been transferred; 1339
“(2) To the extent an agreement between the account debtor and seller of a 1340
payment intangible limits the account debtor’s duty to pay a person other than the seller and 1341
the limitation is effective under law other than this article; or 1342
“(3) At the option of the account debtor, if the notification notifies the account 1343
debtor to: 1344
“(A) Divide a payment; 1345
“(B) Make less than the full amount of an installment or other periodic 1346
payment; or 1347 59
“(C) Pay any part of a payment by more than one method or to more 1348
than one person. 1349
“(e) Subject to subsection (h), if requested by the account debtor, the person giving 1350
the notification under subsection (b) seasonably shall furnish reasonable proof, using the 1351
method in the agreement referred to in subsection (d)(1), that control of the controllable 1352
electronic record has been transferred. Unless the person complies with the request, the 1353
account debtor may discharge its obligation by paying a person that formerly had control, 1354
even if the account debtor has received a notification under subsection (b). 1355
“(f) A person furnishes reasonable proof under subsection (e) that control has been 1356
transferred if the person demonstrates, using the method in the agreement referred to in 1357
subsection (d)(1), that the transferee has the power to: 1358
“(1) Avail itself of substantially all the benefit from the controllable electronic 1359
record; 1360
“(2) Prevent others from availing themselves of substantially all the benefit 1361
from the controllable electronic record; and 1362
“(3) Transfer the powers specified in paragraphs (1) and (2) to another person. 1363
“(g) Subject to subsection (h), an account debtor may not waive or vary its rights 1364
under subsections (d)(1) and (e) or its option under subsection (d)(3). 1365
“(h) This section is subject to law other than this article which establishes a different 1366
rule for an account debtor who is an individual and who incurred the obligation primarily for 1367
personal, family, or household purposes. 1368
§ 28:12-107. Governing law. 1369
“(a) Except as provided in subsection (b), the local law of a controllable electronic 1370 60
record’s jurisdiction governs a matter covered by this article. 1371
“(b) For a controllable electronic record that evidences a controllable account or 1372
controllable payment intangible, the local law of the controllable electronic record’s 1373
jurisdiction governs a matter covered by § 28:12-106 unless an effective agreement 1374
determines that the local law of another jurisdiction governs. 1375
“(c) The following rules determine a controllable electronic record’s jurisdiction 1376
under this section: 1377
“(1) If the controllable electronic record, or a record attached to or logically 1378
associated with the controllable electronic record and readily available for review, expressly 1379
provides that a particular jurisdiction is the controllable electronic record’s jurisdiction for 1380
purposes of this article or this subtitle, that jurisdiction is the controllable electronic record’s 1381
jurisdiction. 1382
“(2) If paragraph (1) does not apply and the rules of the system in which the 1383
controllable electronic record is recorded are readily available for review and expressly 1384
provide that a particular jurisdiction is the controllable electronic record’s jurisdiction for 1385
purposes of this article or this subtitle, that jurisdiction is the controllable electronic record’s 1386
jurisdiction. 1387
“(3) If paragraphs (1) and (2) do not apply and the controllable electronic 1388
record, or a record attached to or logically associated with the controllable electronic record 1389
and readily available for review, expressly provides that the controllable electronic record is 1390
governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic 1391
record’s jurisdiction. 1392
“(4) If paragraphs (1), (2), and (3) do not apply and the rules of the system in 1393 61
which the controllable electronic record is recorded are readily available for review and 1394
expressly provide that the controllable electronic record or the system is governed by the law 1395
of a particular jurisdiction, that jurisdiction is the controllable electronic record’s 1396
jurisdiction. 1397
“(5) If paragraphs (1) through (4) do not apply, the controllable electronic 1398
record’s jurisdiction is the District of Columbia. 1399
“(d) If subsection (c)(5) applies and Article 12 is not in effect in the District of 1400
Columbia without material modification, the governing law for a matter covered by this 1401
article is the law of the District of Columbia as though Article 12 were in effect in the 1402
District of Columbia without material modification. In this subsection, “Article 12” means 1403
Article 12 of Uniform Commercial Code Amendments (2022). 1404
“(e) To the extent subsections (a) and (b) provide that the local law of the controllable 1405
electronic record’s jurisdiction governs a matter covered by this article, that law governs 1406
even if the matter or a transaction to which the matter relates does not bear any relation to the 1407
controllable electronic record’s jurisdiction. 1408
“(f) The rights acquired under § 28:12-104 by a purchaser or qualifying purchaser are 1409
governed by the law applicable under this section at the time of purchase. 1410
“Part 2. Transitional Provisions for Articles 9 and 12. 1411
“PART 1 1412
“GENERAL PROVISIONS AND DEFINITIONS 1413
Ҥ 28:12-201. Definitions. 1414
“(a) In this part: 1415
“(1) “Adjustment date” means July 1, 2025, or the date that is one year after 1416 62
the effective date of this act, whichever is later. 1417
“(2) “Article 9” means Article 12 of this subtitle. 1418
“(3) “Article 12” means Article 12 of this subtitle. 1419
“(4) “Article 12 property” means a controllable account, controllable 1420
electronic record, or controllable payment intangible. 1421
“(5) “2022 Act” means the Uniform Commercial Code Amendment Act of 1422
2022. 1423
“(b) The following definitions in other articles of this subtitle apply to this part. 1424
“(1) “Controllable account”. . . § 28:9- 102. 1425
“(2) “Controllable electronic record”. . . § 28:12-102. 1426
“(3) “Controllable payment intangible”. . . § 28:9- 102. 1427
“(4) “Electronic money”. . . § 28:9- 102. 1428
“(5) “Financing statement”. . . § 28:9- 102. 1429
Ҥ 28:12-202. Saving clause. 1430
“(a) Except as provided in this part, a transaction validly entered into before the 1431
effective date of the 2022 Act and the rights, duties, and interests flowing from the 1432
transaction remain valid thereafter and may be terminated, completed, consummated, or 1433
enforced as required or permitted by law other than this subtitle or, if applicable, this 1434
subtitle, as though the 2022 Act had not taken effect. 1435
“(b) Except as provided in this part, Article 9 as amended by the 2022 Act and Article 1436
12 apply to a transaction, lien, or other interest in property, even if the transaction, lien, or 1437
interest was entered into, created, or acquired before the effective date of this act. 1438
“(c) Except as provided in subsection (d) and §§ 28:12 -203 to 12- 208: 1439 63
“(1) A transaction, lien, or interest in property that was validly entered into, 1440
created, or transferred before the effective date of the 2022 Act and was not governed by this 1441
subtitle, but would be subject to Article 9 as amended by the 2022 Act or Article 12 if it had 1442
been entered into, created, or transferred on or after the effective date of the 2022 Act, 1443
including the rights, duties, and interests flowing from the transaction, lien, or interest, 1444
remains valid on and after the effective date of the 2022 Act; and 1445
“(2) the transaction, lien, or interest may be terminated, completed, 1446
consummated, and enforced as required or permitted by the 2022 Act or by the law that 1447
would apply if the 2022 Act had not taken effect. 1448
“(d) The 2022 Act does not affect an action, case, or proceeding commenced before 1449
the effective date of the 2022 Act. 1450
Ҥ 28:12-203. Security interest perfected before effective date. 1451
“(a) A security interest that is enforceable and perfected immediately before the 1452
effective date of the 2022 Act is a perfected security interest under the 2022 Act if, on the 1453
effective date of the 2022 Act, the requirements for enforceability and perfection under the 1454
2022 Act are satisfied without further action. 1455
“(b) If a security interest is enforceable and perfected immediately before the 1456
effective date of the 2022 Act, but the requirements for enforceability or perfection under the 1457
2022 Act are not satisfied on the effective date of the 2022 Act, the security interest: 1458
“(1) Is a perfected security interest until the earlier of the time perfection 1459
would have ceased under the law in effect immediately before the effective date of the 2022 1460
Act or the adjustment date; 1461
“(2) Remains enforceable thereafter only if the security interest satisfies the 1462 64
requirements for enforceability under § 28:9-203, as amended by the 2022 Act, before the 1463
adjustment date; and 1464
(3) Remains perfected thereafter only if the requirements for perfection under 1465
the 2022 Act are satisfied before the time specified in paragraph (1). 1466
Ҥ 28:12-204. Security interest unperfected before effective date. 1467
“A security interest that is enforceable immediately before the effective date of the 1468
2022 Act but is unperfected at that time: 1469
“(1) Remains an enforceable security interest until the adjustment date; 1470
“(2) Remains enforceable thereafter if the security interest becomes 1471
enforceable under § 28:9- 203, as amended by the 2022 Act, on the effective date of the 2022 1472
Act or before the adjustment date; and 1473
“(3) Becomes perfected: 1474
“(A) Without further action, on the effective date of the 2022 Act if the 1475
requirements for perfection under the 2022 Act are satisfied before or at that time; or 1476
“(B) When the requirements for perfection are satisfied if the 1477
requirements are satisfied after that time. 1478
Ҥ 28:12-205. Effectiveness of actions taken before effective date. 1479
“(a) If action, other than the filing of a financing statement, is taken before the 1480
effective date of the 2022 Act and the action would have resulted in perfection of the security 1481
interest had the security interest become enforceable before the effective date of the 2022 1482
Act, the action is effective to perfect a security interest that attaches under the 2022 Act 1483
before the adjustment date. An attached security interest becomes unperfected on the 1484
adjustment date unless the security interest becomes a perfected security interest under the 1485 65
2022 Act before the adjustment date. 1486
“(b) The filing of a financing statement before the effective date of the 2022 Act is 1487
effective to perfect a security interest on the effective date of the 2022 Act to the extent the 1488
filing would satisfy the requirements for perfection under the 2022 Act. 1489
“(c) The taking of an action before the effective date of the 2022 Act is sufficient for 1490
the enforceability of a security interest on the effective date of the 2022 Act if the action 1491
would satisfy the requirements for enforceability under the 2022 Act. 1492
Ҥ 28:12-206. Priority. 1493
“(a) Subject to subsections (b) and (c), the 2022 Act determines the priority of 1494
conflicting claims to collateral. 1495
“(b) Subject to subsection (c), if the priorities of claims to collateral were established 1496
before the effective date of the 2022 Act, Article 9 as in effect before the effective date of the 1497
2022 Act determines priority. 1498
“(c) On the adjustment date, to the extent the priorities determined by Article 9 as 1499
amended by the 2022 Act modify the priorities established before the effective date of the 1500
2022 Act, the priorities of claims to Article 12 property and electronic money established 1501
before the effective date of the 2022 Act cease to apply. 1502
Ҥ 28:12-208. Priority of claims when priority rules of Article 9 do not apply. 1503
“(a) Subject to subsections (b) and (c), Article 12 determines the priority of 1504
conflicting claims to Article 12 property when the priority rules of Article 9 as amended by 1505
the 2022 Act do not apply. 1506
“(b) Subject to subsection (c), when the priority rules of Article 9 as amended by the 1507
2022 Act do not apply and the priorities of claims to Article 12 property were established 1508 66
before the effective date of the 2022 Act, law other than Article 12 determines priority. 1509
“(c) When the priority rules of Article 9 as amended by the 2022 Act do not apply, to 1510
the extent the priorities determined by the 2022 Act modify the priorities established before 1511
the effective date of the 2022 Act, the priorities of claims to Article 12 property established 1512
before the effective date of the 2022 Act cease to apply on the adjustment date.” 1513
Sec. 3. Fiscal impact statement. 1514
The Council adopts the attached fiscal impact statement as the fiscal impact statement 1515
required by section 602(c)(3) of the District of Columbia Home Rule Act, approved 1516
December 24, 1973 (87 Stat. 813; D.C. Official Code § 1- 206.02(c)(3)). 1517
Sec. 4. Effective date. 1518
This act shall take effect following approval by the Mayor (or in the event of veto by 1519
the Mayor, action by the Council to override the veto), a 30- day period of Congressional 1520
review as provided in section 602(c)(1) of the District of Columbia Home Rule Act, 1521
approved December 24, 1973 (87 Stat. 813; D.C. Official Code § 1- 206.02(c)(1)), and 1522
publication in the District of Columbia Register. 1523
111 N. Wabash Ave.
Suite 1010
Chicago, IL 60602
Uniform Law Commission (312) 450- 6600
NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS www.uniformlaws.org
Overview of 2022 Amendments to the Uniform Commercial Code – Emerging Technologies
The Uniform Commercial Code (UCC) is a set of rules to govern commercial transactions. For over sixty years
the UCC has worked to facilitate commerce throughout the United States because it has been adopted in
nearly identical form by every U.S. jurisdiction. As a result, it does not matter if the parties to a transaction
are in different states – the law governing the transaction is substantially the same.
The UCC has been so widely accepted because its provisions are sensible and consistent with most people’s
expectations. For example, if a merchant agreed to sell the same television to two different buyers, obviously
only one of them could take delivery of the television and use it. Under the UCC, the merchant would be
required to either provide an equally good television to the second buyer or to refund the purchase price. This
is a simple example, but illustrative. The UCC contains many such rules to provide ready answers when
something goes wrong with a transaction.
Most UCC rules, when third party rights are not involved, are default rules. The parties to any particular
transaction can agree to different terms in a contract and their agreement will be enforceable. But if they have
not agreed otherwise the UCC default rules will apply. In this way, the UCC provides legal certainty, which in
turn gives many millions of Americans the confidence to conduct business with strangers. Because this uniform
set of rules is in place, strong commercial markets have developed and thrived.
The UCC is updated periodically to keep pace with legal and technological developments. The 2022
amendments will ensure that the UCC continues to facilitate commercial activity well into the future by
implementing the following updates:
• Digital Assets. A new Article 12 provides rules for transactions involving certain new types of digital
assets, including cryptocurrency and non- fungible tokens (NFTs). Under the UCC, these intangible
assets are called “controllable electronic records,” or “CERs.” To ensure that the UCC remains
relevant, CERs are defined to include not only assets created using today’s distributed ledger or
“blockchain” technology, but also any assets that may function similarly using future technologies.
o Control of Digital Assets. Secti on 12-105 introduces the concept of “control” as it applies to
intangible property such as cryptocurrency. Control of an electronic record is roughly
analogous to possession of a tangible asset – the person with control has the power to
“spend” the intangible asset by transferring it to another person in exchange for goods or
services. The person with control can also prevent anyone else from using the property. The
person with control can be anonymous, but must be positively identifiable in some manner,
such as through the use of a cryptographic key.
o Security Interests in Digital Assets. Amendments to Article 9 will facilitate the use of digital
assets as collateral for loans. Under the prior version of Article 9, there was no effective way
The ULC is a nonprofit formed in 1892 to create nonpartisan state legislation. Over 350 volunteer commissioners—lawyers,
judges, law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to
acts on property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desirable.
for a lender to perfect a security interest in digital assets except by filing a financing statement, and no way to ensure priority of the security interest without obtaining a release or subordination from all other secured parties, if they are even disclosed. The amended
Article 9 will provide that a lender with control of digital assets has a perfected security
interest with priority over the interests of any other lenders who do not have control.
o Tethered Assets. Some digital assets may not have intrinsic value, but rather represent a right
to payment. A simple example would be an electronic promissory note with terms stating the
borrower agrees to pay the lender a fixed monthly payment for a period of time. When the
promissory note was executed on paper, the paper itself could be sold by the original lender
to another party who bought not just the paper itself, but the right to receive future payments
from the borrower. The right to payment was “tethered” to the paper. The 2022 amendments
will provide similar rules for “controllable accounts” and “controllable payment intangibles,”
which are simply digital versions of a tethered asset, e.g. a promissory note in electronic form
rather than in a writing.
o Take-Free Rules. The UCC includes rules to protect innocent parties who receive digital assets
subject to competing property claims. For example, imagine a bank robber who uses stolen
cash to purchase goods at a store. If the store accepted the cash in exchange for valuable
goods without knowing that the cash was stolen, the store is not liable for the bank’s loss
even if the cash received is later traced to the robbery. The robber remains liable for the
amount stolen. Similarly, new UCC provisions will protect innocent parties who accept in good
faith digital assets in exchange for value without knowledge of any other property claim to
the assets.
o Governing Law. Because digital assets have no physical location, conflict of laws questions
may arise. The UCC amendments will allow the parties to a transaction involving digital assets
to choose the law that applies to their transaction for commercial law purposes and
incorporate the choice into their CER or the system in which the CER is recorded. If the parties
do not choose a governing law in the CER or system, the law of the District of Columbia will
apply.
• Tangible and Electronic Money. “Money” is defined under the UCC as a medium of exchange
authorized by a domestic or foreign government and was presumed under many UCC rules to exist
only in tangible form. Recently, some countries’ central banks have proposed creating virtual
currencies to supplement or replace traditional forms of money, and at least two countries have
adopted the virtual currency Bitcoin as an alternate form of legal tender. An amendment to the
Article 1 definition of money clarifies that governmentally created forms of money may be tangible
or electronic and that pre-existing virtual currencies, like Bitcoin, while they may be CERs, are not
“money” for purposes of the UCC. New amendments in Article 9 provide that a security interest in
“electronic money,” i.e. virtual currency created by a government’s central bank, like a security
interest in a CER can only be perfected through control.
2
• Chattel Paper. “Chattel paper” is defined under the former Article 9 as a record containing both a
monetary obligation and a security interest in goods, e.g. the documents governing an automobile
loan. The 2022 amendments modify this definition to refer to the right to payment evidenced by
the record, rather than to the record itself. This makes the rules for chattel paper more consistent
with the new rules for CERs. Similarly, the rule governing control of electronic chattel paper is
amended for consistency with the rule governing control of CERs.
• Hybrid Transactions. Articles 2 and 2A of the UCC apply to the sale and lease of goods, respectively,
and not to contracts for services. The line between these categories has blurred with the emergence
of transactions involving both the sale or lease of goods and the provision of other property or
services. As a result, a new rule is needed for these hybrid transactions. The UCC amendments
provide that, absent the parties’ agreement otherwise, the UCC rules will apply to a hybrid
transaction if the sale/lease of goods is the predominant purpose of the transaction. If the sale of
services or provision of other property predominates, the UCC rules will apply only to aspects of the
transaction that involve the sale or lease of goods. Whether or not the lease of goods aspects of the
transaction predominate, the finance lease provisions of Article 2A will apply to those aspects of the
transaction.
• Negotiable Instruments. Changes to Article 3 clarify that a choice-of-law or choice-of-forum clause
included in an instrument does not affect the negotiability of the instrument, and that an image of
a negotiable instrument (i.e., photos of the front and back of a check) may be substituted for the
actual instrument in accordance with federal banking regulations.
• Terminology. Various UCC provisions are amended to replace obsolete terms that applied only to
transactions on paper. For example, the term “sign” is redefined to include electronic signatures,
the term “record” is substituted for “writing” to encompass electronic documents, and the term
“conspicuous” is redefined to apply more broadly to the terms of both paper and electronic
agreements.
• Transition rules. The UCC amendments will be effective on the effective date in the enacting
legislation. However, to protect any lenders who hold a security interest in digital assets that were
perfected under the prior rules, there will be a transition period during which the lender’s priority
established on the effective date will be maintained. This provides a grace period during which the
parties to a pre-existing loan agreement can renegotiate terms as necessary and comply with
provisions of the new law to ensure that their respective interests remain protected.
3
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www.uniformlaws.org
A Summary of the 2022 Amendments to the Uniform Commercial Code
July 21, 2022
Introduction
The 2022 amendments to the Uniform Commercial Code (“UCC”) address a limited
set of transactions largely involving emerging technologies, such as virtual (non- fiat)
currencies, distributed ledger technologies, and, to a limited extent, artificial intelligence.
The amendments span most of the Articles of the UCC and add a new Article addressing,
in part, certain digital assets.
Background
During a period beginning in 2019, a committee appointed by the American Law
Institute and the Uniform Law Commission, the sponsoring organizations of the UCC,
considered and formulated amendments to the UCC to address emerging technological
developments. The committee included and worked with both lawyers experienced in
UCC matters and lawyers whose practices concentrate on these technological
developments. The work of the committee has benefitted enormously from the
contributions of American Bar Association advisors and approximately 350 observers
from academia, trade groups, government agencies, law firms, private technology
companies, and foreign participants from multinational law reform organizations or who
are active in technology-related law reform efforts in their own countries.
The sponsoring organizations have now approved the amendments . The
amendments are being offered for enactment by the states.
The following is a high- level summary of the amendments.
Executive Summary
The amendments respond to market concerns about the lack of definitive
commercial law rules for transactions involving digital assets, especially relating to (a)
negotiability for virtual (non- fiat) currencies, (b) certain electronic payment rights, (c)
secured lending against virtual (non- fiat) currencies, and (d) security interests in
electronic (fiat) money, such as central bank digital currencies. The amendments also
address other technological developments affecting electronic chattel paper, negotiable
instruments, payment systems, electronic documents of title, and sales and leases of
goods. In particular, the amendments clarify the scope of Articles 2 and 2A when
transactions combine the sale or lease of goods with other matters, a topic of importance
in transactions affected by emerging technologies. The amendments contain, as well,
The ULC is a nonprofit formed in 1892 to create nonpartisan state legislation. Over 350 volunteer commissioners—lawyers,
judges, law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to
acts on property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desirable.
some miscellaneous revisions unrelated to technological developments but providing
needed clarifications of provisions of the UCC.
The amendments address only state commercial law rules . They do not address
the federal or state regulation or taxation of digital assets or money transmitter or anti-
money laundering laws. The amendments defer to law outside of the UCC to answer
many questions concerning digital assets.
I. DIGITAL ASSETS
General
The amendments:
• Concern a class of digital assets – defined as “controllable electronic records”
(“CERs”) – which include certain virtual (non- fiat) currencies, non- fungible
tokens, and digital assets in which specified payment rights are embedded. The
amendments provide for a CER to be in effect negotiable, i.e., capable of being
transferred in such a way as to cut off competing property claims (including
security interests) to the CER (a “take- free” rule similar to the UCC rule for
securities).
• The amendments also provide for a security interest in a CER to be perfected
by “control” (or by filing a financing statement) and for a security interest
perfected by “control” to have priority over a security interest in the CER
perfected only by the filing of a financing statement.
• There are also amendments to address security interests in electronic (fiat)
money (that is, a virtual currency adopted by a government as a medium of
exchange, if the virtual currency did not exist prior to the adoption).
Definition of “Controllable Electronic Record”
A “controllable electronic record” is a record of information in electronic form that
is susceptible to “control.” For a person to have “control” of a CER, the person must have:
• The power to enjoy “substantially all the benefit” of the CER,
• The exclusive power to prevent others from enjoying “substantially all the
benefit” of the CER, and
• The exclusive power to transfer control or to cause another person to obtain
control of the CER.
Moreover, the person must be able readily to identify itself to a third party as the person
having these powers. Identification can be made other than by name, such as by use of
a cryptographic key or account number. The exclusivity requirement is satisfied in most
instances even if there is a sharing of these powers through a multi-signature (“multi-
sig”) or similar arrangement or if changes occur automatically as part of the protocol
built into the system in which the CER is recorded.
One example of a CER is a vir tual (non-fiat) currency. If a person holds an
electronic “wallet” that contains a virtual currency, the person has control of the
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virtual currency if (a) the person may benefit from the use of the virtual currency
as a medium of exchange by spending the virtual currency or exchanging the
virtual currency for another virtual currency, (b) the person has the exclusive power
to prevent others from doing so, and (c) the person has the exclusive power to
transfer control of the virtual currency to another person.
In addition, a person may obtain control of a CER through another person, as the
following example illustrates.
The person described in the example above (A) holding an electronic wallet that
contains a virtual currency has control of the virtual currency . A acknowledges that
A holds the virtual currency for another person (B). B also has control of the virtual
currency (as does A).
For purposes of determining whether a person has control of a CER, there is a
rebuttable presumption that the person’s power to prevent others from enjoying
“substantially all the benefit” of the CER and to transfer control of the CER is exclusive.
In that way these powers must be found to be exclusive unless evidence to the contrary
is provided.
If an electronic record is not susceptible of control, it is not a CER and is outside
the scope of Article 12 (as well as the provisions of Article 9 that apply to CERs). In
addition, the definition of a CER excludes certain digital assets that might otherwise fall
within the definition of that term. These assets are excluded because commercial law
rules already exist and generally work well for these assets. They include electronic
chattel paper, electronic documents, investment property, transferable records under the
federal E-SIGN law or the Uniform Electronic Transactions Act (“UETA”), deposit
accounts, and electronic money. Nothing in the amendments, for example, disturbs
transacting parties’ current practices of using transferable records under E-SIGN and
UETA. Nor do the amendments affect transacting parties’ ability, in effect, to “opt-in” to
Article 8 of the UCC by arranging for a digital asset to be held by a securities intermediary
as a financial asset credited to a securities account. Electronic money is treated
separately under the amendments, as described below.
Rights of a Transferee of a Controllable Electronic Record
Article 12 governs certain transfers of CERs. If a CER is purchased (a term defined
in the UCC to encompass only voluntary transactions, including obtaining a security
interest in the CER), the purchaser acquires an interest in all rights in the CER that the
transferor had, or had the power to transfer. In addition, if the purchaser is a “qualifying
purchaser,” the purchaser benefits from the “take- free” rule, i.e., the purchaser acquires
its interest in the CER free from competing property claims to the CER. A “qualifying
purchaser” is a purchaser that obtains control of a CER for value, in good faith, and
without notice of a property claim to the CER. As with negotiable instruments and
investment property, the filing of a financing statement in and of itself is not notice of a
property claim to the CER.
Consider the example of a person in control of a virtual (non- fiat) currency: If the
person transfers control to a purchaser (or causes the purchaser to obtain control),
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the transferee obtains its interest in whatever rights in the virtual currency that the
transferor had or had the power to transfer. If the transferee is a “qualifying
purchaser” of the virtual currency, the transferee also benefits from the “take- free”
rule.
Tethering and Certain Payment Rights
With one important exception described in the following paragraph, law other than
Article 12 determines what rights are evidenced by the CER, and whether a “take-free”
rule applies to those other rights (in addition to the CER itself) upon a transfer of the CER.
For example, the amendments do not address the effect of copyright law as it relates to
someone in control of a non- fungible token “tethered” to intellectual property. Other law
determines the effect of that “tethering.” Similarly, if a CER purports to evidence an
interest in real estate, whether the “take-free” rule applies to the interest in the real estate
upon a transfer of control of the CER must be determined under other law, presumably
the applicable real estate law.
An important exception to this deference to other law applies when an “account”
or “payment intangible” (as those terms are already defined in Article 9 of the UCC) is
evidenced by a CER, creating a “controllable account” or “controllable payment
intangible” if the person obligated on the account or payment intangible has agreed to
pay the person in control of the CER. If control of a CER that evidences a controllable
account or controllable payment intangible is transferred, the controllable account or
controllable payment intangible travels with the CER, and the transferee, if a qualifying
purchaser, benefits from the same “take- free” rule that applies to the CER. The effect is
to create what is functionally an electronic instrument even though the payment rights
continue to be classified as a “controllable account” or “controllable payment intangible.”
If the terms of the account or payment intangible also provide that the account debtor will
not assert claims or defenses against the transferee of the CER (as, and to the extent,
permitted by UCC § 9-403 and subject to consumer laws), the effect is to create the
substantial electronic equivalent of a negotiable instrument. These provisions respond to
market concerns in the trade finance area that commercial law rules are currently
insufficient for promissory notes in electronic form and electronic bills of exchange.
Consider a buyer of goods who delivers to the buyer’s seller a promissory note in
payment for the goods. A promissory note (as defined in Article 9) must be a
writing. If certain conditions are met, the note would qualify as a negotiable
instrument under Article 3 of the UCC, in which case a holder of the promissory
note could be a holder in due course of the negotiable instrument. But, if the
promise to pay is in electronic form and even if those additional conditions are met,
Article 3 does not apply because a negotiable instrument must be a writing. If the
promise to pay does not qualify as a “transferable record” under UETA or E-SIGN,
the rights of a transferee of the promise to pay are governed under current law by
normal contract rules and some rules under UCC Article 9. Under the
amendments, however, if the promise to pay is evidenced by a CER and the person
obligated on the account or payment intangible has agreed to pay the person in
control of the CER, the “take-free” rule applies to a qualifying purchaser of the
promise to pay. If the buyer also agreed not to assert claims or defenses against
a transferee of the promise to pay, the electronic promise to pay, subject to
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applicable consumer laws, has negotiability characteristics similar to those of a
negotiable instrument under Article 3.
Secured Lending
The provisions applicable to purchasers of CERs are coordinated with corres-
ponding additional and existing provisions of Article 9 to govern security interests in CERs
that are designed to preserve the availability of existing transaction patterns. Under the
amendments, there is no need to change existing collateral descriptions in security
agreements or existing collateral indications on financing statements. For purposes of
Article 9 terminology, a CER is a “general intangible,” a controllable account is an
“account,” and a controllable payment intangible is a “payment intangible.”. The normal
rules for attachment will continue to apply to security interests in CERs, and a security
interest in a CER, a controllable account, or a controllable payment intangible may still be
perfected by the filing of a financing statement.
However, under the amendments, a security interest in a CER, a controllable
account, or a controllable payment intangible also may be perfected by the secured party
obtaining “control” of the CER. A security interest in a CER, a controllable account, or a
controllable payment intangible perfected by “control” has priority over a security interest
in the CER, controllable account, or controllable payment intangible perfected only by
filing (or by another method other than control). Control is defined as described above.
Another example may be helpful. SP-1 lends funds to Debtor, obtains a security
interest in Debtor’s accounts, payment intangibles, and other general intangibles,
and perfects the security interest only by the filing of a financing statement. SP-2
later lends to Debtor, obtains a security interest in a CER that evidences what is
functionally an electronic promissory note payable to the person in control of the
CER (a controllable payment intangible or controllable account), and files a
financing statement to perfect its security interest. SP-1’s security interest has
priority under the first to file or perfect priority rule of Article 9. If SP-2 obtains
control of the CER (which evidences the controllable payment tangible or
controllable account), SP-2’s security interest in the electronic promise to pay is
senior to SP-1’s security interest in the electronic promise to pay.
The transition rules for the 2022 amendments provide for a period during which parties to
a transaction will retain their priorities existing on the effective date of a state’s enactment
of the amendments. Parties will have an opportunity to adjust their transaction before the
new rule establishing priority for a party that obtains control takes effect. See Section VIII
below on “Transition.”
Account Debtor Discharge
Similar to current Article 9 for accounts and payment intangibles generally, the
obligor on an account or payment intangible (an account debtor) receives a discharge by
paying the person formerly in control until the account debtor receives a notification
signed (which, under the amendments, may be done in a writing or electronically) by the
debtor (the person assigning the account or payment intangible) or its secured party
(which may include a buyer of the account or payment intangible) indicating that the
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secured party has a security interest in the controllable account or controllable payment
intangible and a payment instruction (often referred to as a “deflection notification”) to pay
the secured party as the person now in control. Following receipt of the deflection
notification, the account debtor is discharged only by paying the secured party and is not
discharged by paying the debtor.
Also, similar to current Article 9, the account debtor may ask for reasonable proof
that the secured party is the person in control before paying the secured party. However,
unlike under current Article 9, for a controllable account or controllable payment intangible
the method of providing that reasonable proof must have been agreed to by the account
debtor, presumably as part of the CER when it was created. Absent there being an agreed
method of providing reasonable proof, the deflection notification is not effective, and the
account debtor is able to obtain a discharge by continuing to pay the debtor.
As a practical matter, few account debtors question a deflection notification or ask
for reasonable proof. However, if an account debtor does ask for reasonable proof, the
relevant parties have the flexibility to develop for market acceptance methods for
providing the reasonable proof.
Choice of Law
The amendments include substantially identical choice- of-law rules for the Article
12 take- free rules for transferees of CERs and the Article 9 rules for perfection by control
and priority of a security interest in a CER, controllable account, or controllable payment
intangible perfected by control. Having the same rules promotes consistent results and
predictability.
The amendments generally follow the choice- of-law approach taken in Articles 8
and 9 for financial assets credited to a securities account at a securities intermediary. The
state or nation whose law applies to take- free rules in connection with transfers of CERs
and the perfection, effect of perfection or non- perfection, and priority of a security interest
in a CER perfected by control is determined by the law where the CER is considered by
the amendments to be “located”—i.e., the CER’s jurisdiction. For a CER that expressly
provides its jurisdiction, perfection, other than by the filing of a financing statement, and
priority are governed by the law of that jurisdiction. Otherwise, the CER’s jurisdiction is
the jurisdiction whose law governs the system in which the CER is recorded. If no express
provision is made in the CER or the system, the CER is located in the District of Columbia .
If the District of Columbia has not enacted the amendments, the substantive law rules of
the Official Text of the amendments apply. In the case of perfection of a security interest
by the filing of a financing statement, the normal debtor location rules apply for perfection
(but not priority).
II. ELECTRONIC MONEY
The current definition of “money” in the UCC is sufficient to include a virtual (fiat)
currency authorized or adopted by a government, whether token- based or deposit
account-based. But that definition also may include a medium of exchange in an
electronic record (such as Bitcoin) that existed and operated as a medium of exchange
before it was authorized or adopted as a medium of exchange by a government. The
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amendments, however, exclude from “money” such an electronic record that existed and
operated as a medium of exchange before it was authorized or adopted as a medium of
exchange. Nevertheless, such a medium of exchange evidenced by an electronic record
so excluded from the definition of money could still qualify as a CER.
Under current Article 9 a security interest in money can be perfected only by
possession, which means actual physical possession. However, intangible money is not
susceptible to possession. But, if electronic money (defined in the amendments to
exclude money that cannot be subject to control) is not credited to a deposit account, a
security interest in the electronic money may be perfected only by control. The
amendments also provide that, if intangible money is credited to a deposit account (even
one at a central bank), the intangible money is not “money” for purposes of Article 9 and
instead the normal deposit account perfection rules apply. UCC § 9-332 is amended so
that a transferee of money, whether tangible or electronic, can take free of a security
interest in the money. In other circumstances, any “take- free” rule is determined by the
law governing the electronic money.
III. CHATTEL PAPER
The amendments make several changes to the treatment of chattel paper under
the UCC:
• The definition of the term “chattel paper” is modified to refer to a right to payment
evidenced by the relevant records rather than to the records themselves. This
modification aligns the definition of chattel paper with the treatment of a right to
payment consisting of a controllable account or controllable payment intangible
evidenced by a CER, which distinguishes between the payment right and the CER
itself.
• The definition of the term “chattel paper” is further modified so that a right to
payment from a “hybrid” lease transaction– a single transaction consisting of a
lease of goods and the provision of other property or services--is treated as chattel
paper if the acquisition of the right to the use and possession of the goods is the
predominant purpose of the transaction
• The definition of “control” of chattel paper in electronic form is expanded to align
with the definition of control for a CER. As a result, instead of a “single”
authoritative copy of the chattel paper records being required to fit within the
existing “safe harbor” for control of chattel paper in electronic form, a distinction is
made between “authoritative” copies and “non- authoritative” copies. Control is
achieved when a person has control of all “authoritative” copies. At the same time,
in order not to upset settled transactions completed under the existing definition of
“control’ for electronic chattel paper, the “safe harbor” in the existing definition is
“grandfathered” under the amendments.
• Because many chattel paper transactions consist of both chattel paper in tangible
form (i.e., evidenced by a writing) and chattel paper in electronic form and that
chattel paper in tangible form is often converted to chattel paper in electronic form
and vice- versa, the amendments generally eliminate the distinction between
chattel paper in tangible form and chattel paper in electronic form and the defined
terms “electronic chattel paper” and “tangible chattel paper” have been removed.
A security interest in chattel paper is perfected, and non- temporal “superpriority” is
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achieved, by possession and control of the chattel paper. Possession is applicable
to the extent that the authoritative copies of the chattel paper are tangible; control
is applicable to the extent that the authoritative copies of the chattel paper are
electronic.
• The choice- of-law rule for the perfection of a security interest by possession of
chattel paper evidenced wholly by a tangible record, the effect of perfection and
non-perfection of a security interest in the chattel paper, and the priority of a
security interest in the chattel paper are determined by the law of the jurisdiction
in which the tangible record evidencing the chattel paper is located. Both perfection
(other than by filing) and priority for chattel paper that does not consist wholly of
chattel paper in tangible form (i.e., chattel paper evidenced only by an electronic
record or evidenced by both electronic and tangible records) is governed by the
law of the jurisdiction where the chattel paper is considered to be located—i.e. , the
“chattel paper’s jurisdiction.” If chattel paper in electronic form expressly provides
its jurisdiction, perfection and priority are governed by the law of that jurisdiction.
Otherwise, the governing law is that whose law governs the system in which the
chattel paper or electronic record thereof is recorded. If no governing law is stated
in the system, perfection and priority is governed by the law of the debtor’s location.
For all chattel paper, the normal debtor location rules apply to perfection by the
filing of a financing statement.
IV. NEGOTIABLE INSTRUMENTS
The amendments contain several changes to Article 3 of the UCC addressing
negotiable instruments. First, the amendments make clear that a choice- of-law or choice-
of-forum clause contained in the instrument does not affect the negotiability of the
instrument. Second, the amendments provide that, if agreed by the payee, an item may
be issued by a maker or drawer by transmission of an image of the item and information
describing the item if the image and information permits the depository bank to process
the item as an electronic check under Federal Reserve Board Regulation CC. This
change addresses the practice of some makers or drawers of sending an image of a
check to the payee. Third, the amendments provide that a check destroyed following a
remote deposit of the instrument does not discharge the obligation evidenced by the
instrument. The effect of this change is to keep the obligation alive if for some
technological or other reason the remote deposit was not effective but the check had been
destroyed by the payee on the assumption that the remote deposit was effective.
The amendments do not provide for an electronic negotiable instrument under
Article 3.
V. PAYMENT SYSTEMS
The amendments provide some clarification of what constitutes a security
procedure for a funds transfer under Article 4A of the UCC. Symbols, sounds, and
biometrics may constitute a security procedure. Merely verifying an email address, IP
address, or telephone phone number is not a security procedure.
VI. SALES AND LEASES OF GOODS
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As a result of emerging technologies, “hybrid transactions” – transactions that
involve both a sale or lease of goods and a sale, lease, or license of other property or the
provision of services – are increasingly common. The amendments provide that, in the
case of a hybrid transaction in which the sale or lease of goods aspect predominates,
Article 2 or 2A applies. If the goods aspects predominate, a court may, in appropriate
circumstances, apply other law to the aspects of the transaction which do not relate to the
sale or lease of goods. When the goods aspects do not predominate, the provisions of
Article 2 or 2A which relate primarily to the goods aspects of the transaction, and not to
the transaction as a whole, apply to those aspects.
Because most requirements that language be presented in a manner that is
“conspicuous” relate to sales and leases of goods, the meaning of that term is quite
important for Articles 2 and 2A. Yet, the current definition of that term is inadequate for
contracts entered into in an electronic environment. See the discussion of Article 1 below
for a summary of how the definition of the term has been changed.
VII. MISCELLANEOUS AMENDMENTS
“Writing” requirements
A number of “writing” requirements in the UCC are changed to “record”
requirements where the effect is to facilitate electronic commerce. The requirements for
an “instrument” in Articles 3 and 9 to be in a writing is not changed. There are
corresponding changes to the definition of “signed”, discussed immediately below.
Article 1
The definition of “signed” is expanded to apply not only to a signature in a writing,
as in the existing definition, but also to an electronic signature. This definition applies
throughout the UCC where an electronic record is permitted.
The examples of what is “conspicuous” in the “black letter” definition of the term
are deleted. The examples were not considered useful for electronic transactions and are
even of questionable relevance in some cases for paper-based transactions. The Official
Comments further explain the term including discussing the examples removed from the
“black letter” text and providing more appropriate guidelines for electronic transactions.
A new sentence is added to the definition of “person” to provide that a protected
series of a series organization (such as a limited liability company that established
protected series) is a person under the UCC. The protected series is a person separate
from the series organization or from another protected series of the series organization.
Article 5
The amendments clarify that, if a letter of credit issued by a bank states its
governing law, a branch of a bank is still considered as a separate bank for purposes of
UCC Article 5.
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Article 7
The definition of “control” in UCC Article 7 is expanded to be similar to the definition
of control for electronic chattel paper. As with the chattel paper definition of “control,” the
existing “safe harbor” for control of an electronic document of title is “grandfathered.”
Article 9
The word “authenticate” is replaced by the word “sign,” with correlative changes,
because the new definition of “sign” in UCC Article 1 (discussed above) eliminates the
need for the separate term “authenticate” in UCC Article 9.
The amendments clarify that under existing law (a) an “assignor” is a person who
grants a security interest to secure an obligation or a seller of accounts, chattel paper,
payment intangibles, or promissory notes, and (b) an “assignee” is a person in whose
favor a security interest is granted to secure an obligation or a buyer of accounts, chattel
paper, payment intangibles, or promissory notes. The effect is to codify Official Comment
26 to Section 9- 102 consistent with Permanent Editorial Board for the Uniform
Commercial Code Commentary No. 21.
The amendments clarify that a security interest in a commercial tort claim as
proceeds of original collateral properly described in a security agreement may attach to
the commercial tort claim or its proceeds even if the commercial tort claim was not
described in the security agreement. The amendments also clarify that a security interest
may attach under an after-acquired property clause to proceeds of a commercial tort claim
even if the security agreement does not describe or encumber the commercial tort claim.
VIII. TRANSITION
Transition rules for the proposed amendments are designed to protect the
expectations of parties to transactions entered into before a state’s effective date of the
amendments and to provide for sufficient time for parties to plan transactions entered into
after the effective date.
The transition rules do not contain a uniform effective date for the amendments,
because some states appear ready to enact the amendments as early as possible.
However, the rules do contain a uniform “adjustment date” of at least one year from the
effective date. The adjustment date gives transacting parties a grace period to preserve
priorities already established on the effective date if the amendments would otherwise
affect those priorities. The following examples illustrate some significant aspects of the
transition rules.
Pre-effective date SP-1 lends to Debtor, obtains a security interest in Debtor’s
accounts, payment intangibles, and other general intangibles, and perfects the
security interest by the filing of a financing statement. SP-2 later, but still pre-
effective date, lends to Debtor, obtains a security interest in a CER, which
evidences what is functionally an electronic promissory note payable to the person
in control (a controllable payment intangible or controllable account), and obtains
what would be control of the CER (which evidences the controllable payment
tangible or controllable account) under the amendments.
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Pre-effective date SP-2’s security interest in the electronic promise to pay is
unperfected and junior to SP-1’s security interest in the electronic promise to pay
because perfection by control was not a method of perfection under former Article 9. Under the amendments perfection by control is a method of perfection, and a
security interest perfected by control is senior to a security interest perfected by filing.. But for the adjustment date, SP-2’s security interest in the electronic promise
to pay would be senior to SP-1’s security interest on the effective date in the CER’s
jurisdiction. However, this reversal of priorities established pre- effective date and
caused by the amendments is postponed until the adjustment date in order to
permit SP-1 time to address any concern over the loss of its senior priority in the
electronic promise to pay.
IX. ADDITIONAL INFORMATION
This summary is a very general overview of the amendments . The text of the
amendments and additional information are available on the Uniform Law Commission’s
web site, www.uniformlaws.org.
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law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to acts on
property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desirable.
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www.uniformlaws.org
W
HY YOUR STATE SHOULD ADOPT THE 2022 AMENDMENTS
TO THE UNIFORM COMMERCIAL CODE
The Uniform Commercial Code (“UCC”) provides commercial law rules for broad categories of
transactions: the sale or lease of goods, negotiable instruments, bank deposits and collections, funds
transfers, letters of credit, documents of title, investment property, and secured transactions in personal
property. Its adoption in every state allowed the development of strong interstate markets. Today the
UCC is the backbone of United States commerce, giving all Americans the legal structure necessary to
have confidence when transacting business with strangers .
Developed in the 1940’s and 1950’s in a largely goods-based economy, the UCC has been revised by
state legislatures from time to time over the years at the recommendation of the UCC’s sponsoring
organizations, the American Law Institute and the Uniform Law Commission, to reflect the economy’s
shift toward services, software, and information- based transactions. The latest updates are the 2022
amendments, which accommodate emerged and emerging technologies such as distributed ledger
technology (a type of which is known as “blockchain”), and artificial intelligence. The amendments bring
the UCC into the digital age by providing commercial law rules for a new category of transactions: the
transfer and leveraging of virtual currencies and certain other digital assets. A state should adopt the
amendments to facilitate modern commercial transactions involving these technologies and these
assets, thus avoiding the obstacles and lack of clarity under the current law that inhibit transactions or
increase their costs.
• The amendments promote commercial activity involving new types of property. New UCC
Article 12 deals with a category of digital assets referred to as “controllable electronic records”
(“CERs”). Examples of CERs are virtual currencies, non-fungible tokens, and electronic
promises to pay. The amendments provide rules to determine the rights of a person who
receives a CER and for the perfection and priority of a security interest in a CER. The updated
law will stimulate economic activity by providing legal certainty to these increasingly common
transactions.
• The amendments will reduce transaction costs and the cost of credit through uniformity.
The UCC has been successful because of its adoption by states on a substantially uniform basis,
creating greater certainty and thereby reducing the cost of credit as well as transaction costs.
The need for uniformity is especially important to minimize forum shopping for disputes
concerning digital assets, which by their nature cross state borders.
• The amendments are narrowly focused to avoid stifling innovation. The UCC amendments
only address the rules that govern consensual transactions. They do not regulate the use of
CERs, whether as a security or a commodity, address the taxation of CERs, alter the law
governing money transmitters, or revise anti-money laundering rules. These matters are left to
law outside of the UCC.
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• The amendments preserve uniformity of state commercial law. Interstate commercial
markets developed in the United States because the UCC provided standard default rules to
govern transactions between parties in different jurisdictions. Adopting the latest amendments
will preserve the uniformity that benefits businesses and consumers in every state.
• The amendments clarify rules for money in electronic form. Some governments and central
banks are experimenting with digital currency. The amendments create a new, separate asset
category called “electronic money” and contain clearer rules for transactions involving electronic
money than exist under current law, which generally contemplates that money exists only in
tangible form, such as bills or coins.
• The amendments update UCC terminology for the digital age. The language of many current
UCC rules assumes parties still use paper documents. The amendments ensure that the law
applies equally to electronic transactions.
• The amendments apply to future technologies. The new amendments facilitate t ransactions
using distributed ledger technology but are drafted using technologically neutral language, i.e.,
they are not wedded to any particular technology. Consequently, the updated UCC will
accommodate not only technologies known today but also technologies yet to be invented.
• The amendments include a grace period to preserve pre-established priorities. The
amendments contain transition provisions designed to protect the expectations of parties to pre-
effective-date transactions. For example, a secured lender who has a priority security interest in
collateral under the prior law will retain its priority through a transition period, giving parties to
preexisting transactions plenty of time to revise their agreements to comply with the updated
law.
• The amendments are thoroughly vetted. The UCC amendments reflect the efforts of the
American Law Institute and the Uniform Law Commission in conjunction with approximately 350
knowledgeable advisors and stakeholder observers who met dozens of times over a three-year
period to reach consensus on updates to this crucial area of state law.
For further information about enacting the 202 2 Amendments to the Uniform Commercial Code, please
contact ULC Chief Counsel Benjamin Orzeske at (312) 450- 6621 or borzeske@uniformlaws.org .
Uniform Commercial Code Amendments (2022)
Drafted, in partnership with the American Law Institute, by the
Uniform Law Commission
and by it
Approved and Recommended for Enactment in All the States
at its
Meeting in Its One-Hundred-and-Thirty-First Year
Philadelphia, Pennsylvania
July 8 – 13, 2022
Without Prefatory Note and Comments
Copyright © 2022
National Conference of Commissioners on Uniform State Laws
September 6, 2022
Uniform Commercial Code Amendments (2022)
The committee appointed by and representing the National Conference of Commissioners on
Uniform State Laws in preparing this act consists of the following individuals:
Edwin E. Smith Massachusetts, Chair
Juliet M. Moringiello Pennsylvania, Vice Chair
Carl S. Bjerre Oregon
Thomas J. Buiteweg Michigan
Henry Deeb Gabriel North Carolina
Larry T. Garvin Ohio
Thomas S. Hemmendinger Rhode Island
William H. Henning Alabama
Philip A. Nicholas Wyoming
Harvey S. Perlman Nebraska
Sandra S. Stern New York
Frank Sullivan Jr. Indiana
Martin D. Carr California, Division Chair
Dan Robbins California, President
American Law Institute Members
The committee appointed by and representing The American Law Institute in preparing this act
consists of the following individuals:
Amelia H. Boss Pennsylvania
Sylvia F. Chin New York (2021‒2022)
Neil B. Cohen New York
Marek Dubovec Arizona
Walter Effross District of Columbia
Teresa Wilton Harmon Illinois
Tarik J. Haskins Delaware
Stephanie A. Heller New York
Charles W. Mooney Jr. Pennsylvania (2019‒2021)
Norman M. Powell Delaware
Sandra M. Rocks New York
Steven O. Weise California
Other Participants
Charles W. Mooney Jr. Pennsylvania, Reporter (2021‒2022)
Stephen L. Sepinuck Tennessee, Associate Reporter
Steven L. Harris Illinois, Reporter (2019‒2021)
Stephen Y. Chow Massachusetts, American Bar Association Advisor
Candace M. Zierdt North Dakota, American Bar Association Advisor
Guido Carducci France, American Bar Association Section Advisor
Stephen J. Curley Connecticut, American Bar Association Section
Advisor
Andrew Hinkes Florida, Advisor
Stephen A. Keen Colorado, Advisor
Carla L. Reyes Texas, Advisor
Andrea Tosato Pennsylvania, Advisor
Mark J. Cutrona Delaware, Style Liaison
Tim Schnabel Illinois, Executive Director
UNIFORM COMMERCIAL CODE AMENDMENTS (2022)
TABLE OF CONTENTS
ARTICLE 1
GENERAL PROVISIONS
Section 1-201. General Definitions..................................................................................................... 1
Section 1-204. Value. .......................................................................................................................... 4
Section 1-301. Territorial Applicability; Parties’ Power to Choose Applicable Law. ....................... 4
Section 1-306. Waiver or Renunciation of Claim or Right After Breach. .......................................... 4
ARTICLE 2
SALES
Section 2-102. Scope; Certain Security and Other Transactions Excluded from this Article. ........... 4
Section 2-106. Definitions: “Contract”; “Agreement”; “Contract for Sale”; “Sale”; “Present
Sale”; “Conforming” to Contract; “Termination”; “Cancellation”; “Hybrid Transaction”. ... 5
Section 2-201. Formal Requirements; Statute of Frauds. ................................................................... 6
Section 2-202. Final Written Expression: Parol or Extrinsic Evidence. ............................................. 6
Section 2-203. Seals Inoperative......................................................................................................... 7
Section 2-205. Firm Offers. ................................................................................................................ 7
Section 2-209. Modification, Rescission, and Waiver. ....................................................................... 7
ARTICLE 2A
LEASES
Section 2A-102. Scope........................................................................................................................ 8
Section 2A-103. Definitions and Index of Definitions. ...................................................................... 8
Section 2A-107. Waiver or Renunciation of Claim or Right After Default. ...................................... 9
Section 2A-201. Statute of Frauds. ..................................................................................................... 9
Section 2A-202. Final Written Expression: Parol or Extrinsic Evidence. .......................................... 9
Section 2A-203. Seals Inoperative. ................................................................................................... 10
Section 2A-205. Firm Offers. ........................................................................................................... 10
Section 2A-208. Modification, Rescission, and Waiver. .................................................................. 10
ARTICLE 3
NEGOTIABLE INSTRUMENTS
Section 3-104. Negotiable Instrument. ............................................................................................. 11
Section 3-105. Issue of Instrument. .................................................................................................. 11
Section 3-401. Signature Necessary for Liability on Instrument. ..................................................... 12
Section 3-604. Discharge by Cancellation or Renunciation. ............................................................ 12
ARTICLE 4A
FUNDS TRANSFERS
Section 4A-103. Payment Order ‒ Definitions. ................................................................................ 13
Section 4A-201. Security Procedure. ................................................................................................ 13
Section 4A-202. Authorized and Verified Payment Orders. ............................................................ 14
Section 4A-203. Unenforceability of Certain Verified Payment Orders. ......................................... 15
Section 4A-207. Misdescription of Beneficiary. .............................................................................. 15
Section 4A-208. Misdescription of Intermediary Bank or Beneficiary’s Bank. ............................... 16
Section 4A-210. Rejection of Payment Order. ................................................................................. 16
Section 4A-211. Cancellation and Amendment of Payment Order. ................................................. 17
Section 4A-305. Liability for Late or Improper Execution or Failure to Execute Payment
Order. .................................................................................................................................... 17
ARTICLE 5
LETTERS OF CREDIT
Section 5-104. Formal Requirements. ............................................................................................. 18
Section 5-116. Choice of Law and Forum. ....................................................................................... 18
ARTICLE 7
DOCUMENTS OF TITLE
Section 7-102. Definitions and Index of Definitions. ....................................................................... 19
Section 7-106. Control of Electronic Document of Title. ................................................................. 20
ARTICLE 8
INVESTMENT SECURITIES
Section 8-102. Definitions and Index of Definitions. ....................................................................... 22
Section 8-103. Rules for Determining Whether Certain Obligations and Interests are Securities
or Financial Assets. ............................................................................................................... 23
Section 8-106. Control ...................................................................................................................... 23
Section 8-110. Applicability; Choice of Law. .................................................................................. 24
Section 8-303. Protected Purchaser. ................................................................................................. 24
ARTICLE 9
SECURED TRANSACTIONS
Section 9-102. Definitions and Index of Definitions. ....................................................................... 24
Section 9-104. Control of Deposit Account. ..................................................................................... 30
Section 9-105. Control of Electronic Chattel Paper. ......................................................................... 31
Section 9-105. Control of Electronic Copy of Record Evidencing Chattel Paper. ........................... 31
Section 9-105A. Control of Electronic Money. ................................................................................ 34
Section 9-107A. Control of Controllable Electronic Record, Controllable Account, or
Controllable Payment Intangible. ......................................................................................... 36
Section 9-107B. No Requirement to Acknowledge or Confirm; No Duties. ................................... 36
Section 9-203. Attachment and Enforceability of Security Interest; Proceeds; Supporting
Obligations; Formal Requisites............................................................................................. 36
Section 9-204. After-Acquired Property; Future Advances. ............................................................ 37
Section 9-207. Rights and Duties of Secured Party Having Possession or Control of Collateral. ... 38
Section 9-208. Additional Duties of Secured Party Having Control of Collateral. .......................... 38
Section 9-209. Duties of Secured Party if Account Debtor Has Been Notified of Assignment. ..... 40
Section 9-210. Request for Accounting; Request Regarding List of Collateral or Statement of
Account. ................................................................................................................................ 41
Section 9-301. Law Governing Perfection and Priority of Security Interests. ................................. 43
Section 9-304. Law Governing Perfection and Priority of Security Interests in Deposit
Accounts. .............................................................................................................................. 43
Section 9-305. Law Governing Perfection and Priority of Security Interests in Investment
Property. ................................................................................................................................ 43
Section 9-306A. Law Governing Perfection and Priority of Security Interests in Chattel Paper. .... 44
Section 9-306B. Law Governing Perfection and Priority of Security Interests in Controllable
Accounts, Controllable Electronic Records, and Controllable Payment Intangibles. .......... 45
Section 9-310. When Filing Required to Perfect Security Interest or Agricultural Lien; Security
Interests and Agricultural Liens to Which Filing Provisions Do Not Apply. ....................... 46
Section 9-312. 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 Perfection Without Filing or Transfer of Possession. ........................................ 47
Section 9-313. When Possession by or Delivery to Secured Party Perfects Security Interest
Without Filing. ...................................................................................................................... 48
Section 9-314. Perfection by Control................................................................................................ 49
Section 9-314A. Perfection by Possession and Control of Chattel Paper......................................... 49
Section 9-316. Continued Perfection of Security Interest Following Change in Governing
Law. ...................................................................................................................................... 50
Section 9-317. Interests That Take Priority Over or Take Free of Security Interest or
Agricultural Lien. .................................................................................................................. 51
Section 9-323. Future Advances. ..................................................................................................... 52
Section 9-324. Priority of Purchase-Money Security Interests. ....................................................... 53
Section 9-326A. Priority of Security Interest in Controllable Account, Controllable Electronic
Record, and Controllable Payment Intangible. ..................................................................... 54
Section 9-330. Priority of Purchaser of Chattel Paper or Instrument. .............................................. 54
Section 9-331. Priority of Rights of Purchasers of Controllable Accounts, Controllable Electronic
Records, Controllable Payment Intangibles, Instruments, Documents, Instruments, and
Securities Under Other Articles; Priority of Interests in Financial Assets and Security
Entitlements and Protection Against Assertion of Claim Under Article 8 Articles 8 and
12........................................................................................................................................... 55
Section 9-332. Transfer of Money; Transfer of Funds from Deposit Account. ............................... 56
Section 9-334. Priority of Security Interests in Fixtures and Crops. ............................................... 56
Section 9-341. Bank’s Rights and Duties with Respect to Deposit Account. ................................. 56
Section 9-404. Rights Acquired by Assignee; Claims and Defenses Against Assignee. ................ 57
Section 9-406. 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. .................................................................... 57
Section 9-408. Restrictions on Assignment of Promissory Notes, Health-Care-Insurance
Receivables, and Certain General Intangibles Ineffective. ................................................... 58
Section 9-509. Persons Entitled to File a Record. ........................................................................... 59
Section 9-513. Termination Statement. ........................................................................................... 59
Section 9-601. Rights After Default; Judicial Enforcement; Consignor or Buyer of Accounts,
Chattel Paper, Payment Intangibles, or Promissory Notes. .................................................. 60
Section 9-605. Unknown Debtor or Secondary Obligor. .................................................................. 60
Section 9-608. Application of Proceeds of Collection or Enforcement; Liability for Deficiency
and Right to Surplus.............................................................................................................. 60
Section 9-611. Notification Before Disposition of Collateral. ......................................................... 61
Section 9-613. Contents and Form of Notification Before Disposition of Collateral: General. ...... 63
Section 9-614. Contents and Form of Notification Before Disposition of Collateral: Consumer-
Goods Transaction. ............................................................................................................... 66
Section 9-615. Application of Proceeds of Disposition; Liability for Deficiency and Right to
Surplus. ................................................................................................................................. 71
Section 9-616. Explanation of Calculation of Surplus or Deficiency. .............................................. 71
Section 9-619. Transfer of Record or Legal Title. ........................................................................... 72
Section 9-620. Acceptance of Collateral in Full or Partial Satisfaction of Obligation;
Compulsory Disposition of Collateral. ................................................................................. 73
Section 9-621. Notification Of Proposal to Accept Collateral. ....................................................... 74
Section 9-624. Waiver. .................................................................................................................... 75
Section 9-628. Nonliability and Limitation on Liability of Secured Party; Liability of
Secondary Obligor. ............................................................................................................... 75
ARTICLE 12
CONTROLLABLE ELECTRONIC RECORDS
Section 12-101. Title. ........................................................................................................................ 76
Section 12-102. Definitions. ............................................................................................................. 76
Section 12-103. Relation to Article 9 and Consumer Laws. ............................................................. 77
Section 12-104. Rights in Controllable Account, Controllable Electronic Record, and
Controllable Payment Intangible. ......................................................................................... 78
Section 12-105. Control of Controllable Electronic Record. ............................................................ 79
Section 12-106. Discharge of Account Debtor on Controllable Account or Controllable
Payment Intangible. .............................................................................................................. 81
Section 12-107. Governing Law. ...................................................................................................... 84
ARTICLE A
TRANSITIONAL PROVISIONS FOR UNIFORM COMMERCIAL CODE
AMENDMENTS (2022)
PART 1
GENERAL PROVISIONS AND DEFINITIONS
Section A-101. Title. ......................................................................................................................... 86
Section A-102. Definitions. .............................................................................................................. 86
PART 2
GENERAL TRANSITIONAL PROVISION
Section A-201. Saving Clause. ......................................................................................................... 87
PART 3
TRANSITIONAL PROVISIONS FOR ARTICLES 9 AND 12
Section A-301. Saving Clause. ......................................................................................................... 87
Section A-302. Security Interest Perfected Before Effective Date. .................................................. 88
Section A-303. Security Interest Unperfected Before Effective Date. ............................................. 89
Section A-304. Effectiveness of Actions Taken Before Effective Date. .......................................... 89
Section A-305. Priority. .................................................................................................................... 90
Section A-306. Priority of Claims When Priority Rules of Article 9 Do Not Apply. ...................... 91
PART 4
EFFECTIVE DATE
Section A-401. Effective Date. ......................................................................................................... 91 1
UNIFORM COMMERCIAL CODE AMENDMENTS (2022)
ARTICLE 1
GENERAL PROVISIONS
Section 1-201. General Definitions.
* * *
(b) Subject to definitions contained in other articles of [the Uniform Commercial Code]
that apply to particular articles or parts thereof:
* * *
(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. 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.
* * *
(15) “Delivery”, with respect to an electronic document of title, means voluntary
transfer of control and, with respect to an instrument, a tangible document of title, or an
authoritative tangible copy of a record evidencing chattel paper, means voluntary
transfer of possession. 2
* * *
(16A) “Electronic” means relating to technology having electrical, digital,
magnetic, wireless, optical, electromagnetic, or similar capabilities.
* * *
(21) “Holder” means:
(A) the person in possession of a negotiable instrument that is payable
either to bearer or to an identified person that is the person in possession; or
(B) the person in possession of a 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 7-106(g), of a
negotiable electronic document of title.
* * *
(24) “Money” means a medium of exchange that is currently authorized or
adopted by a domestic or foreign government. The term includes a monetary unit of account
established by an intergovernmental organization, or pursuant to an agreement between two or
more countries. The term does not include an electronic record that is a medium of exchange
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 the government.
* * *
(27) “Person” means an individual, corporation, business trust, estate, trust,
partnership, limited liability company, association, joint venture, government, governmental
subdivision, agency, or instrumentality, public corporation, or any other legal or commercial
entity. The term includes a protected series, however denominated, of an entity if the protected 3
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 protected series of the entity to satisfy a claim from assets of the protected series.
* * *
(36) “Send”, in connection with a writing, record, or notice notification means:
(A) to 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:
(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.
* * *
Legislative Note:
A state should review and amend any statute or regulation that relies on or refers to the
definition of “money” in subsection (b)(24) to account for the amendment to that definition.
A state should enact the amendment to subsection (b)(27) whether the state has enacted the 4
Uniform Protected Series Act (2017) or otherwise recognizes a protected series under its law.
Because the amendment applies only under the enacting state’s Uniform Commercial Code,
inclusion of the amendment does not require the enacting state to recognize a limit on liability of
a protected series organized under the law of another jurisdiction or a limit on liability of the
entity that established the protected series. The amendment clarifies the status of a protected
series as a “person” under the choice-of-law and substantive law rules of the enacting state’s
Uniform Commercial Code.
Section 1-204. Value.
Except as otherwise provided in Articles 3, 4, [and] 5, [and 6], [6,] and 12, a person gives
value for rights if the person acquires them:
* * *
Section 1-301. Territorial Applicability; Parties’ Power to Choose Applicable
Law.
* * *
(c) If one of the following provisions of [the Uniform Commercial Code] specifies the
applicable law, that provision governs and a contrary agreement is effective only to the extent
permitted by the law so specified:
* * *
(8) Sections 9-301 through 9-307.;
(9) Section 12-107.
Section 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.
ARTICLE 2
SALES
Section 2-102. Scope; Certain Security and Other Transactions Excluded from 5
this Article.
Unless the context otherwise requires, this Article applies to transactions in goods; it does
not apply to any transaction which although in the form of an unconditional contract to sell or
present 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 a statute regulating sales to consumers, farmers, or other
specified classes of buyers.
Section 2-106. Definitions: “Contract”; “Agreement”; “Contract for Sale”;
“Sale”; “Present Sale”; “Conforming” to Contract; “Termination”; “Cancellation”;
“Hybrid Transaction”. 6
* * *
(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.
Section 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 $500 or more is not enforceable by way of action or defense unless there is some writing
a 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 paragraph subsection beyond the quantity of
goods shown in such writing the record.
(2) Between merchants if within a reasonable time a writing record 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
written notice in a record of objection to its contents is given within 10 days after it is received.
* * *
Section 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 7
or supplemented:
* * *
(b) by evidence of consistent additional terms unless the court finds the writing record to
have been intended also as a complete and exclusive statement of the terms of the agreement.
Section 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.
Section 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.
Section 2-209. Modification, Rescission, and Waiver.
* * *
(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.
* * *
ARTICLE 2A
LEASES 8
Section 2A-102. Scope.
(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 aspects of the transaction apply, and the provisions that relate primarily to the
transaction as a whole do not apply;
(ii) Section 2A-209 applies if the lease is a finance lease; and
(iii) Section 2A-407 applies to the promises 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
(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.
Section 2A-103. Definitions and Index of Definitions.
(1) In this Article, unless the context otherwise requires:
* * *
(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.
* * * 9
Section 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.
Section 2A-201. Statute of Frauds.
(1) A lease contract is not enforceable by way of action or defense unless:
* * *
(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.
* * *
(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 lease term and
the quantity of goods shown in the writing record.
* * *
(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;
* * *
Section 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 10
evidence of any prior agreement or of a contemporaneous oral agreement but may be explained
or supplemented:
* * *
(b) by evidence of consistent additional terms unless the court finds the writing
record to have been intended also as a complete and exclusive statement of the terms of the
agreement.
Section 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.
Section 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 period of irrevocability exceed 3 months. Any such term of assurance on a form
supplied by the offeree must be separately signed by the offeror.
Section 2A-208. Modification, Rescission, and Waiver.
* * *
(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.
* * * 11
ARTICLE 3
NEGOTIABLE INSTRUMENTS
Section 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:
* * *
(3) does not state any other undertaking or instruction by the person promising or
ordering payment to do any act in addition to the payment of money, but the promise or order
may contain (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.
* * *
Section 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 the drawer to the payee of an
image of an item and information derived from the item that enables the depositary bank to
collect the item by transferring or presenting under federal law an electronic check.
* * * 12
Section 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 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.
Section 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, 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 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.
* * *
(c) In this section, “signed,” with respect to a record that is not a writing, includes the
attachment to or logical association with the record of an electronic symbol, sound, or process
with the present intent to adopt or accept the record.
ARTICLE 4A
FUNDS TRANSFERS 13
Section 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 system, or communication system for transmittal to the
receiving bank.
* * *
Section 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
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 14
security procedure.
Section 4A-202. Authorized and Verified Payment Orders.
* * *
(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, or notice of which is not received at a time and in a manner affording 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 15
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.
* * *
Section 4A-203. Unenforceability of Certain Verified Payment Orders.
(a) If an accepted payment order is not, under Section 4A-202(a), an authorized order of a
customer identified as sender, but is effective as an order of the customer pursuant to Section
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.
* * *
Section 4A-207. Misdescription of Beneficiary.
* * *
(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:
* * *
(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 16
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.
* * *
Section 4A-208. Misdescription of Intermediary Bank or Beneficiary’s Bank.
* * *
(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.
* * *
(2) If the sender is not a bank and the receiving bank proves that the sender,
before the payment order was accepted, 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.
* * *
Section 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 17
will not execute or pay the order. Rejection is effective when 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.
* * *
Section 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.
* * *
Section 4A-305. Liability for Late or Improper Execution or Failure to Execute
Payment Order.
* * *
(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 18
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.
* * *
ARTICLE 5
LETTERS OF CREDIT
Section 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 5-
108(e).
Section 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 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. 19
(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 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 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).
ARTICLE 7
DOCUMENTS OF TITLE
Section 7-102. Definitions and Index of Definitions. 20
(a) In this article, unless the context otherwise requires:
* * *
(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.]
* * *
Section 7-106. Control of Electronic Document of Title.
* * *
(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:
* * *
(4) copies or amendments that add or change an identified assignee transferee of
the authoritative copy can be made only with the consent of the person asserting control;
* * *
(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; 21
(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.
(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. 22
(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 9 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.
ARTICLE 8
INVESTMENT SECURITIES
Section 8-102. Definitions and Index of Definitions.
(a) In this Article:
* * *
(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.
* * *
(b) Other The following definitions applying to in this Article and the sections in which 23
they appear are other Articles apply to this Article:
* * *
“Controllable account”. Section 9-102.
“Controllable electronic record”. Section 12-102.
“Controllable payment intangible”. Section 9-102.
* * *
Section 8-103. Rules for Determining Whether Certain Obligations and Interests
are Securities or Financial Assets.
* * *
(h) A controllable account, controllable electronic record, or controllable payment
intangible is not a financial asset unless Section 8-102(a)(9)(iii) applies.
Section 8-106. Control
* * *
(d) A purchaser has “control” of a security entitlement if:
* * *
(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 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. 24
* * *
(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 9 otherwise provides,
the person does not owe any duty to the purchaser and is not required to confirm the
acknowledgment to any other person.
Section 8-110. Applicability; Choice of Law.
* * *
(g) The local law of the issuer’s jurisdiction or the 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 the jurisdiction.
Section 8-303. Protected Purchaser.
* * *
(b) In addition to acquiring the rights of a purchaser, a A protected purchaser acquires its
interest in the security free of any adverse claim.
ARTICLE 9
SECURED TRANSACTIONS
Section 9-102. Definitions and Index of Definitions.
(a) [Article 9 definitions.] In this article:
* * *
(2) “Account”, except as used in “account for”, “account statement”, “account to”,
“commodity account” in paragraph (14), “customer’s account”, “deposit account” in paragraph 25
(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 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 instrument chattel 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 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;
(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. 26
* * *
(7) “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. [Reserved.]
(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.
* * *
(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 27
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.
(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.
* * *
(27A) “Controllable account” means an account evidenced by a controllable
electronic record that provides that the account debtor undertakes to pay the person that has
control under Section 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 12-105 of the controllable electronic record. 28
* * *
(31) “Electronic chattel paper” means chattel paper evidenced by a record or
records consisting of information stored in an electronic medium. [Reserved.]
(31A) “Electronic money” means money in an electronic form.
* * *
(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) [Reserved.] [“Good faith” means honesty in fact and the observance of
reasonable commercial standards of fair dealing.]
* * *
(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.
* * *
(54A) “Money” has the meaning in Section 1-201(b)(24), but does not include (i)
a deposit account or (ii) money in an electronic form that cannot be subjected to control under 29
Section 9-105A.
* * *
(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.
* * *
(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 9-620, 9-621, and 9-622.
* * *
(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.]
* * *
(79) “Tangible chattel paper” means chattel paper evidenced by a record or
records consisting of information that is inscribed on a tangible medium. [Reserved.]
(79A) “Tangible money” means money in a tangible form.
* * *
(b) [Definitions in other articles.] “Control” as provided in Section 7-106 and the
following definitions in other articles apply to this article: 30
* * *
“Controllable electronic record”. Section 12-102.
* * *
“Protected purchaser”. Section 8-303.
* * *
“Qualifying purchaser”. Section 12-102.
* * *
Legislative Note: Replicate the formatting of the tabulated material in subsection (a)(11) exactly
to ensure that the meaning of the material is preserved.
The definition of “good faith” in subsection (a)(43) was deleted from subsection (a) pursuant to
a conforming amendment accompanying the 2001 amendments of Article 1. However, any
jurisdiction that has not adopted the revised definition of “good faith” in Section 1-201(b)(20)
should retain the definition of “good faith” in subsection (a)(43).
Section 9-104. Control of Deposit Account.
(a) [Requirements for control.] A secured party has control of a deposit account if:
* * *
(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 31
it will obtain control of the deposit account on behalf of the secured party.
* * *
Section 9-105. Control of Electronic 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) if the record or
records comprising the chattel 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.
Section 9-105. Control of Electronic Copy of Record Evidencing Chattel Paper.
(a) [General rule: control of electronic copy of record evidencing chattel paper.] A 32
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 the chattel paper are created, stored, and assigned in 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 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; 33
(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
(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 34
specified in subsection (c)(3)(A) and (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.
Section 9-105A. Control of Electronic Money.
(a) [General rule: control of electronic money.] A person has control of electronic
money if:
(1) the electronic money, a record attached to or logically associated with the
electronic money, or a system in which the electronic money is recorded gives the person:
(A) power to avail itself of substantially all the benefit from the electronic
money; and
(B) exclusive power, subject to subsection (b), to:
(i) prevent others from availing themselves of substantially all the
benefit from the electronic money; and
(ii) transfer control of the electronic money to another person or
cause another person to obtain control of other electronic money as a result of the transfer of the
electronic money; and
(2) the electronic money, a record attached to or logically associated with the
electronic money, or a system in which the electronic money is recorded enables the person 35
readily to identify itself in any way, including by name, identifying number, cryptographic key,
office, or account number, as having the powers under 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 electronic money, a record attached to or logically associated with the
electronic money, or a system in which the electronic money is recorded limits the use of the
electronic money 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.
(c) [When power not shared with another person.] A power of a person is not shared
with another person under subsection (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 electronic money.
(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 electronic money if
another person, other than the transferor to the person of an interest in the electronic money:
(1) has control of the electronic money and acknowledges that it has control on
behalf of the person; or
(2) obtains control of the electronic money after having acknowledged that it will 36
obtain control of the electronic money on behalf of the person.
Section 9-107A. Control of Controllable Electronic Record, Controllable
Account, or Controllable Payment Intangible.
(a) [Control under Section 12-105.] A secured party has control of a controllable
electronic record as provided in Section 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.
Section 9-107B. No Requirement to Acknowledge or Confirm; No Duties.
(a) [No requirement to acknowledge.] A person that has control under Section 9-104, 9-
105, or 9-105A is not required to acknowledge that it has control on behalf of another 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.
Section 9-203. Attachment and Enforceability of Security Interest; Proceeds;
Supporting Obligations; Formal Requisites.
* * *
(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:
* * * 37
(3) one of the following conditions is met:
(A) the debtor has authenticated signed a security agreement that provides
a description of the collateral and, if the security interest covers timber to be cut, a description of
the land concerned;
* * *
(C) the collateral is a certificated security in registered form and the
security certificate has been delivered to the secured party under Section 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, electronic money, investment property, or letter-of-credit rights, or electronic
documents, and the secured party has control under Section 7-106, 9-104, 9-105A, 9-106, or 9-
107, or 9-107A pursuant to the debtor’s security agreement; or
(E) the collateral is chattel paper and the secured party has possession and
control under Section 9-314A pursuant to the debtor’s security agreement.
* * *
Section 9-204. After-Acquired Property; Future Advances.
* * *
(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:
* * *
(b.1) [Limitation on subsection (b).] Subsection (b) does not prevent a security interest
from attaching: 38
(1) to consumer goods as proceeds under Section 9-315(a) or commingled goods
under Section 9-336(c);
(2) to a commercial tort claim as proceeds under Section 9-315(a); or
(3) under an after-acquired property clause to property that is proceeds of
consumer goods or a commercial tort claim.
* * *
Section 9-207. Rights and Duties of Secured Party Having Possession or Control
of Collateral.
* * *
(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 7-106, 9-104, 9-105, 9-105A, 9-106, or 9-107, or 9-107A:
* * *
Section 9-208. Additional Duties of Secured Party Having Control of Collateral.
* * *
(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 9-104(a)(2)
shall send to the bank with which the deposit account is maintained an authenticated statement a
signed record that releases the bank from any further obligation to comply with instructions
originated by the secured party;
* * *
(3) a secured party, other than a buyer, having control of electronic chattel paper 39
under Section 9-105 shall:
(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; and
(3) a secured party, other than a buyer, having control under Section 9-105 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;
(4) a secured party having control of investment property under Section 8-
106(d)(2) or 9-106(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 9-107
shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter
of credit to the secured party an authenticated a signed release from any further obligation to pay
or deliver proceeds of the letter of credit to the secured party; and 40
(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 7-106 of an authoritative
electronic copy of an electronic document of title shall transfer control of the electronic copy to
the debtor or a person designated by the debtor;
(7) a secured party having control under Section 9-105A of electronic money shall
transfer control of the electronic money to the debtor or a person designated by the debtor; and
(8) a secured party having control under Section 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, shall transfer control of the controllable
electronic record to the debtor or a person designated by the debtor.
Section 9-209. Duties of Secured Party if Account Debtor Has Been Notified of
Assignment.
* * * 41
(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 9-406(a) or 12-106(b) of an
assignment to the secured party as assignee under Section 9-406(a) an authenticated a signed
record that releases the account debtor from any further obligation to the secured party.
* * *
Section 9-210. Request for Accounting; Request Regarding List of Collateral or
Statement of Account.
(a) [Definitions.] In this section:
* * *
(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 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. 42
(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 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:
* * *
(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:
* * * 43
Section 9-301. Law Governing Perfection and Priority of Security Interests.
Except as otherwise provided in Sections 9-303 through 9-306 9-306B, the following
rules determine the law governing perfection, the effect of perfection or nonperfection, and the
priority of a security interest in collateral:
* * *
(3) Except as otherwise provided in paragraph (4), while negotiable tangible
documents, goods, instruments, or tangible 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.
* * *
Section 9-304. 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.
* * *
Section 9-305. Law Governing Perfection and Priority of Security Interests in
Investment Property.
(a) [Governing law: general rules.] Except as otherwise provided in subsection (c), the 44
following rules apply:
* * *
(5) Paragraphs (2), (3), and (4) apply even if the transaction does not bear any
relation to the jurisdiction.
* * *
Section 9-306A. 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 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, 45
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:
(1) perfection of a security interest in the chattel paper by possession under
Section 9-314A; 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.
Section 9-306B. Law Governing Perfection and Priority of Security Interests in 46
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 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 debtor 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.
Section 9-310. When Filing Required to Perfect Security Interest or Agricultural
Lien; Security Interests and Agricultural Liens to Which Filing Provisions Do Not
Apply.
* * *
(b) [Exceptions: filing not necessary.] The filing of a financing statement is not
necessary to perfect a security interest:
* * *
(8) in controllable accounts, controllable electronic records, controllable payment
intangibles, deposit accounts, electronic chattel paper, electronic documents, investment property,
or letter-of-credit rights which is perfected by control under Section 9-314; 47
(8.1) in chattel paper which is perfected by possession and control under Section
9-314A;
* * *
Section 9-312. 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 Perfection Without Filing or Transfer of Possession.
(a) [Perfection by filing permitted.] A security interest in chattel paper, negotiable
documents, controllable accounts, controllable electronic records, controllable payment
intangibles, 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 9-315(c) and (d) for proceeds:
* * *
(2) except as otherwise provided in Section 9-308(d), a security interest in a letter-
of-credit right may be perfected only by control under Section 9-314; and
(3) a security interest in tangible money may be perfected only by the secured
party’s taking possession under Section 9-313; and
(4) a security interest in electronic money may be perfected only by control under
Section 9-314.
* * *
(e) [Temporary perfection: new value.] A security interest in certificated securities, 48
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 under an authenticated a signed security agreement.
* * *
Section 9-313. When Possession by or Delivery to Secured Party Perfects
Security Interest Without Filing.
(a) [Perfection by possession or delivery.] Except as otherwise provided in subsection
(b), a secured party may perfect a security interest in tangible negotiable documents, goods,
instruments, negotiable tangible documents, or tangible 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 8-301.
* * *
(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 possession of the collateral by a secured party, perfection occurs 49
no not earlier than the time the secured party takes possession and continues only while the
secured party retains possession.
* * *
Section 9-314. 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, electronic money, investment property, or letter-of-credit rights may be perfected by
control of the collateral under Section 7-106, 9-104, 9-105, 9-105A, 9-106, or 9-107, or 9-107A.
(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
intangibles, deposit accounts, electronic documents, electronic money, or letter-of-credit rights is
perfected by control under Section 7-106, 9-104, 9-105, 9-105A, or 9-107, or 9-107A 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 9-106 from not
earlier than the time the secured party obtains control and remains perfected by control until:
* * *
Section 9-314A. 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 50
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 9-313 to perfection by possession of chattel paper.]
Section 9-313(c) and (f) through (i) applies to perfection by possession of an authoritative
tangible copy of a record evidencing chattel paper.
Section 9-316. Continued Perfection of Security Interest Following Change in
Governing Law.
(a) [General rule: effect on perfection of change in governing law.] A security interest
perfected pursuant to the law of the jurisdiction designated in Section 9-301(1), or 9-305(c), 9-
306A(d), or 9-306B(b) remains perfected until the earliest of:
* * *
(f) [Change in jurisdiction of chattel paper, controllable electronic record, bank,
issuer, nominated person, securities intermediary, or commodity intermediary.] A security
interest in chattel paper, controllable accounts, controllable electronic records, 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: 51
* * *
Section 9-317. Interests That Take Priority Over or Take Free of Security
Interest or Agricultural Lien.
* * *
(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 security certificate 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.
* * *
(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, electronic money, 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.
* * *
(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 9-105, obtains control of each authoritative electronic 52
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 7-106, 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 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.
Section 9-323. Future Advances.
* * *
(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:
* * *
(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:
* * * 53
Section 9-324. Priority of Purchase-Money Security Interests.
* * *
(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 9-330, and, except as
otherwise provided in Section 9-327, 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:
* * *
(2) the purchase-money secured party sends an authenticated a signed notification
to the holder of the conflicting security interest;
* * *
(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 9-327, a perfected security interest in their identifiable
proceeds and identifiable products in their unmanufactured states also has priority, if:
* * *
(2) the purchase-money secured party sends an authenticated a signed notification
to the holder of the conflicting security interest;
* * * 54
Section 9-326A. 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 9-330. 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 of under Section 9-105 of each authoritative
electronic copy of the record evidencing the chattel paper under Section 9-105; 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 9-105 of each authoritative electronic copy of the record
evidencing the chattel paper under Section 9-105 in good faith, in the ordinary course of the 55
purchaser’s business, and without knowledge that the purchase violates the rights of the secured
party.
* * *
(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.
Section 9-331. Priority of Rights of Purchasers of Controllable Accounts,
Controllable Electronic Records, Controllable Payment Intangibles, Instruments,
Documents, Instruments, and Securities Under Other Articles; Priority of Interests in
Financial Assets and Security Entitlements and Protection Against Assertion of Claim
Under Article 8 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 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 Article 8 Articles 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 Article 8 or 12.
* * * 56
Section 9-332. Transfer of Money; Transfer of Funds from Deposit Account.
(a) [Transferee of tangible money.] A transferee of tangible 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 the funds without acting in collusion with the debtor in violating the
rights of the secured party.
(c) [Transferee of electronic money.] A transferee of electronic money takes the money
free of a security interest if the transferee obtains control of the money without acting in
collusion with the debtor in violating the rights of the secured party.
Section 9-334. Priority of Security Interests in Fixtures and Crops.
* * *
(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
* * *
Section 9-341. Bank’s Rights and Duties with Respect to Deposit Account.
Except as otherwise provided in Section 9-340(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: 57
* * *
Section 9-404. 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 assignee are subject to:
* * *
(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.
* * *
Section 9-406. 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 (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): 58
* * *
(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 subsections (e) and (k) and Sections 2A-303 and 9-407, 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:
* * *
(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).
* * *
(l) [Inapplicability of certain subsections.] Subsections (a), (b), (c) and (g) do not apply
to a controllable account or controllable payment intangible.
* * *
Section 9-408. Restrictions on Assignment of Promissory Notes, Health-Care-
Insurance Receivables, and Certain General Intangibles Ineffective.
* * *
(g) [“Promissory note.”] In this section, “promissory note” includes a negotiable
instrument that evidences chattel paper. 59
Section 9-509. 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
* * *
(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:
* * *
Section 9-513. Termination 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:
* * *
(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:
* * *
60
Section 9-601. Rights After Default; Judicial Enforcement; Consignor or Buyer
of Accounts, Chattel Paper, Payment Intangibles, or Promissory Notes.
* * *
(b) [Rights and duties of secured party in possession or control.] A secured party in
possession of collateral or control of collateral under Section 7-106, 9-104, 9-105, 9-105A, 9-
106, or 9-107, or 9-107A has the rights and duties provided in Section 9-207.
* * *
Section 9-605. 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:
* * *
(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 logically
associated with the collateral, or the system in which the collateral is recorded.
Section 9-608. 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 61
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 9-607 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.
* * *
Section 9-611. 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
* * *
(b) [Notification of disposition required.] Except as otherwise provided in subsection
(d), a secured party that disposes of collateral under Section 9-610 shall send to the persons
specified in subsection (c) a reasonable authenticated signed notification of disposition. 62
(c) [Persons to be notified.] To comply with subsection (b), the secured party shall send
an authenticated a signed notification of disposition to:
* * *
(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 9-311(a).
* * *
(e) [Compliance with subsection (c)(3)(B).] A secured party complies with the
requirement for notification prescribed by subsection (c)(3)(B) if:
* * *
(2) before the notification date, the secured party:
(A) did not receive a response to the request for information; or 63
(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.
Section 9-613. Contents and Form of Notification Before Disposition of
Collateral: General.
(a) [Contents 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
(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 9- 64
614(3) 9-614(a)(3), when completed in accordance with the instructions in subsection (b) and
Section 9-614(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:
Time:
Place:
[For a private disposition:]
We will sell [or lease or license, as applicable] the [describe collateral] privately
sometime 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) 65
{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.
{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 66
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.
Section 9-614. Contents and Form of Notification Before Disposition of
Collateral: Consumer-Goods Transaction.
(a) [Contents 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 9-613(1) 9-613(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 9-623 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 the
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] 67
Subject: [Identification of Transaction]
We have your [describe collateral] , because you broke promises in our agreement.
[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 sometime 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 the last six months.] 68
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 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 69
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)
[End of Form]
(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 70
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, 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 is
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—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:”. 71
Section 9-615. 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 disposition under Section 9-610 in the following order to:
* * *
(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.
* * *
Section 9-616. 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 subsection (c) of how the
secured party calculated the surplus or deficiency;
(C) states, if applicable, that future debits, credits, charges, including 72
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 9-610.
(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 9-615, 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
* * *
(c) [Required information.] To comply with subsection (a)(1)(B), a writing an
explanation must provide the following information in the following order:
* * *
Section 9-619. Transfer of Record or Legal Title.
(a) [“Transfer statement.”] In this section, “transfer statement” means a record 73
authenticated signed by a secured party stating:
* * *
Section 9-620. 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:
* * *
(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 9-621; 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;
* * *
(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
* * *
(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 74
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 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.
* * *
(f) [Compliance with mandatory disposition requirement.] To comply with
subsection (e), the secured party shall dispose of the collateral:
* * *
(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.
* * *
Section 9-621. 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 75
collateral;
* * *
Section 9-624. Waiver.
(a) [Waiver of disposition notification.] A debtor or secondary obligor may waive the
right to notification of disposition of collateral under Section 9-611 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 9-620(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 waive the right to redeem collateral under Section 9-623 only by an
agreement to that effect entered into and authenticated signed after default.
Section 9-628. 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:
* * *
(b) [Limitation of liability based on status as secured party.] A Subject to subsection
(f), a secured party is not liable because of its status as secured party:
* * *
(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 76
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 (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.
ARTICLE 12
CONTROLLABLE ELECTRONIC RECORDS
Section 12-101. Title.
This article may be cited as Uniform Commercial Code—Controllable Electronic
Records.
Section 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 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, electronic money,
investment
property, or a transferable record.
(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 77
controllable electronic record.
(3) “Transferable record” has the meaning provided for that term in:
(A) Section 201(a)(1) of the Electronic Signatures in Global and National
Commerce Act, 15 U.S.C. Section 7021(a)(1)[, as amended]; or
(B) [cite to Uniform Electronic Transactions Act Section 16(a)].
(4) “Value” has the meaning provided in Section 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 9.] The definitions in Article 9 of “account debtor”,
“controllable account”, “controllable payment intangible”, “chattel paper”, “deposit account”,
“electronic money”, 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.
Legislative Note: It is the intent of this act to incorporate future amendments to the federal law
cited in subsection (a)(3)(A). A state in which the constitution or other law does not permit
incorporation of future amendments when a federal statute is incorporated into state law should
omit the phrase “[as amended]”. A state in which, in the absence of a legislative declaration,
future amendments are incorporated into state law also should omit the phrase.
In subsection (a)(3)(B), the state should cite to the state’s version of the Uniform Electronic
Transactions Act Section 16(a) or comparable state law.
Section 12-103. Relation to Article 9 and Consumer Laws.
(a) [Article 9 governs in case of conflict.] If there is conflict between this article and
Article 9, Article 9 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 [insert
reference to (i) any other statute or regulation that regulates the rates, charges, agreements, and 78
practices for loans, credit sales, or other extensions of credit and (ii) any consumer-protection
statute or regulation].
Section 12-104. Rights in Controllable Account, Controllable 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.
(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 79
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 9 is not notice of a
claim of a property right in a controllable electronic record.
Section 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 in which the electronic record is recorded:
(1) gives the person:
(A) power to avail itself of substantially all the benefit from the electronic
record; and
(B) exclusive power, subject to subsection (b), to:
(i) prevent others from availing themselves of substantially all the 80
benefit 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 (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. 81
(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 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 9 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.
Section 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 82
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, 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 83
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
(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 benefit from the controllable electronic
record;
(2) prevent others from availing themselves of substantially all the benefit from 84
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).
(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.
Section 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 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 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 recorded are readily available for review and expressly provide 85
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, “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. 86
(f) [Rights of purchasers determined at time of purchase.] The rights acquired under
Section 12-104 by a purchaser or qualifying purchaser are governed by the law applicable under
this section at the time of purchase.
ARTICLE A
TRANSITIONAL PROVISIONS FOR UNIFORM COMMERCIAL CODE
AMENDMENTS (2022)
Legislative Note: A state should codify Parts 1, 2 and 3 of this article as a part of the state’s
[Uniform Commercial Code].
In its codification of this article a state should provide a title that is conducive to its usual
methods of codification, which is likely to ensure that it is called to the attention of users of the
state’s [Uniform Commercial Code], and which will avoid misunderstandings as to the
relationship of this article to the other provisions of the state’s [Uniform Commercial Code].
The designation of “Article” indicates that this article is a part of the state’s [Uniform
Commercial Code] as are the other articles. A state that uses a designation other than “article”
may adopt for this article that other designation (such as “division”). Alternatively, a state may
wish to adopt for this article a distinctive designation,” such as “annex,” which would
distinguish its focus on transitional provisions from the content of other articles.
PART 1
GENERAL PROVISIONS AND DEFINITIONS
Section A-101. Title.
This article may be cited as Transitional Provisions for Uniform Commercial Code
Amendments (2022).
Section A-102. Definitions.
(a) [Article A 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].
(3) “Article 12 property” means a controllable account, controllable electronic 87
record, or controllable payment intangible.
(b) [Definitions in other articles.] The following definitions in other articles of [the
Uniform Commercial Code] apply to this article.
“Controllable account”. Section 9-102.
“Controllable electronic record”. Section 12-102.
“Controllable payment intangible”. Section 9-102.
“Electronic money”. Section 9-102.
“Financing statement”. Section 9-102.
(c) [Article 1 definitions and principles.] Article 1 contains general definitions and
principles of construction and interpretation applicable throughout this article.
PART 2
GENERAL TRANSITIONAL PROVISION
Section A-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 9 AND 12
Section A-301. Saving Clause.
(a) [Pre-effective-date transaction, lien, or interest.] Except as provided in this part,
Article 9 as amended by this [act] and Article 12 apply to a transaction, lien, or other interest in 88
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 A-302
through A-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 9 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 A-302. Security Interest Perfected Before Effective Date.
(a) [Continuing perfection: perfection requirements satisfied.] A security interest that
is enforceable and 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 89
[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 9-203, 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 A-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 adjustment date;
(2) remains enforceable thereafter if the security interest becomes enforceable
under Section 9-203, 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 A-304. Effectiveness of Actions Taken Before Effective Date.
(a) [Pre-effective-date action; attachment and perfection before adjustment date.] If 90
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 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 A-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 9 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 9 as amended by this [act] modify the priorities
established before [the effective date of this [act]], the priorities of claims to Article 12 property
and electronic money established before [the effective date of this [act]] cease to apply. 91
Section A-306. Priority of Claims When Priority Rules of Article 9 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 9 as
amended by this [act] do not apply.
(b) [Established priorities.] Subject to subsection (c), when the priority rules of Article
9 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 9 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.
PART 4
EFFECTIVE DATE
Section A-401. Effective Date.
This [act] takes effect on . . .
111 N. Wabash Ave. Suite 1010
Chicago, IL 60602
(312) 450-6600 tel
(312) 450-6601 fax
www.uniformlaws.org
AMENDMENTS TO SECTIONS 9-406 AND 9-408
OF THE UNIFORM COMMERCIAL CODE
-A Summary -
The organizational law of limited liability companies (LLCs) and partnerships has always fundamentally
embraced an idea known as the “pick-your-partner principle,” under which transfers of a member’s or partner’s
ownership interest are restricted by statute, and those restrictions may be tightened or loosened by agreement.
In recent years, the pick-your-partner principle has interacted in complex and not always practical ways with
Article 9 of the Uniform Commercial Code (UCC). Since 2001, UCC §§ 9- 406 and 9- 408 have overridden a
broad range of statutory and agreement-based anti-assignment provisions, subject to complex exceptions that
have tended to protect the pick-your- partner principle in many significant respects, while also proving
analytically very difficult to handle. In 2018, however, UCC Article 9’s overrides of anti -assignment
provisions were amended by the American Law Institute (ALI) and the Uniform Law Commission (ULC) to
make them inapplicable to LLC and partnership interests. The 2018 amendments to UCC §§ 9-406 and 9-408
will simplify the complex web overrides to statutory and agreement-based anti-assignment provisions, and the
complex exceptions generally protecting the pick-your-partnership principle that flow from them.
Background on Unincorporated Organization Law and UCC Article 9
Any co- owner of a privately held business organization may have a substantial stake in determining who the
other co- owners are. If, for example, co-owner B has the power to transfer its interest to a stranger, then co-
owner B can, in effect, force co- owner A into a venture with the stranger/transferee without co-owner A’s
consent. The policy and effect of the pick-your- partner principle under LLC and partnership law is to prevent
such an outcome.
UCC Article 9, by contrast, has the very different policy orientation of facilitating voluntary transfers of
personal property. The most familiar application of Article 9 is to transfers of property as security for the
repayment of loans, but Article 9 also applies to outright sales of certain types of personal property. Some of
these transfers and outright sales are precisely those that the pick-your-partner principle seeks to prevent, and
as a result, for personal property consisting of LLC or partnership interests, the interaction of the pick-your-
partner principle with Article 9 has been complex and thorny.
Ownership interests in a business organization,
particularly one that is unincorporated, can be formally
or informally bifurcated into governance rights
and economic (financial) rights.
Article 9 broadly covers ordinary Complete
ownership interest
in an unincorporated
organization
security interests in both aspects of Governance rights: the owner’s Economic rights: the owner’s
ownership rights as well as in right to vote on, consent to, or entitlement to receive monetary
otherwise make decisions about distributions from the
virtually all other personal
the organization’s activities, and organization, whether from its
property, plus the outright sales of
the right to receive information profits or from an eventual
some types of personal property.
about the organization dissolution and winding up.
The ULC is a nonprofit formed in 1892 to create nonpartisan state legislation. Over 350 volunteer commissioners—lawyers,
judges, law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to
acts on property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desirable.
The scope of Article 9 applies to ordinary security interests in complete ownership interests, ordinary security
interests in economic rights alone, and outright sales of economic rights alone. M ost applicable statutes
governing unincorporated organizations directly restrict transfers of governance rights and complete
ownership interests (e.g., ULLCA § 407(b)(2) (2013)), but few restrict transfers of economic rights alone.
However, an LLC’s or partnership’s own organic documents may alter the statutory law by restricting transfers
of economic rights. Thus, if a restriction on a transfer of a complete ownership interest, governance rights, or
economic rights exists in either statute or an organization’s organic documents, does one of the Article 9
overrides invalidate or limit the restriction? This is precisely the issue the 2018 amendments to UCC §§ 9-406
and 9-408 were drafted to solve.
The 2018 Amendments to §§ 9-406 and 9-408
The amendments drafted and approved by the ALI and the ULC in 2018 will markedly simplify the law in this
area, eliminating the possible conflicts with the pick-your-partner principle that can remain despite the
complex web of overrides and exceptions that currently exist. The 2018 amendments statutorily provide that
Article 9’s overrides do not apply to “a security interest in an ownership interest in a general partnership,
limited partnership, or limited liability company.”
By excluding from the overrides a “security interest” in an ownership interest, Article 9 does not interfere with
the effect of other law. The overrides remain in effect (so that transfers continue to be enabled) for general
intangibles that are not LLC or partnership interests and for other classifications of personal property that are
not relevant to these amendments.
In recent years, several states, led by Delaware, have enacted non-uniform provisions having the same thrust
as the official 2018 amendments to UCC §§ 9-406 and 9-408. Some of the non-uniform provisions appear in
the enacting states’ UCC; others appear in their LLC and partnership statutes; and others appear in both spots,
as belt and suspenders to ensure they will be found.
Conclusion
The 2018 amendments will protect the pick-your-partner principle, a foundational and almost holy element of
the law of unincorporated entities, while also greatly simplifying and clarifying its interactions with Article 9
of the UCC.
For further information about the UCC 9-406 and 9-408 amendments, please contact ULC Legislative
Counsel Kari Bearman at (312) 450-6617 or kbearman@uniformlaws.org or ULC Chief Counsel
Benjamin Orzeske at (312) 450-6621 or borzes ke@uniformlaws.org.
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