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AN ACT relating to the Uniform Commercial Code. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 355.1-201 is amended to read as follows: 3
(1) Unless the context otherwise requires, words or phrases defined in this section, or in 4
the additional definitions contained in other articles of this chapter[the Uniform 5
Commercial Code] that apply to particular articles or parts thereof, have the 6
meanings stated. 7
(2) Subject to definitions contained in other articles of this chapter[the Uniform 8
Commercial Code] that apply to particular articles or parts thereof: 9
(a) "Action," in the sense of a judicial proceeding, includes recoupment, 10
counterclaim, set-off, suit in equity, and any other proceeding in which rights 11
are determined; 12
(b) "Aggrieved party" means a party entitled to pursue a remedy; 13
(c) "Agreement," as distinguished from "contract," means the bargain of the 14
parties in fact, as found in their language or inferred from other 15
circumstances, including course of performance, course of dealing, or usage 16
of trade as provided in KRS 355.1-303; 17
(d) "Bank" means a person engaged in the business of banking and includes a 18
savings bank, savings and loan association, credit union, and trust company; 19
(e) "Bearer" means a person in control of a negotiable electronic document of 20
title or a person in possession of a negotiable instrument, a negotiable tangible 21
document of title, or certificated security that is payable to bearer or indorsed 22
in blank; 23
(f) 1. "Bill of lading" means a document of title evidencing the receipt of 24
goods for shipment issued by a person engaged in the business of 25
directly or indirectly transporting or forwarding goods. 26
2. The term does not include a warehouse receipt; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(g) "Branch" includes a separately incorporated foreign branch of a bank; 1
(h) "Burden of establishing" a fact means the burden of persuading the trier of 2
fact that the existence of the fact is more probable than its nonexistence; 3
(i) 1. "Buyer in ordinary course of business" means a person that buys goods 4
in good faith, without knowledge that the sale violates the rights of 5
another person in the goods, and in the ordinary course from a person, 6
other than a pawnbroker, in the business of selling goods of that kind. 7
2. A person buys goods in the ordinary course if the sale to the person 8
comports with the usual or customary practices in the kind of business in 9
which the seller is engaged or with the seller's own usual or customary 10
practices. 11
3. A person that sells oil, gas, or other minerals at the wellhead or 12
minehead is a person in the business of selling goods of that kind. 13
4. A buyer in ordinary course of business may buy for cash, by exchange 14
of other property, or on secured or unsecured credit, and may acquire 15
goods or documents of title under a preexisting contract for sale. 16
5. Only a buyer that takes possession of the goods or has a right to recover 17
the goods from the seller under Article 2 of this chapter may be a buyer 18
in ordinary course of business. 19
6. "Buyer in ordinary course of business" does not include a person that 20
acquires goods in a transfer in bulk or as security for or in total or partial 21
satisfaction of a money debt; 22
(j) 1. "Conspicuous," with reference to a term, means so written, displayed, or 23
presented that, based on the totality of the circumstances, a reasonable 24
person against which it is to operate ought to have noticed it. 25
2. Whether a term is "conspicuous" or not is a decision for the court[. 26
Conspicuous terms include the following: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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1. A heading in capitals equal to or greater in size than the surrounding 1
text, or in contrasting type, font, or color to the surrounding text of the 2
same or lesser size; and 3
2. Language in the body of a record or display in larger type than the 4
surrounding text, or in contrasting type, font, or color to the surrounding 5
text of the same size, or set off from surrounding text of the same size 6
by symbols or other marks that call attention to the language]; 7
(k) "Consumer" means an individual who enters into a transaction primarily for 8
personal, family, or household purposes; 9
(l) "Contract," as distinguished from "agreement," means the total legal 10
obligation that results from the parties' agreement as determined by this 11
chapter[the Uniform Commercial Code] as supplemented by any other 12
applicable laws; 13
(m) "Creditor" includes a general creditor, a secured creditor, a lien creditor, and 14
any representative of creditors, including an assignee for the benefit of 15
creditors, a trustee in bankruptcy, a receiver in equity, and an executor or 16
administrator of an insolvent debtor's or assignor's estate; 17
(n) "Defendant" includes a person in the position of defendant in a counterclaim, 18
cross-claim, or third-party claim; 19
(o) "Delivery[,]": 20
1. With respect to an electronic document of title, means voluntary transfer 21
of control; and 22
2. With respect to an instrument, a tangible document of title, or an 23
authoritative tangible copy of a record evidencing chattel paper, means 24
voluntary transfer of possession; 25
(p) 1. "Document of title" means a record that: 26
a.[1.] In the regular course of business or financing is treated as 27 UNOFFICIAL COPY 24 RS SB 155/GA
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adequately evidencing that the person in possession or control of 1
the record is entitled to receive, control, hold, and dispose of the 2
record and the goods the record covers; and 3
b.[2.] Purports to be issued by or addressed to a bailee and to cover 4
goods in the bailee's possession which are either identified or are 5
fungible portions of an identified mass. 6
2. The term includes a bill of lading, transport document, dock warrant, 7
dock receipt, warehouse receipt, and order for delivery of goods. 8
3. An electronic document of title is evidenced by a record consisting of 9
information stored in an electronic medium. 10
4. A tangible document of title is evidenced by a record consisting of 11
information that is inscribed on a tangible medium; 12
(q) "Electronic" means relating to technology having electrical, digital, 13
magnetic, wireless, optical, electromagnetic, or similar capabilities; 14
(r) "Fault" means a default, breach, or wrongful act or omission; 15
(s)[(r)] "Fungible goods" means: 16
1. Goods of which any unit, by nature or usage of trade, is the equivalent 17
of any other like unit; or 18
2. Goods that by agreement are treated as equivalent; 19
(t)[(s)] "Genuine" means free of forgery or counterfeiting; 20
(u)[(t)] "Good faith," except as otherwise provided in Article 5 of this chapter, 21
means honesty in fact and the observance of reasonable commercial standards 22
of fair dealing; 23
(v)[(u)] "Holder" means: 24
1. The person in possession of a negotiable instrument that is payable 25
either to bearer or to an identified person that is the person in 26
possession; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2. The person in possession of a negotiable tangible document of title if 1
the goods are deliverable either to bearer or to the order of the person in 2
possession; or 3
3. The[A] person in control, other than pursuant to subsection (7) of 4
Section 38 of this Act, of a negotiable electronic document of title; 5
(w)[(v)] "Insolvency proceeding" includes an assignment for the benefit of 6
creditors or other proceeding intended to liquidate or rehabilitate the estate of 7
the person involved; 8
(x)[(w)] "Insolvent" means: 9
1. Having generally ceased to pay debts in the ordinary course of business 10
other than as a result of bona fide dispute; 11
2. Being unable to pay debts as they become due; or 12
3. Being insolvent within the meaning of federal bankruptcy law; 13
(y)[(x)] 1. "Money" means a medium of exchange that is currently 14
authorized or adopted by a domestic or foreign government. 15
2. The term includes a monetary unit of account established by an 16
intergovernmental organization or by agreement between two (2) or 17
more countries. 18
3. The term does not include an electronic record that is a medium of 19
exchange recorded and transferable in a system that existed and 20
operated for the medium of exchange before the medium of exchange 21
was authorized or adopted by the government; 22
(z)[(y)] "Organization" means a person other than an individual; 23
(aa)[(z)] "Party," as distinguished from "third party," means a person that has 24
engaged in a transaction or made an agreement subject to this chapter[the 25
Uniform Commercial Code]; 26
(ab)[(aa)] 1. "Person" means an individual, corporation, business trust, estate, 27 UNOFFICIAL COPY 24 RS SB 155/GA
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trust, partnership, limited liability company, association, joint venture, 1
government, governmental subdivision, agency, or instrumentality, 2
[public corporation, ]or any other legal or commercial entity. 3
2. The term includes a protected series, however denominated, of an 4
entity if the protected series is established under law other than this 5
chapter that limits, or limits if conditions specified under the law are 6
satisfied, the ability of a creditor of the entity or of any other protected 7
series of the entity to satisfy a claim from assets of the protected series; 8
(ac)[(ab)] "Present value" means the amount as of a date certain of one (1) or more 9
sums payable in the future, discounted to the date certain by use of either an 10
interest rate specified by the parties if that rate is not manifestly unreasonable 11
at the time the transaction is entered into or, if an interest rate is not so 12
specified, a commercially reasonable rate that takes into account the facts and 13
circumstances at the time the transaction is entered into; 14
(ad)[(ac)] "Purchase" means taking by sale, lease, discount, negotiation, mortgage, 15
pledge, lien, security interest, issue or reissue, gift, or any other voluntary 16
transaction creating an interest in property; 17
(ae)[(ad)] "Purchaser" means a person that takes by purchase; 18
(af)[(ae)] "Record" means information that is inscribed on a tangible medium or 19
that is stored in an electronic or other medium and is retrievable in 20
perceivable form; 21
(ag)[(af)] "Remedy" means any remedial right to which an aggrieved party is 22
entitled with or without resort to a tribunal; 23
(ah)[(ag)] "Representative" means a person empowered to act for another, 24
including an agent, an officer of a corporation or association, and a trustee, 25
executor, or administrator of an estate; 26
(ai)[(ah)] "Right" includes remedy; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(aj)[(ai)] 1. "Security interest" means an interest in personal property or 1
fixtures which secures payment or performance of an obligation. 2
2. The term["Security interest"] includes any interest of a consignor and a 3
buyer of accounts, chattel paper, a payment intangible, or a promissory 4
note in a transaction that is subject to Article 9 of this chapter. 5
3. The term["Security interest"] does not include the special property 6
interest of a buyer of goods on identification of those goods to a contract 7
for sale under KRS 355.2-401, but a buyer may also acquire a "security 8
interest" by complying with Article 9 of this chapter. 9
4. Except as otherwise provided in KRS 355.2-505, the right of a seller or 10
lessor of goods under Article 2 or 2A of this chapter to retain or acquire 11
possession of the goods is not a "security interest," but a seller or lessor 12
may also acquire a "security interest" by complying with Article 9 of 13
this chapter. 14
5. The retention or reservation of title by a seller of goods notwithstanding 15
shipment or delivery to the buyer under KRS 355.2-401 is limited in 16
effect to a reservation of a "security interest." 17
6. Whether a transaction in the form of a lease creates a "security interest" 18
is determined pursuant to KRS 355.1-203; 19
(ak)[(aj)] "Send," in connection with a[ writing,] record[,] or notification,[notice] 20
means: 21
1. To deposit in the mail,[ or] deliver for transmission, or transmit by any 22
other usual means of communication, with postage or cost of 23
transmission provided for, addressed[ and properly addressed and, in the 24
case of an instrument, to an address specified thereon or otherwise 25
agreed, or if there be none] to any address reasonable under the 26
circumstances; or 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2. To cause the record or notification to be received within the time it 1
would have been received if properly sent under subparagraph 1. of 2
this paragraph[In any other way to cause to be received any record or 3
notice within the time it would have arrived if properly sent]; 4
(al)[(ak)] 1. "Sign[Signed]" means, with present intent to authenticate or 5
adopt a record: 6
a. Execute or adopt a tangible symbol; or 7
b. Attach to or logically associate with the record an electronic 8
symbol, sound, or process. 9
2. "Signed," "signing," and "signature" have corresponding 10
meanings[includes using any symbol executed or adopted with present 11
intention to adopt or accept a writing]; 12
(am)[(al)] "State" means a State of the United States, the District of Columbia, 13
Puerto Rico, the United States Virgin Islands, or any territory or insular 14
possession subject to the jurisdiction of the United States; 15
(an)[(am)] "Surety" includes a guarantor or other secondary obligor; 16
(ao)[(an)] "Term" means a portion of an agreement that relates to a particular 17
matter; 18
(ap)[(ao)] 1. "Unauthorized signature" means a signature made without actual, 19
implied, or apparent authority. 20
2. The term includes a forgery; 21
(aq)[(ap)] "Warehouse receipt" means a document of title issued by a person 22
engaged in the business of storing goods for hire; and 23
(ar)[(aq)] 1. "Writing" includes printing, typewriting, or any other intentional 24
reduction to tangible form. 25
2. "Written" has a corresponding meaning. 26
Section 2. KRS 355.1-204 is amended to read as follows: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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Except as otherwise provided in Articles 3, 4,[ and] 5, and 12 of this chapter, a person 1
gives value for rights if the person acquires them: 2
(1) In return for a binding commitment to extend credit or for the extension of 3
immediately available credit, whether or not drawn upon and whether or not a 4
charge-back is provided for in the event of difficulties in collection; 5
(2) As security for, or in total or partial satisfaction of, a preexisting claim; 6
(3) By accepting delivery under a preexisting contract for purchase; or 7
(4) In return for any consideration sufficient to support a simple contract. 8
Section 3. KRS 355.1-301 is amended to read as follows: 9
(1) This section applies to a transaction to the extent that it is governed by another 10
article of this chapter[the Uniform Commercial Code]. 11
(2) Except as otherwise provided in this section, when a transaction bears a reasonable 12
relation to this state and also to another state or nation, the parties may agree that 13
the law of either this state or such other state or nation shall govern their rights and 14
duties. 15
(3) In the absence of an agreement effective under subsection (2) of this section, the 16
rights and obligations of the parties are determined by the law that would be 17
selected by application of this state's conflict-of-laws principles. 18
(4) To the extent that this chapter[the Uniform Commercial Code] governs a 19
transaction, if one (1) of the following provisions of this chapter[the Uniform 20
Commercial Code] specifies the applicable law, that provision governs and a 21
contrary agreement is effective only to the extent permitted by the law so specified: 22
(a) KRS 355.2-402; 23
(b) KRS 355.2A-105 and 355.2A-106; 24
(c) KRS 355.4-102; 25
(d) KRS 355.4A-507; 26
(e) KRS 355.5-116; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(f) KRS 355.8-110; 1
(g) KRS 355.9-301 to 355.9-307; or 2
(h) Section 100 of this Act. 3
Section 4. KRS 355.1-306 is amended to read as follows: 4
A claim or right arising out of an alleged breach may be discharged in whole or in part 5
without consideration by agreement of the aggrieved party in a signed[an authenticated] 6
record. 7
SECTION 5. KRS 355.2-102 IS REPEALED AND REENACTED TO READ 8
AS FOLLOWS: 9
(1) Unless the context otherwise requires, and except as provided in subsection (3) of 10
this section, this article applies to transactions in goods and, in the case of a 11
hybrid transaction, it applies to the extent provided in subsection (2) of this 12
section. 13
(2) In a hybrid transaction: 14
(a) If the sale-of-goods aspects do not predominate, only the provisions of this 15
article which relate primarily to the sale-of-goods aspects of the transaction 16
apply, and the provisions that relate primarily to the transaction as a whole 17
do not apply; and 18
(b) If the sale-of-goods aspects predominate, this article applies to the 19
transaction but does not preclude application in appropriate circumstances 20
of other law to aspects of the transaction which do not relate to the sale of 21
goods. 22
(3) This article does not: 23
(a) Apply to a transaction that, even though in the form of an unconditional 24
contract to sell or present sale, operates only to create a security interest; or 25
(b) Impair or repeal any statute regulating sales to consumers, farmers, or 26
other specified classes of buyers. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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Section 6. KRS 355.2-106 is amended to read as follows: 1
(1) In this article, unless the context otherwise requires: 2
(a) "Contract" and "agreement" are limited to those relating to the present or 3
future sale of goods;[.] 4
(b) "Contract for sale" includes both a present sale of goods and a contract to sell 5
goods at a future time;[.] 6
(c) A "sale" consists in the passing of title from the seller to the buyer for a price 7
(KRS 355.2-401); and[.] 8
(d) A "present sale" means a sale which is accomplished by the making of the 9
contract. 10
(2) Goods or conduct, including any part of a performance, are "conforming" or 11
conform to the contract when they are in accordance with the obligations under the 12
contract. 13
(3) (a) "Termination" occurs when either party, pursuant to a power created by 14
agreement or law, puts an end to the contract otherwise than for its breach. 15
(b) On "termination," all obligations which are still executory on both sides are 16
discharged, but any right based on prior breach or performance survives. 17
(4) "Cancellation" occurs when either party puts an end to the contract for breach by 18
the other and its effect is the same as that of "termination," except that the canceling 19
party also retains any remedy for breach of the whole contract or any unperformed 20
balance. 21
(5) "Hybrid transaction" means a single transaction involving a sale of goods and: 22
(a) The provision of services; 23
(b) A lease of other goods; or 24
(c) A sale, lease, or license of property other than goods. 25
Section 7. KRS 355.2-201 is amended to read as follows: 26
(1) Except as otherwise provided in this section, a contract for the sale of goods for the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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price of five hundred dollars ($500) or more is not enforceable by way of action or 1
defense unless there is a record[some writing] sufficient to indicate that a contract 2
for sale has been made between the parties and signed by the party against whom 3
enforcement is sought or by the party's[his] authorized agent or broker. A 4
record[writing] is not insufficient because it omits or incorrectly states a term 5
agreed upon, but the contract is not enforceable under this subsection[paragraph] 6
beyond the quantity of goods shown in the record[such writing]. 7
(2) Between merchants, if within a reasonable time a record[writing] in confirmation of 8
the contract and sufficient against the sender is received and the party receiving it 9
has reason to know its contents, it satisfies the requirements of subsection (1) of 10
this section against the[such] party unless[ written] notice in a record of objection 11
to its contents is given within ten (10) days after it is received. 12
(3) A contract which does not satisfy the requirements of subsection (1) of this section 13
but which is valid in other respects is enforceable: 14
(a) If the goods are to be specially manufactured for the buyer and are not 15
suitable for sale to others in the ordinary course of the seller's business and the 16
seller, before notice of repudiation is received and under circumstances which 17
reasonably indicate that the goods are for the buyer, has made either a 18
substantial beginning of their manufacture or commitments for their 19
procurement;[ or ] 20
(b) If the party against whom enforcement is sought admits in that party's[his] 21
pleading or[,] testimony, or otherwise, in court that a contract for sale was 22
made, but the contract is not enforceable under this provision beyond the 23
quantity of goods admitted; or 24
(c) With respect to goods for which payment has been made and accepted or 25
which have been received and accepted (KRS 355.2-606). 26
Section 8. KRS 355.2-202 is amended to read as follows: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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Terms with respect to which the confirmatory memoranda of the parties agree or which 1
are otherwise set forth in a record[writing] intended by the parties as a final expression of 2
their agreement with respect to such terms as are included therein may not be 3
contradicted by evidence of any prior agreement or of a contemporaneous oral agreement 4
but may be explained or supplemented: 5
(1) By course of performance, course of dealing, or usage of trade (KRS 355.1-303); 6
and 7
(2) By evidence of consistent additional terms unless the court finds the 8
record[writing] to have been intended also as a complete and exclusive statement of 9
the terms of the agreement. 10
Section 9. KRS 355.2-203 is amended to read as follows: 11
The affixing of a seal to a record[writing] evidencing a contract for sale or an offer to 12
buy or sell goods does not constitute the record[writing] a sealed instrument and the law 13
with respect to sealed instruments does not apply to such a contract or offer. 14
Section 10. KRS 355.2-205 is amended to read as follows: 15
An offer by a merchant to buy or sell goods in a signed record[writing] which by its 16
terms gives assurance that it will be held open is not revocable, for lack of consideration, 17
during the time stated or if no time is stated, for a reasonable time, but in no event may 18
such period of irrevocability exceed three (3) months[;] and[but] any such term of 19
assurance on a form supplied by the offeree must be separately signed by the offeror. 20
Section 11. KRS 355.2-209 is amended to read as follows: 21
(1) An agreement modifying a contract within this article needs no consideration to be 22
binding. 23
(2) A signed agreement that[which] excludes modification or rescission except by a 24
signed writing or other signed record cannot be otherwise modified or rescinded, 25
but, except as between merchants, such a requirement on a form supplied by the 26
merchant must be separately signed by the other party. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(3) The requirements of the statute of frauds section of this article (KRS 355.2-201) 1
must be satisfied if the contract as modified is within its provisions. 2
(4) Although an attempt at modification or rescission does not satisfy the requirements 3
of subsection (2) or (3) of this section, it can operate as a waiver. 4
(5) A party who has made a waiver affecting an executory portion of the contract may 5
retract the waiver by reasonable notification received by the other party that strict 6
performance will be required of any term waived, unless the retraction would be 7
unjust in view of a material change of position in reliance on the waiver. 8
Section 12. KRS 355.2A-102 is amended to read as follows: 9
(1) This article applies to any transaction, regardless of form, that creates a lease and, 10
in the case of a hybrid lease, it applies to the extent provided in subsection (2) of 11
this section. 12
(2) In a hybrid lease: 13
(a) If the lease-of-goods aspects do not predominate: 14
1. Only the provisions of this article which relate primarily to the lease-15
of-goods aspects of the transaction apply, and the provisions that 16
relate primarily to the transaction as a whole do not apply; 17
2. KRS 355.2A-209 applies if the lease is a finance lease; and 18
3. KRS 355.2A-407 applies to the promises of the lessee in a finance 19
lease to the extent the promises are consideration for the right to 20
possession and use of the leased goods; and 21
(b) If the lease-of-goods aspects predominate, this article applies to the 22
transaction, but does not preclude application in appropriate circumstances 23
of other law to aspects of the lease which do not relate to the lease of goods. 24
Section 13. KRS 355.2A-103 is amended to read as follows: 25
(1) In this article, unless the context otherwise requires: 26
(a) 1. "Buyer in ordinary course of business" means a person who, in good 27 UNOFFICIAL COPY 24 RS SB 155/GA
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faith and without knowledge that the sale to the person[him] is in 1
violation of the ownership rights or security interest or leasehold interest 2
of a third party in the goods, buys in ordinary course from a person in 3
the business of selling goods of that kind but does not include a 4
pawnbroker. 5
2. "Buying" may be for cash or by exchange of other property or on 6
secured or unsecured credit and includes receiving goods or documents 7
of title under a pre-existing contract for sale but does not include a 8
transfer in bulk or as security for or in total or partial satisfaction of a 9
money debt; 10
(b) "Cancellation" occurs when either party puts an end to the lease contract for 11
default by the other party; 12
(c) 1. "Commercial unit" means such a unit of goods as by commercial usage 13
is a single whole for purposes of lease and division of which materially 14
impairs its character or value on the market or in use. 15
2. A commercial unit may be a single article, as a machine, or a set of 16
articles, as a suite of furniture or a line of machinery, or a quantity, as a 17
gross or carload, or any other unit treated in use or in the relevant 18
market as a single whole; 19
(d) "Conforming" goods or performance under a lease contract means goods or 20
performance that are in accordance with the obligations under the lease 21
contract; 22
(e) "Consumer lease" means a lease that a lessor regularly engaged in the 23
business of leasing or selling makes to a lessee who is an individual and who 24
takes under the lease primarily for a personal, family, or household purpose; 25
(f) "Fault" means wrongful act, omission, breach, or default; 26
(g) "Finance lease" means a lease with respect to which: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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1. The lessor does not select, manufacture, or supply the goods; 1
2. The lessor acquires the goods or the right to possession and use of the 2
goods in connection with the lease; and 3
3. One (1) of the following occurs: 4
a. The lessee receives a copy of the contract by which the lessor 5
acquired the goods or the right to possession and use of the goods 6
before signing the lease contract; 7
b. The lessee's approval of the contract by which the lessor acquired 8
the goods or the right to possession and use of the goods is a 9
condition to effectiveness of the lease contract; 10
c. The lessee, before signing the lease contract, receives an accurate 11
and complete statement designating the promises and warranties, 12
and any disclaimers of warranties, limitations, or modifications of 13
remedies, or liquidated damages, including those of a third party, 14
such as the manufacturer of the goods, provided to the lessor by 15
the person supplying the goods in connection with or as part of the 16
contract by which the lessor acquired the goods or the right to 17
possession and use of the goods; or 18
d. If the lease is not a consumer lease, the lessor, before the lessee 19
signs the lease contract, informs the lessee in writing:[ (a) ] 20
i. Of the identity of the person supplying the goods to the 21
lessor, unless the lessee has selected that person and directed 22
the lessor to acquire the goods or the right to possession and 23
use of the goods from that person;[, (b) ] 24
ii. That the lessee is entitled under this article to the promises 25
and warranties, including those of any third party, provided 26
to the lessor by the person supplying the goods in connection 27 UNOFFICIAL COPY 24 RS SB 155/GA
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with or as part of the contract by which the lessor acquired 1
the goods or the right to possession and use of the goods;[,] 2
and[ (c) ] 3
iii. That the lessee may communicate with the person supplying 4
the goods to the lessor and receive an accurate and complete 5
statement of those promises and warranties, including any 6
disclaimers and limitations of them or of remedies; 7
(h) 1. "Goods" means all things that are movable at the time of identification 8
to the lease contract, or are fixtures (KRS 355.2A-309), but the term 9
does not include money, documents, instruments, accounts, chattel 10
paper, general intangibles, or minerals or the like, including oil and gas, 11
before extraction. 12
2. The term also includes the unborn young of animals; 13
(i) "Hybrid lease" means a single transaction involving a lease of goods and: 14
1. The provision of services; 15
2. A sale of other goods; or 16
3. A sale, lease, or license of property other than goods; 17
(j) "Installment lease contract" means a lease contract that authorizes or requires 18
the delivery of goods in separate lots to be separately accepted, even though 19
the lease contract contains a clause "each delivery is a separate lease" or its 20
equivalent; 21
(k)[(j)] 1. "Lease" means a transfer of the right to possession and use of 22
goods for a term in return for consideration, but a sale, including a sale 23
on approval or a sale or return, or retention or creation of a security 24
interest is not a lease. 25
2. Unless the context clearly indicates otherwise, the term includes a 26
sublease; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(l)[(k)] 1. "Lease agreement" means the bargain, with respect to the lease, of 1
the lessor and the lessee in fact as found in their language or by 2
implication from other circumstances including course of dealing or 3
usage of trade or course of performance as provided in this article. 4
2. Unless the context clearly indicates otherwise, the term includes a 5
sublease agreement; 6
(m)[(l)] 1. "Lease contract" means the total legal obligation that results from 7
the lease agreement as affected by this article and any other applicable 8
rules of law. 9
2. Unless the context clearly indicates otherwise, the term includes a 10
sublease contract; 11
(n)[(m)] "Leasehold interest" means the interest of the lessor or the lessee under a 12
lease contract; 13
(o)[(n)] 1. "Lessee" means a person who acquires the right to possession and 14
use of goods under a lease. 15
2. Unless the context clearly indicates otherwise, the term includes a 16
sublessee; 17
(p)[(o)] 1. "Lessee in ordinary course of business" means a person who, in 18
good faith and without knowledge that the lease to the person[him] is in 19
violation of the ownership rights or security interest or leasehold interest 20
of a third party in the goods, leases in ordinary course from a person in 21
the business of selling or leasing goods of that kind but does not include 22
a pawnbroker. 23
2. "Leasing" may be for cash or by exchange of other property or on 24
secured or unsecured credit and includes receiving goods or documents 25
of title under a pre-existing lease contract but does not include a transfer 26
in bulk or as security for or in total or partial satisfaction of a money 27 UNOFFICIAL COPY 24 RS SB 155/GA
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debt; 1
(q)[(p)] 1. "Lessor" means a person who transfers the right to possession and 2
use of goods under a lease. 3
2. Unless the context clearly indicates otherwise, the term includes a 4
sublessor; 5
(r)[(q)] "Lessor's residual interest" means the lessor's interest in the goods after 6
expiration, termination, or cancellation of the lease contract; 7
(s)[(r)] "Lien" means a charge against or interest in goods to secure payment of 8
a debt or performance of an obligation, but the term does not include a 9
security interest; 10
(t)[(s)] "Lot" means a parcel or a single article that is the subject matter of a 11
separate lease or delivery, whether or not it is sufficient to perform the lease 12
contract;[.] 13
(u)[(t)] "Merchant lessee" means a lessee that is a merchant with respect to 14
goods of the kind subject to the lease; 15
(v)[(u)] 1. "Present value" means the amount as of a date certain of one (1) or 16
more sums payable in the future, discounted to the date certain. 17
2. The discount is determined by the interest rate specified by the parties if 18
the rate was not manifestly unreasonable at the time the transaction was 19
entered into; otherwise, the discount is determined by a commercially 20
reasonable rate that takes into account the facts and circumstances of 21
each case at the time the transaction was entered into; 22
(w)[(v)] "Purchase" includes taking by sale, lease, mortgage, security interest, 23
pledge, gift, or any other voluntary transaction creating an interest in goods; 24
(x)[(w)] "Sublease" means a lease of goods the right to possession and use of 25
which was acquired by the lessor as a lessee under an existing lease; 26
(y)[(x)] "Supplier" means a person from whom a lessor buys or leases goods to 27 UNOFFICIAL COPY 24 RS SB 155/GA
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be leased under a finance lease; 1
(z)[(y)] "Supply contract" means a contract under which a lessor buys or leases 2
goods to be leased; and 3
(aa)[(z)] "Termination" occurs when either party pursuant to a power created by 4
agreement or law puts an end to the lease contract otherwise than for default. 5
(2) The following[Other] definitions in[applying to] this article apply to this 6
article[and the sections in which they appear are]: 7
(a) "Accessions." KRS 355.2A-310(1); 8
(b) "Construction mortgage." KRS 355.2A-309(1)[(d)]; 9
(c) "Encumbrance." KRS 355.2A-309(1)[(e)]; 10
(d) "Fixtures." KRS 355.2A-309(1)[(a)]; 11
(e) "Fixture filing." KRS 355.2A-309(1)[(b)]; and 12
(f) "Purchase money lease." KRS 355.2A-309(1)[(c)]. 13
(3) The following definitions in other articles apply to this article: 14
(a) "Account." KRS 355.9-102[(1)(b)]; 15
(b) "Between merchants." KRS 355.2-104[(3)]; 16
(c) "Buyer." KRS 355.2-103(1)[(a)]; 17
(d) "Chattel paper." KRS 355.9-102[(1)(k)]; 18
(e) "Consumer goods." KRS 355.9-102[(1)(w)]; 19
(f) "Document." KRS 355.9-102[(1)(ad)]; 20
(g) "Entrusting." KRS 355.2-403(3); 21
(h) "General intangible." KRS 355.9-102[(1)(ap)]; 22
(i) "Instrument." KRS 355.9-102[(1)(au)]; 23
(j) "Merchant." KRS 355.2-104[(1)]; 24
(k) "Mortgage." KRS 355.9-102[(1)(bc)]; 25
(l) "Pursuant to commitment." KRS 355.9-102[(1)(bq)]; 26
(m) "Receipt." KRS 355.2-103[(1)(c)]; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(n) "Sale." KRS 355.2-106(1); 1
(o) "Sale on approval." KRS 355.2-326; 2
(p) "Sale or return." KRS 355.2-326; and 3
(q) "Seller." KRS 355.2-103[(1)(d)]. 4
(4) In addition, Article 1 of this chapter contains general definitions and principles of 5
construction and interpretation applicable throughout this article. 6
Section 14. KRS 355.2A-107 is amended to read as follows: 7
Any claim or right arising out of an alleged default or breach of warranty may be 8
discharged in whole or in part without consideration by a[ written] waiver or renunciation 9
in a signed record[and] delivered by the aggrieved party. 10
Section 15. KRS 355.2A-201 is amended to read as follows: 11
(1) A lease contract is not enforceable by way of action or defense unless: 12
(a) The total payments to be made under the lease contract, excluding payments 13
for options to renew or buy, are less than five hundred dollars ($500); or 14
(b) There is a record[writing], signed by the party against whom enforcement is 15
sought or by that party's authorized agent, sufficient to indicate that a lease 16
contract has been made between the parties and to describe the goods leased 17
and the lease term. 18
(2) Any description of leased goods or of the lease term is sufficient and satisfies 19
subsection (1)(b) of this section, whether or not it is specific, if it reasonably 20
identifies what is described. 21
(3) A record[writing] is not insufficient because it omits or incorrectly states a term 22
agreed upon, but the lease contract is not enforceable under subsection (1)(b) of this 23
section beyond the lease term and the quantity of goods shown in the 24
record[writing]. 25
(4) A lease contract that does not satisfy the requirements of subsection (1) of this 26
section, but which is valid in other respects, is enforceable: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(a) If the goods are to be specially manufactured or obtained for the lessee and 1
are not suitable for lease or sale to others in the ordinary course of the lessor's 2
business, and the lessor, before notice of repudiation is received and under 3
circumstances that reasonably indicate that the goods are for the lessee, has 4
made either a substantial beginning of their manufacture or commitments for 5
their procurement; 6
(b) If the party against whom enforcement is sought admits in that party's 7
pleading or[,] testimony, or otherwise, in court that a lease contract was made, 8
but the lease contract is not enforceable under this provision beyond the 9
quantity of goods admitted; or 10
(c) With respect to goods that have been received and accepted by the lessee. 11
(5) The lease term under a lease contract referred to in subsection (4) of this section is: 12
(a) If there is a record[writing] signed by the party against whom enforcement is 13
sought or by that party's authorized agent specifying the lease term, the term 14
so specified; 15
(b) If the party against whom enforcement is sought admits in that party's 16
pleading or[,] testimony, or otherwise, in court a lease term, the term so 17
admitted; or 18
(c) A reasonable lease term. 19
Section 16. KRS 355.2A-202 is amended to read as follows: 20
Terms with respect to which the confirmatory memoranda of the parties agree or which 21
are otherwise set forth in a record[writing] intended by the parties as a final expression of 22
their agreement with respect to such terms as are included therein may not be 23
contradicted by evidence of any prior agreement or of a contemporaneous oral agreement 24
but may be explained or supplemented: 25
(1) By course of dealing or usage of trade or by course of performance; and 26
(2) By evidence of consistent additional terms unless the court finds the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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record[writing] to have been intended also as a complete and exclusive statement of 1
the terms of the agreement. 2
Section 17. KRS 355.2A-203 is amended to read as follows: 3
The affixing of a seal to a record[writing] evidencing a lease contract or an offer to enter 4
into a lease contract does not render the record[writing] a sealed instrument and the law 5
with respect to sealed instruments does not apply to the lease contract or offer. 6
Section 18. KRS 355.2A-205 is amended to read as follows: 7
An offer by a merchant to lease goods to or from another person in a signed 8
record[writing] that by its terms gives assurance it will be held open is not revocable, for 9
lack of consideration, during the time stated or[,] if no time is stated, for a reasonable 10
time, but in no event may the period of irrevocability exceed three (3) months and[.] any 11
such term of assurance on a form supplied by the offeree must be separately signed by the 12
offeror. 13
Section 19. KRS 355.2A-208 is amended to read as follows: 14
(1) An agreement modifying a lease contract needs no consideration to be binding. 15
(2) A signed lease agreement that excludes modification or rescission except by a 16
signed record cannot[writing may not] be otherwise modified or rescinded, but, 17
except as between merchants, such a requirement on a form supplied by a merchant 18
must be separately signed by the other party. 19
(3) Although an attempt at modification or rescission does not satisfy the requirements 20
of subsection (2) of this section, it may operate as a waiver. 21
(4) A party who has made a waiver affecting an executory portion of a lease contract 22
may retract the waiver by reasonable notification received by the other party that 23
strict performance will be required of any term waived, unless the retraction would 24
be unjust in view of a material change of position in reliance on the waiver. 25
Section 20. KRS 355.3-104 is amended to read as follows: 26
(1) Except as provided in subsections (3) and (4) of this section, "negotiable 27 UNOFFICIAL COPY 24 RS SB 155/GA
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instrument" means an unconditional promise or order to pay a fixed amount of 1
money, with or without interest or other charges described in the promise or order, 2
if it: 3
(a) Is payable to bearer or to order at the time it is issued or first comes into 4
possession of a holder; 5
(b) Is payable on demand or at a definite time; and 6
(c) Does not state any other undertaking or instruction by the person promising or 7
ordering payment to do any act in addition to the payment of money, but the 8
promise or order may contain: 9
1. An undertaking or power to give, maintain, or protect collateral to 10
secure payment; 11
2. An authorization or power to the holder to confess judgment or realize 12
on or dispose of collateral;[ or] 13
3. A waiver of the benefit of any law intended for the advantage or 14
protection of an obligor; 15
4. A term that specifies the law that governs the promise or order; or 16
5. An undertaking to resolve in a specified forum a dispute concerning 17
the promise or order. 18
(2) "Instrument" means a negotiable instrument. 19
(3) An order that meets all of the requirements of subsection (1) of this section, except 20
paragraph (a) of that subsection, and otherwise falls within the definition of "check" 21
in subsection (6) of this section is a negotiable instrument and a check. 22
(4) A promise or order other than a check is not an instrument if, at the time it is issued 23
or first comes into possession of a holder, it contains a conspicuous statement, 24
however expressed, to the effect that the promise or order is not negotiable or is not 25
an instrument governed by this article. 26
(5) (a) An instrument is a "note" if it is a promise and is a "draft" if it is an order. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(b) If an instrument falls within the definition of both "note" and "draft," a person 1
entitled to enforce the instrument may treat it as either. 2
(6) (a) "Check" means: 3
1.[(a)] A draft, other than a documentary draft, payable on demand and 4
drawn on a bank; or 5
2.[(b)] A cashier's check or teller's check. 6
(b) An instrument may be a check even though it is described on its face by 7
another term, such as "money order." 8
(7) "Cashier's check" means a draft with respect to which the drawer and drawee are 9
the same bank or branches of the same bank. 10
(8) "Teller's check" means a draft drawn by a bank: 11
(a) On another bank; or 12
(b) Payable at or through a bank. 13
(9) "Traveler's check" means an instrument that: 14
(a) Is payable on demand; 15
(b) Is drawn on or payable at or through a bank; 16
(c) Is designated by the term "traveler's check" or by a substantially similar term; 17
and 18
(d) Requires, as a condition to payment, a countersignature by a person whose 19
specimen signature appears on the instrument. 20
(10) (a) "Certificate of deposit" means an instrument containing an acknowledgment 21
by a bank that a sum of money has been received by the bank and a promise 22
by the bank to repay the sum of money. 23
(b) A certificate of deposit is a note of the bank. 24
Section 21. KRS 355.3-105 is amended to read as follows: 25
(1) "Issue" means: 26
(a) The first delivery of an instrument by the maker or drawer, whether to a 27 UNOFFICIAL COPY 24 RS SB 155/GA
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holder or nonholder, for the purpose of giving rights on the instrument to any 1
person; or 2
(b) If agreed by the payee, the first transmission by the drawer to the payee of 3
an image of an item and information derived from the item that enables the 4
depositary bank to collect the item by transferring or presenting under 5
federal law an electronic check. 6
(2) (a) An unissued instrument, or an unissued incomplete instrument that is 7
completed, is binding on the maker or drawer, but nonissuance is a defense. 8
(b) An instrument that is conditionally issued or is issued for a special purpose is 9
binding on the maker or drawer, but failure of the condition or special purpose 10
to be fulfilled is a defense. 11
(3) "Issuer" applies to issued and unissued instruments and means a maker or drawer of 12
an instrument. 13
Section 22. KRS 355.3-401 is amended to read as follows: 14
[(1) ]A person is not liable on an instrument unless: 15
(1)[(a)] The person signed the instrument; or 16
(2)[(b)] The person is represented by an agent or representative who signed the 17
instrument and the signature is binding on the represented person under KRS 355.3-18
402. 19
[(2) A signature may be made: 20
(a) Manually or by means of a device or machine; and 21
(b) By the use of any name, including a trade or assumed name, or by a word, 22
mark, or symbol executed or adopted by a person with present intention to 23
authenticate a writing.] 24
Section 23. KRS 355.3-417 is amended to read as follows: 25
(1) (a) If an unaccepted draft is presented to the drawee for payment or acceptance 26
and the drawee pays or accepts the draft, 27 UNOFFICIAL COPY 24 RS SB 155/GA
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1. The person obtaining payment or acceptance, at the time of presentment; 1
and 2
2. A previous transferor of the draft, at the time of transfer, 3
warrant to the drawee making payment or accepting the draft in good faith the 4
conditions set out in paragraph (b) of this subsection. 5
(b) 1. The warrantor is, or was, at the time the warrantor transferred the draft, 6
a person entitled to enforce the draft or authorized to obtain payment or 7
acceptance of the draft on behalf of a person entitled to enforce the 8
draft; 9
2. The draft has not been altered; 10
3. The warrantor has no knowledge that the signature of the drawer of the 11
draft is unauthorized; and 12
4. With respect to any remotely created item, that the person on whose 13
account the item is drawn authorized the issuance of the item in the 14
amount for which the item is drawn. 15
(2) (a) A drawee making payment may recover from any warrantor damages for 16
breach of warranty equal to the amount paid by the drawee less the amount 17
the drawee received or is entitled to receive from the drawer because of the 18
payment. In addition, the drawee is entitled to compensation for expenses, 19
including reasonable attorney's fees, and loss of interest resulting from the 20
breach. 21
(b) The right of the drawee to recover damages under this subsection is not 22
affected by any failure of the drawee to exercise ordinary care in making 23
payment. 24
(c) If the drawee accepts the draft, breach of warranty is a defense to the 25
obligation of the acceptor. 26
(d) If the acceptor makes payment with respect to the draft, the acceptor is 27 UNOFFICIAL COPY 24 RS SB 155/GA
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entitled to recover from any warrantor for breach of warranty the amounts 1
stated in this subsection. 2
(3) If a drawee asserts a claim for breach of warranty under subsection (1) of this 3
section based on an unauthorized indorsement of the draft or an alteration of the 4
draft, the warrantor may defend by proving that the indorsement is effective under 5
KRS 355.3-404 or 355.3-405 or the drawer is precluded under KRS 355.3-406 or 6
355.4-406 from asserting against the drawee the unauthorized indorsement or 7
alteration. 8
(4) (a) If: 9
1. a. A dishonored draft is presented for payment to the drawer or an 10
indorser; or 11
b. Any other instrument is presented for payment to a party obliged 12
to pay the instrument; and 13
2. Payment is received, 14
the rules set out in paragraph (b) of this subsection apply. 15
(b) 1. The person obtaining payment and a prior transferor of the instrument 16
warrant to the person making payment in good faith that the warrantor 17
is, or was, at the time the warrantor transferred the instrument, a person 18
entitled to enforce the instrument or authorized to obtain payment on 19
behalf of a person entitled to enforce the instrument. 20
2. The person making payment may recover from any warrantor for breach 21
of warranty an amount equal to the amount paid plus expenses, 22
including reasonable attorney's fees, and loss of interest resulting from 23
the breach. 24
(5) (a) The warranties stated in subsections (1) and (4) of this section cannot be 25
disclaimed with respect to checks. 26
(b) Unless notice of a claim for breach of warranty is given to the warrantor 27 UNOFFICIAL COPY 24 RS SB 155/GA
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within thirty (30) days after the claimant has reason to know of the breach and 1
the identity of the warrantor, the liability of the warrantor under subsection (2) 2
or (4) of this section is discharged to the extent of any loss caused by the 3
delay in giving notice of the claim. 4
(6) A claim for relief for breach of warranty under this section accrues when the 5
claimant has reason to know of the breach. 6
Section 24. KRS 355.3-604 is amended to read as follows: 7
(1) (a) A person entitled to enforce an instrument, with or without consideration, may 8
discharge the obligation of a party to pay the instrument: 9
1.[(a)] By an intentional voluntary act, such as surrender of the 10
instrument to the party, destruction, mutilation, or cancellation of the 11
instrument, cancellation or striking out of the party's signature, or the 12
addition of words to the instrument indicating discharge; or 13
2.[(b)] By agreeing not to sue or otherwise renouncing rights against the 14
party by a signed record. 15
(b) The obligation of a party to pay the instrument is not discharged solely by 16
the destruction of a check in connection with a process in which 17
information is extracted from the check and an image of the check is made 18
and, subsequently, the information and image are transmitted for payment. 19
(2) Cancellation or striking out of an indorsement pursuant to subsection (1) of this 20
section does not affect the status and rights of a party derived from the indorsement. 21
[(3) In this section, "signed," with respect to a record that is not in writing, includes the 22
attachment to or logical association with the record of an electronic symbol, sound, 23
or process with the present intent to adopt or accept the record.] 24
Section 25. KRS 355.4-208 is amended to read as follows: 25
(1) (a) If an unaccepted draft is presented to the drawee for payment or acceptance 26
and the drawee pays or accepts the draft, 27 UNOFFICIAL COPY 24 RS SB 155/GA
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1. The person obtaining payment or acceptance, at the time of presentment; 1
and 2
2. A previous transferor of the draft, at the time of transfer, 3
warrant to the drawee that pays or accepts the draft in good faith the 4
conditions set out in paragraph (b) of this subsection. 5
(b) 1. The warrantor is, or was, at the time the warrantor transferred the draft, 6
a person entitled to enforce the draft or authorized to obtain payment or 7
acceptance of the draft on behalf of a person entitled to enforce the 8
draft; 9
2. The draft has not been altered; 10
3. The warrantor has no knowledge that the signature of the purported 11
drawer of the draft is unauthorized; and 12
4. With respect to any remotely created item, that the person on whose 13
account the item is drawn authorized the issuance of the item in the 14
amount for which the item is drawn. 15
(2) (a) A drawee making payment may recover from a warrantor damages for breach 16
of warranty equal to the amount paid by the drawee less the amount the 17
drawee received or is entitled to receive from the drawer because of the 18
payment. In addition, the drawee is entitled to compensation for expenses, 19
including reasonable attorney's fees, and loss of interest resulting from the 20
breach. 21
(b) The right of the drawee to recover damages under this subsection is not 22
affected by any failure of the drawee to exercise ordinary care in making 23
payment. 24
(c) If the drawee accepts the draft: 25
1.[(a)] Breach of warranty is a defense to the obligation of the acceptor; 26
and 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2.[(b)] If the acceptor makes payment with respect to the draft, the 1
acceptor is entitled to recover from a warrantor for breach of warranty 2
the amounts stated in this subsection. 3
(3) If a drawee asserts a claim for breach of warranty under subsection (1) of this 4
section based on an unauthorized indorsement of the draft or an alteration of the 5
draft, the warrantor may defend by proving that the indorsement is effective under 6
KRS 355.3-404 or 355.3-405 or the drawer is precluded under KRS 355.3-406 or 7
355.4-406 from asserting against the drawee the unauthorized indorsement or 8
alteration. 9
(4) (a) If: 10
1.[(a)] A dishonored draft is presented for payment to the drawer or an 11
indorser; or 12
2.[(b)] Any other item is presented for payment to a party obliged to pay 13
the item, 14
and the item is paid, the person obtaining payment and a prior transferor of 15
the item warrant to the person making payment in good faith that the 16
warrantor is, or was, at the time the warrantor transferred the item, a person 17
entitled to enforce the item or authorized to obtain payment on behalf of a 18
person entitled to enforce the item. 19
(b) The person making payment may recover from any warrantor for breach of 20
warranty an amount equal to the amount paid plus expenses, including 21
reasonable attorney's fees, and loss of interest resulting from the breach. 22
(5) (a) The warranties stated in subsections (1) and (4) of this section cannot be 23
disclaimed with respect to checks. 24
(b) Unless notice of a claim for breach of warranty is given to the warrantor 25
within thirty (30) days after the claimant has reason to know of the breach and 26
the identity of the warrantor, the warrantor is discharged to the extent of any 27 UNOFFICIAL COPY 24 RS SB 155/GA
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loss caused by the delay in giving notice of the claim. 1
(6) A claim for relief for breach of warranty under this section accrues when the 2
claimant has reason to know of the breach. 3
Section 26. KRS 355.4A-103 is amended to read as follows: 4
(1) In this article: 5
(a) "Payment order" means an instruction of a sender to a receiving bank, 6
transmitted orally[, electronically,] or in a record[writing], to pay, or to cause 7
another bank to pay, a fixed or determinable amount of money to a 8
beneficiary if: 9
1. The instruction does not state a condition to payment to the beneficiary 10
other than time of payment; 11
2. The receiving bank is to be reimbursed by debiting an account of, or 12
otherwise receiving payment from, the sender; and 13
3. The instruction is transmitted by the sender directly to the receiving 14
bank or to an agent, funds-transfer system, or communication system for 15
transmittal to the receiving bank. 16
(b) "Beneficiary" means the person to be paid by the beneficiary's bank. 17
(c) "Beneficiary's bank" means the bank identified in a payment order in which 18
an account of the beneficiary is to be credited pursuant to the order or which 19
otherwise is to make payment to the beneficiary if the order does not provide 20
for payment to an account. 21
(d) "Receiving bank" means the bank to which the sender's instruction is 22
addressed. 23
(e) "Sender" means the person giving the instruction to the receiving bank. 24
(2) If an instruction complying with subsection (1)(a) of this section is to make more 25
than one (1) payment to a beneficiary, the instruction is a separate payment order 26
with respect to each payment. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(3) A payment order is issued when it is sent to the receiving bank. 1
Section 27. KRS 355.4A-201 is amended to read as follows: 2
(1) "Security procedure" means a procedure established by agreement of a customer 3
and a receiving bank for the purpose of: 4
(a)[(1)] Verifying that a payment order or communication amending or 5
canceling a payment order is that of the customer; or 6
(b)[(2)] Detecting error in the transmission or the content of the payment order 7
or communication. 8
(2) A security procedure may: 9
(a) Impose an obligation on the receiving bank or the customer; and 10
(b) Require the use of algorithms or other codes, identifying words,[ or] numbers, 11
symbols, sounds, biometrics, encryption, callback procedures, or similar 12
security devices. 13
(3) Comparison of a signature on a payment order or communication with an 14
authorized specimen signature of the customer or requiring a payment order to be 15
sent from a known email address, IP address, or phone number is not by itself a 16
security procedure. 17
Section 28. KRS 355.4A-202 is amended to read as follows: 18
(1) A payment order received by the receiving bank is the authorized order of the 19
person identified as sender if that person authorized the order or is otherwise bound 20
by it under the law of agency. 21
(2) (a) If a bank and its customer have agreed that the authenticity of payment orders 22
issued to the bank in the name of the customer as sender will be verified 23
pursuant to a security procedure, a payment order received by the receiving 24
bank is effective as the order of the customer, whether or not authorized, if: 25
1.[(a)] The security procedure is a commercially reasonable method of 26
providing security against unauthorized payment orders; and 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2.[(b)] The bank proves that it accepted the payment order in good faith 1
and in compliance with the bank's obligations under the security 2
procedure and any[ written] agreement or instruction of the customer, 3
evidenced by a record, restricting acceptance of payment orders issued 4
in the name the customer. 5
(b) The bank is not required to follow an instruction that violates an[a written] 6
agreement with the customer, evidenced by a record, or notice of which is not 7
received at a time and in a manner affording the bank a reasonable 8
opportunity to act on it before the payment order is accepted. 9
(3) (a) Commercial reasonableness of a security procedure is a question of law to be 10
determined by considering the wishes of the customer expressed to the bank, 11
the circumstances of the customer known to the bank, including the size, type, 12
and frequency of payment orders normally issued by the customer to the bank, 13
alternative security procedures offered to the customer, and security 14
procedures in general use by customers and receiving banks similarly situated. 15
(b) A security procedure is deemed to be commercially reasonable if: 16
1.[(a)] The security procedure was chosen by the customer after the bank 17
offered, and the customer refused, a security procedure that was 18
commercially reasonable for that customer; and 19
2.[(b)] The customer expressly agreed in a record[writing] to be bound by 20
any payment order, whether or not authorized, issued in its name and 21
accepted by the bank in compliance with the bank's obligations under 22
the security procedure chosen by the customer. 23
(4) The term "sender" in this article includes the customer in whose name a payment 24
order is issued if the order is: 25
(a) The authorized order of the customer under subsection (1) of this section;[,] 26
or[ it is ] 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(b) Effective as the order of the customer under subsection (2) of this section. 1
(5) This section applies to amendments and cancellations of payment orders to the 2
same extent it applies to payment orders. 3
(6) Except as provided in this section and in KRS 355.4A-203(1)(a), rights and 4
obligations arising under this section or KRS 355.4A-203 may not be varied by 5
agreement. 6
Section 29. KRS 355.4A-203 is amended to read as follows: 7
(1) If an accepted payment order is not, under KRS 355.4A-202(1), an authorized order 8
of a customer identified as sender, but is effective as an order of the customer 9
pursuant to KRS 355.4A-202(2), the following rules apply: 10
(a) By express[ written] agreement, evidenced by a record, the receiving bank 11
may limit the extent to which it is entitled to enforce or retain payment of the 12
payment order; and[.] 13
(b) The receiving bank is not entitled to enforce or retain payment of the payment 14
order if the customer proves that the order was not caused, directly or 15
indirectly, by a person: 16
1. Entrusted at any time with duties to act for the customer with respect to 17
payment orders or the security procedure; or 18
2. Who obtained access to transmitting facilities of the customer or who 19
obtained, from a source controlled by the customer and without 20
authority of the receiving bank, information facilitating breach of the 21
security procedure, regardless of how the information was obtained or 22
whether the customer was at fault. Information includes any access 23
device, computer software, or the like. 24
[ Information includes any access device, computer software, or the like.] 25
(2) This section applies to amendments of payment orders to the same extent it applies 26
to payment orders. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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Section 30. KRS 355.4A-207 is amended to read as follows: 1
(1) Subject to subsection (2) of this section, if, in a payment order received by the 2
beneficiary's bank, the name, bank account number, or other identification of the 3
beneficiary refers to a nonexistent or unidentifiable person or account, no person 4
has rights as a beneficiary of the order and acceptance of the order cannot occur. 5
(2) If a payment order received by the beneficiary's bank identifies the beneficiary both 6
by name and by an identifying or bank account number and the name and number 7
identify different persons, the following rules apply: 8
(a) Except as otherwise provided in subsection (3) of this section:[,] 9
1. If the beneficiary's bank does not know that the name and number refer 10
to different persons, it may rely on the number as the proper 11
identification of the beneficiary of the order; and[.] 12
2. The beneficiary's bank need not determine whether the name and 13
number refer to the same person; and[.] 14
(b) 1. If the beneficiary's bank pays the person identified by name or knows 15
that the name and number identify different persons, no person has 16
rights as beneficiary except the person paid by the beneficiary's bank if 17
that person was entitled to receive payment from the originator of the 18
funds transfer. 19
2. If no person has rights as beneficiary, acceptance of the order cannot 20
occur. 21
(3) [(a) ] If a payment order described in subsection (2) of this section is accepted,[; 22
(b) ] the originator's payment order described the beneficiary inconsistently by 23
name and number,[;] and [ 24
(c) ]the beneficiary's bank pays the person identified by number as permitted by 25
subsection (2)(a) of this section, the following rules apply: 26
(a)[1.] If the originator is a bank, the originator is obliged to pay its order; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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and[.] 1
(b)[2.] 1. If the originator is not a bank and proves that the person identified 2
by number was not entitled to receive payment from the originator, the 3
originator is not obliged to pay its order unless the originator's bank 4
proves that the originator, before acceptance of the originator's order, 5
had notice that payment of a payment order issued by the originator 6
might be made by the beneficiary's bank on the basis of an identifying or 7
bank account number even if it identifies a person different from the 8
named beneficiary. 9
2. Proof of notice may be made by any admissible evidence. 10
3. The originator's bank satisfies the burden of proof if it proves that the 11
originator, before the payment order was accepted, signed a 12
record[writing] stating the information to which the notice relates. 13
(4) In a case governed by subsection (2)(a) of this section, if the beneficiary's bank 14
rightfully pays the person identified by number and that person was not entitled to 15
receive payment from the originator, the amount paid may be recovered from that 16
person to the extent allowed by the law governing mistake and restitution as 17
follows: 18
(a) If the originator is obliged to pay its payment order as stated in subsection (3) 19
of this section, the originator has the right to recover; and[.] 20
(b) If the originator is not a bank and is not obliged to pay its payment order, the 21
originator's bank has the right to recover. 22
Section 31. KRS 355.4A-208 is amended to read as follows: 23
(1) (a) This subsection applies to a payment order identifying an intermediary bank 24
or the beneficiary's bank only by an identifying number. 25
(b)[(a)] The receiving bank may rely on the number as the proper identification 26
of the intermediary or beneficiary's bank and need not determine whether the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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number identifies a bank. 1
(c)[(b)] The sender is obliged to compensate the receiving bank for any loss and 2
expenses incurred by the receiving bank as a result of its reliance on the 3
number in executing or attempting to execute the order. 4
(2) (a) This subsection applies to a payment order identifying an intermediary bank 5
or the beneficiary's bank both by name and an identifying number if the name 6
and number identify different persons. 7
(b)[(a)] 1. If the sender is a bank, the receiving bank may rely on the number 8
as the proper identification of the intermediary or beneficiary's bank if 9
the receiving bank, when it executes the sender's order, does not know 10
that the name and number identify different persons. 11
2. The receiving bank need not determine whether the name and number 12
refer to the same person or whether the number refers to a bank. 13
3. The sender is obliged to compensate the receiving bank for any loss and 14
expenses incurred by the receiving bank as a result of its reliance on the 15
number in executing or attempting to execute the order. 16
(c)[(b)] 1. If the sender is not a bank and the receiving bank proves that the 17
sender, before the payment order was accepted, had notice that the 18
receiving bank might rely on the number as the proper identification of 19
the intermediary or beneficiary's bank even if it identifies a person 20
different from the bank identified by name, the rights and obligations of 21
the sender and the receiving bank are governed by paragraph (b) of this 22
subsection[subsection (1)(b)], as though the sender were a bank. 23
2. Proof of notice may be made by any admissible evidence. 24
3. The receiving bank satisfies the burden of proof if it proves that the 25
sender, before the payment order was accepted, signed a record[writing] 26
stating the information to which the notice relates. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(d)[(c)] 1. Regardless of whether the sender is a bank, the receiving bank 1
may rely on the name as the proper identification of the intermediary or 2
beneficiary's bank if the receiving bank, at the time it executes the 3
sender's order, does not know that the name and number identify 4
different persons. 5
2. The receiving bank need not determine whether the name and number 6
refer to the same person. 7
(e)[(d)] If the receiving bank knows that the name and number identify different 8
persons, reliance on either the name or the number in executing the sender's 9
payment order is a breach of the obligation stated in KRS 355.4A-302(1)(a). 10
Section 32. KRS 355.4A-210 is amended to read as follows: 11
(1) (a) A payment order is rejected by the receiving bank by a notice of rejection 12
transmitted to the sender orally[, electronically,] or in a record[writing]. 13
(b) A notice of rejection need not use any particular words and is sufficient if it 14
indicates that the receiving bank is rejecting the order or will not execute or 15
pay the order. 16
(c) Rejection is effective when the notice is given if transmission is by a means 17
that is reasonable in the circumstances. 18
(d) If notice of rejection is given by a means that is not reasonable, rejection is 19
effective when the notice is received. 20
(e) If an agreement of the sender and receiving bank establishes the means to be 21
used to reject a payment order: 22
1.[(a)] Any means complying with the agreement is reasonable; and 23
2.[(b)] Any means not complying is not reasonable unless no significant 24
delay in receipt of the notice resulted from the use of the noncomplying 25
means. 26
(2) (a) This subsection applies if a receiving bank other than the beneficiary's bank 27 UNOFFICIAL COPY 24 RS SB 155/GA
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fails to execute a payment order despite the existence on the execution date of 1
a withdrawable credit balance in an authorized account of the sender 2
sufficient to cover the order. 3
(b) If the sender does not receive notice of rejection of the order on the execution 4
date and the authorized account of the sender does not bear interest, the bank 5
is obliged to pay interest to the sender on the amount of the order for the 6
number of days elapsing after the execution date to the earlier of the day the 7
order is canceled pursuant to KRS 355.4A-211(4) or the day the sender 8
receives notice or learns that the order was not executed, counting the final 9
day of the period as an elapsed day. If the withdrawable credit balance during 10
that period falls below the amount of the order, the amount of interest is 11
reduced accordingly. 12
(3) If a receiving bank suspends payments, all unaccepted payment orders issued to it 13
are deemed rejected at the time the bank suspends payments. 14
(4) (a) Acceptance of a payment order precludes a later rejection of the order. 15
(b) Rejection of a payment order precludes a later acceptance of the order. 16
Section 33. KRS 355.4A-211 is amended to read as follows: 17
(1) (a) A communication of the sender of a payment order canceling or amending the 18
order may be transmitted to the receiving bank orally[, electronically,] or in a 19
record[writing]. 20
(b) If a security procedure is in effect between the sender and the receiving bank, 21
the communication is not effective to cancel or amend the order unless the 22
communication is verified pursuant to the security procedure or the bank 23
agrees to the cancellation or amendment. 24
(2) Subject to subsection (1) of this section, a communication by the sender canceling 25
or amending a payment order is effective to cancel or amend the order if notice of 26
the communication is received at a time and in a manner affording the receiving 27 UNOFFICIAL COPY 24 RS SB 155/GA
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bank a reasonable opportunity to act on the communication before the bank accepts 1
the payment order. 2
(3) (a) After a payment order has been accepted, cancellation or amendment of the 3
order is not effective unless the receiving bank agrees or a funds-transfer 4
system rule allows cancellation or amendment without agreement of the bank. 5
(b)[(a)] With respect to a payment order accepted by a receiving bank other than 6
the beneficiary's bank, cancellation or amendment is not effective unless a 7
conforming cancellation or amendment of the payment order issued by the 8
receiving bank is also made. 9
(c)[(b)] With respect to a payment order accepted by the beneficiary's bank, 10
cancellation or amendment is not effective unless the order was issued in 11
execution of an unauthorized payment order, or because of a mistake by a 12
sender in the funds transfer which resulted in the issuance of a payment order: 13
1. That is a duplicate of a payment order previously issued by the sender; 14
2. That orders payment to a beneficiary not entitled to receive payment 15
from the originator; or 16
3. That orders payment in an amount greater than the amount the 17
beneficiary was entitled to receive from the originator. If the payment 18
order is canceled or amended, the beneficiary's bank is entitled to 19
recover from the beneficiary any amount paid to the beneficiary to the 20
extent allowed by the law governing mistake and restitution. 21
(4) An unaccepted payment order is canceled by operation of law at the close of the 22
fifth funds-transfer business day of the receiving bank after the execution date or 23
payment date of the order. 24
(5) (a) A canceled payment order cannot be accepted. 25
(b) If an accepted payment order is canceled, the acceptance is nullified and no 26
person has any right or obligation based on the acceptance. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(c) Amendment of a payment order is deemed to be cancellation of the original 1
order at the time of amendment and issue of a new payment order in the 2
amended form at the same time. 3
(6) Unless otherwise provided in an agreement of the parties or in a funds-transfer 4
system rule, if the receiving bank, after accepting a payment order, agrees to 5
cancellation or amendment of the order by the sender or is bound by a funds-6
transfer system rule allowing cancellation or amendment without the bank's 7
agreement, the sender, whether or not cancellation or amendment is effective, is 8
liable to the bank for any loss and expenses, including reasonable attorney's fees, 9
incurred by the bank as a result of the cancellation or amendment or attempted 10
cancellation or amendment. 11
(7) A payment order is not revoked by the death or legal incapacity of the sender unless 12
the receiving bank knows of the death or of an adjudication of incapacity by a court 13
of competent jurisdiction and has reasonable opportunity to act before acceptance 14
of the order. 15
(8) A funds-transfer system rule is not effective to the extent it conflicts with 16
subsection (3)(c)[(b)] of this section. 17
Section 34. KRS 355.4A-305 is amended to read as follows: 18
(1) If a funds transfer is completed but execution of a payment order by the receiving 19
bank in breach of KRS 355.4A-302 results in delay in payment to the beneficiary, 20
the bank is obliged to pay interest to either the originator or the beneficiary of the 21
funds transfer for the period of delay caused by the improper execution. Except as 22
provided in subsection (3) of this section, additional damages are not recoverable. 23
(2) If execution of a payment order by a receiving bank in breach of KRS 355.4A-302 24
results in [: 25
(a) ]noncompletion of the funds transfer, [; 26
(b) ]failure to use an intermediary bank designated by the originator,[;] or [ 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(c) ]issuance of a payment order that does not comply with the terms of the 1
payment order of the originator, the bank is liable to the originator for its 2
expenses in the funds transfer and for incidental expenses and interest losses, 3
to the extent not covered by subsection (1) of this section, resulting from the 4
improper execution. Except as provided in subsection (3) of this section, 5
additional damages are not recoverable. 6
(3) In addition to the amounts payable under subsections (1) and (2) of this section, 7
damages, including consequential damages, are recoverable to the extent provided 8
in an express[ written] agreement of the receiving bank, evidenced by a record. 9
(4) If a receiving bank fails to execute a payment order it was obliged by express 10
agreement to execute, the receiving bank is liable to the sender for its expenses in 11
the transaction and for incidental expenses and interest losses resulting from the 12
failure to execute. Additional damages, including consequential damages, are 13
recoverable to the extent provided in an express[ written] agreement of the 14
receiving bank, evidenced by a record, but are not otherwise recoverable. 15
(5) (a) Reasonable attorney's fees are recoverable if demand for compensation under 16
subsection (1) or (2) of this section is made and refused before an action is 17
brought on the claim. 18
(b) If a claim is made for breach of an agreement under subsection (4) of this 19
section and the agreement does not provide for damages, reasonable attorney's 20
fees are recoverable if demand for compensation under subsection (4) of this 21
section is made and refused before an action is brought on the claim. 22
(6) Except as stated in this section, the liability of a receiving bank under subsections 23
(1) and (2) of this section may not be varied by agreement. 24
Section 35. KRS 355.5-104 is amended to read as follows: 25
A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be 26
issued in any form that is a signed record[ and is authenticated: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(1) By a signature; or 1
(2) In accordance with the agreement of the parties or the standard practice referred to 2
in KRS 355.5-108(5)]. 3
Section 36. KRS 355.5-116 is amended to read as follows: 4
(1) The liability of an issuer, nominated person, or adviser for action or omission is 5
governed by the law of the jurisdiction chosen by an agreement in the form of a 6
record signed[ or otherwise authenticated] by the affected parties[ in the manner 7
provided in KRS 355.5-104] or by a provision in the person's letter of credit, 8
confirmation, or other undertaking. The jurisdiction whose law is chosen need not 9
bear any relation to the transaction. 10
(2) Unless subsection (1) of this section applies, the liability of an issuer, nominated 11
person, or adviser for action or omission is governed by the law of the jurisdiction 12
in which the person is located. The person is considered to be located at the 13
address indicated in the person's undertaking. If more than one (1) address is 14
indicated, the person is considered to be located at the address from which the 15
person's undertaking was issued. 16
(3) For purposes of jurisdiction, choice of law, and recognition of interbranch letters 17
of credit, but not enforcement of a judgment, all branches of a bank are 18
considered separate juridical entities and a bank is considered to be located at the 19
place where its relevant branch is considered to be located under subsection (4) of 20
this section. 21
(4) A branch of a bank is considered to be located at the address indicated in the 22
branch's undertaking. If more than one (1) address is indicated, the branch is 23
considered to be located at the address from which the undertaking was issued. 24
(5) (a) Except as otherwise provided in this subsection, the liability of an issuer, 25
nominated person, or adviser is governed by any rules of custom or practice, 26
such as the Uniform Customs and Practice for Documentary Credits, to which 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the letter of credit, confirmation, or other undertaking is expressly made 1
subject. 2
(b) If [: 3
(a) ]this article would govern the liability of an issuer, nominated person, or 4
adviser under subsection (1) or (2) of this section, [; 5
(b) ]the relevant undertaking incorporates rules of custom or practice,[;] and [ 6
(c) ]there is conflict between this article and those rules as applied to that 7
undertaking, those rules govern except to the extent of any conflict with the 8
nonvariable provisions specified in KRS 355.5-103(3). 9
(6)[(3)] If there is conflict between this article and Article 3, 4, 4A, or 9 of this 10
chapter, this article governs. 11
(7)[(4)] The forum for settling disputes arising out of an undertaking within this article 12
may be chosen in the manner and with the binding effect that governing law may be 13
chosen in accordance with subsection (1) of this section. 14
Section 37. KRS 355.7-102 is amended to read as follows: 15
(1) In this article, unless the context otherwise requires: 16
(a) "Bailee" means a person that by a warehouse receipt, bill of lading, or other 17
document of title acknowledges possession of goods and contracts to deliver 18
them; 19
(b) "Carrier" means a person that issues a bill of lading; 20
(c) "Consignee" means a person named in a bill of lading to which or to whose 21
order the bill promises delivery; 22
(d) "Consignor" means a person named in a bill of lading as the person from 23
which the goods have been received for shipment; 24
(e) "Delivery order" means a record that contains an order to deliver goods 25
directed to a warehouse, carrier, or other person that in the ordinary course of 26
business issues warehouse receipts or bills of lading; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(f) Reserved; 1
(g) "Goods" means all things that are treated as movable for the purposes of a 2
contract for storage or transportation; 3
(h) 1. "Issuer" means a bailee that issues a document of title or, in the case of 4
an unaccepted delivery order, the person that orders the possessor of 5
goods to deliver. 6
2. The term includes a person for which an agent or employee purports to 7
act in issuing a document if the agent or employee has real or apparent 8
authority to issue documents, even if the issuer did not receive any 9
goods, the goods were misdescribed, or in any other respect the agent or 10
employee violated the issuer's instructions; 11
(i) "Person entitled under the document" means the holder, in the case of a 12
negotiable document of title, or the person to which delivery of the goods is to 13
be made by the terms of, or pursuant to instructions in a record under, a 14
nonnegotiable document of title; 15
(j) Reserved; 16
(k) Reserved["Sign" means, with present intent to authenticate or adopt a record: 17
1. To execute or adopt a tangible symbol; or 18
2. To attach to or logically associate with the record an electronic sound, 19
symbol, or process]; 20
(l) "Shipper" means a person that enters into a contract of transportation with a 21
carrier; and 22
(m) "Warehouse" means a person engaged in the business of storing goods for 23
hire. 24
(2) Definitions in other articles applying to this article and the sections in which they 25
appear are: 26
(a) "Contract for sale," KRS 355.2-106; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(b) "Lessee in ordinary course of business," KRS 355.2A-103; and 1
(c) "‘Receipt' of goods," KRS 355.2-103. 2
(3) In addition, Article 1 of this chapter[KRS Chapter 355] contains general definitions 3
and principles of construction and interpretation applicable throughout this article. 4
Section 38. KRS 355.7-106 is amended to read as follows: 5
(1) A person has control of an electronic document of title if a system employed for 6
evidencing the transfer of interests in the electronic document reliably establishes 7
that person as the person to which the electronic document was issued or 8
transferred. 9
(2) A system satisfies subsection (1) of this section, and a person has[is deemed to 10
have] control of an electronic document of title, if the document is created, stored, 11
and transferred[assigned] in[ such] a manner that: 12
(a) A single authoritative copy of the document exists which is unique, 13
identifiable, and, except as otherwise provided in paragraphs (d), (e), and (f) 14
of this subsection, unalterable; 15
(b) The authoritative copy identifies the person asserting control as: 16
1. The person to which the document was issued; or 17
2. If the authoritative copy indicates that the document has been 18
transferred, the person to which the document was most recently 19
transferred; 20
(c) The authoritative copy is communicated to and maintained by the person 21
asserting control or its designated custodian; 22
(d) Copies or amendments that add or change an identified transferee[assignee] 23
of the authoritative copy can be made only with the consent of the person 24
asserting control; 25
(e) Each copy of the authoritative copy and any copy of a copy is readily 26
identifiable as a copy that is not the authoritative copy; and 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(f) Any amendment of the authoritative copy is readily identifiable as authorized 1
or unauthorized. 2
(3) A system satisfies subsection (1) of this section, and a person has control of an 3
electronic document of title, if an authoritative electronic copy of the document, a 4
record attached to or logically associated with the electronic copy, or a system in 5
which the electronic copy is recorded: 6
(a) Enables the person to readily identify each electronic copy as either an 7
authoritative copy or a nonauthoritative copy; 8
(b) Enables the person to readily identify itself in any way, including by name, 9
identifying number, cryptographic key, office, or account number, as the 10
person to which each authoritative electronic copy was issued or 11
transferred; and 12
(c) Gives the person exclusive power, subject to subsection (4) of this section, 13
to: 14
1. Prevent others from adding or changing the person to which each 15
authoritative electronic copy has been issued or transferred; and 16
2. Transfer control of each authoritative electronic copy. 17
(4) Subject to subsection (5) of this section, a power is exclusive under subsection 18
(3)(c)1. and 2. of this section even if: 19
(a) The authoritative electronic copy, a record attached to or logically 20
associated with the authoritative electronic copy, or a system in which the 21
authoritative electronic copy is recorded limits the use of the document of 22
title or has a protocol that is programmed to cause a change, including a 23
transfer or loss of control; or 24
(b) The power is shared with another person. 25
(5) A power of a person is not shared with another person under subsection (4)(b) of 26
this section and the person's power is not exclusive if: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(a) The person can exercise the power only if the power also is exercised by the 1
other person; and 2
(b) The other person: 3
1. Can exercise the power without exercise of the power by the person; or 4
2. Is the transferor to the person of an interest in the document of title. 5
(6) If a person has the powers specified in subsection (3)(c)1. and 2. of this section, 6
the powers are presumed to be exclusive. 7
(7) A person has control of an electronic document of title if another person, other 8
than the transferor to the person of an interest in the document: 9
(a) Has control of the document and acknowledges that it has control on behalf 10
of the person; or 11
(b) Obtains control of the document after having acknowledged that it will 12
obtain control of the document on behalf of the person. 13
(8) A person that has control under this section is not required to acknowledge that it 14
has control on behalf of another person. 15
(9) If a person acknowledges that it has or will obtain control on behalf of another 16
person, unless the person otherwise agrees or law other than this article or 17
Article 9 of this chapter otherwise provides, the person does not owe any duty to 18
the other person and is not required to confirm the acknowledgment to any other 19
person. 20
Section 39. KRS 355.8-102 is amended to read as follows: 21
(1) In this article: 22
(a) "Adverse claim" means a claim that a claimant has a property interest in a 23
financial asset and that it is a violation of the rights of the claimant for another 24
person to hold, transfer, or deal with the financial asset; 25
(b) "Bearer form," as applied to a certificated security, means a form in which the 26
security is payable to the bearer of the security certificate according to its 27 UNOFFICIAL COPY 24 RS SB 155/GA
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terms but not by reason of an indorsement; 1
(c) "Broker" means a person defined as a broker or dealer under the federal 2
securities laws, but without excluding a bank acting in that capacity; 3
(d) "Certificated security" means a security that is represented by a certificate; 4
(e) "Clearing corporation" means: 5
1. A person that is registered as a "clearing agency" under the federal 6
securities laws; 7
2. A federal reserve bank; or 8
3. Any other person that provides clearance or settlement services with 9
respect to financial assets that would require it to register as a clearing 10
agency under the federal securities laws but for an exclusion or 11
exemption from the registration requirement, if its activities as a 12
clearing corporation, including promulgation of rules, are subject to 13
regulation by a federal or state governmental authority; 14
(f) "Communicate" means to: 15
1. Send a signed record[writing]; or 16
2. Transmit information by any mechanism agreed upon by the persons 17
transmitting and receiving the information; 18
(g) 1. "Entitlement holder" means a person identified in the records of a 19
securities intermediary as the person having a security entitlement 20
against the securities intermediary. 21
2. If a person acquires a security entitlement by virtue of KRS 355.8-22
501(2)(b) or (c), that person is the entitlement holder; 23
(h) "Entitlement order" means a notification communicated to a securities 24
intermediary directing transfer or redemption of a financial asset to which the 25
entitlement holder has a security entitlement; 26
(i) 1. "Financial asset," except as otherwise provided in KRS 355.8-103, 27 UNOFFICIAL COPY 24 RS SB 155/GA
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means: 1
a.[1.] A security; 2
b.[2.] An obligation of a person or a share, participation, or other interest 3
in a person or in property or an enterprise of a person, which is, or 4
is of a type, dealt in or traded on financial markets, or which is 5
recognized in any area in which it is issued or dealt in as a medium 6
for investment; or 7
c.[3.] Any property that is held by a securities intermediary for another 8
person in a securities account if the securities intermediary has 9
expressly agreed with the other person that the property is to be 10
treated as a financial asset under this article. 11
2. As context requires, the term means either the interest itself or the 12
means by which a person's claim to it is evidenced, including a 13
certificated or uncertificated security, a security certificate, or a security 14
entitlement; 15
(j) [(]Reserved[)]; 16
(k) "Indorsement" means a signature that alone or accompanied by other words is 17
made on a security certificate in registered form or on a separate document for 18
the purpose of assigning, transferring, or redeeming the security or granting a 19
power to assign, transfer, or redeem it; 20
(l) "Instruction" means a notification communicated to the issuer of an 21
uncertificated security which directs that the transfer of the security be 22
registered or that the security be redeemed; 23
(m) "Registered form," as applied to a certificated security, means a form in 24
which: 25
1. The security certificate specifies a person entitled to the security; and 26
2. A transfer of the security may be registered upon books maintained for 27 UNOFFICIAL COPY 24 RS SB 155/GA
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that purpose by or on behalf of the issuer, or the security certificate so 1
states; 2
(n) "Securities intermediary" means: 3
1. A clearing corporation; or 4
2. A person, including a bank or broker, that in the ordinary course of its 5
business maintains securities accounts for others and is acting in that 6
capacity; 7
(o) "Security," except as otherwise provided in KRS 355.8-103, means an 8
obligation of an issuer or a share, participation, or other interest in an issuer or 9
in property or an enterprise of an issuer: 10
1. Which is represented by a security certificate in bearer or registered 11
form, or the transfer of which may be registered upon books maintained 12
for that purpose by or on behalf of the issuer; 13
2. Which is one of a class or series or by its terms is divisible into a class 14
or series of shares, participations, interests, or obligations; and 15
3. Which: 16
a. Is, or is of a type, dealt in or traded on securities exchanges or 17
securities markets; or 18
b. Is a medium for investment and by its terms expressly provides 19
that it is a security governed by this article; 20
(p) "Security certificate" means a certificate representing a security; 21
(q) "Security entitlement" means the rights and property interest of an entitlement 22
holder with respect to a financial asset specified in Part 5 of this article; and 23
(r) "Uncertificated security" means a security that is not represented by a 24
certificate. 25
(2) The following definitions in[Other definitions applying to] this article and other 26
articles of this chapter apply to this article[the sections in which they appear are]: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(a) "Appropriate person." KRS 355.8-107; 1
(b) "Control." KRS 355.8-106; 2
(c) "Controllable account." Section 44 of this Act; 3
(d) "Controllable electronic record." Section 95 of this Act; 4
(e) "Controllable payment intangible." Section 44 of this Act; 5
(f) "Delivery." KRS 355.8-301; 6
(g)[(d)] "Investment company security." KRS 355.8-103; 7
(h)[(e)] "Issuer." KRS 355.8-201; 8
(i)[(f)] "Overissue." KRS 355.8-210; 9
(j)[(g)] "Protected purchaser." KRS 355.8-303; and 10
(k)[(h)] "Securities account." KRS 355.8-501. 11
(3) In addition, Article 1 of this chapter contains general definitions and principles of 12
construction and interpretation applicable throughout this article. 13
(4) The characterization of a person, business, or transaction for purposes of this article 14
does not determine the characterization of the person, business, or transaction for 15
purposes of any other law, regulation, or rule. 16
Section 40. KRS 355.8-103 is amended to read as follows: 17
(1) A share or similar equity interest issued by a corporation, business trust, joint stock 18
company, or similar entity is a security. 19
(2) (a) An "investment company security" is a security. 20
(b) "Investment company security" means a share or similar equity interest issued 21
by an entity that is registered as an investment company under the federal 22
investment company laws, an interest in a unit investment trust that is so 23
registered, or a face-amount certificate issued by a face-amount certificate 24
company that is so registered. 25
(c) Investment company security does not include an insurance policy or 26
endowment policy or annuity contract issued by an insurance company. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(3) (a) An interest in a partnership or limited liability company is not a security 1
unless: 2
1. It is dealt in or traded on securities exchanges or in securities markets;[,] 3
2. Its terms expressly provide that it is a security governed by this 4
article;[,] or 5
3. It is an investment company security. 6
(b) However, an interest in a partnership or limited liability company is a 7
financial asset if it is held in a securities account. 8
(4) (a) A writing that is a security certificate is governed by this article and not by 9
Article 3 of this chapter, even though it also meets the requirements of that 10
article. 11
(b) However, a negotiable instrument governed by Article 3 of this chapter is a 12
financial asset if it is held in a securities account. 13
(5) An option or similar obligation issued by a clearing corporation to its participants is 14
not a security, but is a financial asset. 15
(6) A commodity contract, as defined in KRS 355.9-102(1)[(o)], is not a security or a 16
financial asset. 17
(7) A document of title, as defined in KRS 355.1-201(2)[(p)], is not a financial asset 18
unless KRS 355.8-102(1)(i)1.c.[3.] applies. 19
(8) A controllable account, controllable electronic record, or controllable payment 20
intangible is not a financial asset unless subsection (1)(i)1.c. of Section 39 of this 21
Act applies. 22
Section 41. KRS 355.8-106 is amended to read as follows: 23
(1) A purchaser has "control" of a certificated security in bearer form if the certificated 24
security is delivered to the purchaser. 25
(2) A purchaser has "control" of a certificated security in registered form if the 26
certificated security is delivered to the purchaser, and: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(a) The certificate is indorsed to the purchaser or in blank by an effective 1
indorsement; or 2
(b) The certificate is registered in the name of the purchaser, upon original issue 3
or registration of transfer by the issuer. 4
(3) A purchaser has "control" of an uncertificated security if: 5
(a) The uncertificated security is delivered to the purchaser; or 6
(b) The issuer has agreed that it will comply with instructions originated by the 7
purchaser without further consent by the registered owner. 8
(4) A purchaser has "control" of a security entitlement if: 9
(a) The purchaser becomes the entitlement holder; 10
(b) The securities intermediary has agreed that it will comply with entitlement 11
orders originated by the purchaser without further consent by the entitlement 12
holder; or 13
(c) Another person, other than the transferor to the purchaser of an interest in 14
the security entitlement: 15
1. Has control of the security entitlement and[on behalf of the purchaser 16
or, having previously acquired control of the security entitlement,] 17
acknowledges that it has control on behalf of the purchaser; or 18
2. Obtains control of the security entitlement after having acknowledged 19
that it will obtain control of the security entitlement on behalf of the 20
purchaser. 21
(5) If an interest in a security entitlement is granted by the entitlement holder to the 22
entitlement holder's own securities intermediary, the securities intermediary has 23
control. 24
(6) A purchaser who has satisfied the requirements of subsection (3) or (4) of this 25
section has control, even if the registered owner in the case of subsection (3) of this 26
section or the entitlement holder in the case of subsection (4) of this section retains 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the right to make substitutions for the uncertificated security or security entitlement, 1
to originate instructions or entitlement orders to the issuer or securities 2
intermediary, or otherwise to deal with the uncertificated security or security 3
entitlement. 4
(7) An issuer or a securities intermediary may not enter into an agreement of the kind 5
described in subsection (3)(b) or (4)(b) of this section without the consent of the 6
registered owner or entitlement holder, but an issuer or a securities intermediary is 7
not required to enter into such an agreement even though the registered owner or 8
entitlement holder so directs. An issuer or securities intermediary that has entered 9
into such an agreement is not required to confirm the existence of the agreement to 10
another party unless requested to do so by the registered owner or entitlement 11
holder. 12
(8) A person that has control under this section is not required to acknowledge that it 13
has control on behalf of a purchaser. 14
(9) If a person acknowledges that it has or will obtain control on behalf of a 15
purchaser, unless the person otherwise agrees or law other than this article or 16
Article 9 of this chapter otherwise provides, the person does not own any duty to 17
the purchaser and is not required to confirm the acknowledgment to any other 18
person. 19
Section 42. KRS 355.8-110 is amended to read as follows: 20
(1) The local law of the issuer's jurisdiction, as specified in subsection (4) of this 21
section, governs: 22
(a) The validity of a security; 23
(b) The rights and duties of the issuer with respect to registration of transfer; 24
(c) The effectiveness of registration of transfer by the issuer; 25
(d) Whether the issuer owes any duties to an adverse claimant to a security; and 26
(e) Whether an adverse claim can be asserted against a person to whom transfer 27 UNOFFICIAL COPY 24 RS SB 155/GA
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of a certificated or uncertificated security is registered or a person who obtains 1
control of an uncertificated security. 2
(2) The local law of the securities intermediary's jurisdiction, as specified in subsection 3
(5) of this section, governs: 4
(a) Acquisition of a security entitlement from the securities intermediary; 5
(b) The rights and duties of the securities intermediary and entitlement holder 6
arising out of a security entitlement; 7
(c) Whether the securities intermediary owes any duties to an adverse claimant to 8
a security entitlement; and 9
(d) Whether an adverse claim can be asserted against a person who acquires a 10
security entitlement from the securities intermediary or a person who 11
purchases a security entitlement or interest therein from an entitlement holder. 12
(3) The local law of the jurisdiction in which a security certificate is located at the time 13
of delivery governs whether an adverse claim can be asserted against a person to 14
whom the security certificate is delivered. 15
(4) (a) "Issuer's jurisdiction" means the jurisdiction under which the issuer of the 16
security is organized or, if permitted by the law of that jurisdiction, the law of 17
another jurisdiction specified by the issuer. 18
(b) An issuer organized under the law of this Commonwealth may specify the law 19
of another jurisdiction as the law governing the matters specified in 20
subsection (1)(b) to (e) of this section. 21
(5) The following rules determine a "securities intermediary's jurisdiction" for purposes 22
of this section: 23
(a) If an agreement between the securities intermediary and its entitlement holder 24
governing the securities account expressly provides that a particular 25
jurisdiction is the securities intermediary's jurisdiction for purposes of this 26
part of this article, this article, or Article 9 of this chapter, that jurisdiction is 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the securities intermediary's jurisdiction;[.] 1
(b) If paragraph (a) of this subsection does not apply and an agreement between 2
the securities intermediary and its entitlement holder governing the securities 3
account expressly provides that the agreement is governed by the law of a 4
particular jurisdiction, that jurisdiction is the securities intermediary's 5
jurisdiction;[.] 6
(c) If neither paragraph (a) nor paragraph (b) of this subsection applies and an 7
agreement between the securities intermediary and its entitlement holder 8
governing the securities account expressly provides that the securities account 9
is maintained at an office in a particular jurisdiction, that jurisdiction is the 10
securities intermediary's jurisdiction;[.] 11
(d) If none of the preceding paragraphs of this subsection applies, the securities 12
intermediary's jurisdiction is the jurisdiction in which the office identified in 13
an account statement as the office serving the entitlement holder's account is 14
located; and[.] 15
(e) If none of the preceding paragraphs of this subsection applies, the securities 16
intermediary's jurisdiction is the jurisdiction in which the chief executive 17
office of the securities intermediary is located. 18
(6) A securities intermediary's jurisdiction is not determined by the: 19
(a) Physical location of certificates representing financial assets;[, or by the ] 20
(b) Jurisdiction in which is organized the issuer of the financial asset with respect 21
to which an entitlement holder has a security entitlement;[,] or[ by the ] 22
(c) Location of facilities for data processing or other record keeping concerning 23
the account. 24
(7) The local law of the issuer's jurisdiction or the securities intermediary's 25
jurisdiction governs a matter or transaction specified in subsection (1) or (2) of 26
this section even if the matter or transaction does not bear any relation to the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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jurisdiction. 1
Section 43. KRS 355.8-303 is amended to read as follows: 2
(1) "Protected purchaser" means a purchaser of a certificated or uncertificated security, 3
or of an interest therein, who: 4
(a) Gives value; 5
(b) Does not have notice of any adverse claim to the security; and 6
(c) Obtains control of the certificated or uncertificated security. 7
(2) [In addition to acquiring the rights of a purchaser, ]A protected purchaser[ also] 8
acquires its interest in the security free of any adverse claim. 9
Section 44. KRS 355.9-102 is amended to read as follows: 10
(1) In this article: 11
(a) "Accession" means goods that are physically united with other goods in such 12
a manner that the identity of the original goods is not lost; 13
(b) 1. "Account," except as used in "account for," "account statement," 14
"account to," "commodity account" in paragraph (p) of this 15
subsection, "customer's account," "deposit account" in paragraph 16
(ag) of this subsection, "on account of," and "statement of account," 17
means a right to payment of a monetary obligation, whether or not 18
earned by performance: 19
a. For property that has been or is to be sold, leased, licensed, 20
assigned, or otherwise disposed of; 21
b. For services rendered or to be rendered; 22
c. For a policy of insurance issued or to be issued; 23
d. For a secondary obligation incurred or to be incurred; 24
e. For energy provided or to be provided; 25
f. For the use or hire of a vessel under a charter or other contract; 26
g. Arising out of the use of a credit or charge card or information 27 UNOFFICIAL COPY 24 RS SB 155/GA
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contained on or for use with the card; or 1
h. As winnings in a lottery or other game of chance operated or 2
sponsored by a state, governmental unit of a state, or person 3
licensed or authorized to operate the game by a state or 4
governmental unit of a state. 5
2. The term includes: 6
a. Controllable accounts; and 7
b. Health-care-insurance receivables. 8
3. The term does not include: 9
a. [Rights to payment evidenced by ]Chattel paper[ or an 10
instrument]; 11
b. Commercial tort claims; 12
c. Deposit accounts; 13
d. Investment property; 14
e. Letter-of-credit rights or letters of credit;[ or] 15
f. Rights to payment for money or funds advanced or sold, other than 16
rights arising out of the use of a credit or charge card or 17
information contained on or for use with the card; or 18
g. Rights to payment evidenced by an instrument; 19
(c) 1. "Account debtor" means a person obligated on an account, chattel paper, 20
or general intangible. 21
2. The term does not include persons obligated to pay a negotiable 22
instrument, even if the negotiable instrument evidences[constitutes part 23
of] chattel paper; 24
(d) "Accounting," except as used in "accounting for," means a record: 25
1. Signed[Authenticated] by a secured party; 26
2. Indicating the aggregate unpaid secured obligations as of a date not 27 UNOFFICIAL COPY 24 RS SB 155/GA
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more than thirty-five (35) days earlier or thirty-five (35) days later than 1
the date of the record; and 2
3. Identifying the components of the obligations in reasonable detail; 3
(e) "Agricultural lien" means an interest in farm products: 4
1. Which secures payment or performance of an obligation for: 5
a. Goods or services furnished in connection with a debtor's farming 6
operation; or 7
b. Rent on real property leased by a debtor in connection with its 8
farming operation; 9
2. Which is created by statute in favor of a person that: 10
a. In the ordinary course of its business furnished goods or services 11
to a debtor in connection with a debtor's farming operation; or 12
b. Leased real property to a debtor in connection with the debtor's 13
farming operation; and 14
3. Whose effectiveness does not depend on the person's possession of the 15
personal property; 16
(f) "As-extracted collateral" means: 17
1. Oil, gas, or other minerals that are subject to a security interest that: 18
a. Is created by a debtor having an interest in the minerals before 19
extraction; and 20
b. Attaches to the minerals as extracted; or 21
2. Accounts arising out of the sale at the wellhead or minehead of oil, gas, 22
or other minerals in which the debtor had an interest before extraction; 23
(g) Reserved["Authenticate" means: 24
1. To sign; or 25
2. With present intent to adopt or accept a record, to attach to or logically 26
associate with the record an electronic sound, symbol, or process]; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(h) 1. "Assignee," except as used in "assignee for benefit of creditors," 1
means a person: 2
a. In whose favor a security interest that secures an obligation is 3
created or provided for under a security agreement, whether or 4
not the obligation is outstanding; or 5
b. To which an account, chattel paper, payment intangible, or 6
promissory note has been sold. 7
2. The term includes a person to which a security interest has been 8
transferred by a security party; 9
(i) 1. "Assignor" means a person that: 10
a. Under a security agreement, creates or provides for a security 11
interest that secures an obligation; or 12
b. Sells an account, chattel paper, payment intangible, or 13
promissory note. 14
2. The term includes a security party that has transferred a security 15
interest to another person; 16
(j)[(h)] "Bank" means an organization that is engaged in the business of 17
banking. The term includes savings banks, savings and loan associations, 18
credit unions, and trust companies; 19
(k)[(i)] "Cash proceeds" means proceeds that are money, checks, deposit 20
accounts, or the like; 21
(l)[(j)] 1. "Certificate of title" means a certificate of title with respect to 22
which a statute provides for the security interest in question to be 23
indicated on the certificate as a condition or result of the security 24
interest's obtaining priority over the rights of a lien creditor with respect 25
to the collateral. 26
2. The term includes another record maintained as an alternative to a 27 UNOFFICIAL COPY 24 RS SB 155/GA
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certificate of title by the governmental unit that issues certificates of title 1
if a statute permits the security interest in question to be indicated on the 2
record as a condition or result of the security interest's obtaining priority 3
over the rights of a lien creditor with respect to the collateral; 4
(m)[(k)] 1. "Chattel paper" means:[ a record or records that evidence both a 5
monetary obligation and a security interest in specific goods, a security 6
interest in specific goods and software used in the goods, a security 7
interest in specific goods and license of software used in the goods, a 8
lease of specific goods, or a lease of specific goods and license of 9
software used in the goods. In this paragraph, "monetary obligation" 10
means a monetary obligation secured by the goods or owed under a 11
lease of the goods and includes a monetary obligation with respect to 12
software used in the goods. The term does not include: 13
1. Charters or other contracts involving the use or hire of a vessel; or 14
2. Records that evidence a right of payment arising out of the use of a 15
credit or charge card or information contained on or for use with the 16
card. 17
If a transaction is evidenced by records that include an instrument or 18
series of instruments, the group of records taken together constitutes 19
chattel paper;] 20
a. A right to payment of a monetary obligation secured by specific 21
goods, if the right to payment and security agreement are 22
evidenced by a record; or 23
b. A right to payment of a monetary obligation owed by a lessee 24
under a lease agreement with respect to specific goods and a 25
monetary obligation owed by the lessee in connection with the 26
transaction giving rise to the lease, if: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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i. The right to payment and lease agreement are evidenced by 1
a record; and 2
ii. The predominant purpose of the transaction giving rise to 3
the lease was to give the lessee the right to possession and 4
use of the goods. 5
2. The term does not include a right to payment arising out of a charter 6
or other contract involving the use or hire of a vessel or a right to 7
payment arising out of the use of a credit or charge card or 8
information contained on or for use with the card; 9
(n)[(l)] 1. "Collateral" means the property subject to a security interest or 10
agricultural lien. 11
2. The term includes: 12
a.[1.] Proceeds to which a security interest attaches; 13
b.[2.] Accounts, chattel paper, payment intangibles, and promissory 14
notes that have been sold; and 15
c.[3.] Goods that are the subject of a consignment; 16
(o)[(m)] "Commercial tort claim" means a claim arising in tort with respect to 17
which: 18
1. The claimant is an organization; or 19
2. The claimant is an individual and the claim: 20
a. Arose in the course of the claimant's business or profession; and 21
b. Does not include damages arising out of personal injury to or the 22
death of an individual; 23
(p)[(n)] "Commodity account" means an account maintained by a commodity 24
intermediary in which a commodity contract is carried for a commodity 25
customer; 26
(q)[(o)] "Commodity contract" means a commodity futures contract, an option 27 UNOFFICIAL COPY 24 RS SB 155/GA
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on a commodity futures contract, a commodity option, or another contract if 1
the contract or option is: 2
1. Traded on or subject to the rules of a board of trade that has been 3
designated as a contract market for such a contract pursuant to federal 4
commodities laws; or 5
2. Traded on a foreign commodity board of trade, exchange, or market, and 6
is carried on the books of a commodity intermediary for a commodity 7
customer; 8
(r)[(p)] "Commodity customer" means a person for which a commodity 9
intermediary carries a commodity contract on its books; 10
(s)[(q)] "Commodity intermediary" means a person that: 11
1. Is registered as a futures commission merchant under federal 12
commodities law; or 13
2. In the ordinary course of its business provides clearance or settlement 14
services for a board of trade that has been designated as a contract 15
market pursuant to federal commodities law; 16
(t)[(r)] "Communicate" means: 17
1. To send a written or other tangible record; 18
2. To transmit a record by any means agreed upon by the persons sending 19
and receiving the record; or 20
3. In the case of transmission of a record to or by a filing office, to transmit 21
a record by any means prescribed by filing-office rule; 22
(u)[(s)] "Consignee" means a merchant to which goods are delivered in a 23
consignment; 24
(v)[(t)] "Consignment" means a transaction, regardless of its form, in which a 25
person delivers goods to a merchant for the purpose of sale and: 26
1. The merchant: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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a. Deals in goods of that kind under a name other than the name of 1
the person making delivery; 2
b. Is not an auctioneer; and 3
c. Is not generally known by its creditors to be substantially engaged 4
in selling the goods of others; 5
2. With respect to each delivery, the aggregate value of the goods is one 6
thousand dollars ($1,000) or more at the time of delivery; 7
3. The goods are not consumer goods immediately before delivery; and 8
4. The transaction does not create a security interest that secures an 9
obligation; 10
(w)[(u)] "Consignor" means a person that delivers goods to a consignee in a 11
consignment; 12
(x)[(v)] "Consumer debtor" means a debtor in a consumer transaction; 13
(y)[(w)] "Consumer goods" means goods that are used or bought for use 14
primarily for personal, family, or household purposes; 15
(z)[(x)] "Consumer-goods transaction" means a consumer transaction in which: 16
1. An individual incurs an obligation primarily for personal, family, or 17
household purposes; and 18
2. A security interest in consumer goods secures the obligation; 19
(aa)[(y)] "Consumer obligor" means an obligor who is an individual and who 20
incurred the obligation as part of a transaction entered into primarily for 21
personal, family, or household purposes; 22
(ab)[(z)] 1. "Consumer transaction" means a transaction in which: 23
a.[1.] An individual incurs an obligation primarily for personal, family, 24
or household purposes; 25
b.[2.] A security interest secures the obligation; and 26
c.[3.] The collateral is held or acquired primarily for personal, family, or 27 UNOFFICIAL COPY 24 RS SB 155/GA
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household purposes. 1
2. The term includes consumer-goods transactions; 2
(ac)[(aa)] "Continuation statement" means an amendment of a financing statement 3
which: 4
1. Identifies, by its file number, the initial financing statement to which it 5
relates; and 6
2. Indicates that it is a continuation statement for, or that it is filed to 7
continue the effectiveness of, the identified financing statement; 8
(ad) "Controllable account" means an account evidenced by a controllable 9
electronic record that provides that the account debtor undertakes to pay the 10
person that has control under Section 98 of this Act of the controllable 11
electronic record; 12
(ae) "Controllable payment intangible" means a payment intangible evidenced 13
by a controllable electronic record that provides that the account debtor 14
undertakes to pay the person that has control under Section 98 of this Act of 15
the controllable electronic record; 16
(af)[(ab)] "Debtor" means: 17
1. A person having an interest, other than a security interest or other lien, 18
in the collateral, whether or not the person is an obligor; 19
2. A seller of accounts, chattel paper, payment intangibles, or promissory 20
notes; or 21
3. A consignee; 22
(ag)[(ac)] 1. "Deposit account" means a demand, time, savings, passbook, or 23
similar account maintained with a bank. 24
2. The term does not include investment property or accounts evidenced by 25
an instrument; 26
(ah)[(ad)] "Document" means a document of title or a receipt of the type described 27 UNOFFICIAL COPY 24 RS SB 155/GA
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in KRS 355.7-201(2); 1
(ai)[(ae)] Reserved["Electronic chattel paper" means chattel paper evidenced by a 2
record or records consisting of information stored in an electronic medium]; 3
(aj) "Electronic money" means money in an electronic form; 4
(ak)[(af)] 1. "Encumbrance" means a right, other than an ownership interest, in 5
real property. 6
2. The term includes mortgages and other liens on real property; 7
(al)[(ag)] "Equipment" means goods other than inventory, farm products, or 8
consumer goods; 9
(am)[(ah)] 1. "Farm products" means goods, other than standing timber, with 10
respect to which the debtor is engaged in a farming operation and which 11
are: 12
a.[1.] Crops grown, growing, or to be grown, including: 13
i.[a.] Crops produced on trees, vines, and bushes; and 14
ii.[b.] Aquatic goods produced in aquacultural operations; 15
b.[2.] Livestock, born or unborn, including aquatic goods produced in 16
aquacultural operations; 17
c.[3.] Supplies used or produced in a farming operation; 18
d.[4.] Products of crops or livestock in their unmanufactured states; or 19
e.[5.] Equine interests, including, but not limited to, interests in horses, 20
mares, yearlings, foals, weanlings, stallions, syndicated stallions, 21
and stallion shares (including seasons and other rights in 22
connection therewith), whether or not the debtor is engaged in 23
farming operations and without regard to the use thereof. 24
2. If goods are farm products, they are neither equipment nor inventory; 25
(an)[(ai)] "Farming operation" means raising, cultivating, propagating, fattening, 26
grazing, or any other farming, livestock, or aquacultural operation; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(ao)[(aj)] "File number" means the number assigned to an initial financing 1
statement pursuant to KRS 355.9-519(1); 2
(ap)[(ak)] "Filing office" means an office designated in KRS 355.9-501 as the 3
place to file a financing statement; 4
(aq)[(al)] "Filing-office rule" means a rule adopted pursuant to KRS 355.9-526; 5
(ar)[(am)] "Financing statement" means a record or records composed of an initial 6
financing statement and any filed record relating to the initial financing 7
statement; 8
(as)[(an)] 1. "Fixture filing" means the filing of a financing statement covering 9
goods that are or are to become fixtures and satisfying KRS 355.9-10
502(1) and (2). 11
2. The term includes the filing of a financing statement covering goods of a 12
transmitting utility which are or are to become fixtures; 13
(at)[(ao)] "Fixtures" means goods that have become so related to particular real 14
property that an interest in them arises under real property law; 15
(au)[(ap)] 1. "General intangible" means any personal property, including 16
things in action, other than accounts, chattel paper, commercial tort 17
claims, deposit accounts, documents, goods, instruments, investment 18
property, letter-of-credit rights, letters of credit, money, and oil, gas, or 19
other minerals before extraction. 20
2. The term includes: 21
a. Controllable electronic records; 22
b. Payment intangibles; and 23
c. Software; 24
(av)[(aq)] [(]Reserved[)]; 25
(aw)[(ar)] 1. "Goods" means all things that are movable when a security interest 26
attaches. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2.[1.] The term includes: 1
a. Fixtures; 2
b. Standing timber that is to be cut and removed under a conveyance 3
or contract for sale; 4
c. The unborn young of animals; 5
d. Crops grown, growing, or to be grown, even if the crops are 6
produced on trees, vines, or bushes; and 7
e. Manufactured homes. 8
3.[2.] The term also includes a computer program embedded in goods and any 9
supporting information provided in connection with a transaction 10
relating to the program if: 11
a. The program is associated with the goods in such a manner that it 12
customarily is considered part of the goods; or 13
b. By becoming the owner of the goods, a person acquires a right to 14
use the program in connection with the goods. 15
4.[3.] The term does not include a computer program embedded in goods that 16
consist solely of the medium in which the program is embedded. 17
5.[4.] The term also does not include accounts, chattel paper, commercial tort 18
claims, deposit accounts, documents, general intangibles, instruments, 19
investment property, letter-of-credit rights, letters of credit, money, or 20
oil, gas, or other minerals before extraction; 21
(ax)[(as)] 1. "Governmental unit" means a subdivision, agency, department, 22
county, parish, municipality, or other unit of the government of the 23
United States, a State, or a foreign country. 24
2. The term includes an organization having a separate corporate existence 25
if the organization is eligible to issue debt on which interest is exempt 26
from income taxation under the laws of the United States; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(ay)[(at)] "Health-care-insurance receivable" means an interest in or claim under a 1
policy of insurance which is a right to payment of a monetary obligation for 2
health-care goods or services provided or to be provided; 3
(az)[(au)] 1. "Instrument" means a negotiable instrument or any other writing 4
that evidences a right to the payment of a monetary obligation, is not 5
itself a security agreement or lease, and is of a type that in ordinary 6
course of business is transferred by delivery with any necessary 7
indorsement or assignment. 8
2. The term does not include: 9
a.[1.] Investment property; 10
b.[2.] Letters of credit;[ or] 11
c.[3.] Writings that evidence a right to payment arising out of the use of 12
a credit or charge card or information contained on or for use with 13
the card; or 14
d. Writings that evidence chattel paper; 15
(ba)[(av)] "Inventory" means goods, other than farm products, which: 16
1. Are leased by a person as lessor; 17
2. Are held by a person for sale or lease or to be furnished under a contract 18
of service; 19
3. Are furnished by a person under a contract of service; or 20
4. Consist of raw materials, work in process, or materials used or 21
consumed in a business; 22
(bb)[(aw)] "Investment property" means a security, whether certificated or 23
uncertificated, security entitlement, securities account, commodity contract, or 24
commodity account; 25
(bc)[(ax)] "Jurisdiction of organization," with respect to a registered organization, 26
means the jurisdiction under whose law the organization is organized; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(bd)[(ay)] 1. "Letter-of-credit right" means a right to payment or performance 1
under a letter of credit, whether or not the beneficiary has demanded or 2
is at the time entitled to demand payment or performance. 3
2. The term does not include the right of a beneficiary to demand payment 4
or performance under a letter of credit; 5
(be)[(az)] "Lien creditor" means: 6
1. A creditor that has acquired a lien on the property involved by 7
attachment, levy, or the like; 8
2. An assignee for benefit of creditors from the time of assignment; 9
3. A trustee in bankruptcy from the date of the filing of the petition; or 10
4. A receiver in equity from the time of appointment; 11
(bf)[(ba)] 1. "Manufactured home" means a structure, transportable in one (1) 12
or more sections, which, in the traveling mode, is eight (8) body feet or 13
more in width or forty (40) body feet or more in length, or, when erected 14
on site, is three hundred twenty (320) or more square feet, and which is 15
built on a permanent chassis and designed to be used as a dwelling with 16
or without a permanent foundation when connected to the required 17
utilities, and includes the plumbing, heating, air-conditioning, and 18
electrical systems contained therein. 19
2. The term includes any structure that meets all of the requirements of this 20
paragraph except the size requirements and with respect to which the 21
manufacturer voluntarily files a certification required by the United 22
States Secretary of Housing and Urban Development and complies with 23
the standards established under Title 42 of the United States Code; 24
(bg)[(bb)] "Manufactured-home transaction" means a secured transaction: 25
1. That creates a purchase-money security interest in a manufactured 26
home, other than a manufactured home held as inventory; or 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2. In which a manufactured home, other than a manufactured home held as 1
inventory, is the primary collateral; 2
(bh) "Money" has the meaning in Section 1 of this Act, but does not include: 3
1. A deposit account; or 4
2. Money in an electronic form that cannot be subjected to control under 5
Section 47 of this Act; 6
(bi)[(bc)] "Mortgage" means a consensual interest in real property, including 7
fixtures, which secures payment or performance of an obligation; 8
(bj)[(bd)] "New debtor" means a person that becomes bound as debtor under KRS 9
355.9-203(4) by a security agreement previously entered into by another 10
person; 11
(bk)[(be)] 1. "New value" means: 12
a.[1.] Money; 13
b.[2.] Money's worth in property, services, or new credit; or 14
c.[3.] Release by a transferee of an interest in property previously 15
transferred to the transferee. 16
2. The term does not include an obligation substituted for another 17
obligation; 18
(bl)[(bf)] "Noncash proceeds" means proceeds other than cash proceeds; 19
(bm)[(bg)] 1. "Obligor" means a person that, with respect to an obligation 20
secured by a security interest in or an agricultural lien on the collateral: 21
a.[1.] Owes payment or other performance of the obligation; 22
b.[2.] Has provided property other than the collateral to secure payment 23
or other performance of the obligation; or 24
c.[3.] Is otherwise accountable in whole or in part for payment or other 25
performance of the obligation. 26
2. The term does not include issuers or nominated persons under a letter of 27 UNOFFICIAL COPY 24 RS SB 155/GA
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credit; 1
(bn)[(bh)] "Original debtor," except as used in KRS 355.9-310(3), means a person 2
that, as debtor, entered into a security agreement to which a new debtor has 3
become bound under KRS 355.9-203(4); 4
(bo)[(bi)] 1. "Payment intangible" means a general intangible under which the 5
account debtor's principal obligation is a monetary obligation. 6
2. The term includes a controllable payment intangible; 7
(bp)[(bj)] "Person related to," with respect to an individual, means: 8
1. The spouse of the individual; 9
2. A brother, brother-in-law, sister, or sister-in-law of the individual; 10
3. An ancestor or lineal descendant of the individual or the individual's 11
spouse; or 12
4. Any other relative, by blood or marriage, of the individual or the 13
individual's spouse who shares the same home with the individual; 14
(bq)[(bk)] "Person related to," with respect to an organization, means: 15
1. A person directly or indirectly controlling, controlled by, or under 16
common control with the organization; 17
2. An officer or director of, or a person performing similar functions with 18
respect to, the organization; 19
3. An officer or director of, or a person performing similar functions with 20
respect to, a person described in subparagraph 1. of this paragraph; 21
4. The spouse of an individual described in subparagraph 1., 2., or 3. of 22
this paragraph; or 23
5. An individual who is related by blood or marriage to an individual 24
described in subparagraph 1., 2., 3., or 4. of this paragraph and shares 25
the same home with the individual; 26
(br)[(bl)] "Proceeds," except as used in KRS 355.9-609(2), means the following 27 UNOFFICIAL COPY 24 RS SB 155/GA
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property: 1
1. Whatever is acquired upon the sale, lease, license, exchange, or other 2
disposition of collateral; 3
2. Whatever is collected on, or distributed on account of, collateral; 4
3. Rights arising out of collateral; 5
4. To the extent of the value of collateral, claims arising out of the loss, 6
nonconformity, or interference with the use of, defects or infringement 7
of rights in, or damage to, the collateral; or 8
5. To the extent of the value of collateral and to the extent payable to the 9
debtor or the secured party, insurance payable by reason of the loss or 10
nonconformity of, defects or infringement of rights in, or damage to, the 11
collateral; 12
(bs)[(bm)] "Promissory note" means an instrument that evidences a promise to pay 13
a monetary obligation, does not evidence an order to pay, and does not 14
contain an acknowledgment by a bank that the bank has received for deposit a 15
sum of money or funds; 16
(bt)[(bn)] "Proposal" means a record signed[authenticated] by a secured party 17
which includes the terms on which the secured party is willing to accept 18
collateral in full or partial satisfaction of the obligation it secures pursuant to 19
KRS 355.9-620, 355.9-621, and 355.9-622; 20
(bu)[(bo)] "Public-finance transaction" means a secured transaction in connection 21
with which: 22
1. Debt securities are issued; 23
2. All or a portion of the securities issued have an initial stated maturity of 24
at least twenty (20) years; and 25
3. The debtor, obligor, secured party, account debtor or other person 26
obligated on collateral, assignor or assignee of a secured obligation, or 27 UNOFFICIAL COPY 24 RS SB 155/GA
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assignor or assignee of a security interest is a state or a governmental 1
unit of a state; 2
(bv)[(bp)] "Public organic record" means a record that is available to the public for 3
inspection and that is: 4
1. A record consisting of the record initially filed with or issued by a state 5
or the United States to form or organize an organization and any record 6
filed with or issued by the state or the United States which amends or 7
restates the initial record; 8
2. An organic record of a business trust consisting of the record initially 9
filed with a state and any record filed with the state which amends or 10
restates the initial record, if a statute of the state governing business 11
trusts requires that the record be filed with the state; or 12
3. A record consisting of legislation enacted by the legislature of a state or 13
the Congress of the United States which forms or organizes an 14
organization, any record amending the legislation, and any record filed 15
with or issued by the state or United States which amends or restates the 16
name of the organization; 17
(bw)[(bq)] "Pursuant to commitment," with respect to an advance made or other 18
value given by a secured party, means pursuant to the secured party's 19
obligation, whether or not a subsequent event of default or other event not 20
within the secured party's control has relieved or may relieve the secured 21
party from its obligation; 22
(bx)[(br)] "Record," except as used in "for record," "of record," "record or legal 23
title," and "record owner," means information that is inscribed on a tangible 24
medium or which is stored in an electronic or other medium and is retrievable 25
in perceivable form; 26
(by)[(bs)] 1. "Registered organization" means an organization formed or 27 UNOFFICIAL COPY 24 RS SB 155/GA
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organized solely under the law of a single state or the United States by 1
the filing of a public organic record with, the issuance of a public 2
organic record by, or the enactment of legislation by the state or the 3
United States. 4
2. The term includes a business trust that is formed or organized under the 5
law of a single state if a statute of the state governing business trusts 6
requires that the business trust's organic record be filed with the state; 7
(bz)[(bt)] "Secondary obligor" means an obligor to the extent that: 8
1. The obligor's obligation is secondary; or 9
2. The obligor has a right of recourse with respect to an obligation secured 10
by collateral against the debtor, another obligor, or property of either; 11
(ca)[(bu)] "Secured party" means: 12
1. A person in whose favor a security interest is created or provided for 13
under a security agreement, whether or not any obligation to be secured 14
is outstanding; 15
2. A person that holds an agricultural lien; 16
3. A consignor; 17
4. A person to which accounts, chattel paper, payment intangibles, or 18
promissory notes have been sold; 19
5. A trustee, indenture trustee, agent, collateral agent, or other 20
representative in whose favor a security interest or agricultural lien is 21
created or provided for; or 22
6. A person that holds a security interest arising under KRS 355.2-401, 23
355.2-505, 355.2-711(3), 355.2A-508(5), 355.4-210, or 355.5-118; 24
(cb)[(bv)] "Security agreement" means an agreement that creates or provides for a 25
security interest; 26
(cc)[(bw)] Reserved["Send," in connection with a record or notification, means: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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1. To deposit in the mail, deliver for transmission, or transmit by any other 1
usual means of communication, with postage or cost of transmission 2
provided for, addressed to any address reasonable under the 3
circumstances; or 4
2. To cause the record or notification to be received within the time that it 5
would have been received if properly sent under subparagraph 1. of this 6
paragraph]; 7
(cd)[(bx)] "Software" means a computer program and any supporting information 8
provided in connection with a transaction relating to the program. The term 9
does not include a computer program that is included in the definition of 10
goods; 11
(ce)[(by)] "State" means a state of the United States, the District of Columbia, 12
Puerto Rico, the United States Virgin Islands, or any territory or insular 13
possession subject to the jurisdiction of the United States; 14
(cf)[(bz)] "Supporting obligation" means a letter-of-credit right or secondary 15
obligation that supports the payment or performance of an account, chattel 16
paper, a document, a general intangible, an instrument, or investment 17
property; 18
(cg)[(ca)] Reserved["Tangible chattel paper" means chattel paper evidenced by a 19
record or records consisting of information that is inscribed on a tangible 20
medium]; 21
(ch) "Tangible money" means money in a tangible form; 22
(ci)[(cb)] "Termination statement" means an amendment of a financing statement 23
which: 24
1. Identifies, by its file number, the initial financing statement to which it 25
relates; and 26
2. Indicates either that it is a termination statement or that the identified 27 UNOFFICIAL COPY 24 RS SB 155/GA
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financing statement is no longer effective; and 1
(cj)[(cc)] "Transmitting utility" means a person primarily engaged in the business 2
of: 3
1. Operating a railroad, subway, street railway, or trolley bus; 4
2. Transmitting communications electrically, electromagnetically, or by 5
light; 6
3. Transmitting goods by pipeline or sewer; or 7
4. Transmitting or producing and transmitting electricity, steam, gas, or 8
water. 9
(2) "Control" as provided in Section 38 of this Act and the following definitions in 10
other articles of this chapter apply to this article: 11
(a) "Applicant." KRS 355.5-102; 12
(b) "Beneficiary." KRS 355.5-102; 13
(c) "Broker." KRS 355.8-102; 14
(d) "Certificated security." KRS 355.8-102; 15
(e) "Check." KRS 355.3-104; 16
(f) "Clearing corporation." KRS 355.8-102; 17
(g) "Contract for sale." KRS 355.2-106; 18
(h) "Controllable electronic record." Section 95 of this Act; 19
(i) "Customer." KRS 355.4-104; 20
(j)[(i)] "Entitlement holder." KRS 355.8-102; 21
(k)[(j)] "Financial asset." KRS 355.8-102; 22
(l)[(k)] "Holder in due course." KRS 355.3-302; 23
(m)[(l)] "Issuer." (with respect to a letter of 24
credit or letter-of-credit right) KRS 355.5-102; 25
(n)[(m)] "Issuer." (with respect to a security) KRS 355.8-201; 26
(o)[(n)] "Lease." KRS 355.2A-103; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(p)[(o)] "Lease agreement." KRS 355.2A-103; 1
(q)[(p)] "Lease contract." KRS 355.2A-103; 2
(r)[(q)] "Leasehold interest." KRS 355.2A-103; 3
(s)[(r)] "Lessee." KRS 355.2A-103; 4
(t)[(s)] "Lessee in ordinary course of business." KRS 355.2A-103; 5
(u)[(t)] "Lessor." KRS 355.2A-103; 6
(v)[(u)] "Lessor's residual interest." KRS 355.2A-103; 7
(w)[(v)] "Letter of credit." KRS 355.5-102; 8
(x)[(w)] "Merchant." KRS 355.2-104; 9
(y)[(x)] "Negotiable instrument." KRS 355.3-104; 10
(z)[(y)] "Nominated person." KRS 355.5-102; 11
(aa)[(z)] "Note." KRS 355.3-104; 12
(ab)[(aa)] "Proceeds of a letter of credit." KRS 355.5-114; 13
(ac) "Protected purchaser." Section 43 of this Act; 14
(ad)[(ab)] "Prove." KRS 355.3-103; 15
(ae) "Qualifying purchaser." Section 95 of this Act; 16
(af)[(ac)] "Sale." KRS 355.2-106; 17
(ag)[(ad)] "Securities account." KRS 355.8-501; 18
(ah)[(ae)] "Securities intermediary." KRS 355.8-102; 19
(ai)[(af)] "Security." KRS 355.8-102; 20
(aj)[(ag)] "Security certificate." KRS 355.8-102; 21
(ak)[(ah)] "Security entitlement." KRS 355.8-102; and 22
(al)[(ai)] "Uncertificated security." KRS 355.8-102. 23
(3) Article 1 of this chapter contains general definitions and principles of construction 24
and interpretation applicable throughout this article. 25
Section 45. KRS 355.9-104 is amended to read as follows: 26
(1) A secured party has control of a deposit account if: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(a) The secured party is the bank with which the deposit account is maintained; 1
(b) The debtor, secured party, and bank have agreed in a signed[an authenticated] 2
record that the bank will comply with instructions originated by the secured 3
party directing disposition of the funds in the deposit account without further 4
consent by the debtor;[ or] 5
(c) The secured party becomes the bank's customer with respect to the deposit 6
account; or 7
(d) Another person, other than the debtor: 8
1. Has control of the deposit account and acknowledges that it has 9
control on behalf of the secured party; or 10
2. Obtains control of the deposit account after having acknowledged that 11
it will obtain control of the deposit account on behalf of the secured 12
party. 13
(2) A secured party that has satisfied subsection (1) of this section has control, even if 14
the debtor retains the right to direct the disposition of funds from the deposit 15
account. 16
SECTION 46. KRS 355.9-105 IS REPEALED AND REENACTED TO READ 17
AS FOLLOWS: 18
(1) A purchaser has control of an authoritative electronic copy of a record 19
evidencing chattel paper if a system employed for evidencing the assignment of 20
interests in the chattel paper reliably establishes the purchaser as the person to 21
which the authoritative electronic copy was assigned. 22
(2) A system satisfies subsection (1) of this section if the record or records evidencing 23
the chattel paper are created, stored, and assigned in a manner that: 24
(a) A single authoritative copy of the record or records exists which is unique, 25
identifiable, and, except as otherwise provided in paragraphs (d), (e), and (f) 26
of this subsection, unalterable; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(b) The authoritative copy identifies the purchaser as the assignee of the record 1
or records; 2
(c) The authoritative copy is communicated to and maintained by the purchaser 3
or its designated custodian; 4
(d) Copies or amendments that add or change an identified assignee of the 5
authoritative copy can be made only with the consent of the purchaser; 6
(e) Each copy of the authoritative copy and any copy of a copy is readily 7
identifiable as a copy that is not the authoritative copy; and 8
(f) Any amendment of the authoritative copy is readily identifiable as 9
authorized or unauthorized. 10
(3) A system satisfies subsection (1) of this section, and a purchaser has control of an 11
authoritative electronic copy of a record evidencing chattel paper, if the electronic 12
copy, a record attached to or logically associated with the electronic copy, or a 13
system in which the electronic copy is recorded: 14
(a) Enables the purchaser to readily identify each electronic copy as either an 15
authoritative copy or a nonauthoritative copy; 16
(b) Enables the purchaser to readily identify itself in any way, including by 17
name, identifying number, cryptographic key, office, or account number, as 18
the assignee of the authoritative electronic copy; and 19
(c) Gives the purchaser exclusive power, subject to subsection (4) of this 20
section, to: 21
1. Prevent others from adding or changing an identified assignee of the 22
authoritative electronic copy; and 23
2. Transfer control of the authoritative electronic copy. 24
(4) Subject to subsection (5) of this section, a power is exclusive under subsection 25
(3)(c)1. and 2. of this section even if: 26
(a) The authoritative electronic copy, a record attached to or logically 27 UNOFFICIAL COPY 24 RS SB 155/GA
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associated with the authoritative electronic copy, or a system in which the 1
authoritative electronic copy is recorded limits the use of the authoritative 2
electronic copy or has a protocol programmed to cause a change, including 3
a transfer or loss of control; or 4
(b) The power is shared with another person. 5
(5) A power of a purchaser is not shared with another person under subsection (4)(b) 6
of this section and the purchaser's power is not exclusive if: 7
(a) The purchaser can exercise the power only if the power also is exercised by 8
the other person; and 9
(b) The other person: 10
1. Can exercise the power without exercise of the power by the 11
purchaser; or 12
2. Is the transferor to the purchaser of an interest in the chattel paper. 13
(6) If a purchaser has the powers specified in subsection (3)(c)1. and 2. of this 14
section, the powers are presumed to be exclusive. 15
(7) A purchaser has control of an authoritative electronic copy of a record 16
evidencing chattel paper if another person, other than the transferor to the 17
purchaser of an interest in the chattel paper: 18
(a) Has control of the authoritative electronic copy and acknowledges that it 19
has control on behalf of the purchaser; or 20
(b) Obtains control of the authoritative electronic copy after having 21
acknowledged that it will obtain control of the electronic copy on behalf of 22
the purchaser. 23
SECTION 47. A NEW SECTION OF ARTICLE 9 OF KRS CHAPTER 355 IS 24
CREATED TO READ AS FOLLOWS: 25
(1) A person has control of electronic money if the electronic money, a record 26
attached to or logically associated with the electronic money, or a system in which 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the electronic money is recorded: 1
(a) Gives the person: 2
1. Power to avail itself of substantially all the benefit from the electronic 3
money; and 4
2. Exclusive power, subject to subsection (2) of this section, to: 5
a. Prevent others from availing themselves of substantially all the 6
benefit from the electronic money; and 7
b. Transfer control of the electronic money to another person or 8
cause another person to obtain control of other electronic money 9
as a result of the transfer of the electronic money; and 10
(b) Enables the person to readily identify itself in any way, including by name, 11
identifying number, cryptographic key, office, or account number, as 12
having the powers under paragraph (a) of this subsection. 13
(2) Subject to subsection (3) of this section, a power is exclusive under subsection 14
(1)(a)2.a. and b. of this section even if: 15
(a) The electronic money, a record attached to or logically associated with the 16
electronic money, or a system in which the electronic money is recorded 17
limits the use of the electronic money or has a protocol programmed to 18
cause a change, including a transfer or loss of control; or 19
(b) The power is shared with another person. 20
(3) A power of a person is not shared with another person under subsection (2)(b) of 21
this section and the person's power is not exclusive if: 22
(a) The person can exercise the power only if the power also is exercised by the 23
other person; and 24
(b) The other person: 25
1. Can exercise the power without exercise of the power by the person; or 26
2. Is the transferor to the person of an interest in the electronic money. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(4) If a person has the powers specified in subsection (1)(a)2.a. and b. of this section, 1
the powers are presumed to be exclusive. 2
(5) A person has control of electronic money if another person, other than the 3
transferor to the person of an interest in the electronic money: 4
(a) Has control of the electronic money and acknowledges that it has control on 5
behalf of the person; or 6
(b) Obtains control of the electronic money after having acknowledged that it 7
will obtain control of the electronic money on behalf of the person. 8
SECTION 48. A NEW SECTION OF ARTICLE 9 OF KRS CHAPTER 355 IS 9
CREATED TO READ AS FOLLOWS: 10
(1) A secured party has control of a controllable electronic record as provided in 11
Section 98 of this Act. 12
(2) A secured party has control of a controllable account or controllable payment 13
intangible if the secured party has control of the controllable electronic record 14
that evidences the controllable account or controllable payment intangible. 15
SECTION 49. A NEW SECTION OF ARTICLE 9 OF KRS CHAPTER 355 IS 16
CREATED TO READ AS FOLLOWS: 17
(1) A person that has control under Section 45, 46, or 47 of this Act is not required to 18
acknowledge that it has control on behalf of another person. 19
(2) If a person acknowledges that it has or will obtain control on behalf of another 20
person, unless the person otherwise agrees or law other than this article 21
otherwise provides, the person does not owe any duty to the other person and is 22
not required to confirm the acknowledgment to any other person. 23
Section 50. KRS 355.9-203 is amended to read as follows: 24
(1) A security interest attaches to collateral when it becomes enforceable against the 25
debtor with respect to the collateral, unless an agreement expressly postpones the 26
time of attachment. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(2) Except as otherwise provided in subsections (3) to (9) of this section, a security 1
interest is enforceable against the debtor and third parties with respect to the 2
collateral only if: 3
(a) Value has been given; 4
(b) The debtor has rights in the collateral or the power to transfer rights in the 5
collateral to a secured party; and 6
(c) One (1) of the following conditions is met: 7
1. The debtor has signed[authenticated] a security agreement that provides 8
a description of the collateral and, if the security interest covers timber 9
to be cut, a description of the land concerned; 10
2. The collateral is not a certificated security and is in the possession of the 11
secured party under KRS 355.9-313 pursuant to the debtor's security 12
agreement; 13
3. The collateral is a certificated security in registered form and the 14
security certificate has been delivered to the secured party under KRS 15
355.8-301 pursuant to the debtor's security agreement;[ or] 16
4. The collateral is controllable accounts, controllable electronic records, 17
controllable payment intangibles, deposit accounts, electronic 18
documents[chattel paper], electronic money, investment property, or 19
letter-of-credit rights,[ or electronic documents,] and the secured party 20
has control under KRS 355.7-106, 355.9-104, [355.9-105,] Section 47 21
of this Act, 355.9-106,[ or] 355.9-107, or Section 48 of this Act 22
pursuant to the debtor's security agreement; or 23
5. The collateral is chattel paper and the secured party has possession 24
and control under Section 65 of this Act pursuant to the debtor's 25
security agreement. 26
(3) Subsection (2) of this section is subject to KRS 355.4-210 on the security interest of 27 UNOFFICIAL COPY 24 RS SB 155/GA
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a collecting bank, KRS 355.5-118 on the security interest of a letter-of-credit issuer 1
or nominated person, KRS 355.9-110 on a security interest arising under Article 2 2
or 2A of this chapter, and KRS 355.9-206 on security interests in investment 3
property. 4
(4) A person becomes bound as debtor by a security agreement entered into by another 5
person if, by operation of law other than this article or by contract: 6
(a) The security agreement becomes effective to create a security interest in the 7
person's property; or 8
(b) The person becomes generally obligated for the obligations of the other 9
person, including the obligation secured under the security agreement, and 10
acquires or succeeds to all or substantially all of the assets of the other person. 11
(5) If a new debtor becomes bound as debtor by a security agreement entered into by 12
another person: 13
(a) The agreement satisfies subsection (2)(c) of this section with respect to 14
existing or after-acquired property of the new debtor to the extent the property 15
is described in the agreement; and 16
(b) Another agreement is not necessary to make a security interest in the property 17
enforceable. 18
(6) The attachment of a security interest in collateral gives the secured party the rights 19
to proceeds provided by KRS 355.9-315 and is also attachment of a security interest 20
in a supporting obligation for the collateral. 21
(7) The attachment of a security interest in a right to payment or performance secured 22
by a security interest or other lien on personal or real property is also attachment of 23
a security interest in the security interest, mortgage, or other lien. 24
(8) The attachment of a security interest in a securities account is also attachment of a 25
security interest in the security entitlements carried in the securities account. 26
(9) The attachment of a security interest in a commodity account is also attachment of a 27 UNOFFICIAL COPY 24 RS SB 155/GA
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security interest in the commodity contracts carried in the commodity account. 1
Section 51. KRS 355.9-204 is amended to read as follows: 2
(1) Except as otherwise provided in subsection (2) of this section, a security agreement 3
may create or provide for a security interest in after-acquired collateral. 4
(2) (a) Subject to paragraph (b) of this subsection, a security interest does not attach 5
under a term constituting an after-acquired property clause to: 6
1.[(a)] Consumer goods, other than an accession when given as additional 7
security, unless the debtor acquires rights in them within ten (10) days 8
after the secured party gives value; or 9
2.[(b)] A commercial tort claim. 10
(b) Paragraph (a) of this subsection does not prevent a security interest from 11
attaching: 12
1. To consumer goods as proceeds under KRS 355.9-315(1) or 13
commingled goods under KRS 355.9-336(3); 14
2. To a commercial tort claim as proceeds under KRS 355.9-315(1); or 15
3. Under an after-acquired property clause to property that is proceeds of 16
consumer goods or a commercial tort claim. 17
(3) A security agreement may provide that collateral secures, or that accounts, chattel 18
paper, payment intangibles, or promissory notes are sold in connection with, future 19
advances or other value, whether or not the advances or value are given pursuant to 20
commitment. 21
Section 52. KRS 355.9-207 is amended to read as follows: 22
(1) Except as otherwise provided in subsection (4) of this section:[,] 23
(a) A secured party shall use reasonable care in the custody and preservation of 24
collateral in the secured party's possession; and[.] 25
(b) In the case of chattel paper or an instrument, reasonable care includes taking 26
necessary steps to preserve rights against prior parties unless otherwise 27 UNOFFICIAL COPY 24 RS SB 155/GA
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agreed. 1
(2) Except as otherwise provided in subsection (4) of this section, if a secured party has 2
possession of collateral: 3
(a) Reasonable expenses, including the cost of insurance and payment of taxes or 4
other charges, incurred in the custody, preservation, use, or operation of the 5
collateral are chargeable to the debtor and are secured by the collateral; 6
(b) The risk of accidental loss or damage is on the debtor to the extent of a 7
deficiency in any effective insurance coverage; 8
(c) The secured party shall keep the collateral identifiable, but fungible collateral 9
may be commingled; and 10
(d) The secured party may use or operate the collateral: 11
1. For the purpose of preserving the collateral or its value; 12
2. As permitted by an order of a court having competent jurisdiction; or 13
3. Except in the case of consumer goods, in the manner and to the extent 14
agreed by the debtor. 15
(3) Except as otherwise provided in subsection (4) of this section, a secured party 16
having possession of collateral or control of collateral under KRS 355.7-106, 355.9-17
104, 355.9-105, Section 47 of this Act, 355.9-106,[ or] 355.9-107, or Section 48 of 18
this Act: 19
(a) May hold as additional security any proceeds, except money or funds, 20
received from the collateral; 21
(b) Shall apply money or funds received from the collateral to reduce the secured 22
obligation, unless remitted to the debtor; and 23
(c) May create a security interest in the collateral. 24
(4) If the secured party is a buyer of accounts, chattel paper, payment intangibles, or 25
promissory notes or a consignor: 26
(a) Subsection (1) of this section does not apply unless the secured party is 27 UNOFFICIAL COPY 24 RS SB 155/GA
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entitled under an agreement: 1
1. To charge back uncollected collateral; or 2
2. Otherwise to full or limited recourse against the debtor or a secondary 3
obligor based on the nonpayment or other default of an account debtor 4
or other obligor on the collateral; and 5
(b) Subsections (2) and (3) of this section do not apply. 6
Section 53. KRS 355.9-208 is amended to read as follows: 7
(1) This section applies to cases in which: 8
(a) There is no outstanding secured obligation; and 9
(b) The secured party is not committed to make advances, incur obligations, or 10
otherwise give value. 11
(2) Within ten (10) days after receiving a signed[an authenticated] demand by the 12
debtor: 13
(a) A secured party having control of a deposit account under KRS 355.9-14
104(1)(b) shall send to the bank with which the deposit account is maintained 15
a signed record[an authenticated statement] that releases the bank from any 16
further obligation to comply with instructions originated by the secured party; 17
(b) A secured party having control of a deposit account under KRS 355.9-18
104(1)(c) shall: 19
1. Pay the debtor the balance on deposit in the deposit account; or 20
2. Transfer the balance on deposit into a deposit account in the debtor's 21
name; 22
(c) A secured party, other than a buyer, having control[ of electronic chattel 23
paper] under KRS 355.9-105 of an authoritative electronic copy of a record 24
evidencing chattel paper shall transfer control of the electronic copy to the 25
debtor or a person designated by the debtor[: 26
1. Communicate the authoritative copy of the electronic chattel paper to 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the debtor or its designated custodian; 1
2. If the debtor designates a custodian that is the designated custodian with 2
which the authoritative copy of the electronic chattel paper is maintained 3
for the secured party, communicate to the custodian an authenticated 4
record releasing the designated custodian from any further obligation to 5
comply with instructions originated by the secured party and instructing 6
the custodian to comply with instructions originated by the debtor; and 7
3. Take appropriate action to enable the debtor or its designated custodian 8
to make copies of or revisions to the authoritative copy which add or 9
change an identified assignee of the authoritative copy without the 10
consent of the secured party]; 11
(d) A secured party having control of investment property under KRS 355.8-12
106(4)(b) or 355.9-106(2) shall send to the securities intermediary or 13
commodity intermediary with which the security entitlement or commodity 14
contract is maintained a signed[an authenticated] record that releases the 15
securities intermediary or commodity intermediary from any further 16
obligation to comply with entitlement orders or directions originated by the 17
secured party; 18
(e) A secured party having control of a letter-of-credit right under KRS 355.9-107 19
shall send to each person having an unfulfilled obligation to pay or deliver 20
proceeds of the letter of credit to the secured party a signed[an authenticated] 21
release from any further obligation to pay or deliver proceeds of the letter of 22
credit to the secured party;[ and] 23
(f) A secured party having control under Section 38 of this Act of an 24
authoritative electronic copy of an electronic document shall transfer control 25
of the electronic copy to the debtor or a person designated by the debtor;[: 26
1. Give control of the electronic document to the debtor or its designated 27 UNOFFICIAL COPY 24 RS SB 155/GA
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custodian; 1
2. If the debtor designates a custodian that is the designated custodian with 2
which the authoritative copy of the electronic document is maintained 3
for the secured party, communicate to the custodian an authenticated 4
record releasing the designated custodian from any further obligation to 5
comply with instructions originated by the secured party and instructing 6
the custodian to comply with instructions originated by the debtor; and 7
3. Take appropriate action to enable the debtor or its designated custodian 8
to make copies of or revisions to the authoritative copy which add or 9
change an identified assignee of the authoritative copy without the 10
consent of the secured party] 11
(g) A secured party having control under Section 47 of this Act of electronic 12
money shall transfer control of the electronic copy to the debtor or a person 13
designated by the debtor; and 14
(h) A secured party having control under Section 98 of this Act of a 15
controllable electronic record, other than a buyer of a controllable account 16
or controllable payment intangible evidenced by the controllable electronic 17
record, shall transfer control of the controllable electronic record to the 18
debtor or a person designated by the debtor. 19
Section 54. KRS 355.9-209 is amended to read as follows: 20
(1) Except as otherwise provided in subsection (3) of this section, this section applies 21
if: 22
(a) There is no outstanding secured obligation; and 23
(b) The secured party is not committed to make advances, incur obligations, or 24
otherwise give value. 25
(2) Within ten (10) days after receiving a signed[an authenticated] demand by the 26
debtor, a secured party shall send to an account debtor that has received notification 27 UNOFFICIAL COPY 24 RS SB 155/GA
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under subsection (1) of Section 77 of this Act or subsection (2) of Section 99 of 1
this Act of an assignment to the secured party as assignee a signed[under KRS 2
355.9-406(1) an authenticated] record that releases the account debtor from any 3
further obligation to the secured party. 4
(3) This section does not apply to an assignment constituting the sale of an account, 5
chattel paper, or payment intangible. 6
Section 55. KRS 355.9-210 is amended to read as follows: 7
(1) In this section: 8
(a) "Request" means a record of a type described in paragraph (b), (c), or (d) of 9
this subsection. 10
(b) "Request for an accounting" means a record signed[authenticated] by a debtor 11
requesting that the recipient provide an accounting of the unpaid obligations 12
secured by collateral and reasonably identifying the transaction or relationship 13
that is the subject of the request. 14
(c) "Request regarding a list of collateral" means a record signed[authenticated] 15
by a debtor requesting that the recipient approve or correct a list of what the 16
debtor believes to be the collateral securing an obligation and reasonably 17
identifying the transaction or relationship that is the subject of the request. 18
(d) "Request regarding a statement of account" means a record 19
signed[authenticated] by a debtor requesting that the recipient approve or 20
correct a statement indicating what the debtor believes to be the aggregate 21
amount of unpaid obligations secured by collateral as of a specified date and 22
reasonably identifying the transaction or relationship that is the subject of the 23
request. 24
(2) Subject to subsections (3), (4), (5), and (6) of this section, a secured party, other 25
than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or 26
a consignor, shall comply with a request within fourteen (14) days after receipt: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(a) In the case of a request for an accounting, by signing[authenticating] and 1
sending to the debtor an accounting; and 2
(b) In the case of a request regarding a list of collateral or a request regarding a 3
statement of account, by signing[authenticating] and sending to the debtor an 4
approval or correction. 5
(3) A secured party that claims a security interest in all of a particular type of collateral 6
owned by the debtor may comply with a request regarding a list of collateral by 7
sending to the debtor a signed[an authenticated] record including a statement to that 8
effect within fourteen (14) days after receipt. 9
(4) A person that receives a request regarding a list of collateral, claims no interest in 10
the collateral when it receives the request, and claimed an interest in the collateral 11
at an earlier time shall comply with the request within fourteen (14) days after 12
receipt by sending to the debtor a signed[an authenticated] record: 13
(a) Disclaiming any interest in the collateral; and 14
(b) If known to the recipient, providing the name and mailing address of any 15
assignee of or successor to the recipient's interest in the collateral. 16
(5) A person that receives a request for an accounting or a request regarding a 17
statement of account, claims no interest in the obligations when it receives the 18
request, and claimed an interest in the obligations at an earlier time shall comply 19
with the request within fourteen (14) days after receipt by sending to the debtor a 20
signed[an authenticated] record: 21
(a) Disclaiming any interest in the obligations; and 22
(b) If known to the recipient, providing the name and mailing address of any 23
assignee of or successor to the recipient's interest in the obligations. 24
(6) (a) A debtor is entitled without charge to one (1) response to a request under this 25
section during any six (6) month period. 26
(b) The secured party may require payment of a charge not exceeding twenty-five 27 UNOFFICIAL COPY 24 RS SB 155/GA
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dollars ($25) for each additional response. 1
Section 56. KRS 355.9-301 is amended to read as follows: 2
Except as otherwise provided in KRS 355.9-303 to Section 60 of this Act[355.9-306], the 3
following rules determine the law governing perfection, the effect of perfection or 4
nonperfection, and the priority of a security interest in collateral: 5
(1) Except as otherwise provided in this section, while a debtor is located in a 6
jurisdiction, the local law of that jurisdiction governs perfection, the effect of 7
perfection or nonperfection, and the priority of a security interest in collateral;[.] 8
(2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs 9
perfection, the effect of perfection or nonperfection, and the priority of a possessory 10
security interest in that collateral;[.] 11
(3) Except as otherwise provided in subsection (4) of this section, while negotiable 12
tangible[ negotiable] documents, goods, instruments, or tangible money[, or 13
tangible chattel paper] is located in a jurisdiction, the local law of that jurisdiction 14
governs: 15
(a) Perfection of a security interest in the goods by filing a fixture filing; 16
(b) Perfection of a security interest in timber to be cut; and 17
(c) The effect of perfection or nonperfection and the priority of a nonpossessory 18
security interest in the collateral; and[.] 19
(4) The local law of the jurisdiction in which the wellhead or minehead is located 20
governs perfection, the effect of perfection or nonperfection, and the priority of a 21
security interest in as-extracted collateral. 22
Section 57. KRS 355.9-304 is amended to read as follows: 23
(1) The local law of a bank's jurisdiction governs perfection, the effect of perfection or 24
nonperfection, and the priority of a security interest in a deposit account maintained 25
with that bank even if the transaction does not bear any relation to the bank's 26
jurisdiction. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(2) The following rules determine a bank's jurisdiction for purposes of this part of this 1
article: 2
(a) If an agreement between the bank and its customer governing the deposit 3
account expressly provides that a particular jurisdiction is the bank's 4
jurisdiction for purposes of this part of this article, this article, or this chapter, 5
that jurisdiction is the bank's jurisdiction;[.] 6
(b) If paragraph (a) of this subsection does not apply and an agreement between 7
the bank and its customer governing the deposit account expressly provides 8
that the agreement is governed by the law of a particular jurisdiction, that 9
jurisdiction is the bank's jurisdiction;[.] 10
(c) If neither paragraph (a) nor (b) of this subsection applies and an agreement 11
between the bank and its customer governing the deposit account expressly 12
provides that the deposit account is maintained at an office in a particular 13
jurisdiction, that jurisdiction is the bank's jurisdiction;[.] 14
(d) If none of the preceding paragraphs applies, the bank's jurisdiction is the 15
jurisdiction in which the office identified in an account statement as the office 16
serving the customer's account is located; and[.] 17
(e) If none of the preceding paragraphs applies, the bank's jurisdiction is the 18
jurisdiction in which the chief executive office of the bank is located. 19
Section 58. KRS 355.9-305 is amended to read as follows: 20
(1) Except as otherwise provided in subsection (3) of this section, the following rules 21
apply: 22
(a) While a security certificate is located in a jurisdiction, the local law of that 23
jurisdiction governs perfection, the effect of perfection or nonperfection, and 24
the priority of a security interest in the certificated security represented 25
thereby;[.] 26
(b) The local law of the issuer's jurisdiction as specified in KRS 355.8-110(4) 27 UNOFFICIAL COPY 24 RS SB 155/GA
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governs perfection, the effect of perfection or nonperfection, and the priority 1
of a security interest in an uncertificated security;[.] 2
(c) The local law of the securities intermediary's jurisdiction as specified in KRS 3
355.8-110(5) governs perfection, the effect of perfection or nonperfection, and 4
the priority of a security interest in a security entitlement or securities 5
account;[.] 6
(d) The local law of the commodity intermediary's jurisdiction governs 7
perfection, the effect of perfection or nonperfection, and the priority of a 8
security interest in a commodity contract or commodity account; and 9
(e) Paragraphs (b), (c), and (d) of this subsection apply even if the transaction 10
does not bear any relation to the jurisdiction. 11
(2) The following rules determine a commodity intermediary's jurisdiction for purposes 12
of this part of this article: 13
(a) If an agreement between the commodity intermediary and commodity 14
customer governing the commodity account expressly provides that a 15
particular jurisdiction is the commodity intermediary's jurisdiction for 16
purposes of this part of this article, this article, or this chapter, that jurisdiction 17
is the commodity intermediary's jurisdiction;[.] 18
(b) If paragraph (a) of this subsection does not apply and an agreement between 19
the commodity intermediary and commodity customer governing the 20
commodity account expressly provides that the agreement is governed by the 21
law of a particular jurisdiction, that jurisdiction is the commodity 22
intermediary's jurisdiction;[.] 23
(c) If neither paragraph (a) nor paragraph (b) of this subsection applies and an 24
agreement between the commodity intermediary and commodity customer 25
governing the commodity account expressly provides that the commodity 26
account is maintained at an office in a particular jurisdiction, that jurisdiction 27 UNOFFICIAL COPY 24 RS SB 155/GA
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is the commodity intermediary's jurisdiction;[.] 1
(d) If none of the preceding paragraphs applies, the commodity intermediary's 2
jurisdiction is the jurisdiction in which the office identified in an account 3
statement as the office serving the commodity customer's account is located; 4
and[.] 5
(e) If none of the preceding paragraphs applies, the commodity intermediary's 6
jurisdiction is the jurisdiction in which the chief executive office of the 7
commodity intermediary is located. 8
(3) The local law of the jurisdiction in which the debtor is located governs: 9
(a) Perfection of a security interest in investment property by filing; 10
(b) Automatic perfection of a security interest in investment property created by a 11
broker or securities intermediary; and 12
(c) Automatic perfection of a security interest in a commodity contract or 13
commodity account created by a commodity intermediary. 14
SECTION 59. A NEW SECTION OF ARTICLE 9 OF KRS CHAPTER 355 IS 15
CREATED TO READ AS FOLLOWS: 16
(1) Except as provided in subsection (4) of this section, if chattel paper is evidenced 17
only by an authoritative electronic copy of the chattel paper or is evidenced by an 18
authoritative electronic copy and an authoritative tangible copy, the local law of 19
the chattel paper's jurisdiction governs perfection, the effect of perfection or 20
nonperfection, and the priority of a security interest in the chattel paper, even if 21
the transaction does not bear any relation to the chattel paper's jurisdiction. 22
(2) The following rules determine the chattel paper's jurisdiction under this section: 23
(a) If the authoritative electronic copy of the record evidencing chattel paper, or 24
a record attached to or logically associated with the electronic copy and 25
readily available for review, expressly provides that a particular jurisdiction 26
is the chattel paper's jurisdiction for purposes of this part, this article, or 27 UNOFFICIAL COPY 24 RS SB 155/GA
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this chapter, that jurisdiction is the chattel paper's jurisdiction; 1
(b) If paragraph (a) of this subsection does not apply and the rules of the 2
system in which the authoritative electronic copy is recorded are readily 3
available for review and expressly provide that a particular jurisdiction is 4
the chattel paper's jurisdiction for purposes of this part, this article, or this 5
chapter, that jurisdiction is the chattel paper's jurisdiction; 6
(c) If paragraphs (a) and (b) of this subsection do not apply and the 7
authoritative electronic copy, or a record attached to or logically associated 8
with the electronic copy and readily available for review, expressly provides 9
that the chattel paper is governed by the law of a particular jurisdiction, that 10
jurisdiction is the chattel paper's jurisdiction; 11
(d) If paragraphs (a), (b), and (c) of this subsection do not apply and the rules 12
of the system in which the authoritative electronic copy is recorded are 13
readily available for review and expressly provide that the chattel paper or 14
the system is governed by the law of a particular jurisdiction, that 15
jurisdiction is the chattel paper's jurisdiction; and 16
(e) If paragraphs (a) to (d) of this subsection do not apply, the chattel paper's 17
jurisdiction is the jurisdiction in which the debtor is located. 18
(3) If an authoritative tangible copy of a record evidences chattel paper and the 19
chattel paper is not evidenced by an authoritative electronic copy, while the 20
authoritative tangible copy of the record evidencing chattel paper is located in a 21
jurisdiction, the local law of that jurisdiction governs: 22
(a) Perfection of a security interest in the chattel paper by possession under 23
Section 65 of this Act; and 24
(b) The effect of perfection or nonperfection and the priority of a security 25
interest in the chattel paper. 26
(4) The local law of the jurisdiction in which the debtor is located governs perfection 27 UNOFFICIAL COPY 24 RS SB 155/GA
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of a security interest in chattel paper by filing. 1
SECTION 60. A NEW SECTION OF ARTICLE 9 OF KRS CHAPTER 355 IS 2
CREATED TO READ AS FOLLOWS: 3
(1) Except as provided in subsection (2) of this section, the local law of the 4
controllable electronic record's jurisdiction specified in subsections (3) and (4) of 5
Section 100 of this Act governs perfection, the effect of perfection or 6
nonperfection, and the priority of a security interest in a controllable electronic 7
record and a security interest in a controllable account or controllable payment 8
intangible evidenced by the controllable electronic record. 9
(2) The local law of the jurisdiction in which the debtor is located governs: 10
(a) Perfection of a security interest in a controllable account, controllable 11
electronic record, or controllable payment intangible by filing; and 12
(b) Automatic perfection of a security interest in a controllable payment 13
intangible created by a sale of the controllable payment intangible. 14
Section 61. KRS 355.9-310 is amended to read as follows: 15
(1) Except as otherwise provided in subsection (2) of this section and KRS 355.9-16
312(2), a financing statement must be filed to perfect all security interests and 17
agricultural liens. 18
(2) The filing of a financing statement is not necessary to perfect a security interest: 19
(a) That is perfected under KRS 355.9-308(4), (5), (6), or (7); 20
(b) That is perfected under KRS 355.9-309 when it attaches; 21
(c) In property subject to a statute, regulation, or treaty described in KRS 355.9-22
311(1); 23
(d) In goods in possession of a bailee which is perfected under KRS 355.9-24
312(4)(a) or (b); 25
(e) In certificated securities, documents, goods, or instruments which is perfected 26
without filing, control, or possession under KRS 355.9-312(5), (6), or (7); 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(f) In collateral in the secured party's possession under KRS 355.9-313; 1
(g) In a certificated security which is perfected by delivery of the security 2
certificate to the secured party under KRS 355.9-313; 3
(h) In controllable accounts, controllable electronic records, controllable 4
payment intangibles, deposit accounts,[ electronic chattel paper,] electronic 5
documents, investment property, or letter-of-credit rights which is perfected 6
by control under KRS 355.9-314; 7
(i) In proceeds which is perfected under KRS 355.9-315;[ or] 8
(j) That is perfected under KRS 355.9-316; or 9
(k) In chattel paper which is perfected by possession and control under Section 10
65 of this Act. 11
(3) If a secured party assigns a perfected security interest or agricultural lien, a filing 12
under this article is not required to continue the perfected status of the security 13
interest against creditors of and transferees from the original debtor. 14
Section 62. KRS 355.9-312 is amended to read as follows: 15
(1) A security interest in chattel paper, controllable accounts, controllable electronic 16
records, controllable payment intangibles[negotiable documents], instruments,[ or] 17
investment property, or negotiable documents may be perfected by filing. 18
(2) Except as otherwise provided in KRS 355.9-315(3) and (4) for proceeds: 19
(a) A security interest in a deposit account may be perfected only by control 20
under KRS 355.9-314; 21
(b) And except as otherwise provided in KRS 355.9-308(4), a security interest in 22
a letter-of-credit right may be perfected only by control under KRS 355.9-23
314;[ and] 24
(c) A security interest in tangible money may be perfected only by the secured 25
party's taking possession under KRS 355.9-313; and 26
(d) A security interest in electronic money may be perfected only by control 27 UNOFFICIAL COPY 24 RS SB 155/GA
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under Section 64 of this Act. 1
(3) While goods are in the possession of a bailee that has issued a negotiable document 2
covering the goods: 3
(a) A security interest in the goods may be perfected by perfecting a security 4
interest in the document; and 5
(b) A security interest perfected in the document has priority over any security 6
interest that becomes perfected in the goods by another method during that 7
time. 8
(4) While goods are in the possession of a bailee that has issued a nonnegotiable 9
document covering the goods, a security interest in the goods may be perfected by: 10
(a) Issuance of a document in the name of the secured party; 11
(b) The bailee's receipt of notification of the secured party's interest; or 12
(c) Filing as to the goods. 13
(5) A security interest in certificated securities, negotiable documents, or instruments is 14
perfected without filing or the taking of possession or control for a period of twenty 15
(20) days from the time it attaches to the extent that it arises for new value given 16
under a signed[an authenticated] security agreement. 17
(6) A perfected security interest in a negotiable document or goods in possession of a 18
bailee, other than one that has issued a negotiable document for the goods, remains 19
perfected for twenty (20) days without filing if the secured party makes available to 20
the debtor the goods or documents representing the goods for the purpose of: 21
(a) Ultimate sale or exchange; or 22
(b) Loading, unloading, storing, shipping, transshipping, manufacturing, 23
processing, or otherwise dealing with them in a manner preliminary to their 24
sale or exchange. 25
(7) A perfected security interest in a certificated security or instrument remains 26
perfected for twenty (20) days without filing if the secured party delivers the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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security certificate or instrument to the debtor for the purpose of: 1
(a) Ultimate sale or exchange; or 2
(b) Presentation, collection, enforcement, renewal, or registration of transfer. 3
(8) After the twenty (20) day period specified in subsection (5), (6), or (7) of this 4
section expires, perfection depends upon compliance with this article. 5
Section 63. KRS 355.9-313 is amended to read as follows: 6
(1) (a) Except as otherwise provided in subsection (2) of this section, a secured party 7
may perfect a security interest in[ tangible negotiable documents,] goods, 8
instruments, negotiable tangible documents, or tangible money[, or tangible 9
chattel paper] by taking possession of the collateral. 10
(b) A secured party may perfect a security interest in certificated securities by 11
taking delivery of the certificated securities under KRS 355.8-301. 12
(2) With respect to goods covered by a certificate of title issued by this 13
Commonwealth, a secured party may perfect a security interest in the goods by 14
taking possession of the goods only in the circumstances described in KRS 355.9-15
316(4). 16
(3) With respect to collateral other than certificated securities and goods covered by a 17
document, a secured party takes possession of collateral in the possession of a 18
person other than the debtor, the secured party, or a lessee of the collateral from the 19
debtor in the ordinary course of the debtor's business, when: 20
(a) The person in possession signs[authenticates] a record acknowledging that it 21
holds possession of the collateral for the secured party's benefit; or 22
(b) The person takes possession of the collateral after having 23
signed[authenticated] a record acknowledging that it will hold possession of 24
the collateral for the secured party's benefit. 25
(4) If perfection of a security interest depends upon possession of the collateral by a 26
secured party, perfection occurs not[no] earlier than the time the secured party takes 27 UNOFFICIAL COPY 24 RS SB 155/GA
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possession and continues only while the secured party retains possession. 1
(5) A security interest in a certificated security in registered form is perfected by 2
delivery when delivery of the certificated security occurs under KRS 355.8-301 and 3
remains perfected by delivery until the debtor obtains possession of the security 4
certificate. 5
(6) A person in possession of collateral is not required to acknowledge that it holds 6
possession for a secured party's benefit. 7
(7) If a person acknowledges that it holds possession for the secured party's benefit: 8
(a) The acknowledgment is effective under subsection (3) of this section or KRS 9
355.8-301(1), even if the acknowledgment violates the rights of a debtor; and 10
(b) Unless the person otherwise agrees or law other than this article otherwise 11
provides, the person does not owe any duty to the secured party and is not 12
required to confirm the acknowledgment to another person. 13
(8) A secured party having possession of collateral does not relinquish possession by 14
delivering the collateral to a person other than the debtor or a lessee of the collateral 15
from the debtor in the ordinary course of the debtor's business if the person was 16
instructed before the delivery or is instructed contemporaneously with the delivery: 17
(a) To hold possession of the collateral for the secured party's benefit; or 18
(b) To redeliver the collateral to the secured party. 19
(9) (a) A secured party does not relinquish possession, even if a delivery under 20
subsection (8) of this section violates the rights of a debtor. 21
(b) A person to which collateral is delivered under subsection (8) of this section 22
does not owe any duty to the secured party and is not required to confirm the 23
delivery to another person unless the person otherwise agrees or law other 24
than this article otherwise provides. 25
Section 64. KRS 355.9-314 is amended to read as follows: 26
(1) A security interest in controllable accounts, controllable electronic records, 27 UNOFFICIAL COPY 24 RS SB 155/GA
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controllable payment intangibles, deposit accounts, electronic documents, 1
electronic money, investment property,[ deposit accounts,] or letter-of-credit 2
rights[, electronic chattel paper, or electronic documents] may be perfected by 3
control of the collateral under KRS 355.7-106, 355.9-104,[ 355.9-105,] Section 47 4
of this Act, 355.9-106,[ or] 355.9-107, or Section 48 of this Act. 5
(2) A security interest in controllable accounts, controllable electronic records, 6
controllable payment intangibles, deposit accounts, electronic documents, 7
electronic money[chattel paper], or letter-of-credit rights[, or electronic documents] 8
is perfected by control under KRS 355.7-106, 355.9-104, [355.9-105,] Section 47 9
of this Act,[ or] 355.9-107, or Section 48 of this Act not earlier than the time[ 10
when] the secured party obtains control and remains perfected by control only while 11
the secured party retains control. 12
(3) A security interest in investment property is perfected by control under KRS 355.9-13
106 not earlier than[from] the time the secured party obtains control and remains 14
perfected by control until: 15
(a) The secured party does not have control; and 16
(b) One (1) of the following occurs: 17
1. If the collateral is a certificated security, the debtor has or acquires 18
possession of the security certificate; 19
2. If the collateral is an uncertificated security, the issuer has registered or 20
registers the debtor as the registered owner; or 21
3. If the collateral is a security entitlement, the debtor is or becomes the 22
entitlement holder. 23
SECTION 65. A NEW SECTION OF ARTICLE 9 OF KRS CHAPTER 355 IS 24
CREATED TO READ AS FOLLOWS: 25
(1) A secured party may perfect a security interest in chattel paper by taking 26
possession of each authoritative tangible copy of the record evidencing the chattel 27 UNOFFICIAL COPY 24 RS SB 155/GA
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paper and obtaining control of each authoritative electronic copy of the electronic 1
record evidencing the chattel paper. 2
(2) A security interest is perfected under subsection (1) of this section not earlier 3
than the time the secured party takes possession and obtains control and remains 4
perfected under subsection (1) of this section only while the secured party retains 5
possession and control. 6
(3) Subsections (3) and (6) to (9) of Section 63 of this Act apply to perfection by 7
possession of an authoritative tangible copy of a record evidencing chattel paper. 8
Section 66. KRS 355.9-316 is amended to read as follows: 9
(1) A security interest perfected pursuant to the law of the jurisdiction designated in 10
KRS 355.9-301(1),[ or] 355.9-305(3), subsection (4) of Section 59 of this Act, or 11
subsection (2) of Section 60 of this Act remains perfected until the earliest of: 12
(a) The time perfection would have ceased under the law of that jurisdiction; 13
(b) The expiration of four (4) months after a change of the debtor's location to 14
another jurisdiction; or 15
(c) The expiration of one (1) year after a transfer of collateral to a person that 16
thereby becomes a debtor and is located in another jurisdiction. 17
(2) If a security interest described in subsection (1) of this section becomes perfected 18
under the law of the other jurisdiction before the earliest time or event described in 19
that subsection, it remains perfected thereafter. If the security interest does not 20
become perfected under the law of the other jurisdiction before the earliest time or 21
event, it becomes unperfected and is deemed never to have been perfected as 22
against a purchaser of the collateral for value. 23
(3) A possessory security interest in collateral, other than goods covered by a certificate 24
of title and as-extracted collateral consisting of goods, remains continuously 25
perfected if: 26
(a) The collateral is located in one jurisdiction and subject to a security interest 27 UNOFFICIAL COPY 24 RS SB 155/GA
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perfected under the law of that jurisdiction; 1
(b) Thereafter the collateral is brought into another jurisdiction; and 2
(c) Upon entry into the other jurisdiction, the security interest is perfected under 3
the law of the other jurisdiction. 4
(4) Except as otherwise provided in subsection (5) of this section, a security interest in 5
goods covered by a certificate of title which is perfected by any method under the 6
law of another jurisdiction when the goods become covered by a certificate of title 7
from this Commonwealth remains perfected until the security interest would have 8
become unperfected under the law of the other jurisdiction had the goods not 9
become so covered. 10
(5) A security interest described in subsection (4) of this section becomes unperfected 11
as against a purchaser of the goods for value and is deemed never to have been 12
perfected as against a purchaser of the goods for value if the applicable 13
requirements for perfection under KRS 355.9-311(2) or 355.9-313 are not satisfied 14
before the earlier of: 15
(a) The time the security interest would have become unperfected under the law 16
of the other jurisdiction had the goods not become covered by a certificate of 17
title from this Commonwealth; or 18
(b) The expiration of four (4) months after the goods had become so covered. 19
(6) A security interest in chattel paper, controllable accounts, controllable electronic 20
records, controllable payment intangibles, deposit accounts, letter-of-credit rights, 21
or investment property which is perfected under the law of the chattel paper's 22
jurisdiction, the controllable electronic record's jurisdiction, the bank's 23
jurisdiction, the issuer's jurisdiction, a nominated person's jurisdiction, the securities 24
intermediary's jurisdiction, or the commodity intermediary's jurisdiction, as 25
applicable, remains perfected until the earlier of: 26
(a) The time the security interest would have become unperfected under the law 27 UNOFFICIAL COPY 24 RS SB 155/GA
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of that jurisdiction; or 1
(b) The expiration of four (4) months after a change of the applicable jurisdiction 2
to another jurisdiction. 3
(7) If a security interest described in subsection (6) of this section becomes perfected 4
under the law of the other jurisdiction before the earlier of the time or the end of the 5
period described in that subsection, it remains perfected thereafter. If the security 6
interest does not become perfected under the law of the other jurisdiction before the 7
earlier of that time or the end of that period, it becomes unperfected and is deemed 8
never to have been perfected as against a purchaser of the collateral for value. 9
(8) The following rules apply to collateral to which a security interest attaches within 10
four (4) months after the debtor changes its location to another jurisdiction: 11
(a) A financing statement filed before the change pursuant to the law of the 12
jurisdiction designated in KRS 355.9-301(1) or 355.9-305(3) is effective to 13
perfect a security interest in the collateral if the financing statement would 14
have been effective to perfect a security interest in the collateral if the debtor 15
had not changed its location; and 16
(b) If a security interest that is perfected by a financing statement that is effective 17
under paragraph (a) of this subsection becomes perfected under the law of the 18
other jurisdiction before the earlier of the time the financing statement would 19
have become ineffective under the law of the jurisdiction designated in KRS 20
355.9-301(1) or 355.9-305(3) or the expiration of the four (4) month period, it 21
remains perfected thereafter. If the security interest does not become perfected 22
under the law of the other jurisdiction before the earlier time or event, it 23
becomes unperfected and is deemed never to have been perfected as against a 24
purchaser of the collateral for value. 25
(9) If a financing statement naming an original debtor is filed pursuant to the law of the 26
jurisdiction designated in KRS 355.9-301(1) or 355.9-305(3) and the new debtor is 27 UNOFFICIAL COPY 24 RS SB 155/GA
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located in another jurisdiction, the following rules apply: 1
(a) The financing statement is effective to perfect a security interest in collateral 2
in which the new debtor has or acquires rights before or within four (4) 3
months after the new debtor becomes bound under KRS 355.9-203(4), if the 4
financing statement would have been effective to perfect a security interest in 5
the collateral if the collateral had been acquired by the original debtor; and 6
(b) A security interest that is perfected by the financing statement and which 7
becomes perfected under the law of the other jurisdiction before the earlier of 8
the expiration of the four (4) month period or the time the financing statement 9
would have become ineffective under the law of the jurisdiction designated in 10
KRS 355.9-301(1) or 355.9-305(3) remains perfected thereafter. A security 11
interest that is perfected by the financing statement but which does not 12
become perfected under the law of the other jurisdiction before the earlier 13
time or event becomes unperfected and is deemed never to have been 14
perfected as against a purchaser of the collateral for value. 15
Section 67. KRS 355.9-317 is amended to read as follows: 16
(1) A security interest or agricultural lien is subordinate to the rights of: 17
(a) A person entitled to priority under KRS 355.9-322; and 18
(b) Except as otherwise provided in subsection (5) of this section, a person that 19
becomes a lien creditor before the earlier of the time: 20
1. The security interest or agricultural lien is perfected; or 21
2. One (1) of the conditions specified in KRS 355.9-203(2)(c) is met and a 22
financing statement covering the collateral is filed. 23
(2) Except as otherwise provided in subsection (5) of this section, a buyer, other than a 24
secured party, of[ tangible chattel paper, documents,] goods, instruments, tangible 25
documents, or a certificated security takes free of a security interest or agricultural 26
lien if the buyer gives value and receives delivery of the collateral without 27 UNOFFICIAL COPY 24 RS SB 155/GA
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knowledge of the security interest or agricultural lien and before it is perfected. 1
(3) Except as otherwise provided in subsection (5) of this section, a lessee of goods 2
takes free of a security interest or agricultural lien if the lessee gives value and 3
receives delivery of the collateral without knowledge of the security interest or 4
agricultural lien and before it is perfected. 5
(4) Subject to subsections (6) to (9) of this section, a licensee of a general intangible or 6
a buyer, other than a secured party, of collateral other than electronic 7
money,[tangible chattel paper, tangible documents,] goods, instruments, tangible 8
documents, or a certificated security takes free of a security interest if the licensee 9
or buyer gives value without knowledge of the security interest and before it is 10
perfected. 11
(5) Except as otherwise provided in KRS 355.9-320 and 355.9-321, if a person files a 12
financing statement with respect to a purchase-money security interest before or 13
within twenty (20) days after the debtor receives delivery of the collateral, the 14
security interest takes priority over the rights of a buyer, lessee, or lien creditor 15
which arise between the time the security interest attaches and the time of filing. 16
(6) A buyer, other than a secured party, of chattel paper takes free of a security 17
interest if, without knowledge of the security interest and before it is perfected, 18
the buyer gives value and: 19
(a) Receives delivery of each authoritative tangible copy of the record 20
evidencing the chattel paper; and 21
(b) If each authoritative electronic copy of the record evidencing chattel paper 22
can be subjected to control under Section 46 of this Act, obtains control of 23
each authoritative electronic copy. 24
(7) A buyer of an electronic document takes free of a security interest if, without 25
knowledge of the security interest and before it is perfected, the buyer gives value 26
and, if each authoritative electronic copy of the document can be subjected to 27 UNOFFICIAL COPY 24 RS SB 155/GA
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control under Section 38 of this Act, obtains control of each authoritative 1
electronic copy. 2
(8) A buyer of a controllable electronic record takes free of a security interest if, 3
without knowledge of the security interest and before it is perfected, the buyer 4
gives value and obtains control of the controllable electronic record. 5
(9) A buyer, other than a secured party, of a controllable account or a controllable 6
payment intangible takes free of a security interest if, without knowledge of the 7
security interest and before it is perfected, the buyer gives value and obtains 8
control of the controllable account or controllable payment intangible. 9
Section 68. KRS 355.9-323 is amended to read as follows: 10
(1) Except as otherwise provided in subsection (3) of this section, for purposes of 11
determining the priority of a perfected security interest under KRS 355.9-322(1)(a), 12
perfection of the security interest dates from the time an advance is made to the 13
extent that the security interest secures an advance that: 14
(a) Is made while the security interest is perfected only: 15
1. Under KRS 355.9-309 when it attaches; or 16
2. Temporarily under KRS 355.9-312(5), (6), or (7); and 17
(b) Is not made pursuant to a commitment entered into before or while the 18
security interest is perfected by a method other than under KRS 355.9-309 or 19
355.9-312(5), (6), or (7). 20
(2) Except as otherwise provided in subsection (3) of this section, a security interest is 21
subordinate to the rights of a person that becomes a lien creditor to the extent that 22
the security interest secures an advance made more than forty-five (45) days after 23
the person becomes a lien creditor unless the advance is made: 24
(a) Without knowledge of the lien; or 25
(b) Pursuant to a commitment entered into without knowledge of the lien. 26
(3) Subsections (1) and (2) of this section do not apply to a security interest held by a 27 UNOFFICIAL COPY 24 RS SB 155/GA
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secured party that is a buyer of accounts, chattel paper, payment intangibles, or 1
promissory notes or a consignor. 2
(4) Except as otherwise provided in subsection (5) of this section, a buyer of goods[ 3
other than a buyer in ordinary course of business] takes free of a security interest to 4
the extent that it secures advances made after the earlier of: 5
(a) The time the secured party acquires knowledge of the buyer's purchase; or 6
(b) Forty-five (45) days after the purchase. 7
(5) Subsection (4) of this section does not apply if the advance is made pursuant to a 8
commitment entered into without knowledge of the buyer's purchase and before the 9
expiration of the forty-five (45) day period. 10
(6) Except as otherwise provided in subsection (7) of this section, a lessee of goods[, 11
other than a lessee in ordinary course of business,] takes the leasehold interest free 12
of a security interest to the extent that it secures advances made after the earlier of: 13
(a) The time the secured party acquires knowledge of the lease; or 14
(b) Forty-five (45) days after the lease contract becomes enforceable. 15
(7) Subsection (6) of this section does not apply if the advance is made pursuant to a 16
commitment entered into without knowledge of the lease and before the expiration 17
of the forty-five (45) day period. 18
Section 69. KRS 355.9-324 is amended to read as follows: 19
(1) Except as otherwise provided in subsection (7) of this section, a perfected purchase-20
money security interest in goods other than inventory or livestock has priority over 21
a conflicting security interest in the same goods, and, except as otherwise provided 22
in KRS 355.9-327, a perfected security interest in its identifiable proceeds also has 23
priority, if the purchase-money security interest is perfected when the debtor 24
receives possession of the collateral or within twenty (20) days thereafter. 25
(2) Subject to subsection (3) of this section and except as otherwise provided in 26
subsection (7) of this section, a perfected purchase-money security interest in 27 UNOFFICIAL COPY 24 RS SB 155/GA
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inventory has priority over a conflicting security interest in the same inventory, has 1
priority over a conflicting security interest in chattel paper or an instrument 2
constituting proceeds of the inventory and in proceeds of the chattel paper, if so 3
provided in KRS 355.9-330, and, except as otherwise provided in KRS 355.9-327, 4
also has priority in identifiable cash proceeds of the inventory to the extent the 5
identifiable cash proceeds are received on or before the delivery of the inventory to 6
a buyer, if: 7
(a) The purchase-money security interest is perfected when the debtor receives 8
possession of the inventory; 9
(b) The purchase-money secured party sends a signed[an authenticated] 10
notification to the holder of the conflicting security interest; 11
(c) The holder of the conflicting security interest receives the notification within 12
five (5) years before the debtor receives possession of the inventory; and 13
(d) The notification states that the person sending the notification has or expects 14
to acquire a purchase-money security interest in inventory of the debtor and 15
describes the inventory. 16
(3) Subsection (2)(b) to (d) of this section apply only if the holder of the conflicting 17
security interest had filed a financing statement covering the same types of 18
inventory: 19
(a) If the purchase-money security interest is perfected by filing, before the date 20
of the filing; or 21
(b) If the purchase-money security interest is temporarily perfected without filing 22
or possession under KRS 355.9-312(6), before the beginning of the twenty 23
(20) day period thereunder. 24
(4) Subject to subsection (5) of this section and except as otherwise provided in 25
subsection (7) of this section, a perfected purchase-money security interest in 26
livestock that are farm products has priority over a conflicting security interest in 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the same livestock, and, except as otherwise provided in KRS 355.9-327, a 1
perfected security interest in their identifiable proceeds and identifiable products in 2
their unmanufactured states also has priority, if: 3
(a) The purchase-money security interest is perfected when the debtor receives 4
possession of the livestock; 5
(b) The purchase-money secured party sends a signed[an authenticated] 6
notification to the holder of the conflicting security interest; 7
(c) The holder of the conflicting security interest receives the notification within 8
six (6) months before the debtor receives possession of the livestock; and 9
(d) The notification states that the person sending the notification has or expects 10
to acquire a purchase-money security interest in livestock of the debtor and 11
describes the livestock. 12
(5) Subsection (4)(b) to (d) of this section apply only if the holder of the conflicting 13
security interest had filed a financing statement covering the same types of 14
livestock: 15
(a) If the purchase-money security interest is perfected by filing, before the date 16
of the filing; or 17
(b) If the purchase-money security interest is temporarily perfected without filing 18
or possession under KRS 355.9-312(6), before the beginning of the twenty 19
(20) day period thereunder. 20
(6) Except as otherwise provided in subsection (7) of this section, a perfected purchase-21
money security interest in software has priority over a conflicting security interest 22
in the same collateral, and, except as otherwise provided in KRS 355.9-327, a 23
perfected security interest in its identifiable proceeds also has priority, to the extent 24
that the purchase-money security interest in the goods in which the software was 25
acquired for use has priority in the goods and proceeds of the goods under this 26
section. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(7) If more than one (1) security interest qualifies for priority in the same collateral 1
under subsection (1), (2), (4), or (6) of this section: 2
(a) A security interest securing an obligation incurred as all or part of the price of 3
the collateral has priority over a security interest securing an obligation 4
incurred for value given to enable the debtor to acquire rights in or the use of 5
collateral; and 6
(b) In all other cases, KRS 355.9-322(1) applies to the qualifying security 7
interests. 8
SECTION 70. A NEW SECTION OF ARTICLE 9 OF KRS CHAPTER 355 IS 9
CREATED TO READ AS FOLLOWS: 10
A security interest in a controllable account, controllable electronic record, or 11
controllable payment intangible held by a secured party having control of the account, 12
electronic record, or payment intangible has priority over a conflicting security interest 13
held by a secured party that does not have control. 14
Section 71. KRS 355.9-330 is amended to read as follows: 15
(1) A purchaser of chattel paper has priority over a security interest in the chattel paper 16
which is claimed merely as proceeds of inventory subject to a security interest if: 17
(a) In good faith and in the ordinary course of the purchaser's business, the 18
purchaser gives new value,[ and] takes possession of each authoritative 19
tangible copy of the record evidencing the chattel paper, and[ or] obtains 20
control under Section 46 of this Act of each authoritative electronic copy of 21
the record evidencing[of] the chattel paper[ under KRS 355.9-105]; and 22
(b) The authoritative copies of the record evidencing the chattel paper do[does] 23
not indicate that the chattel paper[it] has been assigned to an identified 24
assignee other than the purchaser. 25
(2) A purchaser of chattel paper has priority over a security interest in the chattel paper 26
which is claimed other than merely as proceeds of inventory subject to a security 27 UNOFFICIAL COPY 24 RS SB 155/GA
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interest if the purchaser gives new value,[ and] takes possession of each 1
authoritative tangible copy of the record evidencing the chattel paper, and[ or] 2
obtains control under Section 46 of this Act of each authoritative electronic copy 3
of the record evidencing[of] the chattel paper[ under KRS 355.9-105] in good faith, 4
in the ordinary course of the purchaser's business, and without knowledge that the 5
purchase violates the rights of the secured party. 6
(3) Except as otherwise provided in KRS 355.9-327, a purchaser having priority in 7
chattel paper under subsection (1) or (2) of this section also has priority in proceeds 8
of the chattel paper to the extent that: 9
(a) KRS 355.9-322 provides for priority in the proceeds; or 10
(b) The proceeds consist of the specific goods covered by the chattel paper or 11
cash proceeds of the specific goods, even if the purchaser's security interest in 12
the proceeds is unperfected. 13
(4) Except as otherwise provided in KRS 355.9-331(1), a purchaser of an instrument 14
has priority over a security interest in the instrument perfected by a method other 15
than possession if the purchaser gives value and takes possession of the instrument 16
in good faith and without knowledge that the purchase violates the rights of the 17
secured party. 18
(5) For purposes of subsections (1) and (2) of this section, the holder of a purchase-19
money security interest in inventory gives new value for chattel paper constituting 20
proceeds of the inventory. 21
(6) For purposes of subsections (2) and (4) of this section, if the authoritative copies of 22
the record evidencing chattel paper or an instrument indicate[indicates] that the 23
chattel paper or instrument[it] has been assigned to an identified secured party 24
other than the purchaser, a purchaser of the chattel paper or instrument has 25
knowledge that the purchase violates the rights of the secured party. 26
Section 72. KRS 355.9-331 is amended to read as follows: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(1) This article does not limit the rights of a holder in due course of a negotiable 1
instrument, a holder to which a negotiable document of title has been duly 2
negotiated,[ or] a protected purchaser of a security, or a qualifying purchaser of a 3
controllable account, controllable electronic record, or controllable payment 4
intangible. These holders or purchasers take priority over an earlier security 5
interest, even if perfected, to the extent provided in Articles 3, 7, 8, and 12[8] of 6
this chapter. 7
(2) This article does not limit the rights of or impose liability on a person to the extent 8
that the person is protected against the assertion of a claim under Article 8 or 12 of 9
this chapter. 10
(3) Filing under this article does not constitute notice of a claim or defense to the 11
holders, or purchasers, or persons described in subsections (1) and (2) of this 12
section. 13
Section 73. KRS 355.9-332 is amended to read as follows: 14
(1) A transferee of tangible money takes the money free of a security interest if the 15
transferee receives possession of the money without acting[unless the transferee 16
acts] in collusion with the debtor in violating the rights of the secured party. 17
(2) A transferee of funds from a deposit account takes the funds free of a security 18
interest in the deposit account if the transferee receives the funds without 19
acting[unless the transferee acts] in collusion with the debtor in violating the rights 20
of the secured party. 21
(3) A transferee of electronic money takes the money free of a security interest if the 22
transferee obtains control of the money without acting in collusion with the 23
debtor in violating the rights of the secured party. 24
Section 74. KRS 355.9-334 is amended to read as follows: 25
(1) (a) A security interest under this article may be created in goods that are fixtures 26
or may continue in goods that become fixtures. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(b) A security interest does not exist under this article in ordinary building 1
materials incorporated into an improvement on land. 2
(2) This article does not prevent creation of an encumbrance upon fixtures under real 3
property law. 4
(3) In cases not governed by subsections (4) to (8) of this section, a security interest in 5
fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the 6
related real property other than the debtor. 7
(4) Except as otherwise provided in subsection (8) of this section, a perfected security 8
interest in fixtures has priority over a conflicting interest of an encumbrancer or 9
owner of the real property if the debtor has an interest of record in or is in 10
possession of the real property and: 11
(a) The security interest is a purchase-money security interest; 12
(b) The interest of the encumbrancer or owner arises before the goods become 13
fixtures; and 14
(c) The security interest is perfected by a fixture filing before the goods become 15
fixtures or within twenty (20) days thereafter. 16
(5) A perfected security interest in fixtures has priority over a conflicting interest of an 17
encumbrancer or owner of the real property if: 18
(a) The debtor has an interest of record in the real property or is in possession of 19
the real property and the security interest: 20
1. Is perfected by a fixture filing before the interest of the encumbrancer or 21
owner is of record; and 22
2. Has priority over any conflicting interest of a predecessor in title of the 23
encumbrancer or owner; 24
(b) Before the goods become fixtures, the security interest is perfected by any 25
method permitted by this article and the fixtures are readily removable: 26
1. Factory or office machines; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2. Equipment that is not primarily used or leased for use in the operation of 1
the real property; or 2
3. Replacements of domestic appliances that are consumer goods; 3
(c) The conflicting interest is a lien on the real property obtained by legal or 4
equitable proceedings after the security interest was perfected by any method 5
permitted by this article; or 6
(d) The security interest is: 7
1. Created in a manufactured home in a manufactured-home transaction; 8
and 9
2. Perfected pursuant to a statute described in KRS 355.9-311(1)(b). 10
(6) A security interest in fixtures, whether or not perfected, has priority over a 11
conflicting interest of an encumbrancer or owner of the real property if: 12
(a) The encumbrancer or owner has, in a signed[an authenticated] record, 13
consented to the security interest or disclaimed an interest in the goods as 14
fixtures; or 15
(b) The debtor has a right to remove the goods as against the encumbrancer or 16
owner. 17
(7) The priority of the security interest under subsection (6)(b) of this section continues 18
for a reasonable time if the debtor's right to remove the goods as against the 19
encumbrancer or owner terminates. 20
(8) (a) A mortgage is a construction mortgage to the extent that it secures an 21
obligation incurred for the construction of an improvement on land, including 22
the acquisition cost of the land, if a recorded record of the mortgage so 23
indicates. 24
(b) Except as otherwise provided in subsections (5) and (6) of this section, a 25
security interest in fixtures is subordinate to a construction mortgage if a 26
record of the mortgage is recorded before the goods become fixtures and the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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goods become fixtures before the completion of the construction. A mortgage 1
has this priority to the same extent as a construction mortgage to the extent 2
that it is given to refinance a construction mortgage. 3
(9) A perfected security interest in crops growing on real property has priority over a 4
conflicting interest of an encumbrancer or owner of the real property if the debtor 5
has an interest of record in or is in possession of the real property. 6
Section 75. KRS 355.9-341 is amended to read as follows: 7
Except as otherwise provided in KRS 355.9-340(3), and unless the bank otherwise agrees 8
in a signed[an authenticated] record, a bank's rights and duties with respect to a deposit 9
account maintained with the bank are not terminated, suspended, or modified by: 10
(1) The creation, attachment, or perfection of a security interest in the deposit account; 11
(2) The bank's knowledge of the security interest; or 12
(3) The bank's receipt of instructions from the secured party. 13
Section 76. KRS 355.9-404 is amended to read as follows: 14
(1) Unless an account debtor has made an enforceable agreement not to assert defenses 15
or claims, and subject to subsections (2) to (5) of this section, the rights of an 16
assignee are subject to: 17
(a) All terms of the agreement between the account debtor and assignor and any 18
defense or claim in recoupment arising from the transaction that gave rise to 19
the contract; and 20
(b) Any other defense or claim of the account debtor against the assignor which 21
accrues before the account debtor receives a notification of the assignment 22
signed[authenticated] by the assignor or the assignee. 23
(2) Subject to subsection (3) of this section and except as otherwise provided in 24
subsection (4) of this section, the claim of an account debtor against an assignor 25
may be asserted against an assignee under subsection (1) of this section only to 26
reduce the amount the account debtor owes. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(3) This section is subject to law other than this article which establishes a different 1
rule for an account debtor who is an individual and who incurred the obligation 2
primarily for personal, family, or household purposes. 3
(4) In a consumer transaction, if a record evidences the account debtor's obligation, law 4
other than this article requires that the record include a statement to the effect that 5
the account debtor's recovery against an assignee with respect to claims and 6
defenses against the assignor may not exceed amounts paid by the account debtor 7
under the record, and the record does not include such a statement, the extent to 8
which a claim of an account debtor against the assignor may be asserted against an 9
assignee is determined as if the record included such a statement. 10
(5) This section does not apply to an assignment of a health-care-insurance receivable. 11
Section 77. KRS 355.9-406 is amended to read as follows: 12
(1) Subject to subsections (2) to (9) and (12) of this section, an account debtor on an 13
account, chattel paper, or a payment intangible may discharge its obligation by 14
paying the assignor until, but not after, the account debtor receives a notification, 15
signed[authenticated] by the assignor or the assignee, that the amount due or to 16
become due has been assigned and that payment is to be made to the assignee. After 17
receipt of the notification, the account debtor may discharge its obligation by 18
paying the assignee and may not discharge the obligation by paying the assignor. 19
(2) Subject to subsections[subsection] (8) and (12) of this section, notification is 20
ineffective under subsection (1) of this section: 21
(a) If it does not reasonably identify the rights assigned; 22
(b) To the extent that an agreement between an account debtor and a seller of a 23
payment intangible limits the account debtor's duty to pay a person other than 24
the seller and the limitation is effective under law other than this article; or 25
(c) At the option of an account debtor, if the notification notifies the account 26
debtor to make less than the full amount of any installment or other periodic 27 UNOFFICIAL COPY 24 RS SB 155/GA
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payment to the assignee, even if: 1
1. Only a portion of the account, chattel paper, or payment intangible has 2
been assigned to that assignee; 3
2. A portion has been assigned to another assignee; or 4
3. The account debtor knows that the assignment to that assignee is 5
limited. 6
(3) Subject to subsections[subsection] (8) and (12) of this section, if requested by the 7
account debtor, an assignee shall seasonably furnish reasonable proof that the 8
assignment has been made. Unless the assignee complies, the account debtor may 9
discharge its obligation by paying the assignor, even if the account debtor has 10
received a notification under subsection (1) of this section. 11
(4) (a) In this subsection, "promissory note" includes a negotiable instrument that 12
evidences chattel paper. 13
(b) Except as otherwise provided in subsection (5) and (11) of this section and 14
KRS 355.2A-303 and 355.9-407, and subject to subsection (8) of this section, 15
a term in an agreement between an account debtor and an assignor or in a 16
promissory note is ineffective to the extent that it: 17
1.[(a)] Prohibits, restricts, or requires the consent of the account debtor or 18
person obligated on the promissory note to the assignment or transfer of, 19
or the creation, attachment, perfection, or enforcement of a security 20
interest in, the account, chattel paper, payment intangible, or promissory 21
note; or 22
2.[(b)] Provides that the assignment or transfer or the creation, 23
attachment, perfection, or enforcement of the security interest may give 24
rise to a default, breach, right of recoupment, claim, defense, 25
termination, right of termination, or remedy under the account, chattel 26
paper, payment intangible, or promissory note. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(5) Subsection (4) of this section does not apply to the sale of a payment intangible or 1
promissory note, other than a sale pursuant to a disposition under KRS 355.9-610 or 2
an acceptance of collateral under KRS 355.9-620. 3
(6) Except as otherwise provided in subsection (11) of this section and KRS 355.2A-4
303 and 355.9-407 and subject to subsections (8) and (9) of this section, a rule of 5
law, statute, or regulation that prohibits, restricts, or requires the consent of a 6
government, governmental body or official, or account debtor to the assignment or 7
transfer of, or creation of a security interest in, an account or chattel paper is 8
ineffective to the extent that the rule of law, statute, or regulation: 9
(a) Prohibits, restricts, or requires the consent of the government, governmental 10
body or official, or account debtor to the assignment or transfer of, or the 11
creation, attachment, perfection, or enforcement of a security interest in the 12
account or chattel paper; or 13
(b) Provides that the assignment or transfer or the creation, attachment, 14
perfection, or enforcement of the security interest may give rise to a default, 15
breach, right of recoupment, claim, defense, termination, right of termination, 16
or remedy under the account or chattel paper. 17
(7) Subject to subsections[subsection] (8) and (12) of this section, an account debtor 18
may not waive or vary its option under subsection (2)(c) of this section. 19
(8) This section is subject to law other than this article which establishes a different 20
rule for an account debtor who is an individual and who incurred the obligation 21
primarily for personal, family, or household purposes. 22
(9) This section does not apply to an assignment of a health-care-insurance receivable. 23
(10) Reserved. 24
(11) Subsections (4) and (6) of this section do not apply to a security interest in an 25
ownership interest in a general partnership, limited partnership, or limited 26
liability company. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(12) Subsections (1) to (3) and (7) of this section do not apply to a controllable 1
account or controllable payment intangible. 2
Section 78. KRS 355.9-408 is amended to read as follows: 3
(1) Except as otherwise provided in subsections[subsection] (2) and (6) of this section, 4
a term in a promissory note or in an agreement between an account debtor and a 5
debtor which relates to a health-care-insurance receivable or a general intangible, 6
including a contract, permit, license, or franchise, and which term prohibits, 7
restricts, or requires the consent of the person obligated on the promissory note or 8
the account debtor to, the assignment or transfer of, or creation, attachment, or 9
perfection of a security interest in, the promissory note, health-care-insurance 10
receivable, or general intangible, is ineffective to the extent that the term: 11
(a) Would impair the creation, attachment, or perfection of a security interest; or 12
(b) Provides that the assignment or transfer or the creation, attachment, or 13
perfection of the security interest may give rise to a default, breach, right of 14
recoupment, claim, defense, termination, right of termination, or remedy 15
under the promissory note, health-care-insurance receivable, or general 16
intangible. 17
(2) Subsection (1) of this section applies to a security interest in a payment intangible 18
or promissory note only if the security interest arises out of a sale of the payment 19
intangible or promissory note, other than a sale pursuant to a disposition under KRS 20
355.9-610 or an acceptance of collateral under KRS 355.9-620. 21
(3) (a) Except as otherwise provided in paragraph (b) of this subsection and 22
subsection (6) of this section, a rule of law, statute, or regulation that 23
prohibits, restricts, or requires the consent of a government, governmental 24
body or official, person obligated on a promissory note, or account debtor to 25
the assignment or transfer of, or creation of a security interest in, a promissory 26
note, health-care-insurance receivable, or general intangible, including a 27 UNOFFICIAL COPY 24 RS SB 155/GA
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contract, permit, license, or franchise between an account debtor and a debtor, 1
is ineffective to the extent that the rule of law, statute, or regulation: 2
1.[(a)] Would impair the creation, attachment, or perfection of a security 3
interest; or 4
2.[(b)] Provides that the assignment or transfer or the creation, 5
attachment, or perfection of the security interest may give rise to a 6
default, breach, right of recoupment, claim, defense, termination, right 7
of termination, or remedy under the promissory note, health-care-8
insurance receivable, or general intangible. 9
(b) Paragraph (a) of this subsection does not apply to the following statutes, 10
including administrative regulations promulgated under the authority of 11
those statutes: KRS 304.2-260, KRS 304.24-420, Subtitle 33 of KRS Chapter 12
304, and Subtitle 37 of KRS Chapter 304. 13
(4) To the extent that a term in a promissory note or in an agreement between an 14
account debtor and a debtor which relates to a health-care-insurance receivable or 15
general intangible or a rule of law, statute, or regulation described in subsection (3) 16
of this section would be effective under law other than this article but is ineffective 17
under subsection (1) or (3) of this section, the creation, attachment, or perfection of 18
a security interest in the promissory note, health-care-insurance receivable, or 19
general intangible: 20
(a) Is not enforceable against the person obligated on the promissory note or the 21
account debtor; 22
(b) Does not impose a duty or obligation on the person obligated on the 23
promissory note or the account debtor; 24
(c) Does not require the person obligated on the promissory note or the account 25
debtor to recognize the security interest, pay or render performance to the 26
secured party, or accept payment or performance from the secured party; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(d) Does not entitle the secured party to use or assign the debtor's rights under the 1
promissory note, health-care-insurance receivable, or general intangible, 2
including any related information or materials furnished to the debtor in the 3
transaction giving rise to the promissory note, health-care-insurance 4
receivable, or general intangible; 5
(e) Does not entitle the secured party to use, assign, possess, or have access to 6
any trade secrets or confidential information of the person obligated on the 7
promissory note or the account debtor; and 8
(f) Does not entitle the secured party to enforce the security interest in the 9
promissory note, health-care-insurance receivable, or general intangible. 10
(5) This section prevails over any inconsistent provisions of the following statutes and 11
any administrative regulations based on those statutes: KRS 56.230(3)[(2)], 12
138.320(5)[(3)], 138.665(5)[(4)], 138.720(5), 139.250, 154A.400(3), 190.047(1), 13
190.070(2)(c), 217B.535(2),[ 228.070(2),] 230.300(11), 234.330(6)[(10)], 14
243.630(2), 260.815, 286.4-460(2), 292.320(3)[(2)](b), 286.8-036(3), 304.3-15
410(2)(f), 304.3-520(5), 333.080, 350.135(1), 365.430(1)[(27)], and 286.9-16
070(6)[(2)]. 17
(6) This section does not apply to a security interest in an ownership interest in a 18
general partnership, limited partnership, or limited liability company[Subsection 19
(3) of this section does not apply to the following statutes and to administrative 20
regulations promulgated under the authority of those statutes: KRS 304.2-260, KRS 21
304.24-420, Subtitle 33 of KRS Chapter 304, and Subtitle 37 of KRS Chapter 304]. 22
(7) In this section, "promissory note" includes a negotiable instrument that 23
evidences chattel paper. 24
Section 79. KRS 355.9-509 is amended to read as follows: 25
(1) A person may file an initial financing statement, amendment that adds collateral 26
covered by a financing statement, or amendment that adds a debtor to a financing 27 UNOFFICIAL COPY 24 RS SB 155/GA
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statement only if: 1
(a) The debtor authorizes the filing in a signed[an authenticated] record or 2
pursuant to subsection [(1) or ](2) or (3) of this section; or 3
(b) The person holds an agricultural lien that has become effective at the time of 4
filing and the financing statement covers only collateral in which the person 5
holds an agricultural lien. 6
(2) By signing[authenticating] or becoming bound as debtor by a security agreement, a 7
debtor or new debtor authorizes the filing of an initial financing statement, and an 8
amendment, covering: 9
(a) The collateral described in the security agreement; and 10
(b) Property that becomes collateral under KRS 355.9-315(1)(b), whether or not 11
the security agreement expressly covers proceeds. 12
(3) By acquiring collateral in which a security interest or agricultural lien continues 13
under KRS 355.9-315(1)(a), a debtor authorizes the filing of an initial financing 14
statement, and an amendment, covering the collateral and property that becomes 15
collateral under KRS 355.9-315(1)(b). 16
(4) A person may file an amendment other than an amendment that adds collateral 17
covered by a financing statement or an amendment that adds a debtor to a financing 18
statement only if: 19
(a) The secured party of record authorizes the filing; or 20
(b) The amendment is a termination statement for a financing statement as to 21
which the secured party of record has failed to file or send a termination 22
statement as required by KRS 355.9-513(1) or (3), the debtor authorizes the 23
filing, and the termination statement indicates that the debtor authorized it to 24
be filed. 25
(5) If there is more than one (1) secured party of record for a financing statement, each 26
secured party of record may authorize the filing of an amendment under subsection 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(4) of this section. 1
Section 80. KRS 355.9-513 is amended to read as follows: 2
(1) A secured party shall cause the secured party of record for a financing statement to 3
file a termination statement for the financing statement if the financing statement 4
covers consumer goods and: 5
(a) There is no obligation secured by the collateral covered by the financing 6
statement and no commitment to make an advance, incur an obligation, or 7
otherwise give value; or 8
(b) The debtor did not authorize the filing of the initial financing statement. 9
(2) To comply with subsection (1) of this section, a secured party shall cause the 10
secured party of record to file the termination statement: 11
(a) Within one (1) month after there is no obligation secured by the collateral 12
covered by the financing statement and no commitment to make an advance, 13
incur an obligation, or otherwise give value; or 14
(b) If earlier, within twenty (20) days after the secured party receives a signed[an 15
authenticated] demand from a debtor. 16
(3) In cases not governed by subsection (1) of this section, within twenty (20) days 17
after a secured party receives a signed[an authenticated] demand from a debtor, the 18
secured party shall cause the secured party of record for a financing statement to 19
send to the debtor a termination statement for the financing statement or file the 20
termination statement in the filing office if: 21
(a) Except in the case of a financing statement covering accounts or chattel paper 22
that has been sold or goods that are the subject of a consignment, there is no 23
obligation secured by the collateral covered by the financing statement and no 24
commitment to make an advance, incur an obligation, or otherwise give value; 25
(b) The financing statement covers accounts or chattel paper that has been sold 26
but as to which the account debtor or other person obligated has discharged its 27 UNOFFICIAL COPY 24 RS SB 155/GA
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obligation; 1
(c) The financing statement covers goods that were the subject of a consignment 2
to the debtor but are not in the debtor's possession; or 3
(d) The debtor did not authorize the filing of the initial financing statement. 4
(4) (a) Except as otherwise provided in KRS 355.9-510, upon the filing of a 5
termination statement with the filing office, the financing statement to which 6
the termination statement relates ceases to be effective. 7
(b) Except as otherwise provided in KRS 355.9-510, for purposes of KRS 355.9-8
519(7), 355.9-522(1), and 355.9-523(3), the filing with the filing office of a 9
termination statement relating to a financing statement that indicates that the 10
debtor is a transmitting utility also causes the effectiveness of the financing 11
statement to lapse. 12
Section 81. KRS 355.9-601 is amended to read as follows: 13
(1) After default, a secured party has the rights provided in this part of this article and, 14
except as otherwise provided in KRS 355.9-602, those provided by agreement of 15
the parties. A secured party: 16
(a) May reduce a claim to judgment, foreclose, or otherwise enforce the claim, 17
security interest, or agricultural lien by any available judicial procedure; and 18
(b) If the collateral is documents, may proceed either as to the documents or as to 19
the goods they cover. 20
(2) A secured party in possession of collateral or control of collateral under KRS 355.7-21
106, 355.9-104, 355.9-105, Section 47 of this Act, 355.9-106,[ or] 355.9-107, or 22
Section 48 of this Act has the rights and duties provided in KRS 355.9-207. 23
(3) The rights under subsections (1) and (2) of this section are cumulative and may be 24
exercised simultaneously. 25
(4) Except as otherwise provided in subsection (7) of this section and KRS 355.9-605, 26
after default, a debtor and an obligor have the rights provided in this part of this 27 UNOFFICIAL COPY 24 RS SB 155/GA
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article and by agreement of the parties. 1
(5) If a secured party has reduced its claim to judgment, the lien of any levy that may 2
be made upon the collateral by virtue of an execution based upon the judgment 3
relates back to the earliest of: 4
(a) The date of perfection of the security interest or agricultural lien in the 5
collateral; 6
(b) The date of filing a financing statement covering the collateral; or 7
(c) Any date specified in a statute under which the agricultural lien was created. 8
(6) A sale pursuant to an execution is a foreclosure of the security interest or 9
agricultural lien by judicial procedure within the meaning of this section. A secured 10
party may purchase at the sale and thereafter hold the collateral free of any other 11
requirements of this article. 12
(7) Except as otherwise provided in KRS 355.9-607(3), this part of this article imposes 13
no duties upon a secured party that is a consignor or is a buyer of accounts, chattel 14
paper, payment intangibles, or promissory notes. 15
Section 82. KRS 355.9-605 is amended to read as follows: 16
(1) Except as provided in subsection (2) of this section, a secured party does not owe a 17
duty based on its status as secured party: 18
(a)[(1)] To a person that is a debtor or obligor, unless the secured party knows: 19
1.[(a)] That the person is a debtor or obligor; 20
2.[(b)] The identity of the person; and 21
3.[(c)] How to communicate with the person; or 22
(b)[(2)] To a secured party or lienholder that has filed a financing statement 23
against a person, unless the secured party knows: 24
1.[(a)] That the person is a debtor; and 25
2.[(b)] The identity of the person. 26
(2) A secured party owes a duty based on its status as a secured party to a person if, 27 UNOFFICIAL COPY 24 RS SB 155/GA
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at the time the secured party obtains control of collateral that is a controllable 1
account, controllable electronic record, or controllable payment intangible or at 2
the time the security interest attaches to the collateral, whichever is later: 3
(a) The person is a debtor or obligor; and 4
(b) The secured party knows that the information in subsection (1)(a)1., 2., or 5
3. of this section relating to the person is not provided by the collateral, a 6
record attached to or logically associated with the collateral, or the system 7
in which the collateral is recorded. 8
Section 83. KRS 355.9-608 is amended to read as follows: 9
(1) If a security interest or agricultural lien secures payment or performance of an 10
obligation, the following rules apply: 11
(a) A secured party shall apply or pay over for application the cash proceeds of 12
collection or enforcement under KRS 355.9-607 in the following order to: 13
1. The reasonable expenses of collection and enforcement and, to the 14
extent provided for by agreement and not prohibited by law, reasonable 15
attorney's fees and legal expenses incurred by the secured party; 16
2. The satisfaction of obligations secured by the security interest or 17
agricultural lien under which the collection or enforcement is made; and 18
3. The satisfaction of obligations secured by any subordinate security 19
interest in or other lien on the collateral subject to the security interest or 20
agricultural lien under which the collection or enforcement is made if 21
the secured party receives a signed[an authenticated] demand for 22
proceeds before distribution of the proceeds is completed;[.] 23
(b) If requested by a secured party, a holder of a subordinate security interest or 24
other lien shall furnish reasonable proof of the interest or lien within a 25
reasonable time. Unless the holder complies, the secured party need not 26
comply with the holder's demand under paragraph (a)3. of this subsection;[.] 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(c) A secured party need not apply or pay over for application noncash proceeds 1
of collection and enforcement under KRS 355.9-607 unless the failure to do 2
so would be commercially unreasonable. A secured party that applies or pays 3
over for application noncash proceeds shall do so in a commercially 4
reasonable manner; and[.] 5
(d) A secured party shall account to and pay a debtor for any surplus, and the 6
obligor is liable for any deficiency. 7
(2) If the underlying transaction is a sale of accounts, chattel paper, payment 8
intangibles, or promissory notes, the debtor is not entitled to any surplus, and the 9
obligor is not liable for any deficiency. 10
Section 84. KRS 355.9-611 is amended to read as follows: 11
(1) In this section, "notification date" means the earlier of the date on which: 12
(a) A secured party sends to the debtor and any secondary obligor a signed[an 13
authenticated] notification of disposition; or 14
(b) The debtor and any secondary obligor waive the right to notification. 15
(2) Except as otherwise provided in subsection (4) of this section, a secured party that 16
disposes of collateral under KRS 355.9-610 shall send to the persons specified in 17
subsection (3) of this section a reasonable signed[authenticated] notification of 18
disposition. 19
(3) To comply with subsection (2) of this section, the secured party shall send a 20
signed[an authenticated] notification of disposition to: 21
(a) The debtor; 22
(b) Any secondary obligor; and 23
(c) If the collateral is other than consumer goods: 24
1. Any other person from which the secured party has received, before the 25
notification date, a signed[an authenticated] notification of a claim of an 26
interest in the collateral; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2. Any other secured party or lienholder that, ten (10) days before the 1
notification date, held a security interest in or other lien on the collateral 2
perfected by the filing of a financing statement that: 3
a. Identified the collateral; 4
b. Was indexed under the debtor's name as of that date; and 5
c. Was filed in the office in which to file a financing statement 6
against the debtor covering the collateral as of that date; and 7
3. Any other secured party that, ten (10) days before the notification date, 8
held a security interest in the collateral perfected by compliance with a 9
statute, regulation, or treaty described in KRS 355.9-311(1). 10
(4) Subsection (2) of this section does not apply if the collateral is perishable or 11
threatens to decline speedily in value or is of a type customarily sold on a 12
recognized market. 13
(5) A secured party complies with the requirement for notification prescribed by 14
subsection (3)(c)2. of this section if: 15
(a) Not later than twenty (20) days or earlier than thirty (30) days before the 16
notification date, the secured party requests, in a commercially reasonable 17
manner, information concerning financing statements indexed under the 18
debtor's name in the office indicated in subsection (3)(c)2. of this section; and 19
(b) Before the notification date, the secured party: 20
1. Did not receive a response to the request for information; or 21
2. Received a response to the request for information and sent a signed[an 22
authenticated] notification of disposition to each secured party or other 23
lienholder named in that response whose financing statement covered 24
the collateral. 25
Section 85. KRS 355.9-613 is amended to read as follows: 26
(1) Except in a consumer-goods transaction, the following rules apply: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(a)[(1)] The contents of a notification of disposition are sufficient if the 1
notification: 2
1.[(a)] Describes the debtor and the secured party; 3
2.[(b)] Describes the collateral that is the subject of the intended 4
disposition; 5
3.[(c)] States the method of intended disposition; 6
4.[(d)] States that the debtor is entitled to an accounting of the unpaid 7
indebtedness and states the charge, if any, for an accounting; and 8
5.[(e)] States the time and place of a public disposition or the time after 9
which any other disposition is to be made;[.] 10
(b)[(2)] Whether the contents of a notification that lacks any of the information 11
specified in paragraph (a)[subsection (1)] of this subsection[section] are 12
nevertheless sufficient is a question of fact;[.] 13
(c)[(3)] The contents of a notification providing substantially the information 14
specified in paragraph (a)[subsection (1)] of this subsection[section] are 15
sufficient, even if the notification includes: 16
1.[(a)] Information not specified by that paragraph[subsection]; or 17
2.[(b)] Minor errors that are not seriously misleading;[.] 18
(d)[(4)] A particular phrasing of the notification is not required; and[.] 19
(e)[(5)] The following form of notification and the form appearing in KRS 20
355.9-614(1)(c)[(3)], when completed in accordance with the instructions in 21
subsection (2) of this section and subsection (2) of Section 86 of this Act, 22
each provides sufficient information: 23
"NOTIFICATION OF DISPOSITION OF COLLATERAL 24
To: (Name of debtor, obligor, or other person to which the notification is sent) 25
From: (Name, address, and telephone number of secured party) 26
{1} Name of any debtor that is not an addressee: (Name of each debtor) 27 UNOFFICIAL COPY 24 RS SB 155/GA
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{2} We will sell (describe collateral) (to the highest qualified bidder) at public 1
sale. A sale could include a lease or license. The sale will be held as follows: 2
(Date) 3
(Time) 4
(Place) 5
{3} We will sell (describe collateral) at private sale sometime after (date). A sale 6
could include a lease or license. 7
{4} You are entitled to an accounting of the unpaid indebtedness secured by the 8
property that we intend to sell, or as applicable, lease or license. 9
{5} If you request an accounting, you must pay a charge of $ (amount). 10
{6} You may request an accounting by calling us at (telephone number). 11
[End of Form]". 12
["NOTIFICATION OF DISPOSITION OF COLLATERAL 13
To: .....<Name of debtor, obligor, or other person to which the notification is sent> 14
From: ..... <Name, address, and telephone number of secured party> 15
Name of Debtor(s): .....<Include only if debtor(s) are not an addressee> 16
<For a public disposition:> 17
We will sell <or lease or license, as applicable> the .....<describe collateral> <to the 18
highest qualified bidder> in public as follows: 19
Day and Date: ............... 20
Time: ............... 21
Place: ............... 22
<For a private disposition:> 23
We will sell <or lease or license, as applicable> the .....<describe collateral> 24
privately sometime after <day and date>. 25
You are entitled to an accounting of the unpaid indebtedness secured by the 26
property that we intend to sell <or lease or license, as applicable> <for a charge of $.....>. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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You may request an accounting by calling us at .....<telephone number>".] 1
(2) The following instructions apply to the form of notification in subsection (1)(e) of 2
this section: 3
(a) The instructions in this subsection refer to the numbers in braces before 4
items in the form of notification in subsection (1)(e) of this section. Do not 5
include the numbers or braces in the notification. The numbers and braces 6
are used only for the purpose of these instructions; 7
(b) Include and complete item {1} only if there is a debtor that is not an 8
addressee of the notification and list the name or names; 9
(c) Include and complete either item {2}, if the notification relates to a public 10
disposition of the collateral, or item {3}, if the notification relates to a 11
private disposition of the collateral. If item {2} is included, include the 12
words "to the highest qualified bidder" only if applicable; 13
(d) Include and complete items {4} and {6}; and 14
(e) Include and complete item {5} only if the sender will charge the recipient 15
for an accounting. 16
Section 86. KRS 355.9-614 is amended to read as follows: 17
(1) In a consumer-goods transaction, the following rules apply: 18
(a)[(1)] A notification of disposition must provide the following information: 19
1.[(a)] The information specified in KRS 355.9-613(1)(a); 20
2.[(b)] A description of any liability for a deficiency of the person to 21
which the notification is sent; 22
3.[(c)] A telephone number from which the amount that must be paid to 23
the secured party to redeem the collateral under KRS 355.9-623 is 24
available; and 25
4.[(d)] A telephone number or mailing address from which additional 26
information concerning the disposition and the obligation secured is 27 UNOFFICIAL COPY 24 RS SB 155/GA
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available;[.] 1
(b)[(2)] A particular phrasing of the notification is not required;[.] 2
(c)[(3)] The following form of notification, when completed in accordance with 3
the instructions in subsection (2) of this section, provides sufficient 4
information: 5
"(Name and address of secured party) 6
(Date) 7
NOTICE OF OUR PLAN TO SELL PROPERTY 8
(Name and address of any obligor who is also a debtor) 9
Subject: (Identify transaction) 10
We have your (describe collateral) because you broke promises in our agreement. 11
{1} We will sell (describe collateral) at public sale. A sale could include a lease or 12
license. The sale will be held as follows: 13
(Date) 14
(Time) 15
(Place) 16
You may attend the sale and bring bidders if you want. 17
{2} We will sell (describe collateral) at private sale sometime after (date). A sale 18
could include a lease or license. 19
{3} The money that we get from the sale, after paying our costs, will reduce the 20
amount you owe. If we get less money than you owe, you (will or will not, as 21
applicable) still owe us the difference. If we get more money than you owe, you will get 22
the extra money, unless we must pay it to someone else. 23
{4} You can get your property back at any time before we sell it by paying us the 24
full amount you owe, not just the past due payments, including our expenses. To learn 25
the exact amount you must pay, call us at (telephone number). 26
{5} If you want us to explain to you in (writing) (writing or in (description of 27 UNOFFICIAL COPY 24 RS SB 155/GA
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electronic record)) (description of electronic record) how we have figured the amount 1
you owe us, {6} call us at (telephone number) (or) (write us at (secured party's 2
address)) (or contact us by (description of electronic communication method)) {7} and 3
request (a written explanation) (a written explanation or an explanation in (description 4
of electronic record)) (an explanation in (description of electronic record)). 5
{8} We will charge you $ (amount) for the explanation if we sent you another 6
written explanation of the amount you owe us within the last six (6) months. 7
{9} If you need more information about the sale, (call us at (telephone number)) 8
(or) (write us at (secured party's address)) (or contact us by (description of electronic 9
communication method)). 10
{10} We are sending this notice to the following other people who have an interest 11
in (describe collateral) or who owe money under your agreement: 12
(Names of all other debtors and obligors, if any) 13
[End of Form]"; 14
["<Name and address of secured party> 15
<Date> 16
NOTICE OF OUR PLAN TO SELL PROPERTY 17
<Name and address of any obligor who is also a debtor> 18
Subject: <Identification of Transaction> 19
We have your .....<describe collateral>, because you broke promises in our 20
agreement. 21
<For a public disposition:> 22
We will sell .....<describe collateral> at public sale. A sale could include a lease or 23
license. The sale will be held as follows: 24
Date: ............... 25
Time: ............... 26
Place: ............... 27 UNOFFICIAL COPY 24 RS SB 155/GA
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You may attend the sale and bring bidders if you want. 1
<For a private disposition:> 2
We will sell .....<describe collateral> at private sale sometime after .....<date>. A 3
sale could include a lease or license. 4
The money that we get from the sale (after paying our costs) will reduce the amount 5
you owe. If we get less money than you owe, you .....<will or will not, as applicable> still 6
owe us the difference. If we get more money than you owe, you will get the extra money, 7
unless we must pay it to someone else. 8
You can get the property back at any time before we sell it by paying us the full 9
amount you owe (not just the past due payments), including our expenses. To learn the 10
exact amount you must pay, call us at .....<telephone number>. 11
If you want us to explain to you in writing how we have figured the amount that 12
you owe us, you may call us at .....<telephone number> <or write us at .....<secured 13
party's address>> and request a written explanation. <We will charge you $..... for the 14
explanation if we sent you another written explanation of the amount you owe us within 15
the last six (6) months.> 16
If you need more information about the sale call us at .....<telephone number> <or 17
write us at .....<secured party's address>>. 18
We are sending this notice to the following other people who have an interest in 19
.....<describe collateral> or who owe money under your agreement: 20
.....<Names of all other debtors and obligors, if any>"] 21
(d)[(4)] A notification in the form of paragraph (c)[subsection (3)] of this 22
subsection[section] is sufficient, even if additional information appears at the 23
end of the form;[.] 24
(e)[(5)] A notification in the form of paragraph (c)[subsection (3)] of this 25
subsection[section] is sufficient, even if it includes errors in information not 26
required by paragraph (a)[subsection (1)] of this subsection[section], unless 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the error is misleading with respect to rights arising under this article; and[.] 1
(f)[(6)] If a notification under this section is not in the form of paragraph 2
(c)[subsection (3)] of this subsection[section], law other than this article 3
determines the effect of including information not required by paragraph 4
(a)[subsection (1)] of this subsection[section]. 5
(2) The following instructions apply to the form of notification in subsection (1)(c) of 6
this section: 7
(a) The instructions in this subsection refer to the numbers in braces before 8
items in the form of notification in subsection (1)(c) of this section. Do not 9
include the numbers or braces in the notification. The numbers and braces 10
are used only for the purpose of these instructions; 11
(b) Include and complete either item {1}, if the notification relates to a public 12
disposition of the collateral, or item {2}, if the notification relates to a 13
private disposition of the collateral; 14
(c) Include and complete items {3}, {4}, {5}, {6}, and {7}; 15
(d) In item {5}, include and complete any one (1) of the three (3) alternative 16
methods for the explanation - writing, writing or electronic record, or 17
electronic record; 18
(e) In item {6}, include the telephone number. In addition, the sender may 19
include and complete either or both of the two (2) additional alternative 20
methods of communication - writing or electronic communication - for the 21
recipient of the notification to communicate with the sender. Neither of the 22
two (2) additional methods of communication is required to be included; 23
(f) In item {7}, include and complete the method or methods for the 24
explanation – writing, writing or electronic record, or electronic record – 25
included in item {5}; 26
(g) Include and complete item {8} only if a written explanation is included in 27 UNOFFICIAL COPY 24 RS SB 155/GA
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item {5} as a method for communicating the explanation and the sender will 1
charge the recipient for another written explanation; 2
(h) In item {9}, include either the telephone number or the address or both the 3
telephone number and the address. In addition, the sender may include and 4
complete the additional method of communication – electronic 5
communication – for the recipient of the notification to communicate with 6
the sender. The additional method of electronic communication is not 7
required to be included; and 8
(i) If item {10} does not apply, insert "None" after "agreement". 9
Section 87. KRS 355.9-615 is amended to read as follows: 10
(1) A secured party shall apply or pay over for application the cash proceeds of 11
disposition under KRS 355.9-610 in the following order to: 12
(a) The reasonable expenses of retaking, holding, preparing for disposition, 13
processing, and disposing, and, to the extent provided for by agreement and 14
not prohibited by law, reasonable attorney's fees and legal expenses incurred 15
by the secured party; 16
(b) The satisfaction of obligations secured by the security interest or agricultural 17
lien under which the disposition is made; 18
(c) The satisfaction of obligations secured by any subordinate security interest in 19
or other subordinate lien on the collateral if: 20
1. The secured party receives from the holder of the subordinate security 21
interest or other lien a signed[an authenticated] demand for proceeds 22
before distribution of the proceeds is completed; and 23
2. In a case in which a consignor has an interest in the collateral, the 24
subordinate security interest or other lien is senior to the interest of the 25
consignor; and 26
(d) A secured party that is a consignor of the collateral if the secured party 27 UNOFFICIAL COPY 24 RS SB 155/GA
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receives from the consignor a signed[an authenticated] demand for proceeds 1
before distribution of the proceeds is completed. 2
(2) If requested by a secured party, a holder of a subordinate security interest or other 3
lien shall furnish reasonable proof of the interest or lien within a reasonable time. 4
Unless the holder does so, the secured party need not comply with the holder's 5
demand under subsection (1)(c) of this section. 6
(3) (a) A secured party need not apply or pay over for application noncash proceeds 7
of disposition under KRS 355.9-610 unless the failure to do so would be 8
commercially unreasonable. 9
(b) A secured party that applies or pays over for application noncash proceeds 10
shall do so in a commercially reasonable manner. 11
(4) If the security interest under which a disposition is made secures payment or 12
performance of an obligation, after making the payments and applications required 13
by subsection (1) of this section and permitted by subsection (3) of this section: 14
(a) Unless subsection (1)(d) of this section requires the secured party to apply or 15
pay over cash proceeds to a consignor, the secured party shall account to and 16
pay a debtor for any surplus; and 17
(b) The obligor is liable for any deficiency. 18
(5) If the underlying transaction is a sale of accounts, chattel paper, payment 19
intangibles, or promissory notes: 20
(a) The debtor is not entitled to any surplus; and 21
(b) The obligor is not liable for any deficiency. 22
(6) The surplus or deficiency following a disposition is calculated based on the amount 23
of proceeds that would have been realized in a disposition complying with this part 24
of this article to a transferee other than the secured party, a person related to the 25
secured party, or a secondary obligor if: 26
(a) The transferee in the disposition is the secured party, a person related to the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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secured party, or a secondary obligor; and 1
(b) The amount of proceeds of the disposition is significantly below the range of 2
proceeds that a complying disposition to a person other than the secured party, 3
a person related to the secured party, or a secondary obligor would have 4
brought. 5
(7) A secured party that receives cash proceeds of a disposition in good faith and 6
without knowledge that the receipt violates the rights of the holder of a security 7
interest or other lien that is not subordinate to the security interest or agricultural 8
lien under which the disposition is made: 9
(a) Takes the cash proceeds free of the security interest or other lien; 10
(b) Is not obligated to apply the proceeds of the disposition to the satisfaction of 11
obligations secured by the security interest or other lien; and 12
(c) Is not obligated to account to or pay the holder of the security interest or other 13
lien for any surplus. 14
Section 88. KRS 355.9-616 is amended to read as follows: 15
(1) In this section: 16
(a) "Explanation" means a record[writing] that: 17
1. States the amount of the surplus or deficiency; 18
2. Provides an explanation in accordance with subsection (3) of this section 19
of how the secured party calculated the surplus or deficiency; 20
3. States, if applicable, that future debits, credits, charges, including 21
additional credit service charges or interest, rebates, and expenses may 22
affect the amount of the surplus or deficiency; and 23
4. Provides a telephone number or mailing address from which additional 24
information concerning the transaction is available; and[.] 25
(b) "Request" means a record: 26
1. Signed[Authenticated] by a debtor or consumer obligor; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2. Requesting that the recipient provide an explanation; and 1
3. Sent after disposition of the collateral under KRS 355.9-610. 2
(2) In a consumer-goods transaction in which the debtor is entitled to a surplus or a 3
consumer obligor is liable for a deficiency under KRS 355.9-615, the secured party 4
shall: 5
(a) Send an explanation to the debtor or consumer obligor, as applicable, after the 6
disposition and: 7
1. Before or when the secured party accounts to the debtor and pays any 8
surplus or first makes[ written] demand in a record on the consumer 9
obligor after the disposition for payment of the deficiency; and 10
2. Within fourteen (14) days after receipt of a request; or 11
(b) In the case of a consumer obligor who is liable for a deficiency, within 12
fourteen (14) days after receipt of a request, send to the consumer obligor a 13
record waiving the secured party's right to a deficiency. 14
(3) To comply with subsection (1)(a)2. of this section, an explanation[a writing] must 15
provide the following information in the following order: 16
(a) The aggregate amount of obligations secured by the security interest under 17
which the disposition was made, and, if the amount reflects a rebate of 18
unearned interest or credit service charge, an indication of that fact, calculated 19
as of a specified date: 20
1. If the secured party takes or receives possession of the collateral after 21
default, not more than thirty-five (35) days before the secured party 22
takes or receives possession; or 23
2. If the secured party takes or receives possession of the collateral before 24
default or does not take possession of the collateral, not more than 25
thirty-five (35) days before the disposition; 26
(b) The amount of proceeds of the disposition; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(c) The aggregate amount of the obligations after deducting the amount of 1
proceeds; 2
(d) The amount, in the aggregate or by type, and types of expenses, including 3
expenses of retaking, holding, preparing for disposition, processing, and 4
disposing of the collateral, and attorney's fees secured by the collateral which 5
are known to the secured party and relate to the current disposition; 6
(e) The amount, in the aggregate or by type, and types of credits, including 7
rebates of interest or credit service charges, to which the obligor is known to 8
be entitled and which are not reflected in the amount in paragraph (a) of this 9
subsection; and 10
(f) The amount of the surplus or deficiency. 11
(4) (a) A particular phrasing of the explanation is not required. 12
(b) An explanation complying substantially with the requirements of subsection 13
(1) of this section is sufficient, even if it includes minor errors that are not 14
seriously misleading. 15
(5) A debtor or consumer obligor is entitled without charge to one (1) response to a 16
request under this section during any six (6) month period in which the secured 17
party did not send to the debtor or consumer obligor an explanation pursuant to 18
subsection (2)(a) of this section. The secured party may require payment of a charge 19
not exceeding twenty-five dollars ($25) for each additional response. 20
Section 89. KRS 355.9-619 is amended to read as follows: 21
(1) In this section, "transfer statement" means a record signed[authenticated] by a 22
secured party stating: 23
(a) That the debtor has defaulted in connection with an obligation secured by 24
specified collateral; 25
(b) That the secured party has exercised its post-default remedies with respect to 26
the collateral; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(c) That, by reason of the exercise, a transferee has acquired the rights of the 1
debtor in the collateral; and 2
(d) The name and mailing address of the secured party, debtor, and transferee. 3
(2) (a) A transfer statement entitles the transferee to the transfer of record of all 4
rights of the debtor in the collateral specified in the statement in any official 5
filing, recording, registration, or certificate-of-title system covering the 6
collateral. 7
(b) If a transfer statement is presented with the applicable fee and request form to 8
the official or office responsible for maintaining the system, the official or 9
office shall: 10
1.[(a)] Accept the transfer statement; 11
2.[(b)] Promptly amend its records to reflect the transfer; and 12
3.[(c)] If applicable, issue a new appropriate certificate of title in the 13
name of the transferee. 14
(3) A transfer of the record or legal title to collateral to a secured party under 15
subsection (2) of this section or otherwise is not of itself a disposition of collateral 16
under this article and does not of itself relieve the secured party of its duties under 17
this article. 18
(4) A secured party who complies with KRS 186.045(6) is considered to have provided 19
a transfer statement for purposes of this section. 20
Section 90. KRS 355.9-620 is amended to read as follows: 21
(1) Except as otherwise provided in subsection (7) of this section, a secured party may 22
accept collateral in full or partial satisfaction of the obligation it secures only if: 23
(a) The debtor consents to the acceptance under subsection (3) of this section; 24
(b) The secured party does not receive, within the time set forth in subsection (4) 25
of this section, a notification of objection to the proposal 26
signed[authenticated] by: 27 UNOFFICIAL COPY 24 RS SB 155/GA
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1. A person to which the secured party was required to send a proposal 1
under KRS 355.9-621; or 2
2. Any other person, other than the debtor, holding an interest in the 3
collateral subordinate to the security interest that is the subject of the 4
proposal; 5
(c) If the collateral is consumer goods, the collateral is not in the possession of 6
the debtor when the debtor consents to the acceptance; and 7
(d) Subsection (5) of this section does not require the secured party to dispose of 8
the collateral or the debtor waives the requirement pursuant to KRS 355.9-9
624. 10
(2) A purported or apparent acceptance of collateral under this section is ineffective 11
unless: 12
(a) The secured party consents to the acceptance in a signed[an authenticated] 13
record or sends a proposal to the debtor; and 14
(b) The conditions of subsection (1) of this section are met. 15
(3) For purposes of this section: 16
(a) A debtor consents to an acceptance of collateral in partial satisfaction of the 17
obligation it secures only if the debtor agrees to the terms of the acceptance in 18
a record signed[authenticated] after default; and 19
(b) A debtor consents to an acceptance of collateral in full satisfaction of the 20
obligation it secures only if the debtor agrees to the terms of the acceptance in 21
a record signed[authenticated] after default or the secured party: 22
1. Sends to the debtor after default a proposal that is unconditional or 23
subject only to a condition that collateral not in the possession of the 24
secured party be preserved or maintained; 25
2. In the proposal, proposes to accept collateral in full satisfaction of the 26
obligation it secures; and 27 UNOFFICIAL COPY 24 RS SB 155/GA
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3. Does not receive a notification of objection signed[authenticated] by the 1
debtor within twenty (20) days after the proposal is sent. 2
(4) To be effective under subsection (1)(b) of this section, a notification of objection 3
must be received by the secured party: 4
(a) In the case of a person to which the proposal was sent pursuant to KRS 355.9-5
621, within twenty (20) days after notification was sent to that person; and 6
(b) In other cases: 7
1. Within twenty (20) days after the last notification was sent pursuant to 8
KRS 355.9-621; or 9
2. If a notification was not sent, before the debtor consents to the 10
acceptance under subsection (3) of this section. 11
(5) A secured party that has taken possession of collateral shall dispose of the collateral 12
pursuant to KRS 355.9-610 within the time specified in subsection (6) of this 13
section if: 14
(a) Sixty percent (60%) of the cash price has been paid in the case of a purchase-15
money security interest in consumer goods; or 16
(b) Sixty percent (60%) of the principal amount of the obligation secured has 17
been paid in the case of a non-purchase-money security interest in consumer 18
goods. 19
(6) To comply with subsection (5) of this section, the secured party shall dispose of the 20
collateral: 21
(a) Within ninety (90) days after taking possession; or 22
(b) Within any longer period to which the debtor and all secondary obligors have 23
agreed in an agreement to that effect entered into and signed[authenticated] 24
after default. 25
(7) In a consumer transaction, a secured party may not accept collateral in partial 26
satisfaction of the obligation it secures. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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Section 91. KRS 355.9-621 is amended to read as follows: 1
(1) A secured party that desires to accept collateral in full or partial satisfaction of the 2
obligation it secures shall send its proposal to: 3
(a) Any person from which the secured party has received, before the debtor 4
consented to the acceptance, a signed[an authenticated] notification of a claim 5
of an interest in the collateral; 6
(b) Any other secured party or lienholder that, ten (10) days before the debtor 7
consented to the acceptance, held a security interest in or other lien on the 8
collateral perfected by the filing of a financing statement that: 9
1. Identified the collateral; 10
2. Was indexed under the debtor's name as of that date; and 11
3. Was filed in the office or offices in which to file a financing statement 12
against the debtor covering the collateral as of that date; and 13
(c) Any other secured party that, ten (10) days before the debtor consented to the 14
acceptance, held a security interest in the collateral perfected by compliance 15
with a statute, regulation, or treaty described in KRS 355.9-311(1). 16
(2) A secured party that desires to accept collateral in partial satisfaction of the 17
obligation it secures shall send its proposal to any secondary obligor in addition to 18
the persons described in subsection (1) of this section. 19
Section 92. KRS 355.9-624 is amended to read as follows: 20
(1) A debtor or secondary obligor may waive the right to notification of disposition of 21
collateral under KRS 355.9-611 only by an agreement to that effect entered into and 22
signed[authenticated] after default. 23
(2) A debtor may waive the right to require disposition of collateral under KRS 355.9-24
620(5) only by an agreement to that effect entered into and signed[authenticated] 25
after default. 26
(3) Except in a consumer-goods transaction, a debtor or secondary obligor may waive 27 UNOFFICIAL COPY 24 RS SB 155/GA
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the right to redeem collateral under KRS 355.9-623 only by an agreement to that 1
effect entered into and signed[authenticated] after default. 2
Section 93. KRS 355.9-628 is amended to read as follows: 3
(1) Subject to subsection (6) of this section, unless a secured party knows that a person 4
is a debtor or obligor, knows the identity of the person, and knows how to 5
communicate with the person: 6
(a) The secured party is not liable to the person, or to a secured party or 7
lienholder that has filed a financing statement against the person, for failure to 8
comply with this article; and 9
(b) The secured party's failure to comply with this article does not affect the 10
liability of the person for a deficiency. 11
(2) Subject to subsection (6) of this section, a secured party is not liable because of its 12
status as secured party: 13
(a) To a person that is a debtor or obligor, unless the secured party knows: 14
1. That the person is a debtor or obligor; 15
2. The identity of the person; and 16
3. How to communicate with the person; or 17
(b) To a secured party or lienholder that has filed a financing statement against a 18
person, unless the secured party knows: 19
1. That the person is a debtor; and 20
2. The identity of the person. 21
(3) A secured party is not liable to any person, and a person's liability for a deficiency 22
is not affected, because of any act or omission arising out of the secured party's 23
reasonable belief that a transaction is not a consumer-goods transaction or a 24
consumer transaction or that goods are not consumer goods, if the secured party's 25
belief is based on its reasonable reliance on: 26
(a) A debtor's representation concerning the purpose for which collateral was to 27 UNOFFICIAL COPY 24 RS SB 155/GA
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be used, acquired, or held; or 1
(b) An obligor's representation concerning the purpose for which a secured 2
obligation was incurred. 3
(4) A secured party is not liable to any person under KRS 355.9-625(3)(b) for its 4
failure to comply with KRS 355.9-616. 5
(5) A secured party is not liable under KRS 355.9-625(3)(b) more than once with 6
respect to any one (1) secured obligation. 7
(6) Subsections (1) and (2) of this section do not apply to limit the liability of a 8
secured party to a person if, at the time the secured party obtains control of 9
collateral that is a controllable account, controllable electronic record, or 10
controllable payment intangible or at the time the security interest attaches to the 11
collateral, whichever is later: 12
(a) The person is a debtor or obligor; and 13
(b) The secured party knows that the information in subsection (2)(a)1., 2., or 14
3. of this section relating to the person is not provided by the collateral, a 15
record attached to or logically associated with the collateral, or the system 16
in which the collateral is recorded. 17
SECTION 94. ARTICLE 12 OF KRS CHAPTER 355 IS ESTABLISHED, 18
AND A NEW SECTION THEREOF IS CREATED TO READ AS FOLLOWS: 19
This article may be cited as Uniform Commercial Code – Controllable Electronic 20
Records. 21
SECTION 95. A NEW SECTION OF ARTICLE 12 OF KRS CHAPTER 355 22
IS CREATED TO READ AS FOLLOWS: 23
(1) In this article: 24
(a) 1. "Controllable electronic record" means a record stored in an 25
electronic medium that can be subjected to control under Section 98 of 26
this Act. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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2. The term does not include: 1
a. A controllable account; 2
b. A controllable payment intangible; 3
c. A deposit account; 4
d. An electronic copy of a record evidencing chattel paper; 5
e. An electronic document of title; 6
f. Electronic money; 7
g. Investment property; or 8
h. A transferable record; 9
(b) "Qualifying purchaser" means a purchaser of a controllable electronic 10
record or an interest in a controllable electronic record that obtains control 11
of the controllable electronic record for value, in good faith, and without 12
notice of a claim of a property right in the controllable electronic record; 13
(c) "Transferable record" has the meaning provided for that term in: 14
1. The Electronic Signatures in Global and National Commerce Act, 15 15
U.S.C. sec. 7021, as amended; or 16
2. The Uniform Electronic Transactions Act, Section 112 of this Act; and 17
(d) "Value" has the meaning provided in KRS 355.3-303(1), as if references in 18
that subsection to an "instrument" were references to a controllable 19
account, controllable electronic record, or controllable payment intangible. 20
(2) The following definitions in Article 9 of this chapter apply to this article: 21
(a) "Account debtor"; 22
(b) "Chattel paper"; 23
(c) "Controllable account"; 24
(d) "Controllable payment intangible"; 25
(e) "Deposit account"; 26
(f) "Electronic money"; and 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(g) "Investment property." 1
(3) Article 1 of this chapter contains general definitions and principles of 2
construction and interpretation applicable throughout this article. 3
SECTION 96. A NEW SECTION OF ARTICLE 12 OF KRS CHAPTER 355 4
IS CREATED TO READ AS FOLLOWS: 5
(1) If there is conflict between this article and Article 9 of this chapter, Article 9 6
governs. 7
(2) A transaction subject to this article is subject to any applicable rule of law that 8
establishes a different rule for consumers. 9
SECTION 97. A NEW SECTION OF ARTICLE 12 OF KRS CHAPTER 355 10
IS CREATED TO READ AS FOLLOWS: 11
(1) This section applies to the acquisition and purchase of rights in a controllable 12
account or controllable payment intangible, including the rights and benefits 13
under subsections (3), (4), (5), (7), and (8) of this section of a purchaser and 14
qualifying purchaser, in the same manner this section applies to a controllable 15
electronic record. 16
(2) To determine whether a purchaser of a controllable account or a controllable 17
payment intangible is a qualifying purchaser, the purchaser obtains control of 18
the account or payment intangible if it obtains control of the controllable 19
electronic record that evidences the account or payment intangible. 20
(3) Except as provided in this section, law other than this article determines whether 21
a person acquires a right in a controllable electronic record and the right the 22
person acquires. 23
(4) A purchaser of a controllable electronic record acquires all rights in the 24
controllable electronic record that the transferor had or had power to transfer, 25
except that a purchaser of a limited interest in a controllable electronic record 26
acquires rights only to the extent of the interest purchased. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(5) A qualifying purchaser acquires its rights in the controllable electronic record 1
free of a claim of a property right in the controllable electronic record. 2
(6) Except as provided in subsections (1) and (5) of this section for a controllable 3
account and a controllable payment intangible or law other than this article, a 4
qualifying purchaser takes a right to payment, right to performance, or other 5
interest in property evidenced by the controllable electronic record subject to a 6
claim of a property right in the right to payment, right to performance, or other 7
interest in property. 8
(7) An action may not be asserted against a qualifying purchaser based on both a 9
purchase by the qualifying purchaser of a controllable electronic record and a 10
claim of a property right in another controllable electronic record, whether the 11
action is framed in conversion, replevin, constructive trust, equitable lien, or 12
other theory. 13
(8) Filing of a financing statement under Article 9 of this chapter is not notice of a 14
claim of a property right in a controllable electronic record. 15
SECTION 98. A NEW SECTION OF ARTICLE 12 OF KRS CHAPTER 355 16
IS CREATED TO READ AS FOLLOWS: 17
(1) A person has control of a controllable electronic record if the electronic record, a 18
record attached to or logically associated with the electronic record, or a system 19
in which the electronic record is recorded: 20
(a) Gives the person: 21
1. Power to avail itself of substantially all the benefit from the electronic 22
record; and 23
2. Exclusive power, subject to subsection (2) of this section, to: 24
a. Prevent others from availing themselves of substantially all the 25
benefit from the electronic record; and 26
b. Transfer control of the electronic record to another person or 27 UNOFFICIAL COPY 24 RS SB 155/GA
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cause another person to obtain control of another controllable 1
electronic record as a result of the transfer of the electronic 2
record; and 3
(b) Enables the person to readily identify itself in any way, including by name, 4
identifying number, cryptographic key, office, or account number, as 5
having the powers specified in paragraph (a) of this subsection. 6
(2) Subject to subsection (3) of this section, a power is exclusive under subsection 7
(1)(a)2.a. and b. of this section even if: 8
(a) The controllable electronic record, a record attached to or logically 9
associated with the electronic record, or a system in which the electronic 10
record is recorded limits the use of the electronic record or has a protocol 11
programmed to cause a change, including a transfer or loss of control or a 12
modification of benefits afforded by the electronic record; or 13
(b) The power is shared with another person. 14
(3) A power of a person is not shared with another person under subsection (2)(b) of 15
this section and the person's power is not exclusive if: 16
(a) The person can exercise the power only if the power also is exercised by the 17
other person; and 18
(b) The other person: 19
1. Can exercise the power without exercise of the power by the person; or 20
2. Is the transferor to the person of an interest in the controllable 21
electronic record or a controllable account or controllable payment 22
intangible evidenced by the controllable electronic record. 23
(4) If a person has the powers specified in subsection (1)(a)2.a. and b. of this section, 24
the powers are presumed to be exclusive. 25
(5) A person has control of a controllable electronic record if another person, other 26
than the transferor to the person of an interest in the controllable electronic 27 UNOFFICIAL COPY 24 RS SB 155/GA
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record or a controllable account or controllable payment intangible evidenced by 1
the controllable electronic record: 2
(a) Has control of the electronic record and acknowledges that it has control on 3
behalf of the person; or 4
(b) Obtains control of the electronic record after having acknowledged that it 5
will obtain control of the electronic record on behalf of the person. 6
(6) A person that has control under this section is not required to acknowledge that it 7
has control on behalf of another person. 8
(7) If a person acknowledges that it has or will obtain control on behalf of another 9
person, unless the person otherwise agrees or law other than this article or 10
Article 9 of this chapter otherwise provides, the person does not owe any duty to 11
the other person and is not required to confirm acknowledgment to any other 12
person. 13
SECTION 99. A NEW SECTION OF ARTICLE 12 OF KRS CHAPTER 355 14
IS CREATED TO READ AS FOLLOWS: 15
(1) An account debtor on a controllable account or controllable payment intangible 16
may discharge its obligation by paying: 17
(a) The person having control of the controllable electronic record that 18
evidences the controllable account or controllable payment intangible; or 19
(b) Except as provided in subsection (2) of this section, a person that formerly 20
had control of the controllable electronic record. 21
(2) Subject to subsection (4) of this section, the account debtor may not discharge its 22
obligation by paying a person that formerly had control of the controllable 23
electronic record if the account debtor receives a notification that: 24
(a) Is signed by a person that formerly had control or the person to which 25
control was transferred; 26
(b) Reasonably identifies the controllable account or controllable payment 27 UNOFFICIAL COPY 24 RS SB 155/GA
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intangible; 1
(c) Notifies the account debtor that control of the controllable electronic record 2
that evidences the controllable account or controllable payment intangible 3
was transferred; 4
(d) Identifies the transferee, in any reasonable way, including by name, 5
identifying number, cryptographic key, office, or account number; and 6
(e) Provides a commercially reasonable method by which the account debtor is 7
to pay the transferee. 8
(3) After receipt of a notification that complies with subsection (2) of this section, the 9
account debtor may discharge its obligation by paying in accordance with the 10
notification and may not discharge the obligation by paying a person that 11
formerly had control. 12
(4) Subject to subsection (8) of this section, notification is ineffective under 13
subsection (2) of this section: 14
(a) Unless, before the notification is sent, the account debtor and the person 15
that, at that time, had control of the controllable electronic record that 16
evidences the controllable account or controllable payment intangible agree 17
in a signed record to a commercially reasonable method by which a person 18
may furnish reasonable proof that control has been transferred; 19
(b) To the extent an agreement between the account debtor and seller of a 20
payment intangible limits the account debtor's duty to pay a person other 21
than the seller and the limitation is effective under law other than this 22
article; or 23
(c) At the option of the account debtor, if the notification notifies the account 24
debtor to: 25
1. Divide a payment; 26
2. Make less than the full amount of an installment or other periodic 27 UNOFFICIAL COPY 24 RS SB 155/GA
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payment; or 1
3. Pay any part of a payment by more than one (1) method or to more 2
than one (1) person. 3
(5) Subject to subsection (8) of this section, if requested by the account debtor, the 4
person giving the notification under subsection (2) of this section seasonably 5
shall furnish reasonable proof, using the method in the agreement referred to in 6
subsection (4)(a) of this section, that control of the controllable electronic record 7
has been transferred. Unless the person complies with the request, the account 8
debtor may discharge its obligation by paying a person that formerly had control, 9
even if the account debtor has received a notification under subsection (2) of this 10
section. 11
(6) A person furnishes reasonable proof under subsection (5) of this section that 12
control has been transferred if the person demonstrates, using the method in the 13
agreement referred to in subsection (4)(a) of this section, that the transferee has 14
the power to: 15
(a) Avail itself of substantially all the benefit from the controllable electronic 16
record; 17
(b) Prevent others from availing themselves of substantially all the benefit from 18
the controllable electronic record; and 19
(c) Transfer the powers specified in paragraphs (a) and (b) of this subsection to 20
another person. 21
(7) Subject to subsection (8) of this section, an account debtor may not waive or vary 22
its rights under subsections (4)(a) and (5) of this section or its option under 23
subsection (4)(c) of this section. 24
(8) This section is subject to law other than this article which establishes a different 25
rule for an account debtor who is an individual and who incurred the obligation 26
primarily for personal, family, or household purposes. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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SECTION 100. A NEW SECTION OF ARTICLE 12 OF KRS CHAPTER 355 1
IS CREATED TO READ AS FOLLOWS: 2
(1) Except as provided in subsection (2) of this section, the local law of a controllable 3
electronic record's jurisdiction governs the matters covered by this article. 4
(2) For a controllable electronic record that evidences a controllable account or 5
controllable payment intangible, the local law of the controllable electronic 6
record's jurisdiction governs a matter covered by Section 99 of this Act unless an 7
effective agreement determines that the local law of another jurisdiction governs. 8
(3) The following rules determine a controllable electronic record's jurisdiction 9
under this section: 10
(a) If the controllable electronic record, or a record attached to or logically 11
associated with the controllable electronic record and readily available for 12
review, expressly provides that a particular jurisdiction is the controllable 13
electronic record's jurisdiction for purposes of this article or chapter, that 14
jurisdiction is the controllable electronic record's jurisdiction; 15
(b) If paragraph (a) of this subsection does not apply and the rules of the 16
system in which the controllable electronic record is recorded are readily 17
available for review and expressly provide that a particular jurisdiction is 18
the controllable electronic record's jurisdiction for purposes of this article 19
or this chapter, that jurisdiction is the controllable electronic record's 20
jurisdiction; 21
(c) If paragraphs (a) and (b) of this subsection do not apply and the 22
controllable electronic record, or a record attached to or logically associated 23
with the controllable electronic record and readily available for review, 24
expressly provides that the controllable electronic record is governed by the 25
law of a particular jurisdiction, that jurisdiction is the controllable 26
electronic record's jurisdiction; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(d) If paragraphs (a), (b), and (c) of this subsection do not apply and the rules 1
of the system in which the controllable electronic record is recorded are 2
readily available for review and expressly provide that the controllable 3
electronic record or the system is governed by the law of a particular 4
jurisdiction, that jurisdiction is the controllable electronic record's 5
jurisdiction; and 6
(e) If paragraphs (a) to (d) of this subsection do not apply, the controllable 7
electronic record's jurisdiction is the District of Columbia. 8
(4) (a) If subsection (3)(e) of this section applies and Article 12 is not in effect in 9
the District of Columbia without material modification, the governing law 10
for a matter covered by this article is the law of the District of Columbia as 11
though Article 12 were in effect in the District of Columbia without material 12
modification. 13
(b) In this subsection, "Article 12" means Article 12 of the Uniform 14
Commercial Code Amendments (2022). 15
(5) To the extent subsections (1) and (2) of this section provide that the local law of 16
the controllable electronic record's jurisdiction governs a matter covered by this 17
article, that law governs even if the matter or a transaction to which the matter 18
relates does not bear any relation to the controllable electronic record's 19
jurisdiction. 20
(6) The rights acquired under Section 97 of this Act by a purchaser or qualifying 21
purchaser are governed by the law applicable under this section at the time of 22
purchase. 23
SECTION 101. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 24
IS CREATED TO READ AS FOLLOWS: 25
This article may be cited as Transitional Provisions for Uniform Commercial Code 26
Amendments (2022). 27 UNOFFICIAL COPY 24 RS SB 155/GA
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SECTION 102. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 1
IS CREATED TO READ AS FOLLOWS: 2
(1) In this article: 3
(a) "Adjustment date" means July 1, 2025; and 4
(b) "Article 12 property" means a controllable account, controllable electronic 5
record, or controllable payment intangible. 6
(2) The following definitions in other articles of this chapter apply to this article: 7
(a) "Controllable account." Section 44 of this Act; 8
(b) "Controllable electronic record." Section 95 of this Act; 9
(c) "Controllable payment intangible." Section 44 of this Act; 10
(d) "Electronic money." Section 44 of this Act; and 11
(e) "Financing statement." Section 44 of this Act. 12
(3) Article 1 of this chapter contains general definitions and principles of 13
construction and interpretation applicable throughout this article. 14
SECTION 103. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 15
IS CREATED TO READ AS FOLLOWS: 16
Except as provided in Sections 104 to 109 of this Act, a transaction validly entered into 17
before the effective date of this Act and the rights, duties, and interests flowing from 18
the transaction remain valid thereafter and may be terminated, completed, 19
consummated, or enforced as required or permitted by law other than this chapter or, if 20
applicable, this chapter, as though this Act had not taken effect. 21
SECTION 104. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 22
IS CREATED TO READ AS FOLLOWS: 23
(1) Except as provided in this section and Sections 105 to 109 of this Act, Article 9 of 24
this chapter, as amended by this Act, and Article 12 of this chapter apply to a 25
transaction, lien, or other interest in property, even if the transaction, lien, or 26
interest was entered into, created, or acquired before the effective date of this Act. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(2) Except as provided in subsection (3) of this section and Sections 105 to 109 of this 1
Act: 2
(a) A transaction, lien, or interest in property that was validly entered into, 3
created, or transferred before the effective date of this Act and was not 4
governed by this chapter, but would be subject to Article 9 of this chapter, as 5
amended by this Act, or Article 12 of this chapter if it had been entered into, 6
created, or transferred on or after the effective date of this Act, including 7
the rights, duties, and interests flowing from the transaction, lien, or 8
interest, remains valid on and after the effective date of this Act; and 9
(b) The transaction, lien, or interest may be terminated, completed, 10
consummated, and enforced as required or permitted by this Act or by the 11
law that would apply if this Act had not taken effect. 12
(3) This Act does not affect an action, case, or proceeding commenced before the 13
effective date of this Act. 14
SECTION 105. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 15
IS CREATED TO READ AS FOLLOWS: 16
(1) A security interest that is enforceable and perfected immediately before the 17
effective date of this Act is a perfected security interest under this Act if, on the 18
effective date of this Act, the requirements for enforceability and perfection under 19
this Act are satisfied without further action. 20
(2) If a security interest is enforceable and perfected immediately before the effective 21
date of this Act, but the requirements for enforceability or perfection under this 22
Act are not satisfied on the effective date of this Act, the security interest: 23
(a) Is a perfected security interest until the earlier of the time perfection would 24
have ceased under the law in effect immediately before the effective date of 25
this Act or the adjustment date; 26
(b) Remains enforceable thereafter only if the security interest satisfies the 27 UNOFFICIAL COPY 24 RS SB 155/GA
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requirements for enforceability under Section 50 of this Act, as amended by 1
this Act, before the adjustment date; and 2
(c) Remains perfected thereafter only if the requirements for perfection under 3
this Act are satisfied before the time specified in paragraph (a) of this 4
subsection. 5
SECTION 106. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 6
IS CREATED TO READ AS FOLLOWS: 7
A security interest that is enforceable immediately before the effective date of this Act 8
but is unperfected at that time: 9
(1) Remains an enforceable security interest until the adjustment date; 10
(2) Remains enforceable thereafter if the security interest becomes enforceable under 11
Section 50 of this Act, as amended by this Act, on the effective date of this Act or 12
before the adjustment date; and 13
(3) Becomes perfected: 14
(a) Without further action, on the effective date of this Act if the requirements 15
for perfection under this Act are satisfied before or at that time; or 16
(b) When the requirements for perfection are satisfied if the requirements are 17
satisfied after that time. 18
SECTION 107. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 19
IS CREATED TO READ AS FOLLOWS: 20
(1) (a) If action, other than the filing of a financing statement, is taken before the 21
effective date of this Act and the action would have resulted in perfection of 22
the security interest had the security interest become enforceable before the 23
effective date of this Act, the action is effective to perfect a security interest 24
that attaches under this Act before the adjustment date. 25
(b) An attached security interest becomes unperfected on the adjustment date 26
unless the security interest becomes a perfected security interest under this 27 UNOFFICIAL COPY 24 RS SB 155/GA
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Act before the adjustment date. 1
(2) The filing of a financing statement before the effective date of this Act is effective 2
to perfect a security interest on the effective date of this Act to the extent the filing 3
would satisfy the requirements for perfection under this Act. 4
(3) The taking of an action before the effective date of this Act is sufficient for the 5
enforceability of a security interest on the effective date of this Act if the action 6
would satisfy the requirements for enforceability under this Act. 7
SECTION 108. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 8
IS CREATED TO READ AS FOLLOWS: 9
(1) Subject to subsections (2) and (3) of this section, this Act determines the priority 10
of conflicting claims to collateral. 11
(2) Subject to subsection (3) of this section, if the priority of claims to collateral were 12
established before the effective date of this Act, Article 9 of this chapter, as in 13
effect before the effective date of this Act, determines priority. 14
(3) On the adjustment date, to the extent the priorities determined by Article 9 of this 15
chapter, as amended by this Act, modify the priorities established before the 16
effective date of this Act, the priorities of claims to Article 12 property and 17
electronic money established before the effective date of this Act cease to apply. 18
SECTION 109. A NEW SECTION OF ARTICLE 11 OF KRS CHAPTER 355 19
IS CREATED TO READ AS FOLLOWS: 20
(1) Subject to subsections (2) and (3) of this section, Article 12 of this chapter 21
determines the priority of conflicting claims to Article 12 property when the 22
priority rules of Article 9 of this chapter, as amended by this Act, do not apply. 23
(2) Subject to subsection (3) of this section, when the priority rules of Article 9 of this 24
chapter, as amended by this Act, do not apply and the priorities of claims to 25
Article 12 property were established before the effective date of this Act, law other 26
than Article 12 of this chapter determines priority. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(3) When the priority rules of Article 9 of this chapter, as amended by this Act, do not 1
apply, to the extent the priorities determined by this Act modify the priorities 2
established before the effective date of this Act, the priorities of claims to Article 3
12 property established before the effective date of this Act cease to apply on the 4
adjustment date. 5
Section 110. KRS 304.7-360 is amended to read as follows: 6
(1) As used in this section: 7
(a) "Clearing corporation" shall be defined as provided in KRS 355.8-102[(3)] 8
except that, with respect to securities issued by institutions organized or 9
existing under the laws of any foreign country or securities used to meet the 10
deposit requirements pursuant to the laws of a foreign country as a condition 11
of doing business therein, "clearing corporation" may include a corporation 12
organized or existing under the laws of any foreign country which is legally 13
qualified under such laws to effect transactions in securities by computerized 14
book entry; 15
(b) "Custodian bank" means a national bank, state bank, or trust company which 16
is a member of the Federal Reserve System which acts as custodian of all or 17
any part of an insurance company's securities; 18
(c) "Direct participant" means a bank, trust company, or other institution which 19
maintains an account in its name in a clearing corporation and through which 20
an insurance company participates in a clearing corporation; 21
(d) "Federal reserve book-entry system" means the computerized systems 22
sponsored by the United States Department of the Treasury and certain 23
agencies and instrumentalities of the United States for holding and 24
transferring securities of the United States government and such agencies and 25
instrumentalities, respectively, in federal reserve banks through banks which 26
are members of the Federal Reserve System or which otherwise have access 27 UNOFFICIAL COPY 24 RS SB 155/GA
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to such computerized systems; 1
(e) "Member bank" means a national bank, state bank, or trust company which is 2
a member of the Federal Reserve System through which an insurance 3
company participates in the federal reserve book-entry system; 4
(f) "Security" means a certificated security or an uncertificated security; 5
(g) "Certificated security" means a share, participation, or other interest in 6
property or an enterprise of the issuer or an obligation of the issuer which is 7
represented by an instrument issued in bearer or registered form, of a type 8
commonly dealt in on securities exchanges or markets or commonly 9
recognized in any area in which it is issued or dealt in as a medium for 10
investment, and either one (1) of a class or series or by its terms divisible into 11
a class or series of shares, participations, interests, or obligations; and 12
(h) "Uncertificated security" means a share, participation, or other interest in 13
property or an enterprise of the issuer or an obligation of the issuer which is 14
not represented by an instrument and the transfer of which is registered upon 15
books maintained for that purpose by or on behalf of the issuer, of a type 16
commonly dealt in on securities exchanges or markets; and either one (1) of a 17
class or series or by its terms divisible into a class or series of shares, 18
participations, interests, or obligations. 19
(2) Notwithstanding any other provision of law, an insurance company or its custodian 20
bank may deposit or arrange for the deposit of securities held in or purchased for 21
the general account and the separate accounts of such insurance company in a 22
clearing corporation or the federal reserve book-entry system. When securities are 23
deposited with a clearing corporation, certificates representing securities of the 24
same class of the same issuer may be merged and held in bulk in the name of the 25
nominee of such clearing corporation with any other securities deposited with such 26
clearing corporation by any person, regardless of the ownership of such securities, 27 UNOFFICIAL COPY 24 RS SB 155/GA
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and certificates representing securities of small denominations may be merged into 1
one (1) or more certificates of larger denominations. The records of any member 2
bank through which an insurance company holds securities in the federal reserve 3
book-entry system, and the records of any direct participant through which an 4
insurance company holds securities in a clearing corporation, shall at all times show 5
that such securities are held for such insurance company or its custodian bank and 6
for which accounts thereof. Ownership of, and other interests in, such securities 7
may be transferred by bookkeeping entry on the books of such clearing corporation 8
or in the federal reserve book-entry system without, in either case, physical delivery 9
of certificates representing such securities. 10
(3) Notwithstanding any other provision of law, an insurance company may deposit 11
securities held in or purchased for its general account and its separate accounts in a 12
custodial account with a custodian bank approved by, and under a custodial 13
agreement approved by, the commissioner. When securities are deposited in such 14
custodial account, certificates representing securities of the same class of the same 15
issuer may be merged and held in bulk in the name of the custodian bank or its 16
nominee with any other securities held in the custody of the custodian bank or its 17
nominee by any person, regardless of the ownership of such securities, and 18
certificates representing securities of small denominations may be merged into one 19
(1) or more certificates of larger denominations. The records of the custodian bank 20
which holds securities for an insurance company in a custodial account shall at all 21
times show that such securities are held for such insurance company and for which 22
accounts thereof. Ownership of, and other interests in, such securities may be 23
transferred by bookkeeping entry on the books of such custodian bank without 24
physical delivery of certificates representing such securities. 25
(4) The same bank or trust company may act as direct participant, member bank, and 26
custodian bank for an insurance company. 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(5) The commissioner of insurance shall promulgate administrative[rules and] 1
regulations governing the deposit by insurance companies of securities with 2
clearing corporations and in the federal reserve book-entry system and with 3
custodian banks. 4
Section 111. KRS 367.976 is amended to read as follows: 5
As used in KRS 367.976 to 367.985, unless the context otherwise requires: 6
(1) "Advertisement" means a commercial message in any medium that aids, promotes, 7
or assists directly or indirectly a rental-purchase agreement, excluding in-store 8
merchandising aids;[.] 9
(2) "Cash price" means the price at which the lessor would have sold the property to 10
the consumer for cash on the date of the rental-purchase agreement;[.] 11
(3) "Consumer" means a natural person who rents personal property under a rental-12
purchase agreement;[.] 13
(4) "Consummation" means the time a consumer becomes contractually obligated on a 14
rental-purchase agreement;[.] 15
(5) "Division" means the Division of Consumer Protection in the Office of the Attorney 16
General;[.] 17
(6) "Lessor" means a person who, in the ordinary course of business, regularly leases, 18
offers to lease, or arranges for the leasing of property under a rental-purchase 19
agreement;[.] 20
(7) (a) "Rental-purchase agreement" means an agreement for the use of personal 21
property by a natural person primarily for personal, family, or household 22
purposes, for an initial period of four (4) months or less, whether or not there 23
is any obligation beyond the initial period, that is automatically renewable 24
with each payment and that permits the consumer to become the owner of the 25
property. 26
(b) The term rental-purchase agreement shall not be construed to be, nor be 27 UNOFFICIAL COPY 24 RS SB 155/GA
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governed by, any of the following: 1
1.[(a)] A lease or agreement which constitutes a credit sale as defined in 2
12 C.F.R. part 226.2(a)(16) and Section 1602(h)[(g)] of the Truth in 3
Lending Act, 15 U.S.C. sec.[secs.] 1601 et seq.; 4
2.[(b)] A lease which constitutes a consumer lease as defined in 12 C.F.R. 5
part 213.2(e)(1)[(a)(6)]; 6
3.[(c)] Any lease for agricultural, business, or commercial purposes; 7
4.[(d)] Any lease made to an organization; 8
5.[(e)] A lease or agreement which constitutes a retail installment 9
transaction or retail installment contract as defined in KRS 371.210; 10
6.[(f)] A security interest as defined in KRS 355.1-201[(37)]; or 11
7.[(g)] A home solicitation sale as that term is defined in KRS 367.410. 12
Section 112. KRS 369.116 is amended to read as follows: 13
(1) In this section, "transferable record" means an electronic record that: 14
(a) Would be a note under Article 3 of KRS Chapter 355 or a document under 15
Article 7 of KRS Chapter 355 if the electronic record were in writing; and 16
(b) The issuer of the electronic record expressly has agreed is a transferable 17
record. 18
(2) A person has control of a transferable record if a system employed for evidencing 19
the transfer of interests in the transferable record reliably establishes that person as 20
the person to which the transferable record was issued or transferred. 21
(3) A system satisfies subsection (2) of this section, and a person is deemed to have 22
control of a transferable record, if the transferable record is created, stored, and 23
assigned in such a manner that: 24
(a) A single authoritative copy of the transferable record exists which is unique, 25
identifiable, and, except as otherwise provided in paragraphs (d), (e), and (f) 26
of this subsection, unalterable; 27 UNOFFICIAL COPY 24 RS SB 155/GA
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(b) The authoritative copy identifies the person asserting control as: 1
1. The person to which the transferable record was issued; or 2
2. If the authoritative copy indicates that the transferable record has been 3
transferred, the person to which the transferable record was most 4
recently transferred; 5
(c) The authoritative copy is communicated to and maintained by the person 6
asserting control or its designated custodian; 7
(d) Copies of revisions that add or change an identified assignee of the 8
authoritative copy can be made only with the consent of the person asserting 9
control; 10
(e) Each copy of the authoritative copy and any copy of a copy is readily 11
identifiable as a copy that is not the authoritative copy; and 12
(f) Any revision of the authoritative copy is readily identifiable as authorized or 13
unauthorized. 14
(4) (a) Except as otherwise agreed, a person having control of a transferable record is 15
the holder, as defined in KRS 355.1-201[(20)], of the transferable record and 16
has the same rights and defenses as a holder of an equivalent record or writing 17
under KRS Chapter 355, including, if the applicable statutory requirements 18
under KRS 355.3-302(1), 355.7-501, or 355.9-330 are satisfied, the rights and 19
defenses of a holder in due course, a holder to which a negotiable document 20
of title has been duly negotiated, or a purchaser, respectively. 21
(b) Delivery, possession, and indorsement are not required to obtain or exercise 22
any of the rights under this subsection. 23
(5) Except as otherwise agreed, an obligor under a transferable record has the same 24
rights and defenses as an equivalent obligor under equivalent records or writing 25
under KRS Chapter 355. 26
(6) If requested by a person against which enforcement is sought, the person seeking to 27 UNOFFICIAL COPY 24 RS SB 155/GA
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enforce the transferable record shall provide reasonable proof that the person is in 1
control of the transferable record. Proof may include access to the authoritative 2
copy of the transferable record and related business records sufficient to review the 3
terms of the transferable record and to establish the identity of the person having 4
control of the transferable record. 5
Section 113. Nothing in this Act shall be construed to support, endorse, create, 6
or implement a national digital currency. 7
Section 114. This Act takes effect on January 1, 2025. 8