24 LC 48 1222S/AP
House Bill 1240 (AS PASSED HOUSE AND SENATE)
By: Representatives Reeves of the 99
th
, Gunter of the 8
th
, Leverett of the 123
rd
, Oliver of the
82
nd
, Evans of the 57
th
, and others
A BILL TO BE ENTITLED
AN ACT
To amend Title 11 of the Official Code of Georgia Annotated, relating to the commercial
1
code, so as to update and modernize various statutes in the commercial code relating to2
commercial transactions in order to maintain uniformity in this state's statutes governing3
commercial transactions as recommended by the National Conference of Commissioners on4
Uniform State Laws; to establish commercial law for transactions involving digital assets;5
to provide for a short title; to renumber Article 12 as Article 13; to add a new Article 12 to6
the commercial code pertaining to controllable electronic records; to add a new Article 12A7
pertaining to transitional provisions; to make conforming amendments; to provide that8
nothing in this Act shall be construed to support, endorse, create, or implement a national9
digital currency; to provide for related matters; to repeal conflicting laws; and for other10
purposes.11
BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:12
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PART I
13
SHORT TITLE14
SECTION 1-1.15
This Act shall be known and may be cited as the "Uniform Commercial Code Modernization16
Act of 2024."17
SECTION 1-2.18
Nothing in this Act shall be construed to support, endorse, create, or implement a national19
digital currency.20
PART II21
RENUMBERING OF EXISTING ARTICLE 12 TO THE COMMERCIAL CODE22
SECTION 2-1.23
Title 11 of the Official Code of Georgia Annotated, relating to the commercial code, is24
amended by renumbering Article 12 as Article 13, by renumbering Code Section 11-12-10125
as Code Section 11-13-101, and by renumbering Code Section 11-12-102 as Code Section26
11-13-102.27
PART III28
ADOPTION OF ARTICLE 12 TO THE COMMERCIAL CODE29
SECTION 3-1.30
Said title is further amended by adopting a new Article 12, relating to controllable electronic31
records, as follows:32
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"ARTICLE 1233
CONTROLLABLE ELECTRONIC RECORDS34
11-12-101.Short title.35
This article shall be known and may be cited as the 'Uniform Commercial Code —36
Controllable Electronic Records.'37
11-12-102.Definitions.38
(a) Article 12 definitions. As used in this article, the term:39
(1) 'Controllable electronic record' means a record stored in an electronic medium that40
can be subjected to control under Code Section 11-12-105. The term does not include a41
controllable account, a controllable payment intangible, a deposit account, an electronic42
copy of a record evidencing chattel paper, an electronic document of title, electronic43
money, investment property, or a transferable record.44
(2) 'Qualifying purchaser' means a purchaser of a controllable electronic record or an45
interest in a controllable electronic record that obtains control of the controllable46
electronic record for value, in good faith, and without notice of a claim of a property right47
in the controllable electronic record.48
(3) 'Transferable record' has the meaning provided for that term in:49
(A) Section 201(a)(1) of the Electronic Signatures in Global and National Commerce50
Act, 15 U.S.C. Section 7021(a)(1), as amended; or51
(B) Subsection (a) of Code Section 10-12-16.52
(4) 'Value' has the meaning provided in subsection (a) of Code Section 11-3-303, as if53
references in that subsection to an 'instrument' were references to a controllable account,54
controllable electronic record, or controllable payment intangible.55
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(b) Definitions in Article 9. The definitions in Article 9 of this title of 'account debtor,'56
'controllable account,' 'controllable payment intangible,' 'chattel paper,' 'deposit account,'57
'electronic money,' and 'investment property' apply to this article.58
(c) Article 1 definitions and principles. Article 1 of this title contains general definitions59
and principles of construction and interpretation applicable throughout this article.60
11-12-103.Relation to Article 9 and consumer laws.61
(a) Article 9 of this title governs in case of conflict. If there is conflict between this62
article and Article 9 of this title, Article 9 of this title governs.63
(b) Applicable consumer law and other laws. A transaction subject to this article is64
subject to any applicable rule of law that establishes a different rule for consumers and to65
any other statute or regulation of this state that regulates the rates, charges, agreements, and66
practices for loans, credit sales, or other extensions of credit, and to any consumer67
protection statute or regulation of this state.68
11-12-104.Rights in controllable account, controllable electronic record, and69
controllable payment intangible.70
(a) Applicability of section to controllable account and controllable payment71
intangible. This Code section applies to the acquisition and purchase of rights in a72
controllable account or controllable payment intangible, including the rights and benefits73
under subsections (c), (d), (e), (g), and (h) of this Code section of a purchaser and74
qualifying purchaser, in the same manner this Code section applies to a controllable75
electronic record.76
(b) Control of controllable account and controllable payment intangible. To77
determine whether a purchaser of a controllable account or a controllable payment78
intangible is a qualifying purchaser, the purchaser obtains control of the account or79
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payment intangible if it obtains control of the controllable electronic record that evidences80
the account or payment intangible.81
(c) Applicability of other law to acquisition of rights. Except as provided in this Code82
section, law other than this article determines whether a person acquires a right in a83
controllable electronic record and the right the person acquires.84
(d) Shelter principle and purchase of limited interest. A purchaser of a controllable85
electronic record acquires all rights in the controllable electronic record that the transferor86
had or had power to transfer, except that a purchaser of a limited interest in a controllable87
electronic record acquires rights only to the extent of the interest purchased.88
(e) Rights of qualifying purchaser. A qualifying purchaser acquires its rights in the89
controllable electronic record free of a claim of a property right in the controllable90
electronic record.91
(f) Limitation of rights of qualifying purchaser in other property. Except as provided92
in subsections (a) and (e) of this Code section for a controllable account and a controllable93
payment intangible or law other than this article, a qualifying purchaser takes a right to94
payment, right to performance, or other interest in property evidenced by the controllable95
electronic record subject to a claim of a property right in the right to payment, right to96
performance, or other interest in property.97
(g) No-action protection for qualifying purchaser. An action may not be asserted98
against a qualifying purchaser based on both a purchase by the qualifying purchaser of a99
controllable electronic record and a claim of a property right in another controllable100
electronic record, whether the action is framed in conversion, replevin, constructive trust,101
equitable lien, or other theory.102
(h) Filing not notice. Filing of a financing statement under Article 9 of this title is not103
notice of a claim of a property right in a controllable electronic record.104
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11-12-105.Control of controllable electronic record.105
(a) General rule: control of controllable electronic record. A person has control of a106
controllable electronic record if the electronic record, a record attached to or logically107
associated with the electronic record, or a system in which the electronic record is108
recorded:109
(1) Gives the person:110
(A) Power to avail itself of substantially all the benefit from the electronic record; and111
(B) Exclusive power, subject to subsection (b) of this Code section, to:112
(i) Prevent others from availing themselves of substantially all the benefit from the113
electronic record; and114
(ii) Transfer control of the electronic record to another person or cause another115
person to obtain control of another controllable electronic record as a result of the116
transfer of the electronic record; and117
(2) Enables the person readily to identify itself in any way, including by name,118
identifying number, cryptographic key, office, or account number, as having the powers119
specified in paragraph (1) of this subsection.120
(b) Meaning of exclusive. Subject to subsection (c) of this Code section, a power is121
exclusive under subparagraphs (a)(1)(B)(i) and (a)(1)(B)(ii) of this Code section even if:122
(1) The controllable electronic record, a record attached to or logically associated with123
the electronic record, or a system in which the electronic record is recorded limits the use124
of the electronic record or has a protocol programmed to cause a change, including a125
transfer or loss of control or a modification of benefits afforded by the electronic record;126
or127
(2) The power is shared with another person.128
(c) When power not shared with another person. A power of a person is not shared129
with another person under paragraph (2) of subsection (b) of this Code section and the130
person's power is not exclusive if:131
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(1) The person can exercise the power only if the power also is exercised by the other132
person; and133
(2) The other person:134
(A) Can exercise the power without exercise of the power by the person; or135
(B) Is the transferor to the person of an interest in the controllable electronic record or136
a controllable account or controllable payment intangible evidenced by the controllable137
electronic record.138
(d) Presumption of exclusivity of certain powers. If a person has the powers specified139
in subparagraphs (a)(1)(B)(i) and (a)(1)(B)(ii) of this Code section, the powers are140
presumed to be exclusive.141
(e) Control through another person. A person has control of a controllable electronic142
record if another person, other than the transferor to the person of an interest in the143
controllable electronic record or a controllable account or controllable payment intangible144
evidenced by the controllable electronic record:145
(1) Has control of the electronic record and acknowledges that it has control on behalf146
of the person; or147
(2) Obtains control of the electronic record after having acknowledged that it will obtain148
control of the electronic record on behalf of the person.149
(f) No requirement to acknowledge. A person that has control under this Code section150
is not required to acknowledge that it has control on behalf of another person.151
(g) No duties or confirmation. If a person acknowledges that it has or will obtain control152
on behalf of another person, unless the person otherwise agrees or law other than this153
article or Article 9 of this title otherwise provides, the person does not owe any duty to the154
other person and is not required to confirm the acknowledgment to any other person.155
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11-12-106.Discharge of account debtor on controllable account or controllable156
payment intangible.157
(a) Discharge of account debtor. An account debtor on a controllable account or158
controllable payment intangible may discharge its obligation by paying:159
(1) The person having control of the controllable electronic record that evidences the160
controllable account or controllable payment intangible; or161
(2) Except as provided in subsection (b) of this Code section, a person that formerly had162
control of the controllable electronic record.163
(b) Content and effect of notification. Subject to subsection (d) of this Code section, the164
account debtor may not discharge its obligation by paying a person that formerly had165
control of the controllable electronic record if the account debtor receives a notification166
that:167
(1) Is signed by a person that formerly had control or the person to which control was168
transferred;169
(2) Reasonably identifies the controllable account or controllable payment intangible;170
(3) Notifies the account debtor that control of the controllable electronic record that171
evidences the controllable account or controllable payment intangible was transferred;172
(4) Identifies the transferee, in any reasonable way, including by name, identifying173
number, cryptographic key, office, or account number; and174
(5) Provides a commercially reasonable method by which the account debtor is to pay175
the transferee.176
(c) Discharge following effective notification. After receipt of a notification that177
complies with subsection (b) of this Code section, the account debtor may discharge its178
obligation by paying in accordance with the notification and may not discharge the179
obligation by paying a person that formerly had control.180
(d) When notification ineffective. Subject to subsection (h) of this Code section,181
notification is ineffective under subsection (b) of this Code section:182
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(1) Unless, before the notification is sent, the account debtor and the person that, at that183
time, had control of the controllable electronic record that evidences the controllable184
account or controllable payment intangible agree in a signed record to a commercially185
reasonable method by which a person may furnish reasonable proof that control has been186
transferred;187
(2) To the extent an agreement between the account debtor and seller of a payment188
intangible limits the account debtor's duty to pay a person other than the seller and the189
limitation is effective under law other than this article; or190
(3) At the option of the account debtor, if the notification notifies the account debtor to:191
(A) Divide a payment;192
(B) Make less than the full amount of an installment or other periodic payment; or193
(C) Pay any part of a payment by more than one method or to more than one person.194
(e) Proof of transfer of control. Subject to subsection (h) of this Code section, if195
requested by the account debtor, the person giving the notification under subsection (b) of196
this Code section seasonably shall furnish reasonable proof, using the method in the197
agreement referred to in paragraph (1) of subsection (d) of this Code section, that control198
of the controllable electronic record has been transferred. Unless the person complies with199
the request, the account debtor may discharge its obligation by paying a person that200
formerly had control, even if the account debtor has received a notification under201
subsection (b) of this Code section.202
(f) What constitutes reasonable proof. A person furnishes reasonable proof under203
subsection (e) of this Code section that control has been transferred if the person204
demonstrates, using the method in the agreement referred to in paragraph (1) of205
subsection (d) of this Code section, that the transferee has the power to:206
(1) Avail itself of substantially all the benefit from the controllable electronic record;207
(2) Prevent others from availing themselves of substantially all the benefit from the208
controllable electronic record; and209
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(3) Transfer the powers specified in paragraphs (1) and (2) of this subsection to another210
person.211
(g) Rights not waivable. Subject to subsection (h) of this Code section, an account debtor212
may not waive or vary its rights under paragraph (1) of subsection (d) of this Code section213
and subsection (e) of this Code section or its option under paragraph (3) of subsection (d)214
of this Code section.215
(h) Rule for individual under other law. This Code section is subject to law other than216
this article which establishes a different rule for an account debtor who is an individual and217
who incurred the obligation primarily for personal, family, or household purposes.218
11-12-107.Governing law.219
(a) Governing law: general rule. Except as provided in subsection (b) of this Code220
section, the local law of a controllable electronic record's jurisdiction governs a matter221
covered by this article.222
(b) Governing law: Code Section 11-12-106. For a controllable electronic record that223
evidences a controllable account or controllable payment intangible, the local law of the224
controllable electronic record's jurisdiction governs a matter covered by Code225
Section 11-12-106 unless an effective agreement determines that the local law of another226
jurisdiction governs.227
(c) Controllable electronic record's jurisdiction. The following rules determine a228
controllable electronic record's jurisdiction under this Code section:229
(1) If the controllable electronic record, or a record attached to or logically associated230
with the controllable electronic record and readily available for review, expressly231
provides that a particular jurisdiction is the controllable electronic record's jurisdiction232
for purposes of this article or this title, that jurisdiction is the controllable electronic233
record's jurisdiction;234
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(2) If paragraph (1) of this subsection does not apply and the rules of the system in which235
the controllable electronic record is recorded are readily available for review and236
expressly provide that a particular jurisdiction is the controllable electronic record's237
jurisdiction for purposes of this article or this title, that jurisdiction is the controllable238
electronic record's jurisdiction;239
(3) If paragraphs (1) and (2) of this subsection do not apply and the controllable240
electronic record, or a record attached to or logically associated with the controllable241
electronic record and readily available for review, expressly provides that the controllable242
electronic record is governed by the law of a particular jurisdiction, that jurisdiction is the243
controllable electronic record's jurisdiction;244
(4) If paragraphs (1), (2), and (3) of this subsection do not apply and the rules of the245
system in which the controllable electronic record is recorded are readily available for246
review and expressly provide that the controllable electronic record or the system is247
governed by the law of a particular jurisdiction, that jurisdiction is the controllable248
electronic record's jurisdiction; and249
(5) If paragraphs (1) through (4) of this subsection do not apply, the controllable250
electronic record's jurisdiction is the District of Columbia.251
(d) Applicability of Article 12. If paragraph (5) of subsection (c) of this Code section252
applies and Article 12 is not in effect in the District of Columbia without material253
modification, the governing law for a matter covered by this article is the law of the District254
of Columbia as though Article 12 were in effect in the District of Columbia without255
material modification. In this subsection, the term 'Article 12' means Article 12 of Uniform256
Commercial Code Amendments (2022).257
(e) Relation of matter or transaction to controllable electronic record's jurisdiction258
not necessary. To the extent subsections (a) and (b) of this Code section provide that the259
local law of the controllable electronic record's jurisdiction governs a matter covered by260
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this article, that law governs even if the matter or a transaction to which the matter relates261
does not bear any relation to the controllable electronic record's jurisdiction.262
(f) Rights of purchasers determined at time of purchase. The rights acquired under263
Code Section 11-12-104 by a purchaser or qualifying purchaser are governed by the law264
applicable under this Code section at the time of purchase."265
PART IV266
ADOPTION OF ARTICLE 12A TO THE COMMERCIAL CODE267
SECTION 4-1.268
Said title is further amended by adopting a new Article 12A, relating to transitional269
provisions for Uniform Commercial Code Amendments, as follows:270
"ARTICLE 12A271
TRANSITIONAL PROVISIONS272
FOR UNIFORM COMMERCIAL CODE AMENDMENTS273
Part 1274
General Provisions and Definitions275
11-12A-101.Title.276
This article shall be known and may be cited as 'Transitional Provisions for Uniform277
Commercial Code Amendments (2024).'278
11-12A-102.Definitions.279
(a) Article 12A Definitions. In this article:280
(1) 'Adjustment date' means July 1, 2025.281
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(2) 'Article 12' means Article 12 of this title.282
(3) 'Article 12 property' means a controllable account, controllable electronic record, or283
controllable payment intangible.284
(b) Definitions in other articles. The following definitions in other articles of this title285
apply to this article:286
'Controllable account.' Code Section 11-9-102.287
'Controllable electronic record.' Code Section 11-12-102.288
'Controllable payment intangible.' Code Section 11-9-102.289
'Electronic money.' Code Section 11-9-102.290
'Financing statement.' Code Section 11-9-102.291
(c) Article 1 definitions and principles. Article 1 contains general definitions and292
principles of construction and interpretation applicable throughout this article.293
Part 2294
General Transitional Provisions295
11-12A-201.Saving clause.296
Except as provided in Part 3 of this article, a transaction validly entered into before July297
1, 2024, and the rights, duties, and interests flowing from the transaction remain valid298
thereafter and may be terminated, completed, consummated, or enforced as required or299
permitted by law other than this title or, if applicable, this title, as though the Uniform300
Commercial Code Modernization Act of 2024 had not taken effect.301
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Part 3302
Transitional Provisions for Articles 9 and 12303
11-12A-301.Saving clause.304
(a) Pre-effective date transaction, lien, or interest. Except as provided in this part,305
Article 9 of this title as amended by the Uniform Commercial Code Modernization Act of306
2024 and Article 12 of this title apply to a transaction, lien, or other interest in property,307
even if the transaction, lien, or interest was entered into, created, or acquired before July308
1, 2024.309
(b) Continuing validity. Except as provided in subsection (c) of this Code section and310
Code Sections 11-12A-302 through 11-12A-306:311
(1) A transaction, lien, or interest in property that was validly entered into, created, or312
transferred before July 1, 2024, and was not governed by this title, but would be subject313
to Article 9 of this title as amended by the Uniform Commercial Code Modernization Act314
of 2024 or Article 12 of this title if it had been entered into, created, or transferred on or315
after July 1, 2024, including the rights, duties, and interests flowing from the transaction,316
lien, or interest, remains valid on and after July 1, 2024; and317
(2) The transaction, lien, or interest may be terminated, completed, consummated, and318
enforced as required or permitted by the Uniform Commercial Code Modernization Act319
of 2024 or by the law that would apply if the Uniform Commercial Code Modernization320
Act of 2024 had not taken effect.321
(c) Pre-effective date proceeding. The Uniform Commercial Code Modernization Act322
of 2024 does not affect an action, case, or proceeding commenced before July 1, 2024.323
11-12A-302.Security interest perfected before effective date.324
(a) Continuing perfection: perfection requirements satisfied. A security interest that325
is enforceable and perfected immediately before July 1, 2024, is a perfected security326
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interest under the Uniform Commercial Code Modernization Act of 2024, if, on July 1,327
2024, the requirements for enforceability and perfection under the Uniform Commercial328
Code Modernization Act of 2024 are satisfied without further action.329
(b) Continuing perfection: enforceability or perfection requirements not satisfied. 330
If a security interest is enforceable and perfected immediately before July 1, 2024, but the331
requirements for enforceability or perfection under the Uniform Commercial Code332
Modernization Act of 2024 are not satisfied on July 1, 2024, the security interest:333
(1) Is a perfected security interest until the earlier of the time perfection would have334
ceased under the law in effect immediately before July 1, 2024, or the adjustment date;335
(2) Remains enforceable thereafter only if the security interest satisfies the requirements336
for enforceability under Code Section 11-9-203, as amended by the Uniform Commercial337
Code Modernization Act of 2024, before the adjustment date; and338
(3) Remains perfected thereafter only if the requirements for perfection under the339
Uniform Commercial Code Modernization Act of 2024 are satisfied before the time340
specified in paragraph (1) of this subsection.341
11-12A-303.Security interest unperfected before effective date.342
A security interest that is enforceable immediately before July 1, 2024, but is unperfected343
at that time:344
(1) Remains an enforceable security interest until the adjustment date;345
(2) Remains enforceable thereafter if the security interest becomes enforceable under346
Code Section 11-9-203, as amended by the Uniform Commercial Code Modernization347
Act of 2024, on July 1, 2024, or before the adjustment date; and348
(3) Becomes perfected:349
(A) Without further action, on July 1, 2024, if the requirements for perfection under350
the Uniform Commercial Code Modernization Act of 2024 are satisfied before or at that351
time; or352
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(B) When the requirements for perfection are satisfied if the requirements are satisfied353
after that time.354
11-12A-304.Effectiveness of actions taken before effective date.355
(a) Pre-effective date action; attachment and perfection before adjustment date. If356
action, other than the filing of a financing statement, is taken before July 1, 2024, and the357
action would have resulted in perfection of the security interest had the security interest358
become enforceable before July 1, 2024, the action is effective to perfect a security interest359
that attaches under the Uniform Commercial Code Modernization Act of 2024 before the360
adjustment date. An attached security interest becomes unperfected on the adjustment date361
unless the security interest becomes a perfected security interest under the Uniform362
Commercial Code Modernization Act of 2024 before the adjustment date.363
(b) Pre-effective date filing. The filing of a financing statement before July 1, 2024, is364
effective to perfect a security interest on July 1, 2024, to the extent the filing would satisfy365
the requirements for perfection under the Uniform Commercial Code Modernization Act366
of 2024.367
(c) Pre-effective date enforceability action. The taking of an action before July 1, 2024,368
is sufficient for the enforceability of a security interest on July 1, 2024, if the action would369
satisfy the requirements for enforceability under the Uniform Commercial Code370
Modernization Act of 2024.371
11-12A-305.Priority.372
(a) Determination of priority. Subject to subsections (b) and (c) of this Code section, the373
Uniform Commercial Code Modernization Act of 2024 determines the priority of374
conflicting claims to collateral.375
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(b) Established priorities. Subject to subsection (c) of this Code section, if the priorities376
of claims to collateral were established before July 1, 2024, Article 9 of this title as in377
effect before July 1, 2024, determines priority.378
(c) Determination of certain priorities on adjustment date. On the adjustment date, to379
the extent the priorities determined by Article 9 of this title as amended by the Uniform380
Commercial Code Modernization Act of 2024 modify the priorities established before July381
1, 2024, the priorities of claims to Article 12 property and electronic money established382
before July 1, 2024, cease to apply.383
11-12A-306.Priority of claims when priority rules of Article 9 of this title do not384
apply.385
(a) Determination of priority. Subject to subsections (b) and (c) of this Code section,386
Article 12 of this title determines the priority of conflicting claims to Article 12 property387
when the priority rules of Article 9 of this title as amended by the Uniform Commercial388
Code Modernization Act of 2024 do not apply.389
(b) Established priorities. Subject to subsection (c) of this Code section, when the390
priority rules of Article 9 of this title as amended by the Uniform Commercial Code391
Modernization Act of 2024 do not apply and the priorities of claims to Article 12 property392
were established before July 1, 2024, law other than Article 12 of this title determines393
priority.394
(c) Determination of certain priorities on adjustment date. When the priority rules of395
Article 9 of this title as amended by the Uniform Commercial Code Modernization Act of396
2024 do not apply, to the extent the priorities determined by the Uniform Commercial Code397
Modernization Act of 2024 modify the priorities established before July 1, 2024, the398
priorities of claims to Article 12 property established before July 1, 2024, cease to apply399
on the adjustment date.400
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Part 4401
Effective Date402
11-12A-401.Effective date.403
The Uniform Commercial Code Modernization Act of 2024 takes effect on July 1, 2024."404
PART V405
NATIONAL CONFERENCE OF406
COMMISSIONERS ON UNIFORM STATE LAWS407
RECOMMENDED CHANGES TO THE COMMERCIAL CODE408
SECTION 5-1.409
Said title is further amended by revising Code Section 11-1-201, relating to general410
definitions, as follows:411
"11-1-201.General definitions.412
(a) Unless the context otherwise requires, words or phrases defined in this Code section,413
or in the additional definitions contained in other articles of this title that apply to particular414
articles or parts thereof, have the meanings stated.415
(b) Subject to additional definitions contained in the other articles of this title that are416
applicable to specific articles or parts thereof, in this title:417
(1) 'Action' in the sense of a judicial proceeding includes recoupment, counterclaim,418
setoff, suit in equity, and any other proceedings in which rights are determined.419
(2) 'Aggrieved party' means a party entitled to pursue a remedy.420
(3) 'Agreement,' as distinguished from 'contract,' means the bargain of the parties in fact421
as found in their language or inferred from other circumstances including course of422
performance, course of dealing, or usage of trade as provided in Code Section 11-1-303.423
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(4) 'Bank' means a person engaged in the business of banking and includes a savings
424
bank, savings and loan association, credit union, or trust company.425
(5) 'Bearer' means a person in control of a negotiable electronic document of title or a
426
person in possession of a negotiable instrument, negotiable tangible document of title, or 427
certificated security that is payable to bearer or indorsed in blank.428
(6) 'Bill of lading' means a document evidencing the receipt of goods for shipment issued429
by a person engaged in the business of directly or indirectly transporting or forwarding430
goods. The term does not include a warehouse receipt.431
(7) 'Branch' includes a separately incorporated foreign branch of a bank.432
(8) 'Burden of establishing' a fact means the burden of persuading the trier of fact that433
the existence of the fact is more probable than its nonexistence.434
(9) 'Buyer in ordinary course of business' means a person that buys goods in good faith435
without knowledge that the sale violates the rights of another person in the goods, and in436
the ordinary course from a person, other than a pawnbroker, in the business of selling437
goods of that kind. A person buys goods in the ordinary course if the sale to the person438
comports with the usual or customary practices in the kind of business in which the seller439
is engaged or with the seller's own usual or customary practices. A person that sells oil,440
gas, or other minerals at the wellhead or minehead is a person in the business of selling441
goods of that kind. A buyer in the ordinary course of business may buy for cash, by442
exchange of other property, or on secured or unsecured credit, and may acquire goods or443
documents of title under a preexisting contract for sale. Only a buyer that takes444
possession of the goods or has a right to recover the goods from the seller under Article445
2 of this title may be a buyer in ordinary course of business. A person that acquires446
goods in a transfer in bulk or as security for or in total or partial satisfaction of a money447
debt is not a buyer in ordinary course of business.448
(10) 'Conspicuous,' with reference to a term, means so written, displayed, or presented449
that, based on the totality of the circumstances, a reasonable person against which it is to450
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operate ought to have noticed it. Whether a term is 'conspicuous' or not is a decision for
451
the court. Conspicuous terms include the following:
452
(A) A heading in capitals equal to or greater in size than the surrounding text, or in453
contrasting type, font, or color to the surrounding text of the same or lesser size; and454
(B) Language in the body of a record or display in larger type than the surrounding455
text, or in contrasting type, font, or color to the surrounding text of the same size, or set456
off from the surrounding text of the same size by symbols or other marks that call457
attention to the language.458
(11) 'Consumer' means an individual who enters into a transaction primarily for personal,459
family, or household purposes.460
(12) 'Contract,' as distinguished from 'agreement,' means the total legal obligation that461
results from the parties' agreement as determined by this title and any other applicable462
law.463
(13) 'Creditor' includes a general creditor, a secured creditor, a lien creditor and any464
representative of creditors, including an assignee for the benefit of creditors, a trustee in465
bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor's466
or assignor's estate.467
(14) 'Defendant' includes a person in the position of defendant in a counterclaim,468
cross-claim, or third-party claim.469
(15) 'Delivery,' with respect to an electronic document of title, means voluntary transfer470
of control and, with respect to an instrument, a tangible document of title, or an471
authoritative tangible copy of a record evidencing chattel paper, means voluntary transfer472
of possession.473
(16) 'Document of title' includes a bill of lading, dock warrant, dock receipt, warehouse474
receipt, or order for delivery of goods and any other document which means a record (A)475
that in the regular course of business or financing is treated as adequately evidencing that476
the person in possession or control of it the record is entitled to receive, control, hold, and477
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dispose of the document record and the goods it the record covers. To be a document of478
title, a document must purport and (B) that purports to be issued by or addressed to a479
bailee and purport to cover goods in the bailee's possession which are either identified or480
are fungible portions of an identified mass. The term includes a bill of lading, transport481
document, dock warrant, dock receipt, warehouse receipt, and order for delivery of482
goods. An electronic document of title means a document of title evidenced by a record483
consisting of information stored in an electronic medium. A tangible document of title484
means a document of title evidenced by a record consisting of information that is485
inscribed on a tangible medium.486
(16.1) 'Electronic' means relating to technology having electrical, digital, magnetic,487
wireless, optical, electromagnetic, or similar capabilities.488
(17) 'Fault' means a default, breach, or wrongful act or omission.489
(18) 'Fungible goods' means:490
(A) Goods of which any unit is, by nature or usage of trade, the equivalent of any other491
like unit; or492
(B) Goods that by agreement are treated as equivalent.493
(19) 'Genuine' means free of forgery or counterfeiting.494
(20) 'Good faith,' except as otherwise provided in Article 5 of this title, means honesty495
in fact and the observance of reasonable commercial standards of fair dealing.496
(21) 'Holder' means:497
(A) The person in possession of a negotiable instrument that is payable either to bearer498
or to an identified person that is the person in possession; or499
(B) The person in possession of a negotiable tangible document of title if the goods are500
deliverable either to bearer or to the order of the person in possession; or501
(C) The person in control, other than pursuant to subsection (g) of Code Section502
11-7-106, of a negotiable electronic document of title.503
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(22) 'Insolvency proceeding' includes any assignment for the benefit of creditors or other
504
proceeding intended to liquidate or rehabilitate the estate of the person involved.505
(23) 'Insolvent' means:506
(A) Having generally ceased to pay debts in the ordinary course of business other than507
as a result of bona fide dispute;508
(B) Being unable to pay debts as they become due; or509
(C) Being insolvent within the meaning of the federal bankruptcy law.510
(24) 'Money' means a medium of exchange that is currently
authorized or adopted by a511
domestic or foreign government. The term and includes a monetary unit of account512
established by an intergovernmental organization or by agreement between two or more513
countries. The term does not include an electronic record that is a medium of exchange514
recorded and transferable in a system that existed and operated for the medium of515
exchange before the medium of exchange was authorized or adopted by the government.516
(25) 'Organization' means a person other than an individual.517
(26) 'Party,' as distinct from 'third party,' means a person who has engaged in a518
transaction or made an agreement subject to this title.519
(27) 'Person' means an individual, corporation, business trust, estate, trust, partnership,520
limited liability company, association, joint venture, government, governmental521
subdivision, agency, or instrumentality, public corporation, or any other legal or522
commercial entity. The term includes a protected series, however denominated, of an523
entity if the protected series is established under law other than this title that limits, or524
limits if conditions specified under the law are satisfied, the ability of a creditor of the525
entity or of any other protected series of the entity to satisfy a claim from assets of the526
protected series.527
(28) 'Present value' means the amount as of a date certain of one or more sums payable528
in the future, discounted to the date certain by use of either an interest rate specified by529
the parties if that rate is not manifestly unreasonable at the time the transaction is entered530
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into or, if an interest rate is not so specified, a commercially reasonable rate that takes
531
into account the facts and circumstances at the time the transaction is entered into.532
(29) 'Purchase' means taking by sale, lease,
discount, negotiation, mortgage, pledge, lien,533
security interest, issue or reissue, gift, or any other voluntary transaction creating an534
interest in property.535
(30) 'Purchaser' means a person who takes by purchase.536
(31) 'Record' means information that is inscribed on a tangible medium or that is stored537
in an electronic or other medium and is retrievable in perceivable form.538
(32) 'Remedy' means any remedial right to which an aggrieved party is entitled with or539
without resort to a tribunal.540
(33) 'Representative' means a person empowered to act for another, including an agent,541
an officer of a corporation or association, and a trustee, executor, or administrator of an542
estate.543
(34) 'Rights' includes remedies.544
(35) 'Security interest' means an interest in personal property or fixtures which secures545
payment or performance of an obligation. The term also includes any interest of a546
consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory547
note in a transaction that is subject to Article 9 of this title. The term does not include the548
special property interest of a buyer of goods on identification of those goods to a contract549
for sale under Code Section 11-2-401, but a buyer may also acquire a 'security interest'550
by complying with Article 9 of this title. Except as otherwise provided in Code Section551
11-2-505, the right of a seller or lessor of goods under Article 2 or 2A of this title to552
retain or acquire possession of the goods is not a 'security interest,' but a seller or lessor553
may also acquire a 'security interest' by complying with Article 9 of this title. The554
retention or reservation of title by a seller of goods notwithstanding shipment or delivery555
to the buyer under Code Section 11-2-401 is limited in effect to a reservation of a556
'security interest.'557
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Whether a transaction in the form of a lease creates a 'security interest' shall be
558
determined pursuant to Code Section 11-1-203.559
(36) 'Send,
' in connection with a writing, record, or notice notification, means:560
(A) To deposit in the mail, or deliver for transmission, or transmit by any other usual561
means of communication with postage or cost of transmission provided for, and562
properly addressed and, in the case of an instrument, to an address specified thereon or563
otherwise agreed, or if there be none addressed to any address reasonable under the564
circumstances; or565
(B) To cause the record or notification to be received within the time it would have566
been received if properly sent under subparagraph (A) of this paragraph. In any other567
way to cause to be received any record or notice within the time it would have arrived568
if properly sent.569
(37) 'Sign' 'Signed' includes using any symbol executed or adopted with present intention570
to adopt or accept a writing. means, with present intent to authenticate or adopt a record:571
(A) Execute or adopt a tangible symbol; or572
(B) Attach to or logically associate with the record an electronic symbol, sound, or573
process.574
'Signed', 'signing', and 'signature' have corresponding meanings.575
(38) 'State' means a state of the United States, the District of Columbia, Puerto Rico, the576
United States Virgin Islands, or any territory or insular possession subject to the577
jurisdiction of the United States.578
(39) 'Surety' includes a guarantor or other secondary obligor.579
(40) 'Term' means that portion of an agreement that relates to a particular matter.580
(41) 'Unauthorized signature' means a signature made without actual, implied, or581
apparent authority. The term includes a forgery.582
(42) 'Warehouse receipt' means a receipt document of title issued by a person engaged583
in the business of storing goods for hire.584
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(43) 'Written' or 'writing' includes printing, typewriting, or any other intentional
585
reduction to tangible form."586
SECTION 5-2.587
Said title is further amended in Code Section 11-1-203, relating to distinguishing leases from588
security interests, by revising subsection (a) as follows:589
"(a) Whether a transaction in the form of a lease creates a lease or
security interest is590
determined by the facts of each case."591
SECTION 5-3.592
Said title is further amended by revising Code Section 11-1-204, relating to value, as follows:593
"11-1-204.Value.594
Except as otherwise provided in Articles 3, 4, 5, and 6 12 of this title, a person gives value595
for rights if the person acquires them:596
(1) In return for a binding commitment to extend credit or for the extension of597
immediately available credit, whether or not drawn upon and whether or not a598
charge-back is provided for in the event of difficulties in collection;599
(2) As security for, or in total or partial satisfaction of, a preexisting claim;600
(3) By accepting delivery under a preexisting contract for purchase; or601
(4) In return for any consideration sufficient to support a simple contract."602
SECTION 5-4.603
Said title is further amended in Code Section 11-1-301, relating to territorial applicability and604
parties' power to choose applicable law, by revising subsection (c) as follows:605
"(c) If one of the following provisions of this title specifies the applicable law, that606
provision governs and a contrary agreement is effective only to the extent permitted by the607
law so specified:608
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(1) Code Section 11-2-402;
609
(2) Code Sections 11-2A-105 and 11-2A-106;610
(3) Code Section 11-4-102;611
(4) Code Section 11-4A-507;612
(5) Code Section 11-5-116;613
(6) Code Section 11-6-103
Reserved;614
(7) Code Section 11-8-110; or615
(8) Code Sections 11-9-301 through 11-9-307; or616
(9) Code Section 11-12-107."617
SECTION 5-5.618
Said title is further amended in Code Section 11-1-303, relating to course of performance,619
course of dealing, and usage of trade, by revising subsection (f) as follows:620
"(f) Subject to Code Section Sections 11-2-209 and 11-2A-208, a course of performance621
is relevant to show a waiver or modification of any term inconsistent with the course of622
performance."623
SECTION 5-6.624
Said title is further amended by revising Code Section 11-2-102, relating to scope and625
certain security and other transactions excluded from this article, as follows:626
"11-2-102.Scope; certain security and other transactions excluded from this article.627
(1) Unless the context otherwise requires, and except as provided in subsection (3) of this628
Code section, this article applies to transactions in goods and, in the case of a hybrid629
transaction, it applies to the extent provided in subsection (2) of this Code section. Unless630
the context otherwise requires, this article applies to transactions in goods; it does not apply631
to any transaction which although in the form of an unconditional contract to sell or present632
sale is intended to operate only as a security transaction nor does this article impair or633
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repeal any statute regulating sales to consumers, farmers, or other specified classes of634
buyers.635
(2) In a hybrid transaction:636
(a) If the sale-of-goods aspects do not predominate, only the provisions of this article637
which relate primarily to the sale-of-goods aspects of the transaction apply, and the638
provisions that relate primarily to the transaction as a whole do not apply.639
(b) If the sale-of-goods aspects predominate, this article applies to the transaction but640
does not preclude application in appropriate circumstances of other law to aspects of the641
transaction which do not relate to the sale of goods.642
(3) This article does not:643
(a) Apply to a transaction that, even though in the form of an unconditional contract to644
sell or present sale, operates only to create a security interest; or645
(b) Impair or repeal a statute regulating sales to consumers, farmers, or other specified646
classes of buyers."647
SECTION 5-7.648
Said title is further amended by revising Code Section 11-2-106, relating to definitions of649
"contract"; "agreement"; "contract for sale"; "sale"; "present sale"; "conforming" to contract;650
"termination"; and "cancellation", as follows:651
"11-2-106.Definitions: 'contract'; 'agreement'; 'contract for sale'; 'sale'; 'present652
sale'; 'conforming' to contract; 'termination'; 'cancellation.'; hybrid653
transaction.'654
(1) In this article unless the context otherwise requires 'contract' and 'agreement' are655
limited to those relating to the present or future sale of goods. 'Contract for sale' includes656
both a present sale of goods and a contract to sell goods at a future time. A 'sale' consists657
in the passing of title from the seller to the buyer for a price (Code Section 11-2-401). A658
'present sale' means a sale which is accomplished by the making of the contract.659
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(2) Goods or conduct including any part of a performance are 'conforming' or conform to
660
the contract when they are in accordance with the obligations under the contract.661
(3) 'Termination' occurs when either party pursuant to a power created by agreement or662
law puts an end to the contract otherwise than for its breach. On 'termination' all663
obligations which are still executory on both sides are discharged but any right based on664
prior breach or performance survives.665
(4) 'Cancellation' occurs when either party puts an end to the contract for breach by the666
other and its effect is the same as that of 'termination' except that the canceling party also667
retains any remedy for breach of the whole contract or any unperformed balance.668
(5) 'Hybrid transaction' means a single transaction involving a sale of goods and:
669
(a) The provision of services;670
(b) A lease of other goods; or671
(c) A sale, lease, or license of property other than goods."672
SECTION 5-8.673
Said title is further amended by revising Code Section 11-2-201, relating to formal674
requirements and statute of frauds, as follows:675
"11-2-201.Formal requirements; statute of frauds.676
(1) Except as otherwise provided in this Code section a contract for the sale of goods for677
the price of $500.00 or more is not enforceable by way of action or defense unless there is678
some writing a record sufficient to indicate that a contract for sale has been made between679
the parties and signed by the party against whom enforcement is sought or by his the party's680
authorized agent or broker. A writing record is not insufficient because it omits or681
incorrectly states a term agreed upon but the contract is not enforceable under this682
paragraph subsection beyond the quantity of goods shown in such writing the record.683
(2) Between merchants if within a reasonable time a writing record in confirmation of the684
contract and sufficient against the sender is received and the party receiving it has reason685
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to know its contents, it satisfies the requirements of subsection (1) of this Code section
686
against such
the party unless written notice in a record of objection to its contents is given687
within ten days after it is received.688
(3) A contract which does not satisfy the requirements of subsection (1) of this Code689
section but which is valid in other respects is enforceable:690
(a) If the goods are to be specially manufactured for the buyer and are not suitable for691
sale to others in the ordinary course of the seller's business and the seller, before notice692
of repudiation is received and under circumstances which reasonably indicate that the693
goods are for the buyer, has made either a substantial beginning of their manufacture or694
commitments for their procurement; or695
(b) If the party against whom enforcement is sought admits in his or her pleading,696
testimony, or otherwise in court that a contract for sale was made, but the contract is not697
enforceable under this provision beyond the quantity of goods admitted; or698
(c) With respect to goods for which payment has been made and accepted or which have699
been received and accepted (Code Section 11-2-606)."700
SECTION 5-9.701
Said title is further amended by revising Code Section 11-2-202, relating to final written702
expression and parol or extrinsic evidence, as follows:703
"11-2-202.Final written expression; parol or extrinsic evidence.704
Terms with respect to which the confirmatory memoranda of the parties agree or which are705
otherwise set forth in a writing record intended by the parties as a final expression of their706
agreement with respect to such terms as are included therein may not be contradicted by707
evidence of any prior agreement or of a contemporaneous oral agreement but may be708
explained or supplemented:709
(a) By course of performance, course of dealing, or usage of trade (Code Section710
11-1-303); and711
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(b) By evidence of consistent additional terms unless the court finds the writing record712
to have been intended also as a complete and exclusive statement of the terms of the713
agreement."714
SECTION 5-10.715
Said title is further amended in Code Section 11-2-209, relating to modification, rescission,716
and waiver, by revising subsection (2) as follows:717
"(2) A signed agreement which excludes modification or rescission except by a signed718
writing or other signed record cannot be otherwise modified or rescinded, but except as719
between merchants such a requirement on a form supplied by the merchant must be720
separately signed by the other party."721
SECTION 5-11.722
Said title is further amended by revising Code Section 11-2A-102, relating to scope, as723
follows:724
"11-2A-102.Scope.725
(1) This article applies to any transaction, regardless of form, that creates a lease and, in726
the case of a hybrid lease, it applies to the extent provided in subsection (2) of this Code727
section.728
(2) In a hybrid lease:729
(a) If the lease-of-goods aspects do not predominate:730
(i) Only the provisions of this article which relate primarily to the lease-of-goods731
aspects of the transaction apply, and the provisions that relate primarily to the732
transaction as a whole do not apply;733
(ii) Code Section 11-2A-209 applies if the lease is a finance lease; and734
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(iii) Code Section 11-2A-407 applies to the promises of the lessee in a finance lease735
to the extent the promises are consideration for the right to possession and use of the736
leased goods; and737
(b) If the lease-of-goods aspects predominate, this article applies to the transaction, but738
does not preclude application in appropriate circumstances of other law to aspects of the739
lease which do not relate to the lease of goods."740
SECTION 5-12.741
Said title is further amended in subsection (1) of Code Section 11-2A-103, relating to742
definitions and index of definitions, by adding a new paragraph to read as follows:743
"(h.1) 'Hybrid lease' means a single transaction involving a lease of goods and:744
(i) The provision of services;745
(ii) A sale of other goods; or746
(iii) A sale, lease, or license of property other than goods."747
SECTION 5-13.748
Said title is further amended by revising Code Section 11-2A-107, relating to waiver or749
renunciation of claim or right after default, as follows:750
"11-2A-107.Waiver or renunciation of claim or right after default.751
Any claim or right arising out of an alleged default or breach of warranty may be752
discharged in whole or in part without consideration by a written waiver or renunciation753
in a signed and record delivered by the aggrieved party."754
SECTION 5-14.755
Said title is further amended by revising Code Section 11-2A-202, relating to final756
expression: parole or extrinsic evidence, as follows:757
"11-2A-202.Final written expression: Parole or extrinsic evidence.758
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Terms with respect to which the confirmatory memoranda of the parties agree or which are
759
otherwise set forth in a writing
record intended by the parties as a final expression of their760
agreement with respect to such terms as are included therein may not be contradicted by761
evidence of any prior agreement or of a contemporaneous oral agreement but may be762
explained or supplemented:763
(a) By course of dealing or usage of trade or by course of performance; and764
(b) By evidence of consistent additional terms unless the court finds the writing record765
to have been intended also as a complete and exclusive statement of the terms of the766
agreement."767
SECTION 5-15.768
Said title is further amended by revising Code Section 11-2A-208, relating to modification,769
rescission and waiver, as follows:770
"11-2A-208.Modification, rescission, and waiver.771
(1) An agreement modifying a lease contract needs no consideration to be binding.772
(2) A signed lease agreement that excludes modification or rescission except by a signed773
writing record may not be otherwise modified or rescinded, but, except as between774
merchants, such a requirement on a form supplied by a merchant must be separately signed775
by the other party.776
(3) The requirements of the statute of frauds section of this article (Code Section777
11-2A-201) must be satisfied if the contract as modified is within its provisions.778
(4) Although an attempt at modification or rescission does not satisfy the requirements of779
subsection (2) of this Code section, it may operate as a waiver.780
(5) A party who has made a waiver affecting an executory portion of a lease contract may781
retract the waiver by reasonable notification received by the other party that strict782
performance will be required of any term waived, unless the retraction would be unjust in783
view of a material change of position in reliance on the waiver."784
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SECTION 5-16.
785
Said title is further amended in subsection (a) of Code Section 11-3-104, relating to786
negotiable instruments, by revising paragraph (3) as follows:787
"(3) Does not state any other undertaking or instruction by the person promising or788
ordering payment to do any act in addition to the payment of money, but the promise or789
order may contain:790
(i) An undertaking or power to give, maintain, or protect collateral to secure payment;791
(ii) An authorization or power to the holder to confess judgment or realize on or792
dispose of collateral; or
793
(iii) A waiver of the benefit of any law intended for the advantage or protection of an794
obligor;795
(iv) A term that specifies the law that governs the promise or order; or796
(v) An undertaking to resolve in a specified forum a dispute concerning the promise797
or order."798
SECTION 5-17.799
Said title is further amended by revising Code Section 11-3-105, relating to issue of800
instruments, as follows:801
"11-3-105.Issue of instrument.802
(a) 'Issue' means:803
(1) The the first delivery of an instrument by the maker or drawer, whether to a holder804
or nonholder, for the purpose of giving rights on the instrument to any person; or805
(2) If agreed by the payee, the first transmission by the drawer to the payee of an image806
of an item and information derived from the item that enables the depositary bank to807
collect the item by transferring or presenting under federal law an electronic check.808
(b) An unissued instrument, or an unissued incomplete instrument that is completed, is809
binding on the maker or drawer, but nonissuance is a defense. An instrument that is810
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conditionally issued or is issued for a special purpose is binding on the maker or drawer,
811
but failure of the condition or special purpose to be fulfilled is a defense.812
(c) 'Issuer' applies to issued and unissued instruments and means a maker or drawer of an813
instrument."814
SECTION 5-18.815
Said title is further amended by revising Code Section 11-3-119, relating to notices of rights816
to defend actions, as follows:817
"11-3-119.Notice of right to defend action.818
In an action for breach of an obligation for which a third person is answerable over819
pursuant to this article or Article 4 of this title, the defendant may give the third person820
written
notice of the litigation in a record, and the person notified may then give similar821
notice to any other person who is answerable over. If the notice states that (i) the person822
notified may come in and defend; and (ii) failure to do so will bind the person notified in823
an action later brought by the person giving the notice as to any determination of fact824
common to the two litigations, the person notified is so bound unless after seasonable825
receipt of the notice the person notified does come in and defend."826
SECTION 5-19.827
Said title is further amended in subsection (a) of Code Section 11-3-312, relating to lost,828
destroyed, or stolen cashier's checks, teller's checks, or certified checks, by revising the829
introductory language of paragraph (3) as follows:830
"(3) 'Declaration of loss' means a written statement, made in a record under penalty of831
perjury, to the effect that:"832
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SECTION 5-20.
833
Said title is further amended by revising Code Section 11-3-401, relating to signatures, as834
follows:835
"11-3-401.Signature necessary for liability on instrument
.836
(a) A person is not liable on an instrument unless (i) the person signed the instrument;837
or (ii) the person is represented by an agent or representative who signed the instrument838
and the signature is binding on the represented person under Code Section 11-3-402.839
(b) A signature may be made (i) manually or by means of a device or machine; and (ii) by840
the use of any name, including a trade or assumed name or by a word, mark, or symbol841
executed or adopted by a person with present intention to authenticate a writing."842
SECTION 5-21.843
Said title is further amended by revising Code Section 11-3-604, relating to discharge by844
cancellation or renunciation, as follows:845
"11-3-604.Discharge by cancellation or renunciation.846
(a) A person entitled to enforce an instrument, with or without consideration, may847
discharge the obligation of a party to pay the instrument by (i) an intentional voluntary act848
such as surrender of the instrument to the party, destruction, mutilation, or cancellation of849
the instrument, cancellation or striking out of the party's signature, or the addition of words850
to the instrument indicating discharge; or (ii) agreeing not to sue or otherwise renouncing851
rights against the party by a signed writing record. The obligation of a party to pay a check852
is not discharged solely by destruction of the check in connection with a process in which853
information is extracted from the check and an image of the check is made and,854
subsequently, the information and image are transmitted for payment.855
(b) Cancellation or striking out of an indorsement pursuant to subsection (a) of this Code856
section does not affect the status and rights of a party derived from the indorsement."857
H. B. 1240
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SECTION 5-22.
858
Said title is further amended in Code Section 11-4-212, relating to presentment by notice of859
item not payable by, through, or at a bank and liability of drawer or indorser, by revising860
subsection (a) as follows:861
"(a) Unless otherwise instructed, a collecting bank may present an item not payable by,862
through, or at a bank by sending to the party to accept or pay a written
record providing863
notice that the bank holds the item for acceptance or payment. The notice must be sent in864
time to be received on or before the day when presentment is due and the bank must meet865
any requirement of the party to accept or pay under Code Section 11-3-501 by the close of866
the bank's next banking day after it knows of the requirement."867
SECTION 5-23.868
Said title is further amended in subsection (a) of Code Section 11-4-301, relating to deferred869
posting, recovery of payment by return of items, time of dishonor, and return of items by870
payor bank, by revising paragraph (2) as follows:871
"(2) Sends written a record providing notice of dishonor or nonpayment if the item is872
unavailable for return."873
SECTION 5-23.1.874
Said title is further amended in Code Section 11-4-403, relating to customer's right to stop875
payment and burden of proof of loss, by revising subsection (b) as follows:876
"(b) A stop-payment order is effective for six months, but it lapses after 14 calendar days877
if the original order was oral and was not confirmed in writing a record within that period. 878
A stop-payment order may be renewed for additional six-month periods by a writing record879
given to the bank within a period during which the stop-payment order is effective."880
H. B. 1240
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SECTION 5-24.
881
Said title is further amended in subsection (a) of Code Section 11-4A-103, relating to882
payment order – definitions, by revising the introductory language of paragraph (1) as883
follows:884
"(1) 'Payment order' means an instruction of a sender to a receiving bank, transmitted885
orally, electronically, or in writing
or in a record, to pay, or to cause another bank to pay,886
a fixed or determinable amount of money to a beneficiary if:"887
SECTION 5-25.888
Said title is further amended by revising Code Section 11-4A-201, relating to security889
procedures, as follows:890
"11-4A-201.Security procedure.891
'Security procedure' means a procedure established by agreement of a customer and a892
receiving bank for the purpose of (i) verifying that a payment order or communication893
amending or canceling a payment order is that of the customer, or (ii) detecting error in the894
transmission or the content of the payment order or communication. A security procedure895
may impose an obligation on the receiving bank or the customer and may require the use896
of algorithms or other codes, identifying words, or numbers, symbols, sounds, biometrics,897
encryption, callback procedures, or similar security devices. Comparison of a signature on898
a payment order or communication with an authorized specimen signature of the customer899
or requiring a payment order to be sent from a known email address, IP address, or900
telephone number is not by itself a security procedure."901
SECTION 5-26.902
Said title is further amended in Code Section 11-4A-202, relating to authorized and verified903
payment orders, by revising subsections (b) and (c) as follows:904
H. B. 1240
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"(b) If a bank and its customer have agreed that the authenticity of payment orders issued
905
to the bank in the name of the customer as sender will be verified pursuant to a security906
procedure, a payment order received by the receiving bank is effective as the order of the907
customer, whether or not authorized, if (i) the security procedure is a commercially908
reasonable method of providing security against unauthorized payment orders, and (ii) the909
bank proves that it accepted the payment order in good faith and in compliance with the
910
bank's obligations under the security procedure and any written agreement or instruction911
of the customer, evidenced by a record, restricting acceptance of payment orders issued in912
the name of the customer. The bank is not required to follow an instruction that violates913
a written an agreement, evidenced by a record, with the customer or notice of which is not914
received at a time and in a manner affording the bank a reasonable opportunity to act on915
it before the payment order is accepted.916
(c) Commercial reasonableness of a security procedure is a question of law to be917
determined by considering the wishes of the customer expressed to the bank, the918
circumstances of the customer known to the bank, including the size, type, and frequency919
of payment orders normally issued by the customer to the bank, alternative security920
procedures offered to the customer, and security procedures in general use by customers921
and receiving banks similarly situated. A security procedure is deemed to be commercially922
reasonable if (i) the security procedure was chosen by the customer after the bank offered,923
and the customer refused, a security procedure that was commercially reasonable for that924
customer, and (ii) the customer expressly agreed in writing a record to be bound by any925
payment order, whether or not authorized, issued in its name and accepted by the bank in926
compliance with the bank's obligations under the security procedure chosen by the927
customer."928
H. B. 1240
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SECTION 5-27.
929
Said title is further amended in subsection (a) of Code Section 11-4A-203, relating to930
unenforceability of certain verified payment orders, by revising paragraph (1) as follows:931
"(1) By express written
agreement evidenced by a record, the receiving bank may limit932
the extent to which it is entitled to enforce or retain payment of the payment order."933
SECTION 5-28.934
Said title is further amended in Code Section 11-4A-210, relating to rejection of payment935
order, by revising subsection (a) as follows:936
"(a) A payment order is rejected by the receiving bank by a notice of rejection transmitted937
to the sender orally, electronically, or in writing a record. A notice of rejection need not938
use any particular words and is sufficient if it indicates that the receiving bank is rejecting939
the order or will not execute or pay the order. Rejection is effective when the notice is940
given if transmission is by a means that is reasonable in the circumstances. If notice of941
rejection is given by a means that is not reasonable, rejection is effective when the notice942
is received. If an agreement of the sender and receiving bank establishes the means to be943
used to reject a payment order, (i) any means complying with the agreement is reasonable944
and (ii) any means not complying is not reasonable unless no significant delay in receipt945
of the notice resulted from the use of the noncomplying means."946
SECTION 5-29.947
Said title is further amended in Code Section 11-4A-211, relating to cancellation and948
amendment of payment orders, by revising subsection (a) as follows:949
"(a) A communication of the sender of a payment order canceling or amending the order950
may be transmitted to the receiving bank orally, electronically, or in writing a record. If951
a security procedure is in effect between the sender and the receiving bank, the952
communication is not effective to cancel or amend the order unless the communication is953
H. B. 1240
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verified pursuant to the security procedure or the bank agrees to the cancellation or
954
amendment."955
SECTION 5-30.956
Said title is further amended in Code Section 11-4A-305, relating to liability for late or957
improper execution or failure to execute a payment order, by revising subsections (c) and (d)958
as follows:959
"(c) In addition to the amounts payable under subsections (a) and (b), damages, including960
consequential damages, are recoverable to the extent provided in an express written
961
agreement of the receiving bank, evidenced by a record.962
(d) If a receiving bank fails to execute a payment order it was obliged by express963
agreement to execute, the receiving bank is liable to the sender for its expenses in the964
transaction and for incidental expenses and interest losses resulting from the failure to965
execute. Additional damages, including consequential damages, are recoverable to the966
extent provided in an express written agreement of the receiving bank, evidenced by a967
record, but are not otherwise recoverable."968
SECTION 5-31.969
Said title is further amended by revising Code Section 11-5-104, relating to formal970
requirements, as follows:971
"11-5-104.Formal requirements.972
A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued973
in any form that is a signed record and is authenticated:974
(1) By a signature; or975
(2) In accordance with the agreement of the parties or the standard practice referred to976
in subsection (e) of Code Section 11-5-108."977
H. B. 1240
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SECTION 5-32.
978
Said title is further amended by revising Code Section 11-5-116, relating to choice of law and979
forum, as follows:980
"11-5-116.Choice of law and forum.981
(a) The liability of an issuer, nominated person, or adviser for any action or omission is982
governed by the law of the jurisdiction chosen by an agreement in the form of a record983
signed or otherwise authenticated
by the affected parties in the manner provided in Code984
Section 11-5-104 or by a provision in the person's letter of credit, confirmation, or other985
undertaking. The jurisdiction whose law is chosen need not bear any relation to the986
transaction.987
(b) Unless subsection (a) of this Code section applies, the liability of an issuer, nominated988
person, or adviser for any action or omission is governed by the law of the jurisdiction in989
which the person is located. The person is considered to be located at the address indicated990
in the person's undertaking. If more than one address is indicated, the person is considered991
to be located at the address from which the person's undertaking was issued.992
(c) For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of993
credit, but not enforcement of a judgment, all branches of a bank are considered separate994
juridical entities and a bank is considered to be located at the place where its relevant995
branch is considered to be located under this subsection (d) of this Code section.996
(d) A branch of a bank is considered to be located at the address indicated in the branch's997
undertaking. If more than one address is indicated, the branch is considered to be located998
at the address from which the undertaking was issued.999
(c)(e) Except as otherwise provided in this subsection, the liability of an issuer, nominated1000
person, or adviser is governed by any rules of custom or practice, such as the Uniform1001
Customs and Practice for Documentary Credits, to which the letter of credit, confirmation,1002
or other undertaking, is expressly made subject. If:1003
H. B. 1240
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(1) This article would govern the liability of an issuer, nominated person, or adviser
1004
under subsection (a) or (b) of this Code section;1005
(2) The relevant undertaking incorporates rules of custom or practice; and1006
(3) There is conflict between this article and the incorporated rules as applied to that1007
undertaking,1008
the incorporated rules govern except to the extent of any conflict with the nonvariable1009
provisions specified in subsection (c) of Code Section 11-5-103.1010
(d)
(f) If there is conflict between this article and Article 3, 4, 4A, or 9 of this title, this1011
article governs.1012
(e)(g) The forum for settling disputes arising out of an undertaking within this article may1013
be chosen in the manner and with the binding effect that governing law may be chosen in1014
accordance with subsection (a) of this Code section."1015
SECTION 5-33.1016
Said title is further amended in subsection (a) of Code Section 11-7-102, relating to1017
definitions and index of definitions, by repealing and reserving paragraphs (10) and (11).1018
SECTION 5-34.1019
Said title is further amended by revising Code Section 11-7-106, relating to control of1020
electronic document of title, as follows:1021
"11-7-106.Control of electronic document of title.1022
(a) A person has control of an electronic document of title if a system employed for1023
evidencing the transfer of interests in the electronic document reliably establishes that1024
person as the person to which the electronic document was issued or transferred.1025
(b) A system satisfies subsection (a) of this Code section, and a person is deemed to have1026
has control of an electronic document of title, if the document is created, stored, and1027
assigned transferred in a manner that:1028
H. B. 1240
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(1) A single authoritative copy of the document exists which is unique, identifiable, and,
1029
except as otherwise provided in paragraphs (4), (5), and (6) of this subsection,1030
unalterable;1031
(2) The authoritative copy identifies the person asserting control as:1032
(A) The person to which the document was issued; or1033
(B) If the authoritative copy indicates that the document has been transferred, the1034
person to which the document was most recently transferred;1035
(3) The authoritative copy is communicated to and maintained by the person asserting1036
control or its designated custodian;1037
(4) Copies or amendments that add or change an identified assignee
transferee of the1038
authoritative copy can be made only with the consent of the person asserting control;1039
(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as1040
a copy that is not the authoritative copy; and1041
(6) Any amendment of the authoritative copy is readily identifiable as authorized or1042
unauthorized.1043
(c) A system satisfies subsection (a) of this Code section, and a person has control of an1044
electronic document of title, if an authoritative electronic copy of the document, a record1045
attached to or logically associated with the electronic copy, or a system in which the1046
electronic copy is recorded:1047
(1) Enables the person readily to identify each electronic copy as either an authoritative1048
copy or a nonauthoritative copy;1049
(2) Enables the person readily to identify itself in any way, including by name,1050
identifying number, cryptographic key, office, or account number, as the person to which1051
each authoritative electronic copy was issued or transferred; and1052
(3) Gives the person exclusive power, subject to subsection (d) of this Code section, to:1053
(A) Prevent others from adding or changing the person to which each authoritative1054
electronic copy has been issued or transferred; and1055
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(B) Transfer control of each authoritative electronic copy.1056
(d) Subject to subsection (e) of this Code section, a power is exclusive under1057
subparagraphs (c)(3)(A) and (c)(3)(B) of this Code section even if:1058
(1) The authoritative electronic copy, a record attached to or logically associated with1059
the authoritative electronic copy, or a system in which the authoritative electronic copy1060
is recorded limits the use of the document of title or has a protocol that is programmed1061
to cause a change, including a transfer or loss of control; or1062
(2) The power is shared with another person.1063
(e) A power of a person is not shared with another person under paragraph (2) of1064
subsection (d) of this Code section and the person's power is not exclusive if:1065
(1) The person can exercise the power only if the power also is exercised by the other1066
person; and1067
(2) The other person:1068
(A) Can exercise the power without exercise of the power by the person; or1069
(B) Is the transferor to the person of an interest in the document of title.1070
(f) If a person has the powers specified in subparagraphs (c)(3)(A) and (c)(3)(B) of this1071
Code section, the powers are presumed to be exclusive.1072
(g) A person has control of an electronic document of title if another person, other than the1073
transferor to the person of an interest in the document:1074
(1) Has control of the document and acknowledges that it has control on behalf of the1075
person; or1076
(2) Obtains control of the document after having acknowledged that it will obtain control1077
of the document on behalf of the person.1078
(h) A person that has control under this Code section is not required to acknowledge that1079
it has control on behalf of another person.1080
(i) If a person acknowledges that it has or will obtain control on behalf of another person,1081
unless the person otherwise agrees or law other than this article or Article 9 of this title1082
H. B. 1240
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otherwise provides, the person does not owe any duty to the other person and is not1083
required to confirm the acknowledgment to any other person."1084
SECTION 5-35.1085
Said title is further amended by revising Code Section 11-8-102, relating to definitions, as1086
follows:1087
"11-8-102.Definitions.1088
(a) In this article:1089
(1) 'Adverse claim' means a claim that a claimant has a property interest in a financial1090
asset and that it is a violation of the rights of the claimant for another person to hold,1091
transfer, or deal with the financial asset.1092
(2) 'Bearer form,' as applied to a certificated security, means a form in which the security1093
is payable to the bearer of the security certificate according to its terms but not by reason1094
of an indorsement.1095
(3) 'Broker' means a person defined as a broker or dealer under the federal securities1096
laws, but without excluding a bank acting in that capacity.1097
(4) 'Certificated security' means a security that is represented by a certificate.1098
(5) 'Clearing corporation' means:1099
(i) A person that is registered as a 'clearing agency' under the federal securities laws;1100
(ii) A federal reserve bank; or1101
(iii) Any other person that provides clearance or settlement services with respect to1102
financial assets that would require it to register as a clearing agency under the federal1103
securities laws but for an exclusion or exemption from the registration requirement, if1104
its activities as a clearing corporation, including promulgation of rules, are subject to1105
regulation by a federal or state governmental authority.1106
(6) 'Communicate' means to:1107
(i) Send a signed writing record; or1108
H. B. 1240
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(ii) Transmit information by any mechanism agreed upon by the persons transmitting
1109
and receiving the information.1110
(7) 'Entitlement holder' means a person identified in the records of a securities1111
intermediary as the person having a security entitlement against the securities1112
intermediary. If a person acquires a security entitlement by virtue of paragraph (2) or (3)1113
of subsection (b) of Code Section 11-8-501, that person is the entitlement holder.1114
(8) 'Entitlement order' means a notification communicated to a securities intermediary1115
directing transfer or redemption of a financial asset to which the entitlement holder has1116
a security entitlement.1117
(9) 'Financial asset,' except as otherwise provided in Code Section 11-8-103, means:1118
(i) A security;1119
(ii) An obligation of a person or a share, participation, or other interest in a person or1120
in property or an enterprise of a person, which is, or is of a type, dealt in or traded on1121
financial markets, or which is recognized in any area in which it is issued or dealt in as1122
a medium for investment; or1123
(iii) Any property that is held by a securities intermediary for another person in a1124
securities account if the securities intermediary has expressly agreed with the other1125
person that the property is to be treated as a financial asset under this article.1126
As context requires, the term means either the interest itself or the means by which a1127
person's claim to it is evidenced, including a certificated or uncertificated security, a1128
security certificate, or a security entitlement.1129
(10) Reserved.1130
(11) 'Indorsement' means a signature that alone or accompanied by other words is made1131
on a security certificate in registered form or on a separate document for the purpose of1132
assigning, transferring, or redeeming the security or granting a power to assign, transfer,1133
or redeem it.1134
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(12) 'Instruction' means a notification communicated to the issuer of an uncertificated
1135
security which directs that the transfer of the security be registered or that the security be1136
redeemed.1137
(13) 'Registered form,' as applied to a certificated security, means a form in which:1138
(i) The security certificate specifies a person entitled to the security; and1139
(ii) A transfer of the security may be registered upon books maintained for that purpose1140
by or on behalf of the issuer, or the security certificate so states.1141
(14) 'Securities intermediary' means:1142
(i) A clearing corporation; or1143
(ii) A person, including a bank or broker, that in the ordinary course of its business1144
maintains securities accounts for others and is acting in that capacity.1145
(15) 'Security,' except as otherwise provided in Code Section 11-8-103, means an1146
obligation of an issuer or a share, participation, or other interest in an issuer or in property1147
or an enterprise of an issuer:1148
(i) Which is represented by a security certificate in bearer or registered form, or the1149
transfer of which may be registered upon books maintained for that purpose by or on1150
behalf of the issuer;1151
(ii) Which is one of a class or series or by its terms is divisible into a class or series of1152
shares, participations, interests, or obligations; and1153
(iii) Which:1154
(A) Is, or is of a type, dealt in or traded on securities exchanges or securities markets;1155
or1156
(B) Is a medium for investment and by its terms expressly provides that it is a1157
security governed by this article.1158
(16) 'Security certificate' means a certificate representing a security.1159
(17) 'Security entitlement' means the rights and property interest of an entitlement holder1160
with respect to a financial asset specified in Part 5 of this article.1161
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(18) 'Uncertificated security' means a security that is not represented by a certificate.
1162
(b) The following
Other definitions applying to this article and the Code sections in which1163
they appear are in this article and other articles of this title apply to this article:1164
'Appropriate person.' Code Section 11-8-107.1165
'Control.' Code Section 11-8-106.1166
'Controllable account.' Code Section 11-9-102.1167
'Controllable electronic record.' Code Section 11-12-102.1168
'Controllable payment intangible.' Code Section 11-9-102.1169
'Delivery.' Code Section 11-8-301.1170
'Investment company security.' Code Section 11-8-103.1171
'Issuer.' Code Section 11-8-201.1172
'Overissue.' Code Section 11-8-210.1173
'Protected purchaser.' Code Section 11-8-303.1174
'Securities account.' Code Section 11-8-501.1175
(c) In addition, Article 1 of this title contains general definitions and principles of1176
construction and interpretation applicable throughout this article.1177
(d) The characterization of a person, business, or transaction for purposes of this article1178
does not determine the characterization of the person, business, or transaction for purposes1179
of any other law, regulation, or rule."1180
SECTION 5-36.1181
Said title is further amended in Code Section 11-8-103, relating to rules for determining1182
whether certain obligations and interests are securities or financial assets, by adding a new1183
subsection to read as follows:1184
"(h) A controllable account, controllable electronic record, or controllable payment1185
intangible is not a financial asset unless subparagraph (a)(9)(iii) of Code Section 11-8-1021186
applies."1187
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SECTION 5-37.
1188
Said title is further amended by revising Code Section 11-8-106, relating to control, as1189
follows:1190
"11-8-106.Control.1191
(a) A purchaser has 'control' of a certificated security in bearer form if the certificated1192
security is delivered to the purchaser.1193
(b) A purchaser has 'control' of a certificated security in registered form if the certificated1194
security is delivered to the purchaser, and:1195
(1) The certificate is indorsed to the purchaser or in blank by an effective indorsement;1196
or1197
(2) The certificate is registered in the name of the purchaser, upon original issue or1198
registration of transfer by the issuer.1199
(c) A purchaser has 'control' of an uncertificated security if:1200
(1) The uncertificated security is delivered to the purchaser; or1201
(2) The issuer has agreed that it will comply with instructions originated by the purchaser1202
without further consent by the registered owner.1203
(d) A purchaser has 'control' of a security entitlement if:1204
(1) The purchaser becomes the entitlement holder;1205
(2) The securities intermediary has agreed that it will comply with entitlement orders1206
originated by the purchaser without further consent by the entitlement holder; or1207
(3) Another person, other than the transferor to the purchaser of an interest in the security
1208
entitlement: has control of the security entitlement on behalf of the purchaser or, having1209
previously acquired control of the security entitlement, acknowledges that it has control1210
on behalf of the purchaser.1211
(A) Has control of the security entitlement and acknowledges that it has control on1212
behalf of the purchaser; or1213
H. B. 1240
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(B) Obtains control of the security entitlement after having acknowledged that it will1214
obtain control of the security entitlement on behalf of the purchaser.1215
(e) If an interest in a security entitlement is granted by the entitlement holder to the1216
entitlement holder's own securities intermediary, the securities intermediary has control.1217
(f) A purchaser who has satisfied the requirements of subsection (c) or (d) of this Code1218
section has control, even if the registered owner in the case of subsection (c) of this Code1219
section or the entitlement holder in the case of subsection (d) of this Code section retains1220
the right to make substitutions for the uncertificated security or security entitlement, to1221
originate instructions or entitlement orders to the issuer or securities intermediary, or1222
otherwise to deal with the uncertificated security or security entitlement.1223
(g) An issuer or a securities intermediary may not enter into an agreement of the kind1224
described in paragraph (2) of subsection (c) of this Code section or paragraph (2) of1225
subsection (d) of this Code section without the consent of the registered owner or1226
entitlement holder, but an issuer or a securities intermediary is not required to enter into1227
such an agreement even though the registered owner or entitlement holder so directs. An1228
issuer or securities intermediary that has entered into such an agreement is not required to1229
confirm the existence of the agreement to another party unless requested to do so by the1230
registered owner or entitlement holder.1231
(h) A person that has control under this Code section is not required to acknowledge that1232
it has control on behalf of a purchaser.1233
(i) If a person acknowledges that it has or will obtain control on behalf of a purchaser,1234
unless the person otherwise agrees or law other than this article or Article 9 of this title1235
otherwise provides, the person does not owe any duty to the purchaser and is not required1236
to confirm the acknowledgment to any other person."1237
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SECTION 5-38.
1238
Said title is further amended in Code Section 11-8-110, relating to applicability and choice1239
of law, by adding a new subsection to read as follows:1240
"(g) The local law of the issuer's jurisdiction or the securities intermediary's jurisdiction
1241
governs a matter or transaction specified in subsection (a) or (b) of this Code section even1242
if the matter or transaction does not bear any relation to the jurisdiction."1243
SECTION 5-39.1244
Said title is further amended by revising Code Section 11-8-303, relating to protected1245
purchasers, as follows:1246
"11-8-303.Protected purchaser.1247
(a) 'Protected purchaser' means a purchaser of a certificated or uncertificated security, or1248
of an interest therein, who:1249
(1) Gives value;1250
(2) Does not have notice of any adverse claim to the security; and1251
(3) Obtains control of the certificated or uncertificated security.1252
(b) A In addition to acquiring the rights of a purchaser, a protected purchaser also acquires1253
its interest in the security free of any adverse claim."1254
SECTION 5-40.1255
Said title is further amended by revising Code Section 11-9-102, relating to definitions and1256
index of definitions, as follows:1257
"11-9-102.Definitions and index of definitions.1258
(a) Article 9 definitions. As used in this article, the term:1259
(1) 'Accession' means goods that are physically united with other goods in such a manner1260
that the identity of the original goods is not lost.1261
H. B. 1240
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(2) 'Account,' except as used in 'account for,' 'account statement,' 'account to,'1262
'commodity account' in paragraph (15) of this Code section, 'customer's account,' 'deposit1263
account' in paragraph (30) of this Code section, 'on account of,' and 'statement of1264
account,' means a right to payment of a monetary obligation, whether or not earned by1265
performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or1266
otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of1267
insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred,1268
(v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a1269
charter or other contract, (vii) arising out of the use of a credit or charge card or1270
information contained on or for use with the card, or (viii) as winnings in a lottery or1271
other game of chance operated or sponsored by a state, governmental unit of a state, or1272
person licensed or authorized to operate the game by a state or governmental unit of a1273
state. The term includes controllable accounts and health care insurance receivables. The1274
term does not include (i) rights to payment evidenced by chattel paper or an instrument,1275
(ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter of1276
credit rights or letters of credit, or (vi) rights to payment for money or funds advanced or1277
sold, other than rights arising out of the use of a credit or charge card or information1278
contained on or for use with the card, or (vii) rights to payment evidenced by an1279
instrument.1280
(3) 'Account debtor' means a person obligated on an account, chattel paper, or general1281
intangible. The term does not include persons obligated to pay a negotiable instrument,1282
even if the negotiable instrument constitutes part of evidences chattel paper.1283
(4) 'Accounting,' except as used in 'accounting for,' means a record:1284
(A) Signed Authenticated by a secured party;1285
(B) Indicating the aggregate unpaid secured obligations as of a date not more than 351286
days earlier or 35 days later than the date of the record; and1287
(C) Identifying the components of the obligations in reasonable detail.1288
H. B. 1240
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(5) 'Agricultural lien' means an interest in farm products:
1289
(A) Which secures payment or performance of an obligation for:1290
(i) Goods or services furnished in connection with a debtor's farming operation; or1291
(ii) Rent on real property leased by a debtor in connection with its farming operation;1292
(B) Which is created by statute in favor of a person that:1293
(i) In the ordinary course of its business furnished goods or services to a debtor in1294
connection with a debtor's farming operation; or1295
(ii) Leased real property to a debtor in connection with the debtor's farming1296
operation; and1297
(C) Whose effectiveness does not depend on the person's possession of the personal1298
property.1299
(6) 'As-extracted collateral' means:1300
(A) Oil, gas, or other minerals that are subject to a security interest that:1301
(i) Is created by a debtor having an interest in the minerals before extraction; and1302
(ii) Attaches to the minerals as extracted; or1303
(B) Accounts arising out of the sale at the wellhead or minehead of oil, gas, or other1304
minerals in which the debtor had an interest before extraction.1305
(7) 'Authenticate' means:
1306
(A) To sign; or1307
(B) With present intent to adopt or accept a record, to attach to or logically associate1308
with such record an electronic sound, symbol, or process Reserved.1309
(7.1) 'Assignee,' except as used in 'assignee for benefit of creditors,' means a person (i)1310
in whose favor a security interest that secures an obligation is created or provided for1311
under a security agreement, whether or not the obligation is outstanding or (ii) to which1312
an account, chattel paper, payment intangible, or promissory note has been sold. The1313
term includes a person to which a security interest has been transferred by a secured1314
party.1315
H. B. 1240
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(7.2) 'Assignor' means a person that (i) under a security agreement creates or provides1316
for a security interest that secures an obligation or (ii) sells an account, chattel paper,1317
payment intangible, or promissory note. The term includes a secured party that has1318
transferred a security interest to another person.1319
(8) 'Authority' means the Georgia Superior Court Clerks' Cooperative Authority.1320
(9) 'Bank' means an organization that is engaged in the business of banking. The term1321
includes savings banks, savings and loan associations, credit unions, and trust companies.1322
(10) 'Cash proceeds' means proceeds that are money, checks, deposit accounts, or the1323
like.1324
(11) 'Certificate of title' means a certificate of title with respect to which a statute1325
provides for the security interest in question to be indicated on the certificate as a1326
condition or result of the security interest's obtaining priority over the rights of a lien1327
creditor with respect to the collateral. The term shall include another record maintained1328
as an alternative to a certificate of title by the governmental unit that issues certificates1329
of title if a statute permits the security interest in question to be indicated on the record1330
as a condition or result of the security interest's obtaining priority over the rights of a lien1331
creditor with respect to the collateral.1332
(12) 'Chattel paper' means: a record or records that evidence both a monetary obligation1333
and a security interest in specific goods, a security interest in specific goods and software1334
used in the goods, a lease of specific goods, or a lease of specific goods and license of1335
software used in the goods. As used in this paragraph, 'monetary obligation' means a1336
monetary obligation secured by the goods or owed under a lease of the goods and1337
includes a monetary obligation with respect to software used in the goods. The term does1338
not include:1339
(A) Charters or other contracts involving the use or hire of a vessel; or1340
(B) Records that evidence a right to payment arising out of the use of a credit or charge1341
card or information contained on or for use with the card.1342
H. B. 1240
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If a transaction is evidenced by records that include an instrument or series of1343
instruments, the group of records taken together constitutes chattel paper.1344
(A) A right to payment of a monetary obligation secured by specific goods, if the right1345
to payment and security agreement are evidenced by a record; or1346
(B) A right to payment of a monetary obligation owed by a lessee under a lease1347
agreement with respect to specific goods and a monetary obligation owed by the lessee1348
in connection with the transaction giving rise to the lease, if:1349
(i) The right to payment and lease agreement are evidenced by a record; and1350
(ii) The predominant purpose of the transaction giving rise to the lease was to give1351
the lessee the right to possession and use of the goods.1352
The term does not include a right to payment arising out of a charter or other contract1353
involving the use or hire of a vessel or a right to payment arising out of the use of a credit1354
or charge card or information contained on or for use with the card.1355
(13) 'Collateral' means the property subject to a security interest or agricultural lien. The1356
term includes:1357
(A) Proceeds to which a security interest attaches;1358
(B) Accounts, chattel paper, payment intangibles, and promissory notes that have been1359
sold; and1360
(C) Goods that are the subject of a consignment.1361
(14) 'Commercial tort claim' means a claim arising in tort with respect to which:1362
(A) The claimant is an organization; or1363
(B) The claimant is an individual and the claim:1364
(i) Arose in the course of the claimant's business or profession; and1365
(ii) Does not include damages arising out of personal injury to or the death of an1366
individual.1367
(15) 'Commodity account' means an account maintained by a commodity intermediary1368
in which a commodity contract is carried for a commodity customer.1369
H. B. 1240
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(16) 'Commodity contract' means a commodity futures contract, an option on a
1370
commodity futures contract, a commodity option, or another contract if the contract or1371
option is:1372
(A) Traded on or subject to the rules of a board of trade that has been designated as a1373
contract market for such a contract pursuant to federal commodities laws; or1374
(B) Traded on a foreign commodity board of trade, exchange, or market and is carried1375
on the books of a commodity intermediary for a commodity customer.1376
(17) 'Commodity customer' means a person for which a commodity intermediary carries1377
a commodity contract on its books.1378
(18) 'Commodity intermediary' means a person that:1379
(A) Is registered as a futures commission merchant under federal commodities law; or1380
(B) In the ordinary course of its business provides clearance or settlement services for1381
a board of trade that has been designated as a contract market pursuant to federal1382
commodities law.1383
(19) 'Communicate' means:1384
(A) To send a written or other tangible record;1385
(B) To transmit a record by any means agreed upon by the persons sending and1386
receiving the record; or1387
(C) In the case of transmission of a record to or by a filing office or the authority, to1388
transmit a record by any means prescribed by filing office rule.1389
(20) 'Consignee' means a merchant to which goods are delivered in a consignment.1390
(21) 'Consignment' means a transaction, regardless of its form, in which a person delivers1391
goods to a merchant for the purpose of sale and:1392
(A) The merchant:1393
(i) Deals in goods of that kind under a name other than the name of the person1394
making delivery;1395
(ii) Is not an auctioneer; and1396
H. B. 1240
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(iii) Is not generally known by its creditors to be substantially engaged in selling the
1397
goods of others;1398
(B) With respect to each delivery, the aggregate value of the goods is $1,000.00 or1399
more at the time of delivery;1400
(C) The goods are not consumer goods immediately before delivery; and1401
(D) The transaction does not create a security interest that secures an obligation.1402
(22) 'Consignor' means a person that delivers goods to a consignee in a consignment.1403
(23) 'Consumer debtor' means a debtor in a consumer transaction.1404
(24) 'Consumer goods' means goods that are used or bought for use primarily for1405
personal, family, or household purposes.1406
(25) 'Consumer goods transaction' means a consumer transaction in which:1407
(A) An individual incurs an obligation primarily for personal, family, or household1408
purposes; and1409
(B) A security interest in consumer goods secures the obligation.1410
(26) 'Consumer obligor' means an obligor who is an individual and who incurred the1411
obligation as part of a transaction entered into primarily for personal, family, or1412
household purposes.1413
(27) 'Consumer transaction' means a transaction in which (i) an individual incurs an1414
obligation primarily for personal, family, or household purposes, (ii) a security interest1415
secures the obligation, and (iii) the collateral is held or acquired primarily for personal,1416
family, or household purposes. The term includes consumer goods transactions.1417
(28) 'Continuation statement' means an amendment of a financing statement which:1418
(A) Identifies, by its file number, the initial financing statement to which it relates; and1419
(B) Indicates that it is a continuation statement for, or that it is filed to continue the1420
effectiveness of, the identified financing statement.1421
H. B. 1240
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(28.1) 'Controllable account' means an account evidenced by a controllable electronic1422
record that provides that the account debtor undertakes to pay the person that has control1423
under Code Section 11-12-105 of the controllable electronic record.1424
(28.2) 'Controllable payment intangible' means a payment intangible evidenced by a1425
controllable electronic record that provides that the account debtor undertakes to pay the1426
person that has control under Code Section 11-12-105 of the controllable electronic1427
record.1428
(29) 'Debtor' means:1429
(A) A person having an interest, other than a security interest or other lien, in the1430
collateral, whether or not the person is an obligor;1431
(B) A seller of accounts, chattel paper, payment intangibles, or promissory notes; or1432
(C) A consignee.1433
(30) 'Deposit account' means a demand, time, savings, passbook, or similar account1434
maintained with a bank. The term does not include investment property or accounts1435
evidenced by an instrument.1436
(31) 'Document' means a document of title or a receipt of the type described in1437
subsection (2)(b) of Code Section 11-7-201.1438
(32) 'Electronic chattel paper' means chattel paper evidenced by a record or records1439
consisting of information stored in an electronic medium Reserved.1440
(32.1) 'Electronic money' means money in an electronic form.1441
(33) 'Encumbrance' means a right, other than an ownership interest, in real property. The1442
term includes mortgages and other liens on real property.1443
(34) 'Equipment' means goods other than inventory, farm products, or consumer goods.1444
(35) 'Farm products' means goods, other than standing timber, with respect to which the1445
debtor is engaged in a farming operation and which are:1446
(A) Crops grown, growing, or to be grown, including:1447
(i) Crops produced on trees, vines, and bushes; and1448
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(ii) Aquatic goods produced in aquacultural operations;
1449
(B) Livestock, born or unborn, including aquatic goods produced in aquacultural1450
operations;1451
(C) Supplies used or produced in a farming operation; or1452
(D) Products of crops or livestock in their unmanufactured states.1453
(36) 'Farming operation' means raising, cultivating, propagating, fattening, grazing, or1454
any other farming, livestock, or aquacultural operation.1455
(37) 'File number' means the number assigned to an initial financing statement pursuant1456
to subsection (a) of Code Section 11-9-519.1457
(38) 'Filing office' means an office designated in Code Section 11-9-501 as the place to1458
file a financing statement.1459
(39) 'Filing office rule' means a rule adopted pursuant to Code Section 11-9-526.1460
(40) 'Financing statement' means a record or records composed of an initial financing1461
statement and any filed record relating to the initial financing statement.1462
(41) 'Fixture filing' means the filing of a financing statement covering goods that are or1463
are to become fixtures and satisfying subsections (a) and (b) of Code Section 11-9-502. 1464
The term includes the filing of a financing statement covering goods of a transmitting1465
utility which are or are to become fixtures.1466
(42) 'Fixtures' means goods that have become so related to particular real property that1467
an interest in them arises under real property law.1468
(43) 'General intangible' means any personal property, including things in action, other1469
than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods,1470
instruments, investment property, letter of credit rights, letters of credit, money, and oil,1471
gas, or other minerals before extraction. The term includes controllable electronic
1472
records, payment intangibles, and software.1473
(44) Reserved.1474
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(45) 'Goods' means all things that are movable when a security interest attaches. The
1475
term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a1476
conveyance or contract for sale, (iii) the unborn young of animals, and (iv) crops grown,1477
growing, or to be grown, even if the crops are produced on trees, vines, or bushes. The1478
term also includes a computer program embedded in goods and any supporting1479
information provided in connection with a transaction relating to the program if (i) the1480
program is associated with the goods in such a manner that it customarily is considered1481
part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right1482
to use the program in connection with the goods. The term does not include a computer1483
program embedded in goods that consist solely of the medium in which the program is1484
embedded. The term also does not include accounts, chattel paper, commercial tort1485
claims, deposit accounts, documents, general intangibles, instruments, investment1486
property, letter of credit rights, letters of credit, money, or oil, gas, or other minerals1487
before extraction.1488
(46) 'Governmental unit' means a subdivision, agency, department, county, parish,1489
municipality, or other unit of the government of the United States, a state, or a foreign1490
country. The term includes an organization having a separate corporate existence if the1491
organization is eligible to issue debt on which interest is exempt from income taxation1492
under the laws of the United States.1493
(47) 'Health care insurance receivable' means an interest in or claim under a policy of1494
insurance which is a right to payment of a monetary obligation for health care goods or1495
services provided or to be provided.1496
(48) 'Instrument' means a negotiable instrument or any other writing that evidences a1497
right to the payment of a monetary obligation, is not itself a security agreement or lease,1498
and is of a type that in ordinary course of business is transferred by delivery with any1499
necessary indorsement or assignment. The term does not include (i) investment property,1500
(ii) letters of credit, or
(iii) writings that evidence a right to payment arising out of the use1501
H. B. 1240
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of a credit or charge card or information contained on or for use with the card, or (iv)1502
writings that evidence chattel paper.1503
(49) 'Inventory' means goods, other than farm products, which:1504
(A) Are leased by a person as lessor;1505
(B) Are held by a person for sale or lease or to be furnished under a contract of service;1506
(C) Are furnished by a person under a contract of service; or1507
(D) Consist of raw materials, work in process, or materials used or consumed in a1508
business.1509
(50) 'Investment property' means a security, whether certificated or uncertificated,1510
security entitlement, securities account, commodity contract, or commodity account.1511
(51) 'Jurisdiction of organization,' with respect to a registered organization, means the1512
jurisdiction under whose law the organization is formed or organized.1513
(52) 'Letter of credit right' means a right to payment or performance under a letter of1514
credit, whether or not the beneficiary has demanded or is at the time entitled to demand1515
payment or performance. The term does not include the right of a beneficiary to demand1516
payment or performance under a letter of credit.1517
(53) 'Lien creditor' means:1518
(A) A creditor that has acquired a lien on the property involved by attachment, levy,1519
or the like;1520
(B) An assignee for benefit of creditors from the time of assignment;1521
(C) A trustee in bankruptcy from the date of the filing of the petition; or1522
(D) A receiver in equity from the time of appointment.1523
(53.1) 'Money' has the meaning in paragraph (24) of subsection (b) of Code Section1524
11-1-201, but does not include (i) a deposit account or (ii) money in an electronic form1525
that cannot be subjected to control under Code Section 11-9-105A.1526
H. B. 1240
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(54) 'Mortgage' means a consensual interest in real property, including fixtures, which
1527
secures payment or performance of an obligation. The term includes a deed to secure1528
debt.1529
(55) 'New debtor' means a person that becomes bound as debtor under subsection (d) of1530
Code Section 11-9-203 by a security agreement previously entered into by another1531
person.1532
(56) 'New value' means (i) money, (ii) money's worth in property, services, or new credit,1533
or (iii) release by a transferee of an interest in property previously transferred to the1534
transferee. The term does not include an obligation substituted for another obligation.1535
(57) 'Noncash proceeds' means proceeds other than cash proceeds.1536
(58) 'Obligor' means a person that, with respect to an obligation secured by a security1537
interest in or an agricultural lien on the collateral, (i) owes payment or other performance1538
of the obligation, (ii) has provided property other than the collateral to secure payment1539
or other performance of the obligation, or (iii) is otherwise accountable in whole or in1540
part for payment or other performance of the obligation. The term does not include1541
issuers or nominated persons under a letter of credit.1542
(59) 'Original debtor,' except as used in subsection (c) of Code Section 11-9-310, means1543
a person that, as debtor, entered into a security agreement to which a new debtor has1544
become bound under subsection (d) of Code Section 11-9-203.1545
(60) 'Payment intangible' means a general intangible under which the account debtor's1546
principal obligation is a monetary obligation. The term includes a controllable payment
1547
intangible.1548
(61) 'Person related to,' with respect to an individual, means:1549
(A) The spouse of the individual;1550
(B) A brother, brother-in-law, sister, or sister-in-law of the individual;1551
(C) An ancestor or lineal descendant of the individual or the individual's spouse; or1552
H. B. 1240
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(D) Any other relative, by blood or marriage, of the individual or the individual's
1553
spouse who shares the same home with the individual.1554
(62) 'Person related to,' with respect to an organization, means:1555
(A) A person directly or indirectly controlling, controlled by, or under common control1556
with the organization;1557
(B) An officer or director of, or a person performing similar functions with respect to,1558
the organization;1559
(C) An officer or director of, or a person performing similar functions with respect to,1560
a person described in subparagraph (A) of this paragraph;1561
(D) The spouse of an individual described in subparagraph (A), (B), or (C) of this1562
paragraph; or1563
(E) An individual who is related by blood or marriage to an individual described in1564
subparagraph (A), (B), (C), or (D) of this paragraph and shares the same home with the1565
individual.1566
(63) 'Proceeds,' except as used in subsection (d)
(b) of Code Section 11-9-609, means the1567
following property:1568
(A) Whatever is acquired upon the sale, lease, license, exchange, or other disposition1569
of collateral;1570
(B) Whatever is collected on, or distributed on account of, collateral;1571
(C) Rights arising out of collateral;1572
(D) To the extent of the value of collateral, claims arising out of the loss,1573
nonconformity, or interference with the use of, defects or infringement of rights in, or1574
damage to the collateral; or1575
(E) To the extent of the value of collateral and to the extent payable to the debtor or the1576
secured party, insurance payable by reason of the loss or nonconformity of, defects or1577
infringement of rights in, or damage to the collateral.1578
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(64) 'Promissory note' means an instrument that evidences a promise to pay a monetary
1579
obligation, does not evidence an order to pay, and does not contain an acknowledgment1580
by a bank that the bank has received for deposit a sum of money or funds.1581
(65) 'Proposal' means a record authenticated
signed by a secured party which includes1582
the terms on which the secured party is willing to accept collateral in full or partial1583
satisfaction of the obligation it secures pursuant to Code Sections 11-9-620, 11-9-621,1584
and 11-9-622.1585
(66) 'Public finance transaction' means a secured transaction in connection with which:1586
(A) Debt securities are issued;1587
(B) All or a portion of the securities issued have an initial stated maturity of at least1588
five years; and1589
(C) The debtor, obligor, secured party, account debtor or other person obligated on1590
collateral, assignor or assignee of a secured obligation, or assignor or assignee of a1591
security interest is a state or a governmental unit of a state.1592
(67) 'Public organic record' means a record that is available to the public for inspection1593
and is:1594
(A) A record consisting of the record initially filed with or issued by a state or the1595
United States to form or organize an organization and any record filed with or issued1596
by such state or the United States which amends or restates the initial record;1597
(B) An organic record of a business trust consisting of the record initially filed with a1598
state and any record filed with such state which amends or restates the initial record, if1599
a statute of such state governing business trusts requires that the record be filed with1600
such state; or1601
(C) A record consisting of legislation enacted by the legislature of a state or the1602
Congress of the United States which forms or organizes an organization, any record1603
amending the legislation, and any record filed with or issued by such state or the United1604
States which amends or restates the name of the organization.1605
H. B. 1240
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(68) 'Pursuant to commitment,' with respect to an advance made or other value given by
1606
a secured party, means pursuant to the secured party's obligation, whether or not a1607
subsequent event of default or other event not within the secured party's control has1608
relieved or may relieve the secured party from its obligation.1609
(69) 'Record,' except as used in 'for record,' 'of record,' 'record or legal title,' and 'record1610
owner,' means information that is inscribed on a tangible medium or which is stored in1611
an electronic or other medium and is retrievable in perceivable form.1612
(70) 'Registered organization' means an organization formed or organized solely under1613
the law of a single state or the United States by the filing of a public organic record with,1614
the issuance of a public organic record by, or the enactment of legislation by a state or the1615
United States. The term shall include a business trust that is formed or organized under1616
the law of a single state if a statute of such state governing business trusts requires that1617
the business trust's organic record be filed with such state.1618
(71) 'Secondary obligor' means an obligor to the extent that:1619
(A) The obligor's obligation is secondary; or1620
(B) The obligor has a right of recourse with respect to an obligation secured by1621
collateral against the debtor, another obligor, or property of either.1622
(72) 'Secured party' means:1623
(A) A person in whose favor a security interest is created or provided for under a1624
security agreement, whether or not any obligation to be secured is outstanding;1625
(B) A person that holds an agricultural lien;1626
(C) A consignor;1627
(D) A person to which accounts, chattel paper, payment intangibles, or promissory1628
notes have been sold;1629
(E) A trustee, indenture trustee, agent, collateral agent, or other representative in whose1630
favor a security interest or agricultural lien is created or provided for; or1631
H. B. 1240
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(F) A person that holds a security interest arising under Code Section 11-2-401,
1632
11-2-505, or subsection (3) of Code Section 11-2-711, subsection (5) of Code Section1633
11-2A-508, Code Section 11-4-210, or Code Section 11-5-118.1634
(73) 'Security agreement' means an agreement that creates or provides for a security1635
interest.1636
(74) 'Send,' in connection with a record or notification, means:
1637
(A) To deposit in the mail, deliver for transmission, or transmit by any other usual1638
means of communication, with postage or cost of transmission provided for, addressed1639
to any address reasonable under the circumstances; or1640
(B) To cause the record or notification to be received within the time that it would have1641
been received if properly sent under subparagraph (A) of this paragraph Reserved.1642
(75) 'Software' means a computer program and any supporting information provided in1643
connection with a transaction relating to the program. The term does not include a1644
computer program that is included in the definition of goods.1645
(76) 'State' means a state of the United States, the District of Columbia, Puerto Rico, the1646
United States Virgin Islands, or any territory or insular possession subject to the1647
jurisdiction of the United States.1648
(77) 'Supporting obligation' means a letter of credit right or secondary obligation that1649
supports the payment or performance of an account, chattel paper, a document, a general1650
intangible, an instrument, or investment property.1651
(78) 'Tangible chattel paper' means chattel paper evidenced by a record or records1652
consisting of information that is inscribed on a tangible medium Reserved.1653
(78.1) 'Tangible money' means money in a tangible form.1654
(79) 'Termination statement' means an amendment of a financing statement which:1655
(A) Identifies, by its file number, the initial financing statement to which it relates; and1656
(B) Indicates either that it is a termination statement or that the identified financing1657
statement is no longer effective.1658
H. B. 1240
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(80) 'Transmitting utility' means a person primarily engaged in the business of:
1659
(A) Operating a railroad, subway, street railway, or trolley bus;1660
(B) Transmitting communications electrically, electromagnetically, or by light;1661
(C) Transmitting goods by pipeline or sewer; or1662
(D) Transmitting or producing and transmitting electricity, steam, gas, or water.1663
(b) Definitions in other articles. 'Control' as provided in Code Section 11-7-106 and the1664
following definitions in other articles apply to this article:1665
'Applicant.' Code Section 11-5-102.1666
'Beneficiary.' Code Section 11-5-102.1667
'Broker.' Code Section 11-8-102.1668
'Certificated security.' Code Section 11-8-102.1669
'Check.' Code Section 11-3-104.1670
'Clearing corporation.' Code Section 11-8-102.1671
'Contract for sale.' Code Section 11-2-106.1672
'Controllable electronic record.' Code Section 11-12-102.
1673
'Customer.' Code Section 11-4-104.1674
'Entitlement holder.' Code Section 11-8-102.1675
'Financial asset.' Code Section 11-8-102.1676
'Holder in due course.' Code Section 11-3-302.1677
'Issuer' (with respect to a letter of credit or letter of credit right). Code Section 11-5-102.1678
'Issuer' (with respect to a security). Code Section 11-8-201.1679
'Issuer' (with respect to documents of title). Code Section 11-7-102.1680
'Lease.' Code Section 11-2A-103.1681
'Lease agreement.' Code Section 11-2A-103.1682
'Lease contract.' Code Section 11-2A-103.1683
'Leasehold interest.' Code Section 11-2A-103.1684
'Lessee.' Code Section 11-2A-103.1685
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'Lessee in ordinary course of business.' Code Section 11-2A-103.
1686
'Lessor.' Code Section 11-2A-103.1687
'Lessor's residual interest.' Code Section 11-2A-103.1688
'Letter of credit.' Code Section 11-5-102.1689
'Merchant.' Code Section 11-2-104.1690
'Negotiable instrument.' Code Section 11-3-104.1691
'Nominated person.' Code Section 11-5-102.1692
'Note.' Code Section 11-3-104.1693
'Proceeds of a letter of credit.' Code Section 11-5-114.1694
'Protected purchaser.' Code Section 11-8-103.
1695
'Prove.' Code Section 11-3-103.1696
'Qualifying purchaser.' Code Section 11-12-102.1697
'Sale.' Code Section 11-2-106.1698
'Securities account.' Code Section 11-8-501.1699
'Securities intermediary.' Code Section 11-8-102.1700
'Security.' Code Section 11-8-102.1701
'Security certificate.' Code Section 11-8-102.1702
'Security entitlement.' Code Section 11-8-102.1703
'Uncertificated security.' Code Section 11-8-102.1704
(c) Article 1 definitions and principles. Article 1 of this title contains general definitions1705
and principles of construction and interpretation applicable throughout this article."1706
SECTION 5-41.1707
Said title is further amended by revising Code Section 11-9-104, relating to control of deposit1708
accounts, as follows:1709
"11-9-104.Control of deposit account.1710
(a) Requirements for control. A secured party has control of a deposit account if:1711
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(1) The secured party is the bank with which the deposit account is maintained;
1712
(2) The debtor, secured party, and bank have agreed in an authenticated
a signed record1713
that the bank will comply with instructions originated by the secured party directing1714
disposition of the funds in the deposit account without further consent by the debtor; or1715
(3) The secured party becomes the bank's customer with respect to the deposit account;1716
or1717
(4) Another person, other than the debtor:1718
(A) Has control of the deposit account and acknowledges that it has control on behalf1719
of the secured party; or1720
(B) Obtains control of the deposit account after having acknowledged that it will obtain1721
control of the deposit account on behalf of the secured party.1722
(b) Debtor's right to direct disposition. A secured party that has satisfied subsection (a)1723
of this Code section has control, even if the debtor retains the right to direct the disposition1724
of funds from the deposit account."1725
SECTION 5-42.1726
Said title is further amended by revising Code Section 11-9-105, relating to control of1727
electronic chattel paper, as follows:1728
"11-9-105.Control of electronic copy of record evidencing chattel paper.1729
(a) General rule; control of electronic chattel paper. A secured party has control of1730
electronic chattel paper if a system employed for evidencing the transfer of interests in the1731
chattel paper reliably establishes the secured party as the person to which the chattel paper1732
was assigned.1733
(b) Specific facts giving control. A system satisfies the provisions of subsection (a) of1734
this Code section if the record or records comprising the chattel paper are created, stored,1735
and assigned in such a manner that:1736
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(1) A single authoritative copy of the record or records exists which is unique,1737
identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6) of this1738
subsection, unalterable;1739
(2) The authoritative copy identifies the secured party as the assignee of the record or1740
records;1741
(3) The authoritative copy is communicated to and maintained by the secured party or1742
its designated custodian;1743
(4) Copies or amendments that add or change an identified assignee of the authoritative1744
copy can be made only with the consent of the secured party;1745
(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as1746
a copy that is not the authoritative copy; and1747
(6) Any amendment of the authoritative copy is readily identifiable as authorized or1748
unauthorized.1749
(a) General rule: control of electronic copy of record evidencing chattel paper. A1750
purchaser has control of an authoritative electronic copy of a record evidencing chattel1751
paper if a system employed for evidencing the assignment of interests in the chattel paper1752
reliably establishes the purchaser as the person to which the authoritative electronic copy1753
was assigned.1754
(b) Single authoritative copy. A system satisfies subsection (a) of this Code section if1755
the record or records evidencing the chattel paper are created, stored, and assigned in a1756
manner that:1757
(1) A single authoritative copy of the record or records exists which is unique,1758
identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6) of this1759
subsection, unalterable;1760
(2) The authoritative copy identifies the purchaser as the assignee of the record or1761
records;1762
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(3) The authoritative copy is communicated to and maintained by the purchaser or its1763
designated custodian;1764
(4) Copies or amendments that add or change an identified assignee of the authoritative1765
copy can be made only with the consent of the purchaser;1766
(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as1767
a copy that is not the authoritative copy; and1768
(6) Any amendment of the authoritative copy is readily identifiable as authorized or1769
unauthorized.1770
(c) One or more authoritative copies. A system satisfies subsection (a) of this Code1771
section, and a purchaser has control of an authoritative electronic copy of a record1772
evidencing chattel paper, if the electronic copy, a record attached to or logically associated1773
with the electronic copy, or a system in which the electronic copy is recorded:1774
(1) Enables the purchaser readily to identify each electronic copy as either an1775
authoritative copy or a nonauthoritative copy;1776
(2) Enables the purchaser readily to identify itself in any way, including by name,1777
identifying number, cryptographic key, office, or account number, as the assignee of the1778
authoritative electronic copy; and1779
(3) Gives the purchaser exclusive power, subject to subsection (d) of this Code section,1780
to:1781
(A) Prevent others from adding or changing an identified assignee of the authoritative1782
electronic copy; and1783
(B) Transfer control of the authoritative electronic copy.1784
(d) Meaning of exclusive. Subject to subsection (e) of this Code section, a power is1785
exclusive under subparagraphs (c)(3)(A) and (c)(3)(B) of this Code section even if:1786
(1) The authoritative electronic copy, a record attached to or logically associated with1787
the authoritative electronic copy, or a system in which the authoritative electronic copy1788
H. B. 1240
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is recorded limits the use of the authoritative electronic copy or has a protocol1789
programmed to cause a change, including a transfer or loss of control; or1790
(2) The power is shared with another person.1791
(e) When power not shared with another person. A power of a purchaser is not shared1792
with another person under paragraph (2) of subsection (d) of this Code section and the1793
purchaser's power is not exclusive if:1794
(1) The purchaser can exercise the power only if the power also is exercised by the other1795
person; and1796
(2) The other person:1797
(A) Can exercise the power without exercise of the power by the purchaser; or1798
(B) Is the transferor to the purchaser of an interest in the chattel paper.1799
(f) Presumption of exclusivity of certain powers. If a purchaser has the powers1800
specified in subparagraphs (c)(3)(A) and (c)(3)(B) of this Code section, the powers are1801
presumed to be exclusive.1802
(g) Obtaining control through another person. A purchaser has control of an1803
authoritative electronic copy of a record evidencing chattel paper if another person, other1804
than the transferor to the purchaser of an interest in the chattel paper:1805
(1) Has control of the authoritative electronic copy and acknowledges that it has control1806
on behalf of the purchaser; or1807
(2) Obtains control of the authoritative electronic copy after having acknowledged that1808
it will obtain control of the electronic copy on behalf of the purchaser."1809
SECTION 5-43.1810
Said title is further amended by adding new Code Section 11-9-105A, relating to control of1811
electronic money, as follows:1812
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"11-9-105A.Control of electronic money.1813
(a) General rule: control of electronic money. A person has control of electronic money1814
if:1815
(1) The electronic money, a record attached to or logically associated with the electronic1816
money, or a system in which the electronic money is recorded gives the person:1817
(A) Power to avail itself of substantially all the benefit from the electronic money; and1818
(B) Exclusive power, subject to subsection (b) of this Code section, to:1819
(i) Prevent others from availing themselves of substantially all the benefit from the1820
electronic money; and1821
(ii) Transfer control of the electronic money to another person or cause another1822
person to obtain control of other electronic money as a result of the transfer of the1823
electronic money; and1824
(2) The electronic money, a record attached to or logically associated with the electronic1825
money, or a system in which the electronic money is recorded enables the person readily1826
to identify itself in any way, including by name, identifying number, cryptographic key,1827
office, or account number, as having the powers under paragraph (1) of this subsection.1828
(b) Meaning of exclusive. Subject to subsection (c) of this Code section, a power is1829
exclusive under subparagraphs (a)(1)(B)(i) and (a)(1)(B)(ii) of this Code section even if:1830
(1) The electronic money, a record attached to or logically associated with the electronic1831
money, or a system in which the electronic money is recorded limits the use of the1832
electronic money or has a protocol programmed to cause a change, including a transfer1833
or loss of control; or1834
(2) The power is shared with another person.1835
(c) When power not shared with another person. A power of a person is not shared1836
with another person under paragraph (2) of subsection (b) of this Code section and the1837
person's power is not exclusive if:1838
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(1) The person can exercise the power only if the power also is exercised by the other1839
person; and1840
(2) The other person:1841
(A) Can exercise the power without exercise of the power by the person; or1842
(B) Is the transferor to the person of an interest in the electronic money.1843
(d) Presumption of exclusivity of certain powers. If a person has the powers specified1844
in subparagraphs (a)(1)(B)(i) and (a)(1)(B)(ii) of this Code section, the powers are1845
presumed to be exclusive.1846
(e) Control through another person. A person has control of electronic money if1847
another person, other than the transferor to the person of an interest in the electronic1848
money:1849
(1) Has control of the electronic money and acknowledges that it has control on behalf1850
of the person; or1851
(2) Obtains control of the electronic money after having acknowledged that it will obtain1852
control of the electronic money on behalf of the person."1853
SECTION 5-44.1854
Said title is further amended by adding new Code Section 11-9-107A, relating to control of1855
controllable electronic records, controllable accounts, or controllable payment intangibles,1856
as follows:1857
"11-9-107A.Control of controllable electronic record, controllable account, or1858
controllable payment intangible.1859
(a) Control under Code Section 11-12-105. A secured party has control of a controllable1860
electronic record as provided in Code Section 11-12-105.1861
(b) Control of controllable account and controllable payment intangible. A secured1862
party has control of a controllable account or controllable payment intangible if the secured1863
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party has control of the controllable electronic record that evidences the controllable1864
account or controllable payment intangible."1865
SECTION 5-45.1866
Said title is further amended by adding new Code Section 11-9-107B, relating to no1867
requirement to acknowledge or confirm and no duties, as follows:1868
"11-9-107B.No requirement to acknowledge or confirm; no duties.1869
(a) No requirement to acknowledge. A person that has control under Code Section1870
11-9-104, 11-9-105, or 11-9-105A is not required to acknowledge that it has control on1871
behalf of another person.1872
(b) No duties or confirmation. If a person acknowledges that it has or will obtain control1873
on behalf of another person, unless the person otherwise agrees or law other than this1874
article otherwise provides, the person does not owe any duty to the other person and is not1875
required to confirm the acknowledgment to any other person."1876
SECTION 5-46.1877
Said title is further amended in subsection (b) of Code Section 11-9-203, relating to1878
attachment and enforceability of security interests, proceeds, supporting obligations, and1879
formal requisites, by revising paragraph (3) as follows:1880
"(3) One of the following conditions is met:1881
(A) The debtor has authenticated signed a security agreement that provides a1882
description of the collateral and, if the security interest covers timber to be cut, a1883
description of the land concerned;1884
(B) The collateral is not a certificated security and is in the possession of the secured1885
party under Code Section 11-9-313 pursuant to the debtor's security agreement;1886
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(C) The collateral is a certificated security in registered form and the security
1887
certificate has been delivered to the secured party under Code Section 11-8-3011888
pursuant to the debtor's security agreement; or
1889
(D) The collateral is controllable accounts, controllable electronic records, controllable1890
payment intangibles, deposit accounts, electronic chattel paper, electronic documents,1891
electronic money, investment property, or letter of credit rights, or electronic1892
documents, and the secured party has control under Code Section 11-7-106, 11-9-104,1893
11-9-105 11-9-105A, 11-9-106, or 11-9-107, or 11-9-107A pursuant to the debtor's1894
security agreement; or1895
(E) The collateral is chattel paper and the secured party has possession and control1896
under Code Section 11-9-314A pursuant to the debtor's security agreement."1897
SECTION 5-47.1898
Said title is further amended by revising Code Section 11-9-204, relating to after acquired1899
property and future advances, as follows:1900
"11-9-204.After acquired property; future advances.1901
(a) After acquired collateral. Except as otherwise provided in subsection (b) of this1902
Code section, a security agreement may create or provide for a security interest in after1903
acquired collateral.1904
(b) When after acquired property clause not effective. Subject to subsection (b.1) of1905
this Code section, a A security interest does not attach under a term constituting an after1906
acquired property clause to:1907
(1) Consumer goods, other than an accession when given as additional security, unless1908
the debtor acquires rights in them within ten days after the secured party gives value; or1909
(2) A commercial tort claim.1910
(b.1) Limitation on subsection (b) of this Code section. Subsection (b) of this Code1911
section does not prevent a security interest from attaching:1912
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(1) To consumer goods as proceeds under subsection (a) of Code Section 11-9-315 or1913
commingled goods under subsection (c) of Code Section 11-9-336;1914
(2) To a commercial tort claim as proceeds under subsection (a) of Code Section1915
11-9-315; or1916
(3) Under an after-acquired property clause to property that is proceeds of consumer1917
goods or a commercial tort claim.1918
(c) Future advances and other value. A security agreement may provide that collateral1919
secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold1920
in connection with, future advances or other value, whether or not the advances or value1921
are given pursuant to commitment."1922
SECTION 5-48.1923
Said title is further amended in Code Section 11-9-207, relating to rights and duties of a1924
secured party having possession or control of collateral, by revising the introductory1925
language of subsection (c) as follows:1926
"(c) Duties and rights when secured party in possession or control. Except as1927
otherwise provided in subsection (d) of this Code section, a secured party having1928
possession of collateral or control of collateral under Code Section 11-7-106, 11-9-104,1929
11-9-105, 11-9-105A, 11-9-106, or 11-9-107, or 11-9-107A:"1930
SECTION 5-49.1931
Said title is further amended by revising Code Section 11-9-208, relating to additional duties1932
of a secured party having control of collateral, as follows:1933
"11-9-208.Additional duties of secured party having control of collateral.1934
(a) Applicability of Code section. This Code section applies to cases in which there is1935
no outstanding secured obligation and the secured party is not committed to make1936
advances, incur obligations, or otherwise give value.1937
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(b) Duties of secured party after receiving demand from debtor. Within ten days after
1938
receiving an authenticated
a signed demand by the debtor:1939
(1) A secured party having control of a deposit account under paragraph (2) of1940
subsection (a) of Code Section 11-9-104 shall send to the bank with which the deposit1941
account is maintained an authenticated statement a signed record that releases the bank1942
from any further obligation to comply with instructions originated by the secured party;1943
(2) A secured party having control of a deposit account under paragraph (3) of1944
subsection (a) of Code Section 11-9-104 shall:1945
(A) Pay the debtor the balance on deposit in the deposit account; or1946
(B) Transfer the balance on deposit into a deposit account in the debtor's name;1947
(3) A secured party, other than a buyer, having control of electronic chattel paper under1948
Code Section 11-9-105 shall:1949
(A) Communicate the authoritative copy of the electronic chattel paper to the debtor1950
or its designated custodian;1951
(B) If the debtor designates a custodian that is the designated custodian with which the1952
authoritative copy of the electronic chattel paper is maintained for the secured party,1953
communicate to the custodian an authenticated record releasing the designated1954
custodian from any further obligation to comply with instructions originated by the1955
secured party and instructing the custodian to comply with instructions originated by1956
the debtor; and1957
(C) Take appropriate action to enable the debtor or its designated custodian to make1958
copies of or revisions to the authoritative copy which add or change an identified1959
assignee of the authoritative copy without the consent of the secured party;1960
(3) A secured party, other than a buyer, having control under Code Section 11-9-105 of1961
an authoritative electronic copy of a record evidencing chattel paper shall transfer control1962
of the electronic copy to the debtor or a person designated by the debtor;1963
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(4) A secured party having control of investment property under paragraph (2) of
1964
subsection (d) of Code Section 11-8-106 or subsection (b) of Code Section 11-9-106 shall1965
send to the securities intermediary or commodity intermediary with which the security1966
entitlement or commodity contract is maintained an authenticated
a signed record that1967
releases the securities intermediary or commodity intermediary from any further1968
obligation to comply with entitlement orders or directions originated by the secured party;1969
(5) A secured party having control of a letter of credit right under Code Section 11-9-1071970
shall send to each person having an unfulfilled obligation to pay or deliver proceeds of1971
the letter of credit to the secured party an authenticated a signed release from any further1972
obligation to pay or deliver proceeds of the letter of credit to the secured party; and1973
(6) A secured party having control of an electronic document shall:1974
(A) Give control of the electronic document to the debtor or its designated custodian;1975
(B) If the debtor designates a custodian that is the designated custodian with which the1976
authoritative copy of the electronic document is maintained for the secured party,1977
communicate to the custodian an authenticated record releasing the designated1978
custodian from any further obligation to comply with instructions originated by the1979
secured party and instructing the custodian to comply with instructions originated by1980
the debtor; and1981
(C) Take appropriate action to enable the debtor or its designated custodian to make1982
copies of or revisions to the authenticated copy which add or change an identified1983
assignee of the authoritative copy without the consent of the secured party.1984
(6) A secured party having control under Code Section 11-7-106 of an authoritative1985
electronic copy of an electronic document shall transfer control of the electronic copy to1986
the debtor or a person designated by the debtor;1987
(7) A secured party having control under Code Section 11-9-105A of electronic money1988
shall transfer control of the electronic money to the debtor or a person designated by the1989
debtor; and1990
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(8) A secured party having control under Code Section 11-12-105 of a controllable1991
electronic record, other than a buyer of a controllable account or controllable payment1992
intangible evidenced by the controllable electronic record, shall transfer control of the1993
controllable electronic record to the debtor or a person designated by the debtor."1994
SECTION 5-50.1995
Said title is further amended by revising Code Section 11-9-209, relating to duties of a1996
secured party if account debtor has been notified of assignment, as follows:1997
"11-9-209.Duties of secured party if account debtor has been notified of assignment.1998
(a) Applicability of Code section. Except as otherwise provided in subsection (c) of this1999
Code section, this Code section applies if:2000
(1) There is no outstanding secured obligation; and2001
(2) The secured party is not committed to make advances, incur obligations, or otherwise2002
give value.2003
(b) Duties of secured party after receiving demand from debtor. Within ten days after2004
receiving an authenticated a signed demand by the debtor, a secured party shall send to an2005
account debtor that has received notification under subsection (a) of Code Section 11-9-4062006
or subsection (b) of Code Section 11-12-106 of an assignment to the secured party as2007
assignee under subsection (a) of Code Section 11-9-406 an authenticated a signed record2008
that releases the account debtor from any further obligation to the secured party.2009
(c) Inapplicability to sales. This Code section does not apply to an assignment2010
constituting the sale of an account, chattel paper, or payment intangible."2011
SECTION 5-51.2012
Said title is further amended by revising Code Section 11-9-301, relating to law governing2013
perfection and priority of security interests, as follows:2014
H. B. 1240
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"11-9-301. Law governing perfection and priority of security interests.
2015
Except as otherwise provided in Code Sections 11-9-303 through 11-9-306
11-9-306B, the2016
following rules determine the law governing perfection, the effect of perfection or2017
nonperfection, and the priority of a security interest in collateral:2018
(1) Except as otherwise provided in this Code section, while a debtor is located in a2019
jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection2020
or nonperfection, and the priority of a security interest in collateral;2021
(2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs2022
perfection, the effect of perfection or nonperfection, and the priority of a possessory2023
security interest in that collateral;2024
(3) Except as otherwise provided in paragraph (4) of this Code section, while tangible2025
negotiable tangible documents, goods, instruments, or tangible money, or tangible chattel2026
paper is located in a jurisdiction, the local law of that jurisdiction governs:2027
(A) Perfection of a security interest in the goods by filing a fixture filing;2028
(B) Perfection of a security interest in timber to be cut;2029
(C) Perfection of a security interest in crops; and2030
(D) The effect of perfection or nonperfection and the priority of a nonpossessory2031
security interest in the collateral; and2032
(4) The local law of the jurisdiction in which the wellhead or minehead is located2033
governs perfection, the effect of perfection or nonperfection, and the priority of a security2034
interest in as-extracted collateral."2035
SECTION 5-52.2036
Said title is further amended in Code Section 11-9-304, relating to law governing perfection2037
and priority of security interests in deposit accounts, by revising subsection (a) as follows:2038
"(a) Law of bank's jurisdiction governs. The local law of a bank's jurisdiction governs2039
perfection, the effect of perfection or nonperfection, and the priority of a security interest2040
H. B. 1240
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in a deposit account maintained with that bank even if the transaction does not bear any2041
relation to the bank's jurisdiction."2042
SECTION 5-53.2043
Said title is further amended in subsection (a) of Code Section 11-9-305, relating to law2044
governing perfection and priority of security interests in investment property, by deleting2045
"and" at the end of paragraph (3), by substituting "; and" for the period at the end of2046
paragraph (4), and by adding a new paragraph to read as follows:2047
"(5) Paragraphs (2), (3), and (4) of this subsection apply even if the transaction does not2048
bear any relation to the jurisdiction."2049
SECTION 5-54.2050
Said title is further amended by adding new Code Section 11-9-306A, relating to law2051
governing perfection and priority of security interests in chattel paper, as follows:2052
"11-9-306A.Law governing perfection and priority of security interests in chattel2053
paper.2054
(a) Chattel paper evidenced by authoritative electronic copy. Except as provided in2055
subsection (d) of this Code section, if chattel paper is evidenced only by an authoritative2056
electronic copy of the chattel paper or is evidenced by an authoritative electronic copy and2057
an authoritative tangible copy, the local law of the chattel paper's jurisdiction governs2058
perfection, the effect of perfection or nonperfection, and the priority of a security interest2059
in the chattel paper, even if the transaction does not bear any relation to the chattel paper's2060
jurisdiction.2061
(b) Chattel paper's jurisdiction. The following rules determine the chattel paper's2062
jurisdiction under this Code section:2063
(1) If the authoritative electronic copy of the record evidencing chattel paper, or a record2064
attached to or logically associated with the electronic copy and readily available for2065
H. B. 1240
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review, expressly provides that a particular jurisdiction is the chattel paper's jurisdiction2066
for purposes of this part, this article, or this title, that jurisdiction is the chattel paper's2067
jurisdiction;2068
(2) If paragraph (1) of this subsection does not apply and the rules of the system in which2069
the authoritative electronic copy is recorded are readily available for review and expressly2070
provide that a particular jurisdiction is the chattel paper's jurisdiction for purposes of this2071
part, this article, or this title, that jurisdiction is the chattel paper's jurisdiction;2072
(3) If paragraphs (1) and (2) of this subsection do not apply and the authoritative2073
electronic copy, or a record attached to or logically associated with the electronic copy2074
and readily available for review, expressly provides that the chattel paper is governed by2075
the law of a particular jurisdiction, that jurisdiction is the chattel paper's jurisdiction;2076
(4) If paragraphs (1), (2), and (3) of this subsection do not apply and the rules of the2077
system in which the authoritative electronic copy is recorded are readily available for2078
review and expressly provide that the chattel paper or the system is governed by the law2079
of a particular jurisdiction, that jurisdiction is the chattel paper's jurisdiction; and2080
(5) If paragraphs (1) through (4) of this subsection do not apply, the chattel paper's2081
jurisdiction is the jurisdiction in which the debtor is located.2082
(c) Chattel paper evidenced by authoritative tangible copy. If an authoritative tangible2083
copy of a record evidences chattel paper and the chattel paper is not evidenced by an2084
authoritative electronic copy, while the authoritative tangible copy of the record evidencing2085
chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:2086
(1) Perfection of a security interest in the chattel paper by possession under Code Section2087
11-9-314A; and2088
(2) The effect of perfection or nonperfection and the priority of a security interest in the2089
chattel paper.2090
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(d) When perfection governed by law of jurisdiction where debtor located. The local2091
law of the jurisdiction in which the debtor is located governs perfection of a security2092
interest in chattel paper by filing."2093
SECTION 5-55.2094
Said title is further amended by adding new Code Section 11-9-306B, relating to law2095
governing perfection and priority of security interests in controllable accounts, controllable2096
electronic records, and controllable payment intangibles, as follows:2097
"11-9-306B.Law governing perfection and priority of security interests in2098
controllable accounts, controllable electronic records, and controllable2099
payment intangibles.2100
(a) Governing law: general rules. Except as provided in subsection (b) of this Code2101
section, the local law of the controllable electronic record's jurisdiction specified in2102
subsections (c) and (d) of Code Section 11-12-107 governs perfection, the effect of2103
perfection or nonperfection, and the priority of a security interest in a controllable2104
electronic record and a security interest in a controllable account or controllable payment2105
intangible evidenced by the controllable electronic record.2106
(b) When perfection governed by law of jurisdiction where debtor located. The local2107
law of the jurisdiction in which the debtor is located governs:2108
(1) Perfection of a security interest in a controllable account, controllable electronic2109
record, or controllable payment intangible by filing; and2110
(2) Automatic perfection of a security interest in a controllable payment intangible2111
created by a sale of the controllable payment intangible."2112
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SECTION 5-56.
2113
Said title is further amended in Code Section 11-9-310, relating to when filing is required to2114
perfect security interest or agricultural lien and security interests and agricultural liens to2115
which filing provisions do not apply, by revising subsection (b) as follows:2116
"(b) Exceptions; filing not necessary. The filing of a financing statement is not necessary2117
to perfect a security interest:2118
(1) That is perfected under subsection (d), (e), (f), or (g) of Code Section 11-9-308;2119
(2) That is perfected under Code Section 11-9-309 when it attaches;2120
(3) In property subject to a statute, regulation, or treaty described in subsection (a) of2121
Code Section 11-9-311;2122
(4) In goods in possession of a bailee which is perfected under paragraph (1) or (2) of2123
subsection (d) of Code Section 11-9-312;2124
(5) In certificated securities, documents, goods, or instruments which is perfected2125
without filing, control, or possession under subsection (e), (f), or (g) of Code Section2126
11-9-312;2127
(6) In collateral in the secured party's possession under Code Section 11-9-313;2128
(7) In a certificated security which is perfected by delivery of the security certificate to2129
the secured party under Code Section 11-9-313;2130
(8) In controllable accounts, controllable electronic records, controllable payment
2131
intangibles, deposit accounts, electronic chattel paper, electronic documents, investment2132
property, or letter of credit rights which is perfected by control under Code Section2133
11-9-314;2134
(8.1) In chattel paper which is perfected by possession and control under Code Section2135
11-9-314A;2136
(9) In proceeds which is perfected under Code Section 11-9-315; or2137
(10) That is perfected under Code Section 11-9-316."2138
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SECTION 5-57.
2139
Said title is further amended by revising Code Section 11-9-312, relating to perfection of2140
security interests in chattel paper, deposit accounts, documents, goods covered by2141
documents, instruments, investment property, letter of credit rights, and money; perfection2142
by permissive filing; and temporary perfection without filing or transfer of possession, as2143
follows:2144
"11-9-312.Perfection of security interests in chattel paper, controllable accounts,
2145
controllable electronic records, controllable payment intangibles, deposit2146
accounts, negotiable documents, goods covered by documents,2147
instruments, investment property, letter of credit rights, and money;2148
perfection by permissive filing; temporary perfection without filing or2149
transfer of possession.2150
(a) Perfection by filing permitted. A security interest in chattel paper, negotiable2151
documents, controllable accounts, controllable electronic records, controllable payment2152
intangibles, instruments, or investment property, or negotiable documents may be perfected2153
by filing.2154
(b) Control or possession of certain collateral. Except as otherwise provided in2155
subsections (c) and (d) of Code Section 11-9-315 for proceeds:2156
(1) A security interest in a deposit account may be perfected only by control under Code2157
Section 11-9-314;2158
(2) Except as otherwise provided in subsection (d) of Code Section 11-9-308, a security2159
interest in a letter of credit right may be perfected only by control under Code Section2160
11-9-314; and2161
(3) A security interest in tangible money may be perfected only by the secured party's2162
taking possession under Code Section 11-9-313; and2163
(4) A security interest in electronic money may be perfected only by control under Code2164
Section 11-9-314.2165
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(c) Goods covered by negotiable document. While goods are in the possession of a
2166
bailee that has issued a negotiable document covering the goods:2167
(1) A security interest in the goods may be perfected by perfecting a security interest in2168
the document; and2169
(2) A security interest perfected in the document has priority over any security interest2170
that becomes perfected in the goods by another method during that time.2171
(d) Goods covered by nonnegotiable document. While goods are in the possession of2172
a bailee that has issued a nonnegotiable document covering the goods, a security interest2173
in the goods may be perfected by:2174
(1) Issuance of a document in the name of the secured party;2175
(2) The bailee's receipt of notification of the secured party's interest; or2176
(3) Filing as to the goods.2177
(e) Temporary perfection; new value. A security interest in certificated securities,2178
negotiable documents, or instruments is perfected without filing or the taking of possession2179
or control for a period of 20 days from the time it attaches to the extent that it arises for2180
new value given under an authenticated
a signed security agreement.2181
(f) Temporary perfection; goods or documents made available to debtor. A perfected2182
security interest in a negotiable document or goods in possession of a bailee, other than one2183
that has issued a negotiable document for the goods, remains perfected for 20 days without2184
filing if the secured party makes available to the debtor the goods or documents2185
representing the goods for the purpose of:2186
(1) Ultimate sale or exchange; or2187
(2) Loading, unloading, storing, shipping, transshipping, manufacturing, processing, or2188
otherwise dealing with them in a manner preliminary to their sale or exchange.2189
(g) Temporary perfection; delivery of security certificate or instrument to debtor. 2190
A perfected security interest in a certificated security or instrument remains perfected for2191
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20 days without filing if the secured party delivers the security certificate or instrument to
2192
the debtor for the purpose of:2193
(1) Ultimate sale or exchange; or2194
(2) Presentation, collection, enforcement, renewal, or registration of transfer.2195
(h) Expiration of temporary perfection. After the 20 day period specified in2196
subsection (e), (f), or (g) of this Code section expires, perfection depends upon compliance2197
with this article."2198
SECTION 5-58.2199
Said title is further amended in Code Section 11-9-313, relating to when possession by or2200
delivery to a secured party perfects security interest without filing, by revising subsections2201
(a), (c), and (d) as follows:2202
"(a) Perfection by possession or delivery. Except as otherwise provided in subsection2203
(b) of this Code section, a secured party may perfect a security interest in tangible
2204
negotiable documents, goods, instruments, negotiable tangible documents, or tangible2205
money, or tangible chattel paper by taking possession of the collateral. A secured party2206
may perfect a security interest in certificated securities by taking delivery of the certificated2207
securities under Code Section 11-8-301."2208
"(c) Collateral in possession of person other than debtor. With respect to collateral2209
other than certificated securities and goods covered by a document, a secured party takes2210
possession of collateral in the possession of a person other than the debtor, the secured2211
party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's2212
business, when:2213
(1) The person in possession authenticates signs a record acknowledging that it holds2214
possession of the collateral for the secured party's benefit; or2215
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(2) The person takes possession of the collateral after having authenticated signed a2216
record acknowledging that it will hold possession of the collateral for the secured party's2217
benefit.2218
(d) Time of perfection by possession; continuation of perfection. If perfection of a2219
security interest depends upon possession of the collateral by a secured party, perfection2220
occurs no not earlier than the time the secured party takes possession and continues only2221
while the secured party retains possession."2222
SECTION 5-59.2223
Said title is further amended by revising Code Section 11-9-314, relating to perfection by2224
control, as follows:2225
"11-9-314.Perfection by control.2226
(a) Perfection by control. A security interest in investment property, deposit accounts,2227
letter of credit rights, electronic chattel paper, or electronic documents controllable2228
accounts, controllable electronic records, controllable payment intangibles, deposit2229
accounts, electronic documents, electronic money, investment property, or letter of credit2230
rights may be perfected by control of the collateral under Code Section 11-7-106, 11-9-104,2231
11-9-105, 11-9-105A, 11-9-106, or 11-9-107, or 11-9-107A.2232
(b) Specified collateral; time of perfection by control; continuation of perfection. A2233
security interest in deposit accounts, electronic chattel paper, letter of credit rights, or2234
electronic documents controllable accounts, controllable electronic records, controllable2235
payment intangibles, deposit accounts, electronic documents, electronic money, or letter2236
of credit rights is perfected by control under Code Section 11-7-106, 11-9-104, 11-9-105,2237
11-9-105A, or 11-9-107, or 11-9-107A when not earlier than the time the secured party2238
obtains control and remains perfected by control only while the secured party retains2239
control.2240
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(c) Investment property; time of perfection by control; continuation of perfection.
2241
A security interest in investment property is perfected by control under Code2242
Section 11-9-106 from
not earlier than the time the secured party obtains control and2243
remains perfected by control until:2244
(1) The secured party does not have control; and2245
(2) One of the following occurs:2246
(A) If the collateral is a certificated security, the debtor has or acquires possession of2247
the security certificate;2248
(B) If the collateral is an uncertificated security, the issuer has registered or registers2249
the debtor as the registered owner; or2250
(C) If the collateral is a security entitlement, the debtor is or becomes the entitlement2251
holder."2252
SECTION 5-60.2253
Said title is further amended by adding new Code Section 11-9-314A, relating to perfection2254
by possession and control of chattel paper, as follows:2255
"11-9-314A.Perfection by possession and control of chattel paper.2256
(a) Perfection by possession and control. A secured party may perfect a security interest2257
in chattel paper by taking possession of each authoritative tangible copy of the record2258
evidencing the chattel paper and obtaining control of each authoritative electronic copy of2259
the electronic record evidencing the chattel paper.2260
(b) Time of perfection; continuation of perfection. A security interest is perfected under2261
subsection (a) of this Code section not earlier than the time the secured party takes2262
possession and obtains control and remains perfected under subsection (a) of this Code2263
section only while the secured party retains possession and control.2264
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(c) Application of Code Section 11-9-313 to perfection by possession of chattel paper. 2265
Subsections (c) and (f) through (i) of Code Section 11-9-313 apply to perfection by2266
possession of an authoritative tangible copy of a record evidencing chattel paper."2267
SECTION 5-61.2268
Said title is further amended in Code Section 11-9-316, relating to effect of change in2269
governing law, by revising subsection (a) and (f) as follows:2270
"(a) General rule; effect on perfection of change in governing law. A security interest2271
perfected pursuant to the law of the jurisdiction designated in paragraph (1) of Code2272
Section 11-9-301, or subsection (c) of Code Section 11-9-305, subsection (d) of Code2273
Section 11-9-306A, or subsection (b) of Code Section 11-9-306B remains perfected until2274
the earliest of:2275
(1) The time perfection would have ceased under the law of that jurisdiction;2276
(2) The expiration of four months after a change of the debtor's location to another2277
jurisdiction; or2278
(3) The expiration of one year after a transfer of collateral to a person that thereby2279
becomes a debtor and is located in another jurisdiction."2280
"(f) Change in jurisdiction of chattel paper, controllable electronic record, bank,2281
issuer, nominated person, securities intermediary, or commodity intermediary. A2282
security interest in chattel paper, controllable accounts, controllable electronic records,2283
controllable payment intangibles, deposit accounts, letter of credit rights, or investment2284
property which is perfected under the law of the chattel paper's jurisdiction, the controllable2285
electronic record's jurisdiction, the bank's jurisdiction, the issuer's jurisdiction, a nominated2286
person's jurisdiction, the securities intermediary's jurisdiction, or the commodity2287
intermediary's jurisdiction, as applicable, remains perfected until the earlier of:2288
(1) The time the security interest would have become unperfected under the law of that2289
jurisdiction; or2290
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(2) The expiration of four months after a change of the applicable jurisdiction to another
2291
jurisdiction."2292
SECTION 5-62.2293
Said title is further amended by revising Code Section 11-9-317, relating to interests that take2294
priority over or take free of security interest or agricultural lien, as follows:2295
"11-9-317.Interests that take priority over or take free of security interest or2296
agricultural lien.2297
(a) Conflicting security interests and rights of lien creditors. A security interest or2298
agricultural lien is subordinate to the rights of:2299
(1) A person entitled to priority under Code Section 11-9-322; and2300
(2) Except as otherwise provided in subsection (e) of this Code section, a person that2301
becomes a lien creditor before the earlier of the time:2302
(A) The security interest or agricultural lien is perfected; or2303
(B) A financing statement covering the collateral is filed.2304
(b) Buyers that receive delivery. Except as otherwise provided in subsection (e) of this2305
Code section, a buyer, other than a secured party, of tangible chattel paper, tangible
2306
documents, goods, instruments, tangible documents, or a certificated security takes free of2307
a security interest or agricultural lien if the buyer gives value and receives delivery of the2308
collateral without knowledge of the security interest or agricultural lien and before it is2309
perfected.2310
(c) Lessees that receive delivery. Except as otherwise provided in subsection (e) of this2311
Code section, a lessee of goods takes free of a security interest or agricultural lien if the2312
lessee gives value and receives delivery of the collateral without knowledge of the security2313
interest or agricultural lien and before it is perfected.2314
(d) Licensees and buyers of certain collateral. Subject to subsections (f) through (i) of2315
this Code section, a A licensee of a general intangible or a buyer, other than a secured2316
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party, of collateral other than tangible chattel paper, tangible documents, electronic money,2317
goods, instruments, tangible documents, or a certificated security takes free of a security2318
interest if the licensee or buyer gives value without knowledge of the security interest and2319
before it is perfected.2320
(e) Purchase money security interest. Except as otherwise provided in Code Sections2321
11-9-320 and 11-9-321, if a person files a financing statement with respect to a purchase2322
money security interest before or within 20 days after the debtor receives delivery of the2323
collateral, the security interest takes priority over the rights of a buyer, lessee, or lien2324
creditor which arise between the time the security interest attaches and the time of filing.2325
(f) Buyers of chattel paper. A buyer, other than a secured party, of chattel paper takes2326
free of a security interest if, without knowledge of the security interest and before it is2327
perfected, the buyer gives value and:2328
(1) Receives delivery of each authoritative tangible copy of the record evidencing the2329
chattel paper; and2330
(2) If each authoritative electronic copy of the record evidencing the chattel paper can2331
be subjected to control under Code Section 11-9-105, obtains control of each2332
authoritative electronic copy.2333
(g) Buyers of electronic documents. A buyer of an electronic document takes free of a2334
security interest if, without knowledge of the security interest and before it is perfected, the2335
buyer gives value and, if each authoritative electronic copy of the document can be2336
subjected to control under Code Section 11-7-106, obtains control of each authoritative2337
electronic copy.2338
(h) Buyers of controllable electronic records. A buyer of a controllable electronic2339
record takes free of a security interest if, without knowledge of the security interest and2340
before it is perfected, the buyer gives value and obtains control of the controllable2341
electronic record.2342
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(i) Buyers of controllable accounts and controllable payment intangibles. A buyer,2343
other than a secured party, of a controllable account or a controllable payment intangible2344
takes free of a security interest if, without knowledge of the security interest and before it2345
is perfected, the buyer gives value and obtains control of the controllable account or2346
controllable payment intangible."2347
SECTION 5-63.2348
Said title is further amended in Code Section 11-9-323, relating to future advances, by2349
revising subsections (c) and (e) as follows:2350
"(c) Buyer of goods. Except as otherwise provided in subsection (d) of this Code section,2351
a buyer of goods other than a buyer in ordinary course of business takes free of a security2352
interest to the extent that it secures advances made after the earlier of:2353
(1) The time the secured party acquires knowledge of the buyer's purchase; or2354
(2) Forty-five days after the purchase."2355
"(e) Lessee of goods. Except as otherwise provided in subsection (f) of this Code section,2356
a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold2357
interest free of a security interest to the extent that it secures advances made after the2358
earlier of:2359
(1) The time the secured party acquires knowledge of the lease; or2360
(2) Forty-five days after the lease contract becomes enforceable."2361
SECTION 5-64.2362
Said title is further amended by adding new Code Section 11-9-326A, relating to priority of2363
security interests in controllable accounts, controllable electronic records, and controllable2364
payment intangibles, as follows:2365
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"11-9-326A.Priority of security interest in controllable account, controllable2366
electronic record, and controllable payment intangible.2367
A security interest in a controllable account, controllable electronic record, or controllable2368
payment intangible held by a secured party having control of the account, electronic record,2369
or payment intangible has priority over a conflicting security interest held by a secured2370
party that does not have control."2371
SECTION 5-65.2372
Said title is further amended by revising Code Section 11-9-330, relating to priority of2373
purchaser of chattel paper or instrument, as follows:2374
"11-9-330.Priority of purchaser of chattel paper or instrument.2375
(a) Purchaser's priority; security interest claimed merely as proceeds. A purchaser2376
of chattel paper has priority over a security interest in the chattel paper which is claimed2377
merely as proceeds of inventory subject to a security interest if:2378
(1) In good faith and in the ordinary course of the purchaser's business, the purchaser2379
gives new value, and takes possession of each authoritative tangible copy of the record2380
evidencing the chattel paper, or and obtains control of under Code Section 11-9-105 of2381
each authoritative electronic copy of the record evidencing the chattel paper under Code2382
Section 11-9-105; and2383
(2) The chattel paper does authoritative copies of the record evidencing the chattel paper2384
do not indicate that it the chattel paper has been assigned to an identified assignee other2385
than the purchaser.2386
(b) Purchaser's priority; other security interests. A purchaser of chattel paper has2387
priority over a security interest in the chattel paper which is claimed other than merely as2388
proceeds of inventory subject to a security interest if the purchaser gives new value, and2389
takes possession of each authoritative tangible copy of the record evidencing the chattel2390
paper, or and obtains control of under Code Section 11-9-105 of each authoritative2391
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electronic copy of the record evidencing the chattel paper under Code Section 11-9-105 in2392
good faith, in the ordinary course of the purchaser's business, and without knowledge that2393
the purchase violates the rights of the secured party.2394
(c) Chattel paper purchaser's priority in proceeds. Except as otherwise provided in2395
Code Section 11-9-327, a purchaser having priority in chattel paper under subsection (a)2396
or (b) of this Code section also has priority in proceeds of the chattel paper to the extent2397
that:2398
(1) Code Section 11-9-322 provides for priority in the proceeds; or2399
(2) The proceeds consist of the specific goods covered by the chattel paper or cash2400
proceeds of the specific goods, even if the purchaser's security interest in the proceeds is2401
unperfected.2402
(d) Instrument purchaser's priority. Except as otherwise provided in subsection (a) of2403
Code Section 11-9-331, a purchaser of an instrument has priority over a security interest2404
in the instrument perfected by a method other than possession if the purchaser gives value2405
and takes possession of the instrument in good faith and without knowledge that the2406
purchase violates the rights of the secured party.2407
(e) Holder of purchase money security interest gives new value. For purposes of2408
subsections (a) and (b) of this Code section, the holder of a purchase money security2409
interest in inventory gives new value for chattel paper constituting proceeds of the2410
inventory.2411
(f) Indication of assignment gives knowledge. For purposes of subsections (b) and (d)2412
of this Code section, if the authoritative copies of the record evidencing chattel paper or an2413
instrument indicates indicate that it the chattel paper or instrument has been assigned to an2414
identified secured party other than the purchaser, a purchaser of the chattel paper or2415
instrument has knowledge that the purchase violates the rights of the secured party."2416
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SECTION 5-66.
2417
Said title is further amended by revising Code Section 11-9-331, relating to priority of rights2418
of purchasers of instruments, documents, and securities under other articles, and priority of2419
interests in financial assets and security entitlements under Article 8 of this title, as follows:2420
"11-9-331.Priority of rights of purchasers of instruments,
controllable accounts,2421
controllable electronic records, controllable payment intangibles,2422
documents, instruments, and securities under other articles; priority of2423
interests in financial assets and security entitlements and protection2424
against assertion of claim under Article Articles 8 and 12 of this title.2425
(a) Rights under Articles 3, 7, and 8, and 12 of this title not limited. This article does2426
not limit the rights of a holder in due course of a negotiable instrument, a holder to which2427
a negotiable document of title has been duly negotiated, or a protected purchaser of a2428
security, or a qualifying purchaser of a controllable account, controllable electronic record,2429
or controllable payment intangible. These holders or purchasers take priority over an2430
earlier security interest, even if perfected, to the extent provided in Articles 3, 7, and 8, and2431
12 of this title.2432
(b) Protection under Article Articles 8 and 12 of this title. This article does not limit2433
the rights of or impose liability on a person to the extent that the person is protected against2434
the assertion of a claim under Article 8 or 12 of this title.2435
(c) Filing not notice. Filing under this article does not constitute notice of a claim or2436
defense to the holders or purchasers or persons described in subsections (a) and (b) of this2437
Code section."2438
SECTION 5-67.2439
Said title is further amended by revising Code Section 11-9-332, relating to transfers of2440
money and transfers of funds from deposit account, as follows:2441
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"11-9-332.Transfer of money; transfer of funds from deposit account.
2442
(a) Transferee of tangible
money. A transferee of tangible money takes the money free2443
of a security interest unless the transferee acts if the transferee receives possession of the2444
money without acting in collusion with the debtor in violating the rights of the secured2445
party.2446
(b) Transferee of funds from deposit account. A transferee of funds from a deposit2447
account takes the funds free of a security interest in the deposit account unless the2448
transferee acts if the transferee receives the funds without acting in collusion with the2449
debtor in violating the rights of the secured party.2450
(c) Transferee of electronic money. A transferee of electronic money takes the money2451
free of a security interest if the transferee obtains control of the money without acting in2452
collusion with the debtor in violating the rights of the secured party."2453
SECTION 5-68.2454
Said title is further amended by revising Code Section 11-9-406, relating to discharges of2455
account debtors, notifications of assignment, identification and proof of assignment, and2456
restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory2457
notes ineffective, as follows:2458
"11-9-406.Discharge of account debtor; notification of assignment; identification and2459
proof of assignment; restrictions on assignment of accounts, chattel paper,2460
payment intangibles, and promissory notes ineffective.2461
(a) Discharge of account debtor; effect of notification. Subject to subsections (b)2462
through (i) and (j) of this Code section, an account debtor on an account, chattel paper, or2463
a payment intangible may discharge its obligation by paying the assignor until, but not2464
after, the account debtor receives a notification, authenticated signed by the assignor or the2465
assignee, that the amount due or to become due has been assigned and that payment is to2466
be made to the assignee. After receipt of the notification, the account debtor may discharge2467
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its obligation by paying the assignee and may not discharge the obligation by paying the
2468
assignor.2469
(b) When notification ineffective. Subject to subsection
subsections (h) and (j) of this2470
Code section, notification is ineffective under subsection (a) of this Code section:2471
(1) If it does not reasonably identify the rights assigned;2472
(2) To the extent that an agreement between an account debtor and a seller of a payment2473
intangible limits the account debtor's duty to pay a person other than the seller and the2474
limitation is effective under law other than this article; or2475
(3) At the option of an account debtor, if the notification notifies the account debtor to2476
make less than the full amount of any installment or other periodic payment to the2477
assignee, even if:2478
(A) Only a portion of the account, chattel paper, or payment intangible has been2479
assigned to that assignee;2480
(B) A portion has been assigned to another assignee; or2481
(C) The account debtor knows that the assignment to that assignee is limited.2482
(c) Proof of assignment. Subject to subsection subsections (h) and (j) of this Code2483
section, if requested by the account debtor, an assignee shall seasonably furnish reasonable2484
proof that the assignment has been made. Unless the assignee complies, the account debtor2485
may discharge its obligation by paying the assignor, even if the account debtor has received2486
a notification under subsection (a) of this Code section.2487
(d) Term restricting assignment generally ineffective. In this subsection, the term2488
'promissory note' includes a negotiable instrument that evidences chattel paper. Except as2489
otherwise provided in subsection (e) of this Code section and Code Sections 11-2A-303,2490
11-9-407, and 53-12-80 through 53-12-83 and subject to subsection (h) of this Code2491
section, a term in an agreement between an account debtor and an assignor or in a2492
promissory note shall be is ineffective to the extent that it:2493
H. B. 1240
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(1) Prohibits, restricts, or requires the consent of the account debtor or person obligated
2494
on the promissory note to the assignment or transfer of, or the creation, attachment,2495
perfection, or enforcement of a security interest in, the account, chattel paper, payment2496
intangible, or promissory note; or2497
(2) Provides that the assignment, transfer, creation, attachment, perfection, or2498
enforcement of the security interest may give rise to a default, breach, right of2499
recoupment, claim, defense, termination, right of termination, or remedy under the2500
account, chattel paper, payment intangible, or promissory note.2501
(e) Inapplicability of subsection (d) of this Code section to certain sales. 2502
Subsection (d) of this Code section does not apply to the sale of a payment intangible or2503
promissory note, other than a sale pursuant to a disposition under Code Section 11-9-6102504
or an acceptance of collateral under Code Section 11-9-620.2505
(f) Legal restrictions on assignment generally ineffective. Except as otherwise provided2506
in Code Sections 11-2A-303 and 11-9-407 and subject to subsections (h) and (i) of this2507
Code section, a rule of law, statute, or regulation that prohibits, restricts, or requires the2508
consent of a government, governmental body or official, or account debtor to the2509
assignment or transfer of, or creation of a security interest in, an account or chattel paper2510
is ineffective to the extent that the rule of law, statute, or regulation:2511
(1) Prohibits, restricts, or requires the consent of the government, governmental body or2512
official, or account debtor to the assignment or transfer of, or the creation, attachment,2513
perfection, or enforcement of a security interest, in the account or chattel paper; or2514
(2) Provides that the assignment, transfer, creation, attachment, perfection, or2515
enforcement of the security interest may give rise to a default, breach, right of2516
recoupment, claim, defense, termination, right of termination, or remedy under the2517
account or chattel paper.2518
H. B. 1240
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(g) Paragraph (3) of subsection (b) not waivable. Subject to subsection subsections (h)2519
and (j) of this Code section, an account debtor may not waive or vary its option under2520
paragraph (3) of subsection (b) of this Code section.2521
(h) Rule for individual under other law. This Code section is subject to law other than2522
this article which establishes a different rule for an account debtor who is an individual and2523
who incurred the obligation primarily for personal, family, or household purposes.2524
(i) Inapplicability to health care insurance receivable. This Code section does not2525
apply to an assignment of a health care insurance receivable.2526
(j) Inapplicability of certain subsections. Subsections (a), (b), (c), and (g) of this Code2527
section do not apply to a controllable account or controllable payment intangible."2528
SECTION 5-69.2529
Said title is further amended in Code Section 11-9-408, relating to restrictions on assignment2530
of promissory notes, health care insurance receivables, and certain general intangibles2531
ineffective, by adding a new subsection to read as follows:2532
"(e) 'Promissory note.' In this Code section, the term 'promissory note' includes a2533
negotiable instrument that evidences chattel paper."2534
SECTION 5-70.2535
Said title is further amended in Code Section 11-9-601, relating to rights after default,2536
judicial enforcement and consignors or buyers of accounts, chattel paper, payment2537
intangibles, or promissory notes, by revising subsection (b) as follows:2538
"(b) Rights and duties of secured party in possession or control. A secured party in2539
possession of collateral or control of collateral under Code Section 11-7-106, 11-9-104,2540
11-9-105, 11-9-105A, 11-9-106, or 11-9-107, or 11-9-107A has the rights and duties2541
provided in Code Section 11-9-207."2542
H. B. 1240
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SECTION 5-71.
2543
Said title is further amended by revising Code Section 11-9-605, relating to unknown debtors2544
or secondary obligors, as follows:2545
"11-9-605.Unknown debtor or secondary obligor.2546
(a) In general: no duty owed by secured party. Except as provided in subsection (b) of
2547
this Code section, a A secured party does not owe a duty based on its status as secured2548
party:2549
(1) To a person that is a debtor or obligor, unless the secured party knows:2550
(A) That the person is a debtor or obligor;2551
(B) The identity of the person; and2552
(C) How to communicate with the person; or2553
(2) To a secured party or lienholder that has filed a financing statement against a person,2554
unless the secured party knows:2555
(A) That the person is a debtor; and2556
(B) The identity of the person.2557
(b) Exception: secured party owes duty to debtor or obligor. A secured party owes a2558
duty based on its status as a secured party to a person if, at the time the secured party2559
obtains control of collateral that is a controllable account, controllable electronic record,2560
or controllable payment intangible or at the time the security interest attaches to the2561
collateral, whichever is later:2562
(1) The person is a debtor or obligor; and2563
(2) The secured party knows that the information in subparagraphs (a)(1)(A), (a)(1)(B),2564
or (a)(1)(C) of this Code section relating to the person is not provided by the collateral,2565
a record attached to or logically associated with the collateral, or the system in which the2566
collateral is recorded."2567
H. B. 1240
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SECTION 5-72.
2568
Said title is further amended by revising Code Section 11-9-613, relating to consents and the2569
form of notification before disposition of collateral, as follows:2570
"11-9-613.Contents and form of notification before disposition of collateral; general.2571
(a) Contents and form of notification.
Except in a consumer goods transaction, the2572
following rules apply:2573
(1) The contents of a notification of disposition are sufficient if the notification:2574
(A) Describes the debtor and the secured party;2575
(B) Describes the collateral that is the subject of the intended disposition;2576
(C) States the method of intended disposition;2577
(D) States that the debtor is entitled to an accounting of the unpaid indebtedness and2578
states the charge, if any, for an accounting; and2579
(E) States the time and place of a public disposition or the time after which any other2580
disposition is to be made;2581
(2) Whether the contents of a notification that lacks any of the information specified in2582
paragraph (1) of this Code section subsection are nevertheless sufficient is a question of2583
fact;2584
(3) The contents of a notification providing substantially the information specified in2585
paragraph (1) of this Code section subsection are sufficient, even if the notification2586
includes:2587
(A) Information not specified by that paragraph; or2588
(B) Minor errors that are not seriously misleading;2589
(4) A particular phrasing of the notification is not required; and2590
(5) The following form of notification and the form appearing in paragraph (3) of2591
subsection (a) of Code Section 11-9-614, when completed in accordance with the2592
instructions in subsection (b) of this Code section and subsection (b) of Code2593
Section 11-9-614, each provides sufficient information:2594
H. B. 1240
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NOTIFICATION OF DISPOSITION OF COLLATERAL2595
To: (Name of debtor, obligor, or other person to which the notification is sent)2596
From: (Name, address, and telephone number of secured party)2597
Name of Debtor(s): (Include only if debtor(s) is (are) not an addressee)2598
(For a public disposition:)2599
We will sell (or lease or license, as applicable) the (describe collateral) to the highest2600
qualified bidder in public as follows:2601
Day and date: _______________________2602
Time: _______________________2603
Place: _______________________2604
(For a private disposition:)2605
We will sell (or lease or license, as applicable) the (describe collateral) privately2606
sometime after (day and date).2607
You are entitled to an accounting of the unpaid indebtedness secured by the property2608
that we intend to sell (or lease or license, as applicable) (for a charge of2609
$__________). You may request an accounting by calling us at (telephone number).2610
'NOTIFICATION OF DISPOSITION OF COLLATERAL2611
To: (Name of debtor, obligor, or other person to which the notification is sent)2612
From: (Name, address, and telephone number of secured party)2613
{1} Name of any debtor that is not an addressee: (Name of each debtor)2614
{2} We will sell (describe collateral) (to the highest qualified bidder) at public sale. A2615
sale could include a lease or license. The sale will be held as follows:2616
___________(Date)2617
___________(Time)2618
H. B. 1240
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___________(Place)2619
{3} We will sell (describe collateral) at private sale sometime after (date). A sale could2620
include a lease or license.2621
{4} You are entitled to an accounting of the unpaid indebtedness secured by the property2622
that we intend to sell or, as applicable, lease or license.2623
{5} If you request an accounting you must pay a charge of $ (amount).2624
{6} You may request an accounting by calling us at (telephone number).'2625
(b) Instructions for form of notification. The following instructions apply to the form2626
of notification in paragraph (5) of subsection (a) of this Code section:2627
(1) The instructions in this subsection refer to the numbers in braces before items in the2628
form of notification in paragraph (5) of subsection (a) of this Code section. Do not2629
include the numbers or braces in the notification. The numbers and braces are used only2630
for the purpose of these instructions;2631
(2) Include and complete item {1} only if there is a debtor that is not an addressee of the2632
notification and list the name or names;2633
(3) Include and complete either item {2}, if the notification relates to a public disposition2634
of the collateral, or item {3}, if the notification relates to a private disposition of the2635
collateral. If item {2} is included, include the words 'to the highest qualified bidder' only2636
if applicable;2637
(4) Include and complete items {4} and {6}; and2638
(5) Include and complete item {5} only if the sender will charge the recipient for an2639
accounting."2640
SECTION 5-73.2641
Said title is further amended by revising Code Section 11-9-614, relating to contents and the2642
form of notification before disposition of collateral in a consumer goods transaction, as2643
follows:2644
H. B. 1240
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"11-9-614.Contents and form of notification before disposition of collateral;
2645
consumer goods transaction.2646
(a) Contents and form of notification.
In a consumer goods transaction, the following2647
rules apply:2648
(1) A notification of disposition must provide the following information:2649
(A) The information specified in paragraph (1) of subsection (a) of Code Section2650
11-9-613;2651
(B) A description of any liability for a deficiency of the person to which the2652
notification is sent;2653
(C) A telephone number from which the amount that must be paid to the secured party2654
to redeem the collateral under Code Section 11-9-623 is available; and2655
(D) A telephone number or mailing address from which additional information2656
concerning the disposition and the obligation secured is available;2657
(2) A particular phrasing of the notification is not required;2658
(3) The following form of notification, when completed in accordance with the2659
instructions in subsection (b) of this Code section, provides sufficient information:2660
(Name and address of secured party)2661
(Date) 2662
NOTICE OF OUR PLAN TO SELL PROPERTY2663
(Name and address of any obligor who is also a debtor)2664
Subject: (Identification of transaction)2665
We have your (describe collateral), because you broke promises in our agreement.2666
(For a public disposition:)2667
We will sell (describe collateral) at public sale. A sale could include a lease or license. 2668
The sale will be held as follows:2669
H. B. 1240
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Date: _______________________2670
Time: _______________________2671
Place: _______________________2672
You may attend the sale and bring bidders if you want.2673
(For a private disposition:)2674
We will sell (describe collateral) at private sale sometime after (date). A sale could2675
include a lease or license.2676
The money that we get from the sale (after paying our costs) will reduce the amount2677
you owe. If we get less money than you owe, you (will or will not, as applicable) still2678
owe us the difference. If we get more money than you owe, you will get the extra2679
money, unless we must pay it to someone else.2680
You can get the property back at any time before we sell it by paying us the full amount2681
you owe (not just the past due payments), including our expenses. To learn the exact2682
amount you must pay, call us at (telephone number).2683
If you want us to explain to you in writing how we have figured the amount that you2684
owe us, you may call us at (telephone number) or write us at (secured party's address)2685
and request a written explanation. (We will charge you $__________ for the2686
explanation if we sent you another written explanation of the amount you owe us within2687
the last six months.)2688
If you need more information about the sale call us at (telephone number) or write us2689
at (secured party's address).2690
We are sending this notice to the following other people who have an interest in2691
(describe collateral) or who owe money under your agreement:2692
(Names of all other debtors and obligors, if any);2693
H. B. 1240
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'(Name and address of secured party) (Date)2694
NOTICE OF OUR PLAN TO SELL PROPERTY2695
(Name and address of any obligor who is also a debtor)2696
Subject: (Identify transaction)2697
We have your (describe collateral), because you broke promises in our agreement.2698
{1} We will sell (describe collateral) at public sale. A sale could include a lease or2699
license. The sale will be held as follows:2700
___________(Date)2701
___________(Time)2702
___________(Place)2703
You may attend the sale and bring bidders if you want.2704
{2} We will sell (describe collateral) at private sale sometime after (date). A sale could2705
include a lease or license.2706
{3} The money that we get from the sale, after paying our costs, will reduce the amount2707
you owe. If we get less money than you owe, you (will or will not, as applicable) still2708
owe us the difference. If we get more money than you owe, you will get the extra money,2709
unless we must pay it to someone else.2710
{4} You can get the property back at any time before we sell it by paying us the full2711
amount you owe, not just the past due payments, including our expenses. To learn the2712
exact amount you must pay, call us at (telephone number).2713
{5} If you want us to explain to you in (writing) (writing or in (description of electronic2714
record)) (description of electronic record) how we have figured the amount that you owe2715
us, {6} call us at (telephone number) (or) (write us at (secured party's address)) (or2716
contact us by (description of electronic communication method)) {7} and request (a2717
H. B. 1240
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written explanation) (a written explanation or an explanation in (description of electronic2718
record)) (an explanation in (description of electronic record)).2719
{8} We will charge you $(amount) for the explanation if we sent you another written2720
explanation of the amount you owe us within the last six months.2721
{9} If you need more information about the sale (call us at (telephone number)) (or)2722
(write us at (secured party's address)) (or contact us by (description of electronic2723
communication method)).2724
{10} We are sending this notice to the following other people who have an interest in2725
(describe collateral) or who owe money under your agreement:2726
(Names of all other debtors and obligors, if any)'2727
(4) A notification in the form of paragraph (3) of this Code section subsection is2728
sufficient, even if additional information appears at the end of the form;2729
(5) A notification in the form of paragraph (3) of this Code section subsection is2730
sufficient, even if it includes errors in information not required by paragraph (1) of this2731
Code section subsection, unless the error is misleading with respect to rights arising under2732
this article; and2733
(6) If a notification under this Code section is not in the form of paragraph (3) of this2734
Code section subsection, law other than this article determines the effect of including2735
information not required by paragraph (1) of this Code section subsection.2736
(b) Instructions for form of notification. The following instructions apply to the form2737
of notification in paragraph (3) of subsection (a) of this Code section:2738
(1) The instructions in this subsection refer to the numbers in braces before items in the2739
form of notification in paragraph (3) of subsection (a) of this Code section. Do not2740
include the numbers or braces in the notification. The numbers and braces are used only2741
for the purpose of these instructions;2742
H. B. 1240
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(2) Include and complete either item {1}, if the notification relates to a public disposition2743
of the collateral, or item {2}, if the notification relates to a private disposition of the2744
collateral;2745
(3) Include and complete items {3}, {4}, {5}, {6}, and {7};2746
(4) In item {5}, include and complete any one of the three alternative methods for the2747
explanation — writing, writing or electronic record, or electronic record;2748
(5) In item {6}, include the telephone number. In addition, the sender may include and2749
complete either or both of the two additional alternative methods of communication —2750
writing or electronic communication — for the recipient of the notification to2751
communicate with the sender. Neither of the two additional methods of communication2752
is required to be included;2753
(6) In item {7}, include and complete the method or methods for the explanation —2754
writing, writing or electronic record, or electronic record — included in item {5};2755
(7) Include and complete item {8} only if a written explanation is included in item {5}2756
as a method for communicating the explanation and the sender will charge the recipient2757
for another written explanation;2758
(8) In item {9}, include either the telephone number or the address or both the telephone2759
number and the address. In addition, the sender may include and complete the additional2760
method of communication — electronic communication — for the recipient of the2761
notification to communicate with the sender. The additional method of electronic2762
communication is not required to be included; and2763
(9) If item {10} does not apply, insert 'None' after 'agreement:'."2764
SECTION 5-74.2765
Said title is further amended by revising Code Section 11-9-616, relating to explanations of2766
calculation of surplus or deficiency, as follows:2767
H. B. 1240
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"11-9-616.Explanation of calculation of surplus or deficiency.
2768
(a) Definitions. As used in this Code section, the term:2769
(1) 'Explanation' means a writing
record that:2770
(A) States the amount of the surplus or deficiency;2771
(B) Provides an explanation in accordance with subsection (c) of this Code section of2772
how the secured party calculated the surplus or deficiency;2773
(C) States, if applicable, that future debits, credits, charges, including additional credit2774
service charges or interest, rebates, and expenses may affect the amount of the surplus2775
or deficiency; and2776
(D) Provides a telephone number or mailing address from which additional information2777
concerning the transaction is available.2778
(2) 'Request' means a record:2779
(A) Signed Authenticated by a debtor or consumer obligor;2780
(B) Requesting that the recipient provide an explanation; and2781
(C) Sent after disposition of the collateral under Code Section 11-9-610.2782
(b) Explanation of calculation. In a consumer goods transaction in which the debtor is2783
entitled to a surplus or a consumer obligor is liable for a deficiency under Code Section2784
11-9-615, the secured party shall:2785
(1) Send an explanation to the debtor or consumer obligor, as applicable, after the2786
disposition and:2787
(A) Before or when the secured party accounts to the debtor and pays any surplus or2788
first makes written demand in a record on the consumer obligor after the disposition for2789
payment of the deficiency; and2790
(B) Within 14 days after receipt of a request; or2791
(2) In the case of a consumer obligor who is liable for a deficiency, within 14 days after2792
receipt of a request, send to the consumer obligor a record waiving the secured party's2793
right to a deficiency.2794
H. B. 1240
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(c) Required information. To comply with subparagraph (a)(1)(B) of this Code section,
2795
a writing
an explanation must provide the following information in the following order:2796
(1) The aggregate amount of obligations secured by the security interest under which the2797
disposition was made, and, if the amount reflects a rebate of unearned interest or credit2798
service charge, an indication of that fact, calculated as of a specified date:2799
(A) If the secured party takes or receives possession of the collateral after default, not2800
more than 35 days before the secured party takes or receives possession; or2801
(B) If the secured party takes or receives possession of the collateral before default or2802
does not take possession of the collateral, not more than 35 days before the disposition;2803
(2) The amount of proceeds of the disposition;2804
(3) The aggregate amount of the obligations after deducting the amount of proceeds;2805
(4) The amount, in the aggregate or by type, and types of expenses, including expenses2806
of retaking, holding, preparing for disposition, processing, and disposing of the collateral,2807
and attorney's fees secured by the collateral which are known to the secured party and2808
relate to the current disposition;2809
(5) The amount, in the aggregate or by type, and types of credits, including rebates of2810
interest or credit service charges, to which the obligor is known to be entitled and which2811
are not reflected in the amount in paragraph (1) of this subsection; and2812
(6) The amount of the surplus or deficiency.2813
(d) Substantial compliance. A particular phrasing of the explanation is not required. An2814
explanation complying substantially with the requirements of subsection (a) of this Code2815
section is sufficient, even if it includes minor errors that are not seriously misleading.2816
(e) Charges for responses. A debtor or consumer obligor is entitled without charge to2817
one response to a request under this Code section during any six-month period in which the2818
secured party did not send to the debtor or consumer obligor an explanation pursuant to2819
paragraph (1) of subsection (b) of this Code section. The secured party may require2820
payment of a charge not exceeding $10.00 for each additional response."2821
H. B. 1240
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SECTION 5-75.
2822
Said title is further amended by revising Code Section 11-9-628, relating to nonliability and2823
limitation on liability of secured parties and liability of secondary obligors, as follows:2824
"11-9-628.Nonliability and limitation on liability of secured party; liability of2825
secondary obligor.2826
(a) Limitation of liability of secured party for noncompliance with article. Subject to
2827
subsection (f) of this Code section, unless Unless a secured party knows that a person is a2828
debtor or obligor, knows the identity of the person, and knows how to communicate with2829
the person:2830
(1) The secured party is not liable to the person, or to a secured party or lienholder that2831
has filed a financing statement against the person, for failure to comply with this article;2832
and2833
(2) The secured party's failure to comply with this article does not affect the liability of2834
the person for a deficiency.2835
(b) Limitation of liability based on status as secured party. Subject to subsection (f)2836
of this Code section, a A secured party is not liable because of its status as secured party:2837
(1) To a person that is a debtor or obligor, unless the secured party knows:2838
(A) That the person is a debtor or obligor;2839
(B) The identity of the person; and2840
(C) How to communicate with the person; or2841
(2) To a secured party or lienholder that has filed a financing statement against a person,2842
unless the secured party knows:2843
(A) That the person is a debtor; and2844
(B) The identity of the person.2845
(c) Limitation of liability if reasonable belief that transaction not a consumer goods2846
transaction or consumer transaction. A secured party is not liable to any person, and a2847
person's liability for a deficiency is not affected, because of any act or omission arising out2848
H. B. 1240
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of the secured party's reasonable belief that a transaction is not a consumer goods
2849
transaction or a consumer transaction or that goods are not consumer goods, if the secured2850
party's belief is based on its reasonable reliance on:2851
(1) A debtor's representation concerning the purpose for which collateral was to be used,2852
acquired, or held; or2853
(2) An obligor's representation concerning the purpose for which a secured obligation2854
was incurred.2855
(d) Limitation of liability for statutory damages. A secured party is not liable to any2856
person under paragraph (2) of subsection (c) of Code Section 11-9-625 for its failure to2857
comply with Code Section 11-9-616.2858
(e) Limitation of multiple liability for statutory damages. A secured party is not liable2859
under paragraph (2) of subsection (c) of Code Section 11-9-625 more than once with2860
respect to any one secured obligation.2861
(f) Exception: limitation of liability under subsections (a) and (b) of this Code section
2862
does not apply. Subsections (a) and (b) of this Code section do not apply to limit the2863
liability of a secured party to a person if, at the time the secured party obtains control of2864
collateral that is a controllable account, controllable electronic record, or controllable2865
payment intangible or at the time the security interest attaches to the collateral, whichever2866
is later:2867
(1) The person is a debtor or obligor; and2868
(2) The secured party knows that the information in subparagraph (b)(1)(A), (b)(1)(B),2869
or (b)(1)(C) of this Code section relating to the person is not provided by the collateral,2870
a record attached to or logically associated with the collateral, or the system in which the2871
collateral is recorded."2872
H. B. 1240
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PART VI
2873
ADDITIONAL CHANGES2874
SECTION 6-1.2875
Said title is further amended by replacing "authenticated" with "signed", "authenticating"2876
with "signing", and "an authenticated" with "a signed" wherever the phrases occur in:2877
(1) Code Section 11-1-306, relating to waiver or renunciation of claim or right after breach;2878
(2) Code Section 11-9-210, relating to request for accounting and request regarding list of2879
collateral or statement of account;2880
(3) Code Section 11-9-324, relating to priority of purchase money security interests;2881
(4) Code Section 11-9-334, relating to priority of security interests in fixtures and crops;2882
(5) Code Section 11-9-341, relating to a bank's rights and duties with respect to a deposit2883
account;2884
(6) Code Section 11-9-404, relating to rights acquired by assignee and claims and defenses2885
against assignee;2886
(7) Code Section 11-9-509, relating to persons entitled to file a record;2887
(8) Code Section 11-9-513, relating to termination statement;2888
(9) Code Section 11-9-608, relating to application of proceeds of collection or enforcement2889
and liability for deficiency and right to surplus;2890
(10) Code Section 11-9-611, relating to notification before disposition of collateral;2891
(11) Code Section 11-9-615, relating to application of proceeds of disposition and liability2892
for deficiency and right to surplus;2893
(12) Code Section 11-9-619, relating to transfer of record or legal title;2894
(13) Code Section 11-9-620, relating to acceptance of collateral in full or partial2895
satisfaction of obligation and compulsory disposition of collateral;2896
(14) Code Section 11-9-621, relating to notification of proposal to accept collateral; and2897
(15) Code Section 11-9-624, relating to waiver.2898
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SECTION 6-2.
2899
Said title is further amended by replacing "writing" with "record" wherever the term occurs2900
in:2901
(1) Code Section 11-2-203, relating to seals inoperative;2902
(2) Code Section 11-2-205, relating to firm offers;2903
(3) Code Section 11-2A-201, relating to statute of frauds;2904
(4) Code Section 11-2A-203, relating to seals inoperative;2905
(5) Code Section 11-2A-205, relating to firm offers;2906
(6) Code Section 11-3-106, relating to unconditional promise or order;2907
(7) Code Section 11-4A-207, relating to misdescription of beneficiary; and2908
(8) Code Section 11-4A-208, relating to misdescription of intermediary bank or2909
beneficiary's bank.2910
PART VII2911
REPEALER2912
SECTION 7-1.2913
All laws and parts of laws in conflict with this Act are repealed.2914
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