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SENATE DOCKET, NO. 744 FILED ON: 1/14/2025
SENATE . . . . . . . . . . . . . . No. 684
The Commonwealth of Massachusetts
_________________
PRESENTED BY:
Cynthia Stone Creem
_________________
To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:
The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
An Act relative to the Massachusetts Uniform Commercial Code.
_______________
PETITION OF:
NAME:DISTRICT/ADDRESS :Cynthia Stone CreemNorfolk and Middlesex 1 of 88
SENATE DOCKET, NO. 744 FILED ON: 1/14/2025
SENATE . . . . . . . . . . . . . . No. 684
By Ms. Creem, a petition (accompanied by bill, Senate, No. 684) of Cynthia Stone Creem for
legislation relative to the Massachusetts Uniform Commercial Code. Financial Services.
The Commonwealth of Massachusetts
_______________
In the One Hundred and Ninety-Fourth General Court
(2025-2026)
_______________
An Act relative to the Massachusetts Uniform Commercial Code.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
of the same, as follows:
1 SECTION 1. Section 1-201(b)(10) of chapter 106 of the General Laws, as appearing in
2the 2022 Official Edition, is hereby amended by (i) inserting, after the word “that”, the following
3words:-- “, based on the totality of the circumstances,”, (ii) striking out the words “Conspicuous
4terms include the following:” in that Section, and (iii) striking out subsections (A) and (B).
5 SECTION 2. Said chapter 106 is hereby amended by striking out Section 1-201(b)(15),
6and inserting in place thereof the following Section:--
7 (15) “Delivery”, with respect to an electronic document of title, means voluntary transfer
8of control and, with respect to an instrument, a tangible document of title, or an authoritative
9tangible copy of a record evidencing chattel paper, means voluntary transfer of possession.
10 SECTION 3. Section 1-201(b)(16) of said chapter 106 is hereby is hereby amended by
11inserting the following new Section at the end of Section 1-201(b):-- 2 of 88
12 (16A) “Electronic” means relating to technology having electrical, digital, magnetic,
13wireless, optical, electromagnetic, or similar capabilities.
14 SECTION 4. Section 1-201(b)(21) of said chapter 106 is hereby amended by inserting in
15subsection C, after the word “control”, the following words:-- “, other than pursuant to Section 7-
16106(g)”.
17 SECTION 5. Said chapter 106 is hereby amended by striking out Section 1-201(b)(24),
18and inserting in place thereof the following Section:--
19 (24) “Money” means a medium of exchange that is currently authorized or adopted by a
20domestic or foreign government. The term includes a monetary unit of account established by an
21intergovernmental organization, or pursuant to an agreement between two or more countries. The
22term does not include an electronic record that is a medium of exchange recorded and
23transferable in a system that existed and operated for the medium of exchange before the
24medium of exchange was authorized or adopted by the government.
25 SECTION 6. Said chapter 106 is hereby amended by striking out Section 1-201(b)(27),
26and inserting in place thereof the following Section:--
27 (27) “Person” means an individual, corporation, business trust, estate, trust, partnership,
28limited liability company, association, joint venture, government, governmental subdivision,
29agency, or instrumentality, or any other legal or commercial entity. The term includes a protected
30series, however denominated, of an entity if the protected series is established under law other
31than this chapter that limits, or limits if conditions specified under the law are satisfied, the
32ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim
33from assets of the protected series. 3 of 88
34 SECTION 7. Said chapter 106 is hereby amended by striking out Section 1-201(b)(36),
35and inserting in place thereof the following Section:--
36 (36) “Send”, in connection with a record or notification, means:
37 (A) to deposit in the mail, deliver for transmission, or transmit by any other usual means
38of communication, with postage or cost of transmission provided for, addressed to any address
39reasonable under the circumstances; or
40 (B) to cause the record or notification to be received within the time it would have been
41received if properly sent under subparagraph (A).
42 SECTION 8. Said chapter 106 is hereby amended by striking out Section 1-201(b)(37),
43and inserting in place thereof the following Section:--
44 (37) “Sign” means, with present intent to authenticate or adopt a record:
45 (A) execute or adopt a tangible symbol; or
46 (B) attach to or logically associate with the record an electronic symbol, sound, or
47process.
48 “Signed”, “signing”, and “signature” have corresponding meanings.
49 SECTION 9. Section 1-204 of said chapter 106 is hereby amended by (i) striking out the
50words “and 5,” and (ii) inserting in place thereof the following words:-- “5 and 12,”.
51 SECTION 10. Section 1-301(c) of said chapter 106 is hereby further amended by (i)
52striking out the period at the end of subsection (8) and by inserting in place thereof the
53following:-- “;”, and (ii) inserting the following new section at the end of Section 1-301(c):-- 4 of 88
54 (9) Section 12-107.
55 SECTION 11. Section 1-306 of said chapter 106 is hereby amended by striking out the
56words “an authenticated” after the words “party in” and by inserting in place thereof the
57following words:-- “a signed”.
58 SECTION 12. Said chapter 106 is hereby amended by striking out Section 2-102 and
59inserting in place thereof the following Section:--
60 SECTION 2-102. Scope; Certain Security and Other Transactions Excluded from this
61Article.
62 (1) Unless the context otherwise requires, and except as provided in subsection (3), this
63Article applies to transactions in goods and, in the case of a hybrid transaction, it applies to the
64extent provided in subsection (2).
65 (2) In a hybrid transaction:
66 (a) If the sale-of-goods aspects do not predominate, only the provisions of this Article
67that relate primarily to the sale-of-goods aspects of the transaction apply, and the provisions that
68relate primarily to the transaction as a whole do not apply.
69 (b) If the sale-of-goods aspects predominate, this Article applies to the transaction but
70does not preclude application in appropriate circumstances of other law to aspects of the
71transaction that do not relate to the sale of goods.
72 (3) This Article does not: 5 of 88
73 (a) apply to a transaction that, even though in the form of an unconditional contract to sell
74or present sale, operates only to create a security interest; or
75 (b) impair or repeal a statute regulating sales to consumers, farmers, or other specified
76classes of buyers.
77 SECTION 13. Section 2-106 of said chapter 106 is hereby amended by inserting (i) in the
78title of the section, after the word “Cancellation” and before the period, the words “; Hybrid
79Transaction” and (ii) the following new clause:--
80 (5) “Hybrid transaction” means a single transaction involving a sale of goods and:
81 (a) the provision of services;
82 (b) a lease of other goods; or
83 (c) a sale, lease, or license of property other than goods.
84 SECTION 14. Section 2-201 of said chapter 106 is hereby amended by striking out
85subsection (1), and by inserting in place thereof the following new subsection:--
86 (1) Except as otherwise provided in this section a contract for the sale of goods for the
87price of $500 or more is not enforceable by way of action or defense unless there is a record
88sufficient to indicate that a contract for sale has been made between the parties and signed by the
89party against whom enforcement is sought or by the party’s authorized agent or broker. A record
90is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not
91enforceable under this subsection beyond the quantity of goods shown in the record. 6 of 88
92 SECTION 15. Section 2-201 of said chapter 106 is further amended by striking out
93subsection (2), and by and inserting in place thereof the following new subsection:--
94 (2) Between merchants if within a reasonable time a record in confirmation of the
95contract and sufficient against the sender is received and the party receiving it has reason to
96know its contents, it satisfies the requirements of subsection (1) against the party unless notice in
97a record of objection to its contents is given within 10 days after it is received.
98 SECTION 16. Section 2-202 of said chapter 106 is hereby amended by (i) striking out in
99the title of the section the word “written” after the word “final”, (ii) striking out the word
100“writing” wherever it appears in that Section and by inserting in each place thereof the following
101word:-- “record”, and (iii) inserting a colon after the word “supplemented”.
102 SECTION 17. Section 2-203 of said chapter 106 is hereby amended by striking out the
103word “writing” where it appears in that Section and by inserting in each place thereof the
104following word:-- “record”.
105 SECTION 18. Section 2-205 of said chapter 106 is hereby amended by striking out the
106word “writing” wherever it appears in that Section and by inserting in each place thereof the
107following word:-- “record”.
108 SECTION 19. Section 2-209 of said chapter 106 is hereby amended by inserting, after the
109word “writing”, the following:-- “or other signed record”.
110 SECTION 20. Section 2-607(3) of said chapter 106 is hereby amended by (i) striking out
111the word “he” after the word “after” in subsection (a) and inserting in place thereof the word “it”, 7 of 88
112and (ii) striking out the words “such a” after the word “of” in subsection (b) and inserting in
113place thereof the following word:-- “the”.
114 SECTION 21. Section 2-607(5) of said chapter 106 is hereby amended by striking out the
115word “he” after the word “defend” in that Section, and by inserting in place thereof the
116following:-- “the seller”.
117 SECTION 22. Said chapter 106 is hereby amended by striking out Section 2A-102, and
118by inserting in place thereof the following new Section:--
119 Section 2A-102. Scope.
120 (1) This Article applies to any transaction, regardless of form, that creates a lease and, in
121the case of a hybrid lease, it applies to the extent provided in subsection (2).
122 (2) In a hybrid lease:
123 (a) if the lease-of-goods aspects do not predominate:
124 (i) only the provisions of this Article which relate primarily to the lease-of-goods aspects
125of the transaction apply, and the provisions that relate primarily to the transaction as a whole do
126not apply;
127 (ii) Section 2A 209 applies if the lease is a finance lease; and
128 (iii) Section 2A-407 applies to the promises of the lessee in a finance lease to the extent
129the promises are consideration for the right to possession and use of the leased goods; and 8 of 88
130 (b) if the lease-of-goods aspects predominate, this Article applies to the transaction, but
131does not preclude application in appropriate circumstances of other law to aspects of the lease
132which do not relate to the lease of goods.
133 SECTION 23. Section 2A-103 of said chapter 106 is hereby amended by inserting at the
134end of subsection (1) the following new clause:--
135 (h.1) “Hybrid lease” means a single transaction involving a lease of goods and:
136 (i) the provision of services;
137 (ii) a sale of other goods; or
138 (iii) a sale, lease, or license of property other than goods.
139 SECTION 24. Section 2A-107 of said chapter 106 is hereby amended by (i) striking out
140the word “written” after the word “a”, (ii) inserting the words “in a” after the word
141“renunciation”, and (iii) striking out the word “and” after the word “signed” and inserting in
142place thereof the following:-- “record”.
143 SECTION 25. Section 2A-201 of said chapter 106 is hereby amended by striking out the
144word “writing” wherever it appears in that Section and by inserting in each place thereof the
145following:-- “record”.
146 SECTION 26. Section 2A-202 of said chapter 106 is hereby amended by (i) striking out
147the word “written” after the word “final” in the title of that Section, and (ii) striking out the word
148“writing” wherever it appears in that Section and inserting in each place thereof the following:--
149“record”. 9 of 88
150 SECTION 27. Section 2A-203 of said chapter 106 is hereby amended by striking out the
151word “writing” wherever it appears in that Section and by inserting in each place thereof the
152following:-- “record”.
153 SECTION 28. Section 2A-205 of said chapter 106 is hereby amended by striking out the
154word “writing” where it appears in that Section and by inserting in each place thereof the
155following:-- “record”.
156 SECTION 29. Section 2A-208 of said chapter 106 is hereby amended by striking out the
157word “writing” where it appears in that Section and by inserting in each place thereof the
158following:-- “record”.
159 SECTION 30. Section 3-103(a) of chapter 106 of the General Laws is hereby amended
160by (i) striking the definition out of the definition of “good faith”, (ii) inserting the following
161definitions in alphabetical order and (iii) renumbering all of the definitions in numerical order:--
162 (2) “Consumer account” means an account established by an individual primarily for
163personal, family, or household purposes.
164 (3) “Consumer transaction” means a transaction in which an individual incurs an
165obligation primarily for personal, family, or household purposes.
166 (10) “Principal obligor,” with respect to an instrument, means the accommodated party or
167any other party to the instrument against whom a secondary obligor has recourse under this
168Article.
169 (13) “Record” means information that is inscribed on a tangible medium or that is stored
170in an electronic or other medium and is retrievable in perceivable form. 10 of 88
171 (15) “Remotely-created consumer item” means an item drawn on a consumer account,
172which is not created by the payor bank and does not bear a handwritten signature purporting to
173be the signature of the drawer.
174 (16) “Secondary obligor,” with respect to an instrument, means (i) an indorser or an
175accommodation party, (ii) a drawer having the obligation described in Section 3-414(d), or (iii)
176any other party to the instrument that has recourse against another party to the instrument
177pursuant to Section 3-116(b).
178 SECTION 31. Section 3-103(b) of said chapter 106 is hereby amended by inserting a
179reference to a definition for “Account” which appears in “Section 4-104”.
180 SECTION 32. Section 3-104(a)(3) of said chapter 106 is hereby amended by striking the
181word “or” following “collateral,” in subsection (ii), by inserting a comma after the word
182“obligor” in subsection (iii) and by inserting the following new clauses at the end of Section 3-
183104(a):--
184 (iv) a term that specifies the law that governs the promise or order, or
185 (v) an undertaking to resolve in a specified forum a dispute concerning the promise or
186order.
187 SECTION 33: Section 3-105(a) of said chapter is hereby amended by inserting before the
188words “the first”, the following:--“(1)”, and by inserting after the word “person”, the following:--
189“; or”.
190 SECTION 34: Section 3-105(a) of said chapter is further amended by inserting the
191following new section after Section 3-105(a)(1):-- 11 of 88
192 (2) if agreed by the payee, the first transmission by the drawer to the payee of an image
193of an item and information derived from the item that enables the depositary bank to collect the
194item by transferring or presenting under federal law an electronic check.
195 SECTION 35. Section 3-106 of said chapter 106 is hereby amended by striking out the
196word “writing” wherever it appears in that Section and by inserting in each place thereof the
197following word:-- “record”.
198 SECTION 36. Section 3-116(b) of said chapter 106 is hereby amended by striking out the
199words “3-419(e)” in that Section and by inserting in place thereof the following words:-- “3-
200419(f)”.
201 SECTION 37. Section 3-116(c) of said chapter 106 is hereby repealed.
202 SECTION 38. Section 3-119 of said chapter 106 is hereby amended by striking out the
203word “written” in that Section and by inserting, after the word “litigation”, the following words:-
204- “in a record”.
205 SECTION 39. Section 3-305(a) of said chapter 106 is hereby amended by striking out the
206words “stated in subsection (b)” in that Section and by inserting in place thereof the following
207words:-- “otherwise provided in this section”.
208 SECTION 40. Section 3-305 of said chapter 106 is hereby amended by inserting the
209following new subsections at the end of Section 3-305:--
210 (e) In a consumer transaction, if law other than this Article requires that an instrument
211include a statement to the effect that the rights of a holder or transferee are subject to a claim or 12 of 88
212defense that the issuer could assert against the original payee and the instrument does not include
213such a statement:
214 (1) the instrument has the same effect as if the instrument included such a statement;
215 (2) the issuer may assert against the holder or transferee all claims and defenses that
216would have been available if the instrument included such a statement; and
217 (3) the extent to which the claims may be asserted against the holder or transferee is
218determined as if the instrument included such a statement.
219 (f) This section is subject to law other than this Article which establishes a different rule
220for consumer transactions.
221 SECTION 41. Said chapter 106 is hereby amended by striking out Section 3-309(a), and
222inserting in place thereof the following Section:--
223 (a) A person not in possession of an instrument is entitled to enforce the instrument if:
224 (1) the person seeking to enforce the instrument:
225 (A) was entitled to enforce the instrument when loss of possession occurred; or
226 (B) has directly or indirectly acquired ownership of the instrument from a person that was
227entitled to enforce the instrument when loss of possession occurred;
228 (2) the loss of possession was not the result of a transfer by the person or a lawful seizure;
229and 13 of 88
230 (3) the person cannot reasonably obtain possession of the instrument because the
231instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful
232possession of an unknown person or a person that cannot be found or is not amenable to service
233of process.
234 SECTION 42. Section 3-312(a)(3) of said chapter 106 is hereby amended by striking out
235the word “written” in that Section and by inserting, after the word “made”, the following words:-
236- “in a record”.
237 SECTION 43: Section 3-401 of said chapter is hereby amended by striking out the word
238“(a)” before the words “A person”, and by striking out section 3-401(b).
239 SECTION 44. Section 3-416(a) of said chapter 106 is hereby amended by (i) striking out
240the word “and” after the word “warrantor;” in clause (4), (ii) striking out the period at the end of
241clause (5), (iii) inserting in place thereof the following:-- “; and”, and (iv) by inserting the
242following new clause:--
243 (6) with respect to a remotely-created consumer item, that the person on whose account
244the item is drawn authorized the issuance of the item in the amount for which the item is drawn.
245 SECTION 45. Section 3-416 of said chapter 106 is hereby further amended by inserting
246the following new subsection at the end of Section 3-416:--
247 (e) A claim for breach of the warranty in subsection (a)(6) is available against a previous
248transferor of the item only to the extent that under applicable law (including the applicable
249choice-of-law principle) all previous transferors of the item made the warranty in subsection
250(a)(6). 14 of 88
251 SECTION 46. Section 3-417(a) of said chapter 106 is hereby amended by (i) striking out
252the word “and” after the word “altered;” in clause (2), (ii) striking out the period at the end of
253clause (3) and inserting in place thereof the following:-- “; and”, and (iii) by inserting the
254following new clause:--
255 (4) with respect to any remotely-created consumer item, that the person on whose account
256the item is drawn authorized the issuance of the item in the amount for which the item is drawn.
257 SECTION 47. Section 3-417 of said chapter 106 is hereby further amended by inserting
258the following new subsection at the end of Section 3-417:--
259 (g) A claim for breach of the warranty in subsection (a)(4) is available against a previous
260transferor of the item only to the extent that under applicable law (including the applicable
261choice-of-law principle) all previous transferors of the item made the warranty in subsection
262(a)(4).
263 SECTION 48. Section 3-419 of said chapter 106 is hereby amended by striking out
264subsection (e) and by inserting the following new subsections at the end of Section 3-419:--
265 (e) If the signature of a party to an instrument is accompanied by words indicating that
266the party guarantees payment or the signer signs the instrument as an accommodation party in
267some other manner that does not unambiguously indicate an intention to guarantee collection
268rather than payment, the signer is obliged to pay the amount due on the instrument to a person
269entitled to enforce the instrument in the same circumstances as the accommodated party would
270be obliged, without prior resort to the accommodated party by the person entitled to enforce the
271instrument. 15 of 88
272 (f) An accommodation party who pays the instrument is entitled to reimbursement from
273the accommodated party and is entitled to enforce the instrument against the accommodated
274party. In proper circumstances, an accommodation party may obtain relief that requires the
275accommodated party to perform its obligations on the instrument. An accommodated party that
276pays the instrument has no right of recourse against, and is not entitled to contribution from, an
277accommodation party.
278 SECTION 49. Said chapter 106 is hereby amended by striking out Section 3-602, and
279inserting in place thereof the following Section:--
280 SECTION 3-602. PAYMENT.
281 (a) Subject to subsection (e), an instrument is paid to the extent payment is made by or on
282behalf of a party obliged to pay the instrument, and to a person entitled to enforce the instrument.
283 (b) Subject to subsection (e), a note is paid to the extent payment is made by or on behalf
284of a party obliged to pay the note to a person that formerly was entitled to enforce the note only
285if at the time of the payment the party obliged to pay has not received adequate notification that
286the note has been transferred and that payment is to be made to the transferee. A notification is
287adequate only if it is signed by the transferor or the transferee, reasonably identifies the
288transferred note, and provides an address at which payments subsequently are to be made. Upon
289request, a transferee shall seasonably furnish reasonable proof that the note has been transferred.
290Unless the transferee complies with the request, a payment to the person that formerly was
291entitled to enforce the note is effective for purposes of subsection (c) even if the party obliged to
292pay the note has received a notification under this subsection. 16 of 88
293 (c) Subject to subsection (e), to the extent of a payment under subsections (a) and (b), the
294obligation of the party obliged to pay the instrument is discharged even if payment is made with
295knowledge of a claim to the instrument under Section 3-306 by another person.
296 (d) Subject to subsection (e), a transferee, or any party that has acquired rights in the
297instrument directly or indirectly from a transferee, including a party that has rights as a holder in
298due course, is deemed to have notice of any payment that is made under subsection (b) after the
299note is transferred to the transferee but before the party obliged to pay the note receives adequate
300notification of the transfer.
301 (e) The obligation of a party to pay an instrument is not discharged under subsections (a)
302through (d) if:
303 (1) a claim to the instrument under Section 3-306 is enforceable against the party
304receiving payment and (i) payment is made with knowledge by the payor that payment is
305prohibited by injunction or similar process of a court of competent jurisdiction, or (ii) in the case
306of an instrument other than a cashier's check, teller's check, or certified check, the party making
307payment accepted, from the person having a claim to the instrument, indemnity against loss
308resulting from refusal to pay the person entitled to enforce the instrument; or
309 (2) the person making payment knows that the instrument is a stolen instrument and pays
310a person it knows is in wrongful possession of the instrument.
311 SECTION 50. Section 3-604(a) of said chapter 106 is hereby amended by striking out the
312word “writing” in that Section and by inserting in place thereof the following word:-- “record”. 17 of 88
313 SECTION 51: Section 3-604(a)(ii) of said chapter 106 is hereby amended by inserting,
314after the word “record.” the following words:--
315 The obligation of a party to pay a check is not discharged solely by destruction of the
316check in connection with a process in which information is extracted from the check and an
317image of the check is made and, subsequently, the information and image are transmitted for
318payment.
319 SECTION 52. Section 3-604 of said chapter 106 is further amended by striking
320subsection (c).
321 SECTION 53. Said chapter 106 is hereby amended by striking out Section 3-605, and
322inserting in place thereof the following Section:--
323 SECTION 3-605. DISCHARGE OF SECONDARY OBLIGORS.
324 (a) If a person entitled to enforce an instrument releases the obligation of a principal
325obligor in whole or in part and another party to the instrument is a secondary obligor with respect
326to the obligation of that principal obligor, the following rules apply:
327 (1) Any obligations of the principal obligor to the secondary obligor with respect to any
328previous payment by the secondary obligor are not affected. Unless the terms of the release
329preserve the secondary obligor's recourse, the principal obligor is discharged, to the extent of the
330release, from any other duties to the secondary obligor under this Article.
331 (2) Unless the terms of the release provide that the person entitled to enforce the
332instrument retains the right to enforce the instrument against the secondary obligor, the
333secondary obligor is discharged to the same extent as the principal obligor from any unperformed 18 of 88
334portion of its obligation on the instrument. If the instrument is a check and the obligation of the
335secondary obligor is based on an indorsement of the check, the secondary obligor is discharged
336without regard to the language or circumstances of the discharge or other release.
337 (3) If the secondary obligor is not discharged under paragraph (2), the secondary obligor
338is discharged to the extent of the value of the consideration for the release and to the extent that
339the release would otherwise cause loss to the secondary obligor.
340 (b) If a person entitled to enforce an instrument grants a principal obligor an extension of
341the time at which one or more payments are due on the instrument and another party to the
342instrument is a secondary obligor with respect to the obligation of that principal obligor, the
343following rules apply:
344 (1) Any obligations of the principal obligor to the secondary obligor with respect to any
345previous payment by the secondary obligor are not affected. Unless the terms of the extension
346preserve the secondary obligor's recourse, the extension correspondingly extends the time for
347performance of any other duties owed to the secondary obligor by the principal obligor under
348this Article.
349 (2) The secondary obligor is discharged to the extent that the extension would otherwise
350cause loss to the secondary obligor.
351 (3) To the extent that the secondary obligor is not discharged under paragraph (2), the
352secondary obligor may perform its obligations to a person entitled to enforce the instrument as if
353the time for payment had not been extended or, unless the terms of the extension provide that the
354person entitled to enforce the instrument retains the right to enforce the instrument against the 19 of 88
355secondary obligor as if the time for payment had not been extended, treat the time for
356performance of its obligations as having been extended correspondingly.
357 (c) If a person entitled to enforce an instrument agrees, with or without consideration, to a
358modification of the obligation of a principal obligor other than a complete or partial release or an
359extension of the due date and another party to the instrument is a secondary obligor with respect
360to the obligation of that principal obligor, the following rules apply:
361 (1) Any obligations of the principal obligor to the secondary obligor with respect to any
362previous payment by the secondary obligor are not affected. The modification correspondingly
363modifies any other duties owed to the secondary obligor by the principal obligor under this
364Article.
365 (2) The secondary obligor is discharged from any unperformed portion of its obligation to
366the extent that the modification would otherwise cause loss to the secondary obligor.
367 (3) To the extent that the secondary obligor is not discharged under paragraph (2), the
368secondary obligor may satisfy its obligation on the instrument as if the modification had not
369occurred or treat its obligation on the instrument as having been modified correspondingly.
370 (d) If the obligation of a principal obligor is secured by an interest in collateral, another
371party to the instrument is a secondary obligor with respect to that obligation, and a person
372entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of
373the secondary obligor is discharged to the extent of the impairment. The value of an interest in
374collateral is impaired to the extent the value of the interest is reduced to an amount less than the
375amount of the recourse of the secondary obligor or the reduction in value of the interest causes
376an increase in the amount by which the amount of the recourse exceeds the value of the interest. 20 of 88
377For purposes of this subsection, impairing the value of an interest in collateral includes failure to
378obtain or maintain perfection or recordation of the interest in collateral; release of collateral
379without substitution of collateral of equal value or equivalent reduction of the underlying
380obligation; failure to perform a duty to preserve the value of collateral owed, under Article 9 or
381other law, to a debtor or other person secondarily liable; and failure to comply with applicable
382law in disposing of or otherwise enforcing the interest in collateral.
383 (e) A secondary obligor is not discharged under subsections (a)(3), (b), (c), or (d) unless
384the person entitled to enforce the instrument knows that the person is a secondary obligor or has
385notice under Section 3-419(c) that the instrument was signed for accommodation.
386 (f) A secondary obligor is not discharged under this section if the secondary obligor
387consents to the occurrence or nonoccurrence of the event or conduct that is the basis of the
388discharge or the instrument or a separate agreement of the party provides for waiver of discharge
389under this section specifically or by general language indicating that parties waive defenses
390based on suretyship or impairment of collateral. Unless the circumstances indicate otherwise,
391consent by the principal obligor to an act that would lead to a discharge under this section
392constitutes consent to that act by the secondary obligor if the secondary obligor controls the
393principal obligor or deals with the person entitled to enforce the instrument on behalf of the
394principal obligor.
395 (g) A release or extension preserves a secondary obligor's recourse if the terms of the
396release or extension provide that:
397 (1) the person entitled to enforce the instrument retains the right to enforce the instrument
398against the secondary obligor; and 21 of 88
399 (2) the recourse of the secondary obligor continues as if the release or extension had not
400been granted.
401 (h) Except as otherwise provided in subsection (i), a secondary obligor asserting
402discharge under this section has the burden of persuasion both with respect to the occurrence of
403the acts alleged to harm the secondary obligor and loss or prejudice caused by those acts.
404 (i) If the secondary obligor demonstrates prejudice caused by an impairment of its
405recourse and the circumstances of the case indicate that the amount of loss is not reasonably
406susceptible of calculation or requires proof of facts that are not ascertainable, it is presumed that
407the act impairing recourse caused a loss or impairment equal to the liability of the secondary
408obligor on the instrument. In that event, the burden of persuasion as to any lesser amount of the
409loss is on the person entitled to enforce the instrument.
410 SECTION 54. Section 4-104(b) of said chapter 106 is hereby amended by striking out the
411reference to the definition for “bank” and to the definition for “good faith”.
412 SECTION 55. Section 4-104(c) of said chapter 106 is hereby amended by inserting a
413reference to a definition for “record” which appears in “Section 3-103”, and by inserting a
414reference to a definition for “remotely-created consumer item” which appears in “Section 3-
415103”.
416 SECTION 56. Section 4A-103(a)(1) of said chapter 106 is hereby amended by (i) striking
417out the comma following the word “orally” and (ii) striking out the words “electronically, or in a
418writing” following the word “orally”, and inserting in place thereof the following:-- “or in a
419record”. 22 of 88
420 SECTION 57. Section 4A-201(ii) of said chapter 106 is hereby amended by inserting,
421following the words “A security procedure”, the following:-- “may impose an obligation on the
422receiving bank or the customer and”
423 SECTION 58. Section 4A-201(ii) of said chapter 106 is further amended by (i) striking
424out the word “or” following the word “words” and inserting in place thereof a comma, (ii)
425inserting, following the word “numbers”, the following:-- “, symbols, sounds, biometrics”, and
426(iii) inserting, following the word “customer”, the following:-- “or requiring a payment order to
427be sent from a known email address, IP address, or telephone number”
428 SECTION 59. Section 4A-202(b)(ii) of said chapter 106 is hereby amended by (i)
429inserting, following the words “in compliance with”, the following words:-- “the bank’s
430obligations under”, (ii) striking out the word “written” following the words “procedure and any”,
431(iii) inserting the words “, evidenced by a record” following the words “instruction of the
432customer”, (iv) striking out the words “a written” following the word “violates” and inserting in
433place thereof the word “an”, and (iv) inserting, following the words “agreement with a
434customer”, the following:-- “evidenced by a record”
435 SECTION 60. Section 4A-202(c)(ii) of said chapter 106 is hereby amended by (i) striking
436out the word “writing” and inserting in place thereof the following words:-- “a record”, and (ii)
437inserting, following the words “in compliance with”, the following words:-- “the bank’s
438obligations under”.
439 SECTION 61. Section 4A-203(a)(1) of said chapter 106 is hereby amended by striking
440out the word “written” in that subsection and by inserting, after the word “agreement”, the words
441“evidenced by a record”. 23 of 88
442 SECTION 62. Section 4-207(a) of said chapter 106 is hereby amended by (i) striking out
443the word “and” after the word “warrantor;” in clause (4), (ii) striking out the period at the end of
444clause (5) and inserting in place thereof the following:-- “; and” and (iii) inserting the following
445new clause:--
446 (6) with respect to any remotely-created consumer item, the person on whose account the
447item is drawn authorized the issuance of the item in the amount for which the item is drawn.
448 SECTION 63. Section 4-207 of said chapter 106 is hereby further amended by inserting
449the following new subsection at the end of Section 4-207:--
450 (f) A claim for breach of the warranty in subsection (a)(6) is available against a previous
451transferor of the item only to the extent that under applicable law (including the applicable
452choice-of-law principle) all previous transferors of the item made the warranty in subsection
453(a)(6).
454 SECTION 64. Section 4-208(a) of said chapter 106 is hereby amended by (i) striking out
455the word “and” after the word “altered;” in clause (2), (ii) striking out the period at the end of
456clause (3), and inserting in place thereof the following:-- “; and” and (iii) inserting the following
457new clause:--
458 (4) with respect to any remotely-created consumer item, the person on whose account the
459item is drawn authorized the issuance of the item in the amount for which the item is drawn.
460 SECTION 65. Section 4-208 of said chapter 106 is hereby further amended by inserting
461the following new subsection at the end of Section 4-208:-- 24 of 88
462 (g) A claim for breach of the warranty in subsection (a)(4) is available against a previous
463transferor of the item only to the extent that under applicable law (including the applicable
464choice-of-law principle) all previous transferors of the item made the warranty in subsection
465(a)(4).
466 SECTION 66. Section 4-212(a) of said chapter 106 is hereby amended by striking out the
467word “written” in that Section and by inserting in place thereof the following words:-- “record
468providing”.
469 SECTION 67. Section 4-301(a) of said chapter 106 is hereby amended by striking out the
470word “or” in clause (1), by striking out clause (2) and by inserting the following new clauses at
471the end of Section 4-301(a):--
472 (2) returns an image of the item, if the party to which the return is made has entered into
473an agreement to accept the an image as a return of the item; and the image is returned in
474accordance with that agreement; or
475 (3) sends a record providing notice of dishonor or nonpayment if the item is unavailable
476for return.
477 SECTION 68. Section 4-403(b) of said chapter 106 is hereby amended by striking out the
478word “writing” wherever it appears in that Section and by inserting in each place thereof the
479following word:-- “a record”.
480 SECTION 69. Section 4A-207(c)(2) of said chapter 106 is hereby amended by (i) striking
481out the word “writing” in that subsection and inserting in place thereof the word “record”. 25 of 88
482 SECTION 70. Section 4A-208(b)(2) of said chapter 106 is hereby amended by striking
483out the word “writing” in that Section and by inserting in place thereof the word “record”.
484 SECTION 71. Section 4A-210(a) of said chapter 106 is hereby amended by striking out
485the word “, electronically,” in that Section, and by striking out the word “writing” in that Section
486and inserting in place thereof the following words:-- “a record”.
487 SECTION 72. Section 4A-211(a) of said chapter 106 is hereby amended by striking out
488the word “, electronically,” in that Section, and by striking out the word “writing” in that Section
489and inserting in place thereof the following words:-- “a record”.
490 SECTION 73. Section 4A-305(c) of said chapter 106 is hereby amended by striking out
491the word “written”, and by inserting, following the word “bank”, the following words:--“,
492evidenced by a record”.
493 SECTION 74. Section 4A-305(d) of said chapter 106 is hereby amended by striking out
494the word “written”, and by inserting, following the words “of the receiving bank,”, the following
495words:-- “evidenced by a record,”.
496 SECTION 75. Section 5-104 of said chapter 106 is hereby amended by inserting the word
497“signed” before the word “record”, and by striking out the words “and is authenticated (i) by a
498signature or (ii) in accordance with the agreement of the parties or the standard practice referred
499to in Section 5-108(e)”.
500 SECTION 76. Section 5-116(a) of said chapter 106 is hereby amended by striking out the
501words “or otherwise authenticated” in that Section, and by striking out the words “in the manner
502provided in Section 5-104” in that Section. 26 of 88
503 SECTION 77. Section 5-116 of said chapter 106 is hereby amended by inserting the word
504“(c)” following the words “undertaking was issued.” in subsection (b), by starting a new
505paragraph with the sentence now beginning with a (c) so that the new paragraph will be
506subsection (c), by striking out the word “this” following the words “located under” in new
507subsection (c), and by inserting the word “(d)” at the end of the new subsection (c)
508 SECTION 78. Section 5-116 of said chapter 106 is hereby further amended by inserting
509the following new subsection following the new subsection (c):--
510 (d) A branch of a bank is considered to be located at the address indicated in the branch’s
511undertaking. If more than one address is indicated, the branch is considered to be located at the
512address from which the undertaking was issued.
513 SECTION 79. Section 5-116 of said chapter 106 is hereby further amended by striking
514out the word “(c)” from that Section and by inserting in place thereof the word “(e)”, by striking
515out the word “(d)” from that Section and by inserting in place thereof the word “(f)”, and by
516striking out the word “(e)” from that Section and by inserting in place thereof the word “(g)”
517 SECTION 80. Section 7-102(a)(10) of said chapter 106 is hereby amended by striking
518out the words ““Record” means information that is inscribed on a tangible medium or that is
519stored in an electronic or other medium and is retrievable in perceivable form.” and by inserting
520in place thereof the word “[Reserved.]”
521 SECTION 81. Section 7-102(a)(11) of said chapter 106 is hereby amended by striking
522out the words ““Sign” means, with present intent to authenticate or adopt a record: (A) to
523execute or adopt a tangible symbol; or (B) to attach to or logically associate with the record an
524electronic sound, symbol, or process.” and by inserting in place thereof the word “[Reserved.]”. 27 of 88
525 SECTION 82. Section 7-106(b) of said chapter 106 is hereby amended by (i) striking out
526the words “is deemed to have” in that Section and by inserting in place thereof the word “has”,
527(ii) striking out the word “assigned” in that section and by inserting in place thereof the word
528“transferred”, (iii) striking out the word “such” before the words “a manner”, and (iv) striking
529out the word “assignee” in subsection (4) of that section and by inserting in place thereof the
530word “transferee”.
531 SECTION 83. Section 7-106 of said chapter 106 is further hereby amended by inserting,
532following subsection (b), the following new subsections:--
533 (c) A system satisfies subsection (a), and a person has control of an electronic document
534of title, if an authoritative electronic copy of the document, a record attached to or logically
535associated with the electronic copy, or a system in which the electronic copy is recorded:
536 (1) enables the person readily to identify each electronic copy as either an authoritative
537copy or a nonauthoritative copy;
538 (2) enables the person readily to identify itself in any way, including by name, identifying
539number, cryptographic key, office, or account number, as the person to which each authoritative
540electronic copy was issued or transferred; and
541 (3) gives the person exclusive power, subject to subsection (d), to:
542 (A) prevent others from adding or changing the person to which each authoritative
543electronic copy has been issued or transferred; and
544 (B) transfer control of each authoritative electronic copy. 28 of 88
545 (d) Subject to subsection (e), a power is exclusive under subsection (c)(3)(A) and (B),
546even if:
547 (1) the authoritative electronic copy, a record attached to or logically associated with the
548authoritative electronic copy, or a system in which the authoritative electronic copy is recorded
549limits the use of the document of title or has a protocol that is programmed to cause a change,
550including a transfer or loss of control; or
551 (2) the power is shared with another person.
552 (e) A power of a person is not shared with another person under subsection (d)(2) and the
553person’s power is not exclusive if:
554 (1) the person can exercise the power only if the power also is exercised by the other
555person; and
556 (2) the other person:
557 (A) can exercise the power without exercise of the power by the person; or
558 (B) is the transferor to the person of an interest in the document of title.
559 (f) If a person has the powers specified in subsection (c)(3)(A) and (B), the powers are
560presumed to be exclusive.
561 (g) A person has control of an electronic document of title if another person, other than
562the transferor to the person of an interest in the document:
563 (1) has control of the document and acknowledges that it has control on behalf of the
564person; or 29 of 88
565 (2) obtains control of the document after having acknowledged that it will obtain control
566of the document on behalf of the person.
567 (h) A person that has control under this section is not required to acknowledge that it has
568control on behalf of another person.
569 (i) If a person acknowledges that it has or will obtain control on behalf of another person,
570unless the person otherwise agrees or law other than this article or Article 9 otherwise provides,
571the person does not owe any duty to the other person and is not required to confirm the
572acknowledgment to any other person.
573 SECTION 84. Section 8-102(a)(6)(i) of said chapter 106 is hereby amended by striking
574out the word “writing” in that Section and by inserting in place thereof the word “record”.
575 SECTION 85. Section 8-102 of said chapter 106 is hereby amended by striking
576subsection (b) and by inserting in place thereof the following new section:
577 (b) The following definitions in this Article and other Articles apply to this Article:
578 SECTION 86. Section 8-102(a) of said chapter 106 is hereby further amended by
579inserting the following definitions in alphabetical order:
580 “Controllable account”. Section 9-102.
581 “Controllable electronic record”. Section 12-102.
582 “Controllable payment intangible”. Section 9-102.
583 SECTION 87. Section 8-103 of said chapter 106 is hereby amended by inserting, at the
584end of Section 8-103, the following new section:-- 30 of 88
585 (h) A controllable account, controllable electronic record, or controllable payment
586intangible is not a financial asset unless Section 8-102(a)(9)(iii) applies.
587 SECTION 88. Section 8-106(d)(3) of said chapter 106 is hereby amended by striking out
588the words “person has control of the security entitlement on behalf of the purchaser or, having
589previously acquired control of the security entitlement, acknowledges that it has control on
590behalf of the purchaser.” and by inserting in place thereof the following words and new clauses:-
591-
592 “person, other than the transferor to the purchaser of an interest in the security
593entitlement:
594 (A) has control of the security entitlement and acknowledges that it has control on behalf
595of the purchaser; or
596 (B) obtains control of the security entitlement after having acknowledged that it will
597obtain control of the security entitlement on behalf of the purchaser”
598 SECTION 89. Section 8-106 of said chapter 106 is further hereby amended by inserting,
599following subsection (g), the following new subsections:--
600 (h) A person that has control under this section is not required to acknowledge that it has
601control on behalf of a purchaser.
602 (i) If a person acknowledges that it has or will obtain control on behalf of a purchaser,
603unless the person otherwise agrees or law other than this Article or Article 9 otherwise provides,
604the person does not owe any duty to the purchaser and is not required to confirm the
605acknowledgment to any other person. 31 of 88
606 SECTION 90. Section 8-110 of said chapter 106 is hereby amended by inserting, at the
607end of subsection (f), the following new subsection:--
608 (g) The local law of the issuer’s jurisdiction or the securities intermediary’s jurisdiction
609governs a matter or transaction specified in subsection (a) or (b) even if the matter or transaction
610does not bear any relation to the jurisdiction.
611 SECTION 91. Section 8-303(b) of said chapter 106 is hereby amended by striking out the
612words “In addition to acquiring the rights of a purchaser, a” and by inserting in place thereof the
613word “A”.
614 SECTION 92. Section 9-102(a) of said chapter 106 is hereby amended by inserting, after
615the words “account for,”, the following:-- “ “account statement”, “account to”, “commodity
616account” in paragraph (14), “customer’s account”, “deposit account” in paragraph (29), “on
617account of”, and “statement of account”,.
618 SECTION 93. Section 9-102(a)(2) of said chapter 106 is further amended by (i) inserting
619the word “controllable accounts and” after the words “The term includes”, (ii) striking out the
620words “rights to payment evidenced by chattel paper or an instrument” and inserting in place
621thereof the words “chattel paper” in clause (i), after the word “(i)”, (iii) striking the word “or”
622after clause (v), and (iv) inserting, at the end of the section, the following: -- “, or (vii) rights to
623payment evidenced by an instrument”.
624 SECTION 94. Section 9-102(a)(3) of said chapter 106 is hereby amended by inserting the
625words “negotiable” after the words “even if the”, by striking out the words “constitutes part of”,
626after the word “instrument” and inserting in place thereof the following: -- “evidences”. 32 of 88
627 SECTION 95. Section 9-102(a)(4) of said chapter 106 is hereby amended by striking out
628the words “authenticated”, after the word “(A)” and inserting in place thereof the following: --
629“signed”.
630 SECTION 96. Section 9-102(a)(7) of said chapter 106 is hereby amended by striking out
631the words “”Authenticate” means: (A) to sign; or (B) with present intent to adopt or accept a
632record, to attach to or logically associate with the record and electronic sound, symbol, or
633process.” and by inserting in place thereof the word “[Reserved.]”.
634 SECTION 97. Said chapter 106 is hereby amended by inserting following Section 9-
635102(a)(7), the following new definitions:
636 (7A) “Assignee”, except as used in “assignee for benefit of creditors”, means a person (i)
637in whose favor a security interest that secures an obligation is created or provided for under a
638security agreement, whether or not the obligation is outstanding or (ii) to which an account,
639chattel paper, payment intangible, or promissory note has been sold. The term includes a person
640to which a security interest has been transferred by a secured party.
641 (7B) “Assignor” means a person that (i) under a security agreement creates or provides
642for a security interest that secures an obligation or (ii) sells an account, chattel paper, payment
643intangible, or promissory note. The term includes a secured party that has transferred a security
644interest to another person.
645 SECTION 98. Said chapter 106 is hereby amended by striking out Section 9-102(a)(11)
646and by inserting in place thereof the following new definition:--
647 (11) “Chattel paper” means: 33 of 88
648 (A) a right to payment of a monetary obligation secured by specific goods, if the right to
649payment and security agreement are evidenced by a record; or
650 (B) a right to payment of a monetary obligation owed by a lessee under a lease agreement
651with respect to specific goods and a monetary obligation owed by the lessee in connection with
652the transaction giving rise to the lease, if:
653 (i) the right to payment and lease agreement are evidenced by a record; and
654 (ii) the predominant purpose of the transaction giving rise to the lease was to give the
655lessee the right to possession and use of the goods.
656 The term does not include a right to payment arising out of a charter or other contract
657involving the use or hire of a vessel or a right to payment arising out of the use of a credit or
658charge card or information contained on or for use with the card.
659 SECTION 99. Section 9-102(a) of said chapter 106 is hereby amended by inserting the
660following new definitions following Section 9-102(a)(27):--
661 (27A) “Controllable account” means an account evidenced by a controllable electronic
662record that provides that the account debtor undertakes to pay the person that has control under
663Section 12-105 of the controllable electronic record.
664 (27B) “Controllable payment intangible” means a payment intangible evidenced by a
665controllable electronic record that provides that the account debtor undertakes to pay the person
666that has control under Section 12-105 of the controllable electronic record.
667 SECTION 100. Said chapter 106 is hereby amended by striking out Section 9-102(a)(31)
668and by inserting in place thereof the following new definitions:-- 34 of 88
669 (31) [Reserved.]
670 (31A) “Electronic money” means money in an electronic form.
671 SECTION 101. Section 9-102(a)(42) of said chapter 106 is hereby amended by inserting,
672after the word “includes”, the following:-- “controllable electronic records,”.
673 SECTION 102. Section 9-102(a)(47) of said chapter 106 is hereby amended by striking
674out the word “or”, after the word “credit,”, and by inserting after the words “with the card”. the
675following:-- “, or (iv) writings that evidence chattel paper”.
676 SECTION 103. Section 9-102(a) of said chapter 106 is hereby amended by inserting the
677following new definition following Section 9-102(a)(54):
678 (54A) “Money” has the meaning in Section 1-201(b)(24), but does not include (i) a
679deposit account or (ii) money in an electronic form that cannot be subjected to control under
680Section 9-105A.
681 SECTION 104. Section 9-102(a)(61) of said chapter 106 is hereby amended by inserting
682at the end of that section the following:-- “The term includes a controllable payment intangible.”
683 SECTION 105. Section 9-102(a)(66) of said chapter 106 is hereby amended by striking
684out the word “authenticated”, after the word “record”, and by inserting in place thereof the
685following:-- “signed”.
686 SECTION 106. Said chapter 106 is hereby amended by striking out Section 9-102(a)(75)
687and by inserting in place thereof the following new definition:--
688 (75) [Reserved.] 35 of 88
689 SECTION 107. Said chapter 106 is hereby amended by striking out Section 9-102(a)(79)
690and by inserting in place thereof the following new definitions:--
691 (79) [Reserved.]
692 (79A) “Tangible money” means money in a tangible form.
693 SECTION 108. Section 9-102(b) of said chapter 106 is hereby amended by inserting the
694following definitional cross-references in alphabetical order:--
695 “Controllable electronic record”. Section 12-102.
696 “Protected purchaser”. Section 8-303.
697 “Qualifying purchaser”. Section 12-102.
698 SECTION 109. Section 9-104(a) of said chapter 106 is hereby amended by (i) striking
699out the words “an authenticated”, after the word “in” in clause (2) and inserting in place thereof
700the words “a signed”, (ii) striking the word “or” in clause (2) after the word “debtor;” (iii)
701striking the period after the word “account”, and (iv) inserting the word “; or” after the word
702“account”.
703 SECTION 110. Section 9-104(a) of said chapter 106 is further amended by inserting the
704following new clause:
705 (4) another person, other than the debtor:
706 (A) has control of the deposit account and acknowledges that it has control on behalf of
707the secured party; or 36 of 88
708 (B) obtains control of the deposit account after having acknowledged that it will obtain
709control of the deposit account on behalf of the secured party.
710 SECTION 111. Said chapter 106 is hereby amended by striking out Section 9-105 and by
711inserting in place thereof the following new section:--
712 Section 9-105. Control of Electronic Copy of Record Evidencing Chattel Paper.
713 (a) General rule: control of electronic copy of record evidencing chattel paper. A
714purchaser has control of an authoritative electronic copy of a record evidencing chattel paper if a
715system employed for evidencing the assignment of interests in the chattel paper reliably
716establishes the purchaser as the person to which the authoritative electronic copy was assigned.
717 (b) Single authoritative copy. A system satisfies subsection (a) if the record or records
718evidencing the chattel paper are created, stored, and assigned in a manner that:
719 (1) a single authoritative copy of the record or records exists which is unique,
720identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;
721 (2) the authoritative copy identifies the purchaser as the assignee of the record or records;
722 (3) the authoritative copy is communicated to and maintained by the purchaser or its
723designated custodian;
724 (4) copies or amendments that add or change an identified assignee of the authoritative
725copy can be made only with the consent of the purchaser;
726 (5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a
727copy that is not the authoritative copy; and 37 of 88
728 (6) any amendment of the authoritative copy is readily identifiable as authorized or
729unauthorized.
730 (c) One or more authoritative copies. A system satisfies subsection (a), and a purchaser
731has control of an authoritative electronic copy of a record evidencing chattel paper, if the
732electronic copy, a record attached to or logically associated with the electronic copy, or a system
733in which the electronic copy is recorded:
734 (1) enables the purchaser readily to identify each electronic copy as either an
735authoritative copy or a nonauthoritative copy;
736 (2) enables the purchaser readily to identify itself in any way, including by name,
737identifying number, cryptographic key, office, or account number, as the assignee of the
738authoritative electronic copy; and
739 (3) gives the purchaser exclusive power, subject to subsection (d), to:
740 (A) prevent others from adding or changing an identified assignee of the authoritative
741electronic copy; and
742 (B) transfer control of the authoritative electronic copy.
743 (d) Meaning of exclusive. Subject to subsection (e), a power is exclusive under
744subsection (c)(3)(A) and (B), even if:
745 (1) the authoritative electronic copy, a record attached to or logically associated with the
746authoritative electronic copy, or a system in which the authoritative electronic copy is recorded
747limits the use of the authoritative electronic copy or has a protocol programmed to cause a
748change, including a transfer or loss of control; or 38 of 88
749 (2) the power is shared with another person.
750 (e) When power not shared with another person. A power of a purchaser is not shared
751with another person under subsection (d)(2) and the purchaser’s power is not exclusive if:
752 (1) the purchaser can exercise the power only if the power also is exercised by the other
753person; and
754 (2) the other person:
755 (A) can exercise the power without exercise of the power by the purchaser; or
756 (B) is the transferor to the purchaser of an interest in the chattel paper.
757 (f) Presumption of exclusivity of certain powers. If a purchaser has the powers specified
758in subsection (c)(3)(A) and (B), the powers are presumed to be exclusive.
759 (g) Obtaining control through another person. A purchaser has control of an authoritative
760electronic copy of a record evidencing chattel paper if another person, other than the transferor to
761the purchaser of an interest in the chattel paper:
762 (1) has control of the authoritative electronic copy and acknowledges that it has control
763on behalf of the purchaser; or
764 (2) obtains control of the authoritative electronic copy after having acknowledged that it
765will obtain control of the electronic copy on behalf of the purchaser.
766 SECTION 112. Section 9-105A of said chapter 106 is hereby amended by inserting the
767following new section:- 39 of 88
768 Section 9-105A. Control of Electronic Money.
769 (a) General rule: control of electronic money. A person has control of electronic money
770if:
771 (1) the electronic money, a record attached to or logically associated with the electronic
772money, or a system in which the electronic money is recorded gives the person:
773 (A) power to avail itself of substantially all the benefit from the electronic money; and
774 (B) exclusive power, subject to subsection (b), to:
775 (i) prevent others from availing themselves of substantially all the benefit from the
776electronic money; and
777 (ii) transfer control of the electronic money to another person or cause another person to
778obtain control of other electronic money as a result of the transfer of the electronic money; and
779 (2) the electronic money, a record attached to or logically associated with the electronic
780money, or a system in which the electronic money is recorded enables the person readily to
781identify itself in any way, including by name, identifying number, cryptographic key, office, or
782account number, as having the powers under paragraph (1).
783 (b) Meaning of exclusive. Subject to subsection (c) a power is exclusive under subsection
784(a)(1)(B)(i) and (ii) even if:
785 (1) the electronic money, a record attached to or logically associated with the electronic
786money, or a system in which the electronic money is recorded limits the use of the electronic
787money or has a protocol programmed to cause a change, including a transfer or loss of control; or 40 of 88
788 (2) the power is shared with another person.
789 (c) When power not shared with another person. A power of a person is not shared with
790another person under subsection (b)(2) and the person’s power is not exclusive if:
791 (1) the person can exercise the power only if the power also is exercised by the other
792person; and
793 (2) the other person:
794 (A) can exercise the power without exercise of the power by the person; or
795 (B) is the transferor to the person of an interest in the electronic money.
796 (d) Presumption of exclusivity of certain powers. If a person has the powers specified in
797subsection (a)(1)(B)(i) and (ii), the powers are presumed to be exclusive.
798 (e) Control through another person. A person has control of electronic money if another
799person, other than the transferor to the person of an interest in the electronic money:
800 (1) has control of the electronic money and acknowledges that it has control on behalf of
801the person; or
802 (2) obtains control of the electronic money after having acknowledged that it will obtain
803control of the electronic money on behalf of the person.
804 SECTION 113. Section 9-107 of said chapter 106 is further amended by inserting the
805following new sections: 41 of 88
806 Section 9-107A. Control of Controllable Electronic Record, Controllable Account, or
807Controllable Payment Intangible.
808 (a) Control under Section 12-105. A secured party has control of a controllable electronic
809record as provided in Section 12-105.
810 (b) Control of controllable account and controllable payment intangible. A secured party
811has control of a controllable account or controllable payment intangible if the secured party has
812control of the controllable electronic record that evidences the controllable account or
813controllable payment intangible.
814 Section 9-107B. No Requirement to Acknowledge or Confirm; No Duties.
815 (a) No requirement to acknowledge. A person that has control under Section 9-104, 9-
816105, or 9-105A is not required to acknowledge that it has control on behalf of another person.
817 (b) No duties or confirmation. If a person acknowledges that it has or will obtain control
818on behalf of another person, unless the person otherwise agrees or law other than this article
819otherwise provides, the person does not owe any duty to the other person and is not required to
820confirm the acknowledgment to any other person.
821 SECTION 114. Section 9-203(b)(3) of said chapter 106 is hereby amended by (i) striking
822out the word “authenticated”, in subsection (A) and inserting in place thereof the word “signed”
823and (ii) striking the word “or”, in subsection 3(C).
824 SECTION 115. Section 9-203(b)(3) of said chapter 106 is further amended by striking
825out subsection (D) and by inserting at the end of subsection (C) the following new sections:-- 42 of 88
826 (D) the collateral is controllable accounts, controllable electronic records, controllable
827payment intangibles, deposit accounts, electronic documents, electronic money, investment
828property, or letter-of-credit rights, and the secured party has control under Section 7-106, 9-104,
8299-105A, 9-106, or 9-107A pursuant to the debtor’s security agreement; or
830 (E) the collateral is chattel paper and the secured party has possession and control under
831Section 9-314A pursuant to the debtor’s security agreement.
832 SECTION 116. Section 9-204(b) of said chapter 106 is hereby amended by striking out
833the word “A” before the word “security”, and by inserting in place thereof the following:--
834“Subject to Subsection (b.1), a”.
835 SECTION 117. Section 9-204 of said chapter 106 is hereby further amended by inserting
836at the end of subsection (b) the following new subsection:--
837 (b.1) Limitation on subsection (b). Subsection (b) does not prevent a security interest
838from attaching:
839 (1) to consumer goods as proceeds under Section 9-315(a) or commingled goods under
840Section 9 336(c);
841 (2) to a commercial tort claim as proceeds under Section 9-315(a); or
842 (3) under an after-acquired property clause to property that is proceeds of consumer
843goods or a commercial tort claim.
844 SECTION 118. Section 9-207 of said chapter 106 is hereby amended by striking out
845subsection (c) and by inserting in place thereof the following new subsection:-- 43 of 88
846 (c) Duties and rights when secured party in possession or control. Except as otherwise
847provided in subsection (d), a secured party having possession of collateral or control of collateral
848under Section 7-106, 9-104, 9-105, 9-105A, 9-106, or 9-107, or 9-107A:
849 SECTION 119. Section 9-208(b) of said chapter 106 is hereby amended by striking out
850the words “an authenticated” after the word “receiving” in and by inserting in place thereof the
851following:-- “a signed”.
852 SECTION 120. Section 9-208(b)(1) of said chapter 106 is hereby amended by striking
853out the words “an authenticated statement” and by inserting in place thereof the following:--“a
854signed record”.
855 SECTION 121. Section 9-208(b) of said chapter 106 is hereby amended by striking out
856clauses (3) and (6) by inserting in place of each thereof the following new clauses:--
857 (3) a secured party, other than a buyer, having control under Section 9-105 of an
858authoritative electronic copy of a record evidencing chattel paper shall transfer control of the
859electronic copy to the debtor or a person designated by the debtor;
860 (6) a secured party having control under Section 7-106 of an authoritative electronic copy
861of an electronic document shall transfer control of the electronic copy to the debtor or a person
862designated by the debtor;
863 (7) a secured party having control under Section 9-105A of electronic money shall
864transfer control of the electronic money to the debtor or a person designated by the debtor; and
865 (8) a secured party having control under Section 12-105 of a controllable electronic
866record, other than a buyer of a controllable account or controllable payment intangible evidenced 44 of 88
867by the controllable electronic record, shall transfer control of the controllable electronic record to
868the debtor or a person designated by the debtor.
869 SECTION 122. Section 9-208(b)(4) of said chapter 106 is hereby amended by striking
870the words “an authenticated” after the word “maintained” and by inserting in place thereof the
871following:--“a signed”.
872 SECTION 123. Section 9-208(b)(5) of said chapter 106 is hereby amended by striking
873the words “an authenticated” after the word “maintained”, by inserting in place thereof the
874following:--“a signed”, and by striking the word “and” at the end of such subsection.
875 SECTION 124. Section 9-209 of said chapter 106 is hereby amended by striking out
876subsection (b) and inserting in place thereof the following new subsection:--
877 (b) Duties of secured party after receiving demand from debtor. Within 10 days after
878receiving a signed demand by the debtor, a secured party shall send to an account debtor that has
879received notification under Section 9-406(a) or 12-106(b) of an assignment to the secured party
880as assignee a signed record that releases the account debtor from any further obligation to the
881secured party.
882 SECTION 125. Section 9-210(a) of said chapter 106 is hereby amended by striking out
883the word “authenticated” wherever the word appears in that Section and by inserting in place
884thereof the word “signed”.
885 SECTION 126. Section 9-210(b)(2) of said chapter 106 is hereby amended by striking
886out the word “authenticating” in that Section and by inserting in place thereof the word
887“signing”. 45 of 88
888 SECTION 127. Sections 9-210(c), (d), and (e) of said chapter 106 is hereby amended by
889striking out the words “an authenticated” in such Sections and by inserting in place thereof the
890words “a signed”.
891 SECTION 128. Section 9-301 of said chapter 106 is hereby amended by striking out the
892word “9-306”, after the word “through” and by inserting in place thereof the word “9-306B”.
893 SECTION 129. Section 9-301 of said chapter 106 is hereby amended by striking out
894subsection (3) and inserting in place thereof the following new subsection:--
895 (3) Except as otherwise provided in paragraph (4), while negotiable tangible documents,
896goods, instruments, or tangible money is located in a jurisdiction, the local law of that
897jurisdiction governs:
898 (A) perfection of a security interest in the goods by filing a fixture filing;
899 (B) perfection of a security interest in timber to be cut; and
900 (C) the effect of perfection or nonperfection and the priority of a nonpossessory security
901interest in the collateral.
902 SECTION 130. Section 9-304 of said chapter 106 is hereby amended by deleting the
903period at the end of subsection (a), and by inserting, at the end of subsection (a), the following:--
904“ even if the transaction does not bear any relation to the bank’s jurisdiction.”
905 SECTION 131. Section 9-305 of said chapter 106 is hereby amended by inserting, at the
906end of subsection (4), the following new subsection:-- 46 of 88
907 (5) Paragraphs (2), (3), and (4) apply even if the transaction does not bear any relation to
908the jurisdiction.
909 SECTION 132. Said chapter 106 is hereby amended by inserting after Section 9-306 the
910following new sections:
911 Section 9-306A. Law Governing Perfection and Priority of Security Interests in Chattel
912Paper.
913 (a) Chattel paper evidenced by authoritative electronic copy. Except as provided in
914subsection (d), if chattel paper is evidenced only by an authoritative electronic copy of the chattel
915paper or is evidenced by an authoritative electronic copy and an authoritative tangible copy, the
916local law of the chattel paper’s jurisdiction governs perfection, the effect of perfection or
917nonperfection, and the priority of a security interest in the chattel paper, even if the transaction
918does not bear any relation to the chattel paper’s jurisdiction.
919 (b) Chattel paper’s jurisdiction. The following rules determine the chattel paper’s
920jurisdiction under this section:
921 (1) If the authoritative electronic copy of the record evidencing chattel paper, or a record
922attached to or logically associated with the electronic copy and readily available for review,
923expressly provides that a particular jurisdiction is the chattel paper’s jurisdiction for purposes of
924this part, this article, or this chapter, that jurisdiction is the chattel paper’s jurisdiction.
925 (2) If paragraph (1) does not apply and the rules of the system in which the authoritative
926electronic copy is recorded are readily available for review and expressly provide that a 47 of 88
927particular jurisdiction is the chattel paper’s jurisdiction for purposes of this part, this article, or
928this chapter, that jurisdiction is the chattel paper’s jurisdiction.
929 (3) If paragraphs (1) and (2) do not apply and the authoritative electronic copy, or a
930record attached to or logically associated with the electronic copy and readily available for
931review, expressly provides that the chattel paper is governed by the law of a particular
932jurisdiction, that jurisdiction is the chattel paper’s jurisdiction.
933 (4) If paragraphs (1), (2), and (3) do not apply and the rules of the system in which the
934authoritative electronic copy is recorded are readily available for review and expressly provide
935that the chattel paper or the system is governed by the law of a particular jurisdiction, that
936jurisdiction is the chattel paper’s jurisdiction.
937 (5) If paragraphs (1) through (4) do not apply, the chattel paper’s jurisdiction is the
938jurisdiction in which the debtor is located.
939 (c) Chattel paper evidenced by authoritative tangible copy. If an authoritative tangible
940copy of a record evidences chattel paper and the chattel paper is not evidenced by an
941authoritative electronic copy, while the authoritative tangible copy of the record evidencing
942chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:
943 (1) perfection of a security interest in the chattel paper by possession under Section 9-
944314A; and
945 (2) the effect of perfection or nonperfection and the priority of a security interest in the
946chattel paper. 48 of 88
947 (d) When perfection governed by law of jurisdiction where debtor located. The local law
948of the jurisdiction in which the debtor is located governs perfection of a security interest in
949chattel paper by filing.
950 Section 9-306B. Law Governing Perfection and Priority of Security Interests in
951Controllable Accounts, Controllable Electronic Records, and Controllable Payment Intangibles.
952 (a) Governing law: general rules. Except as provided in subsection (b), the local law of
953the controllable electronic record’s jurisdiction specified in Section 12-107(c) and (d) governs
954perfection, the effect of perfection or nonperfection, and the priority of a security interest in a
955controllable electronic record and a security interest in a controllable account or controllable
956payment intangible evidenced by the controllable electronic record.
957 (b) When perfection governed by law of jurisdiction where debtor located. The local law
958of the jurisdiction in which the debtor is located governs:
959 (1) perfection of a security interest in a controllable account, controllable electronic
960record, or controllable payment intangible by filing; and
961 (2) automatic perfection of a security interest in a controllable payment intangible created
962by a sale of the controllable payment intangible.
963 SECTION 133. Section 9-310(b) of said chapter 106 is hereby amended by striking out
964subsection (8) and inserting in place thereof the following new sections:--
965 (8) in controllable accounts, controllable electronic records, controllable payment
966intangibles, deposit accounts, electronic documents, investment property, or letter-of-credit
967rights which is perfected by control under Section 9-314; 49 of 88
968 (8.1) in chattel paper which is perfected by possession and control under Section 9-314A;
969 SECTION 134. Said chapter 106 is hereby amended by striking out Section 9-312 and
970inserting in place thereof the following new section:--
971 Section 9-312. Perfection of Security Interests in Chattel Paper, Controllable Accounts,
972Controllable Electronic Records, Controllable Payment Intangibles, Deposit Accounts,
973Negotiable Documents, Goods Covered by Documents, Instruments, Investment Property,
974Letter-of-Credit Rights, and Money; Perfection by Permissive Filing; Temporary Perfection
975Without Filing or Transfer of Possession.
976 (a) Perfection by filing permitted. A security interest in chattel paper, controllable
977accounts, controllable electronic records, controllable payment intangibles, instruments,
978investment property, or negotiable documents may be perfected by filing.
979 (b) Control or possession of certain collateral. Except as otherwise provided in Section 9-
980315(c) and (d) for proceeds:
981 (1) a security interest in a deposit account may be perfected only by control under Section
9829-314;
983 (2) except as otherwise provided in Section 9-308(d), a security interest in a letter-of-
984credit right may be perfected only by control under Section 9-314;
985 (3) a security interest in tangible money may be perfected only by the secured party’s
986taking possession under Section 9-313; and
987 (4) a security interest in electronic money may be perfected only by control under Section
9889-314. 50 of 88
989 (c) Goods covered by negotiable document. While goods are in the possession of a bailee
990that has issued a negotiable document covering the goods:
991 (1) a security interest in the goods may be perfected by perfecting a security interest in
992the document; and
993 (2) a security interest perfected in the document has priority over any security interest
994that becomes perfected in the goods by another method during that time.
995 (d) Goods covered by nonnegotiable document. While goods are in the possession of a
996bailee that has issued a nonnegotiable document covering the goods, a security interest in the
997goods may be perfected by:
998 (1) issuance of a document in the name of the secured party;
999 (2) the bailee’s receipt of notification of the secured party’s interest; or
1000 (3) filing as to the goods.
1001 (e) Temporary perfection: new value. A security interest in certificated securities,
1002negotiable documents, or instruments is perfected without filing or the taking of possession or
1003control for a period of 20 days from the time it attaches to the extent that it arises for new value
1004given under a signed security agreement.
1005 SECTION 135. Section 9-313 of said chapter 106 is hereby amended by striking out
1006subsection (a) and inserting in place thereof the following new subsection:--
1007 (a) Perfection by possession or delivery. Except as otherwise provided in subsection (b),
1008a secured party may perfect a security interest in goods, instruments, negotiable tangible 51 of 88
1009documents, or tangible money by taking possession of the collateral. A secured party may perfect
1010a security interest in certificated securities by taking delivery of the certificated securities under
1011Section 8-301.
1012 SECTION 136. Section 9-313(c) of said chapter 106 is hereby amended by striking out
1013clauses (1) and (2) and by inserting in place thereof the following new clauses:--
1014 (1) the person in possession signs a record acknowledging that it holds possession of the
1015collateral for the secured party’s benefit; or
1016 (2) the person takes possession of the collateral after having signed a record
1017acknowledging that it will hold possession of the collateral for the secured party’s benefit.
1018 SECTION 137. Section 9-313(d) of said chapter 106 is hereby amended by striking out
1019the word “no” and by inserting in place thereof the word “not”.
1020 SECTION 138. Section 9-314 of said chapter 106 is hereby amended by striking out
1021subsections (a) and (b) and inserting in place thereof the following new subsections:--
1022 (a) Perfection by control. A security interest in controllable accounts, controllable
1023electronic records, controllable payment intangibles, deposit accounts, electronic documents,
1024electronic money, investment property, or letter-of-credit rights may be perfected by control of
1025the collateral under Section 7-106, 9-104, 9-105A, 9-106, 9-107, or 9-107A.
1026 (b) Specified collateral: time of perfection by control; continuation of perfection. A
1027security interest in controllable accounts, controllable electronic records, controllable payment
1028intangibles, deposit accounts, electronic documents, electronic money, or letter-of-credit rights is
1029perfected by control under Section 7-106, 9-104, 9-105A, 9-107, or 9-107A not earlier than the 52 of 88
1030time the secured party obtains control and remains perfected by control only while the secured
1031party retains control.
1032 SECTION 139. Section 9-314(c) of said chapter 106 is hereby amended by striking out
1033the word “from” after the word “9-106”, and by inserting in place thereof the following:--“not
1034earlier than”.
1035 SECTION 140. Said chapter 106 is hereby amended inserting the following new section
1036following Section 9-314:--
1037 Section 9-314A. Perfection by Possession and Control of Chattel Paper.
1038 (a) Perfection by possession and control. A secured party may perfect a security interest
1039in chattel paper by taking possession of each authoritative tangible copy of the record evidencing
1040the chattel paper and obtaining control of each authoritative electronic copy of the electronic
1041record evidencing the chattel paper.
1042 (b) Time of perfection; continuation of perfection. A security interest is perfected under
1043subsection (a) not earlier than the time the secured party takes possession and obtains control and
1044remains perfected under subsection (a) only while the secured party retains possession and
1045control.
1046 (c) Application of Section 9-313 to perfection by possession of chattel paper. Section 9-
1047313(c) and (f) through (i) applies to perfection by possession of an authoritative tangible copy of
1048a record evidencing chattel paper.
1049 SECTION 141. Section 9-316 of said chapter 106 is hereby amended by striking out the
1050chapeau of subsection (a) and inserting in place thereof the following new chapeau:-- 53 of 88
1051 (a) General rule: effect on perfection of change in governing law. A security interest
1052perfected pursuant to the law of the jurisdiction designated in Section 9-301(1), 9-305(c), 9-
1053306A(d), or 9-306B(b) remains perfected until the earliest of:
1054 SECTION 142. Section 9-316 of said chapter 106 is hereby further amended by striking
1055out the chapeau of subsection (f) and inserting in place thereof the following new chapeau:--
1056 (f) Change in jurisdiction of chattel paper, controllable electronic record, bank, issuer,
1057nominated person, securities intermediary, or commodity intermediary. A security interest in
1058chattel paper, controllable accounts, controllable electronic records, controllable payment
1059intangibles, deposit accounts, letter-of-credit rights, or investment property which is perfected
1060under the law of the chattel paper’s jurisdiction, the controllable electronic record’s jurisdiction,
1061the bank’s jurisdiction, the issuer’s jurisdiction, a nominated person’s jurisdiction, the securities
1062intermediary’s jurisdiction, or the commodity intermediary’s jurisdiction, as applicable, remains
1063perfected until the earlier of:
1064 SECTION 143. Section 9-317 of said chapter 106 is hereby amended by striking out
1065subsection (b) and inserting in place thereof the following new subsection:--
1066 (b) Buyers that receive delivery. Except as otherwise provided in subsection (e), a buyer,
1067other than a secured party, of goods, instruments, tangible documents, or a security certificate
1068takes free of a security interest or agricultural lien if the buyer gives value and receives delivery
1069of the collateral without knowledge of the security interest or agricultural lien and before it is
1070perfected.
1071 SECTION 144. Section 9-317 of said chapter 106 is hereby amended by striking out
1072subsection (d) and inserting in place thereof the following new subsection:-- 54 of 88
1073 (d) Licensees and buyers of certain collateral. Subject to subsections (f) through (i), a
1074licensee of a general intangible or a buyer, other than a secured party, of collateral other than
1075electronic money, goods, instruments, tangible documents or a certificated security takes free of
1076a security interest if the licensee or buyer gives value without knowledge of the security interest
1077and before it is perfected.
1078 SECTION 145. Section 9-317 of said chapter 106 is hereby further amended by inserting
1079at the end of subsection (e) the following new subsections:
1080 (f) Buyers of chattel paper. A buyer, other than a secured party, of chattel paper takes free
1081of a security interest if, without knowledge of the security interest and before it is perfected, the
1082buyer gives value and:
1083 (1) receives delivery of each authoritative tangible copy of the record evidencing the
1084chattel paper; and
1085 (2) if each authoritative electronic copy of the record evidencing the chattel paper can be
1086subjected to control under Section 9-105, obtains control of each authoritative electronic copy.
1087 (g) Buyers of electronic documents. A buyer of an electronic document takes free of a
1088security interest if, without knowledge of the security interest and before it is perfected, the
1089buyer gives value and, if each authoritative electronic copy of the document can be subjected to
1090control under Section 7-106, obtains control of each authoritative electronic copy.
1091 (h) Buyers of controllable electronic records. A buyer of a controllable electronic record
1092takes free of a security interest if, without knowledge of the security interest and before it is
1093perfected, the buyer gives value and obtains control of the controllable electronic record. 55 of 88
1094 (i) Buyers of controllable accounts and controllable payment intangibles. A buyer, other
1095than a secured party, of a controllable account or a controllable payment intangible takes free of
1096a security interest if, without knowledge of the security interest and before it is perfected, the
1097buyer gives value and obtains control of the controllable account or controllable payment
1098intangible.
1099 SECTION 146. Section 9-323(d) of said chapter 106 is hereby amended by striking out
1100the words “other than a buyer in ordinary course of business”, after the word “goods”.
1101 SECTION 147. Section 9-323(f) of said chapter 106 is hereby amended by striking out
1102the words “other than a lessee in ordinary course of business”, after the word “goods”.
1103 SECTION 148. Section 9-324 of said chapter 106 is hereby amended by striking out the
1104words “an authenticated” wherever it appears in that Section and by inserting in each place
1105thereof the following:-- “a signed”.
1106 SECTION 149. Said chapter 106 is hereby amended by inserting following Section 326
1107the following new section:
1108 Section 9-326A. Priority of Security Interest in Controllable Account, Controllable
1109Electronic Record, and Controllable Payment Intangible. A security interest in a controllable
1110account, controllable electronic record, or controllable payment intangible held by a secured
1111party having control of the account, electronic record, or payment intangible has priority over a
1112conflicting security interest held by a secured party that does not have control.
1113 SECTION 150. Section 9-330 of said chapter 106 is hereby amended by striking out
1114subsections (a) and (b) and by inserting in place thereof the following new subsections:-- 56 of 88
1115 (a) Purchaser’s priority: security interest claimed merely as proceeds. A purchaser of
1116chattel paper has priority over a security interest in the chattel paper which is claimed merely as
1117proceeds of inventory subject to a security interest if:
1118 (1) in good faith and in the ordinary course of the purchaser’s business, the purchaser
1119gives new value, takes possession of each authoritative tangible copy of the record evidencing
1120the chattel paper, and obtains control under Section 9-105 of each authoritative electronic copy
1121of the record evidencing the chattel paper; and
1122 (2) the authoritative copies of the record evidencing the chattel paper do not indicate that
1123the chattel paper has been assigned to an identified assignee other than the purchaser.
1124 (b) Purchaser’s priority: other security interests. A purchaser of chattel paper has priority
1125over a security interest in the chattel paper which is claimed other than merely as proceeds of
1126inventory subject to a security interest if the purchaser gives new value, takes possession of each
1127authoritative tangible copy of the record evidencing the chattel paper, and obtains control under
1128Section 9-105 of each authoritative electronic copy of the record evidencing the chattel paper in
1129good faith, in the ordinary course of the purchaser’s business, and without knowledge that the
1130purchase violates the rights of the secured party.
1131 SECTION 151. Section 9-330 of said chapter 106 is hereby further amended by striking
1132out subsection (f) and by inserting in place thereof the following new subsection:--
1133 (f) Indication of assignment gives knowledge. For purposes of subsections (b) and (d), if
1134the authoritative copies of the record evidencing chattel paper or an instrument indicate that the
1135chattel paper or instrument has been assigned to an identified secured party other than the 57 of 88
1136purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase
1137violates the rights of the secured party.
1138 SECTION 152. Said chapter 106 is hereby amended by striking out Section 9-331 and by
1139inserting in place thereof the following new Section:--
1140 Section 9-331. Priority of Rights of Purchasers of Controllable Accounts, Controllable
1141Electronic Records, Controllable Payment Intangibles, Documents, Instruments, and Securities
1142Under Other Articles; Priority of Interests in Financial Assets and Security Entitlements and
1143Protection Against Assertion of Claim Under Articles 8 and 12.
1144 (a) Rights under Articles 3, 7, 8, and 12 not limited. This article does not limit the rights
1145of a holder in due course of a negotiable instrument, a holder to which a negotiable document of
1146title has been duly negotiated, a protected purchaser of a security, or a qualifying purchaser of a
1147controllable account, controllable electronic record, or controllable payment intangible. These
1148holders or purchasers take priority over an earlier security interest, even if perfected, to the
1149extent provided in Articles 3, 7, 8, and 12.
1150 (b) Protection under Articles 8 and 12. This article does not limit the rights of or impose
1151liability on a person to the extent that the person is protected against the assertion of a claim
1152under Article 8 or 12.
1153 (c) Filing not notice. Filing under this article does not constitute notice of a claim or
1154defense to the holders, purchasers, or persons described in subsections (a) and (b).
1155 SECTION 153. Said chapter 106 is hereby amended by striking out Section 9-332 and by
1156inserting in place thereof the following new Section:-- 58 of 88
1157 Section 9-332. Transfer of Money; Transfer of Funds from Deposit Account.
1158 (a) Transferee of tangible money. A transferee of tangible money takes the money free of
1159a security interest if the transferee receives possession of the money without acting in collusion
1160with the debtor in violating the rights of the secured party.
1161 (b) Transferee of funds from deposit account. A transferee of funds from a deposit
1162account takes the funds free of a security interest in the deposit account if the transferee receives
1163the funds without acting in collusion with the debtor in violating the rights of the secured party.
1164 (c) Transferee of electronic money. A transferee of electronic money takes the money
1165free of a security interest if the transferee obtains control of the money without acting in
1166collusion with the debtor in violating the rights of the secured party.
1167 SECTION 154. Section 9-334(f) of said chapter 106 is hereby amended by striking out
1168the words “an authenticated” in that subsection (1) and by inserting in place thereof the
1169following:-- “a signed”.
1170 SECTION 155. Section 9-338 of said chapter 106 is hereby amended by striking out in
1171clause (2) and inserting in place thereof the following new clause (2):--
1172 a purchaser, other than a secured party, of the collateral takes free of the security interest
1173or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the
1174purchaser gives value and, in the case of , tangible documents, goods, instruments, or a security
1175certificate, receives possession or delivery of the collateral, and, in the case of chattel paper,
1176takes possession of each authoritative tangible copy of the record evidencing the chattel paper 59 of 88
1177and obtains control of each authoritative electronic copy of the electronic record evidencing the
1178chattel paper.
1179 SECTION 156. Section 9-341 of said chapter 106 is hereby amended by striking out the
1180words “an authenticated”, after the words “agrees in”, and by inserting in place thereof the
1181following:-- “a signed”.
1182 SECTION 157. Section 9-404(a) of said chapter 106 is hereby amended by striking out
1183the words “authenticated” in clause (2) and by inserting in place thereof the following word:--
1184“signed”.
1185 SECTION 158. Section 9-406 of said chapter 106 is hereby amended by striking out
1186subsections (a) through (c) and by inserting in place thereof the following new subsections:--
1187 (a) Discharge of account debtor; effect of notification. Subject to subsections (b) through
1188(i) and (l), an account debtor on an account, chattel paper, or a payment intangible may discharge
1189its obligation by paying the assignor until, but not after, the account debtor receives a
1190notification, signed by the assignor or the assignee, that the amount due or to become due has
1191been assigned and that payment is to be made to the assignee. After receipt of the notification,
1192the account debtor may discharge its obligation by paying the assignee and may not discharge
1193the obligation by paying the assignor.
1194 (b) When notification ineffective. Subject to subsections (h) and (l), notification is
1195ineffective under subsection (a):
1196 (A) only a portion of the account, chattel paper, or payment intangible has been assigned
1197to that assignee; 60 of 88
1198 (B) a portion has been assigned to another assignee; or
1199 (C) the account debtor knows that the assignment to that assignee is limited.
1200 (c) Proof of assignment. Subject to subsections (h) and (l), if requested by the account
1201debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made.
1202Unless the assignee complies, the account debtor may discharge its obligation by paying the
1203assignor, even if the account debtor has received a notification under subsection (a).
1204 SECTION 159. Section 4-406(d) of said chapter 106 is amended by adding the following
1205new sentence at the beginning of subsection (d): --" In this subsection, “promissory note”
1206includes a negotiable instrument that evidences chattel paper.”
1207 SECTION 160. Section 9-406 of said chapter 106 is further amended by striking out the
1208words “subsection (h)”, after the word “to” in subsection (g), and by inserting in place thereof
1209the following:-- “subsections (h) and (l)”.
1210 SECTION 161. Section 9-406 of said chapter 106 is hereby amended by inserting
1211following subsection (j) the following new subsections: --
1212 (k) Inapplicability to interests in certain entities. Subsections (d), (f), and (j) do not apply
1213to a security interest in an ownership interest in a general partnership, limited partnership, or
1214limited liability company.
1215 (l) Inapplicability of certain subsections. Subsections (a), (b), (c), and (g) do not apply to
1216a controllable account or controllable payment intangible.
1217 SECTION 162. Section 9-408 of said chapter 106 is hereby amended by inserting at the
1218end of subsection (f) the following new sections: -- 61 of 88
1219 (f) Inapplicability to interests in certain entities. This section does not apply to a security
1220interest in an ownership interest in a general partnership, limited partnership, or limited liability
1221company.
1222 (g) “Promissory note.” In this section, “promissory note” includes a negotiable
1223instrument that evidences chattel paper.
1224 SECTION 163. Section 9-509(a)(1) of said chapter 106 is hereby amended by striking
1225out the words “an authenticated” and by inserting in the following words:-- “a signed”.
1226 SECTION 164. Section 9-509(b) of said chapter 106 is hereby amended by striking out
1227the word “authenticating” in that Section and by inserting in place thereof the following word:--
1228“signing”.
1229 SECTION 165. Section 9-513 of said chapter 106 is hereby amended by striking out the
1230words “an authenticated” wherever they appear in that Section and by inserting in each place
1231thereof the following words:-- “a signed”.
1232 SECTION 166. Section 9-601(b) of said chapter 106 is hereby amended by inserting the
1233word “9-105A,” after the word “9-105,” in that Section, by striking out the word “or” following
1234the word “9-106,” in that Section, and by inserting the words “, or 9-107A” following the word
1235“9-107” in that Section
1236 SECTION 167. Section 9-605 of said chapter 106 is hereby amended by striking out the
1237word “A” at the beginning of that Section and by inserting in place thereof the following words:-
1238- “(a) In general: No duty owed by secured party. Except as provided in subsection (b), a” 62 of 88
1239 SECTION 168. Section 9-605 of said chapter 106 is further hereby amended by inserting,
1240at the end of subsection (a), the following new subsection:--
1241 (b) Exception: Secured party owes duty to debtor or obligor. A secured party owes a duty
1242based on its status as a secured party to a person if, at the time the secured party obtains control
1243of collateral that is a controllable account, controllable electronic record, or controllable payment
1244intangible or at the time the security interest attaches to the collateral, whichever is later:
1245 (1) the person is a debtor or obligor; and
1246 (2) the secured party knows that the information in subsection (a)(1)(A), (B), or (C)
1247relating to the person is not provided by the collateral, a record attached to or logically associated
1248with the collateral, or the system in which the collateral is recorded.
1249 SECTION 169. Section 9-608(a)(1)(C) of said chapter 106 is hereby amended by striking
1250out the words “an authenticated” in that Section and by inserting in place thereof the following
1251words:-- “a signed”.
1252 SECTION 170. Section 9-611 of said chapter 106 is hereby amended by striking out the
1253words “an authenticated” wherever they appear in that Section and by inserting in each place
1254thereof the following words:-- “a signed”.
1255 SECTION 171. Section 9-611(b) of said chapter 106 is hereby amended by striking out
1256the word “authenticated” in that Section and by inserting in place thereof the following word:--
1257“signed”. 63 of 88
1258 SECTION 172. Section 9-613 of said chapter 106 is hereby amended by inserting before
1259the word “Except” in the beginning of that section the following:-- “(a) Contents and form of
1260notification.”
1261 SECTION 173. Section 9-613 of said chapter 106 is hereby amended by striking the
1262chapeau of clause (5) and by inserting in its place the following new chapeau:
1263 (5) The following form of notification and the form appearing in Section 9-614(a)(3),
1264when completed in accordance with the instructions in subsection (b) and Section 9-614(b), each
1265provides sufficient information:
1266 SECTION 174. Section 9-613 of said chapter 106 is hereby amended by striking out the
1267NOTIFICATION OF DISPOSITION OF COLLATERAL form in that Section and by inserting
1268in place thereof the following form:--
1269 NOTIFICATION OF DISPOSITION OF COLLATERAL
1270 To: (Name of debtor, obligor, or other person to which the notification is sent)
1271 From: (Name, address, and telephone number of secured party)
1272 {1} Name of any debtor that is not an addressee:
1273 (Name of each debtor)
1274 {2} We will sell (describe collateral) (to the highest qualified bidder) at public sale. A
1275sale could include a lease or license. The sale will be held as follows:
1276 (Date) 64 of 88
1277 (Time)
1278 (Place)
1279 {3} We will sell (describe collateral) at private sale sometime after (date). A sale could
1280include a lease or license.
1281 {4} You are entitled to an accounting of the unpaid indebtedness secured by the property
1282that we intend to sell or, as applicable, lease or license.
1283 {5} If you request an accounting you must pay a charge of $ (amount)
1284 {6} You may request an accounting by calling us at (telephone number).
1285 [End of Form]
1286 (b) Instructions for form of notification. The following instructions apply to the form of
1287notification in subsection (a)(5):
1288 (1) The instructions in this subsection refer to the numbers in braces before items in the
1289form of notification in subsection (a)(5). Do not include the numbers or braces in the
1290notification. The numbers and braces are used only for the purpose of these instructions.
1291 (2) Include and complete item {1} only if there is a debtor that is not an addressee of the
1292notification and list the name or names.
1293 (3) Include and complete either item {2}, if the notification relates to a public disposition
1294of the collateral, or item {3}, if the notification relates to a private disposition of the collateral. If
1295item {2} is included, include the words “to the highest qualified bidder” only if applicable. 65 of 88
1296 (4) Include and complete items {4} and {6}.
1297 (5) Include and complete item {5} only if the sender will charge the recipient for an
1298accounting.
1299 SECTION 175. Section 9-614 of said chapter 106 is hereby amended by inserting before
1300the word “In” in the beginning of that Section the following:-- “(a) Contents and form of
1301notification.”
1302 SECTION 176. Section 9-614(a), as amended, of said chapter 106 is hereby amended by
1303striking out the word “9-613(1)“ in clause (1) of that Section and by inserting in place thereof the
1304word “9-613(a)(1)”
1305 SECTION 177. Section 9-614(3) of said chapter 106 is hereby amended by striking the
1306comma after the word “completed”, by inserting after the word “completed” the words “in
1307accordance with the instructions in subsection (b),”.
1308 SECTION 178. Section 9-614(3) of said chapter 106 is hereby amended by striking out
1309the NOTICE OF OUR PLAN TO SELL PROPERTY form in that Section and by inserting in
1310place thereof the following form:--
1311 (Name and address of secured party)
1312 (Date)
1313 NOTICE OF OUR PLAN TO SELL PROPERTY
1314 (Name and address of any obligor who is also a debtor)
1315 Subject: (Identify transaction) 66 of 88
1316 We have your (describe collateral), because you broke promises in our agreement.
1317 {1} We will sell (describe collateral) at public sale. A sale could include a lease or
1318license. The sale will be held as follows:
1319 (Date)
1320 (Time)
1321 (Place)
1322 You may attend the sale and bring bidders if you want.
1323 {2} We will sell (describe collateral) at private sale sometime after (date). A sale could
1324include a lease or license.
1325 {3} The money that we get from the sale, after paying our costs, will reduce the amount
1326you owe. If we get less money than you owe, you (will or will not, as applicable) still owe us the
1327difference. If we get more money than you owe, you will get the extra money, unless we must
1328pay it to someone else.
1329 {4} You can get the property back at any time before we sell it by paying us the full
1330amount you owe, not just the past due payments, including our expenses. To learn the exact
1331amount you must pay, call us at (telephone number).
1332 {5} If you want us to explain to you in (writing) (writing or in (description of electronic
1333record)) (description of electronic record) how we have figured the amount that you owe us, {6}
1334call us at (telephone number) (or) (write us at (secured party’s address)) (or contact us by
1335(description of electronic communication method)) {7} and request (a written explanation) (a 67 of 88
1336written explanation or an explanation in (description of electronic record)) (an explanation in
1337(description of electronic record)).
1338 {8} We will charge you $ (amount) for the explanation if we sent you another written
1339explanation of the amount you owe us within the last six months.
1340 {9} If you need more information about the sale (call us at (telephone number)) (or)
1341(write us at (secured party’s address)) (or contact us by (description of electronic communication
1342method)).
1343 {10} We are sending this notice to the following other people who have an interest in
1344(describe collateral) or who owe money under your agreement:
1345 (Names of all other debtors and obligors, if any)
1346 [End of Form]
1347 SECTION 179. Section 9-614 of said chapter 106 is hereby amended by inserting
1348following Section 6.14(a) as amended, the following new subsection:--
1349 (b) Instructions for form of notification. The following instructions apply to the form of
1350notification in subsection (a)(3):
1351 (1) The instructions in this subsection refer to the numbers in braces before items in the
1352form of notification in subsection (a)(3). Do not include the numbers or braces in the
1353notification. The numbers and braces are used only for the purpose of these instructions.
1354 (2) Include and complete either item {1}, if the notification relates to a public disposition
1355of the collateral, or item {2}, if the notification relates to a private disposition of the collateral. 68 of 88
1356 (3) Include and complete items {3}, {4}, {5}, {6}, and {7}.
1357 (4) In item {5}, include and complete any one of the three alternative methods for the
1358explanation— writing, writing or electronic record, or electronic record.
1359 (5) In item {6}, include the telephone number. In addition, the sender may include and
1360complete either or both of the two additional alternative methods of communication—writing or
1361electronic communication —for the recipient of the notification to communicate with the sender.
1362Neither of the two additional methods of communication is required to be included.
1363 (6) In item {7}, include and complete the method or methods for the explanation —
1364writing, writing or electronic record, or electronic record—included in item {5}.
1365 (7) Include and complete item {8} only if a written explanation is included in item {5} as
1366a method for communicating the explanation and the sender will charge the recipient for another
1367written explanation.
1368 (8) In item {9}, include either the telephone number or the address or both the telephone
1369number and the address. In addition, the sender may include and complete the additional method
1370of communication—electronic communication—for the recipient of the notification to
1371communicate with the sender. The additional method of electronic communication is not
1372required to be included.
1373 (9) If item {10} does not apply, insert “None” after “agreement:”.
1374 SECTION 180. Section 9-615 of said chapter 106 is hereby amended by striking out the
1375words “an authenticated” wherever they appear in that Section and by inserting in each place
1376thereof the following words:-- “a signed”. 69 of 88
1377 SECTION 181. Section 9-616(a)(1) of said chapter 106 is hereby amended by striking
1378out the word “writing” in that Section and by inserting in place thereof the following word:--
1379“record”.
1380 SECTION 182. Section 9-616(a)(2) of said chapter 106 is hereby amended by striking
1381out the word “authenticated” in that Section and by inserting in place thereof the following
1382word:-- “signed”.
1383 SECTION 183. Section 9-616(b)(1)(A) of said chapter 106 is hereby amended by striking
1384out the word “written” in that Section and by inserting, following the word “demand”, the
1385following words:-- “in a record”.
1386 SECTION 184. Section 9-616(c) of said chapter 106 is hereby amended by striking out
1387the words “a writing” in that Section and by inserting in place thereof the following words:-- “an
1388explanation”.
1389 SECTION 185. Section 9-619(a) of said chapter 106 is hereby amended by striking out
1390the word “authenticated” in that Section and by inserting in place thereof the following word:--
1391“signed”.
1392 SECTION 186. Section 9-620(a)(2) of said chapter 106 is hereby amended by striking
1393out the word “authenticated” and by inserting in each place thereof the following word:--
1394“signed”.
1395 SECTION 187. Section 9-620(b) of said chapter 106 is hereby amended by striking out
1396the word “an authenticated” in that Section and by inserting in each place thereof the following
1397words:-- “a signed”. 70 of 88
1398 SECTION 188. Section 9-620(c) of said chapter 106 is hereby amended by striking out
1399the word “authenticated” wherever it appears in that Section and by inserting in each place
1400thereof the following word:-- “signed”.
1401 SECTION 189. Section 9-620(f)(2) of said chapter 106 is hereby amended by striking out
1402the word “authenticated” and by inserting in each place thereof the following word:-- “signed”.
1403 SECTION 190. Section 9-621(a)(1) of said chapter 106 is hereby amended by striking
1404out the words “an authenticated” and by inserting in place thereof the following words:-- “a
1405signed”.
1406 SECTION 191. Section 9-624 of said chapter 106 is hereby amended by striking out the
1407word “authenticated” wherever it appears in that Section and by inserting in each place thereof
1408the following word:-- “signed”.
1409 SECTION 192. Section 9-628(a) of said chapter 106 is hereby amended by striking out
1410the word “Unless” in that Section and by inserting in place thereof the following words:--
1411“Subject to subsection (f), unless”.
1412 SECTION 193. Section 9-628(b) of said chapter 106 is hereby amended by striking out
1413the word “A”, following the words “Limitation of liability based on status as secured party.” in
1414that Section and by inserting in place thereof the following words:-- “Subject to subsection (f),
1415a”.
1416 SECTION 194. Section 9-628 of said chapter 106 is further hereby amended by inserting,
1417at the end of subsection (e), the following new subsection:-- 71 of 88
1418 (f) Exception: Limitation of liability under subsections (a) and (b) does not apply.
1419Subsections (a) and (b) do not apply to limit the liability of a secured party to a person if, at the
1420time the secured party obtains control of collateral that is a controllable account, controllable
1421electronic record, or controllable payment intangible or at the time the security interest attaches
1422to the collateral, whichever is later:
1423 (1) the person is a debtor or obligor; and
1424 (2) the secured party knows that the information in subsection (b)(1)(A), (B), or (C)
1425relating to the person is not provided by the collateral, a record attached to or logically associated
1426with the collateral, or the system in which the collateral is recorded.
1427 SECTION 195. Chapter 106 is further amended by adding the following new article after
1428Article 9:--
1429 ARTICLE 12
1430 CONTROLLABLE ELECTRONIC RECORDS
1431 Section 12-101. Title.
1432 This article may be cited as Uniform Commercial Code —Controllable Electronic
1433Records.
1434 Section 12-102. Definitions.
1435 (a) Article 12 definitions.
1436 In this article: 72 of 88
1437 (1) “Controllable electronic record” means a record stored in an electronic medium that
1438can be subjected to control under Section 12-105. The term does not include a controllable
1439account, a controllable payment intangible, a deposit account, an electronic copy of a record
1440evidencing chattel paper, an electronic document of title, electronic money, investment property,
1441or a transferable record.
1442 (2) “Qualifying purchaser” means a purchaser of a controllable electronic record or an
1443interest in a controllable electronic record that obtains control of the controllable electronic
1444record for value, in good faith, and without notice of a claim of a property right in the
1445controllable electronic record.
1446 (3) “Transferable record” has the meaning provided for that term in:
1447 (A) Section 201(a)(1) of the Electronic Signatures in Global and National Commerce
1448Act, 15 U.S.C. Section 7021(a)(1), as amended; or
1449 (B) Section 16(a) of the Massachusetts Uniform Electronic Transactions Act, Chapter
1450110G.
1451 (4) “Value” has the meaning provided in Section 3-303(a), as if references in that
1452subsection to an “instrument” were references to a controllable account, controllable electronic
1453record, or controllable payment intangible.
1454 (b) Definitions in Article 9. The definitions in Article 9 of “account debtor”, “controllable
1455account”, “controllable payment intangible”, “chattel paper”, “deposit account”, “electronic
1456money”, and “investment property” apply to this article. 73 of 88
1457 (c) Article 1 definitions and principles. Article 1 contains general definitions and
1458principles of construction and interpretation applicable throughout this article.
1459 Section 12-103. Relation to Article 9 and Consumer Laws.
1460 (a) Article 9 governs in case of conflict. If there is conflict between this article and
1461Article 9, Article 9 governs.
1462 (b) Applicable consumer law and other laws. A transaction subject to this article is
1463subject to any applicable rule of law that establishes a different rule for consumers, to any other
1464statute or regulation of the commonwealth that regulates the rates, charges, agreements, and
1465practices for loans, credit sales, or other extensions of credit, and to any consumer-protection
1466statute or regulation of the commonwealth.
1467 Section 12-104. Rights in Controllable Account, Controllable Electronic Record, and
1468Controllable Payment Intangible.
1469 (a) Applicability of section to controllable account and controllable payment intangible.
1470This section applies to the acquisition and purchase of rights in a controllable account or
1471controllable payment intangible, including the rights and benefits under subsections (c), (d), (e),
1472(g), and (h) of a purchaser and qualifying purchaser, in the same manner this section applies to a
1473controllable electronic record.
1474 (b) Control of controllable account and controllable payment intangible. To determine
1475whether a purchaser of a controllable account or a controllable payment intangible is a qualifying
1476purchaser, the purchaser obtains control of the account or payment intangible if it obtains control
1477of the controllable electronic record that evidences the account or payment intangible. 74 of 88
1478 (c) Applicability of other law to acquisition of rights. Except as provided in this section,
1479law other than this article determines whether a person acquires a right in a controllable
1480electronic record and the right the person acquires.
1481 (d) Shelter principle and purchase of limited interest. A purchaser of a controllable
1482electronic record acquires all rights in the controllable electronic record that the transferor had or
1483had power to transfer, except that a purchaser of a limited interest in a controllable electronic
1484record acquires rights only to the extent of the interest purchased.
1485 (e) Rights of qualifying purchaser. A qualifying purchaser acquires its rights in the
1486controllable electronic record free of a claim of a property right in the controllable electronic
1487record.
1488 (f) Limitation of rights of qualifying purchaser in other property. Except as provided in
1489subsections (a) and (e) for a controllable account and a controllable payment intangible or law
1490other than this article, a qualifying purchaser takes a right to payment, right to performance, or
1491other interest in property evidenced by the controllable electronic record subject to a claim of a
1492property right in the right to payment, right to performance, or other interest in property.
1493 (g) No-action protection for qualifying purchaser. An action may not be asserted against a
1494qualifying purchaser based on both a purchase by the qualifying purchaser of a controllable
1495electronic record and a claim of a property right in another controllable electronic record,
1496whether the action is framed in conversion, replevin, constructive trust, equitable lien, or other
1497theory.
1498 (h) Filing not notice. Filing of a financing statement under Article 9 is not notice of a
1499claim of a property right in a controllable electronic record. 75 of 88
1500 Section 12-105. Control of Controllable Electronic Record.
1501 (a) General rule: control of controllable electronic record. A person has control of a
1502controllable electronic record if the electronic record, a record attached to or logically associated
1503with the electronic record, or a system in which the electronic record is recorded:
1504 (1) gives the person:
1505 (A) power to avail itself of substantially all the benefit from the electronic record; and
1506 (B) exclusive power, subject to subsection (b), to:
1507 (i) prevent others from availing themselves of substantially all the benefit from the
1508electronic record; and
1509 (ii) transfer control of the electronic record to another person or cause another person to
1510obtain control of another controllable electronic record as a result of the transfer of the electronic
1511record; and
1512 (2) enables the person readily to identify itself in any way, including by name, identifying
1513number, cryptographic key, office, or account number, as having the powers specified in
1514paragraph (1).
1515 (b) Meaning of exclusive. Subject to subsection (c), a power is exclusive under
1516subsection (a)(1)(B)(i) and (ii) even if:
1517 (1) the controllable electronic record, a record attached to or logically associated with the
1518electronic record, or a system in which the electronic record is recorded limits the use of the 76 of 88
1519electronic record or has a protocol programmed to cause a change, including a transfer or loss of
1520control or a modification of benefits afforded by the electronic record; or
1521 (2) the power is shared with another person.
1522 (c) When power not shared with another person. A power of a person is not shared with
1523another person under subsection (b)(2) and the person’s power is not exclusive if:
1524 (1) the person can exercise the power only if the power also is exercised by the other
1525person; and
1526 (2) the other person:
1527 (A) can exercise the power without exercise of the power by the person; or
1528 (B) is the transferor to the person of an interest in the controllable electronic record or a
1529controllable account or controllable payment intangible evidenced by the controllable electronic
1530record.
1531 (d) Presumption of exclusivity of certain powers. If a person has the powers specified in
1532subsection (a)(1)(B)(i) and (ii), the powers are presumed to be exclusive.
1533 (e) Control through another person. A person has control of a controllable electronic
1534record if another person, other than the transferor to the person of an interest in the controllable
1535electronic record or a controllable account or controllable payment intangible evidenced by the
1536controllable electronic record:
1537 (1) has control of the electronic record and acknowledges that it has control on behalf of
1538the person; or 77 of 88
1539 (2) obtains control of the electronic record after having acknowledged that it will obtain
1540control of the electronic record on behalf of the person.
1541 (f) No requirement to acknowledge. A person that has control under this section is not
1542required to acknowledge that it has control on behalf of another person.
1543 (g) No duties or confirmation. If a person acknowledges that it has or will obtain control
1544on behalf of another person, unless the person otherwise agrees or law other than this article or
1545Article 9 otherwise provides, the person does not owe any duty to the other person and is not
1546required to confirm the acknowledgment to any other person.
1547 Section 12-106. Discharge of Account Debtor on Controllable Account or Controllable
1548Payment Intangible.
1549 (a) Discharge of account debtor. An account debtor on a controllable account or
1550controllable payment intangible may discharge its obligation by paying:
1551 (1) the person having control of the controllable electronic record that evidences the
1552controllable account or controllable payment intangible; or
1553 (2) except as provided in subsection (b), a person that formerly had control of the
1554controllable electronic record.
1555 (b) Content and effect of notification. Subject to subsection (d), the account debtor may
1556not discharge its obligation by paying a person that formerly had control of the controllable
1557electronic record if the account debtor receives a notification that:
1558 (1) is signed by a person that formerly had control or the person to which control was
1559transferred; 78 of 88
1560 (2) reasonably identifies the controllable account or controllable payment intangible;
1561 (3) notifies the account debtor that control of the controllable electronic record that
1562evidences the controllable account or controllable payment intangible was transferred;
1563 (4) identifies the transferee, in any reasonable way, including by name, identifying
1564number, cryptographic key, office, or account number; and
1565 (5) provides a commercially reasonable method by which the account debtor is to pay the
1566transferee.
1567 (c) Discharge following effective notification. After receipt of a notification that complies
1568with subsection (b), the account debtor may discharge its obligation by paying in accordance
1569with the notification and may not discharge the obligation by paying a person that formerly had
1570control.
1571 (d) When notification ineffective. Subject to subsection (h), notification is ineffective
1572under subsection (b):
1573 (1) unless, before the notification is sent, the account debtor and the person that, at that
1574time, had control of the controllable electronic record that evidences the controllable account or
1575controllable payment intangible agree in a signed record to a commercially reasonable method
1576by which a person may furnish reasonable proof that control has been transferred;
1577 (2) to the extent an agreement between the account debtor and seller of a payment
1578intangible limits the account debtor’s duty to pay a person other than the seller and the limitation
1579is effective under law other than this article; or
1580 (3) at the option of the account debtor, if the notification notifies the account debtor to: 79 of 88
1581 (A) divide a payment;
1582 (B) make less than the full amount of an installment or other periodic payment; or
1583 (C) pay any part of a payment by more than one method or to more than one person.
1584 (e) Proof of transfer of control. Subject to subsection (h), if requested by the account
1585debtor, the person giving the notification under subsection (b) seasonably shall furnish
1586reasonable proof, using the method in the agreement referred to in subsection (d)(1), that control
1587of the controllable electronic record has been transferred. Unless the person complies with the
1588request, the account debtor may discharge its obligation by paying a person that formerly had
1589control, even if the account debtor has received a notification under subsection (b).
1590 (f) What constitutes reasonable proof. A person furnishes reasonable proof under
1591subsection (e) that control has been transferred if the person demonstrates, using the method in
1592the agreement referred to in subsection (d)(1), that the transferee has the power to:
1593 (1) avail itself of substantially all the benefit from the controllable electronic record;
1594 (2) prevent others from availing themselves of substantially all the benefit from the
1595controllable electronic record; and
1596 (3) transfer the powers specified in paragraphs (1) and (2) to another person.
1597 (g) Rights not waivable. Subject to subsection (h), an account debtor may not waive or
1598vary its rights under subsections (d)(1) and (e) or its option under subsection (d)(3). 80 of 88
1599 (h) Rule for individual under other law. This section is subject to law other than this
1600article which establishes a different rule for an account debtor who is an individual and who
1601incurred the obligation primarily for personal, family, or household purposes.
1602 Section 12-107. Governing Law.
1603 (a) Governing law: general rule. Except as provided in subsection (b), the local law of a
1604controllable electronic record’s jurisdiction governs a matter covered by this article.
1605 (b) Governing law: Section 12-106. For a controllable electronic record that evidences a
1606controllable account or controllable payment intangible, the local law of the controllable
1607electronic record’s jurisdiction governs a matter covered by Section 12-106 unless an effective
1608agreement determines that the local law of another jurisdiction governs.
1609 (c) Controllable electronic record’s jurisdiction. The following rules determine a
1610controllable electronic record’s jurisdiction under this section:
1611 (1) If the controllable electronic record, or a record attached to or logically associated
1612with the controllable electronic record and readily available for review, expressly provides that a
1613particular jurisdiction is the controllable electronic record’s jurisdiction for purposes of this
1614article or this chapter, that jurisdiction is the controllable electronic record’s jurisdiction.
1615 (2) If paragraph (1) does not apply and the rules of the system in which the controllable
1616electronic record is recorded are readily available for review and expressly provide that a
1617particular jurisdiction is the controllable electronic record’s jurisdiction for purposes of this
1618article or this chapter, that jurisdiction is the controllable electronic record’s jurisdiction. 81 of 88
1619 (3) If paragraphs (1) and (2) do not apply and the controllable electronic record, or a
1620record attached to or logically associated with the controllable electronic record and readily
1621available for review, expressly provides that the controllable electronic record is governed by the
1622law of a particular jurisdiction, that jurisdiction is the controllable electronic record’s
1623jurisdiction.
1624 (4) If paragraphs (1), (2), and (3) do not apply and the rules of the system in which the
1625controllable electronic record is recorded are readily available for review and expressly provide
1626that the controllable electronic record or the system is governed by the law of a particular
1627jurisdiction, that jurisdiction is the controllable electronic record’s jurisdiction.
1628 (5) If paragraphs (1) through (4) do not apply, the controllable electronic record’s
1629jurisdiction is the District of Columbia.
1630 (d) Applicability of Article 12. If subsection (c)(5) applies and Article 12 is not in effect
1631in the District of Columbia without material modification, the governing law for a matter
1632covered by this article is the law of the District of Columbia as though Article 12 were in effect
1633in the District of Columbia without material modification. In this subsection, “Article 12” means
1634Article 12 of Uniform Commercial Code Amendments (2022).
1635 (e) Relation of matter or transaction to controllable electronic record’s jurisdiction not
1636necessary. To the extent subsections (a) and (b) provide that the local law of the controllable
1637electronic record’s jurisdiction governs a matter covered by this article, that law governs even if
1638the matter or a transaction to which the matter relates does not bear any relation to the
1639controllable electronic record’s jurisdiction. 82 of 88
1640 (f) Rights of purchasers determined at time of purchase. The rights acquired under
1641Section 12-104 by a purchaser or qualifying purchaser are governed by the law applicable under
1642this section at the time of purchase.
1643 SECTION 196. Chapter 106 is further amended by adding the following new article after
1644Article 12:--
1645 ARTICLE A
1646 TRANSITIONAL PROVISIONS FOR UNIFORM COMMERCIAL CODE
1647AMENDMENTS (2022)
1648 PART 1
1649 GENERAL PROVISIONS AND DEFINITIONS
1650 Section A-101. Title.
1651 This article may be cited as Transitional Provisions for Uniform Commercial Code
1652Amendments (2022).
1653 Section A-102. Definitions.
1654 (a) Article A Definitions. In this article:
1655 (1) “Adjustment date” means July 1, 2025, or the date that is one year after January 1,
16562027, whichever is later.
1657 (2) “Article 12” means Article 12 of this chapter. 83 of 88
1658 (3) “Article 12 property” means a controllable account, controllable electronic record, or
1659controllable payment intangible.
1660 (b) Definitions in other articles. The following definitions in other articles of this chapter
1661apply to this article.
1662 “Controllable account”. Section 9-102.
1663 “Controllable electronic record”. Section 12-102.
1664 “Controllable payment intangible”. Section 9-102.
1665 “Electronic money”. Section 9-102.
1666 “Financing statement”. Section 9-102.
1667 (c) Article 1 definitions and principles. Article 1 contains general definitions and
1668principles of construction and interpretation applicable throughout this article. References in this
1669article to ''this act'' refer to the legislative enactment by which chapter 106 of the General Laws is
1670amended effective on the date provided in Section A-401.
1671 PART 2
1672 GENERAL TRANSITIONAL PROVISION
1673 Section A-201. Saving Clause.
1674 Except as provided in Part 3, a transaction validly entered into before January 1, 2027
1675and the rights, duties, and interests flowing from the transaction remain valid thereafter and may 84 of 88
1676be terminated, completed, consummated, or enforced as required or permitted by law other than
1677this chapter or, if applicable, this chapter as though this act had not taken effect.
1678 PART 3
1679 TRANSITIONAL PROVISIONS FOR ARTICLES 9 AND 12
1680 Section A-301. Saving Clause.
1681 (a) Pre-effective-date transaction, lien, or interest. Except as provided in this part, Article
16829 as amended by this act and Article 12 apply to a transaction, lien, or other interest in property,
1683even if the transaction, lien, or interest was entered into, created, or acquired before January 1,
16842027.
1685 (b) Continuing validity. Except as provided in subsection (c) and Sections A-302 through
1686A-306:
1687 (1) a transaction, lien, or interest in property that was validly entered into, created, or
1688transferred before January 1, 2027 and was not governed by this chapter, but would be subject to
1689Article 9 as amended by this act or Article 12 if it had been entered into, created, or transferred
1690on or after January 1, 2027, including the rights, duties, and interests flowing from the
1691transaction, lien, or interest, remains valid on and after January 1, 2027; and
1692 (2) the transaction, lien, or interest may be terminated, completed, consummated, and
1693enforced as required or permitted by this chapter as amended by this act or by the law that would
1694apply if this act had not taken effect.
1695 (c) Pre-effective-date proceeding. This act does not affect an action, case, or proceeding
1696commenced before January 1, 2027. 85 of 88
1697 Section A-302. Security Interest Perfected Before Effective Date.
1698 (a) Continuing perfection: perfection requirements satisfied. A security interest that is
1699enforceable and perfected immediately before January 1, 2027 is a perfected security interest
1700under this chapter as amended by this act if, on January 1, 2027, the requirements for
1701enforceability and perfection under this chapter as amended by this act are satisfied without
1702further action.
1703 (b) Continuing perfection: enforceability or perfection requirements not satisfied. If a
1704security interest is enforceable and perfected immediately before January 1, 2027, but the
1705requirements for enforceability or perfection under this chapter as amended by this act, are not
1706satisfied on January 1, 2027, the security interest:
1707 (1) is a perfected security interest until the earlier of the time perfection would have
1708ceased under the law in effect immediately before January 1, 2027 or the adjustment date;
1709 (2) remains enforceable thereafter only if the security interest satisfies the requirements
1710for enforceability under Section 9-203, as amended by this act before the adjustment date; and
1711 (3) remains perfected thereafter only if the requirements for perfection under this chapter
1712as amended by this act are satisfied before the time specified in paragraph (1).
1713 Section A-303. Security Interest Unperfected Before Effective Date.
1714 A security interest that is enforceable immediately before January 1, 2027 but is
1715unperfected at that time:
1716 (1) remains an enforceable security interest until the adjustment date; 86 of 88
1717 (2) remains enforceable thereafter if the security interest becomes enforceable under
1718Section 9-203, as amended by this act, on January 1, 2027 or before the adjustment date; and
1719 (3) becomes perfected:
1720 (A) without further action, on January 1, 2027 if the requirements for perfection under
1721this chapter as amended by this act are satisfied before or at that time; or
1722 (B) when the requirements for perfection are satisfied if the requirements are satisfied
1723after that time.
1724 Section A-304. Effectiveness of Actions Taken Before Effective Date.
1725 (a) Pre-effective-date action; attachment and perfection before adjustment date. If action,
1726other than the filing of a financing statement, is taken before January 1, 2027 and the action
1727would have resulted in perfection of the security interest had the security interest become
1728enforceable before January 1, 2027, the action is effective to perfect a security interest that
1729attaches under this chapter as amended by this act before the adjustment date. An attached
1730security interest becomes unperfected on the adjustment date unless the security interest becomes
1731a perfected security interest under this chapter as amended by this act before the adjustment date.
1732 (b) Pre-effective-date filing. The filing of a financing statement before January 1, 2027 is
1733effective to perfect a security interest on January 1, 2027 to the extent the filing would satisfy the
1734requirements for perfection under this chapter as amended by this act.
1735 (c) Pre-effective-date enforceability action. The taking of an action before January 1,
17362027 is sufficient for the enforceability of a security interest on January 1, 2027 if the action
1737would satisfy the requirements for enforceability under this chapter as amended by this act. 87 of 88
1738 Section A-305. Priority.
1739 (a) Determination of priority. Subject to subsections (b) and (c), this chapter as amended
1740by this act determines the priority of conflicting claims to collateral.
1741 (b) Established priorities. Subject to subsection (c), if the priorities of claims to collateral
1742were established before January 1, 2027, Article 9 as in effect before January 1, 2027 determines
1743priority.
1744 (c) Determination of certain priorities on adjustment date. On the adjustment date, to the
1745extent the priorities determined by Article 9 as amended by this act modify the priorities
1746established before January 1, 2027, the priorities of claims to Article 12 property and electronic
1747money established before January 1, 2027 cease to apply.
1748 Section A-306. Priority of Claims When Priority Rules of Article 9 Do Not Apply.
1749 (a) Determination of priority. Subject to subsections (b) and (c), Article 12 determines the
1750priority of conflicting claims to Article 12 property when the priority rules of Article 9 as
1751amended by this act do not apply.
1752 (b) Established priorities. Subject to subsection (c), when the priority rules of Article 9 as
1753amended by this act do not apply and the priorities of claims to Article 12 property were
1754established before January 1, 2027, law other than Article 12 determines priority.
1755 (c) Determination of certain priorities on adjustment date. When the priority rules of
1756Article 9 as amended by this act do not apply, to the extent the priorities determined by this
1757chapter as amended by this act modify the priorities established before January 1, 2027, the 88 of 88
1758priorities of claims to Article 12 property established before January 1, 2027 cease to apply on
1759the adjustment date.
1760 PART 4
1761 EFFECTIVE DATE
1762 Section A-401. Effective Date.
1763 This act takes effect on January 1, 2027.