Trial Engrossment of Amendment A05131 to Senate Bill 1084 P.N. 1440, Regular Session 2023-2024

A05131

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

1084

Session of

2024

INTRODUCED BY ROTHMAN, DUSH AND PENNYCUICK, MARCH 22, 2024

REFERRED TO BANKING AND INSURANCE, MARCH 22, 2024

AN ACT

Amending Titles 13 (Commercial Code) and 20 (Decedents, Estates

and Fiduciaries) of the Pennsylvania Consolidated Statutes,

extensively revising the Uniform Commercial Code to

accommodate emerging technologies utilized in commercial

transactions:

In general provisions:

Further providing for general definitions, for value,

for territorial applicability and parties' power to

choose applicable law and for waiver or renunciation of

claim or right after breach.

In sales:

Further providing for scope and certain security and

other transactions excluded from division, for

definitions of "contract," "agreement," "contract for

sale," "sale," "present sale," "conforming" to contract,

"termination" and "cancellation," for formal requirements

and statute of frauds, for final written expression and

parol or extrinsic evidence, for seals inoperative, for

firm offers and for modification, rescission and waiver.

In leases:

Further providing for scope, for definitions and

index of definitions, for waiver or renunciation of claim

or right after default, for statute of frauds, for final

written expression and parol or extrinsic evidence, for

seals inoperative, for firm offers, for modification,

rescission and waiver and for exclusion or modification

of warranties.

In negotiable instruments:

Further providing for negotiable instrument, for

issue of instrument, for signature and for discharge by

cancellation or renunciation.

In funds transfers:

Further providing for payment order and definitions,

for security procedure, for authorized and verified

payment orders, for unenforceability of certain verified

payment orders, for misdescription of beneficiary, for

misdescription of intermediary bank or beneficiary's

bank, for rejection of payment order, for cancellation

and amendment of payment order and for liability for late

or improper execution or failure to execute payment

order.

In letters of credit:

Further providing for formal requirements and for

choice of law and forum.

In warehouse receipts, bills of lading and other

documents of title:

Further providing for definitions and index of

definitions and for control of electronic document of

title.

In investment securities:

Further providing for definitions, for rules for

determining whether certain obligations and interests are

securities or financial assets, for control, for

applicability and choice of law and for protected

purchaser.

In secured transactions:

Further providing for definitions and index of

definitions, for control of deposit account and for

control of electronic chattel paper.

Providing for control of controllable electronic

record, controllable account or controllable payment

intangible.

Further providing for attachment and enforceability

of security interest, proceeds, supporting obligations

and formal requisites, for after-acquired property and

future advances, for rights and duties of secured party

having possession or control of collateral, for

additional duties of secured party having control of

collateral, for duties of secured party if account debtor

has been notified of assignment, for request for

accounting and request regarding list of collateral or

statement of account, for law governing perfection and

priority of security interests, for law governing

perfection and priority of security interests in deposit

accounts and for law governing perfection and priority of

security interests in investment property.

Providing for law governing perfection and priority

of security interests in chattel paper and for law

governing perfection and priority of security interests

in controllable accounts, controllable electronic records

and controllable payment intangibles.

Further providing for when filing required to perfect

A05131 - 2 -

security interest or agricultural lien and security

interests and agricultural liens to which filing

provisions do not apply, for perfection of security

interests in chattel paper, deposit accounts, documents,

goods covered by documents, instruments, investment

property, letter-of-credit rights and money, perfection

by permissive filing and temporary perfection without

filing or transfer of possession, for when possession by

or delivery to secured party perfects security interest

without filing and for perfection by control.

Providing for perfection by possession and control of

chattel paper.

Further providing for effect of change in governing

law, for interests which take priority over or take free

of security interest or agricultural lien, for priorities

among conflicting security interests in and agricultural

liens on same collateral, for future advances and for

priority of purchase-money security interests.

Providing for priority of security interest in

controllable account, controllable electronic record and

controllable payment intangible.

Further providing for priority of purchaser of

chattel paper or instrument, for priority of rights of

purchasers of instruments, documents and securities under

other divisions, priority of interests in financial

assets and security entitlements under Division 8, for

transfer of money and transfer of funds from deposit

account, for priority of security interests in fixtures

and crops, for bank's rights and duties with respect to

deposit account, for rights acquired by assignee and

claims and defenses against assignee, for discharge of

account debtor, notification of assignment,

identification and proof of assignment, restrictions on

assignment of accounts, chattel paper, payment

intangibles and promissory notes ineffective, for

restrictions on assignment of promissory notes, health-

care-insurance receivables and certain general

intangibles ineffective, for persons entitled to file a

record, for termination statement, for rights after

default, judicial enforcement and consignor or buyer of

accounts, chattel paper, payment intangibles or

promissory notes, for unknown debtor or secondary

obligor, for application of proceeds of collection or

enforcement and liability for deficiency and right to

surplus, for notification before disposition of

collateral, for contents and form of notification before

disposition of collateral, general, for contents and form

of notification before disposition of collateral,

consumer-goods transaction, for application of proceeds

of disposition and liability for deficiency and right to

surplus, for explanation of calculation of surplus or

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deficiency, for transfer of record or legal title, for

acceptance of collateral in full or partial satisfaction

of obligation and compulsory disposition of collateral,

for notification of proposal to accept collateral, for

waiver and for nonliability and limitation on liability

of secured party and liability of secondary obligor.

In controllable electronic records:

Providing for short title of division, for

definitions, for relation to Division 9 and consumer

laws, for rights in controllable account, controllable

electronic record and controllable payment intangible,

for control of controllable electronic record, for

discharge of account debtor on controllable account or

controllable payment intangible and for governing law.

Providing for transition.

In decedents, estates and fiduciaries, in powers of

attorney:

Further providing for authority that requires

specific and general grant of authority.

Making editorial changes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The General Assembly finds and declares as

follows:

(1) It is necessary to expand Title 13 of the

Pennsylvania Consolidated Statutes to accommodate emerging

technologies which affect commercial transactions.

(2) Expansion under paragraph (1) necessitates

conforming amendments.

(3) Expansion under paragraph (1) requires coordinated

transition into the complex statutory regulation of

commercial law by the Commonwealth and other jurisdictions.

Section 2. Section 1201(b)(10), (15), (16.1), (21)(iii),

(24), (27), (36) and (37) of Title 13 of the Pennsylvania

Consolidated Statutes are amended and the subsection is amended

by adding paragraphs to read:

§ 1201. General definitions.

* * *

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(b) Definitions.--Subject to additional definitions

contained in subsequent provisions of this title which are

applicable to specific provisions of this title, the following

words and phrases when used in this title shall have, unless the

context clearly indicates otherwise, the meanings given to them

in this subsection:

* * *

(10) "Conspicuous." With reference to a term, means so

written, displayed or presented that, based on the totality

of the circumstances, a reasonable person against which it is

to operate ought to have noticed it. Whether a term is

"conspicuous" or not is a decision for the court.

[Conspicuous terms include the following:

(i) A heading in capitals equal to or greater in

size than the surrounding text, or in contrasting type,

font or color to the surrounding text of the same or

lesser size.

(ii) Language in the body of a record or display in

larger type than the surrounding text, in contrasting

type, font or color to the surrounding text of the same

size, or set off from surrounding text of the same size

by symbols or other marks that call attention to the

language.]

* * *

(15) "Delivery." With respect to an electronic document

of title, means voluntary transfer of control and with

respect to an instrument, a tangible document of title or an

authoritative tangible copy of a record evidencing chattel

paper, means voluntary transfer of possession.

* * *

A05131 - 5 -

[(16.1) "Electronic document of title." A document of

title evidenced by a record consisting of information stored

in an electronic medium.]

(16.2) "Electronic." Relating to technology having

electrical, digital, magnetic, wireless, optical,

electromagnetic or similar capabilities.

(16.3) "Electronic document of title." A document of

title evidenced by a record consisting of information stored

in an electronic medium.

* * *

(21) "Holder." As follows:

* * *

(iii) the person in control, other than under

section 7106(g) (relating to control of electronic

document of title), of a negotiable electronic document

of title.

* * *

(24) "Money." A medium of exchange that is currently

authorized or adopted by a domestic or foreign government.

The term includes a monetary unit of account established by

an intergovernmental organization or by agreement between two

or more countries. The term does not include a medium of

exchange in an electronic form.

* * *

(27) "Person." Any individual; corporation; business

trust; estate; trust; partnership; limited liability company;

association; joint venture; government; governmental

subdivision, agency or instrumentality, [public corporation;]

or other legal or commercial entity. The term includes a

protected series, however denominated, of an entity if the

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protected series is established under law other than this

title which limits, or limits if conditions specified under

that law are satisfied, the ability of a creditor of the

entity or of any other protected series of the entity to

satisfy a claim from assets of the protected series.

* * *

(36) "Send." In connection with a [writing,] record or

[notice] notification:

(i) to deposit in the mail [or], deliver for

transmission or transmit by any other usual means of

communication,[:

(A)] with postage or cost of transmission

provided for[;

(B) properly addressed; and

(I) to an address specified thereon or

otherwise agreed upon; or

(II) if no address is specified or agreed

upon], and addressed to any address reasonable

under the circumstances; or

(ii) [in any other way to cause to be received any

record or notice within the time it would have arrived if

properly sent.] to cause the record or notification to be

received within the time it would have been received if

properly sent under subparagraph (i).

(37) "Signed." [Includes using any symbol executed or

adopted with present intention to adopt or accept a writing.]

Means, with present intent to authenticate or adopt a record:

(i) execute or adopt a tangible symbol; or

(ii) attach to or logically associate with the

A05131 - 7 -

record an electronic symbol, sound or process.

* * *

Section 3. Section 1204 introductory paragraph of Title 13

is amended to read:

§ 1204. Value.

Except as otherwise provided in Divisions 3 (relating to

negotiable instruments), 4 (relating to bank deposits and

collections) [and], 5 (relating to letters of credit) and 12

(relating to controllable electronic records), a person gives

value for rights if the person acquires them:

* * *

Section 4. Section 1301(c) of Title 13 is amended by adding

a paragraph to read:

§ 1301. Territorial applicability; parties' power to choose

applicable law.

* * *

following provisions of this title specifies the applicable law,

that provision governs, and a contrary agreement is effective

only to the extent permitted by the law so specified:

* * *

(8) Section 12107 (relating to governing law).

Section 5. Sections 1306 and 2102 of Title 13 are amended to

read:

§ 1306. Waiver or renunciation of claim or right after breach.

A claim or right arising out of an alleged breach may be

discharged in whole or in part without consideration by

agreement of the aggrieved party in [an authenticated] a signed

record.

§ 2102. Scope; certain security and other transactions excluded

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from division.

[Unless the context otherwise requires, this division applies

to transactions in goods; it does not apply to any transaction

which although in the form of an unconditional contract to sell

or present sale is intended to operate only as a security

transaction, nor does this division impair or repeal any statute

regulating sales to consumers, farmers or other specified

classes of buyers.]

(a) Scope.--Unless the context otherwise requires, and

except as provided in subsection (c), this division applies to

transactions in goods and, in the case of a hybrid transaction,

this division applies to the extent provided in subsection (b).

(b) Hybrid transactions.--In a hybrid transaction:

(1) If the sale-of-goods aspects do not predominate,

only the provisions of this division which relate primarily

to the sale-of-goods aspects of the transaction apply, and

the provisions that relate primarily to the transaction as a

whole do not apply.

(2) If the sale-of-goods aspects predominate, this

division applies to the transaction but does not preclude

application in appropriate circumstances of other law to

aspects of the transaction which do not relate to the sale of

goods.

(1) apply to a transaction which, even though in the

form of an unconditional contract to sell or present sale,

operates only to create a security interest; or

(2) impair or repeal a statute regulating sales to

consumers, farmers or other specified classes of buyers.

Section 6. Section 2106 heading of Title 13 is amended and

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the section is amended by adding a subsection to read:

§ 2106. Definitions: "contract"; "agreement"; "contract for

sale"; "sale"; "present sale"; "conforming" to

contract; "termination"; ["cancellation."]

"cancellation"; "hybrid transaction."

* * *

(e) "Hybrid transaction".--A single transaction involving a

sale of goods and:

(1) the provision of services;

(2) a lease of other goods; or

(3) a sale, lease or license of property other than

goods.

Section 7. Sections 2201(a) and (b), 2202 heading,

introductory paragraph and (2), 2203, 2205, 2209(b) and 2A102 of

Title 13 are amended to read:

§ 2201. Formal requirements; statute of frauds.

(a) General rule.--Except as otherwise provided in this

section a contract for the sale of goods for the price of $500

or more is not enforceable by way of action or defense unless

there is [some writing] a record sufficient to indicate that a

contract for sale has been made between the parties and signed

by the party against whom enforcement is sought or by [his] the

party's authorized agent or broker. A [writing] record is not

insufficient because it omits or incorrectly states a term

agreed upon but the contract is not enforceable under this

subsection beyond the quantity of goods shown in [such writing]

the record.

(b) Writing confirming contract between merchants.--Between

merchants if within a reasonable time a [writing] record in

confirmation of the contract and sufficient against the sender

A05131 - 10 -

is received and the party receiving it has reason to know its

contents, it satisfies the requirements of subsection (a)

against [such] the party unless [written] notice in a record of

objection to its contents is given within ten days after it is

received.

* * *

§ 2202. Final [written] expression: parol or extrinsic

evidence.

Terms with respect to which the confirmatory memoranda of the

parties agree or which are otherwise set forth in a [writing]

record intended by the parties as a final expression of their

agreement with respect to such terms as are included therein may

not be contradicted by evidence of any prior agreement or of a

contemporaneous oral agreement but may be explained or

supplemented:

* * *

(2) by evidence of consistent additional terms unless

the court finds the [writing] record to have been intended

also as a complete and exclusive statement of the terms of

the agreement.

§ 2203. Seals inoperative.

The affixing of a seal to a [writing] record evidencing a

contract for sale or an offer to buy or sell goods does not

constitute the [writing] record a sealed instrument and the law

with respect to sealed instruments does not apply to such a

contract or offer.

§ 2205. Firm offers.

An offer by a merchant to buy or sell goods in a signed

[writing] record which by its terms gives assurance that it will

be held open is not revocable, for lack of consideration, during

A05131 - 11 -

the time stated or if no time is stated for a reasonable time,

but in no event may such period of irrevocability exceed three

months; but any such term of assurance on a form supplied by the

offeree must be separately signed by the offeror.

§ 2209. Modification, rescission and waiver.

* * *

(b) Writing excluding modification or rescission.--A signed

agreement which excludes modification or rescission except by a

signed writing or other signed record cannot be otherwise

modified or rescinded, but except as between merchants such a

requirement on a form supplied by the merchant must be

separately signed by the other party.

* * *

§ 2A102. Scope.

(a) Leases generally.--This division applies to any

transaction, regardless of form, that creates a lease[.]; and,

in the case of a hybrid lease, this division applies to the

extent provided in subsection (b).

(b) Hybrid leases.--In a hybrid lease:

(1) if the lease-of-goods aspects do not predominate:

(i) only the provisions of this division which

relate primarily to the lease-of-goods aspects of the

transaction apply, and the provisions that relate

primarily to the transaction as a whole do not apply;

(ii) section 2A209 (relating to lessee under finance

lease as beneficiary of supply contract) applies if the

lease is a finance lease; and

(iii) section 2A407 (relating to irrevocable

promises: finance leases) applies to the promises of the

lessee in a finance lease to the extent the promises are

A05131 - 12 -

consideration for the right to possession and use of the

leased goods; and

(2) if the lease-of-goods aspects predominate, this

division applies to the transaction, but does not preclude

application in appropriate circumstances of other law to

aspects of the lease which do not relate to the lease of

goods.

Section 8. Section 2A103(a) of Title 13 is amended by adding

a definition to read:

§ 2A103. Definitions and index of definitions.

(a) Definitions.--The following words and phrases when used

in this division shall have, unless the context clearly

indicates otherwise, the meanings given to them in this

subsection:

* * *

"Hybrid lease." A single transaction involving a lease of

goods and:

(1) the provision of services;

(2) a sale of other goods; or

(3) a sale, lease or license of property other than

goods.

* * *

Section 9. Sections 2A107, 2A201(a)(2), (c) and (e)(1),

2A202 heading, introductory paragraph and (2), 2A203, 2A205,

2A208(b), 2A214(a), 3104(a)(3), 3105(a), 3401 heading and (b),

3604, 4A103(a)(1) introductory paragraph, 4A201, 4A202(b)(2) and

(c)(2), 4A203(a)(1), 4A207(c)(2), 4A208(b)(2), 4A210(a),

4A211(a), 4A305(c) and (d), 5104 and 5116 of Title 13 are

amended to read:

§ 2A107. Waiver or renunciation of claim or right after

A05131 - 13 -

default.

Any claim or right arising out of an alleged default or

breach of warranty may be discharged in whole or in part without

consideration by a [written] waiver or renunciation in a signed

[and] record delivered by the aggrieved party.

§ 2A201. Statute of frauds.

(a) General rule.--A lease contract is not enforceable by

way of action or defense unless:

* * *

(2) there is a [writing] record, signed by the party

against whom enforcement is sought or by that party's

authorized agent, sufficient to indicate that a lease

contract has been made between the parties and to describe

the goods leased and the lease term.

* * *

is not insufficient because it omits or incorrectly states a

term agreed upon, but the lease contract is not enforceable

under subsection (a)(2) beyond the lease term and the quantity

of goods shown in the [writing] record.

* * *

(e) Term of lease not satisfying general requirements.--The

lease term under a lease contract referred to in subsection (d)

is:

(1) if there is a [writing] record signed by the party

against whom enforcement is sought or by that party's

authorized agent specifying the lease term, the term so

specified;

* * *

§ 2A202. Final [written] expression: parol or extrinsic

A05131 - 14 -

evidence.

Terms with respect to which the confirmatory memoranda of the

parties agree or which are otherwise set forth in a [writing]

record intended by the parties as a final expression of their

agreement with respect to such terms as are included therein may

not be contradicted by evidence of any prior agreement or of a

contemporaneous oral agreement but may be explained or

supplemented:

* * *

(2) by evidence of consistent additional terms unless

the court finds the [writing] record to have been intended

also as a complete and exclusive statement of the terms of

the agreement.

§ 2A203. Seals inoperative.

The affixing of a seal to a [writing] record evidencing a

lease contract or an offer to enter into a lease contract does

not render the [writing] record a sealed instrument, and the law

with respect to sealed instruments does not apply to the lease

contract or offer.

§ 2A205. Firm offers.

An offer by a merchant to lease goods to or from another

person in a signed [writing] record that by its terms gives

assurance it will be held open is not revocable, for lack of

consideration, during the time stated or, if no time is stated,

for a reasonable time, but in no event may the period of

irrevocability exceed three months. Any such term of assurance

on a form supplied by the offeree must be separately signed by

the offeror.

§ 2A208. Modification, rescission and waiver.

* * *

A05131 - 15 -

(b) Writing excluding modification or rescission.--A signed

lease agreement that excludes modification or rescission except

by a signed [writing] record may not be otherwise modified or

rescinded, but, except as between merchants, such a requirement

on a form supplied by a merchant must be separately signed by

the other party.

* * *

§ 2A214. Exclusion or modification of warranties.

(a) Construction of words or conduct creating or limiting

warranties.--Words or conduct relevant to the creation of an

express warranty and words or conduct tending to negate or limit

a warranty must be construed wherever reasonable as consistent

with each other; but, subject to the provisions of section 2A202

(relating to final [written] expression: parol or extrinsic

evidence), negation or limitation is inoperative to the extent

that the construction is unreasonable.

* * *

§ 3104. Negotiable instrument.

(a) Definition of "negotiable instrument".--Except as

provided in subsections (c) and (d), "negotiable instrument"

means an unconditional promise or order to pay a fixed amount of

money, with or without interest or other charges described in

the promise or order, if it:

* * *

(3) does not state any other undertaking or instruction

by the person promising or ordering payment to do any act in

addition to the payment of money, but the promise or order

may contain:

(i) an undertaking or power to give, maintain or

protect collateral to secure payment;

A05131 - 16 -

(ii) an authorization or power to the holder to

confess judgment or realize on or dispose of collateral;

[or]

(iii) a waiver of the benefit of any law intended

for the advantage or protection of an obligor[.];

(iv) a term which specifies the law that governs the

promise or order; or

(v) an undertaking to resolve in a specified forum a

dispute concerning the promise or order.

* * *

§ 3105. Issue of instrument.

(a) Definition of "issue".--"Issue" means:

(1) the first delivery of an instrument by the maker or

drawer, whether to a holder or nonholder, for the purpose of

giving rights on the instrument to any person[.]; or

(2) if agreed by the payee, the first transmission by

the drawer to the payee of an image of an item and

information derived from the item which enables the

depositary bank to collect the item by transferring or

presenting under Federal law an electronic check.

* * *

§ 3401. Signature necessary for liability on instrument.

* * *

[(b) Form of signature.--A signature may be made:

(1) manually or by means of a device or machine; and

(2) by the use of any name, including a trade or assumed

name, or by a word, mark or symbol executed or adopted by a

person with present intention to authenticate a writing.]

§ 3604. Discharge by cancellation or renunciation.

(a) Methods of discharge.--

A05131 - 17 -

(1) A person entitled to enforce an instrument, with or

without consideration, may discharge the obligation of a

party to pay the instrument:

[(1)] (i) by an intentional voluntary act, such as

surrender of the instrument to the party, destruction,

mutilation or cancellation of the instrument,

cancellation or striking out of the party's signature or

the addition of words to the instrument indicating

discharge; or

[(2)] (ii) by agreeing not to sue or otherwise

renouncing rights against the party by a signed writing.

(2) The obligation of a party to pay a check is not

discharged solely by destruction of the check in connection

with a process in which:

(i) information is extracted from the check, and an

image of the check is made; and

(ii) subsequently, the information and image are

transmitted for payment.

(b) Certain rights unaffected.--Cancellation or striking out

of an indorsement pursuant to subsection (a) does not affect the

status and rights of a party derived from the indorsement.

§ 4A103. Payment order; definitions.

(a) Definition of "payment order" and related terms.--The

following words and phrases when used in this division shall

have the meanings given to them in this subsection:

(1) "Payment order." An instruction of a sender to a

receiving bank, transmitted orally[, electronically] or in

[writing] a record, to pay, or to cause another bank to pay,

a fixed or determinable amount of money to a beneficiary if:

* * *

A05131 - 18 -

§ 4A201. Security procedure.

"Security procedure" means a procedure established by

agreement of a customer and a receiving bank for the purpose of:

(1) verifying that a payment order or communication

amending or canceling a payment order is that of the

customer; or

(2) detecting error in the transmission or the content

of the payment order or communication.

A security procedure may impose an obligation on the receiving

bank or the customer and may require the use of algorithms or

other codes, identifying words [or], numbers, symbols, sounds,

biometrics, encryption, callback procedures or similar security

devices. Comparison of a signature on a payment order or

communication with an authorized specimen signature of the

customer or requiring a payment order to be sent from a known

email address, IP address or telephone number is not by itself a

security procedure.

§ 4A202. Authorized and verified payment orders.

* * *

(b) Verified payment order.--If a bank and its customer have

agreed that the authenticity of payment orders issued to the

bank in the name of the customer as sender will be verified

pursuant to a security procedure, a payment order received by

the receiving bank is effective as the order of the customer,

whether or not authorized, if:

* * *

(2) the bank proves that it accepted the payment order

in good faith and in compliance with the bank's obligations

under the security procedure and any [written] agreement or

instruction of the customer, evidenced by a record,

A05131 - 19 -

restricting acceptance of payment orders issued in the name

of the customer.

The bank is not required to follow an instruction that violates

[a written] an agreement with the customer, evidenced by a

record, or notice of which is not received at a time and in a

manner affording the bank a reasonable opportunity to act on it

before the payment order is accepted.

Commercial reasonableness of a security procedure is a question

of law to be determined by considering the wishes of the

customer expressed to the bank, the circumstances of the

customer known to the bank, including the size, type and

frequency of payment orders normally issued by the customer to

the bank, alternative security procedures offered to the

customer and security procedures in general use by customers and

receiving banks similarly situated. A security procedure is

deemed to be commercially reasonable if:

* * *

(2) the customer expressly agreed in [writing] a record

to be bound by any payment order, whether or not authorized,

issued in its name and accepted by the bank in compliance

with the bank's obligations under the security procedure

chosen by the customer.

* * *

§ 4A203. Unenforceability of certain verified payment orders.

(a) General rule.--If an accepted payment order is not,

under section 4A202(a) (relating to authorized and verified

payment orders), an authorized order of a customer identified as

sender, but is effective as an order of the customer pursuant to

section 4A202(b), the following rules apply:

A05131 - 20 -

(1) By express [written] agreement evidenced by a

record, the receiving bank may limit the extent to which it

is entitled to enforce or retain payment of the payment

order.

* * *

§ 4A207. Misdescription of beneficiary.

* * *

number.--If a payment order described in subsection (b) is

accepted, the originator's payment order described the

beneficiary inconsistently by name and number and the

beneficiary's bank pays the person identified by number as

permitted by subsection (b)(1), the following rules apply:

* * *

(2) If the originator is not a bank and proves that the

person identified by number was not entitled to receive

payment from the originator, the originator is not obliged to

pay its order unless the originator's bank proves that the

originator, before acceptance of the originator's order, had

notice that payment of a payment order issued by the

originator might be made by the beneficiary's bank on the

basis of an identifying or bank account number even if it

identifies a person different from the named beneficiary.

Proof of notice may be made by any admissible evidence. The

originator's bank satisfies the burden of proof if it proves

that the originator, before the payment order was accepted,

signed a [writing] record stating the information to which

the notice relates.

* * *

§ 4A208. Misdescription of intermediary bank or beneficiary's

A05131 - 21 -

bank.

* * *

(b) Identification by name and identifying number;

identification of different persons.--This subsection applies to

a payment order identifying an intermediary bank or the

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

name and number identify different persons:

* * *

(2) If the sender is not a bank and the receiving bank

proves that the sender, before the payment order was

accepted, had notice that the receiving bank might rely on

the number as the proper identification of the intermediary

or beneficiary's bank even if it identifies a person

different from the bank identified by name, the rights and

obligations of the sender and the receiving bank are governed

by paragraph (1), as though the sender were a bank. Proof of

notice may be made by any admissible evidence. The receiving

bank satisfies the burden of proof if it proves that the

sender, before the payment order was accepted, signed a

[writing] record stating the information to which the notice

relates.

* * *

§ 4A210. Rejection of payment order.

(a) Manner of rejection.--A payment order is rejected by the

receiving bank by a notice of rejection transmitted to the

sender orally[, electronically] or in [writing] a record. A

notice of rejection need not use any particular words and is

sufficient if it indicates that the receiving bank is rejecting

the order or will not execute or pay the order. Rejection is

effective when the notice is given if transmission is by a means

A05131 - 22 -

that is reasonable in the circumstances. If notice of rejection

is given by a means that is not reasonable, rejection is

effective when the notice is received. If an agreement of the

sender and receiving bank establishes the means to be used to

reject a payment order, any means complying with the agreement

is reasonable and any means not complying is not reasonable

unless no significant delay in receipt of the notice resulted

from the use of the noncomplying means.

* * *

§ 4A211. Cancellation and amendment of payment order.

(a) Communication.--A communication of the sender of a

payment order canceling or amending the order may be transmitted

to the receiving bank orally[, electronically] or in [writing] a

record. If a security procedure is in effect between the sender

and the receiving bank, the communication is not effective to

cancel or amend the order unless the communication is verified

pursuant to the security procedure or the bank agrees to the

cancellation or amendment.

* * *

§ 4A305. Liability for late or improper execution or failure to

execute payment order.

* * *

under subsections (a) and (b), damages, including consequential

damages, are recoverable to the extent provided in an express

[written] agreement of the receiving bank, evidenced by a

record.

(d) Failure to execute payment order.--If a receiving bank

fails to execute a payment order it was obliged by express

agreement to execute, the receiving bank is liable to the sender

A05131 - 23 -

for its expenses in the transaction and for incidental expenses

and interest losses resulting from the failure to execute.

Additional damages, including consequential damages, are

recoverable to the extent provided in an express [written]

agreement of the receiving bank, evidenced by a record, but are

not otherwise recoverable.

* * *

§ 5104. Formal requirements.

A letter of credit, confirmation, advice, transfer, amendment

or cancellation may be issued in any form that is a signed

record. [and is authenticated:

(1) by a signature; or

(2) in accordance with the agreement of the parties or

the standard practice referred to in section 5108(e)

(relating to standard practice).]

§ 5116. Choice of law and forum.

(a) Express choice of law.--The liability of an issuer,

nominated person or advisor for action or omission is governed

by the law of the jurisdiction chosen by an agreement in the

form of a record signed [or otherwise authenticated] by the

affected parties [in the manner provided in section 5104

(relating to formal requirements)] or by a provision in the

person's letter of credit, confirmation or other undertaking.

The jurisdiction whose law is chosen need not bear any relation

to the transaction.

(b) Governing law otherwise.--Unless subsection (a) applies,

the liability of an issuer, nominated person or adviser for

action or omission is governed by the law of the jurisdiction in

which the person is located. The person is considered to be

located at the address indicated in the person's undertaking. If

A05131 - 24 -

more than one address is indicated, the person is considered to

be located at the address from which the person's undertaking

was issued.

of law and recognition of interbranch letters of credit, but not

enforcement of a judgment, all branches of a bank are considered

separate juridical entities, and a bank is considered to be

located at the place where its relevant branch is considered to

be located under [this] subsection (d).

(d) Bank branch locations.--A branch of a bank is considered

to be located at the address indicated in the branch's

undertaking. If more than one address is indicated, the branch

is considered to be located at the address from which the

undertaking was issued.

[(c)] (e) Role of custom or practice.--Except as otherwise

provided in this subsection, the liability of an issuer,

nominated person or adviser is governed by any rules of custom

or practice, such as the Uniform Customs and Practice for

Documentary Credits, to which the letter of credit, confirmation

or other undertaking is expressly made subject. If:

(1) this division would govern the liability of an

issuer, nominated person or adviser under subsection (a) or

(b);

(2) the relevant undertaking incorporates rules of

custom or practice; and

(3) there is conflict between this division and those

rules as applied to that undertaking;

those rules govern except to the extent of any conflict with the

nonvariable provisions specified in section 5103(c) (relating to

variation by agreement or undertaking).

A05131 - 25 -

[(d)] (f) Conflict with certain other divisions.--If there

is conflict between this division and Division 3 (relating to

negotiable instruments), 4 (relating to bank deposits and

collections), 4A (relating to funds transfers) or 9 (relating to

secured transactions), this division governs.

[(e)] (g) Forum.--The forum for settling disputes arising

out of an undertaking within this division may be chosen in the

manner and with the binding effect that governing law may be

chosen in accordance with subsection (a).

Section 10. The definition of "sign" in section 7102(a) and

subsection (b)(1) of Title 13 are amended to read:

§ 7102. Definitions and index of definitions.

(a) Division 7 definitions.--The following words and phrases

when used in this division shall have, unless the context

clearly indicates otherwise, the meanings given to them in this

subsection:

* * *

["Sign." With present intent to authenticate or adopt a

record:

(1) to execute or adopt a tangible symbol; or

(2) to attach to or logically associate with the record

an electronic sound, symbol or process.]

* * *

(b) Definitions in other divisions.--Definitions in other

divisions applying to this division and the sections in which

they appear are:

(1) "Contract for sale." Section 2106 (relating to

definitions: "contract"; "agreement"; "contract for sale";

"sale"; "present sale"; "conforming" to contract;

"termination"; "cancellation"; "hybrid transaction").

A05131 - 26 -

* * *

Section 11. Section 7106(b) introductory paragraph and (4)

of Title 13 are amended and the section is amended by adding

subsections to read:

§ 7106. Control of electronic document of title.

* * *

(b) Manner.--A system satisfies subsection (a) and a person

[is deemed to have] has control of an electronic document of

title if the document is created, stored and [assigned in such]

transferred in a manner that:

* * *

(4) copies or amendments that add or change an

identified [assignee] transferee of the authoritative copy

can be made only with the consent of the person asserting

control;

* * *

person has control of an electronic document of title, if an

authoritative electronic copy of the document, a record attached

to or logically associated with the electronic copy or a system

in which the electronic copy is recorded:

(1) enables the person readily to identify each

electronic copy as either an authoritative copy or a

nonauthoritative copy;

(2) enables the person readily to identify itself in any

way, including by name, identifying number, cryptographic

key, office or account number, as the person to whom or to

which each authoritative electronic copy was issued or

transferred; and

(3) gives the person exclusive power, subject to

A05131 - 27 -

subsection (d), to:

(i) prevent others from adding or changing the

person to whom or to which each authoritative electronic

copy has been issued or transferred; and

(ii) transfer control of each authoritative

electronic copy.

(d) Exclusive power.--Subject to subsection (e), a power is

exclusive under subsection (c)(3) even if:

(1) the authoritative electronic copy, a record attached

to or logically associated with the authoritative electronic

copy or a system in which the authoritative electronic copy

is recorded limits the use of the document of title or has a

protocol that is programmed to cause a change, including a

transfer or loss of control; or

(2) the power is shared with another person.

(e) Shared power.--A power of a person is not shared with

another person under subsection (d)(2) and the person's power is

not exclusive if:

(1) the person can exercise the power only if the power

also is exercised by the other person; and

(2) the other person:

(i) can exercise the power without exercise of the

power by the person; or

(ii) is the transferor to the person of an interest

in the document of title.

(f) Presumption of exclusivity.--If a person has the powers

specified in subsection (c)(3), the powers are presumed to be

exclusive.

(g) Other parties.--A person has control of an electronic

document of title if another person, other than the transferor

A05131 - 28 -

to the person of an interest in the document:

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

has control on behalf of the person; or

(2) obtains control of the document after having

acknowledged that it will obtain control of the document on

behalf of the person.

(h) Acknowledgment not required.--A person that has control

under this section is not required to acknowledge that it has

control on behalf of another person.

(i) Duty to other parties.--If a person acknowledges that it

has or will obtain control on behalf of another person, unless

the person otherwise agrees or law other than this division or

Division 9 (relating to secured transactions) otherwise

provides, the person does not owe any duty to the other person

and is not required to confirm the acknowledgment to any other

person.

Section 12. Section 8102 heading, the definition of

"communicate" in subsection (a) and subsection (b) of Title 13

are amended to read:

§ 8102. Definitions and index of definitions.

(a) Definitions.--The following words and phrases when used

in this division shall have the meanings given to them in this

subsection:

* * *

"Communicate." "Communicate" means to:

(1) send a signed [writing] record; or

(2) transmit information by any mechanism agreed upon by

the persons transmitting and receiving the information.

* * *

(b) Index of other definitions.--[Other] The following

A05131 - 29 -

definitions applying [to] in this division and [the sections in

which they appear] other divisions are:

"Appropriate person." Section 8107.

"Control." Section 8106.

"Controllable account." Section 9102.

"Controllable electronic record." Section 12102.

"Controllable payment intangible." Section 9102.

"Delivery." Section 8301.

"Investment company security." Section 8103.

"Issuer." Section 8201.

"Overissue." Section 8210.

"Protected purchaser." Section 8303.

"Securities account." Section 8501.

* * *

Section 13. Sections 8103(g) and 8106(d)(3) of Title 13 are

amended and the sections are amended by adding subsections to

read:

§ 8103. Rules for determining whether certain obligations and

interests are securities or financial assets.

* * *

(g) [Financial asset] Documents of title.--A document of

title, as defined in section 1201 (relating to general

definitions), is not a financial asset unless paragraph (3) of

the definition of "financial asset" in section 8102 (relating to

definitions and index of definitions) applies.

(h) Controllable accounts, controllable electronic records

and controllable payment intangibles.--A controllable account,

controllable electronic record or controllable payment

intangible is not a financial asset unless the definition of

"financial asset" in section 8102 applies.

A05131 - 30 -

§ 8106. Control.

* * *

(d) "Control" of security entitlement.--A purchaser has

"control" of a security entitlement if:

* * *

(3) another person, other than the transferor to the

purchaser of an interest in the security entitlement:

(i) has control of the security entitlement [on

behalf of the purchaser or, having previously acquired

control of the security entitlement,] and acknowledges

that it has control on behalf of the purchaser[.]; or

(ii) obtains control of the security entitlement

after having acknowledged that it will obtain control of

the security entitlement on behalf of the purchaser.

* * *

(h) Acknowledgment not required.--A person that has control

under this section is not required to acknowledge that it has

control on behalf of another person.

(i) Duty to other parties.--If a person acknowledges that it

has or will obtain control on behalf of another person, unless

the person otherwise agrees or law other than this division or

Division 9 (relating to secured transactions) otherwise

provides, the person does not owe any duty to the other person

and is not required to confirm the acknowledgment to any other

person.

Section 14. Section 8110 of Title 13 is amended by adding a

subsection to read:

§ 8110. Applicability; choice of law.

* * *

(g) When local law of issuer's or securities intermediary's

A05131 - 31 -

jurisdiction governs.--The local law of the issuer's

jurisdiction or the securities intermediary's jurisdiction

governs a matter or transaction specified in subsection (a) or

(b) even if the matter or transaction does not bear any relation

to the jurisdiction.

Section 15. Section 8303(b) of Title 13 is amended to read:

§ 8303. Protected purchaser.

* * *

(b) Rights acquired by protected purchaser.--[In addition to

acquiring the rights of a purchaser, a] A protected purchaser

also acquires its interest in the security free of any adverse

claim.

Section 16. The definitions of "account," "account debtor,"

"accounting," "authenticate," "chattel paper," "electronic

chattel paper," "general intangible," "instrument," "payment

intangible," "proposal," "send" and "tangible chattel paper" in

section 9102(a) and subsection (b) of Title 13 are amended and

subsection (a) is amended by adding definitions to read:

§ 9102. Definitions and index of definitions.

(a) Division 9 definitions.--The following words and phrases

when used in this division shall have the meanings given to them

in this subsection:

* * *

"Account."

(1) Except as used in "account for," "account

statement," "account to," "commodity account," "customer's

account," "deposit account," "on account of" and "statement

of account," a right to payment of a monetary obligation,

whether or not earned by performance:

(i) for property which has been or is to be sold,

A05131 - 32 -

leased, licensed, assigned or otherwise disposed of;

(ii) for services rendered or to be rendered;

(iii) for a policy of insurance issued or to be

issued;

(iv) for a secondary obligation incurred or to be

incurred;

(v) for energy provided or to be provided;

(vi) for the use or hire of a vessel under a charter

or other contract;

(vii) arising out of the use of a credit or charge

card or information contained on or for use with the

card; or

(viii) as winnings in a lottery or other game of

chance operated or sponsored by a state, governmental

unit of a state or person licensed or authorized to

operate the game by a state or governmental unit of a

state.

(2) The term includes controllable accounts and health-

care-insurance receivables.

(3) The term does not include:

(i) [rights to payment evidenced by chattel paper or

an instrument] chattel paper;

(ii) commercial tort claims;

(iii) deposit accounts;

(iv) investment property;

(v) letter-of-credit right or letters of credit;

[or]

(vi) rights to payment for money or funds advanced

or sold, other than rights arising out of the use of a

credit or charge card or information contained on or for

A05131 - 33 -

use with the card[.]; or

(vii) rights to payment evidenced by an instrument.

"Account debtor." A person obligated on an account, chattel

paper or general intangible. The term does not include persons

obligated to pay a negotiable instrument even if the negotiable

instrument [constitutes part of] evidences chattel paper.

"Accounting." Except as used in "accounting for," a record:

(1) [authenticated] signed by a secured party;

(2) indicating the aggregate unpaid secured obligations

as of a date not more than 35 days earlier or 35 days later

than the date of the record; and

(3) identifying the components of the obligations in

reasonable detail.

* * *

"Assignee." Except as used in "assignee for benefit of

creditors," a person:

(1) in whose favor a security interest that secures an

obligation is created or provided for under a security

agreement, whether or not the obligation is outstanding; or

(2) to which an account, chattel paper, payment

intangible or promissory note has been sold.

The term includes a person to which a security interest has been

transferred by a secured party.

"Assignor." A person that:

(1) under a security agreement creates or provides for a

security interest that secures an obligation; or

(2) sells an account, chattel paper, payment intangible

or promissory note.

The term includes a secured party that has transferred a

security interest to another person.

A05131 - 34 -

["Authenticate." To:

(i) sign; or

(ii) with present intent to adopt or accept a

record, attach to or logically associate with the record

an electrical sound, symbol or process.]

* * *

"Chattel paper." [A record or records which evidence both a

monetary obligation and a security interest in specific goods, a

security interest in specific goods and software used in the

goods, a security interest in specific goods and license of

software used in the goods, a lease of specific goods or a lease

of specific goods and license of software used in the goods. In

this definition, "monetary obligation" means a monetary

obligation secured by the goods or owed under a lease of the

goods and includes a monetary obligation with respect to

software used in the goods. The term does not include charters

or other contracts involving the use or hire of a vessel or

records which evidence a right to payment arising out of the use

of a credit or charge card or information contained on or for

use with the card. If a transaction is evidenced by records that

include an instrument or series of instruments, the group of

records taken together constitutes chattel paper.] Either:

(1) a right to payment of a monetary obligation secured

by specific goods, if the right to payment and security

agreement are evidenced by a record; or

(2) a right to payment of a monetary obligation owed by

a lessee under a lease agreement with respect to specific

goods and a monetary obligation owed by the lessee in

connection with the transaction giving rise to the lease, if:

(i) the right to payment and lease agreement are

A05131 - 35 -

evidenced by a record; and

(ii) the predominant purpose of the transaction

giving rise to the lease was to give the lessee the right

to possession and use of the goods.

The term does not include a right to payment arising out of a

charter or other contract involving the use or hire of a vessel

or a right to payment arising out of the use of a credit or

charge card or information contained on or for use with the

card.

* * *

"Controllable account." An account evidenced by a

controllable electronic record that provides that the account

debtor undertakes to pay the person that has control under

section 12105 (relating to control of controllable electronic

record) of the controllable electronic record.

"Controllable payment intangible." A payment intangible

evidenced by a controllable electronic record that provides that

the account debtor undertakes to pay the person that has control

under section 12105 of the controllable electronic record.

* * *

["Electronic chattel paper." Chattel paper evidenced by a

record consisting of information stored in an electronic

medium.]

* * *

"General intangible." Any personal property, including

things in action, other than accounts, chattel paper, commercial

tort claims, deposit accounts, documents, goods, instruments,

investment property, letter-of-credit rights, letters of credit,

money and oil, gas or other minerals before extraction. The term

includes controllable electronic records, payment intangibles

A05131 - 36 -

and software.

* * *

"Instrument." A negotiable instrument or any other writing

which evidences a right to the payment of a monetary obligation,

is not itself a security agreement or lease and is of a type

which in ordinary course of business is transferred by delivery

with any necessary indorsement or assignment. The term does not

include:

(1) investment property;

(2) letters of credit; [or]

(3) writings which evidence a right to payment arising

out of the use of a credit or charge card or information

contained on or for use with the card[.]; or

(4) writings that evidence chattel paper.

* * *

"Money." Has the meaning in section 1201(b)(24) (relating to

general definitions), but does not include a deposit account.

* * *

"Payment intangible." A general intangible under which the

account debtor's principal obligation is a monetary obligation.

The term includes a controllable payment intangible.

* * *

"Proposal." A record [authenticated] signed by a secured

party which includes the terms on which the secured party is

willing to accept collateral in full or partial satisfaction of

the obligation it secures under sections 9620 (relating to

acceptance of collateral in full or partial satisfaction of

obligation; compulsory disposition of collateral), 9621

(relating to notification of proposal to accept collateral) and

9622 (relating to effect of acceptance of collateral).

A05131 - 37 -

* * *

["Send." In connection with a record or notification:

(1) to deposit in the mail, deliver for transmission or

transmit by any other usual means of communication, with

postage or cost of transmission provided for, addressed to

any address reasonable under the circumstances; or

(2) to cause the record or notification to be received

within the time which it would have been received if properly

sent under paragraph (1).]

* * *

["Tangible chattel paper." Chattel paper evidenced by a

record or records consisting of information which is inscribed

on a tangible medium.]

* * *

(b) Definitions in other divisions.--The following

definitions in other divisions apply to this division:

"Applicant." Section 5102.

"Beneficiary." Section 5102.

"Broker." Section 8102.

"Certificated security." Section 8102.

"Check." Section 3104.

"Clearing corporation." Section 8102.

"Contract for sale." Section 2106.

"Control." With respect to a document of title, section

7106.

"Controllable electronic record." Section 12102.

"Customer." Section 4104.

"Entitlement holder." Section 8102.

"Financial asset." Section 8102.

"Holder in due course." Section 3302.

A05131 - 38 -

"Issuer." With respect to a letter of credit or letter-of-

credit right, section 5102.

"Issuer." With respect to a document of title, section 7102.

"Issuer." With respect to a security, section 8201.

"Lease." Section 2A103.

"Lease agreement." Section 2A103.

"Lease contract." Section 2A103.

"Leasehold interest." Section 2A103.

"Lessee." Section 2A103.

"Lessee in ordinary course of business." Section 2A103.

"Lessor." Section 2A103.

"Lessor's residual interest." Section 2A103.

"Letter of credit." Section 5102.

"Merchant." Section 2104.

"Negotiable instrument." Section 3104.

"Nominated person." Section 5102.

"Note." Section 3104.

"Proceeds of a letter of credit." Section 5114.

"Protected purchaser." Section 8303.

"Prove." Section 3103.

"Qualifying purchaser." Section 12102.

"Sale." Section 2106.

"Securities account." Section 8501.

"Securities intermediary." Section 8102.

"Security." Section 8102.

"Security certificate." Section 8102.

"Security entitlement." Section 8102.

"Uncertificated security." Section 8102.

* * *

Section 17. Sections 9104(a) and 9105 of Title 13 are

A05131 - 39 -

amended to read:

§ 9104. Control of deposit account.

(a) Requirements for control.--A secured party has control

of a deposit account if:

(1) the secured party is the bank with which the deposit

account is maintained;

(2) the debtor, secured party and bank have agreed in

[an authenticated] a signed record that the bank will comply

with instructions originated by the secured party directing

disposition of the funds in the deposit account without

further consent by the debtor; [or]

(3) the secured party becomes the bank's customer with

respect to the deposit account[.]; or

(4) another person, other than the debtor:

(i) has control of the deposit account and

acknowledges that it has control on behalf of the secured

party; or

(ii) obtains control of the deposit account after

having acknowledged that it will obtain control of the

deposit account on behalf of the secured party.

* * *

§ 9105. Control of electronic copy of record evidencing chattel

paper.

(a) General rule; control of electronic copy of record

evidencing chattel paper.--A [secured party] purchaser has

control of [electronic] an authoritative electronic copy of a

record evidencing chattel paper if a system employed for

evidencing the [transfer] assignment of interests in the chattel

paper reliably establishes the [secured party] purchaser as the

person to which the [chattel paper] authoritative electronic

A05131 - 40 -

copy was assigned.

(b) [Specific facts giving control] Single authoritative

copy.--A system satisfies subsection (a) if the record or

records [comprising] evidencing the chattel paper are created,

stored and assigned in [such] a manner that:

(1) a single authoritative copy of the record or records

exists which is unique, identifiable and, except as otherwise

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

(2) the authoritative copy identifies the [secured

party] purchaser as the assignee of the record or records;

(3) the authoritative copy is communicated to and

maintained by the [secured party] purchaser or its designated

custodian;

(4) copies or amendments which add or change an

identified assignee of the authoritative copy can be made

only with the consent of the [secured party] purchaser;

(5) each copy of the authoritative copy and any copy of

a copy is readily identifiable as a copy [which] that is not

the authoritative copy; and

(6) any amendment of the authoritative copy is readily

identifiable as authorized or unauthorized.

subsection (a) and a purchaser has control of an authoritative

electronic copy of a record evidencing chattel paper, if the

electronic copy, a record attached to or logically associated

with the electronic copy or a system in which the electronic

copy is recorded:

(1) enables the purchaser readily to identify each

electronic copy as either an authoritative copy or a

nonauthoritative copy;

A05131 - 41 -

(2) enables the purchaser readily to identify itself in

any way, including by name, identifying number, cryptographic

key, office or account number, as the assignee of the

authoritative electronic copy; and

(3) gives the purchaser exclusive power, subject to

subsection (d), to:

(i) prevent others from adding or changing an

identified assignee of the authoritative electronic copy;

and

(ii) transfer control of the authoritative

electronic copy.

(d) Meaning of exclusive.--Subject to subsection (e), a

power is exclusive under subsection (c)(3) even if:

(1) the authoritative electronic copy, a record attached

to or logically associated with the authoritative electronic

copy or a system in which the authoritative electronic copy

is recorded limits the use of the authoritative electronic

copy or has a protocol programmed to cause a change,

including a transfer or loss of control; or

(2) the power is shared with another person.

(e) When power not shared with another person.--A power of a

purchaser is not shared with another person under subsection (d)

(2) and the purchaser's power is not exclusive if:

(1) the purchaser can exercise the power only if the

power also is exercised by the other person; and

(2) the other person:

(i) can exercise the power without exercise of the

power by the purchaser; or

(ii) is the transferor to the purchaser of an

interest in the chattel paper.

A05131 - 42 -

(f) Presumption of exclusivity of certain powers.--If a

purchaser has the powers specified in subsection (c)(3), the

powers are presumed to be exclusive.

(g) Obtaining control through another person.--A purchaser

has control of an authoritative electronic copy of a record

evidencing chattel paper if another person, other than the

transferor to the purchaser of an interest in the chattel paper:

(1) has control of the authoritative electronic copy and

acknowledges that it has control on behalf of the purchaser;

(2) obtains control of the authoritative electronic copy

after having acknowledged that it will obtain control of the

electronic copy on behalf of the purchaser.

Section 18. Title 13 is amended by adding a section to read:

§ 9107.1. Control of controllable electronic record,

controllable account or controllable payment

intangible.

(a) Control under section 12105.--A secured party has

control of a controllable electronic record as provided in

section 12105 (relating to control of controllable electronic

record).

(b) Control of controllable account and controllable payment

intangible.--A secured party has control of a controllable

account or controllable payment intangible if the secured party

has control of the controllable electronic record that evidences

the controllable account or controllable payment intangible.

Section 19. Section 9203(b)(3) of Title 13 is amended to

read:

§ 9203. Attachment and enforceability of security interest;

proceeds; supporting obligations; formal requisites.

A05131 - 43 -

* * *

(b) Enforceability.--Except as otherwise provided in

subsections (c) through (i), a security interest is enforceable

against the debtor and third parties with respect to the

collateral only if all of the following apply:

* * *

(3) One of the following conditions is met:

(i) The debtor has [authenticated] signed a security

agreement which provides a description of the collateral

and, if the security interest covers timber to be cut, a

description of the land concerned.

(ii) The collateral is not a certificated security

and is in the possession of the secured party under

section 9313 (relating to when possession by or delivery

to secured party perfects security interest without

filing) pursuant to the debtor's security agreement.

(iii) The collateral is a certificated security in

registered form, and the security certificate has been

delivered to the secured party under section 8301

(relating to delivery) pursuant to the debtor's security

agreement.

(iv) The collateral is controllable accounts,

controllable electronic records, controlled payment

intangibles, deposit accounts, electronic [chattel

paper,] documents, investment property[,] or letter-of-

credit rights [or electronic documents,] and the secured

party has control under section 7106 (relating to control

of electronic document of title), 9104 (relating to

control of deposit account), [9105 (relating to control

of electronic chattel paper),] 9106 (relating to control

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of investment property) [or], 9107 (relating to control

of letter-of-credit right) or 9107.1 (relating to control

of controllable electronic record, controllable account

or controllable payment intangible) pursuant to the

debtor's security agreement.

(v) The collateral is chattel paper and the secured

party has possession and control under section 9314.1

(relating to perfection by possession and control of

chattel paper) pursuant to the debtor's security

agreement.

* * *

Section 20. Section 9204(b) of Title 13 is amended and the

section is amended by adding a subsection to read:

§ 9204. After-acquired property; future advances.

* * *

(b) When after-acquired property clause not effective.--[A]

Subject to subsection (b.1), a security interest does not attach

under a term constituting an after-acquired property clause to:

(1) consumer goods, other than an accession when given

as additional security, unless the debtor acquires rights in

them within ten days after the secured party gives value; or

(2) a commercial tort claim.

(b.1) Limitation.--Subsection (b) does not prevent a

security interest from attaching:

(1) to consumer goods as proceeds under section 9315(a)

(relating to secured party's rights on disposition of

collateral and in proceeds) or commingled goods under section

9336(c) (relating to commingled goods);

(2) to a commercial tort claim as proceeds under section

9315(a); or

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(3) under an after-acquired property clause to property

that is proceeds of consumer goods or a commercial tort

claim.

* * *

Section 21. Sections 9207(c), 9208(b), 9209(b), 9210,

9301(c) and (e) and 9304(a) of Title 13 are amended to read:

§ 9207. Rights and duties of secured party having possession or

control of collateral.

* * *

control.--Except as otherwise provided in subsection (d), a

secured party having possession of collateral or control of

collateral under section 7106 (relating to control of electronic

document of title), 9104 (relating to control of deposit

account), 9105 (relating to control of electronic copy of record

evidencing chattel paper), 9106 (relating to control of

investment property) [or], 9107 (relating to control of letter-

of-credit right) or 9107.1 (relating to control of controllable

electronic record, controllable account or controllable payment

intangible):

(1) may hold as additional security any proceeds, except

money or funds, received from the collateral;

(2) shall apply money or funds received from the

collateral to reduce the secured obligation unless remitted

to the debtor; and

(3) may create a security interest in the collateral.

* * *

§ 9208. Additional duties of secured party having control of

collateral.

* * *

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(b) Duties of secured party after receiving demand from

debtor.--Within ten days after receiving [an authenticated] a

signed demand by the debtor:

(1) A secured party having control of a deposit account

under section 9104(a)(2) (relating to control of deposit

account) shall send to the bank with which the deposit

account is maintained [an authenticated statement] a signed

record which releases the bank from any further obligation to

comply with instructions originated by the secured party.

(2) A secured party having control of a deposit account

under section 9104(a)(3) shall:

(i) pay the debtor the balance on deposit in the

deposit account; or

(ii) transfer the balance on deposit into a deposit

account in the debtor's name.

(3) A secured party, other than a buyer, having control

[of electronic chattel paper] under section 9105 (relating to

control of electronic copy of record evidencing chattel

paper) of an authoritative electronic copy of a record

evidencing chattel paper shall[:

(i) communicate the authoritative copy of the

electronic chattel paper to the debtor or its designated

custodian;

(ii) if the debtor designates a custodian that is

the designated custodian with whom or which the

authoritative copy of the electronic chattel paper is

maintained for the secured party, communicate to the

custodian an authenticated record releasing the

designated custodian from any further obligation to

comply with instructions originated by the secured party

A05131 - 47 -

and instructing the custodian to comply with instructions

originated by the debtor; and

(iii) take appropriate action to enable the debtor

or its designated custodian to make copies of or

revisions to the authoritative copy which add or change

an identified assignee of the authoritative copy without

the consent of the secured party.] transfer control of

the electronic copy to the debtor or a person designated

by the debtor.

(4) A secured party having control of investment

property under section 8106(d)(2) (relating to control of

security entitlement) or 9106(b) (relating to control of

commodity contract) shall send to the securities intermediary

or commodity intermediary with which the security entitlement

or commodity contract is maintained [an authenticated] a

signed record which releases the securities intermediary or

commodity intermediary from any further obligation to comply

with entitlement orders or directions originated by the

secured party.

(5) A secured party having control of a letter-of-credit

right under section 9107 (relating to control of letter-of-

credit right) shall send to each person having an unfulfilled

obligation to pay or deliver proceeds of the letter of credit

to the secured party [an authenticated] a signed release from

any further obligation to pay or deliver proceeds of the

letter of credit to the secured party.

(6) A secured party having control [of an electronic

document shall:

(i) give control of the electronic document to the

debtor or its designated custodian;

A05131 - 48 -

(ii) if the debtor designates a custodian that is

the designated custodian with which the authoritative

copy of the electronic document is maintained for the

secured party, communicate to the custodian an

authenticated record releasing the designated custodian

from any further obligation to comply with instructions

originated by the secured party and instructing the

custodian to comply with instructions originated by the

debtor; and

(iii) take appropriate action to enable the debtor

or its designated custodian to make copies of or

revisions to the authoritative copy which add or change

an identified assignee of the authoritative copy without

the consent of the secured party.] under section 7106

(relating to control of electronic document of title) of

an authoritative electronic copy of an electronic

document of title shall transfer control of the

electronic copy to the debtor or a person designated by

the debtor.

(7) A secured party having control under section 12105

(relating to control of controllable electronic record) of a

controllable electronic record, other than a buyer of a

controllable account or controllable payment intangible

evidenced by the controllable electronic record, shall

transfer control of the controllable electronic record to the

debtor or a person designated by the debtor.

§ 9209. Duties of secured party if account debtor has been

notified of assignment.

* * *

(b) Duties of secured party after receiving demand from

A05131 - 49 -

debtor.--Within ten days after receiving [an authenticated] a

signed demand by the debtor, a secured party shall send to an

account debtor that has received notification under section

9406(a) (relating to discharge of account debtor ; notification

of assignment; identification and proof of assignment;

restrictions on assignment of accounts, chattel paper, payment

intangibles and promissory notes ineffective ) or 12106(a)

(relating to discharge of account debtor on controllable account

or controllable electronic payment intangible) of an assignment

to the secured party as assignee [under section 9406(a)

(relating to discharge of account debtor; effect of

notification) an authenticated] a signed record which releases

the account debtor from any further obligation to the secured

party.

* * *

§ 9210. Request for accounting; request regarding list of

collateral or statement of account.

(a) Definitions.--As used in this section, the following

words and phrases shall have the meanings given to them in this

subsection:

"Request." A:

(1) request for an accounting;

(2) request regarding a list of collateral; or

(3) request regarding a statement of account.

"Request for an accounting." A record [authenticated] signed

by a debtor requesting that the recipient provide an accounting

of the unpaid obligations secured by collateral and reasonably

identifying the transaction or relationship which is the subject

of the request.

"Request regarding a list of collateral." A record

A05131 - 50 -

[authenticated] signed by a debtor requesting that the recipient

approve or correct a list of what the debtor believes to be the

collateral securing an obligation and reasonably identifying the

transaction or relationship which is the subject of the request.

"Request regarding a statement of account." A record

[authenticated] signed by a debtor requesting that the recipient

approve or correct a statement indicating what the debtor

believes to be the aggregate amount of unpaid obligations

secured by collateral as of a specified date and reasonably

identifying the transaction or relationship which is the subject

of the request.

(b) Duty to respond to requests.--Subject to subsections

(c), (d), (e) and (f), a secured party, other than a buyer of

accounts, chattel paper, payment intangibles or promissory notes

or a consignor, shall comply with a request within 14 days after

receipt:

(1) in the case of a request for an accounting, by

[authenticating] signing and sending to the debtor an

accounting; and

(2) in the case of a request regarding a list of

collateral or a request regarding a statement of account, by

[authenticating] signing and sending to the debtor an

approval or correction.

concerning type of collateral.--A secured party that claims a

security interest in all of a particular type of collateral

owned by the debtor may comply with a request regarding a list

of collateral by sending to the debtor [an authenticated] a

signed record including a statement to that effect within 14

days after receipt.

A05131 - 51 -

(d) Request regarding list of collateral; no interest

claimed.--A person that receives a request regarding a list of

collateral, claims no interest in the collateral when it

receives the request and claimed an interest in the collateral

at an earlier time shall comply with the request within 14 days

after receipt by sending to the debtor [an authenticated] a

signed record:

(1) disclaiming any interest in the collateral; and

(2) if known to the recipient, providing the name and

mailing address of any assignee of or successor to the

recipient's interest in the collateral.

(e) Request for accounting or regarding statement of

account; no interest in obligation claimed.--A person that

receives a request for an accounting or a request regarding a

statement of account, claims no interest in the obligations when

it receives the request and claimed an interest in the

obligations at an earlier time shall comply with the request

within 14 days after receipt by sending to the debtor [an

authenticated] a signed record:

(1) disclaiming any interest in the obligations; and

(2) if known to the recipient, providing the name and

mailing address of any assignee of or successor to the

recipient's interest in the obligations.

(f) Charges for responses.--A debtor is entitled without

charge to one response to a request under this section during

any six-month period. The secured party may require payment of a

charge not exceeding $25 for each additional response.

§ 9301. Law governing perfection and priority of security

interests.

* * *

A05131 - 52 -

nonpossessory tangible personal property security interests;

location of collateral.--Except as otherwise provided in

subsection (d), while collateral is located in a jurisdiction,

the local law of that jurisdiction governs:

(1) perfection of a security interest in goods by filing

a fixture filing;

(2) perfection of a security interest in timber to be

cut; and

(3) the effect of perfection or nonperfection and the

priority of a nonpossessory security interest in tangible

negotiable documents, goods, instruments[,] or money [or

tangible chattel paper].

* * *

(e) Other exceptions.--The rules of this section are subject

to:

(1) Section 9303 (relating to law governing perfection

and priority of security interests in goods covered by

certificate of title).

(2) Section 9304 (relating to law governing perfection

and priority of security interests in deposit accounts).

(3) Section 9305 (relating to law governing perfection

and priority of security interests in investment property).

(4) Section [9306] 9306.1 (relating to law governing

perfection and priority of security interests in [letter-of-

credit rights] chattel paper).

§ 9304. Law governing perfection and priority of security

interests in deposit accounts.

(a) Law of bank's jurisdiction governs.--The local law of a

bank's jurisdiction governs perfection, the effect of perfection

A05131 - 53 -

or nonperfection and the priority of a security interest in a

deposit account maintained with that bank even if the

transaction does not bear any relation to the bank's

jurisdiction.

* * *

Section 22. Section 9305(a) of Title 13 is amended by adding

a paragraph to read:

§ 9305. Law governing perfection and priority of security

interests in investment property.

(a) Governing law; general rules.--Except as otherwise

provided in subsection (c), the following rules apply:

* * *

(5) Paragraphs (2), (3) and (4) apply even if the

transaction does not bear any relation to the jurisdiction.

* * *

Section 23. Title 13 is amended by adding sections to read:

§ 9306.1. Law governing perfection and priority of security

interests in chattel paper.

(a) Chattel paper evidenced by authoritative electronic

copy.--Except as provided in subsection (d), if chattel paper is

evidenced only by an authoritative electronic copy of the

chattel paper or is evidenced by an authoritative electronic

copy and an authoritative tangible copy, the local law of the

chattel paper's jurisdiction governs perfection, the effect of

perfection or nonperfection and the priority of a security

interest in the chattel paper, even if the transaction does not

bear any relation to the chattel paper's jurisdiction.

(b) Chattel paper's jurisdiction.--The following rules

determine the chattel paper's jurisdiction under this section:

(1) If the authoritative electronic copy of the record

A05131 - 54 -