HB-5081, As Passed House, January 25, 2012

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 5081

 

 

 

 

 

 

 

 

 

 

 

 

      A bill to amend 1962 PA 174, entitled

 

"Uniform commercial code,"

 

by amending the heading for part 1 and sections 1101, 1102, 1103,

 

1106, 1202, 1203, 1204, 1205, 1206, 2202, 2A501, 2A518, 2A519,

 

2A527, 2A528, 3103, 4A105, 4A106, 4A204, 5103, and 8102 (MCL

 

440.1101, 440.1102, 440.1103, 440.1106, 440.1202, 440.1203,

 

440.1204, 440.1205, 440.1206, 440.2202, 440.2951, 440.2968,

 

440.2969, 440.2977, 440.2978, 440.3103, 440.4605, 440.4606,

 

440.4704, 440.5103, and 440.8102), sections 1206 and 8102 as

 

amended by 1998 PA 278, sections 2A501, 2A518, 2A519, 2A527, and

 

2A528 as added by 1992 PA 101, section 3103 as amended by 1993 PA

 

130, sections 4A105, 4A106, and 4A204 as added by 1992 PA 100,

 

and section 5103 as amended by 1998 PA 488, and by adding a

 

heading for part 3 and sections 1108, 1301, 1302, 1303, 1304,


 

1305, 1306, 1307, 1308, 1309, and 1310; and to repeal acts and

 

parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1                              PART 1

 

 2  SHORT TITLE, CONSTRUCTION, APPLICATION AND SUBJECT MATTER OF THE

 

 3                      ACT GENERAL PROVISIONS

 

 4        Sec. 1101. (1) This act shall be known and may be cited as

 

 5  the "uniform commercial code".

 

 6        (2) This article shall be known and may be cited as the

 

 7  "uniform commercial code – general provisions".

 

 8        Sec. 1102. (1) This act shall be liberally construed and

 

 9  applied to promote its underlying purposes and policies.

 

10        (2) Underlying purposes and policies of this act are

 

11        (a) to simplify, clarify and modernize the law governing

 

12  commercial transactions;

 

13        (b) to permit the continued expansion of commercial

 

14  practices through custom, usage and agreement of the parties;

 

15        (c) to make uniform the law among the various jurisdictions.

 

16        (3) The effect of provisions of this act may be varied by

 

17  agreement, except as otherwise provided in this act and except

 

18  that the obligations of good faith, diligence, reasonableness and

 

19  care prescribed by this act may not be disclaimed by agreement

 

20  but the parties may by agreement determine the standards by which

 

21  the performance of such obligations is to be measured if such

 

22  standards are not manifestly unreasonable.

 

23        (4) The presence in certain provisions of this act of the

 

24  words "unless otherwise agreed" or words of similar import does


 

 1  not imply that the effect of other provisions may not be varied

 

 2  by agreement under subsection (3).

 

 3        (5) In this act unless the context otherwise requires

 

 4        (a) words in the singular number include the plural, and in

 

 5  the plural include the singular;

 

 6        (b) words of the masculine gender include the feminine and

 

 7  the neuter, and when the sense so indicates words of the neuter

 

 8  gender may refer to any gender. This article applies to a

 

 9  transaction to the extent that it is governed by another article

 

10  of this act.

 

11        Sec. 1103. (1) This act must be liberally construed and

 

12  applied to promote the following underlying purposes and

 

13  policies:

 

14        (a) To simplify, clarify, and modernize the law governing

 

15  commercial transactions.

 

16        (b) To permit the continued expansion of commercial

 

17  practices through custom, usage, and agreement of the parties.

 

18        (c) To make uniform the law among the various jurisdictions.

 

19        (2) Unless displaced by the particular provisions of this

 

20  act, the principles of law and equity, including the law merchant

 

21  and the law relative to capacity to contract, principal and

 

22  agent, estoppel, fraud, misrepresentation, duress, coercion,

 

23  mistake, bankruptcy, or other validating or invalidating cause

 

24  shall supplement its provisions.

 

25        Sec. 1106. (1) The remedies provided by this act shall be

 

26  liberally administered to the end that the aggrieved party may be

 

27  put in as good a position as if the other party had fully


 

 1  performed but neither consequential or special nor penal damages

 

 2  may be had except as specifically provided in this act or by

 

 3  other rule of law.

 

 4        (2) Any right or obligation declared by this act is

 

 5  enforceable by action unless the provision declaring it specifies

 

 6  a different and limited effect. All of the following apply in

 

 7  this act, unless the statutory context otherwise requires:

 

 8        (a) Words in the singular number include the plural, and

 

 9  those in the plural include the singular.

 

10        (b) Words of any gender also refer to any other gender.

 

11        Sec. 1108. This article modifies, limits, and supersedes the

 

12  electronic signatures in global and national commerce act, 15 USC

 

13  7001 to 7031, except that nothing in this article modifies,

 

14  limits, or supersedes section 7001(c) of that act, 15 USC 7001,

 

15  or authorizes electronic delivery of any of the notices described

 

16  in section 7003(b) of that act, 15 USC 7003.

 

17        Sec. 1202. A document in due form purporting to be a bill of

 

18  lading, policy or certificate of insurance, official weigher's or

 

19  inspector's certificate, consular invoice, or any other document

 

20  authorized or required by the contract to be issued by a third

 

21  party shall be prima facie evidence of its own authenticity and

 

22  genuineness and of the fact stated in the document by the third

 

23  party. For purposes of this act:

 

24        (a) Subject to subdivision (f), a person has "notice" of a

 

25  fact if the person has any of the following:

 

26        (i) Actual knowledge of it.

 

27        (ii) Received a notice or notification of it.


 

 1        (iii) From all the facts and circumstances known to the person

 

 2  at the time in question, reason to know that it exists.

 

 3        (b) "Knowledge" means actual knowledge. "Knows" has a

 

 4  corresponding meaning.

 

 5        (c) "Discover", "learn", or words of similar import refer to

 

 6  knowledge rather than to reason to know.

 

 7        (d) A person "notifies" or "gives" a notice or notification

 

 8  to another person by taking those steps as may be reasonably

 

 9  required to inform the other person in ordinary course, whether

 

10  or not the other person actually comes to know of it.

 

11        (e) Subject to subdivision (f), a person "receives" a notice

 

12  or notification when either of the following occurs:

 

13        (i) It comes to that person's attention.

 

14        (ii) It is duly delivered in a form reasonable under the

 

15  circumstances at the place of business through which the contract

 

16  was made or at another location held out by that person as the

 

17  place for receipt of those communications.

 

18        (f) Notice, knowledge, or a notice or notification received

 

19  by an organization is effective for a particular transaction from

 

20  the time it is brought to the attention of the individual

 

21  conducting that transaction and, in any event, from the time it

 

22  would have been brought to the individual's attention if the

 

23  organization had exercised due diligence. An organization

 

24  exercises due diligence if it maintains reasonable routines for

 

25  communicating significant information to the person conducting

 

26  the transaction and there is reasonable compliance with the

 

27  routines. Due diligence does not require an individual acting for


 

 1  the organization to communicate information unless the

 

 2  communication is part of the individual's regular duties or the

 

 3  individual has reason to know of the transaction and that the

 

 4  transaction would be materially affected by the information.

 

 5        Sec. 1203. Every contract or duty within this act imposes an

 

 6  obligation of good faith in its performance or enforcement.

 

 7        (1) Whether a transaction in the form of a lease creates a

 

 8  lease or security interest is determined by the facts of each

 

 9  case.

 

10        (2) A transaction in the form of a lease creates a security

 

11  interest if the consideration that the lessee is to pay the

 

12  lessor for the right to possession and use of the goods is an

 

13  obligation for the term of the lease and is not subject to

 

14  termination by the lessee, and any of the following are met:

 

15        (a) The original term of the lease is equal to or greater

 

16  than the remaining economic life of the goods.

 

17        (b) The lessee is bound to renew the lease for the remaining

 

18  economic life of the goods or is bound to become the owner of the

 

19  goods.

 

20        (c) The lessee has an option to renew the lease for the

 

21  remaining economic life of the goods for no additional

 

22  consideration or for nominal additional consideration upon

 

23  compliance with the lease agreement.

 

24        (d) The lessee has an option to become the owner of the

 

25  goods for no additional consideration or for nominal additional

 

26  consideration upon compliance with the lease agreement.

 

27        (3) A transaction in the form of a lease does not create a


 

 1  security interest merely because any of the following are met:

 

 2        (a) The present value of the consideration the lessee is

 

 3  obligated to pay the lessor for the right to possession and use

 

 4  of the goods is substantially equal to or is greater than the

 

 5  fair market value of the goods at the time the lease is entered

 

 6  into.

 

 7        (b) The lessee assumes risk of loss of the goods.

 

 8        (c) The lessee agrees to pay, with respect to the goods,

 

 9  taxes, insurance, filing, recording, or registration fees, or

 

10  service or maintenance costs.

 

11        (d) The lessee has an option to renew the lease or to become

 

12  the owner of the goods.

 

13        (e) The lessee has an option to renew the lease for a fixed

 

14  rent that is equal to or greater than the reasonably predictable

 

15  fair market rent for the use of the goods for the term of the

 

16  renewal at the time the option is to be performed.

 

17        (f) The lessee has an option to become the owner of the

 

18  goods for a fixed price that is equal to or greater than the

 

19  reasonably predictable fair market value of the goods at the time

 

20  the option is to be performed.

 

21        (4) Additional consideration is nominal if it is less than

 

22  the lessee's reasonably predictable cost of performing under the

 

23  lease agreement if the option is not exercised. Additional

 

24  consideration is not nominal if either of the following are met:

 

25        (a) When the option to renew the lease is granted to the

 

26  lessee, the rent is stated to be the fair market rent for the use

 

27  of the goods for the term of the renewal determined at the time


 

 1  the option is to be performed.

 

 2        (b) When the option to become the owner of the goods is

 

 3  granted to the lessee, the price is stated to be the fair market

 

 4  value of the goods determined at the time the option is to be

 

 5  performed.

 

 6        (5) The "remaining economic life of the goods" and

 

 7  "reasonably predictable" fair market rent, fair market value, or

 

 8  cost of performing under the lease agreement must be determined

 

 9  with reference to the facts and circumstances at the time the

 

10  transaction is entered into.

 

11        Sec. 1204. (1) Whenever this act requires any action to be

 

12  taken within a reasonable time, any time which is not manifestly

 

13  unreasonable may be fixed by agreement.

 

14        (2) What is a reasonable time for taking any action depends

 

15  on the nature, purpose and circumstances of such action.

 

16        (3) An action is taken "seasonably" when it is taken at or

 

17  within the time agreed or if no time is agreed at or within a

 

18  reasonable time. Except as otherwise provided in articles 3, 4,

 

19  and 5, a person gives value for rights if the person acquires

 

20  them for any of the following:

 

21        (a) In return for a binding commitment to extend credit or

 

22  for the extension of immediately available credit, whether or not

 

23  drawn upon and whether or not a charge-back is provided for in

 

24  the event of difficulties in collection.

 

25        (b) As security for, or in total or partial satisfaction of,

 

26  a preexisting claim.

 

27        (c) By accepting delivery under a preexisting contract for


 

 1  purchase.

 

 2        (d) In return for any consideration sufficient to support a

 

 3  simple contract.

 

 4        Sec. 1205. (1) A course of dealing is a sequence of previous

 

 5  conduct between the parties to a particular transaction which is

 

 6  fairly to be regarded as establishing a common basis of

 

 7  understanding for interpreting their expressions and other

 

 8  conduct.

 

 9        (2) A usage of trade is any practice or method of dealing

 

10  having such regularity of observance in a place, vocation or

 

11  trade as to justify an expectation that it will be observed with

 

12  respect to the transaction in question. The existence and scope

 

13  of such a usage are to be proved as facts. If it is established

 

14  that such a usage is embodied in a written trade code or similar

 

15  writing the interpretation of the writing is for the court.

 

16        (3) A course of dealing between parties and any usage of

 

17  trade in the vocation or trade in which they are engaged or of

 

18  which they are or should be aware give particular meaning to and

 

19  supplement or qualify terms of an agreement.

 

20        (4) The express terms of an agreement and an applicable

 

21  course of dealing or usage of trade shall be construed wherever

 

22  reasonable as consistent with each other; but when such

 

23  construction is unreasonable express terms control both course of

 

24  dealing and usage of trade and course of dealing controls usage

 

25  of trade.

 

26        (5) An applicable usage of trade in the place where any part

 

27  of performance is to occur shall be used in interpreting the


 

 1  agreement as to that part of the performance.

 

 2        (6) Evidence of a relevant usage of trade offered by one

 

 3  party is not admissible unless and until he has given the other

 

 4  party such notice as the court finds sufficient to prevent unfair

 

 5  surprise to the latter.

 

 6        (1) Whether a time for taking an action required by this act

 

 7  is reasonable depends on the nature, purpose, and circumstances

 

 8  of the action.

 

 9        (2) An action is taken seasonably if it is taken at or

 

10  within the time agreed or, if no time is agreed, at or within a

 

11  reasonable time.

 

12        Sec. 1206. (1) Except in the cases described in subsection

 

13  (2) of this section, a contract for the sale of personal property

 

14  is not enforceable by way of action or defense beyond $5,000.00

 

15  in amount or value of remedy unless there is some writing which

 

16  indicates that a contract for sale has been made between the

 

17  parties at a defined or stated price, reasonably identifies the

 

18  subject matter, and is signed by the party against whom

 

19  enforcement is sought or by his or her authorized agent.

 

20        (2) Subsection (1) of this section does not apply to

 

21  contracts for the sale of goods (section 2201) nor of securities

 

22  (section 8113) nor to security agreements (section 9203).

 

23  Whenever this act creates a "presumption" with respect to a fact,

 

24  or provides that a fact is "presumed", the trier of fact must

 

25  find the existence of the fact unless and until evidence is

 

26  introduced that supports a finding of its nonexistence.

 

27                              PART 3


 

 1           TERRITORIAL APPLICABILITY AND GENERAL RULES

 

 2        Sec. 1301. (1) Except as otherwise provided in this section,

 

 3  when a transaction bears a reasonable relation to this state and

 

 4  also to another state or nation, the parties may agree that the

 

 5  law either of this state or of that other state or nation shall

 

 6  govern their rights and duties.

 

 7        (2) In the absence of an agreement effective under

 

 8  subsection (1), and except as provided in subsection (3), this

 

 9  act applies to transactions bearing an appropriate relation to

 

10  this state.

 

11        (3) If 1 of the following provisions of this act specifies

 

12  the applicable law, that provision governs and a contrary

 

13  agreement is effective only to the extent permitted by the law so

 

14  specified:

 

15        (a) Section 2402.

 

16        (b) Sections 2A105 and 2A106.

 

17        (c) Section 4102.

 

18        (d) Section 4A507.

 

19        (e) Section 5116.

 

20        (f) Section 8110.

 

21        (g) Sections 9301 through 9307.

 

22        Sec. 1302. (1) Except as otherwise provided in subsection

 

23  (2) or elsewhere in this act, the effect of any provision of this

 

24  act may be varied by agreement.

 

25        (2) The obligations of good faith, diligence,

 

26  reasonableness, and care prescribed by this act may not be

 

27  disclaimed by agreement. The parties, by agreement, may determine


 

 1  the standards by which the performance of those obligations is to

 

 2  be measured if those standards are not manifestly unreasonable.

 

 3  Whenever this act requires an action to be taken within a

 

 4  reasonable time, a time that is not manifestly unreasonable may

 

 5  be fixed by agreement.

 

 6        (3) The presence in certain provisions of this act of the

 

 7  phrase "unless otherwise agreed", or words of similar import,

 

 8  does not imply that the effect of other provisions may not be

 

 9  varied by agreement under this section.

 

10        Sec. 1303. (1) For purposes of this act, a "course of

 

11  performance" is a sequence of conduct between the parties to a

 

12  particular transaction that exists if both of the following are

 

13  met:

 

14        (a) The agreement of the parties with respect to the

 

15  transaction involves repeated occasions for performance by a

 

16  party.

 

17        (b) The other party, with knowledge of the nature of the

 

18  performance and opportunity for objection to it, accepts the

 

19  performance or acquiesces in it without objection.

 

20        (2) For purposes of this act, a "course of dealing" is a

 

21  sequence of conduct concerning previous transactions between the

 

22  parties to a particular transaction that is fairly to be regarded

 

23  as establishing a common basis of understanding for interpreting

 

24  their expressions and other conduct.

 

25        (3) For purposes of this act, a "usage of trade" is any

 

26  practice or method of dealing having such regularity of

 

27  observance in a place, vocation, or trade as to justify an


 

 1  expectation that it will be observed with respect to the

 

 2  transaction in question. The existence and scope of a usage of

 

 3  trade must be proved as facts. If it is established that a usage

 

 4  of trade is embodied in a trade code or similar record, the

 

 5  interpretation of the record is a question of law.

 

 6        (4) A course of performance or course of dealing between the

 

 7  parties or usage of trade in the vocation or trade in which they

 

 8  are engaged or of which they are or should be aware is relevant

 

 9  in ascertaining the meaning of the parties' agreement, may give

 

10  particular meaning to specific terms of the agreement, and may

 

11  supplement or qualify the terms of the agreement. A usage of

 

12  trade applicable in the place in which part of the performance

 

13  under the agreement is to occur may be so utilized as to that

 

14  part of the performance.

 

15        (5) Except as otherwise provided in subsection (6), the

 

16  express terms of an agreement and any applicable course of

 

17  performance, course of dealing, or usage of trade must be

 

18  construed whenever reasonable as consistent with each other. All

 

19  of the following apply if that construction is unreasonable:

 

20        (a) Express terms prevail over course of performance, course

 

21  of dealing, and usage of trade.

 

22        (b) Course of performance prevails over course of dealing

 

23  and usage of trade.

 

24        (c) Course of dealing prevails over usage of trade.

 

25        (6) Subject to section 2209, a course of performance is

 

26  relevant to show a waiver or modification of any term

 

27  inconsistent with the course of performance.


 

 1        (7) Evidence of a relevant usage of trade offered by 1 party

 

 2  is not admissible unless that party has given the other party

 

 3  notice that the court finds sufficient to prevent unfair surprise

 

 4  to the other party.

 

 5        Sec. 1304. Every contract or duty within this act imposes an

 

 6  obligation of good faith in its performance and enforcement.

 

 7        Sec. 1305. (1) The remedies provided in this act must be

 

 8  liberally administered to the end that the aggrieved party may be

 

 9  put in as good a position as if the other party had fully

 

10  performed but neither consequential or special damages nor penal

 

11  damages may be had except as specifically provided in this act or

 

12  by other rule of law.

 

13        (2) Any right or obligation declared by this act is

 

14  enforceable by action unless the provision declaring it specifies

 

15  a different and limited effect.

 

16        Sec. 1306. A claim or right arising out of an alleged breach

 

17  may be discharged in whole or in part without consideration by

 

18  agreement of the aggrieved party in an authenticated record.

 

19        Sec. 1307. A document in due form purporting to be a bill of

 

20  lading, policy or certificate of insurance, official weigher's or

 

21  inspector's certificate, consular invoice, or any other document

 

22  authorized or required by the contract to be issued by a third

 

23  party is prima facie evidence of its own authenticity and

 

24  genuineness and of the facts stated in the document by the third

 

25  party.

 

26        Sec. 1308. (1) A party that with explicit reservation of

 

27  rights performs or promises performance or assents to performance


 

 1  in a manner demanded or offered by the other party does not

 

 2  prejudice the rights reserved by that performance, promise, or

 

 3  assent. Words such as "without prejudice", "under protest", or

 

 4  the like are sufficient.

 

 5        (2) Subsection (1) does not apply to an accord and

 

 6  satisfaction.

 

 7        Sec. 1309. A term providing that 1 party or that party's

 

 8  successor in interest may accelerate payment or performance or

 

 9  require collateral or additional collateral "at will" or when the

 

10  party "deems itself insecure", or words of similar import, means

 

11  that the party has power to do so only if that party in good

 

12  faith believes that the prospect of payment or performance is

 

13  impaired. The burden of establishing lack of good faith is on the

 

14  party against which the power has been exercised.

 

15        Sec. 1310. An obligation may be issued as subordinated to

 

16  performance of another obligation of the person obligated, or a

 

17  creditor may subordinate its right to performance of an

 

18  obligation by agreement with either the person obligated or

 

19  another creditor of the person obligated. Subordination does not

 

20  create a security interest as against either the common debtor or

 

21  a subordinated creditor.

 

22        Sec. 2202. Terms with respect to which the confirmatory

 

23  memoranda of the parties agree or which are otherwise set forth

 

24  in a writing intended by the parties as a final expression of

 

25  their agreement with respect to such those terms as are included

 

26  therein in that memoranda or writing may not be contradicted by

 

27  evidence of any prior agreement or of a contemporaneous oral


 

 1  agreement but may be explained or supplemented by any of the

 

 2  following:

 

 3        (a) by By course of performance, course of dealing, or usage

 

 4  of trade (section 1205) or by course of performance (section

 

 5  2208); and under section 1303.

 

 6        (b) by By evidence of consistent additional terms unless the

 

 7  court finds the writing to have been intended also as a complete

 

 8  and exclusive statement of the terms of the agreement.

 

 9        Sec. 2A501. (1) Whether the lessor or the lessee is in

 

10  default under a lease contract is determined by the lease

 

11  agreement and this article.

 

12        (2) If the lessor or the lessee is in default under the

 

13  lease contract, the party seeking enforcement has rights and

 

14  remedies as provided in this article and, except as limited by

 

15  this article, as provided in the lease agreement.

 

16        (3) If the lessor or the lessee is in default under the

 

17  lease contract, the party seeking enforcement may reduce the

 

18  party's claim to judgment, or otherwise enforce the lease

 

19  contract by self-help or any available judicial procedure or

 

20  nonjudicial procedure, including administrative proceeding,

 

21  arbitration, or the like, in accordance with this article.

 

22        (4) Except as otherwise provided in section 1106(1) 1305(1)

 

23  or this article or the lease agreement, the rights and remedies

 

24  referred to in subsections (2) and (3) are cumulative.

 

25        (5) If the lease agreement covers both real property and

 

26  goods, the party seeking enforcement may proceed under this part

 

27  as to the goods, or under other applicable law as to both the


 

 1  real property and the goods in accordance with that party's

 

 2  rights and remedies in respect of the real property, in which

 

 3  case this part does not apply.

 

 4        Sec. 2A518. (1) After default by a lessor under the lease

 

 5  contract of the type described in section 2A508(1) or, if agreed,

 

 6  after other default by the lessor, the lessee may cover by making

 

 7  any purchase or lease of or contract to purchase or lease goods

 

 8  in substitution for those due from the lessor.

 

 9        (2) Except as otherwise provided with respect to damages

 

10  liquidated in the lease agreement under ( section 2A504 ) or

 

11  otherwise determined pursuant to agreement of the parties under (

 

12  sections 1102(3) 1302 and 2A503, ), if a lessee's cover is by a

 

13  lease agreement substantially similar to the original lease

 

14  agreement and the new lease agreement is made in good faith and

 

15  in a commercially reasonable manner, the lessee may recover from

 

16  the lessor as damages (i) the present value, as of the date of the

 

17  commencement of the term of the new lease agreement, of the rent

 

18  under the new lease agreement applicable to that period of the

 

19  new lease term which is comparable to the then remaining term of

 

20  the original lease agreement minus the present value as of the

 

21  same date of the total rent for the then remaining lease term of

 

22  the original lease agreement and (ii) any incidental or

 

23  consequential damages less expenses saved in consequence of the

 

24  lessor's default.

 

25        (3) If a lessee's cover is by lease agreement that for any

 

26  reason does not qualify for treatment under subsection (2), or is

 

27  by purchase or otherwise, the lessee may recover from the lessor


 

 1  as if the lessee had elected not to cover and section 2A519

 

 2  governs.

 

 3        Sec. 2A519. (1) Except as otherwise provided with respect to

 

 4  damages liquidated in the lease agreement under ( section 2A504 )

 

 5  or otherwise determined pursuant to agreement of the parties

 

 6  under ( sections 1102(3) 1302 and 2A503, ), if a lessee elects

 

 7  not to cover or a lessee elects to cover and the cover is by

 

 8  lease agreement that for any reason does not qualify for

 

 9  treatment under section 2A518(2), or is by purchase or otherwise,

 

10  the measure of damages for nondelivery or repudiation by the

 

11  lessor or for rejection or revocation of acceptance by the lessee

 

12  is the present value, as of the date of the default, of the then

 

13  market rent minus the present value as of the same date of the

 

14  original rent, computed for the remaining lease term of the

 

15  original lease agreement together with incidental and

 

16  consequential damages, less expenses saved in consequence of the

 

17  lessor's default.

 

18        (2) Market rent is to be determined as of the place for

 

19  tender or, in cases of rejection after arrival or revocation of

 

20  acceptance, as of the place of arrival.

 

21        (3) Except as otherwise agreed, if the lessee has accepted

 

22  goods and given notification under ( section 2A516(3), ), the

 

23  measure of damages for nonconforming tender or delivery or other

 

24  default by a lessor is the loss resulting in the ordinary course

 

25  of events from the lessor's default as determined in any manner

 

26  that is reasonable together with incidental and consequential

 

27  damages, less expenses saved in consequence of the lessor's


 

 1  default.

 

 2        (4) Except as otherwise agreed, the measure of damages for

 

 3  breach of warranty is the present value at the time and place of

 

 4  acceptance of the difference between the value of the use of the

 

 5  goods accepted and the value if they had been as warranted for

 

 6  the lease term, unless special circumstances show proximate

 

 7  damages of a different amount, together with incidental and

 

 8  consequential damages, less expenses saved in consequence of the

 

 9  lessor's default or breach of warranty.

 

10        Sec. 2A527. (1) After a default by a lessee under the lease

 

11  contract of the type described in section 2A523(1) or 2A523(3)(a)

 

12  2A523(3), or after the lessor refuses to deliver or takes

 

13  possession of goods under ( section 2A525 or 2A526, ), or, if

 

14  agreed, after other default by a lessee, the lessor may dispose

 

15  of the goods concerned or the undelivered balance thereof by

 

16  lease, sale, or otherwise.

 

17        (2) Except as otherwise provided with respect to damages

 

18  liquidated in the lease agreement under ( section 2A504 ) or

 

19  otherwise determined pursuant to agreement of the parties under (

 

20  sections 1102(3) 1302 and 2A503, ), if the disposition is by

 

21  lease agreement substantially similar to the original lease

 

22  agreement and the new lease agreement is made in good faith and

 

23  in a commercially reasonable manner, the lessor may recover from

 

24  the lessee as damages (i) accrued and unpaid rent as of the date

 

25  of the commencement of the term of the new lease agreement, (ii)

 

26  the present value, as of the same date, of the total rent for the

 

27  then remaining lease term of the original lease agreement minus


 

 1  the present value, as of the same date, of the rent under the new

 

 2  lease agreement applicable to that period of the new lease term

 

 3  which is comparable to the then remaining term of the original

 

 4  lease agreement, and (iii) any incidental damages allowed under

 

 5  section 2A530, less expenses saved in consequence of the lessee's

 

 6  default.

 

 7        (3) If the lessor's disposition is by lease agreement that

 

 8  for any reason does not qualify for treatment under subsection

 

 9  (2), or is by sale or otherwise, the lessor may recover from the

 

10  lessee as if the lessor had elected not to dispose of the goods

 

11  and section 2A528 governs.

 

12        (4) A subsequent buyer or lessee who buys or leases from the

 

13  lessor in good faith for value as a result of a disposition under

 

14  this section takes the goods free of the original lease contract

 

15  and any rights of the original lessee even though the lessor

 

16  fails to comply with 1 or more of the requirements of this

 

17  article.

 

18        (5) The lessor is not accountable to the lessee for any

 

19  profit made on any disposition. A lessee who has rightfully

 

20  rejected or justifiably revoked acceptance shall account to the

 

21  lessor for any excess over the amount of the lessee's security

 

22  interest (section 2A508(5)).

 

23        Sec. 2A528. (1) Except as otherwise provided with respect to

 

24  damages liquidated in the lease agreement under ( section 2A504 )

 

25  or otherwise determined pursuant to agreement of the parties

 

26  under ( sections 1102(3) 1302 and 2A503, ), if a lessor elects to

 

27  retain the goods or a lessor elects to dispose of the goods and


 

 1  disposition is by lease agreement that for any reason does not

 

 2  qualify for treatment under section 2A527(2), or is by sale or

 

 3  otherwise, the lessor may recover from the lessee as damages for

 

 4  a default of the type described in section 2A523(1) or

 

 5  2A523(3)(a), or, if agreed, for other default of the lessee, (i)

 

 6  accrued and unpaid rent as of the date of default if the lessee

 

 7  has never taken possession of the goods, or, if the lessee has

 

 8  taken possession of the goods, as of the date the lessor

 

 9  repossesses the goods or an earlier date on which the lessee

 

10  makes a tender of the goods to the lessor, (ii) the present value

 

11  as of the date determined under this subsection of the total rent

 

12  for the then remaining lease term of the original lease agreement

 

13  minus the present value as of the same date of the market rent at

 

14  the place where the goods are located computed for the same lease

 

15  term, and any incidental damages allowed under section 2A530,

 

16  less expenses saved in consequence of the lessee's default.

 

17        (2) If the measure of damages provided in subsection (1) is

 

18  inadequate to put a lessor in as good a position as performance

 

19  would have, the measure of damages is the present value of the

 

20  profit, including reasonable overhead, the lessor would have made

 

21  from full performance by the lessee, together with any incidental

 

22  damages allowed under section 2A530, due allowance for costs

 

23  reasonably incurred and due credit for payments or proceeds of

 

24  disposition.

 

25        Sec. 3103. (1) As used in this article:

 

26        (a) "Acceptor" means a drawee who has accepted a draft.

 

27        (b) "Drawee" means a person ordered in a draft to make


 

 1  payment.

 

 2        (c) "Drawer" means a person who signs or is identified in a

 

 3  draft as a person ordering payment.

 

 4        (d) "Good faith" means honesty in fact and the observance of

 

 5  reasonable commercial standards of fair dealing.

 

 6        (d) (e) "Maker" means a person who signs or is identified in

 

 7  a note as a person undertaking to pay.

 

 8        (e) (f) "Order" means a written instruction to pay money

 

 9  signed by the person giving the instruction. The instruction may

 

10  be addressed to any person, including the person giving the

 

11  instruction, or to 1 or more persons jointly or in the alterative

 

12  but not in succession. An authorization to pay is not an order

 

13  unless the person authorized to pay is also instructed to pay.

 

14        (f) (g) "Ordinary care" in the case of a person engaged in

 

15  business means observance of reasonable commercial standards,

 

16  prevailing in the area in which the person is located, with

 

17  respect to the business in which the person is engaged. In the

 

18  case of a bank that takes an instrument for processing for

 

19  collection or payment by automated means, reasonable commercial

 

20  standards do not require the bank to examine the instrument if

 

21  the failure to examine does not violate the bank's prescribed

 

22  procedures and the bank's procedures do not vary unreasonably

 

23  from general banking usage not disapproved by this article or

 

24  article 4.

 

25        (g) (h) "Party" means a party to an instrument.

 

26        (h) (i) "Promise" means a written undertaking to pay money

 

27  signed by the person undertaking to pay. An acknowledgment of an


 

 1  obligation by the obligor is not a promise unless the obligor

 

 2  also undertakes to pay the obligation.

 

 3        (i) (j) "Prove" with respect to a fact means to meet the

 

 4  burden of establishing the fact (section 1201(8)) under section

 

 5  1201(2)(h).

 

 6        (j) (k) "Remitter" means a person who purchases an

 

 7  instrument from its issuer if the instrument is payable to an

 

 8  identified person other than the purchaser.

 

 9        (2) Other definitions applying to this article and the

 

10  sections in which they appear are as follows:

 

 

11 "Acceptance"                                       section 3409.

12 "Accommodated party"                               section 3419.

13 "Accommodation party"                              section 3419.

14 "Alteration"                                       section 3407.

15 "Anomalous endorsement"                            section 3205.

16 "Blank endorsement"                                section 3205.

17 "Cashier's check"                                  section 3104.

18 "Certificate of deposit"                           section 3104.

19 "Certified check"                                  section 3409.

20 "Check"                                            section 3104.

21 "Consideration"                                    section 3303.

22 "Draft"                                            section 3104.

23 "Endorsement"                                      section 3204.

24 "Endorser"                                         section 3204.

25 "Holder in due course"                             section 3304.

26 "Incomplete instrument"                            section 3115.

27 "Instrument"                                       section 3104.

28 "Issue"                                            section 3105.


"Issuer"                                           section 3105.

"Negotiable instrument"                            section 3104.

"Negotiation"                                      section 3201.

"Note"                                             section 3104.

"Payable at a definite time"                       section 3108.

"Payable on demand"                                section 3108.

"Payable to bearer"                                section 3109.

"Payable to order"                                 section 3109.

"Payment"                                          section 3602.

10 "Person entitled to enforce"                       section 3301.

11 "Presentment"                                      section 3501.

12 "Reacquisition"                                    section 3207.

13 "Special endorsement"                              section 3205.

14 "Teller's check"                                   section 3104.

15 "Transfer of instrument"                           section 3203.

16 "Traveler's check"                                 section 3104.

17 "Value"                                            section 3303.

 

 

18        (3) The following definitions in other articles apply to

 

19  this article:

 

 

20 "Bank"                                             section 4105.

21 "Banking day"                                      section 4104.

22 "Clearing house"                                   section 4104.

23 "Collecting bank"                                  section 4105.

24 "Depositary bank"                                  section 4105.

25 "Documentary draft"                                section 4104.

26 "Intermediary bank"                                section 4105.

27 "Item"                                             section 4104.

28 "Payor bank"                                       section 4105.

29 "Suspends payments"                                section 4104.


 

 

 1        (4) In addition, article 1 contains general definitions and

 

 2  principles of construction and interpretation applicable

 

 3  throughout this article.

 

 4        Sec. 4A105. (1) As used in this article:

 

 5        (a) "Authorized account" means a deposit account of a

 

 6  customer in a bank designated by the customer as a source of

 

 7  payment of payment orders issued by the customer to the bank. If

 

 8  a customer does not so designate an account, any account of the

 

 9  customer is an authorized account if payment of a payment order

 

10  from that account is not inconsistent with a restriction on the

 

11  use of that account.

 

12        (b) "Bank" means a person engaged in the business of banking

 

13  and includes a savings bank, savings and loan association, credit

 

14  union, and trust company. A branch or separate office of a bank

 

15  is a separate bank for purposes of this article.

 

16        (c) "Customer" means a person, including a bank, having an

 

17  account with a bank or from whom a bank has agreed to receive

 

18  payment orders.

 

19        (d) "Funds-transfer business day" of a receiving bank means

 

20  the part of a day during which the receiving bank is open for the

 

21  receipt, processing, and transmittal of payment orders and

 

22  cancellations and amendments of payment orders.

 

23        (e) "Funds-transfer system" means a wire transfer network,

 

24  automated clearinghouse, or other communication system of a

 

25  clearinghouse or other association of banks through which a

 

26  payment order by a bank may be transmitted to the bank to which

 


 1  the order is addressed.

 

 2        (f) "Good faith" means honesty in fact and the observance of

 

 3  reasonable commercial standards of fair dealing.

 

 4        (f) (g) "Prove" with respect to a fact means to meet the

 

 5  burden of establishing the fact as defined in ( section 1201(8))

 

 6  1201(2)(h).

 

 7        (2) Other definitions applying to this article and the

 

 8  sections in which they appear are as follows:

 

 

     "Acceptance".                                    Section 4A209.

10      "Beneficiary".                                   Section 4A103.

11      "Beneficiary's bank".                            Section 4A103.

12      "Executed".                                      Section 4A301.

13      "Execution date".                                Section 4A301.

14      "Funds transfer".                                Section 4A104.

15      "Funds-transfer system rule".                    Section 4A501.

16      "Intermediary bank".                             Section 4A104.

17      "Originator".                                    Section 4A104.

18      "Originator's bank".                             Section 4A104.

19      "Payment by beneficiary's bank to beneficiary".  Section 4A405.

20      "Payment by originator to beneficiary".          Section 4A406.

21      "Payment by sender to receiving bank".           Section 4A403.

22      "Payment date".                                  Section 4A401.

23      "Payment order".                                 Section 4A103.

24      "Receiving bank".                                Section 4A103.

25      "Security procedure".                            Section 4A201.

26      "Sender".                                        Section 4A103.

 

 

27        (3) The following definitions in article 4 apply to this

 

28  article:

 


 

     "Clearinghouse".                                 Section 4104.

     "Item".                                          Section 4104.

     "Suspends payments".                             Section 4104.

 

 

 4        (4) In addition, article 1 contains general definitions and

 

 5  principles of construction and interpretation applicable

 

 6  throughout this article.

 

 7        Sec. 4A106. (1) The time of receipt of a payment order or

 

 8  communication canceling or amending a payment order is determined

 

 9  by the rules applicable to receipt of a notice stated in section

 

10  1201(27) 1202. A receiving bank may fix a cutoff cut off time or

 

11  times on a funds-transfer funds transfer business day for the

 

12  receipt and processing of payment orders and communications

 

13  canceling or amending payment orders. Different cutoff cut off

 

14  times may apply to payment orders, cancellations, or amendments,

 

15  or to different categories of payment orders, cancellations, or

 

16  amendments. A cutoff cut off time may apply to senders generally

 

17  or different cutoff cut off times may apply to different senders

 

18  or categories of payment orders. If a payment order or

 

19  communication canceling or amending a payment order is received

 

20  after the close of a funds-transfer funds transfer business day

 

21  or after the appropriate cutoff cut off time on a funds-transfer

 

22  funds transfer business day, the receiving bank may treat the

 

23  payment order or communication as received at the opening of the

 

24  next funds-transfer funds transfer business day.

 

25        (2) If this article refers to an execution date or payment

 

26  date or states a day on which a receiving bank is required to

 


 1  take action, and the date or day does not fall on a funds-

 

 2  transfer funds transfer business day, the next day that is a

 

 3  funds-transfer funds transfer business day is treated as the date

 

 4  or day stated, unless the contrary is stated in this article.

 

 5        Sec. 4A204. (1) If a receiving bank accepts a payment order

 

 6  issued in the name of its customer as sender which is (i) not

 

 7  authorized and not effective as the order of the customer under

 

 8  section 4A202, or (ii) not enforceable, in whole or in part,

 

 9  against the customer under section 4A203, the bank shall refund

 

10  any payment of the payment order received from the customer to

 

11  the extent the bank is not entitled to enforce payment and shall

 

12  pay interest on the refundable amount calculated from the date

 

13  the bank received payment to the date of the refund. However, the

 

14  customer is not entitled to interest from the bank on the amount

 

15  to be refunded if the customer fails to exercise ordinary care to

 

16  determine that the order was not authorized by the customer and

 

17  to notify the bank of the relevant facts within a reasonable time

 

18  not exceeding 90 days after the date the customer received

 

19  notification from the bank that the order was accepted or that

 

20  the customer's account was debited with respect to the order. The

 

21  bank is not entitled to any recovery from the customer on account

 

22  of a failure by the customer to give notification as stated in

 

23  this section.

 

24        (2) Reasonable time under subsection (1) may be fixed by

 

25  agreement as stated in section 1204(1) 1302(2), but the

 

26  obligation of a receiving bank to refund payment as stated in

 

27  subsection (1) may not otherwise be varied by agreement.

 


 1        Sec. 5103. (1) This article applies to letters of credit and

 

 2  to certain rights and obligations arising out of transactions

 

 3  involving letters of credit.

 

 4        (2) The statement of a rule in this article does not by

 

 5  itself require, imply, or negate application of the same or a

 

 6  different rule to a situation not provided for, or to a person

 

 7  not specified, in this article.

 

 8        (3) With the exception of this subsection, subsections (1)

 

 9  and (4), sections 5102(1)(i) and (j), 5106(4), and 5114(4), and

 

10  except to the extent prohibited in sections 1102(3) 1302 and

 

11  5117(4), the effect of this article may be varied by agreement or

 

12  by a provision stated or incorporated by reference in an

 

13  undertaking. A term in an agreement or undertaking generally

 

14  excusing liability or generally limiting remedies for failure to

 

15  perform obligations is not sufficient to vary obligations

 

16  prescribed by this article.

 

17        (4) Rights and obligations of an issuer to a beneficiary or

 

18  a nominated person under a letter of credit are independent of

 

19  the existence, performance, or nonperformance of a contract or

 

20  arrangement out of which the letter of credit arises or which

 

21  underlies it, including contracts or arrangements between the

 

22  issuer and the applicant and between the applicant and the

 

23  beneficiary.

 

24        Sec. 8102. (1) As used in this article:

 

25        (a) "Adverse claim" means a claim that a claimant has a

 

26  property interest in a financial asset and that it is a violation

 

27  of the rights of the claimant for another person to hold,

 


 1  transfer, or deal with the financial asset.

 

 2        (b) "Bearer form", as applied to a certificated security,

 

 3  means a form in which the security is payable to the bearer of

 

 4  the security certificate according to its terms but not by reason

 

 5  of an indorsement.

 

 6        (c) "Broker" means a person defined as a broker or dealer

 

 7  under the federal securities laws, but without excluding a bank

 

 8  acting in that capacity.

 

 9        (d) "Certificated security" means a security that is

 

10  represented by a certificate.

 

11        (e) "Clearing corporation" means 1 or more of the following:

 

12        (i) A person that is registered as a clearing agency under

 

13  the federal securities laws.

 

14        (ii) A federal reserve bank.

 

15        (iii) Any other person that provides clearance or settlement

 

16  services with respect to financial assets that would require it

 

17  to register as a clearing agency under the federal securities

 

18  laws but for an exclusion or exemption from the registration

 

19  requirement, if its activities as a clearing corporation,

 

20  including promulgation of rules, are subject to regulation by a

 

21  federal or state governmental authority.

 

22        (f) "Communicate" means either of the following:

 

23        (i) Send a signed writing.

 

24        (ii) Transmit information by any mechanism agreed upon by the

 

25  persons transmitting and receiving the information.

 

26        (g) "Entitlement holder" means a person identified in the

 

27  records of a securities intermediary as the person having a

 


 1  security entitlement against the securities intermediary. If a

 

 2  person acquires a security entitlement under section 8501(2)(b)

 

 3  or (c), that person is the entitlement holder.

 

 4        (h) "Entitlement order" means a notification communicated to

 

 5  a securities intermediary directing transfer or redemption of a

 

 6  financial asset to which the entitlement holder has a security

 

 7  entitlement.

 

 8        (i) "Financial asset", except as otherwise provided in

 

 9  section 8103, means 1 or more of the following:

 

10        (i) A security.

 

11        (ii) An obligation of a person or a share, participation, or

 

12  other interest in a person or in property or an enterprise of a

 

13  person, which is, or is of a type, dealt in or traded on

 

14  financial markets, or which is recognized in any area in which it

 

15  is issued or dealt in as a medium for investment.

 

16        (iii) Any property that is held by a securities intermediary

 

17  for another person in a securities account if the securities

 

18  intermediary has expressly agreed with the other person that the

 

19  property is to be treated as a financial asset under this

 

20  article. As context requires, the term means either the interest

 

21  itself or the means by which a person's claim to it is evidenced,

 

22  including a certificated or uncertificated security, a security

 

23  certificate, or a security entitlement.

 

24        (j) "Good faith", for purposes of the obligation of good

 

25  faith in the performance or enforcement of contracts or duties

 

26  within this article, means honesty in fact and the observance of

 

27  reasonable commercial standards of fair dealing.

 


 1        (j) (k) "Indorsement" means a signature that alone or

 

 2  accompanied by other words is made on a security certificate in

 

 3  registered form or on a separate document for the purpose of

 

 4  assigning, transferring, or redeeming the security or granting a

 

 5  power to assign, transfer, or redeem the security.

 

 6        (k) (l) "Instruction" means a notification communicated to

 

 7  the issuer of an uncertificated security which directs that the

 

 8  transfer of the security be registered or that the security be

 

 9  redeemed.

 

10        (l) (m) "Registered form", as applied to a certificated

 

11  security, means a form containing both of the following:

 

12        (i) The security certificate specifies a person entitled to

 

13  the security.

 

14        (ii) A transfer of the security may be registered upon books

 

15  maintained for that purpose by or on behalf of the issuer, or the

 

16  security certificate so states.

 

17        (m) (n) "Securities intermediary" means either of the

 

18  following:

 

19        (i) A clearing corporation.

 

20        (ii) A person, including a bank or broker, that in the

 

21  ordinary course of its business maintains securities accounts for

 

22  others and is acting in that capacity.

 

23        (n) (o) "Security", except as otherwise provided in section

 

24  8103, means an obligation of an issuer or a share, participation,

 

25  or other interest in an issuer or in property or an enterprise of

 

26  an issuer and is all of the following:

 

27        (i) Represented by a security certificate in bearer or

 


 1  registered form, or the transfer of which may be registered upon

 

 2  books maintained for that purpose by or on behalf of the issuer.

 

 3        (ii) One of a class or series or by its terms is divisible

 

 4  into a class or series of shares, participations, interests, or

 

 5  obligations.

 

 6        (iii) Either of the following:

 

 7        (A) Is, or is of a type, dealt in or traded on securities

 

 8  exchanges or securities markets.

 

 9        (B) Is a medium for investment and by its terms expressly

 

10  provides that it is a security governed by this article.

 

11        (o) (p) "Security certificate" means a certificate

 

12  representing a security.

 

13        (p) (q) "Security entitlement" means the rights and property

 

14  interest of an entitlement holder with respect to a financial

 

15  asset specified in part 5.

 

16        (q) (r) "Uncertificated security" means a security that is

 

17  not represented by a certificate.

 

18        (2) Other definitions applying to this article and the

 

19  sections in which they appear are:

 

 

20       Appropriate person                    Section 8107

21       Control                               Section 8106

22       Delivery                              Section 8301

23       Investment company security           Section 8103

24       Issuer                                Section 8201

25       Overissue                             Section 8210

26       Protected purchaser                   Section 8303

27       Securities account                    Section 8501

 


 

 1        (3) In addition, article 1 contains general definitions and

 

 2  principles of construction and interpretation applicable

 

 3  throughout this article.

 

 4        (4) The characterization of a person, business, or

 

 5  transaction for purposes of this article does not determine the

 

 6  characterization of the person, business, or transaction for

 

 7  purposes of any other law, regulation, or rule.

 

 8        Enacting section 1. Sections 1105, 1107, 1207, 1208, 1209,

 

 9  1210, 1211, 2208, and 2A207 of the uniform commercial code, 1962

 

10  PA 174, MCL 440.1105, 440.1107, 440.1207, 440.1208, 440.1209,

 

11  440.1210, 440.1211, 440.2208, and 440.2857, are repealed.

 

12        Enacting section 2. This amendatory act takes effect July 1,

 

13  2013.

 

14        Enacting section 3. This amendatory act does not take effect

 

15  unless all of the following bills of the 96th Legislature are

 

16  enacted into law:

 

17        (a) House Bill No. 5082.

 

18        (b) House Bill No. 5083.