senate Bill S7816

Signed By Governor
2013-2014 Legislative Session

Relates to revising and modernizing the uniform commercial code

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Archive: Last Bill Status Via A9933 - Signed by Governor


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed by Governor

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Dec 17, 2014 signed chap.505
Dec 05, 2014 delivered to governor
Jun 19, 2014 returned to assembly
passed senate
3rd reading cal.1651
substituted for s7816
Jun 19, 2014 substituted by a9933
ordered to third reading cal.1651
committee discharged and committed to rules
Jun 11, 2014 referred to judiciary

Votes

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S7816 - Bill Details

See Assembly Version of this Bill:
A9933
Law Section:
Uniform Commercial Code
Laws Affected:
Rpld Arts 1 & 7, ยง2-A--207, amd UCC, generally

S7816 - Bill Texts

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Relates to revising and modernizing the uniform commercial code; makes significant amendments and revisions to articles 1, 7 and 9; makes conforming amendments.

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BILL NUMBER:S7816

TITLE OF BILL: An act to amend the uniform commercial code, in
relation to modernizing commercial law in New York state; and to
repeal certain provisions of such code relating thereto

PURPOSE:

To modernize several sections of the Uniform Commercial Code (UCC) and
bring New York up to date with comparable revisions that have been
enacted in other states.

SUMMARY OF PROVISIONS:

Section 1 of the bill repeals existing Article 1 of the UCC and enacts
a new Article 1 ("General Provisions").

Sections 2 through 13 make technical and clarifying amendments within
Article 2 of the UCC.

Sections 14 through 22 make renumbering and clarifying amendments
within Article 2-A of the UCC.

Section 23 repeals existing Article 7 of the UCC and enacts a new
Article 7 ("Documents of Title").

Sections 24 and 25 make clarifying amendments within Article 8 of the
UCC.

Sections 26 through 50 make amendments within Article 9 of the UCC

("Secured Transactions").

Section 51 provides for an immediate effective date, and specifies
that it shall apply to transactions entered into on or after such
date.

JUSTIFICATION:

This bill would modernize three articles of the Uniform Commercial
Code (UCC) and bring New York up to date with comparable revisions
enacted in other states. Historically, New York has been a leading
state for commercial law and this status generates substantial
economic activity and employment in the State of New York.
Unfortunately, New York has fallen significantly behind its sister
states in modernizing its commercial law.

Article 1 contains definitions and concepts which apply to all
articles of the UCC and impact every transaction governed by the UCC.
Article 1 needs to be updated to reflect the fact that other articles
of the UCC have been revised and amended to accommodate changing
business practices and developments in the law. About forty states
have enacted Revised Article 1 of the UCC and the revision is
currently pending in some other states.

Article 7 governs "documents of title," items such as bills of lading
and warehouse receipts that control the right to the goods described


therein during commercial storage and shipment. New York's current
Article 7 does not recognize electronic documents of title, and
therefore does not permit goods covered by electronic documents to be
transferred or financed. The revisions to Article 7 are consistent
with the increasing recognition of electronic documents and
instruments as equal in status to their paper counterparts under both
New York and federal law. About forty states have also enacted Revised
Article 7 of the UCC and the revision is currently pending in some
other states.

Article 9 governs security interest in personal property. The Article
was substantially revised and enacted in New York in 2001. The current
bill contains targeted amendments (the "Amendments") to Article 9
relating to the rules for the system for filing and searching
financing statements, other discrete changes and some transition
rules. At least eight states have enacted the 2010 Amendments to
Article 9 of the UCC and the amendments are currently pending in
several other states.

The National Conference of Commissioners on Uniform State Laws
(NCCUSL) has promulgated model revisions for Articles 1 and 7 which
completely rewrite these articles of the Uniform Commercial Code.
NCCUSL has also promulgated significant amendments for Article 9 of
the Uniform Commercial Code. The New York City Bar Association led
this effort to revise and update these articles. With a few
exceptions, the Article 1 and 7 revisions and the amendments to
Article 9 reflect the draft from the Bar.

Enactment of these revisions and amendments will make commercial
transactions more predictable and will bring New York Law into accord
with many other states.

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

Immediate.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  7816

                            I N  S E N A T E

                              June 11, 2014
                               ___________

Introduced  by  Sen.  FARLEY -- read twice and ordered printed, and when
  printed to be committed to the Committee on Judiciary

AN ACT to amend the uniform commercial code, in relation to  modernizing
  commercial  law in New York state; and to repeal certain provisions of
  such code relating thereto

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. Article 1 of the uniform commercial code is REPEALED and a
new article 1 is added to read as follows:
                                ARTICLE 1
                                 PART 1
                           GENERAL PROVISIONS
SECTION 1--101. SHORT TITLES.
  (A) THIS ACT MAY BE CITED AS THE UNIFORM COMMERCIAL CODE.
  (B) THIS ARTICLE MAY BE CITED AS UNIFORM COMMERCIAL  CODE  --  GENERAL
PROVISIONS.
SECTION 1--102. SCOPE OF ARTICLE.
  THIS  ARTICLE  APPLIES  TO  A  TRANSACTION  TO  THE  EXTENT THAT IT IS
GOVERNED BY ANOTHER ARTICLE OF THIS ACT.
SECTION 1--103. CONSTRUCTION OF UNIFORM COMMERCIAL CODE TO  PROMOTE  ITS
                  PURPOSES  AND  POLICIES; APPLICABILITY OF SUPPLEMENTAL
                  PRINCIPLES OF LAW.
  (A) THIS ACT MUST BE LIBERALLY CONSTRUED AND APPLIED  TO  PROMOTE  ITS
UNDERLYING PURPOSES AND POLICIES, WHICH ARE:
  (1)  TO  SIMPLIFY, CLARIFY, AND MODERNIZE THE LAW GOVERNING COMMERCIAL
TRANSACTIONS;
  (2) TO PERMIT THE CONTINUED EXPANSION OF COMMERCIAL PRACTICES  THROUGH
CUSTOM, USAGE, AND AGREEMENT OF THE PARTIES; AND
  (3) TO MAKE UNIFORM THE LAW AMONG THE VARIOUS JURISDICTIONS.
  (B)  UNLESS  DISPLACED  BY  THE PARTICULAR PROVISIONS OF THIS ACT, THE
PRINCIPLES OF LAW AND EQUITY, INCLUDING THE LAW  MERCHANT  AND  THE  LAW
RELATIVE  TO CAPACITY TO CONTRACT, PRINCIPAL AND AGENT, ESTOPPEL, FRAUD,
MISREPRESENTATION, DURESS,  COERCION,  MISTAKE,  BANKRUPTCY,  AND  OTHER
VALIDATING OR INVALIDATING CAUSE SUPPLEMENT ITS PROVISIONS.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11480-04-4

S. 7816                             2

SECTION 1--104. CONSTRUCTION AGAINST IMPLIED REPEAL.
  THIS  ACT  BEING  A  GENERAL ACT INTENDED AS A UNIFIED COVERAGE OF ITS
SUBJECT MATTER, NO PART OF IT SHALL BE DEEMED TO BE  IMPLIEDLY  REPEALED
BY  SUBSEQUENT  LEGISLATION  IF  SUCH  CONSTRUCTION  CAN  REASONABLY  BE
AVOIDED.
SECTION 1--105. SEVERABILITY.
  IF ANY PROVISION OR CLAUSE OF THIS  ACT  OR  ITS  APPLICATION  TO  ANY
PERSON  OR  CIRCUMSTANCE IS HELD INVALID, THE INVALIDITY DOES NOT AFFECT
OTHER PROVISIONS OR APPLICATIONS OF THIS ACT WHICH CAN BE  GIVEN  EFFECT
WITHOUT  THE  INVALID  PROVISION  OR  APPLICATION,  AND  TO THIS END THE
PROVISIONS OF THIS ACT ARE SEVERABLE.
SECTION 1--106. USE OF SINGULAR AND PLURAL; GENDER.
  IN THIS ACT, UNLESS THE STATUTORY CONTEXT OTHERWISE REQUIRES:
  (1) WORDS IN THE SINGULAR NUMBER INCLUDE THE PLURAL, AND THOSE IN  THE
PLURAL INCLUDE THE SINGULAR; AND
  (2) WORDS OF ANY GENDER ALSO REFER TO ANY OTHER GENDER.
SECTION 1--107. SECTION CAPTIONS.
  SECTION  CAPTIONS  ARE  PART  OF  THIS ACT. THE SUBSECTION HEADINGS IN
ARTICLE NINE ARE NOT PART OF THIS ACT FOR PURPOSES OF CONSTRUCTION.
SECTION 1--108. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL
                 COMMERCE ACT.
  THIS ARTICLE MODIFIES, LIMITS, AND SUPERSEDES THE  FEDERAL  ELECTRONIC
SIGNATURES  IN  GLOBAL AND NATIONAL COMMERCE ACT, 15 U.S.C. SECTION 7001
ET SEQ., EXCEPT THAT NOTHING IN THIS ARTICLE MODIFIES, LIMITS, OR SUPER-
SEDES SECTION 7001(C) OF THAT ACT OR AUTHORIZES ELECTRONIC  DELIVERY  OF
ANY OF THE NOTICES DESCRIBED IN SECTION 7003(B) OF THAT ACT.
                                 PART 2
          GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
SECTION 1--201. GENERAL DEFINITIONS.
  (A) UNLESS THE CONTEXT OTHERWISE REQUIRES, WORDS OR PHRASES DEFINED IN
THIS  SECTION, OR IN THE ADDITIONAL DEFINITIONS CONTAINED IN OTHER ARTI-
CLES OF THIS ACT THAT APPLY TO PARTICULAR  ARTICLES  OR  PARTS  THEREOF,
HAVE THE MEANINGS STATED.
  (B)  SUBJECT  TO  DEFINITIONS  CONTAINED IN OTHER ARTICLES OF THIS ACT
THAT APPLY TO PARTICULAR ARTICLES OR PARTS THEREOF:
  (1) "ACTION", IN THE SENSE OF A JUDICIAL PROCEEDING, INCLUDES  RECOUP-
MENT, COUNTERCLAIM, SET-OFF, 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 1--303.
  (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  CONTROL  OF  A  NEGOTIABLE  ELECTRONIC
DOCUMENT  OF TITLE OR A PERSON IN POSSESSION OF A NEGOTIABLE INSTRUMENT,
NEGOTIABLE TANGIBLE DOCUMENT OF TITLE, OR CERTIFICATED SECURITY THAT  IS
PAYABLE TO BEARER OR INDORSED IN BLANK.
  (6)  "BILL OF LADING" MEANS A DOCUMENT OF TITLE EVIDENCING THE RECEIPT
OF GOODS FOR SHIPMENT ISSUED BY A PERSON  ENGAGED  IN  THE  BUSINESS  OF
DIRECTLY  OR  INDIRECTLY TRANSPORTING OR FORWARDING GOODS. THE TERM DOES
NOT INCLUDE A WAREHOUSE RECEIPT.
  (7) "BRANCH" INCLUDES A SEPARATELY INCORPORATED FOREIGN  BRANCH  OF  A
BANK.

S. 7816                             3

  (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 ARTICLE 2 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 A REASONABLE PERSON AGAINST WHICH IT IS  TO
OPERATE OUGHT TO HAVE NOTICED IT. WHETHER A TERM IS "CONSPICUOUS" OR NOT
IS A DECISION FOR THE COURT.
  (11)  "CONSUMER"  MEANS  AN  INDIVIDUAL  WHO ENTERS INTO A TRANSACTION
PRIMARILY FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES.
  (12) "CONTRACT", AS DISTINGUISHED FROM "AGREEMENT",  MEANS  THE  TOTAL
LEGAL  OBLIGATION THAT RESULTS FROM THE PARTIES' AGREEMENT AS DETERMINED
BY THIS ACT 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 ASSIG-
NEE 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 CHATTEL PAPER, MEANS VOLUNTARY TRANSFER
OF POSSESSION.
  (16) "DOCUMENT OF TITLE" MEANS A RECORD (A) THAT IN THE REGULAR COURSE
OF BUSINESS OR FINANCING IS TREATED AS ADEQUATELY  EVIDENCING  THAT  THE
PERSON  IN  POSSESSION  OR CONTROL OF THE RECORD IS ENTITLED TO RECEIVE,
CONTROL, HOLD, AND DISPOSE OF THE RECORD AND THE GOODS THE RECORD COVERS
AND (B) THAT PURPORTS TO BE ISSUED BY OR ADDRESSED TO A  BAILEE  AND  TO
COVER  GOODS  IN  THE BAILEE'S POSSESSION WHICH ARE EITHER IDENTIFIED OR
ARE FUNGIBLE PORTIONS OF AN IDENTIFIED MASS. THE TERM INCLUDES A BILL OF
LADING,  TRANSPORT  DOCUMENT,  DOCK  WARRANT,  DOCK  RECEIPT,  WAREHOUSE
RECEIPT,  AND  ORDER  FOR  DELIVERY  OF GOODS. AN ELECTRONIC DOCUMENT OF
TITLE MEANS A DOCUMENT OF TITLE EVIDENCED  BY  A  RECORD  CONSISTING  OF
INFORMATION STORED IN AN ELECTRONIC MEDIUM. A TANGIBLE DOCUMENT OF TITLE
MEANS  A  DOCUMENT OF TITLE EVIDENCED BY A RECORD CONSISTING OF INFORMA-
TION THAT IS INSCRIBED ON A TANGIBLE MEDIUM.
  (17) "FAULT" MEANS A DEFAULT, BREACH, OR WRONGFUL ACT OR OMISSION.
  (18) "FUNGIBLE GOODS" MEANS:

S. 7816                             4

  (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" MEANS HONESTY IN FACT IN THE TRANSACTION OR CONDUCT
CONCERNED.
  (21) "HOLDER" MEANS:
  (A) THE PERSON IN POSSESSION OF A NEGOTIABLE INSTRUMENT THAT IS  PAYA-
BLE  EITHER  TO  BEARER OR TO AN IDENTIFIED PERSON THAT IS THE PERSON IN
POSSESSION; OR
  (B) THE PERSON IN POSSESSION OF  A  NEGOTIABLE  TANGIBLE  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  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
  (C) BEING INSOLVENT WITHIN THE MEANING OF FEDERAL BANKRUPTCY LAW.
  (24)  "MONEY"  MEANS  A  MEDIUM  OF  EXCHANGE  CURRENTLY AUTHORIZED OR
ADOPTED BY A DOMESTIC OR FOREIGN GOVERNMENT. THE TERM INCLUDES  A  MONE-
TARY UNIT OF ACCOUNT ESTABLISHED BY AN INTERGOVERNMENTAL ORGANIZATION OR
BY AGREEMENT BETWEEN TWO OR MORE COUNTRIES.
  (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 ACT.
  (27)  "PERSON"  MEANS  AN  INDIVIDUAL,  CORPORATION,  BUSINESS  TRUST,
ESTATE, TRUST,  PARTNERSHIP,  LIMITED  LIABILITY  COMPANY,  ASSOCIATION,
JOINT  VENTURE, GOVERNMENT, GOVERNMENTAL SUBDIVISION, AGENCY, OR INSTRU-
MENTALITY, PUBLIC CORPORATION, OR ANY OTHER LEGAL OR COMMERCIAL ENTITY.
  (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. "SECURI-

S. 7816                             5

TY 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 ARTICLE 9. "SECURITY INTEREST" DOES NOT
INCLUDE THE SPECIAL PROPERTY INTEREST OF A BUYER OF GOODS ON IDENTIFICA-
TION  OF  THOSE GOODS TO A CONTRACT FOR SALE UNDER SECTION 2--401, BUT A
BUYER MAY ALSO ACQUIRE A "SECURITY INTEREST" BY COMPLYING  WITH  ARTICLE
9. EXCEPT AS OTHERWISE PROVIDED IN SECTION 2--505, THE RIGHT OF A SELLER
OR  LESSOR  OF  GOODS  UNDER  ARTICLE  2  OR  2-A  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 ARTICLE
9. THE RETENTION OR RESERVATION OF TITLE BY A SELLER OF  GOODS  NOTWITH-
STANDING  SHIPMENT  OR  DELIVERY  TO  THE  BUYER UNDER SECTION 2--401 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 1--203.
  (36) "SEND" IN CONNECTION WITH A WRITING, RECORD, OR NOTICE MEANS:
  (A) TO DEPOSIT IN THE MAIL OR DELIVER FOR TRANSMISSION  BY  ANY  OTHER
USUAL  MEANS  OF  COMMUNICATION  WITH  POSTAGE  OR  COST OF TRANSMISSION
PROVIDED FOR AND PROPERLY ADDRESSED AND, IN THE CASE OF  AN  INSTRUMENT,
TO AN ADDRESS SPECIFIED THEREON OR OTHERWISE AGREED, OR IF THERE BE NONE
TO ANY ADDRESS REASONABLE UNDER THE CIRCUMSTANCES; OR
  (B)  IN  ANY  OTHER  WAY  TO CAUSE TO BE RECEIVED ANY RECORD OR NOTICE
WITHIN THE TIME IT WOULD HAVE ARRIVED IF PROPERLY SENT.
  (37) "SIGNED" INCLUDES USING ANY SYMBOL EXECUTED OR ADOPTED WITH PRES-
ENT INTENTION TO ADOPT OR ACCEPT A WRITING.
  (38) "STATE" MEANS A STATE OF  THE  UNITED  STATES,  THE  DISTRICT  OF
COLUMBIA, PUERTO RICO, THE UNITED STATES VIRGIN ISLANDS, OR ANY TERRITO-
RY  OR  INSULAR  POSSESSION  SUBJECT  TO  THE JURISDICTION OF THE UNITED
STATES.
  (39) "SURETY" INCLUDES A GUARANTOR OR OTHER SECONDARY OBLIGOR.
  (40) "TERM" MEANS A PORTION OF AN AGREEMENT THAT RELATES TO A  PARTIC-
ULAR MATTER.
  (41)  "UNAUTHORIZED  SIGNATURE" MEANS A SIGNATURE MADE WITHOUT ACTUAL,
IMPLIED, OR APPARENT AUTHORITY.  THE TERM INCLUDES A FORGERY.
  (42) "WAREHOUSE RECEIPT" MEANS A DOCUMENT OF TITLE ISSUED BY A  PERSON
ENGAGED IN THE BUSINESS OF STORING GOODS FOR HIRE.
  (43)  "WRITING"  INCLUDES  PRINTING,  TYPEWRITING, OR ANY OTHER INTEN-
TIONAL REDUCTION TO TANGIBLE FORM.  "WRITTEN" HAS A CORRESPONDING  MEAN-
ING.
SECTION 1--202. NOTICE; KNOWLEDGE.
  (A)  SUBJECT TO SUBSECTION (F), A PERSON HAS "NOTICE" OF A FACT IF THE
PERSON:
  (1) HAS ACTUAL KNOWLEDGE OF IT;
  (2) HAS RECEIVED A NOTICE OR NOTIFICATION OF IT; OR
  (3) FROM ALL THE FACTS AND CIRCUMSTANCES KNOWN TO THE  PERSON  AT  THE
TIME IN QUESTION, HAS REASON TO KNOW THAT IT EXISTS.
  (B)  "KNOWLEDGE"  MEANS  ACTUAL KNOWLEDGE. "KNOWS" HAS A CORRESPONDING
MEANING.
  (C) "DISCOVER", "LEARN", OR WORDS OF SIMILAR IMPORT REFER TO KNOWLEDGE
RATHER THAN TO REASON TO KNOW.
  (D) A PERSON "NOTIFIES" OR "GIVES" A NOTICE OR NOTIFICATION TO ANOTHER
PERSON BY TAKING SUCH STEPS AS MAY BE REASONABLY REQUIRED TO INFORM  THE
OTHER PERSON IN ORDINARY COURSE, WHETHER OR NOT THE OTHER PERSON ACTUAL-
LY COMES TO KNOW OF IT.
  (E) SUBJECT TO SUBSECTION (F), A PERSON "RECEIVES" A NOTICE OR NOTIFI-
CATION WHEN:

S. 7816                             6

  (1) IT COMES TO THAT PERSON'S ATTENTION; OR
  (2)  IT IS DULY DELIVERED IN A FORM REASONABLE UNDER THE CIRCUMSTANCES
AT THE PLACE OF BUSINESS THROUGH WHICH  THE  CONTRACT  WAS  MADE  OR  AT
ANOTHER  LOCATION  HELD  OUT  BY THAT PERSON AS THE PLACE FOR RECEIPT OF
SUCH COMMUNICATIONS.
  (F) NOTICE, KNOWLEDGE, OR A NOTICE  OR  NOTIFICATION  RECEIVED  BY  AN
ORGANIZATION  IS EFFECTIVE FOR A PARTICULAR TRANSACTION FROM THE TIME IT
IS BROUGHT TO THE ATTENTION OF THE  INDIVIDUAL  CONDUCTING  THAT  TRANS-
ACTION  AND,  IN  ANY EVENT, FROM THE TIME IT WOULD HAVE BEEN BROUGHT TO
THE INDIVIDUAL'S ATTENTION IF THE ORGANIZATION HAD EXERCISED  DUE  DILI-
GENCE.  AN  ORGANIZATION EXERCISES DUE DILIGENCE IF IT MAINTAINS REASON-
ABLE ROUTINES FOR COMMUNICATING SIGNIFICANT INFORMATION  TO  THE  PERSON
CONDUCTING  THE  TRANSACTION AND THERE IS REASONABLE COMPLIANCE WITH THE
ROUTINES. DUE DILIGENCE DOES NOT REQUIRE AN INDIVIDUAL  ACTING  FOR  THE
ORGANIZATION TO COMMUNICATE INFORMATION UNLESS THE COMMUNICATION IS PART
OF  THE INDIVIDUAL'S REGULAR DUTIES OR THE INDIVIDUAL HAS REASON TO KNOW
OF THE TRANSACTION AND THAT THE TRANSACTION WOULD BE MATERIALLY AFFECTED
BY THE INFORMATION.
SECTION 1--203. LEASE DISTINGUISHED FROM SECURITY INTEREST.
  (A) WHETHER A TRANSACTION IN THE FORM OF A LEASE CREATES  A  LEASE  OR
SECURITY INTEREST IS DETERMINED BY THE FACTS OF EACH CASE.
  (B)  A  TRANSACTION IN THE FORM OF A LEASE CREATES A SECURITY INTEREST
IF THE CONSIDERATION THAT THE LESSEE IS TO PAY THE LESSOR FOR THE  RIGHT
TO  POSSESSION AND USE OF THE GOODS IS AN OBLIGATION FOR THE TERM OF THE
LEASE AND IS NOT SUBJECT TO TERMINATION BY THE LESSEE, AND:
  (1) THE ORIGINAL TERM OF THE LEASE IS EQUAL TO  OR  GREATER  THAN  THE
REMAINING ECONOMIC LIFE OF THE GOODS;
  (2)  THE LESSEE IS BOUND TO RENEW THE LEASE FOR THE REMAINING ECONOMIC
LIFE OF THE GOODS OR IS BOUND TO BECOME THE OWNER OF THE GOODS;
  (3) THE LESSEE HAS AN OPTION TO RENEW  THE  LEASE  FOR  THE  REMAINING
ECONOMIC  LIFE OF THE GOODS FOR NO ADDITIONAL CONSIDERATION OR FOR NOMI-
NAL ADDITIONAL CONSIDERATION UPON COMPLIANCE WITH THE  LEASE  AGREEMENT;
OR
  (4)  THE  LESSEE HAS AN OPTION TO BECOME THE OWNER OF THE GOODS FOR NO
ADDITIONAL CONSIDERATION OR FOR NOMINAL  ADDITIONAL  CONSIDERATION  UPON
COMPLIANCE WITH THE LEASE AGREEMENT.
  (C)  A  TRANSACTION  IN THE FORM OF A LEASE DOES NOT CREATE A SECURITY
INTEREST MERELY BECAUSE:
  (1) THE PRESENT VALUE OF THE CONSIDERATION THE LESSEE IS OBLIGATED  TO
PAY  THE  LESSOR  FOR  THE  RIGHT  TO POSSESSION AND USE OF THE GOODS IS
SUBSTANTIALLY EQUAL TO OR IS GREATER THAN THE FAIR MARKET VALUE  OF  THE
GOODS AT THE TIME THE LEASE IS ENTERED INTO;
  (2) THE LESSEE ASSUMES RISK OF LOSS OF THE GOODS;
  (3) THE LESSEE AGREES TO PAY, WITH RESPECT TO THE GOODS, TAXES, INSUR-
ANCE, FILING, RECORDING, OR REGISTRATION FEES, OR SERVICE OR MAINTENANCE
COSTS;
  (4) THE LESSEE HAS AN OPTION TO RENEW THE LEASE OR TO BECOME THE OWNER
OF THE GOODS;
  (5)  THE LESSEE HAS AN OPTION TO RENEW THE LEASE FOR A FIXED RENT THAT
IS EQUAL TO OR GREATER THAN THE REASONABLY PREDICTABLE FAIR MARKET  RENT
FOR  THE  USE  OF  THE GOODS FOR THE TERM OF THE RENEWAL AT THE TIME THE
OPTION IS TO BE PERFORMED; OR
  (6) THE LESSEE HAS AN OPTION TO BECOME THE OWNER OF THE  GOODS  FOR  A
FIXED  PRICE THAT IS EQUAL TO OR GREATER THAN THE REASONABLY PREDICTABLE
FAIR MARKET VALUE OF  THE  GOODS  AT  THE  TIME  THE  OPTION  IS  TO  BE
PERFORMED.

S. 7816                             7

  (D)  ADDITIONAL  CONSIDERATION  IS  NOMINAL  IF  IT  IS  LESS THAN THE
LESSEE'S REASONABLY PREDICTABLE  COST  OF  PERFORMING  UNDER  THE  LEASE
AGREEMENT  IF  THE OPTION IS NOT EXERCISED.  ADDITIONAL CONSIDERATION IS
NOT NOMINAL IF:
  (1)  WHEN  THE OPTION TO RENEW THE LEASE IS GRANTED TO THE LESSEE, THE
RENT IS STATED TO BE THE FAIR MARKET RENT FOR THE USE OF THE  GOODS  FOR
THE  TERM  OF  THE  RENEWAL  DETERMINED  AT THE TIME THE OPTION IS TO BE
PERFORMED; OR
  (2) WHEN THE OPTION TO BECOME THE OWNER OF THE GOODS IS GRANTED TO THE
LESSEE, THE PRICE IS STATED TO BE THE FAIR MARKET  VALUE  OF  THE  GOODS
DETERMINED AT THE TIME THE OPTION IS TO BE PERFORMED.
  (E)  THE  "REMAINING  ECONOMIC  LIFE  OF  THE  GOODS"  AND "REASONABLY
PREDICTABLE" FAIR MARKET RENT, FAIR MARKET VALUE, OR COST OF  PERFORMING
UNDER THE LEASE AGREEMENT MUST BE DETERMINED WITH REFERENCE TO THE FACTS
AND CIRCUMSTANCES AT THE TIME THE TRANSACTION IS ENTERED INTO.
SECTION 1--204. VALUE.
  EXCEPT  AS  OTHERWISE PROVIDED IN ARTICLES 3, 4, AND 5, A PERSON GIVES
VALUE FOR RIGHTS IF THE PERSON ACQUIRES THEM:
  (A) 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 CHARGE-BACK IS PROVIDED FOR IN THE EVENT OF DIFFICUL-
TIES IN COLLECTION;
  (B) AS SECURITY FOR, OR IN TOTAL OR PARTIAL SATISFACTION OF, A  PREEX-
ISTING CLAIM;
  (C)  BY  ACCEPTING DELIVERY UNDER A PREEXISTING CONTRACT FOR PURCHASE;
OR
  (D) IN RETURN FOR ANY CONSIDERATION SUFFICIENT  TO  SUPPORT  A  SIMPLE
CONTRACT.
SECTION 1--205. REASONABLE TIME; SEASONABLENESS.
  (A)  WHETHER  A  TIME  FOR  TAKING  AN  ACTION REQUIRED BY THIS ACT IS
REASONABLE DEPENDS ON THE NATURE,  PURPOSE,  AND  CIRCUMSTANCES  OF  THE
ACTION.
  (B) AN ACTION IS TAKEN SEASONABLY IF IT IS TAKEN AT OR WITHIN THE TIME
AGREED OR, IF NO TIME IS AGREED, AT OR WITHIN A REASONABLE TIME.
SECTION 1--206. PRESUMPTIONS.
  WHENEVER  THIS  ACT CREATES A "PRESUMPTION" WITH RESPECT TO A FACT, OR
PROVIDES THAT A FACT IS "PRESUMED," THE TRIER  OF  FACT  MUST  FIND  THE
EXISTENCE  OF  THE  FACT  UNLESS  AND  UNTIL EVIDENCE IS INTRODUCED THAT
SUPPORTS A FINDING OF ITS NONEXISTENCE.
  SECTION 1--207. STATUTE OF FRAUDS FOR KINDS OF PERSONAL  PROPERTY  NOT
OTHERWISE COVERED.
  (A)  EXCEPT IN THE CASES DESCRIBED IN SUBSECTION (B) OF THIS SECTION A
CONTRACT FOR THE SALE OF PERSONAL PROPERTY IS NOT ENFORCEABLE BY WAY  OF
ACTION  OR  DEFENSE  BEYOND  FIVE THOUSAND DOLLARS IN AMOUNT OR VALUE OF
REMEDY UNLESS THERE IS SOME WRITING WHICH INDICATES THAT A CONTRACT  FOR
SALE  HAS  BEEN  MADE  BETWEEN THE PARTIES AT A DEFINED OR STATED PRICE,
REASONABLY IDENTIFIES THE SUBJECT MATTER, AND IS  SIGNED  BY  THE  PARTY
AGAINST WHOM ENFORCEMENT IS SOUGHT OR BY HIS AUTHORIZED AGENT.
  (B) SUBSECTION (A) OF THIS SECTION DOES NOT APPLY TO CONTRACTS FOR THE
SALE OF GOODS (SECTION 2--201) NOR OF SECURITIES (SECTION 8--113) NOR TO
SECURITY AGREEMENTS (SECTION 9--203).
  (C)  SUBSECTION  (A)  OF  THIS  SECTION  DOES NOT APPLY TO A QUALIFIED
FINANCIAL CONTRACT AS THAT TERM IS DEFINED IN PARAGRAPH TWO OF  SUBDIVI-
SION  B  OF  SECTION  5-701 OF THE GENERAL OBLIGATIONS LAW IF EITHER (1)
THERE IS, AS PROVIDED IN PARAGRAPH THREE OF  SUBDIVISION  B  OF  SECTION
5-701  OF  SUCH LAW, SUFFICIENT EVIDENCE TO INDICATE THAT A CONTRACT HAS

S. 7816                             8

BEEN MADE OR (2) THE PARTIES THERETO, BY MEANS OF A PRIOR OR  SUBSEQUENT
WRITTEN CONTRACT, HAVE AGREED TO BE BOUND BY THE TERMS OF SUCH QUALIFIED
FINANCIAL  CONTRACT FROM THE TIME THEY REACH AGREEMENT (BY TELEPHONE, BY
EXCHANGE OF ELECTRONIC MESSAGES, OR OTHERWISE) ON THOSE TERMS.
                                 PART 3
               TERRITORIAL APPLICABILITY AND GENERAL RULES
SECTION 1--301. TERRITORIAL  APPLICABILITY;  PARTIES'  POWER  TO  CHOOSE
                  APPLICABLE LAW.
  (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
SUCH  OTHER STATE OR NATION SHALL GOVERN THEIR RIGHTS AND DUTIES SO LONG
AS NONE OF THE PARTIES TO THE TRANSACTION IS A CONSUMER AND  A  RESIDENT
OF  NEW  YORK.  WHERE A CONSUMER IS A RESIDENT OF THE STATE OF NEW YORK,
NEW YORK STATE LAW SHALL APPLY.
  (B) IN THE ABSENCE OF AN AGREEMENT EFFECTIVE UNDER SUBSECTION (A), AND
EXCEPT AS PROVIDED IN SUBSECTION (C), THIS ACT APPLIES  TO  TRANSACTIONS
BEARING AN APPROPRIATE RELATION TO THIS STATE.
  (C)  IF  ONE  OF  THE  FOLLOWING  PROVISIONS OF THIS ACT 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 2--402;
  (2) SECTIONS 2-A--105 AND 2-A--106;
  (3) SECTION 4--102;
  (4) SECTION 4-A--507;
  (5) SECTION 5--116;
  (6) SECTION 8--110; AND
  (7) SECTIONS 9--301 THROUGH 9--307.
SECTION 1--302. VARIATION BY AGREEMENT.
  (A)  EXCEPT  AS  OTHERWISE  PROVIDED IN SUBSECTION (B) OR ELSEWHERE IN
THIS ACT, THE EFFECT OF PROVISIONS OF THIS ACT MAY BE VARIED  BY  AGREE-
MENT.
  (B) THE OBLIGATIONS OF GOOD FAITH, DILIGENCE, REASONABLENESS, AND CARE
PRESCRIBED  BY THIS ACT MAY NOT BE DISCLAIMED BY AGREEMENT. THE PARTIES,
BY AGREEMENT, MAY DETERMINE THE STANDARDS BY WHICH  THE  PERFORMANCE  OF
THOSE OBLIGATIONS IS TO BE MEASURED IF THOSE STANDARDS ARE NOT MANIFEST-
LY UNREASONABLE.  WHENEVER THIS ACT REQUIRES AN ACTION TO BE TAKEN WITH-
IN  A REASONABLE TIME, A TIME THAT IS NOT MANIFESTLY UNREASONABLE MAY BE
FIXED BY AGREEMENT.
  (C) THE PRESENCE IN CERTAIN PROVISIONS  OF  THIS  ACT  OF  THE  PHRASE
"UNLESS  OTHERWISE  AGREED",  OR WORDS OF SIMILAR IMPORT, DOES NOT IMPLY
THAT THE EFFECT OF OTHER PROVISIONS MAY NOT BE VARIED BY AGREEMENT UNDER
THIS SECTION.
SECTION 1--303. COURSE OF PERFORMANCE, COURSE OF DEALING, AND  USAGE  OF
                  TRADE.
  (A)  A  "COURSE  OF  PERFORMANCE" IS A SEQUENCE OF CONDUCT BETWEEN THE
PARTIES TO A PARTICULAR TRANSACTION THAT EXISTS IF:
  (1) THE AGREEMENT OF THE  PARTIES  WITH  RESPECT  TO  THE  TRANSACTION
INVOLVES REPEATED OCCASIONS FOR PERFORMANCE BY A PARTY; AND
  (2)  THE  OTHER PARTY, WITH KNOWLEDGE OF THE NATURE OF THE PERFORMANCE
AND  OPPORTUNITY  FOR  OBJECTION  TO  IT,  ACCEPTS  THE  PERFORMANCE  OR
ACQUIESCES TO IT WITHOUT OBJECTION.
  (B) A "COURSE OF DEALING" IS A SEQUENCE OF CONDUCT CONCERNING PREVIOUS
TRANSACTIONS  BETWEEN  THE  PARTIES  TO A PARTICULAR TRANSACTION THAT IS
FAIRLY TO BE REGARDED AS ESTABLISHING A COMMON  BASIS  OF  UNDERSTANDING
FOR INTERPRETING THEIR EXPRESSIONS AND OTHER CONDUCT.

S. 7816                             9

  (C)  A  "USAGE  OF  TRADE" IS ANY PRACTICE OR METHOD OF DEALING HAVING
SUCH REGULARITY OF OBSERVANCE IN A  PLACE,  VOCATION,  OR  TRADE  AS  TO
JUSTIFY  AN  EXPECTATION  THAT  IT  WILL BE OBSERVED WITH RESPECT TO THE
TRANSACTION IN QUESTION. THE EXISTENCE AND SCOPE OF SUCH A USAGE MUST BE
PROVED AS FACTS. IF IT IS ESTABLISHED THAT SUCH A USAGE IS EMBODIED IN A
TRADE  CODE  OR  SIMILAR  RECORD,  THE INTERPRETATION OF THE RECORD IS A
QUESTION OF LAW.
  (D) A COURSE OF PERFORMANCE OR COURSE OF DEALING BETWEEN  THE  PARTIES
OR  USAGE OF TRADE IN THE VOCATION OR TRADE IN WHICH THEY ARE ENGAGED OR
OF WHICH THEY ARE OR SHOULD BE AWARE IS  RELEVANT  IN  ASCERTAINING  THE
MEANING  OF  THE  PARTIES'  AGREEMENT,  MAY  GIVE  PARTICULAR MEANING TO
SPECIFIC TERMS OF THE AGREEMENT, AND MAY SUPPLEMENT OR QUALIFY THE TERMS
OF THE AGREEMENT. A USAGE OF TRADE APPLICABLE IN THE PLACE IN WHICH PART
OF THE PERFORMANCE UNDER THE AGREEMENT IS TO OCCUR MAY BE SO UTILIZED AS
TO THAT PART OF THE PERFORMANCE.
  (E) EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION (F), THE EXPRESS  TERMS
OF  AN  AGREEMENT  AND  ANY  APPLICABLE COURSE OF PERFORMANCE, COURSE OF
DEALING, OR USAGE OF TRADE MUST  BE  CONSTRUED  WHENEVER  REASONABLE  AS
CONSISTENT WITH EACH OTHER. IF SUCH A CONSTRUCTION IS UNREASONABLE:
  (1)  EXPRESS TERMS PREVAIL OVER COURSE OF PERFORMANCE, COURSE OF DEAL-
ING, AND USAGE OF TRADE;
  (2) COURSE OF PERFORMANCE PREVAILS OVER COURSE OF DEALING AND USAGE OF
TRADE; AND
  (3) COURSE OF DEALING PREVAILS OVER USAGE OF TRADE.
  (F) SUBJECT TO SECTION 2--209, A COURSE OF PERFORMANCE IS RELEVANT  TO
SHOW  A  WAIVER OR MODIFICATION OF ANY TERM INCONSISTENT WITH THE COURSE
OF PERFORMANCE.
  (G) EVIDENCE OF A RELEVANT USAGE OF TRADE OFFERED BY ONE PARTY IS  NOT
ADMISSIBLE  UNLESS  THAT PARTY HAS GIVEN THE OTHER PARTY NOTICE THAT THE
COURT FINDS SUFFICIENT TO PREVENT UNFAIR SURPRISE TO THE OTHER PARTY.
SECTION 1--304. OBLIGATION OF GOOD FAITH.
  EVERY CONTRACT OR DUTY WITHIN THIS ACT IMPOSES AN OBLIGATION  OF  GOOD
FAITH IN ITS PERFORMANCE AND ENFORCEMENT.
SECTION 1--305. REMEDIES TO BE LIBERALLY ADMINISTERED.
  (A)  THE  REMEDIES PROVIDED BY THIS ACT MUST BE LIBERALLY ADMINISTERED
TO THE END THAT THE AGGRIEVED PARTY MAY BE PUT IN AS GOOD A POSITION  AS
IF  THE  OTHER  PARTY  HAD  FULLY PERFORMED BUT NEITHER CONSEQUENTIAL OR
SPECIAL DAMAGES NOR PENAL DAMAGES MAY  BE  HAD  EXCEPT  AS  SPECIFICALLY
PROVIDED IN THIS ACT OR BY OTHER RULE OF LAW.
  (B)  ANY  RIGHT  OR  OBLIGATION DECLARED BY THIS ACT IS ENFORCEABLE BY
ACTION UNLESS THE PROVISION  DECLARING  IT  SPECIFIES  A  DIFFERENT  AND
LIMITED EFFECT.
SECTION 1--306. WAIVER OR RENUNCIATION OF CLAIM OR RIGHT AFTER BREACH.
  A CLAIM OR RIGHT ARISING OUT OF AN ALLEGED BREACH MAY BE DISCHARGED IN
WHOLE  OR  IN  PART  WITHOUT CONSIDERATION BY AGREEMENT OF THE AGGRIEVED
PARTY IN AN AUTHENTICATED RECORD.
SECTION 1--307. PRIMA FACIE EVIDENCE BY THIRD-PARTY DOCUMENTS.
  A DOCUMENT IN DUE FORM PURPORTING TO BE A BILL OF  LADING,  POLICY  OR
CERTIFICATE OF INSURANCE, OFFICIAL WEIGHER'S OR INSPECTOR'S CERTIFICATE,
CONSULAR  INVOICE,  OR  ANY OTHER DOCUMENT AUTHORIZED OR REQUIRED BY THE
CONTRACT TO BE ISSUED BY A THIRD PARTY IS PRIMA FACIE  EVIDENCE  OF  ITS
OWN AUTHENTICITY AND GENUINENESS AND OF THE FACTS STATED IN THE DOCUMENT
BY THE THIRD PARTY.
SECTION 1--308. PERFORMANCE OR ACCEPTANCE UNDER RESERVATION OF RIGHTS.
  A  PARTY THAT WITH EXPLICIT RESERVATION OF RIGHTS PERFORMS OR PROMISES
PERFORMANCE OR ASSENTS TO PERFORMANCE IN A MANNER DEMANDED OR OFFERED BY

S. 7816                            10

THE OTHER PARTY DOES NOT THEREBY PREJUDICE  THE  RIGHTS  RESERVED.  SUCH
WORDS  AS  "WITHOUT  PREJUDICE," "UNDER PROTEST," OR THE LIKE ARE SUFFI-
CIENT.
SECTION 1--309. OPTION TO ACCELERATE AT WILL.
  A  TERM PROVIDING THAT ONE PARTY OR THAT PARTY'S SUCCESSOR IN INTEREST
MAY ACCELERATE PAYMENT OR PERFORMANCE OR  REQUIRE  COLLATERAL  OR  ADDI-
TIONAL  COLLATERAL  "AT WILL" OR WHEN THE PARTY "DEEMS ITSELF INSECURE,"
OR WORDS OF SIMILAR IMPORT, MEANS THAT THE PARTY HAS POWER TO DO SO ONLY
IF THAT PARTY IN GOOD FAITH BELIEVES THAT THE  PROSPECT  OF  PAYMENT  OR
PERFORMANCE  IS  IMPAIRED. THE BURDEN OF ESTABLISHING LACK OF GOOD FAITH
IS ON THE PARTY AGAINST WHICH THE POWER HAS BEEN EXERCISED.
SECTION 1--310. SUBORDINATED OBLIGATIONS.
  AN OBLIGATION MAY BE ISSUED AS SUBORDINATED TO PERFORMANCE OF  ANOTHER
OBLIGATION  OF  THE  PERSON OBLIGATED, OR A CREDITOR MAY SUBORDINATE ITS
RIGHT TO PERFORMANCE OF AN  OBLIGATION  BY  AGREEMENT  WITH  EITHER  THE
PERSON  OBLIGATED  OR ANOTHER CREDITOR OF THE PERSON OBLIGATED. SUBORDI-
NATION DOES NOT CREATE A SECURITY INTEREST AS AGAINST EITHER THE  COMMON
DEBTOR OR A SUBORDINATED CREDITOR.
  S 2. Subsection 3 of section 2--103 of the uniform commercial code, as
amended  by  chapter  84  of  the  laws  of  2001, is amended to read as
follows:
  (3) The following definitions in other Articles apply to this Article:

               "Check".                 Section 3--104.
               "Consignee".             Section 7--102.
               "Consignor".             Section 7--102.
               "Consumer goods".        Section 9--102.
               "CONTROL".               SECTION 7--106.
               "Dishonor".              Section 3--507.
               "Draft".                 Section 3--104.
  S 3. Section 2--202 of the uniform commercial code is amended to  read
as follows:
Section 2--202. Final Written Expression: Parol or Extrinsic Evidence.
  Terms  with respect to which the confirmatory memoranda of the parties
agree or which are otherwise set forth in  a  writing  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  PERFORMANCE, course of dealing, or usage of trade
(Section  [1--205]  1--303)  [or  by  course  of  performance   (Section
2--208)]; and
  (b)  by evidence of consistent additional terms unless the court finds
the writing to have been intended  also  as  a  complete  and  exclusive
statement of the terms of the agreement.
  S  4.  Subsection (c) of section 2--310 of the uniform commercial code
is amended to read as follows:
  (c) if delivery is authorized and made by way of  documents  of  title
otherwise than by subsection (b) then payment is due REGARDLESS OF WHERE
THE  GOODS  ARE  TO  BE  RECEIVED (I) at the time and place at which the
buyer is to receive DELIVERY OF the TANGIBLE  documents  [regardless  of
where  the goods are to be received] OR (II) AT THE TIME THE BUYER IS TO
RECEIVE DELIVERY OF THE ELECTRONIC DOCUMENTS AND AT THE  SELLER'S  PLACE
OF BUSINESS OR IF NONE, THE SELLER'S RESIDENCE; and
  S  5.  The  opening  paragraph of subsection 2 of section 2-323 of the
uniform commercial code is amended to read as follows:

S. 7816                            11

  Where in a case within subsection (1) a TANGIBLE bill  of  lading  has
been  issued in a set of parts, unless otherwise agreed if the documents
are not to be sent from abroad the buyer may demand tender of  the  full
set;  otherwise  only  one  part of the bill of lading need be tendered.
Even if the agreement expressly requires a full set:
  S  6. Subsection 3 of section 2--401 of the uniform commercial code is
amended to read as follows:
  (3) Unless otherwise explicitly agreed where delivery is  to  be  made
without moving the goods,
       (a) if  the  seller  is  to deliver a TANGIBLE document of title,
           title passes at the time when and the place where he delivers
           such documents AND IF THE SELLER IS TO DELIVER AN  ELECTRONIC
           DOCUMENT  OF TITLE, TITLE PASSES WHEN THE SELLER DELIVERS THE
           DOCUMENT; or
       (b) if the goods are at the time of contracting  already  identi-
           fied  and  no  documents  OF TITLE are to be delivered, title
           passes at the time and place of contracting.
  S 7. Paragraph (b) of subsection 4 of section 2--503  of  the  uniform
commercial code is amended to read as follows:
       (b) tender  to the buyer of a non-negotiable document of title or
           of a [written direction to] RECORD DIRECTING  the  bailee  to
           deliver  is  sufficient  tender  unless  the buyer seasonably
           objects, and receipt by the bailee  of  notification  of  the
           buyer's  rights  fixes those rights as against the bailee and
           all third persons; but risk of loss of the goods and  of  any
           failure by the bailee to honor the non-negotiable document of
           title  or  to  obey the direction remains on the seller until
           the buyer has had a reasonable time to present  the  document
           or  direction, and a refusal by the bailee to honor the docu-
           ment or to obey the direction defeats the tender.
  S 8.  Section 2--505 of the uniform commercial code is amended to read
as follows:
Section 2--505. Seller's Shipment Under Reservation.
  (1) Where the seller has identified goods to the contract by or before
shipment:
       (a) his procurement of a negotiable bill of  lading  to  his  own
           order or otherwise reserves in him a security interest in the
           goods.  His procurement of the bill to the order of a financ-
           ing agency or of the buyer indicates  in  addition  only  the
           seller's  expectation  of  transferring  that interest to the
           person named.
       (b) a non-negotiable bill of lading to  himself  or  his  nominee
           reserves  possession of the goods as security but except in a
           case of  conditional  delivery  (subsection  (2)  of  Section
           2--507)  a  non-negotiable bill of lading naming the buyer as
           consignee reserves no security interest even though the sell-
           er retains possession OR CONTROL of the bill of lading.
  (2) When shipment by the seller with reservation of a security  inter-
est  is in violation of the contract for sale it constitutes an improper
contract for transportation within the  preceding  section  but  impairs
neither  the rights given to the buyer by shipment and identification of
the goods to the contract nor the seller's powers as a holder of a nego-
tiable document OF TITLE.
  S 9. Subsection 2 of section 2--506 of the uniform commercial code  is
amended to read as follows:

S. 7816                            12

  (2) The right to reimbursement of a financing agency which has in good
faith  honored  or  purchased the draft under commitment to or authority
from the buyer is not impaired by subsequent discovery of  defects  with
reference  to any relevant document which was apparently regular [on its
face].
  S 10. Subsection 2 of section 2--509 of the uniform commercial code is
amended to read as follows:
  (2) Where the goods are held by a bailee to be delivered without being
moved, the risk of loss passes to the buyer
       (a) on his receipt of POSSESSION OR CONTROL OF a negotiable docu-
           ment of title covering the goods; or
       (b)  on  acknowledgment  by  the  bailee  of the buyer's right to
           possession of the goods; or
       (c) after his receipt of POSSESSION OR CONTROL OF a  non-negotia-
           ble document of title or other [written] direction to deliver
           IN  A  RECORD,  as  provided in subsection (4) (b) of Section
           2--503.
  S 11. Subsection 2 of section 2--605 of the uniform commercial code is
amended to read as follows:
  (2) Payment against  documents  made  without  reservation  of  rights
precludes  recovery of the payment for defects apparent [on the face of]
IN the documents.
  S 12. Subsection 2 of section 2--705 of the uniform commercial code is
amended to read as follows:
  (2) As against such buyer the seller may stop delivery until
       (a) receipt of the goods by the buyer; or
       (b) acknowledgment to the buyer by any bailee of the goods except
           a carrier that the bailee holds the goods for the buyer; or
       (c) such acknowledgment to the buyer by a carrier  by  reshipment
           or as [warehouseman] A WAREHOUSE; or
       (d)  negotiation to the buyer of any negotiable document of title
           covering the goods.
  S 13. Paragraph (c) of subsection 3 of section 2--705 of  the  uniform
commercial code is amended to read as follows:
    (c)  If a negotiable document of title has been issued for goods the
    bailee is not obliged to obey a notification to stop until surrender
    OF POSSESSION OR CONTROL of the document.
  S 14. Paragraphs (a) and (o) of subsection 1 of  section  2-A--103  of
the  uniform  commercial  code,  as  added by chapter 114 of the laws of
1994, are amended to read as follows:
       (a) "Buyer in ordinary course of business" means a person who  in
           good  faith  and  without  knowledge that the sale to him [or
           her] 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 [receiving]
           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.
       (o) "Lessee in ordinary course of business" means a person who in
           good  faith  and  without knowledge that the lease to him [or
           her] is in violation of  the  ownership  rights  or  security
           interest  or leasehold interest of a third party in the goods

S. 7816                            13

           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
           [receiving]  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.
  S 15. Subsection 3 of section 2-A--103 of the uniform commercial code,
as  amended  by  chapter  84  of the laws of 2001, is amended to read as
follows:
  (3) The following definitions in other articles apply to this Article:
               "Account".                 Section 9--102(a)(2).
               "Between merchants".       Section 2--104(3).
               "Buyer".                   Section 2--103(1)(a).
               "Chattel paper".           Section 9--102(a)(11).
               "Consumer goods".          Section 9--102(a)(23).
               "Document".                Section 9--102(a)(30).
               "Entrusting".              Section 2--403(3).
               "General intangible".      Section 9--102(a)(42).
               "Good faith".              Section 2--103(1)(b).
               "Instrument".              Section 9--102(a)(47).
               "Merchant".                Section 2--104(1).
               "Mortgage".                Section 9--102(a)(55).
               "Pursuant to commitment".  Section [9--102(a)(68)]
                                          9--102(A)(69).
               "Receipt".                 Section 2--103(1)(c).
               "Sale".                    Section 2--106(1).
               "Sale on approval".        Section 2--326.
               "Sale or return".          Section 2--326.
               "Seller".                  Section 2--103(1)(d).
  S 16. Section 2-A--207 of the uniform commercial code is REPEALED.
  S 17. Subsection 4 of section 2-A--501 of the uniform commercial code,
as added by chapter 114 of the laws of  1994,  is  amended  to  read  as
follows:
  (4)  Except  as  otherwise provided in Section [1-106(1)] 1--305(A) or
this Article or the lease agreement, the rights and remedies referred to
in subsections (2) and (3) are cumulative.
  S 18. Subsection 2 of section 2-A--518 of the uniform commercial code,
as added by chapter 114 of the laws of  1994,  is  amended  to  read  as
follows:
  (2) Except as otherwise provided with respect to damages liquidated in
the  lease  agreement (Section 2-A-504) or otherwise determined pursuant
to agreement of the parties (Sections [1-102(3)] 1--302 and 2-A-503), if
a lessee's cover is by a lease agreement substantially  similar  to  the
original  lease  agreement  and  the new lease agreement is made in good
faith and in a commercially reasonable manner, the  lessee  may  recover
from  the lessor as damages (a) the present value, as of the date of the
commencement of the term of the new lease agreement, of the  rent  under
the  new lease agreement applicable to that period of the new lease term
which is comparable to the then remaining term  of  the  original  lease
agreement  minus the present value as of the same date of the total rent
for the then remaining lease term of the original lease  agreement,  and
(b)  any  incidental  or  consequential  damages, less expenses saved in
consequence of the lessor's default.

S. 7816                            14

  S 19. Subsection 1 of section 2-A--519 of the uniform commercial code,
as added by chapter 114 of the laws of  1994,  is  amended  to  read  as
follows:
  (1) Except as otherwise provided with respect to damages liquidated in
the  lease  agreement (Section 2-A-504) or otherwise determined pursuant
to agreement of the parties (Section [1-102(3)] 1--302 and 2-A-503),  if
a  lessee  elects not to cover or a lessee elects to cover and the cover
is by lease agreement, whether or not the lease agreement qualifies  for
treatment  under Section 2-A-518(2), or is by purchase or otherwise, the
measure of damages for non-delivery or repudiation by the lessor or  for
rejection  or  revocation  of  acceptance  by  the lessee is the present
value, as of the date of the default, of the then market rent minus  the
present value as of the same date of the original rent, computed for the
remaining  lease  term  of  the  original lease agreement, together with
incidental and consequential damages, less expenses saved in consequence
of the lessor's default.
  S 20. Paragraph (c) of subsection 2 of section 2-A--526 of the uniform
commercial code, as added by chapter 114 of the laws of 1994, is amended
to read as follows:
       (c) such an acknowledgment to the lessee by a carrier via reship-
           ment or as [warehouseman] A WAREHOUSE.
  S 21. Subsection 2 of section 2-A--527 of the uniform commercial code,
as added by chapter 114 of the laws of  1994,  is  amended  to  read  as
follows:
  (2) Except as otherwise provided with respect to damages liquidated in
the  lease  agreement (Section 2-A-504) or otherwise determined pursuant
to agreement of the parties (Sections [1-102(3)] 1--302 and 2-A-503), if
the disposition is by  lease  agreement  substantially  similar  to  the
original  lease  agreement  and  the new lease agreement is made in good
faith and in a commercially reasonable manner, the  lessor  may  recover
from the lessee as damages (a) accrued and unpaid rent as of the date of
the commencement of the term of the new lease agreement, (b) the present
value,  as  of  the  same date, of the total rent for the then remaining
lease term of the original lease agreement minus the present  value,  as
of  the  same date, of the rent under the new lease agreement applicable
to that period of the new lease term which is  comparable  to  the  then
remaining  lease term of the original lease agreement, and (c) any inci-
dental damages allowed under Section 2-A-530,  less  expenses  saved  in
consequence of the lessee's default.
  S 22. Subsection 1 of section 2-A--528 of the uniform commercial code,
as  added  by  chapter  114  of  the laws of 1994, is amended to read as
follows:
  (1) Except as otherwise provided with respect to damages liquidated in
the lease agreement (Section 2-A-504) or otherwise  determined  pursuant
to agreement of the parties (Sections [1-102(3)] 1--302 and 2-A-503), if
a lessor elects to retain the goods or a lessor elects to dispose of the
goods and the disposition is by lease agreement whether or not the lease
agreement  qualifies  for  treatment  under Section 2-A-527(2), or is by
sale or otherwise, the lessor may recover from the lessee as damages for
a default of the type described in Section 2-A-523(1) or 2-A-523 (3)(a),
or, if agreed, for other default of the lessee, (a) accrued  and  unpaid
rent  as of the date of default if the lessee has never taken possession
of the goods, or, if the lessee has taken possession of the goods, as of
the date the lessor repossesses the goods or an earlier  date  on  which
the  lessee  makes  a tender of the goods to the lessor, (b) the present
value as of the date determined under clause (a) of the total  rent  for

S. 7816                            15

the  then remaining lease term of the original lease agreement minus the
present value as of the same date of the market rent at the place  where
the  goods  are  located  computed  for the same lease term, and (c) any
incidental damages allowed under Section 2-A-530, less expenses saved in
consequence of the lessee's default.
  S  23.  Article 7 of the uniform commercial code is REPEALED and a new
article 7 is added to read as follows:
                      ARTICLE 7-DOCUMENTS OF TITLE
                                 PART 1
                                 GENERAL
SECTION 7--101. SHORT TITLE.
  THIS ARTICLE MAY BE CITED  AS  UNIFORM  COMMERCIAL  CODE-DOCUMENTS  OF
TITLE.
SECTION 7--102. DEFINITIONS AND INDEX OF DEFINITIONS.
  (A) IN THIS ARTICLE, 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 REASON-
ABLE 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 POSSES-
SOR  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) "SIGN" MEANS, WITH PRESENT INTENT  TO  AUTHENTICATE  OR  ADOPT  A
RECORD:
  (A) TO EXECUTE OR ADOPT A TANGIBLE SYMBOL; OR
  (B)  TO ATTACH TO OR LOGICALLY ASSOCIATE WITH THE RECORD AN ELECTRONIC
SOUND, SYMBOL, OR PROCESS.
  (12) "SHIPPER" MEANS A PERSON THAT ENTERS INTO A CONTRACT OF TRANSPOR-
TATION WITH A CARRIER.
  (13) "WAREHOUSE" MEANS A PERSON ENGAGED IN  THE  BUSINESS  OF  STORING
GOODS FOR HIRE.
  (B)  DEFINITIONS  IN  OTHER  ARTICLES APPLYING TO THIS ARTICLE AND THE
SECTIONS IN WHICH THEY APPEAR ARE:
  (1) "CONTRACT FOR SALE", SECTION 2--106.
  (2) "LESSEE IN THE ORDINARY COURSE OF BUSINESS", SECTION 2A--103.

S. 7816                            16

  (3) "RECEIPT" OF GOODS, SECTION 2--103.
  (C) IN ADDITION, ARTICLE 1 CONTAINS GENERAL DEFINITIONS AND PRINCIPLES
OF CONSTRUCTION AND INTERPRETATION APPLICABLE THROUGHOUT THIS ARTICLE.
SECTION 7--103. RELATION OF ARTICLE TO TREATY OR STATUTE.
  (A)  THIS  ARTICLE  IS  SUBJECT TO ANY TREATY OR STATUTE OF THE UNITED
STATES OR REGULATORY STATUTE OF THIS STATE TO  THE  EXTENT  THE  TREATY,
STATUTE, OR REGULATORY STATUTE IS APPLICABLE.
  (B)  THIS  ARTICLE  DOES  NOT MODIFY OR REPEAL ANY LAW PRESCRIBING THE
FORM OR CONTENT OF A DOCUMENT OF TITLE OR THE SERVICES OR FACILITIES  TO
BE  AFFORDED BY A BAILEE, OR OTHERWISE REGULATING A BAILEE'S BUSINESS IN
RESPECTS NOT SPECIFICALLY TREATED IN THIS ARTICLE. HOWEVER, VIOLATION OF
SUCH A LAW DOES NOT AFFECT THE STATUS OF A DOCUMENT OF TITLE THAT OTHER-
WISE IS WITHIN THE DEFINITION OF A DOCUMENT OF TITLE.
  (C) THIS ARTICLE MODIFIES, LIMITS, AND SUPERSEDES  THE  FEDERAL  ELEC-
TRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT (15 U.S.C. SECTION
7001,  ET. SEQ.) BUT DOES NOT MODIFY, LIMIT, OR SUPERSEDE SECTION 101(C)
OF THAT ACT (15 U.S.C. SECTION 7001(C)) OR AUTHORIZE ELECTRONIC DELIVERY
OF ANY OF THE NOTICES DESCRIBED IN SECTION 103(B) OF THAT ACT (15 U.S.C.
SECTION 7003(B)).
  (D) TO THE EXTENT THERE IS A CONFLICT BETWEEN  THE  ELECTRONIC  SIGNA-
TURES AND RECORDS ACT (STATE TECHNOLOGY LAW 301 ET. SEQ.) AND THIS ARTI-
CLE, THIS ARTICLE GOVERNS.
SECTION 7--104. NEGOTIABLE AND NONNEGOTIABLE DOCUMENT OF TITLE.
  (A)  EXCEPT  AS  OTHERWISE  PROVIDED  IN SUBSECTION (C), A DOCUMENT OF
TITLE IS NEGOTIABLE IF BY ITS TERMS THE GOODS ARE  TO  BE  DELIVERED  TO
BEARER OR TO THE ORDER OF A NAMED PERSON.
  (B)  A DOCUMENT OF TITLE OTHER THAN ONE DESCRIBED IN SUBSECTION (A) IS
NONNEGOTIABLE. A BILL OF LADING THAT STATES THAT THE GOODS ARE CONSIGNED
TO A NAMED PERSON IS NOT MADE NEGOTIABLE BY A PROVISION THAT  THE  GOODS
ARE TO BE DELIVERED ONLY AGAINST AN ORDER IN A RECORD SIGNED BY THE SAME
OR ANOTHER NAMED PERSON.
  (C) A DOCUMENT OF TITLE IS NONNEGOTIABLE IF, AT THE TIME IT IS ISSUED,
THE  DOCUMENT  HAS  A  CONSPICUOUS LEGEND, HOWEVER EXPRESSED, THAT IT IS
NONNEGOTIABLE.
SECTION 7--105. REISSUANCE IN ALTERNATIVE MEDIUM.
  (A) UPON REQUEST OF A PERSON ENTITLED UNDER AN ELECTRONIC DOCUMENT  OF
TITLE,  THE ISSUER OF THE ELECTRONIC DOCUMENT MAY ISSUE A TANGIBLE DOCU-
MENT OF TITLE AS A SUBSTITUTE FOR THE ELECTRONIC DOCUMENT IF:
  (1) THE PERSON  ENTITLED  UNDER  THE  ELECTRONIC  DOCUMENT  SURRENDERS
CONTROL OF THE DOCUMENT TO THE ISSUER; AND
  (2)  THE TANGIBLE DOCUMENT WHEN ISSUED CONTAINS A STATEMENT THAT IT IS
ISSUED IN SUBSTITUTION FOR THE ELECTRONIC DOCUMENT.
  (B) UPON ISSUANCE OF A TANGIBLE DOCUMENT OF TITLE IN SUBSTITUTION  FOR
AN ELECTRONIC DOCUMENT OF TITLE IN ACCORDANCE WITH SUBSECTION (A):
  (1) THE ELECTRONIC DOCUMENT CEASES TO HAVE ANY EFFECT OR VALIDITY; AND
  (2)  THE  PERSON  THAT  PROCURED  ISSUANCE  OF  THE  TANGIBLE DOCUMENT
WARRANTS TO ALL SUBSEQUENT PERSONS ENTITLED UNDER THE TANGIBLE  DOCUMENT
THAT  THE  WARRANTOR WAS A PERSON ENTITLED UNDER THE ELECTRONIC DOCUMENT
WHEN THE WARRANTOR SURRENDERED CONTROL OF THE ELECTRONIC DOCUMENT TO THE
ISSUER.
  (C) UPON REQUEST OF A PERSON ENTITLED UNDER  A  TANGIBLE  DOCUMENT  OF
TITLE, THE ISSUER OF THE TANGIBLE DOCUMENT MAY ISSUE AN ELECTRONIC DOCU-
MENT OF TITLE AS A SUBSTITUTE FOR THE TANGIBLE DOCUMENT IF:
  (1)  THE  PERSON  ENTITLED  UNDER  THE  TANGIBLE  DOCUMENT  SURRENDERS
POSSESSION OF THE DOCUMENT TO THE ISSUER; AND

S. 7816                            17

  (2) THE ELECTRONIC DOCUMENT WHEN ISSUED CONTAINS A STATEMENT  THAT  IT
IS ISSUED IN SUBSTITUTION FOR THE TANGIBLE DOCUMENT.
  (D)  UPON  ISSUANCE OF AN ELECTRONIC DOCUMENT OF TITLE IN SUBSTITUTION
FOR A TANGIBLE DOCUMENT OF TITLE IN ACCORDANCE WITH SUBSECTION (C):
  (1) THE TANGIBLE DOCUMENT CEASES TO HAVE ANY EFFECT OR VALIDITY; AND
  (2) THE PERSON THAT  PROCURED  ISSUANCE  OF  THE  ELECTRONIC  DOCUMENT
WARRANTS  TO  ALL SUBSEQUENT PERSONS ENTITLED UNDER THE ELECTRONIC DOCU-
MENT THAT THE WARRANTOR WAS A PERSON ENTITLED UNDER THE  TANGIBLE  DOCU-
MENT  WHEN THE WARRANTOR SURRENDERED POSSESSION OF THE TANGIBLE DOCUMENT
TO THE ISSUER.
SECTION 7--106. CONTROL OF ELECTRONIC DOCUMENT OF TITLE.
  (A) A PERSON HAS CONTROL OF AN  ELECTRONIC  DOCUMENT  OF  TITLE  IF  A
SYSTEM  EMPLOYED  FOR  EVIDENCING THE TRANSFER OF INTERESTS IN THE ELEC-
TRONIC DOCUMENT RELIABLY ESTABLISHES THAT PERSON AS THE PERSON TO  WHICH
THE ELECTRONIC DOCUMENT WAS ISSUED OR TRANSFERRED.
  (B)  A SYSTEM SATISFIES SUBSECTION (A), AND A PERSON IS DEEMED TO HAVE
CONTROL OF AN ELECTRONIC DOCUMENT OF TITLE, IF THE DOCUMENT IS  CREATED,
STORED AND ASSIGNED IN SUCH 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  TRANS-
FERRED;
  (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 ASSIGNEE  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.
                                 PART 2
                 WAREHOUSE RECEIPTS: SPECIAL PROVISIONS
SECTION 7--201. PERSON THAT MAY ISSUE A WAREHOUSE RECEIPT; STORAGE UNDER
                  BOND.
  (A) A WAREHOUSE RECEIPT MAY BE ISSUED BY ANY WAREHOUSE.
  (B)  IF  GOODS,  INCLUDING  DISTILLED SPIRITS AND AGRICULTURAL COMMOD-
ITIES, ARE STORED UNDER A STATUTE REQUIRING A BOND AGAINST WITHDRAWAL OR
A LICENSE FOR THE ISSUANCE  OF  RECEIPTS  IN  THE  NATURE  OF  WAREHOUSE
RECEIPTS,  A  RECEIPT  ISSUED  FOR THE GOODS IS DEEMED TO BE A WAREHOUSE
RECEIPT EVEN IF ISSUED BY A PERSON THAT IS THE OWNER OF THE GOODS AND IS
NOT A WAREHOUSE.
SECTION 7--202. FORM OF WAREHOUSE RECEIPT; EFFECT OF OMISSION.
  (A) A WAREHOUSE RECEIPT NEED NOT BE IN ANY PARTICULAR FORM.
  (B) UNLESS A WAREHOUSE RECEIPT PROVIDES FOR EACH OF THE FOLLOWING, THE
WAREHOUSE IS LIABLE FOR DAMAGES CAUSED TO A PERSON INJURED BY ITS  OMIS-
SION:
  (1)  A  STATEMENT  OF THE LOCATION OF THE WAREHOUSE FACILITY WHERE THE
GOODS ARE STORED;
  (2) THE DATE OF ISSUE OF THE RECEIPT;
  (3) THE UNIQUE IDENTIFICATION CODE OF THE RECEIPT;

S. 7816                            18

  (4) A STATEMENT WHETHER THE GOODS RECEIVED WILL BE  DELIVERED  TO  THE
BEARER, TO A NAMED PERSON, OR TO A NAMED PERSON OR ITS ORDER;
  (5)  THE RATE OF STORAGE AND HANDLING CHARGES, UNLESS GOODS ARE STORED
UNDER A FIELD WAREHOUSING ARRANGEMENT, IN WHICH CASE A STATEMENT OF THAT
FACT IS SUFFICIENT ON A NONNEGOTIABLE RECEIPT;
  (6) A DESCRIPTION OF THE GOODS OR THE PACKAGES CONTAINING THEM;
  (7) THE SIGNATURE OF THE WAREHOUSE OR ITS AGENT;
  (8) IF THE RECEIPT IS ISSUED FOR GOODS THAT THE WAREHOUSE OWNS, EITHER
SOLELY, JOINTLY, OR IN COMMON WITH OTHERS, A STATEMENT OF  THE  FACT  OF
THAT OWNERSHIP; AND
  (9)  A  STATEMENT  OF  THE  AMOUNT OF ADVANCES MADE AND OF LIABILITIES
INCURRED FOR WHICH THE WAREHOUSE CLAIMS A  LIEN  OR  SECURITY  INTEREST,
UNLESS  THE  PRECISE AMOUNT OF ADVANCES MADE OR LIABILITIES INCURRED, AT
THE TIME OF THE ISSUE OF THE RECEIPT, IS UNKNOWN TO THE WAREHOUSE OR  TO
ITS AGENT THAT ISSUED THE RECEIPT, IN WHICH CASE A STATEMENT OF THE FACT
THAT  ADVANCES HAVE BEEN MADE OR LIABILITIES INCURRED AND THE PURPOSE OF
THE ADVANCES OR LIABILITIES IS SUFFICIENT.
  (C) A WAREHOUSE MAY INSERT IN ITS  RECEIPT  ANY  TERMS  THAT  ARE  NOT
CONTRARY  TO THIS ACT AND DO NOT IMPAIR ITS OBLIGATION OF DELIVERY UNDER
SECTION 7--403 OR ITS DUTY OF CARE UNDER SECTION  7--204.  ANY  CONTRARY
PROVISION IS INEFFECTIVE.
SECTION 7--203. LIABILITY FOR NONRECEIPT OR MISDESCRIPTION.
  A  PARTY  TO,  OR  PURCHASER FOR, VALUE IN GOOD FAITH OF A DOCUMENT OF
TITLE, OTHER THAN A BILL OF LADING, THAT RELIES UPON THE DESCRIPTION  OF
THE  GOODS IN THE DOCUMENT MAY RECOVER FROM THE ISSUER DAMAGES CAUSED BY
THE NONRECEIPT OR MISDESCRIPTION OF THE  GOODS,  EXCEPT  TO  THE  EXTENT
THAT:
  (1) THE DOCUMENT CONSPICUOUSLY INDICATES THAT THE ISSUER DOES NOT KNOW
WHETHER ALL OR PART OF THE GOODS IN FACT WERE RECEIVED OR CONFORM TO THE
DESCRIPTION,  SUCH  AS  A  CASE  IN WHICH THE DESCRIPTION IS IN TERMS OF
MARKS OR LABELS OR KIND, QUANTITY,  OR  CONDITION,  OR  THE  RECEIPT  OR
DESCRIPTION  IS QUALIFIED BY "CONTENTS, CONDITION, AND QUALITY UNKNOWN",
"SAID TO CONTAIN", OR WORDS OF SIMILAR  IMPORT,  IF  THE  INDICATION  IS
TRUE; OR
  (2)  THE  PARTY OR PURCHASER OTHERWISE HAS NOTICE OF THE NONRECEIPT OR
MISDESCRIPTION.
SECTION 7--204. DUTY OF  CARE;  CONTRACTUAL  LIMITATION  OF  WAREHOUSE'S
                  LIABILITY.
  (A)  A  WAREHOUSE  IS  LIABLE FOR DAMAGES FOR LOSS OF OR INJURY TO THE
GOODS CAUSED BY ITS FAILURE TO EXERCISE CARE WITH REGARD  TO  THE  GOODS
THAT  A  REASONABLY  CAREFUL PERSON WOULD EXERCISE UNDER SIMILAR CIRCUM-
STANCES.   UNLESS OTHERWISE AGREED, THE  WAREHOUSE  IS  NOT  LIABLE  FOR
DAMAGES THAT COULD NOT HAVE BEEN AVOIDED BY THE EXERCISE OF THAT CARE.
  (B) DAMAGES MAY BE LIMITED BY A TERM IN THE WAREHOUSE RECEIPT OR STOR-
AGE AGREEMENT LIMITING THE AMOUNT OF LIABILITY IN CASE OF LOSS OR DAMAGE
BEYOND  WHICH  THE  WAREHOUSE  IS  NOT  LIABLE. SUCH A LIMITATION IS NOT
EFFECTIVE WITH RESPECT TO THE WAREHOUSE'S LIABILITY  FOR  CONVERSION  TO
ITS OWN USE. ON REQUEST OF THE BAILOR IN A RECORD AT THE TIME OF SIGNING
THE  STORAGE  AGREEMENT OR WITHIN A REASONABLE TIME AFTER RECEIPT OF THE
WAREHOUSE RECEIPT, THE WAREHOUSE'S LIABILITY MAY BE INCREASED ON PART OR
ALL OF THE GOODS COVERED BY  THE  STORAGE  AGREEMENT  OR  THE  WAREHOUSE
RECEIPT.  IN  THIS  EVENT,  INCREASED  RATES  MAY BE CHARGED BASED ON AN
INCREASED VALUATION OF THE GOODS.
  (C) REASONABLE PROVISIONS AS TO THE  TIME  AND  MANNER  OF  PRESENTING
CLAIMS  AND  COMMENCING ACTIONS BASED ON THE BAILMENT MAY BE INCLUDED IN
THE WAREHOUSE RECEIPT OR STORAGE AGREEMENT.

S. 7816                            19

SECTION 7--205. TITLE UNDER WAREHOUSE RECEIPT DEFEATED IN CERTAIN CASES.
  A  BUYER  IN  ORDINARY  COURSE  OF BUSINESS OF FUNGIBLE GOODS SOLD AND
DELIVERED BY A WAREHOUSE THAT IS ALSO IN  THE  BUSINESS  OF  BUYING  AND
SELLING  SUCH  GOODS TAKES THE GOODS FREE OF ANY CLAIM UNDER A WAREHOUSE
RECEIPT EVEN IF THE RECEIPT IS NEGOTIABLE AND HAS BEEN DULY NEGOTIATED.
SECTION 7--206. TERMINATION OF STORAGE AT WAREHOUSE'S OPTION.
  (A) A WAREHOUSE, BY GIVING NOTICE TO THE PERSON ON WHOSE  ACCOUNT  THE
GOODS  ARE  HELD  AND ANY OTHER PERSON KNOWN TO CLAIM AN INTEREST IN THE
GOODS, MAY REQUIRE PAYMENT OF ANY CHARGES AND REMOVAL OF THE GOODS  FROM
THE  WAREHOUSE  AT THE TERMINATION OF THE PERIOD OF STORAGE FIXED BY THE
DOCUMENT OF TITLE OR, IF A PERIOD IS NOT FIXED, WITHIN A  STATED  PERIOD
NOT LESS THAN 30 DAYS AFTER THE WAREHOUSE GIVES NOTICE. IF THE GOODS ARE
NOT  REMOVED  BEFORE THE DATE SPECIFIED IN THE NOTICE, THE WAREHOUSE MAY
SELL THEM PURSUANT TO SECTION 7--210.
  (B) IF A WAREHOUSE IN GOOD FAITH BELIEVES  THAT  GOODS  ARE  ABOUT  TO
DETERIORATE  OR  DECLINE  IN  VALUE  TO LESS THAN THE AMOUNT OF ITS LIEN
WITHIN THE TIME PROVIDED IN SUBSECTION (A) AND SECTION 7--210, THE WARE-
HOUSE MAY SPECIFY IN THE NOTICE GIVEN UNDER SUBSECTION (A)  ANY  REASON-
ABLE  SHORTER  TIME  FOR  REMOVAL OF THE GOODS AND, IF THE GOODS ARE NOT
REMOVED, MAY SELL THEM AT PUBLIC SALE HELD NOT LESS THAN ONE WEEK  AFTER
A SINGLE ADVERTISEMENT OR POSTING.
  (C)  IF,  AS  A RESULT OF A QUALITY OR CONDITION OF THE GOODS OF WHICH
THE WAREHOUSE DID NOT HAVE NOTICE AT THE TIME OF DEPOSIT, THE GOODS  ARE
A  HAZARD TO OTHER PROPERTY, THE WAREHOUSE FACILITIES, OR OTHER PERSONS,
THE WAREHOUSE MAY SELL THE GOODS  AT  PUBLIC  OR  PRIVATE  SALE  WITHOUT
ADVERTISEMENT OR POSTING ON REASONABLE NOTIFICATION TO ALL PERSONS KNOWN
TO CLAIM AN INTEREST IN THE GOODS.  IF THE WAREHOUSE, AFTER A REASONABLE
EFFORT,  IS  UNABLE  TO  SELL  THE  GOODS, IT MAY DISPOSE OF THEM IN ANY
LAWFUL MANNER AND DOES NOT INCUR LIABILITY BY REASON  OF  THAT  DISPOSI-
TION.
  (D) A WAREHOUSE SHALL DELIVER THE GOODS TO ANY PERSON ENTITLED TO THEM
UNDER THIS ARTICLE UPON DUE DEMAND MADE AT ANY TIME BEFORE SALE OR OTHER
DISPOSITION UNDER THIS SECTION.
  (E)  A WAREHOUSE MAY SATISFY ITS LIEN FROM THE PROCEEDS OF ANY SALE OR
DISPOSITION UNDER THIS SECTION BUT SHALL HOLD THE BALANCE  FOR  DELIVERY
ON THE DEMAND OF ANY PERSON TO WHICH THE WAREHOUSE WOULD HAVE BEEN BOUND
TO DELIVER THE GOODS.
SECTION 7--207. GOODS MUST BE KEPT SEPARATE; FUNGIBLE GOODS.
  (A) UNLESS THE WAREHOUSE RECEIPT PROVIDES OTHERWISE, A WAREHOUSE SHALL
KEEP  SEPARATE  THE GOODS COVERED BY EACH RECEIPT SO AS TO PERMIT AT ALL
TIMES IDENTIFICATION AND DELIVERY OF  THOSE  GOODS.  HOWEVER,  DIFFERENT
LOTS OF FUNGIBLE GOODS MAY BE COMMINGLED.
  (B)  IF DIFFERENT LOTS OF FUNGIBLE GOODS ARE COMMINGLED, THE GOODS ARE
OWNED IN COMMON BY THE PERSONS ENTITLED THERETO  AND  THE  WAREHOUSE  IS
SEVERALLY  LIABLE  TO  EACH OWNER FOR THAT OWNER'S SHARE. IF, BECAUSE OF
OVERISSUE, A MASS OF FUNGIBLE GOODS IS  INSUFFICIENT  TO  MEET  ALL  THE
RECEIPTS  THE  WAREHOUSE  HAS  ISSUED  AGAINST  IT, THE PERSONS ENTITLED
INCLUDE ALL HOLDERS TO WHICH OVERISSUED RECEIPTS HAVE BEEN DULY  NEGOTI-
ATED.
SECTION 7--208. ALTERED WAREHOUSE RECEIPTS.
  IF  A BLANK IN A NEGOTIABLE TANGIBLE WAREHOUSE RECEIPT HAS BEEN FILLED
IN WITHOUT AUTHORITY, A  GOOD-FAITH  PURCHASER  FOR  VALUE  AND  WITHOUT
NOTICE  OF  THE LACK OF AUTHORITY MAY TREAT THE INSERTION AS AUTHORIZED.
ANY OTHER UNAUTHORIZED ALTERATION  LEAVES  ANY  TANGIBLE  OR  ELECTRONIC
WAREHOUSE  RECEIPT  ENFORCEABLE  AGAINST  THE  ISSUER  ACCORDING  TO ITS
ORIGINAL TENOR.

S. 7816                            20

SECTION 7--209. LIEN OF WAREHOUSE.
  (A)  A WAREHOUSE HAS A LIEN AGAINST THE BAILOR ON THE GOODS COVERED BY
A WAREHOUSE RECEIPT OR STORAGE AGREEMENT OR ON THE PROCEEDS  THEREOF  IN
ITS  POSSESSION  FOR  CHARGES  FOR  STORAGE OR TRANSPORTATION, INCLUDING
DEMURRAGE AND TERMINAL CHARGES,  INSURANCE,  LABOR,  OR  OTHER  CHARGES,
PRESENT  OR FUTURE, IN RELATION TO THE GOODS, AND FOR EXPENSES NECESSARY
FOR PRESERVATION OF THE GOODS  OR  REASONABLY  INCURRED  IN  THEIR  SALE
PURSUANT  TO  LAW.  IF THE PERSON ON WHOSE ACCOUNT THE GOODS ARE HELD IS
LIABLE FOR SIMILAR CHARGES OR EXPENSES IN RELATION TO OTHER GOODS  WHEN-
EVER  DEPOSITED  AND  IT  IS  STATED IN THE WAREHOUSE RECEIPT OR STORAGE
AGREEMENT THAT A LIEN IS CLAIMED FOR CHARGES AND EXPENSES IN RELATION TO
OTHER GOODS, THE WAREHOUSE ALSO HAS A LIEN AGAINST THE GOODS COVERED  BY
THE WAREHOUSE RECEIPT OR STORAGE AGREEMENT OR ON THE PROCEEDS THEREOF IN
ITS  POSSESSION FOR THOSE CHARGES AND EXPENSES, WHETHER OR NOT THE OTHER
GOODS HAVE BEEN DELIVERED BY THE WAREHOUSE. HOWEVER, AS AGAINST A PERSON
TO WHICH A NEGOTIABLE WAREHOUSE RECEIPT  IS  DULY  NEGOTIATED,  A  WARE-
HOUSE'S  LIEN  IS LIMITED TO CHARGES IN AN AMOUNT OR AT A RATE SPECIFIED
IN THE WAREHOUSE RECEIPT OR, IF  NO  CHARGES  ARE  SO  SPECIFIED,  TO  A
REASONABLE  CHARGE  FOR  STORAGE  OF  THE  SPECIFIC GOODS COVERED BY THE
RECEIPT SUBSEQUENT TO THE DATE OF THE RECEIPT.
  (B) A WAREHOUSE MAY ALSO  RESERVE  A  SECURITY  INTEREST  AGAINST  THE
BAILOR FOR THE MAXIMUM AMOUNT SPECIFIED ON THE RECEIPT FOR CHARGES OTHER
THAN  THOSE  SPECIFIED IN SUBSECTION (A), SUCH AS FOR MONEY ADVANCED AND
INTEREST. THE SECURITY INTEREST IS GOVERNED BY ARTICLE 9.
  (C) A WAREHOUSE'S LIEN FOR CHARGES AND EXPENSES UNDER  SUBSECTION  (A)
OR  A  SECURITY  INTEREST UNDER SUBSECTION (B) IS ALSO EFFECTIVE AGAINST
ANY PERSON THAT SO ENTRUSTED THE BAILOR WITH  POSSESSION  OF  THE  GOODS
THAT  A PLEDGE OF THEM BY THE BAILOR TO A GOOD-FAITH PURCHASER FOR VALUE
WOULD HAVE BEEN VALID. HOWEVER, THE LIEN OR  SECURITY  INTEREST  IS  NOT
EFFECTIVE  AGAINST  A PERSON THAT BEFORE ISSUANCE OF A DOCUMENT OF TITLE
HAD A LEGAL INTEREST OR A PERFECTED SECURITY INTEREST IN THE  GOODS  AND
THAT DID NOT:
  (1) DELIVER OR ENTRUST THE GOODS OR ANY DOCUMENT OF TITLE COVERING THE
GOODS TO THE BAILOR OR THE BAILOR'S NOMINEE WITH:
  (A) ACTUAL OR APPARENT AUTHORITY TO SHIP, STORE, OR SELL;
  (B) POWER TO OBTAIN DELIVERY UNDER SECTION 7--403; OR
  (C)   POWER   OF   DISPOSITION   UNDER  SECTIONS  2--403,  2A--304(2),
2A--305(2), 9--320, OR 9--321(C) OR OTHER STATUTE OR RULE OF LAW; OR
  (2) ACQUIESCE IN THE PROCUREMENT BY THE BAILOR OR ITS NOMINEE  OF  ANY
DOCUMENT.
  (D)  A WAREHOUSE'S LIEN ON HOUSEHOLD GOODS FOR CHARGES AND EXPENSES IN
RELATION TO THE GOODS UNDER SUBSECTION (A) IS ALSO EFFECTIVE AGAINST ALL
PERSONS IF THE DEPOSITOR WAS THE LEGAL POSSESSOR OF  THE  GOODS  AT  THE
TIME  OF DEPOSIT. IN THIS SUBSECTION, "HOUSEHOLD GOODS" MEANS FURNITURE,
FURNISHINGS, OR PERSONAL EFFECTS USED BY THE DEPOSITOR IN A DWELLING.
  (E) A WAREHOUSE LOSES ITS LIEN ON ANY GOODS THAT IT VOLUNTARILY DELIV-
ERS OR UNJUSTIFIABLY REFUSES TO DELIVER.
SECTION 7--210. ENFORCEMENT OF WAREHOUSE'S LIEN.
  (A) EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION (B), A WAREHOUSE'S LIEN
MAY BE ENFORCED BY PUBLIC OR PRIVATE SALE OF THE GOODS, IN  BULK  OR  IN
PACKAGES,  AT  ANY  TIME OR PLACE AND ON ANY TERMS THAT ARE COMMERCIALLY
REASONABLE, AFTER NOTIFYING ALL PERSONS KNOWN TO CLAIM  AN  INTEREST  IN
THE  GOODS. THE NOTIFICATION MUST INCLUDE A STATEMENT OF THE AMOUNT DUE,
THE NATURE OF THE PROPOSED SALE, AND THE TIME AND PLACE  OF  ANY  PUBLIC
SALE. THE FACT THAT A BETTER PRICE COULD HAVE BEEN OBTAINED BY A SALE AT
A  DIFFERENT  TIME  OR  IN  A METHOD DIFFERENT FROM THAT SELECTED BY THE

S. 7816                            21

WAREHOUSE IS NOT OF ITSELF SUFFICIENT TO ESTABLISH THAT THE SALE WAS NOT
MADE IN A COMMERCIALLY REASONABLE  MANNER.  THE  WAREHOUSE  SELLS  IN  A
COMMERCIALLY  REASONABLE  MANNER IF THE WAREHOUSE SELLS THE GOODS IN THE
USUAL  MANNER  IN  ANY  RECOGNIZED  MARKET THEREFORE, SELLS AT THE PRICE
CURRENT IN THAT MARKET AT THE TIME OF THE SALE, OR  OTHERWISE  SELLS  IN
CONFORMITY  WITH  COMMERCIALLY REASONABLE PRACTICES AMONG DEALERS IN THE
TYPE OF GOODS SOLD. A SALE OF MORE GOODS THAN APPARENTLY NECESSARY TO BE
OFFERED TO ENSURE SATISFACTION OF THE  OBLIGATION  IS  NOT  COMMERCIALLY
REASONABLE, EXCEPT IN CASES COVERED BY THE PRECEDING SENTENCE.
  (B) A WAREHOUSE MAY ENFORCE ITS LIEN ON GOODS, OTHER THAN GOODS STORED
BY  A  MERCHANT  IN  THE  COURSE  OF ITS BUSINESS, ONLY IF THE FOLLOWING
REQUIREMENTS ARE SATISFIED:
  (1) ALL PERSONS KNOWN TO CLAIM AN INTEREST IN THE GOODS MUST BE  NOTI-
FIED.
  (2)  THE NOTIFICATION MUST INCLUDE AN ITEMIZED STATEMENT OF THE CLAIM,
A DESCRIPTION OF THE GOODS SUBJECT TO THE LIEN,  A  DEMAND  FOR  PAYMENT
WITHIN  A  SPECIFIED  TIME  NOT  LESS THAN TEN DAYS AFTER RECEIPT OF THE
NOTIFICATION, AND A CONSPICUOUS STATEMENT THAT UNLESS THE CLAIM IS  PAID
WITHIN  THAT  TIME  THE  GOODS  WILL  BE ADVERTISED FOR SALE AND SOLD BY
AUCTION AT A SPECIFIED TIME AND PLACE.
  (3) THE SALE MUST CONFORM TO THE TERMS OF THE NOTIFICATION.
  (4) THE SALE MUST BE HELD AT THE NEAREST SUITABLE PLACE TO  WHERE  THE
GOODS ARE HELD OR STORED.
  (5)  AFTER  THE  EXPIRATION  OF THE TIME GIVEN IN THE NOTIFICATION, AN
ADVERTISEMENT OF THE SALE MUST BE PUBLISHED ONCE A WEEK  FOR  TWO  WEEKS
CONSECUTIVELY IN A NEWSPAPER OF GENERAL CIRCULATION WHERE THE SALE IS TO
BE  HELD. THE ADVERTISEMENT MUST INCLUDE A DESCRIPTION OF THE GOODS, THE
NAME OF THE PERSON ON WHOSE ACCOUNT THE GOODS ARE BEING  HELD,  AND  THE
TIME  AND  PLACE  OF THE SALE. THE SALE MUST TAKE PLACE AT LEAST FIFTEEN
DAYS AFTER THE FIRST PUBLICATION. IF THERE IS NO  NEWSPAPER  OF  GENERAL
CIRCULATION  WHERE  THE  SALE  IS  TO BE HELD, THE ADVERTISEMENT MUST BE
POSTED AT LEAST TEN DAYS BEFORE THE SALE IN NOT FEWER THAN SIX CONSPICU-
OUS PLACES IN THE NEIGHBORHOOD OF THE PROPOSED SALE.
  (C) BEFORE ANY SALE PURSUANT TO THIS SECTION, ANY  PERSON  CLAIMING  A
RIGHT  IN THE GOODS MAY PAY THE AMOUNT NECESSARY TO SATISFY THE LIEN AND
THE REASONABLE EXPENSES INCURRED IN COMPLYING WITH THIS SECTION. IN THAT
EVENT, THE GOODS MAY NOT BE SOLD BUT MUST BE RETAINED BY  THE  WAREHOUSE
SUBJECT TO THE TERMS OF THE RECEIPT AND THIS ARTICLE.
  (D)  A  WAREHOUSE  MAY  BUY  AT  ANY PUBLIC SALE HELD PURSUANT TO THIS
SECTION.
  (E) A PURCHASER IN GOOD FAITH OF GOODS SOLD TO ENFORCE  A  WAREHOUSE'S
LIEN  TAKES  THE  GOODS  FREE OF ANY RIGHTS OF PERSONS AGAINST WHICH THE
LIEN WAS VALID, DESPITE THE WAREHOUSE'S NONCOMPLIANCE WITH THIS SECTION.
  (F) A WAREHOUSE MAY SATISFY ITS LIEN FROM THE  PROCEEDS  OF  ANY  SALE
PURSUANT  TO THIS SECTION BUT SHALL HOLD THE BALANCE, IF ANY, FOR DELIV-
ERY ON DEMAND TO ANY PERSON TO WHICH THE WAREHOUSE WOULD HAVE BEEN BOUND
TO DELIVER THE GOODS.
  (G) THE RIGHTS PROVIDED BY THIS SECTION ARE IN ADDITION TO  ALL  OTHER
RIGHTS ALLOWED BY LAW TO A CREDITOR AGAINST A DEBTOR.
  (H)  IF  A  LIEN IS ON GOODS STORED BY A MERCHANT IN THE COURSE OF ITS
BUSINESS, THE LIEN MAY BE ENFORCED IN ACCORDANCE WITH SUBSECTION (A)  OR
(B).
  (I) A WAREHOUSE IS LIABLE FOR DAMAGES CAUSED BY FAILURE TO COMPLY WITH
THE  REQUIREMENTS  FOR  SALE  UNDER THIS SECTION AND, IN CASE OF WILLFUL
VIOLATION, IS LIABLE FOR CONVERSION.

S. 7816                            22

                                 PART 3
                   BILLS OF LADING: SPECIAL PROVISIONS
SECTION 7--301. LIABILITY  FOR  NONRECEIPT  OR  MISDESCRIPTION; "SAID TO
                  CONTAIN"; "SHIPPER'S WEIGHT, LOAD, AND COUNT"; IMPROP-
                  ER HANDLING.
  (A) A CONSIGNEE OF A NONNEGOTIABLE BILL  OF  LADING  WHICH  HAS  GIVEN
VALUE  IN  GOOD  FAITH,  OR A HOLDER TO WHICH A NEGOTIABLE BILL HAS BEEN
DULY NEGOTIATED, RELYING UPON THE DESCRIPTION OF THE GOODS IN  THE  BILL
OR  UPON THE DATE SHOWN IN THE BILL, MAY RECOVER FROM THE ISSUER DAMAGES
CAUSED BY THE MISDATING OF THE BILL OR THE NONRECEIPT OR  MISDESCRIPTION
OF  THE  GOODS,  EXCEPT  TO  THE EXTENT THAT THE BILL INDICATES THAT THE
ISSUER DOES NOT KNOW WHETHER ANY PART OR ALL OF THE GOODS IN  FACT  WERE
RECEIVED  OR  CONFORM TO THE DESCRIPTION, SUCH AS IN A CASE IN WHICH THE
DESCRIPTION IS IN TERMS OF MARKS OR LABELS OR KIND, QUANTITY, OR  CONDI-
TION  OR  THE RECEIPT OR DESCRIPTION IS QUALIFIED BY "CONTENTS OR CONDI-
TION OF CONTENTS OF PACKAGES UNKNOWN",  "SAID  TO  CONTAIN",  "SHIPPER'S
WEIGHT, LOAD, AND COUNT," OR WORDS OF SIMILAR IMPORT, IF THAT INDICATION
IS TRUE.
  (B) IF GOODS ARE LOADED BY THE ISSUER OF A BILL OF LADING:
  (1)  THE  ISSUER SHALL COUNT THE PACKAGES OF GOODS IF SHIPPED IN PACK-
AGES AND ASCERTAIN THE KIND AND QUANTITY IF SHIPPED IN BULK; AND
  (2) WORDS SUCH AS "SHIPPER'S WEIGHT, LOAD, AND  COUNT,"  OR  WORDS  OF
SIMILAR  IMPORT  INDICATING THAT THE DESCRIPTION WAS MADE BY THE SHIPPER
ARE INEFFECTIVE EXCEPT AS TO GOODS CONCEALED IN PACKAGES.
  (C) IF BULK GOODS ARE LOADED BY A SHIPPER THAT MAKES AVAILABLE TO  THE
ISSUER OF A BILL OF LADING ADEQUATE FACILITIES FOR WEIGHING THOSE GOODS,
THE  ISSUER  SHALL  ASCERTAIN  THE KIND AND QUANTITY WITHIN A REASONABLE
TIME AFTER RECEIVING THE SHIPPER'S REQUEST IN A RECORD TO DO SO. IN THAT
CASE, "SHIPPER'S WEIGHT" OR WORDS OF SIMILAR IMPORT ARE INEFFECTIVE.
  (D) THE ISSUER OF A BILL OF LADING, BY INCLUDING IN THE BILL THE WORDS
"SHIPPER'S WEIGHT, LOAD, AND COUNT," OR WORDS  OF  SIMILAR  IMPORT,  MAY
INDICATE  THAT THE GOODS WERE LOADED BY THE SHIPPER, AND, IF THAT STATE-
MENT IS TRUE, THE ISSUER IS NOT LIABLE FOR DAMAGES CAUSED BY THE IMPROP-
ER LOADING. HOWEVER, OMISSION OF SUCH WORDS DOES NOT IMPLY LIABILITY FOR
DAMAGES CAUSED BY IMPROPER LOADING.
  (E) A SHIPPER GUARANTEES TO AN ISSUER THE  ACCURACY  AT  THE  TIME  OF
SHIPMENT  OF  THE  DESCRIPTION,  MARKS,  LABELS, NUMBER, KIND, QUANTITY,
CONDITION, AND WEIGHT, AS FURNISHED BY  THE  SHIPPER,  AND  THE  SHIPPER
SHALL  INDEMNIFY  THE  ISSUER  AGAINST  DAMAGE CAUSED BY INACCURACIES IN
THOSE PARTICULARS. THIS RIGHT OF INDEMNITY DOES NOT LIMIT  THE  ISSUER'S
RESPONSIBILITY OR LIABILITY UNDER THE CONTRACT OF CARRIAGE TO ANY PERSON
OTHER THAN THE SHIPPER.
SECTION 7--302. THROUGH BILLS OF LADING AND SIMILAR DOCUMENTS OF TITLE.
  (A) THE ISSUER OF A THROUGH BILL OF LADING, OR OTHER DOCUMENT OF TITLE
EMBODYING  AN  UNDERTAKING TO BE PERFORMED IN PART BY A PERSON ACTING AS
ITS AGENT OR BY A PERFORMING CARRIER, IS LIABLE TO ANY  PERSON  ENTITLED
TO  RECOVER  ON  THE  BILL OR OTHER DOCUMENT FOR ANY BREACH BY THE OTHER
PERSON OR THE PERFORMING CARRIER OF ITS OBLIGATION  UNDER  THE  BILL  OR
OTHER  DOCUMENT.  HOWEVER, TO THE EXTENT THAT THE BILL OR OTHER DOCUMENT
COVERS AN UNDERTAKING TO BE  PERFORMED  OVERSEAS  OR  IN  TERRITORY  NOT
CONTIGUOUS  TO THE CONTINENTAL UNITED STATES OR AN UNDERTAKING INCLUDING
MATTERS OTHER THAN TRANSPORTATION, THIS  LIABILITY  FOR  BREACH  BY  THE
OTHER PERSON OR THE PERFORMING CARRIER MAY BE VARIED BY AGREEMENT OF THE
PARTIES.
  (B)  IF GOODS COVERED BY A THROUGH BILL OF LADING OR OTHER DOCUMENT OF
TITLE EMBODYING AN UNDERTAKING TO BE PERFORMED IN PART BY A PERSON OTHER

S. 7816                            23

THAN THE ISSUER ARE RECEIVED BY THAT PERSON, THE PERSON IS SUBJECT, WITH
RESPECT TO ITS OWN PERFORMANCE WHILE THE GOODS ARE IN ITS POSSESSION, TO
THE OBLIGATION OF THE ISSUER. THE PERSON'S OBLIGATION IS  DISCHARGED  BY
DELIVERY  OF  THE  GOODS TO ANOTHER PERSON PURSUANT TO THE BILL OR OTHER
DOCUMENT AND DOES NOT INCLUDE LIABILITY FOR BREACH BY ANY  OTHER  PERSON
OR BY THE ISSUER.
  (C)  THE ISSUER OF A THROUGH BILL OF LADING OR OTHER DOCUMENT OF TITLE
DESCRIBED IN SUBSECTION (A) IS ENTITLED TO RECOVER FROM  THE  PERFORMING
CARRIER,  OR  OTHER PERSON IN POSSESSION OF THE GOODS WHEN THE BREACH OF
THE OBLIGATION UNDER THE BILL OR OTHER DOCUMENT OCCURRED:
  (1) THE AMOUNT IT MAY BE REQUIRED TO PAY TO  ANY  PERSON  ENTITLED  TO
RECOVER  ON  THE  BILL  OR  OTHER  DOCUMENT  FOR  THE  BREACH, AS MAY BE
EVIDENCED BY ANY RECEIPT, JUDGMENT, OR TRANSCRIPT OF JUDGMENT; AND
  (2) THE AMOUNT OF ANY EXPENSE REASONABLY INCURRED  BY  THE  ISSUER  IN
DEFENDING  ANY ACTION COMMENCED BY ANY PERSON ENTITLED TO RECOVER ON THE
BILL OR OTHER DOCUMENT FOR THE BREACH.
SECTION 7--303. DIVERSION; RECONSIGNMENT; CHANGE OF INSTRUCTIONS.
  (A) UNLESS THE BILL OF LADING OTHERWISE PROVIDES, A CARRIER MAY DELIV-
ER THE GOODS TO A PERSON OR DESTINATION OTHER THAN THAT  STATED  IN  THE
BILL OR MAY OTHERWISE DISPOSE OF THE GOODS, WITHOUT LIABILITY FOR MISDE-
LIVERY, ON INSTRUCTIONS FROM:
  (1) THE HOLDER OF A NEGOTIABLE BILL;
  (2)  THE  CONSIGNOR ON A NONNEGOTIABLE BILL, EVEN IF THE CONSIGNEE HAS
GIVEN CONTRARY INSTRUCTIONS;
  (3) THE CONSIGNEE ON A NONNEGOTIABLE BILL IN THE ABSENCE  OF  CONTRARY
INSTRUCTIONS FROM THE CONSIGNOR, IF THE GOODS HAVE ARRIVED AT THE BILLED
DESTINATION OR IF THE CONSIGNEE IS IN POSSESSION OF THE TANGIBLE BILL OR
IN CONTROL OF THE ELECTRONIC BILL; OR
  (4)  THE  CONSIGNEE ON A NONNEGOTIABLE BILL, IF THE CONSIGNEE IS ENTI-
TLED AS AGAINST THE CONSIGNOR TO DISPOSE OF THE GOODS.
  (B) UNLESS INSTRUCTIONS DESCRIBED IN SUBSECTION (A) ARE INCLUDED IN  A
NEGOTIABLE BILL OF LADING, A PERSON TO WHICH THE BILL IS DULY NEGOTIATED
MAY HOLD THE BAILEE ACCORDING TO THE ORIGINAL TERMS.
SECTION 7--304. TANGIBLE BILLS OF LADING IN A SET.
  (A)  EXCEPT  AS  CUSTOMARY IN INTERNATIONAL TRANSPORTATION, A TANGIBLE
BILL OF LADING MAY NOT BE ISSUED IN A SET OF PARTS. THE ISSUER IS LIABLE
FOR DAMAGES CAUSED BY VIOLATION OF THIS SUBSECTION.
  (B) IF A TANGIBLE BILL OF LADING IS LAWFULLY ISSUED IN A SET OF PARTS,
EACH OF WHICH CONTAINS AN IDENTIFICATION CODE AND  IS  EXPRESSED  TO  BE
VALID  ONLY IF THE GOODS HAVE NOT BEEN DELIVERED AGAINST ANY OTHER PART,
THE WHOLE OF THE PARTS CONSTITUTES ONE BILL.
  (C) IF A TANGIBLE NEGOTIABLE BILL OF LADING IS LAWFULLY  ISSUED  IN  A
SET  OF  PARTS  AND DIFFERENT PARTS ARE NEGOTIATED TO DIFFERENT PERSONS,
THE TITLE OF THE HOLDER TO WHICH  THE  FIRST  DUE  NEGOTIATION  IS  MADE
PREVAILS  AS  TO  BOTH  THE  DOCUMENT OF TITLE AND THE GOODS EVEN IF ANY
LATER HOLDER MAY HAVE RECEIVED THE GOODS FROM THE CARRIER IN GOOD  FAITH
AND DISCHARGED THE CARRIER'S OBLIGATION BY SURRENDERING ITS PART.
  (D)  A PERSON THAT NEGOTIATES OR TRANSFERS A SINGLE PART OF A TANGIBLE
BILL OF LADING ISSUED IN A SET IS LIABLE TO HOLDERS OF THAT PART  AS  IF
IT WERE THE WHOLE SET.
  (E) THE BAILEE SHALL DELIVER IN ACCORDANCE WITH PART 4 OF THIS ARTICLE
AGAINST  THE  FIRST PRESENTED PART OF A TANGIBLE BILL OF LADING LAWFULLY
ISSUED IN A SET. DELIVERY IN THIS MANNER DISCHARGES THE  BAILEE'S  OBLI-
GATION ON THE WHOLE BILL.
SECTION 7--305. DESTINATION BILLS.

S. 7816                            24

  (A)  INSTEAD OF ISSUING A BILL OF LADING TO THE CONSIGNOR AT THE PLACE
OF SHIPMENT, A CARRIER, AT THE REQUEST OF THE CONSIGNOR, MAY PROCURE THE
BILL TO BE ISSUED AT DESTINATION OR AT ANY OTHER PLACE DESIGNATED IN THE
REQUEST.
  (B)  UPON  REQUEST  OF  ANY  PERSON  ENTITLED  AS AGAINST A CARRIER TO
CONTROL THE GOODS WHILE IN TRANSIT AND ON  SURRENDER  OF  POSSESSION  OR
CONTROL  OF ANY OUTSTANDING BILL OF LADING OR OTHER RECEIPT COVERING THE
GOODS, THE ISSUER, SUBJECT TO SECTION 7--105, MAY PROCURE  A  SUBSTITUTE
BILL TO BE ISSUED AT ANY PLACE DESIGNATED IN THE REQUEST.
SECTION 7--306. ALTERED BILLS OF LADING.
  AN  UNAUTHORIZED  ALTERATION  OR  FILLING  IN  OF A BLANK IN A BILL OF
LADING LEAVES THE BILL ENFORCEABLE ACCORDING TO ITS ORIGINAL TENOR.
SECTION 7--307. LIEN OF CARRIER.
  (A) A CARRIER HAS A LIEN ON THE GOODS COVERED BY A BILL OF  LADING  OR
ON  THE PROCEEDS THEREOF IN ITS POSSESSION FOR CHARGES AFTER THE DATE OF
THE CARRIER'S RECEIPT  OF  THE  GOODS  FOR  STORAGE  OR  TRANSPORTATION,
INCLUDING DEMURRAGE AND TERMINAL CHARGES, AND FOR EXPENSES NECESSARY FOR
PRESERVATION OF THE GOODS INCIDENT TO THEIR TRANSPORTATION OR REASONABLY
INCURRED IN THEIR SALE PURSUANT TO LAW. HOWEVER, AGAINST A PURCHASER FOR
VALUE  OF  A  NEGOTIABLE  BILL OF LADING, A CARRIER'S LIEN IS LIMITED TO
CHARGES STATED IN THE BILL OR THE APPLICABLE TARIFFS OR, IF  NO  CHARGES
ARE STATED, A REASONABLE CHARGE.
  (B) A LIEN FOR CHARGES AND EXPENSES UNDER SUBSECTION (A) ON GOODS THAT
THE  CARRIER WAS REQUIRED BY LAW TO RECEIVE FOR TRANSPORTATION IS EFFEC-
TIVE AGAINST THE CONSIGNOR OR ANY PERSON ENTITLED TO  THE  GOODS  UNLESS
THE  CARRIER  HAD  NOTICE THAT THE CONSIGNOR LACKED AUTHORITY TO SUBJECT
THE GOODS  TO  THOSE  CHARGES  AND  EXPENSES.    ANY  OTHER  LIEN  UNDER
SUBSECTION  (A)  IS  EFFECTIVE AGAINST THE CONSIGNOR AND ANY PERSON THAT
PERMITTED THE BAILOR TO HAVE CONTROL OR POSSESSION OF THE  GOODS  UNLESS
THE CARRIER HAD NOTICE THAT THE BAILOR LACKED AUTHORITY.
  (C) A CARRIER LOSES ITS LIEN ON ANY GOODS THAT IT VOLUNTARILY DELIVERS
OR UNJUSTIFIABLY REFUSES TO DELIVER.
SECTION 7--308. ENFORCEMENT OF CARRIER'S LIEN.
  (A)  A  CARRIER'S  LIEN  ON GOODS MAY BE ENFORCED BY PUBLIC OR PRIVATE
SALE OF THE GOODS, IN BULK OR IN PACKAGES, AT ANY TIME OR PLACE  AND  ON
ANY  TERMS THAT ARE COMMERCIALLY REASONABLE, AFTER NOTIFYING ALL PERSONS
KNOWN TO CLAIM AN INTEREST IN THE GOODS. THE NOTIFICATION MUST INCLUDE A
STATEMENT OF THE AMOUNT DUE, THE NATURE OF THE PROPOSED  SALE,  AND  THE
TIME  AND  PLACE  OF ANY PUBLIC SALE. THE FACT THAT A BETTER PRICE COULD
HAVE BEEN OBTAINED BY A SALE AT A DIFFERENT TIME OR IN A METHOD  DIFFER-
ENT  FROM  THAT  SELECTED  BY THE CARRIER IS NOT OF ITSELF SUFFICIENT TO
ESTABLISH THAT THE SALE  WAS  NOT  MADE  IN  A  COMMERCIALLY  REASONABLE
MANNER.  THE  CARRIER SELLS GOODS IN A COMMERCIALLY REASONABLE MANNER IF
THE CARRIER SELLS THE GOODS IN THE USUAL MANNER IN ANY RECOGNIZED MARKET
THEREFOR, SELLS AT THE PRICE CURRENT IN THAT MARKET AT THE TIME  OF  THE
SALE,  OR  OTHERWISE  SELLS  IN  CONFORMITY WITH COMMERCIALLY REASONABLE
PRACTICES AMONG DEALERS IN THE TYPE OF GOODS SOLD. A SALE OF MORE  GOODS
THAN  APPARENTLY  NECESSARY  TO BE OFFERED TO ENSURE SATISFACTION OF THE
OBLIGATION IS NOT COMMERCIALLY REASONABLE, EXCEPT IN  CASES  COVERED  BY
THE PRECEDING SENTENCE.
  (B)  BEFORE  ANY  SALE PURSUANT TO THIS SECTION, ANY PERSON CLAIMING A
RIGHT IN THE GOODS MAY PAY THE AMOUNT NECESSARY TO SATISFY THE LIEN  AND
THE REASONABLE EXPENSES INCURRED IN COMPLYING WITH THIS SECTION. IN THAT
EVENT,  THE  GOODS  MAY NOT BE SOLD BUT MUST BE RETAINED BY THE CARRIER,
SUBJECT TO THE TERMS OF THE BILL OF LADING AND THIS ARTICLE.
  (C) A CARRIER MAY BUY AT ANY PUBLIC SALE PURSUANT TO THIS SECTION.

S. 7816                            25

  (D) A PURCHASER IN GOOD FAITH OF GOODS SOLD  TO  ENFORCE  A  CARRIER'S
LIEN  TAKES  THE  GOODS  FREE OF ANY RIGHTS OF PERSONS AGAINST WHICH THE
LIEN WAS VALID, DESPITE THE CARRIER'S NONCOMPLIANCE WITH THIS SECTION.
  (E)  A  CARRIER  MAY  SATISFY  ITS  LIEN FROM THE PROCEEDS OF ANY SALE
PURSUANT TO THIS SECTION BUT SHALL HOLD THE BALANCE, IF ANY, FOR  DELIV-
ERY  ON  DEMAND TO ANY PERSON TO WHICH THE CARRIER WOULD HAVE BEEN BOUND
TO DELIVER THE GOODS.
  (F) THE RIGHTS PROVIDED BY THIS SECTION ARE IN ADDITION TO  ALL  OTHER
RIGHTS ALLOWED BY LAW TO A CREDITOR AGAINST A DEBTOR.
  (G) A CARRIER'S LIEN MAY BE ENFORCED PURSUANT TO EITHER SUBSECTION (A)
OR THE PROCEDURE SET FORTH IN SECTION 7--210(B).
  (H)  A  CARRIER IS LIABLE FOR DAMAGES CAUSED BY FAILURE TO COMPLY WITH
THE REQUIREMENTS FOR SALE UNDER THIS SECTION AND,  IN  CASE  OF  WILLFUL
VIOLATION, IS LIABLE FOR CONVERSION.
SECTION 7--309. DUTY   OF  CARE;  CONTRACTUAL  LIMITATION  OF  CARRIER'S
                  LIABILITY.
  (A) A CARRIER THAT ISSUES A BILL  OF  LADING,  WHETHER  NEGOTIABLE  OR
NONNEGOTIABLE,  SHALL  EXERCISE  THE  DEGREE  OF CARE IN RELATION TO THE
GOODS WHICH A REASONABLY CAREFUL PERSON  WOULD  EXERCISE  UNDER  SIMILAR
CIRCUMSTANCES.  THIS SUBSECTION DOES NOT AFFECT ANY STATUTE, REGULATION,
OR RULE OF LAW THAT IMPOSES LIABILITY UPON A COMMON CARRIER FOR  DAMAGES
NOT CAUSED BY ITS NEGLIGENCE.
  (B)  DAMAGES  MAY  BE  LIMITED BY A TERM IN THE BILL OF LADING OR IN A
TRANSPORTATION AGREEMENT THAT THE CARRIER'S LIABILITY MAY NOT  EXCEED  A
VALUE  STATED  IN  THE BILL OR TRANSPORTATION AGREEMENT IF THE CARRIER'S
RATES ARE DEPENDENT UPON VALUE AND THE CONSIGNOR IS AFFORDED AN OPPORTU-
NITY TO DECLARE A HIGHER VALUE AND  THE  CONSIGNOR  IS  ADVISED  OF  THE
OPPORTUNITY. HOWEVER, SUCH A LIMITATION IS NOT EFFECTIVE WITH RESPECT TO
THE CARRIER'S LIABILITY FOR CONVERSION TO ITS OWN USE.
  (C)  REASONABLE  PROVISIONS  AS  TO  THE TIME AND MANNER OF PRESENTING
CLAIMS AND COMMENCING ACTIONS BASED ON THE SHIPMENT MAY BE INCLUDED IN A
BILL OF LADING OR A TRANSPORTATION AGREEMENT.
                                 PART 4
       WAREHOUSE RECEIPTS AND BILLS OF LADING: GENERAL OBLIGATIONS
SECTION 7--401. IRREGULARITIES IN ISSUE OF RECEIPT OR BILL OR CONDUCT OF
                  ISSUER.
  THE OBLIGATIONS IMPOSED BY THIS ARTICLE ON AN ISSUER APPLY TO A  DOCU-
MENT OF TITLE EVEN IF:
  (1) THE DOCUMENT DOES NOT COMPLY WITH THE REQUIREMENTS OF THIS ARTICLE
OR  OF  ANY  OTHER  STATUTE, RULE, OR REGULATION REGARDING ITS ISSUANCE,
FORM, OR CONTENT;
  (2) THE ISSUER VIOLATED LAWS REGULATING THE CONDUCT OF ITS BUSINESS;
  (3) THE GOODS COVERED BY THE DOCUMENT WERE OWNED BY  THE  BAILEE  WHEN
THE DOCUMENT WAS ISSUED; OR
  (4)  THE  PERSON ISSUING THE DOCUMENT IS NOT A WAREHOUSE BUT THE DOCU-
MENT PURPORTS TO BE A WAREHOUSE RECEIPT.
SECTION 7--402. DUPLICATE DOCUMENT OF TITLE; OVERISSUE.
  A DUPLICATE OR ANY OTHER DOCUMENT OF TITLE PURPORTING TO  COVER  GOODS
ALREADY  REPRESENTED  BY AN OUTSTANDING DOCUMENT OF THE SAME ISSUER DOES
NOT CONFER ANY RIGHT IN THE GOODS, EXCEPT AS PROVIDED  IN  THE  CASE  OF
TANGIBLE  BILLS  OF LADING IN A SET OF PARTS, OVERISSUE OF DOCUMENTS FOR
FUNGIBLE GOODS, SUBSTITUTES FOR LOST, STOLEN, OR DESTROYED DOCUMENTS, OR
SUBSTITUTE DOCUMENTS ISSUED PURSUANT TO SECTION 7--105.  THE  ISSUER  IS
LIABLE  FOR  DAMAGES  CAUSED  BY  ITS OVERISSUE OR FAILURE TO IDENTIFY A
DUPLICATE DOCUMENT BY A CONSPICUOUS NOTATION.
SECTION 7--403. OBLIGATION OF BAILEE TO DELIVER; EXCUSE.

S. 7816                            26

  (A) A BAILEE SHALL DELIVER THE GOODS TO  A  PERSON  ENTITLED  UNDER  A
DOCUMENT  OF  TITLE IF THE PERSON COMPLIES WITH SUBSECTIONS (B) AND (C),
UNLESS AND TO THE EXTENT THAT THE BAILEE ESTABLISHES ANY OF THE  FOLLOW-
ING:
  (1)  DELIVERY  OF  THE GOODS TO A PERSON WHOSE RECEIPT WAS RIGHTFUL AS
AGAINST THE CLAIMANT;
  (2) DAMAGE TO OR DELAY, LOSS, OR DESTRUCTION OF THE  GOODS  FOR  WHICH
THE BAILEE IS NOT LIABLE;
  (3) PREVIOUS SALE OR OTHER DISPOSITION OF THE GOODS IN LAWFUL ENFORCE-
MENT OF A LIEN OR ON A WAREHOUSE'S LAWFUL TERMINATION OF STORAGE;
  (4) THE EXERCISE BY A SELLER OF ITS RIGHT TO STOP DELIVERY PURSUANT TO
SECTION  2--705 OR BY A LESSOR OF ITS RIGHT TO STOP DELIVERY PURSUANT TO
SECTION 2-A--526;
  (5) A DIVERSION,  RECONSIGNMENT,  OR  OTHER  DISPOSITION  PURSUANT  TO
SECTION 7--303;
  (6)  RELEASE,  SATISFACTION, OR ANY OTHER PERSONAL DEFENSE AGAINST THE
CLAIMANT; OR
  (7) ANY OTHER LAWFUL EXCUSE.
  (B) A PERSON CLAIMING GOODS COVERED  BY  A  DOCUMENT  OF  TITLE  SHALL
SATISFY  THE BAILEE'S LIEN IF THE BAILEE SO REQUESTS OR IF THE BAILEE IS
PROHIBITED BY LAW FROM DELIVERING THE GOODS UNTIL THE CHARGES ARE PAID.
  (C) UNLESS A PERSON CLAIMING THE GOODS IS A PERSON AGAINST  WHICH  THE
DOCUMENT OF TITLE DOES NOT CONFER A RIGHT UNDER SECTION 7--503(A):
  (1) THE PERSON CLAIMING UNDER A DOCUMENT SHALL SURRENDER POSSESSION OR
CONTROL  OF  ANY  OUTSTANDING NEGOTIABLE DOCUMENT COVERING THE GOODS FOR
CANCELLATION OR INDICATION OF PARTIAL DELIVERIES; AND
  (2) THE BAILEE SHALL CANCEL THE DOCUMENT OR CONSPICUOUSLY INDICATE  IN
THE  DOCUMENT THE PARTIAL DELIVERY OR THE BAILEE IS LIABLE TO ANY PERSON
TO WHICH THE DOCUMENT IS DULY NEGOTIATED.
SECTION 7--404. NO LIABILITY FOR GOOD-FAITH DELIVERY PURSUANT  TO  DOCU-
                  MENT OF TITLE.
  A BAILEE THAT IN GOOD FAITH HAS RECEIVED GOODS AND DELIVERED OR OTHER-
WISE DISPOSED OF THE GOODS ACCORDING TO THE TERMS OF A DOCUMENT OF TITLE
OR PURSUANT TO THIS ARTICLE IS NOT LIABLE FOR THE GOODS EVEN IF:
  (1)  THE  PERSON FROM WHICH THE BAILEE RECEIVED THE GOODS DID NOT HAVE
AUTHORITY TO PROCURE THE DOCUMENT OR TO DISPOSE OF THE GOODS; OR
  (2) THE PERSON TO WHICH THE BAILEE DELIVERED THE GOODS  DID  NOT  HAVE
AUTHORITY TO RECEIVE THE GOODS.
                                 PART 5
    WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION AND TRANSFER
SECTION 7--501. FORM OF NEGOTIATION AND REQUIREMENTS OF DUE NEGOTIATION.
  (A)  THE  FOLLOWING  RULES  APPLY TO A NEGOTIABLE TANGIBLE DOCUMENT OF
TITLE:
  (1) IF THE DOCUMENT'S ORIGINAL TERMS RUN  TO  THE  ORDER  OF  A  NAMED
PERSON, THE DOCUMENT IS NEGOTIATED BY THE NAMED PERSON'S INDORSEMENT AND
DELIVERY.  AFTER  THE  NAMED PERSON'S INDORSEMENT IN BLANK OR TO BEARER,
ANY PERSON MAY NEGOTIATE THE DOCUMENT BY DELIVERY ALONE.
  (2) IF THE DOCUMENT'S ORIGINAL TERMS RUN TO BEARER, IT  IS  NEGOTIATED
BY DELIVERY ALONE.
  (3)  IF  THE  DOCUMENT'S  ORIGINAL  TERMS  RUN TO THE ORDER OF A NAMED
PERSON AND IT IS DELIVERED TO THE NAMED PERSON, THE EFFECT IS  THE  SAME
AS IF THE DOCUMENT HAD BEEN NEGOTIATED.
  (4)  NEGOTIATION OF THE DOCUMENT AFTER IT HAS BEEN INDORSED TO A NAMED
PERSON REQUIRES INDORSEMENT BY THE NAMED PERSON AND DELIVERY.
  (5) A DOCUMENT IS DULY NEGOTIATED IF IT IS NEGOTIATED  IN  THE  MANNER
STATED  IN  THIS SUBSECTION TO A HOLDER THAT PURCHASES IT IN GOOD FAITH,

S. 7816                            27

WITHOUT NOTICE OF ANY DEFENSE AGAINST OR CLAIM TO IT ON THE PART OF  ANY
PERSON,  AND FOR VALUE, UNLESS IT IS ESTABLISHED THAT THE NEGOTIATION IS
NOT IN THE REGULAR COURSE OF BUSINESS OR FINANCING OR INVOLVES RECEIVING
THE DOCUMENT IN SETTLEMENT OR PAYMENT OF A MONETARY OBLIGATION.
  (B)  THE  FOLLOWING RULES APPLY TO A NEGOTIABLE ELECTRONIC DOCUMENT OF
TITLE:
  (1) IF THE DOCUMENT'S ORIGINAL TERMS RUN  TO  THE  ORDER  OF  A  NAMED
PERSON OR TO BEARER, THE DOCUMENT IS NEGOTIATED BY DELIVERY OF THE DOCU-
MENT  TO ANOTHER PERSON. INDORSEMENT BY THE NAMED PERSON IS NOT REQUIRED
TO NEGOTIATE THE DOCUMENT.
  (2) IF THE DOCUMENT'S ORIGINAL TERMS RUN  TO  THE  ORDER  OF  A  NAMED
PERSON  AND  THE NAMED PERSON HAS CONTROL OF THE DOCUMENT, THE EFFECT IS
THE SAME AS IF THE DOCUMENT HAD BEEN NEGOTIATED.
  (3) A DOCUMENT IS DULY NEGOTIATED IF IT IS NEGOTIATED  IN  THE  MANNER
STATED  IN  THIS SUBSECTION TO A HOLDER THAT PURCHASES IT IN GOOD FAITH,
WITHOUT NOTICE OF ANY DEFENSE AGAINST OR CLAIM TO IT ON THE PART OF  ANY
PERSON,  AND FOR VALUE, UNLESS IT IS ESTABLISHED THAT THE NEGOTIATION IS
NOT IN THE REGULAR COURSE OF BUSINESS OR FINANCING  OR  INVOLVES  TAKING
DELIVERY  OF  THE  DOCUMENT IN SETTLEMENT OR PAYMENT OF A MONETARY OBLI-
GATION.
  (C) INDORSEMENT OF A NONNEGOTIABLE DOCUMENT OF TITLE NEITHER MAKES  IT
NEGOTIABLE NOR ADDS TO THE TRANSFEREE'S RIGHTS.
  (D)  THE NAMING IN A NEGOTIABLE BILL OF LADING OF A PERSON TO BE NOTI-
FIED OF THE ARRIVAL OF THE GOODS DOES NOT LIMIT THE NEGOTIABILITY OF THE
BILL OR CONSTITUTE NOTICE TO A PURCHASER OF THE BILL OF ANY INTEREST  OF
THAT PERSON IN THE GOODS.
SECTION 7--502. RIGHTS ACQUIRED BY DUE NEGOTIATION.
  (A) SUBJECT TO SECTIONS 7--205 AND 7--503, A HOLDER TO WHICH A NEGOTI-
ABLE DOCUMENT OF TITLE HAS BEEN DULY NEGOTIATED ACQUIRES THEREBY:
  (1) TITLE TO THE DOCUMENT;
  (2) TITLE TO THE GOODS;
  (3) ALL RIGHTS ACCRUING UNDER THE LAW OF AGENCY OR ESTOPPEL, INCLUDING
RIGHTS  TO  GOODS DELIVERED TO THE BAILEE AFTER THE DOCUMENT WAS ISSUED;
AND
  (4) THE DIRECT OBLIGATION OF THE ISSUER TO HOLD OR DELIVER  THE  GOODS
ACCORDING  TO  THE TERMS OF THE DOCUMENT FREE OF ANY DEFENSE OR CLAIM BY
THE ISSUER EXCEPT THOSE ARISING UNDER THE TERMS OF THE DOCUMENT OR UNDER
THIS ARTICLE, BUT IN THE CASE OF A DELIVERY ORDER,  THE  BAILEE'S  OBLI-
GATION  ACCRUES  ONLY UPON THE BAILEE'S ACCEPTANCE OF THE DELIVERY ORDER
AND THE OBLIGATION ACQUIRED BY THE HOLDER IS THAT  THE  ISSUER  AND  ANY
INDORSER WILL PROCURE THE ACCEPTANCE OF THE BAILEE.
  (B)  SUBJECT TO SECTION 7--503, TITLE AND RIGHTS ACQUIRED BY DUE NEGO-
TIATION ARE NOT DEFEATED BY ANY STOPPAGE OF THE GOODS REPRESENTED BY THE
DOCUMENT OF TITLE OR BY SURRENDER OF THE GOODS BY THE BAILEE AND ARE NOT
IMPAIRED EVEN IF:
  (1) THE DUE NEGOTIATION OR ANY PRIOR  DUE  NEGOTIATION  CONSTITUTED  A
BREACH OF DUTY;
  (2)  ANY PERSON HAS BEEN DEPRIVED OF POSSESSION OF A NEGOTIABLE TANGI-
BLE DOCUMENT OR CONTROL OF A NEGOTIABLE ELECTRONIC DOCUMENT BY MISREPRE-
SENTATION, FRAUD, ACCIDENT, MISTAKE, DURESS, LOSS, THEFT, OR CONVERSION;
OR
  (3) A PREVIOUS SALE OR OTHER TRANSFER OF THE  GOODS  OR  DOCUMENT  HAS
BEEN MADE TO A THIRD PERSON.
SECTION 7--503. DOCUMENT OF TITLE TO GOODS DEFEATED IN CERTAIN CASES.

S. 7816                            28

  (A)  A  DOCUMENT  OF  TITLE CONFERS NO RIGHT IN GOODS AGAINST A PERSON
THAT BEFORE ISSUANCE OF THE DOCUMENT HAD A LEGAL INTEREST OR A PERFECTED
SECURITY INTEREST IN THE GOODS AND THAT DID NOT:
  (1) DELIVER OR ENTRUST THE GOODS OR ANY DOCUMENT OF TITLE COVERING THE
GOODS TO THE BAILOR OR THE BAILOR'S NOMINEE WITH:
  (A) ACTUAL OR APPARENT AUTHORITY TO SHIP, STORE, OR SELL;
  (B) POWER TO OBTAIN DELIVERY UNDER SECTION 7--403; OR
  (C)   POWER   OF   DISPOSITION   UNDER  SECTION  2--403,  2-A--304(2),
2-A--305(2), 9--320, OR 9--321(C) OR OTHER STATUTE OR RULE OF LAW; OR
  (2) ACQUIESCE IN THE PROCUREMENT BY THE BAILOR OR ITS NOMINEE  OF  ANY
DOCUMENT.
  (B)  TITLE TO GOODS BASED UPON AN UNACCEPTED DELIVERY ORDER IS SUBJECT
TO THE RIGHTS OF ANY PERSON TO WHICH A NEGOTIABLE WAREHOUSE  RECEIPT  OR
BILL  OF  LADING COVERING THE GOODS HAS BEEN DULY NEGOTIATED. THAT TITLE
MAY BE DEFEATED UNDER SECTION 7--504 TO THE SAME EXTENT AS THE RIGHTS OF
THE ISSUER OR A TRANSFEREE FROM THE ISSUER.
  (C) TITLE TO GOODS BASED UPON A BILL OF LADING  ISSUED  TO  A  FREIGHT
FORWARDER  IS SUBJECT TO THE RIGHTS OF ANY PERSON TO WHICH A BILL ISSUED
BY THE FREIGHT FORWARDER IS DULY NEGOTIATED. HOWEVER,  DELIVERY  BY  THE
CARRIER  IN  ACCORDANCE  WITH PART 4 OF THIS ARTICLE PURSUANT TO ITS OWN
BILL OF LADING DISCHARGES THE CARRIER'S OBLIGATION TO DELIVER.
SECTION 7--504. RIGHTS ACQUIRED IN ABSENCE OF DUE NEGOTIATION; EFFECT OF
                  DIVERSION; STOPPAGE OF DELIVERY.
  (A) A TRANSFEREE OF A DOCUMENT OF TITLE, WHETHER NEGOTIABLE OR  NONNE-
GOTIABLE,  TO WHICH THE DOCUMENT HAS BEEN DELIVERED BUT NOT DULY NEGOTI-
ATED, ACQUIRES THE TITLE AND RIGHTS THAT ITS TRANSFEROR HAD OR HAD ACTU-
AL AUTHORITY TO CONVEY.
  (B) IN THE CASE OF A TRANSFER OF A NONNEGOTIABLE  DOCUMENT  OF  TITLE,
UNTIL  BUT  NOT  AFTER  THE  BAILEE RECEIVES NOTICE OF THE TRANSFER, THE
RIGHTS OF THE TRANSFEREE MAY BE DEFEATED:
  (1) BY THOSE CREDITORS OF THE TRANSFEROR WHICH COULD TREAT THE  TRANS-
FER AS VOID UNDER SECTION 2--402 OR 2-A--308;
  (2)  BY  A BUYER FROM THE TRANSFEROR IN ORDINARY COURSE OF BUSINESS IF
THE BAILEE HAS DELIVERED THE GOODS TO THE BUYER OR RECEIVED NOTIFICATION
OF THE BUYER'S RIGHTS;
  (3) BY A LESSEE FROM THE TRANSFEROR IN ORDINARY COURSE OF BUSINESS  IF
THE  BAILEE  HAS DELIVERED THE GOODS TO THE LESSEE OR RECEIVED NOTIFICA-
TION OF THE LESSEE'S RIGHTS; OR
  (4) AS AGAINST THE BAILEE, BY GOOD-FAITH DEALINGS OF THE  BAILEE  WITH
THE TRANSFEROR.
  (C)  A  DIVERSION  OR  OTHER  CHANGE  OF  SHIPPING INSTRUCTIONS BY THE
CONSIGNOR IN A NONNEGOTIABLE BILL OF LADING WHICH CAUSES THE BAILEE  NOT
TO  DELIVER  THE GOODS TO THE CONSIGNEE DEFEATS THE CONSIGNEE'S TITLE TO
THE GOODS IF THE GOODS HAVE BEEN DELIVERED TO A BUYER IN ORDINARY COURSE
OF BUSINESS OR A LESSEE IN ORDINARY  COURSE  OF  BUSINESS  AND,  IN  ANY
EVENT, DEFEATS THE CONSIGNEE'S RIGHTS AGAINST THE BAILEE.
  (D)  DELIVERY  OF  THE  GOODS  PURSUANT TO A NONNEGOTIABLE DOCUMENT OF
TITLE MAY BE STOPPED BY A SELLER UNDER SECTION 2--705 OR A LESSOR  UNDER
SECTION  2-A--526,  SUBJECT  TO  THE REQUIREMENTS OF DUE NOTIFICATION IN
THOSE  SECTIONS.  A  BAILEE  THAT  HONORS  THE  SELLER'S   OR   LESSOR'S
INSTRUCTIONS  IS  ENTITLED  TO  BE  INDEMNIFIED  BY THE SELLER OR LESSOR
AGAINST ANY RESULTING LOSS OR EXPENSE.
SECTION 7--505. INDORSER NOT GUARANTOR FOR OTHER PARTIES.
  THE INDORSEMENT OF A TANGIBLE DOCUMENT OF TITLE  ISSUED  BY  A  BAILEE
DOES  NOT  MAKE  THE  INDORSER  LIABLE  FOR ANY DEFAULT BY THE BAILEE OR
PREVIOUS INDORSERS.

S. 7816                            29

SECTION 7--506. DELIVERY WITHOUT INDORSEMENT: RIGHT TO  COMPEL  INDORSE-
                  MENT.
  THE  TRANSFEREE  OF  A  NEGOTIABLE  TANGIBLE  DOCUMENT  OF TITLE HAS A
SPECIFICALLY ENFORCEABLE RIGHT TO HAVE ITS TRANSFEROR SUPPLY ANY  NECES-
SARY  INDORSEMENT, BUT THE TRANSFER BECOMES A NEGOTIATION ONLY AS OF THE
TIME THE INDORSEMENT IS SUPPLIED.
SECTION 7--507. WARRANTIES ON NEGOTIATION OR  DELIVERY  OF  DOCUMENT  OF
                  TITLE.
  IF  A  PERSON  NEGOTIATES  OR  DELIVERS A DOCUMENT OF TITLE FOR VALUE,
OTHERWISE THAN AS A  MERE  INTERMEDIARY  UNDER  SECTION  7--508,  UNLESS
OTHERWISE  AGREED,  THE  TRANSFEROR, IN ADDITION TO ANY WARRANTY MADE IN
SELLING OR LEASING THE GOODS, WARRANTS TO ITS IMMEDIATE  PURCHASER  ONLY
THAT:
  (1) THE DOCUMENT IS GENUINE;
  (2)  THE  TRANSFEROR  DOES  NOT  HAVE KNOWLEDGE OF ANY FACT THAT WOULD
IMPAIR THE DOCUMENT'S VALIDITY OR WORTH; AND
  (3) THE NEGOTIATION OR DELIVERY IS RIGHTFUL AND FULLY  EFFECTIVE  WITH
RESPECT TO THE TITLE TO THE DOCUMENT AND THE GOODS IT REPRESENTS.
SECTION 7--508. WARRANTIES OF COLLECTING BANK AS TO DOCUMENTS OF TITLE.
  A  COLLECTING  BANK  OR  OTHER INTERMEDIARY KNOWN TO BE ENTRUSTED WITH
DOCUMENTS OF TITLE ON BEHALF OF ANOTHER OR WITH COLLECTION OF A DRAFT OR
OTHER CLAIM AGAINST DELIVERY OF DOCUMENTS WARRANTS BY  THE  DELIVERY  OF
THE DOCUMENTS ONLY ITS OWN GOOD FAITH AND AUTHORITY EVEN IF THE COLLECT-
ING  BANK  OR  OTHER INTERMEDIARY HAS PURCHASED OR MADE ADVANCES AGAINST
THE CLAIM OR DRAFT TO BE COLLECTED.
SECTION 7--509. ADEQUATE COMPLIANCE WITH COMMERCIAL CONTRACT.
  WHETHER A DOCUMENT OF TITLE IS ADEQUATE TO FULFILL THE OBLIGATIONS  OF
A CONTRACT FOR SALE, A CONTRACT FOR LEASE, OR THE CONDITIONS OF A LETTER
OF CREDIT IS DETERMINED BY ARTICLE 2, 2-A, OR 5.
                                 PART 6
                 WAREHOUSE RECEIPTS AND BILLS OF LADING:
                        MISCELLANEOUS PROVISIONS
SECTION 7--601. LOST, STOLEN, OR DESTROYED DOCUMENTS OF TITLE.
  (A)  IF A DOCUMENT OF TITLE IS LOST, STOLEN, OR DESTROYED, A COURT MAY
ORDER DELIVERY OF THE GOODS OR ISSUANCE OF A SUBSTITUTE DOCUMENT AND THE
BAILEE MAY WITHOUT LIABILITY TO ANY PERSON COMPLY WITH THE  ORDER.    IF
THE DOCUMENT WAS NEGOTIABLE, A COURT MAY NOT ORDER DELIVERY OF THE GOODS
OR  ISSUANCE  OF  A  SUBSTITUTE  DOCUMENT WITHOUT THE CLAIMANT'S POSTING
SECURITY UNLESS IT FINDS THAT ANY PERSON  THAT  MAY  SUFFER  LOSS  AS  A
RESULT  OF  NONSURRENDER  OF  POSSESSION  OR  CONTROL OF THE DOCUMENT IS
ADEQUATELY PROTECTED AGAINST THE LOSS. IF THE  DOCUMENT  WAS  NONNEGOTI-
ABLE,  THE  COURT MAY REQUIRE SECURITY. THE COURT MAY ALSO ORDER PAYMENT
OF THE BAILEE'S REASONABLE COSTS AND ATTORNEY'S FEES IN ANY ACTION UNDER
THIS SUBSECTION.
  (B) A BAILEE THAT, WITHOUT A COURT ORDER, DELIVERS GOODS TO  A  PERSON
CLAIMING  UNDER  A MISSING NEGOTIABLE DOCUMENT OF TITLE IS LIABLE TO ANY
PERSON INJURED THEREBY. IF THE DELIVERY IS NOT IN GOOD FAITH, THE BAILEE
IS LIABLE FOR CONVERSION. DELIVERY IN GOOD FAITH IS  NOT  CONVERSION  IF
THE CLAIMANT POSTS SECURITY WITH THE BAILEE IN AN AMOUNT AT LEAST DOUBLE
THE  VALUE  OF  THE GOODS AT THE TIME OF POSTING TO INDEMNIFY ANY PERSON
INJURED BY THE DELIVERY WHICH FILES A NOTICE OF CLAIM  WITHIN  ONE  YEAR
AFTER THE DELIVERY.
SECTION 7--602. JUDICIAL  PROCESS  AGAINST  GOODS  COVERED BY NEGOTIABLE
                 DOCUMENT OF TITLE.
  UNLESS A DOCUMENT OF TITLE WAS ORIGINALLY ISSUED UPON DELIVERY OF  THE
GOODS  BY  A  PERSON  THAT DID NOT HAVE POWER TO DISPOSE OF THEM, A LIEN

S. 7816                            30

DOES NOT ATTACH BY VIRTUE OF  ANY  JUDICIAL  PROCESS  TO  GOODS  IN  THE
POSSESSION  OF  A  BAILEE  FOR  WHICH  A NEGOTIABLE DOCUMENT OF TITLE IS
OUTSTANDING UNLESS POSSESSION  OR  CONTROL  OF  THE  DOCUMENT  IS  FIRST
SURRENDERED TO THE BAILEE OR THE DOCUMENT'S NEGOTIATION IS ENJOINED. THE
BAILEE  MAY  NOT  BE  COMPELLED TO DELIVER THE GOODS PURSUANT TO PROCESS
UNTIL POSSESSION OR CONTROL OF THE DOCUMENT IS SURRENDERED TO THE BAILEE
OR TO THE COURT. A PURCHASER OF THE DOCUMENT FOR VALUE WITHOUT NOTICE OF
THE PROCESS OR INJUNCTION TAKES FREE OF THE  LIEN  IMPOSED  BY  JUDICIAL
PROCESS.
SECTION 7--603. CONFLICTING CLAIMS; INTERPLEADER.
  IF  MORE  THAN  ONE PERSON CLAIMS TITLE TO OR POSSESSION OF THE GOODS,
THE BAILEE IS EXCUSED FROM DELIVERY UNTIL THE BAILEE  HAS  A  REASONABLE
TIME  TO  ASCERTAIN THE VALIDITY OF THE ADVERSE CLAIMS OR TO COMMENCE AN
ACTION FOR INTERPLEADER. THE BAILEE MAY ASSERT AN INTERPLEADER EITHER IN
DEFENDING AN ACTION FOR NONDELIVERY OF THE GOODS OR BY ORIGINAL ACTION.
  S 24. Section 8--103 of the uniform  commercial  code  is  amended  by
adding two new subsections (g) and (h) to read as follows:
  (G)  A  DOCUMENT  OF  TITLE  IS  NOT  A FINANCIAL ASSET UNLESS SECTION
8--102(A)(9)(III) APPLIES.
  (H) AN OBLIGATION, SHARE, PARTICIPATION, OR INTEREST DOES NOT  SATISFY
SECTION  8--102(A)(13)(II) OR 8--102(A)(15)(I) MERELY BECAUSE THE ISSUER
OR A PERSON ACTING ON ITS BEHALF:
  (1) MAINTAINS RECORDS OF THE OWNER THEREOF FOR A  PURPOSE  OTHER  THAN
REGISTRATION OF TRANSFER; OR
  (2)  COULD,  BUT DOES NOT, MAINTAIN BOOKS FOR THE PURPOSE OF REGISTRA-
TION OF TRANSFER.
  S 25. Section 8--106 of the uniform  commercial  code  is  amended  by
adding two new subsections (h) and (i) to read as follows:
  (H) UNDER SUBSECTION (C)(2) OR (D)(2), AUTHENTICATION OF A RECORD DOES
NOT  IMPOSE  UPON  THE  ISSUER  OR  SECURITIES INTERMEDIARY ANY DUTY NOT
EXPRESSLY AGREED TO BY THE ISSUER  OR  SECURITIES  INTERMEDIARY  IN  THE
RECORD.
  (I)  A  PURCHASER HAS "CONTROL" UNDER SUBSECTION (C)(2) OR (D)(2) EVEN
IF ANY DUTY OF THE ISSUER OR THE SECURITIES INTERMEDIARY TO COMPLY  WITH
INSTRUCTIONS  OR  ENTITLEMENT  ORDERS  ORIGINATED  BY  THE  PURCHASER IS
SUBJECT TO ANY CONDITION OR CONDITIONS (OTHER THAN  FURTHER  CONSENT  BY
THE REGISTERED OWNER OR THE ENTITLEMENT HOLDER).
  S 26. Section 9--102 of the uniform commercial code, as added by chap-
ter 84 of the laws of 2001, is amended to read as follows:
Section 9--102. Definitions And Index of Definitions.
  (a) Article 9 definitions. In this article:
       (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", 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

S. 7816                            31

           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  health-care-insurance
           receivables.  The term does not include (i) rights to payment
           evidenced by chattel paper or an instrument, (ii)  commercial
           tort  claims, (iii) deposit accounts, (iv) investment proper-
           ty, (v) letter-of-credit rights or letters of credit, or (vi)
           rights to payment for money or funds advanced or sold,  other
           than rights arising out of the use of a credit or charge card
           or information contained on or for use with the card.
       (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 instrument constitutes part of chattel paper.
       (4) "Accounting", except as used in  "accounting  for",  means  a
           record:
           (A) authenticated 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; and
           (C) identifying the components of the obligations in  reason-
               able detail.
       (5) "Agricultural lien" means an interest[, other than a security
           interest,] in farm products:
           (A) which  secures  payment  or  performance of an obligation
               for:
               (i) goods or services  furnished  in  connection  with  a
                   debtor's farming operation; or
               (ii) rent   on  real  property  leased  by  a  debtor  in
                    connection with its farming operation; and
           (B) which is created by statute in favor of a person that:
               (i) in the ordinary  course  of  its  business  furnished
                   goods  or  services  to a debtor in connection with a
                   debtor's farming operation; or
               (ii) leased real property to a debtor in connection  with
                    the debtor's farming operation; and
           (C) whose  effectiveness  does  not  depend  on  the person's
               possession of the personal property.
       (6) "As-extracted collateral" means:
           (A) oil, gas, or other minerals that are subject to a securi-
               ty interest that:
               (i) is created by a debtor  having  an  interest  in  the
                   minerals before extraction; and
               (ii) attaches to the minerals as extracted; or
           (B) accounts arising out of the sale at the wellhead or mine-
               head  of  oil, gas, or other minerals in which the debtor
               had an interest before extraction.
       (7) "Authenticate" means:
           (A) to sign; or
           (B) [to execute or otherwise adopt a symbol,  or  encrypt  or
               similarly  process a record in whole or in part, with the
               present intent of the authenticating person  to  identify
               the  person  and  adopt  or accept a record] WITH PRESENT
               INTENT TO ADOPT OR ACCEPT  A  RECORD,  TO  ATTACH  TO  OR
               LOGICALLY  ASSOCIATE WITH THE RECORD AN ELECTRONIC SOUND,
               SYMBOL, OR PROCESS.

S. 7816                            32

       (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, depos-
           it accounts, or the like.
       (10) "Certificate  of  title"  means  a certificate of title with
            respect to which a statute provides for the security  inter-
            est  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.   SUCH TERM INCLUDES  ANOTHER  RECORD  MAIN-
            TAINED  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) "Chattel paper" means a record or records that evidence both
            a monetary obligation and a security  interest  in  specific
            goods,  a  security  interest in specific goods and software
            used in the goods, a security interest in specific goods and
            license of software used in the goods, a lease  of  specific
            goods,  or a lease of specific goods and license of software
            used in the goods. In this paragraph, "monetary  obligation"
            means  a  monetary  obligation  secured by the goods or owed
            under a lease of the goods and  includes  a  monetary  obli-
            gation  with respect to software used in the goods. The term
            does not include (i) charters or other  contracts  involving
            the  use or hire of a vessel or (ii) records 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. If a transaction is evidenced by records that  include
            an instrument or series of instruments, the group of records
            taken together constitutes chattel paper.
       (11-a) "Check" means (i) a draft, other than a documentary draft,
              payable  on demand and drawn on a bank or (ii) a cashier's
              check or a teller's check. An instrument may  be  a  check
              even  though  it is described on its face by another term,
              such as "money order". An instrument that (i) meets all of
              the requirements stated in Article 3 of this chapter to be
              a negotiable instrument other  than  stating  that  it  is
              payable to order or bearer and (ii) otherwise qualifies as
              a check is a negotiable instrument and a check.
       (12) "Collateral" means the property subject to a security inter-
            est or agricultural lien. The term includes:
           (A) proceeds to which a security interest attaches;
           (B) accounts, chattel paper, payment intangibles, and promis-
               sory notes that have been sold; and
           (C) goods that are the subject of a consignment.
       (13) "Commercial  tort  claim" means a claim arising in tort with
            respect to which:
           (A) the claimant is an organization; or
           (B) the claimant is an individual and the claim:
               (i) arose in the course of  the  claimant's  business  or
                   profession; and

S. 7816                            33

               (ii) 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 commod-
            ity  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:
           (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; or
           (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:
           (A) is  registered  as  a  futures  commission merchant under
               federal commodities law; or
           (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:
           (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; or
           (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:
           (A) the merchant:
               (i) deals  in  goods of that kind under a name other than
                   the name of the person making delivery;
               (ii) is not an auctioneer; and
               (iii) is 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 $1,000 or more at the time of delivery;
           (C) the goods  are  not  consumer  goods  immediately  before
               delivery; and
           (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:

S. 7816                            34

           (A) an   individual   incurs   an  obligation  primarily  for
               personal, family, or household purposes; and
           (B) a  security  interest in consumer goods secures the obli-
               gation.
       (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:
           (A) identifies, by its file  number,  the  initial  financing
               statement to which it relates; and
           (B) indicates  that  it  is  a continuation statement for, or
               that it is filed to continue the  effectiveness  of,  the
               identified financing statement.
       (27-a) "Cooperative  addendum"  means  a  record  that  satisfies
              Section 9--502(e).
       (27-b) "Cooperative interest" means an ownership  interest  in  a
              cooperative organization, which interest, when created, is
              coupled  with possessory rights of a proprietary nature in
              identified physical space  belonging  to  the  cooperative
              organization.  A  subsequent termination of the possessory
              rights shall not cause  an  ownership  interest  to  cease
              being a cooperative interest.
       (27-c) "Cooperative organization" means an organization which has
              as  its  principal  asset  an interest in real property in
              this state and in which organization all ownership  inter-
              ests are cooperative interests.
       (27-d) "Cooperative organization security interest" means a secu-
              rity  interest  which  is in a cooperative interest, is in
              favor of the cooperative organization, is created  by  the
              cooperative  record, and secures only obligations incident
              to ownership of that cooperative interest.
       (27-e) "Cooperative record"  means  those  records  which,  as  a
              whole, evidence cooperative interests and define the mutu-
              al rights and obligations of the owners of the cooperative
              interests and the cooperative organization.
       (27-f) "Cooperative  unit"  means  the  physical space associated
              with a cooperative interest.
       (28) "Debtor" means:
           (A) a person having an interest, other than a security inter-
               est 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; or
           (C) a consignee.
       (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.

S. 7816                            35

       (30) "Document"  means  a  document  of title or a receipt of the
            type described in Section 7--201[(2)] (B).
       (31) "Electronic  chattel paper" means chattel paper evidenced by
            a record or records consisting of information stored  in  an
            electronic medium.
       (32) "Encumbrance"  means a right, other than an ownership inter-
            est, 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:
           (A) crops grown, growing, or to be grown, including:
               (i) crops produced on trees, vines, and bushes; and
               (ii) aquatic goods produced in aquacultural operations;
           (B) livestock,  born  or  unborn,  including  aquatic   goods
               produced in aquacultural operations;
           (C) supplies used or produced in a farming operation; or
           (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 Section 9--519(a).
       (37) "Filing office" means an office designated in Section 9--501
            as the place to file a financing statement.
       (38) "Filing-office  rule"  means  a  rule  adopted  pursuant  to
            Section 9--526.
       (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 satis-
            fying  Section  9--502(a)  and  (b).  The  term includes the
            filing of a financing statement covering goods of  a  trans-
            mitting 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) "Good faith" means honesty in fact  and  the  observance  of
            reasonable commercial standards of fair dealing.
       (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)

S. 7816                            36

            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  consists  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 govern-
            ment of the United States, a state, or  a  foreign  country.
            The  term  includes an organization having a separate corpo-
            rate 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  trans-
            ferred by delivery with any necessary indorsement or assign-
            ment.  The  term  does  not include (i) investment property,
            (ii) letters of credit, or (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.
       (48) "Inventory" means goods, other than farm products, which:
           (A) are leased by a person as lessor;
           (B) are held by a person for sale or lease or to be furnished
               under a contract of service;
           (C) are furnished by a person under a contract of service; or
           (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) "Lien creditor" means:

S. 7816                            37

           (A) a  creditor  that  has  acquired  a  lien on the property
               involved by attachment, levy, or the like;
           (B) an  assignee  for  benefit  of creditors from the time of
               assignment;
           (C) a trustee in bankruptcy from the date of  the  filing  of
               the petition; or
           (D) a receiver in equity from the time of appointment.
       (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 founda-
            tion  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 manufac-
            turer  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:
           (A) that  creates  a  purchase-money  security  interest in a
               manufactured home, other than a manufactured home held as
               inventory; or
           (B) 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 Section 9--203(d) 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 trans-
            feree.  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 colla-
            teral to secure payment or other performance  of  the  obli-
            gation,  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 Section 9--310(c),
            means a person that, as  debtor,  entered  into  a  security
            agreement  to  which  a  new  debtor  has become bound under
            Section 9--203(d).
       (61) "Payment intangible" means a general intangible under  which
            the  account  debtor's  principal  obligation  is a monetary
            obligation.

S. 7816                            38

       (62) "Person related to", with respect to an individual, means:
           (A) the spouse of the individual;
           (B) a  brother,  brother-in-law,  sister, or sister-in-law of
               the individual;
           (C) an ancestor or lineal descendant of the individual or the
               individual's spouse; or
           (D) any other relative, by blood or marriage, of the individ-
               ual or the individual's spouse who shares the  same  home
               with the individual.
       (63) "Person related to", with respect to an organization, means:
           (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 subpara-
               graph (A);
           (D) the spouse of an  individual  described  in  subparagraph
               (A), (B), or (C); or
           (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 Section 9--609(b), means 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;
           (C) rights arising out 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; or
           (E) to  the  extent  of  the  value  of collateral and to the
               extent payable to the debtor or the secured party, insur-
               ance 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 prom-
            ise 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 authenticated by a  secured  party
            which includes the terms on which the secured party is will-
            ing  to accept collateral in full or partial satisfaction of
            the obligation  it  secures  pursuant  to  Sections  9--620,
            9--621, and 9--622.
       (66-a) "Prove" with respect to a fact means to meet the burden of
              establishing the fact (Section 1-201(8)).
       (67) "Public-finance  transaction" means a secured transaction in
            connection with which:
           (A) debt securities are issued;
           (B) all or a portion of the securities issued have an initial
               stated maturity of at least 20 years; and

S. 7816                            39

           (C) the debtor, obligor, secured  party,  account  debtor  or
               other  person obligated on collateral, assignor or assig-
               nee 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:
           (A) A RECORD CONSISTING OF THE RECORD INITIALLY FILED WITH OR
               ISSUED BY A STATE OR THE UNITED STATES TO FORM OR  ORGAN-
               IZE  AN  ORGANIZATION AND ANY RECORD FILED WITH OR ISSUED
               BY THE  STATE  OR  THE  UNITED  STATES  WHICH  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  WHICH  AMENDS  OR  RESTATES THE INITIAL
               RECORD, IF A STATUTE  OF  THE  STATE  GOVERNING  BUSINESS
               TRUSTS  REQUIRES THAT THE RECORD BE FILED WITH THE STATE;
               OR
           (C) A RECORD CONSISTING OF LEGISLATION ENACTED BY THE  LEGIS-
               LATURE  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.
       [(69)]  (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  retrieva-
            ble in perceivable form.
       [(70)] (71)   "Registered  organization"  means  an  organization
            FORMED OR organized solely under the law of a  single  state
            or  the  United  States  [and  as  to which the state or the
            United States must maintain  a  public  record  showing  the
            organization  to  have  been  organized]  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.
       [(71)]  (72) "Secondary  obligor"  means an obligor to the extent
            that:
           (A) the obligor's obligation is secondary; or
           (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.
       [(72)] (73) "Secured party" means:
           (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;

S. 7816                            40

           (B) a person that holds an agricultural lien;
           (C) a consignor;
           (D) a person to which accounts, chattel paper, payment intan-
               gibles, 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; or
           (F) a person that holds a  security  interest  arising  under
               Section 2--401, 2--505, 2--711(3), 2-A-508(5), 4--210, or
               5--118.
       [(73)] (74)  "Security agreement" means an agreement that creates
            or provides for a security interest.  A  cooperative  record
            that  provides  that the owner of a cooperative interest has
            an obligation to pay amounts to the cooperative organization
            incident to ownership of that cooperative interest and which
            states that the cooperative organization has a direct remedy
            against that cooperative interest if such  amounts  are  not
            paid  is  a security agreement creating a cooperative organ-
            ization security interest.
       [(74)] (75) "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 that it would have  been  received  if  properly
               sent under subparagraph (A).
       [(75)] (76)  "Software" means a computer program and any support-
            ing information provided in connection  with  a  transaction
            relating to the program. The term does not include a comput-
            er program that is included in the definition of goods.
       [(76)] (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.
       [(77)]  (78) "Supporting  obligation"  means  a  letter-of-credit
            right  or  secondary obligation that supports the payment or
            performance of an account,  chattel  paper,  a  document,  a
            general intangible, an instrument, or investment property.
       [(78)] (79)   "Tangible   chattel   paper"  means  chattel  paper
            evidenced by a record or records consisting  of  information
            that is inscribed on a tangible medium.
       [(79)] (80)  "Termination  statement"  means  an  amendment  of a
            financing statement which:
           (A) identifies, by its file  number,  the  initial  financing
               statement to which it relates; and
           (B) indicates  either  that  it is a termination statement or
               that the identified  financing  statement  is  no  longer
               effective.
       [(80)] (81)  "Transmitting  utility"  means  a  person  primarily
            engaged in the business of:
           (A) operating a railroad, subway, street railway, or  trolley
               bus;
           (B) transmitting communications electrically, electromagneti-
               cally, or by light;

S. 7816                            41

           (C) transmitting goods by pipeline or sewer; or
           (D) transmitting  or  producing and transmitting electricity,
               steam, gas, or water.
  (b) Definitions in other articles. The following definitions in  other
articles apply to this article:

     "Applicant"                                  Section 5--102.
     "Beneficiary"                                Section 5--102.
     "Broker"                                     Section 8--102.
     "Certificated security"                      Section 8--102.
     "Clearing corporation"                       Section 8--102.
     "Contract for sale"                          Section 2--106.
     "CONTROL" (WITH RESPECT TO A DOCUMENT        SECTION 7--106.
                 OF TITLE)
     "Customer"                                   Section 4--104.
     "Entitlement holder"                         Section 8--102.
     "Financial asset"                            Section 8--102.
     "Holder in due course"                       Section 3--302.
     "Issuer" (with respect to a letter of
        credit or letter-of-credit right)         Section 5--102.
     "Issuer" (with respect to a security)        Section 8--201.
     "ISSUER" (WITH RESPECT TO DOCUMENT OF TITLE) SECTION 7--102.
     "Lease"                                      Section 2-A-103.
     "Lease agreement"                            Section 2-A-103.
     "Lease contract"                             Section 2-A-103.
     "Leasehold interest"                         Section 2-A-103.
     "Lessee"                                     Section 2-A-103.
     "Lessee in ordinary course of business"      Section 2-A-103.
     "Lessor"                                     Section 2-A-103.
     "Lessor's residual interest"                 Section 2-A-103.
     "Letter of credit"                           Section 5--102.
     "Merchant"                                   Section 2--104.
     "Negotiable instrument"                      Section 3--104.
     "Nominated person"                           Section 5--102.
     "Note"                                       Section 3--104.
     "Proceeds of a letter of credit"             Section 5--114.
     "PROVE"                                      SECTION 4-A-105.
     "Sale"                                       Section 2--106.
     "Securities account"                         Section 8--501.
     "Securities intermediary"                    Section 8--102.
     "Security"                                   Section 8--102.
     "Security certificate"                       Section 8--102.
     "Security entitlement"                       Section 8--102.
     "Uncertificated security"                    Section 8--102.
  (c) Article  1  definitions and principles. Article 1 contains general
definitions and principles of construction and interpretation applicable
throughout this article.
  S 27. Section 9--104 of the uniform commercial code, as added by chap-
ter 84 of the laws of 2001, is amended to read as follows:
Section 9--104. Control of Deposit Account.
  (a) Requirements for control. A secured party has control of a deposit
account if:
       (1) the secured party is the bank with which the deposit  account
           is maintained;
       (2) the debtor, secured party, and bank have agreed in an authen-
           ticated  record  that  the bank will comply with instructions

S. 7816                            42

           originated by the secured party directing disposition of  the
           funds  in  the deposit account without further consent by the
           debtor; [or]
       (3) the secured party becomes the bank's customer with respect to
           the deposit account;
       (4)  THE  NAME  ON THE DEPOSIT ACCOUNT IS THE NAME OF THE SECURED
           PARTY OR INDICATES THAT THE  SECURED  PARTY  HAS  A  SECURITY
           INTEREST IN THE DEPOSIT ACCOUNT; OR
       (5)  ANOTHER  PERSON HAS CONTROL OF THE DEPOSIT ACCOUNT ON BEHALF
           OF THE SECURED PARTY OR, HAVING PREVIOUSLY  ACQUIRED  CONTROL
           OF  THE  DEPOSIT ACCOUNT, ACKNOWLEDGES THAT IT HAS CONTROL ON
           BEHALF OF THE SECURED PARTY.
  (b) Debtor's right to direct disposition. A  secured  party  that  has
satisfied  subsection  (a)  has  control, even if the debtor retains the
right to direct the disposition of funds from the deposit account.
  (C) NO IMPLIED DUTIES OF BANK. THE AUTHENTICATION OF A RECORD  BY  THE
BANK  UNDER SUBSECTION (A)(2) DOES NOT IMPOSE UPON THE BANK ANY DUTY NOT
EXPRESSLY AGREED TO BY THE BANK IN THE RECORD. THE NAMING OF THE DEPOSIT
ACCOUNT IN THE NAME OF THE SECURED PARTY OR WITH AN INDICATION THAT  THE
SECURED  PARTY  HAS  A  SECURITY  INTEREST  IN THE DEPOSIT ACCOUNT UNDER
SUBSECTION (A)(4) DOES NOT IMPOSE UPON THE BANK ANY DUTY  NOT  EXPRESSLY
AGREED TO BY THE BANK.
  (D)  CONDITIONS  NOT  RELEVANT.  A  SECURED  PARTY  HAS  CONTROL UNDER
SUBSECTION  (A)(2)  EVEN  IF  ANY  DUTY  OF  THE  BANK  TO  COMPLY  WITH
INSTRUCTIONS  ORIGINATED  BY  THE SECURED PARTY DIRECTING DISPOSITION OF
THE FUNDS IN THE DEPOSIT ACCOUNT IS SUBJECT TO ANY CONDITION  OR  CONDI-
TIONS (OTHER THAN FURTHER CONSENT BY THE DEBTOR).
  (E)  NO  INFERENCES.  THE  PROCEDURES  AND  REQUIREMENTS OF SUBSECTION
(A)(4) AVAILABLE TO OBTAIN CONTROL SHALL NOT BE USED IN INTERPRETING THE
SUFFICIENCY OF A SECURED PARTY'S  COMPLIANCE  WITH  THE  PROCEDURES  AND
REQUIREMENTS  OF  SUBSECTION (A)(1), (A)(2) OR (A)(3) TO OBTAIN CONTROL.
THE PROVISIONS OF SUBSECTION (A)(4) SHALL CREATE NO INFERENCE  REGARDING
THE  REQUIREMENTS  FOR  COMPLIANCE  WITH  SUBSECTION  (A)(1),  (A)(2) OR
(A)(3).
  S 28. Subparagraph (D) of paragraph 3 of  subsection  (b)  of  section
9--203  of  the  uniform  commercial code, as added by chapter 84 of the
laws of 2001, is amended to read as follows:
           (D) the collateral is deposit  accounts,  electronic  chattel
               paper, investment property, [or] letter-of-credit rights,
               OR  ELECTRONIC  DOCUMENTS,  and  the  secured  party  has
               control under Section 7--106, 9--104, 9--105, 9--106,  or
               9--107 pursuant to the debtor's security agreement.
  S 29. Subsection (c) of section 9--207 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:
  (c) Duties and rights when secured party  in  possession  or  control.
Except  as  otherwise provided in subsection (d), a secured party having
possession of collateral or control of collateral under Section  7--106,
9--104, 9--105, 9--106, or 9--107:
       (1) may hold as additional security any proceeds, except money or
           funds, received from the collateral;
       (2) shall  apply  money  or funds received from the collateral to
           reduce the secured obligation, unless remitted to the debtor;
           and
       (3) may create a security interest in the collateral.

S. 7816                            43

  S 30. Paragraphs 4 and 5 of subsection (b) of section  9--208  of  the
uniform commercial code, as added by chapter 84 of the laws of 2001, are
amended and a new paragraph 6 is added to read as follows:
       (4) a  secured  party having control of investment property under
           Section 8--106(d)(2) or 9--106(b) shall send to  the  securi-
           ties  intermediary  or  commodity intermediary with which the
           security entitlement or commodity contract is  maintained  an
           authenticated  record  that  releases the securities interme-
           diary or commodity intermediary from any  further  obligation
           to comply with entitlement orders or directions originated by
           the secured party; [and]
       (5) a  secured  party  having control of a letter-of-credit right
           under Section 9--107 shall send  to  each  person  having  an
           unfulfilled  obligation  to  pay  or  deliver proceeds of the
           letter-of-credit  to  the  secured  party  an   authenticated
           release  from  any  further  obligation  to  pay  or  deliver
           proceeds of the letter-of-credit to the secured party; AND
       (6) A SECURED PARTY HAVING  CONTROL  OF  AN  ELECTRONIC  DOCUMENT
           SHALL:
           (A)  GIVE CONTROL OF THE ELECTRONIC DOCUMENT TO THE DEBTOR OR
               ITS DESIGNATED CUSTODIAN;
           (B) IF THE DEBTOR DESIGNATES A CUSTODIAN THAT IS  THE  DESIG-
               NATED  CUSTODIAN WITH WHICH THE AUTHORITATIVE COPY OF THE
               ELECTRONIC DOCUMENT IS MAINTAINED FOR THE SECURED  PARTY,
               COMMUNICATE  TO  THE  CUSTODIAN  AN  AUTHENTICATED RECORD
               RELEASING THE DESIGNATED CUSTODIAN FROM ANY FURTHER OBLI-
               GATION TO COMPLY  WITH  INSTRUCTIONS  ORIGINATED  BY  THE
               SECURED  PARTY  AND  INSTRUCTING  THE CUSTODIAN TO COMPLY
               WITH INSTRUCTIONS ORIGINATED BY THE DEBTOR; AND
           (C) TAKE APPROPRIATE ACTION  TO  ENABLE  THE  DEBTOR  OR  ITS
               DESIGNATED  CUSTODIAN  TO  MAKE COPIES OF OR REVISIONS TO
               THE AUTHORITATIVE COPY WHICH ADD OR CHANGE AN  IDENTIFIED
               ASSIGNEE OF THE AUTHORITATIVE COPY WITHOUT THE CONSENT OF
               THE SECURED PARTY.
  S  31.  Subsection  (c) of section 9--301 of of the uniform commercial
code, as added by chapter 84 of the laws of 2001, is amended to read  as
follows:
  (c) Except  as otherwise provided in [paragraph] SUBSECTION (d), while
TANGIBLE negotiable documents, goods, instruments,  money,  or  tangible
chattel paper is located in a jurisdiction, the local law of that juris-
diction governs:
       (1) perfection  of  a  security interest in the goods by filing a
           fixture filing;
       (2) perfection of a security interest in timber to be cut; and
       (3) the effect of perfection or nonperfection and the priority of
           a nonpossessory security interest in the collateral.
  S 32. Paragraph 1 of subsection (b) of Section 9--304 of  the  uniform
commercial  code, as added by chapter 84 of the laws of 2001, is amended
to read as follows:
       (1) If an agreement between the bank and [the debtor] ITS CUSTOM-
           ER governing the deposit account expressly  provides  that  a
           particular   jurisdiction  is  the  bank's  jurisdiction  for
           purposes of this part, this article, or  this  chapter,  that
           jurisdiction is the bank's jurisdiction.

S. 7816                            44

  S  33.  Paragraph 2 of subsection (f) of section 9--307 of the uniform
commercial code, as added by chapter 84 of the laws of 2001, is  amended
to read as follows:
       (2) in  the  state  that  the registered organization, branch, or
           agency designates, if the law of the United States authorizes
           the registered organization, branch, or agency  to  designate
           its  state  of  location,  INCLUDING  BY DESIGNATING ITS MAIN
           OFFICE, HOME OFFICE, OR OTHER COMPARABLE OFFICE; or
  S 34. Subsections 12 and 13 of section 9--309 of the  uniform  commer-
cial code, as added by chapter 84 of the laws of 2001, are amended and a
new subsection 14 is added to read as follows:
  (12) an  assignment for the benefit of all creditors of the transferor
and subsequent transfers by the assignee thereunder; [and]
  (13) a security interest created by  an  assignment  of  a  beneficial
interest in a decedent's estate; AND
  (14)  A SALE BY AN INDIVIDUAL OF AN ACCOUNT THAT IS A RIGHT TO PAYMENT
OF WINNINGS IN A LOTTERY OR OTHER GAME OF CHANCE.
  S 35. Subsection (b) of section 9--310 of the uniform commercial code,
as added by chapter 84 of the laws of   2001,  is  amended  to  read  as
follows:
  (b) Exceptions: filing not necessary. Except as provided in subsection
(d),  the  filing of a financing statement is not necessary to perfect a
security interest:
       (1) that is perfected under Section 9--308(d), (e), (f), or (g);
       (2) that is perfected under Section 9--309 when it attaches;
       (3) in property subject  to  a  statute,  regulation,  or  treaty
           described in Section 9--311(a);
       (4) in  goods  in possession of a bailee which is perfected under
           Section 9--312(d)(1) or (2);
       (5) in certificated securities, documents, goods, or  instruments
           which  is  perfected  without  filing, CONTROL, or possession
           under Section 9--312(e), (f), or (g);
       (6) in collateral in the secured party's possession under Section
           9--313;
       (7) in a certificated security which is perfected by delivery  of
           the  security  certificate to the secured party under Section
           9--313;
       (8) in deposit accounts,  electronic  chattel  paper,  ELECTRONIC
           DOCUMENTS,  investment  property,  or letter-of-credit rights
           which is perfected by control under Section 9--314;
       (9) in proceeds which is perfected under Section 9--315;
       (10) that is perfected under Section 9--316; or
       (11) that is a cooperative organization security interest.
  S 36. Paragraph 3 of subsection (a) of section 9--311 of  the  uniform
commercial  code, as added by chapter 84 of the laws of 2001, is amended
to read as follows:
           (3) a [certificate-of-title] statute of another  jurisdiction
               which provides for a security interest to be indicated on
               [the]  A certificate OF TITLE as a condition or result of
               the  security  interest's  obtaining  priority  over  the
               rights of a lien creditor with respect to the property.
  S 37. Subsection (e) of section 9--312 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:
  (e) Temporary perfection: new value. A security  interest  in  certif-
icated  securities,  negotiable  documents,  or instruments is perfected

S. 7816                            45

without filing or the taking of possession OR CONTROL for a period of 20
days from the time it attaches to the extent  that  it  arises  for  new
value given under an authenticated security agreement.
  S 38. Subsection (a) of section 9--313 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:
  (a) Perfection by possession or delivery. Except as otherwise provided
in subsection (b), a secured party may perfect a  security  interest  in
TANGIBLE  negotiable  documents,  goods, instruments, money, or tangible
chattel paper by taking possession of the collateral.  A  secured  party
may  perfect  a  security  interest in certificated securities by taking
delivery of the certificated securities under Section 8--301.
  S 39. Subsections (a) and (b) of section 9--314 of the uniform commer-
cial code, as added by chapter 84 of the laws of 2001,  are  amended  to
read as follows:
  (a) Perfection by control. A security interest in investment property,
deposit  accounts,  letter-of-credit  rights,  [or]  electronic  chattel
paper, OR ELECTRONIC DOCUMENTS may be perfected by control of the colla-
teral under Section 7--106, 9--104, 9--105, 9--106, or 9--107.
  (b) Specified collateral: time of perfection by control;  continuation
of perfection. A security interest in deposit accounts, electronic chat-
tel  paper,  [or]  letter-of-credit  rights,  OR ELECTRONIC DOCUMENTS is
perfected by control under Section 7--106,  9--104,  9--105,  or  9--107
when  the secured party obtains control and remains perfected by control
only while the secured party retains control.
  S 40. The section heading of section 9--316 of the uniform  commercial
code, as added by chapter 84 of the laws of 2001, is amended and two new
subsections (h) and (i) are added to read as follows:
Section 9--316. [Continued  Perfection  of  Security Interest Following]
                  EFFECT OF Change in Governing Law.
  (H) EFFECT ON FILED FINANCING STATEMENT OF CHANGE  IN  GOVERNING  LAW.
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 SECTION 9--301(A) OR
           9--305(C) IS EFFECTIVE TO PERFECT A SECURITY INTEREST IN  THE
           COLLATERAL  IF THE FINANCING STATEMENT WOULD HAVE BEEN EFFEC-
           TIVE 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 SECTION
           9--301(A) OR 9--305(C) 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) EFFECT OF CHANGE IN GOVERNING LAW ON  FINANCING  STATE-
           MENT  FILED AGAINST ORIGINAL DEBTOR. IF A FINANCING STATEMENT
           NAMING AN ORIGINAL DEBTOR IS FILED PURSUANT TO THE LAW OF THE
           JURISDICTION DESIGNATED IN SECTION 9--301(A) OR 9--305(C) AND

S. 7816                            46

           THE NEW  DEBTOR  IS  LOCATED  IN  ANOTHER  JURISDICTION,  THE
           FOLLOWING RULES APPLY:
       (1)  THE  FINANCING  STATEMENT IS EFFECTIVE TO PERFECT A SECURITY
           INTEREST IN  COLLATERAL  IN  WHICH  THE  NEW  DEBTOR  HAS  OR
           ACQUIRES  RIGHTS  BEFORE  OR WITHIN FOUR MONTHS AFTER THE NEW
           DEBTOR BECOMES BOUND UNDER SECTION 9--203(D), IF THE  FINANC-
           ING 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 THAT IS PERFECTED BY THE FINANCING STATE-
           MENT AND WHICH BECOMES PERFECTED UNDER THE LAW OF  THE  OTHER
           JURISDICTION BEFORE THE EARLIER OF THE EXPIRATION OF THE FOUR
           MONTH  PERIOD  OR THE TIME THE FINANCING STATEMENT WOULD HAVE
           BECOME INEFFECTIVE UNDER THE LAW OF THE  JURISDICTION  DESIG-
           NATED  IN  SECTION  9--301(A)  OR 9--305(C) 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.
  S 41. Subsections (b) and (d) of section 9--317 of the uniform commer-
cial  code,  as  added by chapter 84 of the laws of 2001, are amended to
read as follows:
  (b) Buyers that receive delivery.  Except  as  otherwise  provided  in
subsection (e), a buyer, other than a secured party, of tangible chattel
paper,  TANGIBLE  documents,  goods, instruments, or a [security certif-
icate] CERTIFICATED SECURITY takes free of a security interest or  agri-
cultural  lien  if  the  buyer  gives value and receives delivery of the
collateral without knowledge of the security  interest  or  agricultural
lien and before it is perfected.
  (d) Licensees and buyers of certain collateral. A licensee of a gener-
al intangible or a buyer, other than a secured party, of accounts, elec-
tronic  chattel  paper,  ELECTRONIC  DOCUMENTS,  general intangibles, or
investment property other than 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.
  S 42. Section 9--326 of the uniform commercial code, as added by chap-
ter 84 of the laws of 2001, is amended to read as follows:
Section 9--326. Priority of Security Interests Created by New Debtor.
  (a) Subordination  of security interest created by new debtor. Subject
to subsection (b), a security interest THAT IS created by a  new  debtor
[which  is] IN COLLATERAL IN WHICH THE NEW DEBTOR HAS OR ACQUIRES RIGHTS
AND IS perfected SOLELY by a filed financing statement that  [is  effec-
tive solely under Section 9--508 in collateral in which a new debtor has
or  acquires rights] WOULD BE INEFFECTIVE TO PERFECT THE SECURITY INTER-
EST BUT FOR THE APPLICATION OF SECTION 9--316(I)(1) OR 9--508 is  subor-
dinate  to a security interest in the same collateral which is perfected
other than by SUCH a filed financing statement [that is effective solely
under Section 9--508].
  (b) Priority under other provisions; multiple  original  debtors.  The
other  provisions  of this part determine the priority among conflicting
security interests in the same collateral perfected by  filed  financing
statements [that are effective solely under Section 9--508] DESCRIBED IN
SUBSECTION  (A).  However,  if  the  security  agreements to which a new
debtor became bound as debtor were not entered into by the same original

S. 7816                            47

debtor, the conflicting security interests rank according to priority in
time of the new debtor's having become bound.
  S 43. Section 9--338 of the uniform commercial code, as added by chap-
ter 84 of the laws of 2001, is amended to read as follows:
Section 9--338. Priority  of  Security  Interest  or  Agricultural  Lien
                  Perfected  by  Filed  Financing  Statement   Providing
                  Certain Incorrect Information.
  If  a  security  interest or agricultural lien is perfected by a filed
financing  statement  providing   information   described   in   Section
9--516(b)(5)  which  is incorrect at the time the financing statement is
filed:
  [(a)](1) the security interest or agricultural lien is subordinate  to
a  conflicting  perfected  security  interest  in  the collateral to the
extent that the holder of the conflicting security interest gives  value
in reasonable reliance upon the incorrect information; and
  [(b)](2) a  purchaser,  other  than a secured party, of the collateral
takes free of the security interest or agricultural lien to  the  extent
that,  in  reasonable  reliance  upon  the  incorrect  information,  the
purchaser gives value and, in the case of TANGIBLE chattel paper, TANGI-
BLE documents, goods, instruments, or a security  certificate,  receives
delivery of the collateral.
  S 44. Subsection (c) of section 9--502 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:
  (c) Record of mortgage as financing statement. A record of a  mortgage
is effective, from the date of recording, as a financing statement filed
as  a  fixture  filing or as a financing statement covering as-extracted
collateral or timber to be cut only if:
       (1) the record indicates the goods or accounts that it covers;
       (2) the goods are or are to become fixtures related to  the  real
           property described in the record or the collateral is related
           to  the  real  property described in the record and is as-ex-
           tracted collateral or timber to be cut;
       (3) the record satisfies the requirements for a financing  state-
           ment in this section [other than an indication], BUT:
           (A)  THE  RECORD  NEED NOT INDICATE that it is to be filed in
               the real property records; and
           (B) THE RECORD SUFFICIENTLY PROVIDES THE NAME OF A DEBTOR WHO
               IS AN INDIVIDUAL IF IT PROVIDES THE  INDIVIDUAL  NAME  OF
               THE  DEBTOR OR THE SURNAME AND FIRST PERSONAL NAME OF THE
               DEBTOR, EVEN IF THE  DEBTOR  IS  AN  INDIVIDUAL  TO  WHOM
               SECTION 9--503(A)(4) APPLIES; AND
       (4) the record is duly recorded.
  S 45. Section 9--503 of the uniform commercial code, as added by chap-
ter 84 of the laws of 2001, is amended to read as follows:
Section 9--503. Name of Debtor and Secured Party.
  (a) Sufficiency  of  debtor's name. A financing statement sufficiently
provides the name of the debtor:
       (1) EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH (3), if the  debtor
           is  a  registered organization OR THE COLLATERAL IS HELD IN A
           TRUST THAT IS A REGISTERED ORGANIZATION, only if the  financ-
           ing  statement  provides  the  name [of the debtor indicated]
           THAT IS STATED TO BE THE REGISTERED  ORGANIZATION'S  NAME  on
           the  public  ORGANIC  record [of] MOST RECENTLY FILED WITH OR
           ISSUED OR ENACTED BY the [debtor's] REGISTERED ORGANIZATION'S
           jurisdiction of organization which [shows the debtor to  have

S. 7816                            48

           been  organized]  PURPORTS  TO  STATE,  AMEND, OR RESTATE THE
           REGISTERED ORGANIZATION'S NAME;
       (2) SUBJECT  TO  SUBSECTION  (F),  if the [debtor is a decedent's
           estate] COLLATERAL IS  BEING  ADMINISTERED  BY  THE  PERSONAL
           REPRESENTATIVE OF A DECEDENT, only if the financing statement
           provides, AS THE NAME OF THE DEBTOR, the name of the decedent
           and, IN A SEPARATE PART OF THE FINANCING STATEMENT, indicates
           that  the  [debtor is an estate] COLLATERAL IS BEING ADMINIS-
           TERED BY A PERSONAL REPRESENTATIVE;
       (3) if the [debtor is a trust or a trustee acting with respect to
           property held in trust,  only  if  the  financing  statement]
           COLLATERAL IS HELD IN A TRUST THAT IS NOT A REGISTERED ORGAN-
           IZATION, ONLY IF THE FINANCING STATEMENT:
           (A) [provides the name specified for the trust in its organic
               documents  or, if no name is specified, provides the name
               of the settlor and additional information  sufficient  to
               distinguish  the  debtor  from other trusts having one or
               more of the same settlors; and] PROVIDES, AS THE NAME  OF
               THE DEBTOR:
               (I)  IF  THE ORGANIC RECORD OF THE TRUST SPECIFIES A NAME
                   FOR THE TRUST, THE NAME SPECIFIED; OR
               (II) IF THE ORGANIC RECORD OF THE TRUST DOES NOT  SPECIFY
                    A  NAME  FOR  THE  TRUST, THE NAME OF THE SETTLOR OR
                    TESTATOR; AND
           (B) [indicates, in the debtor's name or otherwise,  that  the
               debtor  is a trust or is a trustee acting with respect to
               property held in  trust;]  IN  A  SEPARATE  PART  OF  THE
               FINANCING STATEMENT:
               (I)  IF  THE NAME IS PROVIDED IN ACCORDANCE WITH SUBPARA-
                   GRAPH (A)(I), INDICATES THAT THE COLLATERAL  IS  HELD
                   IN A TRUST; OR
               (II)  IF THE NAME IS PROVIDED IN ACCORDANCE WITH SUBPARA-
                    GRAPH  (A)(II),  PROVIDES   ADDITIONAL   INFORMATION
                    SUFFICIENT  TO  DISTINGUISH  THE  TRUST  FROM  OTHER
                    TRUSTS HAVING ONE OR MORE OF THE  SAME  SETTLORS  OR
                    THE  SAME TESTATOR AND INDICATES THAT THE COLLATERAL
                    IS HELD IN A TRUST, UNLESS THE  ADDITIONAL  INFORMA-
                    TION SO INDICATES;
       (4)  SUBJECT TO SUBSECTION (G), IF THE DEBTOR IS AN INDIVIDUAL TO
           WHOM THIS STATE HAS ISSUED A DRIVER'S LICENSE  OR  NON-DRIVER
           PHOTO  IDENTIFICATION  CARD THAT HAS NOT EXPIRED, ONLY IF THE
           FINANCING STATEMENT PROVIDES THE NAME OF THE INDIVIDUAL WHICH
           IS INDICATED ON THE  DRIVER'S  LICENSE  OR  NON-DRIVER  PHOTO
           IDENTIFICATION CARD;
       (5) IF THE DEBTOR IS AN INDIVIDUAL TO WHOM PARAGRAPH (4) DOES NOT
           APPLY,  ONLY IF THE FINANCING STATEMENT PROVIDES THE INDIVID-
           UAL NAME OF THE DEBTOR OR THE SURNAME AND FIRST PERSONAL NAME
           OF THE DEBTOR; AND
       (6) in other cases:
           (A) if the debtor has a name,  only  if  [it]  THE  FINANCING
               STATEMENT  provides  the  [individual  or] organizational
               name of the debtor; and
           (B) if the debtor does not have a name, only if  it  provides
               the  names of the partners, members, associates, or other
               persons comprising the debtor, IN A MANNER THAT EACH NAME

S. 7816                            49

               PROVIDED WOULD BE SUFFICIENT IF THE PERSON NAMED WERE THE
               DEBTOR.
  (b) Additional  debtor-related information. A financing statement that
provides the name of the debtor in accordance with subsection (a) is not
rendered ineffective by the absence of:
       (1) a trade name or other name of the debtor; or
       (2) unless required under subsection [(a)(4)(B)] (A)(6)(B), names
           of partners, members, associates, or other persons comprising
           the debtor.
  (c) Debtor's trade  name  insufficient.  A  financing  statement  that
provides  only the debtor's trade name does not sufficiently provide the
name of the debtor.
  (d) Representative capacity. Failure to  indicate  the  representative
capacity  of  a  secured party or representative of a secured party does
not affect the sufficiency of a financing statement.
  (e) Multiple debtors and secured parties. A  financing  statement  may
provide  the  name of more than one debtor and the name of more than one
secured party.
  (F) NAME OF DECEDENT. THE NAME OF THE DECEDENT INDICATED ON THE  ORDER
APPOINTING  THE  PERSONAL  REPRESENTATIVE  OF THE DECEDENT ISSUED BY THE
COURT HAVING JURISDICTION OVER THE COLLATERAL IS SUFFICIENT AS THE "NAME
OF THE DECEDENT" UNDER SUBSECTION (A)(2).
  (G) MULTIPLE DRIVER'S LICENSES. IF THIS STATE HAS ISSUED TO  AN  INDI-
VIDUAL MORE THAN ONE DRIVER'S LICENSE OR NON-DRIVER PHOTO IDENTIFICATION
CARD  OF  A KIND DESCRIBED IN SUBSECTION (A)(4), THE ONE THAT WAS ISSUED
MOST RECENTLY IS THE ONE TO WHICH SUBSECTION (A)(4) REFERS.
  (H) DEFINITION. IN THIS SECTION, THE "NAME OF THE SETTLOR OR TESTATOR"
MEANS:
       (1) IF THE SETTLOR IS A REGISTERED ORGANIZATION, THE NAME THAT IS
           STATED TO BE THE SETTLOR'S NAME ON THE PUBLIC ORGANIC  RECORD
           MOST  RECENTLY  FILED  WITH  OR  ISSUED  OR  ENACTED  BY  THE
           SETTLOR'S JURISDICTION  OF  ORGANIZATION  WHICH  PURPORTS  TO
           STATE, AMEND, OR RESTATE THE SETTLOR'S NAME; OR
       (2) IN OTHER CASES, THE NAME OF THE SETTLOR OR TESTATOR INDICATED
           IN THE TRUST'S ORGANIC RECORD.
  S 46. Subsection (c) of section 9--507 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:
  (c) Change in debtor's name. If [a debtor so  changes  its]  THE  name
that  a filed financing statement PROVIDES FOR A DEBTOR becomes INSUFFI-
CIENT AS THE NAME OF THE DEBTOR UNDER  SECTION  9--503(A)  SO  THAT  THE
FINANCING STATEMENT BECOMES seriously misleading under Section 9--506:
       (1) the  financing  statement  is effective to perfect a security
           interest in collateral acquired  by  the  debtor  before,  or
           within four months after, the [change] FILED FINANCING STATE-
           MENT BECOMES SERIOUSLY MISLEADING; and
       (2) the financing statement is not effective to perfect a securi-
           ty  interest  in  collateral acquired by the debtor more than
           four months after  the  [change]  FILED  FINANCING  STATEMENT
           BECOMES  SERIOUSLY  MISLEADING,  unless  an  amendment to the
           financing statement which renders the financing statement not
           seriously misleading is filed within four months  after  [the
           change] THE FINANCING STATEMENT BECAME SERIOUSLY MISLEADING.
  S 47. Subsection (f) of section 9--515 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:

S. 7816                            50

  (f) Transmitting utility financing statement. If a debtor is a  trans-
mitting  utility  and  a filed INITIAL financing statement so indicates,
the financing statement is effective until a  termination  statement  is
filed.
  S 48. Subsection (b) of section 9--601 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:
  (b) Rights and duties of secured party in  possession  or  control.  A
secured party in possession of collateral or control of collateral under
Section  7--106,  9--104,  9--105,  9--106, or 9--107 has the rights and
duties provided in Section 9--207.
  S 49. Subparagraph (A) of paragraph 2 of  subsection  (b)  of  section
9--607  of  the  uniform  commercial code, as added by chapter 84 of the
laws of 2001, is amended to read as follows:
           (A) a default has occurred WITH  RESPECT  TO  THE  OBLIGATION
               SECURED BY THE MORTGAGE; and
  S 50. Subsection (c) of section 9--625 of the uniform commercial code,
as  added  by  chapter  84  of  the  laws of 2001, is amended to read as
follows:
  (c) Persons entitled to recover damages; statutory damages [in consum-
er-goods transaction] IF COLLATERAL IS CONSUMER GOODS. Except as  other-
wise provided in Section 9--628:
       (1) a  person that, at the time of the failure, was a debtor, was
           an obligor, or held a security interest in or other  lien  on
           the  collateral  may recover damages under subsection (b) for
           its loss; and
       (2) if the collateral is consumer goods,  a  person  that  was  a
           debtor  or  a  secondary  obligor at the time a secured party
           failed to comply with this part may recover for that  failure
           in  any  event  an  amount  not  less than the credit service
           charge plus 10 percent of the principal amount of  the  obli-
           gation  or the time-price differential plus 10 percent of the
           cash price.
  S 51. This act shall take effect immediately and shall apply to trans-
actions entered into on or after such date.

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