2023 -- H 5543

========

LC001292

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

____________

A N   A C T

RELATING TO THE UNIFORM COMMERCIAL CODE

     Introduced By: Representatives Kennedy, Azzinaro, Edwards, Kazarian, and Diaz

     Date Introduced: February 15, 2023

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 6A-1-201, 6A-1-204, 6A-1-301 and 6A-1-306 of the General Laws

in Chapter 6A-1 entitled "General Provisions" are hereby amended to read as follows:

     6A-1-201. General definitions.

     (a) Unless the context otherwise requires, words or phrases defined in this section, or in

the additional definitions contained in other chapters of title 6A that apply to particular chapters or

parts thereof, have the meanings stated.

     (b) Subject to definitions contained in other chapters of title 6A that apply to particular

chapters or parts thereof:

     (1) “Action”, in the sense of a judicial proceeding, includes recoupment, counterclaim, set-

off, suit in equity, and any other proceeding in which rights are determined.

     (2) “Aggrieved party” means a party entitled to pursue a remedy.

     (3) “Agreement”, as distinguished from “contract”, means the bargain of the parties in fact,

as found in their language or inferred from other circumstances, including course of performance,

course of dealing, or usage of trade as provided in § 6A-1-303.

     (4) “Bank” means a person engaged in the business of banking and includes a savings bank,

savings and loan association, credit union, and trust company.

     (5) “Bearer” means a person in control of a negotiable electronic document of title or a

person in possession of a negotiable instrument, negotiable tangible document of title, or

certificated security that is payable to bearer or indorsed in blank.

     (6) “Bill of lading” means a document of title evidencing the receipt of goods for shipment

issued by a person engaged in the business of directly or indirectly transporting or forwarding

goods. This term does not include a warehouse receipt.

     (7) “Branch” includes a separately incorporated foreign branch of a bank.

     (8) “Burden of establishing” a fact means the burden of persuading the trier of fact that the

existence of the fact is more probable than its nonexistence.

     (9) “Buyer in ordinary course of business” means a person that buys goods in good faith,

without knowledge that the sale violates the rights of another person in the goods, and in the

ordinary course from a person, other than a pawnbroker, in the business of selling goods of that

kind. A person buys goods in the ordinary course if the sale to the person comports with the usual

or customary practices in the kind of business in which the seller is engaged or with the seller’s

own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or

minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of

business may buy for cash, by exchange of other property, or on secured or unsecured credit, and

may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that

takes possession of the goods or has a right to recover the goods from the seller under Chapter 2

may be a buyer in ordinary course of business. “Buyer in ordinary course of business” does not

include a person that acquires goods in a transfer in bulk or as security for or in total or partial

satisfaction of a money debt.

     (10) “Conspicuous”, with reference to a term, means so written, displayed, or presented

that, based on the totality of the circumstances, a reasonable person against which it is to operate

ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court.

Conspicuous terms include the following:

     (A) A heading in capitals equal to or greater in size than the surrounding text, or in

contrasting type, font, or color to the surrounding text of the same or lesser size; and

     (B) Language in the body of a record or display in larger type than the surrounding text, or

in contrasting type, font, or color to the surrounding text of the same size, or set off from

surrounding text of the same size by symbols or other marks that call attention to the language.

     (11) “Consumer” means an individual who enters into a transaction primarily for personal,

family, or household purposes.

     (12) “Contract”, as distinguished from “agreement”, means the total legal obligation that

results from the parties’ agreement as determined by title 6A as supplemented by any other

applicable laws.

     (13) “Creditor” includes a general creditor, a secured creditor, a lien creditor, and any

LC001292 - Page 2 of 113

representative of creditors, including an assignee for the benefit of creditors, a trustee in

bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor’s or

assignor’s estate.

     (14) “Defendant” includes a person in the position of defendant in a counterclaim, cross-

claim, or third-party claim.

     (15) “Delivery”, with respect to an electronic document of title means voluntary transfer

of control and with respect to an instrument, a tangible document of title, or an authoritative tangible

copy of a record evidencing chattel paper, means voluntary transfer of possession.

     (16) “Document of title” means a record:

     (i) That in the regular course of business or financing is treated as adequately evidencing

that the person in possession or control of the record is entitled to receive, control, hold, and dispose

of the record and the goods the record covers; and

     (ii) That purports to be issued by or addressed to a bailee and to cover goods in the bailee’s

possession which are either identified or are fungible portions of an identified mass. The term

includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and

order for delivery of goods.

     An electronic document of title means a document of title evidenced by a record consisting

of information stored in an electronic medium. A tangible document of title means a document of

title evidenced by a record consisting of information that is inscribed on a tangible medium.

     (16.1) "Electronic" means relating to technology having electrical, digital, magnetic,

wireless, optical, electromagnetic, or similar capabilities.

     (17) “Fault” means a default, breach, or wrongful act or omission.

     (18) “Fungible goods” means:

     (A) Goods of which any unit, by nature or usage of trade, is the equivalent of any other like

unit; or

     (B) Goods that by agreement are treated as equivalent.

     (19) “Genuine” means free of forgery or counterfeiting.

     (20) “Good faith” means honesty in fact in the conduct or transaction concerned.

     (21) “Holder” means:

     (A) The person in possession of a negotiable instrument that is payable either to bearer or

to an identified person that is the person in possession;

     (B) The person in possession of a negotiable tangible document of title if the goods are

deliverable either to bearer or to the order of the person in possession; or

     (C) The person in control other than pursuant to § 6A-7-106(g) of a negotiable electronic

LC001292 - Page 3 of 113

document of title.

     (22) “Insolvency proceeding” includes an assignment for the benefit of creditors or other

proceeding intended to liquidate or rehabilitate the estate of the person involved.

     (23) “Insolvent” means:

     (A) Having generally ceased to pay debts in the ordinary course of business other than as

a result of bona fide dispute;

     (B) Being unable to pay debts as they become due; or

     (C) Being insolvent within the meaning of federal bankruptcy law.

     (24) “Money” means a medium of exchange that is currently authorized or adopted by a

domestic or foreign government. The term includes a monetary unit of account established by an

intergovernmental organization or by agreement between two (2) or more countries. The term

"money" does not include an electronic record that is a medium of exchange recorded and

transferable in a system that existed and operated for the medium of exchange before the medium

of exchange was authorized or adopted by the government.

     (25) “Organization” means a person other than an individual.

     (26) “Party”, as distinguished from “third-party”, means a person that has engaged in a

transaction or made an agreement subject to title 6A.

     (27) “Person” means an individual, corporation, business trust, estate, trust, partnership,

limited liability company, association, joint venture, government, governmental subdivision,

agency, or instrumentality, public corporation, or any other legal or commercial entity. The term

"person" includes a protected series, however denominated, of an entity if the protected series is

established under law other than this title that limits, or limits if conditions specified under the law

are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to

satisfy a claim from assets of the protected series.

     (28) “Present value” means the amount as of a date certain of one or more sums payable in

the future, discounted to the date certain by use of either an interest rate specified by the parties if

that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest

rate is not so specified, a commercially reasonable rate that takes into account the facts and

circumstances at the time the transaction is entered into.

     (29) “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien,

security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in

property.

     (30) “Purchaser” means a person that takes by purchase.

     (31) “Record” means information that is inscribed on a tangible medium or that is stored

LC001292 - Page 4 of 113

in an electronic or other medium and is retrievable in perceivable form.

     (32) “Remedy” means any remedial right to which an aggrieved party is entitled with or

without resort to a tribunal.

     (33) “Representative” means a person empowered to act for another, including an agent,

an officer of a corporation or association, and a trustee, executor, or administrator of an estate.

     (34) “Right” includes remedy.

     (35) “Security interest” means an interest in personal property or fixtures which secures

payment or performance of an obligation. “Security interest” includes any interest of a consignor

and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction

that is subject to Chapter 9. “Security interest” does not include the special property interest of a

buyer of goods on identification of those goods to a contract for sale under § 6A-2-401, but a buyer

may also acquire a “security interest” by complying with Chapter 9. Except as otherwise provided

in § 6A-2-505, the right of a seller or lessor of goods under Chapter 2 or 2.1 to retain or acquire

possession of the goods is not a “security interest”, but a seller or lessor may also acquire a “security

interest” by complying with Chapter 9. The retention or reservation of title by a seller of goods

notwithstanding shipment or delivery to the buyer under § 6A-2-401 is limited in effect to a

reservation of a “security interest.” Whether a transaction in the form of a lease creates a “security

interest” is determined pursuant to § 6A-1-203.

     (36) “Send” in connection with a writing, record, or notice record or notification means:

     (A) To deposit in the mail, or deliver for transmission, or transmit by any other usual means

of communication with postage or cost of transmission provided for, and properly addressed and,

in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none

addressed to any address reasonable under the circumstances; or

     (B) In any other way to cause to be received any record or notice within the time it would

have arrived if properly sent. To cause the record or notification to be received within the time it

would have been received if properly sent under subsection (b)(36)(A) of this section.

     (37) “Signed” includes using any symbol executed or adopted with present intention to

adopt or accept a writing. "Sign" means, with present intent to authenticate or adopt a record:

     (i) Execute or adopt a tangible symbol; or

     (ii) Attach to or logically associate with the record an electronic symbol, sound, or process.

     "Signed", "signing". And "signature" have corresponding meanings.

     (38) “State” means a State of the United States, the District of Columbia, Puerto Rico, the

United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the

United States.

LC001292 - Page 5 of 113

     (39) “Surety” includes a guarantor or other secondary obligor.

     (40) “Term” means a portion of an agreement that relates to a particular matter.

     (41) “Unauthorized signature” means a signature made without actual, implied, or apparent

authority. The term includes a forgery.

     (42) “Warehouse receipt” means a document of title issued by a person engaged in the

business of storing goods for hire. The term does not include a bill of lading.

     (43) “Writing” includes printing, typewriting, or any other intentional reduction to tangible

form. “Written” has a corresponding meaning.

     6A-1-204. Value.

     Except as otherwise provided in chapters 3, 4, and 5, and 12 of this title, a person gives

value for rights if the person acquires them:

     (1) In return for a binding commitment to extend credit or for the extension of immediately

available credit, whether or not drawn upon and whether or not a charge-back is provided for in the

event of difficulties in collection;

     (2) As security for, or in total or partial satisfaction of, a preexisting claim;

     (3) By accepting delivery under a preexisting contract for purchase; or

     (4) In return for any consideration sufficient to support a simple contract.

     6A-1-301. Territorial applicability — Parties’ power to choose applicable law.

     (a) Except as otherwise provided in this section, when a transaction bears a reasonable

relation to this state and also to another state or nation, the parties may agree that the law either of

this state or of such other state or nation shall govern their rights and duties.

     (b) In the absence of an agreement effective under subsection (a), and except as provided

in subsection (c), the Uniform Commercial Code applies to transactions bearing an appropriate

relation to this state.

     (c) If one of the following provisions of title 6A specifies the applicable law, that provision

governs and a contrary agreement is effective only to the extent permitted by the law so specified:

     (1) Section 6A-2-402;

     (2) Sections 6A-2.1-105 and 6A-2.1-106;

     (3) Section 6A-4-102;

     (4) Section 6A-4.1-507;

     (5) Section 6A-5-116;

     (6) [RESERVED]

     (7) Section 6A-8-110;

     (8) Sections 6A-9-301 through 6A-9-307.

LC001292 - Page 6 of 113

     (9) Section 6A-12-107.

     6A-1-306. Waiver or renunciation of claim or right after breach.

     A claim or right arising out of an alleged breach may be discharged in whole or in part

without consideration by agreement of the aggrieved party in an authenticated a signed record.

     SECTION 2. Sections 6A-2-102, 6A-2-106, 6A-2-201, 6A-2-202, 6A-2-203, 6A-2-205

and 6A-2-209 of the General Laws in Chapter 6A-2 entitled "Sales" are hereby amended to read as

follows:

     6A-2-102. Scope — Certain security and other transactions excluded from this

chapter.

     Unless the context otherwise requires, this chapter applies to transactions in goods; it does

not apply to any transaction which, although in the form of an unconditional contract to sell or

present sale, is intended to operate only as a security transaction, nor does this chapter impair or

repeal any statute regulating sales to consumers, farmers, or other specified classes of buyers.

     (1) Unless the context otherwise requires, and except as provided in subsection (3) of this

section, this chapter applies to transactions in goods and, in the case of a hybrid transaction, it

applies to the extent provided in subsection (2) of this section.

     (2) In a hybrid transaction:

     (a) If the sale-of-goods aspects do not predominate, only the provisions of this chapter

which relate primarily to the sale-of-goods aspects of the transaction apply, and the provisions that

relate primarily to the transaction as a whole do not apply.

     (b) If the sale-of-goods aspects predominate, this chapter applies to the transaction but does

not preclude application in appropriate circumstances of other law to aspects of the transaction

which do not relate to the sale of goods.

     (3) This chapter does not:

     (a) Apply to a transaction that, even though in the form of an unconditional contract to sell

or present sale, operates only to create a security interest; or

     (b) Impair or repeal a statute regulating sales to consumers, farmers, or other specified

classes of buyers.

     6A-2-106. Definitions — “Contract” — “Agreement” — “Contract for sale” — “Sale”

— “Present sale” — “Conforming” to contract — “Termination” — “Cancellation”.

Definitions — “Contract” — “Agreement” — “Contract for sale” — “Sale” — “Present sale”

— “Conforming” to contract — “Termination” — “Cancellation” – “Hybrid Transaction”.

     (1) In this chapter unless the context otherwise requires “contract” and “agreement” are

limited to those relating to the present or future sale of goods. “Contract for sale” includes both a

LC001292 - Page 7 of 113

present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing

of title from the seller to the buyer for a price (§ 6A-2-401). A “present sale” means a sale which

is accomplished by the making of the contract.

     (2) Goods or conduct including any part of a performance are “conforming” or conform to

the contract when they are in accordance with the obligations under the contract.

     (3) “Termination” occurs when either party pursuant to a power created by agreement or

law puts an end to the contract otherwise than for its breach. On “termination” all obligations which

are still executory on both sides are discharged but any right based on prior breach or performance

survives.

     (4) “Cancellation” occurs when either party puts an end to the contract for breach by the

other and its effect is the same as that of “termination” except that the cancelling party also retains

any remedy for breach of the whole contract or any unperformed balance.

     (5) “Hybrid transaction” means a single transaction involving a sale of goods and:

     (i) The provision of services;

     (ii) A lease of other goods; or

     (iii) A sale, lease, or license of property other than goods.

     6A-2-201. Formal requirements — Statute of frauds.

     (1) Except as otherwise provided in this section, a contract for the sale of goods for the

price of five hundred dollars ($500) or more is not enforceable by way of action or defense unless

there is some writing a record sufficient to indicate that a contract for sale has been made between

the parties and signed by the party against whom enforcement is sought or by his or her the party's

authorized agent or broker. A writing record is not insufficient because it omits or incorrectly states

a term agreed upon but the contract is not enforceable under this paragraph subsection beyond the

quantity of goods shown in such writing the record.

     (2) Between merchants if within a reasonable time a writing record in confirmation of the

contract and sufficient against the sender is received and the party receiving it has reason to know

its contents, it satisfies the requirements of subsection (1) against such the party unless written

notice in a record of objection to its contents is given within ten (10) days after it is received.

     (3) A contract which does not satisfy the requirements of subsection (1) but which is valid

in other respects is enforceable,

     (a) If the goods are to be specially manufactured for the buyer and are not suitable for sale

to others in the ordinary course of the seller’s business and the seller, before notice of repudiation

is received and under circumstances which reasonably indicate that the goods are for the buyer, has

made either a substantial beginning of their manufacture or commitments for their procurement; or

LC001292 - Page 8 of 113

     (b) If the party against whom enforcement is sought admits in his or her pleading, testimony

or otherwise in court that a contract for sale was made, but the contract is not enforceable under

this provision beyond the quantity of goods admitted; or

     (c) With respect to goods for which payment has been made and accepted or which have

been received and accepted (§ 6A-2-606).

     6A-2-202. Final written expression — Parol or extrinsic evidence.

     Terms with respect to which the confirmatory memoranda of the parties agree or which are

otherwise set forth in a writing record intended by the parties as a final expression of their

agreement with respect to such terms as are included therein may not be contradicted by evidence

of any prior agreement or of a contemporaneous oral agreement but may be explained or

supplemented,

     (a) By course of performance, course of dealing, or usage of trade (§ 6A-1-303); and

     (b) By evidence of consistent additional terms unless the court finds the writing record to

have been intended also as a complete and exclusive statement of the terms of the agreement.

     6A-2-203. Seals inoperative.

     The affixing of a seal to a writing record evidencing a contract for sale or an offer to buy

or sell goods does not constitute the writing record a sealed instrument and the law with respect to

sealed instruments does not apply to such a contract or offer.

     6A-2-205. Firm offers.

     An offer by a merchant to buy or sell goods in a signed writing record which by its terms

gives assurance that it will be held open is not revocable, for lack of consideration, during the time

stated, or if no time is stated for a reasonable time, but in no event may such period of irrevocability

exceed three (3) months; but any such term of assurance on a form supplied by the offeree must be

separately signed by the offeror.

     6A-2-209. Modification, rescission, and waiver.

     (1) An agreement modifying a contract within this chapter needs no consideration to be

binding.

     (2) A signed agreement which excludes modification or rescission except by a signed

writing or other signed record cannot be otherwise modified or rescinded, but except as between

merchants such a requirement on a form supplied by the merchant must be separately signed by the

other party.

     (3) The requirements of the statute of frauds section of this chapter (§ 6A-2-201) must be

satisfied if the contract as modified is within its provisions.

     (4) Although an attempt at modification or rescission does not satisfy the requirements of

LC001292 - Page 9 of 113

subsection (2) or (3) it can operate as a waiver.

     (5) A party who has made a waiver affecting an executory portion of the contract may

retract the waiver by reasonable notification received by the other party that strict performance will

be required of any term waived, unless the retraction would be unjust in view of a material change

of position in reliance on the waiver.

     SECTION 3. Sections 6A- 2.1-102, 6A-2.1-103, 6A-2.1-107, 6A-2.1-201, 6A-2.1-202,

6A-2.1-203, 6A-2.1-205 and 6A-2.1-208 of the General Laws in Chapter 6A-2.1 entitled "Leases"

are hereby amended to read as follows:

     6A-2.1-102. Scope.

     (1) This chapter applies to any transaction, regardless of form, that creates a lease and, in

the case of a hybrid lease, it applies to the extent provided in subsection (b) of this section.

     (2) In a hybrid lease;

     (a) If the lease-of goods aspects do not predominate;

     (i) Only the provisions of this chapter which relate primarily to the lease-of-goods aspects

of the transaction apply, and the provisions that relate primarily to the transaction as a whole do

not apply;

     (ii) Section 6A-2.1-209 applies if the lease is a finance lease; and

     (iii) Section 6A-2.1-407 applies to the promises of the of the lessee in a finance lease to the

extent the promises are consideration for the right to possession and use of the leased goods.

     (b) If the lease-of-goods aspects predominate, this chapter applies to the transaction, but

does not preclude application in appropriate circumstances of other law to aspects of the lease

which do not relate to the lease of goods.

     6A-2.1-103. Definitions and index of definitions.

     (1) In this chapter unless the context otherwise requires:

     (a) “Buyer in ordinary course of business” means a person who in good faith and without

knowledge that the sale to him or her is in violation of the ownership rights or security interest or

leasehold interest of a third party in the goods buys in ordinary course from a person in the business

of selling goods of that kind but does not include a pawnbroker. “Buying” may be for cash or by

exchange of other property or on secured or unsecured credit and includes acquiring goods or

documents of title under a preexisting contract for sale but does not include a transfer in bulk or as

security for or in total or partial satisfaction of a money debt.

     (b) “Cancellation” occurs when either party puts an end to the lease contract for default by

the other party.

     (c) “Commercial unit” means such a unit of goods as by commercial usage is a single whole

LC001292 - Page 10 of 113

for purposes of lease and division of which materially impairs its character or value on the market

or in use. A commercial unit may be a single chapter, as a machine, or a set of chapters, as a suite

of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in

use or in the relevant market as a single whole.

     (d) “Conforming” goods or performance under a lease contract means goods or

performance that are in accordance with the obligations under the lease contract.

     (e) “Consumer lease” means a lease that a lessor regularly engaged in the business of

leasing or selling makes to a lessee who is an individual and who takes under the lease primarily

for a personal, family, or household purpose.

     (f) “Fault” means wrongful act, omission, breach, or default.

     (g) “Finance lease” means a lease with respect to which:

     (i) The lessor does not select, manufacture, or supply the goods;

     (ii) The lessor acquires the goods or the right to possession and use of the goods in

connection with the lease; and

     (iii) One of the following occurs:

     (A) The lessee receives a copy of the contract by which the lessor acquired the goods or

the right to possession and use of the goods before signing the lease contract;

     (B) The lessee’s approval of the contract by which the lessor acquired the goods or the

right to possession and use of the goods is a condition to effectiveness of the lease contract;

     (C) The lessee, before signing the lease contract, receives an accurate and complete

statement designating the promises and warranties, and any disclaimers of warranties, limitations

or modifications of remedies, or liquidated damages, including those of a third party, such as the

manufacturer of the goods, provided to the lessor by the person supplying the goods in connection

with or as part of the contract by which the lessor acquired the goods or the right to possession and

use of the goods; or

     (D) If the lease is not a consumer lease, the lessor, before the lessee signs the lease contract,

informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor,

unless the lessee has selected that person and directed the lessor to acquire the goods or the right to

possession and use of the goods from that person, (b) that the lessee is entitled under this chapter

to the promises and warranties, including those of any third party, provided to the lessor by the

person supplying the goods in connection with or as part of the contract by which the lessor

acquired the goods or the right to possession and use of the goods, and (c) that the lessee may

communicate with the person supplying the goods to the lessor and receive an accurate and

complete statement of those promises and warranties, including any disclaimers and limitations of

LC001292 - Page 11 of 113

them or of remedies.

     (h) “Goods” means all things that are movable at the time of identification to the lease

contract, or are fixtures (§ 6A-2.1-309), but the term does not include money, documents,

instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and

gas, before extraction. The term also includes the unborn young of animals.

     (h.1) "Hybrid lease" means a single transaction involving a lease of goods and;

     (1) The provision of services;

     (2) A sale of other goods; or

     (3) A sale, lease, or license of property other than goods.

     (i) “Installment lease contract” means a lease contract that authorizes or requires the

delivery of goods in separate lots to be separately accepted, even though the lease contract contains

a clause “each delivery is a separate lease” or its equivalent.

     (j) “Lease” means a transfer of the right to possession and use of goods for a term in return

for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation

of a security interest is not a lease. Unless the context clearly indicates otherwise, the term includes

a sublease.

     (k) “Lease agreement” means the bargain, with respect to the lease, of the lessor and the

lessee in fact as found in their language or by implication from other circumstances including

course of dealing or usage of trade or course of performance as provided in this chapter. Unless the

context clearly indicates otherwise, the term includes a sublease agreement.

     (l) “Lease contract” means the total legal obligation that results from the lease agreement

as affected by this chapter and any other applicable rules of law. Unless the context clearly indicates

otherwise, the term includes a sublease contract.

     (m) “Leasehold interest” means the interest of the lessor or the lessee under a lease contract.

     (n) “Lessee” means a person who acquires the right to possession and use of goods under

a lease. Unless the context clearly indicates otherwise, the term includes a sublessee.

     (o) “Lessee in ordinary course of business” means a person who in good faith and without

knowledge that the lease to him or her is in violation of the ownership rights or security interest or

leasehold interest of a third party in the goods leases in ordinary course from a person in the

business of selling or leasing goods of that kind but does not include a pawnbroker. “Leasing” may

be for cash or by exchange of other property or on secured or unsecured credit and includes

acquiring goods or documents of title under a preexisting lease contract but does not include a

transfer in bulk or as security for or in total or partial satisfaction of a money debt.

     (p) “Lessor” means a person who transfers the right to possession and use of goods under

LC001292 - Page 12 of 113

a lease. Unless the context clearly indicates otherwise, the term includes a sublessor.

     (q) “Lessor’s residual interest” means the lessor’s interest in the goods after expiration,

termination, or cancellation of the lease contract.

     (r) “Lien” means a charge against or interest in goods to secure payment of a debt or

performance of an obligation, but the term does not include a security interest.

     (s) “Lot” means a parcel or a single chapter that is the subject matter of a separate lease or

delivery, whether or not it is sufficient to perform the lease contract.

     (t) “Merchant lessee” means a lessee that is a merchant with respect to goods of the kind

subject to the lease.

     (u) “Present value” means the amount as of a date certain of one or more sums payable in

the future, discounted to the date certain. The discount is determined by the interest rate specified

by the parties if the rate was not manifestly unreasonable at the time the transaction was entered

into; otherwise, the discount is determined by a commercially reasonable rate that takes into

account the facts and circumstances of each case at the time the transaction was entered into.

     (v) “Purchase” includes taking by sale, lease, mortgage, security interest, pledge, gift, or

any other voluntary transaction creating an interest in goods.

     (w) “Sublease” means a lease of goods the right to possession and use of which was

acquired by the lessor as a lessee under an existing lease.

     (x) “Supplier” means a person from whom a lessor buys or leases goods to be leased under

a finance lease.

     (y) “Supply contract” means a contract under which a lessor buys or leases goods to be

leased.

     (z) “Termination” occurs when either party pursuant to a power created by agreement or

law puts an end to the lease contract otherwise than for default.

     (2) Other definitions applying to this chapter and the sections in which they appear are:

     “Accessions”. § 6A-2.1-310(1).

     “Construction mortgage”. § 6A-2.1-309(1)(d).

     “Encumbrance”. § 6A-2.1-309(1)(e).

     “Fixtures”. § 6A-2.1-309(1)(a).

     “Fixture filing”. § 6A-2.1-309(1)(b).

     “Purchase money lease”. § 6A-2.1-309(1)(c).

     (3) The following definitions in other chapters apply to this Chapter:

     “Account”. § 6A-9-102(a)(2).

     “Between merchants”. § 6A-2-104(3).

LC001292 - Page 13 of 113

     “Buyer”. § 6A-2-103(1)(a).

     “Chattel paper”. § 6A-9-102(a)(11).

     “Consumer goods”. § 6A-9-102(a)(23).

     “Document”. § 6A-9-102(a)(30).

     “Entrusting”. § 6A-2-403(3).

     “General intangibles”. § 6A-9-102(a)(42).

     “Good faith”. § 6A-2-103(1)(b).

     “Instrument”. § 6A-9-102(a)(47).

     “Merchant”. § 6A-2-104(1).

     “Mortgage”. § 6A-9-102(a)(55).

     “Pursuant to commitment”. § 6A-9-102(a)(69).

     “Receipt”. § 6A-2-103(1)(c).

     “Sale”. § 6A-2-106(1).

     “Sale on approval”. § 6A-2-326.

     “Sale or return”. § 6A-2-326.

     “Seller”. § 6A-2-103(1)(d).

     (4) In addition, chapter 1 of this title contains general definitions and principles of

construction and interpretation applicable throughout this chapter.

     6A-2.1-107. Waiver or renunciation of claim or right after default.

     Any claim or right arising out of an alleged default or breach of warranty may be discharged

in whole or in part without consideration by a written waiver or renunciation signed and in a signed

record delivered by the aggrieved party.

     6A-2.1-201. Statute of frauds.

     (1) A lease contract is not enforceable by way of action or defense unless:

     (a) The total payments to be made under the lease contract, excluding payments for options

to renew or buy, are less than $ 1,000; or

     (b) There is a writing record, signed by the party against whom enforcement is sought or

by that party’s authorized agent, sufficient to indicate that a lease contract has been made between

the parties and to describe the goods leased and the lease term.

     (2) Any description of leased goods or of the lease term is sufficient and satisfies subsection

(1)(b), whether or not it is specific, if it reasonably identifies what is described.

     (3) A writing record is not insufficient because it omits or incorrectly states a term agreed

upon, but the lease contract is not enforceable under subsection (1)(b) beyond the lease term and

the quantity of goods shown in the writing record.

LC001292 - Page 14 of 113

     (4) A lease contract that does not satisfy the requirements of subsection (1), but which is

valid in other respects, is enforceable:

     (a) If the goods are to be specially manufactured or obtained for the lessee and are not

suitable for lease or sale to others in the ordinary course of the lessor’s business, and the lessor,

before notice of repudiation is received and under circumstances that reasonably indicate that the

goods are for the lessee, has made either a substantial beginning of their manufacture or

commitments for their procurement;

     (b) If the party against whom enforcement is sought admits in that party’s pleading,

testimony or otherwise in court that a lease contract was made, but the lease contract is not

enforceable under this provision beyond the quantity of goods admitted; or

     (c) With respect to goods that have been received and accepted by the lessee.

     (5) The lease term under a lease contract referred to in subsection (4) is:

     (a) If there is a writing record signed by the party against whom enforcement is sought or

by that party’s authorized agent specifying the lease term, the term so specified;

     (b) If the party against whom enforcement is sought admits in that party’s pleading,

testimony, or otherwise in court a lease term, the term so admitted; or

     (c) A reasonable lease term.

     6A-2.1-202. Final written expression: parol or extrinsic evidence. Final expression:

Parol or extrinsic evidence.

     Terms with respect to which the confirmatory memoranda of the parties agree or which are

otherwise set forth in a writing record intended by the parties as a final expression of their

agreement with respect to such terms as are included therein may not be contradicted by evidence

of any prior agreement or of a contemporaneous oral agreement but may be explained or

supplemented:

     (a) By course of dealing or usage of trade or by course of performance; and

     (b) By evidence of consistent additional terms unless the court finds the writing record to

have been intended also as a complete and exclusive statement of the terms of the agreement.

     6A-2.1-203. Seals inoperative.

     The affixing of a seal to a writing record evidencing a lease contract or an offer to enter

into a lease contract does not render the writing record a sealed instrument, and the law with respect

to sealed instruments does not apply to the lease contract or offer.

     6A-2.1-205. Firm offers.

     An offer by a merchant to lease goods to or from another person in a signed writing record

that by its terms gives assurance it will be held open is not revocable, for lack of consideration,

LC001292 - Page 15 of 113

during the time stated or, if no time is stated, for a reasonable time, but in no event may the period

of irrevocability exceed 3 months. Any such term of assurance on a form supplied by the offeree

must be separately signed by the offeror.

     6A-2.1-208. Modification, rescission, and waiver.

     (1) An agreement modifying a lease contract needs no consideration to be binding.

     (2) A signed lease agreement that excludes modification or rescission except by a signed

writing record may not be otherwise modified or rescinded, but, except as between merchants, such

a requirement on a form supplied by a merchant must be separately signed by the other party.

     (3) Although an attempt at modification or rescission does not satisfy the requirements of

subsection (2), it may operate as a waiver.

     (4) A party who has made a waiver affecting an executory portion of a lease contract may

retract the waiver by reasonable notification received by the other party that strict performance will

be required of any term waived, unless the retraction would be unjust in view of a material change

of position in reliance on the waiver.

     SECTION 4. Sections 6A-3-104, 6A-3-105, 6A-3-401 and 6A-3-604 of the General Laws

in Chapter 6A-3 entitled "Negotiable Instruments" are hereby amended to read as follows:

     6A-3-104. Negotiable instrument.

     (a) Except as provided in subsections (c) and (d), “negotiable instrument” means an

unconditional promise or order to pay a fixed amount of money, with or without interest or other

charges described in the promise or order, if it:

     (1) Is payable to bearer or to order at the time it is issued or first comes into possession of

a holder;

     (2) Is payable on demand or at a definite time; and

     (3) Does not state any other undertaking or instruction by the person promising or ordering

payment to do any act in addition to the payment of money, but the promise or order may contain

(i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an

authorization or power to the holder to confess judgment or realize on or dispose of collateral, or

(iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor (iv) a

term that specifies the law that governs the promise or order, or (v) an undertaking to resolve, in a

specified forum, a dispute concerning the promise or order.

     (b) “Instrument” means a negotiable instrument.

     (c) An order that meets all of the requirements of subsection (a), except paragraph (1), and

otherwise falls within the definition of “check” in subsection (f) is a negotiable instrument and a

check.

LC001292 - Page 16 of 113

     (d) A promise or order other than a check is not an instrument if, at the time it is issued or

first comes into possession of a holder, it contains a conspicuous statement, however expressed, to

the effect that the promise or order is not negotiable or is not an instrument governed by this chapter.

     (e) An instrument is a “note” if it is a promise and is a “draft” if it is an order. If an

instrument falls within the definition of both “note” and “draft,” a person entitled to enforce the

instrument may treat it as either.

     (f) “Check” means (i) a draft, other than a documentary draft, payable on demand and

drawn on a bank or (ii) a cashier’s check or teller’s check. An instrument may be a check even

though it is described on its face by another term, such as “money order.”

     (g) “Cashier’s check” means a draft with respect to which the drawer and drawee are the

same bank or branches of the same bank.

     (h) “Teller’s check” means a draft drawn by a bank (i) on another bank, or (ii) payable at

or through a bank.

     (i) “Traveler’s check” means an instrument that (i) is payable on demand, (ii) is drawn on

or payable at or through a bank, (iii) is designated by the term “traveler’s check” or by a

substantially similar term, and (iv) requires, as a condition to payment, a countersignature by a

person whose specimen signature appears on the instrument.

     (j) “Certificate of deposit” means an instrument containing an acknowledgment by a bank

that a sum of money has been received by the bank and a promise by the bank to repay the sum of

money. A certificate of deposit is a note of the bank.

     6A-3-105. Issue of instrument.

     (a) “Issue” means:

     the (1) The first delivery of an instrument by the maker or drawer, whether to a holder or

nonholder, for the purpose of giving rights on the instrument to any person.; or

     (2) If agreed by the payee, the first transmission by the drawer to the payee of an image of

an item and information derived from the item that enables the depositary bank to collect the item

by transferring or presenting under federal law an electronic check.

     (b) An unissued instrument, or an unissued incomplete instrument that is completed, is

binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally

issued or is issued for a special purpose is binding on the maker or drawer, but failure of the

condition or special purpose to be fulfilled is a defense.

     (c) “Issuer” applies to issued and unissued instruments and means a maker or drawer of an

instrument.

     6A-3-401. Signature.

LC001292 - Page 17 of 113

     (a) A person is not liable on an instrument unless (i) the person signed the instrument, or

(ii) the person is represented by an agent or representative who signed the instrument and the

signature is binding on the represented person under § 6A-3-402.

     (b) A signature may be made (i) manually or by means of a device or machine, and (ii) by

the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed

or adopted by a person with present intention to authenticate a writing.

     6A-3-604. Discharge by cancellation or renunciation.

     (a) A person entitled to enforce an instrument, with or without consideration, may

discharge the obligation of a party to pay the instrument (i) by an intentional voluntary act, such as

surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument,

cancellation or striking out of the party’s signature, or the addition of words to the instrument

indicating discharge, or (ii) by agreeing not to sue or otherwise renouncing rights against the party

by a signed writing record. The obligation of a party to pay a check is not discharged solely by

destruction of the check in connection with a process in which information is extracted from the

check and an image of the check is made and, subsequently, the information and image are

transmitted for payment.

     (b) Cancellation or striking out of an indorsement pursuant to subsection (a) does not affect

the status and rights of a party derived from the indorsement.

     SECTION 5. Sections 6A-4.1-103, 6A-4.1-201, 6A-4.1-202, 6A-4.1-203, 6A-4.1-207, 6A-

4.1-208, 6A-4.1-210, 6A-4.1-211 and 6A-4.1-305 of the General Laws in Chapter 6A-4.1 entitled

"Funds Transfers" are hereby amended to read as follows:

     6A-4.1-103. Payment order — Definitions.

     (a) In this chapter:

     (1) “Payment order” means an instruction of a sender to a receiving bank, transmitted

orally, electronically, or in writing or in a record, to pay, or to cause another bank to pay, a fixed

or determinable amount of money to a beneficiary if:

     (i) The instruction does not state a condition to payment to the beneficiary other than time

of payment;

     (ii) The receiving bank is to be reimbursed by debiting an account of, or otherwise receiving

payment from, the sender; and

     (iii) The instruction is transmitted by the sender directly to the receiving bank or to an

agent, funds-transfer system, or communication system for transmittal to the receiving bank.

     (2) “Beneficiary” means the person to be paid by the beneficiary’s bank.

     (3) “Beneficiary’s bank” means the bank identified in a payment order in which an account

LC001292 - Page 18 of 113

of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to

the beneficiary if the order does not provide for payment to an account.

     (4) “Receiving bank” means the bank to which the sender’s instruction is addressed.

     (5) “Sender” means the person giving the instruction to the receiving bank.

     (b) If an instruction complying with subsection (a)(1) is to make more than one payment

to a beneficiary, the instruction is a separate payment order with respect to each payment.

     (c) A payment order is issued when it is sent to the receiving bank.

     6A-4.1-201. Security procedure.

     “Security procedure” means a procedure established by agreement of a customer and a

receiving bank for the purpose of (i) verifying that a payment order or communication amending

or cancelling a payment order is that of the customer, or (ii) detecting error in the transmission or

the content of the payment order or communication. A security procedure may impose an obligation

on the receiving bank or the customer and may require the use of algorithms or other codes,

identifying words or, numbers, symbols, sounds, biometrics, encryption, callback procedures, or

similar security devices. Comparison of a signature on a payment order or communication with an

authorized specimen signature of the customer or requiring a payment order to be sent from a

known email address, IP address, or telephone number is not by itself a security procedure.

     6A-4.1-202. Authorized and verified payment orders.

     (a) A payment order received by the receiving bank is the authorized order of the person

identified as sender if that person authorized the order or is otherwise bound by it under the law of

agency.

     (b) If a bank and its customer have agreed that the authenticity of payment orders issued to

the bank in the name of the customer as sender will be verified pursuant to a security procedure, a

payment order received by the receiving bank is effective as the order of the customer whether or

not authorized, if (i) the security procedure is a commercially reasonable method of providing

security against unauthorized payment orders, and (ii) the bank provides that it accepted the

payment order in good faith and in compliance with the bank's obligations under the security

procedure and any written agreement or instruction of the customer evidenced by a record

restricting acceptance of payment orders issued in the name of the customer. The bank is not

required to follow an instruction that violates a written an agreement with the customer, evidenced

by a record, or notice of which is not received at a time and in a manner affording the bank a

reasonable opportunity to act on it before the payment order is accepted.

     (c) Commercial reasonableness of a security procedure is a question of law to be

determined by considering the wishes of the customer expressed to the bank, the circumstances of

LC001292 - Page 19 of 113

the customer known to the bank, including the mix, type, and frequency of payment orders normally

issued by the customer to the bank, alternative security procedures offered to the customer, and

security procedures in general use by customers and receiving banks similarly situated. A security

procedure is deemed to be commercially reasonable if (i) the security procedure was chosen by the

customer after the bank offered, and the customer refused, a security procedure that was

commercially reasonable for that customer, and (ii) the customer expressly agreed in writing a

record to be bound by any payment order, whether or not authorized, issued in its name and

accepted by the bank in compliance with the bank's obligations under the security procedure chosen

by the customer.

     (d) The term “sender” in this chapter includes the customer in whose name a payment order

is issued if the order is the authorized order of the customer under subsection (a), or it is effective

as the order of the customer under subsection (b).

     (e) This section applies to amendments and cancellations of payment orders to the same

extent it applies to payment orders.

     (f) Except as provided in this section and in § 6A-4.1-203(a)(1), rights and obligations

arising under this section and § 6A-4.1-203 may not be varied by agreement.

     6A-4.1-203. Unenforceability of certain verified payment orders.

     (a) If an accepted payment order is not, under § 6A-4.1-202(a), an authorized order of a

customer identified as sender, but is effective as an order of the customer pursuant to § 6A-4.1-

202(b), the following rules apply:

     (1) By express written agreement evidenced by a record, the receiving bank may limit the

extent to which it is entitled to enforce or retain payment of the payment order.

     (2) The receiving bank is not entitled to enforce or retain payment of the payment order if

the customer proves that the order was not caused, directly or indirectly, by a person (i) entrusted

at any time with duties to act for the customer with respect to payment orders or the security

procedure, or (ii) who obtained access to transmitting facilities of the customer or who obtained,

from a source controlled by the customer and without authority of the receiving bank, information

facilitating breach of the security procedures, regardless of how the information was obtained or

whether the customer was at fault. Information includes any access device, computer software, or

the like.

     (b) This section applies to amendments of payment orders to the same extent it applies to

payment orders.

     6A-4.1-207. Misdescription of beneficiary.

     (a) Subject to subsection (b), if, in a payment order received by the beneficiary’s bank, the

LC001292 - Page 20 of 113

name, bank account number, or other identification of the beneficiary refers to a nonexistent or

unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance

of the order cannot occur.

     (b) If a payment order received by the beneficiary’s bank identifies the beneficiary both by

name and by an identifying or bank account number and the name and number identify different

persons, the following rules apply:

     (1) Except as otherwise provided in subsection (c), if the beneficiary’s bank does not know

that the name and number refer to different persons, it may rely on the number as the proper

identification of the beneficiary of the order. The beneficiary’s bank need not determine whether

the name and number refer to the same person.

     (2) If the beneficiary’s bank pays the person identified by name or knows that the name

and number identify different persons, no person has rights as beneficiary except the person paid

by the beneficiary’s bank if that person was entitled to receive payment from the originator of the

funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur.

     (c) If (i) a payment order described in subsection (b) is accepted, (ii) the originator’s

payment order described the beneficiary inconsistently by name and number, and (iii) the

beneficiary’s bank pays the person identified by number as permitted by subsection (b)(1), the

following rules apply:

     (1) If the originator is a bank, the originator is obliged to pay its order.

     (2) If the originator is not a bank and proves that the person identified by number was not

entitled to receive payment from the originator, the originator is not obliged to pay its order unless

the originator’s bank proves that the originator, before acceptance of the originator’s order, had

notice that payment of a payment order issued by the originator might be made by the beneficiary’s

bank on the basis of an identifying or bank account number even if it identifies a person different

from the named beneficiary. Proof of notice may be made by any admissible evidence. The

originator’s bank satisfies the burden of proof if it proves that the originator, before the payment

order was accepted, signed a writing record stating the information to which the notice relates.

     (d) In a case governed by subsection (b)(1), if the beneficiary’s bank rightfully pays the

person identified by number and that person was not entitled to receive payment from the

originator, the amount paid may be recovered from that person to the extent allowed by the law

governing mistake and restitution as follows:

     (1) If the originator is obliged to pay its payment order as stated in subsection (c), the

originator has the right to recover.

     (2) If the originator is not a bank and is not obliged to pay its payment order, the originator’s

LC001292 - Page 21 of 113

bank has the right to recover.

     6A-4.1-208. Misdescription of intermediary bank or beneficiary’s bank.

     (a) This subsection applies to a payment order identifying an intermediary bank or the

beneficiary’s bank only by an identifying number.

     (1) The receiving bank may rely on the number as the proper identification of the

intermediary or beneficiary’s bank and need not determine whether the number identifies a bank.

     (2) The sender is obliged to compensate the receiving bank for any loss and expenses

incurred by the receiving bank as a result of its reliance on the number in executing or attempting

to execute the order.

     (b) This subsection applies to a payment order identifying an intermediary bank or the

beneficiary’s bank both by name and an identifying number if the name and number identify

different persons.

     (1) If the sender is a bank, the receiving bank may rely on the number as the proper

identification of the intermediary or beneficiary’s bank if the receiving bank, when it executes the

sender’s order, does not know that the name and number identify different persons. The receiving

bank need not determine whether the name and number refer to the same person or whether the

number refers to a bank. The sender is obliged to compensate the receiving bank for any loss and

expenses incurred by the receiving bank as a result of its reliance on the number in executing or

attempting to execute the order.

     (2) If the sender is not a bank and the receiving bank proves that the sender, before the

payment order was accepted, had notice that the receiving bank might rely on the number as the

proper identification of the intermediary or beneficiary’s bank even if it identifies a person different

from the bank identified by name, the rights and obligations of the sender and the receiving bank

are governed by subsection (b)(1), as though the sender were a bank. Proof of notice may be made

by any admissible evidence. The receiving bank satisfies the burden of proof if it proves that the

sender, before the payment order was accepted, signed a writing record stating the information to

which the notice relates.

     (3) Regardless of whether the sender is a bank, the receiving bank may rely on the same as

the proper identification of the intermediary or beneficiary’s bank if the receiving bank, at the time

it executes the sender’s order, does not know that the name and number identify different persons.

The receiving bank need not determine whether the name and number refer to the same person.

     (4) If the receiving bank knows that the name and number identify different persons,

reliance on either the name or the number in executing the sender’s payment order is a breach of

the obligation stated in § 6A-4.1-302(a)(1).

LC001292 - Page 22 of 113

     6A-4.1-210. Rejection of payment order.

     (a) A payment order is rejected by the receiving bank by a notice of rejection transmitted

to the sender orally, electronically, or in writing or in a record. A notice of rejection need not use

any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or

will not execute or pay the order. Rejection is effective when the notice is given if transmission is

by a means that is reasonable in the circumstances. If notice of rejection is given by a means that

is not reasonable, rejection is effective when the notice is received. If an agreement of the sender

and receiving bank establishes the means to be used to reject a payment order, (i) any means

complying with the agreement is reasonable and (ii) any means not complying is not reasonable

unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.

     (b) This subsection applies if a receiving bank other than the beneficiary’s bank fails to

execute a payment order despite the existence on the execution date of a withdrawable credit

balance in an authorized account of the sender sufficient to cover the order. If the sender does not

receive notice of rejection of the order on the execution date and the authorized account of the

sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the

order for the number of days elapsing after the execution date to the earlier of the day the order is

canceled pursuant to § 6A-4.1-211(d) or the day the sender receives notice or learns that the order

was not executed, counting the final day of the period as an elapsed day. If the withdrawable credit

balance during that period falls below the amount of the order, the amount of interest is reduced

accordingly.

     (c) If a receiving bank suspends payments, all unaccepted payment orders issued to it are

deemed rejected at the time the bank suspends payments.

     (d) Acceptance of a payment order precludes a later rejection of the order. Rejection of a

payment order precludes a later acceptance of the order.

     6A-4.1-211. Cancellation and amendment of payment order.

     (a) A communication of the sender of a payment order cancelling or amending the order

may be transmitted to the receiving bank orally, electronically, or in writing or in a record. If a

security procedure is in effect between the sender and the receiving bank, the communication is not

effective to cancel or amend the order unless the communication is verified pursuant to the security

procedure or the bank agrees to the cancellation or amendment.

     (b) Subject to subsection (a), a communication by the sender cancelling or amending a

payment order is effective to cancel or amend the order if notice of the communication is received

at a time and in a manner affording the receiving bank a reasonable opportunity to act on the

communication before the bank accepts the payment order.

LC001292 - Page 23 of 113

     (c) After a payment order has been accepted, cancellation or amendment of the order is not

effective unless the receiving bank agrees or a funds transfer system rule allows cancellation or

amendment without agreement of the bank.

     (1) With respect to a payment order accepted by a receiving bank other than the

beneficiary’s bank, cancellation or amendment is not effective unless a conforming cancellation or

amendment of the payment order issued by the receiving bank is also made.

     (2) With respect to a payment order accepted by the beneficiary’s bank, cancellation or

amendment is not effective unless the order was issued in execution of an unauthorized payment

order, or because of a mistake by a sender in the funds transfer which resulted in the issuance of a

payment order (i) that is a duplicate of a payment order previously issued by the sender, (ii) that

orders payment to a beneficiary not entitled to receive payment from the originator, or (iii) that

orders payment in an amount greater than the amount the beneficiary was entitled to receive from

the originator. If the payment order is canceled or amended, the beneficiary’s bank is entitled to

recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law

governing mistake and restitution.

     (d) An unaccepted payment order is canceled by operation of law at the close of the fifth

funds transfer business day of the receiving bank after the execution date or payment date of the

order.

     (e) A canceled payment order cannot be accepted. If an accepted payment order is canceled,

the acceptance is nullified and no person has any right or obligation based on the acceptance.

Amendment of the payment order is deemed to be cancellation of the original order at the time of

amendment and issue of a new payment order in the amended form at the same time.

     (f) Unless otherwise provided in an agreement of the parties or in a funds transfer system

rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment

of the order by the sender or is bound by a funds transfer system rule allowing cancellation or

amendment without the bank’s agreement, the sender, whether or not cancellation or amendment

is effective, is liable to the bank for any loss and expenses, including reasonable attorney’s fees,

incurred by the bank as a result of the cancellation or amendment or attempted cancellation or

amendment.

     (g) A payment order is not revoked by the death or legal incapacity of the sender unless

the receiving bank knows of the death or of an adjudication of incapacity by a court of competent

jurisdiction and has reasonable opportunity to act before acceptance of the order.

     (h) A funds transfer system rule is not effective to the extent it conflicts with subsection

(c)(2).

LC001292 - Page 24 of 113

     6A-4.1-305. Liability for late or improper execution or failure to execute payment

order.

     (a) If a funds transfer is completed but execution of a payment order by the receiving bank

in breach of § 6A-4.1-302 results in delay in payment to the beneficiary, the bank is obliged to pay

interest to either the originator or the beneficiary of the funds transfer for the period of delay caused

by the improper execution. Except as provided in subsection (c), additional damages are not

recoverable.

     (b) If execution of a payment order by a receiving bank in breach of § 6A-4.1-302 results

in (i) noncompletion of the funds transfer, (ii) failure to use an intermediary bank designated by the

originator, or (iii) issuance of a payment order that does not comply with the terms of the payment

order of the originator, the bank is liable to the originator for its expenses in the funds transfer and

for incidental expenses and interest losses, to the extent not covered by subsection (a), resulting

from the improper execution. Except as provided in subsection (c), additional damages are not

recoverable.

     (c) In addition to the amounts payable under subsections (a) and (b), damages, including

consequential damages, are recoverable to the extent provided in an express written agreement of

the receiving bank evidenced by a record.

     (d) If a receiving bank fails to execute a payment order it was obliged by express agreement

to execute, the receiving bank is liable to the sender for its expenses in the transaction and for

incidental expenses and interest losses resulting from the failure to execute. Additional damages,

including consequential damages, are recoverable to the extent provided in an express written

agreement of the receiving bank, evidenced by a record, but are not otherwise recoverable.

     (e) Reasonable attorney’s fees are recoverable if demand for compensation under

subsection (a) or (b) is made and refused before an action is brought on the claim. If a claim is

made for breach of an agreement under subsection (d) and the agreement does not provide for

damages, reasonable attorney’s fees are recoverable if demand for compensation under subsection

(d) is made and refused before an action is brought on the claim.

     (f) Except as stated in this section, the liability of a receiving bank under subsections (a)

and (b) may not be varied by agreement.

     SECTION 6. Sections 6A-5-104 and 6A-5-116 of the General Laws in Chapter 6A-5

entitled "Letters of Credit" are hereby amended to read as follows:

     6A-5-104. Formal requirements.

     A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued

in any form that is a signed record and is authenticated (1) by a signature or (2) in accordance with

LC001292 - Page 25 of 113

the agreement of the parties or the standard practice referred to in § 6A-5-108(e).

     6A-5-116. Choice of law and forum.

     (a) The liability of an issuer, nominated person, or adviser for action or omission is

governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or

otherwise authenticated by the affected parties in the manner provided in § 6A-5-104 or by a

provision in the person’s letter of credit, confirmation, or other undertaking. The jurisdiction whose

law is chosen need not bear any relation to the transaction.

     (b) Unless subsection (a) applies, the liability of an issuer, nominated person, or adviser

for action or omission is governed by the law of the jurisdiction in which the person is located. The

person is considered to be located at the address indicated in the person’s undertaking. If more than

one address is indicated, the person is considered to be located at the address from which the

person’s undertaking was issued.

     (c) For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of

credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical

entities and a bank is considered to be located at the place where its relevant branch is considered

to be located under this subsection (d) of this section.

     (d) A branch of a bank is considered to be located at the address indicated in the branch's

undertaking. If more than one address is indicated, the branch is considered to be located at the

address from which the undertaking was issued.

     (c)(e) Except as otherwise provided in this subsection, the liability of an issuer, nominated

person, or adviser is governed by any rules of custom or practice, such as the Uniform Customs

and Practice for Documentary Credits, to which the letter of credit, confirmation, or other

undertaking is expressly made subject. If (1) this chapter would govern the liability of an issuer,

nominated person, or adviser under subsection (a) or (b), (2) the relevant undertaking incorporates

rules of custom or practice, and (3) there is conflict between this chapter and those rules as applied

to that undertaking, those rules govern except to the extent of any conflict with the nonvariable

provisions specified in § 6A-5-103(c).

     (d)(f) If there is conflict between this chapter and chapters 3, 4, 4.1 or 9 of this title, this

chapter governs.

     (e)(g) The forum for settling disputes arising out of an undertaking within this chapter may

be chosen in the manner and with the binding effect that governing law may be chosen in

accordance with subsection (a).

     SECTION 7. Sections 6A-7-102 and 6A-7-106 of the General Laws in Chapter 6A-7

entitled "Documents of Title" are hereby amended to read as follows:

LC001292 - Page 26 of 113

     6A-7-102. Definitions and index of definitions.

     (a) In this chapter, unless the context otherwise requires:

     (1) “Bailee” means a person that by a warehouse receipt, bill of lading, or other document

of title acknowledges possession of goods and contracts to deliver them.

     (2) “Carrier” means a person that issues a bill of lading.

     (3) “Consignee” means a person named in a bill of lading to which or to whose order the

bill promises delivery.

     (4) “Consignor” means a person named in a bill of lading as the person from which the

goods have been received for shipment.

     (5) “Delivery order” means a record that contains an order to deliver goods directed to a

warehouse, carrier, or other person that in the ordinary course of business issues warehouse receipts

or bills of lading.

     (6) “Good faith” means honesty in fact and the observance of reasonable commercial

standards of fair dealing.

     (7) “Goods” means all things that are treated as movable for the purposes of a contract for

storage or transportation.

     (8) “Issuer” means a bailee that issues a document of title or, in the case of an unaccepted

delivery order, the person that orders the possessor of goods to deliver. The term includes a person

for which an agent or employee purports to act in issuing a document if the agent or employee has

real or apparent authority to issue documents, even if the issuer did not receive any goods, the goods

were misdescribed, or in any other respect the agent or employee violated the issuer’s instructions.

     (9) “Person entitled under the document” means the holder, in the case of a negotiable

document of title, or the person to which delivery of the goods is to be made by the terms of, or

pursuant to instructions in a record under, a nonnegotiable document of title.

     (10) “Record” means information that is inscribed on a tangible medium or that is stored

in an electronic or other medium and is retrievable in perceivable form.

     (11) “Sign” means, with present intent to authenticate or adopt a record:

     (A) To execute or adopt a tangible symbol; or

     (B) To attach to or logically associate with the record an electronic sound, symbol, or

process.

     (12) “Shipper” means a person that enters into a contract of transportation with a carrier.

     (13) “Warehouse” means a person engaged in the business of storing goods for hire.

     (b) Definitions in other chapters applying to this chapter and the sections in which they

appear are:

LC001292 - Page 27 of 113

     (1) "Contract for sale," § 6A-2-106.

     (2) "Lessee in the ordinary course of business," § 6A-2.1-103.

     (3) "Receipt" of goods, § 6A-2-103.

     (c) In addition, chapter 1 contains general definitions and principles of construction and

interpretation applicable throughout this chapter.

     6A-7-106. Control of electronic document of title.

     (a) A person has control of an electronic document of title if a system employed for

evidencing the transfer of interests in the electronic document reliably establishes that person as

the person to which the electronic document was issued or transferred.

     (b) A system satisfies subsection (a), and a person is deemed to have has control of an

electronic document of title, if the document is created, stored, and assigned transferred in such a

manner that:

     (1) A single authoritative copy of the document exists which is unique, identifiable, and,

except as otherwise provided in paragraphs (4), (5), and (6), unalterable;

     (2) The authoritative copy identifies the person asserting control as:

     (A) The person to which the document was issued; or

     (B) If the authoritative copy indicates that the document has been transferred, the person

to which the document was most recently transferred;

     (3) The authoritative copy is communicated to and maintained by the person asserting

control or its designated custodian;

     (4) Copies or amendments that add or change an identified assignee transferee of the

authoritative copy can be made only with the consent of the person asserting control;

     (5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a

copy that is not the authoritative copy; and

     (6) Any amendment of the authoritative copy is readily identifiable as authorized or

unauthorized.

     (c) A system satisfies subsection (a) of this section, and a person has control of an electronic

document of title, if an authoritative electronic copy of the document, a record attached to or

logically associated with the electronic copy, or a system in which the electronic copy is recorded:

     (1) Enables the person readily to identify each electronic copy as either an authoritative

copy or a nonauthoritative copy;

     (2) Enables the person readily to identify itself in any way, including by name, identifying

number, cryptographic key, office, or account number, as the person to which each authoritative

electronic copy was issued or transferred; and

LC001292 - Page 28 of 113

     (3) Gives the person exclusive power, subject to subsection (d) of this section, to:

     (i) Prevent others from adding or changing the person to which each authoritative electronic

copy has been issued or transferred; and

     (ii) Transfer control of each authoritative electronic copy.

     (d) Subject to subsection (e) of this section, a power is exclusive under subsections (c)(3)(i)

and (ii) of this section even if:

     (1) The authoritative electronic copy, a record attached to or logically associated with the

authoritative electronic copy, or a system in which the authoritative electronic copy is recorded

limits the use of the document of title or has a protocol that is programmed to cause a change,

including a transfer or loss of control; or

     (2) The power is shared with another person.

     (e) A power of a person is not shared with another person under subsection (d)(2) of this

section and the person’s power is not exclusive if:

     (1) The person can exercise the power only if the power also is exercised by the other

person; and

     (2) The other person:

     (i) Can exercise the power without exercise of the power by the person; or

     (ii) Is the transferor to the person of an interest in the document of title.

     (f) If a person has the powers specified in subsection (c)(3)(i) and (ii) of this section, the

powers are presumed to be exclusive.

     (g) A person has control of an electronic document of title if another person, other than the

transferor to the person of an interest in the document:

     (1) Has control of the document and acknowledges that it has control on behalf of the

person; or

     (2) Obtains control of the document after having acknowledged that it will obtain control

of the document on behalf of the person.

     (h) A person that has control under this section is not required to acknowledge that it has

control on behalf of another person.

     (i) If a person acknowledges that it has or will obtain control on behalf of another person,

unless the person otherwise agrees or law other than this chapter or chapter 6A-9 otherwise

provides, the person does not owe any duty to the other person and is not required to confirm the

acknowledgment to any other person.

     SECTION 8. Sections 6A-8-102, 6A-8-103, 6A-8-106, 6A-8-110 and 6A-8-303 of the

General Laws in Chapter 6A-8 entitled "Investment Securities" are hereby amended to read as

LC001292 - Page 29 of 113

follows:

     6A-8-102. Definitions.

     (a) In this chapter:

     (1) “Adverse claim” means a claim that a claimant has a property interest in a financial

asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or

deal with the financial asset.

     (2) “Bearer form,” as applied to a certificated security, means a form in which the security

is payable to the bearer of the security certificate according to its terms but not by reason of an

indorsement.

     (3) “Broker” means a person defined as a broker or dealer under the federal securities laws,

but without excluding a bank acting in that capacity.

     (4) “Certificated security” means a security that is represented by a certificate.

     (5) “Clearing corporation” means:

     (i) a person that is registered as a “clearing agency” under the federal securities laws;

     (ii) A federal reserve bank; or

     (iii) Any other person that provides clearance or settlement services with respect to

financial assets that would require it to register as a clearing agency under the federal securities

laws but for an exclusion or exemption from the registration requirement, if its activities as a

clearing corporation, including promulgation of rules, are subject to regulation by a federal or state

governmental authority.

     (6) “Communicate” means to:

     (i) Send a signed writing record; or

     (ii) Transmit information by any mechanism agreed upon by the persons transmitting and

receiving the information.

     (7) “Entitlement holder” means a person identified in the records of a securities

intermediary as the person having a security entitlement against the securities intermediary. If a

person acquires a security entitlement by virtue of § 6A-8-501(b)(2) or (3), that person is the

entitlement holder.

     (8) “Entitlement order” means a notification communicated to a securities intermediary

directing transfer or redemption of a financial asset to which the entitlement holder has a security

entitlement.

     (9) “Financial asset,” except as otherwise provided in § 6A-8-103, means:

     (i) A security;

     (ii) An obligation of a person or a share, participation, or other interest in a person or in

LC001292 - Page 30 of 113

property or an enterprise of a person, which is, or is of a type, dealt in or traded on financial markets,

or which is recognized in any area in which it is issued or dealt in as a medium for investment; or

     (iii) Any property that is held by a securities intermediary for another person in a securities

account if the securities intermediary has expressly agreed with the other person that the property

is to be treated as a financial asset under this chapter.

     As context requires, the term means either the interest itself or the means by which a

person’s claim to it is evidenced, including a certificated or uncertificated security, a security

certificate, or a security entitlement.

     (10) “Good faith,” for purposes of the obligation of good faith in the performance or

enforcement of contracts or duties within this chapter, means honesty in fact and the observance of

reasonable commercial standards of fair dealing.

     (11) “Indorsement” means a signature that alone or accompanied by other words is made

on a security certificate in registered form or on a separate document for the purpose of assigning,

transferring, or redeeming the security or granting a power to assign, transfer, or redeem it.

     (12) “Instruction” means a notification communicated to the issuer of an uncertificated

security which directs that the transfer of the security be registered or that the security be redeemed.

     (13) “Registered form,” as applied to a certificated security, means a form in which:

     (i) The security certificate specifies a person entitled to the security; and

     (ii) A transfer of the security may be registered upon books maintained for that purpose by

or on behalf of the issuer, or the security certificate so states.

     (14) “Securities intermediary” means:

     (i) A clearing corporation; or

     (ii) A person, including a bank or broker, that in the ordinary course of its business

maintains securities accounts for others and is acting in that capacity.

     (15) “Security,” except as otherwise provided in § 6A-8-103, means an obligation of an

issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an

issuer:

     (i) Which is represented by a security certificate in bearer or registered form, or the transfer

of which may be registered upon books maintained for that purpose by or on behalf of the issuer;

     (ii) Which is one of a class or series or by its terms is divisible into a class or series of

shares, participations, interests, or obligations; and

     (iii) Which:

     (A) Is, or is of a type, dealt in or traded on securities exchanges or securities markets; or

     (B) Is a medium for investment and by its terms expressly provides that it is a security

LC001292 - Page 31 of 113

governed by this chapter.

     (16) “Security certificate” means a certificate representing a security.

     (17) “Security entitlement” means the rights and property interest of an entitlement holder

with respect to a financial asset specified in part 5 of this chapter.

     (18) “Uncertificated security” means a security that is not represented by a certificate.

     (b) Other The following definitions applying to in this chapter and the sections in which

they appear are other chapters of this title apply to this chapter:

     Appropriate person § 6A-8-107

     Control § 6A-8-106

     Controllable account § 6A-9-102

     Controllable electronic record § 6A-12-102

     Controllable payment intangible § 6A-9-102

     Delivery § 6A-8-301

     Investment company security § 6A-8-103

     Issuer § 6A-8-201

     Overissue § 6A-8-210

     Protected purchaser § 6A-8-303

     Securities account § 6A-8-501

     (c) In addition, chapter 1 of this title contains general definitions and principles of

construction and interpretation applicable throughout this chapter.

     (d) The characterization of a person, business, or transaction for purposes of this chapter

does not determine the characterization of the person, business, or transaction for purposes of any

other law, regulation, or rule.

     6A-8-103. Rules for determining whether certain obligations and interests are

securities or financial assets.

     (a) A share or similar equity interest issued by a corporation, business trust, joint stock

company, or similar entity is a security.

     (b) An “investment company security” is a security. “Investment company security” means

a share or similar equity interest issued by an entity that is registered as an investment company

under the federal investment company laws, an interest in a unit investment trust that is so

registered, or a face-amount certificate issued by a face-amount certificate company that is so

registered. Investment company security does not include an insurance policy or endowment policy

or annuity contract issued by an insurance company.

     (c) An interest in a partnership or limited liability company is not a security unless it is

LC001292 - Page 32 of 113

dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that

it is a security governed by this chapter, or it is an investment company security. However, an

interest in a partnership or limited liability company is a financial asset if it is held in a securities

account.

     (d) A writing that is a security certificate is governed by this chapter and not by chapter 3

of this title, even though it also meets the requirements of that chapter. However, a negotiable

instrument governed by chapter 3 of this title is a financial asset if it is held in a securities account.

     (e) An option or similar obligation issued by a clearing corporation to its participants is not

a security, but is a financial asset.

     (f) A commodity contract, as defined in § 6A-9-102(a)(15), is not a security or a financial

asset.

     (g) A document of title is not a financial asset unless subsection 6A-8-102(a)(9)(iii) applies.

     (h) A controllable account, controllable electronic record, or controllable payment

intangible is not a financial asset unless § 6A-8-102(a)(9)(iii) applies.

     6A-8-106. Control.

     (a) A purchaser has “control” of a certificated security in bearer form if the certificated

security is delivered to the purchaser.

     (b) A purchaser has “control” of a certificated security in registered form if the certificated

security is delivered to the purchaser, and:

     (1) the certificate is indorsed to the purchaser or in blank by an effective indorsement; or

     (2) the certificate is registered in the name of the purchaser, upon original issue or

registration of transfer by the issuer.

     (c) A purchaser has “control” of an uncertificated security if:

     (1) the uncertificated security is delivered to the purchaser; or

     (2) the issuer has agreed that it will comply with instructions originated by the purchaser

without further consent by the registered owner.

     (d) A purchaser has “control” of a security entitlement if:

     (1) the purchaser becomes the entitlement holder;

     (2) the securities intermediary has agreed that it will comply with entitlement orders

originated by the purchaser without further consent by the entitlement holder; or

     (3) another person has control of the security entitlement on behalf of the purchaser or,

having previously acquired control of the security entitlement, acknowledges that it has control on

behalf of the purchaser person, other than the transferor to the purchaser of an interest in the security

entitlement:

LC001292 - Page 33 of 113

     (i) has control of the security entitlement and acknowledges that it has control on behalf of

the purchaser; or

     (ii) obtains control of the security entitlement after having acknowledged that it will obtain

control of the security entitlement on behalf of the purchaser.

     (e) If an interest in a security entitlement is granted by the entitlement holder to the

entitlement holder’s own securities intermediary, the securities intermediary has control.

     (f) A purchaser who has satisfied the requirements of subsection (c) or (d) has control even

if the registered owner in the case of subsection (c) or the entitlement holder in the case of

subsection (d) retains the right to make substitutions for the uncertificated security or security

entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary,

or otherwise to deal with the uncertificated security or security entitlement.

     (g) An issuer or a securities intermediary may not enter into an agreement of the kind

described in subsection (c)(2) or (d)(2) without the consent of the registered owner or entitlement

holder, but an issuer or a securities intermediary is not required to enter into such an agreement

even though the registered owner or entitlement holder so directs. An issuer or securities

intermediary that has entered into such an agreement is not required to confirm the existence of the

agreement to another party unless requested to do so by the registered owner or entitlement holder.

     (h) A person that has control under this section is not required to acknowledge that it has

control on behalf of a purchaser.

     (i) If a person acknowledges that it has or will obtain control on behalf of a purchaser,

unless the person otherwise agrees or law other than this chapter or chapter 6A-9 otherwise

provides, the person does not owe any duty to the purchaser and is not required to confirm the

acknowledgment to any other person.

     6A-8-110. Applicability — Choice of law.

     (a) The local law of the issuer’s jurisdiction, as specified in subsection (d), governs:

     (1) the validity of a security;

     (2) the rights and duties of the issuer with respect to registration of transfer;

     (3) the effectiveness of registration of transfer by the issuer;

     (4) whether the issuer owes any duties to an adverse claimant to a security; and

     (5) whether an adverse claim can be asserted against a person to whom transfer of a

certificated or uncertificated security is registered or a person who obtains control of an

uncertificated security.

     (b) The local law of the securities intermediary’s jurisdiction, as specified in subsection

(e), governs:

LC001292 - Page 34 of 113

     (1) acquisition of a security entitlement from the securities intermediary;

     (2) the rights and duties of the securities intermediary and entitlement holder arising out of

a security entitlement;

     (3) whether the securities intermediary owes any duties to an adverse claimant to a security

entitlement; and

     (4) whether an adverse claim can be asserted against a person who acquires a security

entitlement from the securities intermediary or a person who purchases a security entitlement or

interest therein from an entitlement holder.

     (c) The local law of the jurisdiction in which a security certificate is located at the time of

delivery governs whether an adverse claim can be asserted against a person to whom the security

certificate is delivered.

     (d) “Issuer’s jurisdiction” means the jurisdiction under which the issuer of the security is

organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified

by the issuer. An issuer organized under the law of this State may specify the law of another

jurisdiction as the law governing the matters specified in subsection (a)(2) through (5).

     (e) The following rules determine a “securities intermediary’s jurisdiction” for purposes of

this section:

     (1) If an agreement between the securities intermediary and its entitlement holder

governing the securities account expressly provides that a particular jurisdiction is the securities

intermediary’s jurisdiction for purposes of this part, this chapter, or this title, that jurisdiction is the

securities intermediary’s jurisdiction.

     (2) If paragraph (1) does not apply and an agreement between the securities intermediary

and its entitlement holder governing the securities account expressly provides that the agreement

is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary’s

jurisdiction.

     (3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the

securities intermediary and its entitlement holder governing the securities account expressly

provides that the securities account is maintained at an office in a particular jurisdiction, that

jurisdiction is the securities intermediary’s jurisdiction.

     (4) If none of the preceding paragraphs applies, the securities intermediary’s jurisdiction is

the jurisdiction in which the office identified in an account statement as the office serving the

entitlement holder’s account is located.

     (5) If none of the preceding paragraphs applies, the securities intermediary’s jurisdiction is

the jurisdiction in which the chief executive office of the securities intermediary is located.

LC001292 - Page 35 of 113

     (f) A securities intermediary’s jurisdiction is not determined by the physical location of

certificates representing financial assets, or by the jurisdiction in which is organized the issuer of

the financial asset with respect to which an entitlement holder has a security entitlement, or by the

location of facilities for data processing or other record keeping concerning the account.

     (g) The local law of the issuer’s jurisdiction or the securities intermediary’s jurisdiction

governs a matter or transaction specified in subsections (a) or (b) of this section even if the matter

or transaction does not bear any relation to the jurisdiction.

     6A-8-303. Protected purchaser.

     (a) “Protected purchaser” means a purchaser of a certificated or uncertificated security, or

of an interest therein, who:

     (1) gives value;

     (2) does not have notice of any adverse claim to the security; and

     (3) obtains control of the certificated or uncertificated security.

     (b) In addition to acquiring the rights of a purchaser, a A protected purchaser also acquires

its interest in the security free of any adverse claim.

     SECTION 9. Sections 6A-9-102, 6A-9-104, 6A-9-105, 6A-9-203, 6A-9-204, 6A-9-207,

6A-9-208, 6A-9-209, 6A-9-210, 6A-9-301, 6A-9-304, 6A-9-305, 6A-9-310, 6A-9-312, 6A-9-313,

6A-9-314, 6A-9-316, 6A-9-317, 6A-9-323, 6A-9-324, 6A-9-330, 6A-9-331, 6A-9-332, 6A-9-334,

6A-9-341, 6A-9-404, 6A-9-406, 6A-9-408, 6A-9-509, 6A-9-513, 6A-9-601, 6A-9-605, 6A-9-608,

6A-9-611, 6A-9-613, 6A-9-614, 6A-9-615, 6A-9-616, 6A-9-619, 6A-9-620, 6A-9-621, 6A-9-624

and 6A-9-628 of the General Laws in Chapter 6A-9 entitled "Secured Transactions" are hereby

amended to read as follows:

     6A-9-102. Definitions.

     (a) Chapter 9 definitions. In this chapter:

     (1) “Accession” means goods that are physically united with other goods in such a manner

that the identity of the original goods is not lost.

     (2) “Account”, except as used in “account for”, "account statement", account to",

"commodity account in subsection (a)(14) of this section", "customer's account", "deposit account

in subsection (a)(29) of this section", "on account of", and "statement of account" means a right to

payment of a monetary obligation, whether or not earned by performance, (i) for property that has

been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered

or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation

incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a

vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or

LC001292 - Page 36 of 113

information contained on or for use with the card, or (viii) as winnings in a lottery or other game

of chance operated or sponsored by a State, governmental unit of a State, or person licensed or

authorized to operate the game by a State or governmental unit of a State. The term includes

controllable accounts and health-care-insurance receivables. The term does not include (i) rights to

payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit

accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, or (vi) rights to

payment for money or funds advanced or sold, other than rights arising out of the use of a credit or

charge card or information contained on or for use with the card, or (vii) rights to payment

evidenced by an instrument.

     (3) “Account debtor” means a person obligated on an account, chattel paper, or general

intangible. The term does not include persons obligated to pay a negotiable instrument, even if the

negotiable instrument constitutes part of evidences chattel paper.

     (4) “Accounting”, except as used in “accounting for”, means a record:

     (i) Authenticated Signed by a secured party;

     (ii) Indicating the aggregate unpaid secured obligations as of a date not more than 35 days

earlier or 35 days later than the date of the record; and

     (iii) Identifying the components of the obligations in reasonable detail.

     (5) “Agricultural lien” means an interest in farm products:

     (i) Which secures payment or performance of an obligation for:

     (A) Goods or services furnished in connection with a debtor’s farming operation; or

     (B) Rent on real property leased by a debtor in connection with its farming operation;

     (ii) Which is created by statute in favor of a person that:

     (A) In the ordinary course of its business furnished goods or services to a debtor in

connection with a debtor’s farming operation; or

     (B) Leased real property to a debtor in connection with the debtor’s farming operation; and

     (iii) Whose effectiveness does not depend on the person’s possession of the personal

property.

     (6) “As-extracted collateral” means:

     (i) Oil, gas, or other minerals that are subject to a security interest that:

     (A) Is created by a debtor having an interest in the minerals before extraction; and

     (B) Attaches to the minerals as extracted; or

     (ii) Accounts arising out of the sale at the wellhead or minehead of oil, gas, or other

minerals in which the debtor had an interest before extraction.

     (7) “Authenticate” means:

LC001292 - Page 37 of 113

     (i) To sign; or

     (ii) With present intent to adopt or accept a record, to attach to or logically associate with

the record an electronic sound, symbol, or process. [RESERVED]

     (7.1) “Assignee”, except as used in “assignee for benefit of creditors”, means a person (i)

in whose favor a security interest that secures an obligation is created or provided for under a

security agreement, whether or not the obligation is outstanding or (ii) to which an account, chattel

paper, payment intangible, or promissory note has been sold. The term includes a person to which

a security interest has been transferred by a secured party.

     (7.2) “Assignor” means a person that (i) under a security agreement creates or provides for

a security interest that secures an obligation or (ii) sells an account, chattel paper, payment

intangible, or promissory note. The term includes a secured party that has transferred a security

interest to another person.

     (8) “Bank” means an organization that is engaged in the business of banking. The term

includes savings banks, savings and loan associations, credit unions, and trust companies.

     (9) “Cash proceeds” means proceeds that are money, checks, deposit accounts, or the like.

     (10) “Certificate of title” means a certificate of title with respect to which a statute provides

for the security interest in question to be indicated on the certificate as a condition or result of the

security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral.

The term includes another record maintained as an alternative to a certificate of title by the

governmental unit that issues certificates of title if a statute permits the security interest in question

to be indicated on the record as a condition or result of the security interest’s obtaining priority over

the rights of a lien creditor with respect to the collateral.

     (11) “Chattel paper” means: a record or records that evidence both a monetary obligation

and a security interest in specific goods, a security interest in specific goods and software used in

the goods, a security interest in specific goods and license of software used in the goods, a lease of

specific goods, or a lease of specific goods and license of software used in the goods. In this

paragraph, “monetary obligation” means a monetary obligation secured by the goods or owed under

a lease of the goods and includes a monetary obligation with respect to software used in the goods.

The term does not include (i) charters or other contracts involving the use or hire of a vessel or (ii)

records that evidence a right to payment arising out of the use of a credit or charge card or

information contained on or for use with the card. If a transaction is evidenced by records that

include an instrument or series of instruments, the group of records taken together constitutes

chattel paper.

     (i) a right to payment of a monetary obligation secured by specific goods, if the right to

LC001292 - Page 38 of 113

payment and security agreement are evidenced by a record; or

     (ii) a right to payment of a monetary obligation owed by a lessee under a lease agreement

with respect to specific goods and a monetary obligation owed by the lessee in connection with the

transaction giving rise to the lease, if:

     (A) the right to payment and lease agreement are evidenced by a record; and

     (B) the predominant purpose of the transaction giving rise to the lease was to give the lessee

the right to possession and use of the goods.

     The term "chattel paper" does not include a right to payment arising out of a charter or

other contract involving the use or hire of a vessel or a right to payment arising out of the use of a

credit or charge card or information contained on or for use with the card.

     (12) “Collateral” means the property subject to a security interest or agricultural lien. The

term includes:

     (i) Proceeds to which a security interest attaches;

     (ii) Accounts, chattel paper, payment intangibles, and promissory notes that have been sold;

and

     (iii) Goods that are the subject of a consignment.

     (13) “Commercial tort claim” means a claim arising in tort with respect to which:

     (i) The claimant is an organization; or

     (ii) The claimant is an individual and the claim:

     (A) Arose in the course of the claimant’s business or profession; and

     (B) Does not include damages arising out of personal injury to or the death of an individual.

     (14) “Commodity account” means an account maintained by a commodity intermediary in

which a commodity contract is carried for a commodity customer.

     (15) “Commodity contract” means a commodity futures contract, an option on a

commodity futures contract, a commodity option, or another contract if the contract or option is:

     (i) Traded on or subject to the rules of a board of trade that has been designated as a contract

market for such a contract pursuant to federal commodities laws; or

     (ii) Traded on a foreign commodity board of trade, exchange, or market, and is carried on

the books of a commodity intermediary for a commodity customer.

     (16) “Commodity customer” means a person for which a commodity intermediary carries

a commodity contract on its books.

     (17) “Commodity intermediary” means a person that:

     (i) Is registered as a futures commission merchant under federal commodities law; or

     (ii) In the ordinary course of its business provides clearance or settlement services for a

LC001292 - Page 39 of 113

board of trade that has been designated as a contract market pursuant to federal commodities law.

     (18) “Communicate” means:

     (i) To send a written or other tangible record;

     (ii) To transmit a record by any means agreed upon by the persons sending and receiving

the record; or

     (iii) In the case of transmission of a record to or by a filing office, to transmit a record by

any means prescribed by filing-office rule.

     (19) “Consignee” means a merchant to which goods are delivered in a consignment.

     (20) “Consignment” means a transaction, regardless of its form, in which a person delivers

goods to a merchant for the purpose of sale and:

     (i) The merchant:

     (A) Deals in goods of that kind under a name other than the name of the person making

delivery;

     (B) Is not an auctioneer; and

     (C) Is not generally known by its creditors to be substantially engaged in selling the goods

of others;

     (ii) With respect to each delivery, the aggregate value of the goods is $1,000 or more at the

time of delivery;

     (iii) The goods are not consumer goods immediately before delivery; and

     (iv) The transaction does not create a security interest that secures an obligation.

     (21) “Consignor” means a person that delivers goods to a consignee in a consignment.

     (22) “Consumer debtor” means a debtor in a consumer transaction.

     (23) “Consumer goods” means goods that are used or bought for use primarily for personal,

family, or household purposes.

     (24) “Consumer-goods transaction” means a consumer transaction in which:

     (i) An individual incurs an obligation primarily for personal, family, or household

purposes; and

     (ii) A security interest in consumer goods secures the obligation.

     (25) “Consumer obligor” means an obligor who is an individual and who incurred the

obligation as part of a transaction entered into primarily for personal, family, or household

purposes.

     (26) “Consumer transaction” means a transaction in which (i) an individual incurs an

obligation primarily for personal, family, or household purposes, (ii) a security interest secures the

obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household

LC001292 - Page 40 of 113

purposes. The term includes consumer-goods transactions.

     (27) “Continuation statement” means an amendment of a financing statement which:

     (i) Identifies, by its file number, the initial financing statement to which it relates; and

     (ii) Indicates that it is a continuation statement for, or that it is filed to continue the

effectiveness of, the identified financing statement.

     (27.1) “Controllable account” means an account evidenced by a controllable electronic

record that provides that the account debtor undertakes to pay the person that has control under §

6A-12-105 of the controllable electronic record.

     (27.2) “Controllable payment intangible” means a payment intangible evidenced by a

controllable electronic record that provides that the account debtor undertakes to pay the person

that has control under § 6A-12-105 of the controllable electronic record.

     (28) “Debtor” means:

     (i) A person having an interest, other than a security interest or other lien, in the collateral,

whether or not the person is an obligor;

     (ii) A seller of accounts, chattel paper, payment intangibles, or promissory notes; or

     (iii) A consignee.

     (29) “Deposit account” means a demand, time, savings, passbook, or similar account

maintained with a bank. The term does not include investment property or accounts evidenced by

an instrument.

     (30) “Document” means a document of title or a receipt of the type described in § 6A-7-

201(b).

     (31) “Electronic chattel paper” means chattel paper evidenced by a record or records

consisting of information stored in an electronic medium. [RESERVED]

     (31.1) “Electronic money” means money in an electronic form.

     (32) “Encumbrance” means a right, other than an ownership interest, in real property. The

term includes mortgages and other liens on real property.

     (33) “Equipment” means goods other than inventory, farm products, or consumer goods.

     (34) “Farm products” means goods, other than standing timber, with respect to which the

debtor is engaged in a farming operation and which are:

     (i) Crops grown, growing, or to be grown, including:

     (A) Crops produced on trees, vines, and bushes; and

     (B) Aquatic goods, including seaweeds, produced in aquacultural operations;

     (ii) Livestock, born or unborn, including fish, shellfish and other aquatic goods produced

in aquacultural operations;

LC001292 - Page 41 of 113

     (iii) Supplies used or produced in a farming operation; or

     (iv) Products of crops or livestock in their unmanufactured states.

     (35) “Farming operation” means raising, cultivating, propagating, fattening, grazing, or

any other farming, livestock, or aquacultural operation.

     (36) “File number” means the number assigned to an initial financing statement pursuant

to § 6A-9-519(a).

     (37) “Filing office” means an office designated in § 6A-9-501 as the place to file a

financing statement.

     (38) “Filing-office rule” means a rule adopted pursuant to § 6A-9-526.

     (39) “Financing statement” means a record or records composed of an initial financing

statement and any filed record relating to the initial financing statement.

     (40) “Fixture filing” means the filing of a financing statement covering goods that are or

are to become fixtures and satisfying § 6A-9-502(a) and (b). The term includes the filing of a

financing statement covering goods of a transmitting utility which are or are to become fixtures.

     (41) “Fixtures” means goods that have become so related to particular real property that an

interest in them arises under real property law.

     (42) “General intangible” means any personal property, including things in action, other

than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods,

instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or

other minerals before extraction. The term includes controllable electronic records payment

intangibles and software.

     (43) “Good faith” means honesty in fact and the observance of reasonable commercial

standards of fair dealing.

     (44) “Goods” means all things that are movable when a security interest attaches. The term

includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or

contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even

if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term also

includes a computer program embedded in goods and any supporting information provided in

connection with a transaction relating to the program if (i) the program is associated with the goods

in such a manner that it customarily is considered part of the goods, or (ii) by becoming the owner

of the goods, a person acquires a right to use the program in connection with the goods. The term

does not include a computer program embedded in goods that consist solely of the medium in which

the program is embedded. The term also does not include accounts, chattel paper, commercial tort

claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-

LC001292 - Page 42 of 113

of-credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.

     (45) “Governmental unit” means a subdivision, agency, department, county, parish,

municipality, or other unit of the government of the United States, a State, or a foreign country.

The term includes an organization having a separate corporate existence if the organization is

eligible to issue debt on which interest is exempt from income taxation under the laws of the United

States.

     (46) “Health-care-insurance receivable” means an interest in or claim under a policy of

insurance which is a right to payment of a monetary obligation for health-care goods or services

provided or to be provided.

     (47) “Instrument” means a negotiable instrument or any other writing that evidences a right

to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type

that in ordinary course of business is transferred by delivery with any necessary indorsement or

assignment. The term does not include (i) investment property, (ii) letters of credit, or (iii) writings

that evidence a right to payment arising out of the use of a credit or charge card or information

contained on or for use with the card, or (iv) writings that evidence chattel paper.

     (48) “Inventory” means goods, other than farm products, which:

     (i) Are leased by a person as lessor;

     (ii) Are held by a person for sale or lease or to be furnished under a contract of service;

     (iii) Are furnished by a person under a contract of service; or

     (iv) Consist of raw materials, work in process, or materials used or consumed in a business.

     (49) “Investment property” means a security, whether certificated or uncertificated,

security entitlement, securities account, commodity contract, or commodity account.

     (50) “Jurisdiction of organization”, with respect to a registered organization, means the

jurisdiction under whose law the organization is formed or organized.

     (51) “Letter-of-credit right” means a right to payment or performance under a letter of

credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment

or performance. The term does not include the right of a beneficiary to demand payment or

performance under a letter of credit.

     (52) “Lien creditor” means:

     (i) A creditor that has acquired a lien on the property involved by attachment, levy, or the

like;

     (ii) An assignee for benefit of creditors from the time of assignment;