Bill Text: CA SB95 | 2023-2024 | Regular Session | Chaptered

California Senate Bill 95

Bill Title: Commercial transactions.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2023-09-22 - Chaptered by Secretary of State. Chapter 210, Statutes of 2023. [SB95 Detail]

Download: California-2023-SB95-Chaptered.html

Senate Bill No. 95

CHAPTER 210

An act to amend Sections 1201, 1204, 1301, 1306, 2102, 2106, 2201, 2202, 2205, 2209, 3104, 3105, 3401, 3604, 5104, 5116, 7102, 7106, 8102, 8103, 8106, 8110, 8303, 9102, 9104, 9105, 9203, 9204, 9207, 9208, 9209, 9210, 9301, 9304, 9305, 9310, 9312, 9313, 9314, 9316, 9317, 9323, 9324, 9330, 9331, 9332, 9334, 9341, 9404, 9406, 9408, 9509, 9513, 9601, 9605, 9608, 9611, 9613, 9614, 9615, 9616, 9619, 9620, 9621, 9624, 9628, 10102, 10103, 10107, 10201, 10202, 10205, 10208, 11103, 11201, 11202, 11203, 11207, 11208, 11210, 11211, and 11305 of, to add Sections 9105.1, 9107.1, 9107.2, 9306.1, 9306.2, 9314.1, and 9326.1 to, and to add Division 12 (commencing with Section 12101) and Division 17 (commencing with Section 17101) to, the Commercial Code, relating to commercial transactions.

[ Approved by Governor September 22, 2023. Filed with Secretary of State September 22, 2023. ]

LEGISLATIVE COUNSEL'S DIGEST

SB 95, Roth. Commercial transactions.

Existing provisions of the Commercial Code generally govern commercial transactions.

This bill would revise those provisions generally in accordance with the revisions to Articles 1, 2, 2A, 3, 4A, 5, 7, 8, and 9 of, the addition of Article 12 to, and the addition of specified general provisions and definitions, transitional provisions, and effective date provisions to, the Uniform Commercial Code, as proposed in the 2022 Amendments to the Uniform Commercial Code by the National Conference of Commissioners on Uniform State Laws. Specifically, among other revisions, this bill would add provisions governing control of, and rights to, electronic money, controllable electronic records, controllable accounts, and controllable payment intangibles, as defined. The bill would make changes to the valid signing of records and would also make various conforming changes.

Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

Section 1201 of the Commercial Code is amended to read:

1201.

(a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other divisions of this code that apply to particular divisions or chapters thereof, have the meanings stated.

(b) Subject to definitions contained in other divisions of this code that apply to particular divisions or chapters thereof:

(1) “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, setoff, suit in equity, and any other proceeding in which rights are determined.

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

(3) “Agreement,” as distinguished from “contract,” means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1303.

(4) “Bank” means a person engaged in the business of banking, and includes a savings bank, savings and loan association, credit union, and trust company.

(5) “Bearer” means a person in possession of a negotiable instrument, document of title, or certificated security that is payable to bearer or endorsed in blank.

(6) “Bill of lading” means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods.

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

(8) “Burden of establishing” a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.

(9) “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Division 2 (commencing with Section 2101) may be a buyer in ordinary course of business. “Buyer in ordinary course of business” does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(10) “Conspicuous,” with reference to a term, means so written, displayed, or presented that, based on the totality of the circumstances, a reasonable person against whom it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court.

(11) [Reserved]

(12) “Contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties’ agreement as determined by this code and as supplemented by any other applicable laws.

(13) “Creditor” includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor’s or assignor’s estate.

(14) “Defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.

(15) “Delivery,” with respect to an electronic document of title, means voluntary transfer of control and, with respect to an instrument, a tangible document of title, or an authoritative tangible copy of a record evidencing chattel paper, means voluntary transfer of possession.

(16) “Document of title” includes a bill of lading, dock warrant, dock receipt, warehouse receipt, or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers. To be a document of title, a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass.

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

(18) “Fungible goods” means:

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

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

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

(20) “Good faith,” except as otherwise provided in Division 5 (commencing with Section 5101), means honesty in fact and the observance of reasonable commercial standards of fair dealing.

(21) “Holder” means:

(A) the person in possession of a negotiable instrument that is payable either to bearer or, to an identified person that is the person in possession;

(B) the person in possession of a document of title if the goods are deliverable either to bearer or to the order of the person in possession; or

(C) the person in control, other than pursuant to subdivision (g) of Section 7106, of a negotiable electronic document of title.

(22) “Insolvency proceeding” includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.

(23) “Insolvent” means:

(A) having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;

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

(24) “Money” means a medium of exchange that is currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries. The term does not include an electronic record that is a medium of exchange recorded and transferable in a system that existed and operated for the medium of exchange before the medium of exchange was authorized or adopted by the government.

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

(26) “Party,” as distinguished from “third party,” means a person that has engaged in a transaction or made an agreement subject to this code.

(27) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. The term includes a protected series, however denominated, of an entity if the protected series is established under law other than this code that limits, or limits if conditions specified under the law are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim from assets of the protected series.

(28) “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.

(29) “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property.

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

(31) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(32) “Remedy” means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.

(33) “Representative” means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate.

(34) “Right” includes remedy.

(35) “Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. “Security interest” includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Division 9 (commencing with Section 9101). “Security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under Section 2401, but a buyer may also acquire a “security interest” by complying with Division 9 (commencing with Section 9101). Except as otherwise provided in Section 2505, the right of a seller or lessor of goods under Division 2 (commencing with Section 2101) or Division 10 (commencing with Section 10101) to retain or acquire possession of the goods is not a “security interest,” but a seller or lessor may also acquire a “security interest” by complying with Division 9 (commencing with Section 9101). The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2401 is limited in effect to a reservation of a “security interest.”

Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to Section 1203.

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

(A) 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

(B) to cause the record or notification to be received within the time it would have been received if properly sent under subparagraph (A).

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

(A) execute or adopt a tangible symbol; or

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

“Signed,” “signing,” and “signature” have corresponding meanings.

(38) “Spouse” includes “registered domestic partner,” as required by Section 297.5 of the Family Code.

(39) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

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

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

(42) “Unauthorized signature” means a signature made without actual, implied, or apparent authority. The term includes a forgery.

(43) “Warehouse receipt” means a receipt issued by a person engaged in the business of storing goods for hire.

(44) “Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning.

(45) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

SEC. 2.

Section 1204 of the Commercial Code is amended to read:

1204.

Except as otherwise provided in Divisions 3, 4, 5, 6, and 12, a person gives value for rights if the person acquires them:

(1) in return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a chargeback is provided for in the event of difficulties in collection;

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

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

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

SEC. 3.

Section 1301 of the Commercial Code is amended to read:

1301.

(a) Except as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law either of this state or of the other state or nation shall govern their rights and duties.

(b) In the absence of an agreement effective under subdivision (a), and except as provided in subdivision (c), this code applies to transactions bearing an appropriate relation to this state.

(c) If one of the following provisions specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:

(1) Section 2402.

(2) Section 4102.

(3) Section 5116.

(4) Section 6103.

(5) Section 8110.

(6) Sections 9301 to 9307, inclusive.

(7) Sections 10105 and 10106.

(8) Section 11507.

(9) Section 12107.

SEC. 4.

Section 1306 of the Commercial Code is amended to read:

1306.

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 a signed record.

SEC. 5.

Section 2102 of the Commercial Code is amended to read:

2102.

(a) Unless the context otherwise requires, and except as provided in subdivision (c), this division applies to transactions in goods and, in the case of a hybrid transaction, it applies to the extent provided in subdivision (b).

(b) 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 that, 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.

SEC. 6.

Section 2106 of the Commercial Code is amended to read:

2106.

(1) In this division unless the context otherwise requires “contract” and “agreement” are limited to those relating to the present or future sale of goods. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing of title from the seller to the buyer for a price (Section 2401). A “present sale” means a sale which is accomplished by the making of the contract.

(2) Goods or conduct including any part of a performance are “conforming” or conform to the contract when they are in accordance with the obligations under the contract.

(3) “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On “termination” all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.

(4) “Cancellation” occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of “termination” except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.

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

(a) the provision of services;

(b) a lease of other goods; or

SEC. 7.

Section 2201 of the Commercial Code is amended to read:

2201.

(1) Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars ($500) or more is not enforceable by way of action or defense unless there is 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 the party’s authorized agent or broker. A record is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subdivision beyond the quantity of goods shown in the record.

(2) Between merchants if within a reasonable time a record in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subdivision (1) against the party unless notice in a record of objection to its contents is given within 10 days after it is received.

(3) A contract which does not satisfy the requirements of subdivision (1) but which is valid in other respects is enforceable:

(a) If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement;

(b) If the party against whom enforcement is sought admits in its pleading, testimony, or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or

(c) With respect to goods for which payment has been made and accepted or which have been received and accepted (Section 2606).

(4) Subdivision (1) of this section does not apply to a qualified financial contract as that term is defined in paragraph (2) of subdivision (b) of Section 1624 of the Civil Code if either (a) there is, as provided in paragraph (3) of subdivision (b) of 1624 of the Civil Code, sufficient evidence to indicate that a contract has been made or (b) the parties thereto, by means of a prior or subsequent written contract, have agreed to be bound by the terms of the qualified financial contract from the time they reach agreement (by telephone, by exchange of electronic messages, or otherwise) on those terms.

SEC. 8.

Section 2202 of the Commercial Code is amended to read:

2202.

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:

(a) By course of dealing, course of performance, or usage of trade (Section 1303); and

(b) By evidence of consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement.

SEC. 9.

Section 2205 of the Commercial Code is amended to read:

2205.

(a) An offer by a merchant to buy or sell goods in a signed record which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

(b) Notwithstanding subdivision (a), when a merchant renders an offer, oral or written, to supply goods to a contractor licensed pursuant to the provisions of Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code or a similar contractor’s licensing law of another state, and the merchant has actual or imputed knowledge that the contractor is so licensed, and that the offer will be relied upon by the contractor in the submission of its bid for a construction contract with a third party, the offer relied upon shall be irrevocable, notwithstanding lack of consideration, for 10 days after the awarding of the contract to the prime contractor, but in no event for more than 90 days after the date the bid or offer was rendered by the merchant; except that an oral bid or offer, when for a price of two thousand five hundred dollars ($2,500) or more, shall be confirmed in a record by the contractor or the contractor’s agent within 48 hours after it is rendered. Failure by the contractor to confirm the offer in a record shall release the merchant from the merchant’s offer. Nothing in this subdivision shall prevent a merchant from providing that the bid or offer will be held open for less than the time provided for herein.

SEC. 10.

Section 2209 of the Commercial Code is amended to read:

2209.

(1) An agreement modifying a contract within this division needs no consideration to be binding.

(2) A signed agreement which excludes modification or rescission except by a signed writing or other signed record cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

(3) The requirements of the statute of frauds section of this division (Section 2201) must be satisfied if the contract as modified is within its provisions.

(4) Although an attempt at modification or rescission does not satisfy the requirements of subdivision (2) or (3) it can operate as a waiver.

(5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

SEC. 11.

Section 3104 of the Commercial Code is amended to read:

3104.

(a) Except as provided in subdivisions (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 is all of the following:

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

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

(3) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor, (iv) a term that specifies the law that governs the promise or order, or (v) an undertaking to resolve in a specified forum a dispute concerning the promise or order.

(b) “Instrument” means a negotiable instrument.

(c) An order that meets all of the requirements of subdivision (a), except paragraph (1), and otherwise falls within the definition of “check” in subdivision (f) is a negotiable instrument and a check.

(d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this division.

(e) An instrument is a “note” if it is a promise and is a “draft” if it is an order. If an instrument falls within the definition of both “note” and “draft,” a person entitled to enforce the instrument may treat it as either.

(f) “Check” means (1) a draft, other than a documentary draft, payable on demand and drawn on a bank, (2) a cashier’s check or teller’s check, or (3) a demand draft. An instrument may be a check even though it is described on its face by another term, such as “money order.”

(g) “Cashier’s check” means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.

(h) “Teller’s check” means a draft drawn by a bank (1) on another bank, or (2) payable at or through a bank.

(i) “Traveler’s check” means an instrument that (1) is payable on demand, (2) is drawn on or payable at or through a bank, (3) is designated by the term “traveler’s check” or by a substantially similar term, and (4) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.

(j) “Certificate of deposit” means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.

(k) “Demand draft” means a writing not signed by a customer that is created by a third party under the purported authority of the customer for the purpose of charging the customer’s account with a bank. A demand draft shall contain the customer’s account number and may contain any or all of the following:

(1) The customer’s printed or typewritten name.

(2) A notation that the customer authorized the draft.

(3) The statement “No Signature Required” or words to that effect.

A demand draft shall not include a check purportedly drawn by and bearing the signature of a fiduciary, as defined in paragraph (1) of subdivision (a) of Section 3307.

SEC. 12.

Section 3105 of the Commercial Code is amended to read:

3105.

(a) “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 that enables the depositary bank to collect the item by transferring or presenting under federal law an electronic check.

(b) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.

SEC. 13.

Section 3401 of the Commercial Code is amended to read:

3401.

A person is not liable on an instrument unless (a) the person signed the instrument, or (b) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under Section 3402.

SEC. 14.

Section 3604 of the Commercial Code is amended to read:

3604.

(a) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument (1) 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) by agreeing not to sue or otherwise renouncing rights against the party by a signed record. The obligation of a party to pay a check is not discharged solely by destruction of the check in connection with a process in which information is extracted from the check and an image of the check is made and, subsequently, the information and image are transmitted for payment.

(b) Cancellation or striking out of an indorsement pursuant to subdivision (a) does not affect the status and rights of a party derived from the indorsement.

SEC. 15.

Section 5104 of the Commercial Code is amended to read:

5104.

A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a signed record.

SEC. 16.

Section 5116 of the Commercial Code is amended to read:

5116.

(a) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed by the affected parties or by a provision in the person’s letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction.

(b) Unless subdivision (a) applies, the liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person’s undertaking. If more than one address is indicated, the person is considered to be located at the address from which the person’s undertaking was issued.

(c) For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under subdivision (d).

(d) A branch of a bank is considered to be located at the address indicated in the branch’s undertaking. If more than one address is indicated, the branch is considered to be located at the address from which the undertaking was issued.

(e) Except as otherwise provided in this subdivision, 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 (i) this division would govern the liability of an issuer, nominated person, or adviser under subdivision (a) or (b), (ii) the relevant undertaking incorporates rules of custom or practice, and (iii) there is conflict between this division and those rules applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in subdivision (c) of Section 5103.

(f) If there is conflict between this division and Division 3 (commencing with Section 3101), Division 4 (commencing with Section 4101), or Division 9 (commencing with Section 9101), this division governs.

(g) 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 subdivision (a).

SEC. 17.

Section 7102 of the Commercial Code is amended to read:

7102.

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

(1) “Bailee” means a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them.

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

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

(4) “Consignor” means a person named in a bill of lading as the person from which the goods have been received for shipment.

(5) “Delivery order” means a record that contains an order to deliver goods directed to a warehouse, carrier, or other person that in the ordinary course of business issues warehouse receipts or bills of lading.

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

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

(8) “Issuer” means a bailee that issues a document of title or, in the case of an unaccepted delivery order, the person that orders the possessor of goods to deliver. The term includes a person for which an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, even if the issuer did not receive any goods, the goods were misdescribed, or in any other respect the agent or employee violated the issuer’s instructions.

(9) “Person entitled under the document” means the holder, in the case of a negotiable document of title, or the person to which delivery of the goods is to be made by the terms of, or pursuant to instructions in a record under, a nonnegotiable document of title.

(10) [Reserved]

(11) [Reserved]

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

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

(b) Definitions in other divisions applying to this division and the sections in which they appear are:

(1) “Contract for sale,” Section 2106.

(2) “Lessee in the ordinary course of business,” Section 10103.

(3) “Receipt of goods,” Section 2103.

(c) In addition, Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division.

SEC. 18.

Section 7106 of the Commercial Code is amended to read:

7106.

(a) A person has control of an electronic document of title if a system employed for evidencing the transfer of interests in the electronic document reliably establishes that person as the person to which the electronic document was issued or transferred.

(b) A system satisfies subdivision (a), and a person has control of an electronic document of title, if the document is created, stored, and transferred in a manner that:

(1) a single authoritative copy of the document exists which is unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;

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

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

(B) if the authoritative copy indicates that the document has been transferred, the person to which the document was most recently transferred;

(3) the authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;

(4) copies or amendments that add or change an identified transferee of the authoritative copy can be made only with the consent of the person asserting control;

(5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and

(6) any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.

(c) A system satisfies subdivision (a), and a person has control of an electronic document of title, if an authoritative electronic copy of the document, a record attached to or logically associated with the electronic copy, or a system in which the electronic copy is recorded:

(1) enables the person readily to identify each electronic copy as either an authoritative copy or a nonauthoritative copy;

(2) enables the person readily to identify itself in any way, including by name, identifying number, cryptographic key, office, or account number, as the person to which each authoritative electronic copy was issued or transferred; and

(3) gives the person exclusive power, subject to subdivision (d), to:

(A) prevent others from adding or changing the person to which each authoritative electronic copy has been issued or transferred; and

(B) transfer control of each authoritative electronic copy.

(d) Subject to subdivision (e), a power is exclusive under subparagraphs (A) and (B) of paragraph (3) of subdivision (c) even if:

(1) the authoritative electronic copy, a record attached to or logically associated with the authoritative electronic copy, or a system in which the authoritative electronic copy is recorded limits the use of the document of title or has a protocol that is programmed to cause a change, including a transfer or loss of control; or

(2) the power is shared with another person.

(e) A power of a person is not shared with another person under paragraph (2) of subdivision (d) 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:

(A) can exercise the power without exercise of the power by the person; or

(B) is the transferor to the person of an interest in the document of title.

(f) If a person has the powers specified in subparagraphs (A) and (B) of paragraph (3) of subdivision (c), the powers are presumed to be exclusive.

(g) A person has control of an electronic document of title if another person, other than the transferor to the person of an interest in the document:

(1) has control of the document and acknowledges that it has control on behalf of the person; or

(2) obtains control of the document after having acknowledged that it will obtain control of the document on behalf of the person.

(h) A person that has control under this section is not required to acknowledge that it has control on behalf of another person.

(i) If a person acknowledges that it has or will obtain control on behalf of another person, unless the person otherwise agrees or law other than this division or Division 9 (commencing with Section 9101) 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.

SEC. 19.

Section 8102 of the Commercial Code is amended to read:

8102.

(a) In this division:

(1) “Adverse claim” means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or deal with the financial asset.

(2) “Bearer form,” as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an indorsement.

(3) “Broker” means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity.

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

(5) “Clearing corporation” means any of the following:

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

(B) A federal reserve bank.

(C) Any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority.

(6) “Communicate” means to either:

(A) Send a signed record.

(B) Transmit information by any mechanism agreed upon by the persons transmitting and receiving the information.

(7) “Entitlement holder” means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security entitlement by virtue of paragraph (2) or (3) of subdivision (b) of Section 8501, that person is the entitlement holder.

(8) “Entitlement order” means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement.

(9) “Financial asset,” except as otherwise provided in Section 8103, means any of the following:

(A) A security.

(B) An obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, that is, or is of a type, dealt in or traded on financial markets, or that is recognized in any area in which it is issued or dealt in as a medium for investment.

(C) Any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this division. As context requires, the term means either the interest itself or the means by which a person’s claim to it is evidenced, including a certificated or uncertificated security, a security certificate, or a security entitlement.

(10) [Reserved]

(11) “Endorsement” means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring, or redeeming the security or granting a power to assign, transfer, or redeem it.

(12) “Instruction” means a notification communicated to the issuer of an uncertificated security that directs that the transfer of the security be registered or that the security be redeemed.

(13) “Registered form,” as applied to a certificated security, means a form in which both of the following apply:

(A) The security certificate specifies a person entitled to the security.

(B) A transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer, or the security certificate so states.

(14) “Securities intermediary” means either:

(A) A clearing corporation.

(B) A person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.

(15) “Security,” except as otherwise provided in Section 8103, means an obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer that is all of the following:

(A) It is represented by a security certificate in bearer or registered form, or the transfer of it may be registered upon books maintained for that purpose by or on behalf of the issuer.

(B) It is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.

(i) It is, or is of a type, dealt in or traded on securities exchanges or securities markets.

(ii) It is a medium for investment and by its terms expressly provides that it is a security governed by this division.

(16) “Security certificate” means a certificate representing a security.

(17) “Security entitlement” means the rights and property interest of an entitlement holder with respect to a financial asset specified in Chapter 5 (commencing with Section 8501).

(18) “Uncertificated security” means a security that is not represented by a certificate.

(b) The following definitions in this division and other divisions apply to this division:

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.

(c) In addition, Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division.

(d) The characterization of a person, business, or transaction for purposes of this division does not determine the characterization of the person, business, or transaction for purposes of any other law, regulation, or rule.

SEC. 20.

Section 8103 of the Commercial Code is amended to read:

8103.

(a) A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security.

(b) An “investment company security” is a security. “Investment company security” means a share or similar equity interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered. Investment company security does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.

(c) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this division, or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.

(d) A writing that is a security certificate is governed by this division and not by Division 3 (commencing with Section 3101), even though it also meets the requirements of that division. However, a negotiable instrument governed by Division 3 (commencing with Section 3101) is a financial asset if it is held in a securities account.

(e) An option or similar obligation issued by a clearing corporation to its participants is not a security, but is a financial asset.

(f) A commodity contract, as defined in paragraph (15) of subdivision (a) of Section 9102, is not a security or a financial asset.

(g) A document of title is not a financial asset unless subparagraph (C) of paragraph (9) of subdivision (a) of Section 8102 applies.

(h) A controllable account, controllable electronic record, or controllable payment intangible is not a financial asset unless subparagraph (C) of paragraph (9) of subdivision (a) of Section 8102 applies.

SEC. 21.

Section 8106 of the Commercial Code is amended to read:

8106.

(a) A purchaser has “control” of a certificated security in bearer form if the certificated security is delivered to the purchaser.

(b) A purchaser has “control” of a certificated security in registered form if the certificated security is delivered to the purchaser, and either of the following applies:

(1) The certificate is endorsed to the purchaser or in blank by an effective endorsement.

(2) The certificate is registered in the name of the purchaser, upon original issue or registration of transfer by the issuer.

(1) The uncertificated security is delivered to the purchaser; or

(2) The issuer has agreed that it will comply with instructions originated by the purchaser without further consent by the registered owner.

(d) A purchaser has “control” of a security entitlement if any of the following apply:

(1) The purchaser becomes the entitlement holder.

(2) The securities intermediary has agreed that it will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder.

(3) Another person, other than the transferor to the purchaser of an interest in the security entitlement, satisfies either of the following conditions:

(A) The person has control of the security entitlement and acknowledges that it has control on behalf of the purchaser.

(B) The person obtains control of the security entitlement after having acknowledged that it will obtain control of the security entitlement on behalf of the purchaser.

(e) If an interest in a security entitlement is granted by the entitlement holder to the entitlement holder’s own securities intermediary, the securities intermediary has control.

(f) A purchaser who has satisfied the requirements of subdivision (c) or (d) has control, even if the registered owner in the case of subdivision (c) or the entitlement holder in the case of subdivision (d) retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary, or otherwise to deal with the uncertificated security or security entitlement.

(g) An issuer or a securities intermediary may not enter into an agreement of the kind described in paragraph (2) of subdivision (c) or paragraph (2) of subdivision (d) without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so directs. An issuer or securities intermediary that has entered into such an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder.

(h) A person that has control under this section is not required to acknowledge that it has control on behalf of a purchaser.

(i) If a person acknowledges that it has or will obtain control on behalf of a purchaser, unless the person otherwise agrees or law other than this division or Division 9 (commencing with Section 9101) otherwise provides, the person does not owe any duty to the purchaser and is not required to confirm the acknowledgment to any other person.

SEC. 22.

Section 8110 of the Commercial Code is amended to read:

8110.

(a) The local law of the issuer’s jurisdiction, as specified in subdivision (d), governs the following:

(1) The validity of a security.

(2) The rights and duties of the issuer with respect to registration of transfer.

(3) The effectiveness of registration of transfer by the issuer.

(4) Whether the issuer owes any duties to an adverse claimant to a security.

(5) Whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.

(b) The local law of the securities intermediary’s jurisdiction, as specified in subdivision (e), governs the following:

(1) Acquisition of a security entitlement from the securities intermediary.

(2) The rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement.

(3) Whether the securities intermediary owes any duties to an adverse claimant to a security entitlement.

(4) Whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a person who purchases a security entitlement or interest therein from an entitlement holder.

(c) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered.

(d) “Issuer’s jurisdiction” means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in paragraphs (2) to (5), inclusive, of subdivision (a).

(e) The following rules determine a “securities intermediary’s jurisdiction” for purposes of this section:

(1) If an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the security intermediary’s jurisdiction for purposes of this code, that jurisdiction is the securities intermediary’s jurisdiction.

(2) If paragraph (1) does not apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.

(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.

(4) If none of the preceding paragraphs applies, the securities intermediary’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder’s account is located.

(5) If none of the preceding paragraphs applies, the securities intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located.

(f) A securities intermediary’s jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other record keeping concerning the account.

(g) The local law of the issuer’s jurisdiction or the securities intermediary’s jurisdiction governs a matter or transaction specified in subdivision (a) or (b) even if the matter or transaction does not bear any relation to the jurisdiction.

SEC. 23.

Section 8303 of the Commercial Code is amended to read:

8303.

(a) “Protected purchaser” means a purchaser of a certificated or uncertificated security, or of an interest therein, who does all of the following:

(1) Gives value.

(2) Does not have notice of any adverse claim to the security.

(3) Obtains control of the certificated or uncertificated security.

(b) A protected purchaser also acquires its interest in the security free of any adverse claim.

SEC. 24.

Section 9102 of the Commercial Code is amended to read:

9102.

(a) In this division:

(1) “Accession” means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost.

(2) “Account,” except as used in “account for,” “account statement,” “account to,” “commodity account” in paragraph (14), “customer’s account,” “deposit account” in paragraph (29), “on account of,” and “statement of account,” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state. The term includes controllable accounts and health care insurance receivables. The term does not include (i) chattel paper, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card, or (vii) rights to payment evidenced by an instrument.

(3) “Account debtor” means a person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the negotiable instrument evidences chattel paper.

(4) “Accounting,” except as used in “accounting for,” means a record that is all of the following:

(A) Signed by a secured party.

(B) 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.

(5) “Agricultural lien” means an interest in farm products that meets all of the following conditions:

(A) It secures payment or performance of an obligation for either of the following:

(i) Goods or services furnished in connection with a debtor’s farming operation.

(ii) Rent on real property leased by a debtor in connection with its farming operation.

(B) It is created by statute in favor of a person that does either of the following:

(i) In the ordinary course of its business furnished goods or services to a debtor in connection with a debtor’s farming operation.

(ii) Leased real property to a debtor in connection with the debtor’s farming operation.

(6) “As-extracted collateral” means either of the following:

(A) Oil, gas, or other minerals that are subject to a security interest that does both of the following:

(i) Is created by a debtor having an interest in the minerals before extraction.

(ii) Attaches to the minerals as extracted.

(B) Accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction.

(7) [Reserved]

(8) “Bank” means an organization that is engaged in the business of banking. The term includes savings banks, savings and loan associations, credit unions, and trust companies.

(9) “Cash proceeds” means proceeds that are money, checks, deposit accounts, or the like.

(10) “Certificate of title” means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral.

(11) (A) “Chattel paper” means either of the following:

(i) 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.

(ii) A right to payment of a monetary obligation owed by a lessee under a lease agreement with respect to specific goods and a monetary obligation owed by the lessee in connection with the transaction giving rise to the lease, if both of the following are met:

(I) The right to payment and lease agreement are evidenced by a record.

(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.

(B) “Chattel paper” does not include a right to payment arising out of a charter or other contract involving the use or hire of a vessel or a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.

(12) “Collateral” means the property subject to a security interest or agricultural lien. The term includes all of the following:

(A) Proceeds to which a security interest attaches.

(B) Accounts, chattel paper, payment intangibles, and promissory notes that have been sold.

(13) “Commercial tort claim” means a claim arising in tort with respect to which either of the following conditions is satisfied:

(A) The claimant is an organization.

(B) The claimant is an individual and both of the following conditions are satisfied regarding the claim:

(i) It arose in the course of the claimant’s business or profession.

(ii) It does not include damages arising out of personal injury to or the death of an individual.

(14) “Commodity account” means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.

(15) “Commodity contract” means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is either of the following:

(A) Traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to federal commodities laws.

(B) Traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.

(16) “Commodity customer” means a person for which a commodity intermediary carries a commodity contract on its books.

(17) “Commodity intermediary” means a person that is either of the following:

(A) Is registered as a futures commission merchant under federal commodities law.

(B) In the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.

(18) “Communicate” means to do any of the following:

(A) To send a written or other tangible record.

(B) To transmit a record by any means agreed upon by the persons sending and receiving the record.

(C) In the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing-office rule.

(19) “Consignee” means a merchant to which goods are delivered in a consignment.

(20) “Consignment” means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and all of the following conditions are satisfied:

(A) The merchant satisfies all of the following conditions:

(i) They deal in goods of that kind under a name other than the name of the person making delivery.

(ii) They are not an auctioneer.

(iii) They are not generally known by its creditors to be substantially engaged in selling the goods of others.

(B) With respect to each delivery, the aggregate value of the goods is one thousand dollars ($1,000) or more at the time of delivery.

(D) The transaction does not create a security interest that secures an obligation.

(21) “Consignor” means a person that delivers goods to a consignee in a consignment.

(22) “Consumer debtor” means a debtor in a consumer transaction.

(23) “Consumer goods” means goods that are used or bought for use primarily for personal, family, or household purposes.

(24) “Consumer-goods transaction” means a consumer transaction in which both of the following conditions are satisfied:

(A) An individual incurs an obligation primarily for personal, family, or household purposes.

(B) A security interest in consumer goods secures the obligation.

(25) “Consumer obligor” means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family, or household purposes.

(26) “Consumer transaction” means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer-goods transactions.

(27) “Continuation statement” means an amendment of a financing statement which does both of the following:

(A) Identifies, by its file number, the initial financing statement to which it relates.

(B) Indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.

(28) “Debtor” means any of the following:

(A) A person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor.

(B) A seller of accounts, chattel paper, payment intangibles, or promissory notes.

(29) “Deposit account” means a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument.

(30) “Document” means a document of title or a receipt of the type described in subdivision (b) of Section 7201.

(31) [Reserved]

(32) “Encumbrance” means a right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property.

(33) “Equipment” means goods other than inventory, farm products, or consumer goods.

(34) “Farm products” means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are any of the following:

(A) Crops grown, growing, or to be grown, including both of the following:

(i) Crops produced on trees, vines, and bushes.

(ii) Aquatic goods produced in aquacultural operations.

(B) Livestock, born or unborn, including aquatic goods produced in aquacultural operations.

(D) Products of crops or livestock in their unmanufactured states.

(35) “Farming operation” means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.

(36) “File number” means the number assigned to an initial financing statement pursuant to subdivision (a) of Section 9519.

(37) “Filing office” means an office designated in Section 9501 as the place to file a financing statement.

(38) “Filing-office rule” means a rule adopted pursuant to Section 9526.

(39) “Financing statement” means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement.

(40) “Fixture filing” means the filing of a financing statement covering goods that are or are to become fixtures and satisfying subdivisions (a) and (b) of Section 9502. The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.

(41) “Fixtures” means goods that have become so related to particular real property that an interest in them arises under real property law.

(42) “General intangible” means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.

(43) [Reserved]

(44) “Goods” means all things that are movable when a security interest attaches. The term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such a manner that it customarily is considered part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.

(45) “Governmental unit” means a subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country. The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States.

(46) “Health care insurance receivable” means an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health care goods or services provided or to be provided.

(47) “Instrument” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment. The term does not include (i) investment property, (ii) letters of credit, (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card, or (iv) writings that evidence chattel paper.

(48) “Inventory” means goods, other than farm products, which are any of the following:

(A) Leased by a person as lessor.

(B) Held by a person for sale or lease or to be furnished under a contract of service.

(D) Consist of raw materials, work in process, or materials used or consumed in a business.

(49) “Investment property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.

(50) “Jurisdiction of organization,” with respect to a registered organization, means the jurisdiction under whose law the organization is formed or organized.

(51) “Letter-of-credit right” means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.

(52) (A) “Lien creditor” means any of the following:

(i) A creditor that has acquired a lien on the property involved by attachment, levy, or the like.

(ii) An assignee for benefit of creditors from the time of assignment.

(iii) A trustee in bankruptcy from the date of the filing of the petition.

(iv) A receiver in equity from the time of appointment.

(B) “Lien creditor” does not include a creditor who by filing a notice with the Secretary of State has acquired only an attachment or judgment lien on personal property, or both.

(53) “Manufactured home” means a structure, transportable in one or more sections, which, in the traveling mode, is eight body-feet or more in width or 40 body-feet or more in length, or, when erected on site, is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein. The term includes any structure that meets all of the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States Secretary of Housing and Urban Development and complies with the standards established under Title 42 of the United States Code.

(54) “Manufactured home transaction” means a secured transaction that satisfies either of the following:

(A) It creates a purchase money security interest in a manufactured home, other than a manufactured home held as inventory.

(B) It is a secured transaction in which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.

(55) “Mortgage” means a consensual interest in real property, including fixtures, which secures payment or performance of an obligation.

(56) “New debtor” means a person that becomes bound as debtor under subdivision (d) of Section 9203 by a security agreement previously entered into by another person.

(57) “New value” means (i) money, (ii) money’s worth in property, services, or new credit, or (iii) release by a transferee of an interest in property previously transferred to the transferee. The term does not include an obligation substituted for another obligation.

(58) “Noncash proceeds” means proceeds other than cash proceeds.

(59) “Obligor” means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (i) owes payment or other performance of the obligation, (ii) has provided property other than the collateral to secure payment or other performance of the obligation, or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.

(60) “Original debtor,” except as used in subdivision (c) of Section 9310, means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under subdivision (d) of Section 9203.

(61) “Payment intangible” means a general intangible under which the account debtor’s principal obligation is a monetary obligation. The term includes a controllable payment intangible.

(62) “Person related to,” with respect to an individual, means any of the following:

(A) The spouse of the individual.

(B) A brother, brother-in-law, sister, or sister-in-law of the individual.

(D) Any other relative, by blood or marriage, of the individual or the individual’s spouse who shares the same home with the individual.

(63) “Person related to,” with respect to an organization, means any of the following:

(A) A person directly or indirectly controlling, controlled by, or under common control with the organization.

(B) An officer or director of, or a person performing similar functions with respect to, the organization.

(C) An officer or director of, or a person performing similar functions with respect to, a person described in subparagraph (A).

(D) The spouse of an individual described in subparagraph (A), (B), or (C).

(E) An individual who is related by blood or marriage to an individual described in subparagraph (A), (B), (C), or (D) and shares the same home with the individual.

(64) “Proceeds,” except as used in subdivision (b) of Section 9609, means any of the following property:

(A) Whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral.

(B) Whatever is collected on, or distributed on account of, collateral.

(D) To the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral.

(E) To the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.

(65) “Promissory note” means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.

(66) “Proposal” means a record signed by a secured party that includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to Sections 9620, 9621, and 9622.

(67) “Public finance transaction” means a secured transaction in connection with which all of the following conditions are satisfied:

(A) Debt securities are issued.

(B) All or a portion of the securities issued have an initial stated maturity of at least 20 years.

(C) The debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation, or assignor or assignee of a security interest is a state or a governmental unit of a state.

(68) “Public organic record” means a record that is available to the public for inspection and is any of the following:

(A) A record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States that amends or restates the initial record.

(B) An organic record of a business trust consisting of the record initially filed with a state and any record filed with the state that amends or restates the initial record, if a statute of the state governing business trusts requires that the record be filed with the state.

(C) A record consisting of legislation enacted by the legislature of a state or the Congress of the United States which forms or organizes an organization, any record amending the legislation, and any record filed with or issued by the state or the United States which amends or restates the name of the organization.

(69) “Pursuant to commitment,” with respect to an advance made or other value given by a secured party, means pursuant to the secured party’s obligation, whether or not a subsequent event of default or other event not within the secured party’s control has relieved or may relieve the secured party from its obligation.

(70) “Record,” except as used in “for record,” “of record,” “record or legal title,” and “record owner,” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

(71) “Registered organization” means an organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or the United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust’s organic record be filed with the state.

(72) “Secondary obligor” means an obligor to the extent that either of the following conditions are satisfied:

(A) The obligor’s obligation is secondary.

(B) The obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.

(73) “Secured party” means any of the following:

(A) A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding.

(B) A person that holds an agricultural lien.

(D) A person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold.

(E) A trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for.

(F) A person that holds a security interest arising under Section 2401, 2505, 4210, or 5118, or under subdivision (3) of Section 2711 or subdivision (5) of Section 10508.

(74) “Security agreement” means an agreement that creates or provides for a security interest.

(75) [Reserved]

(76) “Software” means a computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods.

(77) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(78) “Supporting obligation” means a letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, document, general intangible, instrument, or investment property.

(79) [Reserved]

(80) “Termination statement” means an amendment of a financing statement that does both of the following:

(A) Identifies, by its file number, the initial financing statement to which it relates.

(B) Indicates either that it is a termination statement or that the identified financing statement is no longer effective.

(81) “Transmitting utility” means a person primarily engaged in the business of any of the following:

(A) Operating a railroad, subway, street railway, or trolley bus.

(B) Transmitting communications electrically, electromagnetically, or by light.

(D) Transmitting or producing and transmitting electricity, steam, gas, or water.

(82) “Assignee,” except as used in “assignee for benefit of creditors,” means a person (A) 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 (B) 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.

(83) “Assignor” means a person that (A) under a security agreement creates or provides for a security interest that secures an obligation or (B) 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.

(84) “Controllable account” means an account evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person that has control under Section 12105 of the controllable electronic record.

(85) “Controllable payment intangible” means a payment intangible evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person that has control under Section 12105 of the controllable electronic record.

(86) “Electronic money” means money in an electronic form.

(87) “Money” has the same meaning as in paragraph (24) of subdivision (b) of Section 1201, but does not include (A) a deposit account or (B) money in an electronic form that cannot be subjected to control under Section 9105.1.

(88) “Tangible money” means money in a tangible form.

(b) 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”	Section 7106.
“Controllable electronic record”	Section 12102.
“Customer”	Section 4104.
“Entitlement holder”	Section 8102.
“Financial asset”	Section 8102.
“Holder in due course”	Section 3302.
“Issuer” (with respect to a letter of credit or letter-of-credit right)	Section 5102.
“Issuer” (with respect to a security)	Section 8201.
“Issuer” (with respect to documents of title)	Section 7102.
“Lease”	Section 10103.
“Lease agreement”	Section 10103.
“Lease contract”	Section 10103.
“Leasehold interest”	Section 10103.
“Lessee”	Section 10103.
“Lessee in ordinary course of business”	Section 10103.
“Lessor”	Section 10103.
“Lessor’s residual interest”	Section 10103.
“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.

(c) Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division.

SEC. 25.

Section 9104 of the Commercial Code is amended to read:

9104.

(a) A secured party has control of a deposit account if any of the following conditions is satisfied:

(1) The secured party is the bank with which the deposit account is maintained.

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

(3) The secured party becomes the bank’s customer with respect to the deposit account.

(4) Another person, other than the debtor, satisfies either of the following conditions:

(A) The person has control of the deposit account and acknowledges that it has control on behalf of the secured party.

(B) The person obtains control of the deposit account after having acknowledged that it will obtain control of the deposit account on behalf of the secured party.

(b) A secured party that has satisfied subdivision (a) has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.

SEC. 26.

Section 9105 of the Commercial Code is amended to read:

9105.

(a) A purchaser has control of an authoritative electronic copy of a record evidencing chattel paper if a system employed for evidencing the assignment of interests in the chattel paper reliably establishes the purchaser as the person to which the authoritative electronic copy was assigned.

(b) A system satisfies subdivision (a) if the record or records evidencing the chattel paper are created, stored, and assigned in such a manner that each of the following conditions is satisfied:

(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 purchaser as the assignee of the record or records.

(3) The authoritative copy is communicated to and maintained by the purchaser or its designated custodian.

(4) Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the purchaser.

(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy.

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

(c) A system satisfies subdivision (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 satisfies each of the following conditions:

(1) It enables the purchaser readily to identify each electronic copy as either an authoritative copy or a nonauthoritative copy.

(2) It 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.

(3) It gives the purchaser exclusive power, subject to subdivision (d), to do both of the following:

(A) Prevent others from adding or changing an identified assignee of the authoritative electronic copy.

(B) Transfer control of the authoritative electronic copy.

(d) Subject to subdivision (e), a power is exclusive under subparagraphs (A) and (B) of paragraph (3) of subdivision (c) even if either of the following is true:

(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.

(2) The power is shared with another person.

(e) A power of a purchaser is not shared with another person under paragraph (2) of subdivision (d) and the purchaser’s power is not exclusive if each of the following conditions is satisfied:

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

(2) Either of the following is true:

(A) The other person can exercise the power without exercise of the power by the purchaser.

(B) The other person is the transferor to the purchaser of an interest in the chattel paper.

(f) If a purchaser has the powers specified in subparagraphs (A) and (B) of paragraph (3) of subdivision (c), the powers are presumed to be exclusive.

(g) 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, satisfies either of the following conditions:

(1) The other person has control of the authoritative electronic copy and acknowledges that it has control on behalf of the purchaser.

(2) The other person obtains control of the authoritative electronic copy after having acknowledged that it will obtain control of the electronic copy on behalf of the purchaser.

SEC. 27.

Section 9105.1 is added to the Commercial Code, to read:

9105.1.

(a) A person has control of electronic money if each of the following conditions is satisfied:

(1) The electronic money, a record attached to or logically associated with the electronic money, or a system in which the electronic money is recorded gives the person all of the following:

(A) Power to avail itself of substantially all the benefit from the electronic money.

(B) Exclusive power, subject to subdivision (b), to do both of the following:

(i) Prevent others from availing themselves of substantially all the benefit from the electronic money.

(ii) Transfer control of the electronic money to another person or cause another person to obtain control of other electronic money as a result of the transfer of the electronic money.

(2) The electronic money, a record attached to or logically associated with the electronic money, or a system in which the electronic money is recorded 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 under paragraph (1).

(b) Subject to subdivision (c), a power is exclusive under clauses (i) and (ii) of subparagraph (B) of paragraph (1) of subdivision (a) even if either of the following is true:

(1) The electronic money, a record attached to or logically associated with the electronic money, or a system in which the electronic money is recorded limits the use of the electronic money or has a protocol programmed to cause a change, including a transfer or loss of control.

(2) The power is shared with another person.

(c) A power of a person is not shared with another person under paragraph (2) of subdivision (b) and the person’s power is not exclusive if each of the following conditions is satisfied:

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

(2) Either of the following is true:

(A) The other person can exercise the power without exercise of the power by the person.

(B) The other person is the transferor to the person of an interest in the electronic money.

(d) If a person has the powers specified in clauses (i) and (ii) of subparagraph (B) of paragraph (1) of subdivision (a), the powers are presumed to be exclusive.

(e) A person has control of electronic money if another person, other than the transferor to the person of an interest in the electronic money, satisfies either of the following conditions:

(1) The other person has control of the electronic money and acknowledges that it has control on behalf of the person.

(2) The other person obtains control of the electronic money after having acknowledged that it will obtain control of the electronic money on behalf of the person.

SEC. 28.

Section 9107.1 is added to the Commercial Code, to read:

9107.1.

(a) A secured party has control of a controllable electronic record as provided in Section 12105.

(b) 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.

SEC. 29.

Section 9107.2 is added to the Commercial Code, to read:

9107.2.

(a) A person that has control under Section 9104, 9105, or 9105.1 is not required to acknowledge that it has control on behalf of another person.

(b) 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 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.

SEC. 30.

Section 9203 of the Commercial Code is amended to read:

9203.

(a) A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.

(b) Except as otherwise provided in subdivisions (c) to (i), inclusive, a security interest is enforceable against the debtor and third parties with respect to the collateral only if each of the following conditions is satisfied:

(1) Value has been given.

(2) The debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party.

(3) One of the following conditions is met:

(A) The debtor has signed a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned.

(B) The collateral is not a certificated security and is in the possession of the secured party under Section 9313 pursuant to the debtor’s security agreement.

(C) The collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under Section 8301 pursuant to the debtor’s security agreement.

(D) The collateral is controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, investment property, or letter-of-credit rights and the secured party has control under Section 7106, 9104, 9105.1, 9106, 9107, or 9107.1 pursuant to the debtor’s security agreement.

(E) The collateral is chattel paper and the secured party has possession and control under Section 9314.1 pursuant to the debtor’s security agreement.

(c) Subdivision (b) is subject to Section 4210 on the security interest of a collecting bank, Section 5118 on the security interest of a letter-of-credit issuer or nominated person, Section 9110 on a security interest arising under Division 2 (commencing with Section 2101) or Division 10 (commencing with Section 10101), and Section 9206 on security interests in investment property.

(d) A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this division or by contract, either of the following conditions is satisfied:

(1) The security agreement becomes effective to create a security interest in the person’s property.

(2) The person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.

(e) If a new debtor becomes bound as debtor by a security agreement entered into by another person, both of the following apply:

(1) The agreement satisfies paragraph (3) of subdivision (b) with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement.

(2) Another agreement is not necessary to make a security interest in the property enforceable.

(f) The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by Section 9315 and is also attachment of a security interest in a supporting obligation for the collateral.

(g) The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.

(h) The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.

(i) The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.

SEC. 31.

Section 9204 of the Commercial Code is amended to read:

9204.

(a) Except as otherwise provided in subdivision (b), a security agreement may create or provide for a security interest in after-acquired collateral.

(b) Subject to subdivision (c), a security interest does not attach under a term constituting an after-acquired property clause to either of the following:

(1) Consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within 10 days after the secured party gives value.

(2) A commercial tort claim.

(1) Consumer goods as proceeds under subdivision (a) of Section 9315 or commingled goods under subdivision (c) of Section 9336.

(2) A commercial tort claim as proceeds under subdivision (a) of Section 9315.

(3) Property that is the proceeds of consumer goods or a commercial tort claim under an after-acquired property clause.

(d) A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.

SEC. 32.

Section 9207 of the Commercial Code is amended to read:

9207.

(a) Except as otherwise provided in subdivision (d), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party’s possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

(b) Except as otherwise provided in subdivision (d), if a secured party has possession of collateral, all of the following apply:

(1) Reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral.

(2) The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage.

(3) The secured party shall keep the collateral identifiable, but fungible collateral may be commingled.

(4) The secured party may use or operate the collateral for any of the following purposes:

(A) For the purpose of preserving the collateral or its value.

(B) As permitted by an order of a court having competent jurisdiction.

(c) Except as otherwise provided in subdivision (d), a secured party having possession of collateral or control of collateral under Section 7106, 9104, 9105, 9105.1, 9106, 9107, or 9107.1 may or shall, as the case may be, do all of the following:

(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.

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

(d) If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, both of the following apply:

(1) Subdivision (a) does not apply unless the secured party is entitled under an agreement to either of the following:

(A) To charge back uncollected collateral.

(B) Otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral.

(2) Subdivisions (b) and (c) do not apply.

SEC. 33.

Section 9208 of the Commercial Code is amended to read:

9208.

(a) This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.

(b) Within 10 days after receiving a signed demand by the debtor, all of the following apply:

(1) A secured party having control of a deposit account under paragraph (2) of subdivision (a) of Section 9104 shall send to the bank with which the deposit account is maintained a signed record that 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 paragraph (3) of subdivision (a) of Section 9104 shall do either of the following:

(A) Pay the debtor the balance on deposit in the deposit account.

(B) Transfer the balance on deposit into a deposit account in the debtor’s name.

(3) A secured party, other than a buyer, having control under Section 9105 of an authoritative electronic copy of a record evidencing chattel paper shall 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 paragraph (2) of subdivision (d) of Section 8106 or under subdivision (b) of Section 9106 shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained a signed record that 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 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party 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 under Section 7106 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 9105.1 of electronic money shall transfer control of the electronic money to the debtor or a person designated by the debtor.

(8) A secured party having control under Section 12105 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.

SEC. 34.

Section 9209 of the Commercial Code is amended to read:

9209.

(a) Except as otherwise provided in subdivision (c), this section applies if both of the following conditions are satisfied:

(1) There is no outstanding secured obligation.

(2) The secured party is not committed to make advances, incur obligations, or otherwise give value.

(b) Within 10 days after receiving a signed demand by the debtor, a secured party shall send to an account debtor that has received notification under subdivision (a) of Section 9406 or subdivision (b) of Section 12106 of an assignment to the secured party as assignee a signed record that releases the account debtor from any further obligation to the secured party.

(c) This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.

SEC. 35.

Section 9210 of the Commercial Code is amended to read:

9210.

(a) In this section:

(1) “Request” means a record of a type described in paragraph (2), (3), or (4).

(2) “Request for an accounting” means a record 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 that is the subject of the request.

(3) “Request regarding a list of collateral” means a record 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 that is the subject of the request.

(4) “Request regarding a statement of account” means a record 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 that is the subject of the request.

(b) Subject to subdivisions (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 as follows:

(1) In the case of a request for an accounting, by signing and sending to the debtor an accounting.

(2) In the case of a request regarding a list of collateral or a request regarding a statement of account, by signing and sending to the debtor an approval or correction.

(c) 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 a signed record including a statement to that effect within 14 days after receipt.

(d) 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 a signed record that contains both of the following:

(1) It disclaims any interest in the collateral.

(2) If known to the recipient, it provides the name and mailing address of any assignee of or successor to the recipient’s interest in the collateral.

(e) 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 a signed record that contains both of the following:

(1) It disclaims any interest in the obligations.

(2) If known to the recipient, it provides the name and mailing address of any assignee of or successor to the recipient’s interest in the obligations.

(f) 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 twenty-five dollars ($25) for each additional response.

SEC. 36.

Section 9301 of the Commercial Code is amended to read:

9301.

Except as otherwise provided in Sections 9303 to 9306.2, inclusive, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:

(1) Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.

(2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.

(3) Except as otherwise provided in paragraph (4), while negotiable tangible documents, goods, instruments, or tangible money is located in a jurisdiction, the local law of that jurisdiction governs all of the following:

(A) Perfection of a security interest in the goods by filing a fixture filing.

(B) Perfection of a security interest in timber to be cut.

(4) The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as-extracted collateral.

SEC. 37.

Section 9304 of the Commercial Code is amended to read:

9304.

(a) The local law of a bank’s jurisdiction governs perfection, the effect of perfection 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.

(b) The following rules determine a bank’s jurisdiction for purposes of this chapter:

(1) If an agreement between the bank and its customer governing the deposit account expressly provides that a particular jurisdiction is the bank’s jurisdiction for purposes of this chapter, this division, or this code, that jurisdiction is the bank’s jurisdiction.

(2) If paragraph (1) does not apply and an agreement between the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank’s jurisdiction.

(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the bank and its customer governing the deposit account expressly provides that the deposit account is maintained at an office in a particular jurisdiction, that jurisdiction is the bank’s jurisdiction.

(4) If none of the preceding paragraphs applies, the bank’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer’s account is located.

(5) If none of the preceding paragraphs applies, the bank’s jurisdiction is the jurisdiction in which the chief executive office of the bank is located.

SEC. 38.

Section 9305 of the Commercial Code is amended to read:

9305.

(a) Except as otherwise provided in subdivision (c), the following rules apply:

(1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby.

(2) The local law of the issuer’s jurisdiction as specified in subdivision (d) of Section 8110 governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security.

(3) The local law of the securities intermediary’s jurisdiction as specified in subdivision (e) of Section 8110 governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account.

(4) The local law of the commodity intermediary’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account.

(5) Paragraphs (2) to (4), inclusive, apply even if the transaction does not bear any relation to the jurisdiction.

(b) The following rules determine a commodity intermediary’s jurisdiction for purposes of this chapter:

(1) If an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that a particular jurisdiction is the commodity intermediary’s jurisdiction for purposes of this chapter, this division, or this code, that jurisdiction is the commodity intermediary’s jurisdiction.

(2) If paragraph (1) does not apply and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary’s jurisdiction.

(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary’s jurisdiction.

(4) If none of the preceding paragraphs applies, the commodity intermediary’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer’s account is located.

(5) If none of the preceding paragraphs applies, the commodity intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.

(1) Perfection of a security interest in investment property by filing.

(2) Automatic perfection of a security interest in investment property created by a broker or securities intermediary.

(3) Automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.

SEC. 39.

Section 9306.1 is added to the Commercial Code, to read:

9306.1.

(a) Except as provided in subdivision (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) The following rules determine the chattel paper’s jurisdiction under this section:

(1) If the authoritative electronic copy of the record 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 chapter, division, or code, 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 chapter, this division, or this code, 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) to (3), inclusive, 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) to (4), inclusive, do not apply, the chattel paper’s jurisdiction is the jurisdiction in which the debtor is located.

(c) If an authoritative tangible copy of a record evidences chattel paper and the chattel paper is not evidenced by an 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 both of the following:

(1) Perfection of a security interest in the chattel paper by possession under Section 9314.1.

(2) The effect of perfection or nonperfection and the priority of a security interest in the chattel paper.

(d) The local law of the jurisdiction in which the debtor is located governs perfection of a security interest in chattel paper by filing.

SEC. 40.

Section 9306.2 is added to the Commercial Code, to read:

9306.2.

(a) Except as provided in subdivision (b), the local law of the controllable electronic record’s jurisdiction specified in subdivisions (c) and (d) of Section 12107 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) The local law of the jurisdiction in which the debtor is located governs both of the following:

(1) Perfection of a security interest in a controllable account, controllable electronic record, or controllable payment intangible by filing.

(2) Automatic perfection of a security interest in a controllable payment intangible created by a sale of the controllable payment intangible.

SEC. 41.

Section 9310 of the Commercial Code is amended to read:

9310.

(a) Except as otherwise provided in subdivision (b) and in subdivision (b) of Section 9312, a financing statement must be filed to perfect all security interests and agricultural liens.

(b) The filing of a financing statement is not necessary to perfect a security interest that satisfies any of the following conditions:

(1) It is perfected under subdivision (d), (e), (f), or (g) of Section 9308.

(2) It is perfected under Section 9309 when it attaches.

(3) It is a security interest in property subject to a statute, regulation, or treaty described in subdivision (a) of Section 9311.

(4) It is a security interest in goods in possession of a bailee which is perfected under paragraph (1) or (2) of subdivision (d) of Section 9312.

(5) It is a security interest in certificated securities, documents, goods, or instruments which is perfected without filing, control, or possession under subdivision (e), (f), or (g) of Section 9312.

(6) It is a security interest in collateral in the secured party’s possession under Section 9313.

(7) It is a security interest in a certificated security which is perfected by delivery of the security certificate to the secured party under Section 9313.

(8) It is a security interest in controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, investment property, or letter-of-credit rights which is perfected by control under Section 9314.

(9) It is a security interest in proceeds which is perfected under Section 9315.

(10) It is perfected under Section 9316.

(11) It is a security interest in, or claim in or under, any policy of insurance including unearned premiums which is perfected by written notice to the insurer under paragraph (4) of subdivision (b) of Section 9312.

(12) It is a security interest in chattel paper which is perfected by possession and control under Section 9314.1.

(c) If a secured party assigns a perfected security interest or agricultural lien, a filing under this division is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.

SEC. 42.

Section 9312 of the Commercial Code is amended to read:

9312.

(a) A security interest in chattel paper, controllable accounts, controllable electronic records, controllable payment intangibles, instruments, investment property, or negotiable documents may be perfected by filing.

(b) Except as otherwise provided in subdivisions (c) and (d) of Section 9315 for proceeds, all of the following apply:

(1) A security interest in a deposit account may be perfected only by control under Section 9314.

(2) Except as otherwise provided in subdivision (d) of Section 9308, a security interest in a letter-of-credit right may be perfected only by control under Section 9314.

(3) A security interest in tangible money may be perfected only by the secured party’s taking possession under Section 9313.

(4) A security interest in, or claim in or under, any policy of insurance, including unearned premiums, may be perfected only by giving written notice of the security interest or claim to the insurer. This paragraph does not apply to a health care insurance receivable. A security interest in a health care insurance receivable may be perfected only as otherwise provided in this division.

(5) A security interest in electronic money may be perfected only by control under Section 9314.

(c) While goods are in the possession of a bailee that has issued a negotiable document covering the goods, both of the following apply:

(1) A security interest in the goods may be perfected by perfecting a security interest in the document.

(2) A security interest perfected in the document has priority over any security interest that becomes perfected in the goods by another method during that time.

(d) While goods are in the possession of a bailee that has issued a nonnegotiable document covering the goods, a security interest in the goods may be perfected by any of the following methods:

(1) Issuance of a document in the name of the secured party.

(2) The bailee’s receipt of notification of the secured party’s interest.

(3) Filing as to the goods.

(e) 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 a signed security agreement.

(f) A perfected security interest in a negotiable document or goods in possession of a bailee, other than one that has issued a negotiable document for the goods, remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of either of the following:

(1) Ultimate sale or exchange.

(2) Loading, unloading, storing, shipping, transshipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary to their sale or exchange.

(g) A perfected security interest in a certificated security or instrument remains perfected for 20 days without filing if the secured party delivers the security certificate or instrument to the debtor for the purpose of either of the following:

(1) Ultimate sale or exchange.

(2) Presentation, collection, enforcement, renewal, or registration of transfer.

(h) After the 20-day period specified in subdivision (e), (f), or (g) expires, perfection depends upon compliance with this division.

SEC. 43.

Section 9313 of the Commercial Code is amended to read:

9313.

(a) Except as otherwise provided in subdivision (b), a secured party may perfect a security interest in goods, instruments, negotiable tangible documents, or tangible money by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under Section 8301.

(b) With respect to goods covered by a certificate of title issued by this state, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in subdivision (d) of Section 9316.

(c) 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 either of the following conditions is satisfied:

(1) The person in possession signs a record acknowledging that it holds possession of the collateral for the secured party’s benefit.

(2) The person takes possession of the collateral after having signed a record acknowledging that it will hold possession of the collateral for the secured party’s benefit.

(d) If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs not earlier than the time the secured party takes possession and continues only while the secured party retains possession.

(e) A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under Section 8301 and remains perfected by delivery until the debtor obtains possession of the security certificate.

(f) A person in possession of collateral is not required to acknowledge that it holds possession for a secured party’s benefit.

(g) If a person acknowledges that it holds possession for the secured party’s benefit, both of the following apply:

(1) The acknowledgment is effective under subdivision (c) or under subdivision (a) of Section 8301, even if the acknowledgment violates the rights of a debtor.

(2) Unless the person otherwise agrees or law other than this division otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.

(h) A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor’s business if the person was instructed before the delivery or is instructed contemporaneously with the delivery to do either of the following:

(1) To hold possession of the collateral for the secured party’s benefit.

(2) To redeliver the collateral to the secured party.

(i) A secured party does not relinquish possession, even if a delivery under subdivision (h) violates the rights of a debtor. A person to which collateral is delivered under subdivision (h) does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this division otherwise provides.

SEC. 44.

Section 9314 of the Commercial Code is amended to read:

9314.

(a) A security interest in controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, investment property, or letter-of-credit rights may be perfected by control of the collateral under Section 7106, 9104, 9105.1, 9106, 9107, or 9107.1.

(b) A security interest in controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, or letter-of-credit rights is perfected by control under Section 7106, 9104, 9105.1, 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.

(c) A security interest in investment property is perfected by control under Section 9106 not earlier than the time the secured party obtains control and remains perfected by control until both of the following conditions are satisfied:

(1) The secured party does not have control.

(2) One of the following occurs:

(A) If the collateral is a certificated security, the debtor has or acquires possession of the security certificate.

(B) If the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner.

SEC. 45.

Section 9314.1 is added to the Commercial Code, to read:

9314.1.

(a) A secured party may perfect a security interest in chattel paper by taking 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) A security interest is perfected under subdivision (a) not earlier than the time the secured party takes possession and obtains control and remains perfected under subdivision (a) only while the secured party retains possession and control.

(c) Subdivisions (c) and (f) to (i), inclusive, of Section 9313 apply to perfection by possession of an authoritative tangible copy of a record evidencing chattel paper.

SEC. 46.

Section 9316 of the Commercial Code is amended to read:

9316.

(a) A security interest perfected pursuant to the law of the jurisdiction designated in subdivision (1) of Section 9301, subdivision (c) of Section 9305, subdivision (d) of Section 9306.1, or subdivision (b) of Section 9306.2 remains perfected until the earliest of any of the following:

(1) The time perfection would have ceased under the law of that jurisdiction.

(2) The expiration of four months after a change of the debtor’s location to another jurisdiction.

(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.

(b) If a security interest described in subdivision (a) becomes perfected under the law of the other jurisdiction before the earliest time or event described in that subdivision, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

(c) A possessory security interest in collateral, other than goods covered by a certificate of title and as-extracted collateral consisting of goods, remains continuously perfected if all of the following conditions are satisfied:

(1) The collateral is located in one jurisdiction and subject to a security interest perfected under the law of that jurisdiction.

(2) Thereafter the collateral is brought into another jurisdiction.

(3) Upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.

(d) Except as otherwise provided in subdivision (e), a security interest in goods covered by a certificate of title which is perfected by any method under the law of another jurisdiction when the goods become covered by a certificate of title from this state remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.

(e) A security interest described in subdivision (d) becomes unperfected as against a purchaser of the goods for value and is deemed never to have been perfected as against a purchaser of the goods for value if the applicable requirements for perfection under subdivision (b) of Section 9311 or under Section 9313 are not satisfied before the earlier of either of the following:

(1) The time the security interest would have become unperfected under the law of the other jurisdiction had the goods not become covered by a certificate of title from this state.

(2) The expiration of four months after the goods had become so covered.

(f) 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 the following:

(1) The time the security interest would have become unperfected under the law of that jurisdiction.

(2) The expiration of four months after a change of the applicable jurisdiction to another jurisdiction.

(g) If a security interest described in subdivision (f) becomes perfected under the law of the other jurisdiction before the earlier of the time or the end of the period described in that subdivision, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

(h) The following rules apply to collateral to which a security interest attaches within four months after the debtor changes its location to another jurisdiction:

(1) A financing statement filed before the change pursuant to the law of the jurisdiction designated in paragraph (1) of Section 9301 or subdivision (c) of Section 9305 is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral had the debtor not changed its location.

(2) If a security interest perfected by a financing statement that is effective under paragraph (1) becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in paragraph (1) of Section 9301 or subdivision (c) of Section 9305 or the expiration of the four-month period, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

(i) If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in paragraph (1) of Section 9301 or subdivision (c) of Section 9305 and the new debtor is located in another jurisdiction, each of the following rules apply:

(1) The financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four months after, the new debtor becomes bound under subdivision (d) of Section 9203, if the financing statement would have been effective to perfect a security interest in the collateral had the collateral been acquired by the original debtor.

(2) A security interest perfected by the financing statement and which becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in paragraph (1) of Section 9301 or subdivision (c) of Section 9305 or the expiration of the four-month period remains perfected thereafter. A security interest that is perfected by the financing statement but which does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

SEC. 47.

Section 9317 of the Commercial Code is amended to read:

9317.

(a) A security interest or agricultural lien is subordinate to the rights of both of the following:

(1) A person entitled to priority under Section 9322.

(2) Except as otherwise provided in subdivision (e), a person that becomes a lien creditor before the earlier of the time the security interest or agricultural lien is perfected, or one of the conditions specified in paragraph (3) of subdivision (b) of Section 9203 is met and a financing statement covering the collateral is filed.

(b) Except as otherwise provided in subdivision (e), a buyer, other than a secured party, of 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.

(c) Except as otherwise provided in subdivision (e), a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(d) Subject to subdivisions (f) to (i), inclusive, a licensee of a general intangible or a buyer, other than a secured party, of collateral other than electronic money, 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.

(e) Except as otherwise provided in Sections 9320 and 9321, if a person files a financing statement with respect to a purchase money security interest before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.

(f) 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 both of the following conditions are satisfied:

(1) The buyer receives delivery of each authoritative tangible copy of the record evidencing the chattel paper.

(2) If each authoritative electronic copy of the record evidencing the chattel paper can be subjected to control under Section 9105, the buyer obtains control of each authoritative electronic copy.

(g) A buyer of an electronic document takes free of a security interest if, 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, obtains control of each authoritative electronic copy.

(h) 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) 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.

SEC. 48.

Section 9323 of the Commercial Code is amended to read:

9323.

(a) Except as otherwise provided in subdivision (c), for purposes of determining the priority of a perfected security interest under paragraph (1) of subdivision (a) of Section 9322, perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that satisfies both of the following conditions:

(1) It is made while the security interest is perfected only under either of the following:

(A) Under Section 9309 when it attaches.

(B) Temporarily under subdivision (e), (f), or (g) of Section 9312.

(2) It is not made pursuant to a commitment entered into before or while the security interest is perfected by a method other than under Section 9309 or under subdivision (e), (f), or (g) of Section 9312.

(b) Except as otherwise provided in subdivision (c), a security interest is subordinate to the rights of a person who becomes a lien creditor to the extent that the security interest secures an advance made more than 45 days after the person becomes a lien creditor unless either of the following conditions is satisfied:

(1) The advance is made without knowledge of the lien.

(2) The advance is made pursuant to a commitment entered into without knowledge of the lien.

(c) Subdivisions (a) and (b) do not apply to a security interest held by a secured party who is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor.

(d) Except as otherwise provided in subdivision (e), a buyer of goods takes free of a security interest to the extent that it secures advances made after the earlier of the following:

(1) The time the secured party acquires knowledge of the buyer’s purchase.

(2) Forty-five days after the purchase.

(e) Subdivision (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45-day period.

(f) Except as otherwise provided in subdivision (g), a lessee of goods takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of either of the following:

(1) The time the secured party acquires knowledge of the lease.

(2) Forty-five days after the lease contract becomes enforceable.

(g) Subdivision (f) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the 45-day period.

SEC. 49.

Section 9324 of the Commercial Code is amended to read:

9324.

(a) Except as otherwise provided in subdivision (g), a perfected purchase money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in Section 9327, a perfected security interest in its identifiable proceeds also has priority, if the purchase money security interest is perfected when the debtor receives possession of the collateral or within 20 days thereafter.

(b) Subject to subdivision (c) and except as otherwise provided in subdivision (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, 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 all of the following conditions are satisfied:

(1) The purchase money security interest is perfected when the debtor receives possession of the inventory.

(2) The purchase money secured party sends 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.

(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.

(c) Paragraphs (2) to (4), inclusive, of subdivision (b) apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory as follows:

(1) If the purchase money security interest is perfected by filing, before the date of the filing.

(2) If the purchase money security interest is temporarily perfected without filing or possession under subdivision (f) of Section 9312, before the beginning of the 20-day period thereunder.

(d) Subject to subdivision (e) and except as otherwise provided in subdivision (g), a perfected purchase money security interest in livestock that 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 states also has priority, if all of the following conditions are satisfied:

(1) The purchase money security interest is perfected when the debtor receives possession of the livestock.

(2) The purchase money secured party sends 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.

(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.

(e) Paragraphs (2) to (4), inclusive, of subdivision (d) apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock as follows:

(1) If the purchase money security interest is perfected by filing, before the date of the filing.

(2) If the purchase money security interest is temporarily perfected without filing or possession under subdivision (f) of Section 9312, before the beginning of the 20-day period thereunder.

(f) Except as otherwise provided in subdivision (g), a perfected purchase money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in Section 9327, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.

(g) If more than one security interest qualifies for priority in the same collateral under subdivision (a), (b), (d), or (f), the following rules apply:

(1) A security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in, or the use of, collateral.

(2) In all other cases, subdivision (a) of Section 9322 applies to the qualifying security interests.

SEC. 50.

Section 9326.1 is added to the Commercial Code, to read:

9326.1.

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.

SEC. 51.

Section 9330 of the Commercial Code is amended to read:

9330.

(a) 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 both of the following conditions are satisfied:

(1) In good faith and in the ordinary course of the purchaser’s business, the purchaser gives new value, takes possession of each authoritative tangible copy of the record evidencing the chattel paper, and obtains control under Section 9105 of each authoritative electronic copy of the record evidencing the chattel paper.

(2) The authoritative copies of the record evidencing the chattel paper do not indicate that the chattel paper has been assigned to an identified assignee other than the purchaser.

(b) 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, takes possession of each authoritative tangible copy of the record evidencing the chattel paper, and obtains control under Section 9105 of each authoritative electronic copy of the record evidencing the chattel paper 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.

(c) Except as otherwise provided in Section 9327, a purchaser having priority in chattel paper under subdivision (a) or (b) also has priority in proceeds of the chattel paper to the extent that either of the following applies:

(1) Section 9322 provides for priority in the proceeds.

(2) The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser’s security interest in the proceeds is unperfected.

(d) Except as otherwise provided in subdivision (a) of Section 9331, 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.

(e) For purposes of subdivisions (a) and (b), the holder of a purchase money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.

(f) For purposes of subdivisions (b) and (d), if the authoritative copies of the record evidencing chattel paper or an instrument indicate that 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.

SEC. 52.

Section 9331 of the Commercial Code is amended to read:

9331.

(a) 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, a protected purchaser of a security, or a qualifying purchaser of a controllable account, controllable electronic record, or controllable payment intangible. These holders or purchasers take priority over an earlier security interest, even if perfected, to the extent provided in Division 3 (commencing with Section 3101), Division 7 (commencing with Section 7101), Division 8 (commencing with Section 8101), and Division 12 (commencing with Section 12101).

(b) 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 (commencing with Section 8101) and Division 12 (commencing with Section 12101).

(c) Filing under this division does not constitute notice of a claim or defense to the holders, purchasers, or persons described in subdivisions (a) and (b).

SEC. 53.

Section 9332 of the Commercial Code is amended to read:

9332.

(a) A transferee of tangible money takes the money free of a security interest if the transferee receives possession of the money without acting in collusion with the debtor in violating the rights of the secured party.

(b) A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account if the transferee receives the funds without acting in collusion with the debtor in violating the rights of the secured party.

(c) A transferee of electronic money takes the money free of a security interest if the transferee obtains control of the money without acting in collusion with the debtor in violating the rights of the secured party.

SEC. 54.

Section 9334 of the Commercial Code is amended to read:

9334.

(a) A security interest under this division may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this division in ordinary building materials incorporated into an improvement on land.

(b) This division does not prevent creation of an encumbrance upon fixtures under real property law.

(c) In cases not governed by subdivisions (d) to (h), inclusive, a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.

(d) Except as otherwise provided in subdivision (h), a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and all of the following conditions are satisfied:

(1) The security interest is a purchase money security interest.

(2) The interest of the encumbrancer or owner arises before the goods become fixtures.

(3) The security interest is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.

(e) A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if any of the following conditions is satisfied:

(1) The debtor has an interest of record in the real property or is in possession of the real property and both of the following conditions are satisfied:

(A) The security interest is perfected by a fixture filing before the interest of the encumbrancer or owner is of record.

(B) The security interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner.

(2) The fixtures are readily removable factory or office machines or readily removable replacements of domestic appliances that are consumer goods.

(3) The conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this division.

(4) The security interest is both of the following:

(A) Created in a manufactured home in a manufactured home transaction.

(B) Perfected pursuant to a statute described in paragraph (2) of subdivision (a) of Section 9311.

(f) A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if either of the following conditions is satisfied:

(1) The encumbrancer or owner has, in a signed record, consented to the security interest or disclaimed an interest in the goods as fixtures.

(2) The debtor has a right to remove the goods as against the encumbrancer or owner.

(g) The priority of the security interest under paragraph (2) of subdivision (f) continues for a reasonable time if the debtor’s right to remove the goods as against the encumbrancer or owner terminates.

(h) A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates. Except as otherwise provided in subdivisions (e) and (f), a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.

(i) A perfected security interest in crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in, or is in possession of, the real property.

SEC. 55.

Section 9341 of the Commercial Code is amended to read:

9341.

Except as otherwise provided in subdivision (c) of Section 9340, and unless the bank otherwise agrees in 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 any of the following:

(1) The creation, attachment, or perfection of a security interest in the deposit account.

(2) The bank’s knowledge of the security interest.

(3) The bank’s receipt of instructions from the secured party.

SEC. 56.

Section 9404 of the Commercial Code is amended to read:

9404.

(a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subdivisions (b) to (e), inclusive, the rights of an assignee are subject to both of the following:

(1) All terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract.

(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 signed by the assignor or the assignee.

(b) Subject to subdivision (c) and except as otherwise provided in subdivision (d), the claim of an account debtor against an assignor may be asserted against an assignee under subdivision (a) only to reduce the amount the account debtor owes.

(c) 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.

(d) In a consumer transaction, if a record evidences the account debtor’s obligation, law other than this division requires that the record include a statement to the effect that the account debtor’s recovery against an assignee with respect to claims and defenses against the assignor may not exceed amounts paid by the account debtor under the record, and the record does not include such a statement, the extent to which a claim of an account debtor against the assignor may be asserted against an assignee is determined as if the record included such a statement.

(e) This section does not apply to an assignment of a health care insurance receivable.

SEC. 57.

Section 9406 of the Commercial Code is amended to read:

9406.

(a) Subject to subdivisions (b) to (i), inclusive, 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, 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) Subject to subdivisions (h) and (l), notification is ineffective under subdivision (a) as follows:

(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 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 any of the following conditions is satisfied:

(A) Only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee.

(B) A portion has been assigned to another assignee.

(c) Subject to subdivisions (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 subdivision (a).

(d) In this subdivision, “promissory note” includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in subdivisions (e) and (k) and in Sections 9407 and 10303, and subject to subdivision (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 does either of the following:

(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.

(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.

(e) Subdivision (d) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under Section 9610 or an acceptance of collateral under Section 9620.

(f) Except as otherwise provided in subdivision (k) and Sections 9407 and 10303, and subject to subdivisions (h) and (i), a rule of law, statute, or regulation, that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation does either of the following:

(1) Prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account or chattel paper.

(g) Subject to subdivisions (h) and (l), an account debtor may not waive or vary its option under paragraph (3) of subdivision (b).

(h) 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.

(i) This section does not apply to an assignment of a health care insurance receivable.

(j) Subdivision (f) does not apply to an assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, a claim or right to receive compensation for injuries or sickness as described in paragraph (1) or (2) of subsection (a) of Section 104 of Title 26 of the United States Code, as amended, or a claim or right to receive benefits under a special needs trust as described in paragraph (4) of subsection (d) of Section 1396p of Title 42 of the United States Code, as amended, to the extent that subdivision (f) is inconsistent with those laws.

(k) Subdivisions (d), (f), and (j) do not apply to a security interest in an ownership interest in a general partnership, limited partnership, or limited liability company.

(l) Subdivisions (a) to (c), inclusive, and (g) do not apply to a controllable account or controllable payment intangible.

SEC. 58.

Section 9408 of the Commercial Code is amended to read:

9408.

(a) Except as otherwise provided in subdivisions (b) and (f), a term in a promissory note or in an agreement between an account debtor and a debtor that relates to a health care insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or the creation, attachment, or perfection of a security interest in, the promissory note, health care insurance receivable, or general intangible, is ineffective to the extent that the term does, or would do, either of the following:

(1) It would impair the creation, attachment, or perfection of a security interest.

(2) It provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health care insurance receivable, or general intangible.

(b) Subdivision (a) applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note, other than a sale pursuant to a disposition under Section 9610 or an acceptance of collateral under Section 9620.

(c) Except as otherwise provided in subdivision (f), a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or the creation of a security interest in, a promissory note, health care insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation does, or would do, either of the following:

(1) It would impair the creation, attachment, or perfection of a security interest.

(d) To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor that relates to a health care insurance receivable or general intangible or a rule of law, statute, or regulation described in subdivision (c) would be effective under law other than this division but is ineffective under subdivision (a) or (c), the creation, attachment, or perfection of a security interest in the promissory note, health care insurance receivable, or general intangible is subject to all of the following rules:

(1) It is not enforceable against the person obligated on the promissory note or the account debtor.

(2) It does not impose a duty or obligation on the person obligated on the promissory note or the account debtor.

(3) It does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party.

(4) It does not entitle the secured party to use or assign the debtor’s rights under the promissory note, health care insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health care insurance receivable, or general intangible.

(5) It does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor.

(6) It does not entitle the secured party to enforce the security interest in the promissory note, health care insurance receivable, or general intangible.

(e) Subdivision (c) does not apply to an assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, a claim or right to receive compensation for injuries or sickness as described in paragraph (1) or (2) of subsection (a) of Section 104 of Title 26 of the United States Code, as amended, or a claim or right to receive benefits under a special needs trust as described in paragraph (4) of subsection (d) of Section 1396p of Title 42 of the United States Code, as amended, to the extent that subdivision (c) is inconsistent with those laws.

(f) This section does not apply to a security interest in an ownership interest in a general partnership, limited partnership, or limited liability company.

(g) In this section, “promissory note” includes a negotiable instrument that evidences chattel paper.

SEC. 59.

Section 9509 of the Commercial Code is amended to read:

9509.

(a) A person may file an initial financing statement, an amendment that adds collateral covered by a financing statement, or an amendment that adds a debtor to a financing statement only if either of the following conditions is satisfied:

(1) The debtor authorizes the filing in a signed record or pursuant to subdivision (b) or (c).

(2) The person holds an agricultural lien that has become effective at the time of filing and the financing statement covers only collateral in which the person holds an agricultural lien.

(b) By 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 both of the following:

(1) The collateral described in the security agreement.

(2) Property that becomes collateral under paragraph (2) of subdivision (a) of Section 9315, whether or not the security agreement expressly covers proceeds.

(c) By acquiring collateral in which a security interest or agricultural lien continues under paragraph (1) of subdivision (a) of Section 9315, a debtor authorizes the filing of an initial financing statement, and an amendment, covering the collateral and property that becomes collateral under paragraph (2) of subdivision (a) of Section 9315.

(d) A person may file an amendment other than an amendment that adds collateral covered by a financing statement or an amendment that adds a debtor to a financing statement only if either of the following conditions is satisfied:

(1) The secured party of record authorizes the filing.

(2) The amendment is a termination statement for a financing statement as to which the secured party of record has failed to file or send a termination statement as required by subdivision (a) or (c) of Section 9513, the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed.

(e) If there is more than one secured party of record for a financing statement, each secured party of record may authorize the filing of an amendment under subdivision (d).

SEC. 60.

Section 9513 of the Commercial Code is amended to read:

9513.

(a) A secured party shall cause the secured party of record for a financing statement to file a termination statement for the financing statement if the financing statement covers consumer goods and either of the following conditions is satisfied:

(1) 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 debtor did not authorize the filing of the initial financing statement.

(b) To comply with subdivision (a), a secured party shall cause the secured party of record to file the termination statement in accordance with either of the following rules:

(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.

(2) If earlier, within 20 days after the secured party receives a signed demand from a debtor.

(c) In cases not governed by subdivision (a), within 20 days after a secured party receives 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 any of the following conditions is satisfied:

(1) Except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that 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 that has been sold but as to which the account debtor or other person obligated has discharged its obligation.

(3) The financing statement covers goods that were the subject of a consignment to the debtor but are not in the debtor’s possession.

(4) The debtor did not authorize the filing of the initial financing statement.

(d) Except as otherwise provided in Section 9510, upon the filing of a termination statement with the filing office, the financing statement to which the termination statement relates ceases to be effective. Except as otherwise provided in Section 9510, for purposes of subdivision (g) of Section 9519, subdivision (a) of Section 9522, and subdivision (c) of Section 9523, the filing with the filing office of a termination statement relating to a financing statement that indicates that the debtor is a transmitting utility also causes the effectiveness of the financing statement to lapse.

SEC. 61.

Section 9601 of the Commercial Code is amended to read:

9601.

(a) After default, a secured party has the rights provided in this chapter and, except as otherwise provided in Section 9602, those rights provided by agreement of the parties. A secured party may do both of the following:

(1) Reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure.

(2) If the collateral is documents, proceed either as to the documents or as to the goods they cover.

(b) A secured party in possession of collateral or control of collateral under Section 7106, 9104, 9105, 9105.1, 9106, 9107, or 9107.1 has the rights and duties provided in Section 9207.

(d) Except as otherwise provided in subdivision (g) and in Section 9605, after default, a debtor and an obligor have the rights provided in this chapter and by agreement of the parties.

(e) If a secured party has reduced its claim to judgment, the lien of any levy that may be made upon the collateral by virtue of an execution based upon the judgment relates back to the earliest of any of the following:

(1) The date of perfection of the security interest or agricultural lien in the collateral.

(2) The date of filing a financing statement covering the collateral.

(3) Any date specified in a statute under which the agricultural lien was created.

(f) A sale pursuant to an execution is a foreclosure of the security interest or agricultural lien by judicial procedure within the meaning of this section. A secured party may purchase at the sale and thereafter hold the collateral free of any other requirements of this division.

(g) Except as otherwise provided in subdivision (c) of Section 9607, this part imposes no duties upon a secured party that is a consignor or is a buyer of accounts, chattel paper, payment intangibles, or promissory notes.

SEC. 62.

Section 9605 of the Commercial Code is amended to read:

9605.

(a) Except as provided in subdivision (b), a secured party does not owe a duty based on its status as secured party to either of the following persons:

(1) To a person that is a debtor or obligor, unless the secured party knows all of the following:

(A) That the person is a debtor or obligor.

(B) The identity of the person.

(2) To a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows both of the following:

(A) That the person is a debtor.

(B) The identity of the person.

(b) 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, both of the following conditions are satisfied:

(1) The person is a debtor or obligor.

(2) The secured party knows that the information in subparagraph (A), (B), or (C) of paragraph (1) of subdivision (a) 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.

SEC. 63.

Section 9608 of the Commercial Code is amended to read:

9608.

(a) 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 in the following order to:

(A) The reasonable expenses of collection and enforcement and, to the extent provided for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses incurred by the secured party.

(B) The satisfaction of obligations secured by the security interest or agricultural lien under which the collection or enforcement is made.

(C) 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 a signed demand for proceeds before distribution of the proceeds is completed.

(2) If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder complies, the secured party need not comply with the holder’s demand under subparagraph (C) of paragraph (1).

(3) A secured party need not apply or pay over for application noncash proceeds of collection and enforcement under Section 9607 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.

(4) A secured party shall account to and pay a debtor for any surplus, and except as otherwise provided in subdivision (b) of Section 9626, the obligor is liable for any deficiency.

(b) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency. Subdivision (b) of Section 701.040 of the Code of Civil Procedure relating to the payment of proceeds applies only if the security agreement provides that the debtor is entitled to any surplus.

SEC. 64.

Section 9611 of the Commercial Code is amended to read:

9611.

(a) In this section, “notification date” means the earlier of the date on which:

(1) A secured party sends to the debtor and any secondary obligor a signed notification of disposition.

(2) The debtor and any secondary obligor waive the right to notification.

(b) Except as otherwise provided in subdivision (d), a secured party that disposes of collateral under Section 9610 shall send to the persons specified in subdivision (c) a reasonable signed notification of disposition.

(c) To comply with subdivision (b), the secured party shall send a signed notification of disposition to all of the following persons:

(1) The debtor.

(2) Any secondary obligor.

(3) If the collateral is other than consumer goods to both of the following persons:

(A) Any other person from which the secured party has received, before the notification date, a signed notification of a claim of an interest in the collateral.

(B) Any other secured party or lienholder that, 10 days before the notification date, held a security interest in or other lien on the collateral perfected by the filing of a financing statement with respect to which all of the following apply:

(i) It identified the collateral.

(ii) It was indexed under the debtor’s name as of that date.

(iii) It was filed in the office in which to file a financing statement against the debtor covering the collateral as of that date.

(C) Any other secured party that, 10 days before the notification date, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in subdivision (a) of Section 9311.

(d) Subdivision (b) does not apply if the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market.

(e) A secured party complies with the requirement for notification prescribed in subparagraph (B) of paragraph (3) of subdivision (c) if it satisfies both of the following conditions:

(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 subparagraph (B) of paragraph (3) of subdivision (c).

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

(A) Did not receive a response to the request for information.

(B) Received a response to the request for information and sent a signed notification of disposition to each secured party or other lienholder named in that response whose financing statement covered the collateral.

SEC. 65.

Section 9613 of the Commercial Code is amended to read:

9613.

(a) Except in a consumer-goods transaction, the following rules apply:

(1) The contents of a notification of disposition are sufficient if the notification does all of the following:

(A) It describes the debtor and the secured party.

(B) It describes the collateral that is the subject of the intended disposition.

(D) It states that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for an accounting.

(E) It 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 that 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 either of the following:

(A) Information not specified by that paragraph.

(B) Minor errors that 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 paragraph (3) of subdivision (a) of Section 9614, when completed in accordance with the instructions in subdivision (b) and subdivision (b) or (c), as applicable, of Section 9614, 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]
{1} Name of any debtor that is not an addressee:
[Name of each debtor]

{2} We will sell the _____ [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]

(b) The following instructions apply to the form of notification in paragraph (5) of subdivision (a):

(1) The instructions in this subdivision refer to the numbers in braces before items in the form of notification in paragraph (5) of subdivision (a). 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.

SEC. 66.

Section 9614 of the Commercial Code is amended to read:

9614.

(a) In a consumer-goods transaction, the following rules apply:

(1) A notification of disposition must provide all of the following information:

(A) The information specified in paragraph (1) of subdivision (a) of Section 9613.

(B) A description of any liability for a deficiency of the person to which the notification is sent.

(C) A telephone number from which the amount that must be paid to the secured party to redeem the collateral under Section 9623 is available.

(D) 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 subdivision (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.


{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.

{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 $_____ 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]

(b) The following instructions apply to the form of notification in paragraph (3) of subdivision (a):

(1) The instructions in this subdivision refer to the numbers in braces before items in the form of notification in paragraph (3) of subdivision (a). 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} to {7}, inclusive.

(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 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:”.

(c) (1) If the collateral is a motor vehicle, a public disposition includes, but is not limited to, the following defined categories:

(A) Retail disposition by a retail seller of motor vehicles who offers the collateral for sale or lease to the general public in the same manner as goods that the seller disposes of on the seller’s own behalf.

(B) Retail disposition made subsequent to advertising in a publication with a recognized ability to attract retail motor vehicle buyers and lessees and in a manner designed to reach the retail buying and leasing public for vehicles of that type and condition.

(2) For dispositions under subparagraphs (A) and (B) of paragraph (1), the secured creditor shall ensure that the consumer has reasonable access to the motor vehicle in question in order to be able to exercise the right to inspect the motor vehicle.

(3) For dispositions under paragraph (1), the following rules apply:

(A) A notification in the form of paragraph (4) is sufficient, even if additional information appears at the end of the form.

(B) A notification in the form of paragraph (4) is sufficient, even if it includes errors in information not required by paragraph (1) of subdivision (a), unless the error is misleading with respect to rights arising under this division.

(C) If a notification under this subdivision is not in the form of paragraph (4), law other than this division determines the effect of including information not required by paragraph (1) of subdivision (a).

(4) For dispositions under paragraph (1), the following form of notification, when completed, 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.

We will sell _____ (describe type of motor vehicle) _____
beginning on _____ (date) _____
by offering it for retail sale or lease to the general public through
(select the applicable provision:)
(A) Name of dealer
Address of dealer
You may inspect the motor vehicle and encourage people to purchase or lease it.
(or)
(B) Advertising it for sale to the general public to be purchased from _____ (name of secured creditor) _____
at _____ (address where vehicle is to be sold) _____
You may inspect the motor vehicle and encourage people to purchase or lease it.

(d) Nothing in this section shall be construed to alter or disturb any right to inspect a consumer good prior to sale under existing law.

SEC. 67.

Section 9615 of the Commercial Code is amended to read:

9615.

(a) A secured party shall apply or pay over for application the cash proceeds of disposition under Section 9610 in the following order to each of the following:

(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’s 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 and to the satisfaction of any subordinate attachment lien or execution lien pursuant to subdivision (b) of Section 701.040 of the Code of Civil Procedure if both of the following conditions are satisfied:

(A) The secured party receives from the holder of the subordinate security interest or other lien a signed demand for proceeds or notice of the levy of attachment or execution before distribution of the proceeds is completed.

(B) 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 collateral if the secured party receives from the consignor a signed demand for proceeds before distribution of the proceeds is completed.

(b) If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder’s demand under paragraph (3) of subdivision (a).

(c) A secured party need not apply or pay over for application noncash proceeds of disposition under Section 9610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.

(d) If the security interest under which a disposition is made secures payment or performance of an obligation, after making the payments and applications required by subdivision (a) and permitted by subdivision (c), both of the following apply:

(1) Unless paragraph (4) of subdivision (a) requires the secured party to apply or pay over cash proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus except as provided in Section 701.040 of the Code of Civil Procedure.

(2) Subject to subdivision (b) of Section 9626, the obligor is liable for any deficiency.

(e) (1) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, both of the following apply:

(A) The debtor is not entitled to any surplus.

(B) The obligor is not liable for any deficiency.

(2) Subdivision (b) of Section 701.040 of the Code of Civil Procedure relating to the payment of proceeds and the liability of the secured party applies only if the security agreement provides that the debtor is entitled to any surplus.

(f) The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this chapter to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if both of the following apply:

(1) The transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor.

(2) The amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.

(g) The following rules apply with respect to a secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:

(1) The secured party takes the cash proceeds free of the security interest or other lien.

(2) The secured party is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien.

(3) The secured party is not obligated to account to or pay the holder of the security interest or other lien for any surplus.

SEC. 68.

Section 9616 of the Commercial Code is amended to read:

9616.

(a) In this section:

(1) “Explanation” means a record that contains all of the following:

(A) States the amount of the surplus or deficiency.

(B) Provides an explanation in accordance with subdivision (c) of how the secured party calculated the surplus or deficiency.

(C) 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.

(D) Provides a telephone number or mailing address from which additional information concerning the transaction is available.

(2) “Request” means a record that is all of the following:

(A) Signed by a debtor or consumer obligor.

(B) Requesting that the recipient provide an explanation.

(b) In a consumer-goods transaction in which the debtor is entitled to a surplus or a consumer obligor is liable for a deficiency under Section 9615, the secured party shall do either of the following:

(1) Send an explanation to the debtor or consumer obligor, as applicable, after the disposition and in accordance with both of the following:

(A) Before or when the secured party accounts to the debtor and pays any surplus or first makes demand in a record on the consumer obligor after the disposition for payment of the deficiency.

(B) 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.

(c) To comply with subparagraph (B) of paragraph (1) of subdivision (a), 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 in accordance with either of the following:

(A) 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.

(B) If the secured party takes or receives possession of the collateral before default or does not 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’s 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.

(d) A particular phrasing of the explanation is not required. An explanation complying substantially with the requirements of subdivision (a) is sufficient, even if it includes minor errors that are not seriously misleading.

(e) A debtor or consumer obligor is entitled without charge to one response to a request under this section during any six-month period in which the secured party did not send to the debtor or consumer obligor an explanation pursuant to paragraph (1) of subdivision (b). The secured party may require payment of a charge not exceeding twenty-five dollars ($25) for each additional response.

SEC. 69.

Section 9619 of the Commercial Code is amended to read:

9619.

(a) In this section, “transfer statement” means a record signed by a secured party stating all of the following:

(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.

(4) The name and mailing address of the secured party, debtor, and transferee.

(b) A transfer statement entitles the transferee to the transfer of record of all rights of the debtor in the collateral specified in the statement in any official filing, recording, registration, or certificate of title system covering the collateral. If a transfer statement is presented with the applicable fee and request form to the official or office responsible for maintaining the system, the official or office shall do all of the following:

(1) Accept the transfer statement.

(2) Promptly amend its records to reflect the transfer.

(3) If applicable, issue a new appropriate certificate of title in the name of the transferee.

(c) A transfer of the record or legal title to collateral to a secured party under subdivision (b) or otherwise is not of itself a disposition of collateral under this division and does not of itself relieve the secured party of its duties under this division.

SEC. 70.

Section 9620 of the Commercial Code is amended to read:

9620.

(a) Except as otherwise provided in subdivision (g), a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if all of the following conditions are satisfied:

(1) The debtor consents to the acceptance under subdivision (c).

(2) The secured party does not receive, within the time set forth in subdivision (d), a notification of objection to the proposal signed by either of the following:

(A) A person to which the secured party was required to send a proposal under Section 9621.

(B) Any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that 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) Subdivision (e) does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to Section 9624.

(b) A purported or apparent acceptance of collateral under this section is ineffective unless both of the following conditions are satisfied:

(1) The secured party consents to the acceptance in a signed record or sends a proposal to the debtor.

(2) The conditions of subdivision (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 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 signed after default or the secured party does all of the following:

(A) Sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained.

(B) In the proposal, proposes to accept collateral in full satisfaction of the obligation it secures.

(d) To be effective under paragraph (2) of subdivision (a), a notification of objection must be received by the secured party as follows:

(1) In the case of a person to which the proposal was sent pursuant to Section 9621, within 20 days after notification was sent to that person.

(2) In other cases, in accordance with either of the following:

(A) Within 20 days after the last notification was sent pursuant to Section 9621.

(B) If a notification was not sent, before the debtor consents to the acceptance under subdivision (c).

(e) A secured party that has taken possession of collateral shall dispose of the collateral pursuant to Section 9610 within the time specified in subdivision (f) if either of the following conditions has been satisfied:

(1) Sixty percent of the cash price has been paid in the case of a purchase money security interest in consumer goods.

(2) Sixty percent of the principal amount of the obligation secured has been paid in the case of a nonpurchase money security interest in consumer goods.

(f) To comply with subdivision (e), the secured party shall dispose of the collateral within either of the following time periods:

(1) Within 90 days after taking possession.

(2) Within any longer period to which the debtor and all secondary obligors have agreed in an agreement to that effect entered into and signed after default.

(g) In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures.

SEC. 71.

Section 9621 of the Commercial Code is amended to read:

9621.

(a) A secured party that desires to accept collateral in full or partial satisfaction of the obligation it secures shall send its proposal to all of the following persons:

(1) Any person from which the secured party has received, before the debtor consented to the acceptance, a signed notification of a claim of an interest in the collateral.

(2) Any other secured party or lienholder that, 10 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 that satisfied all of the following conditions:

(A) It identified the collateral.

(B) It was indexed under the debtor’s name as of that date.

(C) It 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, 10 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 subdivision (a) of Section 9311.

(b) A secured party that desires to accept collateral in partial satisfaction of the obligation it secures shall send its proposal to any secondary obligor in addition to the persons described in subdivision (a).

SEC. 72.

Section 9624 of the Commercial Code is amended to read:

9624.

(a) A debtor or secondary obligor may waive the right to notification of disposition of collateral under Section 9611 only by an agreement to that effect entered into and signed after default.

(b) A debtor may waive the right to require disposition of collateral under subdivision (e) of Section 9620 only by an agreement to that effect entered into and signed after default.

(c) Except in a consumer-goods transaction, a debtor or secondary obligor may waive the right to redeem collateral under Section 9623 only by an agreement to that effect entered into and signed after default.

SEC. 73.

Section 9628 of the Commercial Code is amended to read:

9628.

(a) Subject to subdivision (e), 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 both of the following rules apply:

(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.

(2) The secured party’s failure to comply with this division does not affect the liability of the person for a deficiency.

(b) Subject to subdivision (e), a secured party is not liable because of its status as secured party to either of the following persons:

(1) To a person that is a debtor or obligor, unless the secured party knows all of the following:

(A) That the person is a debtor or obligor.

(B) The identity of the person.

(2) To a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows both of the following:

(A) That the person is a debtor.

(B) The identity of the person.

(c) A secured party is not liable to any person, and a person’s liability for a deficiency is not affected, because of any act or omission arising out of the secured party’s reasonable belief that a transaction is not a consumer-goods transaction or a consumer transaction or that goods are not consumer goods, if the secured party’s belief is based on its reasonable reliance on either of the following representations:

(1) A debtor’s representation concerning the purpose for which collateral was to be used, acquired, or held.

(2) An obligor’s representation concerning the purpose for which a secured obligation was incurred.

(d) A secured party is not liable under paragraph (2) of subdivision (c) of Section 9625 more than once with respect to any one secured obligation.

(e) Subdivisions (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, both of the following conditions are satisfied:

(1) The person is a debtor or obligor.

(2) The secured party knows that the information in subparagraph (A), (B), or (C) of paragraph (1) of subdivision (b) 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.

SEC. 74.

Section 10102 of the Commercial Code is amended to read:

10102.

(a) This division applies to any transaction, regardless of form, that creates a lease and, in the case of a hybrid lease, it applies to the extent provided in subdivision (b).

(b) In a hybrid lease, the following rules apply:

(1) If the lease-of-goods aspects do not predominate, the following rules apply:

(A) 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.

(B) Section 10209 applies if the lease is a finance lease.

(C) Section 10407 applies to the promises of the lessee in a finance lease to the extent the promises are consideration for the right to possession and use of the leased goods.

(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.

SEC. 75.

Section 10103 of the Commercial Code is amended to read:

10103.

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

(1) “Buyer in ordinary course of business” means a person who, in good faith and without knowledge that the sale to it is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind, but does not include a pawnbroker. “Buying” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

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

(3) “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole.

(4) “Conforming” goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract.

(5) “Consumer lease” means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose.

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

(7) “Finance lease” means a lease with respect to which (A) the lessor does not select, manufacture, or supply the goods, (B) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease, and (C) one of the following occurs:

(i) The lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract.

(ii) The lessee’s approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract.

(iii) The lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods.

(iv) The lessor, before the lessee signs the lease contract, informs the lessee in writing (aa) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (bb) that the lessee is entitled under this division to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (cc) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.

(8) “Goods” means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 10309), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction. The term also includes the unborn young of animals.

(9) “Installment lease contract” means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause “each delivery is a separate lease” or its equivalent.

(10) “Lease” means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease.

(11) “Lease agreement” means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this division. Unless the context clearly indicates otherwise, the term includes a sublease agreement.

(12) “Lease contract” means the total legal obligation that results from the lease agreement as affected by this division and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract.

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

(14) “Lessee” means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee.

(15) “Lessee in ordinary course of business” means a person who, in good faith and without knowledge that the lease to it is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, leases in ordinary course from a person in the business of selling or leasing goods of that kind, but does not include a pawnbroker. “Leasing” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(16) “Lessor” means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor.

(17) “Lessor’s residual interest” means the lessor’s interest in the goods after expiration, termination, or cancellation of the lease contract.

(18) “Lien” means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest.

(19) “Lot” means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract.

(20) “Merchant lessee” means a lessee that is a merchant with respect to goods of the kind subject to the lease.

(21) “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.

(22) “Purchase” includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods.

(23) “Sublease” means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease.

(24) “Supplier” means a person from whom a lessor buys or leases goods to be leased under a finance lease.

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

(26) “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.

(27) “Hybrid lease” means a single transaction involving a lease of goods and any of the following:

(A) The provision of services.

(B) A sale of other goods.

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

“Accessions.” Subdivision (a) of Section 10310.

“Construction mortgage.” Paragraph (4) of subdivision (a) of Section 10309.

“Encumbrance.” Paragraph (5) of subdivision (a) of Section 10309.

“Fixtures.” Paragraph (1) of subdivision (a) of Section 10309.

“Fixture filing.” Paragraph (2) of subdivision (a) of Section 10309.

“Purchase money lease.” Paragraph (3) of subdivision (a) of Section 10309.

“Account.” Paragraph (2) of subdivision (a) of Section 9102.

“Between merchants.” Subdivision (3) of Section 2104.

“Buyer.” Paragraph (a) of subdivision (1) of Section 2103.

“Chattel paper.” Paragraph (11) of subdivision (a) of Section 9102.

“Consumer goods.” Paragraph (23) of subdivision (a) of Section 9102.

“Document.” Paragraph (30) of subdivision (a) of Section 9102.

“Entrusting.” Subdivision (3) of Section 2403.

“General intangible.” Paragraph (42) of subdivision (a) of Section 9102.

“Instrument.” Paragraph (47) of subdivision (a) of Section 9102.

“Merchant.” Subdivision (1) of Section 2104.

“Mortgage.” Paragraph (55) of subdivision (a) of Section 9102.

“Pursuant to commitment.” Paragraph (69) of subdivision (a) of Section 9102.

“Receipt of goods.” Paragraph (c) of subdivision (1) of Section 2103.

“Sale.” Subdivision (1) of Section 2106.

“Sale on approval.” Section 2326.

“Sale or return.” Section 2326.

“Seller.” Paragraph (d) of subdivision (1) of Section 2103.

(d) In addition, Division 1 contains general definitions and principles of construction and interpretation applicable throughout this division.

SEC. 76.

Section 10107 of the Commercial Code is amended to read:

10107.

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 waiver or renunciation in a signed record delivered by the aggrieved party.

SEC. 77.

Section 10201 of the Commercial Code is amended to read:

10201.

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

(1) In a lease contract that is not a consumer lease, the total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than one thousand dollars ($1,000); or

(2) There is a 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.

(b) Any description of leased goods or of the lease term is sufficient and satisfies paragraph (2) of subdivision (a), whether or not it is specific, if it reasonably identifies what is described.

(c) A record is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under paragraph (2) of subdivision (a) beyond the lease term and the quantity of goods shown in the record.

(d) A lease contract that does not satisfy the requirements of subdivision (a), but which is valid in other respects, is enforceable:

(1) If the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale to others in the ordinary course of the lessor’s business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement;

(2) If the party against whom enforcement is sought admits in that party’s pleading, testimony, or otherwise in court that a lease contract was made, but the lease contract is not enforceable under this provision beyond the quantity of goods admitted; or

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

(e) The lease term under a lease contract referred to in subdivision (d) is:

(1) If there is a 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;

(2) If the party against whom enforcement is sought admits in that party’s pleading, testimony, or otherwise in court a lease term, the term so admitted; or

(3) A reasonable lease term.

SEC. 78.

Section 10202 of the Commercial Code is amended to read:

10202.

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

(b) By evidence of consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement.

SEC. 79.

Section 10205 of the Commercial Code is amended to read:

10205.

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

SEC. 80.

Section 10208 of the Commercial Code is amended to read:

10208.

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

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

(c) Although an attempt at modification or rescission does not satisfy the requirements of subdivision (b), it may operate as a waiver.

(d) A party who has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

SEC. 81.

Section 11103 of the Commercial Code is amended to read:

11103.

(a) In this division:

(1) “Payment order” means an instruction of a sender to a receiving bank, transmitted orally or in a record, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if all of the following apply:

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

(ii) The receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender.

(iii) The instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank.

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

(3) “Beneficiary’s bank” means the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.

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

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

(b) If an instruction complying with paragraph (1) of subdivision (a) is to make more than one payment to a beneficiary, the instruction is a separate payment order with respect to each payment.

SEC. 82.

Section 11201 of the Commercial Code is amended to read:

11201.

“Security procedure” means a procedure established by agreement of a customer and a receiving bank for the purpose of (i) verifying that a payment order or communication amending or canceling a payment order is that of the customer, or (ii) detecting error in the transmission or the content of the payment order or communication. A security procedure may impose an obligation on the receiving bank or the customer and may require the use of algorithms or other codes, identifying words, 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.

SEC. 83.

Section 11202 of the Commercial Code is amended to read:

11202.

(a) A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency.

(b) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if (i) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and (ii) the bank proves that it accepted the payment order in good faith and in compliance with the bank’s obligations under the security procedure and any agreement or instruction of the customer, evidenced by a record, restricting acceptance of payment orders issued in the name of the customer. The bank is not required to follow an instruction that violates an agreement with the customer, evidenced by a record, or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted.

(c) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of 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 (i) the security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer, and (ii) the customer expressly agreed in a record to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the bank’s obligations under the security procedure chosen by the customer.

(d) The term “sender” in this division includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subdivision (a), or it is effective as the order of the customer under subdivision (b).

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

(f) Except as provided in this section and in paragraph (1) of subdivision (a) of Section 11203, rights and obligations arising under this section or Section 11203 may not be varied by agreement.

SEC. 84.

Section 11203 of the Commercial Code is amended to read:

11203.

(a) If an accepted payment order is not, under subdivision (a) of Section 11202, an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to subdivision (b) of Section 11202, the following rules apply:

(1) By express agreement evidenced by a record, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order.

(2) The receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was not caused, directly or indirectly, by a person (i) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure, or (ii) who obtained access to transmitting facilities of the customer or who obtained, from a source controlled by the customer and without authority of the receiving bank, information facilitating breach of the security procedure, regardless of how the information was obtained or whether the customer was at fault. Information includes any access device, computer software, or the like.

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

SEC. 85.

Section 11207 of the Commercial Code is amended to read:

11207.

(a) Subject to subdivision (b), if, in a payment order received by the beneficiary’s bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.

(b) If a payment order received by the beneficiary’s bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:

(1) Except as otherwise provided in subdivision (c), if the beneficiary’s bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary’s bank need not determine whether the name and number refer to the same person.

(2) If the beneficiary’s bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary’s bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur.

(c) If (i) a payment order described in subdivision (b) is accepted, (ii) the originator’s payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary’s bank pays the person identified by number as permitted by paragraph (1) of subdivision (b), the following rules apply:

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

(2) If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator’s bank proves that the originator, before acceptance of the originator’s order, had notice that payment of a payment order issued by the originator might be made by the beneficiary’s bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary. Proof of notice may be made by any admissible evidence. The originator’s bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a record stating the information to which the notice relates.

(d) In a case governed by paragraph (1) of subdivision (b), if the beneficiary’s bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:

(1) If the originator is obliged to pay its payment order as stated in subdivision (c), the originator has the right to recover.

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

SEC. 86.

Section 11208 of the Commercial Code is amended to read:

11208.

(a) This subdivision applies to a payment order identifying an intermediary bank or the beneficiary’s bank only by an identifying number.

(1) The receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank and need not determine whether the number identifies a bank.

(2) The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.

(b) This subdivision applies to a payment order identifying an intermediary bank or the beneficiary’s bank both by name and an identifying number if the name and number identify different persons.

(1) If the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, when it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person or whether the number refers to a bank. The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.

(2) If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary’s bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by paragraph (1) of subdivision (b), 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 record stating the information to which the notice relates.

(3) Regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, at the time it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person.

(4) If the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender’s payment order is a breach of the obligation stated in paragraph (1) of subdivision (a) of Section 11302.

SEC. 87.

Section 11210 of the Commercial Code is amended to read:

11210.

(a) A payment order is rejected by the receiving bank by a notice of rejection transmitted to the sender orally or in a record. A notice of rejection need not use any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order. Rejection is effective when the notice is given if transmission is by a means that is reasonable in the circumstances. If notice of rejection is given by a means that is not reasonable, rejection is effective when the notice is received. If an agreement of the sender and receiving bank establishes the means to be used to reject a payment order, (i) any means complying with the agreement is reasonable and (ii) any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.

(b) This subdivision applies if a receiving bank other than the beneficiary’s bank fails to execute a payment order despite the existence on the execution date of a withdrawable credit balance in an authorized account of the sender sufficient to cover the order. If the sender does not receive notice of rejection of the order on the execution date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the execution date to the earlier of the day the order is canceled pursuant to subdivision (d) of Section 11211 or the day the sender receives notice or learns that the order was not executed, counting the final day of the period as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest is reduced accordingly.

(c) If a receiving bank suspends payments, all unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments.

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

SEC. 88.

Section 11211 of the Commercial Code is amended to read:

11211.

(a) A communication of the sender of a payment order canceling or amending the order may be transmitted to the receiving bank orally or in a record. If a security procedure is in effect between the sender and the receiving bank, the communication is not effective to cancel or amend the order unless the communication is verified pursuant to the security procedure or the bank agrees to the cancellation or amendment.

(b) Subject to subdivision (a), a communication by the sender canceling or amending a payment order is effective to cancel or amend the order if notice of the communication is received at a time and in a manner affording the receiving bank a reasonable opportunity to act on the communication before the bank accepts the payment order.

(c) After a payment order has been accepted, cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank.

(1) With respect to a payment order accepted by a receiving bank other than the beneficiary’s bank, cancellation or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made.

(2) With respect to a payment order accepted by the beneficiary’s bank, cancellation or amendment is not effective unless the order was issued in execution of an unauthorized payment order, or because of a mistake by a sender in the funds transfer which resulted in the issuance of a payment order (i) that is a duplicate of a payment order previously issued by the sender, (ii) that orders payment to a beneficiary not entitled to receive payment from the originator, or (iii) that orders payment in an amount greater than the amount the beneficiary was entitled to receive from the originator. If the payment order is canceled or amended, the beneficiary’s bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.

(d) An unaccepted payment order is canceled by operation of law at the close of the fifth funds-transfer business day of the receiving bank after the execution date or payment date of the order.

(e) A canceled payment order cannot be accepted. If an accepted payment order is canceled, the acceptance is nullified and no person has any right or obligation based on the acceptance. Amendment of a payment order is deemed to be cancellation of the original order at the time of amendment and issue of a new payment order in the amended form at the same time.

(f) Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the bank’s agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney’s fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment.

(g) A payment order is not revoked by the death or legal incapacity of the sender unless the receiving bank knows of the death or of an adjudication of incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance of the order.

(h) A funds-transfer system rule is not effective to the extent it conflicts with paragraph (2) of subdivision (c).

SEC. 89.

Section 11305 of the Commercial Code is amended to read:

11305.

(a) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of Section 11302 results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds transfer for the period of delay caused by the improper execution. Except as provided in subdivision (c), additional damages are not recoverable.

(b) If execution of a payment order by a receiving bank in breach of Section 11302 results in (i) noncompletion of the funds transfer, (ii) failure to use an intermediary bank designated by the originator, or (iii) issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by subdivision (a), resulting from the improper execution. Except as provided in subdivision (c), additional damages are not recoverable.

(c) In addition to the amounts payable under subdivisions (a) and (b), damages, including consequential damages, are recoverable to the extent provided in an express agreement of the receiving bank, evidenced by a record.

(d) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute. Additional damages, including consequential damages, are recoverable to the extent provided in an express agreement of the receiving bank, evidenced by a record, but are not otherwise recoverable.

(e) Reasonable attorney’s fees are recoverable if demand for compensation under subdivision (a) or (b) is made and refused before an action is brought on the claim. If a claim is made for breach of an agreement under subdivision (d) and the agreement does not provide for damages, reasonable attorney’s fees are recoverable if demand for compensation under subdivision (d) is made and refused before an action is brought on the claim.

(f) Except as stated in this section, the liability of a receiving bank under subdivisions (a) and (b) may not be varied by agreement.

SEC. 90.

Division 12 (commencing with Section 12101) is added to the Commercial Code, to read:

DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS

12101.

This division may be cited as Uniform Commercial Code—Controllable Electronic Records.

12102.

(a) In this division, the following definitions apply:

(1) “Controllable electronic record” means a record stored in an electronic medium that can be subjected to control under Section 12105. 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, electronic money, investment property, or a transferable record.

(2) “Qualifying purchaser” means a purchaser of a controllable 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.

(3) “Transferable record” has the meaning provided for that term in either of the following:

(A) Paragraph (1) of subsection (a) of Section 7021 of Title 15 of the United States Code.

(B) Subsection (a) of Section 16 of the Uniform Electronic Transactions Act of any state whose law is applicable.

(4) “Value” has the meaning provided in subdivision (a) of Section 3303, as if references in that subdivision to an “instrument” were references to a controllable account, controllable electronic record, or controllable payment intangible.

(b) The definitions in Division 9 (commencing with Section 9101) of “account debtor,” “controllable account,” “controllable payment intangible,” “chattel paper,” “deposit account,” “electronic money,” and “investment property” apply to this division.

(c) Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division.

12103.

(a) If there is conflict between this division and Division 9 (commencing with Section 9101), Division 9 governs.

(b) A transaction subject to this division is subject to all of the following:

(1) Any applicable rule of law that establishes a different rule for consumers.

(2) Any other statute or regulation that regulates the rates, charges, agreements, and practices for loans, credit sales, or other extensions of credit.

(3) Any consumer-protection statute or regulation.

12104.

(a) This section applies to the acquisition and purchase of rights in a controllable account or controllable payment intangible, including the rights and benefits under subdivisions (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) 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 it obtains control of the controllable electronic record that evidences the account or payment intangible.

(c) 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) 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 rights only to the extent of the interest purchased.

(e) 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) Except as provided in subdivisions (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) 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 of a financing statement under Division 9 (commencing with Section 9101) is not notice of a claim of a property right in a controllable electronic record.

12105.

(a) 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, satisfies each of the following conditions:

(1) It gives the person both of the following:

(A) Power to avail itself of substantially all the benefit from the electronic record.

(B) Exclusive power, subject to subdivision (b), to do both of the following:

(i) Prevent others from availing themselves of substantially all the benefit from the electronic record.

(ii) 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.

(2) It 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) Subject to subdivision (c), a power is exclusive under clause (i) and (ii) of subparagraph (B) of paragraph (1) of subdivision (a) even if either of the following is true:

(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.

(2) The power is shared with another person.

(c) A power of a person is not shared with another person under paragraph (2) of subdivision (b) and the person’s power is not exclusive if each of the following conditions is satisfied:

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

(2) Either of the following is true:

(A) The other person can exercise the power without exercise of the power by the person.

(B) The other person 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) If a person has the powers specified in clause (i) and (ii) of subparagraph (B) of paragraph (1) of subdivision (a), the powers are presumed to be exclusive.

(e) 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, satisfies either of the following conditions:

(1) The other person has control of the electronic record and acknowledges that it has control on behalf of the person.

(2) The other person obtains control of the electronic record after having acknowledged that it will obtain control of the electronic record on behalf of the person.

(f) A person that has control under this section is not required to acknowledge that it has control on behalf of another person.

(g) 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 (commencing with Section 9101) 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.

12106.

(a) An account debtor on a controllable account or controllable payment intangible may discharge its obligation by paying either of the following:

(1) The person having control of the controllable electronic record that evidences the controllable account or controllable payment intangible.

(2) Except as provided in subdivision (b), a person that formerly had control of the controllable electronic record.

(b) Subject to subdivision (d), the account debtor shall 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 meets all of the following:

(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.

(5) Provides a commercially reasonable method by which the account debtor is to pay the transferee.

(c) After receipt of a notification that complies with subdivision (b), the account debtor may discharge its obligation by paying in accordance with the notification and shall not discharge the obligation by paying a person that formerly had control.

(d) Subject to subdivision (h), notification is ineffective under subdivision (b) if any of the following apply:

(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 do any of the following:

(A) Divide the payment.

(B) Make less than the full amount of an installment or other periodic payment.

(e) Subject to subdivision (h), if requested by the account debtor, the person giving the notification under subdivision (b) seasonably shall furnish reasonable proof, using the method in the agreement referred to in paragraph (1) of subdivision (d), 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 subdivision (b).

(f) A person furnishes reasonable proof under subdivision (e) that control has been transferred if the person demonstrates, using the method in the agreement referred to in paragraph (1) of subdivision (d), that the transferee has the power to do all of the following:

(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.

(3) Transfer the powers specified in paragraphs (1) and (2) to another person.

(g) Subject to subdivision (h), an account debtor may not waive or vary its rights under paragraph (1) of subdivision (d) or under subdivision (e), or its option under paragraph (3) of subdivision (d).

12107.

(a) Except as provided in subdivision (b), the local law of a controllable electronic record’s jurisdiction governs a matter covered by this division.

(b) 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 unless an effective agreement determines that the local law of another jurisdiction governs.

(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 this code, 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 this code, 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 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) to (3), inclusive, 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) to (4), inclusive, do not apply, the controllable electronic record’s jurisdiction is the District of Columbia.

(d) If paragraph (5) of subdivision (c) and Article 12 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. In this subdivision, “Article 12” means Article 12 of Uniform Commercial Code Amendments (2022).

(e) To the extent subdivisions (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) The rights acquired under Section 12104 by a purchaser or qualifying purchaser are governed by the law applicable under this section at the time of purchase.

SEC. 91.

Division 17 (commencing with Section 17101) is added to the Commercial Code, to read:

DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS

CHAPTER 1. General Provisions and Definitions

17101.

This division may be cited as Transitional Provisions for Uniform Commercial Code Amendments (2022).

17102.

(a) In this division, the following definitions apply.

(1) “Adjustment date” means July 1, 2025, or the date that is one year after the effective date of the act adding this division, whichever is later.

(2) “Division 12” means Division 12 (commencing with Section 12101).

(3) “Division 12 property” means a controllable account, controllable electronic record, or controllable payment intangible.

(b) The following definitions in other divisions apply to this division:

“Controllable account”	Section 9102.
“Controllable electronic record”	Section 12102.
“Controllable payment intangible”	Section 9102.
“Electronic money”	Section 9102.
“Financing statement”	Section 9102.

(c) Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division.

CHAPTER 2. General Transition Provisions

17201.

Except as provided in Chapter 3 (commencing with Section 17301), a transaction validly entered into before the effective date of the act adding this division 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 code or, if applicable, this code, as though the act adding this division had not taken effect.

CHAPTER 3. Transitional Provisions for Divisions 9 and 12

17301.

(a) Except as provided in this chapter, Division 9 (commencing with Section 9101), as amended by the act adding this division, and Division 12 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 the act adding this division.

(b) Except as provided in subdivision (c), Section 17302 to 17306, inclusive, the following rules apply:

(1) A transaction, lien, or interest in property that was validly entered into, created, or transferred before the effective date of the act adding this division and was not governed by this code, but would be subject to Division 9 (commencing with Section 9101), as amended by the act adding this division, or Division 12 if it had been entered into, created, or transferred on or after the effective date of the act adding this division, including the rights, duties, and interests flowing from the transaction, lien, or interest, remains valid on and after the effective date of the act adding this division.

(2) The transaction, lien, or interest may be terminated, completed, consummated, and enforced as required or permitted by the act adding this division or by the law that would apply if the act adding this division had not taken effect.

(c) The act adding this division does not affect an action, case, or proceeding commenced before the effective date of the act adding this division.

17302.

(a) A security interest that is enforceable and perfected immediately before the effective date of the act adding this division is a perfected security interest under the act adding this division if, on the effective date of the act adding this division, the requirements for enforceability and perfection under the act adding this division are satisfied without further action.

(b) If a security interest is enforceable and perfected immediately before the effective date of the act adding this division, but the requirements for enforceability or perfection under the act adding this division are not satisfied on the effective date of the act adding this division, the following rules apply to the security interest:

(1) The security interest 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 the act adding this division or the adjustment date.

(2) The security interest remains enforceable thereafter only if the security interest satisfies the requirements for enforceability under Section 9203, as amended by the act adding this division, before the adjustment date.

(3) The security interest remains perfected thereafter only if the requirements for perfection under the act adding this division are satisfied before the time specified in paragraph (1).

17303.

A security interest that is enforceable immediately before the effective date of the act adding this division but is unperfected at that time:

(a) remains an enforceable security interest until the adjustment date;

(b) remains enforceable thereafter if the security interest becomes enforceable under Section 9203, as amended by the act adding this division, on the effective date of the act adding this division or before the adjustment date; and

(1) without further action, on the effective date of the act adding this division if the requirements for perfection under the act adding this division are satisfied before or at that time; or

(2) when the requirements for perfection are satisfied if the requirements are satisfied after that time.

17304.

(a) If action, other than the filing of a financing statement, is taken before the effective date of the act adding this division and the action would have resulted in perfection of the security interest had the security interest become enforceable before the effective date of the act adding this division, the action is effective to perfect a security interest that attaches under the act adding this division 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 division before the adjustment date.

(b) The filing of a financing statement before the effective date of the act adding this division is effective to perfect a security interest on the effective date of the act adding this division to the extent the filing would satisfy the requirements for perfection under the act adding this division.

(c) The taking of an action before the effective date of the act adding this division is sufficient for the enforceability of a security interest on the effective date of the act adding this division if the action would satisfy the requirements for enforceability under the act adding this division.

17305.

(a) Subject to subdivisions (b) and (c), the act adding this division determines the priority of conflicting claims to collateral.

(b) Subject to subdivision (c), if the priorities of claims to collateral were established before the effective date of the act adding this division, Division 9 (commencing with Section 9101) as in effect before the effective date of the act adding this division determines priority.

(c) On the adjustment date, to the extent the priorities determined by Division 9 (commencing with Section 9101), as amended by the act adding this division, modify the priorities established before the effective date of the act adding this division, the priorities of claims to Division 12 property and electronic money established before the effective date of the act adding this division cease to apply.

17306.

(a) Subject to subdivisions (b) and (c), Division 12 determines the priority of conflicting claims to Division 12 property when the priority rules of Division 9 (commencing with Section 9101) as amended by the act adding this division do not apply.

(b) Subject to subdivision (c), when the priority rules of Division 9 (commencing with Section 9101) as amended by the act adding this division do not apply and the priorities of claims to Division 12 property were established before the effective date of the act adding this division, law other than Division 12 determines priority.

(c) When the priority rules of Division 9 (commencing with Section 9101) as amended by the act adding this division do not apply, to the extent the priorities determined by the act adding this division modify the priorities established before the effective date of the act adding this division, the priorities of claims to Division 12 property established before the effective date of the act adding this division cease to apply on the adjustment date.

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Bill Text: CA SB95 | 2023-2024 | Regular Session | Chaptered

California Senate Bill 95

LEGISLATIVE COUNSEL'S DIGEST

Digest Key

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

1201.

SEC. 2.

1204.

SEC. 3.

1301.

SEC. 4.

1306.

SEC. 5.

2102.

SEC. 6.

2106.

SEC. 7.

2201.

SEC. 8.

2202.

SEC. 9.

2205.

SEC. 10.

2209.

SEC. 11.

3104.

SEC. 12.

3105.

SEC. 13.

3401.

SEC. 14.

3604.

SEC. 15.

5104.

SEC. 16.

5116.

SEC. 17.

7102.

SEC. 18.

7106.

SEC. 19.

8102.

SEC. 20.

8103.

SEC. 21.

8106.

SEC. 22.

8110.

SEC. 23.

8303.

SEC. 24.

9102.

SEC. 25.

9104.

SEC. 26.

9105.

SEC. 27.

9105.1.

SEC. 28.

9107.1.

SEC. 29.

9107.2.

SEC. 30.

9203.

SEC. 31.

9204.

SEC. 32.

9207.

SEC. 33.

9208.

SEC. 34.

9209.

SEC. 35.

9210.

SEC. 36.

9301.

SEC. 37.