Regular Session 2023-2024 Senate Bill 1084 P.N. 1440

PRINTER'S NO. 1440

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

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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.

* * *

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[(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

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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

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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

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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

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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

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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

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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.

* * *

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(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;

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(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.--

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(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:

* * *

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§ 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,

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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:

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(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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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).

20240SB1084PN1440 - 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").

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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.

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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,

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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.

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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).

20240SB1084PN1440 - 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.

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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;

20240SB1084PN1440 - 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.

20240SB1084PN1440 - 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.

20240SB1084PN1440 - 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

20240SB1084PN1440 - 44 -

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

20240SB1084PN1440 - 45 -

(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.

* * *

20240SB1084PN1440 - 46 -

(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

20240SB1084PN1440 - 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;

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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.

20240SB1084PN1440 - 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.

* * *

20240SB1084PN1440 - 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

20240SB1084PN1440 - 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

20240SB1084PN1440 - 54 -

evidencing chattel paper, or a record attached to or

logically associated with the electronic copy and readily

available for review, expressly provides that a particular

jurisdiction is the chattel paper's jurisdiction for purposes

of this division or title, that jurisdiction is the chattel

paper's jurisdiction.

(2) If paragraph (1) does not apply and the rules of the

system in which the authoritative electronic copy is recorded

are readily available for review and expressly provide that a

particular jurisdiction is the chattel paper's jurisdiction

for purposes of this division or title, that jurisdiction is

the chattel paper's jurisdiction.

(3) If paragraphs (1) and (2) do not apply and the

authoritative electronic copy, or a record attached to or

logically associated with the electronic copy and readily

available for review, expressly provides that the chattel

paper is governed by the law of a particular jurisdiction,

that jurisdiction is the chattel paper's jurisdiction.

(4) If paragraphs (1), (2) and (3) do not apply and the

rules of the system in which the authoritative electronic

copy is recorded are readily available for review and

expressly provide that the chattel paper or the system is

governed by the law of a particular jurisdiction, that

jurisdiction is the chattel paper's jurisdiction.

(5) If paragraphs (1), (2), (3) and (4) do not apply,

the chattel paper's jurisdiction is the jurisdiction in which

the debtor is located.

copy.--If an authoritative tangible copy of a record evidences

chattel paper and the chattel paper is not evidenced by an

20240SB1084PN1440 - 55 -

authoritative electronic copy, while the authoritative tangible

copy of the record evidencing chattel paper is located in a

jurisdiction, the local law of that jurisdiction governs:

(1) Perfection of a security interest in the chattel

paper by possession under section 9314.1 (relating to

perfection by possession and control of chattel paper).

(2) The effect of perfection or nonperfection and the

priority of a security interest in the chattel paper.

(d) When perfection governed by law of jurisdiction where

debtor located.--The local law of the jurisdiction in which the

debtor is located governs perfection of a security interest in

chattel paper by filing.

§ 9306.2. Law governing perfection and priority of security

interests in controllable accounts, controllable

electronic records and controllable payment

intangibles.

(a) General rule.--Except as provided in subsection (b), the

local law of the controllable electronic record's jurisdiction

specified in section 12107(c) and (d) (relating to governing

law) governs perfection, the effect of perfection or

nonperfection and the priority of a security interest in a

controllable electronic record and a security interest in a

controllable account or controllable payment intangible

evidenced by the controllable electronic record.

(b) When perfection governed by law of jurisdiction where

debtor located.--The local law of the jurisdiction in which the

debtor is located governs:

(1) Perfection of a security interest in a controllable

account, controllable electronic record or controllable

payment intangible by filing.

20240SB1084PN1440 - 56 -

(2) Automatic perfection of a security interest in a

controllable payment intangible created by a sale of the

controllable payment intangible.

Section 24. Section 9310(a) and (b)(4), (5) and (8) of Title

13 are amended and subsection (b) is amended by adding a

paragraph to read:

§ 9310. When filing required to perfect security interest or

agricultural lien; security interests and

agricultural liens to which filing provisions do not

apply.

(a) General rule: perfection by filing.--Except as otherwise

provided in subsection (b) and section 9312(b) (relating to

[control or possession of certain collateral] perfection of

security interests in chattel paper, controllable accounts,

controllable electronic records, controllable payment

intangibles, deposit accounts, documents, goods covered by

documents, instruments, investment property, letter-of-credit

rights and money; perfection by permissive filing; temporary

perfection without filing or transfer of possession), a

financing statement must be filed to perfect all security

interests and agricultural liens.

(b) Exceptions: filing not necessary.--The filing of a

financing statement is not necessary to perfect a security

interest:

* * *

(4) in goods in possession of a bailee which is

perfected under section 9312(d)(1) or (2) [(relating to goods

covered by nonnegotiable document)];

(5) in certificated securities, documents, goods or

instruments which is perfected without filing, control or

20240SB1084PN1440 - 57 -

possession under section:

(i) 9312(e) [(relating to temporary perfection: new

value)];

(ii) 9312(f) [(relating to temporary perfection:

goods or documents made available to debtor)]; or

(iii) 9312(g) [(relating to temporary perfection:

delivery of security certificate or instrument to

debtor)];

* * *

(8) in controllable accounts, controllable electronic

records, controllable payment intangibles, deposit accounts,

[electronic chattel paper,] electronic documents, investment

property or letter-of-credit rights which is perfected by

control under section 9314 (relating to perfection by

control);

(8.1) in chattel paper which is perfected by possession

and control under section 9314.1 (relating to perfection by

possession and control of chattel paper);

* * *

Section 25. Sections 9312 heading, (a) and (e), 9313(a), (c)

and (d) and 9314 of Title 13 are amended to read:

§ 9312. Perfection of security interests in chattel paper,

controllable accounts, controllable electronic

records, controllable payment intangibles, deposit

accounts, documents, goods covered by documents,

instruments, investment property, letter-of-credit

rights and money; perfection by permissive filing;

temporary perfection without filing or transfer of

possession.

(a) Perfection by filing permitted.--A security interest in

20240SB1084PN1440 - 58 -

chattel paper, [negotiable documents,] controllable accounts,

controllable electronic records, controllable payment

intangibles, instruments [or], investment property or negotiable

documents may be perfected by filing.

* * *

(e) Temporary perfection: new value.--A security interest in

certificated securities, negotiable documents or instruments is

perfected without filing or the taking of possession or control

for a period of 20 days from the time it attaches to the extent

that it arises for new value given under [an authenticated] a

signed security agreement.

* * *

§ 9313. When possession by or delivery to secured party

perfects security interest without filing.

(a) Perfection by possession or delivery.--Except as

otherwise provided in subsection (b), a secured party may

perfect a security interest in [tangible negotiable documents,]

goods, instruments, negotiable tangible documents or money [or

tangible chattel paper] by taking possession of the collateral.

A secured party may perfect a security interest in certificated

securities by taking delivery under section 8301 (relating to

delivery).

* * *

With respect to collateral other than certificated securities

and goods covered by a document, a secured party takes

possession of collateral in the possession of a person other

than the debtor, the secured party or a lessee of the collateral

from the debtor in the ordinary course of the debtor's business

when:

20240SB1084PN1440 - 59 -

(1) the person in possession [authenticates] signs a

record acknowledging that the person holds possession of the

collateral for the secured party's benefit; or

(2) the person takes possession of the collateral after

having [authenticated] signed a record acknowledging that the

person will hold possession of the collateral for the secured

party's benefit.

(d) Time of perfection by possession; continuation of

perfection.--If perfection of a security interest depends upon

possession of the collateral by a secured party, perfection

occurs [no] not earlier than the time the secured party takes

possession and continues only while the secured party retains

possession.

* * *

§ 9314. Perfection by control.

(a) Perfection by control.--A security interest in

[investment property, deposit accounts, letter-of-credit rights,

electronic chattel paper or electronic documents] controllable

accounts, controllable electronic records, controllable payment

intangibles, deposit accounts, electronic documents, investment

property or letter-of-credit rights may be perfected by control

of the 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

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).

(b) Specified collateral: time of perfection by control;

20240SB1084PN1440 - 60 -

continuation of perfection.--A security interest in [deposit

accounts, electronic chattel paper, letter-of-credit rights or

electronic documents] controllable accounts, controllable

electronic records, controllable payment intangibles, deposit

accounts, electronic documents or letter-of-credit rights is

perfected by control under section 7106, 9104, [9105 or 9107

when] 9107 or 9107.1 not earlier than the time the secured party

obtains control and remains perfected by control only while the

secured party retains control.

continuation of perfection.--A security interest in investment

property is perfected by control under section 9106 [from] not

earlier than the time the secured party obtains control and

remains perfected by control until both of the following

paragraphs apply:

(1) The secured party does not have control.

(2) One of the following occurs:

(i) If the collateral is a certificated security,

the debtor has or acquires possession of the security

certificate.

(ii) If the collateral is an uncertificated

security, the issuer has registered or registers the

debtor as the registered owner.

(iii) If the collateral is a security entitlement,

the debtor is or becomes the entitlement holder.

Section 26. Title 13 is amended by adding a section to read:

§ 9314.1. Perfection by possession and control of chattel

paper.

(a) Perfection by possession and control.--A secured party

may perfect a security interest in chattel paper by taking

20240SB1084PN1440 - 61 -

possession of each authoritative tangible copy of the record

evidencing the chattel paper and obtaining control of each

authoritative electronic copy of the electronic record

evidencing the chattel paper.

(b) Time of perfection; continuation of perfection.--A

security interest is perfected under subsection (a) not earlier

than the time the secured party takes possession and obtains

control and remains perfected under subsection (a) only while

the secured party retains possession and control.

of chattel paper.--Section 9313(c), (f), (g), (h) and (i)

(relating to when possession by or delivery to secured party

perfects security interest without filing) applies to perfection

by possession of an authoritative tangible copy of a record

evidencing chattel paper.

Section 27. Section 9316(a) and (f) of Title 13 are amended

to read:

§ 9316. Effect of change in governing law.

(a) General rule: effect on perfection of change in

governing law.--A security interest perfected pursuant to the

law of the jurisdiction designated in section 9301(a) (relating

to general rule: location of debtor) [or], 9305(c) (relating to

when perfection governed by law of jurisdiction where debtor

located), 9306.1(d) (relating to law governing perfection and

priority of security interests in chattel paper) or 9306.2(b)

(relating to law governing perfection and priority of security

interests in controllable accounts, controllable electronic

records and controllable payment intangibles) remains perfected

until the earliest of:

(1) the time perfection would have ceased under the law

20240SB1084PN1440 - 62 -

of that jurisdiction;

(2) the expiration of four months after a change of the

debtor's location to another jurisdiction; or

(3) the expiration of one year after a transfer of

collateral to a person that thereby becomes a debtor and is

located in another jurisdiction.

* * *

(f) Change in jurisdiction of chattel paper, controllable

electronic record, bank, issuer, nominated person, securities

intermediary or commodity intermediary.--A security interest in

chattel paper, controllable accounts, controllable electronic

records, controllable payment intangibles, deposit accounts,

letter-of-credit rights or investment property which is

perfected under the law of the chattel paper's jurisdiction, the

controllable electronic record's jurisdiction, the bank's

jurisdiction, the issuer's jurisdiction, a nominated person's

jurisdiction, the securities intermediary's jurisdiction or the

commodity intermediary's jurisdiction, as applicable, remains

perfected until the earlier of:

(1) the time the security interest would have become

unperfected under the law of that jurisdiction; or

(2) the expiration of four months after a change of the

applicable jurisdiction to another jurisdiction.

* * *

Section 28. Section 9317(b) and (d) of Title 13 are amended

and the section is amended by adding subsections to read:

§ 9317. Interests which take priority over or take free of

security interest or agricultural lien.

* * *

(b) Buyers that receive delivery.--Except as otherwise

20240SB1084PN1440 - 63 -

provided in subsection (e), a buyer, other than a secured party,

of [tangible chattel paper, tangible documents,] goods,

instruments, tangible documents or a certificated security takes

free of a security interest or agricultural lien if the buyer

gives value and receives delivery of the collateral without

knowledge of the security interest or agricultural lien and

before it is perfected.

* * *

(d) Licensees and buyers of certain collateral.--[A] Subject

to subsections (f), (g), (h) and (i), a licensee of a general

intangible or a buyer, other than a secured party, of collateral

other than [tangible chattel paper, tangible documents,] goods,

instruments, tangible documents or a certificated security takes

free of a security interest if the licensee or buyer gives value

without knowledge of the security interest and before it is

perfected.

* * *

(f) Buyers of chattel paper.--A buyer, other than a secured

party, of chattel paper takes free of a security interest if,

without knowledge of the security interest and before it is

perfected, the buyer gives value and:

(1) receives delivery of each authoritative tangible

copy of the record evidencing the chattel paper; and

(2) if each authoritative electronic copy of the record

evidencing the chattel paper can be subjected to control

under section 9105 (relating to control of electronic copy of

record evidencing chattel paper), obtains control of each

authoritative electronic copy.

(g) Buyers of electronic documents.--A buyer of an

electronic document takes free of a security interest if,

20240SB1084PN1440 - 64 -

without knowledge of the security interest and before it is

perfected, the buyer gives value and, if each authoritative

electronic copy of the document can be subjected to control

under section 7106 (relating to control of electronic document

of title), obtains control of each authoritative electronic

copy.

(h) Buyers of controllable electronic records.--A buyer of a

controllable electronic record takes free of a security interest

if, without knowledge of the security interest and before it is

perfected, the buyer gives value and obtains control of the

controllable electronic record.

(i) Buyers of controllable accounts and controllable payment

intangibles.--A buyer, other than a secured party, of a

controllable account or a controllable payment intangible takes

free of a security interest if, without knowledge of the

security interest and before it is perfected, the buyer gives

value and obtains control of the controllable account or

controllable payment intangible.

Section 29. Sections 9322(c), 9323(a)(1)(ii), (d) and (f)

and 9324(b), (c)(2) and (d) of Title 13 are amended to read:

§ 9322. Priorities among conflicting security interests in and

agricultural liens on same collateral.

* * *

obligations.--Except as otherwise provided in subsection (f), a

security interest in collateral which qualifies for priority

over a conflicting security interest under section 9327

(relating to priority of security interests in deposit account),

9328 (relating to priority of security interests in investment

property), 9329 (relating to priority of security interests in

20240SB1084PN1440 - 65 -

letter-of-credit right), 9330 (relating to priority of purchaser

of chattel paper or instrument) or 9331 (relating to priority of

rights of purchasers of [instruments, documents] controllable

accounts, controllable electronic records, controllable payment

intangibles, documents, instruments and securities under other

divisions; priority of interests in financial assets and

security entitlements and protection against assertion of claim

under [Division 8] Divisions 8 and 12) also has priority over a

conflicting security interest in all of the following:

(1) Any supporting obligation for the collateral.

(2) Proceeds of the collateral if:

(i) the security interest in proceeds is perfected;

(ii) the proceeds are cash proceeds or of the same

type as the collateral; and

(iii) in the case of proceeds which are proceeds of

proceeds, all intervening proceeds are:

(A) cash proceeds;

(B) proceeds of the same type as the collateral;

* * *

§ 9323. Future advances.

(a) When priority based on time of advance.--Except as

otherwise provided in subsection (c), for purposes of

determining the priority of a perfected security interest under

section 9322(a)(1) (relating to general priority rules),

perfection of the security interest dates from the time an

advance is made to the extent that the security interest secures

an advance which:

(1) is made while the security interest is perfected

20240SB1084PN1440 - 66 -

only:

* * *

(ii) temporarily under any of the following

sections:

(A) 9312(e) (relating to [temporary perfection:

new value] perfection of security interests in

chattel paper, controllable accounts, controllable

electronic records, controllable payment intangibles,

deposit accounts, documents, goods covered by

documents, instruments, investment property, letter-

of-credit rights and money; perfection by permissive

filing; temporary perfection without filing or

transfer of possession);

(B) 9312(f) [(relating to temporary perfection:

goods or documents made available to debtor)]; or

delivery of security certificate or instrument to

debtor)]; and

* * *

(d) Buyer of goods.--Except as otherwise provided in

subsection (e), a buyer of goods [other than a buyer in ordinary

course of business] takes free of a security interest to the

extent that it secures advances made after the earlier of:

(1) the time the secured party acquires knowledge of the

buyer's purchase; or

(2) 45 days after the purchase.

* * *

(f) Lessee of goods.--Except as otherwise provided in

subsection (g), a lessee of goods[, other than a lessee in

ordinary course of business,] takes the leasehold interest free

20240SB1084PN1440 - 67 -

of a security interest to the extent that it secures advances

made after the earlier of:

(1) the time the secured party acquires knowledge of the

lease; or

(2) 45 days after the lease contract becomes

enforceable.

* * *

§ 9324. Priority of purchase-money security interests.

* * *

(b) Inventory purchase-money priority.--Subject to

subsection (c) and except as otherwise provided in subsection

(g), a perfected purchase-money security interest in inventory

has priority over a conflicting security interest in the same

inventory; has priority over a conflicting security interest in

chattel paper or an instrument constituting proceeds of the

inventory and in proceeds of the chattel paper if so provided in

section 9330 (relating to priority of purchaser of chattel paper

or instrument); and, except as otherwise provided in section

9327, also has priority in identifiable cash proceeds of the

inventory to the extent the identifiable cash proceeds are

received on or before the delivery of the inventory to a buyer,

if:

(1) the purchase-money security interest is perfected

when the debtor receives possession of the inventory;

(2) the purchase-money secured party sends [an

authenticated] a signed notification to the holder of the

conflicting security interest;

(3) the holder of the conflicting security interest

receives the notification within five years before the debtor

receives possession of the inventory; and

20240SB1084PN1440 - 68 -

(4) the notification states that the person sending the

notification has or expects to acquire a purchase-money

security interest in inventory of the debtor and describes

the inventory.

be notified.--Subsection (b)(2) through (4) apply only if the

holder of the conflicting security interest had filed a

financing statement covering the same types of inventory:

* * *

(2) if the purchase-money security interest is

temporarily perfected without filing or possession under

section 9312(f) (relating to [temporary perfection: goods or

documents made available to debtor] perfection of security

interests in chattel paper, controllable accounts,

controllable electronic records, controllable payment

intangibles, deposit accounts, documents, goods covered by

documents, instruments, investment property, letter-of-credit

rights and money; perfection by permissive filing; temporary

perfection without filing or transfer of possession), before

the beginning of the 20-day period thereunder.

(d) Livestock purchase-money priority.--Subject to

subsection (e) and except as otherwise provided in subsection

(g), a perfected purchase-money security interest in livestock

which are farm products has priority over a conflicting security

interest in the same livestock; and, except as otherwise

provided in section 9327, a perfected security interest in their

identifiable proceeds and identifiable products in their

unmanufactured state also has priority, if:

(1) the purchase-money security interest is perfected

when the debtor receives possession of the livestock;

20240SB1084PN1440 - 69 -

(2) the purchase-money secured party sends [an

authenticated] a signed notification to the holder of the

conflicting security interest;

(3) the holder of the conflicting security interest

receives the notification within six months before the debtor

receives possession of the livestock; and

(4) the notification states that the person sending the

notification has or expects to acquire a purchase-money

security interest in livestock of the debtor and describes

the livestock.

* * *

Section 30. Title 13 is amended by adding a section to read:

§ 9326.1. Priority of security interest in controllable

account, controllable electronic record and

controllable payment intangible.

A security interest in a controllable account, controllable

electronic record or controllable payment intangible held by a

secured party having control of the account, electronic record

or payment intangible has priority over a conflicting security

interest held by a secured party that does not have control.

Section 31. Sections 9330(a), (b), (d) and (f), 9331

heading, (a) and (b), 9332, 9334(f), 9341 and 9404(a)(2) of

Title 13 are amended to read:

§ 9330. Priority of purchaser of chattel paper or instrument.

(a) Purchaser's priority: security interest claimed merely

as proceeds.--A purchaser of chattel paper has priority over a

security interest in the chattel paper which is claimed merely

as proceeds of inventory subject to a security interest if:

(1) in good faith and in the ordinary course of the

purchaser's business, the purchaser gives new value [and],

20240SB1084PN1440 - 70 -

takes possession of each authoritative tangible copy of the

record evidencing the chattel paper [or] and obtains control

[of] under section 9105 (relating to control of electronic

copy of record evidencing chattel paper) of each

authoritative electronic copy of the record evidencing the

chattel paper [under section 9105 (relating to control of

electronic chattel paper)]; and

(2) the authoritative copies of the record evidencing

the chattel paper [does] do not indicate that [it] the

chattel paper has been assigned to an identified assignee

other than the purchaser.

(b) Purchaser's priority: other security interests.--A

purchaser of chattel paper has priority over a security interest

in the chattel paper which is claimed other than merely as

proceeds of inventory subject to a security interest if the

purchaser gives new value [and], takes possession of each

authoritative tangible copy of the record evidencing the chattel

paper [or] and obtains control [of] under section 9105 of each

authoritative electronic copy of the record evidencing the

chattel paper [under section 9105] in good faith, in the

ordinary course of the purchaser's business and without

knowledge that the purchase violates the rights of the secured

party.

* * *

(d) Instrument purchaser's priority.--Except as otherwise

provided in section 9331(a) (relating to priority of rights of

purchasers of controllable accounts, controllable electronic

records, controllable payment intangibles, documents,

instruments and securities under other divisions; priority of

interests in financial assets and security entitlements and

20240SB1084PN1440 - 71 -

protection against assertion of claim under Divisions [3, 7 and]

8 [not limited] and 12), a purchaser of an instrument has

priority over a security interest in the instrument perfected by

a method other than possession if the purchaser gives value and

takes possession of the instrument in good faith and without

knowledge that the purchase violates the rights of the secured

party.

* * *

(f) Indication of assignment gives knowledge.--For purposes

of subsections (b) and (d), if the authoritative copies of the

record evidencing chattel paper or an instrument [indicates]

indicate that [it] the chattel paper or instrument has been

assigned to an identified secured party other than the

purchaser, a purchaser of the chattel paper or instrument has

knowledge that the purchase violates the rights of the secured

party.

§ 9331. Priority of rights of purchasers of [instruments,

documents] controllable accounts, controllable

electronic records, controllable payment intangibles,

documents, instruments and securities under other

divisions; priority of interests in financial assets

and security entitlements and protection against

assertion of claim under [Division 8] Divisions 8 and

12.

(a) Rights under Divisions 3, 7 [and], 8 and 12 not

limited.--This division does not limit the rights of a holder in

due course of a negotiable instrument, a holder to which a

negotiable document of title has been duly negotiated [or], a

protected purchaser of a security or a qualifying purchaser of a

controllable account, controllable electronic record or

20240SB1084PN1440 - 72 -

controllable payment intangible. These holders or purchasers

take priority over an earlier security interest, even if

perfected, to the extent provided in Divisions 3 (relating to

negotiable instruments), 7 (relating to warehouse receipts,

bills of lading and other documents of title) [and], 8 (relating

to investment securities) and 12 (relating to controllable

electronic records).

(b) Protection under [Division 8] Divisions 8 and 12.--This

division does not limit the rights of or impose liability on a

person to the extent that the person is protected against the

assertion of a claim under Division 8 or 12.

* * *

§ 9332. Transfer of money; transfer of funds from deposit

account.

(a) Transferee of money.--A transferee of money takes the

money free of a security interest [unless the transferee acts]

if the transferee receives possession of the money without

acting in collusion with the debtor in violating the rights of

the secured party.

(b) Transferee of funds from deposit account.--A transferee

of funds from a deposit account takes the funds free of a

security interest in the deposit account [unless the transferee

acts] if the transferee receives the funds without acting in

collusion with the debtor in violating the rights of the secured

party.

§ 9334. Priority of security interests in fixtures and crops.

* * *

(f) Priority based on consent, disclaimer or right to

remove.--A security interest in fixtures, whether or not

perfected, has priority over a conflicting interest of an

20240SB1084PN1440 - 73 -

encumbrancer or owner of the real property if:

(1) the encumbrancer or owner has, in [an authenticated]

a signed record, consented to the security interest or

disclaimed an interest in the goods as fixtures; or

(2) the debtor has a right to remove the goods as

against the encumbrancer or owner.

* * *

§ 9341. Bank's rights and duties with respect to deposit

account.

Except as otherwise provided in section 9340(c) (relating to

when set-off ineffective) and unless the bank otherwise agrees

in [an authenticated] a signed record, a bank's rights and

duties with respect to a deposit account maintained with the

bank are not terminated, suspended or modified by:

(1) the creation, attachment or perfection of a security

interest in the deposit account;

(2) the bank's knowledge of the security interest; or

(3) the bank's receipt of instructions from the secured

party.

§ 9404. Rights acquired by assignee; claims and defenses

against assignee.

(a) Assignee's rights subject to terms, claims and defenses;

exceptions.--Unless an account debtor has made an enforceable

agreement not to assert defenses or claims, and subject to

subsections (b) through (e), the rights of an assignee are

subject to:

* * *

(2) any other defense or claim of the account debtor

against the assignor which accrues before the account debtor

receives a notification of the assignment [authenticated]

20240SB1084PN1440 - 74 -

signed by the assignor or the assignee.

* * *

Section 32. Section 9406(a), (b), (c), (d) and (g) of Title

13 are amended and the section is amended by adding subsections

to read:

§ 9406. 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.

(a) Discharge of account debtor; effect of notification.--

Subject to subsections (b) through (i) and (l), an account

debtor on an account, chattel paper or a payment intangible may

discharge its obligation by paying the assignor until, but not

after, the account debtor receives a notification,

[authenticated] signed by the assignor or the assignee, that the

amount due or to become due has been assigned and that payment

is to be made to the assignee. After receipt of the

notification, the account debtor may discharge its obligation by

paying the assignee and may not discharge the obligation by

paying the assignor.

(b) When notification ineffective.--Subject to [subsection

(h)] subsections (h) and (l), notification is ineffective under

subsection (a):

(1) If it does not reasonably identify the rights

assigned.

(2) To the extent that an agreement between an account

debtor and a seller of a payment intangible limits the

account debtor's duty to pay a person other than the seller

and the limitation is effective under law other than this

20240SB1084PN1440 - 75 -

division.

(3) At the option of an account debtor, if the

notification notifies the account debtor to make less than

the full amount of any installment or other periodic payment

to the assignee even if:

(i) only a portion of the account, chattel paper or

payment intangible has been assigned to that assignee;

(ii) a portion has been assigned to another

assignee; or

(iii) the account debtor knows that the assignment

to that assignee is limited.

subsections (h) and (l), if requested by the account debtor, an

assignee shall seasonably furnish reasonable proof that the

assignment has been made. Unless the assignee complies, the

account debtor may discharge its obligation by paying the

assignor even if the account debtor has received a notification

under subsection (a).

(d) Term restricting assignment generally ineffective.--In

this subsection, "promissory note" includes a negotiable

instrument that evidences chattel paper. Except as otherwise

provided in subsections (e) and (j) and sections 2A303 (relating

to alienability of party's interest under lease contract or of

lessor's residual interest in goods; delegation of performance;

transfer of rights) and 9407 (relating to restrictions on

creation or enforcement of security interest in leasehold

interest or in lessor's residual interest) and subject to

subsection (h), a term in an agreement between an account debtor

and an assignor or in a promissory note is ineffective to the

extent that it:

20240SB1084PN1440 - 76 -

(1) prohibits, restricts or requires the consent of the

account debtor or person obligated on the promissory note to

the assignment or transfer of, or the creation, attachment,

perfection or enforcement of a security interest in, the

account, chattel paper, payment intangible or promissory

note; or

(2) provides that the assignment or transfer or the

creation, attachment, perfection or enforcement of the

security interest may give rise to a default, breach, right

of recoupment, claim, defense, termination, right of

termination or remedy under the account, chattel paper,

payment intangible or promissory note.

* * *

(g) Subsection (b)(3) not waivable.--Subject to [subsection

(h)] subsections (h) and (l), an account debtor may not waive or

vary its option under subsection (b)(3).

* * *

(k) (Reserved).

(l) Inapplicability of certain subsections.--Subsections

(a), (b), (c) and (g) do not apply to a controllable account or

controllable payment intangible.

Section 33. Section 9408 of Title 13 is amended by adding

subsections to read:

§ 9408. Restrictions on assignment of promissory notes, health-

care-insurance receivables and certain general

intangibles ineffective.

* * *

(f) (Reserved).

(g) "Promissory note".--In this section, "promissory note"

includes a negotiable instrument that evidences chattel paper.

20240SB1084PN1440 - 77 -

Section 34. Sections 9509(a) and (b), 9513(b) and (c),

9601(b), 9605, 9608(a)(1), 9611(a), (b), (c) and (e), 9613,

9614, 9615(a), 9616(a), (b) and (c), 9619(a), 9620(a), (b), (c)

and (f), 9621(a) and 9624 of Title 13 are amended to read:

§ 9509. Persons entitled to file a record.

(a) Person entitled to file record.--A person may file an

initial financing statement, amendment which adds collateral

covered by a financing statement or amendment which adds a

debtor to a financing statement only if:

(1) the debtor authorizes the filing in [an

authenticated] a signed record or pursuant to subsection (b)

or (c); or

(2) the person holds an agricultural lien which has

become effective at the time of filing and the financing

statement covers only collateral in which the person holds an

agricultural lien.

(b) Security agreement as authorization.--By

[authenticating] signing or becoming bound as debtor by a

security agreement, a debtor or new debtor authorizes the filing

of an initial financing statement and an amendment covering:

(1) the collateral described in the security agreement;

and

(2) property which becomes collateral under section

9315(a)(2) (relating to secured party's rights on disposition

of collateral and in proceeds), whether or not the security

agreement expressly covers proceeds.

* * *

§ 9513. Termination statement.

* * *

(b) Time for compliance with subsection (a).--To comply with

20240SB1084PN1440 - 78 -

subsection (a), a secured party shall cause the secured party of

record to file the termination statement:

(1) within one month after there is no obligation

secured by the collateral covered by the financing statement

and no commitment to make an advance, incur an obligation or

otherwise give value; or

(2) if earlier, within 20 days after the secured party

receives [an authenticated] a signed demand from a debtor.

(a), within 20 days after a secured party receives [an

authenticated] a signed demand from a debtor, the secured party

shall cause the secured party of record for a financing

statement to send to the debtor a termination statement for the

financing statement or file the termination statement in the

filing office if:

(1) except in the case of a financing statement covering

accounts or chattel paper which has been sold or goods which

are the subject of a consignment, there is no obligation

secured by the collateral covered by the financing statement

and no commitment to make an advance, incur an obligation or

otherwise give value;

(2) the financing statement covers accounts or chattel

paper which has been sold but as to which the account debtor

or other person obligated has discharged its obligation;

(3) the financing statement covers goods which were the

subject of a consignment to the debtor but are not in the

debtor's possession; or

(4) the debtor did not authorize the filing of the

initial financing statement.

* * *

20240SB1084PN1440 - 79 -

§ 9601. Rights after default; judicial enforcement; consignor

or buyer of accounts, chattel paper, payment

intangibles or promissory notes.

* * *

(b) Rights and duties of secured party in possession or

control.--A secured party in 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) has the rights and duties

provided in section 9207 (relating to rights and duties of

secured party having possession or control of collateral).

* * *

§ 9605. Unknown debtor or secondary obligor.

[A] (a) In general: no duty owed by secured party.--Except

as provided in subsection (b), a secured party does not owe a

duty based on its status as secured party to any of the

following:

(1) A person that is a debtor or obligor unless the

secured party knows:

(i) that the person is a debtor or obligor;

(ii) the identity of the person; and

(iii) how to communicate with the person.

(2) A secured party or lienholder that has filed a

financing statement against a person unless the secured party

knows:

20240SB1084PN1440 - 80 -

(i) that the person is a debtor; and

(ii) the identity of the person.

(b) Exception: secured party owes duty to debtor or

obligor.--A secured party owes a duty based on its status as a

secured party to a person if, at the time the secured party

obtains control of collateral that is a controllable account,

controllable electronic record or controllable payment

intangible or at the time the security interest attaches to the

collateral, whichever is later:

(1) the person is a debtor or obligor; and

(2) the secured party knows that the information in

subsection (a)(1) relating to the person is not provided by

the collateral, a record attached to or logically associated

with the collateral or the system in which the collateral is

recorded.

§ 9608. Application of proceeds of collection or enforcement;

liability for deficiency and right to surplus.

(a) Application of proceeds, surplus and deficiency if

obligation secured.--If a security interest or agricultural lien

secures payment or performance of an obligation, the following

rules apply:

(1) A secured party shall apply or pay over for

application the cash proceeds of collection or enforcement

under section 9607 (relating to collection and enforcement by

secured party) in the following order to:

(i) the reasonable expenses of collection and

enforcement and, to the extent provided for by agreement

and not prohibited by law, reasonable attorney fees and

legal expenses incurred by the secured party;

(ii) the satisfaction of obligations secured by the

20240SB1084PN1440 - 81 -

security interest or agricultural lien under which the

collection or enforcement is made; and

(iii) the satisfaction of obligations secured by any

subordinate security interest in or other lien on the

collateral subject to the security interest or

agricultural lien under which the collection or

enforcement is made if the secured party receives [an

authenticated] a signed demand for proceeds before

distribution of the proceeds is completed.

* * *

§ 9611. Notification before disposition of collateral.

(a) Notification date.--As used in this section, the term

"notification date" means the earlier of the date on which:

(1) a secured party sends to the debtor and any

secondary obligor [an authenticated] a signed notification of

disposition; or

(2) the debtor and any secondary obligor waive the right

to notification.

(b) Notification of disposition required.--Except as

otherwise provided in subsection (d), a secured party that

disposes of collateral under section 9610 (relating to

disposition of collateral after default) shall send to the

persons specified in subsection (c) a reasonable [authenticated]

signed notification of disposition.

the secured party shall send [an authenticated] a signed

notification of disposition to all of the following:

(1) The debtor.

(2) Any secondary obligor.

(3) If the collateral is other than consumer goods, all

20240SB1084PN1440 - 82 -

of the following:

(i) Any other person from which the secured party

has received, before the notification date, [an

authenticated] a signed notification of a claim of an

interest in the collateral.

(ii) Any other secured party or lienholder that, ten

days before the notification date, held a security

interest in or other lien on the collateral perfected by

the filing of a financing statement which:

(A) identified the collateral;

(B) was indexed under the debtor's name as of

that date; and

financing statement against the debtor covering the

collateral as of that date.

(iii) Any other secured party that, ten days before

the notification date, held a security interest in the

collateral perfected by compliance with a statute,

regulation or treaty described in section 9311(a)

(relating to security interest subject to other law).

* * *

(e) Compliance with subsection (c)(3)(ii).--A secured party

complies with the requirement for notification prescribed by

subsection (c)(3)(ii) if both of the following paragraphs apply:

(1) Not later than 20 days or earlier than 30 days

before the notification date, the secured party requests, in

a commercially reasonable manner, information concerning

financing statements indexed under the debtor's name in the

office indicated in subsection (c)(3)(ii).

(2) Before the notification date, the secured party:

20240SB1084PN1440 - 83 -

(i) did not receive a response to the request for

information; or

(ii) received a response to the request for

information and sent [an authenticated] a signed

notification of disposition to each secured party or

other lienholder named in that response whose financing

statement covered the collateral.

§ 9613. Contents and form of notification before disposition of

collateral: general.

(a) Contents and form of notification.--Except in a

consumer-goods transaction, the following rules apply:

(1) The contents of a notification of disposition are

sufficient if the notification:

(i) describes the debtor and the secured party;

(ii) describes the collateral which is the subject

of the intended disposition;

(iii) states the method of intended disposition;

(iv) states that the debtor is entitled to an

accounting of the unpaid indebtedness and states the

charge, if any, for an accounting; and

(v) states the time and place of a public

disposition or the time after which any other disposition

is to be made.

(2) Whether the contents of a notification which lacks

any of the information specified in paragraph (1) are

nevertheless sufficient is a question of fact.

(3) The contents of a notification providing

substantially the information specified in paragraph (1) are

sufficient even if the notification includes:

(i) information not specified by that paragraph; or

20240SB1084PN1440 - 84 -

(ii) minor errors which are not seriously

misleading.

(4) A particular phrasing of the notification is not

required.

(5) The following form of notification and the form

appearing in section [9614(3)] 9614(a)(3) (relating to

contents and form of notification before disposition of

collateral: consumer-goods transaction), when completed in

accordance with the instructions in subsection (b) and

section 9614(b), each provides sufficient information:

NOTIFICATION OF DISPOSITION OF COLLATERAL

[To:______________________(Name of debtor, obligor or

other person to which the notification is sent)

From:_____________________(Name, address and telephone

number of secured party)

Name of Debtor(s):______________________(include only if

debtor(s) are not an addressee)

(For a public disposition:)

We will sell (or lease or license, as applicable) the

______________________(describe collateral) (to the highest

qualified bidder) in public as follows:

Day and Date:_____________________

Time:_____________________

Place:_____________________

(For a private disposition:)

We will sell (or lease or license, as applicable) the

_____________________(describe collateral) privately

sometime after ________________________ (day and date).

You are entitled to an accounting of the unpaid

indebtedness secured by the property that we intend to sell

20240SB1084PN1440 - 85 -

(or lease or license, as applicable) (for a charge of

$_______). You may request an accounting by calling us at

_____________________(telephone number).

(End of Form)]

To: (Name of debtor, obligor, or other person to which the

notification is sent)

From: (Name, address, and telephone number of secured party)

{1} Name of any debtor that is not an addressee: (Name

of each debtor)

{2} We will sell (describe collateral) (to the highest

qualified bidder) at public sale. A sale could include a

lease or license. The sale will be held as follows:

(Date)

(Time)

(Place)

{3} We will sell (describe collateral) at private sale

sometime after (date). A sale could include a lease or

license.

{4} You are entitled to an accounting of the unpaid

indebtedness secured by the property that we intend to sell

or, as applicable, lease or license.

{5} If you request an accounting you must pay a charge

of $ (amount).

{6} You may request an accounting by calling us at

(telephone number).

(End of Form)

(b) Instructions for form of notification.--The following

instructions apply to the form of notification in subsection (a)

(5):

(1) The instructions in this subsection refer to the

20240SB1084PN1440 - 86 -

numbers in braces before items in the form of notification in

subsection (a)(5). Do not include the numbers or braces in

the notification. The numbers and braces are used only for

the purpose of these instructions.

(2) Include and complete item {1} only if there is a

debtor that is not an addressee of the notification and list

the name or names.

(3) Include and complete either item {2}, if the

notification relates to a public disposition of the

collateral, or item {3}, if the notification relates to a

private disposition of the collateral. If item {2} is

included, include the words "to the highest qualified bidder"

only if applicable.

(4) Include and complete items {4} and {6}.

(5) Include and complete item {5} only if the sender

will charge the recipient for an accounting.

§ 9614. Contents and form of notification before disposition of

collateral: consumer-goods transaction.

(a) Contents and form of notification.--In a consumer-goods

transaction, the following rules apply:

(1) A notification of disposition must provide the

following information:

(i) the information specified in section [9613(1)]

96 13(a)(1) (relating to contents and form of notification

before disposition of collateral: general);

(ii) a description of any liability for a deficiency

of the person to which the notification is sent;

(iii) a telephone number from which the amount which

must be paid to the secured party to redeem the

collateral under section 9623 (relating to right to

20240SB1084PN1440 - 87 -

redeem collateral) is available; and

(iv) a telephone number or mailing address from

which additional information concerning the disposition

and the obligation secured is available.

(2) A particular phrasing of the notification is not

required.

(3) The following form of notification, when completed

in accordance with the instructions in subsection (b),

provides sufficient information:

[_____________________ (Name and address of secured

party)

_____________________ (Date)

NOTICE OF OUR PLAN TO SELL PROPERTY

_____________________ (Name and address of any obligor

who is also a debtor)

Subject: ____________________ (Identification of

transaction)

We have your ____________________ (describe

collateral) because you broke promises in our agreement.

(For a public disposition:)

We will sell _____________________ (describe

collateral) at public sale. A sale could include a lease

or license. The sale will be held as follows:

Date:_________________

Time:_________________

Place:________________

You may attend the sale and bring bidders if you want.

(For a private disposition:)

We will sell __________________ (describe collateral)

at private sale sometime after _______________ (date). A

20240SB1084PN1440 - 88 -

sale could include a lease or license. The money that we

get from the sale (after paying our costs) will reduce

the amount you owe. If we get less money than you owe,

you (will or will not, as applicable) still owe us the

difference. If we get more money than you owe, you will

get the extra money unless we must pay it to someone

else. You can get the property back at any time before we

sell it by paying us the full amount you owe (not just

the past due payments), including our expenses. To learn

the exact amount you must pay, call us at ______________

(telephone number). If you want us to explain to you in

writing how we have figured the amount that you owe us,

you may call us at __________________ (telephone number)

(or write us at ___________________ (secured party's

address)) and request a written explanation. (We will

charge you $ __________ for the explanation if we sent

you another written explanation of the amount you owe us

within the last six months.) If you need more information

about the sale, call us at ________________ (telephone

number) (or write us at ____________________ (secured

party's address)). We are sending this notice to the

following other people who have an interest in

______________________ (describe collateral) or who owe

money under your agreement: __________________ (Names of

all other debtors and obligors, if any)

(End of Form)

(4) A notification in the form of paragraph (3) is

sufficient even if additional information appears at the end

of the form.

(5) A notification in the form of paragraph (3) is

20240SB1084PN1440 - 89 -

sufficient even if it includes errors in information not

required by paragraph (1) unless the error is misleading with

respect to rights arising under this division.

(6) If a notification under this section is not in the

form of paragraph (3), law other than this division

determines the effect of including information not required

by paragraph (1).]

(Name and address of secured party)

(Date)

NOTICE OF OUR PLAN TO SELL PROPERTY

(Name and address of any obligor who is also a debtor)

Subject: (Identify transaction)

We have your (describe collateral), because you broke

promises in our agreement.

{1} We will sell (describe collateral) at public sale. A

sale could include a lease or license. The sale will be held

as follows:

(Date)

(Time)

(Place)

You may attend the sale and bring bidders if you want.

{2} We will sell (describe collateral) at private sale

sometime after (date). A sale could include a lease or

license.

{3} The money that we get from the sale, after paying

our costs, will reduce the amount you owe. If we get less

money than you owe, you (will or will not, as applicable)

still owe us the difference. If we get more money than you

owe, you will get the extra money, unless we must pay it to

someone else.

20240SB1084PN1440 - 90 -

{4} You can get the property back at any time before we

sell it by paying us the full amount you owe, not just the

past due payments, including our expenses. To learn the exact

amount you must pay, call us at (telephone number).

{5} If you want us to explain to you in (writing)

(writing or in (description of electronic record))

(description of electronic record) how we have figured the

amount that you owe us, {6} call us at (telephone number)

(or) (write us at (secured party's address)) (or contact us

by (description of electronic communication method)) {7} and

request (a written explanation) (a written explanation or an

explanation in (description of electronic record)) (an

explanation in (description of electronic record)).

{8} We will charge you $ (amount) for the explanation if

we sent you another written explanation of the amount you owe

us within the last six months.

{9} If you need more information about the sale (call us

at (telephone number)) (or) (write us at (secured party's

address)) (or contact us by (description of electronic

communication method)).

{10} We are sending this notice to the following other

people who have an interest in (describe collateral) or who

owe money under your agreement:

(Names of all other debtors and obligors, if any)

(End of Form)

(b) Instructions for form of notification.--The following

instructions apply to the form of notification in subsection (a)

(3):

(1) The instructions in this subsection refer to the

numbers in braces before items in the form of notification in

20240SB1084PN1440 - 91 -

subsection (a)(3). Do not include the numbers or braces in

the notification. The numbers and braces are used only for

the purpose of these instructions.

(2) Include and complete either item {1}, if the

notification relates to a public disposition of the

collateral, or item {2}, if the notification relates to a

private disposition of the collateral.

(3) Include and complete items {3}, {4}, {5}, {6} and

{7}.

(4) In item {5}, include and complete any one of the

three alternative methods for the explanation--writing,

writing or electronic record or electronic record.

(5) In item {6}, include the telephone number. In

addition, the sender may include and complete either or both

of the two additional alternative methods of communication--

writing or electronic communication--for the recipient of the

notification to communicate with the sender. Neither of the

two additional methods of communication is required to be

included.

(6) In item {7}, include and complete the method or

methods for the explanation--writing, writing or electronic

record or electronic record--included in item {5}.

(7) Include and complete item {8} only if a written

explanation is included in item {5} as a method for

communicating the explanation and the sender will charge the

recipient for another written explanation.

(8) In item {9}, include either the telephone number or

the address or both the telephone number and the address. In

addition, the sender may include and complete the additional

method of communication--electronic communication for the

20240SB1084PN1440 - 92 -

recipient of the notification to communicate with the sender.

The additional method of electronic communication is not

required to be included.

(9) If item {10} does not apply, insert "None" after

"agreement:".

§ 9615. Application of proceeds of disposition; liability for

deficiency and right to surplus.

(a) Application of proceeds.--A secured party shall apply or

pay over for application the cash proceeds of disposition under

section 9610 (relating to disposition of collateral after

default) in the following order to:

(1) The reasonable expenses of retaking, holding,

preparing for disposition, processing and disposing and, to

the extent provided for by agreement and not prohibited by

law, reasonable attorney fees and legal expenses incurred by

the secured party.

(2) The satisfaction of obligations secured by the

security interest or agricultural lien under which the

disposition is made.

(3) The satisfaction of obligations secured by any

subordinate security interest in or other subordinate lien on

the collateral if:

(i) the secured party receives from the holder of

the subordinate security interest or other lien [an

authenticated] a signed demand for proceeds before

distribution of the proceeds is completed; and

(ii) in a case in which a consignor has an interest

in the collateral, the subordinate security interest or

other lien is senior to the interest of the consignor.

(4) A secured party that is a consignor of the

20240SB1084PN1440 - 93 -

collateral if the secured party receives from the consignor

[an authenticated] a signed demand for proceeds before

distribution of the proceeds is completed.

* * *

§ 9616. Explanation of calculation of surplus or deficiency.

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

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

subsection:

"Explanation." A [writing] record which:

(1) states the amount of the surplus or deficiency;

(2) provides an explanation in accordance with

subsection (c) of how the secured party calculated the

surplus or deficiency;

(3) states, if applicable, that future debits, credits,

charges, including additional credit service charges or

interest, rebates and expenses may affect the amount of the

surplus or deficiency; and

(4) provides a telephone number or mailing address from

which additional information concerning the transaction is

available.

"Request." A record:

(1) [authenticated] signed by a debtor or consumer

obligor;

(2) requesting that the recipient provide an

explanation; and

(3) sent after disposition of the collateral under

section 9610 (relating to disposition of collateral after

default).

(b) Explanation of calculation.--In a consumer-goods

transaction in which the debtor is entitled to a surplus or a

20240SB1084PN1440 - 94 -

consumer obligor is liable for a deficiency under section 9615

(relating to application of proceeds of disposition; liability

for deficiency and right to surplus), the secured party shall

comply with one of the following paragraphs:

(1) Send an explanation to the debtor or consumer

obligor, as applicable, after the disposition and:

(i) before or when the secured party accounts to the

debtor and pays any surplus or first makes [written]

demand in a record on the consumer obligor after the

disposition for payment of the deficiency; and

(ii) within 14 days after receipt of a request.

(2) In the case of a consumer obligor who is liable for

a deficiency, within 14 days after receipt of a request, send

to the consumer obligor a record waiving the secured party's

right to a deficiency.

the definition of the term "explanation" in subsection (a), [a

writing] an explanation must provide the following information

in the following order:

(1) The aggregate amount of obligations secured by the

security interest under which the disposition was made and,

if the amount reflects a rebate of unearned interest or

credit service charge, an indication of that fact, calculated

as of a specified date:

(i) if the secured party takes or receives

possession of the collateral after default, not more than

35 days before the secured party takes or receives

possession; or

(ii) if the secured party takes or receives

possession of the collateral before default or does not

20240SB1084PN1440 - 95 -

take possession of the collateral, not more than 35 days

before the disposition.

(2) The amount of proceeds of the disposition.

(3) The aggregate amount of the obligations after

deducting the amount of proceeds.

(4) The amount, in the aggregate or by type, and types

of expenses, including expenses of retaking, holding,

preparing for disposition, processing and disposing of the

collateral and attorney fees secured by the collateral which

are known to the secured party and relate to the current

disposition.

(5) The amount, in the aggregate or by type and types of

credits, including rebates of interest or credit service

charges, to which the obligor is known to be entitled and

which are not reflected in the amount in paragraph (1).

(6) The amount of the surplus or deficiency.

* * *

§ 9619. Transfer of record or legal title.

(a) Transfer statement.--As used in this section, the term

"transfer statement" means a record [authenticated] signed by a

secured party stating:

(1) that the debtor has defaulted in connection with an

obligation secured by specified collateral;

(2) that the secured party has exercised its postdefault

remedies with respect to the collateral;

(3) that, by reason of the exercise, a transferee has

acquired the rights of the debtor in the collateral; and

(4) the name and mailing address of the secured party,

debtor and transferee.

* * *

20240SB1084PN1440 - 96 -

§ 9620. Acceptance of collateral in full or partial

satisfaction of obligation; compulsory disposition of

collateral.

(a) Conditions to acceptance in satisfaction.--Except as

otherwise provided in subsection (g), a secured party may accept

collateral in full or partial satisfaction of the obligation it

secures only if all of the following paragraphs apply:

(1) The debtor consents to the acceptance under

subsection (c).

(2) The secured party does not receive, within the time

set forth in subsection (d), a notification of objection to

the proposal [authenticated] signed by:

(i) a person to which the secured party was required

to send a proposal under section 9621 (relating to

notification of proposal to accept collateral); or

(ii) any other person, other than the debtor,

holding an interest in the collateral subordinate to the

security interest which is the subject of the proposal.

(3) If the collateral is consumer goods, the collateral

is not in the possession of the debtor when the debtor

consents to the acceptance.

(4) Subsection (e) does not require the secured party to

dispose of the collateral or the debtor waives the

requirement pursuant to section 9624 (relating to waiver).

(b) Purported acceptance ineffective.--A purported or

apparent acceptance of collateral under this section is

ineffective unless:

(1) the secured party consents to the acceptance in [an

authenticated] a signed record or sends a proposal to the

debtor; and

20240SB1084PN1440 - 97 -

(2) the conditions of subsection (a) are met.

(1) A debtor consents to an acceptance of collateral in

partial satisfaction of the obligation it secures only if the

debtor agrees to the terms of the acceptance in a record

[authenticated] signed after default.

(2) A debtor consents to an acceptance of collateral in

full satisfaction of the obligation it secures only if the

debtor agrees to the terms of the acceptance in a record

[authenticated] signed after default or the secured party:

(i) sends to the debtor after default a proposal

which is unconditional or subject only to a condition

that collateral not in the possession of the secured

party be preserved or maintained;

(ii) in the proposal, proposes to accept collateral

in full satisfaction of the obligation it secures; and

(iii) does not receive a notification of objection

[authenticated] signed by the debtor within 20 days after

the proposal is sent.

* * *

(f) Compliance with mandatory disposition requirement.--To

comply with subsection (e), the secured party shall dispose of

the collateral:

(1) within 90 days after taking possession; or

(2) within any longer period to which the debtor and all

secondary obligors have agreed in an agreement to that effect

entered into and [authenticated] signed after default.

* * *

§ 9621. Notification of proposal to accept collateral.

(a) Persons to which proposal to be sent.--A secured party

20240SB1084PN1440 - 98 -

that desires to accept collateral in full or partial

satisfaction of the obligation it secures shall send its

proposal to all of the following:

(1) Any person from which the secured party has

received, before the debtor consented to the acceptance, [an

authenticated] a signed notification of a claim of an

interest in the collateral.

(2) Any other secured party or lienholder that, ten days

before the debtor consented to the acceptance, held a

security interest in or other lien on the collateral

perfected by the filing of a financing statement which:

(i) identified the collateral;

(ii) was indexed under the debtor's name as of that

date; and

(iii) was filed in the office or offices in which to

file a financing statement against the debtor covering

the collateral as of that date.

(3) Any other secured party that, ten days before the

debtor consented to the acceptance, held a security interest

in the collateral perfected by compliance with a statute,

regulation or treaty described in section 9311(a) (relating

to security interest subject to other law).

* * *

§ 9624. Waiver.

(a) Waiver of disposition notification.--A debtor or

secondary obligor may waive the right to notification of

disposition of collateral under section 9611 (relating to

notification before disposition of collateral) only by an

agreement to that effect entered into and [authenticated] signed

after default.

20240SB1084PN1440 - 99 -

(b) Waiver of mandatory disposition.--A debtor may waive the

right to require disposition of collateral under section 9620(e)

(relating to mandatory disposition of consumer goods) only by an

agreement to that effect entered into and [authenticated] signed

after default.

transaction, a debtor or secondary obligor may waive the right

to redeem collateral under section 9623 (relating to right to

redeem collateral) only by an agreement to that effect entered

into and [authenticated] signed after default.

Section 35. Section 9628(a) and (b) of Title 13 are amended

and the section is amended by adding a subsection to read:

§ 9628. Nonliability and limitation on liability of secured

party; liability of secondary obligor.

(a) Limitation of liability of secured party for

noncompliance with division.--[Unless] Subject to subsection

(f), unless a secured party knows that a person is a debtor or

obligor, knows the identity of the person and knows how to

communicate with the person:

(1) the secured party is not liable to the person or to

a secured party or lienholder that has filed a financing

statement against the person for failure to comply with this

division; and

(2) the secured party's failure to comply with this

division does not affect the liability of the person for a

deficiency.

(b) Limitation of liability based on status as secured

party.--[A] Subject to subsection (f), a secured party is not

liable because of its status as secured party to any of the

following:

20240SB1084PN1440 - 100 -

(1) A person that is a debtor or obligor unless the

secured party knows:

(i) that the person is a debtor or obligor;

(ii) the identity of the person; and

(iii) how to communicate with the person.

(2) A secured party or lienholder that has filed a

financing statement against a person unless the secured party

knows:

(i) that the person is a debtor; and

(ii) the identity of the person.

* * *

(f) Exception: limitation of liability under subsections (a)

and (b) does not apply.--Subsections (a) and (b) do not apply to

limit the liability of a secured party to a person if, at the

time the secured party obtains control of collateral that is a

controllable account, controllable electronic record or

controllable payment intangible or at the time the security

interest attaches to the collateral, whichever is later:

(1) the person is a debtor or obligor; and

(2) the secured party knows that the information in

subsection (b)(1) relating to the person is not provided by

the collateral, a record attached to or logically associated

with the collateral or the system in which the collateral is

recorded.

Section 36. Title 13 is amended by adding divisions to read:

DIVISION 12

CONTROLLABLE ELECTRONIC RECORDS

Chapter

121. General Provisions

123. (Reserved)

20240SB1084PN1440 - 101 -

CHAPTER 121

GENERAL PROVISIONS

Sec.

12101. Short title of division.

12102. Definitions.

12103. Relation to Division 9 and consumer laws.

12104. Rights in controllable account, controllable electronic

record and controllable payment intangible.

12105. Control of controllable electronic record.

12106. Discharge of account debtor on controllable account or

controllable payment intangible.

12107. Governing law.

§ 12101. Short title of division.

This division may be cited as Uniform Commercial Code -

Controllable Electronic Records.

§ 12102. Definitions.

(a) Definitions.--In this division:

"Controllable electronic record" means a record stored in an

electronic medium that can be subjected to control under section

12105 (relating to control of controllable electronic record).

The term does not include a controllable account, a controllable

payment intangible, a deposit account, an electronic copy of a

record evidencing chattel paper, an electronic document of

title, investment property, a transferable record or an

electronic record that is currently authorized or adopted by a

domestic or foreign government and is not a medium of exchange

that was recorded and transferable in a system that existed and

operated for the medium of exchange before the medium of

exchange was authorized or adopted by a government.

"Qualifying purchaser" means a purchaser of a controllable

20240SB1084PN1440 - 102 -

electronic record or an interest in a controllable electronic

record that obtains control of the controllable electronic

record for value, in good faith, and without notice of a claim

of a property right in the controllable electronic record.

"Transferable record" has the meaning provided for that term

in:

(1) Section 201(a)(1) of the Electronic Signatures in

Global and National Commerce Act (Public Law 106-229, 15

U.S.C. § 7021(a)(1)); or

(2) Section 312(f) of the act of December 16, 1999

(P.L.971, No.69), known as the Electronic Transactions Act.

"Value" has the meaning provided in section 3303(a)(relating

to value and consideration), as if references in that subsection

to an "instrument" were references to a controllable account,

controllable electronic record or controllable payment

intangible.

(b) Definitions in Division 9.--The definitions in Division

9 (relating to secured transactions) of "account debtor,"

"chattel paper," "controllable account," "controllable payment

intangible," "deposit account" and "investment property" apply

to this division.

(relating to general provisions) contains general definitions

and principles of construction and interpretation applicable

throughout this division.

§ 12103. Relation to Division 9 and consumer laws.

(a) Division 9 governs in case of conflict.--If there is

conflict between this division and Division 9 (relating to

secured transactions), Division 9 governs.

(b) Applicable consumer law and other laws.--A transaction

20240SB1084PN1440 - 103 -

subject to this division is subject to any applicable rule of

law that establishes a different rule for consumers and the act

of December 17, 1968 (P.L.1224, No.387), known as the Unfair

Trade Practices and Consumer Protection Law.

§ 12104. Rights in controllable account, controllable

electronic record and controllable payment

intangible.

(a) Applicability of section to controllable account and

controllable payment intangible.--This section applies to the

acquisition and purchase of rights in a controllable account or

controllable payment intangible, including the rights and

benefits under subsections (c), (d), (e), (g) and (h) of a

purchaser and qualifying purchaser, in the same manner this

section applies to a controllable electronic record.

(b) Control of controllable account and controllable payment

intangible.--To determine whether a purchaser of a controllable

account or a controllable payment intangible is a qualifying

purchaser, the purchaser obtains control of the account or

payment intangible if the purchaser obtains control of the

controllable electronic record that evidences the account or

payment intangible.

Except as provided in this section, law other than this division

determines whether a person acquires a right in a controllable

electronic record and the right the person acquires.

(d) Shelter principle and purchase of limited interest.--A

purchaser of a controllable electronic record acquires all

rights in the controllable electronic record that the transferor

had or had power to transfer, except that a purchaser of a

limited interest in a controllable electronic record acquires

20240SB1084PN1440 - 104 -

rights only to the extent of the interest purchased.

(e) Rights of qualifying purchaser.--A qualifying purchaser

acquires its rights in the controllable electronic record free

of a claim of a property right in the controllable electronic

record.

(f) Limitation of rights of qualifying purchaser in other

property.--Except as provided in subsections (a) and (e) for a

controllable account and a controllable payment intangible or

law other than this division, a qualifying purchaser takes a

right to payment, right to performance or other interest in

property evidenced by the controllable electronic record subject

to a claim of a property right in the right to payment, right to

performance or other interest in property.

(g) No-action protection for qualifying purchaser.--An

action may not be asserted against a qualifying purchaser based

on both a purchase by the qualifying purchaser of a controllable

electronic record and a claim of a property right in another

controllable electronic record, whether the action is framed in

conversion, replevin, constructive trust, equitable lien or

other theory.

(h) Filing not notice.--Filing of a financing statement

under Division 9 (relating to secured transactions) is not

notice of a claim of a property right in a controllable

electronic record.

§ 12105. Control of controllable electronic record.

(a) General rule.--A person has control of a controllable

electronic record if the electronic record, a record attached to

or logically associated with the electronic record or a system

in which the electronic record is recorded:

(1) gives the person:

20240SB1084PN1440 - 105 -

(i) power to avail itself of substantially all the

benefit from the electronic record; and

(ii) exclusive power, subject to subsection (b), to:

(A) prevent others from availing themselves of

substantially all the benefit from the electronic

record; and

(B) transfer control of the electronic record to

another person or cause another person to obtain

control of another controllable electronic record as

a result of the transfer of the electronic record;

and

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

way, including by name, identifying number, cryptographic

key, office or account number, as having the powers specified

in paragraph (1).

(b) Meaning of exclusive.--Subject to subsection (c), a

power is exclusive under subsection (a)(1)(ii)(A) and (B) even

if:

(1) the controllable electronic record, a record

attached to or logically associated with the electronic

record or a system in which the electronic record is recorded

limits the use of the electronic record or has a protocol

programmed to cause a change, including a transfer or loss of

control or a modification of benefits afforded by the

electronic record; or

(2) the power is shared with another person.

person is not shared with another person under subsection (b)(2)

and the person's power is not exclusive if:

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

20240SB1084PN1440 - 106 -

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 controllable electronic record or a controllable

account or controllable payment intangible evidenced by

the controllable electronic record.

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

person has the powers specified in subsection (a)(1)(ii)(A) and

(B), the powers are presumed to be exclusive.

(e) Control through another person.--A person has control of

a controllable electronic record if another person, other than

the transferor to the person of an interest in the controllable

electronic record or a controllable account or controllable

payment intangible evidenced by the controllable electronic

record:

(1) has control of the electronic record and

acknowledges that it has control on behalf of the person; or

(2) obtains control of the electronic record after

having acknowledged that it will obtain control of the

electronic record on behalf of the person.

(f) No requirement to acknowledge.--A person that has

control under this section is not required to acknowledge that

it has control on behalf of another person.

(g) No duties or confirmation.--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

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other person and is not required to confirm the acknowledgment

to any other person.

§ 12106. Discharge of account debtor on controllable account or

controllable payment intangible.

(a) Discharge of account debtor.--An account debtor on a

controllable account or controllable payment intangible may

discharge its obligation by paying:

(1) the person having control of the controllable

electronic record that evidences the controllable account or

controllable payment intangible; or

(2) except as provided in subsection (b), a person that

formerly had control of the controllable electronic record.

(b) Content and effect of notification.--Subject to

subsection (d), the account debtor may not discharge its

obligation by paying a person that formerly had control of the

controllable electronic record if the account debtor receives a

notification that:

(1) is signed by a person that formerly had control or

the person to which control was transferred;

(2) reasonably identifies the controllable account or

controllable payment intangible;

(3) notifies the account debtor that control of the

controllable electronic record that evidences the

controllable account or controllable payment intangible was

transferred;

(4) identifies the transferee, in any reasonable way,

including by name, identifying number, cryptographic key,

office or account number; and

(5) provides a commercially reasonable method by which

the account debtor is to pay the transferee.

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receipt of a notification that complies with subsection (b), the

account debtor may discharge its obligation by paying in

accordance with the notification and may not discharge the

obligation by paying a person that formerly had control.

(d) When notification ineffective.--Subject to subsection

(h), notification is ineffective under subsection (b):

(1) unless, before the notification is sent, the account

debtor and the person that, at that time, had control of the

controllable electronic record that evidences the

controllable account or controllable payment intangible agree

in a signed record to a commercially reasonable method by

which a person may furnish reasonable proof that control has

been transferred;

(2) to the extent an agreement between the account

debtor and seller of a payment intangible limits the account

debtor's duty to pay a person other than the seller and the

limitation is effective under law other than this division;

(3) at the option of the account debtor, if the

notification notifies the account debtor to:

(i) divide a payment;

(ii) make less than the full amount of an

installment or other periodic payment; or

(iii) pay any part of a payment by more than one

method or to more than one person.

(e) Proof of transfer of control.--Subject to subsection

(h), if requested by the account debtor, the person giving the

notification under subsection (b) seasonably shall furnish

reasonable proof, using the method in the agreement referred to

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in subsection (d)(1), that control of the controllable

electronic record has been transferred. Unless the person

complies with the request, the account debtor may discharge its

obligation by paying a person that formerly had control, even if

the account debtor has received a notification under subsection

(b).

(f) What constitutes reasonable proof.--A person furnishes

reasonable proof under subsection (e) that control has been

transferred if the person demonstrates, using the method in the

agreement referred to in subsection (d)(1), that the transferee

has the power to:

(1) avail itself of substantially all the benefit from

the controllable electronic record;

(2) prevent others from availing themselves of

substantially all the benefit from the controllable

electronic record; and

(3) transfer the powers specified in paragraphs (1) and

(2) to another person.

(g) Rights not waivable.--Subject to subsection (h), an

account debtor may not waive or vary its rights under

subsections (d)(1) and (e) or its option under subsection (d)

(3).

(h) Rule for individual under other law.--This section is

subject to law other than this division which establishes a

different rule for an account debtor who is an individual and

who incurred the obligation primarily for personal, family or

household purposes.

§ 12107. Governing law.

(a) General rule.--Except as provided in subsection (b), the

local law of a controllable electronic record's jurisdiction

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governs a matter covered by this division.

(b) Exception.--For a controllable electronic record that

evidences a controllable account or controllable payment

intangible, the local law of the controllable electronic

record's jurisdiction governs a matter covered by section 12106

(relating to discharge of account debtor on controllable account

or controllable payment intangible) unless an effective

agreement determines that the local law of another jurisdiction

governs.

following rules determine a controllable electronic record's

jurisdiction under this section:

(1) If the controllable electronic record, or a record

attached to or logically associated with the controllable

electronic record and readily available for review, expressly

provides that a particular jurisdiction is the controllable

electronic record's jurisdiction for purposes of this

division or title, that jurisdiction is the controllable

electronic record's jurisdiction.

(2) If paragraph (1) does not apply and the rules of the

system in which the controllable electronic record is

recorded are readily available for review and expressly

provide that a particular jurisdiction is the controllable

electronic record's jurisdiction for purposes of this

division or title, that jurisdiction is the controllable

electronic record's jurisdiction.

(3) If paragraphs (1) and (2) do not apply and the

controllable electronic record, or a record attached to or

logically associated with the controllable electronic record

and readily available for review, expressly provides that the

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controllable electronic record is governed by the law of a

particular jurisdiction, that jurisdiction is the

controllable electronic record's jurisdiction.

(4) If paragraphs (1), (2) and (3) do not apply and the

rules of the system in which the controllable electronic

record is recorded are readily available for review and

expressly provide that the controllable electronic record or

the system is governed by the law of a particular

jurisdiction, that jurisdiction is the controllable

electronic record's jurisdiction.

(5) If paragraphs (1), (2), (3) and (4) do not apply,

the controllable electronic record's jurisdiction is the

District of Columbia.

(d) Applicability of Article 12.--If subsection (c)(5)

applies and Article 12 of Uniform Commercial Code Amendments

(2022) is not in effect in the District of Columbia without

material modification, the governing law for a matter covered by

this division is the law of the District of Columbia as though

Article 12 were in effect in the District of Columbia without

material modification.

(e) Relation of matter or transaction to controllable

electronic record's jurisdiction not necessary.--To the extent

subsections (a) and (b) provide that the local law of the

controllable electronic record's jurisdiction governs a matter

covered by this division, that law governs even if the matter or

a transaction to which the matter relates does not bear any

relation to the controllable electronic record's jurisdiction.

(f) Rights of purchasers determined at time of purchase.--

The rights acquired under section 12104 (relating to rights in

controllable account, controllable electronic record and

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controllable payment intangible) by a purchaser or qualifying

purchaser are governed by the law applicable under this section

at the time of purchase.

CHAPTER 123

(Reserved)

DIVISION 91

TRANSITIONAL PROVISIONS

Chapter

911. Transitional Provisions for 2022 Amendments

CHAPTER 911

TRANSITIONAL PROVISIONS FOR 2022 AMENDMENTS

Subchapter

A. General Provisions and Definitions

B. General Transitional Provision

C. Transitional Provisions for Divisions 9 and 12

SUBCHAPTER A

GENERAL PROVISIONS AND DEFINITIONS

Sec.

91101. Short title of chapter.

91102. Definitions.

§ 91101. Short title of chapter.

This chapter may be cited as Transitional Provisions for 2022

Amendments.

§ 91102. Definitions.

(a) Definitions.--In this chapter:

"Adjustment date" means July 1, 2025, or the date that is one

year after the effective date of this section, whichever is

later.

"Division 12 property" means a controllable account,

controllable electronic record or controllable payment

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intangible.

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

definitions in other divisions of this title apply to this

chapter.

"Controllable account." Section 9102 (relating to

definitions and index of definitions).

"Controllable electronic record." Section 12102 (relating to

definitions).

"Controllable payment intangible." Section 9102.

"Financing statement." Section 9102.

(relating to general provisions) contains general definitions

and principles of construction and interpretation applicable

throughout this chapter.

SUBCHAPTER B

GENERAL TRANSITIONAL PROVISION

Sec.

91121. Savings clause.

§ 91121. Savings clause.

Except as provided in Subchapter C (relating to transitional

provisions for Divisions 9 and 12), a transaction validly

entered into before the effective date of this section and the

rights, duties and interests flowing from the transaction remain

valid thereafter and may be terminated, completed, consummated

or enforced as required or permitted by law other than this

title or, if applicable, this title, as though this section had

not taken effect.

SUBCHAPTER C

TRANSITIONAL PROVISIONS FOR DIVISIONS 9 AND 12

Sec.

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91131. Savings clause.

91132. Security interest perfected before effective date.

91133. Security interest unperfected before effective date.

91134. Effectiveness of actions taken before effective date.

91135. Priority.

91136. Priority of claims when priority rules of Division 9 do

not apply.

§ 91131. Savings clause.

(a) Pre-effective-date transaction, lien or interest.--

Except as provided in this subchapter, the amendments to

Division 9 (relating to secured transactions) that take effect

on the effective date of this section and Division 12 (relating

to controllable electronic records) apply to a transaction, lien

or other interest in property, even if the transaction, lien or

interest was entered into, created or acquired before the

effective date of this section.

(b) Continuing validity.--Except as provided in subsection

before effective date), 91133 (relating to security interest

unperfected before effective date), 91134 (relating to

effectiveness of actions taken before effective date), 91135

(relating to priority) and 91136 (relating to priority of claims

when priority rules of Division 9 do not apply):

(1) a transaction, lien or interest in property that was

validly entered into, created or transferred before the

effective date of this section and was not governed by this

title, but would be subject to the amendments to Division 9

that take effect on the effective date of this section or

Division 12 if it had been entered into, created or

transferred on or after the effective date of this section,

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including the rights, duties and interests flowing from the

transaction, lien or interest, remains valid on and after the

effective date of this section; and

(2) the transaction, lien or interest may be terminated,

completed, consummated and enforced as required or permitted

by the act adding this chapter or by the law that would apply

if the act adding this chapter had not taken effect.

chapter does not affect an action, case or proceeding commenced

before the effective date of this section.

§ 91132. Security interest perfected before effective date.

(a) Continuing perfection; perfection requirements

satisfied.--A security interest that is enforceable and

perfected immediately before the effective date of this section

is a perfected security interest under the act adding this

chapter if, on the effective date of this section, the

requirements for enforceability and perfection under the act

adding this chapter are satisfied without further action.

(b) Continuing perfection; enforceability or perfection

requirements not satisfied.--If a security interest is

enforceable and perfected immediately before the effective date

of this section, but the requirements for enforceability or

perfection under the act adding this chapter are not satisfied

on the effective date of this section, the security interest:

(1) is a perfected security interest until the earlier

of the time perfection would have ceased under the law in

effect immediately before the effective date of this section

or the adjustment date;

(2) remains enforceable thereafter only if the security

interest satisfies the requirements for enforceability under

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section 9203 (relating to attachment and enforceability of

security interest; proceeds; supporting obligations; formal

requisites), as amended by the act adding this chapter,

before the adjustment date; and

(3) remains perfected thereafter only if the

requirements for perfection under the act adding this chapter

are satisfied before the time specified in paragraph (1).

§ 91133. Security interest unperfected before effective date.

A security interest that is enforceable immediately before

the effective date of this section but is unperfected at that

time:

(1) remains an enforceable security interest until the

adjustment date;

(2) remains enforceable thereafter if the security

interest becomes enforceable under section 9203 (relating to

attachment and enforceability of security interest; proceeds;

supporting obligations; formal requisites), as amended by the

act adding this chapter, on the effective date of this

section or before the adjustment date; and

(3) becomes perfected:

(i) without further action, on the effective date of

this section if the requirements for perfection under

the act adding this chapter are satisfied before or at

that time; or

(ii) when the requirements for perfection are

satisfied if the requirements are satisfied after that

time.

§ 91134. Effectiveness of actions taken before effective date.

(a) Pre-effective-date action; attachment and perfection

before adjustment date.--If action, other than the filing of a

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financing statement, is taken before the effective date of this

section and the action would have resulted in perfection of the

security interest had the security interest become enforceable

before the effective date of this section, the action is

effective to perfect a security interest that attaches under

the act adding this chapter before the adjustment date. An

attached security interest becomes unperfected on the adjustment

date unless the security interest becomes a perfected security

interest under the act adding this chapter before the adjustment

date.

(b) Pre-effective-date filing.--The filing of a financing

statement before the effective date of this section is effective

to perfect a security interest on the effective date of this

section to the extent the filing would satisfy the requirements

for perfection under the act adding this chapter.

an action before the effective date of this section is

sufficient for the enforceability of a security interest on the

effective date of this section if the action would satisfy the

requirements for enforceability under the act adding this

chapter.

§ 91135. Priority.

(a) Determination of priority.--Subject to subsections (b)

and (c), the act adding this chapter determines the priority of

conflicting claims to collateral.

(b) Established priorities.--Subject to subsection (c), if

the priorities of claims to collateral were established before

the effective date of this section, Division 9 (relating to

secured transactions) as in effect before the effective date of

this section determines priority.

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date.--On the adjustment date, to the extent the priorities

determined by Division 9 as amended by the act adding this

chapter modify the priorities established before the effective

date of this section, the priorities of claims to Division 12

(relating to controllable electronic records) property

established before the effective date of this section cease to

apply.

§ 91136. Priority of claims when priority rules of Division 9

do not apply.

(a) Determination of priority.--Subject to subsections (b)

and (c), Division 12 (relating to controllable electronic

records) determines the priority of conflicting claims to

Division 12 property when the priority rules of Division 9

(relating to secured transactions) as amended by the act adding

this chapter do not apply.

(b) Established priorities.--Subject to subsection (c), when

the priority rules of Division 9 as amended by the act adding

this chapter do not apply and the priorities of claims to

Division 12 property were established before the effective date

of this section, law other than Division 12 determines priority.

date.--When the priority rules of Division 9 as amended by the

act adding this chapter do not apply, to the extent the

priorities determined by the act adding this chapter modify the

priorities established before the effective date of this

section, the priorities of claims to Division 12 property

established before the effective date of this section cease to

apply on the adjustment date.

Section 37. Section 5601.4(a)(9) of Title 20 is amended to

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read:

§ 5601.4. Authority that requires specific and general grant of

authority.

(a) General rule.--An agent under a power of attorney may do

the following on behalf of the principal or with the principal's

property only if the power of attorney expressly grants the

agent the authority and exercise of the authority is not

otherwise prohibited by another agreement or instrument to which

the authority or property is subject:

* * *

(9) Access the content of electronic communications [and

digital assets of] sent or received by the principal. As used

in this paragraph, the [following words and phrases shall

have the meanings given to them in this paragraph unless the

context clearly indicates otherwise:

"Digital asset." As defined in section 3902

(relating to definitions).

"Electronic communication." As defined in section

3902.] phrase "content of electronic communications"

shall have the same meaning as "content of an electronic

communication" as defined in section 3902 (relating to

definitions).

* * *

Section 38. The amendment of 20 Pa.C.S. § 5601.4(a)(9) shall

apply to a power of attorney executed on or after January 19,

2021.

Section 39. This act shall take effect in 60 days.

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