1.1                          A bill for an act 
  1.2             relating to commerce; enacting the revisions to the 
  1.3             general provisions of the Uniform Commercial Code and 
  1.4             amendments to Articles 3 and 4 of the Uniform 
  1.5             Commercial Code recommended by the National Conference 
  1.6             of Commissioners on Uniform State Laws; making 
  1.7             conforming changes; amending Minnesota Statutes 2002, 
  1.8             sections 17.94; 84.787, subdivision 9; 84.797, 
  1.9             subdivision 10; 84.92, subdivision 6; 86B.820, 
  1.10            subdivision 12; 168A.01, subdivision 20; 234.27; 
  1.11            325L.03; 325L.16; 336.2-103; 336.2-202; 336.2A-103; 
  1.12            336.2A-501; 336.2A-518; 336.2A-519; 336.2A-527; 
  1.13            336.2A-528; 336.3-103; 336.3-106; 336.3-116; 
  1.14            336.3-305; 336.3-309; 336.3-416; 336.3-417; 336.3-602; 
  1.15            336.3-604; 336.3-605; 336.4-104; 336.4-207; 336.4-208; 
  1.16            336.4-212; 336.4-301; 336.4-403; 336.4A-105; 
  1.17            336.4A-106; 336.4A-204; 336.5-103; 336.8-102; 
  1.18            336.9-102; 513.33, subdivision 1; 514.963, subdivision 
  1.19            9; 514.965, subdivision 10; proposing coding for new 
  1.20            law in Minnesota Statutes, chapter 336; repealing 
  1.21            Minnesota Statutes 2002, sections 336.1-101; 
  1.22            336.1-102; 336.1-103; 336.1-104; 336.1-105; 336.1-106; 
  1.23            336.1-107; 336.1-108; 336.1-109; 336.1-110; 336.1-201; 
  1.24            336.1-202; 336.1-203; 336.1-204; 336.1-205; 336.1-206; 
  1.25            336.1-207; 336.1-208; 336.1-209; 336.2-208; 336.2A-207.
  1.26  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.27                             ARTICLE 1 
  1.28                REVISION OF UNIFORM COMMERCIAL CODE 
  1.29                               PART 1 
  1.30                         GENERAL PROVISIONS 
  1.31     Section 1.  [336.1-101] [SHORT TITLES.] 
  1.32     (a) This chapter may be cited as the Uniform Commercial 
  1.33  Code. 
  1.34     (b) This article may be cited as Uniform Commercial Code - 
  1.35  General Provisions. 
  2.1      Sec. 2.  [336.1-102] [SCOPE OF ARTICLE.] 
  2.2      This article applies to a transaction to the extent that it 
  2.3   is governed by another article of the Uniform Commercial Code. 
  2.4      Sec. 3.  [336.1-103] [CONSTRUCTION OF UNIFORM COMMERCIAL 
  2.5   CODE TO PROMOTE ITS PURPOSES AND POLICIES; APPLICABILITY OF 
  2.6   SUPPLEMENTAL PRINCIPLES OF LAW.] 
  2.7      (a) The Uniform Commercial Code must be liberally construed 
  2.8   and applied to promote its underlying purposes and policies, 
  2.9   which are: 
  2.10     (1) to simplify, clarify, and modernize the law governing 
  2.11  commercial transactions; 
  2.12     (2) to permit the continued expansion of commercial 
  2.13  practices through custom, usage, and agreement of the parties; 
  2.14  and 
  2.15     (3) to make uniform the law among the various jurisdictions.
  2.16     (b) Unless displaced by the particular provisions of the 
  2.17  Uniform Commercial Code, the principles of law and equity, 
  2.18  including the law merchant and the law relative to capacity to 
  2.19  contract, principal and agent, estoppel, fraud, 
  2.20  misrepresentation, duress, coercion, mistake, bankruptcy, and 
  2.21  other validating or invalidating cause supplement its provisions.
  2.22     Sec. 4.  [336.1-104] [CONSTRUCTION AGAINST IMPLIED REPEAL.] 
  2.23     The Uniform Commercial Code being a general act intended as 
  2.24  a unified coverage of its subject matter, no part of it shall be 
  2.25  deemed to be impliedly repealed by subsequent legislation if 
  2.26  such construction can reasonably be avoided. 
  2.27     Sec. 5.  [336.1-105] [SEVERABILITY.] 
  2.28     If any provision or clause of the Uniform Commercial Code 
  2.29  or its application to any person or circumstance is held 
  2.30  invalid, the invalidity does not affect other provisions or 
  2.31  applications of the Uniform Commercial Code which can be given 
  2.32  effect without the invalid provision or application, and to this 
  2.33  end the provisions of the Uniform Commercial Code are severable. 
  2.34     Sec. 6.  [336.1-106] [USE OF SINGULAR AND PLURAL; GENDER.] 
  2.35     In the Uniform Commercial Code, unless the statutory 
  2.36  context otherwise requires: 
  3.1      (1) words in the singular number include the plural, and 
  3.2   those in the plural include the singular; and 
  3.3      (2) words of any gender also refer to any other gender. 
  3.4      Sec. 7.  [336.1-107] [SECTION CAPTIONS.] 
  3.5      Section captions are part of the Uniform Commercial Code. 
  3.6      Sec. 8.  [336.1-108] [RELATION TO ELECTRONIC SIGNATURES IN 
  3.7   GLOBAL AND NATIONAL COMMERCE ACT.] 
  3.8      This chapter modifies, limits, and supersedes the federal 
  3.9   Electronic Signatures in Global and National Commerce Act (15 
  3.10  U.S.C. Section 7001, et seq.) but does not modify, limit, or 
  3.11  supersede Section 101(c) of that act (15 U.S.C. Section 7001(c)) 
  3.12  or authorize electronic delivery of any of the notices described 
  3.13  in Section 103(b) of that act (15 U.S.C. Section 7003(b)). 
  3.14     Sec. 9.  [336.1-110] [UNIFORM COMMERCIAL CODE ACCOUNT.] 
  3.15     The Uniform Commercial Code account is established as an 
  3.16  account in the state treasury.  Fees that are not expressly set 
  3.17  by statute but are charged by the secretary of state to offset 
  3.18  the costs of providing a service under this chapter must be 
  3.19  deposited in the state treasury and credited to the Uniform 
  3.20  Commercial Code account. 
  3.21     Fees that are not expressly set by statute but are charged 
  3.22  by the secretary of state to offset the costs of providing 
  3.23  information contained in the computerized records maintained by 
  3.24  the secretary of state must be deposited in the state treasury 
  3.25  and credited to the Uniform Commercial Code account. 
  3.26     Money in the Uniform Commercial Code account is 
  3.27  continuously appropriated to the secretary of state to implement 
  3.28  and maintain the central filing system under this chapter and to 
  3.29  provide electronic access to other computerized records 
  3.30  maintained by the secretary of state. 
  3.31                               PART 2
  3.32        GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
  3.33     Sec. 10.  [336.1-201] [GENERAL DEFINITIONS.] 
  3.34     (a) Unless the context otherwise requires, words or phrases 
  3.35  defined in this section, or in the additional definitions 
  3.36  contained in other articles of the Uniform Commercial Code that 
  4.1   apply to particular articles or parts thereof, have the meanings 
  4.2   stated. 
  4.3      (b) Subject to definitions contained in other articles of 
  4.4   the Uniform Commercial Code that apply to particular articles or 
  4.5   parts thereof: 
  4.6      (1) "Action," in the sense of a judicial proceeding, 
  4.7   includes recoupment, counterclaim, set-off, suit in equity, and 
  4.8   any other proceeding in which rights are determined. 
  4.9      (2) "Aggrieved party" means a party entitled to pursue a 
  4.10  remedy. 
  4.11     (3) "Agreement," as distinguished from "contract," means 
  4.12  the bargain of the parties in fact, as found in their language 
  4.13  or inferred from other circumstances, including course of 
  4.14  performance, course of dealing, or usage of trade as provided in 
  4.15  section 336.1-303. 
  4.16     (4) "Bank" means a person engaged in the business of 
  4.17  banking and includes a savings bank, savings and loan 
  4.18  association, credit union, and trust company. 
  4.19     (5) "Bearer" means a person in possession of a negotiable 
  4.20  instrument, document of title, or certificated security that is 
  4.21  payable to bearer or indorsed in blank. 
  4.22     (6) "Bill of lading" means a document evidencing the 
  4.23  receipt of goods for shipment issued by a person engaged in the 
  4.24  business of transporting or forwarding goods. 
  4.25     (7) "Branch" includes a separately incorporated foreign 
  4.26  branch of a bank. 
  4.27     (8) "Burden of establishing" a fact means the burden of 
  4.28  persuading the trier of fact that the existence of the fact is 
  4.29  more probable than its nonexistence. 
  4.30     (9) "Buyer in ordinary course of business" means a person 
  4.31  that buys goods in good faith, without knowledge that the sale 
  4.32  violates the rights of another person in the goods, and in the 
  4.33  ordinary course from a person, other than a pawnbroker, in the 
  4.34  business of selling goods of that kind.  A person buys goods in 
  4.35  the ordinary course if the sale to the person comports with the 
  4.36  usual or customary practices in the kind of business in which 
  5.1   the seller is engaged or with the seller's own usual or 
  5.2   customary practices.  A person that sells oil, gas, or other 
  5.3   minerals at the wellhead or minehead is a person in the business 
  5.4   of selling goods of that kind.  A buyer in ordinary course of 
  5.5   business may buy for cash, by exchange of other property, or on 
  5.6   secured or unsecured credit, and may acquire goods or documents 
  5.7   of title under a preexisting contract for sale.  Only a buyer 
  5.8   that takes possession of the goods or has a right to recover the 
  5.9   goods from the seller under article 2 may be a buyer in ordinary 
  5.10  course of business.  "Buyer in ordinary course of business" does 
  5.11  not include a person that acquires goods in a transfer in bulk 
  5.12  or as security for or in total or partial satisfaction of a 
  5.13  money debt. 
  5.14     (10) "Conspicuous," with reference to a term, means so 
  5.15  written, displayed, or presented that a reasonable person 
  5.16  against which it is to operate ought to have noticed it.  
  5.17  Whether a term is "conspicuous" or not is a decision for the 
  5.18  court.  Conspicuous terms include the following: 
  5.19     (A) a heading in capitals equal to or greater in size than 
  5.20  the surrounding text, or in contrasting type, font, or color to 
  5.21  the surrounding text of the same or lesser size; and 
  5.22     (B) language in the body of a record or display in larger 
  5.23  type than the surrounding text, or in contrasting type, font, or 
  5.24  color to the surrounding text of the same size, or set off from 
  5.25  surrounding text of the same size by symbols or other marks that 
  5.26  call attention to the language. 
  5.27     (11) "Consumer" means an individual who enters into a 
  5.28  transaction primarily for personal, family, or household 
  5.29  purposes. 
  5.30     (12) "Contract," as distinguished from "agreement," means 
  5.31  the total legal obligation that results from the parties' 
  5.32  agreement as determined by the Uniform Commercial Code as 
  5.33  supplemented by any other applicable laws. 
  5.34     (13) "Creditor" includes a general creditor, a secured 
  5.35  creditor, a lien creditor, and any representative of creditors, 
  5.36  including an assignee for the benefit of creditors, a trustee in 
  6.1   bankruptcy, a receiver in equity, and an executor or 
  6.2   administrator of an insolvent debtor's or assignor's estate. 
  6.3      (14) "Defendant" includes a person in the position of 
  6.4   defendant in a counterclaim, cross-claim, or third-party claim. 
  6.5      (15) "Delivery," with respect to an instrument, document of 
  6.6   title, or chattel paper, means voluntary transfer of possession. 
  6.7      (16) "Document of title" includes bill of lading, dock 
  6.8   warrant, dock receipt, warehouse receipt or order for the 
  6.9   delivery of goods, and also any other document which in the 
  6.10  regular course of business or financing is treated as adequately 
  6.11  evidencing that the person in possession of it is entitled to 
  6.12  receive, hold, and dispose of the document and the goods it 
  6.13  covers.  To be a document of title, a document must purport to 
  6.14  be issued by or addressed to a bailee and purport to cover goods 
  6.15  in the bailee's possession which are either identified or are 
  6.16  fungible portions of an identified mass. 
  6.17     (17) "Fault" means a default, breach, or wrongful act or 
  6.18  omission. 
  6.19     (18) "Fungible goods" means: 
  6.20     (A) goods of which any unit, by nature or usage of trade, 
  6.21  is the equivalent of any other like unit; or 
  6.22     (B) goods that by agreement are treated as equivalent. 
  6.23     (19) "Genuine" means free of forgery or counterfeiting. 
  6.24     (20) "Good faith," except as otherwise provided in article 
  6.25  5, means honesty in fact and the observance of reasonable 
  6.26  commercial standards of fair dealing. 
  6.27     (21) "Holder" means: 
  6.28     (A) the person in possession of a negotiable instrument 
  6.29  that is payable either to bearer or to an identified person that 
  6.30  is the person in possession; or 
  6.31     (B) the person in possession of a document of title if the 
  6.32  goods are deliverable either to bearer or to the order of the 
  6.33  person in possession. 
  6.34     (22) "Insolvency proceeding" includes an assignment for the 
  6.35  benefit of creditors or other proceeding intended to liquidate 
  6.36  or rehabilitate the estate of the person involved. 
  7.1      (23) "Insolvent" means: 
  7.2      (A) having generally ceased to pay debts in the ordinary 
  7.3   course of business other than as a result of bona fide dispute; 
  7.4      (B) being unable to pay debts as they become due; or 
  7.5      (C) being insolvent within the meaning of federal 
  7.6   bankruptcy law. 
  7.7      (24) "Money" means a medium of exchange currently 
  7.8   authorized or adopted by a domestic or foreign government.  The 
  7.9   term includes a monetary unit of account established by an 
  7.10  intergovernmental organization or by agreement between two or 
  7.11  more countries. 
  7.12     (25) "Organization" means a person other than an individual.
  7.13     (26) "Party," as distinguished from "third party," means a 
  7.14  person that has engaged in a transaction or made an agreement 
  7.15  subject to the Uniform Commercial Code. 
  7.16     (27) "Person" means an individual, corporation, business 
  7.17  trust, estate, trust, partnership, limited liability company, 
  7.18  association, joint venture, government, governmental 
  7.19  subdivision, agency, or instrumentality, public corporation, or 
  7.20  any other legal or commercial entity. 
  7.21     (28) "Present value" means the amount as of a date certain 
  7.22  of one or more sums payable in the future, discounted to the 
  7.23  date certain by use of either an interest rate specified by the 
  7.24  parties if that rate is not manifestly unreasonable at the time 
  7.25  the transaction is entered into or, if an interest rate is not 
  7.26  so specified, a commercially reasonable rate that takes into 
  7.27  account the facts and circumstances at the time the transaction 
  7.28  is entered into. 
  7.29     (29) "Purchase" means taking by sale, lease, discount, 
  7.30  negotiation, mortgage, pledge, lien, security interest, issue or 
  7.31  reissue, gift, or any other voluntary transaction creating an 
  7.32  interest in property. 
  7.33     (30) "Purchaser" means a person that takes by purchase. 
  7.34     (31) "Record" means information that is inscribed on a 
  7.35  tangible medium or that is stored in an electronic or other 
  7.36  medium and is retrievable in perceivable form. 
  8.1      (32) "Remedy" means any remedial right to which an 
  8.2   aggrieved party is entitled with or without resort to a tribunal.
  8.3      (33) "Representative" means a person empowered to act for 
  8.4   another, including an agent, an officer of a corporation or 
  8.5   association, and a trustee, executor, or administrator of an 
  8.6   estate. 
  8.7      (34) "Right" includes remedy. 
  8.8      (35) "Security interest" means an interest in personal 
  8.9   property or fixtures which secures payment or performance of an 
  8.10  obligation.  "Security interest" includes any interest of a 
  8.11  consignor and a buyer of accounts, chattel paper, a payment 
  8.12  intangible, or a promissory note in a transaction that is 
  8.13  subject to article 9.  "Security interest" does not include the 
  8.14  special property interest of a buyer of goods on identification 
  8.15  of those goods to a contract for sale under section 336.2-401, 
  8.16  but a buyer may also acquire a "security interest" by complying 
  8.17  with article 9.  Except as otherwise provided in section 
  8.18  336.2-505, the right of a seller or lessor of goods under 
  8.19  article 2 or 2A to retain or acquire possession of the goods is 
  8.20  not a "security interest," but a seller or lessor may also 
  8.21  acquire a "security interest" by complying with article 9.  The 
  8.22  retention or reservation of title by a seller of goods 
  8.23  notwithstanding shipment or delivery to the buyer under section 
  8.24  336.2-401 is limited in effect to a reservation of a "security 
  8.25  interest."  Whether a transaction in the form of a lease creates 
  8.26  a "security interest" is determined pursuant to section 
  8.27  336.1-203. 
  8.28     (36) "Send" in connection with a writing, record, or notice 
  8.29  means: 
  8.30     (A) to deposit in the mail or deliver for transmission by 
  8.31  any other usual means of communication with postage or cost or 
  8.32  transmission provided for and properly addressed, and in the 
  8.33  case of an instrument, to an address specified thereon or 
  8.34  otherwise agreed, or if there be none to any address reasonable 
  8.35  under the circumstances; or 
  8.36     (B) in any other way to cause to be received any record or 
  9.1   notice within the time it would have arrived if properly sent. 
  9.2      (37) "Signed" includes using any symbol executed or adopted 
  9.3   with present intention to adopt or accept a writing. 
  9.4      (38) "State" means a state of the United States, the 
  9.5   District of Columbia, Puerto Rico, the United States Virgin 
  9.6   Islands, or any territory or insular possession subject to the 
  9.7   jurisdiction of the United States. 
  9.8      (39) "Surety" includes a guarantor or other secondary 
  9.9   obligor. 
  9.10     (40) "Term" means a portion of an agreement that relates to 
  9.11  a particular matter. 
  9.12     (41) "Unauthorized signature" means a signature made 
  9.13  without actual, implied, or apparent authority.  The term 
  9.14  includes a forgery. 
  9.15     (42) "Warehouse receipt" means a receipt issued by a person 
  9.16  engaged in the business of storing goods for hire. 
  9.17     (43) "Writing" includes printing, typewriting, or any other 
  9.18  intentional reduction to tangible form.  "Written" has a 
  9.19  corresponding meaning. 
  9.20     Sec. 11.  [336.1-202] [NOTICE; KNOWLEDGE.] 
  9.21     (a) Subject to subsection (f), a person has "notice" of a 
  9.22  fact if the person: 
  9.23     (1) has actual knowledge of it; 
  9.24     (2) has received a notice or notification of it; or 
  9.25     (3) from all the facts and circumstances known to the 
  9.26  person at the time in question, has reason to know that it 
  9.27  exists. 
  9.28     (b) "Knowledge" means actual knowledge.  "Knows" has a 
  9.29  corresponding meaning. 
  9.30     (c) "Discover," "learn," or words of similar import refer 
  9.31  to knowledge rather than to reason to know. 
  9.32     (d) A person "notifies" or "gives" a notice or notification 
  9.33  to another person by taking such steps as may be reasonably 
  9.34  required to inform the other person in ordinary course, whether 
  9.35  or not the other person actually comes to know of it. 
  9.36     (e) Subject to subsection (f), a person "receives" a notice 
 10.1   or notification when: 
 10.2      (1) it comes to that person's attention; or 
 10.3      (2) it is duly delivered in a form reasonable under the 
 10.4   circumstances at the place of business through which the 
 10.5   contract was made or at another location held out by that person 
 10.6   as the place for receipt of such communications. 
 10.7      (f) Notice, knowledge, or a notice or notification received 
 10.8   by an organization is effective for a particular transaction 
 10.9   from the time it is brought to the attention of the individual 
 10.10  conducting that transaction and, in any event, from the time it 
 10.11  would have been brought to the individual's attention if the 
 10.12  organization had exercised due diligence.  An organization 
 10.13  exercises due diligence if it maintains reasonable routines for 
 10.14  communicating significant information to the person conducting 
 10.15  the transaction and there is reasonable compliance with the 
 10.16  routines.  Due diligence does not require an individual acting 
 10.17  for the organization to communicate information unless the 
 10.18  communication is part of the individual's regular duties or the 
 10.19  individual has reason to know of the transaction and that the 
 10.20  transaction would be materially affected by the information.  
 10.21     Sec. 12.  [336.1-203] [LEASE DISTINGUISHED FROM SECURITY 
 10.22  INTEREST.] 
 10.23     (a) Whether a transaction in the form of a lease creates a 
 10.24  lease or security interest is determined by the facts of each 
 10.25  case. 
 10.26     (b) A transaction in the form of a lease creates a security 
 10.27  interest if the consideration that the lessee is to pay the 
 10.28  lessor for the right to possession and use of the goods is an 
 10.29  obligation for the term of the lease and is not subject to 
 10.30  termination by the lessee, and: 
 10.31     (1) the original term of the lease is equal to or greater 
 10.32  than the remaining economic life of the goods; 
 10.33     (2) the lessee is bound to renew the lease for the 
 10.34  remaining economic life of the goods or is bound to become the 
 10.35  owner of the goods; 
 10.36     (3) the lessee has an option to renew the lease for the 
 11.1   remaining economic life of the goods for no additional 
 11.2   consideration or for nominal additional consideration upon 
 11.3   compliance with the lease agreement; or 
 11.4      (4) the lessee has an option to become the owner of the 
 11.5   goods for no additional consideration or for nominal additional 
 11.6   consideration upon compliance with the lease agreement. 
 11.7      (c) A transaction in the form of a lease does not create a 
 11.8   security interest merely because: 
 11.9      (1) the present value of the consideration the lessee is 
 11.10  obligated to pay the lessor for the right to possession and use 
 11.11  of the goods is substantially equal to or is greater than the 
 11.12  fair market value of the goods at the time the lease is entered 
 11.13  into; 
 11.14     (2) the lessee assumes risk of loss of the goods; 
 11.15     (3) the lessee agrees to pay, with respect to the goods, 
 11.16  taxes, insurance, filing, recording, or registration fees, or 
 11.17  service or maintenance costs; 
 11.18     (4) the lessee has an option to renew the lease or to 
 11.19  become the owner of the goods; 
 11.20     (5) the lessee has an option to renew the lease for a fixed 
 11.21  rent that is equal to or greater than the reasonably predictable 
 11.22  fair market rent for the use of the goods for the term of the 
 11.23  renewal at the time the option is to be performed; or 
 11.24     (6) the lessee has an option to become the owner of the 
 11.25  goods for a fixed price that is equal to or greater than the 
 11.26  reasonably predictable fair market value of the goods at the 
 11.27  time the option is to be performed. 
 11.28     (d) Additional consideration is nominal if it is less than 
 11.29  the lessee's reasonably predictable cost of performing under the 
 11.30  lease agreement if the option is not exercised.  Additional 
 11.31  consideration is not nominal if: 
 11.32     (1) when the option to renew the lease is granted to the 
 11.33  lessee, the rent is stated to be the fair market rent for the 
 11.34  use of the goods for the term of the renewal determined at the 
 11.35  time the option is to be performed; or 
 11.36     (2) when the option to become the owner of the goods is 
 12.1   granted to the lessee, the price is stated to be the fair market 
 12.2   value of the goods determined at the time the option is to be 
 12.3   performed. 
 12.4      (e) The "remaining economic life of the goods" and 
 12.5   "reasonably predictable" fair market rent, fair market value, or 
 12.6   cost of performing under the lease agreement must be determined 
 12.7   with reference to the fact and circumstances at the time the 
 12.8   transaction is entered into. 
 12.9      Sec. 13.  [336.1-204] [VALUE.] 
 12.10     Except as otherwise provided in articles 3, 4, and 5, a 
 12.11  person gives value for rights if the person acquires them: 
 12.12     (1) in return for a binding commitment to extend credit or 
 12.13  for the extension of immediately available credit, whether or 
 12.14  not drawn upon and whether or not a chargeback is provided for 
 12.15  in the event of difficulties in collection; 
 12.16     (2) as security for, or in total or partial satisfaction 
 12.17  of, a preexisting claim; 
 12.18     (3) by accepting delivery under a preexisting contract for 
 12.19  purchase; or 
 12.20     (4) in return for any consideration sufficient to support a 
 12.21  simple contract. 
 12.22     Sec. 14.  [336.1-205] [REASONABLE TIME; SEASONABLENESS.] 
 12.23     (a) Whether a time for taking an action required by the 
 12.24  Uniform Commercial Code is reasonable depends on the nature, 
 12.25  purpose, and circumstances of the action. 
 12.26     (b) An action is taken seasonably if it is taken at or 
 12.27  within the time agreed or, if no time is agreed, at or within a 
 12.28  reasonable time. 
 12.29     Sec. 15.  [336.1-206] [PRESUMPTIONS.] 
 12.30     Whenever the Uniform Commercial Code creates a 
 12.31  "presumption" with respect to a fact, or provides that a fact is 
 12.32  "presumed," the trier of fact must find the existence of the 
 12.33  fact unless and until evidence is introduced that supports a 
 12.34  finding of its nonexistence. 
 12.35                               PART 3
 12.36            TERRITORIAL APPLICABILITY AND GENERAL RULES
 13.1      Sec. 16.  [336.1-301] [TERRITORIAL APPLICABILITY; PARTIES' 
 13.2   POWER TO CHOOSE APPLICABLE LAW.] 
 13.3      (a) In this section: 
 13.4      (1) "Domestic transaction" means a transaction other than 
 13.5   an international transaction. 
 13.6      (2) "International transaction" means a transaction that 
 13.7   bears a reasonable relation to a country other than the United 
 13.8   States. 
 13.9      (b) This section applies to a transaction to the extent 
 13.10  that it is governed by another article of the Uniform Commercial 
 13.11  Code. 
 13.12     (c) Except as otherwise provided in this section: 
 13.13     (1) an agreement by parties to a domestic transaction that 
 13.14  any or all of the their rights and obligations are to be 
 13.15  determined by the law of this state or of another state is 
 13.16  effective, whether or not the transaction bears a relation to 
 13.17  the state designated; and 
 13.18     (2) an agreement by parties to an international transaction 
 13.19  that any or all of their rights and obligations are to be 
 13.20  determined by the law of this state or of another state or 
 13.21  country is effective, whether or not the transaction bears a 
 13.22  relation to the state or country designated. 
 13.23     (d) In the absence of an agreement effective under 
 13.24  subsection (c), and except as provided in subsections (e) and 
 13.25  (g), the rights and obligations of the parties are determined by 
 13.26  the law that would be selected by application of this state's 
 13.27  conflict of laws principles. 
 13.28     (e) If one of the parties to a transaction is a consumer, 
 13.29  the following rules apply: 
 13.30     (1) An agreement referred to in subsection (c) is not 
 13.31  effective unless the transaction bears a reasonable relation to 
 13.32  the state or country designated. 
 13.33     (2) Application of the law of the state or country 
 13.34  determined pursuant to subsection (c) or (d) may not deprive the 
 13.35  consumer of the protection of any rule of law governing a matter 
 13.36  within the scope of this section, which both is protective of 
 14.1   consumers and may not be varied by agreement: 
 14.2      (A) of the state or country in which the consumer 
 14.3   principally resides, unless subparagraph (B) applies; or 
 14.4      (B) if the transaction is a sale of goods, of the state or 
 14.5   country in which the consumer both makes the contract and takes 
 14.6   delivery of those goods, if such state or country is not the 
 14.7   state or country in which the consumer principally resides. 
 14.8      (f) An agreement otherwise effective under subsection (c) 
 14.9   is not effective to the extent that application of the law of 
 14.10  the state or country designated would be contrary to a 
 14.11  fundamental policy of the state or country whose law would 
 14.12  govern in the absence of agreement under subsection (d). 
 14.13     (g) To the extent that the Uniform Commercial Code governs 
 14.14  a transaction, if one of the following provisions of the Uniform 
 14.15  Commercial Code specifies the applicable law, that provision 
 14.16  governs and a contrary agreement is effective only to the extent 
 14.17  permitted by the law so specified: 
 14.18     (1) section 336.2-402; 
 14.19     (2) sections 336.2A-105 and 336.2A-106; 
 14.20     (3) section 336.4-102; 
 14.21     (4) section 336.4A-507; 
 14.22     (5) section 336.5-116; 
 14.23     (6) section 336.8-110; 
 14.24     (7) sections 336.9-301 through 336.9-307. 
 14.25     Sec. 17.  [336.1-302] [VARIATION BY AGREEMENT.] 
 14.26     (a) Except as otherwise provided in subsection (b) or 
 14.27  elsewhere in the Uniform Commercial Code, the effect of 
 14.28  provisions of the Uniform Commercial Code may be varied by 
 14.29  agreement. 
 14.30     (b) The obligations of good faith, diligence, 
 14.31  reasonableness, and care prescribed by the Uniform Commercial 
 14.32  Code may not be disclaimed by agreement.  The parties, by 
 14.33  agreement, may determine the standards by which the performance 
 14.34  of those obligations is to be measured if those standards are 
 14.35  not manifestly unreasonable.  Whenever the Uniform Commercial 
 14.36  Code requires an action to be taken within a reasonable time, a 
 15.1   time that is not manifestly unreasonable may be fixed by 
 15.2   agreement. 
 15.3      (c) The presence in certain provisions of the Uniform 
 15.4   Commercial Code of the phrase "unless otherwise agreed," or 
 15.5   words of similar import, does not imply that the effect of other 
 15.6   provisions may not be varied by agreement under this section. 
 15.7      Sec. 18.  [336.1-303] [COURSE OF PERFORMANCE, COURSE OF 
 15.8   DEALING, AND USAGE OF TRADE.] 
 15.9      (a) A "course of performance" is a sequence of conduct 
 15.10  between the parties to a particular transaction that exists if: 
 15.11     (1) the agreement of the parties with respect to the 
 15.12  transaction involves repeated occasions for performance by a 
 15.13  party; and 
 15.14     (2) the other party, with knowledge of the nature of the 
 15.15  performance and opportunity for objection to it, accepts the 
 15.16  performance or acquiesces in it without objection. 
 15.17     (b) A "course of dealing" is a sequence of conduct 
 15.18  concerning previous transactions between the parties to a 
 15.19  particular transaction that is fairly to be regarded as 
 15.20  establishing a common basis of understanding for interpreting 
 15.21  their expressions and other conduct. 
 15.22     (c) A "usage of trade" is any practice or method of dealing 
 15.23  having such regularity of observance in a place, vocation, or 
 15.24  trade as to justify an expectation that it will be observed with 
 15.25  respect to the transaction in question.  The existence and scope 
 15.26  of such a usage must be proved as facts.  If it is established 
 15.27  that such a usage is embodied in a trade code or similar record, 
 15.28  the interpretation of the record is a question of law. 
 15.29     (d) A course of performance or course of dealing between 
 15.30  the parties or usage of trade in the vocation or trade in which 
 15.31  they are engaged or of which they are or should be aware is 
 15.32  relevant in ascertaining the meaning of the parties' agreement, 
 15.33  may give particular meaning to specific terms of the agreement, 
 15.34  and may supplement or qualify the terms of the agreement.  A 
 15.35  usage of trade applicable in the place in which part of the 
 15.36  performance under the agreement is to occur may be so utilized 
 16.1   as to that part of the performance. 
 16.2      (e) Except as otherwise provided in subsection (f), the 
 16.3   express terms of an agreement and any applicable course of 
 16.4   performance, course of dealing, or usage of trade must be 
 16.5   construed whenever reasonable as consistent with each other.  If 
 16.6   such a construction is unreasonable: 
 16.7      (1) express terms prevail over course of performance, 
 16.8   course of dealing, and usage of trade; 
 16.9      (2) course of performance prevails over course of dealing 
 16.10  and usage of trade; and 
 16.11     (3) course of dealing prevails over usage of trade. 
 16.12     (f) Subject to section 336.2-209, a course of performance 
 16.13  is relevant to show a waiver or modification of any term 
 16.14  inconsistent with the course of performance. 
 16.15     (g) Evidence of a relevant usage of trade offered by one 
 16.16  party is not admissible unless that party has given the other 
 16.17  party notice that the court finds sufficient to prevent unfair 
 16.18  surprise to the other party. 
 16.19     Sec. 19.  [336.1-304] [OBLIGATION OF GOOD FAITH.] 
 16.20     Every contract or duty within the Uniform Commercial Code 
 16.21  imposes an obligation of good faith in its performance and 
 16.22  enforcement. 
 16.23     Sec. 20.  [336.1-305] [REMEDIES TO BE LIBERALLY 
 16.24  ADMINISTERED.] 
 16.25     (a) The remedies provided by the Uniform Commercial Code 
 16.26  must be liberally administered to the end that the aggrieved 
 16.27  party may be put in as good a position as if the other party had 
 16.28  fully performed but neither consequential or special damages nor 
 16.29  penal damages may be had except as specifically provided in the 
 16.30  Uniform Commercial Code or by other rule of law. 
 16.31     (b) Any right or obligation declared by the Uniform 
 16.32  commercial Code is enforceable by action unless the provision 
 16.33  declaring it specifies a different and limited effect. 
 16.34     Sec. 21.  [336.1-306] [WAIVER OR RENUNCIATION OF CLAIM OR 
 16.35  RIGHT AFTER BREACH.] 
 16.36     A claim or right arising out of an alleged breach may be 
 17.1   discharged in whole or in part without consideration by 
 17.2   agreement of the aggrieved party in an authenticated record. 
 17.3      Sec. 22.  [336.1-307] [PRIMA FACIE EVIDENCE BY THIRD-PARTY 
 17.4   DOCUMENTS.] 
 17.5      A document in due form purporting to be a bill of lading, 
 17.6   policy or certificate of insurance, official weigher's or 
 17.7   inspector's certificate, consular invoice, or any other document 
 17.8   authorized or required by the contract to be issued by a third 
 17.9   party is prima facie evidence of its own authenticity and 
 17.10  genuineness and of the facts stated in the document by the third 
 17.11  party. 
 17.12     Sec. 23.  [336.1-308] [PERFORMANCE OR ACCEPTANCE UNDER 
 17.13  RESERVATION OF RIGHTS.] 
 17.14     (a) A party that with explicit reservation of rights 
 17.15  performs or promises performance or assents to performance in a 
 17.16  manner demanded or offered by the other party does not thereby 
 17.17  prejudice the rights reserved.  Such words as "without 
 17.18  prejudice," "under protest," or the like are sufficient. 
 17.19     (b) Subsection (a) does not apply to an accord and 
 17.20  satisfaction. 
 17.21     Sec. 24.  [336.1-309] [OPTION TO ACCELERATE AT WILL.] 
 17.22     A term providing that one party or that party's successor 
 17.23  in interest may accelerate payment or performance or require 
 17.24  collateral or additional collateral "at will" or when the party 
 17.25  "deems itself insecure," or words of similar import, means that 
 17.26  the party has power to do so only if that party in good faith 
 17.27  believes that the prospect of payment or performance is 
 17.28  impaired.  The burden of establishing lack of good faith is on 
 17.29  the party against which the power has been exercised.  
 17.30     Sec. 25.  [336.1-310] [SUBORDINATED OBLIGATIONS.] 
 17.31     An obligation may be issued as subordinated to performance 
 17.32  of another obligation of the person obligated, or a creditor may 
 17.33  subordinate its right to performance of an obligation by 
 17.34  agreement with either the person obligated or another creditor 
 17.35  of the person obligated.  Subordination does not create a 
 17.36  security interest as against either the common debtor or a 
 18.1   subordinated creditor. 
 18.2      Sec. 26.  [REPEALER.] 
 18.3      Minnesota Statutes 2002, sections 336.1-101; 336.1-102; 
 18.4   336.1-103; 336.1-104; 336.1-105; 336.1-106; 336.1-107; 
 18.5   336.1-108; 336.1-109; 336.1-110; 336.1-201; 336.1-202; 
 18.6   336.1-203; 336.1-204; 336.1-205; 336.1-206; 336.1-207; 
 18.7   336.1-208; and 336.1-209, are repealed. 
 18.8                              ARTICLE 2 
 18.9             CONFORMING AMENDMENTS TO OTHER UCC ARTICLES 
 18.10     Section 1.  Minnesota Statutes 2002, section 336.2-103, is 
 18.11  amended to read: 
 18.12     336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
 18.13     (1) In this article unless the context otherwise requires: 
 18.14     (a) "Buyer" means a person who buys or contracts to buy 
 18.15  goods. 
 18.16     (b) "Good faith" in the case of a merchant means honesty in 
 18.17  fact and the observance of reasonable commercial standards of 
 18.18  fair dealing in the trade. [Reserved.] 
 18.19     (c) "Receipt" of goods means taking physical possession of 
 18.20  them. 
 18.21     (d) "Seller" means a person who sells or contracts to sell 
 18.22  goods.  
 18.23     (2) Other definitions applying to this article or to 
 18.24  specified parts thereof, and the sections in which they appear 
 18.25  are: 
 18.26     "Acceptance," section 336.2-606. 
 18.27     "Banker's credit," section 336.2-325. 
 18.28     "Between merchants," section 336.2-104. 
 18.29     "Cancellation," section 336.2-106(4). 
 18.30     "Commercial unit," section 336.2-105. 
 18.31     "Confirmed credit," section 336.2-325. 
 18.32     "Conforming to contract," section 336.2-106. 
 18.33     "Contract for sale," section 336.2-106. 
 18.34     "Cover," section 336.2-712. 
 18.35     "Entrusting," section 336.2-403. 
 18.36     "Financing agency," section 336.2-104. 
 19.1      "Future goods," section 336.2-105. 
 19.2      "Goods," section 336.2-105. 
 19.3      "Identification," section 336.2-501. 
 19.4      "Installment contract," section 336.2-612. 
 19.5      "Letter of credit," section 336.2-325. 
 19.6      "Lot," section 336.2-105. 
 19.7      "Merchant," section 336.2-104. 
 19.8      "Overseas," section 336.2-323. 
 19.9      "Person in position of seller," section 336.2-707. 
 19.10     "Present sale," section 336.2-106. 
 19.11     "Sale," section 336.2-106. 
 19.12     "Sale on approval," section 336.2-326. 
 19.13     "Sale or return," section 336.2-326. 
 19.14     "Termination," section 336.2-106. 
 19.15     (3) The following definitions in other articles apply to 
 19.16  this article: 
 19.17     "Check," section 336.3-104. 
 19.18     "Consignee," section 336.7-102. 
 19.19     "Consignor," section 336.7-102. 
 19.20     "Consumer goods," section 336.9-102. 
 19.21     "Dishonor," section 336.3-502. 
 19.22     "Draft," section 336.3-104. 
 19.23     (4) In addition article 1 contains general definitions and 
 19.24  principles of construction and interpretation applicable 
 19.25  throughout this article. 
 19.26     Sec. 2.  Minnesota Statutes 2002, section 336.2-202, is 
 19.27  amended to read: 
 19.28     336.2-202 [FINAL WRITTEN EXPRESSION; PAROL OR EXTRINSIC 
 19.29  EVIDENCE.] 
 19.30     Terms with respect to which the confirmatory memoranda of 
 19.31  the parties agree or which are otherwise set forth in a writing 
 19.32  intended by the parties as a final expression of their agreement 
 19.33  with respect to such terms as are included therein may not be 
 19.34  contradicted by evidence of any prior agreement or of a 
 19.35  contemporaneous oral agreement but may be explained or 
 19.36  supplemented 
 20.1      (a) by course of performance, course of dealing, or usage 
 20.2   of trade (section 336.1-205 336.1-303) or by course of 
 20.3   performance (section 336.2-208); and 
 20.4      (b) by evidence of consistent additional terms unless the 
 20.5   court finds the writing to have been intended also as a complete 
 20.6   and exclusive statement of the terms of the agreement.  
 20.7      Sec. 3.  Minnesota Statutes 2002, section 336.2A-103, is 
 20.8   amended to read: 
 20.9      336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
 20.10     (1) In this article unless the context otherwise requires: 
 20.11     (a) "Buyer in ordinary course of business" means a person 
 20.12  who in good faith and without knowledge that the sale is in 
 20.13  violation of the ownership rights or security interest or 
 20.14  leasehold interest of a third party in the goods, buys in 
 20.15  ordinary course from a person in the business of selling goods 
 20.16  of that kind but does not include a pawnbroker.  "Buying" may be 
 20.17  for cash or by exchange of other property or on secured or 
 20.18  unsecured credit and includes receiving goods or documents of 
 20.19  title under a preexisting contract for sale but does not include 
 20.20  a transfer in bulk or as security for or in total or partial 
 20.21  satisfaction of a money debt. 
 20.22     (b) "Cancellation" occurs when either party puts an end to 
 20.23  the lease contract for default by the other party. 
 20.24     (c) "Commercial unit" means a unit of goods that by 
 20.25  commercial usage is a single whole for purposes of lease and 
 20.26  division of which materially impairs its character or value on 
 20.27  the market or in use.  A commercial unit may be a single 
 20.28  article, as a machine, or a set of articles, as a suite of 
 20.29  furniture or a line of machinery, or a quantity, as a gross or 
 20.30  carload, or any other unit treated in use or in the relevant 
 20.31  market as a single whole. 
 20.32     (d) "Conforming" goods or performance under a lease 
 20.33  contract means goods or performance that are in accordance with 
 20.34  the obligations under the lease contract. 
 20.35     (e) "Consumer lease" means a lease that a lessor regularly 
 20.36  engaged in the business of leasing or selling makes to a lessee 
 21.1   who is an individual and who takes under the lease primarily for 
 21.2   a personal, family, or household purpose, if the total payments 
 21.3   to be made under the lease contract, excluding payments for 
 21.4   options to renew or buy, do not exceed $25,000. 
 21.5      (f) "Fault" means wrongful act, omission, breach, or 
 21.6   default. 
 21.7      (g) "Finance lease" means a lease in which 
 21.8      (1) the lessor does not select, manufacture, or supply the 
 21.9   goods, 
 21.10     (2) the lessor acquires the goods or the right to 
 21.11  possession and use of the goods in connection with the lease, 
 21.12  and 
 21.13     (3) either 
 21.14     (i) the lessee receives a copy of the contract evidencing 
 21.15  the lessor's purchase of the goods or a disclaimer statement on 
 21.16  or before signing the lease contract, or 
 21.17     (ii) the lessee's approval of the contract evidencing the 
 21.18  lessor's purchase of the goods or a disclaimer statement is a 
 21.19  condition to effectiveness of the lease contract.  
 21.20     "Disclaimer statement" means a written statement that is 
 21.21  part of or separate from the lease contract that discloses all 
 21.22  warranties and other rights provided to the lessee by the lessor 
 21.23  and supplier in connection with the lease contract and informs 
 21.24  the lessee in a conspicuous manner that there are no warranties 
 21.25  or other rights provided to the lessee by the lessor and 
 21.26  supplier other than those disclosed in the statement. 
 21.27     (h) "Goods" means all things that are movable at the time 
 21.28  of identification to the lease contract, or are fixtures 
 21.29  (section 336.2A-309), but the term does not include money, 
 21.30  documents, instruments, accounts, chattel paper, general 
 21.31  intangibles, or minerals or the like, including oil and gas, 
 21.32  before extraction.  The term also includes the unborn young of 
 21.33  animals. 
 21.34     (i) "Installment lease contract" means a lease contract 
 21.35  that authorizes or requires the delivery of goods in separate 
 21.36  lots to be separately accepted, even though the lease contract 
 22.1   contains a clause "each delivery is a separate lease" or its 
 22.2   equivalent. 
 22.3      (j) "Lease" means a transfer of the right to possession and 
 22.4   use of goods for a term in return for consideration, but a sale, 
 22.5   including a sale on approval or a sale or return, or retention 
 22.6   or creation of a security interest is not a lease.  Unless the 
 22.7   context clearly indicates otherwise, the term includes a 
 22.8   sublease. 
 22.9      (k) "Lease agreement" means the bargain, with respect to 
 22.10  the lease, of the lessor and the lessee in fact as found in 
 22.11  their language or by implication from other circumstances 
 22.12  including course of dealing or usage of trade or course of 
 22.13  performance as provided in this article.  Unless the context 
 22.14  clearly indicates otherwise, the term includes a sublease 
 22.15  agreement. 
 22.16     (l) "Lease contract" means the total legal obligation that 
 22.17  results from the lease agreement as affected by this article and 
 22.18  any other applicable rules of law.  Unless the context clearly 
 22.19  indicates otherwise, the term includes a sublease contract. 
 22.20     (m) "Leasehold interest" means the interest of the lessor 
 22.21  or the lessee under a lease contract. 
 22.22     (n) "Lessee" means a person who acquires the right to 
 22.23  possession and use of goods under a lease.  Unless the context 
 22.24  clearly indicates otherwise, the term includes a sublessee. 
 22.25     (o) "Lessee in ordinary course of business" means a person 
 22.26  who in good faith and without knowledge that the lease is in 
 22.27  violation of the ownership rights or security interest or 
 22.28  leasehold interest of a third party in the goods leases in 
 22.29  ordinary course from a person in the business of selling or 
 22.30  leasing goods of that kind but does not include a pawnbroker.  
 22.31  "Leasing" may be for cash or by exchange of other property or on 
 22.32  secured or unsecured credit and includes receiving goods or 
 22.33  documents of title under a preexisting lease contract but does 
 22.34  not include a transfer in bulk or as security for or in total or 
 22.35  partial satisfaction of a money debt. 
 22.36     (p) "Lessor" means a person who transfers the right to 
 23.1   possession and use of goods under a lease.  Unless the context 
 23.2   clearly indicates otherwise, the term includes a sublessor. 
 23.3      (q) "Lessor's residual interest" means the lessor's 
 23.4   interest in the goods after expiration, termination, or 
 23.5   cancellation of the lease contract. 
 23.6      (r) "Lien" means a charge against or interest in goods to 
 23.7   secure payment of a debt or performance of an obligation, but 
 23.8   the term does not include a security interest. 
 23.9      (s) "Lot" means a parcel or a single article that is the 
 23.10  subject matter of a separate lease or delivery, whether or not 
 23.11  it is sufficient to perform the lease contract. 
 23.12     (t) "Merchant lessee" means a lessee that is a merchant 
 23.13  with respect to goods of the kind subject to the lease. 
 23.14     (u) "Present value" means the amount as of a date certain 
 23.15  of one or more sums payable in the future, discounted to the 
 23.16  date certain.  The discount is determined by the interest rate 
 23.17  specified by the parties if the rate was not manifestly 
 23.18  unreasonable at the time the transaction was entered into; 
 23.19  otherwise, the discount is determined by a commercially 
 23.20  reasonable rate that takes into account the facts and 
 23.21  circumstances of each case at the time the transaction was 
 23.22  entered into. 
 23.23     (v) "Purchase" includes taking by sale, lease, mortgage, 
 23.24  security interest, pledge, gift, or any other voluntary 
 23.25  transaction creating an interest in goods. 
 23.26     (w) "Sublease" means a lease of goods the right to 
 23.27  possession and use of which was acquired by the lessor as a 
 23.28  lessee under an existing lease. 
 23.29     (x) "Supplier" means a person from whom a lessor buys or 
 23.30  leases goods to be leased under a finance lease. 
 23.31     (y) "Supply contract" means a contract under which a lessor 
 23.32  buys or leases goods to be leased. 
 23.33     (z) "Termination" occurs when either party pursuant to a 
 23.34  power created by agreement or law puts an end to the lease 
 23.35  contract otherwise than for default. 
 23.36     (2) Other definitions applying to this article and the 
 24.1   sections in which they appear are: 
 24.2      "Accessions."  Section 336.2A-310(1). 
 24.3      "Construction mortgage."  Section 336.2A-309(1)(d). 
 24.4      "Encumbrance."  Section 336.2A-309(1)(e). 
 24.5      "Fixtures."  Section 336.2A-309(1)(a). 
 24.6      "Fixture filing."  Section 336.2A-309(1)(b). 
 24.7      "Purchase money lease."  Section 336.2A-309(1)(c). 
 24.8      (3) The following definitions in other articles apply to 
 24.9   this article: 
 24.10     "Account."  Section 336.9-102(a)(2). 
 24.11     "Between merchants."  Section 336.2-104(3). 
 24.12     "Buyer."  Section 336.2-103(1)(a). 
 24.13     "Chattel paper."  Section 336.9-102(a)(11). 
 24.14     "Consumer goods."  Section 336.9-102(a)(23). 
 24.15     "Document."  Section 336.9-102(a)(30). 
 24.16     "Entrusting."  Section 336.2-403(3). 
 24.17     "General intangible."  Section 336.9-102(a)(42). 
 24.18     "Good faith."  Section 336.2-103(1)(b). 
 24.19     "Instrument."  Section 336.9-102(a)(47). 
 24.20     "Merchant."  Section 336.2-104(1). 
 24.21     "Mortgage."  Section 336.9-102(a)(55). 
 24.22     "Pursuant to commitment."  Section 336.9-102(a)(68). 
 24.23     "Receipt."  Section 336.2-103(1)(c). 
 24.24     "Sale."  Section 336.2-106(1). 
 24.25     "Sale on approval."  Section 336.2-326. 
 24.26     "Sale or return."  Section 336.2-326. 
 24.27     "Seller."  Section 336.2-103(1)(d). 
 24.28     (4) In addition, sections 336.1-101 to 336.1-109 336.1-310 
 24.29  contain general definitions and principles of construction and 
 24.30  interpretation applicable throughout this article. 
 24.31     Sec. 4.  Minnesota Statutes 2002, section 336.2A-501, is 
 24.32  amended to read: 
 24.33     336.2A-501 [DEFAULT; PROCEDURE.] 
 24.34     (1) Whether the lessor or the lessee is in default under a 
 24.35  lease contract is determined by the lease agreement and this 
 24.36  article. 
 25.1      (2) If the lessor or the lessee is in default under the 
 25.2   lease contract, the party seeking enforcement has rights and 
 25.3   remedies as provided in this article and, except as limited by 
 25.4   this article, as provided in the lease agreement. 
 25.5      (3) If the lessor or the lessee is in default under the 
 25.6   lease contract, the party seeking enforcement may reduce the 
 25.7   party's claim to judgment, or otherwise enforce the lease 
 25.8   contract by self-help or any available judicial procedure or 
 25.9   nonjudicial procedure, including administrative proceeding, 
 25.10  arbitration, or the like, in accordance with this article. 
 25.11     (4) Except as otherwise provided in 
 25.12  section 336.1-106(1) 336.1-305(a) or this article or the lease 
 25.13  agreement, the rights and remedies referred to in subsections 
 25.14  (2) and (3) are cumulative. 
 25.15     (5) If the lease agreement covers both real property and 
 25.16  goods, the party seeking enforcement may proceed under this part 
 25.17  as to the goods, or under other applicable law as to both the 
 25.18  real property and the goods in accordance with that party's 
 25.19  rights and remedies in respect of the real property, in which 
 25.20  case this part does not apply. 
 25.21     Sec. 5.  Minnesota Statutes 2002, section 336.2A-518, is 
 25.22  amended to read: 
 25.23     336.2A-518 [COVER; SUBSTITUTE GOODS.] 
 25.24     (1) After a default by a lessor under the lease contract of 
 25.25  the type described in section 336.2A-508(1), or, if agreed, 
 25.26  after other default by the lessor, the lessee may cover by 
 25.27  making any purchase or lease of or contract to purchase or lease 
 25.28  goods in substitution for those due from the lessor. 
 25.29     (2) Except as otherwise provided with respect to damages 
 25.30  liquidated in the lease agreement (section 336.2A-504) or 
 25.31  otherwise determined pursuant to agreement of the parties 
 25.32  (sections 336.1-102(3) 336.1-302 and 336.2A-503), if a lessee's 
 25.33  cover is by a lease agreement substantially similar to the 
 25.34  original lease agreement and the new lease agreement is made in 
 25.35  good faith and in a commercially reasonable manner, the lessee 
 25.36  may recover from the lessor as damages (i) the present value, as 
 26.1   of the date of the commencement of the term of the new lease 
 26.2   agreement, of the rent under the new lease agreement applicable 
 26.3   to that period of the new lease term which is comparable to the 
 26.4   then remaining term of the original lease agreement minus the 
 26.5   present value as of the same date of the total rent for the then 
 26.6   remaining lease term of the original lease agreement, and (ii) 
 26.7   any incidental or consequential damages, less expenses saved in 
 26.8   consequence of the lessor's default. 
 26.9      (3) If a lessee's cover is by lease agreement that for any 
 26.10  reason does not qualify for treatment under subsection (2), or 
 26.11  is by purchase or otherwise, the lessee may recover from the 
 26.12  lessor as if the lessee had elected not to cover and section 
 26.13  336.2A-519 governs. 
 26.14     Sec. 6.  Minnesota Statutes 2002, section 336.2A-519, is 
 26.15  amended to read: 
 26.16     336.2A-519 [LESSEE'S DAMAGES FOR NONDELIVERY, REPUDIATION, 
 26.17  DEFAULT, AND BREACH OF WARRANTY IN REGARD TO ACCEPTED GOODS.] 
 26.18     (1) Except as otherwise provided with respect to damages 
 26.19  liquidated in the lease agreement (section 336.2A-504) or 
 26.20  otherwise determined pursuant to agreement of the parties 
 26.21  (sections 336.1-102(3) 336.1-302 and 336.2A-503), if a lessee 
 26.22  elects not to cover or a lessee elects to cover and the cover is 
 26.23  by lease agreement that for any reason does not qualify for 
 26.24  treatment under section 336.2A-518(2), or is by purchase or 
 26.25  otherwise, the measure of damages for nondelivery or repudiation 
 26.26  by the lessor or for rejection or revocation of acceptance by 
 26.27  the lessee is the present value, as of the date of the default, 
 26.28  of the then market rent minus the present value as of the same 
 26.29  date of the original rent, computed for the remaining lease term 
 26.30  of the original lease agreement, together with incidental and 
 26.31  consequential damages, less expenses saved in consequence of the 
 26.32  lessor's default. 
 26.33     (2) Market rent is to be determined as of the place for 
 26.34  tender or, in cases of rejection after arrival or revocation of 
 26.35  acceptance, as of the place of arrival. 
 26.36     (3) Except as otherwise agreed, if the lessee has accepted 
 27.1   goods and given notification (section 336.2A-516(3)), the 
 27.2   measure of damages for nonconforming tender or delivery or other 
 27.3   default by a lessor is the loss resulting in the ordinary course 
 27.4   of events from the lessor's default as determined in any manner 
 27.5   that is reasonable together with incidental and consequential 
 27.6   damages, less expenses saved in consequence of the lessor's 
 27.7   default. 
 27.8      (4) Except as otherwise agreed, the measure of damages for 
 27.9   breach of warranty is the present value at the time and place of 
 27.10  acceptance of the difference between the value of the use of the 
 27.11  goods accepted and the value if they had been as warranted for 
 27.12  the lease term, unless special circumstances show proximate 
 27.13  damages of a different amount, together with incidental and 
 27.14  consequential damages, less expenses saved in consequence of the 
 27.15  lessor's default or breach of warranty. 
 27.16     Sec. 7.  Minnesota Statutes 2002, section 336.2A-527, is 
 27.17  amended to read: 
 27.18     336.2A-527 [LESSOR'S RIGHTS TO DISPOSE OF GOODS.] 
 27.19     (1) After a default by a lessee under the lease contract of 
 27.20  the type described in section 336.2A-523(1) or 336.2A-523(3)(a) 
 27.21  or after the lessor refuses to deliver or takes possession of 
 27.22  goods (section 336.2A-525 or 336.2A-526), or, if agreed, after 
 27.23  other default by a lessee, the lessor may dispose of the goods 
 27.24  concerned or the undelivered balance by lease, sale, or 
 27.25  otherwise.  
 27.26     (2) Except as otherwise provided with respect to damages 
 27.27  liquidated in the lease agreement (section 336.2A-504) or 
 27.28  otherwise determined pursuant to agreement of the parties 
 27.29  (sections 336.1-102(3) 336.1-302 and 336.2A-503), if the 
 27.30  disposition is by lease agreement substantially similar to the 
 27.31  original lease agreement and the new lease agreement is made in 
 27.32  good faith and in a commercially reasonable manner, the lessor 
 27.33  may recover from the lessee as damages (i) accrued and unpaid 
 27.34  rent as of the date of the start of the term of the new lease 
 27.35  agreement, (ii) the present value, as of the same date, of the 
 27.36  total rent for the then remaining lease term of the original 
 28.1   lease agreement minus the present value, as of the same date, of 
 28.2   the rent under the new lease agreement applicable to that period 
 28.3   of the new lease term that is comparable to the then remaining 
 28.4   term of the original lease agreement, and (iii) any incidental 
 28.5   damages allowed under section 336.2A-530, less expenses saved in 
 28.6   consequence of the lessee's default. 
 28.7      (3) If the lessor's disposition is by lease agreement that 
 28.8   for any reason does not qualify for treatment under subsection 
 28.9   (2), or is by sale or otherwise, the lessor may recover from the 
 28.10  lessee as if the lessor had elected not to dispose of the goods 
 28.11  and section 336.2A-528 governs. 
 28.12     (4) A subsequent buyer or lessee who buys or leases from 
 28.13  the lessor in good faith for value as a result of a disposition 
 28.14  under this section takes the goods free of the original lease 
 28.15  contract and any rights of the original lessee even though the 
 28.16  lessor fails to comply with one or more of the requirements of 
 28.17  this article. 
 28.18     (5) The lessor is not accountable to the lessee for any 
 28.19  profit made on any disposition.  A lessee who has rightfully 
 28.20  rejected or justifiably revoked acceptance shall account to the 
 28.21  lessor for any excess over the amount of the lessee's security 
 28.22  interest (section 336.2A-508(5)). 
 28.23     Sec. 8.  Minnesota Statutes 2002, section 336.2A-528, is 
 28.24  amended to read: 
 28.25     336.2A-528 [LESSOR'S DAMAGES FOR NONACCEPTANCE, FAILURE TO 
 28.26  PAY, REPUDIATION, OR OTHER DEFAULT.] 
 28.27     (1) Except as otherwise provided with respect to damages 
 28.28  liquidated in the lease agreement (section 336.2A-504) or 
 28.29  otherwise determined pursuant to agreement of the parties 
 28.30  (sections 336.1-102(3) 336.1-302 and 336.2A-503), if a lessor 
 28.31  elects to retain the goods or a lessor elects to dispose of the 
 28.32  goods and the disposition is by lease agreement that for any 
 28.33  reason does not qualify for treatment under section 
 28.34  336.2A-527(2), or is by sale or otherwise, the lessor may 
 28.35  recover from the lessee as damages for a default of the type 
 28.36  described in section 336.2A-523(1) or 336.2A-523(3)(a), or, if 
 29.1   agreed, for other default of the lessee, (i) accrued and unpaid 
 29.2   rent as of the date of default if the lessee has never taken 
 29.3   possession of the goods, or, if the lessee has taken possession 
 29.4   of the goods, as of the date the lessor repossesses the goods or 
 29.5   an earlier date on which the lessee makes a tender of the goods 
 29.6   to the lessor, (ii) the present value as of the date determined 
 29.7   under clause (i) of the total rent for the then remaining lease 
 29.8   term of the original lease agreement minus the present value as 
 29.9   of the same date of the market rent at the place where the goods 
 29.10  are located computed for the same lease term, and (iii) any 
 29.11  incidental damages allowed under section 336.2A-530, less 
 29.12  expenses saved in consequence of the lessee's default. 
 29.13     (2) If the measure of damages provided in subsection (1) is 
 29.14  inadequate to put a lessor in as good a position as performance 
 29.15  would have, the measure of damages is the present value of the 
 29.16  profit, including reasonable overhead, the lessor would have 
 29.17  made from full performance by the lessee, together with any 
 29.18  incidental damages allowed under section 336.2A-530, due 
 29.19  allowance for costs reasonably incurred and due credit for 
 29.20  payments or proceeds of disposition. 
 29.21     Sec. 9.  Minnesota Statutes 2002, section 336.3-103, is 
 29.22  amended to read: 
 29.23     336.3-103 [DEFINITIONS.] 
 29.24     (a) In this article: 
 29.25     (1) "Acceptor" means a drawee who has accepted a draft. 
 29.26     (2) "Drawee" means a person ordered in a draft to make 
 29.27  payment. 
 29.28     (3) "Drawer" means a person who signs or is identified in a 
 29.29  draft as a person ordering payment. 
 29.30     (4) "Good faith" means honesty in fact and the observance 
 29.31  of reasonable commercial standards of fair dealing. [Reserved.] 
 29.32     (5) "Maker" means a person who signs or is identified in a 
 29.33  note as a person undertaking to pay. 
 29.34     (6) "Order" means a written instruction to pay money signed 
 29.35  by the person giving the instruction.  The instruction may be 
 29.36  addressed to any person, including the person giving the 
 30.1   instruction, or to one or more persons jointly or in the 
 30.2   alternative but not in succession.  An authorization to pay is 
 30.3   not an order unless the person authorized to pay is also 
 30.4   instructed to pay. 
 30.5      (7) "Ordinary care" in the case of a person engaged in 
 30.6   business means observance of reasonable commercial standards, 
 30.7   prevailing in the area in which the person is located, with 
 30.8   respect to the business in which the person is engaged.  In the 
 30.9   case of a bank that takes an instrument for processing for 
 30.10  collection or payment by automated means, reasonable commercial 
 30.11  standards do not require the bank to examine the instrument if 
 30.12  the failure to examine does not violate the bank's prescribed 
 30.13  procedures and the bank's procedures do not vary unreasonably 
 30.14  from general banking usage not disapproved by this article or 
 30.15  article 4. 
 30.16     (8) "Party" means a party to an instrument. 
 30.17     (9) "Promise" means a written undertaking to pay money 
 30.18  signed by the person undertaking to pay.  An acknowledgment of 
 30.19  an obligation by the obligor is not a promise unless the obligor 
 30.20  also undertakes to pay the obligation. 
 30.21     (10) "Prove" with respect to a fact means to meet the 
 30.22  burden of establishing the fact (section 
 30.23  336.1-201(8) 336.1-201(b)(8)). 
 30.24     (11) "Remitter" means a person who purchases an instrument 
 30.25  from its issuer if the instrument is payable to an identified 
 30.26  person other than the purchaser. 
 30.27     (b) Other definitions applying to this article and the 
 30.28  sections in which they appear are: 
 30.29     "Acceptance," section 336.3-409. 
 30.30     "Accommodated party," section 336.3-419. 
 30.31     "Accommodation party," section 336.3-419. 
 30.32     "Alteration," section 336.3-407. 
 30.33     "Anomalous endorsement," section 336.3-205.  
 30.34     "Blank endorsement," section 336.3-205.  
 30.35     "Cashier's check," section 336.3-104. 
 30.36     "Certificate of deposit," section 336.3-104. 
 31.1      "Certified check," section 336.3-409.  
 31.2      "Check," section 336.3-104. 
 31.3      "Consideration," section 336.3-303. 
 31.4      "Draft," section 336.3-104. 
 31.5      "Endorsement," section 336.3-204.  
 31.6      "Endorser," section 336.3-204. 
 31.7      "Holder in due course," section 336.3-302. 
 31.8      "Incomplete instrument," section 336.3-115. 
 31.9      "Instrument," section 336.3-104. 
 31.10     "Issue," section 336.3-105. 
 31.11     "Issuer," section 336.3-105. 
 31.12     "Negotiable instrument," section 336.3-104. 
 31.13     "Negotiation," section 336.3-201. 
 31.14     "Note," section 336.3-104. 
 31.15     "Payable at a definite time," section 336.3-108. 
 31.16     "Payable on demand," section 336.3-108. 
 31.17     "Payable to bearer," section 336.3-109. 
 31.18     "Payable to order," section 336.3-109. 
 31.19     "Payment," section 336.3-602. 
 31.20     "Person entitled to enforce," section 336.3-301. 
 31.21     "Presentment," section 336.3-501. 
 31.22     "Reacquisition," section 336.3-207. 
 31.23     "Special endorsement," section 336.3-205.  
 31.24     "Teller's check," section 336.3-104. 
 31.25     "Transfer of instrument," section 336.3-203. 
 31.26     "Traveler's check," section 336.3-104. 
 31.27     "Value," section 336.3-303. 
 31.28     (c) The following definitions in other articles apply to 
 31.29  this article: 
 31.30     "Bank," section 336.4-105. 
 31.31     "Banking day," section 336.4-104. 
 31.32     "Clearinghouse," section 336.4-104. 
 31.33     "Collecting bank," section 336.4-105. 
 31.34     "Depositary bank," section 336.4-105. 
 31.35     "Documentary draft," section 336.4-104. 
 31.36     "Intermediary bank," section 336.4-105. 
 32.1      "Item," section 336.4-104. 
 32.2      "Payor bank," section 336.4-105. 
 32.3      "Suspends payments," section 336.4-104. 
 32.4      (d) In addition, article 1 contains general definitions and 
 32.5   principles of construction and interpretation applicable 
 32.6   throughout this article. 
 32.7      Sec. 10.  Minnesota Statutes 2002, section 336.4-104, is 
 32.8   amended to read: 
 32.9      336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
 32.10     (a) In this article, unless the context otherwise requires: 
 32.11     (1) "Account" means any deposit or credit account with a 
 32.12  bank, including a demand, time, savings, passbook, share draft, 
 32.13  or like account, other than an account evidenced by a 
 32.14  certificate of deposit; 
 32.15     (2) "Afternoon" means the period of a day between noon and 
 32.16  midnight; 
 32.17     (3) "Banking day" means that part of any day, excluding 
 32.18  Saturday, Sunday, and holidays, on which a bank is open to the 
 32.19  public for carrying on substantially all of its banking 
 32.20  functions; 
 32.21     (4) "Clearinghouse" means an association of banks or other 
 32.22  payors regularly clearing items; 
 32.23     (5) "Customer" means a person having an account with a bank 
 32.24  or for whom a bank has agreed to collect items, including a bank 
 32.25  that maintains an account at another bank; 
 32.26     (6) "Documentary draft" means a draft to be presented for 
 32.27  acceptance or payment if specified documents, certificated 
 32.28  securities (section 336.8-102) or instructions for 
 32.29  uncertificated securities (section 336.8-102), or other 
 32.30  certificates, statements, or the like are to be received by the 
 32.31  drawee or other payor before acceptance or payment of the draft; 
 32.32     (7) "Draft" means a draft as defined in section 336.3-104 
 32.33  or an item, other than an instrument, that is an order; 
 32.34     (8) "Drawee" means a person ordered in a draft to make 
 32.35  payment; 
 32.36     (9) "Item" means an instrument or a promise or order to pay 
 33.1   money handled by a bank for collection or payment.  The term 
 33.2   does not include a payment order governed by article 4A or a 
 33.3   credit or debit card slip; 
 33.4      (10) "Midnight deadline" with respect to a bank is midnight 
 33.5   on its next banking day following the banking day on which it 
 33.6   receives the relevant item or notice or from which the time for 
 33.7   taking action commences to run, whichever is later; 
 33.8      (11) "Settle" means to pay in cash, by clearinghouse 
 33.9   settlement, in a charge or credit or by remittance, or otherwise 
 33.10  as agreed.  A settlement may be either provisional or final; 
 33.11     (12) "Suspends payments" with respect to a bank means that 
 33.12  it has been closed by order of the supervisory authorities, that 
 33.13  a public officer has been appointed to take it over, or that it 
 33.14  ceases or refuses to make payments in the ordinary course of 
 33.15  business. 
 33.16     (b) Other definitions applying to this article and the 
 33.17  sections in which they appear are: 
 33.18     "Agreement for electronic presentment," section 336.4-110 
 33.19     "Bank," section 336.4-105 
 33.20     "Collecting bank," section 336.4-105 
 33.21     "Depositary bank," section 336.4-105 
 33.22     "Intermediary bank," section 336.4-105 
 33.23     "Payor bank," section 336.4-105 
 33.24     "Presenting bank," section 336.4-105 
 33.25     "Presentment notice," section 336.4-110 
 33.26     (c) The following definitions in other articles apply to 
 33.27  this article: 
 33.28     "Acceptance," section 336.3-409 
 33.29     "Alteration," section 336.3-407 
 33.30     "Cashier's check," section 336.3-104 
 33.31     "Certificate of deposit," section 336.3-104 
 33.32     "Certified check," section 336.3-409 
 33.33     "Check," section 336.3-104 
 33.34     "Good faith," section 336.3-103 
 33.35     "Holder in due course," section 336.3-302 
 33.36     "Instrument," section 336.3-104 
 34.1      "Notice of dishonor," section 336.3-503 
 34.2      "Order," section 336.3-103 
 34.3      "Ordinary care," section 336.3-103 
 34.4      "Person entitled to enforce," section 336.3-301 
 34.5      "Presentment," section 336.3-501 
 34.6      "Promise," section 336.3-103 
 34.7      "Prove," section 336.3-103 
 34.8      "Teller's check," section 336.3-104 
 34.9      "Unauthorized signature," section 336.3-403 
 34.10     (d) In addition, article 1 contains general definitions and 
 34.11  principles of construction and interpretation applicable 
 34.12  throughout this article. 
 34.13     Sec. 11.  Minnesota Statutes 2002, section 336.4A-105, is 
 34.14  amended to read: 
 34.15     336.4A-105 [OTHER DEFINITIONS.] 
 34.16     (a) In this article: 
 34.17     (1) "Authorized account" means a deposit account of a 
 34.18  customer in a bank designated by the customer as a source of 
 34.19  payment of payment orders issued by the customer to the bank.  
 34.20  If a customer does not so designate an account, any account of 
 34.21  the customer is an authorized account if payment of a payment 
 34.22  order from that account is not inconsistent with a restriction 
 34.23  on the use of that account. 
 34.24     (2) "Bank" means a person engaged in the business of 
 34.25  banking and includes a savings bank, savings association, credit 
 34.26  union, and trust company.  A branch or separate office of a bank 
 34.27  is a separate bank for purposes of this article. 
 34.28     (3) "Customer" means a person, including a bank, having an 
 34.29  account with a bank or from whom a bank has agreed to receive 
 34.30  payment orders. 
 34.31     (4) "Funds-transfer business day" of a receiving bank means 
 34.32  the part of a day during which the receiving bank is open for 
 34.33  the receipt, processing, and transmittal of payment orders and 
 34.34  cancellations and amendments of payment orders. 
 34.35     (5) "Funds-transfer system" means a wire transfer network, 
 34.36  automated clearinghouse, or other communication system of a 
 35.1   clearinghouse or other association of banks through which a 
 35.2   payment order by a bank may be transmitted to the bank to which 
 35.3   the order is addressed. 
 35.4      (6) "Good faith" means honesty in fact and the observance 
 35.5   of reasonable commercial standards of fair dealing. [Reserved.] 
 35.6      (7) "Prove" with respect to a fact means to meet the burden 
 35.7   of establishing the fact (section 336.1-201(8) 336.1-201(b)(8)). 
 35.8      (b) Other definitions applying to the article and the 
 35.9   sections in which they appear: 
 35.10     "Acceptance." Section 336.4A-209. 
 35.11     "Beneficiary." Section 336.4A-103. 
 35.12     "Beneficiary's bank." Section 336.4A-103. 
 35.13     "Executed." Section 336.4A-301. 
 35.14     "Execution date." Section 336.4A-301. 
 35.15     "Funds transfer." Section 336.4A-104. 
 35.16     "Funds-transfer system rule." Section 336.4A-501. 
 35.17     "Intermediary bank." Section 336.4A-104. 
 35.18     "Originator." Section 336.4A-104. 
 35.19     "Originator's bank." Section 336.4A-104. 
 35.20     "Payment by beneficiary's bank to beneficiary." Section 
 35.21  336.4A-405. 
 35.22     "Payment by originator to beneficiary." Section 336.4A-406. 
 35.23     "Payment by sender to receiving bank." Section 336.4A-403. 
 35.24     "Payment date." Section 336.4A-401. 
 35.25     "Payment order." Section 336.4A-103. 
 35.26     "Receiving bank." Section 336.4A-103. 
 35.27     "Security procedure." Section 336.4A-201. 
 35.28     "Sender." Section 336.4A-103. 
 35.29     (c) The following definitions in article 4 apply to this 
 35.30  article: 
 35.31     "Clearinghouse." Section 336.4-104. 
 35.32     "Item." Section 336.4-104. 
 35.33     "Suspends payments." Section 336.4-104. 
 35.34     (d) In addition, sections 336.1-101 to 336.1-209 contain 
 35.35  general definitions and principles of construction and 
 35.36  interpretation applicable throughout this article. 
 36.1      Sec. 12.  Minnesota Statutes 2002, section 336.4A-106, is 
 36.2   amended to read: 
 36.3      336.4A-106 [TIME PAYMENT ORDER IS RECEIVED.] 
 36.4      (a) The time of receipt of a payment order or communication 
 36.5   canceling or amending a payment order is determined by the rules 
 36.6   applicable to receipt of a notice stated in section 
 36.7   336.1-201(27) 336.1-202.  A receiving bank may fix a cut-off 
 36.8   time or times on a funds-transfer business day for the receipt 
 36.9   and processing of payment orders and communications canceling or 
 36.10  amending payment orders.  Different cut-off times may apply to 
 36.11  payment orders, cancellations, or amendments, or to different 
 36.12  categories of payment orders, cancellations, or amendments.  A 
 36.13  cut-off time may apply to senders generally or different cut-off 
 36.14  times may apply to different senders or categories of payment 
 36.15  orders.  If a payment order or communication canceling or 
 36.16  amending a payment order is received after the close of a 
 36.17  funds-transfer business day or after the appropriate cut-off 
 36.18  time on a funds-transfer business day, the receiving bank may 
 36.19  treat the payment order or communication as received at the 
 36.20  opening of the next funds-transfer business day. 
 36.21     (b) If this article refers to an execution date or payment 
 36.22  date or states a day on which a receiving bank is required to 
 36.23  take action, and the date or day does not fall on a 
 36.24  funds-transfer business day, the next day that is a 
 36.25  funds-transfer business day is treated as the date or day 
 36.26  stated, unless the contrary is stated in this article. 
 36.27     Sec. 13.  Minnesota Statutes 2002, section 336.4A-204, is 
 36.28  amended to read: 
 36.29     336.4A-204 [REFUND OF PAYMENT AND DUTY OF CUSTOMER TO 
 36.30  REPORT WITH RESPECT TO UNAUTHORIZED PAYMENT ORDER.] 
 36.31     (a) If a receiving bank accepts a payment order issued in 
 36.32  the name of its customer as sender which is (i) not authorized 
 36.33  and not effective as the order of the customer under section 
 36.34  336.4A-202, or (ii) not enforceable, in whole or in part, 
 36.35  against the customer under section 336.4A-203, the bank shall 
 36.36  refund any payment of the payment order received from the 
 37.1   customer to the extent the bank is not entitled to enforce 
 37.2   payment and shall pay interest on the refundable amount 
 37.3   calculated from the date the bank received payment to the date 
 37.4   of the refund.  However, the customer is not entitled to 
 37.5   interest from the bank on the amount to be refunded if the 
 37.6   customer fails to exercise ordinary care to determine that the 
 37.7   order was not authorized by the customer and to notify the bank 
 37.8   of the relevant facts within a reasonable time not exceeding 90 
 37.9   days after the date the customer received notification from the 
 37.10  bank that the order was accepted or that the customer's account 
 37.11  was debited with respect to the order.  The bank is not entitled 
 37.12  to any recovery from the customer on account of a failure by the 
 37.13  customer to give notification as stated in this section. 
 37.14     (b) Reasonable time under subsection (a) may be fixed by 
 37.15  agreement as stated in section 336.1-204(1) 336.1-302(b), but 
 37.16  the obligation of a receiving bank to refund payment as stated 
 37.17  in subsection (a) may not otherwise be varied by agreement. 
 37.18     Sec. 14.  Minnesota Statutes 2002, section 336.5-103, is 
 37.19  amended to read: 
 37.20     336.5-103 [SCOPE.] 
 37.21     (a) This article applies to letters of credit and to 
 37.22  certain rights and obligations arising out of transactions 
 37.23  involving letters of credit. 
 37.24     (b) The statement of a rule in this article does not by 
 37.25  itself require, imply, or negate application of the same or a 
 37.26  different rule to a situation not provided for, or to a person 
 37.27  not specified, in this article. 
 37.28     (c) With the exception of this subsection, subsections (a) 
 37.29  and (d), sections 336.5-102(a)(9) and (10), 336.5-106(d), and 
 37.30  336.5-114(d), and except to the extent prohibited in sections 
 37.31  336.1-102(3) 336.1-302 and 336.5-117(d), the effect of this 
 37.32  article may be varied by agreement or by a provision stated or 
 37.33  incorporated by reference in an undertaking.  A term in an 
 37.34  agreement or undertaking generally excusing liability or 
 37.35  generally limiting remedies for failure to perform obligations 
 37.36  is not sufficient to vary obligations prescribed by this article.
 38.1      (d) Rights and obligations of an issuer to a beneficiary or 
 38.2   a nominated person under a letter of credit are independent of 
 38.3   the existence, performance, or nonperformance of a contract or 
 38.4   arrangement out of which the letter of credit arises or which 
 38.5   underlies it, including contracts or arrangements between the 
 38.6   issuer and the applicant and between the applicant and the 
 38.7   beneficiary. 
 38.8      Sec. 15.  Minnesota Statutes 2002, section 336.8-102, is 
 38.9   amended to read: 
 38.10     336.8-102 [DEFINITIONS.] 
 38.11     (a) In this article: 
 38.12     (1) "Adverse claim" means a claim that a claimant has a 
 38.13  property interest in a financial asset and that it is a 
 38.14  violation of the rights of the claimant for another person to 
 38.15  hold, transfer, or deal with the financial asset. 
 38.16     (2) "Bearer form," as applied to a certificated security, 
 38.17  means a form in which the security is payable to the bearer of 
 38.18  the security certificate according to its terms but not by 
 38.19  reason of an endorsement. 
 38.20     (3) "Broker" means a person defined as a broker or dealer 
 38.21  under the federal securities laws, but without excluding a bank 
 38.22  acting in that capacity. 
 38.23     (4) "Certificated security" means a security that is 
 38.24  represented by a certificate. 
 38.25     (5) "Clearing corporation" means: 
 38.26     (i) a person that is registered as a "clearing agency" 
 38.27  under the federal securities laws; 
 38.28     (ii) a federal reserve bank; or 
 38.29     (iii) any other person that provides clearance or 
 38.30  settlement services with respect to financial assets that would 
 38.31  require it to register as a clearing agency under the federal 
 38.32  securities laws but for an exclusion or exemption from the 
 38.33  registration requirement, if its activities as a clearing 
 38.34  corporation, including promulgation of rules, are subject to 
 38.35  regulation by a federal or state governmental authority. 
 38.36     (6) "Communicate" means to: 
 39.1      (i) send a signed writing; or 
 39.2      (ii) transmit information by any mechanism agreed upon by 
 39.3   the persons transmitting and receiving the information. 
 39.4      (7) "Entitlement holder" means a person identified in the 
 39.5   records of a securities intermediary as the person having a 
 39.6   security entitlement against the securities intermediary.  If a 
 39.7   person acquires a security entitlement by virtue of section 
 39.8   336.8-501(b)(2) or (3), that person is the entitlement holder. 
 39.9      (8) "Entitlement order" means a notification communicated 
 39.10  to a securities intermediary directing transfer or redemption of 
 39.11  a financial asset to which the entitlement holder has a security 
 39.12  entitlement. 
 39.13     (9) "Financial asset," except as otherwise provided in 
 39.14  section 336.8-103, means: 
 39.15     (i) a security; 
 39.16     (ii) an obligation of a person or a share, participation, 
 39.17  or other interest in a person or in property or an enterprise of 
 39.18  a person, which is, or is of a type, dealt in or traded on 
 39.19  financial markets, or which is recognized in any area in which 
 39.20  it is issued or dealt in as a medium for investment; or 
 39.21     (iii) any property that is held by a securities 
 39.22  intermediary for another person in a securities account if the 
 39.23  securities intermediary has expressly agreed with the other 
 39.24  person that the property is to be treated as a financial asset 
 39.25  under this article.  
 39.26  As context requires, the term means either the interest itself 
 39.27  or the means by which a person's claim to it is evidenced, 
 39.28  including a certificated or uncertificated security, a security 
 39.29  certificate, or a security entitlement. 
 39.30     (10) "Good faith," for purposes of the obligation of good 
 39.31  faith in the performance or enforcement of contracts or duties 
 39.32  within this article, means honesty in fact and the observance of 
 39.33  reasonable commercial standards of fair dealing. [Reserved.] 
 39.34     (11) "Endorsement" means a signature that alone or 
 39.35  accompanied by other words is made on a security certificate in 
 39.36  registered form or on a separate document for the purpose of 
 40.1   assigning, transferring, or redeeming the security or granting a 
 40.2   power to assign, transfer, or redeem it. 
 40.3      (12) "Instruction" means a notification communicated to the 
 40.4   issuer of an uncertificated security which directs that the 
 40.5   transfer of the security be registered or that the security be 
 40.6   redeemed. 
 40.7      (13) "Registered form," as applied to a certificated 
 40.8   security, means a form in which: 
 40.9      (i) the security certificate specifies a person entitled to 
 40.10  the security; and 
 40.11     (ii) a transfer of the security may be registered upon 
 40.12  books maintained for that purpose by or on behalf of the issuer, 
 40.13  or the security certificate so states. 
 40.14     (14) "Securities intermediary" means: 
 40.15     (i) a clearing corporation; or 
 40.16     (ii) a person, including a bank or broker, that in the 
 40.17  ordinary course of its business maintains securities accounts 
 40.18  for others and is acting in that capacity. 
 40.19     (15) "Security," except as otherwise provided in section 
 40.20  336.8-103, means an obligation of an issuer or a share, 
 40.21  participation, or other interest in an issuer or in property or 
 40.22  an enterprise of an issuer: 
 40.23     (i) which is represented by a security certificate in 
 40.24  bearer or registered form, or the transfer of which may be 
 40.25  registered upon books maintained for that purpose by or on 
 40.26  behalf of the issuer; 
 40.27     (ii) which is one of a class or series or by its terms is 
 40.28  divisible into a class or series of shares, participations, 
 40.29  interests, or obligations; and 
 40.30     (iii) which: 
 40.31     (A) is, or is of a type, dealt in or traded on securities 
 40.32  exchanges or securities markets; or 
 40.33     (B) is a medium for investment and by its terms expressly 
 40.34  provides that it is a security governed by this article. 
 40.35     (16) "Security certificate" means a certificate 
 40.36  representing a security. 
 41.1      (17) "Security entitlement" means the rights and property 
 41.2   interest of an entitlement holder with respect to a financial 
 41.3   asset specified in part 5. 
 41.4      (18) "Uncertificated security" means a security that is not 
 41.5   represented by a certificate. 
 41.6      (b) Other definitions applying to this article and the 
 41.7   sections in which they appear are: 
 41.8      "Appropriate person," section 336.8-107 
 41.9      "Control," section 336.8-106 
 41.10     "Delivery," section 336.8-301 
 41.11     "Investment company security," section 336.8-103 
 41.12     "Issuer," section 336.8-201 
 41.13     "Overissue," section 336.8-210 
 41.14     "Protected purchaser," section 336.8-303 
 41.15     "Securities account," section 336.8-501 
 41.16     (c) In addition, article 1 contains general definitions and 
 41.17  principles of construction and interpretation applicable 
 41.18  throughout this article. 
 41.19     (d) The characterization of a person, business, or 
 41.20  transaction for purposes of this article does not determine the 
 41.21  characterization of the person, business, or transaction for 
 41.22  purposes of any other law, regulation, or rule. 
 41.23     Sec. 16.  Minnesota Statutes 2002, section 336.9-102, is 
 41.24  amended to read: 
 41.25     336.9-102 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
 41.26     (a)  [DEFINITIONS.] In this article: 
 41.27     (1) "Accession" means goods that are physically united with 
 41.28  other goods in such a manner that the identity of the original 
 41.29  goods is not lost. 
 41.30     (2) "Account", except as used in "account for", means a 
 41.31  right to payment of a monetary obligation, whether or not earned 
 41.32  by performance, (i) for property that has been or is to be sold, 
 41.33  leased, licensed, assigned, or otherwise disposed of, (ii) for 
 41.34  services rendered or to be rendered, (iii) for a policy of 
 41.35  insurance issued or to be issued, (iv) for a secondary 
 41.36  obligation incurred or to be incurred, (v) for energy provided 
 42.1   or to be provided, (vi) for the use or hire of a vessel under a 
 42.2   charter or other contract, (vii) arising out of the use of a 
 42.3   credit or charge card or information contained on or for use 
 42.4   with the card, or (viii) as winnings in a lottery or other game 
 42.5   of chance operated or sponsored by a state, governmental unit of 
 42.6   a state, or person licensed or authorized to operate the game by 
 42.7   a state or governmental unit of a state.  The term includes 
 42.8   health-care-insurance receivables.  The term does not include (i)
 42.9   rights to payment evidenced by chattel paper or an instrument, 
 42.10  (ii) commercial tort claims, (iii) deposit accounts, (iv) 
 42.11  investment property, (v) letter of credit rights or letters of 
 42.12  credit, or (vi) rights to payment for money or funds advanced or 
 42.13  sold, other than rights arising out of the use of a credit or 
 42.14  charge card or information contained on or for use with the card.
 42.15     (3) "Account debtor" means a person obligated on an 
 42.16  account, chattel paper, or general intangible.  The term does 
 42.17  not include persons obligated to pay a negotiable instrument, 
 42.18  even if the instrument constitutes part of chattel paper. 
 42.19     (4) "Accounting", except as used in "accounting for", means 
 42.20  a record: 
 42.21     (A) authenticated by a secured party; 
 42.22     (B) indicating the aggregate unpaid secured obligations as 
 42.23  of a date not more than 35 days earlier or 35 days later than 
 42.24  the date of the record; and 
 42.25     (C) identifying the components of the obligations in 
 42.26  reasonable detail. 
 42.27     (5) "Agricultural lien" means an interest, other than a 
 42.28  security interest, in farm products: 
 42.29     (A) which secures payment or performance of an obligation 
 42.30  for: 
 42.31     (i) goods or services furnished in connection with a 
 42.32  debtor's farming operation; or 
 42.33     (ii) rent on real property leased by a debtor in connection 
 42.34  with its farming operation; 
 42.35     (B) which is created by statute in favor of a person that: 
 42.36     (i) in the ordinary course of its business furnished goods 
 43.1   or services to a debtor in connection with a debtor's farming 
 43.2   operation; or 
 43.3      (ii) leased real property to a debtor in connection with 
 43.4   the debtor's farming operation; and 
 43.5      (C) whose effectiveness does not depend on the person's 
 43.6   possession of the personal property. 
 43.7      (6) "As-extracted collateral" means: 
 43.8      (A) oil, gas, or other minerals that are subject to a 
 43.9   security interest that: 
 43.10     (i) is created by a debtor having an interest in the 
 43.11  minerals before extraction; and 
 43.12     (ii) attaches to the minerals as extracted; or 
 43.13     (B) accounts arising out of the sale at the wellhead or 
 43.14  minehead of oil, gas, or other minerals in which the debtor had 
 43.15  an interest before extraction. 
 43.16     (7) "Authenticate" means: 
 43.17     (A) to sign; or 
 43.18     (B) to execute or otherwise adopt a symbol, or encrypt or 
 43.19  similarly process a record in whole or in part, with the present 
 43.20  intent of the authenticating person to identify the person and 
 43.21  adopt or accept a record. 
 43.22     (8) "Bank" means an organization that is engaged in the 
 43.23  business of banking.  The term includes savings banks, savings 
 43.24  and loan associations, credit unions, and trust companies. 
 43.25     (9) "Cash proceeds" means proceeds that are money, checks, 
 43.26  deposit accounts, or the like. 
 43.27     (10) "Certificate of title" means a certificate of title 
 43.28  with respect to which a statute provides for the security 
 43.29  interest in question to be indicated on the certificate as a 
 43.30  condition or result of the security interest's obtaining 
 43.31  priority over the rights of a lien creditor with respect to the 
 43.32  collateral. 
 43.33     (11) "Chattel paper" means a record or records that 
 43.34  evidence both a monetary obligation and a security interest in 
 43.35  specific goods, a security interest in specific goods and 
 43.36  software used in the goods, a security interest in specific 
 44.1   goods and license of software used in the goods, a lease of 
 44.2   specific goods, or a lease of specific goods and license of 
 44.3   software used in the goods.  In this paragraph, "monetary 
 44.4   obligation" means a monetary obligation secured by the goods or 
 44.5   owed under a lease of the goods and includes a monetary 
 44.6   obligation with respect to software used in the goods.  The term 
 44.7   does not include (i) charters or other contracts involving the 
 44.8   use or hire of a vessel or (ii) records that evidence a right to 
 44.9   payment arising out of the use of a credit or charge card or 
 44.10  information contained on or for use with the card.  If a 
 44.11  transaction is evidenced by records that include an instrument 
 44.12  or series of instruments, the group of records taken together 
 44.13  constitutes chattel paper. 
 44.14     (12) "Collateral" means the property subject to a security 
 44.15  interest or agricultural lien.  The term includes: 
 44.16     (A) proceeds to which a security interest attaches; 
 44.17     (B) accounts, chattel paper, payment intangibles, and 
 44.18  promissory notes that have been sold; and 
 44.19     (C) goods that are the subject of a consignment. 
 44.20     (13) "Commercial tort claim" means a claim arising in tort 
 44.21  with respect to which: 
 44.22     (A) the claimant is an organization; or 
 44.23     (B) the claimant is an individual and the claim: 
 44.24     (i) arose in the course of the claimant's business or 
 44.25  profession; and 
 44.26     (ii) does not include damages arising out of personal 
 44.27  injury to or the death of an individual. 
 44.28     (14) "Commodity account" means an account maintained by a 
 44.29  commodity intermediary in which a commodity contract is carried 
 44.30  for a commodity customer. 
 44.31     (15) "Commodity contract" means a commodity futures 
 44.32  contract, an option on a commodity futures contract, a commodity 
 44.33  option, or another contract if the contract or option is: 
 44.34     (A) traded on or subject to the rules of a board of trade 
 44.35  that has been designated as a contract market for such a 
 44.36  contract pursuant to federal commodities law; or 
 45.1      (B) traded on a foreign commodity board of trade, exchange, 
 45.2   or market, and is carried on the books of a commodity 
 45.3   intermediary for a commodity customer. 
 45.4      (16) "Commodity customer" means a person for which a 
 45.5   commodity intermediary carries a commodity contract on its books.
 45.6      (17) "Commodity intermediary" means a person that: 
 45.7      (A) is registered as a futures commission merchant under 
 45.8   federal commodities law; or 
 45.9      (B) in the ordinary course of its business provides 
 45.10  clearance or settlement services for a board of trade that has 
 45.11  been designated as a contract market pursuant to federal 
 45.12  commodities law. 
 45.13     (18) "Communicate" means: 
 45.14     (A) to send a written or other tangible record; 
 45.15     (B) to transmit a record by any means agreed upon by the 
 45.16  persons sending and receiving the record; or 
 45.17     (C) in the case of transmission of a record to or by a 
 45.18  filing office, to transmit a record by any means prescribed by 
 45.19  filing office rule. 
 45.20     (19) "Consignee" means a merchant to which goods are 
 45.21  delivered in a consignment. 
 45.22     (20) "Consignment" means a transaction, regardless of its 
 45.23  form, in which a person delivers goods to a merchant for the 
 45.24  purpose of sale and: 
 45.25     (A) the merchant: 
 45.26     (i) deals in goods of that kind under a name other than the 
 45.27  name of the person making delivery; 
 45.28     (ii) is not an auctioneer; and 
 45.29     (iii) is not generally known by its creditors to be 
 45.30  substantially engaged in selling the goods of others; 
 45.31     (B) with respect to each delivery, the aggregate value of 
 45.32  the goods is $1,000 or more at the time of delivery; 
 45.33     (C) the goods are not consumer goods immediately before 
 45.34  delivery; and 
 45.35     (D) the transaction does not create a security interest 
 45.36  that secures an obligation. 
 46.1      (21) "Consignor" means a person that delivers goods to a 
 46.2   consignee in a consignment. 
 46.3      (22) "Consumer debtor" means a debtor in a consumer 
 46.4   transaction. 
 46.5      (23) "Consumer goods" means goods that are used or bought 
 46.6   for use primarily for personal, family, or household purposes. 
 46.7      (24) "Consumer goods transaction" means a consumer 
 46.8   transaction in which: 
 46.9      (A) an individual incurs an obligation primarily for 
 46.10  personal, family, or household purposes; and 
 46.11     (B) a security interest in consumer goods secures the 
 46.12  obligation. 
 46.13     (25) "Consumer obligor" means an obligor who is an 
 46.14  individual and who incurred the obligation as part of a 
 46.15  transaction entered into primarily for personal, family, or 
 46.16  household purposes. 
 46.17     (26) "Consumer transaction" means a transaction in which (i)
 46.18  an individual incurs an obligation primarily for personal, 
 46.19  family, or household purposes, (ii) a security interest secures 
 46.20  the obligation, and (iii) the collateral is held or acquired 
 46.21  primarily for personal, family, or household purposes.  The term 
 46.22  includes consumer goods transactions. 
 46.23     (27) "Continuation statement" means an amendment of a 
 46.24  financing statement which: 
 46.25     (A) identifies, by its file number, the initial financing 
 46.26  statement to which it relates; and 
 46.27     (B) indicates that it is a continuation statement for, or 
 46.28  that it is filed to continue the effectiveness of, the 
 46.29  identified financing statement. 
 46.30     (28) "Debtor" means: 
 46.31     (A) a person having an interest, other than a security 
 46.32  interest or other lien, in the collateral, whether or not the 
 46.33  person is an obligor; 
 46.34     (B) a seller of accounts, chattel paper, payment 
 46.35  intangibles, or promissory notes; or 
 46.36     (C) a consignee. 
 47.1      (29) "Deposit account" means a demand, time, savings, 
 47.2   passbook, or similar account maintained with a bank.  The term 
 47.3   does not include investment property or accounts evidenced by an 
 47.4   instrument. 
 47.5      (30) "Document" means a document of title or a receipt of 
 47.6   the type described in section 336.7-201(2). 
 47.7      (31) "Electronic chattel paper" means chattel paper 
 47.8   evidenced by a record or records consisting of information 
 47.9   stored in an electronic medium. 
 47.10     (32) "Encumbrance" means a right, other than an ownership 
 47.11  interest, in real property.  The term includes mortgages and 
 47.12  other liens on real property. 
 47.13     (33) "Equipment" means goods other than inventory, farm 
 47.14  products, or consumer goods. 
 47.15     (34) "Farm products" means goods, other than standing 
 47.16  timber, with respect to which the debtor is engaged in a farming 
 47.17  operation and which are: 
 47.18     (A) crops grown, growing, or to be grown, including: 
 47.19     (i) crops produced on trees, vines, and bushes; and 
 47.20     (ii) aquatic goods produced in aquacultural operations; 
 47.21     (B) livestock, born or unborn, including aquatic goods 
 47.22  produced in aquacultural operations; 
 47.23     (C) supplies used or produced in a farming operation; or 
 47.24     (D) products of crops or livestock in their unmanufactured 
 47.25  states. 
 47.26     (35) "Farming operation" means raising, cultivating, 
 47.27  propagating, fattening, grazing, or any other farming, 
 47.28  livestock, or aquacultural operation. 
 47.29     (36) "File number" means the number assigned to an initial 
 47.30  financing statement pursuant to section 336.9-519(a). 
 47.31     (37) "Filing office" means an office designated in section 
 47.32  336.9-501 as the place to file a financing statement. 
 47.33     (38) "Filing office rule" means a rule adopted pursuant to 
 47.34  Laws 2000, chapter 399, article 1, section 139. 
 47.35     (39) "Financing statement" means a record or records 
 47.36  composed of an initial financing statement and any filed record 
 48.1   relating to the initial financing statement. 
 48.2      (40) "Fixture filing" means the filing of a financing 
 48.3   statement covering goods that are or are to become fixtures and 
 48.4   satisfying section 336.9-502(a) and (b).  The term includes the 
 48.5   filing of a financing statement covering goods of a transmitting 
 48.6   utility which are or are to become fixtures. 
 48.7      (41) "Fixtures" means goods that have become so related to 
 48.8   particular real property that an interest in them arises under 
 48.9   real property law. 
 48.10     (42) "General intangible" means any personal property, 
 48.11  including things in action, other than accounts, chattel paper, 
 48.12  commercial tort claims, deposit accounts, documents, goods, 
 48.13  instruments, investment property, letter of credit rights, 
 48.14  letters of credit, money, and oil, gas, or other minerals before 
 48.15  extraction.  The term includes payment intangibles and software. 
 48.16     (43) "Good faith" means honesty in fact and the observance 
 48.17  of reasonable commercial standards of fair dealing. [Reserved.] 
 48.18     (44) "Goods" means all things that are movable when a 
 48.19  security interest attaches.  The term includes (i) fixtures, 
 48.20  (ii) standing timber that is to be cut and removed under a 
 48.21  conveyance or contract for sale, (iii) the unborn young of 
 48.22  animals, (iv) crops grown, growing, or to be grown, even if the 
 48.23  crops are produced on trees, vines, or bushes, and (v) 
 48.24  manufactured homes.  The term also includes a computer program 
 48.25  embedded in goods and any supporting information provided in 
 48.26  connection with a transaction relating to the program if the 
 48.27  program is associated with the goods in such a manner that it 
 48.28  customarily is considered part of the goods, or by becoming the 
 48.29  owner of the goods, a person acquires a right to use the program 
 48.30  in connection with the goods.  The term does not include a 
 48.31  computer program embedded in goods that consist solely of the 
 48.32  medium in which the program is embedded.  The term also does not 
 48.33  include accounts, chattel paper, commercial tort claims, deposit 
 48.34  accounts, documents, general intangibles, instruments, 
 48.35  investment property, letter of credit rights, letters of credit, 
 48.36  money, or oil, gas, or other minerals before extraction. 
 49.1      (45) "Governmental unit" means a subdivision, agency, 
 49.2   department, county, parish, municipality, or other unit of the 
 49.3   government of the United States, a state, or a foreign country.  
 49.4   The term includes an organization having a separate corporate 
 49.5   existence if the organization is eligible to issue debt on which 
 49.6   interest is exempt from income taxation under the laws of the 
 49.7   United States. 
 49.8      (46) "Health-care-insurance receivable" means an interest 
 49.9   in or claim under a policy of insurance which is a right to 
 49.10  payment of a monetary obligation for health-care goods or 
 49.11  services provided. 
 49.12     (47) "Instrument" means a negotiable instrument or any 
 49.13  other writing that evidences a right to the payment of a 
 49.14  monetary obligation, is not itself a security agreement or 
 49.15  lease, and is of a type that in ordinary course of business is 
 49.16  transferred by delivery with any necessary endorsement or 
 49.17  assignment.  The term does not include (i) investment property, 
 49.18  (ii) letters of credit, or (iii) writings that evidence a right 
 49.19  to payment arising out of the use of a credit or charge card or 
 49.20  information contained on or for use with the card. 
 49.21     (48) "Inventory" means goods, other than farm products, 
 49.22  which: 
 49.23     (A) are leased by a person as lessor; 
 49.24     (B) are held by a person for sale or lease or to be 
 49.25  furnished under a contract of service; 
 49.26     (C) are furnished by a person under a contract of service; 
 49.27  or 
 49.28     (D) consist of raw materials, work in process, or materials 
 49.29  used or consumed in a business. 
 49.30     (49) "Investment property" means a security, whether 
 49.31  certificated or uncertificated, security entitlement, securities 
 49.32  account, commodity contract, or commodity account. 
 49.33     (50) "Jurisdiction of organization", with respect to a 
 49.34  registered organization, means the jurisdiction under whose law 
 49.35  the organization is organized. 
 49.36     (51) "Letter of credit right" means a right to payment or 
 50.1   performance under a letter of credit, whether or not the 
 50.2   beneficiary has demanded or is at the time entitled to demand 
 50.3   payment or performance.  The term does not include the right of 
 50.4   a beneficiary to demand payment or performance under a letter of 
 50.5   credit. 
 50.6      (52) "Lien creditor" means: 
 50.7      (A) a creditor that has acquired a lien on the property 
 50.8   involved by attachment, levy, or the like; 
 50.9      (B) an assignee for benefit of creditors from the time of 
 50.10  assignment; 
 50.11     (C) a trustee in bankruptcy from the date of the filing of 
 50.12  the petition; or 
 50.13     (D) a receiver in equity from the time of appointment. 
 50.14     (53) Unless a certificate has been issued, "manufactured 
 50.15  home" means a structure, transportable in one or more sections, 
 50.16  which, in the traveling mode, is eight body feet or more in 
 50.17  width or 40 body feet or more in length, or, when erected on 
 50.18  site, is 320 or more square feet, and which is built on a 
 50.19  permanent chassis and designed to be used as a dwelling with or 
 50.20  without a permanent foundation when connected to the required 
 50.21  utilities, and includes the plumbing, heating, air-conditioning, 
 50.22  and electrical systems contained therein.  The term includes any 
 50.23  structure that meets all of the requirements of this paragraph 
 50.24  except the size requirements and with respect to which the 
 50.25  manufacturer voluntarily files a certification required by the 
 50.26  United States Secretary of Housing and Urban Development and 
 50.27  complies with the standards established under United States 
 50.28  Code, title 42.  
 50.29     A manufactured home within the meaning of this section does 
 50.30  not include a manufactured home for which a certificate of title 
 50.31  as defined in section 336.9-102(a)(10) has been issued.  
 50.32     (54) "Manufactured home transaction" means a secured 
 50.33  transaction: 
 50.34     (A) that creates a purchase-money security interest in a 
 50.35  manufactured home, other than a manufactured home held as 
 50.36  inventory; or 
 51.1      (B) in which a manufactured home, other than a manufactured 
 51.2   home held as inventory, is the primary collateral. 
 51.3      (55) "Mortgage" means a consensual interest in real 
 51.4   property, including fixtures, which secures payment or 
 51.5   performance of an obligation.  Mortgage includes an executory 
 51.6   contract for the sale of real property or of an interest in real 
 51.7   property that entitles the purchaser to possession of the real 
 51.8   property. 
 51.9      (56) "New debtor" means a person that becomes bound as 
 51.10  debtor under section 336.9-203(d) by a security agreement 
 51.11  previously entered into by another person. 
 51.12     (57) "New value" means (i) money, (ii) money's worth in 
 51.13  property, services, or new credit, or (iii) release by a 
 51.14  transferee of an interest in property previously transferred to 
 51.15  the transferee.  The term does not include an obligation 
 51.16  substituted for another obligation. 
 51.17     (58) "Noncash proceeds" means proceeds other than cash 
 51.18  proceeds. 
 51.19     (59) "Obligor" means a person that, with respect to an 
 51.20  obligation secured by a security interest in or an agricultural 
 51.21  lien on the collateral, (i) owes payment or other performance of 
 51.22  the obligation, (ii) has provided property other than the 
 51.23  collateral to secure payment or other performance of the 
 51.24  obligation, or (iii) is otherwise accountable in whole or in 
 51.25  part for payment or other performance of the obligation.  The 
 51.26  term does not include issuers or nominated persons under a 
 51.27  letter of credit. 
 51.28     (60) "Original debtor", except as used in section 
 51.29  336.9-310(c), means a person that, as debtor, entered into a 
 51.30  security agreement to which a new debtor has become bound under 
 51.31  section 336.9-203(d). 
 51.32     (61) "Payment intangible" means a general intangible under 
 51.33  which the account debtor's principal obligation is a monetary 
 51.34  obligation. 
 51.35     (62) "Person related to", with respect to an individual, 
 51.36  means: 
 52.1      (A) the spouse of the individual; 
 52.2      (B) a brother, brother-in-law, sister, or sister-in-law of 
 52.3   the individual; 
 52.4      (C) an ancestor or lineal descendant of the individual or 
 52.5   the individual's spouse; or 
 52.6      (D) any other relative, by blood or marriage, of the 
 52.7   individual or the individual's spouse who shares the same home 
 52.8   with the individual. 
 52.9      (63) "Person related to", with respect to an organization, 
 52.10  means: 
 52.11     (A) a person directly or indirectly controlling, controlled 
 52.12  by, or under common control with the organization; 
 52.13     (B) an officer or director of, or a person performing 
 52.14  similar functions with respect to, the organization; 
 52.15     (C) an officer or director of, or a person performing 
 52.16  similar functions with respect to, a person described in 
 52.17  subparagraph (A); 
 52.18     (D) the spouse of an individual described in subparagraph 
 52.19  (A), (B), or (C); or 
 52.20     (E) an individual who is related by blood or marriage to an 
 52.21  individual described in subparagraph (A), (B), (C), or (D), and 
 52.22  shares the same home with the individual. 
 52.23     (64) "Proceeds", except as used in section 336.9-609(b), 
 52.24  means the following property: 
 52.25     (A) whatever is acquired upon the sale, lease, license, 
 52.26  exchange, or other disposition of collateral; 
 52.27     (B) whatever is collected on, or distributed on account of, 
 52.28  collateral; 
 52.29     (C) rights arising out of collateral; 
 52.30     (D) to the extent of the value of collateral, claims 
 52.31  arising out of the loss, nonconformity, or interference with the 
 52.32  use of, defects or infringement of rights in, or damage to, the 
 52.33  collateral; or 
 52.34     (E) to the extent of the value of collateral and to the 
 52.35  extent payable to the debtor or the secured party, insurance 
 52.36  payable by reason of the loss or nonconformity of, defects or 
 53.1   infringement of rights in, or damage to, the collateral. 
 53.2      (65) "Promissory note" means an instrument that evidences a 
 53.3   promise to pay a monetary obligation, does not evidence an order 
 53.4   to pay, and does not contain an acknowledgment by a bank that 
 53.5   the bank has received for deposit a sum of money or funds. 
 53.6      (66) "Proposal" means a record authenticated by a secured 
 53.7   party which includes the terms on which the secured party is 
 53.8   willing to accept collateral in full or partial satisfaction of 
 53.9   the obligation it secures pursuant to sections 336.9-620, 
 53.10  336.9-621, and 336.9-622. 
 53.11     (67) "Public-finance transaction" means a secured 
 53.12  transaction in connection with which: 
 53.13     (A) debt securities are issued; 
 53.14     (B) all or a portion of the securities issued have an 
 53.15  initial stated maturity of at least 20 years; and 
 53.16     (C) the debtor, obligor, secured party, account debtor or 
 53.17  other person obligated on collateral, assignor or assignee of a 
 53.18  secured obligation, or assignor or assignee of a security 
 53.19  interest is a state or a governmental unit of a state. 
 53.20     (68) "Pursuant to commitment", with respect to an advance 
 53.21  made or other value given by a secured party, means pursuant to 
 53.22  the secured party's obligation, whether or not a subsequent 
 53.23  event of default or other event not within the secured party's 
 53.24  control has relieved or may relieve the secured party from its 
 53.25  obligation. 
 53.26     (69) "Record", except as used in "for record", "of record", 
 53.27  "record or legal title", and "record owner", means information 
 53.28  that is inscribed on a tangible medium or which is stored in an 
 53.29  electronic or other medium and is retrievable in perceivable 
 53.30  form. 
 53.31     (70) "Registered organization" means an organization 
 53.32  organized solely under the law of a single state or the United 
 53.33  States and as to which the state or the United States must 
 53.34  maintain a public record showing the organization to have been 
 53.35  organized. 
 53.36     (71) "Secondary obligor" means an obligor to the extent 
 54.1   that: 
 54.2      (A) the obligor's obligation is secondary; or 
 54.3      (B) the obligor has a right of recourse with respect to an 
 54.4   obligation secured by collateral against the debtor, another 
 54.5   obligor, or property of either. 
 54.6      (72) "Secured party" means: 
 54.7      (A) a person in whose favor a security interest is created 
 54.8   or provided for under a security agreement, whether or not any 
 54.9   obligation to be secured is outstanding; 
 54.10     (B) a person that holds an agricultural lien; 
 54.11     (C) a consignor; 
 54.12     (D) a person to which accounts, chattel paper, payment 
 54.13  intangibles, or promissory notes have been sold; 
 54.14     (E) a trustee, indenture trustee, agent, collateral agent, 
 54.15  or other representative in whose favor a security interest or 
 54.16  agricultural lien is created or provided for; or 
 54.17     (F) a person that holds a security interest arising under 
 54.18  section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5), 
 54.19  336.4-210, or 336.5-118. 
 54.20     (73) "Security agreement" means an agreement that creates 
 54.21  or provides for a security interest. 
 54.22     (74) "Send", in connection with a record or notification, 
 54.23  means: 
 54.24     (A) to deposit in the mail, deliver for transmission, or 
 54.25  transmit by any other usual means of communication, with postage 
 54.26  or cost of transmission provided for, addressed to any address 
 54.27  reasonable under the circumstances; or 
 54.28     (B) to cause the record or notification to be received 
 54.29  within the time that it would have been received if properly 
 54.30  sent under subparagraph (A). 
 54.31     (75) "Software" means a computer program and any supporting 
 54.32  information provided in connection with a transaction relating 
 54.33  to the program.  The term does not include a computer program 
 54.34  that is included in the definition of goods. 
 54.35     (76) "State" means a state of the United States, the 
 54.36  District of Columbia, Puerto Rico, the United States Virgin 
 55.1   Islands, or any territory or insular possession subject to the 
 55.2   jurisdiction of the United States. 
 55.3      (77) "Supporting obligation" means a letter of credit right 
 55.4   or secondary obligation that supports the payment or performance 
 55.5   of an account, chattel paper, a document, a general intangible, 
 55.6   an instrument, or investment property. 
 55.7      (78) "Tangible chattel paper" means chattel paper evidenced 
 55.8   by a record or records consisting of information that is 
 55.9   inscribed on a tangible medium. 
 55.10     (79) "Termination statement" means an amendment of a 
 55.11  financing statement which: 
 55.12     (A) identifies, by its file number, the initial financing 
 55.13  statement to which it relates; and 
 55.14     (B) indicates either that it is a termination statement or 
 55.15  that the identified financing statement is no longer effective. 
 55.16     (80) "Transmitting utility" means a person primarily 
 55.17  engaged in the business of: 
 55.18     (A) operating a railroad, subway, street railway, or 
 55.19  trolley bus; 
 55.20     (B) transmitting communications electrically, 
 55.21  electromagnetically, or by light; 
 55.22     (C) transmitting goods by pipeline or sewer; or 
 55.23     (D) transmitting or producing and transmitting electricity, 
 55.24  steam, gas, or water. 
 55.25     A person filing a financing statement under this article 
 55.26  and under the authority of sections 300.111 to 300.115 is a 
 55.27  transmitting utility for purposes of this article. 
 55.28     (b)  [DEFINITIONS IN OTHER ARTICLES.] The following 
 55.29  definitions in other articles apply to this article: 
 55.30       "Applicant"                    Section 336.5-102
 55.31       "Beneficiary"                  Section 336.5-102
 55.32       "Broker"                       Section 336.8-102
 55.33       "Certificated security"        Section 336.8-102
 55.34       "Check"                        Section 336.3-104
 55.35       "Clearing corporation"         Section 336.8-102
 55.36       "Contract for sale"            Section 336.2-106
 56.1        "Customer"                     Section 336.4-104
 56.2        "Entitlement holder"           Section 336.8-102
 56.3        "Financial asset"              Section 336.8-102
 56.4        "Holder in due course"         Section 336.3-302
 56.5        "Issuer" (with respect to a    
 56.6         letter of credit or
 56.7         letter of credit right)       Section 336.5-102
 56.8        "Issuer" (with respect to
 56.9         a security)                   Section 336.8-201
 56.10       "Lease"                        Section 336.2A-103
 56.11       "Lease agreement"              Section 336.2A-103
 56.12       "Lease contract"               Section 336.2A-103
 56.13       "Leasehold interest"           Section 336.2A-103
 56.14       "Lessee"                       Section 336.2A-103
 56.15       "Lessee in ordinary course
 56.16        of business"                  Section 336.2A-103
 56.17       "Lessor"                       Section 336.2A-103
 56.18       "Lessor's residual interest"   Section 336.2A-103
 56.19       "Letter of credit"             Section 336.5-102
 56.20       "Merchant"                     Section 336.2-104
 56.21       "Negotiable instrument"        Section 336.3-104
 56.22       "Nominated person"             Section 336.5-102
 56.23       "Note"                         Section 336.3-104
 56.24       "Proceeds of a letter of
 56.25        credit"                       Section 336.5-114
 56.26       "Prove"                        Section 336.3-103
 56.27       "Sale"                         Section 336.2-106
 56.28       "Securities account"           Section 336.8-501
 56.29       "Securities intermediary"      Section 336.8-102
 56.30       "Security"                     Section 336.8-102
 56.31       "Security certificate"         Section 336.8-102
 56.32       "Security entitlement"         Section 336.8-102
 56.33       "Uncertificated security"      Section 336.8-102
 56.34     (c)  [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1 
 56.35  contains general definitions and principles of construction and 
 56.36  interpretation applicable throughout this article. 
 57.1      Sec. 17.  [REPEALER.] 
 57.2      Minnesota Statutes 2002, sections 336.2-208; and 
 57.3   336.2A-207, are repealed. 
 57.4                              ARTICLE 3
 57.5                    GENERAL CONFORMING AMENDMENTS
 57.6      Section 1.  Minnesota Statutes 2002, section 17.94, is 
 57.7   amended to read: 
 57.8      17.94 [IMPLIED PROMISE OF GOOD FAITH.] 
 57.9      There is an implied promise of good faith as defined in 
 57.10  section 336.1-201, subsection (19)(b)(20), by all parties in all 
 57.11  agricultural contracts.  In an action to recover damages, if the 
 57.12  court finds that there has been a violation of this provision, 
 57.13  damages, court costs, and attorney fees may be recovered.  
 57.14     Sec. 2.  Minnesota Statutes 2002, section 84.787, 
 57.15  subdivision 9, is amended to read: 
 57.16     Subd. 9.  [PERSON.] "Person" has the meaning given it in 
 57.17  section 336.1-201, subsection (30)(b)(27). 
 57.18     Sec. 3.  Minnesota Statutes 2002, section 84.797, 
 57.19  subdivision 10, is amended to read: 
 57.20     Subd. 10.  [PERSON.] "Person" has the meaning given in 
 57.21  section 336.1-201, paragraph (30)(b)(27). 
 57.22     Sec. 4.  Minnesota Statutes 2002, section 84.92, 
 57.23  subdivision 6, is amended to read: 
 57.24     Subd. 6.  [PERSON.] "Person" means an individual or an 
 57.25  organization as defined in section 336.1-201, paragraph 
 57.26  (30)(b)(27).  
 57.27     Sec. 5.  Minnesota Statutes 2002, section 86B.820, 
 57.28  subdivision 12, is amended to read: 
 57.29     Subd. 12.  [SECURITY INTEREST.] "Security interest" has the 
 57.30  meaning given it in section 336.1-201, subsection (37)(b)(35), 
 57.31  and includes statutory liens for which lien statements are filed.
 57.32     Sec. 6.  Minnesota Statutes 2002, section 168A.01, 
 57.33  subdivision 20, is amended to read: 
 57.34     Subd. 20.  [SECURITY INTEREST.] "Security interest" means a 
 57.35  security interest as defined in section 336.1-201(37)(b)(35).  A 
 57.36  security interest is "perfected" when it is valid against third 
 58.1   parties generally, subject only to specific statutory exception. 
 58.2      Sec. 7.  Minnesota Statutes 2002, section 234.27, is 
 58.3   amended to read: 
 58.4      234.27 [UNIFORM COMMERCIAL CODE TO APPLY.] 
 58.5      The provisions of article 7 of the Uniform Commercial Code 
 58.6   relative to the negotiation, transfer, sale, or endorsement of 
 58.7   warehouse receipts, apply, to the extent possible, to the 
 58.8   negotiation, transfer, sale, or endorsement of certificates 
 58.9   under this chapter.  
 58.10     For the purpose of application of the Uniform Commercial 
 58.11  Code:  
 58.12     (a) A certificate authorized by the department which 
 58.13  evidences the storing of grain under this chapter is a document 
 58.14  of title as defined in section 336.1-201, clause (15)(b)(16).  
 58.15     (b) A person who has title to and possession of grain 
 58.16  stored under this chapter is a warehouse operator as defined in 
 58.17  section 336.7-102, clause (1)(h). 
 58.18     Sec. 8.  Minnesota Statutes 2002, section 325L.03, is 
 58.19  amended to read: 
 58.20     325L.03 [SCOPE.] 
 58.21     (a) Except as otherwise provided in paragraphs (b) and (e), 
 58.22  this chapter applies to electronic records and electronic 
 58.23  signatures relating to a transaction. 
 58.24     (b) This chapter does not apply to a transaction to the 
 58.25  extent it is governed by: 
 58.26     (1) the Uniform Commercial Code other than sections 
 58.27  336.1-107 and 336.1-206 section 336.1-306, Article 2, and 
 58.28  Article 2A; and 
 58.29     (2) section 145C.03, subdivision 1, relating to 
 58.30  requirements for creation of a health care directive; section 
 58.31  507.24, relating to requirements for recording any conveyance, 
 58.32  power of attorney, or other instrument affecting real estate; 
 58.33  section 523.23, subdivision 3, relating to requirements for 
 58.34  creation of a statutory short form power of attorney; and 
 58.35  section 253B.03, subdivision 6b, relating to requirements for 
 58.36  creation of a declaration of preferences or instructions 
 59.1   regarding intrusive mental health treatment. 
 59.2      (c) This chapter applies to an electronic record or 
 59.3   electronic signature otherwise excluded from the application of 
 59.4   this chapter under paragraph (b) to the extent it is governed by 
 59.5   a law other than those specified in paragraph (b). 
 59.6      (d) A transaction subject to this chapter is also subject 
 59.7   to other applicable substantive law. 
 59.8      (e) This chapter does not apply to the creation and 
 59.9   execution of wills, codicils, or trusts other than trusts 
 59.10  relating to the conduct of business, commercial, or governmental 
 59.11  purposes. 
 59.12     Sec. 9.  Minnesota Statutes 2002, section 325L.16, is 
 59.13  amended to read: 
 59.14     325L.16 [TRANSFERABLE RECORD.] 
 59.15     (a) In this section, "transferable record" means an 
 59.16  electronic record that: 
 59.17     (1) would be a note under Article 3 of the Uniform 
 59.18  Commercial Code or a document under Article 7 of the Uniform 
 59.19  Commercial Code if the electronic record were in writing; and 
 59.20     (2) the issuer of the electronic record expressly has 
 59.21  agreed is a transferable record. 
 59.22     (b) A person has control of a transferable record if a 
 59.23  system employed for evidencing the transfer of interests in the 
 59.24  transferable record reliably establishes that person as the 
 59.25  person to which the transferable record was issued or 
 59.26  transferred. 
 59.27     (c) A system satisfies paragraph (b), and a person is 
 59.28  deemed to have control of a transferable record, if the 
 59.29  transferable record is created, stored, and assigned in such a 
 59.30  manner that: 
 59.31     (1) a single authoritative copy of the transferable record 
 59.32  exists which is unique, identifiable, and, except as otherwise 
 59.33  provided in clauses (4), (5), and (6), unalterable; 
 59.34     (2) the authoritative copy identifies the person asserting 
 59.35  control as: 
 59.36     (i) the person to which the transferable record was issued; 
 60.1   or 
 60.2      (ii) if the authoritative copy indicates that the 
 60.3   transferable record has been transferred, the person to which 
 60.4   the transferable record was most recently transferred; 
 60.5      (3) the authoritative copy is communicated to and 
 60.6   maintained by the person asserting control or its designated 
 60.7   custodian; 
 60.8      (4) copies or revisions that add or change an identified 
 60.9   assignee of the authoritative copy can be made only with the 
 60.10  consent of the person asserting control; 
 60.11     (5) each copy of the authoritative copy and any copy of a 
 60.12  copy is readily identifiable as a copy that is not the 
 60.13  authoritative copy; and 
 60.14     (6) any revision of the authoritative copy is readily 
 60.15  identifiable as authorized or unauthorized. 
 60.16     (d) Except as otherwise agreed, a person having control of 
 60.17  a transferable record is the holder, as defined in section 
 60.18  336.1-201(20)(b)(21) of the Uniform Commercial Code, of the 
 60.19  transferable record and has the same rights and defenses as a 
 60.20  holder of an equivalent record or writing under the Uniform 
 60.21  Commercial Code, including, if the applicable statutory 
 60.22  requirements under section 336.3-302(a), 336.7-501, or 336.9-330 
 60.23  of the Uniform Commercial Code are satisfied, the rights and 
 60.24  defenses of a holder in due course, a holder to which a 
 60.25  negotiable document of title has been duly negotiated, or a 
 60.26  purchaser, respectively.  Delivery, possession, and endorsement 
 60.27  are not required to obtain or exercise any of the rights under 
 60.28  this paragraph. 
 60.29     (e) Except as otherwise agreed, an obligor under a 
 60.30  transferable record has the same rights and defenses as an 
 60.31  equivalent obligor under equivalent records or writings under 
 60.32  the Uniform Commercial Code. 
 60.33     (f) If requested by a person against which enforcement is 
 60.34  sought, the person seeking to enforce the transferable record 
 60.35  shall provide reasonable proof that the person is in control of 
 60.36  the transferable record.  Proof may include access to the 
 61.1   authoritative copy of the transferable record and related 
 61.2   business records sufficient to review the terms of the 
 61.3   transferable record and to establish the identity of the person 
 61.4   having control of the transferable record. 
 61.5      Sec. 10.  Minnesota Statutes 2002, section 513.33, 
 61.6   subdivision 1, is amended to read: 
 61.7      Subdivision 1.  [DEFINITIONS.] For the purposes of this 
 61.8   section, the following terms have the meanings given them:  
 61.9      (1) "credit agreement" means an agreement to lend or 
 61.10  forbear repayment of money, goods, or things in action, to 
 61.11  otherwise extend credit, or to make any other financial 
 61.12  accommodation; 
 61.13     (2) "creditor" means a person who extends credit under a 
 61.14  credit agreement with a debtor; 
 61.15     (3) "debtor" means a person who obtains credit or seeks a 
 61.16  credit agreement with a creditor or who owes money to a 
 61.17  creditor; and 
 61.18     (4) "signed" has the meaning specified in section 
 61.19  336.1-201(39)(b)(37). 
 61.20     Sec. 11.  Minnesota Statutes 2002, section 514.963, 
 61.21  subdivision 9, is amended to read: 
 61.22     Subd. 9.  [PERSON.] "Person" means an individual or an 
 61.23  organization as defined in section 336.1-201(30)(b)(27). 
 61.24     Sec. 12.  Minnesota Statutes 2002, section 514.965, 
 61.25  subdivision 10, is amended to read: 
 61.26     Subd. 10.  [PERSON.] "Person" means an individual or an 
 61.27  organization as defined in section 336.1-201(30)(b)(27). 
 61.28                             ARTICLE 4
 61.29          AMENDMENTS TO UNIFORM COMMERCIAL CODE ARTICLE 3
 61.30     Section 1.  Minnesota Statutes 2002, section 336.3-103, is 
 61.31  amended to read: 
 61.32     336.3-103 [DEFINITIONS.] 
 61.33     (a) In this article: 
 61.34     (1) "Acceptor" means a drawee who has accepted a draft. 
 61.35     (2) "Consumer account" means an account established by an 
 61.36  individual primarily for personal, family, or household purposes.
 62.1      (3) "Consumer transaction" means a transaction in which an 
 62.2   individual incurs an obligation primarily for personal, family, 
 62.3   or household purposes. 
 62.4      (4) "Drawee" means a person ordered in a draft to make 
 62.5   payment. 
 62.6      (3) (5) "Drawer" means a person who signs or is identified 
 62.7   in a draft as a person ordering payment. 
 62.8      (4) (6) "Good faith" means honesty in fact and the 
 62.9   observance of reasonable commercial standards of fair dealing. 
 62.10  [Reserved.] 
 62.11     (5) (7) "Maker" means a person who signs or is identified 
 62.12  in a note as a person undertaking to pay. 
 62.13     (6) (8) "Order" means a written instruction to pay money 
 62.14  signed by the person giving the instruction.  The instruction 
 62.15  may be addressed to any person, including the person giving the 
 62.16  instruction, or to one or more persons jointly or in the 
 62.17  alternative but not in succession.  An authorization to pay is 
 62.18  not an order unless the person authorized to pay is also 
 62.19  instructed to pay. 
 62.20     (7) (9) "Ordinary care" in the case of a person engaged in 
 62.21  business means observance of reasonable commercial standards, 
 62.22  prevailing in the area in which the person is located, with 
 62.23  respect to the business in which the person is engaged.  In the 
 62.24  case of a bank that takes an instrument for processing for 
 62.25  collection or payment by automated means, reasonable commercial 
 62.26  standards do not require the bank to examine the instrument if 
 62.27  the failure to examine does not violate the bank's prescribed 
 62.28  procedures and the bank's procedures do not vary unreasonably 
 62.29  from general banking usage not disapproved by this article or 
 62.30  article 4. 
 62.31     (8) (10) "Party" means a party to an instrument. 
 62.32     (11) "Principal obligor," with respect to an instrument, 
 62.33  means the accommodated party or any other party to the 
 62.34  instrument against whom a secondary obligor has recourse under 
 62.35  this article. 
 62.36     (9) (12) "Promise" means a written undertaking to pay money 
 63.1   signed by the person undertaking to pay.  An acknowledgment of 
 63.2   an obligation by the obligor is not a promise unless the obligor 
 63.3   also undertakes to pay the obligation. 
 63.4      (10) (13) "Prove" with respect to a fact means to meet the 
 63.5   burden of establishing the fact (section 336.1-201(8)). 
 63.6      (14) [Reserved.] 
 63.7      (11) (15) "Remitter" means a person who purchases an 
 63.8   instrument from its issuer if the instrument is payable to an 
 63.9   identified person other than the purchaser. 
 63.10     (16) "Remotely-created consumer item" means an item drawn 
 63.11  on a consumer account, which is not created by the payor bank 
 63.12  and does not bear a handwritten signature purporting to be the 
 63.13  signature of the drawer. 
 63.14     (17) "Secondary obligor," with respect to an instrument, 
 63.15  means (a) an endorser or an accommodation party, (b) a drawer 
 63.16  having the obligation described in section 336.3-414(d), or (c) 
 63.17  any other party to the instrument that has recourse against 
 63.18  another party to the instrument pursuant to section 336.3-116(b).
 63.19     (b) Other definitions applying to this article and the 
 63.20  sections in which they appear are: 
 63.21     "Acceptance," section 336.3-409. 
 63.22     "Accommodated party," section 336.3-419. 
 63.23     "Accommodation party," section 336.3-419. 
 63.24     "Account," section 336.4-104. 
 63.25     "Alteration," section 336.3-407. 
 63.26     "Anomalous endorsement," section 336.3-205.  
 63.27     "Blank endorsement," section 336.3-205.  
 63.28     "Cashier's check," section 336.3-104. 
 63.29     "Certificate of deposit," section 336.3-104. 
 63.30     "Certified check," section 336.3-409.  
 63.31     "Check," section 336.3-104. 
 63.32     "Consideration," section 336.3-303. 
 63.33     "Draft," section 336.3-104. 
 63.34     "Endorsement," section 336.3-204.  
 63.35     "Endorser," section 336.3-204. 
 63.36     "Holder in due course," section 336.3-302. 
 64.1      "Incomplete instrument," section 336.3-115. 
 64.2      "Instrument," section 336.3-104. 
 64.3      "Issue," section 336.3-105. 
 64.4      "Issuer," section 336.3-105. 
 64.5      "Negotiable instrument," section 336.3-104. 
 64.6      "Negotiation," section 336.3-201. 
 64.7      "Note," section 336.3-104. 
 64.8      "Payable at a definite time," section 336.3-108. 
 64.9      "Payable on demand," section 336.3-108. 
 64.10     "Payable to bearer," section 336.3-109. 
 64.11     "Payable to order," section 336.3-109. 
 64.12     "Payment," section 336.3-602. 
 64.13     "Person entitled to enforce," section 336.3-301. 
 64.14     "Presentment," section 336.3-501. 
 64.15     "Reacquisition," section 336.3-207. 
 64.16     "Special endorsement," section 336.3-205.  
 64.17     "Teller's check," section 336.3-104. 
 64.18     "Transfer of instrument," section 336.3-203. 
 64.19     "Traveler's check," section 336.3-104. 
 64.20     "Value," section 336.3-303. 
 64.21     (c) The following definitions in other articles apply to 
 64.22  this article: 
 64.23     "Bank," section 336.4-105. 
 64.24     "Banking day," section 336.4-104. 
 64.25     "Clearinghouse," section 336.4-104. 
 64.26     "Collecting bank," section 336.4-105. 
 64.27     "Depositary bank," section 336.4-105. 
 64.28     "Documentary draft," section 336.4-104. 
 64.29     "Intermediary bank," section 336.4-105. 
 64.30     "Item," section 336.4-104. 
 64.31     "Payor bank," section 336.4-105. 
 64.32     "Suspends payments," section 336.4-104. 
 64.33     (d) In addition, article 1 contains general definitions and 
 64.34  principles of construction and interpretation applicable 
 64.35  throughout this article. 
 64.36     Sec. 2.  Minnesota Statutes 2002, section 336.3-106, is 
 65.1   amended to read: 
 65.2      336.3-106 [UNCONDITIONAL PROMISE OR ORDER.] 
 65.3      (a) Except as provided in this section, for the purposes of 
 65.4   section 336.3-104(a), a promise or order is unconditional unless 
 65.5   it states (i) an express condition to payment, (ii) that the 
 65.6   promise or order is subject to or governed by another 
 65.7   writing record, or (iii) that rights or obligations with respect 
 65.8   to the promise or order are stated in another writing record.  A 
 65.9   reference to another writing record does not of itself make the 
 65.10  promise or order conditional. 
 65.11     (b) A promise or order is not made conditional (i) by a 
 65.12  reference to another writing record for a statement of rights 
 65.13  with respect to collateral, prepayment, or acceleration, or (ii) 
 65.14  because payment is limited to resort to a particular fund or 
 65.15  source. 
 65.16     (c) If a promise or order requires, as a condition to 
 65.17  payment, a countersignature by a person whose specimen signature 
 65.18  appears on the promise or order, the condition does not make the 
 65.19  promise or order conditional for the purposes of section 
 65.20  336.3-104(a).  If the person whose specimen signature appears on 
 65.21  an instrument fails to countersign the instrument, the failure 
 65.22  to countersign is a defense to the obligation of the issuer, but 
 65.23  the failure does not prevent a transferee of the instrument from 
 65.24  becoming a holder of the instrument. 
 65.25     (d) If a promise or order at the time it is issued or first 
 65.26  comes into possession of a holder contains a statement, required 
 65.27  by applicable statutory or administrative law, to the effect 
 65.28  that the rights of a holder or transferee are subject to claims 
 65.29  or defenses that the issuer could assert against the original 
 65.30  payee, the promise or order is not thereby made conditional for 
 65.31  the purposes of section 336.3-104(a); but if the promise or 
 65.32  order is an instrument, there cannot be a holder in due course 
 65.33  of the instrument. 
 65.34     Sec. 3.  Minnesota Statutes 2002, section 336.3-116, is 
 65.35  amended to read: 
 65.36     336.3-116 [JOINT AND SEVERAL LIABILITY; CONTRIBUTION.] 
 66.1      (a) Except as otherwise provided in the instrument, two or 
 66.2   more persons who have the same liability on an instrument as 
 66.3   makers, drawers, acceptors, endorsers who endorse as joint 
 66.4   payees, or anomalous endorsers are jointly and severally liable 
 66.5   in the capacity in which they sign. 
 66.6      (b) Except as provided in section 336.3-419(e) or by 
 66.7   agreement of the affected parties, a party having joint and 
 66.8   several liability who pays the instrument is entitled to receive 
 66.9   from any party having the same joint and several liability 
 66.10  contribution in accordance with applicable law. 
 66.11     (c) Discharge of one party having joint and several 
 66.12  liability by a person entitled to enforce the instrument does 
 66.13  not affect the right under subsection (b) of a party having the 
 66.14  same joint and several liability to receive contribution from 
 66.15  the party discharged. 
 66.16     Sec. 4.  Minnesota Statutes 2002, section 336.3-305, is 
 66.17  amended to read: 
 66.18     336.3-305 [DEFENSES AND CLAIMS IN RECOUPMENT.] 
 66.19     (a) Except as stated in subsection (b), the right to 
 66.20  enforce the obligation of a party to pay an instrument is 
 66.21  subject to the following: 
 66.22     (1) a defense of the obligor based on (i) infancy of the 
 66.23  obligor to the extent it is a defense to a simple contract, (ii) 
 66.24  duress, lack of legal capacity, or illegality of the transaction 
 66.25  which, under other law, nullifies the obligation of the obligor, 
 66.26  (iii) fraud that induced the obligor to sign the instrument with 
 66.27  neither knowledge nor reasonable opportunity to learn of its 
 66.28  character or its essential terms, or (iv) discharge of the 
 66.29  obligor in insolvency proceedings; 
 66.30     (2) a defense of the obligor stated in another section of 
 66.31  this article or a defense of the obligor that would be available 
 66.32  if the person entitled to enforce the instrument were enforcing 
 66.33  a right to payment under a simple contract; and 
 66.34     (3) a claim in recoupment of the obligor against the 
 66.35  original payee of the instrument if the claim arose from the 
 66.36  transaction that gave rise to the instrument; but the claim of 
 67.1   the obligor may be asserted against a transferee of the 
 67.2   instrument only to reduce the amount owing on the instrument at 
 67.3   the time the action is brought. 
 67.4      (b) The right of a holder in due course to enforce the 
 67.5   obligation of a party to pay the instrument is subject to 
 67.6   defenses of the obligor stated in subsection (a)(1), but is not 
 67.7   subject to defenses of the obligor stated in subsection (a)(2) 
 67.8   or claims in recoupment stated in subsection (a)(3) against a 
 67.9   person other than the holder. 
 67.10     (c) Except as stated in subsection (d), in an action to 
 67.11  enforce the obligation of a party to pay the instrument, the 
 67.12  obligor may not assert against the person entitled to enforce 
 67.13  the instrument a defense, claim in recoupment, or claim to the 
 67.14  instrument (section 336.3-306) of another person, but the other 
 67.15  person's claim to the instrument may be asserted by the obligor 
 67.16  if the other person is joined in the action and personally 
 67.17  asserts the claim against the person entitled to enforce the 
 67.18  instrument.  An obligor is not obliged to pay the instrument if 
 67.19  the person seeking enforcement of the instrument does not have 
 67.20  rights of a holder in due course and the obligor proves that the 
 67.21  instrument is a lost or stolen instrument. 
 67.22     (d) In an action to enforce the obligation of an 
 67.23  accommodation party to pay an instrument, the accommodation 
 67.24  party may assert against the person entitled to enforce the 
 67.25  instrument any defense or claim in recoupment under subsection 
 67.26  (a) that the accommodated party could assert against the person 
 67.27  entitled to enforce the instrument, except the defenses of 
 67.28  discharge in insolvency proceedings, infancy, and lack of legal 
 67.29  capacity. 
 67.30     (e) In a consumer transaction, if law other than this 
 67.31  article requires that an instrument include a statement to the 
 67.32  effect that the rights of a holder or transferee are subject to 
 67.33  a claim or defense that the issuer could assert against the 
 67.34  original payee, and the instrument does not include such a 
 67.35  statement: 
 67.36     (1) the instrument has the same effect as if the instrument 
 68.1   included such a statement; 
 68.2      (2) the issuer may assert against the holder or transferee 
 68.3   all claims and defenses that would have been available if the 
 68.4   instrument included such a statement; and 
 68.5      (3) the extent to which claims may be asserted against the 
 68.6   holder or transferee is determined as if the instrument included 
 68.7   such a statement. 
 68.8      (f) This section is subject to law other than this article 
 68.9   that establishes a different rule for consumer transactions. 
 68.10     Sec. 5.  Minnesota Statutes 2002, section 336.3-309, is 
 68.11  amended to read: 
 68.12     336.3-309 [ENFORCEMENT OF LOST, DESTROYED, OR STOLEN 
 68.13  INSTRUMENT.] 
 68.14     (a) A person not in possession of an instrument is entitled 
 68.15  to enforce the instrument if (i) the person was in possession of 
 68.16  the instrument and 
 68.17     (1) the person seeking to enforce the instrument (A) was 
 68.18  entitled to enforce it the instrument when loss of possession 
 68.19  occurred, (ii) or (B) has directly or indirectly acquired 
 68.20  ownership of the instrument from a person who was entitled to 
 68.21  enforce the instrument when loss of possession occurred; 
 68.22     (2) the loss of possession was not the result of a transfer 
 68.23  by the person or a lawful seizure,; and 
 68.24     (iii) (3) the person cannot reasonably obtain possession of 
 68.25  the instrument because the instrument was destroyed, its 
 68.26  whereabouts cannot be determined, or it is in the wrongful 
 68.27  possession of an unknown person or a person that cannot be found 
 68.28  or is not amenable to service of process. 
 68.29     (b) A person seeking enforcement of an instrument under 
 68.30  subsection (a) must prove the terms of the instrument and the 
 68.31  person's right to enforce the instrument.  If that proof is 
 68.32  made, section 336.3-308 applies to the case as if the person 
 68.33  seeking enforcement had produced the instrument.  The court may 
 68.34  not enter judgment in favor of the person seeking enforcement 
 68.35  unless it finds that the person required to pay the instrument 
 68.36  is adequately protected against loss that might occur by reason 
 69.1   of a claim by another person to enforce the instrument.  
 69.2   Adequate protection may be provided by any reasonable means. 
 69.3      Sec. 6.  Minnesota Statutes 2002, section 336.3-416, is 
 69.4   amended to read: 
 69.5      336.3-416 [TRANSFER WARRANTIES.] 
 69.6      (a) A person who transfers an instrument for consideration 
 69.7   warrants to the transferee and, if the transfer is by 
 69.8   endorsement, to any subsequent transferee that:  
 69.9      (1) the warrantor is a person entitled to enforce the 
 69.10  instrument; 
 69.11     (2) all signatures on the instrument are authentic and 
 69.12  authorized; 
 69.13     (3) the instrument has not been altered; 
 69.14     (4) the instrument is not subject to a defense or claim in 
 69.15  recoupment of any party which can be asserted against the 
 69.16  warrantor; and 
 69.17     (5) the warrantor has no knowledge of any insolvency 
 69.18  proceeding commenced with respect to the maker or acceptor or, 
 69.19  in the case of an unaccepted draft, the drawer; and 
 69.20     (6) remotely-created consumer item, that the person on 
 69.21  whose account the item is drawn authorized the issuance of the 
 69.22  item in the amount for which the item is drawn.  
 69.23     (b) A person to whom the warranties under subsection (a) 
 69.24  are made and who took the instrument in good faith may recover 
 69.25  from the warrantor as damages for breach of warranty an amount 
 69.26  equal to the loss suffered as a result of the breach, but not 
 69.27  more than the amount of the instrument plus expenses and loss of 
 69.28  interest incurred as a result of the breach. 
 69.29     (c) The warranties stated in subsection (a) cannot be 
 69.30  disclaimed with respect to checks.  Unless notice of a claim for 
 69.31  breach of warranty is given to the warrantor within 30 days 
 69.32  after the claimant has reason to know of the breach and the 
 69.33  identity of the warrantor, the liability of the warrantor under 
 69.34  subsection (b) is discharged to the extent of any loss caused by 
 69.35  the delay in giving notice of the claim.  
 69.36     (d) A cause of action for breach of warranty under this 
 70.1   section accrues when the claimant has reason to know of the 
 70.2   breach.  
 70.3      Sec. 7.  Minnesota Statutes 2002, section 336.3-417, is 
 70.4   amended to read: 
 70.5      336.3-417 [PRESENTMENT WARRANTIES.] 
 70.6      (a) If an unaccepted draft is presented to the drawee for 
 70.7   payment or acceptance and the drawee pays or accepts the draft, 
 70.8   (i) the person obtaining payment or acceptance, at the time of 
 70.9   presentment, and (ii) a previous transferor of the draft, at the 
 70.10  time of transfer, warrant to the drawee making payment or 
 70.11  accepting the draft in good faith that:  
 70.12     (1) the warrantor is, or was, at the time the warrantor 
 70.13  transferred the draft, a person entitled to enforce the draft or 
 70.14  authorized to obtain payment or acceptance of the draft on 
 70.15  behalf of a person entitled to enforce the draft; 
 70.16     (2) the draft has not been altered; and 
 70.17     (3) the warrantor has no knowledge that the signature of 
 70.18  the drawer of the draft is unauthorized; and 
 70.19     (4) remotely-created consumer item, that the person on 
 70.20  whose account the item is drawn authorized the issuance of the 
 70.21  item in the amount for which the item is drawn.  
 70.22     (b) A drawee making payment may recover from any warrantor 
 70.23  damages for breach of warranty equal to the amount paid by the 
 70.24  drawee less the amount the drawee received or is entitled to 
 70.25  receive from the drawer because of the payment.  In addition, 
 70.26  the drawee is entitled to compensation for expenses and loss of 
 70.27  interest resulting from the breach.  The right of the drawee to 
 70.28  recover damages under this subsection is not affected by any 
 70.29  failure of the drawee to exercise ordinary care in making 
 70.30  payment.  If the drawee accepts the draft, breach of warranty is 
 70.31  a defense to the obligation of the acceptor.  If the acceptor 
 70.32  makes payment with respect to the draft, the acceptor is 
 70.33  entitled to recover from any warrantor for breach of warranty 
 70.34  the amounts stated in this subsection.  
 70.35     (c) If a drawee asserts a claim for breach of warranty 
 70.36  under subsection (a) based on an unauthorized endorsement of the 
 71.1   draft or an alteration of the draft, the warrantor may defend by 
 71.2   proving that the endorsement is effective under section 
 71.3   336.3-404 or 336.3-405 or the drawer is precluded under section 
 71.4   336.3-406 or 336.4-406 from asserting against the drawee the 
 71.5   unauthorized endorsement or alteration.  
 71.6      (d) If (i) a dishonored draft is presented for payment to 
 71.7   the drawer or an endorser or (ii) any other instrument is 
 71.8   presented for payment to a party obliged to pay the instrument, 
 71.9   and (iii) payment is received, the following rules apply:  
 71.10     (1) The person obtaining payment and a prior transferor of 
 71.11  the instrument warrant to the person making payment in good 
 71.12  faith that the warrantor is, or was, at the time the warrantor 
 71.13  transferred the instrument, a person entitled to enforce the 
 71.14  instrument or authorized to obtain payment on behalf of a person 
 71.15  entitled to enforce the instrument.  
 71.16     (2) The person making payment may recover from any 
 71.17  warrantor for breach of warranty an amount equal to the amount 
 71.18  paid plus expenses and loss of interest resulting from the 
 71.19  breach.  
 71.20     (e) The warranties stated in subsections (a) and (d) cannot 
 71.21  be disclaimed with respect to checks.  Unless notice of a claim 
 71.22  for breach of warranty is given to the warrantor within 30 days 
 71.23  after the claimant has reason to know of the breach and the 
 71.24  identity of the warrantor, the liability of the warrantor under 
 71.25  subsection (b) or (d) is discharged to the extent of any loss 
 71.26  caused by the delay in giving notice of the claim.  
 71.27     (f) A cause of action for breach of warranty under this 
 71.28  section accrues when the claimant has reason to know of the 
 71.29  breach. 
 71.30     Sec. 8.  Minnesota Statutes 2002, section 336.3-602, is 
 71.31  amended to read: 
 71.32     336.3-602 [PAYMENT.] 
 71.33     (a) Subject to subsection (b) (e), an instrument is paid to 
 71.34  the extent payment is made (i) by or on behalf of a party 
 71.35  obliged to pay the instrument, and (ii) to a person entitled to 
 71.36  enforce the instrument.  
 72.1      (b) Subject to subsection (e), a note is paid to the extent 
 72.2   payment is made by or on behalf of a party obliged to pay the 
 72.3   note to a person that formerly was entitled to enforce the note 
 72.4   only if at the time of the payment the party obliged to pay has 
 72.5   not received adequate notification that the note has been 
 72.6   transferred and that payment is to be made to the transferee.  A 
 72.7   notification is adequate only if it is signed by the transferor 
 72.8   or the transferee; reasonably identifies the transferred note; 
 72.9   and provides an address at which payments subsequently are to be 
 72.10  made.  Upon request, a transferee shall seasonably furnish 
 72.11  reasonable proof that the note has been transferred.  Unless the 
 72.12  transferee complies with the request, a payment to the person 
 72.13  that formerly was entitled to enforce the note is effective for 
 72.14  purposes of subsection (c) even if the party obliged to pay the 
 72.15  note has received a notification under this paragraph. 
 72.16     (c) Subject to subsection (e), to the extent of the a 
 72.17  payment under subsections (a) and (b), the obligation of the 
 72.18  party obliged to pay the instrument is discharged even though 
 72.19  payment is made with knowledge of a claim to the instrument 
 72.20  under section 336.3-306 by another person.  
 72.21     (d) Subject to subsection (e), a transferee, or any party 
 72.22  that has acquired rights in the instrument directly or 
 72.23  indirectly from a transferee, including any such party that has 
 72.24  rights as a holder in due course, is deemed to have notice of 
 72.25  any payment that is made under subsection (b) after the date 
 72.26  that the note is transferred to the transferee but before the 
 72.27  party obliged to pay the note receives adequate notification of 
 72.28  the transfer. 
 72.29     (b) (e) The obligation of a party to pay the instrument is 
 72.30  not discharged under subsection subsections (a) through (d) if:  
 72.31     (1) a claim to the instrument under section 336.3-306 is 
 72.32  enforceable against the party receiving payment and (i) payment 
 72.33  is made with knowledge by the payor that payment is prohibited 
 72.34  by injunction or similar process of a court of competent 
 72.35  jurisdiction, or (ii) in the case of an instrument other than a 
 72.36  cashier's check, teller's check, or certified check, the party 
 73.1   making payment accepted, from the person having a claim to the 
 73.2   instrument, indemnity against loss resulting from refusal to pay 
 73.3   the person entitled to enforce the instrument; or 
 73.4      (2) the person making payment knows that the instrument is 
 73.5   a stolen instrument and pays a person it knows is in wrongful 
 73.6   possession of the instrument.  
 73.7      (f) As used in this section, "signed," with respect to a 
 73.8   record that is not a writing, includes the attachment to or 
 73.9   logical association with the record of an electronic symbol, 
 73.10  sound, or process to or with the record with the present intent 
 73.11  to adopt or accept the record. 
 73.12     Sec. 9.  Minnesota Statutes 2002, section 336.3-604, is 
 73.13  amended to read: 
 73.14     336.3-604 [DISCHARGE BY CANCELLATION OR RENUNCIATION.] 
 73.15     (a) A person entitled to enforce an instrument, with or 
 73.16  without consideration, may discharge the obligation of a party 
 73.17  to pay the instrument (i) by an intentional voluntary act, such 
 73.18  as surrender of the instrument to the party, destruction, 
 73.19  mutilation, or cancellation of the instrument, cancellation or 
 73.20  striking out of the party's signature, or the addition of words 
 73.21  to the instrument indicating discharge, or (ii) by agreeing not 
 73.22  to sue or otherwise renouncing rights against the party by a 
 73.23  signed writing record.  
 73.24     (b) Cancellation or striking out of an endorsement pursuant 
 73.25  to subsection (a) does not affect the status and rights of a 
 73.26  party derived from the endorsement.  
 73.27     (c) In this section, "signed," with respect to a record 
 73.28  that is not a writing, includes the attachment to or logical 
 73.29  association with the record of an electronic symbol, sound, or 
 73.30  process to or with the record with the present intent to adopt 
 73.31  or accept the record. 
 73.32     Sec. 10.  Minnesota Statutes 2002, section 336.3-605, is 
 73.33  amended to read: 
 73.34     336.3-605 [DISCHARGE OF ENDORSERS AND ACCOMMODATION PARTIES 
 73.35  SECONDARY OBLIGORS.] 
 73.36     (a) In this section, the term "endorser" includes a drawer 
 74.1   having the obligation described in section 336.3-414(d).  
 74.2      (b) Discharge, under section 336.3-604, of the obligation 
 74.3   of a party to pay an instrument does not discharge the 
 74.4   obligation of an endorser or accommodation party having a right 
 74.5   of recourse against the discharged party.  
 74.6      (c) If a person entitled to enforce an instrument agrees, 
 74.7   with or without consideration, to an extension of the due date 
 74.8   of the obligation of a party to pay the instrument, the 
 74.9   extension discharges an endorser or accommodation party having a 
 74.10  right of recourse against the party whose obligation is extended 
 74.11  to the extent the endorser or accommodation party proves that 
 74.12  the extension caused loss to the endorser or accommodation party 
 74.13  with respect to the right of recourse.  
 74.14     (d) If a person entitled to enforce an instrument agrees, 
 74.15  with or without consideration, to a material modification of the 
 74.16  obligation of a party other than an extension of the due date, 
 74.17  the modification discharges the obligation of an endorser or 
 74.18  accommodation party having a right of recourse against the 
 74.19  person whose obligation is modified to the extent the 
 74.20  modification causes loss to the endorser or accommodation party 
 74.21  with respect to the right of recourse.  The loss suffered by the 
 74.22  endorser or accommodation party as a result of the modification 
 74.23  is equal to the amount of the right of recourse unless the 
 74.24  person enforcing the instrument proves that no loss was caused 
 74.25  by the modification or that the loss caused by the modification 
 74.26  was an amount less than the amount of the right of recourse.  
 74.27     (e) If the obligation of a party to pay an instrument is 
 74.28  secured by an interest in collateral and a person entitled to 
 74.29  enforce the instrument impairs the value of the interest in 
 74.30  collateral, the obligation of an endorser or accommodation party 
 74.31  having a right of recourse against the obligor is discharged to 
 74.32  the extent of the impairment.  The value of an interest in 
 74.33  collateral is impaired to the extent (i) the value of the 
 74.34  interest is reduced to an amount less than the amount of the 
 74.35  right of recourse of the party asserting discharge, or (ii) the 
 74.36  reduction in value of the interest causes an increase in the 
 75.1   amount by which the amount of the right of recourse exceeds the 
 75.2   value of the interest.  The burden of proving impairment is on 
 75.3   the party asserting discharge.  
 75.4      (f) If the obligation of a party is secured by an interest 
 75.5   in collateral not provided by an accommodation party and a 
 75.6   person entitled to enforce the instrument impairs the value of 
 75.7   the interest in collateral, the obligation of any party who is 
 75.8   jointly and severally liable with respect to the secured 
 75.9   obligation is discharged to the extent the impairment causes the 
 75.10  party asserting discharge to pay more than that party would have 
 75.11  been obliged to pay, taking into account rights of contribution, 
 75.12  if impairment had not occurred.  If the party asserting 
 75.13  discharge is an accommodation party not entitled to discharge 
 75.14  under subsection (e), the party is deemed to have a right to 
 75.15  contribution based on joint and several liability rather than a 
 75.16  right to reimbursement.  The burden of proving impairment is on 
 75.17  the party asserting discharge.  
 75.18     (g) Under subsection (e) or (f), impairing value of an 
 75.19  interest in collateral includes (i) failure to obtain or 
 75.20  maintain perfection or recordation of the interest in 
 75.21  collateral, (ii) release of collateral without substitution of 
 75.22  collateral of equal value, (iii) failure to perform a duty to 
 75.23  preserve the value of collateral owed, under article 9 or other 
 75.24  law, to a debtor or surety or other person secondarily liable, 
 75.25  or (iv) failure to comply with applicable law in disposing of 
 75.26  collateral.  
 75.27     (h) An accommodation party is not discharged under 
 75.28  subsection (c), (d), or (e) unless the person entitled to 
 75.29  enforce the instrument knows of the accommodation or has notice 
 75.30  under section 336.3-419(c) that the instrument was signed for 
 75.31  accommodation. 
 75.32     (i) A party is not discharged under this section if (i) the 
 75.33  party asserting discharge consents to the event or conduct that 
 75.34  is the basis of the discharge, or (ii) the instrument or a 
 75.35  separate agreement of the party provides for waiver of discharge 
 75.36  under this section either specifically or by general language 
 76.1   indicating that parties waive defenses based on suretyship or 
 76.2   impairment of collateral. 
 76.3      (a) If a person entitled to enforce an instrument releases 
 76.4   the obligation of a principal obligor in whole or in part, and 
 76.5   another party to the instrument is a secondary obligor with 
 76.6   respect to the obligation of that principal obligor, the 
 76.7   following rules apply: 
 76.8      (1) Any obligations of the principal obligor to the 
 76.9   secondary obligor with respect to any previous payment by the 
 76.10  secondary obligor are not affected.  Unless the terms of the 
 76.11  release preserve the secondary obligor's recourse, the principal 
 76.12  obligor is discharged, to the extent of the release, from any 
 76.13  other duties to the secondary obligor under this article.  
 76.14     (2) Unless the terms of the release provide that the person 
 76.15  entitled to enforce the instrument retains the right to enforce 
 76.16  the instrument against the secondary obligor, the secondary 
 76.17  obligor is discharged to the same extent as the principal 
 76.18  obligor from any unperformed portion of its obligation on the 
 76.19  instrument.  If the instrument is a check and the obligation of 
 76.20  the secondary obligor is based on an indorsement of the check, 
 76.21  the secondary obligor is discharged without regard to the 
 76.22  language or circumstances of the discharge or other release. 
 76.23     (3) If the secondary obligor is not discharged under 
 76.24  paragraph (2), the secondary obligor is discharged to the extent 
 76.25  of the value of the consideration for the release, and to the 
 76.26  extent that the release would otherwise cause the secondary 
 76.27  obligor a loss. 
 76.28     (b) If a person entitled to enforce an instrument grants a 
 76.29  principal obligor an extension of the time at which one or more 
 76.30  payments are due on the instrument and another party to the 
 76.31  instrument is a secondary obligor with respect to the obligation 
 76.32  of that principal obligor, the following rules apply: 
 76.33     (1) Any obligations of the principal obligor to the 
 76.34  secondary obligor with respect to any previous payment by the 
 76.35  secondary obligor are not affected.  Unless the terms of the 
 76.36  extension preserve the secondary obligor's recourse, the 
 77.1   extension correspondingly extends the time for performance of 
 77.2   any other duties owed to the secondary obligor by the principal 
 77.3   obligor under this article. 
 77.4      (2) The secondary obligor is discharged to the extent that 
 77.5   the extension would otherwise cause the secondary obligor a loss.
 77.6      (3) To the extent that the secondary obligor is not 
 77.7   discharged under paragraph (2), the secondary obligor may 
 77.8   perform its obligations to a person entitled to enforce the 
 77.9   instrument as if the time for payment had not been extended or, 
 77.10  unless the terms of the extension provide that the person 
 77.11  entitled to enforce the instrument retains the right to enforce 
 77.12  the instrument against the secondary obligor as if the time for 
 77.13  payment had not been extended, treat the time for performance of 
 77.14  its obligations as having been extended correspondingly. 
 77.15     (c) If a person entitled to enforce an instrument agrees, 
 77.16  with or without consideration, to a modification of the 
 77.17  obligation of a principal obligor other than a complete or 
 77.18  partial release or an extension of the due date and another 
 77.19  party to the instrument is a secondary obligor with respect to 
 77.20  the obligation of that principal obligor, the following rules 
 77.21  apply: 
 77.22     (1) Any obligations of the principal obligor to the 
 77.23  secondary obligor with respect to any previous payment by the 
 77.24  secondary obligor are not affected.  The modification 
 77.25  correspondingly modifies any other duties owed to the secondary 
 77.26  obligor by the principal obligor under this article. 
 77.27     (2) The secondary obligor is discharged from any 
 77.28  unperformed portion of its obligation to the extent that the 
 77.29  modification would otherwise cause the secondary obligor a loss. 
 77.30     (3) To the extent that the secondary obligor is not 
 77.31  discharged under paragraph (2), the secondary obligor may 
 77.32  satisfy its obligation on the instrument as if the modification 
 77.33  had not occurred, or treat its obligation on the instrument as 
 77.34  having been modified correspondingly. 
 77.35     (d) If the obligation of a principal obligor is secured by 
 77.36  an interest in collateral, another party to the instrument is a 
 78.1   secondary obligor with respect to that obligation, and a person 
 78.2   entitled to enforce the instrument impairs the value of the 
 78.3   interest in collateral, the obligation of the secondary obligor 
 78.4   is discharged to the extent of the impairment.  The value of an 
 78.5   interest in collateral is impaired to the extent the value of 
 78.6   the interest is reduced to an amount less than the amount of the 
 78.7   recourse of the secondary obligor, or the reduction in value of 
 78.8   the interest causes an increase in the amount by which the 
 78.9   amount of the recourse exceeds the value of the interest.  For 
 78.10  purposes of this subsection, impairing the value of an interest 
 78.11  in collateral includes failure to obtain or maintain perfection 
 78.12  or recordation of the interest in collateral, release of 
 78.13  collateral without substitution of collateral of equal value or 
 78.14  equivalent reduction of the underlying obligation, failure to 
 78.15  perform a duty to preserve the value of collateral owed, under 
 78.16  Article 9 or other law, to a debtor or other person secondarily 
 78.17  liable, and failure to comply with applicable law in disposing 
 78.18  of or otherwise enforcing the interest in collateral. 
 78.19     (e) A secondary obligor is not discharged under subsection 
 78.20  (a)(3), (b), (c), or (d) unless the person entitled to enforce 
 78.21  the instrument knows that the person is a secondary obligor or 
 78.22  has notice under section 336.3-419(c) that the instrument was 
 78.23  signed for accommodation. 
 78.24     (f) A secondary obligor is not discharged under this 
 78.25  section if the secondary obligor consents to the event or 
 78.26  conduct that is the basis of the discharge, or the instrument or 
 78.27  a separate agreement of the party provides for waiver of 
 78.28  discharge under this section specifically or by general language 
 78.29  indicating that parties waive defenses based on suretyship or 
 78.30  impairment of collateral.  Unless the circumstances indicate 
 78.31  otherwise, consent by the principal obligor to an act that would 
 78.32  lead to a discharge under this section constitutes consent to 
 78.33  that act by the secondary obligor if the secondary obligor 
 78.34  controls the principal obligor or deals with the person entitled 
 78.35  to enforce the instrument on behalf of the principal obligor. 
 78.36     (g) A release or extension preserves a secondary obligor's 
 79.1   recourse if the terms of the release or extension provide that 
 79.2   the person entitled to enforce the instrument retains the right 
 79.3   to enforce the instrument against the secondary obligor and the 
 79.4   recourse of the secondary obligor continues as if the release or 
 79.5   extension had not been granted. 
 79.6      (h) Except as otherwise provided in subsection (i), a 
 79.7   secondary obligor asserting discharge under this section has the 
 79.8   burden of persuasion both with respect to the occurrence of the 
 79.9   acts alleged to harm the secondary obligor and loss or prejudice 
 79.10  caused by those acts.  
 79.11     (i) If the secondary obligor demonstrates prejudice caused 
 79.12  by an impairment of its recourse, and the circumstances of the 
 79.13  case indicate that the amount of loss is not reasonably 
 79.14  susceptible of calculation or requires proof of facts that are 
 79.15  not ascertainable, it is presumed that the act impairing 
 79.16  recourse caused a loss or impairment equal to the liability of 
 79.17  the secondary obligor on the instrument.  In that event, the 
 79.18  burden of persuasion as to any lesser amount of the loss is on 
 79.19  the person entitled to enforce the instrument. 
 79.20                             ARTICLE 5
 79.21          AMENDMENTS TO UNIFORM COMMERCIAL CODE ARTICLE 4
 79.22     Section 1.  Minnesota Statutes 2002, section 336.4-104, is 
 79.23  amended to read: 
 79.24     336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
 79.25     (a) In this article, unless the context otherwise requires: 
 79.26     (1) "Account" means any deposit or credit account with a 
 79.27  bank, including a demand, time, savings, passbook, share draft, 
 79.28  or like account, other than an account evidenced by a 
 79.29  certificate of deposit; 
 79.30     (2) "Afternoon" means the period of a day between noon and 
 79.31  midnight; 
 79.32     (3) "Banking day" means that part of any day, excluding 
 79.33  Saturday, Sunday, and holidays, on which a bank is open to the 
 79.34  public for carrying on substantially all of its banking 
 79.35  functions; 
 79.36     (4) "Clearinghouse" means an association of banks or other 
 80.1   payors regularly clearing items; 
 80.2      (5) "Customer" means a person having an account with a bank 
 80.3   or for whom a bank has agreed to collect items, including a bank 
 80.4   that maintains an account at another bank; 
 80.5      (6) "Documentary draft" means a draft to be presented for 
 80.6   acceptance or payment if specified documents, certificated 
 80.7   securities (section 336.8-102) or instructions for 
 80.8   uncertificated securities (section 336.8-102), or other 
 80.9   certificates, statements, or the like are to be received by the 
 80.10  drawee or other payor before acceptance or payment of the draft; 
 80.11     (7) "Draft" means a draft as defined in section 336.3-104 
 80.12  or an item, other than an instrument, that is an order; 
 80.13     (8) "Drawee" means a person ordered in a draft to make 
 80.14  payment; 
 80.15     (9) "Item" means an instrument or a promise or order to pay 
 80.16  money handled by a bank for collection or payment.  The term 
 80.17  does not include a payment order governed by article 4A or a 
 80.18  credit or debit card slip; 
 80.19     (10) "Midnight deadline" with respect to a bank is midnight 
 80.20  on its next banking day following the banking day on which it 
 80.21  receives the relevant item or notice or from which the time for 
 80.22  taking action commences to run, whichever is later; 
 80.23     (11) "Settle" means to pay in cash, by clearinghouse 
 80.24  settlement, in a charge or credit or by remittance, or otherwise 
 80.25  as agreed.  A settlement may be either provisional or final; 
 80.26     (12) "Suspends payments" with respect to a bank means that 
 80.27  it has been closed by order of the supervisory authorities, that 
 80.28  a public officer has been appointed to take it over, or that it 
 80.29  ceases or refuses to make payments in the ordinary course of 
 80.30  business. 
 80.31     (b) Other definitions applying to this article and the 
 80.32  sections in which they appear are: 
 80.33     "Agreement for electronic presentment," section 336.4-110 
 80.34     "Bank," section 336.4-105 
 80.35     "Collecting bank," section 336.4-105 
 80.36     "Depositary bank," section 336.4-105 
 81.1      "Intermediary bank," section 336.4-105 
 81.2      "Payor bank," section 336.4-105 
 81.3      "Presenting bank," section 336.4-105 
 81.4      "Presentment notice," section 336.4-110 
 81.5      (c) The following definitions in other articles apply to 
 81.6   this article: 
 81.7      "Acceptance," section 336.3-409 
 81.8      "Alteration," section 336.3-407 
 81.9      "Cashier's check," section 336.3-104 
 81.10     "Certificate of deposit," section 336.3-104 
 81.11     "Certified check," section 336.3-409 
 81.12     "Check," section 336.3-104 
 81.13     "Good faith," section 336.3-103 
 81.14     "Holder in due course," section 336.3-302 
 81.15     "Instrument," section 336.3-104 
 81.16     "Notice of dishonor," section 336.3-503 
 81.17     "Order," section 336.3-103 
 81.18     "Ordinary care," section 336.3-103 
 81.19     "Person entitled to enforce," section 336.3-301 
 81.20     "Presentment," section 336.3-501 
 81.21     "Promise," section 336.3-103 
 81.22     "Prove," section 336.3-103 
 81.23     "Record," section 336.3-103 
 81.24     "Remotely-created consumer item," section 336.3-103 
 81.25     "Teller's check," section 336.3-104 
 81.26     "Unauthorized signature," section 336.3-403 
 81.27     (d) In addition, article 1 contains general definitions and 
 81.28  principles of construction and interpretation applicable 
 81.29  throughout this article. 
 81.30     Sec. 2.  Minnesota Statutes 2002, section 336.4-207, is 
 81.31  amended to read: 
 81.32     336.4-207 [TRANSFER WARRANTIES.] 
 81.33     (a) A customer or collecting bank that transfers an item 
 81.34  and receives a settlement or other consideration warrants to the 
 81.35  transferee and to any subsequent collecting bank that:  
 81.36     (1) the warrantor is a person entitled to enforce the item; 
 82.1      (2) all signatures on the item are authentic and 
 82.2   authorized; 
 82.3      (3) the item has not been altered; 
 82.4      (4) the item is not subject to a defense or claim in 
 82.5   recoupment (section 336.3-305(a)) of any party that can be 
 82.6   asserted against the warrantor; and 
 82.7      (5) the warrantor has no knowledge of any insolvency 
 82.8   proceeding commenced with respect to the maker or acceptor or, 
 82.9   in the case of an unaccepted draft, the drawer; and 
 82.10     (6) with respect to any remotely-created consumer item, 
 82.11  that the person on whose account the item is drawn authorized 
 82.12  the issuance of the item in the amount for which the item is 
 82.13  drawn.  
 82.14     (b) If an item is dishonored, a customer or collecting bank 
 82.15  transferring the item and receiving settlement or other 
 82.16  consideration is obliged to pay the amount due on the item (i) 
 82.17  according to the terms of the item at the time it was 
 82.18  transferred, or (ii) if the transfer was of an incomplete item, 
 82.19  according to its terms when completed as stated in sections 
 82.20  336.3-115 and 336.3-407.  The obligation of a transferor is owed 
 82.21  to the transferee and to any subsequent collecting bank that 
 82.22  takes the item in good faith.  A transferor cannot disclaim its 
 82.23  obligation under this subsection by an endorsement stating that 
 82.24  it is made "without recourse" or otherwise disclaiming liability.
 82.25     (c) A person to whom the warranties under subsection (a) 
 82.26  are made and who took the item in good faith may recover from 
 82.27  the warrantor as damages for breach of warranty an amount equal 
 82.28  to the loss suffered as a result of the breach, but not more 
 82.29  than the amount of the item plus expenses and loss of interest 
 82.30  incurred as a result of the breach.  
 82.31     (d) The warranties stated in subsection (a) cannot be 
 82.32  disclaimed with respect to checks.  Unless notice of a claim for 
 82.33  breach of warranty is given to the warrantor within 30 days 
 82.34  after the claimant has reason to know of the breach and the 
 82.35  identity of the warrantor, the warrantor is discharged to the 
 82.36  extent of any loss caused by the delay in giving notice of the 
 83.1   claim. 
 83.2      (e) A cause of action for breach of warranty under this 
 83.3   section accrues when the claimant has reason to know of the 
 83.4   breach. 
 83.5      Sec. 3.  Minnesota Statutes 2002, section 336.4-208, is 
 83.6   amended to read: 
 83.7      336.4-208 [PRESENTMENT WARRANTIES.] 
 83.8      (a) If an unaccepted draft is presented to the drawee for 
 83.9   payment or acceptance and the drawee pays or accepts the draft, 
 83.10  (i) the person obtaining payment or acceptance, at the time of 
 83.11  presentment, and (ii) a previous transferor of the draft, at the 
 83.12  time of transfer, warrant to the drawee that pays or accepts the 
 83.13  draft in good faith that:  
 83.14     (1) the warrantor is, or was, at the time the warrantor 
 83.15  transferred the draft, a person entitled to enforce the draft or 
 83.16  authorized to obtain payment or acceptance of the draft on 
 83.17  behalf of a person entitled to enforce the draft; 
 83.18     (2) the draft has not been altered; and 
 83.19     (3) the warrantor has no knowledge that the signature of 
 83.20  the purported drawer of the draft is unauthorized; and 
 83.21     (4) with respect to any remotely-created consumer item, 
 83.22  that the person on whose account the item is drawn authorized 
 83.23  the issuance of the item in the amount for which the item is 
 83.24  drawn.  
 83.25     (b) A drawee making payment may recover from a warrantor 
 83.26  damages for breach of warranty equal to the amount paid by the 
 83.27  drawee less the amount the drawee received or is entitled to 
 83.28  receive from the drawer because of the payment.  In addition, 
 83.29  the drawee is entitled to compensation for expenses and loss of 
 83.30  interest resulting from the breach.  The right of the drawee to 
 83.31  recover damages under this subsection is not affected by any 
 83.32  failure of the drawee to exercise ordinary care in making 
 83.33  payment.  If the drawee accepts the draft (i) breach of warranty 
 83.34  is a defense to the obligation of the acceptor, and (ii) if the 
 83.35  acceptor makes payment with respect to the draft, the acceptor 
 83.36  is entitled to recover from a warrantor for breach of warranty 
 84.1   the amounts stated in this subsection.  
 84.2      (c) If a drawee asserts a claim for breach of warranty 
 84.3   under subsection (a) based on an unauthorized endorsement of the 
 84.4   draft or an alteration of the draft, the warrantor may defend by 
 84.5   proving that the endorsement is effective under section 
 84.6   336.3-404 or 336.3-405 or the drawer is precluded under section 
 84.7   336.3-406 or 336.4-406 from asserting against the drawee the 
 84.8   unauthorized endorsement or alteration.  
 84.9      (d) If (i) a dishonored draft is presented for payment to 
 84.10  the drawer or an endorser or (ii) any other item is presented 
 84.11  for payment to a party obliged to pay the item, and the item is 
 84.12  paid, the person obtaining payment and a prior transferor of the 
 84.13  item warrant to the person making payment in good faith that the 
 84.14  warrantor is, or was, at the time the warrantor transferred the 
 84.15  item, a person entitled to enforce the item or authorized to 
 84.16  obtain payment on behalf of a person entitled to enforce the 
 84.17  item.  The person making payment may recover from any warrantor 
 84.18  for breach of warranty an amount equal to the amount paid plus 
 84.19  expenses and loss of interest resulting from the breach.  
 84.20     (e) The warranties stated in subsections (a) and (d) cannot 
 84.21  be disclaimed with respect to checks.  Unless notice of a claim 
 84.22  for breach of warranty is given to the warrantor within 30 days 
 84.23  after the claimant has reason to know of the breach and the 
 84.24  identity of the warrantor, the warrantor is discharged to the 
 84.25  extent of any loss caused by the delay in giving notice of the 
 84.26  claim.  
 84.27     (f) A cause of action for breach of warranty under this 
 84.28  section accrues when the claimant has reason to know of the 
 84.29  breach. 
 84.30     Sec. 4.  Minnesota Statutes 2002, section 336.4-212, is 
 84.31  amended to read: 
 84.32     336.4-212 [PRESENTMENT BY NOTICE OF ITEM NOT PAYABLE BY, 
 84.33  THROUGH, OR AT BANK; LIABILITY OF DRAWER OR ENDORSER.] 
 84.34     (a) Unless otherwise instructed, a collecting bank may 
 84.35  present an item not payable by, through, or at a bank by sending 
 84.36  to the party to accept or pay a written record providing notice 
 85.1   that the bank holds the item for acceptance or payment.  The 
 85.2   notice must be sent in time to be received on or before the day 
 85.3   when presentment is due and the bank must meet any requirement 
 85.4   of the party to accept or pay under section 336.3-501 by the 
 85.5   close of the bank's next banking day after it knows of the 
 85.6   requirement.  
 85.7      (b) If presentment is made by notice and payment, 
 85.8   acceptance, or request for compliance with a requirement under 
 85.9   section 336.3-501 is not received by the close of business on 
 85.10  the day after maturity or, in the case of demand items, by the 
 85.11  close of business on the third banking day after notice was 
 85.12  sent, the presenting bank may treat the item as dishonored and 
 85.13  charge any drawer or endorser by sending it notice of the facts. 
 85.14     Sec. 5.  Minnesota Statutes 2002, section 336.4-301, is 
 85.15  amended to read: 
 85.16     336.4-301 [DEFERRED POSTING; RECOVERY OF PAYMENT BY RETURN 
 85.17  OF ITEMS; TIME OF DISHONOR; RETURN OF ITEMS BY PAYOR BANK.] 
 85.18     (a) If a payor bank settles for a demand item other than a 
 85.19  documentary draft presented otherwise than for immediate payment 
 85.20  over the counter before midnight of the banking day of receipt, 
 85.21  the payor bank may revoke the settlement and recover the 
 85.22  settlement if, before it has made final payment and before its 
 85.23  midnight deadline, it: 
 85.24     (1) returns the item; or 
 85.25     (2) returns an image of the item, if the party to which the 
 85.26  return is made has entered into an agreement to accept an image 
 85.27  as a return of the item and the image is returned in accordance 
 85.28  with that agreement; or 
 85.29     (3) sends written a record providing notice of dishonor or 
 85.30  nonpayment if the item is unavailable for return. 
 85.31     (b) If a demand item is received by a payor bank for credit 
 85.32  on its books, it may return the item or send notice of dishonor 
 85.33  and may revoke any credit given or recover the amount thereof 
 85.34  withdrawn by its customer, if it acts within the time limit and 
 85.35  in the manner specified in subsection (a).  
 85.36     (c) Unless previous notice of dishonor has been sent, an 
 86.1   item is dishonored at the time when for purposes of dishonor it 
 86.2   is returned or notice sent in accordance with this section.  
 86.3      (d) An item is returned: 
 86.4      (1) as to an item presented through a clearinghouse, when 
 86.5   it is delivered to the presenting or last collecting bank or to 
 86.6   the clearinghouse or is sent or delivered in accordance with 
 86.7   clearinghouse rules; or 
 86.8      (2) in all other cases, when it is sent or delivered to the 
 86.9   bank's customer or transferor or pursuant to instructions.  
 86.10     Sec. 6.  Minnesota Statutes 2002, section 336.4-403, is 
 86.11  amended to read: 
 86.12     336.4-403 [CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF 
 86.13  PROOF OF LOSS.] 
 86.14     (a) A customer or any person authorized to draw on the 
 86.15  account if there is more than one person may stop payment of any 
 86.16  item drawn on the customer's account or close the account by an 
 86.17  order to the bank describing the item or account with reasonable 
 86.18  certainty received at a time and in a manner that affords the 
 86.19  bank a reasonable opportunity to act on it before any action by 
 86.20  the bank with respect to the item described in section 
 86.21  336.4-303.  If the signature of more than one person is required 
 86.22  to draw on an account, any of these persons may stop payment or 
 86.23  close the account.  
 86.24     (b) A stop-payment order is effective for six months, but 
 86.25  it lapses after 14 calendar days if the original order was oral 
 86.26  and was not confirmed in writing a record within that period.  A 
 86.27  stop-payment order may be renewed for additional six-month 
 86.28  periods by a writing record given to the bank within a period 
 86.29  during which the stop-payment order is effective.  
 86.30     (c) The burden of establishing the fact and amount of loss 
 86.31  resulting from the payment of an item contrary to a stop-payment 
 86.32  order or order to close an account is on the customer.  The loss 
 86.33  from payment of an item contrary to a stop-payment order may 
 86.34  include damages for dishonor of subsequent items under section 
 86.35  336.4-402.