PRINTER'S NO. 1400
No. 1152 Session of 2007
INTRODUCED BY GIBBONS, BAKER, DENLINGER, DePASQUALE, HALUSKA,
HENNESSEY, JOSEPHS, KORTZ, McILHATTAN, PETRARCA, RUBLEY,
SOLOBAY, J. WHITE AND YOUNGBLOOD, APRIL 23, 2007
REFERRED TO COMMITTEE ON COMMERCE, APRIL 23, 2007
AN ACT
1 Amending Title 13 (Commercial Code) of the Pennsylvania
2 Consolidated Statutes, extensively revising preliminary
3 provisions and provisions relating to warehouse receipts,
4 bills of lading and documents of title; further providing, in
5 secured transactions, for definitions, for perfection and
6 priority in deposit accounts and for perfection upon
7 attachment; and making editorial changes.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Division 1 of Title 13 of the Pennsylvania
11 Consolidated Statutes is amended to read:
12 [DIVISION 1
13 GENERAL PROVISIONS
14 Chapter
15 11. Short Title, Construction, Application and Subject
16 Matter of Title
17 12. General Definitions and Principles of Interpretation
18 CHAPTER 11
19 SHORT TITLE, CONSTRUCTION, APPLICATION
20 AND SUBJECT MATTER OF TITLE
1 Sec.
2 1101. Short title of title.
3 1102. Purposes; rules of construction; variation by agreement.
4 1103. Supplementary general principles of law applicable.
5 1104. Construction against implicit repeal.
6 1105. Territorial application of title; power of parties to
7 choose applicable law.
8 1106. Remedies to be liberally administered.
9 1107. Waiver or renunciation of claim or right after breach.
10 1108. (Reserved).
11 1109. Section and subsection captions.
12 § 1101. Short title of title.
13 This title shall be known and may be cited as the Uniform
14 Commercial Code.
15 § 1102. Purposes; rules of construction; variation by
16 agreement.
17 (a) Title to be liberally construed.--This title shall be
18 liberally construed and applied to promote its underlying
19 purposes and policies.
20 (b) Purposes and policies of title.--Underlying purposes and
21 policies of this title are:
22 (1) To simplify, clarify and modernize the law governing
23 commercial transactions.
24 (2) To permit the continued expansion of commercial
25 practices through custom, usage and agreement of the parties.
26 (3) To make uniform the law among the various
27 jurisdictions.
28 (c) Variation of title by agreement.--The effect of
29 provisions of this title may be varied by agreement, except as
30 otherwise provided in this title and except that the obligations
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1 of good faith, diligence, reasonableness and care prescribed by
2 this title may not be disclaimed by agreement but the parties
3 may by agreement determine the standards by which the
4 performance of such obligations is to be measured if such
5 standards are not manifestly unreasonable.
6 (d) Effect of "unless otherwise agreed".--The presence in
7 certain provisions of this title of the words "unless otherwise
8 agreed" or words of similar import does not imply that the
9 effect of other provisions may not be varied by agreement under
10 subsection (c).
11 § 1103. Supplementary general principles of law applicable.
12 Unless displaced by the particular provisions of this title,
13 the principles of law and equity, including the law merchant and
14 the law relative to capacity to contract, principal and agent,
15 estoppel, fraud, misrepresentation, duress, coercion, mistake,
16 bankruptcy, or other validating or invalidating cause shall
17 supplement its provisions.
18 § 1104. Construction against implicit repeal.
19 This title being a general law intended as a unified coverage
20 of its subject matter, no part of it shall be deemed to be
21 impliedly repealed by subsequent legislation if such
22 construction can reasonably be avoided.
23 § 1105. Territorial application of title; power of parties to
24 choose applicable law.
25 (a) General rule.--Except as otherwise provided in this
26 section, when a transaction bears a reasonable relation to this
27 Commonwealth and also to another state or nation the parties may
28 agree that the law either of this Commonwealth or of such other
29 state or nation shall govern their rights and duties. Failing
30 such agreement this title applies to transactions bearing an
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1 appropriate relation to this Commonwealth.
2 (b) Limitations on power of parties to choose applicable
3 law.--Where one of the following provisions of this title
4 specifies the applicable law, that provision governs and a
5 contrary agreement is effective only to the extent permitted by
6 the law (including the conflict of laws rules) so specified:
7 Section 2402 (relating to rights of creditors of seller
8 against sold goods).
9 Sections 2A105 (relating to territorial application of
10 division to goods covered by certificate of title) and 2A106
11 (relating to limitation on power of parties to consumer lease
12 to choose applicable law and judicial forum).
13 Section 4102 (relating to applicability of division on
14 bank deposits and collections).
15 Section 4A507 (relating to choice of law).
16 Section 5116 (relating to choice of law and forum).
17 Section 8110 (relating to applicability; choice of law).
18 Subchapter A of Chapter 93 (relating to law governing
19 perfection and priority).
20 § 1106. Remedies to be liberally administered.
21 (a) General rule.--The remedies provided by this title shall
22 be liberally administered to the end that the aggrieved party
23 may be put in as good a position as if the other party had fully
24 performed but neither consequential or special nor penal damages
25 may be had except as specifically provided in this title or by
26 other rule of law.
27 (b) Enforceability of rights and obligations by action.--Any
28 right or obligation declared by this title is enforceable by
29 action unless the provision declaring it specifies a different
30 and limited effect.
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1 § 1107. Waiver or renunciation of claim or right after breach.
2 Any claim or right arising out of an alleged breach can be
3 discharged in whole or in part without consideration by a
4 written waiver or renunciation signed and delivered by the
5 aggrieved party.
6 § 1108. (Reserved).
7 § 1109. Section and subsection captions.
8 Notwithstanding 1 Pa.C.S. § 1101(b) (relating to enumeration
9 and use of unofficial provisions), section captions are parts of
10 this title but subsection captions are not parts of this title.
11 CHAPTER 12
12 GENERAL DEFINITIONS AND PRINCIPLES
13 OF INTERPRETATION
14 Sec.
15 1201. General definitions.
16 1202. Prima facie evidence by third party documents.
17 1203. Obligation of good faith.
18 1204. Time; reasonable time; "seasonably."
19 1205. Course of dealing and usage of trade.
20 1206. Statute of frauds for kinds of personal property not
21 otherwise covered.
22 1207. Performance or acceptance under reservation of rights.
23 1208. Option to accelerate at will.
24 1209. Subordinated obligations.
25 § 1201. General definitions.
26 Subject to additional definitions contained in the subsequent
27 provisions of this title which are applicable to specific
28 provisions of this title, the following words and phrases when
29 used in this title shall have, unless the context clearly
30 indicates otherwise, the meanings given to them in this section:
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1 "Action." In the sense of a judicial proceeding includes
2 recoupment, counterclaim, set-off, suit in equity and any other
3 proceedings in which rights are determined.
4 "Aggrieved party." A party entitled to resort to a remedy.
5 "Agreement." The bargain of the parties in fact as found in
6 their language or by implication from other circumstances
7 including course of dealing or usage of trade or course of
8 performance as provided in this title (sections 1205 and 2208).
9 Whether an agreement has legal consequences is determined by the
10 provisions of this title, if applicable; otherwise by the law of
11 contracts (section 1103 (relating to supplementary general
12 principles of law applicable)). (Compare definition of
13 "contract".)
14 "Airbill." A document serving for air transportation as a
15 bill of lading does for marine or rail transportation, and
16 includes an air consignment note or air waybill.
17 "Bank." Any person engaged in the business of banking.
18 "Bearer." The person in possession of an instrument,
19 document of title, or certificated security payable to bearer or
20 indorsed in blank.
21 "Bill of lading." A document evidencing the receipt of goods
22 for shipment issued by a person engaged in the business of
23 transporting or forwarding goods, and includes an airbill.
24 "Branch." Includes a separately incorporated foreign branch
25 of a bank.
26 "Burden of establishing a fact." The burden of persuading
27 the triers of fact that the existence of the fact is more
28 probable than its nonexistence.
29 "Buyer in ordinary course of business." A person that buys
30 goods in good faith, without knowledge that the sale violates
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1 the rights of another person in the goods, and in the ordinary
2 course from a person, other than a pawnbroker, in the business
3 of selling goods of that kind. A person buys goods in the
4 ordinary course if the sale to the person comports with the
5 usual or customary practices in the kind of business in which
6 the seller is engaged or with the seller's own usual or
7 customary practices. A person that sells oil, gas or other
8 minerals at the wellhead or minehead is a person in the business
9 of selling goods of that kind. A buyer in ordinary course of
10 business may buy for cash, by exchange of other property or on
11 secured or unsecured credit and may acquire goods or documents
12 of title under a preexisting contract for sale. Only a buyer
13 that takes possession of the goods or has a right to recover the
14 goods from the seller under Division 2 (relating to sales) may
15 be a buyer in ordinary course of business. A person that
16 acquires goods in a transfer in bulk or as security for or in
17 total or partial satisfaction of a money debt is not a buyer in
18 ordinary course of business.
19 "Conspicuous." A term or clause is conspicuous when it is so
20 written that a reasonable person against whom it is to operate
21 ought to have noticed it.
22 A printed heading in capitals (as: NONNEGOTIABLE BILL OF
23 LADING) is conspicuous.
24 Language in the body of a form is conspicuous if it is in
25 larger or other contrasting type or color. But in a telegram
26 any stated term is conspicuous.
27 Whether a term or clause is conspicuous or not is for
28 decision by the court.
29 "Contract." The total legal obligation which results from
30 the agreement of the parties as affected by this title and any
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1 other applicable rules of law. (Compare definition of
2 "agreement".)
3 "Creditor." Includes:
4 a general creditor;
5 a secured creditor;
6 a lien creditor; and
7 any representative of creditors, including an assignee
8 for the benefit of creditors, a trustee in bankruptcy, a
9 receiver in equity and an executor or administrator of an
10 insolvent debtor's or assignor's estate.
11 "Defendant." Includes a person in the position of defendant
12 in a cross-action or counterclaim.
13 "Delivery." With respect to instruments, documents of title,
14 chattel paper or certificated securities, means voluntary
15 transfer of possession.
16 "Discover." See definition of "notice."
17 "Document of title." Includes:
18 a bill of lading;
19 a dock warrant;
20 a dock receipt;
21 a warehouse receipt or order for the delivery of goods;
22 and
23 any other document which in the regular course of
24 business or financing is treated as adequately evidencing
25 that the person in possession of it is entitled to receive,
26 hold and dispose of the document and the goods it covers.
27 To be a document of title a document must purport to be
28 issued by or addressed to a bailee and purport to cover goods in
29 the possession of the bailee which are either identified or are
30 fungible portions of an identified mass.
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1 "Fault." Wrongful act, omission or breach.
2 "Fungible." With respect to goods or securities, means goods
3 or securities of which any unit is, by nature or usage of trade,
4 the equivalent of any other like unit. Goods which are not
5 fungible shall be deemed fungible for the purpose of this title
6 to the extent that under a particular agreement or document
7 unlike units are treated as equivalents.
8 "Genuine." Free of forgery or counterfeiting.
9 "Good faith." Honesty in fact in the conduct or transaction
10 concerned.
11 "Holder."
12 (1) With respect to a negotiable instrument, the person
13 in possession if the instrument is payable to bearer or, in
14 the case of an instrument payable to an identified person, if
15 the identified person is in possession.
16 (2) With respect to a document of title, the person in
17 possession if the goods are deliverable to bearer or to the
18 order of the person in possession.
19 "Honor." To pay or to accept and pay, or where a credit so
20 engages to purchase or discount a draft complying with the terms
21 of the credit.
22 "Insolvency proceedings." Includes any assignment for the
23 benefit of creditors or other proceedings intended to liquidate
24 or rehabilitate the estate of the person involved.
25 "Insolvent." A person is insolvent who either has ceased to
26 pay his debts in the ordinary course of business or cannot pay
27 his debts as they become due or is insolvent within the meaning
28 of the Federal bankruptcy law.
29 "Knows" or "knowledge." See definition of "notice."
30 "Learn." See definition of "notice."
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1 "Money." A medium of exchange authorized or adopted by a
2 domestic or foreign government and includes a monetary unit of
3 account established by an intergovernmental organization or by
4 agreement between two or more nations.
5 "Notice." A person has "notice" of a fact when:
6 (1) he has actual knowledge of it;
7 (2) he has received a notice or notification of it; or
8 (3) from all the facts and circumstances known to him at
9 the time in question he has reason to know that it exists.
10 A person "knows" or has "knowledge" of a fact when he has
11 actual knowledge of it. "Discover" or "learn" or a word or
12 phrase of similar import refers to knowledge rather than to
13 reason to know. The time and circumstances under which a notice
14 or notification may cease to be effective are not determined by
15 this title.
16 A person "notifies" or "gives" a notice or notification to
17 another by taking such steps as may be reasonably required to
18 inform the other in ordinary course whether or not such other
19 actually comes to know of it. A person "receives" a notice or
20 notification when:
21 (1) it comes to his attention; or
22 (2) it is duly delivered at the place of business
23 through which the contract was made or at any other place
24 held out by him as the place for receipt of such
25 communications.
26 Notice, knowledge or a notice or notification received by an
27 organization is effective for a particular transaction from the
28 time when it is brought to the attention of the individual
29 conducting that transaction, and in any event from the time when
30 it would have been brought to his attention if the organization
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1 had exercised due diligence. An organization exercises due
2 diligence if it maintains reasonable routines for communicating
3 significant information to the person conducting the transaction
4 and there is reasonable compliance with the routines. Due
5 diligence does not require an individual acting for the
6 organization to communicate information unless such
7 communication is part of his regular duties or unless he has
8 reason to know of the transaction and that the transaction would
9 be materially affected by the information.
10 "Organization." Includes a corporation, government or
11 governmental subdivision or agency, business trust, estate,
12 trust, partnership or association, two or more persons having a
13 joint or common interest, or any other legal or commercial
14 entity.
15 "Party." As distinct from "third party," means a person who
16 has engaged in a transaction or made an agreement within this
17 title.
18 "Person." Includes an individual or an organization. See
19 section 1102 (relating to purposes; rules of construction;
20 variation by agreement).
21 "Presumption" or "presumed." Either means that the trier of
22 fact must find the existence of the fact presumed unless and
23 until evidence is introduced which would support a finding of
24 its nonexistence.
25 "Purchase." Includes taking by sale, discount, negotiation,
26 mortgage, pledge, lien, security interest, issue or reissue,
27 gift or any other voluntary transaction creating an interest in
28 property.
29 "Purchaser." A person who takes by purchase.
30 "Remedy." Any remedial right to which an aggrieved party is
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1 entitled with or without resort to a tribunal.
2 "Representative." Includes an agent, an officer of a
3 corporation or association, and a trustee, executor or
4 administrator of an estate, or any other person empowered to act
5 for another.
6 "Rights." Includes remedies.
7 "Security interest."
8 (1) General definition.--A security interest means an
9 interest in personal property or fixtures which secures
10 payment or performance of an obligation.
11 (2) Interest of consignor or buyer under Division 9.--
12 The term "security interest" also includes any interest of a
13 consignor and a buyer of accounts, chattel paper, a payment
14 intangible or a promissory note in a transaction that is
15 subject to Division 9 (relating to secured transactions).
16 (3) Buyer's interest in identified goods.--The special
17 property interest of a buyer of goods on identification of
18 those goods to a contract for sale under section 2401
19 (relating to passing of title; reservation for security;
20 limited application of section) is not a "security interest,"
21 but a buyer may also acquire a "security interest" by
22 complying with Division 9.
23 (4) Sellers and lessors of goods.--Except as otherwise
24 provided in section 2505 (relating to shipment by seller
25 under reservation), the right of a seller or lessor of goods
26 under Division 2 (relating to sales) or 2A (relating to
27 leases) to retain or acquire possession of the goods is not a
28 "security interest," but a seller or lessor may also acquire
29 a "security interest" by complying with Division 9. The
30 retention or reservation of title by a seller of goods
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1 notwithstanding shipment or delivery to the buyer (section
2 2401) is limited in effect to a reservation of a "security
3 interest."
4 (5) Determination of lease or security interest.--
5 Whether a transaction creates a lease or security interest is
6 determined by the facts of each case; however:
7 (i) A transaction creates a security interest if the
8 consideration the lessee is to pay the lessor for the
9 right to possession and use of the goods is an obligation
10 for the term of the lease not subject to termination by
11 the lessee and:
12 (A) the original term of the lease is equal to
13 or greater than the remaining economic life of the
14 goods;
15 (B) the lessee is bound to renew the lease for
16 the remaining economic life of the goods or is bound
17 to become the owner of the goods;
18 (C) the lessee has an option to renew the lease
19 for the remaining economic life of the goods for no
20 additional consideration or nominal additional
21 consideration upon compliance with the lease
22 agreement; or
23 (D) the lessee has an option to become the owner
24 of the goods for no additional consideration or
25 nominal additional consideration upon compliance with
26 the lease agreement.
27 (ii) A transaction does not create a security
28 interest merely because it provides that:
29 (A) the present value of the consideration the
30 lessee is obligated to pay the lessor for the right
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1 to possession and use of the goods is substantially
2 equal to or is greater than the fair market value of
3 the goods at the time the lease is entered into;
4 (B) the lessee assumes risk of loss of the
5 goods, or agrees to pay taxes, insurance, filing,
6 recording or registration fees, or service or
7 maintenance costs with respect to the goods;
8 (C) the lessee has an option to renew the lease
9 or to become the owner of the goods;
10 (D) the lessee has an option to renew the lease
11 for a fixed rent that is equal to or greater than the
12 reasonably predictable fair market rent for the use
13 of the goods for the term of the renewal at the time
14 the option is to be performed; or
15 (E) the lessee has an option to become the owner
16 of the goods for a fixed price that is equal to or
17 greater than the reasonably predictable fair market
18 value of the goods at the time the option is to be
19 performed.
20 (iii) For purposes of determining whether the
21 transaction is a lease or a security interest:
22 (A) Additional consideration is not nominal if:
23 (I) when the option to renew the lease is
24 granted to the lessee, the rent is stated to be
25 the fair market rent for the use of the goods for
26 the term of the renewal determined at the time
27 the option is to be performed; or
28 (II) when the option to become the owner of
29 the goods is granted to the lessee, the price is
30 stated to be the fair market value of the goods
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1 determined at the time the option is to be
2 performed.
3 Additional consideration is nominal if it is less
4 than the lessee's reasonably predictable cost of
5 performing under the lease agreement if the option is
6 not exercised.
7 (B) "Reasonably predictable" and "remaining
8 economic life of the goods" are to be determined with
9 reference to the facts and circumstances at the time
10 the transaction is entered into.
11 (C) "Present value" means the amount as of a
12 date certain of one or more sums payable in the
13 future, discounted to the date certain. The discount
14 is determined by the interest rate specified by the
15 parties if the rate is not manifestly unreasonable at
16 the time the transaction is entered into; otherwise,
17 the discount is determined by a commercially
18 reasonable rate that takes into account the facts and
19 circumstances of each case at the time the
20 transaction was entered into.
21 "Send." In connection with any writing or notice, means to
22 deposit in the mail or deliver for transmission by any other
23 usual means of communication with postage or cost of
24 transmission provided for and properly addressed and in the case
25 of an instrument to an address specified thereon or otherwise
26 agreed, or if there be none to any address reasonable under the
27 circumstances. The receipt of any writing or notice within the
28 time at which it would have arrived if properly sent has the
29 effect of a proper sending.
30 "Signed." Includes any symbol executed or adopted by a party
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1 with present intention to authenticate a writing.
2 "Surety." Includes guarantor.
3 "Telegram." Includes a message transmitted by radio,
4 teletype, cable, any mechanical method of transmission, or the
5 like.
6 "Term." That portion of an agreement which relates to a
7 particular matter.
8 "Unauthorized signature." A signature made without actual,
9 implied or apparent authority and includes a forgery.
10 "Value." Except as otherwise provided with respect to
11 negotiable instruments (section 3303) and bank collections
12 (sections 4210 and 4211), a person gives "value" for rights if
13 he acquires them:
14 (1) in return for a binding commitment to extend credit
15 or for the extension of immediately available credit whether
16 or not drawn upon and whether or not a chargeback is provided
17 for in the event of difficulties in collection;
18 (2) as security for or in total or partial satisfaction
19 of a preexisting claim;
20 (3) by accepting delivery pursuant to a preexisting
21 contract for purchase; or
22 (4) generally, in return for any consideration
23 sufficient to support a simple contract.
24 "Warehouse receipt." A receipt issued by a person engaged in
25 the business of storing goods for hire.
26 "Written" or "writing." Includes printing, typewriting or
27 any other intentional reduction to tangible form.
28 § 1202. Prima facie evidence by third party documents.
29 A document in due form purporting to be a bill of lading,
30 policy or certificate of insurance, official weigher's or
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1 inspector's certificate, consular invoice, or any other document
2 authorized or required by the contract to be issued by a third
3 party shall be prima facie evidence of its own authenticity and
4 genuineness and of the facts stated in the document by the third
5 party.
6 § 1203. Obligation of good faith.
7 Every contract or duty within this title imposes an
8 obligation of good faith in its performance or enforcement.
9 § 1204. Time; reasonable time; "seasonably."
10 (a) Time fixed by agreement.--Whenever this title requires
11 any action to be taken within a reasonable time, any time which
12 is not manifestly unreasonable may be fixed by agreement.
13 (b) Reasonable time.--What is a reasonable time for taking
14 any action depends on the nature, purpose and circumstances of
15 such action.
16 (c) Definition of "seasonably".--An action is taken
17 "seasonably" when it is taken at or within the time agreed or if
18 no time is agreed at or within a reasonable time.
19 § 1205. Course of dealing and usage of trade.
20 (a) Definition of course of dealing.--A course of dealing is
21 a sequence of previous conduct between the parties to a
22 particular transaction which is fairly to be regarded as
23 establishing a common basis of understanding for interpreting
24 their expressions and other conduct.
25 (b) Usage of trade.--A usage of trade is any practice or
26 method of dealing having such regularity of observance in a
27 place, vocation or trade as to justify an expectation that it
28 will be observed with respect to the transaction in question.
29 The existence and scope of such a usage are to be proved as
30 facts. If it is established that such a usage is embodied in a
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1 written trade code or similar writing the interpretation of the
2 writing is for the court.
3 (c) Effect on agreements.--A course of dealing between
4 parties and any usage of trade in the vocation or trade in which
5 they are engaged or of which they are or should be aware give
6 particular meaning to and supplement or qualify terms of an
7 agreement.
8 (d) Construction.--The express terms of an agreement and an
9 applicable course of dealing or usage of trade shall be
10 construed wherever reasonable as consistent with each other; but
11 when such construction is unreasonable express terms control
12 both course of dealing and usage of trade and course of dealing
13 controls usage of trade.
14 (e) Applicable usage of trade.--An applicable usage of trade
15 in the place where any part of performance is to occur shall be
16 used in interpreting the agreement as to that part of the
17 performance.
18 (f) Admissibility of evidence.--Evidence of a relevant usage
19 of trade offered by one party is not admissible unless and until
20 he has given the other party such notice as the court finds
21 sufficient to prevent unfair surprise to the latter.
22 § 1206. Statute of frauds for kinds of personal property not
23 otherwise covered.
24 (a) General rule.--Except in the cases described in
25 subsection (b), a contract for the sale of personal property is
26 not enforceable by way of action or defense beyond $5,000 in
27 amount or value of remedy unless there is some writing which
28 indicates that a contract for sale has been made between the
29 parties at a defined or stated price, reasonably identifies the
30 subject matter, and is signed by the party against whom
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1 enforcement is sought or by his authorized agent.
2 (b) Exceptions.--Subsection (a) does not apply to contracts
3 for the sale of goods (section 2201) nor of securities (section
4 8113) nor to security agreements (section 9203). Furthermore,
5 subsection (a) does not apply to qualified financial contracts
6 to the extent provided in subsection (c).
7 (c) Qualified financial contracts.--
8 (1) As used in this section and in section 2201(d)
9 (relating to formal requirements; statute of frauds),
10 "qualified financial contract" means an agreement to which
11 each party is other than a natural person and which is:
12 (i) for the purchase and sale of foreign exchange,
13 foreign currency, bullion, coin or precious metals on a
14 forward, spot, next-day value or other basis;
15 (ii) a contract (other than a contract for the
16 purchase and sale of a commodity for future delivery on,
17 or subject to the rules of, a contract market or board of
18 trade) for the purchase, sale or transfer of any
19 commodity or any similar good, article, service, right or
20 interest which is presently or in the future becomes the
21 subject of dealing in the forward contract trade, or any
22 product or by-product thereof, with a maturity date more
23 than two days after the date the contract is entered
24 into;
25 (iii) for the purchase and sale of currency, or
26 interbank deposits denominated in United States dollars;
27 (iv) for a currency option, currency swap or cross-
28 currency rate swap;
29 (v) for a commodity swap or a commodity option
30 (other than an option contract traded on or subject to
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1 the rules of a contract market or board of trade);
2 (vi) for a rate swap, basis swap, forward rate
3 transaction or an interest rate option;
4 (vii) for a security-index swap or option or a
5 security or securities price swap or option;
6 (viii) an agreement which involves any other similar
7 transaction relating to a price or index (including,
8 without limitation, any transaction or agreement
9 involving any combination of agreements described in
10 subparagraphs (i) through (vii), and any cap, floor,
11 collar or similar transaction with respect to a rate,
12 commodity price, commodity index, security or securities
13 price, security-index or other price index); or
14 (ix) an option with respect to any agreement
15 described in subparagraphs (i) through (viii).
16 (2) Subsection (a) does not apply to a qualified
17 financial contract if either:
18 (i) there is, as provided in paragraph (3),
19 sufficient evidence to indicate that a contract has been
20 made; or
21 (ii) the parties thereto, by means of a prior or
22 subsequent written contract, have agreed to be bound by
23 the terms of the qualified financial contract from the
24 time they reach agreement (by telephone, by exchange of
25 electronic messages or otherwise) on those terms.
26 (3) For purposes of this subsection and section 2201(d),
27 there is sufficient evidence that a contract has been made if
28 any of the following applies:
29 (i) There is evidence of electronic communication
30 (including, without limitation, the recording of a
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1 telephone call or the tangible written text produced by
2 computer retrieval) sufficient to indicate that in the
3 communication a contract was made between the parties.
4 (ii) A confirmation in writing sufficient to
5 indicate that a contract has been made between the
6 parties and sufficient against the sender is received by
7 the party against whom enforcement is sought no later
8 than the fifth business day after the contract is made
9 (or such other period of time as the parties may agree in
10 writing) and the sender does not receive, on or before
11 the third business day after receipt (or such other
12 period of time as the parties may agree in writing),
13 written objection to a material term of the confirmation.
14 For purposes of this subparagraph, a confirmation or an
15 objection thereto is received at the time there has been
16 actual receipt by an individual responsible for the
17 transaction or, if earlier, at the time there has been
18 constructive receipt, which is the time actual receipt by
19 such an individual would have occurred if the receiving
20 party, as an organization, had exercised reasonable
21 diligence. For purposes of this subparagraph, a "business
22 day" is a day on which both parties are open and
23 transacting business of the kind involved in that
24 qualified financial contract which is the subject of the
25 confirmation. The confirmation and notice of objection
26 referred to in this subparagraph may be communicated by
27 means of telex, telefacsimile, computer or other similar
28 process by which electronic signals are transmitted by
29 telephone or otherwise, but a party claiming to have
30 communicated in such manner shall, unless the parties
20070H1152B1400 - 21 -
1 have otherwise agreed in writing, have the burden of
2 establishing actual or constructive receipt by the other
3 party as set forth in this subparagraph.
4 (iii) The party against whom enforcement is sought
5 admits in its pleading, testimony or otherwise in court
6 that a contract was made.
7 (iv) There is a note, memorandum or other writing
8 sufficient to indicate that a contract has been made,
9 signed by the party against whom enforcement is sought or
10 by its authorized agent or broker.
11 (4) For purposes of this subsection and section 2201(d):
12 (i) Evidence of an electronic communication
13 indicating the making therein of a contract or a
14 confirmation, admission, note, memorandum or writing is
15 not insufficient merely because it omits or incorrectly
16 states one or more material terms agreed upon, so long as
17 such evidence provides a reasonable basis for concluding
18 that a contract was made.
19 (ii) The tangible written text produced by telex,
20 telefacsimile, computer retrieval or other process by
21 which electronic signals are transmitted by telephone or
22 otherwise shall constitute a writing.
23 (5) Nothing in this subsection shall be construed to
24 affect in any respect the construction or interpretation of
25 any provision of this title, other than this subsection and
26 section 2201(d). Without limiting the generality of the
27 foregoing, nothing in this subsection shall be construed to
28 limit the generality of the term "writing" as defined in
29 section 1201 (relating to general definitions), to affect the
30 interpretation of subsection (a) or section 2201(a) insofar
20070H1152B1400 - 22 -
1 as they relate to the sufficiency of a writing or to affect
2 the construction of any other provision of this title
3 relating to the time when a communication is deemed received,
4 given or effective. Nothing in this subsection or in section
5 2201(d) shall be construed to imply that a qualified
6 financial contract would be subject to subsection (a) or
7 section 2201(a) but for this subsection or section 2201(d).
8 (6) Nothing in this subsection or in section 2201(d)
9 shall be construed to affect or limit the application to a
10 qualified financial contract of any other law validating
11 records, signatures or transactions made or evidenced by
12 nontraditional media.
13 § 1207. Performance or acceptance under reservation of rights.
14 (a) General rule.--A party who with explicit reservation of
15 rights performs or promises performance or assents to
16 performance in a manner demanded or offered by the other party
17 does not thereby prejudice the rights reserved. Such words as
18 "without prejudice," "under protest" or the like are sufficient.
19 (b) Exception.--Subsection (a) does not apply to an accord
20 and satisfaction.
21 § 1208. Option to accelerate at will.
22 A term providing that one party or his successor in interest
23 may accelerate payment or performance or require collateral or
24 additional collateral "at will" or "when he deems himself
25 insecure" or in words of similar import shall be construed to
26 mean that he shall have power to do so only if he in good faith
27 believes that the prospect of payment or performance is
28 impaired. The burden of establishing lack of good faith is on
29 the party against whom the power has been exercised.
30 § 1209. Subordinated obligations.
20070H1152B1400 - 23 -
1 An obligation may be issued as subordinated to payment of
2 another obligation of the person obligated, or a creditor may
3 subordinate his right to payment of an obligation by agreement
4 with either the person obligated or another creditor of the
5 person obligated. Such a subordination does not create a
6 security interest as against either the common debtor or a
7 subordinated creditor. This section shall be construed as
8 declaring the law as it existed prior to the effective date of
9 this section and not as modifying it.]
10 Section 1.1. Title 13 is amended by adding a division to
11 read:
12 DIVISION 1
13 GENERAL PROVISIONS
14 Chapter
15 11. General Provisions
16 12. General Definitions and Principles of Interpretation
17 13. Territorial Applicability and General Rules
18 CHAPTER 11
19 GENERAL PROVISIONS
20 Sec.
21 1101. Short titles.
22 1102. Scope of division.
23 1103. Construction of title to promote its purposes and
24 policies; applicability of supplemental principles
25 of law.
26 1104. Construction against implied repeal.
27 1105. (Reserved).
28 1106. Use of singular and plural; gender.
29 1107. Section captions.
30 1108. Relation to Electronic Signatures in Global and
20070H1152B1400 - 24 -
1 National Commerce Act.
2 § 1101. Short titles.
3 (a) Title.--This title may be cited as the Uniform
4 Commercial Code.
5 (b) Division.--This division may be cited as Uniform
6 Commercial Code-General Provisions.
7 § 1102. Scope of division.
8 This division applies to a transaction to the extent that it
9 is governed by another division of this title.
10 § 1103. Construction of title to promote its purposes and
11 policies; applicability of supplemental principles of
12 law.
13 (a) Liberal construction.--This title must be liberally
14 construed and applied to promote its underlying purposes and
15 policies, which are:
16 (1) to simplify, clarify and modernize the law governing
17 commercial transactions;
18 (2) to permit the continued expansion of commercial
19 practices through custom, usage and agreement of the parties;
20 and
21 (3) to make uniform the law among the various
22 jurisdictions.
23 (b) Law and equity.--Unless displaced by the particular
24 provisions of this title, the principles of law and equity,
25 including the law merchant and the law relative to capacity to
26 contract, principal and agent, estoppel, fraud,
27 misrepresentation, duress, coercion, mistake, bankruptcy and
28 other validating or invalidating cause, supplement its
29 provisions.
30 § 1104. Construction against implied repeal.
20070H1152B1400 - 25 -
1 This title being a general act intended as a unified coverage
2 of its subject matter, no part of it shall be deemed to be
3 impliedly repealed by subsequent legislation if such
4 construction can reasonably be avoided.
5 § 1105. (Reserved).
6 § 1106. Use of singular and plural; gender.
7 (Reserved).
8 § 1107. Section captions.
9 Notwithstanding 1 Pa.C.S. § 1924 (relating to construction of
10 titles, preambles, provisos, exceptions and headings), section
11 captions are part of this title.
12 § 1108. Relation to Electronic Signatures in Global and
13 National Commerce Act.
14 This division modifies, limits and supersedes the Electronic
15 Signatures in Global and National Commerce Act (Public Law 106-
16 229, 15 U.S.C. § 7001 et seq.) but does not modify, limit or
17 supersede section 101(c) of that act (15 U.S.C. § 7001(c)) or
18 authorize electronic delivery of any of the notices described in
19 section 103(b) of that act (15 U.S.C. § 7003(b)).
20 CHAPTER 12
21 GENERAL DEFINITIONS AND
22 PRINCIPLES OF INTERPRETATION
23 Sec.
24 1201. General definitions.
25 1202. Notice; knowledge.
26 1203. Lease distinguished from security interest.
27 1204. Value.
28 1205. Reasonable time; seasonableness.
29 1206. Presumptions.
30 § 1201. General definitions.
20070H1152B1400 - 26 -
1 (a) Definition provisions.--Unless the context otherwise
2 requires, words or phrases defined in this section, or in the
3 additional definitions contained in other divisions of this
4 title that apply to particular divisions or chapters of this
5 title, have the meanings stated.
6 (b) Definitions.--Subject to additional definitions
7 contained in subsequent provisions of this title which are
8 applicable to specific provisions of this title, the following
9 words and phrases when used in this title shall have, unless the
10 context clearly indicates otherwise, the meanings given to them
11 in this subsection:
12 (1) "Action." In the sense of a judicial proceeding,
13 the term includes recoupment, counterclaim, set-off, suit in
14 equity and any other proceeding in which rights are
15 determined.
16 (2) "Aggrieved party." A party entitled to pursue a
17 remedy.
18 (3) "Agreement." As distinguished from "contract" under
19 paragraph (12), the term means the bargain of the parties in
20 fact, as found in their language or inferred from other
21 circumstances, including course of performance, course of
22 dealing or usage of trade as provided in section 1303
23 (relating to course of performance, course of dealing and
24 usage of trade).
25 (4) "Bank." A person engaged in the business of
26 banking. The term includes a savings bank, savings and loan
27 association, credit union and trust company.
28 (5) "Bearer." A person in control of a negotiable
29 electronic document of title or a person in possession of a
30 negotiable instrument, negotiable tangible document of title
20070H1152B1400 - 27 -
1 or certificated security, that is payable to bearer or
2 indorsed in blank.
3 (6) "Bill of lading." A document of title evidencing
4 the receipt of goods for shipment issued by a person engaged
5 in the business of directly or indirectly transporting or
6 forwarding goods. The term does not include a warehouse
7 receipt.
8 (7) "Branch." The term includes a separately
9 incorporated foreign branch of a bank.
10 (8) "Burden of establishing." As to a fact, the burden
11 of persuading the trier of fact that the existence of the
12 fact is more probable than its nonexistence.
13 (9) "Buyer in ordinary course of business." A person
14 that buys goods in good faith, without knowledge that the
15 sale violates the rights of another person in the goods, and
16 in the ordinary course from a person, other than a
17 pawnbroker, in the business of selling goods of that kind.
18 (i) A person buys goods in the ordinary course of
19 business if the sale to the person comports with the
20 usual or customary practices in the kind of business in
21 which the seller is engaged or with the seller's own
22 usual or customary practices.
23 (ii) A person that sells oil, gas or other minerals
24 at the wellhead or minehead is a person in the business
25 of selling goods of that kind.
26 (iii) A buyer in ordinary course of business may buy
27 for cash, by exchange of other property or on secured or
28 unsecured credit and may acquire goods or documents of
29 title under a preexisting contract for sale.
30 (iv) Only a buyer that takes possession of the goods
20070H1152B1400 - 28 -
1 or has a right to recover the goods from the seller under
2 Division 2 (relating to sales) may be a buyer in ordinary
3 course of business.
4 The term does not include a person that acquires goods in a
5 transfer in bulk or as security for or in total or partial
6 satisfaction of a money debt.
7 (10) "Conspicuous." With reference to a term, means so
8 written, displayed or presented that a reasonable person
9 against which it is to operate ought to have noticed it.
10 Whether a term is "conspicuous" or not is a decision for the
11 court. Conspicuous terms include the following:
12 (i) A heading in capitals equal to or greater in
13 size than the surrounding text, or in contrasting type,
14 font, or color to the surrounding text of the same or
15 lesser size.
16 (ii) Language in the body of a record or display in
17 larger type than the surrounding text; in contrasting
18 type, font or color to the surrounding text of the same
19 size; or set off from surrounding text of the same size
20 by symbols or other marks that call attention to the
21 language.
22 (11) "Consumer." An individual who enters into a
23 transaction primarily for personal, family or household
24 purposes.
25 (12) "Contract." As distinguished from "agreement" in
26 paragraph (3), the total legal obligation that results from
27 the parties' agreement as determined by this title as
28 supplemented by any other applicable laws.
29 (13) "Creditor." The term includes a general creditor;
30 a secured creditor; a lien creditor; a representative of
20070H1152B1400 - 29 -
1 creditors, including an assignee for the benefit of
2 creditors; a trustee in bankruptcy; a receiver in equity; and
3 an executor or administrator of an insolvent debtor's or
4 assignor's estate.
5 (14) "Defendant." Includes a person in the position of
6 defendant in a counterclaim, cross-claim or third-party
7 claim.
8 (15) "Delivery." With respect to an electronic document
9 of title, means voluntary transfer of control and with
10 respect to an instrument, a tangible document of title or
11 chattel paper, means voluntary transfer of possession.
12 (16) "Document of title." A record that:
13 (i) in the regular course of business or financing
14 is treated as adequately evidencing that the person in
15 possession or control of the record is entitled to
16 receive, control, hold and dispose of the record and the
17 goods the record covers; or
18 (ii) purports to be issued by or addressed to a
19 bailee and to cover goods in the bailee's possession
20 which are either identified or are fungible portions of
21 an identified mass.
22 The term includes a bill of lading, transport document, dock
23 warrant, dock receipt, warehouse receipt and order for
24 delivery of goods.
25 (16.1) "Electronic document of title." A document of
26 title evidenced by a record consisting of information stored
27 in an electronic medium.
28 (17) "Fault." A default, breach or wrongful act or
29 omission.
30 (18) "Fungible goods." As follows:
20070H1152B1400 - 30 -
1 (i) goods of which any unit, by nature or usage of
2 trade, is the equivalent of any other like unit; or
3 (ii) goods that by agreement are treated as
4 equivalent.
5 (19) "Genuine." Free of forgery or counterfeiting.
6 (20) "Good faith." Except as otherwise provided in
7 Division 5 (relating to letters of credit), honesty in fact
8 and the observance of reasonable commercial standards of fair
9 dealing.
10 (21) "Holder." As follows:
11 (i) the person in possession of a negotiable
12 instrument that is payable either to bearer or to an
13 identified person that is the person in possession;
14 (ii) the person in possession of a negotiable
15 tangible document of title if the goods are deliverable
16 either to bearer or to the order of the person in
17 possession; or
18 (iii) the person in control of a negotiable
19 electronic document of title.
20 (22) "Insolvency proceeding." Includes an assignment
21 for the benefit of creditors or other proceeding intended to
22 liquidate or rehabilitate the estate of the person involved.
23 (23) "Insolvent." As follows:
24 (i) having generally ceased to pay debts in the
25 ordinary course of business other than as a result of
26 bona fide dispute;
27 (ii) being unable to pay debts as they become due;
28 or
29 (iii) being insolvent within the meaning of Federal
30 bankruptcy law.
20070H1152B1400 - 31 -
1 (24) "Money." A medium of exchange currently authorized
2 or adopted by a domestic or foreign government. The term
3 includes a monetary unit of account established by an
4 intergovernmental organization or by agreement between two or
5 more countries.
6 (25) "Organization." A person other than an individual.
7 (26) "Party." As distinguished from "third party," a
8 person that has engaged in a transaction or made an agreement
9 subject to this title.
10 (27) "Person." Any individual; corporation; business
11 trust; estate; trust; partnership; limited liability company;
12 association; joint venture; government; governmental
13 subdivision, agency or instrumentality; public corporation;
14 or other legal or commercial entity.
15 (28) "Present value." The amount as of a date certain
16 of one or more sums payable in the future, discounted to the
17 date certain by use of either:
18 (i) an interest rate specified by the parties if
19 that rate is not manifestly unreasonable at the time the
20 transaction is entered into; or
21 (ii) if an interest rate is not so specified, a
22 commercially reasonable rate that takes into account the
23 facts and circumstances at the time the transaction is
24 entered into.
25 (29) "Purchase." Taking by sale, lease, discount,
26 negotiation, mortgage, pledge, lien, security interest, issue
27 or reissue, gift or other voluntary transaction creating an
28 interest in property.
29 (30) "Purchaser." A person that takes by purchase.
30 (31) "Record." Information that is inscribed on a
20070H1152B1400 - 32 -
1 tangible medium or that is stored in an electronic or other
2 medium and is retrievable in perceivable form.
3 (32) "Remedy." Any remedial right to which an aggrieved
4 party is entitled with or without resort to a tribunal.
5 (33) "Representative." A person empowered to act for
6 another, including an agent; an officer of a corporation or
7 association; and a trustee, executor or administrator of an
8 estate.
9 (34) "Right." Includes remedy.
10 (35) "Security interest." An interest in personal
11 property or fixtures which secures payment or performance of
12 an obligation.
13 (i) The term includes any interest of a consignor
14 and a buyer of accounts, chattel paper, a payment
15 intangible or a promissory note, in a transaction that is
16 subject to Division 9 (relating to secured transactions).
17 (ii) The term does not include the special property
18 interest of a buyer of goods on identification of those
19 goods to a contract for sale under section 2401 (relating
20 to passing of title; reservation for security; limited
21 application of section), but a buyer may also acquire a
22 "security interest" by complying with Division 9.
23 (iii) Except as otherwise provided in section 2505
24 (relating to shipment by seller under reservation), the
25 right of a seller or lessor of goods under Division 2
26 (relating to sales) or 2A (relating to leases) to retain
27 or acquire possession of the goods is not a "security
28 interest"; but a seller or lessor may also acquire a
29 "security interest" by complying with Division 9. The
30 retention or reservation of title by a seller of goods
20070H1152B1400 - 33 -
1 notwithstanding shipment or delivery to the buyer under
2 section 2401 is limited in effect to a reservation of a
3 "security interest."
4 (iv) Whether a transaction in the form of a lease
5 creates a "security interest" is determined pursuant to
6 section 1203 (relating to lease distinguished from
7 security interest).
8 (36) "Send." In connection with a writing, record or
9 notice:
10 (i) to deposit in the mail or deliver for
11 transmission by any other usual means of communication:
12 (A) with postage or cost of transmission
13 provided for;
14 (B) properly addressed; and
15 (C) in the case of an instrument:
16 (I) to an address specified thereon or
17 otherwise agreed upon; or
18 (II) if no address is specified or agreed
19 upon, to any address reasonable under the
20 circumstances; or
21 (ii) in any other way to cause to be received any
22 record or notice within the time it would have arrived if
23 properly sent.
24 (37) "Signed." Includes using any symbol executed or
25 adopted with present intention to adopt or accept a writing.
26 (38) "State." A state of the United States, the
27 District of Columbia, Puerto Rico, the United States Virgin
28 Islands or any territory or insular possession subject to the
29 jurisdiction of the United States.
30 (39) "Surety." Includes a guarantor or other secondary
20070H1152B1400 - 34 -
1 obligor.
2 (39.1) "Tangible document of title." A document of
3 title evidenced by a record consisting of information that is
4 inscribed on a tangible medium.
5 (40) "Term." A portion of an agreement that relates to
6 a particular matter.
7 (41) "Unauthorized signature." A signature made without
8 actual, implied or apparent authority. The term includes a
9 forgery.
10 (42) "Warehouse receipt." A document of title issued by
11 a person engaged in the business of storing goods for hire.
12 (43) "Writing." Includes printing, typewriting or any
13 other intentional reduction to tangible form.
14 (44) "Written." Includes printing, typewriting or any
15 other intentional reduction to tangible form.
16 § 1202. Notice; knowledge.
17 (a) Notice.--Subject to subsection (f), a person has notice
18 of a fact if the person:
19 (1) has actual knowledge of it;
20 (2) has received a notice or notification of it; or
21 (3) from all the facts and circumstances known to the
22 person at the time in question, has reason to know that
23 it exists.
24 (b) Knowledge.--"Knowledge" means actual knowledge. "Knows"
25 has a corresponding meaning.
26 (c) Reason to know distinguished.--"Discover," "learn" or
27 words of similar import refer to knowledge rather than to reason
28 to know.
29 (d) Notify.--A person notifies or gives a notice or
30 notification to another person by taking such steps as may be
20070H1152B1400 - 35 -
1 reasonably required to inform the other person in ordinary
2 course, whether or not the other person actually comes to know
3 of it.
4 (e) Be notified.--Subject to subsection (f), a person
5 receives a notice or notification when:
6 (1) it comes to that person's attention; or
7 (2) it is duly delivered in a form reasonable under the
8 circumstances at:
9 (i) the place of business through which the contract
10 was made; or
11 (ii) another location held out by that person as the
12 place for receipt of such communications.
13 (f) Communication to organizations.--Notice, knowledge or
14 notice or notification received by an organization is effective
15 for a particular transaction from the time it is brought to the
16 attention of the individual conducting that transaction and, in
17 any event, from the time it would have been brought to the
18 individual's attention if the organization had exercised due
19 diligence. An organization exercises due diligence if it
20 maintains reasonable routines for communicating significant
21 information to the person conducting the transaction and there
22 is reasonable compliance with the routines. Due diligence does
23 not require an individual acting for the organization to
24 communicate information unless the communication is part of the
25 individual's regular duties or the individual has reason to know
26 of the transaction and that the transaction would be materially
27 affected by the information.
28 § 1203. Lease distinguished from security interest.
29 (a) Factual determination.--Whether a transaction in the
30 form of a lease creates a lease or security interest is
20070H1152B1400 - 36 -
1 determined by the facts of each case.
2 (b) Sufficient attributes for security interest.--A
3 transaction in the form of a lease creates a security interest
4 if the consideration that the lessee is to pay the lessor for
5 the right to possession and use of the goods is an obligation
6 for the term of the lease and is not subject to termination by
7 the lessee, and:
8 (1) the original term of the lease is equal to or
9 greater than the remaining economic life of the goods;
10 (2) the lessee is bound to renew the lease for the
11 remaining economic life of the goods or is bound to become
12 the owner of the goods;
13 (3) the lessee has an option to renew the lease for the
14 remaining economic life of the goods for no additional
15 consideration or for nominal additional consideration upon
16 compliance with the lease agreement; or
17 (4) the lessee has an option to become the owner of the
18 goods for no additional consideration or for nominal
19 additional consideration upon compliance with the lease
20 agreement.
21 (c) Insufficient attributes for security interest.--A
22 transaction in the form of a lease does not create a security
23 interest merely because:
24 (1) the present value of the consideration the lessee is
25 obligated to pay the lessor for the right to possession and
26 use of the goods is substantially equal to or is greater than
27 the fair market value of the goods at the time the lease is
28 entered into;
29 (2) the lessee assumes risk of loss of the goods;
30 (3) the lessee agrees to pay, with respect to the goods,
20070H1152B1400 - 37 -
1 taxes, insurance, filing, recording or registration fees, or
2 service or maintenance costs;
3 (4) the lessee has an option to renew the lease or to
4 become the owner of the goods;
5 (5) the lessee has an option to renew the lease for a
6 fixed rent that is equal to or greater than the reasonably
7 predictable fair market rent for the use of the goods for the
8 term of the renewal at the time the option is to be
9 performed; or
10 (6) the lessee has an option to become the owner of the
11 goods for a fixed price that is equal to or greater than the
12 reasonably predictable fair market value of the goods at the
13 time the option is to be performed.
14 (d) Nominal consideration.--Additional consideration is
15 nominal if it is less than the lessee's reasonably predictable
16 cost of performing under the lease agreement if the option is
17 not exercised. Additional consideration is not nominal if:
18 (1) when the option to renew the lease is granted to the
19 lessee, the rent is stated to be the fair market rent for the
20 use of the goods for the term of the renewal determined at
21 the time the option is to be performed; or
22 (2) when the option to become the owner of the goods is
23 granted to the lessee, the price is stated to be the fair
24 market value of the goods determined at the time the option
25 is to be performed.
26 (e) Remaining economic life and reasonable predictability.--
27 The "remaining economic life of the goods" and "reasonably
28 predictable" fair market rent, fair market value or cost of
29 performing under the lease agreement shall be determined with
30 reference to the facts and circumstances at the time the
20070H1152B1400 - 38 -
1 transaction is entered into.
2 § 1204. Value.
3 Except as otherwise provided in Divisions 3 (relating to
4 negotiable instruments), 4 (relating to bank deposits and
5 collections) and 5 (relating to letters of credit), a person
6 gives value for rights if the person acquires them:
7 (1) in return for a binding commitment to extend credit
8 or for the extension of immediately available credit, whether
9 or not drawn upon and whether or not a charge-back is
10 provided for in the event of difficulties in collection;
11 (2) as security for, or in total or partial satisfaction
12 of, a preexisting claim;
13 (3) by accepting delivery under a preexisting contract
14 for purchase; or
15 (4) in return for any consideration sufficient to
16 support a simple contract.
17 § 1205. Reasonable time; seasonableness.
18 (a) Reasonable time.--Whether a time for taking an action
19 required by this title is reasonable depends on the nature,
20 purpose and circumstances of the action.
21 (b) Seasonableness.--An action is taken seasonably if it is
22 taken at or within the time agreed or, if no time is agreed, at
23 or within a reasonable time.
24 § 1206. Presumptions.
25 Whenever this title creates a "presumption" with respect to a
26 fact, or provides that a fact is "presumed," the trier of fact
27 must find the existence of the fact unless and until evidence is
28 introduced that supports a finding of its nonexistence.
29 CHAPTER 13
30 TERRITORIAL APPLICABILITY AND GENERAL RULES
20070H1152B1400 - 39 -
1 Sec.
2 1301. Territorial applicability; parties' power to choose
3 applicable law.
4 1302. Variation by agreement.
5 1303. Course of performance, course of dealing and
6 usage of trade.
7 1304. Obligation of good faith.
8 1305. Remedies to be liberally administered.
9 1306. Waiver or renunciation of claim or right after breach.
10 1307. Prima facie evidence by third-party documents.
11 1308. Performance or acceptance under reservation of rights.
12 1309. Option to accelerate at will.
13 1310. Subordinated obligations.
14 § 1301. Territorial applicability; parties' power to choose
15 applicable law.
16 (a) Agreement; reasonable relation requirement.--Except as
17 otherwise provided in this section, when a transaction bears a
18 reasonable relation to this Commonwealth and also to another
19 state or nation the parties may agree that the law either of
20 this Commonwealth or of such other state or nation shall govern
21 their rights and duties.
22 (b) Absence of agreement; approved relation requirement.--In
23 the absence of an agreement effective under subsection (a), and
24 except as provided in subsection (c), this title applies to
25 transactions bearing an appropriate relation to this
26 Commonwealth.
27 (c) Mandatory applicability of title.--If one of the
28 following provisions of this title specifies the applicable law,
29 that provision governs and a contrary agreement is effective
30 only to the extent permitted by the law so specified:
20070H1152B1400 - 40 -
1 (1) Section 2402 (relating to rights of creditors of
2 seller against sold goods).
3 (2) Sections 2A105 (relating to territorial application
4 of division to goods covered by certificate of title) and
5 2A106 (relating to limitation on power of parties to consumer
6 lease to choose applicable law and judicial forum).
7 (3) Section 4102 (relating to applicability).
8 (4) Section 4A507 (relating to choice of law).
9 (5) Section 5116 (relating to choice of law and forum).
10 (6) Section 8110 (relating to applicability; choice of
11 law).
12 (7) Ch. 93 Subch. A (relating to law governing
13 perfection and priority).
14 § 1302. Variation by agreement.
15 (a) General rule.--Except as otherwise provided in
16 subsection (b) or elsewhere in this title, the effect of
17 provisions of this title may be varied by agreement.
18 (b) Exceptions.--The obligations of good faith, diligence,
19 reasonableness and care prescribed by this title may not be
20 disclaimed by agreement. The parties, by agreement, may
21 determine the standards by which the performance of those
22 obligations is to be measured if those standards are not
23 manifestly unreasonable. Whenever this title requires an action
24 to be taken within a reasonable time, a time that is not
25 manifestly unreasonable may be fixed by agreement.
26 (c) Effect of terminology.--The presence in certain
27 provisions of this title of the phrase "unless otherwise
28 agreed," or words of similar import, does not imply that the
29 effect of other provisions may not be varied by agreement under
30 this section.
20070H1152B1400 - 41 -
1 § 1303. Course of performance, course of dealing and usage of
2 trade.
3 (a) Course of performance.--A "course of performance" is a
4 sequence of conduct between the parties to a particular
5 transaction that exists if:
6 (1) the agreement of the parties with respect to the
7 transaction involves repeated occasions for performance by a
8 party; and
9 (2) the other party, with knowledge of the nature of the
10 performance and opportunity for objection to it, accepts the
11 performance or acquiesces in it without objection.
12 (b) Course of dealing.--A "course of dealing" is a sequence
13 of conduct concerning previous transactions between the parties
14 to a particular transaction that is fairly to be regarded as
15 establishing a common basis of understanding for interpreting
16 their expressions and other conduct.
17 (c) Usage of trade.--A "usage of trade" is any practice or
18 method of dealing having such regularity of observance in a
19 place, vocation or trade as to justify an expectation that it
20 will be observed with respect to the transaction in question.
21 The existence and scope of such a usage must be proved as fact.
22 If it is established that such a usage is embodied in a trade
23 code or similar record, the interpretation of the record is a
24 question of law.
25 (d) Evidentiary effect.--A course of performance or course
26 of dealing between the parties or usage of trade in the vocation
27 or trade in which they are engaged or of which they are or
28 should be aware is relevant in ascertaining the meaning of the
29 parties' agreement, may give particular meaning to specific
30 terms of the agreement and may supplement or qualify the terms
20070H1152B1400 - 42 -
1 of the agreement. A usage of trade applicable in the place in
2 which part of the performance under the agreement is to occur
3 may be so utilized as to that part of the performance.
4 (e) Construction in general.--Except as otherwise provided
5 in subsection (f), the express terms of an agreement and any
6 applicable course of performance, course of dealing or usage of
7 trade must be construed whenever reasonable as consistent with
8 each other. If such a construction is unreasonable:
9 (1) express terms prevail over course of performance,
10 course of dealing and usage of trade;
11 (2) course of performance prevails over course of
12 dealing and usage of trade; and
13 (3) course of dealing prevails over usage of trade.
14 (f) Waiver or modification.--Subject to section 2209
15 (relating to modification, rescission and waiver), a course of
16 performance is relevant to show a waiver or modification of any
17 term inconsistent with the course of performance.
18 (g) Evidence.--Evidence of a relevant usage of trade offered
19 by one party is not admissible unless that party has given the
20 other party notice that the court finds sufficient to prevent
21 unfair surprise to the other party.
22 § 1304. Obligation of good faith.
23 Every contract or duty within this title imposes an
24 obligation of good faith in its performance and enforcement.
25 § 1305. Remedies to be liberally administered.
26 (a) Administration.--The remedies provided by this title
27 must be liberally administered to the end that the aggrieved
28 party may be put in as good a position as if the other party had
29 fully performed, but neither consequential or special damages
30 nor penal damages may be had except as specifically provided in
20070H1152B1400 - 43 -
1 this title or by other rule of law.
2 (b) Enforceability.--Any right or obligation declared by
3 this title is enforceable by action unless the provision
4 declaring it specifies a different and limited effect.
5 § 1306. Waiver or renunciation of claim or right after breach.
6 A claim or right arising out of an alleged breach may be
7 discharged in whole or in part without consideration by
8 agreement of the aggrieved party in an authenticated record.
9 § 1307. Prima facie evidence by third-party documents.
10 A document in due form purporting to be a bill of lading, a
11 policy or certificate of insurance, an official weigher's or
12 inspector's certificate, a consular invoice or any other
13 document authorized or required by the contract to be issued by
14 a third party is prima facie evidence of its own authenticity
15 and genuineness and of the facts stated in the document by the
16 third party.
17 § 1308. Performance or acceptance under reservation of rights.
18 (a) General rule.--Except as set forth in subsection (b), a
19 party that with explicit reservation of rights performs or
20 promises performance or assents to performance in a manner
21 demanded or offered by the other party does not thereby
22 prejudice the rights reserved. The words "without prejudice,"
23 "under protest" and the like are sufficient.
24 (b) Exception.--Subsection (a) does not apply to an accord
25 and satisfaction.
26 § 1309. Option to accelerate at will.
27 A term providing that one party or that party's successor in
28 interest may accelerate payment or performance or require
29 collateral or additional collateral "at will" or when the party
30 "deems itself insecure," or words of similar import, means that
20070H1152B1400 - 44 -
1 the party has power to do so only if that party in good faith
2 believes that the prospect of payment or performance is
3 impaired. The burden of establishing lack of good faith is on
4 the party against which the power has been exercised.
5 § 1310. Subordinated obligations.
6 An obligation may be issued as subordinated to performance of
7 another obligation of the person obligated, or a creditor may
8 subordinate its right to performance of an obligation by
9 agreement with either the person obligated or another creditor
10 of the person obligated. Subordination does not create a
11 security interest as against either the common debtor or a
12 subordinated creditor.
13 Section 2. Section 2103(a) of Title 13 is amended and
14 subsection (c) is amended by adding a definition to read:
15 § 2103. Definitions and index of definitions.
16 (a) Definitions.--The following words and phrases when used
17 in this division shall have, unless the context clearly
18 indicates otherwise, the meanings given to them in this
19 subsection:
20 "Buyer." A person who buys or contracts to buy goods.
21 ["Good faith." In the case of a merchant, good faith means
22 honesty in fact and the observance of reasonable commercial
23 standards of fair dealing in the trade.]
24 "Receipt." Receipt of goods means taking physical possession
25 of them.
26 "Seller." A person who sells or contracts to sell goods.
27 * * *
28 (c) Index of definitions in other divisions.--The following
29 definitions in other divisions apply to this division:
30 * * *
20070H1152B1400 - 45 -
1 "Control." Section 7106.
2 * * *
3 Section 3. The definition of "financing agency" in section
4 2104 of Title 13 is amended to read:
5 § 2104. Definitions: "merchant"; "between merchants";
6 "financing agency."
7 The following words and phrases when used in this division
8 shall have the meanings given to them in this section:
9 * * *
10 "Financing agency." [A] Any bank, finance company, or other
11 person who in the ordinary course of business makes advances
12 against goods or documents of title or who by arrangement with
13 either the seller or the buyer intervenes in ordinary course to
14 make or collect payment due or claimed under the contract for
15 sale, as by purchasing or paying the draft of the seller or
16 making advances against it or by merely taking it for collection
17 whether or not documents of title accompany or are associated
18 with the draft. ["Financing agency"] The term includes also a
19 bank or other person who similarly intervenes between persons
20 who are in the position of seller and buyer in respect to the
21 goods (see section 2707).
22 * * *
23 Section 4. Sections 2202, 2208, 2310(3), 2323(b),
24 2401(3)(i), 2503(d)(2) and (e)(2), 2505(a)(2) and (b), 2506(b),
25 2509(b)(1) and (3), 2605(b) and 2705(b)(3) and (c)(3) of Title
26 13 are amended to read:
27 § 2202. Final written expression: parol or extrinsic evidence.
28 Terms with respect to which the confirmatory memoranda of the
29 parties agree or which are otherwise set forth in a writing
30 intended by the parties as a final expression of their agreement
20070H1152B1400 - 46 -
1 with respect to such terms as are included therein may not be
2 contradicted by evidence of any prior agreement or of a
3 contemporaneous oral agreement but may be explained or
4 supplemented:
5 (1) by course of performance, course of dealing or usage
6 of trade (section [1205] 1303) [or by course of performance
7 (section 2208)]; and
8 (2) by evidence of consistent additional terms unless
9 the court finds the writing to have been intended also as a
10 complete and exclusive statement of the terms of the
11 agreement.
12 [§ 2208. Course of performance or practical construction.
13 (a) Relevancy of accepted performance.--Where the contract
14 for sale involves repeated occasions for performance by either
15 party with knowledge of the nature of the performance and
16 opportunity for objection to it by the other, any course of
17 performance accepted or acquiesced in without objection shall be
18 relevant to determine the meaning of the agreement.
19 (b) Construction of express terms and performance.--The
20 express terms of the agreement and any such course of
21 performance, as well as any course of dealing and usage of
22 trade, shall be construed whenever reasonable as consistent with
23 each other; but when such construction is unreasonable, express
24 terms shall control course of performance and course of
25 performance shall control both course of dealing and usage of
26 trade (section 1205).
27 (c) Waiver or modification of terms inconsistent with
28 performance.--Subject to the provisions of section 2209
29 (relating to modification, rescission and waiver), such course
30 of performance shall be relevant to show a waiver or
20070H1152B1400 - 47 -
1 modification of any term inconsistent with such course of
2 performance.]
3 § 2310. Open time for payment or running of credit; authority
4 to ship under reservation.
5 Unless otherwise agreed:
6 * * *
7 (3) If delivery is authorized and made by way of
8 documents of title otherwise than by paragraph (2), then
9 payment is due, regardless of where the goods are to be
10 received:
11 (i) at the time and place at which the buyer is to
12 receive delivery of the tangible documents [regardless of
13 where the goods are to be received.]; or
14 (ii) at the time the buyer is to receive delivery of
15 the electronic documents and at the seller's place of
16 business or, if none, at the seller's residence.
17 * * *
18 § 2323. Form of bill of lading required in overseas shipment;
19 "overseas."
20 * * *
21 (b) Bill in set of parts.--Where in a case within subsection
22 (a) a tangible bill of lading has been issued in a set of parts,
23 unless otherwise agreed if the documents are not to be sent from
24 abroad the buyer may demand tender of the full set; otherwise
25 only one part of the bill of lading need be tendered. Even if
26 the agreement expressly requires a full set:
27 (1) due tender of a single part is acceptable within the
28 provisions of this division on cure of improper delivery
29 (section 2508(a)); and
30 (2) even though the full set is demanded, if the
20070H1152B1400 - 48 -
1 documents are sent from abroad the person tendering an
2 incomplete set may nevertheless require payment upon
3 furnishing an indemnity which the buyer in good faith deems
4 adequate.
5 * * *
6 § 2401. Passing of title; reservation for security; limited
7 application of section.
8 Each provision of this division with regard to the rights,
9 obligations and remedies of the seller, the buyer, purchasers or
10 other third parties applies irrespective of title to the goods
11 except where the provision refers to such title. Insofar as
12 situations are not covered by the other provisions of this
13 division and matters concerning title become material the
14 following rules apply:
15 * * *
16 (3) Delivery without moving goods.--Unless otherwise
17 explicitly agreed where delivery is to be made without moving
18 the goods:
19 (i) if the seller is to deliver a tangible document
20 of title, title passes at the time when and the place
21 where he delivers such documents and if the seller is to
22 deliver an electronic document of title, title passes
23 when the seller delivers the document; or
24 * * *
25 § 2503. Manner of tender of delivery by seller.
26 * * *
27 (d) Goods in possession of bailee and deliverable without
28 being moved.--Where goods are in the possession of a bailee and
29 are to be delivered without being moved:
30 * * *
20070H1152B1400 - 49 -
1 (2) tender to the buyer of a nonnegotiable document of
2 title or of a [written direction to] record directing the
3 bailee to deliver is sufficient tender unless the buyer
4 seasonably objects, and except as otherwise provided in
5 Division 9 (relating to secured transactions) receipt by the
6 bailee of notification of the rights of the buyer fixes those
7 rights as against the bailee and all third persons; but risk
8 of loss of the goods and of any failure by the bailee to
9 honor the nonnegotiable document of title or to obey the
10 direction remains on the seller until the buyer has had a
11 reasonable time to present the document or direction, and a
12 refusal by the bailee to honor the document or to obey the
13 direction defeats the tender.
14 (e) Form and manner of delivering documents.--Where the
15 contract requires the seller to deliver documents:
16 * * *
17 (2) tender through customary banking channels is
18 sufficient and dishonor of a draft accompanying or associated
19 with the documents constitutes nonacceptance or rejection.
20 § 2505. Shipment by seller under reservation.
21 (a) General rule.--Where the seller has identified goods to
22 the contract by or before shipment:
23 * * *
24 (2) A nonnegotiable bill of lading to himself or his
25 nominee reserves possession of the goods as security, but
26 except in a case of conditional delivery (section 2507(b)) a
27 nonnegotiable bill of lading naming the buyer as consignee
28 reserves no security interest even though the seller retains
29 possession or control of the bill of lading.
30 (b) Shipment in violation of contract.--When shipment by the
20070H1152B1400 - 50 -
1 seller with reservation of a security interest is in violation
2 of the contract for sale it constitutes an improper contract for
3 transportation within section 2504 (relating to shipment by
4 seller) but impairs neither the rights given to the buyer by
5 shipment and identification of the goods to the contract nor the
6 powers of the seller as a holder of a negotiable document of
7 title.
8 § 2506. Rights of financing agency.
9 * * *
10 (b) Right to reimbursement unimpaired by latent defect.--The
11 right to reimbursement of a financing agency which has in good
12 faith honored or purchased the draft under commitment to or
13 authority from the buyer is not impaired by subsequent discovery
14 of defects with reference to any relevant document which was
15 apparently regular [on its face].
16 § 2509. Risk of loss in absence of breach.
17 * * *
18 (b) Goods held by bailee.--Where the goods are held by a
19 bailee to be delivered without being moved, the risk of loss
20 passes to the buyer:
21 (1) on his receipt, possession or control of a
22 negotiable document of title covering the goods;
23 * * *
24 (3) after his receipt, possession or control of a
25 nonnegotiable document of title or other [written] direction
26 to deliver in a record, as provided in section 2503(d)(2)
27 (relating to manner of tender of delivery by seller).
28 * * *
29 § 2605. Waiver of objections of buyer by failure to
30 particularize.
20070H1152B1400 - 51 -
1 * * *
2 (b) Payment against defective documents.--Payment against
3 documents made without reservation of rights precludes recovery
4 of the payment for defects apparent [on the face of] in the
5 documents.
6 § 2705. Stoppage by seller of delivery in transit or otherwise.
7 * * *
8 (b) When seller loses right.--As against such buyer the
9 seller may stop delivery until:
10 * * *
11 (3) such acknowledgment to the buyer by a carrier by
12 reshipment or as [warehouseman] a warehouse; or
13 * * *
14 (c) Notice and compliance.--
15 * * *
16 (3) If a negotiable document of title has been issued
17 for goods the bailee is not obliged to obey a notification to
18 stop until surrender of possession or control of the
19 document.
20 * * *
21 Section 5. The definitions of "buyer in ordinary course of
22 business" and "lessee in ordinary course of business" in section
23 2A103(a) of Title 13 and the definition of "good faith" in
24 subsection (c) are amended to read:
25 § 2A103. Definitions and index of definitions.
26 (a) Definitions.--The following words and phrases when used
27 in this division shall have, unless the context clearly
28 indicates otherwise, the meanings given to them in this
29 subsection:
30 "Buyer in ordinary course of business." A person who, in
20070H1152B1400 - 52 -
1 good faith and without knowledge that the sale to him is in
2 violation of the ownership rights or security interest or
3 leasehold interest of a third party in the goods, buys in
4 ordinary course from a person in the business of selling goods
5 of that kind but does not include a pawnbroker. "Buying" may be
6 for cash or by exchange of other property or on secured or
7 unsecured credit and includes [receiving] acquiring goods or
8 documents of title under a preexisting contract for sale but
9 does not include a transfer in bulk or as security for or in
10 total or partial satisfaction of a money debt.
11 * * *
12 "Lessee in ordinary course of business." A person who, in
13 good faith and without knowledge that the lease to him is in
14 violation of the ownership rights or security interest or
15 leasehold interest of a third party in the goods, leases in
16 ordinary course from a person in the business of selling or
17 leasing goods of that kind but does not include a pawnbroker.
18 "Leasing" may be for cash or by exchange of other property or on
19 secured or unsecured credit and includes [receiving] acquiring
20 goods or documents of title under a preexisting lease contract
21 but does not include a transfer in bulk or as security for or in
22 total or partial satisfaction of a money debt.
23 * * *
24 (c) Index of definitions in other divisions.--The following
25 definitions in other divisions apply to this division:
26 * * *
27 ["Good faith." Section 2103(a).]
28 * * *
29 Section 6. Sections 2A207, 2A501(d), 2A514(b), 2A518(b)
30 introductory paragraph, 2A519(a), 2A526(b)(3), 2A527(b)
20070H1152B1400 - 53 -
1 introductory paragraph and 2A528(a) introductory paragraph of
2 Title 13 are amended to read:
3 [§ 2A207. Course of performance or practical construction.
4 (a) Relevancy of accepted performance.--If a lease contract
5 involves repeated occasions for performance by either party with
6 knowledge of the nature of the performance and opportunity for
7 objection to it by the other, any course of performance accepted
8 or acquiesced in without objection is relevant to determine the
9 meaning of the lease agreement.
10 (b) Construction of express terms and performance.--The
11 express terms of a lease agreement and any course of
12 performance, as well as any course of dealing and usage of
13 trade, must be construed whenever reasonable as consistent with
14 each other; but if that construction is unreasonable, express
15 terms control course of performance, course of performance
16 controls both course of dealing and usage of trade, and course
17 of dealing controls usage of trade.
18 (c) Waiver or modification of terms inconsistent with
19 performance.--Subject to the provisions of section 2A208
20 (relating to modification, rescission and waiver), course of
21 performance is relevant to show a waiver or modification of any
22 term inconsistent with the course of performance.]
23 § 2A501. Default: procedure.
24 * * *
25 (d) Rights and remedies cumulative.--Except as otherwise
26 provided in section [1106(a)] 1305(a) (relating to remedies to
27 be liberally administered) or this division or the lease
28 agreement, the rights and remedies referred to in subsections
29 (b) and (c) are cumulative.
30 * * *
20070H1152B1400 - 54 -
1 § 2A514. Waiver of lessee's objections.
2 * * *
3 (b) Payment against defective documents.--A lessee's failure
4 to reserve rights when paying rent or other consideration
5 against documents precludes recovery of the payment for defects
6 apparent [on the face of] in the documents.
7 § 2A518. Cover; substitute goods.
8 * * *
9 (b) Damages recoverable.--Except as otherwise provided with
10 respect to damages liquidated in the lease agreement (section
11 2A504) or otherwise determined pursuant to agreement of the
12 parties (sections [1102(c)] 1302 and 2A503), if a lessee's cover
13 is by lease agreement substantially similar to the original
14 lease agreement and the new lease agreement is made in good
15 faith and in a commercially reasonable manner, the lessee may
16 recover from the lessor as damages:
17 * * *
18 § 2A519. Lessee's damages for nondelivery, repudiation, default
19 and breach of warranty in regard to accepted goods.
20 (a) Measure of damages for nondelivery or rejection.--Except
21 as otherwise provided with respect to damages liquidated in the
22 lease agreement (section 2A504) or otherwise determined pursuant
23 to agreement of the parties (sections [1102(c)] 1302 and 2A503),
24 if a lessee elects not to cover or a lessee elects to cover and
25 the cover is by lease agreement that for any reason does not
26 qualify for treatment under section 2A518(b) (relating to cover;
27 substitute goods), or is by purchase or otherwise, the measure
28 of damages for nondelivery or repudiation by the lessor or for
29 rejection or revocation of acceptance by the lessee is the
30 present value, as of the date of the default, of the then market
20070H1152B1400 - 55 -
1 rent minus the present value as of the same date of the original
2 rent, computed for the remaining lease term of the original
3 lease agreement, together with incidental and consequential
4 damages, less expenses saved in consequence of the lessor's
5 default.
6 * * *
7 § 2A526. Lessor's stoppage of delivery in transit or otherwise.
8 * * *
9 (b) When lessor loses right.--In pursuing its remedies under
10 subsection (a), the lessor may stop delivery until:
11 * * *
12 (3) such an acknowledgment to the lessee by a carrier
13 via reshipment or as [warehouseman] a warehouse.
14 * * *
15 § 2A527. Lessor's rights to dispose of goods.
16 * * *
17 (b) Damages recoverable.--Except as otherwise provided with
18 respect to damages liquidated in the lease agreement (section
19 2A504) or otherwise determined pursuant to agreement of the
20 parties (sections [1102(c)] 1302 and 2A503), if the disposition
21 is by lease agreement substantially similar to the original
22 lease agreement and the lease agreement is made in good faith
23 and in a commercially reasonable manner, the lessor may recover
24 from the lessee as damages:
25 * * *
26 § 2A528. Lessor's damages for nonacceptance, failure to pay,
27 repudiation or other default.
28 (a) General rule.--Except as otherwise provided with respect
29 to damages liquidated in the lease agreement (section 2A504) or
30 otherwise determined pursuant to agreement of the parties
20070H1152B1400 - 56 -
1 (sections [1102(c)] 1302 and 2A523), if a lessor elects to
2 retain the goods or a lessor elects to dispose of the goods and
3 the disposition is by lease agreement that for any reason does
4 not qualify for treatment under section 2A527(b) (relating to
5 lessor's rights to dispose of goods), or is by sale or
6 otherwise, the lessor may recover from the lessee as damages for
7 a default of the type described in section 2A523(a) or (c)(1)
8 (relating to lessor's remedies) or, if agreed, for other default
9 of the lessee:
10 * * *
11 Section 7. The definitions of "good faith" and "prove" in
12 section 3103(a) of Title 13 are amended to read:
13 § 3103. Definitions and index of definitions.
14 (a) Definitions.--The following words and phrases when used
15 in this division shall have the meanings given to them in this
16 subsection:
17 * * *
18 ["Good faith." Honesty in fact and the observance of
19 reasonable commercial standards of fair dealing.]
20 * * *
21 "Prove." With respect to a fact means to meet the burden of
22 establishing the fact (section 1201(b)(8)).
23 * * *
24 Section 8. The definition of "good faith" in section 4104(c)
25 of Title 13 is amended and the subsection is amended by adding a
26 definition to read:
27 § 4104. Definitions and index of definitions.
28 * * *
29 (c) Index of definitions in other divisions.--The following
30 definitions in other divisions apply to this division:
20070H1152B1400 - 57 -
1 * * *
2 "Control." Section 7106.
3 ["Good faith." Section 3103.]
4 * * *
5 Section 9. Section 4210(c) introductory paragraph of Title
6 13 is amended to read:
7 § 4210. Security interest of collecting bank in items,
8 accompanying documents and proceeds.
9 * * *
10 (c) Satisfaction and continuation of security interest.--
11 Receipt by a collecting bank of a final settlement for an item
12 is a realization on its security interest in the item,
13 accompanying documents and proceeds. So long as the bank does
14 not receive final settlement for the item or give up possession
15 of the item or possession or control of the accompanying
16 documents for purposes other than collection, the security
17 interest continues to that extent and is subject to Division 9
18 (relating to secured transactions), but:
19 * * *
20 Section 10. The definitions of "good faith" and "prove" in
21 section 4A105(a) of Title 13 are amended to read:
22 § 4A105. Other definitions.
23 (a) Definitions.--The following words and phrases when used
24 in this division shall have the meanings given to them in this
25 subsection:
26 * * *
27 ["Good faith." Honesty in fact and the observance of
28 reasonable commercial standards of fair dealing.]
29 "Prove." With respect to a fact, means to meet the burden of
30 establishing the fact (section 1201(b)(8)).
20070H1152B1400 - 58 -
1 * * *
2 Section 11. Sections 4A106(a), 4A204(b) and 5103(c) of Title
3 13 are amended to read:
4 § 4A106. Time payment order is received.
5 (a) General rule.--The time of receipt of a payment order or
6 communication canceling or amending a payment order is
7 determined by the rules applicable to receipt of a notice stated
8 in section [1201 (relating to general definitions)] 1202
9 (relating to notice; knowledge). A receiving bank may fix a
10 cutoff time or times on a funds-transfer business day for the
11 receipt and processing of payment orders and communications
12 canceling or amending payment orders. Different cutoff times may
13 apply to payment orders, cancellations or amendments or to
14 different categories of payment orders, cancellations or
15 amendments. A cutoff time may apply to senders generally or
16 different cutoff times may apply to different senders or
17 categories of payment orders. If a payment order or
18 communication canceling or amending a payment order is received
19 after the close of a funds-transfer business day or after the
20 appropriate cutoff time on a funds-transfer business day, the
21 receiving bank may treat the payment order or communication as
22 received at the opening of the next funds-transfer business day.
23 * * *
24 § 4A204. Refund of payment and duty of customer to report with
25 respect to unauthorized payment order.
26 * * *
27 (b) Reasonable time.--Reasonable time under subsection (a)
28 may be fixed by agreement as stated in section [1204(b)
29 (relating to time;] 1205(a) (relating to reasonable time;
30 ["seasonably"] seasonableness), but the obligation of a
20070H1152B1400 - 59 -
1 receiving bank to refund payment as stated in subsection (a) may
2 not otherwise be varied by agreement.
3 § 5103. Scope.
4 * * *
5 (c) Variation by agreement or undertaking.--With the
6 exception of this subsection, subsections (a) and (d), the
7 definitions of "issuer" and "letter of credit" under section
8 5102(a) (relating to definitions) and sections 5106(d) (relating
9 to perpetual letters of credit) and 5114(d) (relating to
10 assignment of proceeds), and except to the extent prohibited
11 under sections [1102(c)] 1302 (relating to variation [of title]
12 by agreement) and 5117(d) (relating to time at which subrogation
13 rights arise), the effect of this division may be varied by
14 agreement or by a provision stated or incorporated by reference
15 in an undertaking. A term in an agreement or undertaking
16 generally excusing liability or generally limiting remedies for
17 failure to perform obligations is not sufficient to vary
18 obligations prescribed by this division.
19 * * *
20 Section 12. Division 7 of Title 13 is amended to read:
21 [DIVISION 7
22 WAREHOUSE RECEIPTS, BILLS OF LADING
23 AND OTHER DOCUMENTS OF TITLE
24 Chapter
25 71. General
26 72. Warehouse Receipts: Special Provisions
27 73. Bills of Lading: Special Provisions
28 74. Warehouse Receipts and Bills of Lading: General
29 Obligations
30 75. Warehouse Receipts and Bills of Lading: Negotiation
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1 and Transfer
2 76. Warehouse Receipts and Bills of Lading: Miscellaneous
3 Provisions
4 CHAPTER 71
5 GENERAL
6 Sec.
7 7101. Short title of division.
8 7102. Definitions and index of definitions.
9 7103. Relation of division to treaty, statute, tariff,
10 classification or regulation.
11 7104. Negotiable and nonnegotiable warehouse receipt, bill
12 of lading or other document of title.
13 7105. Construction against negative implication.
14 § 7101. Short title of division.
15 This division shall be known and may be cited as the Uniform
16 Commercial Code, Article 7, Documents of Title.
17 § 7102. Definitions and index of definitions.
18 (a) Definitions.--The following words and phrases when used
19 in this division shall have, unless the context clearly
20 indicates otherwise, the meanings given to them in this
21 subsection:
22 "Bailee." The person who by a warehouse receipt, bill of
23 lading or other document of title acknowledges possession of
24 goods and contracts to deliver them.
25 "Consignee." The person named in a bill to whom or to whose
26 order the bill promises delivery.
27 "Consignor." The person named in a bill as the person from
28 whom the goods have been received for shipment.
29 "Delivery order." A written order to deliver goods directed
30 to a warehouseman, carrier or other person who in the ordinary
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1 course of business issues warehouse receipts or bills of lading.
2 "Document." Document of title as defined in section 1201
3 (relating to general definitions).
4 "Goods." All things which are treated as movable for the
5 purposes of a contract of storage or transportation.
6 "Issuer." A bailee who issues a document except that in
7 relation to an unaccepted delivery order it means the person who
8 orders the possessor of goods to deliver. Issuer includes any
9 person for whom an agent or employee purports to act in issuing
10 a document if the agent or employee has real or apparent
11 authority to issue documents, notwithstanding that the issuer
12 received no goods or that the goods were misdescribed or that in
13 any other respect the agent or employee violated his
14 instructions.
15 "Warehouseman." A person engaged in the business of storing
16 goods for hire.
17 (b) Index of other definitions in division.--Other
18 definitions applying to this division or to specified chapters
19 thereof, and the sections in which they appear are:
20 "Duly negotiate." Section 7501.
21 "Person entitled under the document." Section 7403(d).
22 (c) Index of definitions in other divisions.--Definitions in
23 other divisions applying to this division and the sections in
24 which they appear are:
25 "Contract for sale." Section 2106.
26 "Overseas." Section 2323.
27 "Receipt" of goods. Section 2103.
28 (d) Applicability of general definitions and principles.--In
29 addition Division 1 (relating to general provisions) contains
30 general definitions and principles of construction and
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1 interpretation applicable throughout this division.
2 § 7103. Relation of division to treaty, statute, tariff,
3 classification or regulation.
4 To the extent that any treaty or statute of the United
5 States, regulatory statute of this Commonwealth or tariff,
6 classification or regulation filed or issued pursuant thereto is
7 applicable, the provisions of this division are subject thereto.
8 § 7104. Negotiable and nonnegotiable warehouse receipt, bill of
9 lading or other document of title.
10 (a) Negotiable document of title.--A warehouse receipt, bill
11 of lading or other document of title is negotiable:
12 (1) if by its terms the goods are to be delivered to
13 bearer or to the order of a named person; or
14 (2) where recognized in overseas trade, if it runs to a
15 named person or assigns.
16 (b) Nonnegotiable document of title.--Any other document is
17 nonnegotiable. A bill of lading in which it is stated that the
18 goods are consigned to a named person is not made negotiable by
19 a provision that the goods are to be delivered only against a
20 written order signed by the same or another named person.
21 § 7105. Construction against negative implication.
22 The omission from either Chapter 72 (relating to warehouse
23 receipts: special provisions) or Chapter 73 (relating to bills
24 of lading: special provisions) of a provision corresponding to a
25 provision made in the other chapter does not imply that a
26 corresponding rule of law is not applicable.
27 CHAPTER 72
28 WAREHOUSE RECEIPTS: SPECIAL PROVISIONS
29 Sec.
30 7201. Who may issue warehouse receipt; storage under
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1 government bond.
2 7202. Form of warehouse receipt; essential terms; optional
3 terms.
4 7203. Liability for nonreceipt or misdescription.
5 7204. Duty of care; contractual limitation of liability of
6 warehouseman.
7 7205. Title under warehouse receipt defeated in certain cases.
8 7206. Termination of storage at option of warehouseman.
9 7207. Goods must be kept separate; fungible goods.
10 7208. Altered warehouse receipts.
11 7209. Lien of warehouseman.
12 7210. Enforcement of lien of warehouseman.
13 § 7201. Who may issue warehouse receipt; storage under
14 government bond.
15 (a) Who may issue warehouse receipt.--A warehouse receipt
16 may be issued by any warehouseman.
17 (b) Storage under government bond.--Where goods including
18 distilled spirits and agricultural commodities are stored under
19 a statute requiring a bond against withdrawal or a license for
20 the issuance of receipts in the nature of warehouse receipts, a
21 receipt issued for the goods has like effect as a warehouse
22 receipt even though issued by a person who is the owner of the
23 goods and is not a warehouseman.
24 § 7202. Form of warehouse receipt; essential terms; optional
25 terms.
26 (a) Form of warehouse receipt.--A warehouse receipt need not
27 be in any particular form.
28 (b) Essential terms.--Unless a warehouse receipt embodies
29 within its written or printed terms each of the following, the
30 warehouseman is liable for damages caused by the omission to a
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1 person injured thereby:
2 (1) The location of the warehouse where the goods are
3 stored.
4 (2) The date of issue of the receipt.
5 (3) The consecutive number of the receipt.
6 (4) A statement whether the goods received will be
7 delivered to the bearer, to a specified person, or to a
8 specified person or his order.
9 (5) The rate of storage and handling charges, except
10 that where goods are stored under a field warehousing
11 arrangement a statement of that fact is sufficient on a
12 nonnegotiable receipt.
13 (6) A description of the goods or of the packages
14 containing them.
15 (7) The signature of the warehouseman, which may be made
16 by his authorized agent.
17 (8) If the receipt is issued for goods of which the
18 warehouseman is owner, either solely or jointly or in common
19 with others, the fact of such ownership.
20 (9) A statement of the amount of advances made and of
21 liabilities incurred for which the warehouseman claims a lien
22 or security interest (section 7209 (relating to lien of
23 warehouseman)). If the precise amount of such advances made
24 or of such liabilities incurred is, at the time of the issue
25 of the receipt, unknown to the warehouseman or to his agent
26 who issues it, a statement of the fact that advances have
27 been made or liabilities incurred and the purpose thereof is
28 sufficient.
29 (c) Optional terms.--A warehouseman may insert in his
30 receipt any other terms which are not contrary to the provisions
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1 of this title and do not impair his obligation of delivery
2 (section 7403) or his duty of care (section 7204). Any contrary
3 provisions shall be ineffective.
4 § 7203. Liability for nonreceipt or misdescription.
5 A party to or purchaser for value in good faith of a document
6 of title other than a bill of lading relying in either case upon
7 the description therein of the goods, may recover from the
8 issuer damages caused by the nonreceipt or misdescription of the
9 goods, except to the extent that the document conspicuously
10 indicates that the issuer does not know whether any part or all
11 of the goods in fact were received or conform to the
12 description, as where the description is in terms of marks or
13 labels or kind, quantity or condition, or the receipt or
14 description is qualified by "contents, condition and quality
15 unknown," "said to contain" or the like, if such indication be
16 true, or the party or purchaser otherwise has notice.
17 § 7204. Duty of care; contractual limitation of liability of
18 warehouseman.
19 (a) Duty of care.--A warehouseman is liable for damages for
20 loss of or injury to the goods caused by his failure to exercise
21 such care in regard to them as a reasonably careful man would
22 exercise under like circumstances but unless otherwise agreed he
23 is not liable for damages which could not have been avoided by
24 the exercise of such care.
25 (b) Contractual limitation of liability.--Damages may be
26 limited by a term in the warehouse receipt or storage agreement
27 limiting the amount of liability in case of loss or damage, and
28 setting forth a specific liability per article or item, or value
29 per unit of weight beyond which the warehouseman shall not be
30 liable; provided, however, that such liability may on written
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1 request of the bailor at the time of signing such storage
2 agreement or within a reasonable time after receipt of the
3 warehouse receipt be increased on part or all of the goods
4 thereunder, in which event increased rates may be charged based
5 on such increased valuation, but that no such increase shall be
6 permitted contrary to a lawful limitation of liability contained
7 in the tariff of the warehouseman, if any. No such limitation is
8 effective with respect to the liability of the warehouseman for
9 conversion to his own use.
10 (c) Provisions for presenting claims and instituting
11 actions.--Reasonable provisions as to the time and manner of
12 presenting claims and instituting actions based on the bailment
13 may be included in the warehouse receipt or tariff.
14 § 7205. Title under warehouse receipt defeated in certain
15 cases.
16 A buyer in the ordinary course of business of fungible goods
17 sold and delivered by a warehouseman who is also in the business
18 of buying and selling such goods takes free of any claim under a
19 warehouse receipt even though it has been duly negotiated.
20 § 7206. Termination of storage at option of warehouseman.
21 (a) General rule.--A warehouseman may on notifying the
22 person on whose account the goods are held and any other person
23 known to claim an interest in the goods require payment of any
24 charges and removal of the goods from the warehouse at the
25 termination of the period of storage fixed by the document, or,
26 if no period is fixed within a stated period not less than 30
27 days after the notification. If the goods are not removed before
28 the date specified in the notification, the warehouseman may
29 sell them in accordance with the provisions of section 7210
30 (relating to enforcement of lien of warehouseman).
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1 (b) Goods about to decline in value.--If a warehouseman in
2 good faith believes that the goods are about to deteriorate or
3 decline in value to less than the amount of his lien within the
4 time prescribed in subsection (a) for notification,
5 advertisement and sale, the warehouseman may specify in the
6 notification any reasonable shorter time for removal of the
7 goods and in case the goods are not removed, may sell them at
8 public sale held not less than one week after a single
9 advertisement or posting.
10 (c) Hazardous goods.--If as a result of a quality or
11 condition of the goods of which the warehouseman had no notice
12 at the time of deposit the goods are a hazard to other property
13 or to the warehouse or to persons, the warehouseman may sell the
14 goods at public or private sale without advertisement on
15 reasonable notification to all persons known to claim an
16 interest in the goods. If the warehouseman after a reasonable
17 effort is unable to sell the goods he may dispose of them in any
18 lawful manner and shall incur no liability by reason of such
19 disposition.
20 (d) Delivery of goods upon demand.--The warehouseman must
21 deliver the goods to any person entitled to them under this
22 division upon due demand made at any time prior to sale or other
23 disposition under this section.
24 (e) Disposition of proceeds of sale.--The warehouseman may
25 satisfy his lien from the proceeds of any sale or disposition
26 under this section but must hold the balance for delivery on the
27 demand of any person to whom he would have been bound to deliver
28 the goods.
29 § 7207. Goods must be kept separate; fungible goods.
30 (a) General rule.--Unless the warehouse receipt otherwise
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1 provides, a warehouseman must keep separate the goods covered by
2 each receipt so as to permit at all times identification and
3 delivery of those goods except that different lots of fungible
4 goods may be commingled.
5 (b) Commingled fungible goods.--Fungible goods so commingled
6 are owned in common by the persons entitled thereto and the
7 warehouseman is severally liable to each owner for the share of
8 that owner. Where because of overissue a mass of fungible goods
9 is insufficient to meet all the receipts which the warehouseman
10 has issued against it, the persons entitled include all holders
11 to whom overissued receipts have been duly negotiated.
12 § 7208. Altered warehouse receipts.
13 Where a blank in a negotiable warehouse receipt has been
14 filled in without authority, a purchaser for value and without
15 notice of the want of authority may treat the insertion as
16 authorized. Any other unauthorized alteration leaves any receipt
17 enforceable against the issuer according to its original tenor.
18 § 7209. Lien of warehouseman.
19 (a) Charges and expenses covered by lien.--A warehouseman
20 has a lien against the bailor on the goods covered by a
21 warehouse receipt or on the proceeds thereof in his possession
22 for charges for storage or transportation (including demurrage
23 and terminal charges), insurance, labor, or charges present or
24 future in relation to the goods, and for expenses necessary for
25 preservation of the goods or reasonably incurred in their sale
26 pursuant to law. If the person on whose account the goods are
27 held is liable for like charges or expenses in relation to other
28 goods whenever deposited and it is stated in the receipt that a
29 lien is claimed for charges and expenses in relation to other
30 goods, the warehouseman also has a lien against him for such
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1 charges and expenses whether or not the other goods have been
2 delivered by the warehouseman. But against a person to whom a
3 negotiable warehouse receipt is duly negotiated the lien of a
4 warehouseman is limited to charges in an amount or at a rate
5 specified on the receipt or if no charges are so specified then
6 to a reasonable charge for storage of the goods covered by the
7 receipt subsequent to the date of the receipt.
8 (b) Reservation of security interest for other charges.--The
9 warehouseman may also reserve a security interest against the
10 bailor for a maximum amount specified on the receipt for charges
11 other than those specified in subsection (a), such as for money
12 advanced and interest. Such a security interest is governed by
13 Division 9 (relating to secured transactions).
14 (c) Other persons against whom lien or security interest
15 effective.--
16 (1) The lien of a warehouseman for charges and expenses
17 under subsection (a) or a security interest under subsection
18 (b) is also effective against any person who so entrusted the
19 bailor with possession of the goods that a pledge of them by
20 him to a good faith purchaser for value would have been valid
21 but is not effective against a person as to whom the document
22 confers no right in the goods covered by it under section
23 7503 (relating to document of title to goods defeated in
24 certain cases).
25 (2) The lien of a warehouseman on household goods for
26 charges and expenses in relation to the goods under
27 subsection (a) is also effective against all persons if the
28 depositor was the legal possessor of the goods at the time of
29 deposit. "Household goods" means furniture, furnishings and
30 personal effects used by the depositor in a dwelling.
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1 (d) Loss of lien.--A warehouseman loses his lien on any
2 goods which he voluntarily delivers or which he unjustifiably
3 refuses to deliver.
4 § 7210. Enforcement of lien of warehouseman.
5 (a) Sale of goods to enforce lien.--Except as provided in
6 subsection (b), the lien of a warehouseman may be enforced by
7 public or private sale of the goods in block or in parcels, at
8 any time or place and on any terms which are commercially
9 reasonable, after notifying all persons known to claim an
10 interest in the goods. Such notification must include a
11 statement of the amount due, the nature of the proposed sale and
12 the time and place of any public sale. The fact that a better
13 price could have been obtained by a sale at a different time or
14 in a different method from that selected by the warehouseman is
15 not of itself sufficient to establish that the sale was not made
16 in a commercially reasonable manner. If the warehouseman either
17 sells the goods in the usual manner in any recognized market
18 therefor, or if he sells at the price current in such market at
19 the time of his sale, or if he has otherwise sold in conformity
20 with commercially reasonable practices among dealers in the type
21 of goods sold, he has sold in a commercially reasonable manner.
22 A sale of more goods than apparently necessary to be offered to
23 insure satisfaction of the obligation is not commercially
24 reasonable except in cases covered by the preceding sentence.
25 (b) Procedure for enforcement of lien.--The lien of a
26 warehouseman on goods other than goods stored by a merchant in
27 the course of his business may be enforced only as follows:
28 (1) All persons known to claim an interest in the goods
29 must be notified.
30 (2) The notification must be delivered in person or sent
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1 by registered or certified letter to the last known address
2 of any person to be notified.
3 (3) The notification must include an itemized statement
4 of the claim, a description of the goods subject to the lien,
5 a demand for payment within a specified time not less than
6 ten days after receipt of the notification, and a conspicuous
7 statement that unless the claim is paid within that time the
8 goods will be advertised for sale and sold by auction at a
9 specified time and place.
10 (4) The sale must conform to the terms of the
11 notification.
12 (5) The sale must be held at the nearest suitable place
13 to that where the goods are held or stored.
14 (6) After the expiration of the time given in the
15 notification, an advertisement of the sale must be published
16 once a week for two weeks consecutively in a newspaper of
17 general circulation where the sale is to be held. The
18 advertisement must include a description of the goods, the
19 name of the person on whose account they are being held, and
20 the time and place of the sale. The sale must take place at
21 least 15 days after the first publication. If there is no
22 newspaper of general circulation where the sale is to be held
23 the advertisement must be posted at least ten days before the
24 sale in not less than six conspicuous places in the
25 neighborhood of the proposed sale.
26 (c) Satisfaction of lien prior to sale.--Before any sale
27 pursuant to this section any person claiming a right in the
28 goods may pay the amount necessary to satisfy the lien and the
29 reasonable expenses incurred under this section. In that event
30 the goods must not be sold, but must be retained by the
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1 warehouseman subject to the terms of the receipt and this
2 division.
3 (d) Warehouseman may purchase at public sale.--The
4 warehouseman may buy at any public sale pursuant to this
5 section.
6 (e) Rights acquired by good faith purchaser.--A purchaser in
7 good faith of goods sold to enforce the lien of a warehouseman
8 takes the goods free of any rights of persons against whom the
9 lien was valid, despite noncompliance by the warehouseman with
10 the requirements of this section.
11 (f) Disposition of proceeds of sale.--The warehouseman may
12 satisfy his lien from the proceeds of any sale pursuant to this
13 section but must hold the balance, if any, for delivery on
14 demand to any person to whom he would have been bound to deliver
15 the goods.
16 (g) Rights under section not exclusive.--The rights provided
17 by this section shall be in addition to all other rights allowed
18 by law to a creditor against his debtor.
19 (h) Lien on goods stored by merchant in course of
20 business.--Where a lien is on goods stored by a merchant in the
21 course of his business the lien may be enforced in accordance
22 with either subsection (a) or (b).
23 (i) Liability of warehouseman for noncompliance.--The
24 warehouseman is liable for damages caused by failure to comply
25 with the requirements for sale under this section and in case of
26 willful violation is liable for conversion.
27 CHAPTER 73
28 BILLS OF LADING: SPECIAL PROVISIONS
29 Sec.
30 7301. Liability for nonreceipt or misdescription; "said to
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1 contain"; "shipper's weight, load and count"; improper
2 handling.
3 7302. Through bills of lading and similar documents.
4 7303. Diversion; reconsignment; change of instructions.
5 7304. Bills of lading in a set.
6 7305. Destination bills.
7 7306. Altered bills of lading.
8 7307. Lien of carrier.
9 7308. Enforcement of lien of carrier.
10 7309. Duty of care; contractual limitation of liability of
11 carrier.
12 § 7301. Liability for nonreceipt or misdescription; "said to
13 contain"; "shipper's weight, load and count";
14 improper handling.
15 (a) Liability of issuer for nonreceipt or misdescription.--A
16 consignee of a nonnegotiable bill who has given value in good
17 faith or a holder to whom a negotiable bill has been duly
18 negotiated relying in either case upon the description therein
19 of the goods, or upon the date therein shown, may recover from
20 the issuer damages caused by the misdating of the bill or the
21 nonreceipt or misdescription of the goods, except to the extent
22 that the document indicates that the issuer does not know
23 whether any part or all of the goods in fact were received or
24 conform to the description, as where the description is in terms
25 of marks or labels or kind, quantity, or condition or the
26 receipt or description is qualified by "contents or condition of
27 contents of packages unknown," "said to contain," "shipper's
28 weight, load and count" or the like, if such indication be true.
29 (b) Duty of carrier issuer loading goods.--When goods are
30 loaded by an issuer who is a common carrier, the issuer must
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1 count the packages of goods if package freight and ascertain the
2 kind and quantity if bulk freight. In such cases "shipper's
3 weight, load and count" or other words indicating that the
4 description was made by the shipper are ineffective except as to
5 freight concealed by packages.
6 (c) Duty of carrier issuer when freight loaded by shipper.--
7 When bulk freight is loaded by a shipper who makes available to
8 the issuer adequate facilities for weighing such freight, an
9 issuer who is a common carrier must ascertain the kind and
10 quantity within a reasonable time after receiving the written
11 request of the shipper to do so. In such cases "shipper's
12 weight" or other words of like purport are ineffective.
13 (d) Liability of issuer for improper loading.--The issuer
14 may by inserting in the bill the words "shipper's weight, load
15 and count" or other words of like purport indicate that the
16 goods were loaded by the shipper; and if such statement be true
17 the issuer shall not be liable for damages caused by the
18 improper loading. But their omission does not imply liability
19 for such damages.
20 (e) Guaranty of shipper.--The shipper shall be deemed to
21 have guaranteed to the issuer the accuracy at the time of
22 shipment of the description, marks, labels, number, kind,
23 quantity, condition and weight, as furnished by him; and the
24 shipper shall indemnify the issuer against damage caused by
25 inaccuracies in such particulars. The right of the issuer to
26 such indemnity shall in no way limit his responsibility and
27 liability under the contract of carriage to any person other
28 than the shipper.
29 § 7302. Through bills of lading and similar documents.
30 (a) Liability of issuer for acts of other persons.--The
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1 issuer of a through bill of lading or other document embodying
2 an undertaking to be performed in part by persons acting as its
3 agents or by connecting carriers is liable to anyone entitled to
4 recover on the document for any breach by such other persons or
5 by a connecting carrier of its obligation under the document but
6 to the extent that the bill covers an undertaking to be
7 performed overseas or in territory not contiguous to the
8 continental United States or an undertaking including matters
9 other than transportation this liability may be varied by
10 agreement of the parties.
11 (b) Other person subjected to obligation of issuer.--Where
12 goods covered by a through bill of lading or other document
13 embodying an undertaking to be performed in part by persons
14 other than the issuer are received by any such person, he is
15 subject with respect to his own performance while the goods are
16 in his possession to the obligation of the issuer. His
17 obligation is discharged by delivery of the goods to another
18 such person pursuant to the document, and does not include
19 liability for breach by any other such persons or by the issuer.
20 (c) Recovery by issuer against other persons.--The issuer of
21 such through bill of lading or other document shall be entitled
22 to recover from the connecting carrier or such other person in
23 possession of the goods when the breach of the obligation under
24 the document occurred, the amount it may be required to pay to
25 anyone entitled to recover on the document therefor, as may be
26 evidenced by any receipt, judgment, or transcript thereof, and
27 the amount of any expense reasonably incurred by it in defending
28 any action brought by anyone entitled to recover on the document
29 therefor.
30 § 7303. Diversion; reconsignment; change of instructions.
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1 (a) General rule.--Unless the bill of lading otherwise
2 provides, the carrier may deliver the goods to a person or
3 destination other than that stated in the bill or may otherwise
4 dispose of the goods on instructions from:
5 (1) the holder of a negotiable bill;
6 (2) the consignor on a nonnegotiable bill
7 notwithstanding contrary instructions from the consignee;
8 (3) the consignee on a nonnegotiable bill in the absence
9 of contrary instructions from the consignor, if the goods
10 have arrived at the billed destination or if the consignee is
11 in possession of the bill; or
12 (4) the consignee on a nonnegotiable bill if he is
13 entitled as against the consignor to dispose of them.
14 (b) Liability of bailee when instructions not on document.--
15 Unless such instructions are noted on a negotiable bill of
16 lading, a person to whom the bill is duly negotiated can hold
17 the bailee according to the original terms.
18 § 7304. Bills of lading in a set.
19 (a) General rule.--Except where customary in overseas
20 transportation, a bill of lading must not be issued in a set of
21 parts. The issuer is liable for damages caused by violation of
22 this subsection.
23 (b) Set of parts constitutes one bill.--Where a bill of
24 lading is lawfully drawn in a set of parts, each of which is
25 numbered and expressed to be valid only if the goods have not
26 been delivered against any other part, the whole of the parts
27 constitute one bill.
28 (c) Negotiation of parts of set to different persons.--Where
29 a bill of lading is lawfully issued in a set of parts and
30 different parts are negotiated to different persons, the title
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1 of the holder to whom the first due negotiation is made prevails
2 as to both the document and the goods even though any later
3 holder may have received the goods from the carrier in good
4 faith and discharged the obligation of the carrier by surrender
5 of his part.
6 (d) Liability for negotiation of single part of set.--Any
7 person who negotiates or transfers a single part of a bill of
8 lading drawn in a set is liable to holders of that part as if it
9 were the whole set.
10 (e) Duty of bailee upon presentation of part of set.--The
11 bailee is obliged to deliver in accordance with Chapter 74
12 (relating to warehouse receipts and bills of lading: general
13 obligations) against the first presented part of a bill of
14 lading lawfully drawn in a set. Such delivery discharges the
15 obligation of the bailee on the whole bill.
16 § 7305. Destination bills.
17 (a) Destination bill procured by carrier.--Instead of
18 issuing a bill of lading to the consignor at the place of
19 shipment a carrier may at the request of the consignor procure
20 the bill to be issued at destination or at any other place
21 designated in the request.
22 (b) Substitute bill procured by issuer.--Upon request of
23 anyone entitled as against the carrier to control the goods
24 while in transit and on surrender of any outstanding bill of
25 lading or other receipt covering such goods, the issuer may
26 procure a substitute bill to be issued at any place designated
27 in the request.
28 § 7306. Altered bills of lading.
29 An unauthorized alteration or filling in of a blank in a bill
30 of lading leaves the bill enforceable according to its original
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1 tenor.
2 § 7307. Lien of carrier.
3 (a) Charges and expenses covered by lien.--A carrier has a
4 lien on the goods covered by a bill of lading for charges
5 subsequent to the date of its receipt of the goods for storage
6 or transportation (including demurrage and terminal charges) and
7 for expenses necessary for preservation of the goods or incident
8 to their transportation or reasonably incurred in their sale
9 pursuant to law. But against a purchaser for value of a
10 negotiable bill of lading the lien of a carrier is limited to
11 charges stated in the bill or the applicable tariffs, or if no
12 charges are stated then to a reasonable charge.
13 (b) Persons against whom lien effective.--A lien for charges
14 and expenses under subsection (a) on goods which the carrier was
15 required by law to receive for transportation is effective
16 against the consignor or any person entitled to the goods unless
17 the carrier had notice that the consignor lacked authority to
18 subject the goods to such charges and expenses. Any other lien
19 under subsection (a) is effective against the consignor and any
20 person who permitted the bailor to have control or possession of
21 the goods unless the carrier had notice that the bailor lacked
22 such authority.
23 (c) Loss of lien.--A carrier loses his lien on any goods
24 which he voluntarily delivers or which he unjustifiably refuses
25 to deliver.
26 § 7308. Enforcement of lien of carrier.
27 (a) Sale of goods to enforce lien.--The lien of a carrier
28 may be enforced by public or private sale of the goods, in block
29 or in parcels, at any time or place and on any terms which are
30 commercially reasonable, after notifying all persons known to
20070H1152B1400 - 79 -
1 claim an interest in the goods. Such notification must include a
2 statement of the amount due, the nature of the proposed sale and
3 the time and place of any public sale. The fact that a better
4 price could have been obtained by a sale at a different time or
5 in a different method from that selected by the carrier is not
6 of itself sufficient to establish that the sale was not made in
7 a commercially reasonable manner. If the carrier either sells
8 the goods in the usual manner in any recognized market therefor
9 or if he sells at the price current in such market at the time
10 of his sale or if he has otherwise sold in conformity with
11 commercially reasonable practices among dealers in the type of
12 goods sold he has sold in a commercially reasonable manner. A
13 sale of more goods than apparently necessary to be offered to
14 ensure satisfaction of the obligation is not commercially
15 reasonable except in cases covered by the preceding sentence.
16 (b) Satisfaction of lien prior to sale.--Before any sale
17 pursuant to this section any person claiming a right in the
18 goods may pay the amount necessary to satisfy the lien and the
19 reasonable expenses incurred under this section. In that event
20 the goods must not be sold, but must be retained by the carrier
21 subject to the terms of the bill and this division.
22 (c) Carrier may purchase at public sale.--The carrier may
23 buy at any public sale pursuant to this section.
24 (d) Rights acquired by good faith purchaser.--A purchaser in
25 good faith of goods sold to enforce the lien of a carrier takes
26 the goods free of any rights of persons against whom the lien
27 was valid, despite noncompliance by the carrier with the
28 requirements of this section.
29 (e) Disposition of proceeds of sale.--The carrier may
30 satisfy his lien from the proceeds of any sale pursuant to this
20070H1152B1400 - 80 -
1 section but must hold the balance, if any, for delivery on
2 demand to any person to whom he would have been bound to deliver
3 the goods.
4 (f) Rights under section not exclusive.--The rights provided
5 by this section shall be in addition to all other rights allowed
6 by law to a creditor against his debtor.
7 (g) Alternative methods of enforcing lien.--The lien of a
8 carrier may be enforced in accordance with either subsection (a)
9 or the procedure set forth in section 7210(b) (relating to
10 enforcement of lien of warehouseman).
11 (h) Liability of carrier for noncompliance.--The carrier is
12 liable for damages caused by failure to comply with the
13 requirements for sale under this section and in case of willful
14 violation is liable for conversion.
15 § 7309. Duty of care; contractual limitation of liability of
16 carrier.
17 (a) Duty of care.--A carrier who issues a bill of lading
18 whether negotiable or nonnegotiable must exercise the degree of
19 care in relation to the goods which a reasonably careful man
20 would exercise under like circumstances. This subsection does
21 not repeal or change any law or rule of law which imposes
22 liability upon a common carrier for damages not caused by its
23 negligence.
24 (b) Contractual limitation of liability.--Damages may be
25 limited by a provision that the liability of the carrier shall
26 not exceed a value stated in the document if the rates of the
27 carrier are dependent upon value and the consignor by the tariff
28 of the carrier is afforded an opportunity to declare a higher
29 value or a value as lawfully provided in the tariff, or where no
30 tariff is filed he is otherwise advised of such opportunity; but
20070H1152B1400 - 81 -
1 no such limitation is effective with respect to the liability of
2 the carrier for conversion to its own use.
3 (c) Provisions for presenting claims and instituting
4 actions.--Reasonable provisions as to the time and manner of
5 presenting claims and instituting actions based on the shipment
6 may be included in a bill of lading or tariff.
7 CHAPTER 74
8 WAREHOUSE RECEIPTS AND BILLS OF LADING:
9 GENERAL OBLIGATIONS
10 Sec.
11 7401. Irregularities in issue of receipt or bill or conduct of
12 issuer.
13 7402. Duplicate receipt or bill; overissue.
14 7403. Obligation of warehouseman or carrier to deliver; excuse.
15 7404. No liability for good faith delivery pursuant to receipt
16 or bill.
17 § 7401. Irregularities in issue of receipt or bill or conduct
18 of issuer.
19 The obligations imposed by this division on an issuer apply
20 to a document of title regardless of the fact that:
21 (1) the document may not comply with the requirements of
22 this division or of any other law or regulation regarding its
23 issue, form or content;
24 (2) the issuer may have violated laws regulating the
25 conduct of his business;
26 (3) the goods covered by the document were owned by the
27 bailee at the time the document was issued; or
28 (4) the person issuing the document does not come within
29 the definition of warehouseman if it purports to be a
30 warehouse receipt.
20070H1152B1400 - 82 -
1 § 7402. Duplicate receipt or bill; overissue.
2 Neither a duplicate nor any other document of title
3 purporting to cover goods already represented by an outstanding
4 document of the same issuer confers any right in the goods,
5 except as provided in the case of bills in a set, overissue of
6 documents for fungible goods and substitutes for lost, stolen or
7 destroyed documents. But the issuer is liable for damages caused
8 by his overissue or failure to identify a duplicate document as
9 such by conspicuous notation on its face.
10 § 7403. Obligation of warehouseman or carrier to deliver;
11 excuse.
12 (a) General rule.--The bailee must deliver the goods to a
13 person entitled under the document who complies with subsections
14 (b) and (c), unless and to the extent that the bailee
15 establishes any of the following:
16 (1) Delivery of the goods to a person whose receipt was
17 rightful as against the claimant.
18 (2) Damage to or delay, loss or destruction of the goods
19 for which the bailee is not liable, but the burden of
20 establishing negligence in such cases is on the person
21 entitled under the document.
22 (3) Previous sale or other disposition of the goods in
23 lawful enforcement of a lien or on lawful termination of
24 storage by a warehouseman.
25 (4) The exercise by a seller of his right to stop
26 delivery pursuant to the provisions of Division 2 (section
27 2705).
28 (5) A diversion, reconsignment or other disposition
29 pursuant to the provisions of this division (section 7303) or
30 tariff regulating such right.
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1 (6) Release, satisfaction or any other fact affording a
2 personal defense against the claimant.
3 (7) Any other lawful excuse.
4 (b) Satisfaction of lien.--A person claiming goods covered
5 by a document of title must satisfy the lien of the bailee where
6 the bailee so requests or where the bailee is prohibited by law
7 from delivering the goods until the charges are paid.
8 (c) Surrender of negotiable document.--Unless the person
9 claiming is one against whom the document confers no right under
10 section 7503(a) (relating to document of title to goods defeated
11 in certain cases), he must surrender for cancellation or
12 notation of partial deliveries any outstanding negotiable
13 document covering the goods, and the bailee must cancel the
14 document or conspicuously note the partial delivery thereon or
15 be liable to any person to whom the document is duly negotiated.
16 (d) Definition of "person entitled under the document".--
17 "Person entitled under the document" means holder in the case of
18 a negotiable document, or the person to whom delivery is to be
19 made by the terms of or pursuant to written instructions under a
20 nonnegotiable document.
21 § 7404. No liability for good faith delivery pursuant to
22 receipt or bill.
23 A bailee who in good faith including observance of reasonable
24 commercial standards has received goods and delivered or
25 otherwise disposed of them according to the terms of the
26 document of title or pursuant to this division is not liable
27 therefor. This rule applies even though the person from whom he
28 received the goods had no authority to procure the document or
29 to dispose of the goods and even though the person to whom he
30 delivered the goods had no authority to receive them.
20070H1152B1400 - 84 -
1 CHAPTER 75
2 WAREHOUSE RECEIPTS AND BILLS OF LADING:
3 NEGOTIATION AND TRANSFER
4 Sec.
5 7501. Form of negotiation and requirements of "due
6 negotiation."
7 7502. Rights acquired by due negotiation.
8 7503. Document of title to goods defeated in certain cases.
9 7504. Rights acquired in absence of due negotiation; effect
10 of diversion; stoppage by seller of delivery.
11 7505. Indorser not guarantor for other parties.
12 7506. Delivery without indorsement: right to compel
13 indorsement.
14 7507. Warranties on negotiation or transfer of receipt or bill.
15 7508. Warranties of collecting bank as to documents.
16 7509. Receipt or bill: when adequate compliance with
17 commercial contract.
18 § 7501. Form of negotiation and requirements of "due
19 negotiation."
20 (a) Negotiation by indorsement and delivery.--A negotiable
21 document of title running to the order of a named person is
22 negotiated by his indorsement and delivery. After his
23 indorsement in blank or to bearer any person can negotiate it by
24 delivery alone.
25 (b) Negotiation by delivery.--
26 (1) A negotiable document of title is also negotiated by
27 delivery alone when by its original terms it runs to bearer.
28 (2) When a document running to the order of a named
29 person is delivered to him the effect is the same as if the
30 document had been negotiated.
20070H1152B1400 - 85 -
1 (c) Negotiation by special indorsee.--Negotiation of a
2 negotiable document of title after it has been indorsed to a
3 specified person requires indorsement by the special indorsee as
4 well as delivery.
5 (d) Definition of "duly negotiated".--A negotiable document
6 of title is "duly negotiated" when it is negotiated in the
7 manner stated in this section to a holder who purchases it in
8 good faith without notice of any defense against or claim to it
9 on the part of any person and for value, unless it is
10 established that the negotiation is not in the regular course of
11 business or financing or involves receiving the document in
12 settlement or payment of a money obligation.
13 (e) Indorsement of nonnegotiable document.--Indorsement of a
14 nonnegotiable document neither makes it negotiable nor adds to
15 the rights of the transferee.
16 (f) Naming person to be notified of arrival of goods.--The
17 naming in a negotiable bill of a person to be notified of the
18 arrival of the goods does not limit the negotiability of the
19 bill nor constitute notice to a purchaser thereof of any
20 interest of such person in the goods.
21 § 7502. Rights acquired by due negotiation.
22 (a) General rule.--Subject to section 7205 (relating to
23 title under warehouse receipt defeated in certain cases) on
24 fungible goods and section 7503 (relating to document of title
25 to goods defeated in certain cases), a holder to whom a
26 negotiable document of title has been duly negotiated acquires
27 thereby:
28 (1) title to the document;
29 (2) title to the goods;
30 (3) all rights accruing under the law of agency or
20070H1152B1400 - 86 -
1 estoppel, including rights to goods delivered to the bailee
2 after the document was issued; and
3 (4) the direct obligation of the issuer to hold or
4 deliver the goods according to the terms of the document free
5 of any defense or claim by him except those arising under the
6 terms of the document or under this division. In the case of
7 a delivery order the obligation of the bailee accrues only
8 upon acceptance and the obligation acquired by the holder is
9 that the issuer and any indorser will procure the acceptance
10 of the bailee.
11 (b) Rights acquired unaffected by certain matters.--Subject
12 to section 7503, title and rights so acquired are not defeated
13 by any stoppage of the goods represented by the document or by
14 surrender of such goods by the bailee, and are not impaired even
15 though the negotiation or any prior negotiation constituted a
16 breach of duty or even though any person has been deprived of
17 possession of the document by misrepresentation, fraud,
18 accident, mistake, duress, loss, theft or conversion, or even
19 though a previous sale or other transfer of the goods or
20 document has been made to a third person.
21 § 7503. Document of title to goods defeated in certain cases.
22 (a) Prior legal or perfected security interest.--A document
23 of title confers no right in goods against a person who before
24 issuance of the document had a legal interest or a perfected
25 security interest in them and who neither:
26 (1) delivered or entrusted them or any document of title
27 covering them to the bailor or his nominee with actual or
28 apparent authority to ship, store or sell or with power to
29 obtain delivery under this division (section 7403 (relating
30 to obligation of warehouseman or carrier to deliver; excuse))
20070H1152B1400 - 87 -
1 or with power of disposition under this title (section 2403
2 (relating to power to transfer; good faith purchase of goods;
3 "entrusting") and section 9320 (relating to buyer of goods))
4 or other statute or rule of law; nor
5 (2) acquiesced in the procedure by the bailor or his
6 nominee of any document of title.
7 (b) Subordination of title based upon unaccepted delivery
8 order.--Title to goods based upon an unaccepted delivery order
9 is subject to the rights of anyone to whom a negotiable
10 warehouse receipt or bill of lading governing the goods has been
11 duly negotiated. Such a title may be defeated under section 7504
12 (relating to rights acquired in absence of due negotiation;
13 effect of diversion; stoppage by seller of delivery) to the same
14 extent as the rights of the issuer or a transferee from the
15 issuer.
16 (c) Subordination of title based upon bill to freight
17 forwarder.--Title to goods based upon a bill of lading issued to
18 a freight forwarder is subject to the rights of anyone to whom a
19 bill issued by the freight forwarder covering such goods has
20 been duly negotiated; but delivery by the carrier in accordance
21 with Chapter 74 (relating to warehouse receipts and bills of
22 lading: general obligations) pursuant to its own bill of lading
23 discharges the obligation of the carrier to deliver.
24 § 7504. Rights acquired in absence of due negotiation; effect
25 of diversion; stoppage by seller of delivery.
26 (a) Rights of transferee when document delivered but not
27 negotiated.--A transferee of a document, whether negotiable or
28 nonnegotiable, to whom the document has been delivered but not
29 duly negotiated, acquires the title and rights which his
30 transferor had or had actual authority to convey.
20070H1152B1400 - 88 -
1 (b) Defeat of rights of transferee of nonnegotiable
2 document.--In the case of a nonnegotiable document, until but
3 not after the bailee receives notification of the transfer, the
4 rights of the transferee may be defeated:
5 (1) by those creditors of the transferor who could treat
6 the sale as void under section 2402 (relating to rights of
7 creditors of seller against sold goods);
8 (2) by a buyer from the transferor in ordinary course of
9 business if the bailee has delivered the goods to the buyer
10 or received notification of his rights; or
11 (3) as against the bailee by good faith dealings of the
12 bailee with the transferor.
13 (c) Change of shipping instructions under nonnegotiable
14 document.--A diversion or other change of shipping instructions
15 by the consignor in a nonnegotiable bill of lading which causes
16 the bailee not to deliver to the consignee defeats the title of
17 the consignee to the goods if they have been delivered to a
18 buyer in ordinary course of business and in any event defeats
19 the rights of the consignee against the bailee.
20 (d) Stoppage by seller of delivery under nonnegotiable
21 document.--Delivery pursuant to a nonnegotiable document may be
22 stopped by a seller under section 2705 (relating to stoppage by
23 seller of delivery in transit or otherwise) and subject to the
24 requirement of due notification there provided. A bailee
25 honoring the instructions of the seller is entitled to be
26 indemnified by the seller against any resulting loss or expense.
27 § 7505. Indorser not guarantor for other parties.
28 The indorsement of a document of title issued by a bailee
29 does not make the indorser liable for any default by the bailee
30 or by previous indorsers.
20070H1152B1400 - 89 -
1 § 7506. Delivery without indorsement: right to compel
2 indorsement.
3 The transferee of a negotiable document of title has a
4 specifically enforceable right to have his transferor supply any
5 necessary indorsement but the transfer becomes a negotiation
6 only as of the time the indorsement is supplied.
7 § 7507. Warranties on negotiation or transfer of receipt or
8 bill.
9 Where a person negotiates or transfers a document of title
10 for value otherwise than as a mere intermediary under section
11 7508 (relating to warranties of collecting bank as to
12 documents), then unless otherwise agreed he warrants to his
13 immediate purchaser only in addition to any warranty made in
14 selling the goods:
15 (1) that the document is genuine;
16 (2) that he has no knowledge of any fact which would
17 impair its validity or worth; and
18 (3) that his negotiation or transfer is rightful and
19 fully effective with respect to the title to the document and
20 the goods it represents.
21 § 7508. Warranties of collecting bank as to documents.
22 A collecting bank or other intermediary known to be entrusted
23 with documents on behalf of another or with collection of a
24 draft or other claim against delivery of documents warrants by
25 such delivery of the documents only its own good faith and
26 authority. This rule applies even though the intermediary has
27 purchased or made advances against the claim or draft to be
28 collected.
29 § 7509. Receipt or bill: when adequate compliance with
30 commercial contract.
20070H1152B1400 - 90 -
1 The question whether a document is adequate to fulfill the
2 obligations of a contract for sale or the conditions of a credit
3 is governed by Division 2 (relating to sales) and Division 5
4 (relating to letters of credit).
5 CHAPTER 76
6 WAREHOUSE RECEIPTS AND BILLS OF LADING:
7 MISCELLANEOUS PROVISIONS
8 Sec.
9 7601. Lost and missing documents.
10 7602. Attachment of goods covered by negotiable document.
11 7603. Conflicting claims; interpleader.
12 § 7601. Lost and missing documents.
13 (a) Delivery of substitute document under court order.--If a
14 document has been lost, stolen or destroyed, a court may order
15 delivery of the goods or issuance of a substitute document and
16 the bailee may without liability to any person comply with such
17 order. If the document was negotiable the claimant must post
18 security approved by the court to indemnify any person who may
19 suffer loss as a result of nonsurrender of the document. If the
20 document was not negotiable, such security may be required at
21 the discretion of the court. The court may also in its
22 discretion order payment of the reasonable costs and counsel
23 fees of the bailee.
24 (b) Liability for delivery without court order.--A bailee
25 who without court order delivers goods to a person claiming
26 under a missing negotiable document is liable to any person
27 injured thereby, and if the delivery is not in good faith
28 becomes liable for conversion. Delivery in good faith is not
29 conversion if made in accordance with a filed classification or
30 tariff or, where no classification or tariff is filed, if the
20070H1152B1400 - 91 -
1 claimant posts security with the bailee in an amount at least
2 double the value of the goods at the time of posting to
3 indemnify any person injured by the delivery who files a notice
4 of claim within one year after the delivery.
5 § 7602. Attachment of goods covered by negotiable document.
6 Except where the document was originally issued upon delivery
7 of the goods by a person who had no power to dispose of them, no
8 lien attaches by virtue of any judicial process to goods in the
9 possession of a bailee for which a negotiable document of title
10 is outstanding unless the document be first surrendered to the
11 bailee or its negotiation enjoined, and the bailee shall not be
12 compelled to deliver the goods pursuant to process until the
13 document is surrendered to him or impounded by the court. One
14 who purchases the document for value without notice of the
15 process or injunction takes free of the lien imposed by judicial
16 process.
17 § 7603. Conflicting claims; interpleader.
18 If more than one person claims title or possession of the
19 goods, the bailee is excused from delivering until he has had a
20 reasonable time to ascertain the validity of the adverse claims
21 or to bring an action to compel all claimants to interplead and
22 may compel such interpleader, either in defending an action for
23 nondelivery of the goods, or by original action, whichever is
24 appropriate.]
25 Section 13. Title 13 is amended by adding a division to
26 read:
27 DIVISION 7
28 WAREHOUSE RECEIPTS, BILLS OF LADING AND OTHER
29 DOCUMENTS OF TITLE
30 Chapter
20070H1152B1400 - 92 -
1 71. General
2 72. Warehouse Receipts: Special Provisions
3 73. Bills of Lading: Special Provisions
4 74. Warehouse Receipts and Bills of Lading: General
5 Obligations
6 75. Warehouse Receipts and Bills of Lading: Negotiation
7 and Transfer
8 76. Warehouse Receipts and Bills of Lading: Miscellaneous
9 Provisions
10 CHAPTER 71
11 GENERAL
12 Sec.
13 7101. Short title of division.
14 7102. Definitions and index of definitions.
15 7103. Relation of division to treaty or statute.
16 7104. Negotiable and nonnegotiable document of title.
17 7105. Reissuance in alternative medium.
18 7106. Control of electronic document of title.
19 § 7101. Short title of division.
20 This division shall be known and may be cited as Uniform
21 Commercial Code-Documents of Title.
22 § 7102. Definitions and index of definitions.
23 (a) Division 7 definitions.--The following words and phrases
24 when used in this division shall have, unless the context
25 clearly indicates otherwise, the meanings given to them in this
26 subsection:
27 "Bailee." A person that by a warehouse receipt, bill of
28 lading or other document of title acknowledges possession of
29 goods and contracts to deliver them.
30 "Carrier." A person that issues a bill of lading.
20070H1152B1400 - 93 -
1 "Consignee." A person named in a bill of lading to which or
2 to whose order the bill promises delivery.
3 "Consignor." A person named in a bill of lading as the
4 person from which the goods have been received for shipment.
5 "Delivery order." A record that contains an order to deliver
6 goods directed to a warehouse, carrier or other person that in
7 the ordinary course of business issues warehouse receipts or
8 bills of lading.
9 "Goods." All things that are treated as movable for the
10 purposes of a contract for storage or transportation.
11 "Issuer." A bailee that issues a document of title or, in
12 the case of an unaccepted delivery order, the person that orders
13 the possessor of goods to deliver. The term includes a person
14 for which an agent or employee purports to act in issuing a
15 document if the agent or employee has real or apparent authority
16 to issue documents, even if the issuer did not receive any
17 goods, the goods were misdescribed or in any other respect the
18 agent or employee violated the issuer's instructions.
19 "Person entitled under the document." The holder, in the
20 case of a negotiable document of title, or the person to which
21 delivery of the goods is to be made by the terms of, or pursuant
22 to instructions in a record under, a nonnegotiable document of
23 title.
24 "Shipper." A person that enters into a contract of
25 transportation with a carrier.
26 "Sign." With present intent to authenticate or adopt a
27 record:
28 (1) to execute or adopt a tangible symbol; or
29 (2) to attach to or logically associate with the record
30 an electronic sound, symbol or process.
20070H1152B1400 - 94 -
1 "Warehouse." A person engaged in the business of storing
2 goods for hire.
3 (b) Definitions in other divisions.--Definitions in other
4 divisions applying to this division and the sections in which
5 they appear are:
6 (1) "Contract for sale." Section 2106 (relating to
7 definitions: "contract"; "agreement"; "contract for sale";
8 "sale"; "present sale"; "conforming to contract";
9 "termination"; "cancellation").
10 (2) "Lessee in ordinary course of business." Section
11 2A103 (relating to definitions and index of definitions).
12 (3) "Receipt." Section 2103 (relating to definitions
13 and index of definitions).
14 (c) Division 1 definitions and principles.--In addition,
15 Division 1 (relating to general provisions) contains general
16 definitions and principles of construction and interpretation
17 applicable throughout this division.
18 § 7103. Relation of division to treaty or statute.
19 (a) Hierarchy.--This division is subject to any treaty or
20 statute of the United States or a regulatory statute of this
21 Commonwealth to the extent the treaty, statute or regulatory
22 statute is applicable.
23 (b) No repeal or modification.--This division does not
24 modify or repeal any law prescribing the form or content of a
25 document of title or the services or facilities to be afforded
26 by a bailee, or otherwise regulating a bailee's businesses in
27 respects not specifically treated in this division. However,
28 violation of these laws does not affect the status of a document
29 of title that otherwise is within the definition of a document
30 of title.
20070H1152B1400 - 95 -
1 (c) Electronic Signatures in Global and National Commerce
2 Act.--This title modifies, limits and supersedes the Electronic
3 Signatures in Global and National Commerce Act (Public Law 106-
4 229, 15 U.S.C. § 7001 et seq.) but does not modify, limit or
5 supersede section 101(c) of that act (15 U.S.C. § 7001(c)) or
6 authorize electronic delivery of any of the notices described in
7 section 103(b) of that act (15 U.S.C. § 7003(b)).
8 (d) Conflict.--To the extent there is a conflict between
9 Chapter 1, 3 or 5 of the act of December 16, 1999 (P.L.971,
10 No.69), known as the Electronic Transactions Act, and this
11 division, this division governs.
12 § 7104. Negotiable and nonnegotiable document of title.
13 (a) Negotiable.--Except as otherwise provided in subsection
14 (c), document of title is negotiable if by its terms the goods
15 are to be delivered to bearer or to the order of a named person.
16 (b) Nonnegotiable.--A document of title other than one
17 described in subsection (a) is nonnegotiable. A bill of lading
18 that states that the goods are consigned to a named person is
19 not made negotiable by a provision that the goods are to be
20 delivered only against an order in a record signed by the same
21 or another named person.
22 (c) Legend determinative.--A document of title is
23 nonnegotiable if, at the time it is issued, the document has a
24 conspicuous legend, however expressed, that it is nonnegotiable.
25 § 7105. Reissuance in alternative medium.
26 (a) Authority for electronic to tangible.--Upon request of a
27 person entitled under an electronic document of title, the
28 issuer of the electronic document may issue a tangible document
29 of title as a substitute for the electronic document if:
30 (1) the person entitled under the electronic document
20070H1152B1400 - 96 -
1 surrenders control of the document to the issuer; and
2 (2) the tangible document when issued contains a
3 statement that it is issued in substitution for the
4 electronic document.
5 (b) Effect of electronic to tangible.--Upon issuance of a
6 tangible document of title in substitution for an electronic
7 document of title in accordance with subsection (a):
8 (1) the electronic document ceases to have any effect or
9 validity; and
10 (2) the person that procured issuance of the tangible
11 document warrants to all subsequent persons entitled under
12 the tangible document that the warrantor was a person
13 entitled under the electronic document when the warrantor
14 surrendered control of the electronic document to the issuer.
15 (c) Authority for tangible to electronic.--Upon request of a
16 person entitled under a tangible document of title, the issuer
17 of the tangible document may issue an electronic document of
18 title as a substitute for the tangible document if:
19 (1) the person entitled under the tangible document
20 surrenders possession of the document to the issuer; and
21 (2) the electronic document when issued contains a
22 statement that it is issued in substitution for the tangible
23 document.
24 (d) Effect of tangible to electronic.--Upon issuance of the
25 electronic document of title in substitution for a tangible
26 document of title in accordance with subsection (c):
27 (1) the tangible document ceases to have any effect or
28 validity; and
29 (2) the person that procured issuance of the electronic
30 document warrants to all subsequent persons entitled under
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1 the electronic document that the warrantor was a person
2 entitled under the tangible document when the warrantor
3 surrendered possession of the tangible document to the
4 issuer.
5 § 7106. Control of electronic document of title.
6 (a) Establishment.--A person has control of an electronic
7 document of title if a system employed for evidencing the
8 transfer of interests in the electronic document reliably
9 establishes that person as the person to which the electronic
10 document was issued or transferred.
11 (b) Manner.--A system satisfies subsection (a), and a person
12 is deemed to have control of an electronic document of title if
13 the document is created, stored and assigned in such a manner
14 that:
15 (1) a single authoritative copy of the document exists
16 which is unique, identifiable and, except as otherwise
17 provided in paragraphs (4), (5) and (6), unalterable;
18 (2) the authoritative copy identifies the person
19 asserting control as:
20 (i) the person to which the document was issued; or
21 (ii) if the authoritative copy indicates that the
22 document has been transferred, the person to which the
23 document was most recently transferred;
24 (3) the authoritative copy is communicated to and
25 maintained by the person asserting control or its designated
26 custodian;
27 (4) copies or amendments that add or change an
28 identified assignee of the authoritative copy can be made
29 only with the consent of the person asserting control;
30 (5) each copy of the authoritative copy and any copy of
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1 a copy is readily identifiable as a copy that is not the
2 authoritative copy; and
3 (6) any amendment of the authoritative copy is readily
4 identifiable as authorized or unauthorized.
5 CHAPTER 72
6 WAREHOUSE RECEIPTS: SPECIAL PROVISIONS
7 Sec.
8 7201. Person that may issue a warehouse receipt; storage under
9 bond.
10 7202. Form of warehouse receipt; effect of omission.
11 7203. Liability for nonreceipt or misdescription.
12 7204. Duty of care; contractual limitation of warehouse's
13 liability.
14 7205. Title under warehouse receipt defeated in certain cases.
15 7206. Termination of storage at warehouse's option.
16 7207. Goods must be kept separate; fungible goods.
17 7208. Altered warehouse receipts.
18 7209. Lien of warehouse.
19 7210. Enforcement of warehouse's lien.
20 § 7201. Person that may issue a warehouse receipt; storage
21 under bond.
22 (a) Issuer.--A warehouse receipt may be issued by any
23 warehouse.
24 (b) Storage under bond.--If goods, including distilled
25 spirits and agricultural commodities, are stored under a statute
26 requiring a bond against withdrawal or a license for the
27 issuance of receipts in the nature of warehouse receipts, a
28 receipt issued for the goods is deemed to be a warehouse receipt
29 even if issued by a person that is the owner of the goods and is
30 not a warehouse.
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1 § 7202. Form of warehouse receipt; effect of omission.
2 (a) Form.--A warehouse receipt need not be in any particular
3 form.
4 (b) Effect of omission.--Unless a warehouse receipt provides
5 for each of the following, the warehouse is liable for damages
6 caused to a person injured by its omission:
7 (1) a statement of the location of the warehouse
8 facility where the goods are stored;
9 (2) the date of issue of the receipt;
10 (3) the unique identification code of the receipt;
11 (4) a statement whether the goods received will be
12 delivered to the bearer, to a named person or to a named
13 person or its order;
14 (5) the rate of storage and handling charges, unless
15 goods are stored under a field warehousing arrangement, in
16 which case a statement of that fact is sufficient on a
17 nonnegotiable receipt;
18 (6) a description of the goods or the packages
19 containing them;
20 (7) the signature of the warehouse or its agent;
21 (8) if the receipt is issued for goods that the
22 warehouse owns, either solely, jointly or in common with
23 others, a statement of the fact of that ownership; and
24 (9) a statement of the amount of advances made and of
25 liabilities incurred for which the warehouse claims a lien or
26 security interest, unless the precise amount of advances made
27 or of liabilities incurred, at the time of the issue of the
28 receipt, is unknown to the warehouse or to its agent that
29 issued the receipt, in which case a statement of the fact
30 that advances have been made or liabilities incurred and the
20070H1152B1400 - 100 -
1 purpose of the advances or liabilities is sufficient.
2 (c) Permissible terms.--A warehouse may insert in its
3 receipt any terms that are not contrary to this title and do not
4 impair its obligation of delivery under section 7403 (relating
5 to obligation of bailee to deliver; excuse) or its duty of care
6 under section 7204 (relating to duty of care; contractual
7 limitation of warehouse's liability). Any contrary provision is
8 ineffective.
9 § 7203. Liability for nonreceipt or misdescription.
10 A party to or purchaser for value in good faith of a document
11 of title, other than a bill of lading, that relies upon the
12 description of the goods in the document may recover from the
13 issuer damages caused by the nonreceipt or misdescription of the
14 goods, except to the extent that:
15 (1) the document conspicuously indicates that the issuer
16 does not know whether all or part of the goods in fact were
17 received or conform to the description, such as a case in
18 which the description is in terms of marks or labels or kind,
19 quantity or condition or the receipt or description is
20 qualified by "contents, condition and quality unknown," "said
21 to contain," or words of similar import, if the indication is
22 true; or
23 (2) the party or purchaser otherwise has notice of the
24 nonreceipt or misdescription.
25 § 7204. Duty of care; contractual limitation of warehouse's
26 liability.
27 (a) Duty of care.--A warehouse is liable for damages for
28 loss of or injury to the goods caused by its failure to exercise
29 care with regard to the goods that a reasonably careful person
30 would exercise under similar circumstances. Unless otherwise
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1 agreed, the warehouse is not liable for damages that could not
2 have been avoided by the exercise of that care.
3 (b) Contractual limitation.--Damages may be limited by a
4 term in the warehouse receipt or storage agreement limiting the
5 amount of liability in case of loss or damage beyond which the
6 warehouse is not liable. Such a limitation is not effective with
7 respect to the warehouse's liability for conversion to its own
8 use. On request of the bailor in a record at the time of signing
9 the storage agreement or within a reasonable time after receipt
10 of the warehouse receipt, the warehouse's liability may be
11 increased on part or all of the goods covered by the storage
12 agreement or the warehouse receipt. In this event, increased
13 rates may be charged based on an increased valuation of the
14 goods.
15 (c) Claim presentation.--Reasonable provisions as to the
16 time and manner of presenting claims and commencing actions
17 based on the bailment may be included in the warehouse receipt
18 or storage agreement.
19 § 7205. Title under warehouse receipt defeated in certain
20 cases.
21 A buyer in ordinary course of business of fungible goods sold
22 and delivered by a warehouse that is also in the business of
23 buying and selling such goods takes the goods free of any claim
24 under a warehouse receipt even if the receipt is negotiable and
25 has been duly negotiated.
26 § 7206. Termination of storage at warehouse's option.
27 (a) Payment and removal.--A warehouse, by giving notice to
28 the person on whose account the goods are held and any other
29 person known to claim an interest in the goods, may require
30 payment of any charges and removal of the goods from the
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1 warehouse at the termination of the period of storage fixed by
2 the document of title or, if a period is not fixed, within a
3 stated period not less than 30 days after the warehouse gives
4 notice. If the goods are not removed before the date specified
5 in the notice, the warehouse may sell them pursuant to section
6 7210 (relating to enforcement of warehouse's lien).
7 (b) Perishable goods.--If a warehouse in good faith believes
8 that goods are about to deteriorate or decline in value to less
9 than the amount of its lien within the time provided in
10 subsection (a) and section 7210, the warehouse may specify in
11 the notice given under subsection (a) any reasonable shorter
12 time for removal of the goods and, if the goods are not removed,
13 may sell them at public sale held not less than one week after a
14 single advertisement or posting.
15 (c) Hazardous goods.--If, as a result of a quality or
16 condition of the goods of which the warehouse did not have
17 notice at the time of deposit, the goods are a hazard to other
18 property, the warehouse facilities or other persons, the
19 warehouse may sell the goods at public or private sale without
20 advertisement or posting on reasonable notification to all
21 persons known to claim an interest in the goods. If the
22 warehouse, after a reasonable effort, is unable to sell the
23 goods, it may dispose of them in any lawful manner and does not
24 incur liability by reason of that disposition.
25 (d) Demand.--A warehouse shall deliver the goods to any
26 person entitled to them under this division upon due demand made
27 at any time before sale or other disposition under this section.
28 (e) Lien satisfaction.--A warehouse may satisfy its lien
29 from the proceeds of any sale or disposition under this section
30 but shall hold the balance for delivery on the demand of any
20070H1152B1400 - 103 -
1 person to which the warehouse would have been bound to deliver
2 the goods.
3 § 7207. Goods must be kept separate; fungible goods.
4 (a) Separation.--
5 (1) Unless the warehouse receipt provides otherwise,
6 except as set forth in paragraph (2), a warehouse shall keep
7 separate the goods covered by each receipt so as to permit at
8 all times identification and delivery of those goods.
9 (2) Different lots of fungible goods may be commingled.
10 (b) Fungible goods.--If different lots of fungible goods are
11 commingled, the goods are owned in common by the persons
12 entitled thereto and the warehouse is severally liable to each
13 owner for that owner's share. If, because of overissue, a mass
14 of fungible goods is insufficient to meet all the receipts the
15 warehouse has issued against it, the persons entitled include
16 all holders to which overissued receipts have been duly
17 negotiated.
18 § 7208. Altered warehouse receipts.
19 If a blank in a negotiable tangible warehouse receipt has
20 been filled in without authority, a good-faith purchaser for
21 value and without notice of the lack of authority may treat the
22 insertion as authorized. Any other unauthorized alteration
23 leaves any tangible or electronic warehouse receipt enforceable
24 against the issuer according to its original tenor.
25 § 7209. Lien of warehouse.
26 (a) Existence.--
27 (1) A warehouse has a lien against the bailor on the
28 goods covered by a warehouse receipt or storage agreement or
29 on the proceeds thereof in its possession for charges for
30 storage or transportation, including demurrage and terminal
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1 charges, insurance, labor or other charges, present or
2 future, in relation to the goods, and for expenses necessary
3 for preservation of the goods or reasonably incurred in their
4 sale pursuant to law.
5 (2) The warehouse also has a lien against the goods
6 covered by the warehouse receipt or storage agreement or on
7 the proceeds thereof in its possession for those charges and
8 expenses, whether or not the other goods have been delivered
9 by the warehouse if:
10 (i) the person on whose account the goods are held
11 is liable for similar charges or expenses in relation to
12 other goods whenever deposited; and
13 (ii) it is stated in the warehouse receipt or
14 storage agreement that a lien is claimed for charges and
15 expenses in relation to other goods.
16 (3) However, as against a person to which a negotiable
17 warehouse receipt is duly negotiated, a warehouse's lien is
18 limited to charges in an amount or at a rate specified in the
19 warehouse receipt or, if no charges are so specified, to a
20 reasonable charge for storage of the specific goods covered
21 by the receipt subsequent to the date of the receipt.
22 (b) Security interest.--A warehouse may also reserve a
23 security interest against the bailor for the maximum amount
24 specified on the receipt for charges other than those specified
25 in subsection (a), such as for money advanced and interest. A
26 security interest is governed by Division 9 (relating to secured
27 transactions).
28 (c) Effectiveness against entrustors.--
29 (1) Except as set forth in paragraph (2), a warehouse's
30 lien for charges and expenses under subsection (a) or a
20070H1152B1400 - 105 -
1 security interest under subsection (b) is also effective
2 against any person that so entrusted the bailor with
3 possession of the goods that a pledge of them by the bailor
4 to a good-faith purchaser for value would have been valid.
5 (2) The lien or security interest is not effective
6 against a person that before issuance of a document of title
7 had a legal interest or a perfected security interest in the
8 goods and that did not:
9 (i) deliver or entrust the goods or any document
10 covering the goods to the bailor or the bailor's nominee
11 with:
12 (A) actual or apparent authority to ship, store
13 or sell;
14 (B) power to obtain delivery under section 7403
15 (relating to obligation of bailee to deliver;
16 excuse); or
17 (C) power of disposition under section 2403
18 (relating to power to transfer; good faith purchase
19 of goods; "entrusting"), 2A304(a)(2) (relating to
20 subsequent lease of goods by lessor), 2A305(a)(2)
21 (relating to sale or sublease of goods by lessee),
22 9320 (relating to buyer of goods) or 9321(c)
23 (relating to licensee of general intangible and
24 lessee of goods in ordinary course of business) or
25 other statute or rule of law; or
26 (ii) acquiesce in the procurement by the bailor or
27 its nominee of any document.
28 (d) Effectiveness in general.--A warehouse's lien on
29 household goods for charges and expenses in relation to the
30 goods under subsection (a) is also effective against all persons
20070H1152B1400 - 106 -
1 if the depositor was the legal possessor of the goods at the
2 time of deposit. As used in this subsection, the term "household
3 goods" means furniture, furnishings or personal effects used by
4 the depositor in a dwelling.
5 (e) Losing lien.--A warehouse loses its lien on any goods
6 that it voluntarily delivers or unjustifiably refuses to
7 deliver.
8 § 7210. Enforcement of warehouse's lien.
9 (a) Sale.--
10 (1) Except as otherwise provided in subsection (b), a
11 warehouse's lien may be enforced by public or private sale of
12 the goods, in bulk or in packages, at any time or place and
13 on any terms that are commercially reasonable, after
14 notifying all persons known to claim an interest in the
15 goods.
16 (2) The notification must include a statement of the
17 amount due, the nature of the proposed sale and the time and
18 place of any public sale.
19 (3) The fact that a better price could have been
20 obtained by a sale at a different time or in a different
21 method from that selected by the warehouse is not of itself
22 sufficient to establish that the sale was not made in a
23 commercially reasonable manner.
24 (4) The warehouse has sold in a commercially reasonable
25 manner if the warehouse sells the goods in the usual manner
26 in any recognized market therefor, sells at the price current
27 in that market at the time of the sale or has otherwise sold
28 in conformity with commercially reasonable practices among
29 dealers in the type of goods sold.
30 (5) A sale of more goods than apparently necessary to be
20070H1152B1400 - 107 -
1 offered to ensure satisfaction of the obligation is not
2 commercially reasonable, except in cases covered by paragraph
3 (4).
4 (b) Conditions of enforcement.--A warehouse's lien on goods,
5 other than goods stored by a merchant in the course of its
6 business, may be enforced only if the following requirements are
7 satisfied:
8 (1) All persons known to claim an interest in the goods
9 must be notified.
10 (2) The notification must include:
11 (i) an itemized statement of the claim;
12 (ii) a description of the goods subject to the lien;
13 (iii) a demand for payment within a specified time
14 not less than ten days after receipt of the notification;
15 and
16 (iv) a conspicuous statement that unless the claim
17 is paid within that time the goods will be advertised for
18 sale and sold at auction at a specified time and place.
19 (3) The sale must conform to the terms of the
20 notification.
21 (4) The sale must be held at the nearest suitable place
22 to where the goods are held or stored.
23 (5) After the expiration of the time given in the
24 notification, an advertisement of the sale must be published
25 once a week for two weeks consecutively in a newspaper of
26 general circulation where the sale is to be held. The
27 advertisement must include a description of the goods, the
28 name of the person on whose account the goods are being held
29 and the time and place of the sale. The sale must take place
30 at least 15 days after the first publication. If there is no
20070H1152B1400 - 108 -
1 newspaper of general circulation where the sale is to be
2 held, the advertisement must be posted at least ten days
3 before the sale in not less than six conspicuous places in
4 the neighborhood of the proposed sale.
5 (c) Satisfaction.--Before any sale pursuant to this section,
6 any person claiming a right in the goods may pay the amount
7 necessary to satisfy the lien and the reasonable expenses
8 incurred in complying with this section. In that event, the
9 goods may not be sold but must be retained by the warehouse
10 subject to the terms of the receipt and this division.
11 (d) Purchase by warehouse.--A warehouse may buy at any
12 public sale held pursuant to this section.
13 (e) Purchaser in good faith.--A purchaser in good faith of
14 goods sold to enforce a warehouse's lien takes the goods free of
15 any rights of persons against which the lien was valid, despite
16 the warehouse's noncompliance with this section.
17 (f) Proceeds of sale.--A warehouse may satisfy its lien from
18 the proceeds of any sale pursuant to this section but shall hold
19 the balance, if any, for delivery on demand to any person to
20 which the warehouse would have been bound to deliver the goods.
21 (g) Additional rights.--The rights provided by this section
22 are in addition to all other rights allowed by law to a creditor
23 against a debtor.
24 (h) Goods stored by merchant.--If a lien is on goods stored
25 by a merchant in the course of its business, the lien may be
26 enforced in accordance with subsection (a) or (b).
27 (i) Liability of warehouse.--A warehouse is liable for
28 damages caused by failure to comply with the requirements for
29 sale under this section and, in case of willful violation, is
30 liable for conversion.
20070H1152B1400 - 109 -
1 CHAPTER 73
2 BILLS OF LADING: SPECIAL PROVISIONS
3 Sec.
4 7301. Liability for nonreceipt or misdescription; "said to
5 contain"; "shipper's weight, load and count"; improper
6 handling.
7 7302. Through bills of lading and similar documents of title.
8 7303. Diversion; reconsignment; change of instructions.
9 7304. Tangible bills of lading in a set.
10 7305. Destination bills.
11 7306. Altered bills of lading.
12 7307. Lien of carrier.
13 7308. Enforcement of carrier's lien.
14 7309. Duty of care; contractual limitation of carrier's
15 liability.
16 § 7301. Liability for nonreceipt or misdescription; "said to
17 contain"; "shipper's weight, load and count";
18 improper handling.
19 (a) Liability.--A consignee of a nonnegotiable bill of
20 lading which has given value in good faith, or a holder to which
21 a negotiable bill has been duly negotiated, relying upon the
22 description of the goods in the bill or upon the date shown in
23 the bill, may recover from the issuer damages caused by the
24 misdating of the bill or the nonreceipt or misdescription of the
25 goods, except to the extent that the bill indicates that the
26 issuer does not know whether any part or all of the goods in
27 fact were received or conform to the description, such as in a
28 case in which the description is in terms of marks or labels or
29 kind, quantity or condition or the receipt or description is
30 qualified by "contents or condition of contents of packages
20070H1152B1400 - 110 -
1 unknown," "said to contain," "shipper's weight, load and count"
2 or words of similar import, if that indication is true.
3 (b) Package count.--If goods are loaded by the issuer of the
4 bill of lading:
5 (1) the issuer shall count the packages of goods if
6 shipped in packages and ascertain the kind and quantity if
7 shipped in bulk; and
8 (2) words such as "shipper's weight, load and count," or
9 words of similar import indicating that the description was
10 made by the shipper are ineffective except as to goods
11 concealed by packages.
12 (c) Kind and quantity.--If bulk goods are loaded by a
13 shipper that makes available to the issuer of the bill of lading
14 adequate facilities for weighing those goods, the issuer shall
15 ascertain the kind and quantity within a reasonable time after
16 receiving the shipper's request in a record to do so. In that
17 case, "shipper's weight" or words of similar import are
18 ineffective.
19 (d) Deference to shipper.--The issuer of a bill of lading,
20 by including in the bill of lading the words "shipper's weight,
21 load and count," or words of similar import, may indicate that
22 the goods were loaded by the shipper; and, if that statement is
23 true, the issuer is not liable for damages caused by the
24 improper loading. However, omission of such words does not imply
25 liability for damages caused by improper loading.
26 (e) Accuracy guaranteed.--A shipper guarantees to the issuer
27 the accuracy at the time of shipment of the description, marks,
28 labels, number, kind, quantity, condition and weight, as
29 furnished by the shipper, and the shipper shall indemnify the
30 issuer against damage caused by inaccuracies in those
20070H1152B1400 - 111 -
1 particulars. This right of indemnity does not limit its
2 responsibility or liability under the contract of carriage to
3 any person other than the shipper.
4 § 7302. Through bills of lading and similar documents of title.
5 (a) Liability of issuer.--The issuer of a through bill of
6 lading or other document of title embodying an undertaking to be
7 performed in part by a person acting as its agent or by a
8 performing carrier is liable to any person entitled to recover
9 on the bill or other document for any breach by the other person
10 or the performing carrier of its obligation under the bill or
11 other document. However, to the extent that the bill or other
12 document covers an undertaking to be performed overseas or in
13 territory not contiguous to the continental United States or an
14 undertaking including matters other than transportation, this
15 liability for breach by the other person or the performing
16 carrier may be varied by agreement of the parties.
17 (b) Liability of person other than issuer.--If goods covered
18 by a through bill of lading or other document of title embodying
19 an undertaking to be performed in part by a person other than
20 the issuer are received by that person, the person is subject,
21 with respect to its own performance while the goods are in its
22 possession, to the obligation of the issuer. The person's
23 obligation is discharged by delivery of the goods to another
24 person pursuant to the bill or other document and does not
25 include liability for breach by any other person or by the
26 issuer.
27 (c) Damages.--The issuer of a through bill of lading or
28 other document of title described in subsection (a) is entitled
29 to recover from the performing carrier, or other person in
30 possession of the goods, when the breach of the obligation under
20070H1152B1400 - 112 -
1 the bill or other document occurred:
2 (1) the amount it may be required to pay to any person
3 entitled to recover on the bill or other document for the
4 breach, as may be evidenced by any receipt, judgment or
5 transcript of judgment; and
6 (2) the amount of any expense reasonably incurred by the
7 issuer in defending any action commenced by any person
8 entitled to recover on the bill or other document for the
9 breach.
10 § 7303. Diversion; reconsignment; change of instructions.
11 (a) Proper instruction.--Unless the bill of lading otherwise
12 provides, a carrier may deliver the goods to a person or
13 destination other than that stated in the bill or may otherwise
14 dispose of the goods, without liability for misdelivery, on
15 instructions from:
16 (1) the holder of a negotiable bill;
17 (2) the consignor on a nonnegotiable bill even if the
18 consignee has given contrary instructions;
19 (3) the consignee on a nonnegotiable bill in the absence
20 of contrary instructions from the consignor, if the goods
21 have arrived at the billed destination or if the consignee is
22 in possession of the tangible bill or in control of the
23 electronic bill; or
24 (4) the consignee on a nonnegotiable bill, if the
25 consignee is entitled as against the consignor to dispose of
26 the goods.
27 (b) Original terms.--Unless instructions described in
28 subsection (a) are included in a negotiable bill of lading, a
29 person to which the bill is duly negotiated may hold the bailee
30 according to the original terms.
20070H1152B1400 - 113 -
1 § 7304. Tangible bills of lading in a set.
2 (a) Prohibition.--Except as customary in international
3 transportation, a tangible bill of lading may not be issued in a
4 set of parts. The issuer is liable for damages caused by
5 violation of this subsection.
6 (b) Single bill.--If a tangible bill of lading is lawfully
7 issued in a set of parts, each of which contains an
8 identification code and is expressed to be valid only if the
9 goods have not been delivered against any other part, the whole
10 of the parts constitutes one bill.
11 (c) Priority of title.--If a tangible negotiable bill of
12 lading is lawfully issued in a set of parts and different parts
13 are negotiated to different persons, the title of the holder to
14 which the first due negotiation is made prevails as to both the
15 document of title and the goods even if any later holder may
16 have received the goods from the carrier in good faith and
17 discharged the carrier's obligation by surrendering its part.
18 (d) Liability.--A person that negotiates or transfers a
19 single part of a tangible bill of lading issued in a set is
20 liable to holders of that part as if it were the whole set.
21 (e) Bailee.--The bailee shall deliver in accordance with
22 this chapter against the first presented part of a tangible bill
23 of lading lawfully issued in a set. Delivery in this manner
24 discharges the bailee's obligation on the whole bill.
25 § 7305. Destination bills.
26 (a) Location.--Instead of issuing a bill of lading to the
27 consignor at the place of shipment, a carrier, at the request of
28 the consignor, may procure the bill to be issued at destination
29 or at any other place designated in the request.
30 (b) Substitute.--Upon request of any person entitled as
20070H1152B1400 - 114 -
1 against a carrier to control the goods while in transit and on
2 surrender of possession or control of any outstanding bill of
3 lading or other receipt covering the goods, the issuer, subject
4 to section 7105 (relating to reissuance in alternative medium),
5 may procure a substitute bill to be issued at any place
6 designated in the request.
7 § 7306. Altered bills of lading.
8 An unauthorized alteration or filling in of a blank in a bill
9 of lading leaves the bill enforceable according to its original
10 tenor.
11 § 7307. Lien of carrier.
12 (a) Establishment.--
13 (1) Except as set forth in paragraph (2), a carrier has
14 a lien on the goods covered by a bill of lading or on the
15 proceeds thereof in its possession for charges after the date
16 of the carrier's receipt of the goods for storage or
17 transportation, including demurrage and terminal charges, and
18 for expenses necessary for preservation of the goods incident
19 to their transportation or reasonably incurred in their sale
20 pursuant to law.
21 (2) Against a purchaser for value of a negotiable bill
22 of lading, a carrier's lien is limited to charges stated in
23 the bill or the applicable tariffs or, if no charges are
24 stated, a reasonable charge.
25 (b) Effectiveness.--A lien for charges and expenses under
26 subsection (a) on goods that the carrier was required by law to
27 receive for transportation is effective against the consignor or
28 any person entitled to the goods unless the carrier had notice
29 that the consignor lacked authority to subject the goods to
30 those charges and expenses. Any other lien under subsection (a)
20070H1152B1400 - 115 -
1 is effective against the consignor and any person that permitted
2 the bailor to have control or possession of the goods unless the
3 carrier had notice that the bailor lacked authority.
4 (c) Loss.--A carrier loses its lien on any goods that it
5 voluntarily delivers or unjustifiably refuses to deliver.
6 § 7308. Enforcement of carrier's lien.
7 (a) Sale.--
8 (1) Except as otherwise provided in subsection (b), a
9 carrier's lien on goods may be enforced by public or private
10 sale of the goods, in bulk or in packages, at any time or
11 place and on any terms that are commercially reasonable,
12 after notifying all persons known to claim an interest in the
13 goods.
14 (2) The notification must include a statement of the
15 amount due, the nature of the proposed sale and the time and
16 place of any public sale.
17 (3) The fact that a better price could have been
18 obtained by a sale at a different time or in a different
19 method from that selected by the carrier is not of itself
20 sufficient to establish that the sale was not made in a
21 commercially reasonable manner.
22 (4) The carrier has sold goods in a commercially
23 reasonable manner if the carrier sells the goods in the usual
24 manner in any recognized market therefor, sells at the price
25 current in that market at the time of the sale or has
26 otherwise sold in conformity with commercially reasonable
27 practices among dealers in the type of goods sold.
28 (5) A sale of more goods than apparently necessary to be
29 offered to ensure satisfaction of the obligation is not
30 commercially reasonable, except in cases covered by paragraph
20070H1152B1400 - 116 -
1 (4).
2 (b) Satisfaction.--Before any sale pursuant to this section,
3 any person claiming a right in the goods may pay the amount
4 necessary to satisfy the lien and the reasonable expenses
5 incurred in complying with this section. In that event, the
6 goods may not be sold but must be retained by the carrier,
7 subject to the terms of the bill of lading and this division.
8 (c) Purchase by carrier.--A carrier may buy at any public
9 sale pursuant to this section.
10 (d) Purchaser in good faith.--A purchaser in good faith of
11 goods sold to enforce a carrier's lien takes the goods free of
12 any rights of persons against which the lien was valid, despite
13 the carrier's noncompliance with this section.
14 (e) Proceeds of sale.--A carrier may satisfy its lien from
15 the proceeds of any sale pursuant to this section but shall hold
16 the balance, if any, for delivery on demand to any person to
17 which the carrier would have been bound to deliver the goods.
18 (f) Additional rights.--The rights provided by this section
19 are in addition to all other rights allowed by law to a creditor
20 against a debtor.
21 (g) Enforcement.--A carrier's lien may be enforced pursuant
22 to either subsection (a) or the procedure set forth in section
23 7210(b) (relating to enforcement of warehouse's lien).
24 (h) Liability.--A carrier is liable for damages caused by
25 failure to comply with the requirements for sale under this
26 section and, in case of willful violation, is liable for
27 conversion.
28 § 7309. Duty of care; contractual limitation of carrier's
29 liability.
30 (a) Standard.--A carrier that issues a bill of lading,
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1 whether negotiable or nonnegotiable, shall exercise the degree
2 of care in relation to the goods which a reasonably careful
3 person would exercise under similar circumstances. This
4 subsection shall not affect any statute, regulation or rule of
5 law that imposes liability upon a common carrier for damages not
6 caused by its negligence.
7 (b) Limitation of damages.--
8 (1) Except as set forth in paragraph (2), damages may be
9 limited by a term in the bill of lading or in a
10 transportation agreement that the carrier's liability may not
11 exceed a value stated in the bill or transportation agreement
12 if the carrier's rates are dependent upon value and the
13 consignor is afforded an opportunity to declare a higher
14 value and the consignor is advised of the opportunity.
15 (2) A limitation under paragraph (1) is not effective
16 with respect to the carrier's liability for conversion to its
17 own use.
18 (c) Included provisions.--Reasonable provisions as to the
19 time and manner of presenting claims and commencing actions
20 based on the shipment may be included in a bill of lading or a
21 transportation agreement.
22 CHAPTER 74
23 WAREHOUSE RECEIPTS AND BILLS OF LADING:
24 GENERAL OBLIGATIONS
25 Sec.
26 7401. Irregularities in issue of receipt or bill or conduct
27 of issuer.
28 7402. Duplicate document of title; overissue.
29 7403. Obligation of bailee to deliver; excuse.
30 7404. No liability for good faith delivery pursuant to
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1 document of title.
2 § 7401. Irregularities in issue of receipt or bill or conduct
3 of issuer.
4 The obligations imposed by this division on an issuer apply
5 to a document of title even if:
6 (1) the document does not comply with the requirements
7 of this division or of any other statute, rule or regulation
8 regarding its issuance, form or content;
9 (2) the issuer violated laws regulating the conduct of
10 its business;
11 (3) the goods covered by the document were owned by the
12 bailee when the document was issued; or
13 (4) the person issuing the document is not a warehouse
14 but the document purports to be a warehouse receipt.
15 § 7402. Duplicate document of title; overissue.
16 A duplicate or any other document of title purporting to
17 cover goods already represented by an outstanding document of
18 the same issuer does not confer any right in the goods, except
19 as provided in the case of tangible bills of lading in a set of
20 parts, overissue of documents for fungible goods, substitutes
21 for lost, stolen or destroyed documents or substitute documents
22 issued pursuant to section 7105 (relating to reissuance in
23 alternative medium). The issuer is liable for damages caused by
24 its overissue or failure to identify a duplicate document by a
25 conspicuous notation.
26 § 7403. Obligation of bailee to deliver; excuse.
27 (a) Delivery.--A bailee shall deliver the goods to a person
28 entitled under a document of title if the person complies with
29 subsections (b) and (c) unless and to the extent that the bailee
30 establishes any of the following:
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1 (1) delivery of the goods to a person whose receipt was
2 rightful as against the claimant;
3 (2) damage to or delay, loss or destruction of the goods
4 for which the bailee is not liable;
5 (3) previous sale or other disposition of the goods in
6 lawful enforcement of a lien or on a warehouse's lawful
7 termination of storage;
8 (4) the exercise by a seller of its right to stop
9 delivery pursuant to section 2705 (relating to stoppage by
10 seller of delivery in transit or otherwise) or by a lessor of
11 its right to stop delivery pursuant to section 2A526
12 (relating to lessor's stoppage of delivery in transit or
13 otherwise);
14 (5) a diversion, reconsignment or other disposition
15 pursuant to section 7303 (relating to diversion;
16 reconsignment; change of instructions);
17 (6) release, satisfaction or any other personal defense
18 against the claimant; or
19 (7) any other lawful excuse.
20 (b) Satisfaction of bailee's lien.--A person claiming goods
21 covered by a document of title shall satisfy the bailee's lien
22 if the bailee so requests or the bailee is prohibited by law
23 from delivering the goods until the charges are paid.
24 (c) Document.--Unless a person claiming the goods is a
25 person against which the document of title does not confer a
26 right under section 7503(a) (relating to document of title to
27 goods defeated in certain cases):
28 (1) the person claiming under a document shall surrender
29 possession or control of any outstanding negotiable document
30 covering the goods for cancellation or indication of partial
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1 deliveries; and
2 (2) the bailee shall cancel the document or
3 conspicuously indicate in the document the partial delivery
4 or the bailee liable to any person to which the document is
5 duly negotiated.
6 § 7404. No liability for good faith delivery pursuant to
7 document of title.
8 A bailee that in good faith has received goods and delivered
9 or otherwise disposed of the goods according to the terms of a
10 document of title or pursuant to this division is not liable for
11 the goods even if:
12 (1) the person from which the bailee received the goods
13 did not have authority to procure the document or to dispose
14 of the goods; or
15 (2) the person to which the bailee delivered the goods
16 did not have authority to receive the goods.
17 CHAPTER 75
18 WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION AND
19 TRANSFER
20 Sec.
21 7501. Form of negotiation and requirements of due negotiation.
22 7502. Rights acquired by due negotiation.
23 7503. Document of title to goods defeated in certain cases.
24 7504. Rights acquired in absence of due negotiation; effect of
25 diversion; stoppage of delivery.
26 7505. Indorser not guarantor for other parties.
27 7506. Delivery without indorsement; right to compel
28 indorsement.
29 7507. Warranties on negotiation or delivery of document of
30 title.
20070H1152B1400 - 121 -
1 7508. Warranties of collecting bank as to documents of title.
2 7509. Adequate compliance with commercial contract.
3 § 7501. Form of negotiation and requirements of due
4 negotiation.
5 (a) Tangible documents.--The following rules apply to a
6 negotiable tangible document of title:
7 (1) If the document's original terms run to the order of
8 a named person, the document is negotiated by the named
9 person's indorsement and delivery. After the named person's
10 indorsement in blank or to bearer, any person may negotiate
11 the document by delivery alone.
12 (2) If the document's original terms run to the bearer,
13 it is negotiated by delivery alone.
14 (3) If the document's original terms run to the order of
15 a named person and it is delivered to the named person, the
16 effect is the same as if the document had been negotiated.
17 (4) Negotiation of the document after it has been
18 indorsed to a named person requires indorsement by the named
19 person as well as delivery.
20 (5) A document is duly negotiated if it is negotiated in
21 the manner stated in this subsection to a holder that
22 purchases it in good faith, without notice of any defense
23 against or claim to it on the part of any person, and for
24 value, unless it is established that the negotiation is not
25 in the regular course of business or financing or involves
26 receiving the document in settlement or payment of a monetary
27 obligation.
28 (b) Electronic documents.--The following rules apply to a
29 negotiable electronic document of title:
30 (1) If the document's original terms run to the order of
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1 a named person or to bearer, the document is negotiated by
2 delivery of the document to another person. Indorsement by
3 the named person is not required to negotiate the document.
4 (2) If the document's original terms run to the order of
5 a named person and the named person has control of the
6 document, the effect is the same as if the document had been
7 negotiated.
8 (3) A document is duly negotiated if it is negotiated in
9 the manner stated in this subsection to a holder that
10 purchases it in good faith, without notice of any defense
11 against or claim to it on the part of any person, and for
12 value, unless it is established that the negotiation is not
13 in the regular course of business or financing or involves
14 taking delivery of the document in settlement or payment of a
15 monetary obligation.
16 (c) Nonnegotiable documents.--Indorsement of a nonnegotiable
17 document of title neither makes it negotiable nor adds to the
18 transferee's rights.
19 (d) Notice of interest.--The naming in a negotiable bill of
20 lading of a person to be notified of the arrival of the goods
21 does not limit the negotiability of the bill or constitute
22 notice to a purchaser of the bill of any interest of that person
23 in the goods.
24 § 7502. Rights acquired by due negotiation.
25 (a) Rights.--Subject to sections 7205 (relating to title
26 under warehouse receipt defeated in certain cases) and 7503
27 (relating to document of title to goods defeated in certain
28 cases), a holder to which a negotiable document of title has
29 been duly negotiated acquires thereby all of the following:
30 (1) Title to the document.
20070H1152B1400 - 123 -
1 (2) Title to the goods.
2 (3) All rights accruing under the law of agency or
3 estoppel, including rights to goods delivered to the bailee
4 after the document was issued.
5 (4) The direct obligation of the issuer to hold or
6 deliver the goods according to the terms of the document free
7 of any defense or claim by the issuer except those arising
8 under the terms of the document or under this division. In
9 the case of a delivery order, the bailee's obligation accrues
10 only upon the bailee's acceptance of the delivery order, and
11 the obligation acquired by the holder is that the issuer and
12 any indorser will procure the acceptance of the bailee.
13 (b) Effect of stoppage or surrender.--Subject to section
14 7503, title and rights acquired by due negotiation are not
15 defeated by any stoppage of the goods represented by the
16 document of title or by surrender of the goods by the bailee and
17 are not impaired even if:
18 (1) the due negotiation or any prior due negotiation
19 constituted a breach of duty;
20 (2) any person has been deprived of possession of a
21 negotiable tangible document or control of a negotiable
22 electronic document by misrepresentation, fraud, accident,
23 mistake, duress, loss, theft or conversion; or
24 (3) a previous sale or other transfer of the goods or
25 document has been made to a third person.
26 § 7503. Document of title to goods defeated in certain cases.
27 (a) General rule.--A document of title confers no right in
28 goods against a person that before issuance of the document had
29 a legal interest or a perfected security interest in the goods
30 and that did not:
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1 (1) deliver or entrust the goods or any document of
2 title covering the goods to the bailor or the bailor's
3 nominee with actual or apparent authority to ship, store or
4 sell; with power to obtain delivery under section 7403
5 (relating to obligation of bailee to deliver; excuse); or
6 with power of disposition under section 2403 (relating to
7 power to transfer; good faith purchase of goods;
8 "entrusting"), 2A304(a)(2) (relating to subsequent lease of
9 goods by lessor), 2A305(a)(2) (relating to sale or sublease
10 of goods by lessee), 9320 (relating to buyer of goods),
11 9321(c) (relating to licensee of general intangible and
12 lessee of goods in ordinary course of business) or other
13 statute or rule of law; or
14 (2) acquiesce in the procurement by the bailor or its
15 nominee of any document.
16 (b) Negotiable warehouse receipt or bill of lading.--Title
17 to goods based upon an unaccepted delivery order is subject to
18 the rights of any person to which a negotiable warehouse receipt
19 or bill of lading covering the goods has been duly negotiated.
20 That title may be defeated under section 7504 (relating to
21 rights acquired in absence of due negotiation; effect of
22 diversion; stoppage of delivery) to the same extent as the
23 rights of the issuer or a transferee from the issuer.
24 (c) Freight forwarder.--Title to goods based upon a bill of
25 lading issued to a freight forwarder is subject to the rights of
26 any person to which a bill issued by the freight forwarder is
27 duly negotiated. However, delivery by the carrier in accordance
28 with Chapter 74 (relating to warehouse receipts and bills of
29 lading: general obligations) pursuant to its own bill of lading
30 discharges the carrier's obligation to deliver.
20070H1152B1400 - 125 -
1 § 7504. Rights acquired in absence of due negotiation; effect
2 of diversion; stoppage of delivery.
3 (a) Transferee.--A transferee of a document of title,
4 whether negotiable or nonnegotiable, to which the document has
5 been delivered but not duly negotiated, acquires the title and
6 rights that its transferor had or had actual authority to
7 convey.
8 (b) Third parties.--In the case of a transfer of a
9 nonnegotiable document of title, until but not after the bailee
10 receives notice of the transfer, the rights of the transferee
11 may be defeated:
12 (1) by those creditors of the transferor that could
13 treat the transfer as void under section 2402 (relating to
14 rights of creditors of seller against sold goods) or 2A308
15 (relating to special rights of creditors);
16 (2) by a buyer from the transferor in ordinary course of
17 business if the bailee has delivered the goods to the buyer
18 or received notification of the buyer's rights;
19 (3) by a lessee from the transferor in ordinary course
20 of business if the bailee has delivered the goods to the
21 lessee or received notification of the lessee's rights; or
22 (4) as against the bailee, by good faith dealings of the
23 bailee with the transferor.
24 (c) Diversion or change by consignor.--A diversion or other
25 change of shipping instructions by the consignor in a
26 nonnegotiable bill of lading which causes the bailee not to
27 deliver the goods to the consignee:
28 (1) defeats the consignee's title to the goods if the
29 goods have been delivered to a buyer in ordinary course of
30 business or a lessee in ordinary course of business; and
20070H1152B1400 - 126 -
1 (2) in any event defeats the consignee's rights against
2 the bailee.
3 (d) Stopping delivery.--Delivery of the goods pursuant to a
4 nonnegotiable document of title may be stopped by a seller under
5 section 2705 (relating to stoppage by seller of delivery in
6 transit or otherwise) or a lessor under section 2A526 (relating
7 to lessor's stoppage of delivery in transit or otherwise),
8 subject to the requirements of due notification in those
9 sections. A bailee honoring the seller's or lessor's
10 instructions is entitled to be indemnified by the seller or
11 lessor against any resulting loss or expense.
12 § 7505. Indorser not guarantor for other parties.
13 The indorsement of a tangible document of title issued by a
14 bailee does not make the indorser liable for any default by the
15 bailee or previous indorsers.
16 § 7506. Delivery without indorsement; right to compel
17 indorsement.
18 The transferee of a negotiable tangible document of title has
19 a specifically enforceable right to have its transferor supply
20 any necessary indorsement, but the transfer becomes a
21 negotiation only as of the time the indorsement is supplied.
22 § 7507. Warranties on negotiation or delivery of document of
23 title.
24 If a person negotiates or delivers a document of title for
25 value, otherwise than as a mere intermediary under section 7508
26 (relating to warranties of collecting bank as to documents of
27 title), unless otherwise agreed, the transferor warrants to its
28 immediate purchaser only in addition to any warranty made in
29 selling or leasing the goods that:
30 (1) the document is genuine;
20070H1152B1400 - 127 -
1 (2) the transferor does not have knowledge of any fact
2 that would impair the document's validity or worth; and
3 (3) the negotiation or delivery is rightful and fully
4 effective with respect to the title to the document and the
5 goods it represents.
6 § 7508. Warranties of collecting bank as to documents of title.
7 A collecting bank or other intermediary known to be entrusted
8 with documents of title on behalf of another or with collection
9 of a draft or other claim against delivery of documents warrants
10 by the delivery of the documents only its own good faith and
11 authority even if the collecting bank or other intermediary has
12 purchased or made advances against the claim or draft to be
13 collected.
14 § 7509. Adequate compliance with commercial contract.
15 Whether a document of title is adequate to fulfill the
16 obligations of a contract for sale, a contract for lease, or the
17 conditions of a letter of credit is determined by Division 2
18 (relating to sales), 2A (relating to leases) or 5 (relating to
19 letters of credit).
20 CHAPTER 76
21 WAREHOUSE RECEIPTS AND BILLS OF LADING: MISCELLANEOUS
22 PROVISIONS
23 Sec.
24 7601. Lost, stolen or destroyed documents of title.
25 7602. Judicial process against goods covered by negotiable
26 document of title.
27 7603. Conflicting claims; interpleader.
28 § 7601. Lost, stolen or destroyed documents of title.
29 (a) Court orders.--If a document of title is lost, stolen or
30 destroyed, a court may order delivery of the goods or issuance
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1 of a substitute document, and the bailee may without liability
2 to any person comply with the order. If the document was
3 negotiable, a court may not order delivery of the goods or
4 issuance of a substitute document without the claimant's posting
5 security unless it finds that any person that may suffer loss as
6 a result of nonsurrender of possession or control of the
7 document is adequately protected against the loss. If the
8 document was nonnegotiable, the court may require security. The
9 court may also order payment of the bailee's reasonable costs
10 and attorney fees in any action under this subsection.
11 (b) Bailee delivery.--A bailee that without court order
12 delivers goods to a person claiming under a missing negotiable
13 document of title is liable to any person injured thereby. If
14 the delivery is not in good faith, the bailee is liable for
15 conversion. Delivery in good faith is not conversion if the
16 claimant posts security with the bailee in an amount at least
17 double the value of the goods at the time of posting to
18 indemnify any person injured by the delivery which files a
19 notice of claim within one year after the delivery.
20 § 7602. Judicial process against goods covered by negotiable
21 document of title.
22 Unless a document of title was originally issued upon
23 delivery of the goods by a person that did not have power to
24 dispose of them, a lien does not attach by virtue of any
25 judicial process to goods in the possession of a bailee for
26 which a negotiable document of title is outstanding unless
27 possession or control of the document is first surrendered to
28 the bailee or the document's negotiation is enjoined. The bailee
29 may not be compelled to deliver the goods pursuant to process
30 until possession or control of the document is surrendered to
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1 the bailee or to the court. A purchaser of the document for
2 value without notice of the process or injunction takes free of
3 the lien imposed by judicial process.
4 § 7603. Conflicting claims; interpleader.
5 If more than one person claims title to or possession of the
6 goods, the bailee is excused from delivery until the bailee has
7 a reasonable time to ascertain the validity of the adverse
8 claims or to commence an action for interpleader. The bailee may
9 assert an interpleader either in defending an action for
10 nondelivery of the goods or by original action.
11 Section 14. The definition of "good faith" in section
12 8102(a) of Title 13 is amended to read:
13 § 8102. Definitions.
14 (a) Definitions.--The following words and phrases when used
15 in this division shall have the meanings given to them in this
16 subsection:
17 * * *
18 ["Good faith." For purposes of the obligation of good faith
19 in the performance or enforcement of contracts or duties within
20 this division, honesty in fact and the observance of reasonable
21 commercial standards of fair dealing.]
22 * * *
23 Section 15. Section 8103 of Title 13 is amended by adding a
24 subsection to read:
25 § 8103. Rules for determining whether certain obligations and
26 interests are securities or financial assets.
27 * * *
28 (g) Financial asset.--A document of title, as defined in
29 section 1201 (relating to general definitions), is not a
30 financial asset unless paragraph (3) of the definition of
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1 "financial asset" in section 8102 (relating to definitions)
2 applies.
3 Section 16. The definitions of "agricultural lien,"
4 "document," "good faith" and "health-care-insurance receivable"
5 in section 9102(a) of Title 13 are amended and subsection (b) is
6 amended by adding definitions to read:
7 § 9102. Definitions and index of definitions.
8 (a) Division 9 definitions.--The following words and phrases
9 when used in this division shall have the meanings given to them
10 in this subsection:
11 * * *
12 "Agricultural lien." An interest[, other than a security
13 interest,] in farm products:
14 (1) which secures payment or performance of an
15 obligation for:
16 (i) goods or services furnished in connection with a
17 debtor's farming operation; or
18 (ii) rent on real property leased by a debtor in
19 connection with its farming operation;
20 (2) which is created by statute in favor of a person
21 that:
22 (i) in the ordinary course of its business furnished
23 goods or services to a debtor in connection with a
24 debtor's farming operation; or
25 (ii) leased real property to a debtor in connection
26 with the debtor's farming operation; and
27 (3) whose effectiveness does not depend on the person's
28 possession of the personal property.
29 * * *
30 "Document." A document of title or a receipt of the type
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1 described in section 7201(b) (relating to person that may issue
2 a warehouse receipt; storage under [government] bond).
3 * * *
4 ["Good faith." Honesty in fact and the observance of
5 reasonable commercial standards of fair dealing.]
6 * * *
7 "Health-care-insurance receivable." An interest in or claim
8 under a policy of insurance which is a right to payment of a
9 monetary obligation for health-care goods or services provided
10 or to be provided.
11 * * *
12 (b) Definitions in other divisions.--The following
13 definitions in other divisions apply to this division:
14 * * *
15 "Control." With respect to a document of title, section
16 7106.
17 * * *
18 "Issuer." With respect to a document of title, section 7102.
19 * * *
20 Section 17. Sections 9203(b)(3)(iv) and 9207(c) introductory
21 paragraph of Title 13 are amended to read:
22 § 9203. Attachment and enforceability of security interest;
23 proceeds; supporting obligations; formal requisites.
24 * * *
25 (b) Enforceability.--Except as otherwise provided in
26 subsections (c) through (i), a security interest is enforceable
27 against the debtor and third parties with respect to the
28 collateral only if all of the following apply:
29 * * *
30 (3) One of the following conditions is met:
20070H1152B1400 - 132 -
1 * * *
2 (iv) The collateral is deposit accounts, electronic
3 chattel paper, investment property [or], letter-of-credit
4 rights or electronic documents, and the secured party has
5 control under section 7106 (relating to control of
6 electronic document of title), 9104 (relating to control
7 of deposit account), 9105 (relating to control of
8 electronic chattel paper), 9106 (relating to control of
9 investment property) or 9107 (relating to control of
10 letter-of-credit right) pursuant to the debtor's security
11 agreement.
12 * * *
13 § 9207. Rights and duties of secured party having possession or
14 control of collateral.
15 * * *
16 (c) Duties and rights when secured party in possession or
17 control.--Except as otherwise provided in subsection (d), a
18 secured party having possession of collateral or control of
19 collateral under section 7106 (relating to control of electronic
20 document of title), 9104 (relating to control of deposit
21 account), 9105 (relating to control of electronic chattel
22 paper), 9106 (relating to control of investment property) or
23 9107 (relating to control of letter-of-credit right):
24 * * *
25 Section 18. Section 9208(b) of Title 13 is amended by adding
26 a paragraph to read:
27 § 9208. Additional duties of secured party having control of
28 collateral.
29 * * *
30 (b) Duties of secured party after receiving demand from
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1 debtor.--Within ten days after receiving an authenticated demand
2 by the debtor:
3 * * *
4 (6) A secured party having control of an electronic
5 document shall:
6 (i) give control of the electronic document to the
7 debtor or its designated custodian;
8 (ii) if the debtor designates a custodian that is
9 the designated custodian with which the authoritative
10 copy of the electronic document is maintained for the
11 secured party, communicate to the custodian an
12 authenticated record releasing the designated custodian
13 from any further obligation to comply with instructions
14 originated by the secured party and instructing the
15 custodian to comply with instructions originated by the
16 debtor; and
17 (iii) take appropriate action to enable the debtor
18 or its designated custodian to make copies of or
19 revisions to the authoritative copy which add or change
20 an identified assignee of the authoritative copy without
21 the consent of the secured party.
22 Section 19. Sections 9301(c)(3) and 9304(b)(1) of Title 13
23 are amended to read:
24 § 9301. Law governing perfection and priority of security
25 interests.
26 * * *
27 (c) Fixture filings, timber to be cut, priority of
28 nonpossessory tangible personal property security interests;
29 location of collateral.--Except as otherwise provided in
30 subsection (d), while collateral is located in a jurisdiction,
20070H1152B1400 - 134 -
1 the local law of that jurisdiction governs:
2 * * *
3 (3) the effect of perfection or nonperfection and the
4 priority of a nonpossessory security interest in tangible
5 negotiable documents, goods, instruments, money or tangible
6 chattel paper.
7 * * *
8 § 9304. Law governing perfection and priority of security
9 interests in deposit accounts.
10 * * *
11 (b) Bank's jurisdiction.--The following rules determine a
12 bank's jurisdiction for purposes of this chapter:
13 (1) If an agreement between the bank and [the debtor]
14 its customer governing the deposit account expressly provides
15 that a particular jurisdiction is the bank's jurisdiction for
16 purposes of this chapter[,] or this division [or this title],
17 that jurisdiction is the bank's jurisdiction.
18 * * *
19 Section 20. Section 9309 of Title 13 is amended by adding a
20 paragraph to read:
21 § 9309. Security interest perfected upon attachment.
22 The following security interests are perfected when they
23 attach:
24 (14) A sale by an individual of an account that is a
25 right to payment of winnings in a lottery or other game of
26 chance.
27 Section 21. Sections 9310(b)(5) introductory paragraph and
28 (8), 9312(e), 9313(a), 9314(a) and (b), 9317(b) and (d), 9338(2)
29 and 9601(b) of Title 13 are amended to read:
30 § 9310. When filing required to perfect security interest or
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1 agricultural lien; security interests and
2 agricultural liens to which filing provisions do not
3 apply.
4 * * *
5 (b) Exceptions: filing not necessary.--The filing of a
6 financing statement is not necessary to perfect a security
7 interest:
8 * * *
9 (5) in certificated securities, documents, goods or
10 instruments which is perfected without filing, control or
11 possession under section:
12 * * *
13 (8) in deposit accounts, electronic chattel paper,
14 electronic documents, investment property or letter-of-credit
15 rights which is perfected by control under section 9314
16 (relating to perfection by control);
17 * * *
18 § 9312. Perfection of security interests in chattel paper,
19 deposit accounts, documents, goods covered by
20 documents, instruments, investment property, letter-
21 of-credit rights and money; perfection by permissive
22 filing; temporary perfection without filing or
23 transfer of possession.
24 * * *
25 (e) Temporary perfection: new value.--A security interest in
26 certificated securities, negotiable documents or instruments is
27 perfected without filing or the taking of possession or control
28 for a period of 20 days from the time it attaches to the extent
29 that it arises for new value given under an authenticated
30 security agreement.
20070H1152B1400 - 136 -
1 * * *
2 § 9313. When possession by or delivery to secured party
3 perfects security interest without filing.
4 (a) Perfection by possession or delivery.--Except as
5 otherwise provided in subsection (b), a secured party may
6 perfect a security interest in tangible negotiable documents,
7 goods, instruments, money or tangible chattel paper by taking
8 possession of the collateral. A secured party may perfect a
9 security interest in certificated securities by taking delivery
10 under section 8301 (relating to delivery).
11 * * *
12 § 9314. Perfection by control.
13 (a) Perfection by control.--A security interest in
14 investment property, deposit accounts, letter-of-credit rights
15 [or], electronic chattel paper or electronic documents may be
16 perfected by control of the collateral under section 7106
17 (relating to control of electronic document of title), 9104
18 (relating to control of deposit account), 9105 (relating to
19 control of electronic chattel paper), 9106 (relating to control
20 of investment property) or 9107 (relating to control of letter-
21 of-credit right).
22 (b) Specified collateral: time of perfection by control;
23 continuation of perfection.--A security interest in deposit
24 accounts, electronic chattel paper [or], letter-of-credit rights
25 or electronic documents is perfected by control under section
26 7106, 9104, 9105 or 9107 when the secured party obtains control
27 and remains perfected by control only while the secured party
28 retains control.
29 * * *
30 § 9317. Interests which take priority over or take free of
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1 security interest or agricultural lien.
2 * * *
3 (b) Buyers that receive delivery.--Except as otherwise
4 provided in subsection (e), a buyer, other than a secured party,
5 of tangible chattel paper, tangible documents, goods,
6 instruments or a security certificate takes free of a security
7 interest or agricultural lien if the buyer gives value and
8 receives delivery of the collateral without knowledge of the
9 security interest or agricultural lien and before it is
10 perfected.
11 * * *
12 (d) Licensees and buyers of certain collateral.--A licensee
13 of a general intangible or a buyer, other than a secured party,
14 of accounts, electronic chattel paper, electronic documents,
15 general intangibles or investment property other than a
16 certificated security takes free of a security interest if the
17 licensee or buyer gives value without knowledge of the security
18 interest and before it is perfected.
19 * * *
20 § 9338. Priority of security interest or agricultural lien
21 perfected by filed financing statement providing
22 certain incorrect information.
23 If a security interest or agricultural lien is perfected by a
24 filed financing statement providing information described in
25 section 9516(b)(5) (relating to what constitutes filing;
26 effectiveness of filing) which is incorrect at the time the
27 financing statement is filed:
28 * * *
29 (2) a purchaser, other than a secured party, of the
30 collateral takes free of the security interest or
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1 agricultural lien to the extent that, in reasonable reliance
2 upon the incorrect information, the purchaser gives value
3 and, in the case of tangible chattel paper, tangible
4 documents, goods, instruments or a security certificate,
5 receives delivery of the collateral.
6 § 9601. Rights after default; judicial enforcement; consignor
7 or buyer of accounts, chattel paper, payment
8 intangibles or promissory notes.
9 * * *
10 (b) Rights and duties of secured party in possession or
11 control.--A secured party in possession of collateral or control
12 of collateral under section 7106 (relating to control of
13 electronic document of title), 9104 (relating to control of
14 deposit account), 9105 (relating to control of electronic
15 chattel paper), 9106 (relating to control of investment
16 property) or 9107 (relating to control of letter-of-credit
17 right) has the rights and duties provided in section 9207
18 (relating to rights and duties of secured party having
19 possession or control of collateral).
20 * * *
21 Section 22. This act shall apply as follows:
22 (1) This act applies to a document of title that is
23 issued or a bailment that arises on or after the effective
24 date of this section.
25 (2) This act does not apply to a document of title that
26 is issued or a bailment that arises before the effective date
27 of this section even if the document of title or bailment
28 would be subject to this act if the document of title had
29 been issued or bailment had arisen after the effective date
30 of this section.
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1 (3) This act does not apply to a right of action that
2 has accrued before the effective date of this section.
3 Section 23. A document of title issued or a bailment that
4 arises before the effective date of this section and the rights,
5 obligations and interests flowing from that document or bailment
6 are governed by any statute or other rule amended or repealed by
7 this act as if the amendment or repeal had not occurred and may
8 be terminated, completed, consummated or enforced under that
9 statute or other rule.
10 Section 24. This act shall take effect in 60 days.
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