Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 2004, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 162-H.F.No. 1983
An act relating to commerce; enacting the revisions to
the general provisions of the Uniform Commercial Code
and enacting a revised Article 7 of the Uniform
Commercial Code recommended by the National Conference
of Commissioners on Uniform State Laws; making
conforming changes; amending provisions in Articles 3
and 4 of the Uniform Commercial Code relating to
warranties on remotely created items; amending
Minnesota Statutes 2002, sections 17.94; 84.787,
subdivision 9; 84.797, subdivision 10; 84.92,
subdivision 6; 86B.820, subdivision 12; 168A.01,
subdivision 20; 234.27; 325L.03; 325L.16; 336.2-103;
336.2-104; 336.2-202; 336.2-310; 336.2-323; 336.2-401;
336.2-503; 336.2-505; 336.2-506; 336.2-509; 336.2-605;
336.2-705; 336.2A-103; 336.2A-501; 336.2A-514;
336.2A-518; 336.2A-519; 336.2A-526; 336.2A-527;
336.2A-528; 336.4-210; 336.4A-105; 336.4A-106;
336.4A-204; 336.5-103; 336.8-102; 336.8-103;
336.9-102; 336.9-203; 336.9-207; 336.9-208; 336.9-301;
336.9-310; 336.9-312; 336.9-313; 336.9-314; 336.9-317;
336.9-338; 336.9-601; 513.33, subdivision 1; 514.963,
subdivision 9; 514.965, subdivision 10; 514.973;
Minnesota Statutes 2003 Supplement, sections
336.3-103; 336.3-416; 336.3-417; 336.4-104; 336.4-207;
336.4-208; proposing coding for new law in Minnesota
Statutes, chapter 336; repealing Minnesota Statutes
2002, sections 336.1-101; 336.1-102; 336.1-103;
336.1-104; 336.1-105; 336.1-106; 336.1-107; 336.1-108;
336.1-109; 336.1-110; 336.1-201; 336.1-202; 336.1-203;
336.1-204; 336.1-205; 336.1-206; 336.1-207; 336.1-208;
336.1-209; 336.2-208; 336.2A-207; 336.7-101;
336.7-102; 336.7-103; 336.7-104; 336.7-105; 336.7-201;
336.7-202; 336.7-203; 336.7-204; 336.7-205; 336.7-206;
336.7-207; 336.7-208; 336.7-209; 336.7-210; 336.7-301;
336.7-302; 336.7-303; 336.7-304; 336.7-305; 336.7-306;
336.7-307; 336.7-308; 336.7-309; 336.7-401; 336.7-402;
336.7-403; 336.7-404; 336.7-501; 336.7-502; 336.7-503;
336.7-504; 336.7-505; 336.7-506; 336.7-507; 336.7-508;
336.7-509; 336.7-601; 336.7-602; 336.7-603; 336.10-104.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
REVISION OF UNIFORM COMMERCIAL CODE
PART 1
GENERAL PROVISIONS
Section 1. [336.1-101] [SHORT TITLES.]
(a) This chapter may be cited as the Uniform Commercial
Code.
(b) This article may be cited as Uniform Commercial Code -
General Provisions.
Sec. 2. [336.1-102] [SCOPE OF ARTICLE.]
This article applies to a transaction to the extent that it
is governed by another article of the Uniform Commercial Code.
Sec. 3. [336.1-103] [CONSTRUCTION OF UNIFORM COMMERCIAL
CODE TO PROMOTE ITS PURPOSES AND POLICIES; APPLICABILITY OF
SUPPLEMENTAL PRINCIPLES OF LAW.]
(a) The Uniform Commercial Code 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 the
Uniform Commercial Code, 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.
Sec. 4. [336.1-104] [CONSTRUCTION AGAINST IMPLIED REPEAL.]
The Uniform Commercial Code 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.
Sec. 5. [336.1-105] [SEVERABILITY.]
If any provision or clause of the Uniform Commercial Code
or its application to any person or circumstance is held
invalid, the invalidity does not affect other provisions or
applications of the Uniform Commercial Code which can be given
effect without the invalid provision or application, and to this
end the provisions of the Uniform Commercial Code are severable.
Sec. 6. [336.1-106] [USE OF SINGULAR AND PLURAL; GENDER.]
In the Uniform Commercial Code, 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.
Sec. 7. [336.1-107] [SECTION CAPTIONS.]
Section captions are part of the Uniform Commercial Code.
Sec. 8. [336.1-108] [RELATION TO ELECTRONIC SIGNATURES IN
GLOBAL AND NATIONAL COMMERCE ACT.]
This chapter modifies, limits, and supersedes the federal
Electronic 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)).
Sec. 9. [336.1-110] [UNIFORM COMMERCIAL CODE ACCOUNT.]
The Uniform Commercial Code account is established as an
account in the state treasury. Fees that are not expressly set
by statute but are charged by the secretary of state to offset
the costs of providing a service under this chapter must be
deposited in the state treasury and credited to the Uniform
Commercial Code account.
Fees that are not expressly set by statute but are charged
by the secretary of state to offset the costs of providing
information contained in the computerized records maintained by
the secretary of state must be deposited in the state treasury
and credited to the Uniform Commercial Code account.
Money in the Uniform Commercial Code account is
continuously appropriated to the secretary of state to implement
and maintain the central filing system under this chapter and to
provide electronic access to other computerized records
maintained by the secretary of state.
PART 2
GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
Sec. 10. [336.1-201] [GENERAL DEFINITIONS.]
(a) Unless the context otherwise requires, words or phrases
defined in this section, or in the additional definitions
contained in other articles of the Uniform Commercial Code that
apply to particular articles or parts thereof, have the meanings
stated.
(b) Subject to definitions contained in other articles of
the Uniform Commercial Code that apply to particular articles or
parts thereof:
(1) "Action," in the sense of a judicial proceeding,
includes recoupment, 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 336.1-303.
(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.
(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. Conspicuous terms include the following:
(A) a heading in capitals equal to or greater in size than
the surrounding text, or in contrasting type, font, or color to
the surrounding text of the same or lesser size; and
(B) language in the body of a record or display in larger
type than the surrounding text, or in contrasting type, font, or
color to the surrounding text of the same size, or set off from
surrounding text of the same size by symbols or other marks that
call attention to the language.
(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 the Uniform Commercial Code as
supplemented by any other applicable laws.
(13) "Creditor" includes a general creditor, a secured
creditor, a lien creditor, and any representative of creditors,
including an assignee for the benefit of creditors, a trustee in
bankruptcy, a receiver in equity, and an executor or
administrator of an insolvent debtor's or assignor's estate.
(14) "Defendant" includes a person in the position of
defendant in a counterclaim, cross-claim, or third-party claim.
(15) "Delivery," with respect to an electronic document of
title means voluntary transfer of control and with respect to an
instrument, a tangible document of title, or chattel paper,
means voluntary transfer of possession.
(16) "Document of title" means a record (i) 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 (ii) 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 information that is
inscribed on a tangible medium.
(17) "Fault" means a default, breach, or wrongful act or
omission.
(18) "Fungible goods" means:
(A) goods of which any unit, by nature or usage of trade,
is the equivalent of any other like unit; or
(B) goods that by agreement are treated as equivalent.
(19) "Genuine" means free of forgery or counterfeiting.
(20) "Good faith," except as otherwise provided in article
5, means honesty in fact and the observance of reasonable
commercial standards of fair dealing.
(21) "Holder" means:
(A) the person in possession of a negotiable instrument
that is payable either to bearer or to an identified person that
is the person in possession;
(B) the person in possession of a 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 monetary 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 the Uniform Commercial Code.
(27) "Person" means an individual, corporation, business
trust, estate, trust, partnership, limited liability company,
association, joint venture, government, governmental
subdivision, agency, or instrumentality, 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. "Security interest" includes any interest of a
consignor and a buyer of accounts, chattel paper, a payment
intangible, or a promissory note in a transaction that is
subject to article 9. "Security interest" does not include the
special property interest of a buyer of goods on identification
of those goods to a contract for sale under section 336.2-401,
but a buyer may also acquire a "security interest" by complying
with article 9. Except as otherwise provided in section
336.2-505, the right of a seller or lessor of goods under
article 2 or 2A 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
notwithstanding shipment or delivery to the buyer under section
336.2-401 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
336.1-203.
(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 or
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 present 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 territory 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 particular 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
intentional reduction to tangible form. "Written" has a
corresponding meaning.
Sec. 11. [336.1-202] [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 actually comes to know of it.
(e) Subject to subsection (f), a person "receives" a notice
or notification when:
(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 transaction and, in any event, from the time it
would have been brought to the individual's attention if the
organization had exercised due diligence. An organization
exercises due diligence if it maintains reasonable 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.
Sec. 12. [336.1-203] [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 nominal 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, insurance, 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.
(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 fact and circumstances at the time the
transaction is entered into.
Sec. 13. [336.1-204] [VALUE.]
Except as otherwise provided in articles 3, 4, and 5, a
person gives value for rights if the person acquires them:
(1) in return for a binding commitment to extend credit or
for the extension of immediately available credit, whether or
not drawn upon and whether or not a chargeback is provided for
in the event of difficulties in collection;
(2) as security for, or in total or partial satisfaction
of, a preexisting claim;
(3) by accepting delivery under a preexisting contract for
purchase; or
(4) in return for any consideration sufficient to support a
simple contract.
Sec. 14. [336.1-205] [REASONABLE TIME; SEASONABLENESS.]
(a) Whether a time for taking an action required by the
Uniform Commercial Code 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.
Sec. 15. [336.1-206] [PRESUMPTIONS.]
Whenever the Uniform Commercial Code 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.
PART 3
TERRITORIAL APPLICABILITY AND GENERAL RULES
Sec. 16. [336.1-301] [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.
(b) In the absence of an agreement effective under
subsection (a), and except as provided in subsection (c), the
Uniform Commercial Code applies to transactions bearing an
appropriate relation to this state.
(c) If one of the following provisions of the Uniform
Commercial Code 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 336.2-402;
(2) sections 336.2A-105 and 336.2A-106;
(3) section 336.4-102;
(4) section 336.4A-507;
(5) section 336.5-116;
(6) section 336.8-110;
(7) sections 336.9-301 through 336.9-307.
Sec. 17. [336.1-302] [VARIATION BY AGREEMENT.]
(a) Except as otherwise provided in subsection (b) or
elsewhere in the Uniform Commercial Code, the effect of
provisions of the Uniform Commercial Code may be varied by
agreement.
(b) The obligations of good faith, diligence,
reasonableness, and care prescribed by the Uniform Commercial
Code 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 manifestly unreasonable. Whenever the Uniform Commercial
Code requires an action to be taken within a reasonable time, a
time that is not manifestly unreasonable may be fixed by
agreement.
(c) The presence in certain provisions of the Uniform
Commercial Code 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.
Sec. 18. [336.1-303] [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 in 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.
(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 dealing, 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 336.2-209, 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.
Sec. 19. [336.1-304] [OBLIGATION OF GOOD FAITH.]
Every contract or duty within the Uniform Commercial Code
imposes an obligation of good faith in its performance and
enforcement.
Sec. 20. [336.1-305] [REMEDIES TO BE LIBERALLY
ADMINISTERED.]
(a) The remedies provided by the Uniform Commercial Code
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 the
Uniform Commercial Code or by other rule of law.
(b) Any right or obligation declared by the Uniform
Commercial Code is enforceable by action unless the provision
declaring it specifies a different and limited effect.
Sec. 21. [336.1-306] [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.
Sec. 22. [336.1-307] [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.
Sec. 23. [336.1-308] [PERFORMANCE OR ACCEPTANCE UNDER
RESERVATION OF RIGHTS.]
(a) A party that with explicit reservation of rights
performs or promises performance or assents to performance in a
manner demanded or offered by the other party does not thereby
prejudice the rights reserved. Such words as "without
prejudice," "under protest," or the like are sufficient.
(b) Subsection (a) does not apply to an accord and
satisfaction.
Sec. 24. [336.1-309] [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 additional 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.
Sec. 25. [336.1-310] [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. Subordination does not create a
security interest as against either the common debtor or a
subordinated creditor.
Sec. 26. [REPEALER.]
Minnesota Statutes 2002, sections 336.1-101; 336.1-102;
336.1-103; 336.1-104; 336.1-105; 336.1-106; 336.1-107;
336.1-108; 336.1-109; 336.1-110; 336.1-201; 336.1-202;
336.1-203; 336.1-204; 336.1-205; 336.1-206; 336.1-207;
336.1-208; and 336.1-209, are repealed.
ARTICLE 2
CONFORMING AMENDMENTS TO OTHER UCC ARTICLES
Section 1. Minnesota Statutes 2002, section 336.2-103, is
amended to read:
336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(1) In this article unless the context otherwise requires:
(a) "Buyer" means a person who buys or contracts to buy
goods.
(b) "Good faith" in the case of a merchant means honesty in
fact and the observance of reasonable commercial standards of
fair dealing in the trade. [Reserved.]
(c) "Receipt" of goods means taking physical possession of
them.
(d) "Seller" means a person who sells or contracts to sell
goods.
(2) Other definitions applying to this article or to
specified parts thereof, and the sections in which they appear
are:
"Acceptance," section 336.2-606.
"Banker's credit," section 336.2-325.
"Between merchants," section 336.2-104.
"Cancellation," section 336.2-106(4).
"Commercial unit," section 336.2-105.
"Confirmed credit," section 336.2-325.
"Conforming to contract," section 336.2-106.
"Contract for sale," section 336.2-106.
"Cover," section 336.2-712.
"Entrusting," section 336.2-403.
"Financing agency," section 336.2-104.
"Future goods," section 336.2-105.
"Goods," section 336.2-105.
"Identification," section 336.2-501.
"Installment contract," section 336.2-612.
"Letter of credit," section 336.2-325.
"Lot," section 336.2-105.
"Merchant," section 336.2-104.
"Overseas," section 336.2-323.
"Person in position of seller," section 336.2-707.
"Present sale," section 336.2-106.
"Sale," section 336.2-106.
"Sale on approval," section 336.2-326.
"Sale or return," section 336.2-326.
"Termination," section 336.2-106.
(3) The following definitions in other articles apply to
this article:
"Check," section 336.3-104.
"Consignee," section 336.7-102.
"Consignor," section 336.7-102.
"Consumer goods," section 336.9-102.
"Dishonor," section 336.3-502.
"Draft," section 336.3-104.
(4) In addition article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 2. Minnesota Statutes 2002, section 336.2-202, is
amended to read:
336.2-202 [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 336.1-205 336.1-303) or by course of
performance (section 336.2-208); 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.
Sec. 3. Minnesota Statutes 2002, section 336.2A-103, is
amended to read:
336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(1) In this article unless the context otherwise requires:
(a) "Buyer in ordinary course of business" means a person
who in good faith and without knowledge that the sale 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 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.
(b) "Cancellation" occurs when either party puts an end to
the lease contract for default by the other party.
(c) "Commercial unit" means a unit of goods that by
commercial usage is a single whole for purposes of lease and
division of which materially impairs its character or value on
the market or in use. A commercial unit may be a single
article, as a machine, or a set of articles, as a suite of
furniture or a line of machinery, or a quantity, as a gross or
carload, or any other unit treated in use or in the relevant
market as a single whole.
(d) "Conforming" goods or performance under a lease
contract means goods or performance that are in accordance with
the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor regularly
engaged in the business of leasing or selling makes to a lessee
who is an individual and who takes under the lease primarily for
a personal, family, or household purpose, if the total payments
to be made under the lease contract, excluding payments for
options to renew or buy, do not exceed $25,000.
(f) "Fault" means wrongful act, omission, breach, or
default.
(g) "Finance lease" means a lease in which
(1) the lessor does not select, manufacture, or supply the
goods,
(2) the lessor acquires the goods or the right to
possession and use of the goods in connection with the lease,
and
(3) either
(i) the lessee receives a copy of the contract evidencing
the lessor's purchase of the goods or a disclaimer statement on
or before signing the lease contract, or
(ii) the lessee's approval of the contract evidencing the
lessor's purchase of the goods or a disclaimer statement is a
condition to effectiveness of the lease contract.
"Disclaimer statement" means a written statement that is
part of or separate from the lease contract that discloses all
warranties and other rights provided to the lessee by the lessor
and supplier in connection with the lease contract and informs
the lessee in a conspicuous manner that there are no warranties
or other rights provided to the lessee by the lessor and
supplier other than those disclosed in the statement.
(h) "Goods" means all things that are movable at the time
of identification to the lease contract, or are fixtures
(section 336.2A-309), but the term does not include money,
documents, instruments, accounts, chattel paper, general
intangibles, or minerals or the like, including oil and gas,
before extraction. The term also includes the unborn young of
animals.
(i) "Installment lease contract" means a lease contract
that authorizes or requires the delivery of goods in separate
lots to be separately accepted, even though the lease contract
contains a clause "each delivery is a separate lease" or its
equivalent.
(j) "Lease" means a transfer of the right to possession and
use of goods for a term in return for consideration, but a sale,
including a sale on approval or a sale or return, or retention
or creation of a security interest is not a lease. Unless the
context clearly indicates otherwise, the term includes a
sublease.
(k) "Lease agreement" means the bargain, with respect to
the lease, of the lessor and the lessee in fact as found in
their language or by implication from other circumstances
including course of dealing or usage of trade or course of
performance as provided in this article. Unless the context
clearly indicates otherwise, the term includes a sublease
agreement.
(l) "Lease contract" means the total legal obligation that
results from the lease agreement as affected by this article and
any other applicable rules of law. Unless the context clearly
indicates otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor
or the lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person
who in good faith and without knowledge that the lease is in
violation of the ownership rights or security interest or
leasehold interest of a third party in the goods leases in
ordinary course from a person in the business of selling or
leasing goods of that kind but does not include a pawnbroker.
"Leasing" may be for cash or by exchange of other property or on
secured or unsecured credit and includes receiving 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.
(p) "Lessor" means a person who transfers the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's
interest in the goods after expiration, termination, or
cancellation of the lease contract.
(r) "Lien" means a charge against or interest in goods to
secure payment of a debt or performance of an obligation, but
the term does not include a security interest.
(s) "Lot" means a parcel or a single article that is the
subject matter of a separate lease or delivery, whether or not
it is sufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant
with respect to goods of the kind subject to the lease.
(u) "Present value" means the amount as of a date certain
of one or more sums payable in the future, discounted to the
date certain. The discount is determined by the interest rate
specified by the parties if the rate was not manifestly
unreasonable at the time the transaction was entered into;
otherwise, the discount is determined by a commercially
reasonable rate that takes into account the facts and
circumstances of each case at the time the transaction was
entered into.
(v) "Purchase" includes taking by sale, lease, mortgage,
security interest, pledge, gift, or any other voluntary
transaction creating an interest in goods.
(w) "Sublease" means a lease of goods the right to
possession and use of which was acquired by the lessor as a
lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor buys or
leases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which a lessor
buys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant to a
power created by agreement or law puts an end to the lease
contract otherwise than for default.
(2) Other definitions applying to this article and the
sections in which they appear are:
"Accessions." Section 336.2A-310(1).
"Construction mortgage." Section 336.2A-309(1)(d).
"Encumbrance." Section 336.2A-309(1)(e).
"Fixtures." Section 336.2A-309(1)(a).
"Fixture filing." Section 336.2A-309(1)(b).
"Purchase money lease." Section 336.2A-309(1)(c).
(3) The following definitions in other articles apply to
this article:
"Account." Section 336.9-102(a)(2).
"Between merchants." Section 336.2-104(3).
"Buyer." Section 336.2-103(1)(a).
"Chattel paper." Section 336.9-102(a)(11).
"Consumer goods." Section 336.9-102(a)(23).
"Document." Section 336.9-102(a)(30).
"Entrusting." Section 336.2-403(3).
"General intangible." Section 336.9-102(a)(42).
"Good faith." Section 336.2-103(1)(b).
"Instrument." Section 336.9-102(a)(47).
"Merchant." Section 336.2-104(1).
"Mortgage." Section 336.9-102(a)(55).
"Pursuant to commitment." Section 336.9-102(a)(68).
"Receipt." Section 336.2-103(1)(c).
"Sale." Section 336.2-106(1).
"Sale on approval." Section 336.2-326.
"Sale or return." Section 336.2-326.
"Seller." Section 336.2-103(1)(d).
(4) In addition, sections 336.1-101 to 336.1-109 336.1-310
contain general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 4. Minnesota Statutes 2002, section 336.2A-501, is
amended to read:
336.2A-501 [DEFAULT; PROCEDURE.]
(1) Whether the lessor or the lessee is in default under a
lease contract is determined by the lease agreement and this
article.
(2) If the lessor or the lessee is in default under the
lease contract, the party seeking enforcement has rights and
remedies as provided in this article and, except as limited by
this article, as provided in the lease agreement.
(3) If the lessor or the lessee is in default under the
lease contract, the party seeking enforcement may reduce the
party's claim to judgment, or otherwise enforce the lease
contract by self-help or any available judicial procedure or
nonjudicial procedure, including administrative proceeding,
arbitration, or the like, in accordance with this article.
(4) Except as otherwise provided in
section 336.1-106(1) 336.1-305(a) or this article or the lease
agreement, the rights and remedies referred to in subsections
(2) and (3) are cumulative.
(5) If the lease agreement covers both real property and
goods, the party seeking enforcement may proceed under this part
as to the goods, or under other applicable law as to both the
real property and the goods in accordance with that party's
rights and remedies in respect of the real property, in which
case this part does not apply.
Sec. 5. Minnesota Statutes 2002, section 336.2A-518, is
amended to read:
336.2A-518 [COVER; SUBSTITUTE GOODS.]
(1) After a default by a lessor under the lease contract of
the type described in section 336.2A-508(1), or, if agreed,
after other default by the lessor, the lessee may cover by
making any purchase or lease of or contract to purchase or lease
goods in substitution for those due from the lessor.
(2) Except as otherwise provided with respect to damages
liquidated in the lease agreement (section 336.2A-504) or
otherwise determined pursuant to agreement of the parties
(sections 336.1-102(3) 336.1-302 and 336.2A-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 (i) 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 (ii)
any incidental or consequential damages, less expenses saved in
consequence of the lessor's default.
(3) If a lessee's cover is by lease agreement that for any
reason does not qualify for treatment under subsection (2), or
is by purchase or otherwise, the lessee may recover from the
lessor as if the lessee had elected not to cover and section
336.2A-519 governs.
Sec. 6. Minnesota Statutes 2002, section 336.2A-519, is
amended to read:
336.2A-519 [LESSEE'S DAMAGES FOR NONDELIVERY, REPUDIATION,
DEFAULT, AND BREACH OF WARRANTY IN REGARD TO ACCEPTED GOODS.]
(1) Except as otherwise provided with respect to damages
liquidated in the lease agreement (section 336.2A-504) or
otherwise determined pursuant to agreement of the parties
(sections 336.1-102(3) 336.1-302 and 336.2A-503), if a lessee
elects not to cover or a lessee elects to cover and the cover is
by lease agreement that for any reason does not qualify for
treatment under section 336.2A-518(2), or is by purchase or
otherwise, the measure of damages for nondelivery 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.
(2) Market rent is to be determined as of the place for
tender or, in cases of rejection after arrival or revocation of
acceptance, as of the place of arrival.
(3) Except as otherwise agreed, if the lessee has accepted
goods and given notification (section 336.2A-516(3)), the
measure of damages for nonconforming tender or delivery or other
default by a lessor is the loss resulting in the ordinary course
of events from the lessor's default as determined in any manner
that is reasonable together with incidental and consequential
damages, less expenses saved in consequence of the lessor's
default.
(4) Except as otherwise agreed, the measure of damages for
breach of warranty is the present value at the time and place of
acceptance of the difference between the value of the use of the
goods accepted and the value if they had been as warranted for
the lease term, unless special circumstances show proximate
damages of a different amount, together with incidental and
consequential damages, less expenses saved in consequence of the
lessor's default or breach of warranty.
Sec. 7. Minnesota Statutes 2002, section 336.2A-527, is
amended to read:
336.2A-527 [LESSOR'S RIGHTS TO DISPOSE OF GOODS.]
(1) After a default by a lessee under the lease contract of
the type described in section 336.2A-523(1) or 336.2A-523(3)(a)
or after the lessor refuses to deliver or takes possession of
goods (section 336.2A-525 or 336.2A-526), or, if agreed, after
other default by a lessee, the lessor may dispose of the goods
concerned or the undelivered balance by lease, sale, or
otherwise.
(2) Except as otherwise provided with respect to damages
liquidated in the lease agreement (section 336.2A-504) or
otherwise determined pursuant to agreement of the parties
(sections 336.1-102(3) 336.1-302 and 336.2A-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 (i) accrued and unpaid
rent as of the date of the start of the term of the new lease
agreement, (ii) 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 that is comparable to the then remaining
term of the original lease agreement, and (iii) any incidental
damages allowed under section 336.2A-530, less expenses saved in
consequence of the lessee's default.
(3) If the lessor's disposition is by lease agreement that
for any reason does not qualify for treatment under subsection
(2), or is by sale or otherwise, the lessor may recover from the
lessee as if the lessor had elected not to dispose of the goods
and section 336.2A-528 governs.
(4) A subsequent buyer or lessee who buys or leases from
the lessor in good faith for value as a result of a disposition
under this section takes the goods free of the original lease
contract and any rights of the original lessee even though the
lessor fails to comply with one or more of the requirements of
this article.
(5) The lessor is not accountable to the lessee for any
profit made on any disposition. A lessee who has rightfully
rejected or justifiably revoked acceptance shall account to the
lessor for any excess over the amount of the lessee's security
interest (section 336.2A-508(5)).
Sec. 8. Minnesota Statutes 2002, section 336.2A-528, is
amended to read:
336.2A-528 [LESSOR'S DAMAGES FOR NONACCEPTANCE, FAILURE TO
PAY, REPUDIATION, OR OTHER DEFAULT.]
(1) Except as otherwise provided with respect to damages
liquidated in the lease agreement (section 336.2A-504) or
otherwise determined pursuant to agreement of the parties
(sections 336.1-102(3) 336.1-302 and 336.2A-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 that for any
reason does not qualify for treatment under section
336.2A-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 336.2A-523(1) or 336.2A-523(3)(a), or, if
agreed, for other default of the lessee, (i) 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, (ii) the present value as of the date determined
under clause (i) 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 market rent at the place where the goods
are located computed for the same lease term, and (iii) any
incidental damages allowed under section 336.2A-530, less
expenses saved in consequence of the lessee's default.
(2) If the measure of damages provided in subsection (1) is
inadequate to put a lessor in as good a position as performance
would have, the measure of damages is the present value of the
profit, including reasonable overhead, the lessor would have
made from full performance by the lessee, together with any
incidental damages allowed under section 336.2A-530, due
allowance for costs reasonably incurred and due credit for
payments or proceeds of disposition.
Sec. 9. Minnesota Statutes 2003 Supplement, section
336.3-103, is amended to read:
336.3-103 [DEFINITIONS.]
(a) In this article:
(1) "Acceptor" means a drawee who has accepted a draft.
(2) "Consumer account" means an account established by an
individual primarily for personal, family, or household purposes.
(3) "Consumer transaction" means a transaction in which an
individual incurs an obligation primarily for personal, family,
or household purposes.
(4) "Drawee" means a person ordered in a draft to make
payment.
(5) "Drawer" means a person who signs or is identified in a
draft as a person ordering payment.
(6) "Good faith" means honesty in fact and the observance
of reasonable commercial standards of fair dealing. [Reserved.]
(7) "Maker" means a person who signs or is identified in a
note as a person undertaking to pay.
(8) "Order" means a written instruction to pay money signed
by the person giving the instruction. The instruction may be
addressed to any person, including the person giving the
instruction, or to one or more persons jointly or in the
alternative but not in succession. An authorization to pay is
not an order unless the person authorized to pay is also
instructed to pay.
(9) "Ordinary care" in the case of a person engaged in
business means observance of reasonable commercial standards,
prevailing in the area in which the person is located, with
respect to the business in which the person is engaged. In the
case of a bank that takes an instrument for processing for
collection or payment by automated means, reasonable commercial
standards do not require the bank to examine the instrument if
the failure to examine does not violate the bank's prescribed
procedures and the bank's procedures do not vary unreasonably
from general banking usage not disapproved by this article or
article 4.
(10) "Party" means a party to an instrument.
(11) "Principal obligor," with respect to an instrument,
means the accommodated party or any other party to the
instrument against whom a secondary obligor has recourse under
this article.
(12) "Promise" means a written undertaking to pay money
signed by the person undertaking to pay. An acknowledgment of
an obligation by the obligor is not a promise unless the obligor
also undertakes to pay the obligation.
(13) "Prove" with respect to a fact means to meet the
burden of establishing the fact (section
336.1-201(8) 336.1-201(b)(8)).
(14) "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.
(15) "Remitter" means a person who purchases an instrument
from its issuer if the instrument is payable to an identified
person other than the purchaser.
(16) "Remotely-created item" means an item that is not
created by the payor bank and does not bear a handwritten or
facsimile signature purporting to be the signature of the drawer.
(17) "Secondary obligor," with respect to an instrument,
means (a) an endorser or an accommodation party, (b) a drawer
having the obligation described in section 336.3-414(d), or (c)
any other party to the instrument that has recourse against
another party to the instrument pursuant to section 336.3-116(b).
(b) Other definitions applying to this article and the
sections in which they appear are:
"Acceptance," section 336.3-409.
"Accommodated party," section 336.3-419.
"Accommodation party," section 336.3-419.
"Account," section 336.4-104.
"Alteration," section 336.3-407.
"Anomalous endorsement," section 336.3-205.
"Blank endorsement," section 336.3-205.
"Cashier's check," section 336.3-104.
"Certificate of deposit," section 336.3-104.
"Certified check," section 336.3-409.
"Check," section 336.3-104.
"Consideration," section 336.3-303.
"Draft," section 336.3-104.
"Endorsement," section 336.3-204.
"Endorser," section 336.3-204.
"Holder in due course," section 336.3-302.
"Incomplete instrument," section 336.3-115.
"Instrument," section 336.3-104.
"Issue," section 336.3-105.
"Issuer," section 336.3-105.
"Negotiable instrument," section 336.3-104.
"Negotiation," section 336.3-201.
"Note," section 336.3-104.
"Payable at a definite time," section 336.3-108.
"Payable on demand," section 336.3-108.
"Payable to bearer," section 336.3-109.
"Payable to order," section 336.3-109.
"Payment," section 336.3-602.
"Person entitled to enforce," section 336.3-301.
"Presentment," section 336.3-501.
"Reacquisition," section 336.3-207.
"Special endorsement," section 336.3-205.
"Teller's check," section 336.3-104.
"Transfer of instrument," section 336.3-203.
"Traveler's check," section 336.3-104.
"Value," section 336.3-303.
(c) The following definitions in other articles apply to
this article:
"Bank," section 336.4-105.
"Banking day," section 336.4-104.
"Clearinghouse," section 336.4-104.
"Collecting bank," section 336.4-105.
"Depositary bank," section 336.4-105.
"Documentary draft," section 336.4-104.
"Intermediary bank," section 336.4-105.
"Item," section 336.4-104.
"Payor bank," section 336.4-105.
"Suspends payments," section 336.4-104.
(d) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 10. Minnesota Statutes 2003 Supplement, section
336.4-104, is amended to read:
336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(a) In this article, unless the context otherwise requires:
(1) "Account" means any deposit or credit account with a
bank, including a demand, time, savings, passbook, share draft,
or like account, other than an account evidenced by a
certificate of deposit;
(2) "Afternoon" means the period of a day between noon and
midnight;
(3) "Banking day" means that part of any day, excluding
Saturday, Sunday, and holidays, on which a bank is open to the
public for carrying on substantially all of its banking
functions;
(4) "Clearinghouse" means an association of banks or other
payors regularly clearing items;
(5) "Customer" means a person having an account with a bank
or for whom a bank has agreed to collect items, including a bank
that maintains an account at another bank;
(6) "Documentary draft" means a draft to be presented for
acceptance or payment if specified documents, certificated
securities (section 336.8-102) or instructions for
uncertificated securities (section 336.8-102), or other
certificates, statements, or the like are to be received by the
drawee or other payor before acceptance or payment of the draft;
(7) "Draft" means a draft as defined in section 336.3-104
or an item, other than an instrument, that is an order;
(8) "Drawee" means a person ordered in a draft to make
payment;
(9) "Item" means an instrument or a promise or order to pay
money handled by a bank for collection or payment. The term
does not include a payment order governed by article 4A or a
credit or debit card slip;
(10) "Midnight deadline" with respect to a bank is midnight
on its next banking day following the banking day on which it
receives the relevant item or notice or from which the time for
taking action commences to run, whichever is later;
(11) "Settle" means to pay in cash, by clearinghouse
settlement, in a charge or credit or by remittance, or otherwise
as agreed. A settlement may be either provisional or final;
(12) "Suspends payments" with respect to a bank means that
it has been closed by order of the supervisory authorities, that
a public officer has been appointed to take it over, or that it
ceases or refuses to make payments in the ordinary course of
business.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Agreement for electronic presentment," section 336.4-110
"Bank," section 336.4-105
"Collecting bank," section 336.4-105
"Depositary bank," section 336.4-105
"Intermediary bank," section 336.4-105
"Payor bank," section 336.4-105
"Presenting bank," section 336.4-105
"Presentment notice," section 336.4-110
(c) The following definitions in other articles apply to
this article:
"Acceptance," section 336.3-409
"Alteration," section 336.3-407
"Cashier's check," section 336.3-104
"Certificate of deposit," section 336.3-104
"Certified check," section 336.3-409
"Check," section 336.3-104
"Good faith," section 336.3-103
"Holder in due course," section 336.3-302
"Instrument," section 336.3-104
"Notice of dishonor," section 336.3-503
"Order," section 336.3-103
"Ordinary care," section 336.3-103
"Person entitled to enforce," section 336.3-301
"Presentment," section 336.3-501
"Promise," section 336.3-103
"Prove," section 336.3-103
"Record," section 336.3-103
"Remotely-created item," section 336.3-103
"Teller's check," section 336.3-104
"Unauthorized signature," section 336.3-403
(d) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 11. Minnesota Statutes 2002, section 336.4A-105, is
amended to read:
336.4A-105 [OTHER DEFINITIONS.]
(a) In this article:
(1) "Authorized account" means a deposit account of a
customer in a bank designated by the customer as a source of
payment of payment orders issued by the customer to the bank.
If a customer does not so designate an account, any account of
the customer is an authorized account if payment of a payment
order from that account is not inconsistent with a restriction
on the use of that account.
(2) "Bank" means a person engaged in the business of
banking and includes a savings bank, savings association, credit
union, and trust company. A branch or separate office of a bank
is a separate bank for purposes of this article.
(3) "Customer" means a person, including a bank, having an
account with a bank or from whom a bank has agreed to receive
payment orders.
(4) "Funds-transfer business day" of a receiving bank means
the part of a day during which the receiving bank is open for
the receipt, processing, and transmittal of payment orders and
cancellations and amendments of payment orders.
(5) "Funds-transfer system" means a wire transfer network,
automated clearinghouse, or other communication system of a
clearinghouse or other association of banks through which a
payment order by a bank may be transmitted to the bank to which
the order is addressed.
(6) "Good faith" means honesty in fact and the observance
of reasonable commercial standards of fair dealing. [Reserved.]
(7) "Prove" with respect to a fact means to meet the burden
of establishing the fact (section 336.1-201(8) 336.1-201(b)(8)).
(b) Other definitions applying to the article and the
sections in which they appear:
"Acceptance." Section 336.4A-209.
"Beneficiary." Section 336.4A-103.
"Beneficiary's bank." Section 336.4A-103.
"Executed." Section 336.4A-301.
"Execution date." Section 336.4A-301.
"Funds transfer." Section 336.4A-104.
"Funds-transfer system rule." Section 336.4A-501.
"Intermediary bank." Section 336.4A-104.
"Originator." Section 336.4A-104.
"Originator's bank." Section 336.4A-104.
"Payment by beneficiary's bank to beneficiary." Section
336.4A-405.
"Payment by originator to beneficiary." Section 336.4A-406.
"Payment by sender to receiving bank." Section 336.4A-403.
"Payment date." Section 336.4A-401.
"Payment order." Section 336.4A-103.
"Receiving bank." Section 336.4A-103.
"Security procedure." Section 336.4A-201.
"Sender." Section 336.4A-103.
(c) The following definitions in article 4 apply to this
article:
"Clearinghouse." Section 336.4-104.
"Item." Section 336.4-104.
"Suspends payments." Section 336.4-104.
(d) In addition, sections 336.1-101 to 336.1-209 contain
general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 12. Minnesota Statutes 2002, section 336.4A-106, is
amended to read:
336.4A-106 [TIME PAYMENT ORDER IS RECEIVED.]
(a) The time of receipt of a payment order or communication
canceling or amending a payment order is determined by the rules
applicable to receipt of a notice stated in section
336.1-201(27) 336.1-202. A receiving bank may fix a cut-off
time or times on a funds-transfer business day for the receipt
and processing of payment orders and communications canceling or
amending payment orders. Different cut-off times may apply to
payment orders, cancellations, or amendments, or to different
categories of payment orders, cancellations, or amendments. A
cut-off time may apply to senders generally or different cut-off
times may apply to different senders or categories of payment
orders. If a payment order or communication canceling or
amending a payment order is received after the close of a
funds-transfer business day or after the appropriate cut-off
time on a funds-transfer business day, the receiving bank may
treat the payment order or communication as received at the
opening of the next funds-transfer business day.
(b) If this article refers to an execution date or payment
date or states a day on which a receiving bank is required to
take action, and the date or day does not fall on a
funds-transfer business day, the next day that is a
funds-transfer business day is treated as the date or day
stated, unless the contrary is stated in this article.
Sec. 13. Minnesota Statutes 2002, section 336.4A-204, is
amended to read:
336.4A-204 [REFUND OF PAYMENT AND DUTY OF CUSTOMER TO
REPORT WITH RESPECT TO UNAUTHORIZED PAYMENT ORDER.]
(a) If a receiving bank accepts a payment order issued in
the name of its customer as sender which is (i) not authorized
and not effective as the order of the customer under section
336.4A-202, or (ii) not enforceable, in whole or in part,
against the customer under section 336.4A-203, the bank shall
refund any payment of the payment order received from the
customer to the extent the bank is not entitled to enforce
payment and shall pay interest on the refundable amount
calculated from the date the bank received payment to the date
of the refund. However, the customer is not entitled to
interest from the bank on the amount to be refunded if the
customer fails to exercise ordinary care to determine that the
order was not authorized by the customer and to notify the bank
of the relevant facts within a reasonable time not exceeding 90
days after the date the customer received notification from the
bank that the order was accepted or that the customer's account
was debited with respect to the order. The bank is not entitled
to any recovery from the customer on account of a failure by the
customer to give notification as stated in this section.
(b) Reasonable time under subsection (a) may be fixed by
agreement as stated in section 336.1-204(1) 336.1-302(b), but
the obligation of a receiving bank to refund payment as stated
in subsection (a) may not otherwise be varied by agreement.
Sec. 14. Minnesota Statutes 2002, section 336.5-103, is
amended to read:
336.5-103 [SCOPE.]
(a) This article applies to letters of credit and to
certain rights and obligations arising out of transactions
involving letters of credit.
(b) The statement of a rule in this article does not by
itself require, imply, or negate application of the same or a
different rule to a situation not provided for, or to a person
not specified, in this article.
(c) With the exception of this subsection, subsections (a)
and (d), sections 336.5-102(a)(9) and (10), 336.5-106(d), and
336.5-114(d), and except to the extent prohibited in sections
336.1-102(3) 336.1-302 and 336.5-117(d), the effect of this
article may be varied by agreement or by a provision stated or
incorporated by reference in an undertaking. A term in an
agreement or undertaking generally excusing liability or
generally limiting remedies for failure to perform obligations
is not sufficient to vary obligations prescribed by this article.
(d) Rights and obligations of an issuer to a beneficiary or
a nominated person under a letter of credit are independent of
the existence, performance, or nonperformance of a contract or
arrangement out of which the letter of credit arises or which
underlies it, including contracts or arrangements between the
issuer and the applicant and between the applicant and the
beneficiary.
Sec. 15. Minnesota Statutes 2002, section 336.8-102, is
amended to read:
336.8-102 [DEFINITIONS.]
(a) In this article:
(1) "Adverse claim" means a claim that a claimant has a
property interest in a financial asset and that it is a
violation of the rights of the claimant for another person to
hold, transfer, or deal with the financial asset.
(2) "Bearer form," as applied to a certificated security,
means a form in which the security is payable to the bearer of
the security certificate according to its terms but not by
reason of an endorsement.
(3) "Broker" means a person defined as a broker or dealer
under the federal securities laws, but without excluding a bank
acting in that capacity.
(4) "Certificated security" means a security that is
represented by a certificate.
(5) "Clearing corporation" means:
(i) a person that is registered as a "clearing agency"
under the federal securities laws;
(ii) a federal reserve bank; or
(iii) any other person that provides clearance or
settlement services with respect to financial assets that would
require it to register as a clearing agency under the federal
securities laws but for an exclusion or exemption from the
registration requirement, if its activities as a clearing
corporation, including promulgation of rules, are subject to
regulation by a federal or state governmental authority.
(6) "Communicate" means to:
(i) send a signed writing; or
(ii) transmit information by any mechanism agreed upon by
the persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in the
records of a securities intermediary as the person having a
security entitlement against the securities intermediary. If a
person acquires a security entitlement by virtue of section
336.8-501(b)(2) or (3), that person is the entitlement holder.
(8) "Entitlement order" means a notification communicated
to a securities intermediary directing transfer or redemption of
a financial asset to which the entitlement holder has a security
entitlement.
(9) "Financial asset," except as otherwise provided in
section 336.8-103, means:
(i) a security;
(ii) an obligation of a person or a share, participation,
or other interest in a person or in property or an enterprise of
a person, which is, or is of a type, dealt in or traded on
financial markets, or which is recognized in any area in which
it is issued or dealt in as a medium for investment; or
(iii) any property that is held by a securities
intermediary for another person in a securities account if the
securities intermediary has expressly agreed with the other
person that the property is to be treated as a financial asset
under this article.
As context requires, the term means either the interest itself
or the means by which a person's claim to it is evidenced,
including a certificated or uncertificated security, a security
certificate, or a security entitlement.
(10) "Good faith," for purposes of the obligation of good
faith in the performance or enforcement of contracts or duties
within this article, means honesty in fact and the observance of
reasonable commercial standards of fair dealing. [Reserved.]
(11) "Endorsement" means a signature that alone or
accompanied by other words is made on a security certificate in
registered form or on a separate document for the purpose of
assigning, transferring, or redeeming the security or granting a
power to assign, transfer, or redeem it.
(12) "Instruction" means a notification communicated to the
issuer of an uncertificated security which directs that the
transfer of the security be registered or that the security be
redeemed.
(13) "Registered form," as applied to a certificated
security, means a form in which:
(i) the security certificate specifies a person entitled to
the security; and
(ii) a transfer of the security may be registered upon
books maintained for that purpose by or on behalf of the issuer,
or the security certificate so states.
(14) "Securities intermediary" means:
(i) a clearing corporation; or
(ii) a person, including a bank or broker, that in the
ordinary course of its business maintains securities accounts
for others and is acting in that capacity.
(15) "Security," except as otherwise provided in section
336.8-103, means an obligation of an issuer or a share,
participation, or other interest in an issuer or in property or
an enterprise of an issuer:
(i) which is represented by a security certificate in
bearer or registered form, or the transfer of which may be
registered upon books maintained for that purpose by or on
behalf of the issuer;
(ii) which is one of a class or series or by its terms is
divisible into a class or series of shares, participations,
interests, or obligations; and
(iii) which:
(A) is, or is of a type, dealt in or traded on securities
exchanges or securities markets; or
(B) is a medium for investment and by its terms expressly
provides that it is a security governed by this article.
(16) "Security certificate" means a certificate
representing a security.
(17) "Security entitlement" means the rights and property
interest of an entitlement holder with respect to a financial
asset specified in part 5.
(18) "Uncertificated security" means a security that is not
represented by a certificate.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Appropriate person," section 336.8-107
"Control," section 336.8-106
"Delivery," section 336.8-301
"Investment company security," section 336.8-103
"Issuer," section 336.8-201
"Overissue," section 336.8-210
"Protected purchaser," section 336.8-303
"Securities account," section 336.8-501
(c) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
(d) The characterization of a person, business, or
transaction for purposes of this article does not determine the
characterization of the person, business, or transaction for
purposes of any other law, regulation, or rule.
Sec. 16. Minnesota Statutes 2002, section 336.9-102, is
amended to read:
336.9-102 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(a) [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 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 property, (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
reasonable 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;
(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
security 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
minehead 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.
(8) "Bank" means an organization that is engaged in the
business of banking. The term includes savings banks, savings
and loan associations, credit unions, and trust companies.
(9) "Cash proceeds" means proceeds that are money, checks,
deposit accounts, or the like.
(10) "Certificate of title" means a certificate of title
with respect to which a statute provides for the security
interest in question to be indicated on the certificate as a
condition or result of the security interest's obtaining
priority over the rights of a lien creditor with respect to the
collateral.
(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
obligation 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.
(12) "Collateral" means the property subject to a security
interest or agricultural lien. The term includes:
(A) proceeds to which a security interest attaches;
(B) accounts, chattel paper, payment intangibles, and
promissory 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
(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
commodity intermediary in which a commodity contract is carried
for a commodity customer.
(15) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a commodity
option, or another contract if the contract or option is:
(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 law; 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:
(A) an individual incurs an obligation primarily for
personal, family, or household purposes; and
(B) a security interest in consumer goods secures the
obligation.
(25) "Consumer obligor" means an obligor who is an
individual and who incurred the obligation as part of a
transaction entered into primarily for personal, family, or
household purposes.
(26) "Consumer transaction" means a transaction in which (i)
an individual incurs an obligation primarily for personal,
family, or household purposes, (ii) a security interest secures
the obligation, and (iii) the collateral is held or acquired
primarily for personal, family, or household purposes. The term
includes consumer goods transactions.
(27) "Continuation statement" means an amendment of a
financing statement which:
(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.
(28) "Debtor" means:
(A) a person having an interest, other than a security
interest or other lien, in the collateral, whether or not the
person is an obligor;
(B) a seller of accounts, chattel paper, payment
intangibles, or promissory notes; 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.
(30) "Document" means a document of title or a receipt of
the type described in section 336.7-201(2).
(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
interest, in real property. The term includes mortgages and
other liens on real property.
(33) "Equipment" means goods other than inventory, farm
products, or consumer goods.
(34) "Farm products" means goods, other than standing
timber, with respect to which the debtor is engaged in a farming
operation and which are:
(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 336.9-519(a).
(37) "Filing office" means an office designated in section
336.9-501 as the place to file a financing statement.
(38) "Filing office rule" means a rule adopted pursuant to
Laws 2000, chapter 399, article 1, section 139.
(39) "Financing statement" means a record or records
composed of an initial financing statement and any filed record
relating to the initial financing statement.
(40) "Fixture filing" means the filing of a financing
statement covering goods that are or are to become fixtures and
satisfying section 336.9-502(a) and (b). The term includes the
filing of a financing statement covering goods of a transmitting
utility which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related to
particular real property that an interest in them arises under
real property law.
(42) "General intangible" means any personal property,
including things in action, other than accounts, chattel paper,
commercial tort claims, deposit accounts, documents, goods,
instruments, investment property, letter of credit rights,
letters of credit, money, and oil, gas, or other minerals before
extraction. The term includes payment intangibles and software.
(43) "Good faith" means honesty in fact and the observance
of reasonable commercial standards of fair dealing. [Reserved.]
(44) "Goods" means all things that are movable when a
security interest attaches. The term includes (i) fixtures,
(ii) standing timber that is to be cut and removed under a
conveyance or contract for sale, (iii) the unborn young of
animals, (iv) crops grown, growing, or to be grown, even if the
crops are produced on trees, vines, or bushes, and (v)
manufactured homes. The term also includes a computer program
embedded in goods and any supporting information provided in
connection with a transaction relating to the program if the
program is associated with the goods in such a manner that it
customarily is considered part of the goods, or by becoming the
owner of the goods, a person acquires a right to use the program
in connection with the goods. The term does not include a
computer program embedded in goods that consist solely of the
medium in which the program is embedded. The term also does not
include accounts, chattel paper, commercial tort claims, deposit
accounts, documents, general intangibles, instruments,
investment property, letter of credit rights, letters of credit,
money, or oil, gas, or other minerals before extraction.
(45) "Governmental unit" means a subdivision, agency,
department, county, parish, municipality, or other unit of the
government of the United States, a state, or a foreign country.
The term includes an organization having a separate corporate
existence if the organization is eligible to issue debt on which
interest is exempt from income taxation under the laws of the
United States.
(46) "Health-care-insurance receivable" means an interest
in or claim under a policy of insurance which is a right to
payment of a monetary obligation for health-care goods or
services provided.
(47) "Instrument" means a negotiable instrument or any
other writing that evidences a right to the payment of a
monetary obligation, is not itself a security agreement or
lease, and is of a type that in ordinary course of business is
transferred by delivery with any necessary endorsement or
assignment. 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 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:
(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) Unless a certificate has been issued, "manufactured
home" means a structure, transportable in one or more sections,
which, in the traveling mode, is eight body feet or more in
width or 40 body feet or more in length, or, when erected on
site, is 320 or more square feet, and which is built on a
permanent chassis and designed to be used as a dwelling with or
without a permanent foundation when connected to the required
utilities, and includes the plumbing, heating, air-conditioning,
and electrical systems contained therein. The term includes any
structure that meets all of the requirements of this paragraph
except the size requirements and with respect to which the
manufacturer voluntarily files a certification required by the
United States Secretary of Housing and Urban Development and
complies with the standards established under United States
Code, title 42.
A manufactured home within the meaning of this section does
not include a manufactured home for which a certificate of title
as defined in section 336.9-102(a)(10) has been issued.
(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. Mortgage includes an executory
contract for the sale of real property or of an interest in real
property that entitles the purchaser to possession of the real
property.
(56) "New debtor" means a person that becomes bound as
debtor under section 336.9-203(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 transferee. The term does not include an obligation
substituted for another obligation.
(58) "Noncash proceeds" means proceeds other than cash
proceeds.
(59) "Obligor" means a person that, with respect to an
obligation secured by a security interest in or an agricultural
lien on the collateral, (i) owes payment or other performance of
the obligation, (ii) has provided property other than the
collateral to secure payment or other performance of the
obligation, or (iii) is otherwise accountable in whole or in
part for payment or other performance of the obligation. The
term does not include issuers or nominated persons under a
letter of credit.
(60) "Original debtor", except as used in section
336.9-310(c), means a person that, as debtor, entered into a
security agreement to which a new debtor has become bound under
section 336.9-203(d).
(61) "Payment intangible" means a general intangible under
which the account debtor's principal obligation is a monetary
obligation.
(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
individual 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
subparagraph (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 336.9-609(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, insurance
payable by reason of the loss or nonconformity of, defects or
infringement of rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that evidences a
promise to pay a monetary obligation, does not evidence an order
to pay, and does not contain an acknowledgment by a bank that
the bank has received for deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a secured
party which includes the terms on which the secured party is
willing to accept collateral in full or partial satisfaction of
the obligation it secures pursuant to sections 336.9-620,
336.9-621, and 336.9-622.
(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
(C) the debtor, obligor, secured party, account debtor or
other person obligated on collateral, assignor or assignee of a
secured obligation, or assignor or assignee of a security
interest is a state or a governmental unit of a state.
(68) "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) "Record", except as used in "for record", "of record",
"record or legal title", and "record owner", means information
that is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable
form.
(70) "Registered organization" means an organization
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.
(71) "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) "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;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper, payment
intangibles, or promissory notes have been sold;
(E) a trustee, indenture trustee, agent, collateral agent,
or other representative in whose favor a security interest or
agricultural lien is created or provided for; or
(F) a person that holds a security interest arising under
section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5),
336.4-210, or 336.5-118.
(73) "Security agreement" means an agreement that creates
or provides for a security interest.
(74) "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) "Software" means a computer program and any supporting
information provided in connection with a transaction relating
to the program. The term does not include a computer program
that is included in the definition of goods.
(76) "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) "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) "Tangible chattel paper" means chattel paper evidenced
by a record or records consisting of information that is
inscribed on a tangible medium.
(79) "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) "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,
electromagnetically, or by light;
(C) transmitting goods by pipeline or sewer; or
(D) transmitting or producing and transmitting electricity,
steam, gas, or water.
A person filing a financing statement under this article
and under the authority of sections 300.111 to 300.115 is a
transmitting utility for purposes of this article.
(b) [DEFINITIONS IN OTHER ARTICLES.] The following
definitions in other articles apply to this article:
"Applicant" Section 336.5-102
"Beneficiary" Section 336.5-102
"Broker" Section 336.8-102
"Certificated security" Section 336.8-102
"Check" Section 336.3-104
"Clearing corporation" Section 336.8-102
"Contract for sale" Section 336.2-106
"Customer" Section 336.4-104
"Entitlement holder" Section 336.8-102
"Financial asset" Section 336.8-102
"Holder in due course" Section 336.3-302
"Issuer" (with respect to a
letter of credit or
letter of credit right) Section 336.5-102
"Issuer" (with respect to
a security) Section 336.8-201
"Lease" Section 336.2A-103
"Lease agreement" Section 336.2A-103
"Lease contract" Section 336.2A-103
"Leasehold interest" Section 336.2A-103
"Lessee" Section 336.2A-103
"Lessee in ordinary course
of business" Section 336.2A-103
"Lessor" Section 336.2A-103
"Lessor's residual interest" Section 336.2A-103
"Letter of credit" Section 336.5-102
"Merchant" Section 336.2-104
"Negotiable instrument" Section 336.3-104
"Nominated person" Section 336.5-102
"Note" Section 336.3-104
"Proceeds of a letter of
credit" Section 336.5-114
"Prove" Section 336.3-103
"Sale" Section 336.2-106
"Securities account" Section 336.8-501
"Securities intermediary" Section 336.8-102
"Security" Section 336.8-102
"Security certificate" Section 336.8-102
"Security entitlement" Section 336.8-102
"Uncertificated security" Section 336.8-102
(c) [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1
contains general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 17. [REPEALER.]
Minnesota Statutes 2002, sections 336.2-208; and
336.2A-207, are repealed.
ARTICLE 3
GENERAL CONFORMING AMENDMENTS
Section 1. Minnesota Statutes 2002, section 17.94, is
amended to read:
17.94 [IMPLIED PROMISE OF GOOD FAITH.]
There is an implied promise of good faith as defined in
section 336.1-201, subsection (19)(b)(20), by all parties in all
agricultural contracts. In an action to recover damages, if the
court finds that there has been a violation of this provision,
damages, court costs, and attorney fees may be recovered.
Sec. 2. Minnesota Statutes 2002, section 84.787,
subdivision 9, is amended to read:
Subd. 9. [PERSON.] "Person" has the meaning given it in
section 336.1-201, subsection (30)(b)(27).
Sec. 3. Minnesota Statutes 2002, section 84.797,
subdivision 10, is amended to read:
Subd. 10. [PERSON.] "Person" has the meaning given in
section 336.1-201, paragraph (30)(b)(27).
Sec. 4. Minnesota Statutes 2002, section 84.92,
subdivision 6, is amended to read:
Subd. 6. [PERSON.] "Person" means an individual or an
organization as defined in section 336.1-201, paragraph
(30)(b)(27).
Sec. 5. Minnesota Statutes 2002, section 86B.820,
subdivision 12, is amended to read:
Subd. 12. [SECURITY INTEREST.] "Security interest" has the
meaning given it in section 336.1-201, subsection (37)(b)(35),
and includes statutory liens for which lien statements are filed.
Sec. 6. Minnesota Statutes 2002, section 168A.01,
subdivision 20, is amended to read:
Subd. 20. [SECURITY INTEREST.] "Security interest" means a
security interest as defined in section 336.1-201(37)(b)(35). A
security interest is "perfected" when it is valid against third
parties generally, subject only to specific statutory exception.
Sec. 7. Minnesota Statutes 2002, section 234.27, is
amended to read:
234.27 [UNIFORM COMMERCIAL CODE TO APPLY.]
The provisions of article 7 of the Uniform Commercial Code
relative to the negotiation, transfer, sale, or endorsement of
warehouse receipts, apply, to the extent possible, to the
negotiation, transfer, sale, or endorsement of certificates
under this chapter.
For the purpose of application of the Uniform Commercial
Code:
(a) A certificate authorized by the department which
evidences the storing of grain under this chapter is a document
of title as defined in section 336.1-201, clause (15)(b)(16).
(b) A person who has title to and possession of grain
stored under this chapter is a warehouse operator as defined in
section 336.7-102, clause (1)(h).
Sec. 8. Minnesota Statutes 2002, section 325L.03, is
amended to read:
325L.03 [SCOPE.]
(a) Except as otherwise provided in paragraphs (b) and (e),
this chapter applies to electronic records and electronic
signatures relating to a transaction.
(b) This chapter does not apply to a transaction to the
extent it is governed by:
(1) the Uniform Commercial Code other than sections
336.1-107 and 336.1-206 section 336.1-306, Article 2, and
Article 2A; and
(2) section 145C.03, subdivision 1, relating to
requirements for creation of a health care directive; section
507.24, relating to requirements for recording any conveyance,
power of attorney, or other instrument affecting real estate;
section 523.23, subdivision 3, relating to requirements for
creation of a statutory short form power of attorney; and
section 253B.03, subdivision 6b, relating to requirements for
creation of a declaration of preferences or instructions
regarding intrusive mental health treatment.
(c) This chapter applies to an electronic record or
electronic signature otherwise excluded from the application of
this chapter under paragraph (b) to the extent it is governed by
a law other than those specified in paragraph (b).
(d) A transaction subject to this chapter is also subject
to other applicable substantive law.
(e) This chapter does not apply to the creation and
execution of wills, codicils, or trusts other than trusts
relating to the conduct of business, commercial, or governmental
purposes.
Sec. 9. Minnesota Statutes 2002, section 325L.16, is
amended to read:
325L.16 [TRANSFERABLE RECORD.]
(a) In this section, "transferable record" means an
electronic record that:
(1) would be a note under Article 3 of the Uniform
Commercial Code or a document under Article 7 of the Uniform
Commercial Code if the electronic record were in writing; and
(2) the issuer of the electronic record expressly has
agreed is a transferable record.
(b) A person has control of a transferable record if a
system employed for evidencing the transfer of interests in the
transferable record reliably establishes that person as the
person to which the transferable record was issued or
transferred.
(c) A system satisfies paragraph (b), and a person is
deemed to have control of a transferable record, if the
transferable record is created, stored, and assigned in such a
manner that:
(1) a single authoritative copy of the transferable record
exists which is unique, identifiable, and, except as otherwise
provided in clauses (4), (5), and (6), unalterable;
(2) the authoritative copy identifies the person asserting
control as:
(i) the person to which the transferable record was issued;
or
(ii) if the authoritative copy indicates that the
transferable record has been transferred, the person to which
the transferable record was most recently transferred;
(3) the authoritative copy is communicated to and
maintained by the person asserting control or its designated
custodian;
(4) copies or revisions 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 revision of the authoritative copy is readily
identifiable as authorized or unauthorized.
(d) Except as otherwise agreed, a person having control of
a transferable record is the holder, as defined in section
336.1-201(20)(b)(21) of the Uniform Commercial Code, of the
transferable record and has the same rights and defenses as a
holder of an equivalent record or writing under the Uniform
Commercial Code, including, if the applicable statutory
requirements under section 336.3-302(a), 336.7-501, or 336.9-330
of the Uniform Commercial Code are satisfied, the rights and
defenses of a holder in due course, a holder to which a
negotiable document of title has been duly negotiated, or a
purchaser, respectively. Delivery, possession, and endorsement
are not required to obtain or exercise any of the rights under
this paragraph.
(e) Except as otherwise agreed, an obligor under a
transferable record has the same rights and defenses as an
equivalent obligor under equivalent records or writings under
the Uniform Commercial Code.
(f) If requested by a person against which enforcement is
sought, the person seeking to enforce the transferable record
shall provide reasonable proof that the person is in control of
the transferable record. Proof may include access to the
authoritative copy of the transferable record and related
business records sufficient to review the terms of the
transferable record and to establish the identity of the person
having control of the transferable record.
Sec. 10. Minnesota Statutes 2002, section 513.33,
subdivision 1, is amended to read:
Subdivision 1. [DEFINITIONS.] For the purposes of this
section, the following terms have the meanings given them:
(1) "credit agreement" means an agreement to lend or
forbear repayment of money, goods, or things in action, to
otherwise extend credit, or to make any other financial
accommodation;
(2) "creditor" means a person who extends credit under a
credit agreement with a debtor;
(3) "debtor" means a person who obtains credit or seeks a
credit agreement with a creditor or who owes money to a
creditor; and
(4) "signed" has the meaning specified in section
336.1-201(39)(b)(37).
Sec. 11. Minnesota Statutes 2002, section 514.963,
subdivision 9, is amended to read:
Subd. 9. [PERSON.] "Person" means an individual or an
organization as defined in section 336.1-201(30)(b)(27).
Sec. 12. Minnesota Statutes 2002, section 514.965,
subdivision 10, is amended to read:
Subd. 10. [PERSON.] "Person" means an individual or an
organization as defined in section 336.1-201(30)(b)(27).
ARTICLE 4
UNIFORM COMMERCIAL CODE
ARTICLE 7 - DOCUMENTS OF TITLE
PART 1
GENERAL
Section 1. [336.7-101] [SHORT TITLE.]
This article may be cited as Uniform Commercial Code -
Documents of Title.
Sec. 2. [336.7-102] [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) [RESERVED.]
(7) "Goods" means all things that are treated as movable
for the purposes of a contract for storage or transportation.
(8) "Issuer" means a bailee that issues a document of title
or, in the case of an unaccepted delivery order, the person that
orders the possessor of goods to deliver. The term includes a
person for which an agent or employee purports to act in issuing
a document if the agent or employee has real or apparent
authority to issue documents, even if the issuer did not receive
any goods, the goods were misdescribed, or in any other respect
the agent or employee violated the issuer's instructions.
(9) "Person entitled under the document" means the holder,
in the case of a negotiable document of title, or the person to
which delivery of the goods is to be made by the terms of, or
pursuant to instructions in a record under, a nonnegotiable
document of title.
(10) [RESERVED.]
(11) "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 transportation 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 336.2-106.
(2) "Lessee in the ordinary course of business," section
336.2A-103.
(3) "Receipt" of goods, section 336.2-103.
(c) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 3. [336.7-103] [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 otherwise is
within the definition of a document of title.
(c) This act modifies, limits, and supersedes the federal
Electronic 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 chapter 325L
and this article, this article governs.
Sec. 4. [336.7-104] [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.
Sec. 5. [336.7-105] [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 document 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 document 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
(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 document that the warrantor was a person entitled
under the tangible document when the warrantor surrendered
possession of the tangible document to the issuer.
Sec. 6. [336.7-106] [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 electronic 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 the document has
been transferred, the person to which the document was most
recently transferred;
(3) the authoritative copy is communicated to and
maintained by the person asserting control or its designated
custodian;
(4) copies or amendments that add or change an identified
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
Sec. 7. [336.7-201] [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
commodities, 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.
Sec. 8. [336.7-202] [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 omission:
(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;
(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 the Uniform Commercial Code and do not
impair its obligation of delivery under section 336.7-403 or its
duty of care under section 336.7-204. Any contrary provision is
ineffective.
Sec. 9. [336.7-203] [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.
Sec. 10. [336.7-204] [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 circumstances. 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 storage 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.
Sec. 11. [336.7-205] [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.
Sec. 12. [336.7-206] [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 336.7-210.
(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 period provided in subsection (a)
and section 336.7-210, the warehouse may specify in the notice
given under subsection (a) any reasonable 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
disposition.
(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.
Sec. 13. [336.7-207] [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 negotiated.
Sec. 14. [336.7-208] [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.
Sec. 15. [336.7-209] [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 whenever 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 warehouse'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 336.7-403; or
(C) power of disposition under sections 336.2-403,
336.2A-304(2), 336.2A-305(2), 336.9-320, or 336.9-321(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 delivers or unjustifiably refuses to deliver.
Sec. 16. [336.7-210] [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 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 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) 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 notified.
(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 10 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
15 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 10 days before the sale in
not fewer than six conspicuous 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 delivery 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.
PART 3
BILLS OF LADING: SPECIAL PROVISIONS
Sec. 17. [336.7-301] [LIABILITY FOR NONRECEIPT OR
MISDESCRIPTION; "SAID TO CONTAIN"; "SHIPPER'S WEIGHT, LOAD, AND
COUNT"; IMPROPER 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
condition or the receipt or description is qualified by
"contents or condition 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 packages 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 statement is true, the issuer is not
liable for damages caused by the improper 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.
Sec. 18. [336.7-302] [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 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.
Sec. 19. [336.7-303] [DIVERSION; RECONSIGNMENT; CHANGE OF
INSTRUCTIONS.]
(a) Unless the bill of lading otherwise provides, a carrier
may deliver the goods to a person or destination other than that
stated in the bill or may otherwise dispose of the goods,
without liability for misdelivery, 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 entitled 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.
Sec. 20. [336.7-304] [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
against the first presented part of a tangible bill of lading
lawfully issued in a set. Delivery in this manner discharges
the bailee's obligation on the whole bill.
Sec. 21. [336.7-305] [DESTINATION BILLS.]
(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
336.7-105, may procure a substitute bill to be issued at any
place designated in the request.
Sec. 22. [336.7-306] [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.
Sec. 23. [336.7-307] [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 effective 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.
Sec. 24. [336.7-308] [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 different
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.
(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 delivery 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
336.7-210(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.
Sec. 25. [336.7-309] [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 opportunity 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
Sec. 26. [336.7-401] [IRREGULARITIES IN ISSUE OF RECEIPT
OR BILL OR CONDUCT OF ISSUER.]
The obligations imposed by this article on an issuer apply
to a document 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 document purports to be a warehouse receipt.
Sec. 27. [336.7-402] [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 336.7-105. The issuer is
liable for damages caused by its overissue or failure to
identify a duplicate document by a conspicuous notation.
Sec. 28. [336.7-403] [OBLIGATION OF BAILEE TO DELIVER;
EXCUSE.]
(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 following:
(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 enforcement 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 336.2-705 or by a lessor of its right to
stop delivery pursuant to section 336.2A-526;
(5) a diversion, reconsignment, or other disposition
pursuant to section 336.7-303;
(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 336.7-503(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.
Sec. 29. [336.7-404] [NO LIABILITY FOR GOOD-FAITH DELIVERY
PURSUANT TO DOCUMENT OF TITLE.]
A bailee that in good faith has received goods and
delivered or otherwise 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
Sec. 30. [336.7-501] [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, 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 document 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 obligation.
(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 notified 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.
Sec. 31. [336.7-502] [RIGHTS ACQUIRED BY DUE NEGOTIATION.]
(a) Subject to sections 336.7-205 and 336.7-503, a holder
to which a negotiable 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 obligation 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 336.7-503, title and rights acquired
by due negotiation 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 tangible document or control of a negotiable
electronic document by misrepresentation, 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.
Sec. 32. [336.7-503] [DOCUMENT OF TITLE TO GOODS DEFEATED
IN CERTAIN CASES.]
(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 336.7-403; or
(C) power of disposition under section 336.2-403,
336.2A-304(2), 336.2A-305(2), 336.9-320, or 336.9-321(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
336.7-504 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 pursuant to its own bill of lading discharges the
carrier's obligation to deliver.
Sec. 33. [336.7-504] [RIGHTS ACQUIRED IN ABSENCE OF DUE
NEGOTIATION; EFFECT OF DIVERSION; STOPPAGE OF DELIVERY.]
(a) A transferee of a document of title, whether negotiable
or nonnegotiable, to which the document has been delivered but
not duly negotiated, acquires the title and rights that its
transferor had or had actual 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 transfer as void under section 336.2-402 or 336.2A-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 notification 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
336.2-705 or a lessor under section 336.2A-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.
Sec. 34. [336.7-505] [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.
Sec. 35. [336.7-506] [DELIVERY WITHOUT INDORSEMENT: RIGHT
TO COMPEL INDORSEMENT.]
The transferee of a negotiable tangible document of title
has a specifically enforceable right to have its transferor
supply any necessary indorsement, but the transfer becomes a
negotiation only as of the time the indorsement is supplied.
Sec. 36. [336.7-507] [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
336.7-508, 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.
Sec. 37. [336.7-508] [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 collecting bank or other
intermediary has purchased or made advances against the claim or
draft to be collected.
Sec. 38. [336.7-509] [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, 2A,
or 5.
PART 6
WAREHOUSE RECEIPTS AND BILLS OF LADING:
MISCELLANEOUS PROVISIONS
Sec. 39. [336.7-601] [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
nonnegotiable, 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.
Sec. 40. [336.7-602] [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 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.
Sec. 41. [336.7-603] [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.
PART 7
MISCELLANEOUS PROVISIONS
Sec. 42. [EFFECTIVE DATE.]
This act takes effect on August 1, 2004.
Sec. 43. [REPEALER.]
Minnesota Statutes 2002, sections 336.7-101, 336.7-102,
336.7-103, 336.7-104, 336.7-105, 336.7-201, 336.7-202,
336.7-203, 336.7-204, 336.7-205, 336.7-206, 336.7-207,
336.7-208, 336.7-209, 336.7-210, 336.7-301, 336.7-302,
336.7-303, 336.7-304, 336.7-305, 336.7-306, 336.7-307,
336.7-308, 336.7-309, 336.7-401, 336.7-402, 336.7-403,
336.7-404, 336.7-501, 336.7-502, 336.7-503, 336.7-504,
336.7-505, 336.7-506, 336.7-507, 336.7-508, 336.7-509,
336.7-601, 336.7-602, 336.7-603, and 336.10-104, are repealed.
Sec. 44. [336.7-703] [APPLICABILITY.]
This act applies to a document of title that is issued or a
bailment that arises on or after the effective date of this
act. This act does not apply to a document of title that is
issued or a bailment that arises before the effective date of
this act even if the document of title or bailment would be
subject to this act if the document of title had been issued or
bailment had arisen on or after the effective date of this act.
This act does not apply to a right of action that has accrued
before the effective date of this act.
Sec. 45. [336.7-704] [SAVINGS CLAUSE.]
A document of title issued or a bailment that arises before
the effective date of this act and the rights, obligations, and
interests flowing from that document or bailment are governed by
any statute or other rule amended or repealed by this act as if
amendment or repeal had not occurred and may be terminated,
completed, consummated, or enforced under that statute or other
rule.
ARTICLE 5
UNIFORM COMMERCIAL CODE
CONFORMING CHANGES
Section 1. Minnesota Statutes 2002, section 336.2-103, is
amended to read:
336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(1) In this article unless the context otherwise requires:
(a) "Buyer" means a person who buys or contracts to buy
goods.
(b) "Good faith" in the case of a merchant means honesty in
fact and the observance of reasonable commercial standards of
fair dealing in the trade.
(c) "Receipt" of goods means taking physical possession of
them.
(d) "Seller" means a person who sells or contracts to sell
goods.
(2) Other definitions applying to this article or to
specified parts thereof, and the sections in which they appear
are:
"Acceptance," section 336.2-606.
"Banker's credit," section 336.2-325.
"Between merchants," section 336.2-104.
"Cancellation," section 336.2-106(4).
"Commercial unit," section 336.2-105.
"Confirmed credit," section 336.2-325.
"Conforming to contract," section 336.2-106.
"Contract for sale," section 336.2-106.
"Cover," section 336.2-712.
"Entrusting," section 336.2-403.
"Financing agency," section 336.2-104.
"Future goods," section 336.2-105.
"Goods," section 336.2-105.
"Identification," section 336.2-501.
"Installment contract," section 336.2-612.
"Letter of credit," section 336.2-325.
"Lot," section 336.2-105.
"Merchant," section 336.2-104.
"Overseas," section 336.2-323.
"Person in position of seller," section 336.2-707.
"Present sale," section 336.2-106.
"Sale," section 336.2-106.
"Sale on approval," section 336.2-326.
"Sale or return," section 336.2-326.
"Termination," section 336.2-106.
(3) "Control" as provided in section 336.7-106 and the
following definitions in other articles apply to this article:
"Check," section 336.3-104.
"Consignee," section 336.7-102.
"Consignor," section 336.7-102.
"Consumer goods," section 336.9-102.
"Dishonor," section 336.3-502.
"Draft," section 336.3-104.
(4) In addition article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 2. Minnesota Statutes 2002, section 336.2-104, is
amended to read:
336.2-104 [DEFINITIONS: "MERCHANT"; "BETWEEN MERCHANTS";
"FINANCING AGENCY".]
(1) "Merchant" means a person who deals in goods of the
kind or otherwise by occupation holds out as having knowledge or
skill peculiar to the practices or goods involved in the
transaction or to whom such knowledge or skill may be attributed
by employment of an agent or broker or other intermediary who by
occupation holds out as having such knowledge or skill.
(2) "Financing agency" means a bank, finance company or
other person who in the ordinary course of business makes
advances against goods or documents of title or who by
arrangement with either the seller or the buyer intervenes in
ordinary course to make or collect payment due or claimed under
the contract for sale, as by purchasing or paying the seller's
draft or making advances against it or by merely taking it for
collection whether or not documents of title accompany or are
associated with the draft. "Financing agency" includes also a
bank or other person who similarly intervenes between persons
who are in the position of seller and buyer in respect to the
goods (section 336.2-707).
(3) "Between merchants" means in any transaction with
respect to which both parties are chargeable with the knowledge
or skill of merchants.
Sec. 3. Minnesota Statutes 2002, section 336.2-310, is
amended to read:
336.2-310 [OPEN TIME FOR PAYMENT OR RUNNING OF CREDIT;
AUTHORITY TO SHIP UNDER RESERVATION.]
Unless otherwise agreed
(a) payment is due at the time and place at which the buyer
is to receive the goods even though the place of shipment is the
place of delivery; and
(b) if the seller is authorized to send the goods the
seller may ship them under reservation, and may tender the
documents of title, but the buyer may inspect the goods after
their arrival before payment is due unless such inspection is
inconsistent with the terms of the contract (section 336.2-513);
and
(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
(d) where the seller is required or authorized to ship the
goods on credit the credit period runs from the time of shipment
but postdating the invoice or delaying its dispatch will
correspondingly delay the starting of the credit period.
Sec. 4. Minnesota Statutes 2002, section 336.2-323, is
amended to read:
336.2-323 [FORM OF BILL OF LADING REQUIRED IN OVERSEAS
SHIPMENT; "OVERSEAS".]
(1) Where the contract contemplates overseas shipment and
contains a term C.I.F. or C.& F. or F.O.B. vessel, the seller
unless otherwise agreed must obtain a negotiable bill of lading
stating that the goods have been loaded on board or, in the case
of a term C.I.F. or C.& F., received for shipment.
(2) Wherein 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
(a) due tender of a single part is acceptable within the
provisions of this article on cure of improper delivery
(subsection (1) of section 336.2-508); and
(b) even though the full set is demanded, if the documents
are sent from abroad the person tendering an incomplete set may
nevertheless require payment upon furnishing an indemnity which
the buyer in good faith deems adequate.
(3) A shipment by water or by air or a contract
contemplating such shipment is "overseas" insofar as by usage of
trade or agreement it is subject to the commercial, financing or
shipping practices characteristic of international deep water
commerce.
Sec. 5. Minnesota Statutes 2002, section 336.2-401, is
amended to read:
336.2-401 [PASSING OF TITLE; RESERVATION FOR SECURITY;
LIMITED APPLICATION OF THIS SECTION.]
Each provision of this article with regard to the rights,
obligations and remedies of the seller, the buyer, purchasers or
other third parties applies irrespective of title to the goods
except where the provision refers to such title. Insofar as
situations are not covered by the other provisions of this
article and matters concerning title become material the
following rules apply:
(1) Title to goods cannot pass under a contract for sale
prior to their identification to the contract (section
336.2-501), and unless otherwise explicitly agreed the buyer
acquires by their identification a special property as limited
by this chapter. Any retention or reservation by the seller of
the title (property) in goods shipped or delivered to the buyer
is limited in effect to a reservation of a security interest.
Subject to these provisions and to the provisions of the article
on secured transactions (article 9), title to goods passes from
the seller to the buyer in any manner and on any conditions
explicitly agreed on by the parties.
(2) Unless otherwise explicitly agreed title passes to the
buyer at the time and place at which the seller completes
performance with reference to the physical delivery of the
goods, despite any reservation of a security interest and even
though a document of title is to be delivered at a different
time or place; and in particular and despite any reservation of
a security interest by the bill of lading
(a) if the contract requires or authorizes the seller to
send the goods to the buyer but does not require the seller to
deliver them at destination, title passes to the buyer at the
time and place of shipment; but
(b) if the contract requires delivery at destination, title
passes on tender there.
(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 the
seller 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
identified and no documents of title are to be delivered, title
passes at the time and place of contracting.
(4) A rejection or other refusal by the buyer to receive or
retain the goods, whether or not justified, or a justified
revocation of acceptance revests title to the goods in the
seller. Such revesting occurs by operation of law and is not a
"sale."
Sec. 6. Minnesota Statutes 2002, section 336.2-503, is
amended to read:
336.2-503 [MANNER OF SELLER'S TENDER OF DELIVERY.]
(1) Tender of delivery requires that the seller put and
hold conforming goods at the buyer's disposition and give the
buyer any notification reasonably necessary to enable the buyer
to take delivery. The manner, time and place for tender are
determined by the agreement and this article, and in particular
(a) tender must be at a reasonable hour, and if it is of
goods they must be kept available for the period reasonably
necessary to enable the buyer to take possession; but
(b) unless otherwise agreed the buyer must furnish
facilities reasonably suited to the receipt of the goods.
(2) Where the case is within the next section respecting
shipment tender requires that the seller comply with its
provisions.
(3) Where the seller is required to deliver at a particular
destination tender requires that the seller comply with
subsection (1) and also in any appropriate case tender documents
as described in subsections (4) and (5) of this section.
(4) Where goods are in the possession of a bailee and are
to be delivered without being moved
(a) tender requires that the seller either tender a
negotiable document of title covering such goods or procure
acknowledgment by the bailee of the buyer's right to possession
of the goods; but
(b) tender to the buyer of a nonnegotiable document of
title or of a written direction record directing to the bailee
to deliver is sufficient tender unless the buyer seasonably
objects, and except as otherwise provided in Article 9 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
nonnegotiable 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 document or to obey the direction defeats the
tender.
(5) Where the contract requires the seller to deliver
documents
(a) the seller must tender all such documents in correct
form, except as provided in this article with respect to bills
of lading in a set (subsection (2) of section 336.2-323); and
(b) tender through customary banking channels is sufficient
and dishonor of a draft accompanying or associated with the
documents constitutes nonacceptance or rejection.
Sec. 7. Minnesota Statutes 2002, section 336.2-505, is
amended to read:
336.2-505 [SELLER'S SHIPMENT UNDER RESERVATION.]
(1) Where the seller has identified goods to the contract
by or before shipment:
(a) The seller's procurement of a negotiable bill of
lading to the seller's own order or otherwise reserves in the
seller a security interest in the goods. The seller's
procurement of the bill to the order of a financing agency or of
the buyer indicates in addition only the seller's expectation of
transferring that interest to the person named.
(b) A nonnegotiable bill of lading to the seller or the
seller's nominee reserves possession of the goods as security
but except in a case of conditional delivery (subsection (2) of
section 336.2-507) a nonnegotiable bill of lading naming the
buyer as a consignee reserves no security interest even though
the seller retains possession or control of the bill of lading.
(2) When shipment by the seller with reservation of a
security interest 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 negotiable
document of title.
Sec. 8. Minnesota Statutes 2002, section 336.2-506, is
amended to read:
336.2-506 [RIGHTS OF FINANCING AGENCY.]
(1) A financing agency by paying or purchasing for value a
draft which relates to a shipment of goods acquires to the
extent of the payment or purchase and in addition to its own
rights under the draft and any document of title securing it any
rights of the shipper in the goods including the right to stop
delivery and the shipper's right to have the draft honored by
the buyer.
(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.
Sec. 9. Minnesota Statutes 2002, section 336.2-509, is
amended to read:
336.2-509 [RISK OF LOSS IN THE ABSENCE OF BREACH.]
(1) Where the contract requires or authorizes the seller to
ship the goods by carrier
(a) if it does not require the seller to deliver them at a
particular destination, the risk of loss passes to the buyer
when the goods are duly delivered to the carrier even though the
shipment is under reservation (section 336.2-505); but
(b) if it does require the seller to deliver them at a
particular destination and the goods are there duly tendered
while in the possession of the carrier, the risk of loss passes
to the buyer when the goods are there duly so tendered as to
enable the buyer to take delivery.
(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 the buyer's receipt of possession or control of a
negotiable document 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 the buyer's receipt of possession or control of a
nonnegotiable document of title or other written direction to
deliver in a record, as provided in subsection (4) (b) of
section 336.2-503.
(3) In any case not within subsection (1) or (2), the risk
of loss passes to the buyer on receipt of the goods if the
seller is a merchant; otherwise the risk passes to the buyer on
tender of delivery.
(4) The provisions of this section are subject to contrary
agreement of the parties and to the provisions of this article
on sale on approval (section 336.2-327) and on effect of breach
on risk of loss (section 336.2-510).
Sec. 10. Minnesota Statutes 2002, section 336.2-605, is
amended to read:
336.2-605 [WAIVER OF BUYER'S OBJECTIONS BY FAILURE TO
PARTICULARIZE.]
(1) The buyer's failure to state in connection with
rejection a particular defect which is ascertainable by
reasonable inspection precludes the buyer from relying on the
unstated defect to justify rejection or to establish breach
(a) where the seller could have cured it if stated
seasonably; or
(b) between merchants when the seller has after rejection
made a request in writing for a full and final written statement
of all defects on which the buyer proposes to rely.
(2) Payment against documents made without reservation of
rights precludes recovery of the payment for defects apparent on
the face of in the documents.
Sec. 11. Minnesota Statutes 2002, section 336.2-705, is
amended to read:
336.2-705 [SELLER'S STOPPAGE OF DELIVERY IN TRANSIT OR
OTHERWISE.]
(1) The seller may stop delivery of goods in the possession
of a carrier or other bailee on discovering the buyer to be
insolvent (section 336.2-702) and may stop delivery of carload,
truckload, planeload or larger shipments of express or freight
when the buyer repudiates or fails to make a payment due before
delivery or if for any other reason the seller has a right to
withhold or reclaim the goods.
(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 a warehouse operator; or
(d) negotiation to the buyer of any negotiable document of
title covering the goods.
(3) (a) To stop delivery the seller must so notify as to
enable the bailee by reasonable diligence to prevent delivery of
the goods.
(b) After such notification the bailee must hold and
deliver the goods according to the directions of the seller but
the seller is liable to the bailee for any ensuing charges or
damages.
(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.
(d) A carrier who has issued a nonnegotiable bill of lading
is not obliged to obey a notification to stop received from a
person other than the consignor.
Sec. 12. Minnesota Statutes 2002, section 336.2A-103, is
amended to read:
336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(1) In this article unless the context otherwise requires:
(a) "Buyer in ordinary course of business" means a person
who in good faith and without knowledge that the sale 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.
(b) "Cancellation" occurs when either party puts an end to
the lease contract for default by the other party.
(c) "Commercial unit" means a unit of goods that by
commercial usage is a single whole for purposes of lease and
division of which materially impairs its character or value on
the market or in use. A commercial unit may be a single
article, as a machine, or a set of articles, as a suite of
furniture or a line of machinery, or a quantity, as a gross or
carload, or any other unit treated in use or in the relevant
market as a single whole.
(d) "Conforming" goods or performance under a lease
contract means goods or performance that are in accordance with
the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor regularly
engaged in the business of leasing or selling makes to a lessee
who is an individual and who takes under the lease primarily for
a personal, family, or household purpose, if the total payments
to be made under the lease contract, excluding payments for
options to renew or buy, do not exceed $25,000.
(f) "Fault" means wrongful act, omission, breach, or
default.
(g) "Finance lease" means a lease in which
(1) the lessor does not select, manufacture, or supply the
goods,
(2) the lessor acquires the goods or the right to
possession and use of the goods in connection with the lease,
and
(3) either
(i) the lessee receives a copy of the contract evidencing
the lessor's purchase of the goods or a disclaimer statement on
or before signing the lease contract, or
(ii) the lessee's approval of the contract evidencing the
lessor's purchase of the goods or a disclaimer statement is a
condition to effectiveness of the lease contract.
"Disclaimer statement" means a written statement that is
part of or separate from the lease contract that discloses all
warranties and other rights provided to the lessee by the lessor
and supplier in connection with the lease contract and informs
the lessee in a conspicuous manner that there are no warranties
or other rights provided to the lessee by the lessor and
supplier other than those disclosed in the statement.
(h) "Goods" means all things that are movable at the time
of identification to the lease contract, or are fixtures
(section 336.2A-309), but the term does not include money,
documents, instruments, accounts, chattel paper, general
intangibles, or minerals or the like, including oil and gas,
before extraction. The term also includes the unborn young of
animals.
(i) "Installment lease contract" means a lease contract
that authorizes or requires the delivery of goods in separate
lots to be separately accepted, even though the lease contract
contains a clause "each delivery is a separate lease" or its
equivalent.
(j) "Lease" means a transfer of the right to possession and
use of goods for a term in return for consideration, but a sale,
including a sale on approval or a sale or return, or retention
or creation of a security interest is not a lease. Unless the
context clearly indicates otherwise, the term includes a
sublease.
(k) "Lease agreement" means the bargain, with respect to
the lease, of the lessor and the lessee in fact as found in
their language or by implication from other circumstances
including course of dealing or usage of trade or course of
performance as provided in this article. Unless the context
clearly indicates otherwise, the term includes a sublease
agreement.
(l) "Lease contract" means the total legal obligation that
results from the lease agreement as affected by this article and
any other applicable rules of law. Unless the context clearly
indicates otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor
or the lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person
who in good faith and without knowledge that the lease is in
violation of the ownership rights or security interest or
leasehold interest of a third party in the goods leases in
ordinary course from a person in the business of selling or
leasing goods of that kind but does not include a pawnbroker.
"Leasing" may be for cash or by exchange of other property or on
secured or unsecured credit and includes 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.
(p) "Lessor" means a person who transfers the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's
interest in the goods after expiration, termination, or
cancellation of the lease contract.
(r) "Lien" means a charge against or interest in goods to
secure payment of a debt or performance of an obligation, but
the term does not include a security interest.
(s) "Lot" means a parcel or a single article that is the
subject matter of a separate lease or delivery, whether or not
it is sufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant
with respect to goods of the kind subject to the lease.
(u) "Present value" means the amount as of a date certain
of one or more sums payable in the future, discounted to the
date certain. The discount is determined by the interest rate
specified by the parties if the rate was not manifestly
unreasonable at the time the transaction was entered into;
otherwise, the discount is determined by a commercially
reasonable rate that takes into account the facts and
circumstances of each case at the time the transaction was
entered into.
(v) "Purchase" includes taking by sale, lease, mortgage,
security interest, pledge, gift, or any other voluntary
transaction creating an interest in goods.
(w) "Sublease" means a lease of goods the right to
possession and use of which was acquired by the lessor as a
lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor buys or
leases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which a lessor
buys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant to a
power created by agreement or law puts an end to the lease
contract otherwise than for default.
(2) Other definitions applying to this article and the
sections in which they appear are:
"Accessions." Section 336.2A-310(1).
"Construction mortgage." Section 336.2A-309(1)(d).
"Encumbrance." Section 336.2A-309(1)(e).
"Fixtures." Section 336.2A-309(1)(a).
"Fixture filing." Section 336.2A-309(1)(b).
"Purchase money lease." Section 336.2A-309(1)(c).
(3) The following definitions in other articles apply to
this article:
"Account." Section 336.9-102(a)(2).
"Between merchants." Section 336.2-104(3).
"Buyer." Section 336.2-103(1)(a).
"Chattel paper." Section 336.9-102(a)(11).
"Consumer goods." Section 336.9-102(a)(23).
"Document." Section 336.9-102(a)(30).
"Entrusting." Section 336.2-403(3).
"General intangible." Section 336.9-102(a)(42).
"Good faith." Section 336.2-103(1)(b).
"Instrument." Section 336.9-102(a)(47).
"Merchant." Section 336.2-104(1).
"Mortgage." Section 336.9-102(a)(55).
"Pursuant to commitment." Section 336.9-102(a)(68).
"Receipt." Section 336.2-103(1)(c).
"Sale." Section 336.2-106(1).
"Sale on approval." Section 336.2-326.
"Sale or return." Section 336.2-326.
"Seller." Section 336.2-103(1)(d).
(4) In addition, sections 336.1-101 to 336.1-109 contain
general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 13. Minnesota Statutes 2002, section 336.2A-514, is
amended to read:
336.2A-514 [WAIVER OF LESSEE'S OBJECTIONS.]
(1) In rejecting goods, a lessee's failure to state a
particular defect that is ascertainable by reasonable inspection
precludes the lessee from relying on the defect to justify
rejection or to establish default:
(a) if, stated seasonably, the lessor or the supplier could
have cured it (section 336.2A-513); or
(b) between merchants if the lessor or the supplier after
rejection has made a request in writing for a full and final
written statement of all defects on which the lessee proposes to
rely.
(2) A lessee's failure to reserve rights when paying rent
or other consideration against documents precludes recovery of
the payment for defects apparent on the face of in the documents.
Sec. 14. Minnesota Statutes 2002, section 336.2A-526, is
amended to read:
336.2A-526 [LESSOR'S STOPPAGE OF DELIVERY IN TRANSIT OR
OTHERWISE.]
(1) A lessor may stop delivery of goods in the possession
of a carrier or other bailee if the lessor discovers the lessee
to be insolvent and may stop delivery of carload, truckload,
planeload, or larger shipments of express or freight if the
lessee repudiates or fails to make a payment due before
delivery, whether for rent, security or otherwise under the
lease contract, or for any other reason the lessor has a right
to withhold or take possession of the goods.
(2) In pursuing its remedies under subsection (1), the
lessor may stop delivery until
(a) receipt of the goods by the lessee;
(b) acknowledgment to the lessee by any bailee of the
goods, except a carrier, that the bailee holds the goods for the
lessee; or
(c) an acknowledgment to the lessee by a carrier via
reshipment or as a warehouse operator.
(3)(a) To stop delivery, a lessor shall so notify as to
enable the bailee by reasonable diligence to prevent delivery of
the goods.
(b) After notification, the bailee shall hold and deliver
the goods according to the directions of the lessor, but the
lessor is liable to the bailee for any ensuing charges or
damages.
(c) A carrier who has issued a nonnegotiable bill of lading
is not obliged to obey a notification to stop received from a
person other than the consignor.
Sec. 15. Minnesota Statutes 2003 Supplement, section
336.4-104, is amended to read:
336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(a) In this article, unless the context otherwise requires:
(1) "Account" means any deposit or credit account with a
bank, including a demand, time, savings, passbook, share draft,
or like account, other than an account evidenced by a
certificate of deposit;
(2) "Afternoon" means the period of a day between noon and
midnight;
(3) "Banking day" means that part of any day, excluding
Saturday, Sunday, and holidays, on which a bank is open to the
public for carrying on substantially all of its banking
functions;
(4) "Clearinghouse" means an association of banks or other
payors regularly clearing items;
(5) "Customer" means a person having an account with a bank
or for whom a bank has agreed to collect items, including a bank
that maintains an account at another bank;
(6) "Documentary draft" means a draft to be presented for
acceptance or payment if specified documents, certificated
securities (section 336.8-102) or instructions for
uncertificated securities (section 336.8-102), or other
certificates, statements, or the like are to be received by the
drawee or other payor before acceptance or payment of the draft;
(7) "Draft" means a draft as defined in section 336.3-104
or an item, other than an instrument, that is an order;
(8) "Drawee" means a person ordered in a draft to make
payment;
(9) "Item" means an instrument or a promise or order to pay
money handled by a bank for collection or payment. The term
does not include a payment order governed by article 4A or a
credit or debit card slip;
(10) "Midnight deadline" with respect to a bank is midnight
on its next banking day following the banking day on which it
receives the relevant item or notice or from which the time for
taking action commences to run, whichever is later;
(11) "Settle" means to pay in cash, by clearinghouse
settlement, in a charge or credit or by remittance, or otherwise
as agreed. A settlement may be either provisional or final;
(12) "Suspends payments" with respect to a bank means that
it has been closed by order of the supervisory authorities, that
a public officer has been appointed to take it over, or that it
ceases or refuses to make payments in the ordinary course of
business.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Agreement for electronic presentment," section 336.4-110
"Bank," section 336.4-105
"Collecting bank," section 336.4-105
"Depositary bank," section 336.4-105
"Intermediary bank," section 336.4-105
"Payor bank," section 336.4-105
"Presenting bank," section 336.4-105
"Presentment notice," section 336.4-110
(c) "Control" as provided in section 336.7-106 and the
following definitions in other articles apply to this article:
"Acceptance," section 336.3-409
"Alteration," section 336.3-407
"Cashier's check," section 336.3-104
"Certificate of deposit," section 336.3-104
"Certified check," section 336.3-409
"Check," section 336.3-104
"Good faith," section 336.3-103
"Holder in due course," section 336.3-302
"Instrument," section 336.3-104
"Notice of dishonor," section 336.3-503
"Order," section 336.3-103
"Ordinary care," section 336.3-103
"Person entitled to enforce," section 336.3-301
"Presentment," section 336.3-501
"Promise," section 336.3-103
"Prove," section 336.3-103
"Record," section 336.3-103
"Remotely-created item," section 336.3-103
"Teller's check," section 336.3-104
"Unauthorized signature," section 336.3-403
(d) In addition, article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 16. Minnesota Statutes 2002, section 336.4-210, is
amended to read:
336.4-210 [SECURITY INTEREST OF COLLECTING BANK IN ITEMS,
ACCOMPANYING DOCUMENTS, AND PROCEEDS.]
(a) A collecting bank has a security interest in an item
and any accompanying documents or the proceeds of either:
(1) in case of an item deposited in an account, to the
extent to which credit given for the item has been withdrawn or
applied;
(2) in case of an item for which it has given credit
available for withdrawal as of right, to the extent of the
credit given, whether or not the credit is drawn upon or there
is a right of chargeback; or
(3) if it makes an advance on or against the item.
(b) If credit given for several items received at one time
or pursuant to a single agreement is withdrawn or applied in
part, the security interest remains upon all the items, any
accompanying documents or the proceeds of either. For the
purpose of this section, credits first given are first withdrawn.
(c) Receipt by a collecting bank of a final settlement for
an item is a realization on its security interest in the item,
accompanying documents, and proceeds. So long as the bank does
not receive final settlement for the item or give up possession
of the item or possession or control of the accompanying
documents for purposes other than collection, the security
interest continues to that extent and is subject to article 9,
but:
(1) no security agreement is necessary to make the security
interest enforceable (section 336.9-203(b)(3)(A));
(2) no filing is required to perfect the security interest;
and
(3) the security interest has priority over conflicting
perfected security interests in the item, accompanying
documents, or proceeds.
Sec. 17. Minnesota Statutes 2002, section 336.8-103, is
amended to read:
336.8-103 [RULES FOR DETERMINING WHETHER CERTAIN
OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.]
(a) A share or similar equity interest issued by a
corporation, business trust, joint stock company, or similar
entity is a security.
(b) An "investment company security" is a security.
"Investment company security" means a share or similar equity
interest issued by an entity that is registered as an investment
company under the federal investment company laws, an interest
in a unit investment trust that is so registered, or a
face-amount certificate issued by a face-amount certificate
company that is so registered. Investment company security does
not include an insurance policy or endowment policy or annuity
contract issued by an insurance company.
(c) An interest in a partnership or limited liability
company is a general intangible and is not a security or a
financial asset, except as follows:
(1) An interest in a partnership or limited liability
company is a security and is not a general intangible if it is
dealt in or traded on a securities exchange or in a securities
market, its terms expressly provide that it is a security
governed by this article, or it is an investment company
security.
(2) An interest in a partnership or limited liability
company is a financial asset and is not a general intangible if
it is held in a securities account.
(d) A writing that is a security certificate is governed by
this article and not by article 3, even though it also meets the
requirements of that article. However, a negotiable instrument
governed by article 3 is a financial asset if it is held in a
securities account.
(e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a
financial asset.
(f) A commodity contract, as defined in section
336.9-102(a)(15), is not a security or a financial asset.
(g) A document of title is not a financial asset unless
section 336.8-102(a)(9)(iii) applies.
Sec. 18. Minnesota Statutes 2002, section 336.9-102, is
amended to read:
336.9-102 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(a) [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 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 property, (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
reasonable 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;
(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
security 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
minehead 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.
(8) "Bank" means an organization that is engaged in the
business of banking. The term includes savings banks, savings
and loan associations, credit unions, and trust companies.
(9) "Cash proceeds" means proceeds that are money, checks,
deposit accounts, or the like.
(10) "Certificate of title" means a certificate of title
with respect to which a statute provides for the security
interest in question to be indicated on the certificate as a
condition or result of the security interest's obtaining
priority over the rights of a lien creditor with respect to the
collateral.
(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
obligation 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.
(12) "Collateral" means the property subject to a security
interest or agricultural lien. The term includes:
(A) proceeds to which a security interest attaches;
(B) accounts, chattel paper, payment intangibles, and
promissory 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
(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
commodity intermediary in which a commodity contract is carried
for a commodity customer.
(15) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a commodity
option, or another contract if the contract or option is:
(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 law; 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:
(A) an individual incurs an obligation primarily for
personal, family, or household purposes; and
(B) a security interest in consumer goods secures the
obligation.
(25) "Consumer obligor" means an obligor who is an
individual and who incurred the obligation as part of a
transaction entered into primarily for personal, family, or
household purposes.
(26) "Consumer transaction" means a transaction in which (i)
an individual incurs an obligation primarily for personal,
family, or household purposes, (ii) a security interest secures
the obligation, and (iii) the collateral is held or acquired
primarily for personal, family, or household purposes. The term
includes consumer goods transactions.
(27) "Continuation statement" means an amendment of a
financing statement which:
(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.
(28) "Debtor" means:
(A) a person having an interest, other than a security
interest or other lien, in the collateral, whether or not the
person is an obligor;
(B) a seller of accounts, chattel paper, payment
intangibles, or promissory notes; 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.
(30) "Document" means a document of title or a receipt of
the type described in section 336.7-201(2) 336.7-201(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
interest, in real property. The term includes mortgages and
other liens on real property.
(33) "Equipment" means goods other than inventory, farm
products, or consumer goods.
(34) "Farm products" means goods, other than standing
timber, with respect to which the debtor is engaged in a farming
operation and which are:
(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 336.9-519(a).
(37) "Filing office" means an office designated in section
336.9-501 as the place to file a financing statement.
(38) "Filing office rule" means a rule adopted pursuant to
Laws 2000, chapter 399, article 1, section 139.
(39) "Financing statement" means a record or records
composed of an initial financing statement and any filed record
relating to the initial financing statement.
(40) "Fixture filing" means the filing of a financing
statement covering goods that are or are to become fixtures and
satisfying section 336.9-502(a) and (b). The term includes the
filing of a financing statement covering goods of a transmitting
utility which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related to
particular real property that an interest in them arises under
real property law.
(42) "General intangible" means any personal property,
including things in action, other than accounts, chattel paper,
commercial tort claims, deposit accounts, documents, goods,
instruments, investment property, letter of credit rights,
letters of credit, money, and oil, gas, or other minerals before
extraction. The term includes payment intangibles and software.
(43) "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)
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 the
program is associated with the goods in such a manner that it
customarily is considered part of the goods, or by becoming the
owner of the goods, a person acquires a right to use the program
in connection with the goods. The term does not include a
computer program embedded in goods that consist solely of the
medium in which the program is embedded. The term also does not
include accounts, chattel paper, commercial tort claims, deposit
accounts, documents, general intangibles, instruments,
investment property, letter of credit rights, letters of credit,
money, or oil, gas, or other minerals before extraction.
(45) "Governmental unit" means a subdivision, agency,
department, county, parish, municipality, or other unit of the
government of the United States, a state, or a foreign country.
The term includes an organization having a separate corporate
existence if the organization is eligible to issue debt on which
interest is exempt from income taxation under the laws of the
United States.
(46) "Health-care-insurance receivable" means an interest
in or claim under a policy of insurance which is a right to
payment of a monetary obligation for health-care goods or
services provided.
(47) "Instrument" means a negotiable instrument or any
other writing that evidences a right to the payment of a
monetary obligation, is not itself a security agreement or
lease, and is of a type that in ordinary course of business is
transferred by delivery with any necessary endorsement or
assignment. 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 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:
(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) Unless a certificate has been issued, "manufactured
home" means a structure, transportable in one or more sections,
which, in the traveling mode, is eight body feet or more in
width or 40 body feet or more in length, or, when erected on
site, is 320 or more square feet, and which is built on a
permanent chassis and designed to be used as a dwelling with or
without a permanent foundation when connected to the required
utilities, and includes the plumbing, heating, air-conditioning,
and electrical systems contained therein. The term includes any
structure that meets all of the requirements of this paragraph
except the size requirements and with respect to which the
manufacturer voluntarily files a certification required by the
United States Secretary of Housing and Urban Development and
complies with the standards established under United States
Code, title 42.
A manufactured home within the meaning of this section does
not include a manufactured home for which a certificate of title
as defined in section 336.9-102(a)(10) has been issued.
(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. Mortgage includes an executory
contract for the sale of real property or of an interest in real
property that entitles the purchaser to possession of the real
property.
(56) "New debtor" means a person that becomes bound as
debtor under section 336.9-203(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 transferee. The term does not include an obligation
substituted for another obligation.
(58) "Noncash proceeds" means proceeds other than cash
proceeds.
(59) "Obligor" means a person that, with respect to an
obligation secured by a security interest in or an agricultural
lien on the collateral, (i) owes payment or other performance of
the obligation, (ii) has provided property other than the
collateral to secure payment or other performance of the
obligation, or (iii) is otherwise accountable in whole or in
part for payment or other performance of the obligation. The
term does not include issuers or nominated persons under a
letter of credit.
(60) "Original debtor", except as used in section
336.9-310(c), means a person that, as debtor, entered into a
security agreement to which a new debtor has become bound under
section 336.9-203(d).
(61) "Payment intangible" means a general intangible under
which the account debtor's principal obligation is a monetary
obligation.
(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
individual 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
subparagraph (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 336.9-609(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, insurance
payable by reason of the loss or nonconformity of, defects or
infringement of rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that evidences a
promise to pay a monetary obligation, does not evidence an order
to pay, and does not contain an acknowledgment by a bank that
the bank has received for deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a secured
party which includes the terms on which the secured party is
willing to accept collateral in full or partial satisfaction of
the obligation it secures pursuant to sections 336.9-620,
336.9-621, and 336.9-622.
(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
(C) the debtor, obligor, secured party, account debtor or
other person obligated on collateral, assignor or assignee of a
secured obligation, or assignor or assignee of a security
interest is a state or a governmental unit of a state.
(68) "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) "Record", except as used in "for record", "of record",
"record or legal title", and "record owner", means information
that is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable
form.
(70) "Registered organization" means an organization
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.
(71) "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) "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;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper, payment
intangibles, or promissory notes have been sold;
(E) a trustee, indenture trustee, agent, collateral agent,
or other representative in whose favor a security interest or
agricultural lien is created or provided for; or
(F) a person that holds a security interest arising under
section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5),
336.4-210, or 336.5-118.
(73) "Security agreement" means an agreement that creates
or provides for a security interest.
(74) "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) "Software" means a computer program and any supporting
information provided in connection with a transaction relating
to the program. The term does not include a computer program
that is included in the definition of goods.
(76) "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) "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) "Tangible chattel paper" means chattel paper evidenced
by a record or records consisting of information that is
inscribed on a tangible medium.
(79) "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) "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,
electromagnetically, or by light;
(C) transmitting goods by pipeline or sewer; or
(D) transmitting or producing and transmitting electricity,
steam, gas, or water.
A person filing a financing statement under this article
and under the authority of sections 300.111 to 300.115 is a
transmitting utility for purposes of this article.
(b) [DEFINITIONS IN OTHER ARTICLES.] "Control" as provided
in section 336.7-106 and the following definitions in other
articles apply to this article:
"Applicant" Section 336.5-102
"Beneficiary" Section 336.5-102
"Broker" Section 336.8-102
"Certificated security" Section 336.8-102
"Check" Section 336.3-104
"Clearing corporation" Section 336.8-102
"Contract for sale" Section 336.2-106
"Customer" Section 336.4-104
"Entitlement holder" Section 336.8-102
"Financial asset" Section 336.8-102
"Holder in due course" Section 336.3-302
"Issuer" (with respect to a
letter of credit or
letter of credit right) Section 336.5-102
"Issuer" (with respect to
a security) Section 336.8-201
"Issuer" (with respect to
documents of title) Section 336.7-102
"Lease" Section 336.2A-103
"Lease agreement" Section 336.2A-103
"Lease contract" Section 336.2A-103
"Leasehold interest" Section 336.2A-103
"Lessee" Section 336.2A-103
"Lessee in ordinary course
of business" Section 336.2A-103
"Lessor" Section 336.2A-103
"Lessor's residual interest" Section 336.2A-103
"Letter of credit" Section 336.5-102
"Merchant" Section 336.2-104
"Negotiable instrument" Section 336.3-104
"Nominated person" Section 336.5-102
"Note" Section 336.3-104
"Proceeds of a letter of
credit" Section 336.5-114
"Prove" Section 336.3-103
"Sale" Section 336.2-106
"Securities account" Section 336.8-501
"Securities intermediary" Section 336.8-102
"Security" Section 336.8-102
"Security certificate" Section 336.8-102
"Security entitlement" Section 336.8-102
"Uncertificated security" Section 336.8-102
(c) [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1
contains general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 19. Minnesota Statutes 2002, section 336.9-203, is
amended to read:
336.9-203 [ATTACHMENT AND ENFORCEABILITY OF SECURITY
INTEREST; PROCEEDS; SUPPORTING OBLIGATIONS; FORMAL REQUISITES.]
(a) [ATTACHMENT.] A security interest attaches to
collateral when it becomes enforceable against the debtor with
respect to the collateral, unless an agreement expressly
postpones the time of attachment.
(b) [ENFORCEABILITY.] Except as otherwise provided in
subsections (c) through (i), a security interest is enforceable
against the debtor and third parties with respect to the
collateral only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the power to
transfer rights in the collateral to a secured party; and
(3) one of the following conditions is met:
(A) the debtor has authenticated a security agreement that
provides a description of the collateral and, if the security
interest covers timber to be cut, a description of the land
concerned;
(B) the collateral is not a certificated security and is in
the possession of the secured party under section 336.9-313
pursuant to the debtor's security agreement;
(C) the collateral is a certificated security in registered
form and the security certificate has been delivered to the
secured party under section 336.8-301 pursuant to the debtor's
security agreement; or
(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 336.7-106, 336.9-104, 336.9-105, 336.9-106, or 336.9-107
pursuant to the debtor's security agreement.
(c) [OTHER UCC PROVISIONS.] Subsection (b) is subject to
section 336.4-210 on the security interest of a collecting bank,
section 336.5-118 on the security interest of a letter of credit
issuer or nominated person, section 336.9-110 on a security
interest arising under article 2 or 2A, and section 336.9-206 on
security interests in investment property.
(d) [WHEN PERSON BECOMES BOUND BY ANOTHER PERSON'S
SECURITY AGREEMENT.] A person becomes bound as debtor by a
security agreement entered into by another person if, by
operation of law other than this article or by contract:
(1) the security agreement becomes effective to create a
security interest in the person's property; or
(2) the person becomes generally obligated for the
obligations of the other person, including the obligation
secured under the security agreement, and acquires or succeeds
to all or substantially all of the assets of the other person.
(e) [EFFECT OF NEW DEBTOR BECOMING BOUND.] If a new debtor
becomes bound as debtor by a security agreement entered into by
another person:
(1) the agreement satisfies subsection (b)(3) with respect
to existing or after-acquired property of the new debtor to the
extent the property is described in the agreement; and
(2) another agreement is not necessary to make a security
interest in the property enforceable.
(f) [PROCEEDS AND SUPPORTING OBLIGATIONS.] The attachment
of a security interest in collateral gives the secured party the
rights to proceeds provided by section 336.9-315 and is also
attachment of a security interest in a supporting obligation for
the collateral.
(g) [LIEN SECURING RIGHT TO PAYMENT.] The attachment of a
security interest in a right to payment or performance secured
by a security interest or other lien on personal or real
property is also attachment of a security interest in the
security interest, mortgage, or other lien. The attachment of a
security interest in the mortgage or lien on real property does
not create an interest in real property.
(h) [SECURITY ENTITLEMENT CARRIED IN SECURITIES ACCOUNT.]
The attachment of a security interest in a securities account is
also attachment of a security interest in the security
entitlements carried in the securities account.
(i) [COMMODITY CONTRACTS CARRIED IN COMMODITY ACCOUNT.]
The attachment of a security interest in a commodity account is
also attachment of a security interest in the commodity
contracts carried in the commodity account.
Sec. 20. Minnesota Statutes 2002, section 336.9-207, is
amended to read:
336.9-207 [RIGHTS AND DUTIES OF SECURED PARTY HAVING
POSSESSION OR CONTROL OF COLLATERAL.]
(a) [DUTY OF CARE WHEN SECURED PARTY IN POSSESSION.]
Except as otherwise provided in subsection (d), a secured party
shall use reasonable care in the custody and preservation of
collateral in the secured party's possession. In the case of
chattel paper or an instrument, reasonable care includes taking
necessary steps to preserve rights against prior parties unless
otherwise agreed.
(b) [EXPENSES, RISKS, DUTIES, AND RIGHTS WHEN SECURED
PARTY IN POSSESSION.] Except as otherwise provided in subsection
(d), if a secured party has possession of collateral:
(1) reasonable expenses, including the cost of insurance
and payment of taxes or other charges incurred in the custody,
preservation, use, or operation of the collateral are chargeable
to the debtor and are secured by the collateral;
(2) the risk of accidental loss or damage is on the debtor
to the extent of a deficiency in any effective insurance
coverage;
(3) the secured party shall keep the collateral
identifiable, but fungible collateral may be commingled; and
(4) the secured party may use or operate the collateral:
(A) for the purpose of preserving the collateral or its
value;
(B) as permitted by an order of a court having competent
jurisdiction; or
(C) except in the case of consumer goods, in the manner and
to the extent agreed by the debtor.
(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 336.7-106, 336.9-104, 336.9-105,
336.9-106, or 336.9-107:
(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.
(d) [BUYER OF CERTAIN RIGHTS TO PAYMENT.] If the secured
party is a buyer of accounts, chattel paper, payment
intangibles, or promissory notes or a consignor:
(1) subsection (a) does not apply unless the secured party
is entitled under an agreement:
(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse against the
debtor or a secondary obligor based on the nonpayment or other
default of an account debtor or other obligor on the collateral;
and
(2) subsections (b) and (c) do not apply.
Sec. 21. Minnesota Statutes 2002, section 336.9-208, is
amended to read:
336.9-208 [ADDITIONAL DUTIES OF SECURED PARTY HAVING
CONTROL OF COLLATERAL.]
(a) [APPLICABILITY OF SECTION.] This section applies to
cases in which there is no outstanding secured obligation and
the secured party is not committed to make advances, incur
obligations, or otherwise give value.
(b) [DUTIES OF SECURED PARTY AFTER RECEIVING DEMAND FROM
DEBTOR.] Within ten days after receiving an authenticated demand
by the debtor:
(1) a secured party having control of a deposit account
under section 336.9-104(a)(2) shall send to the bank with which
the deposit account is maintained an authenticated statement
that releases the bank from any further obligation to comply
with instructions originated by the secured party;
(2) a secured party having control of a deposit account
under section 336.9-104(a)(3) shall:
(A) pay the debtor the balance on deposit in the deposit
account; or
(B) transfer the balance on deposit into a deposit account
in the debtor's name;
(3) a secured party, other than a buyer, having control of
electronic chattel paper under section 336.9-105 shall:
(A) communicate the authoritative copy of the electronic
chattel paper to the debtor or its designated custodian;
(B) if the debtor designates a custodian that is the
designated custodian with which the authoritative copy of the
electronic chattel paper is maintained for the secured party,
communicate to the custodian an authenticated record releasing
the designated custodian from any further obligation to comply
with instructions originated by the secured party 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;
(4) a secured party having control of investment property
under section 336.8-106(d)(2) or 336.9-106(b) shall send to the
securities intermediary or commodity intermediary with which the
security entitlement or commodity contract is maintained an
authenticated record that releases the securities intermediary
or commodity intermediary from any further obligation to comply
with entitlement orders or directions originated by the secured
party; and
(5) a secured party having control of a letter of credit
right under section 336.9-107 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
designated custodian with which the authoritative copy of the
electronic document is maintained for the secured party,
communicate to the custodian an authenticated record releasing
the designated custodian from any further obligation to comply
with instructions originated by the secured party and
instructing the custodian to comply with instructions originated
by the debtor; and
(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.
Sec. 22. Minnesota Statutes 2002, section 336.9-301, is
amended to read:
336.9-301 [LAW GOVERNING PERFECTION AND PRIORITY OF
SECURITY INTERESTS.]
Except as otherwise provided in sections 336.9-303 through
336.9-306, the following rules determine the law governing
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in collateral:
(1) Except as otherwise provided in this section, while a
debtor is located in a jurisdiction, the local law of that
jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral.
(2) While collateral is located in a jurisdiction, the
local law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a possessory
security interest in that collateral.
(3) Except as otherwise provided in paragraph (4), while
tangible negotiable documents, goods, instruments, money, or
tangible chattel paper is located in a jurisdiction, the local
law of that jurisdiction governs:
(A) perfection of a security interest in the goods by
filing a fixture filing;
(B) perfection of a security interest in timber to be cut;
and
(C) the effect of perfection or nonperfection and the
priority of a nonpossessory security interest in the collateral.
(4) The local law of the jurisdiction in which the wellhead
or minehead is located governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in as-extracted collateral.
Sec. 23. Minnesota Statutes 2002, section 336.9-310, is
amended to read:
336.9-310 [WHEN FILING REQUIRED TO PERFECT SECURITY
INTEREST OR AGRICULTURAL LIEN; SECURITY INTERESTS AND
AGRICULTURAL LIENS TO WHICH FILING PROVISIONS DO NOT APPLY.]
(a) [GENERAL RULE: PERFECTION BY FILING.] Except as
otherwise provided in subsection (b) and section 336.9-312(b), a
financing statement must be filed to perfect all security
interests and agricultural liens.
(b) [EXCEPTIONS: FILING NOT NECESSARY.] The filing of a
financing statement is not necessary to perfect a security
interest:
(1) that is perfected under section 336.9-308(d), (e), (f),
or (g);
(2) that is perfected under section 336.9-309 when it
attaches;
(3) in property subject to a statute, regulation, or treaty
described in section 336.9-311(a);
(4) in goods in possession of a bailee which is perfected
under section 336.9-312(d)(1) or (2);
(5) in certificated securities, documents, goods, or
instruments which is perfected without filing, control, or
possession under section 336.9-312(e), (f), or (g);
(6) in collateral in the secured party's possession under
section 336.9-313;
(7) in a certificated security which is perfected by
delivery of the security certificate to the secured party under
section 336.9-313;
(8) in deposit accounts, electronic chattel
paper, electronic documents, investment property, or letter of
credit rights which is perfected by control under section
336.9-314;
(9) in proceeds which is perfected under section 336.9-315;
or
(10) that is perfected under section 336.9-316.
(c) [ASSIGNMENT OF PERFECTED SECURITY INTEREST.] If a
secured party assigns a perfected security interest or
agricultural lien, a filing under this article is not required
to continue the perfected status of the security interest
against creditors of and transferees from the original debtor.
Sec. 24. Minnesota Statutes 2002, section 336.9-312, is
amended to read:
336.9-312 [PERFECTION OF SECURITY INTERESTS IN CHATTEL
PAPER, DEPOSIT ACCOUNTS, DOCUMENTS, GOODS COVERED BY DOCUMENTS,
INSTRUMENTS, INVESTMENT PROPERTY, LETTER OF CREDIT RIGHTS, AND
MONEY; PERFECTION BY PERMISSIVE FILING; TEMPORARY PERFECTION
WITHOUT FILING OR TRANSFER OF POSSESSION.]
(a) [PERFECTION BY FILING PERMITTED.] A security interest
in chattel paper, negotiable documents, instruments, or
investment property may be perfected by filing.
(b) [CONTROL OR POSSESSION OF CERTAIN COLLATERAL.] Except
as otherwise provided in section 336.9-315(c) and (d) for
proceeds:
(1) a security interest in a deposit account may be
perfected only by control under section 336.9-314;
(2) and except as otherwise provided in section
336.9-308(d), a security interest in a letter of credit right
may be perfected only by control under section 336.9-314; and
(3) a security interest in money may be perfected only by
the secured party's taking possession under section 336.9-313.
(c) [GOODS COVERED BY NEGOTIABLE DOCUMENT.] While goods
are in the possession of a bailee that has issued a negotiable
document covering the goods:
(1) a security interest in the goods may be perfected by
perfecting a security interest in the document; and
(2) a security interest perfected in the document has
priority over any security interest that becomes perfected in
the goods by another method during that time.
(d) [GOODS COVERED BY NONNEGOTIABLE DOCUMENT.] While goods
are in the possession of a bailee that has issued a
nonnegotiable document covering the goods, a security interest
in the goods may be perfected by:
(1) issuance of a document in the name of the secured
party;
(2) the bailee's receipt of notification of the secured
party's interest; or
(3) filing as to the goods.
(e) [TEMPORARY PERFECTION: NEW VALUE.] A security
interest in certificated securities, negotiable documents, or
instruments is perfected without filing or the taking of
possession or control for a period of 20 days from the time it
attaches to the extent that it arises for new value given under
an authenticated security agreement.
(f) [TEMPORARY PERFECTION: GOODS OR DOCUMENTS MADE
AVAILABLE TO DEBTOR.] A perfected security interest in a
negotiable document or goods in possession of a bailee, other
than one that has issued a negotiable document for the goods,
remains perfected for 20 days without filing if the secured
party makes available to the debtor the goods or documents
representing the goods for the purpose of:
(1) ultimate sale or exchange; or
(2) loading, unloading, storing, shipping, transshipping,
manufacturing, processing, or otherwise dealing with them in a
manner preliminary to their sale or exchange.
(g) [TEMPORARY PERFECTION: DELIVERY OF SECURITY
CERTIFICATE OR INSTRUMENT TO DEBTOR.] A perfected security
interest in a certificated security or instrument remains
perfected for 20 days without filing if the secured party
delivers the security certificate or instrument to the debtor
for the purpose of:
(1) ultimate sale or exchange; or
(2) presentation, collection, enforcement, renewal, or
registration of transfer.
(h) [EXPIRATION OF TEMPORARY PERFECTION.] After the 20-day
period specified in subsection (e), (f), or (g) expires,
perfection depends upon compliance with this article.
Sec. 25. Minnesota Statutes 2002, section 336.9-313, is
amended to read:
336.9-313 [WHEN POSSESSION BY OR DELIVERY TO SECURED PARTY
PERFECTS SECURITY INTEREST WITHOUT FILING.]
(a) [PERFECTION BY POSSESSION OR DELIVERY.] Except as
otherwise provided in subsection (b), a secured party may
perfect a security interest in tangible negotiable documents,
goods, instruments, 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 336.8-301.
(b) [GOODS COVERED BY CERTIFICATE OF TITLE.] With respect
to goods covered by a certificate of title issued by this state,
a secured party may perfect a security interest in the goods by
taking possession of the goods only in the circumstances
described in section 336.9-316(e).
(c) [COLLATERAL IN POSSESSION OF PERSON OTHER THAN
DEBTOR.] With respect to collateral other than certificated
securities and goods covered by a document, a secured party
takes possession of collateral in the possession of a person
other than the debtor, the secured party, or a lessee of the
collateral from the debtor in the ordinary course of the
debtor's business, when:
(1) the person in possession authenticates a record
acknowledging that it holds possession of the collateral for the
secured party's benefit; or
(2) the person takes possession of the collateral after
having authenticated a record acknowledging that it will hold
possession of collateral for the secured party's benefit.
(d) [TIME OF PERFECTION BY POSSESSION; CONTINUATION OF
PERFECTION.] If perfection of a security interest depends upon
possession of the collateral by a secured party, perfection
occurs no earlier than the time the secured party takes
possession and continues only while the secured party retains
possession.
(e) [TIME OF PERFECTION BY DELIVERY; CONTINUATION OF
PERFECTION.] A security interest in a certificated security in
registered form is perfected by delivery when delivery of the
certificated security occurs under section 336.8-301 and remains
perfected by delivery until the debtor obtains possession of the
security certificate.
(f) [ACKNOWLEDGMENT NOT REQUIRED.] A person in possession
of collateral is not required to acknowledge that it holds
possession for a secured party's benefit.
(g) [EFFECTIVENESS OF ACKNOWLEDGMENT; NO DUTIES OR
CONFIRMATION.] If a person acknowledges that it holds possession
for the secured party's benefit:
(1) the acknowledgment is effective under subsection (c) or
section 336.8-301(a), even if the acknowledgment violates the
rights of a debtor; and
(2) unless the person otherwise agrees or law other than
this article otherwise provides, the person does not owe any
duty to the secured party and is not required to confirm the
acknowledgment to another person.
(h) [SECURED PARTY'S DELIVERY TO PERSON OTHER THAN
DEBTOR.] A secured party having possession of collateral does
not relinquish possession by delivering the collateral to a
person other than the debtor or a lessee of the collateral from
the debtor in the ordinary course of the debtor's business if
the person was instructed before the delivery or is instructed
contemporaneously with the delivery:
(1) to hold possession of the collateral for the secured
party's benefit; or
(2) to redeliver the collateral to the secured party.
(i) [EFFECT OF DELIVERY UNDER SUBSECTION (H); NO DUTIES OR
CONFIRMATION.] A secured party does not relinquish possession,
even if a delivery under subsection (h) violates the rights of a
debtor. A person to which collateral is delivered under
subsection (h) does not owe any duty to the secured party and is
not required to confirm the delivery to another person unless
the person otherwise agrees or law other than this article
otherwise provides.
Sec. 26. Minnesota Statutes 2002, section 336.9-314, is
amended to read:
336.9-314 [PERFECTION BY CONTROL.]
(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 collateral under section 336.7-106,
336.9-104, 336.9-105, 336.9-106, or 336.9-107.
(b) [SPECIFIED COLLATERAL: TIME OF PERFECTION BY CONTROL;
CONTINUATION OF PERFECTION.] A security interest in deposit
accounts, electronic chattel paper, or letter of credit rights,
or electronic documents is perfected by control under section
336.7-106, 336.9-104, 336.9-105, or 336.9-107 when the secured
party obtains control and remains perfected by control only
while the secured party retains control.
(c) [INVESTMENT PROPERTY: TIME OF PERFECTION BY CONTROL;
CONTINUATION OF PERFECTION.] A security interest in investment
property is perfected by control under section 336.9-106 from
the time the secured party obtains control and remains perfected
by control until:
(1) the secured party does not have control; and
(2) one of the following occurs:
(A) if the collateral is a certificated security, the
debtor has or acquires possession of the security certificate;
(B) if the collateral is an uncertificated security, the
issuer has registered or registers the debtor as the registered
owner; or
(C) if the collateral is a security entitlement, the debtor
is or becomes the entitlement holder.
Sec. 27. Minnesota Statutes 2002, section 336.9-317, is
amended to read:
336.9-317 [INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE
OF SECURITY INTEREST OR AGRICULTURAL LIEN.]
(a) [CONFLICTING SECURITY INTERESTS AND RIGHTS OF LIEN
CREDITORS.] A security interest or agricultural lien is
subordinate to the rights of:
(1) a person entitled to priority under section 336.9-322;
and
(2) except as otherwise provided in subsection (e), a
person that becomes a lien creditor before the earlier of the
time:
(A) the security interest or agricultural lien is
perfected; or
(B) one of the conditions specified in section
336.9-203(b)(3) is met and a financing statement covering the
collateral is filed.
(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 certificate takes free of a security
interest or agricultural lien if the buyer gives value and
receives delivery of the collateral without knowledge of the
security interest or agricultural lien and before it is
perfected.
(c) [LESSEES THAT RECEIVE DELIVERY.] Except as otherwise
provided in subsection (e), a lessee of goods takes free of a
security interest or agricultural lien if the lessee gives value
and receives delivery of the collateral without knowledge of the
security interest or agricultural lien and before it is
perfected.
(d) [LICENSEES AND BUYERS OF CERTAIN COLLATERAL.] A
licensee of a general intangible or a buyer, other than a
secured party, of accounts, electronic 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.
(e) [PURCHASE-MONEY SECURITY INTEREST.] Except as
otherwise provided in sections 336.9-320 and 336.9-321, if a
person files a financing statement with respect to a
purchase-money security interest before or within 20 days after
the debtor receives delivery of the collateral, the security
interest takes priority over the rights of a buyer, lessee, or
lien creditor which arise between the time the security interest
attaches and the time of filing.
Sec. 28. Minnesota Statutes 2002, section 336.9-338, is
amended to read:
336.9-338 [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 336.9-516(b)(5) which is incorrect at the time the
financing statement is filed:
(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
(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, tangible documents, goods,
instruments, or a security certificate, receives delivery of the
collateral.
Sec. 29. Minnesota Statutes 2002, section 336.9-601, is
amended to read:
336.9-601 [RIGHTS AFTER DEFAULT; JUDICIAL ENFORCEMENT;
CONSIGNOR OR BUYER OF ACCOUNTS, CHATTEL PAPER, PAYMENT
INTANGIBLES, OR PROMISSORY NOTES.]
(a) [RIGHTS OF SECURED PARTY AFTER DEFAULT.] After
default, a secured party has the rights provided in this part
and, except as otherwise provided in section 336.9-602, those
provided by agreement of the parties. A secured party:
(1) may reduce a claim to judgment, foreclose, or otherwise
enforce the claim, security interest, or agricultural lien by
any available judicial procedure; and
(2) if the collateral is documents, may proceed either as
to the documents or as to the goods they cover.
(b) [RIGHTS AND DUTIES OF SECURED PARTY IN POSSESSION OR
CONTROL.] A secured party in possession of collateral or control
of collateral under section 336.7-106, 336.9-104, 336.9-105,
336.9-106, or 336.9-107 has the rights and duties provided in
section 336.9-207.
(c) [RIGHTS CUMULATIVE; SIMULTANEOUS EXERCISE.] The rights
under subsections (a) and (b) are cumulative and may be
exercised simultaneously.
(d) [RIGHTS OF DEBTOR AND OBLIGOR.] Except as otherwise
provided in subsection (g) and section 336.9-605, after default,
a debtor and an obligor have the rights provided in this part
and by agreement of the parties.
(e) [LIEN OF LEVY AFTER JUDGMENT.] If a secured party has
reduced its claim to judgment, the lien of any levy that may be
made upon the collateral by virtue of an execution based upon
the judgment relates back to the earliest of:
(1) the date of perfection of the security interest or
agricultural lien in the collateral;
(2) the date of filing a financing statement covering the
collateral; or
(3) any date specified in a statute under which the
agricultural lien was created.
(f) [EXECUTION SALE.] A sale pursuant to an execution is a
foreclosure of the security interest or agricultural lien by
judicial procedure within the meaning of this section. A
secured party may purchase at the sale and thereafter hold the
collateral free of any other requirements of this article.
(g) [CONSIGNOR OR BUYER OF CERTAIN RIGHTS TO PAYMENT.]
Except as otherwise provided in section 336.9-607(c), this part
imposes no duties upon a secured party that is a consignor or is
a buyer of accounts, chattel paper, payment intangibles, or
promissory notes.
(h) A person may not begin to enforce a security interest
in collateral that is agricultural property subject to sections
583.20 to 583.32 that has secured a debt of more than $5,000
unless: a mediation notice under subsection (i) is served on
the debtor after a condition of default has occurred in the
security agreement and a copy served on the director of the
agricultural extension service; and the debtor and creditor have
completed mediation under sections 583.20 to 583.32; or as
otherwise allowed under sections 583.20 to 583.32.
(i) A mediation notice under subsection (h) must contain
the following notice with the blanks properly filled in.
"TO: ...(Name of Debtor)...
YOU HAVE DEFAULTED ON THE ...(Debt in Default)... SECURED
BY AGRICULTURAL PROPERTY DESCRIBED AS ...(Reasonable Description
of Agricultural Property Collateral)...
AS A SECURED PARTY, ...(Name of Secured Party)... INTENDS
TO ENFORCE THE SECURITY AGREEMENT AGAINST THE AGRICULTURAL
PROPERTY DESCRIBED ABOVE BY REPOSSESSING, FORECLOSING ON, OR
OBTAINING A COURT JUDGMENT AGAINST THE PROPERTY.
YOU HAVE THE RIGHT TO HAVE THE DEBT REVIEWED FOR
MEDIATION. IF YOU REQUEST MEDIATION, A DEBT THAT IS IN DEFAULT
WILL BE MEDIATED ONLY ONCE. IF YOU DO NOT REQUEST MEDIATION,
THIS DEBT WILL NOT BE SUBJECT TO FUTURE MEDIATION IF THE SECURED
PARTY ENFORCES THE DEBT.
IF YOU PARTICIPATE IN MEDIATION, THE DIRECTOR OF THE
AGRICULTURAL EXTENSION SERVICE WILL PROVIDE AN ORIENTATION
MEETING AND A FINANCIAL ANALYST TO HELP YOU TO PREPARE FINANCIAL
INFORMATION. IF YOU DECIDE TO PARTICIPATE IN MEDIATION, IT WILL
BE TO YOUR ADVANTAGE TO ASSEMBLE YOUR FARM FINANCE AND OPERATION
RECORDS AND TO CONTACT A COUNTY EXTENSION OFFICE AS SOON AS
POSSIBLE. MEDIATION WILL ATTEMPT TO ARRIVE AT AN AGREEMENT FOR
HANDLING FUTURE FINANCIAL RELATIONS.
TO HAVE THE DEBT REVIEWED FOR MEDIATION YOU MUST FILE A
MEDIATION REQUEST WITH THE DIRECTOR WITHIN 14 DAYS AFTER YOU
RECEIVE THIS NOTICE. THE MEDIATION REQUEST FORM IS AVAILABLE AT
ANY COUNTY RECORDER'S OR COUNTY EXTENSION OFFICE.
FROM: ...(Name and Address of Secured Party)..."
ARTICLE 6
MISCELLANEOUS CONFORMING CHANGES
Section 1. Minnesota Statutes 2002, section 234.27, is
amended to read:
234.27 [UNIFORM COMMERCIAL CODE TO APPLY.]
The provisions of article 7 of the Uniform Commercial Code
relative to the negotiation, transfer, sale, or endorsement of
warehouse receipts, apply, to the extent possible, to the
negotiation, transfer, sale, or endorsement of certificates
under this chapter.
For the purpose of application of the Uniform Commercial
Code:
(a) A certificate authorized by the department which
evidences the storing of grain under this chapter is a document
of title as defined in section 336.1-201, clause (15).
(b) A person who has title to and possession of grain
stored under this chapter is a warehouse operator as defined in
section 336.7-102, clause (1)(h) (a)(3).
Sec. 2. Minnesota Statutes 2002, section 514.973, is
amended to read:
514.973 [ENFORCEMENT OF LIEN.]
An owner's lien established under sections 514.970 to
514.979 for a claim that has become due must be enforced in the
same manner as warehouse operator's warehouse's liens under
section 336.7-210.
ARTICLE 7
UNIFORM COMMERCIAL CODE ARTICLES 3 AND 4
CHANGES INVOLVING WARRANTIES ON REMOTELY CREATED ITEMS
Section 1. Minnesota Statutes 2003 Supplement, section
336.3-416, is amended to read:
336.3-416 [TRANSFER WARRANTIES.]
(a) A person who transfers an instrument for consideration
warrants to the transferee and, if the transfer is by
endorsement, to any subsequent transferee that:
(1) the warrantor is a person entitled to enforce the
instrument;
(2) all signatures on the instrument are authentic and
authorized;
(3) the instrument has not been altered;
(4) the instrument is not subject to a defense or claim in
recoupment of any party which can be asserted against the
warrantor;
(5) the warrantor has no knowledge of any insolvency
proceeding commenced with respect to the maker or acceptor or,
in the case of an unaccepted draft, the drawer; and
(6) with respect to a remotely-created item, the person on
whose account the item is drawn authorized the issuance of the
item in the amount for which the item is drawn.
(b) A person to whom the warranties under subsection (a)
are made and who took the instrument in good faith may recover
from the warrantor as damages for breach of warranty an amount
equal to the loss suffered as a result of the breach, but not
more than the amount of the instrument plus expenses and loss of
interest incurred as a result of the breach.
(c) The warranties stated in subsection (a) cannot be
disclaimed with respect to checks. Unless notice of a claim for
breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the liability of the warrantor under
subsection (b) is discharged to the extent of any loss caused by
the delay in giving notice of the claim.
(d) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(e) No A claim for breach of the warranty in subsection
(a)(6) is available against a person to which an item was
transferred previous transferor of the item only to the extent
that under applicable law (including the applicable
choice-of-law principles) the person that transferred all
previous transferors of the item to that person did not
make made the warranty in subsection (a)(6).
Sec. 2. Minnesota Statutes 2003 Supplement, section
336.3-417, is amended to read:
336.3-417 [PRESENTMENT WARRANTIES.]
(a) If an unaccepted draft is presented to the drawee for
payment or acceptance and the drawee pays or accepts the draft,
(i) the person obtaining payment or acceptance, at the time of
presentment, and (ii) a previous transferor of the draft, at the
time of transfer, warrant to the drawee making payment or
accepting the draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on
behalf of a person entitled to enforce the draft;
(2) the draft has not been altered;
(3) the warrantor has no knowledge that the signature of
the drawer of the draft is unauthorized; and
(4) with respect to any remotely-created item, the person
on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn.
(b) A drawee making payment may recover from any warrantor
damages for breach of warranty equal to the amount paid by the
drawee less the amount the drawee received or is entitled to
receive from the drawer because of the payment. In addition,
the drawee is entitled to compensation for expenses and loss of
interest resulting from the breach. The right of the drawee to
recover damages under this subsection is not affected by any
failure of the drawee to exercise ordinary care in making
payment. If the drawee accepts the draft, breach of warranty is
a defense to the obligation of the acceptor. If the acceptor
makes payment with respect to the draft, the acceptor is
entitled to recover from any warrantor for breach of warranty
the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty
under subsection (a) based on an unauthorized endorsement of the
draft or an alteration of the draft, the warrantor may defend by
proving that the endorsement is effective under section
336.3-404 or 336.3-405 or the drawer is precluded under section
336.3-406 or 336.4-406 from asserting against the drawee the
unauthorized endorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to
the drawer or an endorser or (ii) any other instrument is
presented for payment to a party obliged to pay the instrument,
and (iii) payment is received, the following rules apply:
(1) The person obtaining payment and a prior transferor of
the instrument warrant to the person making payment in good
faith that the warrantor is, or was, at the time the warrantor
transferred the instrument, a person entitled to enforce the
instrument or authorized to obtain payment on behalf of a person
entitled to enforce the instrument.
(2) The person making payment may recover from any
warrantor for breach of warranty an amount equal to the amount
paid plus expenses and loss of interest resulting from the
breach.
(e) The warranties stated in subsections (a) and (d) cannot
be disclaimed with respect to checks. Unless notice of a claim
for breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the liability of the warrantor under
subsection (b) or (d) is discharged to the extent of any loss
caused by the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(g) No A claim for breach of the warranty in subsection
(a)(4) is available against a person to which an item was
transferred previous transferor of the item only to the extent
that under applicable law (including the applicable
choice-of-law principles) the person that transferred all
previous transferors of the item to that person did not
make made the warranty in subsection (a)(4).
Sec. 3. Minnesota Statutes 2003 Supplement, section
336.4-207, is amended to read:
336.4-207 [TRANSFER WARRANTIES.]
(a) A customer or collecting bank that transfers an item
and receives a settlement or other consideration warrants to the
transferee and to any subsequent collecting bank that:
(1) the warrantor is a person entitled to enforce the item;
(2) all signatures on the item are authentic and
authorized;
(3) the item has not been altered;
(4) the item is not subject to a defense or claim in
recoupment (section 336.3-305(a)) of any party that can be
asserted against the warrantor;
(5) the warrantor has no knowledge of any insolvency
proceeding commenced with respect to the maker or acceptor or,
in the case of an unaccepted draft, the drawer; and
(6) with respect to any remotely-created item, the person
on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn.
(b) If an item is dishonored, a customer or collecting bank
transferring the item and receiving settlement or other
consideration is obliged to pay the amount due on the item (i)
according to the terms of the item at the time it was
transferred, or (ii) if the transfer was of an incomplete item,
according to its terms when completed as stated in sections
336.3-115 and 336.3-407. The obligation of a transferor is owed
to the transferee and to any subsequent collecting bank that
takes the item in good faith. A transferor cannot disclaim its
obligation under this subsection by an endorsement stating that
it is made "without recourse" or otherwise disclaiming liability.
(c) A person to whom the warranties under subsection (a)
are made and who took the item in good faith may recover from
the warrantor as damages for breach of warranty an amount equal
to the loss suffered as a result of the breach, but not more
than the amount of the item plus expenses and loss of interest
incurred as a result of the breach.
(d) The warranties stated in subsection (a) cannot be
disclaimed with respect to checks. Unless notice of a claim for
breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the warrantor is discharged to the
extent of any loss caused by the delay in giving notice of the
claim.
(e) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(f) No A claim for breach in the warranty in subsection
(a)(6) is available against a person to which an item was
transferred previous transferor of the item only to the extent
that under applicable law (including the applicable
choice-of-law principles) the person that transferred all
previous transferors of the item to that person did not
make made the warranty in subsection (a)(6).
Sec. 4. Minnesota Statutes 2003 Supplement, section
336.4-208, is amended to read:
336.4-208 [PRESENTMENT WARRANTIES.]
(a) If an unaccepted draft is presented to the drawee for
payment or acceptance and the drawee pays or accepts the draft,
(i) the person obtaining payment or acceptance, at the time of
presentment, and (ii) a previous transferor of the draft, at the
time of transfer, warrant to the drawee that pays or accepts the
draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on
behalf of a person entitled to enforce the draft;
(2) the draft has not been altered;
(3) the warrantor has no knowledge that the signature of
the purported drawer of the draft is unauthorized; and
(4) with respect to any remotely-created item, the person
on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn.
(b) A drawee making payment may recover from a warrantor
damages for breach of warranty equal to the amount paid by the
drawee less the amount the drawee received or is entitled to
receive from the drawer because of the payment. In addition,
the drawee is entitled to compensation for expenses and loss of
interest resulting from the breach. The right of the drawee to
recover damages under this subsection is not affected by any
failure of the drawee to exercise ordinary care in making
payment. If the drawee accepts the draft (i) breach of warranty
is a defense to the obligation of the acceptor, and (ii) if the
acceptor makes payment with respect to the draft, the acceptor
is entitled to recover from a warrantor for breach of warranty
the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty
under subsection (a) based on an unauthorized endorsement of the
draft or an alteration of the draft, the warrantor may defend by
proving that the endorsement is effective under section
336.3-404 or 336.3-405 or the drawer is precluded under section
336.3-406 or 336.4-406 from asserting against the drawee the
unauthorized endorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to
the drawer or an endorser or (ii) any other item is presented
for payment to a party obliged to pay the item, and the item is
paid, the person obtaining payment and a prior transferor of the
item warrant to the person making payment in good faith that the
warrantor is, or was, at the time the warrantor transferred the
item, a person entitled to enforce the item or authorized to
obtain payment on behalf of a person entitled to enforce the
item. The person making payment may recover from any warrantor
for breach of warranty an amount equal to the amount paid plus
expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections (a) and (d) cannot
be disclaimed with respect to checks. Unless notice of a claim
for breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the
identity of the warrantor, the warrantor is discharged to the
extent of any loss caused by the delay in giving notice of the
claim.
(f) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.
(g) No A claim for breach of the warranty in subsection
(a)(4) is available against a person to which an item was
transferred previous transferor of the item only to the extent
that under applicable law (including the applicable
choice-of-law principle) the person that transferred all
previous transferors of the item to that person did not
make made the warranty in subsection (a)(4).
Presented to the governor April 22, 2004
Signed by the governor April 26, 2004, 3:30 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes