PRINTER'S NO. 1400

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

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
    20070H1152B1400                 - 17 -     

     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
    20070H1152B1400                 - 18 -     

     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
    20070H1152B1400                 - 19 -     

     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
    20070H1152B1400                 - 20 -     

     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
    20070H1152B1400                 - 60 -     

     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
    20070H1152B1400                 - 61 -     

     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
    20070H1152B1400                 - 62 -     

     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
    20070H1152B1400                 - 63 -     

     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
    20070H1152B1400                 - 64 -     

     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
    20070H1152B1400                 - 65 -     

     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
    20070H1152B1400                 - 66 -     

     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).
    20070H1152B1400                 - 67 -     

     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
    20070H1152B1400                 - 68 -     

     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
    20070H1152B1400                 - 69 -     

     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.
    20070H1152B1400                 - 70 -     

     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
    20070H1152B1400                 - 71 -     

     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
    20070H1152B1400                 - 72 -     

     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
    20070H1152B1400                 - 73 -     

     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
    20070H1152B1400                 - 74 -     

     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
    20070H1152B1400                 - 75 -     

     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.
    20070H1152B1400                 - 76 -     

     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
    20070H1152B1400                 - 77 -     

     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
    20070H1152B1400                 - 78 -     

     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.
    20070H1152B1400                 - 83 -     

     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
    20070H1152B1400                 - 97 -     

     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
    20070H1152B1400                 - 98 -     

     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.
    20070H1152B1400                 - 99 -     

     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
    20070H1152B1400                 - 101 -    

     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
    20070H1152B1400                 - 102 -    

     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
    20070H1152B1400                 - 104 -    

     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,
    20070H1152B1400                 - 117 -    

     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
    20070H1152B1400                 - 118 -    

     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:
    20070H1152B1400                 - 119 -    

     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
    20070H1152B1400                 - 120 -    

     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
    20070H1152B1400                 - 122 -    

     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:
    20070H1152B1400                 - 124 -    

     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
    20070H1152B1400                 - 128 -    

     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
    20070H1152B1400                 - 129 -    

     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
    20070H1152B1400                 - 130 -    

     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:
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     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
    20070H1152B1400                 - 138 -    

     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.
    20070H1152B1400                 - 139 -    

     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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