HOUSE BILL No. 5082

 

October 18, 2011, Introduced by Reps. Cotter, Lipton and Huuki and referred to the Committee on Banking and Financial Services.

 

      A bill to amend 1962 PA 174, entitled

 

"Uniform commercial code,"

 

by amending sections 1201, 2103, 2104, 2310, 2323, 2401, 2503,

 

2505, 2506, 2509, 2605, 2705, 2A103, 2A514, 2A526, 4104, 4210,

 

7101, 7102, 7103, 7104, 7105, 7201, 7202, 7203, 7204, 7205, 7206,

 

7207, 7208, 7209, 7210, 7301, 7302, 7303, 7304, 7305, 7307, 7308,

 

7309, 7401, 7402, 7403, 7404, 7501, 7502, 7503, 7504, 7505, 7506,

 

7507, 7508, 7509, 7601, 7602, 7603, 8103, 9102, 9203, 9207, 9208,

 

9301, 9310, 9312, 9313, 9314, 9317, 9338, and 9601 (MCL 440.1201,

 

440.2103, 440.2104, 440.2310, 440.2323, 440.2401, 440.2503,

 

440.2505, 440.2506, 440.2509, 440.2605, 440.2705, 440.2803,

 

440.2964, 440.2976, 440.4104, 440.4210, 440.7101, 440.7102,

 

440.7103, 440.7104, 440.7105, 440.7201, 440.7202, 440.7203,

 

440.7204, 440.7205, 440.7206, 440.7207, 440.7208, 440.7209,

 

440.7210, 440.7301, 440.7302, 440.7303, 440.7304, 440.7305,


 

440.7307, 440.7308, 440.7309, 440.7401, 440.7402, 440.7403,

 

440.7404, 440.7501, 440.7502, 440.7503, 440.7504, 440.7505,

 

440.7506, 440.7507, 440.7508, 440.7509, 440.7601, 440.7602,

 

440.7603, 440.8103, 440.9102, 440.9203, 440.9207, 440.9208,

 

440.9301, 440.9310, 440.9312, 440.9313, 440.9314, 440.9317,

 

440.9338, and 440.9601), sections 1201, 2103, 2A103, 4210, 7503,

 

8103, 9102, 9203, 9207, 9208, 9301, 9310, 9312, 9313, 9314, and

 

9317 as amended and sections 9338 and 9601 as added by 2000 PA

 

348, sections 2A514 and 2A526 as added by 1992 PA 101, and

 

section 4104 as amended by 1998 PA 278, and by adding section

 

7106 and part 7.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1        Sec. 1201. Subject to additional definitions contained in

 

 2  the subsequent articles of this act which are applicable to

 

 3  specific articles or parts of this act, and unless the context

 

 4  otherwise requires, as used in this act:

 

 5        (1) "Action" in the sense of a judicial proceeding includes

 

 6  recoupment, counterclaim, setoff, suit in equity, and any other

 

 7  proceedings in which rights are determined.

 

 8        (2) "Aggrieved party" means a party entitled to resort to a

 

 9  remedy.

 

10        (3) "Agreement" means the bargain of the parties in fact as

 

11  found in their language or by implication from other

 

12  circumstances including course of dealing or usage of trade or

 

13  course of performance as provided in this act ( sections 1205 and

 

14  2208. ). Whether an agreement has legal consequences is

 

15  determined by the provisions of this act, if applicable;


 

 1  otherwise by the law of contracts under ( section 1103. ).

 

 2  (Compare "Contract".)

 

 3        (4) "Bank" means any person engaged in the business of

 

 4  banking.

 

 5        (5) "Bearer" means the a person in control of a negotiable

 

 6  electronic document of title or a person in possession of an

 

 7  instrument, a negotiable tangible document of title, or a

 

 8  certificated security payable to bearer or indorsed in blank.

 

 9        (6) "Bill of lading" means a document of title evidencing

 

10  the receipt of goods for shipment issued by a person engaged in

 

11  the business of directly or indirectly transporting or forwarding

 

12  goods. , and includes an airbill. "Airbill" means a document

 

13  serving for air transportation as a bill of lading does for

 

14  marine or rail transportation, and includes an air consignment

 

15  note or air waybill. The term does not include a warehouse

 

16  receipt.

 

17        (7) "Branch" includes a separately incorporated foreign

 

18  branch of a bank.

 

19        (8) "Burden of establishing a fact" means the burden of

 

20  persuading the triers of fact that the existence of the fact is

 

21  more probable than its nonexistence.

 

22        (9) "Buyer in ordinary course of business" means a person

 

23  that buys goods in good faith, without knowledge that the sale

 

24  violates the rights of another person in the good, and in the

 

25  ordinary course from a person, other than a pawnbroker, in the

 

26  business of selling goods of that kind. A person buys goods in

 

27  the ordinary course if the sale to the person comports with the


 

 1  usual or customary practices in the kind of business in which the

 

 2  seller is engaged or with the seller's own usual or customary

 

 3  practices. A person that sells oil, gas, or other minerals at the

 

 4  wellhead or minehead is a person in the business of selling goods

 

 5  of that kind. A buyer in ordinary course of business may buy for

 

 6  cash, by exchange of other property, or on secured or unsecured

 

 7  credit, and may acquire goods or documents of title under a

 

 8  preexisting contract for sale. Only a buyer that takes possession

 

 9  of the goods or has a right to recover the goods from the seller

 

10  under article 2 may be a buyer in ordinary course of business. A

 

11  person that acquires goods in a transfer in bulk or as security

 

12  for or in total or partial satisfaction of a money debt is not a

 

13  buyer in ordinary course of business.

 

14        (10) "Conspicuous", : A term or clause is conspicuous when

 

15  it is so written that a reasonable person against whom it is to

 

16  operate ought to have noticed it. A printed heading in capitals

 

17  (as: non-negotiable bill of lading) is conspicuous. Language in

 

18  the body of a form is "conspicuous" if it is in larger or other

 

19  contrasting type or color. But in a telegram any stated term is

 

20  "conspicuous". Whether a term or clause is "conspicuous" or not

 

21  is for decision by the court. with reference to a term, means so

 

22  written, displayed, or presented that a reasonable person against

 

23  which it is to operate ought to have noticed it. Whether a term

 

24  is "conspicuous" or not is a decision for the court. Conspicuous

 

25  terms include any of the following:

 

26        (a) A heading in capitals equal to or greater in size than

 

27  the surrounding text, or in contrasting type, font, or color to


 

 1  the surrounding text of the same or lesser size.

 

 2        (b) Language in the body of a record or display in larger

 

 3  type than the surrounding text, or in contrasting type, font, or

 

 4  color to the surrounding text of the same size, or set off from

 

 5  surrounding text of the same size by symbols or other marks that

 

 6  call attention to the language.

 

 7        (11) "Contract" means the total legal obligation which

 

 8  results from the parties' agreement as affected by this act and

 

 9  any other applicable rules of law. (Compare "Agreement".)

 

10        (12) "Creditor" includes a general creditor, a secured

 

11  creditor, a lien creditor and any representative of creditors,

 

12  including an assignee for the benefit of creditors, a trustee in

 

13  bankruptcy, a receiver in equity, and an executor or

 

14  administrator of an insolvent debtor's or assignor's estate.

 

15        (13) "Defendant" includes a person in the position of

 

16  defendant in a cross action or counterclaim.

 

17        (14) "Delivery" with respect to an electronic document of

 

18  title means voluntary transfer of control and with respect to

 

19  instruments, tangible documents of title, chattel paper, or

 

20  certificated securities means voluntary transfer of possession.

 

21        (15) "Document of title" includes bill of lading, dock

 

22  warrant, dock receipt, warehouse receipt, or order for the

 

23  delivery of goods, and also any other document which means a

 

24  record that in the regular course of business or financing is

 

25  treated as adequately evidencing that the person in possession of

 

26  it or control of the record is entitled to receive, control,

 

27  hold, and dispose of the document record and the goods it the


 

 1  record covers . To be a document of title a document must purport

 

 2  to be issued by or addressed to a bailee and purport to cover

 

 3  goods in the bailee's possession which are either identified or

 

 4  are fungible portions of an identified mass. and that purports to

 

 5  be issued by or addressed to a bailee and to cover goods in the

 

 6  bailee’s possession which are either identified or are fungible

 

 7  portions of an identified mass. The term includes a bill of

 

 8  lading, transport document, dock warrant, dock receipt, warehouse

 

 9  receipt, and order for delivery of goods. "Electronic document of

 

10  title" means a document of title evidenced by a record consisting

 

11  of information stored in an electronic medium. "Tangible document

 

12  of title" means a document of title evidenced by a record

 

13  consisting of information that is inscribed on a tangible medium.

 

14        (16) "Fault" means wrongful act, omission, or breach.

 

15        (17) "Fungible" with respect to goods or securities means

 

16  goods or securities of which any unit is, by nature or usage of

 

17  trade, the equivalent of any other like unit. Goods which are not

 

18  fungible shall be deemed are considered fungible for the purposes

 

19  of this act to the extent that under a particular agreement or

 

20  document unlike units are treated as equivalents.

 

21        (18) "Genuine" means free of forgery or counterfeiting.

 

22        (19) "Good faith" means honesty in fact in the conduct or

 

23  transaction concerned.

 

24        (20) "Holder" , with respect to a negotiable instrument,

 

25  means the person in possession if the instrument is payable to

 

26  bearer or, in the case of an instrument payable to an identified

 

27  person, if the identified person is in possession. Holder, with


 

 1  respect to a document of title, means the person in possession if

 

 2  the goods are deliverable to bearer or to the order of the person

 

 3  in possession. means any of the following:

 

 4        (a) A person in possession of a negotiable instrument that

 

 5  is payable either to bearer or to an identified person that is

 

 6  the person in possession.

 

 7        (b) A person in possession of a negotiable tangible document

 

 8  of title if the goods are deliverable either to bearer or to the

 

 9  order of the person in possession.

 

10        (c) A person in control of a negotiable electronic document

 

11  of title.

 

12        (21) To "honor" is to pay or to accept and pay, or where a

 

13  credit so engages to purchase or discount a draft complying with

 

14  the terms of the credit.

 

15        (22) "Insolvency proceedings" includes any assignment for

 

16  the benefit of creditors or other proceedings intended to

 

17  liquidate or rehabilitate the estate of the person involved.

 

18        (23) A person is "insolvent" who either has ceased to pay

 

19  his or her debts in the ordinary course of business or cannot pay

 

20  his or her debts as they become due or is insolvent within the

 

21  meaning of the federal bankruptcy law.

 

22        (24) "Money" means a medium of exchange authorized or

 

23  adopted by a domestic or foreign government and includes a

 

24  monetary unit of account established by an intergovernmental

 

25  organization or by agreement between 2 or more nations.

 

26        (25) A Subject to subsection (27), a person has "notice" of

 

27  a fact when he or she if the person has actual knowledge of it;


 

 1  he or she has received a notice or notification of it; or from

 

 2  all the facts and circumstances known to him or her the person at

 

 3  the time in question, he or she has reason to know that it

 

 4  exists. A person "knows" or has "knowledge" of a fact when he or

 

 5  she the person has actual knowledge of it. "Discover" or "learn"

 

 6  or a word or phrase of similar import refers to knowledge rather

 

 7  than to reason to know. The time and circumstances under which a

 

 8  notice or notification may cease to be effective are not

 

 9  determined by this act.

 

10        (26) A person "notifies" or "gives" a notice or notification

 

11  to another person by taking such those steps as may be that are

 

12  reasonably required to inform the other person in ordinary

 

13  course, whether or not such the other person actually comes to

 

14  know of it. A Subject to subsection (27), a person "receives" a

 

15  notice or notification when 1 of the following occurs:

 

16        (a) It comes to his or her that person's attention.

 

17        (b) It is duly delivered in a form reasonable under the

 

18  circumstances at the place of business through which the contract

 

19  was made or at any other place another location held out by him

 

20  or her that person as the place for receipt of such similar

 

21  communications.

 

22        (27) Notice, knowledge, or a notice or notification received

 

23  by an organization is effective for a particular transaction from

 

24  the time when it is brought to the attention of the individual

 

25  conducting that transaction, and in any event from the time when

 

26  it would have been brought to the individual's attention if the

 

27  organization had exercised due diligence. An organization


 

 1  exercises due diligence if it maintains reasonable routines for

 

 2  communicating significant information to the person conducting

 

 3  the transaction and there is reasonable compliance with the

 

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

 

 5  the organization to communicate information unless such that

 

 6  communication is part of his or her the individual's regular

 

 7  duties or unless he or she the individual has reason to know of

 

 8  the transaction and that the transaction would be materially

 

 9  affected by the information.

 

10        (28) "Organization" includes a corporation, government, or

 

11  governmental subdivision or agency, business trust, estate,

 

12  trust, partnership or association, 2 or more persons having a

 

13  joint or common interest, or any other legal or commercial

 

14  entity.

 

15        (29) "Party", as distinct from "third party", means a person

 

16  who that has engaged in a transaction or made an agreement within

 

17  this act.

 

18        (30) "Person" includes an individual or an organization (see

 

19  section 1102).

 

20        (31) "Presumption" or "presumed" means that the trier of

 

21  fact must find the existence of the fact presumed unless and

 

22  until evidence is introduced which would support a finding of its

 

23  nonexistence.

 

24        (32) "Purchase" includes taking by sale, discount,

 

25  negotiation, mortgage, pledge, lien, security interest, issue or

 

26  reissue, gift, or any other voluntary transaction creating an

 

27  interest in property.


 

 1        (33) "Purchaser" means a person who that takes by purchase.

 

 2        (34) "Remedy" means any remedial right to which an aggrieved

 

 3  party is entitled with or without resort to a tribunal.

 

 4        (35) "Representative" includes an agent, an officer of a

 

 5  corporation or association, and a trustee, executor, or

 

 6  administrator of an estate, or any other person empowered to act

 

 7  for another.

 

 8        (36) "Rights" includes remedies.

 

 9        (37) All of the following apply to the term "security

 

10  interest":

 

11        (a) "Security interest" means an interest in personal

 

12  property or fixtures which secures payment or performance of an

 

13  obligation. The term also includes any interest of a consignor

 

14  and a buyer of an account, chattel paper, a payment intangible,

 

15  or a promissory note in a transaction that is subject to article

 

16  9. The special property interest of a buyer of goods on

 

17  identification of those goods to a contract for sale under

 

18  section 2401 is not a "security interest", but a buyer may also

 

19  acquire a "security interest" by complying with article 9. Except

 

20  as otherwise provided in section 2505, the right of a seller or

 

21  lessor of goods under article 2 or 2A to retain or acquire

 

22  possession of the goods is not a "security interest", but a

 

23  seller or lessor may also acquire a "security interest" by

 

24  complying with article 9. The retention or reservation of title

 

25  by a seller of goods notwithstanding shipment or delivery to the

 

26  buyer under ( section 2401 ) is limited in effect to a

 

27  reservation of a "security interest". Whether a transaction


 

 1  creates a lease or security interest is determined by the facts

 

 2  of each case; however, a transaction creates a security interest

 

 3  if the consideration the lessee is to pay the lessor for the

 

 4  right to possession and use of the goods is an obligation for the

 

 5  term of the lease not subject to termination by the lessee, and

 

 6  any of the following:

 

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

 

 8  than the remaining economic life of the goods.

 

 9        (ii) (b) The lessee is bound to renew the lease for the

 

10  remaining economic life of the goods or is bound to become the

 

11  owner of the goods.

 

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

 

13  remaining economic life of the goods for no additional

 

14  consideration or nominal additional consideration upon compliance

 

15  with the lease agreement.

 

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

 

17  goods for no additional consideration or nominal additional

 

18  consideration upon compliance with the lease agreement.

 

19        (b) A transaction does not create a security interest merely

 

20  because it provides any of the following:

 

21        (i) (a) The present value of the consideration the lessee is

 

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

 

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

 

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

 

25  into.

 

26        (ii) (b) The lessee assumes risk of loss of the goods, or

 

27  agrees to pay taxes, insurance, filing, recording, or


 

 1  registration fees, or service or maintenance costs with respect

 

 2  to the goods.

 

 3        (iii) (c) The lessee has an option to renew the lease or to

 

 4  become the owner of the goods.

 

 5        (iv) (d) The lessee has an option to renew the lease for a

 

 6  fixed rent that is equal to or greater than the reasonably

 

 7  predictable fair market rent for the use of the goods for the

 

 8  term of the renewal at the time the option is to be performed.

 

 9        (v) (e) The lessee has an option to become the owner of the

 

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

 

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

 

12  the option is to be performed.

 

13        (c) As used in this subsection:

 

14        (i) (a) Additional consideration is not nominal if when the

 

15  option to renew the lease is granted to the lessee the rent is

 

16  stated to be the fair market rent for the use of the goods for

 

17  the term of the renewal determined at the time the option is to

 

18  be performed, or when the option to become the owner of the goods

 

19  is granted to the lessee, the price is stated to be the fair

 

20  market value of the goods determined at the time the option is to

 

21  be performed. Additional consideration is nominal if it is less

 

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

 

23  the lease agreement if the option is not exercised.

 

24        (ii) (b) "Present value" means the amount as of a date

 

25  certain of 1 or more sums payable in the future, discounted to

 

26  the date certain. The discount is determined by the interest rate

 

27  specified by the parties if the rate is not manifestly


 

 1  unreasonable at the time the transaction is entered into;

 

 2  otherwise, the discount is determined by a commercially

 

 3  reasonable rate that takes into account the facts and

 

 4  circumstances of each case at the time the transaction was

 

 5  entered into.

 

 6        (iii) (c) "Reasonably predictable" and "remaining economic

 

 7  life of the goods" are to be determined with reference to the

 

 8  facts and circumstances at the time the transaction is entered

 

 9  into.

 

10        (38) "Send" in connection with any a writing, record, or

 

11  notice means to deposit in the mail or deliver for transmission

 

12  by any other usual means of communication with postage or cost of

 

13  transmission provided for and properly addressed and in the case

 

14  of an instrument to an address specified thereon or otherwise

 

15  agreed, or if there be none to any address reasonable under the

 

16  circumstances. The receipt of any writing or notice within the

 

17  time at which it would have arrived, if properly sent, has the

 

18  effect of a proper sending. any of the following:

 

19        (a) To deposit in the mail or deliver for transmission by

 

20  any other usual means of communication with postage or cost of

 

21  transmission provided for and properly addressed and, in the case

 

22  of an instrument, to an address specified on the instrument or

 

23  otherwise agreed, or if there is not an address specified or

 

24  agreed, to any address reasonable under the circumstances.

 

25        (b) In any other way to cause to be received any record or

 

26  notice within the time it would have arrived if properly sent.

 

27        (39) "Signed" includes any symbol executed or adopted by a


 

 1  party with present intention to authenticate a writing, including

 

 2  a carbon copy of his or her signature.

 

 3        (40) "Surety" includes guarantor.

 

 4        (41) "Telegram" includes a message transmitted by radio,

 

 5  teletype, cable, any mechanical method of transmission, or the

 

 6  like.

 

 7        (42) "Term" means that portion of an agreement which relates

 

 8  to a particular matter.

 

 9        (43) "Unauthorized" signature means one made without actual,

 

10  implied or apparent authority and includes a forgery.

 

11        (44) "Value". Except as otherwise provided with respect to

 

12  negotiable instruments and bank collections under ( sections

 

13  3303, 4208, and 4209, ) a person gives "value" for rights if the

 

14  person acquires them:

 

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

 

16  for the extension of immediately available credit whether or not

 

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

 

18  the event of difficulties in collection; or

 

19        (b) As security for or in total or partial satisfaction of a

 

20  preexisting claim; or

 

21        (c) By accepting delivery pursuant to a preexisting contract

 

22  for purchase; or

 

23        (d) Generally, in return for any consideration sufficient to

 

24  support a simple contract.

 

25        (45) "Warehouse receipt" means a receipt document of title

 

26  issued by a person engaged in the business of storing goods for

 

27  hire.


 

 1        (46) "Written" or "writing" includes printing, typewriting,

 

 2  or any other intentional reduction to tangible form.

 

 3        Sec. 2103. (1) In As used in this article unless the context

 

 4  otherwise requires:

 

 5        (a) "Buyer" means a person who buys or contracts to buy

 

 6  goods.

 

 7        (b) "Good faith" in the case of a merchant means honesty in

 

 8  fact and the observance of reasonable commercial standards of

 

 9  fair dealing in the trade.

 

10        (c) "Receipt" of goods means taking physical possession of

 

11  them.

 

12        (d) "Seller" means a person who sells or contracts to sell

 

13  goods.

 

14        (2) Other definitions applying to this article or to

 

15  specified parts thereof, and the sections in which they appear

 

16  are:

 

 

17      "Acceptance".                       Section 2606.

18      "Banker's credit".                  Section 2325.

19      "Between merchants".                Section 2104.

20      "Cancellation".                     Section 2106(4).

21      "Commercial unit".                  Section 2105.

22      "Confirmed credit".                 Section 2325.

23      "Conforming to contract".           Section 2106.

24      "Contract for sale".                Section 2106.

25      "Cover".                            Section 2712.

26      "Entrusting".                       Section 2403.

27      "Financing agency".                 Section 2104.


     "Future goods".                     Section 2105.

     "Goods".                            Section 2105.

     "Identification".                   Section 2501.

     "Installment contract".             Section 2612.

     "Letter of credit".                 Section 2325.

     "Lot".                              Section 2105.

     "Merchant".                         Section 2104.

     "Overseas".                         Section 2323.

     "Person in position of seller".     Section 2707.

10      "Present sale".                     Section 2106.

11      "Sale".                             Section 2106.

12      "Sale on approval".                 Section 2326.

13      "Sale or return".                   Section 2326.

14      "Termination".                      Section 2106.

 

 

15        (3) The "Control" as provided in section 7106 and the

 

16  following definitions in other articles apply to this article:

 

 

17      "Check".                            Section 3104.

18      "Consignee".                        Section 7102.

19      "Consignor".                        Section 7102.

20      "Consumer goods".                   Section 9102.

21      "Dishonor".                         Section 3502.

22      "Draft".                            Section 3104.

 

 

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

 

24  principles of construction and interpretation applicable

 

25  throughout this article.

 

26        Sec. 2104. (1) "Merchant" means a person who that deals in

 

27  goods of the kind or otherwise by his the person's occupation

 


 1  holds himself itself out as having knowledge or skill peculiar to

 

 2  the practices or goods involved in the transaction or to whom

 

 3  such which that knowledge or skill may be attributed by his the

 

 4  person's employment of an agent or broker or other intermediary

 

 5  who by his the person's occupation holds himself itself out as

 

 6  having such that knowledge or skill.

 

 7        (2) "Financing agency" means a bank, finance company, or

 

 8  other person who that in the ordinary course of business makes

 

 9  advances against goods or documents of title or who that by

 

10  arrangement with either the seller or the buyer intervenes in

 

11  ordinary course to make or collect payment due or claimed under

 

12  the contract for sale, as by purchasing or paying the sellers

 

13  draft or making advances against it or by merely taking it for

 

14  collection whether or not documents of title accompany or are

 

15  associated with the draft. "Financing agency" includes also a

 

16  bank or other person who that similarly intervenes between

 

17  persons who that are in the position of seller and buyer in

 

18  respect to the goods under ( section 2707. ).

 

19        (3) "Between merchants" means in any transaction with

 

20  respect to which both parties are chargeable with the knowledge

 

21  or skill of merchants.

 

22        Sec. 2310. Unless otherwise agreed, all of the following

 

23  apply:

 

24        (a) payment Payment is due at the time and place at which

 

25  the buyer is to receive the goods even though if the place of

 

26  shipment is the place of delivery. ; and

 

27        (b) if If the seller is authorized to send the goods, he the

 


 1  seller may ship them under reservation, and may tender the

 

 2  documents of title, but the buyer may inspect the goods after

 

 3  their arrival before payment is due unless such that inspection

 

 4  is inconsistent with the terms of the contract pursuant to (

 

 5  section 2513. ); and

 

 6        (c) if If delivery is authorized and made by way of

 

 7  documents of title otherwise than by subsection subdivision (b),

 

 8  then payment is due at regardless of where the goods are to be

 

 9  received at 1 of the following times, as applicable:

 

10        (i) At the time and place at which the buyer is to receive

 

11  delivery of the tangible documents. regardless of where the goods

 

12  are to be received; and

 

13        (ii) At the time the buyer is to receive delivery of the

 

14  electronic documents and at the seller’s place of business or if

 

15  none, the seller’s residence.

 

16        (d) where If the seller is required or authorized to ship

 

17  the goods on credit, the credit period runs from the time of

 

18  shipment but postdating the invoice or delaying its dispatch will

 

19  correspondingly delay the starting of the credit period.

 

20        Sec. 2323. (1) Where the If a contract contemplates overseas

 

21  shipment and contains a term C.I.F. or C. & F. or F.O.B. vessel,

 

22  the seller unless otherwise agreed must obtain a negotiable bill

 

23  of lading stating that the goods have been loaded on board or, in

 

24  the case of a term C.I.F. or C. & F., received for shipment.

 

25        (2) Where in a case within In connection with a contract

 

26  subject to subsection (1), if a tangible bill of lading has been

 

27  is issued in a set of parts, unless otherwise agreed if the

 


 1  documents are not to be sent from abroad the buyer may demand

 

 2  tender of the full set; otherwise only one part of the bill of

 

 3  lading need must be tendered. Even if the agreement expressly

 

 4  requires a full set, both of the following apply:

 

 5        (a) due Due tender of a single part is acceptable within the

 

 6  provisions of this article on concerning cure of improper

 

 7  delivery (subsection (1) of section 2508); and under section

 

 8  2508(1).

 

 9        (b) even though the Even if a full set is demanded, if the

 

10  documents are sent from abroad the person tendering an incomplete

 

11  set may nevertheless require payment upon furnishing an indemnity

 

12  which the buyer in good faith deems adequate.

 

13        (3) A shipment by water or by air or a contract

 

14  contemplating such shipment is "overseas" insofar as by usage of

 

15  trade or agreement it is subject to the commercial, financing, or

 

16  shipping practices characteristic of international deep water

 

17  commerce.

 

18        Sec. 2401. Each provision of this article with regard to the

 

19  rights, obligations, and remedies of the seller, the buyer,

 

20  purchasers, or other third parties applies irrespective of title

 

21  to the goods except where the provisions refers to such the

 

22  title. Insofar as In situations that are not covered by the other

 

23  provisions of this article and matters concerning title become

 

24  material, the following rules apply:

 

25        (a) (1) Title to goods cannot pass under a contract for sale

 

26  prior to before their identification to the contract under (

 

27  section 2501, ), and unless otherwise explicitly agreed the buyer

 


 1  acquires by their identification a special property as limited by

 

 2  this act. Any retention or reservation by the seller of the title

 

 3  (property) in goods shipped or delivered to the buyer is limited

 

 4  in effect to a reservation of a security interest. Subject to

 

 5  these provisions and to the provisions of the article on secured

 

 6  transactions ( article 9, ), title to goods passes from the

 

 7  seller to the buyer in any manner and on any conditions

 

 8  explicitly agreed on by the parties.

 

 9        (b) (2) Unless otherwise explicitly agreed title passes to

 

10  the buyer at the time and place at which the seller completes his

 

11  its performance with reference to the physical delivery of the

 

12  goods, despite any reservation of a security interest and even

 

13  though if a document of title is to be delivered at a different

 

14  time or place. ; and in In particular and despite any reservation

 

15  of a security interest by the bill of lading, both of the

 

16  following apply:

 

17        (i) (a) Unless subparagraph (ii) applies, if the contract

 

18  requires or authorizes the seller to send the goods to the buyer

 

19  but does not require him the seller to deliver them at

 

20  destination, title passes to the buyer at the time and place of

 

21  shipment. ; but

 

22        (ii) (b) if If the contract requires delivery at destination,

 

23  title passes on tender there.

 

24        (c) (3) Unless otherwise explicitly agreed where delivery is

 

25  to be made without moving the goods, 1 of the following applies:

 

26        (i) (a) if If the seller is to deliver a tangible document of

 

27  title, title passes at the time when and the place where he the

 


 1  seller delivers such documents; or the document of title.

 

 2        (ii) If the seller is to deliver an electronic document of

 

 3  title, title passes when the seller delivers the document.

 

 4        (iii) (b) if If the goods are at the time of contracting

 

 5  already identified and no documents of title are to be delivered,

 

 6  title passes at the time and place of contracting.

 

 7        (d) (4) A rejection or other refusal by the buyer to receive

 

 8  or retain the goods, whether or not justified, or a justified

 

 9  revocation of acceptance revests title to the goods in the

 

10  seller. Such revesting Revesting of title under this subdivision

 

11  occurs by operation of law and is not a "sale".

 

12        Sec. 2503. (1) Tender of delivery requires that the seller

 

13  put and hold conforming goods at the buyer's disposition and give

 

14  the buyer any notification reasonably necessary to enable him the

 

15  buyer to take delivery. The manner, time, and place for tender

 

16  are determined by the agreement and this article, and in

 

17  particular all of the following apply:

 

18        (a) tender Tender must be at a reasonable hour, and if it is

 

19  a tender of goods, they the goods must be kept available for the

 

20  period reasonably necessary to enable the buyer to take

 

21  possession. ; but

 

22        (b) unless Unless otherwise agreed, the buyer must furnish

 

23  facilities reasonably suited to the receipt of the goods.

 

24        (2) Where the case is within the next section respecting If

 

25  section 2504 applies to a shipment, tender requires that the

 

26  seller comply with its provisions that section.

 

27        (3) Where the If a seller is required to deliver at a

 


 1  particular destination, tender requires that he the seller comply

 

 2  with subsection (1) and also, in any appropriate case if

 

 3  appropriate, tender documents as described in subsections (4) and

 

 4  (5). of this section.

 

 5        (4) Where If goods are in the possession of a bailee and are

 

 6  to be delivered without being moved, both of the following apply:

 

 7        (a) Except as provided in subdivision (b), tender requires

 

 8  that the seller either tender a negotiable document of title

 

 9  covering such the goods or procure acknowledgment by the bailee

 

10  of the buyer's right to possession of the goods. ; but

 

11        (b) tender Tender to the buyer of a non-negotiable

 

12  nonnegotiable document of title or of a written direction to

 

13  record directing the bailee to deliver is sufficient tender

 

14  unless the buyer seasonally objects, and except as otherwise

 

15  provided in article 9, receipt by the bailee of notification of

 

16  the buyer's rights fixes those rights as against the bailee and

 

17  all third persons. ; but However, risk of loss of the goods and

 

18  of any failure by the bailee to honor the non-negotiable

 

19  nonnegotiable document of title or to obey the direction remains

 

20  on the seller until the buyer has had a reasonable time to

 

21  present the document or direction, and a refusal by the bailee to

 

22  honor the document or to obey the direction defeats the tender.

 

23        (5) Where Both of the following apply if the contract

 

24  requires the seller to deliver documents:

 

25        (a) he The seller must tender all such the documents in

 

26  correct form, except as provided in this article section 2323(2)

 

27  with respect to bills of lading in a set. (subsection (2) of

 


 1  section 2323); and

 

 2        (b) tender Tender through customary banking channels is

 

 3  sufficient and dishonor of a draft accompanying or associated

 

 4  with the documents constitutes nonacceptance or rejection.

 

 5        Sec. 2505. (1) Where the Both of the following apply if a

 

 6  seller has identified goods to the a contract by or before

 

 7  shipment:

 

 8        (a) his The seller's procurement of a negotiable bill of

 

 9  lading to his the seller's own order or otherwise reserves in him

 

10  the seller a security interest in the goods. His The seller's

 

11  procurement of the bill to the order of a financing agency or of

 

12  the buyer indicates in addition only the seller's expectation of

 

13  transferring that interest to the person named.

 

14        (b) a non-negotiable A nonnegotiable bill of lading to

 

15  himself or his the seller or the seller's nominee reserves

 

16  possession of the goods as security. but However, except in a

 

17  case of conditional delivery (subsection (2) of section 2507) a

 

18  non-negotiable under section 2507(2), a nonnegotiable bill of

 

19  lading naming the buyer as consignee reserves no does not reserve

 

20  a security interest even though if the seller retains possession

 

21  or control of the bill of lading.

 

22        (2) When If a shipment by the a seller with reservation of a

 

23  security interest is in violation of the contract for sale, it

 

24  constitutes an improper contract for transportation within the

 

25  preceding section 2504 but impairs neither it does not impair the

 

26  rights given to the buyer by shipment and identification of the

 

27  goods to the contract nor or impair the seller's powers as a

 


 1  holder of a negotiable document of title.

 

 2        Sec. 2506. (1) A financing agency by paying or purchasing

 

 3  for value a draft which that relates to a shipment of goods

 

 4  acquires to the extent of the payment or purchase and in addition

 

 5  to its own rights under the draft and any document of title

 

 6  securing it any rights of the shipper in the goods including the

 

 7  right to stop delivery and the shipper's right to have the draft

 

 8  honored by the buyer.

 

 9        (2) The right to reimbursement of a financing agency which

 

10  that has in good faith honored or purchased the draft under

 

11  commitment to or authority from the buyer is not impaired by

 

12  subsequent discovery of defects with reference to any relevant

 

13  document which was apparently regular. on its face.

 

14        Sec. 2509. (1) Where the The following apply if a contract

 

15  requires or authorizes the seller to ship the goods by carrier:

 

16        (a) if it If the contract does not require him the seller to

 

17  deliver them the goods at a particular destination, the risk of

 

18  loss passes to the buyer when the goods are duly delivered to the

 

19  carrier even though if the shipment is under reservation under (

 

20  section 2505. ); but

 

21        (b) if it If the contract does require him the seller to

 

22  deliver them the goods at a particular destination and the goods

 

23  are there duly tendered to the buyer at that destination while in

 

24  the possession of the carrier, the risk of loss passes to the

 

25  buyer when the goods are there duly so tendered as to enable at

 

26  that destination in a manner that enables the buyer to take

 

27  delivery.

 


 1        (2) Where the If goods are held by a bailee to be delivered

 

 2  without being moved, the risk of loss passes to the buyer when 1

 

 3  of the following occurs:

 

 4        (a) on his receipt The buyer receives possession or control

 

 5  of a negotiable document of title covering the goods. ; or

 

 6        (b) on acknowledgment by the The bailee provides

 

 7  acknowledgement of the buyer's right to possession of the goods.

 

 8  ; or

 

 9        (c) after his receipt of a non-negotiable The buyer receives

 

10  possession or control of a nonnegotiable document of title or

 

11  other written direction to deliver in a record, as provided in

 

12  subsection (4)(b) of section 2503 2503(4)(b).

 

13        (3) In any case not within If subsection (1) or (2) does not

 

14  apply, the risk of loss passes to the buyer on his the buyer's

 

15  receipt of the goods if the seller is a merchant. ; otherwise

 

16  Otherwise, the risk of loss passes to the buyer on tender of

 

17  delivery.

 

18        (4) The provisions of this section are subject to contrary

 

19  agreement of the parties and to the provisions of this article

 

20  section 2327 on sale on approval (section 2327) and section 2510

 

21  on effect of breach on risk of loss. (section 2510).

 

22        Sec. 2605. (1) The A buyer's failure to state in connection

 

23  with rejection a particular defect which that is ascertainable by

 

24  reasonable inspection precludes him the buyer from relying on the

 

25  unstated defect to justify rejection or to establish breach if

 

26  either of the following applies:

 

27        (a) where the The seller could have cured it the defect if

 


 1  the buyer stated the defect seasonably. ; or

 

 2        (b) between Between merchants, when if the seller has after

 

 3  rejection made makes a request in writing for a full and final

 

 4  written statement of all defects on which the buyer proposes to

 

 5  rely.

 

 6        (2) Payment against documents made without reservation of

 

 7  rights precludes recovery of the payment for defects apparent on

 

 8  the face of in the documents.

 

 9        Sec. 2705. (1) The A seller may stop delivery of goods in

 

10  the possession of a carrier or other bailee when he if the seller

 

11  discovers the buyer to be insolvent under ( section 2702 ) and

 

12  may stop delivery of carload, truckload, planeload, or larger

 

13  shipments of express or freight when if the buyer repudiates or

 

14  fails to make a payment due before delivery or if for any other

 

15  reason the seller has a right to withhold or reclaim the goods.

 

16        (2) As against such a buyer described in subsection (1), the

 

17  seller may stop delivery until 1 of the following occurs:

 

18        (a) receipt Receipt of the goods by the buyer. ; or

 

19        (b) acknowledgment Acknowledgement to the buyer by any a

 

20  bailee of the goods except a carrier that the bailee holds the

 

21  goods for the buyer. ; or

 

22        (c) such An acknowledgment to the buyer by a carrier by

 

23  reshipment or as warehouseman; or a warehouse that the carrier

 

24  holds the goods for the buyer.

 

25        (d) negotiation Negotiation to the buyer of any a negotiable

 

26  document of title covering the goods.

 

27        (3) (3)(a) To stop delivery the All of the following must be

 


 1  met to stop delivery under this section:

 

 2        (a) The seller must so notify the bailee so as to enable the

 

 3  bailee by reasonable diligence to prevent delivery of the goods.

 

 4        (b) After such notification under subdivision (a), the

 

 5  bailee must hold and deliver the goods according to the

 

 6  directions of the seller but the seller is liable to the bailee

 

 7  for any ensuing charges or damages.

 

 8        (c) If a negotiable document of title has been issued for

 

 9  goods, the bailee is not obliged to obey a notification to stop

 

10  until surrender of possession or control of the document.

 

11        (d) A carrier who that has issued a non-negotiable

 

12  nonnegotiable bill of lading is not obliged to obey a

 

13  notification to stop received from a person other than the

 

14  consignor.

 

15        Sec. 2A103. (1) In this article unless the context otherwise

 

16  requires:

 

17        (a) "Buyer in ordinary course of business" means a person

 

18  who in good faith and without knowledge that the sale to him or

 

19  her is in violation of the ownership rights or security interest

 

20  or leasehold interest of a third party in the goods buys in

 

21  ordinary course from a person in the business of selling goods of

 

22  that kind. but The term does not include a pawnbroker. "Buying"

 

23  may be for cash or by exchange of other property or on secured or

 

24  unsecured credit and includes receiving acquiring goods or

 

25  documents of title under a pre-existing contract for sale but

 

26  does not include a transfer in bulk or as security for or in

 

27  total or partial satisfaction of a money debt.

 


 1        (b) "Cancellation" occurs when either party puts an end to

 

 2  the lease contract for default by the other party.

 

 3        (c) "Commercial unit" means such a unit of goods as that by

 

 4  commercial usage is a single whole for purposes of lease and

 

 5  division of which materially impairs its character or value on

 

 6  the market or in use. A commercial unit may be a single article,

 

 7  as a machine, or a set of articles, as a suite of furniture or a

 

 8  line of machinery, or a quantity, as a gross or carload, or any

 

 9  other unit treated in use or in the relevant market as a single

 

10  whole.

 

11        (d) "Conforming" means goods or performance under a lease

 

12  contract that are in accordance with the obligations under the

 

13  lease contract.

 

14        (e) "Consumer lease" means a lease that a lessor regularly

 

15  engaged in the business of leasing or selling makes to a lessee

 

16  who is an individual and who takes under the lease primarily for

 

17  a personal, family, or household purpose, if the total payments

 

18  to be made under the lease contract, excluding payments for

 

19  options to renew or buy, do not exceed $25,000.00.

 

20        (f) "Fault" means wrongful act, omission, breach, or

 

21  default.

 

22        (g) "Finance lease" means a lease with respect to which all

 

23  of the following apply:

 

24        (i) The lessor does not select, manufacture, or supply the

 

25  goods.

 

26        (ii) The lessor acquires the goods or the right to possession

 

27  and use of the goods in connection with the lease.

 


 1        (iii) One of the following occurs:

 

 2        (A) The lessee receives a copy of the contract by which the

 

 3  lessor acquired the goods or the right to possession and use of

 

 4  the goods before signing the lease contract.

 

 5        (B) The lessee's approval of the contract by which the

 

 6  lessor acquired the goods or the right to possession and use of

 

 7  the goods is a condition to effectiveness of the lease contract.

 

 8        (C) The lessee, before signing the lease contract, receives

 

 9  an accurate and complete statement designating the promises and

 

10  warranties, and any disclaimers of warranties, limitations or

 

11  modifications of remedies, or liquidated damages, including those

 

12  of a third party, such as the manufacturer of the goods, provided

 

13  to the lessor by the person supplying the goods in connection

 

14  with or as part of the contract by which the lessor acquired the

 

15  goods or the right to possession and use of the goods.

 

16        (D) If the lease is not a consumer lease, the lessor, before

 

17  the lessee signs the lease contract, informs the lessee in

 

18  writing of the following:

 

19        (I) The identity of the person supplying the goods to the

 

20  lessor, unless the lessee has selected that person and directed

 

21  the lessor to acquire the goods or the right to possession and

 

22  use of the goods from that person.

 

23        (II) The lessee is entitled under this article to the

 

24  promises and warranties, including those of any third party,

 

25  provided to the lessor by the person supplying the goods in

 

26  connection with or as part of the contract by which the lessor

 

27  acquired the goods or the right to possession and use of the

 


 1  goods.

 

 2        (III) The lessee may communicate with the person supplying

 

 3  the goods to the lessor and receive an accurate and complete

 

 4  statement of those promises and warranties, including any

 

 5  disclaimers and limitations of them or of remedies.

 

 6        (h) "Goods" means all things that are movable at the time of

 

 7  identification to the lease contract, or are fixtures under (

 

 8  section 2A309, ), but the term does not include money, documents,

 

 9  instruments, accounts, chattel paper, general intangibles, or

 

10  minerals or the like, including oil and gas, before extraction.

 

11  The term also includes the unborn young of animals.

 

12        (i) "Installment lease contract" means a lease contract that

 

13  authorizes or requires the delivery of goods in separate lots to

 

14  be separately accepted, even though the lease contract contains a

 

15  clause "each delivery is a separate lease" or its equivalent.

 

16        (j) "Lease" means a transfer of the right to possession and

 

17  use of goods for a term in return for consideration, but a sale,

 

18  including a sale on approval or a sale or return, or retention or

 

19  creation of a security interest is not a lease. Unless the

 

20  context clearly indicates otherwise, the term includes a

 

21  sublease.

 

22        (k) "Lease agreement" means the bargain, with respect to the

 

23  lease, of the lessor and the lessee in fact as found in their

 

24  language or by implication from other circumstances including

 

25  course of dealing or usage of trade or course of performance as

 

26  provided in this article. Unless the context clearly indicates

 

27  otherwise, the term includes a sublease agreement.

 


 1        (l) "Lease contract" means the total legal obligation that

 

 2  results from the lease agreement as affected by this article and

 

 3  any other applicable rules of law. Unless the context clearly

 

 4  indicates otherwise, the term includes a sublease contract.

 

 5        (m) "Leasehold interest" means the interest of the lessor or

 

 6  the lessee under a lease contract.

 

 7        (n) "Lessee" means a person who acquires the right to

 

 8  possession and use of goods under a lease. Unless the context

 

 9  clearly indicates otherwise, the term includes a sublessee.

 

10        (o) "Lessee in ordinary course of business" means a person

 

11  who in good faith and without knowledge that the lease to him or

 

12  her is in violation of the ownership rights or security interest

 

13  or leasehold interest of a third party in the goods leases in

 

14  ordinary course from a person in the business of selling or

 

15  leasing goods of that kind but does not include a pawnbroker.

 

16  "Leasing" may be for cash or by exchange of other property or on

 

17  secured or unsecured credit and includes receiving acquiring

 

18  goods or documents of title under a pre-existing lease contract

 

19  but does not include a transfer in bulk or as security for or in

 

20  total or partial satisfaction of a money debt.

 

21        (p) "Lessor" means a person who transfers the right to

 

22  possession and use of goods under a lease. Unless the context

 

23  clearly indicates otherwise, the term includes a sublessor.

 

24        (q) "Lessor's residual interest" means the lessor's interest

 

25  in the goods after expiration, termination, or cancellation of

 

26  the lease contract.

 

27        (r) "Lien" means a charge against or interest in goods to

 


 1  secure payment of a debt or performance of an obligation, but the

 

 2  term does not include a security interest.

 

 3        (s) "Lot" means a parcel or a single article that is the

 

 4  subject matter of a separate lease or delivery, whether or not it

 

 5  is sufficient to perform the lease contract.

 

 6        (t) "Merchant lessee" means a lessee that is a merchant with

 

 7  respect to goods of the kind subject to the lease.

 

 8        (u) "Present value" means the amount as of a date certain of

 

 9  1 or more sums payable in the future, discounted to the date

 

10  certain. The discount is determined by the interest rate

 

11  specified by the parties if the rate was not manifestly

 

12  unreasonable at the time the transaction was entered into;

 

13  otherwise, the discount is determined by a commercially

 

14  reasonable rate that takes into account the facts and

 

15  circumstances of each case at the time the transaction was

 

16  entered into.

 

17        (v) "Purchase" includes taking by sale, lease, mortgage,

 

18  security interest, pledge, gift, or any other voluntary

 

19  transaction creating an interest in goods.

 

20        (w) "Sublease" means a lease of goods the right to

 

21  possession and use of which was acquired by the lessor as a

 

22  lessee under an existing lease.

 

23        (x) "Supplier" means a person from whom a lessor buys or

 

24  leases goods to be leased under a finance lease.

 

25        (y) "Supply contract" means a contract under which a lessor

 

26  buys or leases goods to be leased.

 

27        (z) "Termination" occurs when either party pursuant to a

 


 1  power created by agreement or law puts an end to the lease

 

 2  contract otherwise than for default.

 

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

 

 4  sections in which they appear are:

 

 

     "Accessions".                     Section 2A310(1).

     "Construction mortgage".          Section 2A309(1)(d).

     "Encumbrance".                    Section 2A309(1)(e).

     "Fixtures".                       Section 2A309(1)(a).

     "Fixture filing".                 Section 2A309(1)(b).

10      "Purchase money lease".           Section 2A309(1)(c).

 

 

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

 

12  this article:

 

 

13      "Account".                        Section 9102(1)(b).

14      "Between merchants".              Section 2104(3).

15      "Buyer".                          Section 2103(1)(a).

16      "Chattel paper".                  Section 9102(1)(k).

17      "Consumer goods".                 Section 9102(1)(w).

18      "Document".                       Section 9102(1)(dd).

19      "Entrusting".                     Section 2403(3).

20      "General intangible".             Section 9102(1)(pp).

21      "Good faith".                     Section 2103(1)(b).

22      "Instrument".                     Section 9102(1)(uu).

23      "Merchant".                       Section 2104(1).

24      "Mortgage".                       Section 9102(1)(ccc).

25      "Pursuant to commitment".         Section 9102(1)(sss).

26      "Receipt".                        Section 2103(1)(c).

27      "Sale".                           Section 2106(1).

28      "Sale on approval".               Section 2326.


     "Sale or return".                 Section 2326.

     "Seller".                         Section 2103(1)(d).

 

 

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

 

 4  principles of construction and interpretation applicable

 

 5  throughout this article.

 

 6        Sec. 2A514. (1) In rejecting goods, a lessee's failure to

 

 7  state a particular defect that is ascertainable by reasonable

 

 8  inspection precludes the lessee from relying on the defect to

 

 9  justify rejection or to establish default (i) if either of the

 

10  following applies:

 

11        (a) If, stated seasonably, the lessor or the supplier could

 

12  have cured it, or (ii) between the defect.

 

13        (b) Between merchants, if the lessor or the supplier after

 

14  rejection has made a request in writing for a full and final

 

15  written statement of all defects on which the lessee proposes to

 

16  rely.

 

17        (2) A lessee's failure to reserve rights when paying rent or

 

18  other consideration against documents precludes recovery of the

 

19  payment for defects apparent on the face of in the documents.

 

20        Sec. 2A526. (1) A lessor may stop delivery of goods in the

 

21  possession of a carrier or other bailee if the lessor discovers

 

22  the lessee to be is insolvent and may stop delivery of carload,

 

23  truckload, planeload, or larger shipments of express or freight

 

24  if the lessee repudiates or fails to make a payment due before

 

25  delivery, whether for rent, security, or otherwise under the

 

26  lease contract, or for any other reason the lessor has a right to

 


 1  withhold or take possession of the goods.

 

 2        (2) In pursuing its remedies under subsection (1), the

 

 3  lessor may stop delivery until 1 of the following occurs:

 

 4        (a) Receipt of the goods by the lessee.

 

 5        (b) Acknowledgment to the lessee by any bailee of the goods,

 

 6  except a carrier, that the bailee holds the goods for the lessee.

 

 7        (c) An acknowledgment to the lessee by a carrier via

 

 8  reshipment or as warehouseperson a warehouse.

 

 9        (3) To stop delivery under this section, a lessor shall so

 

10  notify the bailee so as to enable the bailee by reasonable

 

11  diligence to prevent delivery of the goods.

 

12        (4) After notification under subsection (3), the bailee

 

13  shall hold and deliver the goods according to the directions of

 

14  the lessor, but the lessor is liable to the bailee for any

 

15  ensuing charges or damages.

 

16        (5) A carrier who has issued a nonnegotiable bill of lading

 

17  is not obliged to obey a notification to stop received from a

 

18  person other than the consignor.

 

19        Sec. 4104. (1) As used in this article unless the context

 

20  otherwise requires:

 

21        (a) "Account" means any depositor credit account with a

 

22  bank, including a demand, time, savings, passbook, share draft,

 

23  or like account, other than an account evidenced by a certificate

 

24  of deposit.

 

25        (b) "Afternoon" means the period of a day between noon and

 

26  midnight.

 

27        (c) "Banking day" means the part of a day on which a bank is

 


 1  open to the public for carrying on substantially all of its

 

 2  banking functions.

 

 3        (d) "Clearing-house" means an association of banks or other

 

 4  payors regularly clearing items.

 

 5        (e) "Customer" means any person having an account with a

 

 6  bank or for whom a bank has agreed to collect items, including a

 

 7  bank that maintains an account at another bank.

 

 8        (f) "Documentary draft" means a draft to be presented for

 

 9  acceptance or payment if specified documents, certificated

 

10  securities , ( under section 8102 ) or instructions for

 

11  uncertificated securities under ( section 8102, ), or other

 

12  certificates, statements, or the like are to be received by the

 

13  drawee or other payor before acceptance or payment of the draft.

 

14        (g) "Draft" means a draft as defined in section 3104 or an

 

15  item, other than an instrument, that is an order.

 

16        (h) "Drawee" means a person ordered in a draft to make

 

17  payment.

 

18        (i) "Item" means an instrument or a promise or order to pay

 

19  money handled by a bank for collection or pay. The term does not

 

20  include a payment order governed by article 2a or a credit or

 

21  debit card slip.

 

22        (j) "Midnight deadline" with respect to a bank is midnight

 

23  on its next banking day following the banking day on which it

 

24  receives the relevant item or notice or from which the time for

 

25  taking action commences to run, whichever is later.

 

26        (k) "Settle" means to pay in cash, by clearing-house

 

27  settlement, in a charge or credit or by remittance, or otherwise

 


 1  as agreed. A settlement may be either provisional or final.

 

 2        (l) "Suspends payments" with respect to a bank means that it

 

 3  has been closed by order of the supervisory authorities, that a

 

 4  public officer has been appointed to take it over or that it

 

 5  ceases or refuses to make payments in the ordinary course of

 

 6  business.

 

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

 

 8  sections in which they appear are:

 

 

     "Agreement for electronic presentment".     Section  4110.

10      "Bank".                                     Section  4105.

11      "Collecting bank".                          Section  4105.

12      "Depositary bank".                          Section  4105.

13      "Intermediary bank".                        Section  4105.

14      "Payor bank".                               Section  4105.

15      "Presenting bank".                          Section  4105.

16      "Presentment notice".                       Section  4110.

 

 

17        (3) The "Control" as provided in section 7106 and the

 

18  following definitions in other articles apply to this article:

 

 

19      "Acceptance".                               Section  3409.

20      "Alteration".                               Section  3409.

21      "Certificate of deposit".                   Section  3104.

22      "Cashier's check".                          Section  3104.

23      "Certified check".                          Section  3409.

24      "Check".                                    Section  3104.

25      "Draft".                                    Section  3104.

26      "Good faith".                               Section  3103.

27      "Holder in due course".                     Section  3302.


     "Instrument".                               Section  3104.

     "Notice of dishonor".                       Section  3503.

     "Order".                                    Section  3103.

     "Ordinary care".                            Section  3103.

     "Person entitled to enforce".               Section  3301.

     "Presentment".                              Section  3501.

     "Promise".                                  Section  3103.

     "Prove".                                    Section  3103.

     "Teller's check".                           Section  3104.

10      "Unauthorized signature".                   Section  3403.

 

 

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

 

12  principles of construction and interpretation applicable

 

13  throughout this article.

 

14        Sec. 4210. (1) A collecting bank has a security interest in

 

15  an item and any accompanying documents or the proceeds of any of

 

16  the following:

 

17        (a) In case of If an item is deposited in an account, to the

 

18  extent to which credit given for the item has been withdrawn or

 

19  applied.

 

20        (b) In case of If an item for which it has given credit is

 

21  available for withdrawal as of right, to the extent of the credit

 

22  given whether or not the credit is drawn upon and whether or not

 

23  there is a right of charge-back.

 

24        (c) If it makes an advance on or against the item.

 

25        (2) If credit given for several items received at one time

 

26  or pursuant to a single agreement is withdrawn or applied in part

 

27  the security interest remains upon all the items, any

 

28  accompanying documents or the proceeds of either. For the purpose


 

 1  of this section, credits first given are first withdrawn.

 

 2        (3) Receipt by a collecting bank of a final settlement for

 

 3  an item is a realization on its security interest in the item,

 

 4  accompanying documents and proceeds. So long as the bank does not

 

 5  receive final settlement for the item or give up possession of

 

 6  the item or possession or control of the accompanying documents

 

 7  for purposes other than collection, the security interest

 

 8  continues to that extent and is subject to article 9 except for

 

 9  the following:

 

10        (a) No A security agreement is not necessary to make the

 

11  security interest enforceable under ( section 9203(2)(c)(i). ).

 

12        (b) No A filing is not required to perfect the security

 

13  interest.

 

14        (c) The security interest has priority over conflicting

 

15  perfected security interests in the item, accompanying documents,

 

16  or proceeds.

 

17        Sec. 7101. This article shall be known and may be cited as

 

18  "uniform commercial code—documents of title".

 

19        Sec. 7102. (1) In As used in this article, unless the

 

20  context otherwise requires:

 

21        (a) "Bailee" means the a person who that by a warehouse

 

22  receipt, bill of lading, or other document of title acknowledges

 

23  possession of goods and contracts to deliver them.

 

24        (b) "Carrier" means a person that issues a bill of lading.

 

25        (c) (b) "Consignee" means the a person named in a bill of

 

26  lading to whom which or to whose order the bill promises

 

27  delivery.


 

 1        (d) (c) "Consignor" means the a person named in a bill of

 

 2  lading as the person from whom which the goods have been received

 

 3  for shipment.

 

 4        (e) (d) "Delivery order" means a written record that

 

 5  contains an order to deliver goods directed to a warehouseman,

 

 6  carrier, or other person who that in the ordinary course of

 

 7  business issues warehouse receipts or bills of lading.

 

 8        (e) "Document" means document of title as defined in the

 

 9  general definitions in article 1 (section 1201).

 

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

 

11  reasonable commercial standards of fair dealing.

 

12        (g) (f) "Goods" means all things which that are treated as

 

13  movable for the purposes of a contract of for storage or

 

14  transportation.

 

15        (h) (g) "Issuer" means a bailee who that issues a document

 

16  except that in relation to of title or, in the case of an

 

17  unaccepted delivery order, it means the person who that orders

 

18  the possessor of goods to deliver. Issuer The term includes any

 

19  person for whom which an agent or employee purports to act in

 

20  issuing a document if the agent or employee has real or apparent

 

21  authority to issue documents, notwithstanding that even if the

 

22  issuer received no did not receive any goods, or that the goods

 

23  were misdescribed, or that in any other respect the agent or

 

24  employee violated his the issuer's instructions.

 

25        (h) "Warehouseman" is a person engaged in the business of

 

26  storing goods for hire.

 

27        (i) "Person entitled under the document" means the holder,


 

 1  in the case of a negotiable document of title, or the person to

 

 2  which delivery of the goods is to be made by the terms of, or

 

 3  pursuant to instructions in a record under, a nonnegotiable

 

 4  document of title.

 

 5        (j) "Record" means information that is inscribed on a

 

 6  tangible medium or that is stored in an electronic or other

 

 7  medium and is retrievable in perceivable form.

 

 8        (k) "Sign" means any of the following, with present intent

 

 9  to authenticate or adopt a record:

 

10        (i) To execute or adopt a tangible symbol.

 

11        (ii) To attach to or logically associate with the record an

 

12  electronic sound, symbol, or process.

 

13        (l) "Shipper" means a person that enters into a contract of

 

14  transportation with a carrier.

 

15        (m) "Warehouse" means a person engaged in the business of

 

16  storing goods for hire.

 

17        (2) Other definitions applying to this article or to

 

18  specified parts thereof, and the sections in which they appear

 

19  are:

 

 

20      "Duly negotiate".                           Section 7501.

21      "Person entitled under the document".       Section 7403(4).

 

 

22        (3) Definitions in other articles applying to this article

 

23  and the sections in which they appear are:

 

 

24      "Contract for sale".                        Section 2106.

25      "Overseas".                                 Section 2323.


    "Receipt" of goods.                         Section 2103.

 

 

 2        (2) All of the following definitions from other articles

 

 3  apply to this article:

 

 4        (a) "Contract for sale" as defined in section 2106.

 

 5        (b) "Lessee in the ordinary course of business" as defined

 

 6  in section 2A103.

 

 7        (c) "Receipt of goods" as defined in section 2103.

 

 8        (3) (4) In addition article Article 1 contains general

 

 9  definitions and principles of construction and interpretation

 

10  applicable throughout this article.

 

11        Sec. 7103. (1) To the extent that any treaty or statute of

 

12  the United States, regulatory statute of this state or tariff,

 

13  classification or regulation filed or issued pursuant thereto is

 

14  applicable, the provisions of this article are subject thereto.

 

15  This article is subject to any treaty or statute of the United

 

16  States or regulatory statute of this state to the extent the

 

17  treaty, statute, or regulatory statute is applicable.

 

18        (2) This article does not modify or repeal any law

 

19  prescribing the form or content of a document of title or the

 

20  services or facilities to be afforded by a bailee, or otherwise

 

21  regulating a bailee’s business in respects not specifically

 

22  treated in this article. However, violation of such a law does

 

23  not affect the status of a document of title that otherwise is

 

24  within the definition of a document of title.

 

25        (3) This act modifies, limits, and supersedes the electronic

 

26  signatures in the global and national commerce act, 15 USC 7001

 


 1  to 7031, but does not modify, limit, or supersede 15 USC 7001(a)

 

 2  or authorize electronic delivery of any of the notices described

 

 3  in 15 USC 7003(b).

 

 4        (4) To the extent there is a conflict between the uniform

 

 5  electronic transactions act, 2000 PA 305, MCL 450.831 to 450.849,

 

 6  and this article, this article governs.

 

 7        Sec. 7104. (1) A warehouse receipt, bill of lading or other

 

 8  document of title is negotiable Except as otherwise provided in

 

 9  subsection (3), a document of title is negotiable if by its terms

 

10  the goods are to be delivered to bearer or to the order of a

 

11  named person.

 

12        (a) if by its terms the goods are to be delivered to bearer

 

13  or to the order of a named person; or

 

14        (b) where recognized in overseas trade, if it runs to a

 

15  named person or assigns.

 

16        (2) Any other A document of title other than one described

 

17  in subsection (1) is non-negotiable nonnegotiable. A bill of

 

18  lading in which it is stated that states that the goods are

 

19  consigned to a named person is not made negotiable by a provision

 

20  that the goods are to be delivered only against a written an

 

21  order in a record signed by the same or another named person.

 

22        (3) A document of title is nonnegotiable if, at the time it

 

23  is issued, the document has a conspicuous legend, however

 

24  expressed, that it is nonnegotiable.

 

25        Sec. 7105. (1) The omission from either part 2 or part 3 of

 

26  this article of a provision corresponding to a provision made in

 

27  the other part does not imply that a corresponding rule of law is

 


 1  not applicable. Upon request of a person entitled under an

 

 2  electronic document of title, the issuer of the electronic

 

 3  document may issue a tangible document of title as a substitute

 

 4  for the electronic document if both of the following are met:

 

 5        (a) The person entitled under the electronic document

 

 6  surrenders control of the document to the issuer.

 

 7        (b) The tangible document when issued contains a statement

 

 8  that it is issued in substitution for the electronic document.

 

 9        (2) All of the following apply upon issuance of a tangible

 

10  document of title in substitution for an electronic document of

 

11  title in accordance with subsection (1):

 

12        (a) The electronic document ceases to have any effect or

 

13  validity.

 

14        (b) The person that procured issuance of the tangible

 

15  document warrants to all subsequent persons entitled under the

 

16  tangible document that the warrantor was a person entitled under

 

17  the electronic document when the warrantor surrendered control of

 

18  the electronic document to the issuer.

 

19        (3) Upon request of a person entitled under a tangible

 

20  document of title, the issuer of the tangible document may issue

 

21  an electronic document of title as a substitute for the tangible

 

22  document if both of the following are met:

 

23        (a) The person entitled under the tangible document

 

24  surrenders possession of the document to the issuer.

 

25        (b) The electronic document when issued contains a statement

 

26  that it is issued in substitution for the tangible document.

 

27        (4) All of the following apply upon issuance of an

 


 1  electronic document of title in substitution for a tangible

 

 2  document of title in accordance with subsection (3):

 

 3        (a) The tangible document ceases to have any effect or

 

 4  validity.

 

 5        (b) The person that procured issuance of the electronic

 

 6  document warrants to all subsequent persons entitled under the

 

 7  electronic document that the warrantor was a person entitled

 

 8  under the tangible document when the warrantor surrendered

 

 9  possession of the tangible document to the issuer.

 

10        Sec. 7106. (1) A person has control of an electronic

 

11  document of title if a system employed for evidencing the

 

12  transfer of interests in the electronic document reliably

 

13  establishes that person as the person to which the electronic

 

14  document was issued or transferred.

 

15        (2) A system satisfies subsection (1), and a person is

 

16  considered to have control of an electronic document of title, if

 

17  the document is created, stored, and assigned in a manner that

 

18  meets all of the following:

 

19        (a) A single authoritative copy of the document exists that

 

20  is unique, identifiable, and, except as otherwise provided in

 

21  subdivisions (d), (e), and (f), unalterable.

 

22        (b) The authoritative copy described in subdivision (a)

 

23  identifies the person asserting control as 1 of the following:

 

24        (i) The person to which the document was issued.

 

25        (ii) If the authoritative copy indicates that the document

 

26  has been transferred, the person to which the document was most

 

27  recently transferred.

 


 1        (c) The authoritative copy described in subdivision (a) is

 

 2  communicated to and maintained by the person asserting control or

 

 3  its designated custodian.

 

 4        (d) Copies or amendments that add or change an identified

 

 5  assignee of the authoritative copy described in subdivision (a)

 

 6  can be made only with the consent of the person asserting

 

 7  control.

 

 8        (e) Each copy of the authoritative copy described in

 

 9  subdivision (a) and any copy of a copy is readily identifiable as

 

10  a copy that is not the authoritative copy.

 

11        (f) Any amendment of the authoritative copy described in

 

12  subdivision (a) is readily identifiable as authorized or

 

13  unauthorized.

 

14        Sec. 7201. (1) A warehouse receipt may be issued by any

 

15  warehouseman warehouse.

 

16        (2) Where goods including If distilled spirits, and

 

17  agricultural commodities, or any other goods are stored under a

 

18  statute requiring a bond against withdrawal or a license for the

 

19  issuance of receipts in the nature of warehouse receipts, a

 

20  receipt issued for the goods has like effect as is considered to

 

21  be a warehouse receipt even though if issued by a person who that

 

22  is the owner of the goods and is not a warehouseman warehouse.

 

23        Sec. 7202. (1) A warehouse receipt need not be in any

 

24  particular form.

 

25        (2) Unless a warehouse receipt embodies within its written

 

26  or printed terms provides for each of the following, the

 

27  warehouseman warehouse is liable for damages caused by the

 


 1  omission to a person injured thereby by its omission:

 

 2        (a) A statement of the location of the warehouse where the

 

 3  goods are stored. ;

 

 4        (b) the The date of issue of the receipt. ;

 

 5        (c) the consecutive number The unique identification code of

 

 6  the receipt. ;

 

 7        (d) a A statement whether the goods received will be

 

 8  delivered to the bearer, to a specified named person, or to a

 

 9  specified named person or his its order. ;

 

10        (e) the The rate of storage and handling charges, except

 

11  that where unless goods are stored under a field warehousing

 

12  arrangement, in which case a statement of that fact is sufficient

 

13  on a non-negotiable nonnegotiable receipt. ;

 

14        (f) a A description of the goods or of the packages

 

15  containing them. ;

 

16        (g) the The signature of the warehouseman, which may be made

 

17  by his authorized agent; warehouse or its agent.

 

18        (h) if If the receipt is issued for goods of which that the

 

19  warehouseman is owner warehouse owners, either solely, or

 

20  jointly, or in common with others, the fact of such a statement

 

21  of the fact of that ownership. ; and

 

22        (i) a A statement of the amount of advances made and of

 

23  liabilities incurred for which the warehouseman warehouse claims

 

24  a lien or security interest, (section 7209). If unless the

 

25  precise amount of such advances made or of such liabilities

 

26  incurred, is, at the time of the issue of the receipt, is unknown

 

27  to the warehouseman warehouse or to his its agent who issues it

 


 1  that issued the receipt, in which case a statement of the fact

 

 2  that advances have been made or liabilities incurred and the

 

 3  purpose thereof of the advances or liabilities is sufficient.

 

 4        (3) A warehouseman warehouse may insert in his its receipt

 

 5  any other terms which that are not contrary to the provisions of

 

 6  this act and do not impair his its obligation of delivery under (

 

 7  section 7403 ) or his its duty of care under ( section 7204. ).

 

 8  Any contrary provisions shall be is ineffective.

 

 9        Sec. 7203. A party to or purchaser for value in good faith

 

10  of a document of title, other than a bill of lading, relying in

 

11  either case that relies upon the description therein of the goods

 

12  in the document may recover from the issuer damages caused by the

 

13  non-receipt nonreceipt or misdescription of the goods, except to

 

14  the extent that the any of the following apply:

 

15        (a) The document conspicuously indicates that the issuer

 

16  does not know whether all or any part or all of the goods in fact

 

17  were received or conform to the description, as where such as a

 

18  case in which the description is in terms of marks or labels or

 

19  kind, quantity, or condition, or the receipt or description is

 

20  qualified by "contents, condition, and quality unknown", "said to

 

21  contain", or the like, if such indication be words of similar

 

22  import, if the indication is true. , or the

 

23        (b) The party or purchaser otherwise has notice of the

 

24  nonreceipt or misdescription.

 

25        Sec. 7204. (1) A warehouseman warehouse is liable for

 

26  damages for loss of or injury to the goods caused by his its

 

27  failure to exercise such care in with regard to them as the goods

 


 1  that a reasonably careful man person would exercise under like

 

 2  similar circumstances. but unless Unless otherwise agreed, he the

 

 3  warehouse is not liable for damages which that could not have

 

 4  been avoided by the exercise of such that care.

 

 5        (2) Damages may be limited by a term in the a warehouse

 

 6  receipt or storage agreement limiting the amount of liability in

 

 7  case of loss or damage , and setting forth a specific liability

 

 8  per article or item, or value per unit of weight, beyond which

 

 9  the warehouseman shall not be liable; provided, however, that

 

10  such liability may on written beyond which the warehouse is not

 

11  liable. Such a limitation is not effective with respect to the

 

12  warehouse’s liability for conversion to its own use. On request

 

13  of the bailor in a record at the time of signing such the storage

 

14  agreement or within a reasonable time after receipt of the

 

15  warehouse receipt, the warehouse's liability may be increased on

 

16  part or all of the goods thereunder, in which covered by the

 

17  storage agreement or the warehouse receipt. In this event,

 

18  increased rates may be charged based on such increased valuation,

 

19  but that no such increase shall be permitted contrary to a lawful

 

20  limitation of liability contained in the warehouseman's tariff,

 

21  if any. No such limitation is effective with respect to the

 

22  warehouseman's liability for conversion to his own use an

 

23  increased valuation of the goods.

 

24        (3) Reasonable provisions as to the time and manner of

 

25  presenting claims and instituting commencing actions based on the

 

26  bailment may be included in the warehouse receipt or tariff

 

27  storage agreement.

 


 1        Sec. 7205. A buyer in the ordinary course of business of

 

 2  fungible goods sold and delivered by a warehouseman who warehouse

 

 3  that is also in the business of buying and selling such those

 

 4  goods takes the goods free of any claim under a warehouse receipt

 

 5  even though it if the receipt is negotiable and has been duly

 

 6  negotiated.

 

 7        Sec. 7206. (1) A warehouseman may on notifying warehouse, by

 

 8  giving notice to the person on whose account the goods are held

 

 9  and any other person known to claim an interest in the goods, may

 

10  require payment of any charges and removal of the goods from the

 

11  warehouse at the termination of the period of storage fixed by

 

12  the document , of title or, if no a period is not fixed, within a

 

13  stated period not less than 30 days after the notification

 

14  warehouse gives notice. If the goods are not removed before the

 

15  date specified in the notification notice, the warehouseman

 

16  warehouse may sell them in accordance with the provisions of the

 

17  section on enforcement of a warehouseman's lien (section 7210)

 

18  pursuant to section 7210.

 

19        (2) If a warehouseman warehouse in good faith believes that

 

20  the goods are about to deteriorate or decline in value to less

 

21  than the amount of his its lien within the time prescribed

 

22  provided in subsection (1) for notification, advertisement and

 

23  sale and section 7210, the warehouseman warehouse may specify in

 

24  the notification notice given under subsection (1) any reasonable

 

25  shorter time for removal of the goods and, in case if the goods

 

26  are not removed, may sell them at public sale held not less than

 

27  1 week after a single advertisement or posting.

 


 1        (3) If, as a result of a quality or condition of the goods

 

 2  of which the warehouseman had no warehouse did not have notice at

 

 3  the time of deposit, the goods are a hazard to other property, or

 

 4  to the warehouse or to the warehouse facilities, or other

 

 5  persons, the warehouseman warehouse may sell the goods at public

 

 6  or private sale without advertisement or posting on reasonable

 

 7  notification to all persons known to claim an interest in the

 

 8  goods. If the warehouseman warehouse, after a reasonable effort,

 

 9  is unable to sell the goods, he it may dispose of them in any

 

10  lawful manner and shall incur no does not incur liability by

 

11  reason of such that disposition.

 

12        (4) The warehouseman must A warehouse shall deliver the

 

13  goods to any person entitled to them under this article upon due

 

14  demand made at any time prior to before sale or other disposition

 

15  under this section.

 

16        (5) The warehouseman A warehouse may satisfy his its lien

 

17  from the proceeds of any sale or disposition under this section

 

18  but must shall hold the balance for delivery on the demand of any

 

19  person to whom he which the warehouse would have been bound to

 

20  deliver the goods.

 

21        Sec. 7207. (1) Unless the warehouse receipt provides

 

22  otherwise, provides, a warehouseman must a warehouse shall keep

 

23  separate the goods covered by each receipt so as to permit at all

 

24  times identification and delivery of those goods. except that

 

25  However, different lots of fungible goods may be commingled.

 

26        (2) Fungible If different lots of fungible goods so are

 

27  commingled, the goods are owned in common by the persons entitled

 


 1  thereto and the warehouseman warehouse is severally liable to

 

 2  each owner for that owner's share. Where If, because of

 

 3  overissue, a mass of fungible goods is insufficient to meet all

 

 4  the receipts which the warehouseman warehouse has issued against

 

 5  it, the persons entitled include all holders to whom which

 

 6  overissued receipts have been duly negotiated.

 

 7        Sec. 7208. Where If a blank in a negotiable tangible

 

 8  warehouse receipt has been filled in without authority, a good

 

 9  faith purchaser for value and without notice of the want lack

 

10  of authority may treat the insertion as authorized. Any other

 

11  unauthorized alteration leaves any tangible or electronic

 

12  warehouse receipt enforceable against the issuer according to its

 

13  original tenor.

 

14        Sec. 7209. (1) A warehouseman warehouse has a lien against

 

15  the bailor on the goods covered by a warehouse receipt or storage

 

16  agreement or on the proceeds thereof of those goods in his its

 

17  possession for charges for storage or transportation, ( including

 

18  demurrage and terminal charges, ), insurance, labor, or other

 

19  charges, present or future, in relation to the goods, and for

 

20  expenses necessary for preservation of the goods or reasonably

 

21  incurred in their sale pursuant to law. If the person on whose

 

22  account the goods are held is liable for like similar charges or

 

23  expenses in relation to other goods whenever deposited and it is

 

24  stated in the receipt warehouse receipt or storage agreement that

 

25  a lien is claimed for charges and expenses in relation to other

 

26  goods, the warehouseman warehouse also has a lien against him the

 

27  goods covered by the warehouse receipt or storage agreement or on

 


 1  the proceeds of those goods in its possession for such those

 

 2  charges and expenses, whether or not the other goods have been

 

 3  delivered by the warehouseman. But warehouse. However, as against

 

 4  a person to whom which a negotiable warehouse receipt is duly

 

 5  negotiated, a warehouseman's warehouse's lien is limited to

 

 6  charges in an amount or at a rate specified on in the warehouse

 

 7  receipt or, if no charges are so specified, then to a reasonable

 

 8  charge for storage of the specific goods covered by the receipt

 

 9  subsequent to the date of the receipt.

 

10        (2) The warehouseman A warehouse may also reserve a security

 

11  interest against the bailor for a the maximum amount specified on

 

12  the receipt for charges other than those specified in subsection

 

13  (1), such as for money advanced and interest. Such a The security

 

14  interest is governed by the article 9. on secured transactions

 

15  (article 9).

 

16        (3) A warehouseman's warehouse's lien for charges and

 

17  expenses under subsection (1) or a security interest under

 

18  subsection (2) is also effective against any person who that so

 

19  entrusted the bailor with possession of the goods that a pledge

 

20  of them by him the bailor to a good faith purchaser for value

 

21  would have been valid. but However, the lien or security interest

 

22  is not effective against a person as to whom the document confers

 

23  no right in the goods covered by it under section 7503. that

 

24  before issuance of a document of title had a legal interest or a

 

25  perfected security interest in the goods and that did not do any

 

26  of the following:

 

27        (a) Deliver or entrust the goods or any document of title

 


 1  covering the goods to the bailor or the bailor’s nominee with any

 

 2  of the following:

 

 3        (i) Actual or apparent authority to ship, store, or sell.

 

 4        (ii) Power to obtain delivery under section 7403.

 

 5        (iii) Power of disposition under section 2403, 2A304(2),

 

 6  2A305(2), 9320, or 9321 or other statute or rule of law.

 

 7        (b) Acquiesce in the procurement by the bailor or its

 

 8  nominee of any document.

 

 9        (4) A warehouse’s lien on household goods for charges and

 

10  expenses in relation to the goods under subsection (1) is also

 

11  effective against all persons if the depositor was the legal

 

12  possessor of the goods at the time of deposit. As used in this

 

13  subsection, "household goods" means furniture, furnishings, or

 

14  personal effects used by the depositor in a dwelling.

 

15        (5) (4) A warehouseman warehouse loses his its lien on any

 

16  goods which he that it voluntarily delivers or which he

 

17  unjustifiably refuses to deliver.

 

18        Sec. 7210. (1) Except as otherwise provided in subsection

 

19  (2), a warehouseman's warehouse's lien may be enforced by public

 

20  or private sale of the goods, in bloc bulk or in parcels

 

21  packages, at any time or place and on any terms which that are

 

22  commercially reasonable, after notifying all persons known to

 

23  claim an interest in the goods. Such The notification must

 

24  include a statement of the amount due, the nature of the proposed

 

25  sale, and the time and place of any public sale. The fact that a

 

26  better price could have been obtained by a sale at a different

 

27  time or in a different method different from that selected by the

 


 1  warehouseman warehouse is not of itself sufficient to establish

 

 2  that the sale was not made in a commercially reasonable manner.

 

 3  If the warehouseman either A warehouse sells in a commercially

 

 4  reasonable manner if the warehouse sells the goods in the usual

 

 5  manner in any recognized market therefor, or if he for the goods,

 

 6  sells at the price current in such that market at the time of his

 

 7  the sale, or if he has otherwise sold sells in conformity with

 

 8  commercially reasonable practices among dealers in the type of

 

 9  goods sold. , he has sold in a commercially reasonable manner. A

 

10  sale of more goods than apparently necessary to be offered to

 

11  insure ensure satisfaction of the obligation is not commercially

 

12  reasonable, except in cases covered by the preceding sentence.

 

13        (2) A warehouseman's warehouse may enforce its lien on

 

14  goods, other than goods stored by a merchant in the course of his

 

15  its business, may be enforced only as follows only if the

 

16  following requirements are satisfied:

 

17        (a) All persons known to claim an interest in the goods must

 

18  be notified.

 

19        (b) The notification must be delivered in person or sent by

 

20  registered or certified letter to the last known address of any

 

21  person to be notified.

 

22        (c) The notification must include an itemized statement of

 

23  the claim, a description of the goods subject to the lien, a

 

24  demand for payment within a specified time not less than 10 days

 

25  after receipt of the notification, and a conspicuous statement

 

26  that unless the claim is paid within that time the goods will be

 

27  advertised for sale and sold by auction at a specified time and

 


 1  place.

 

 2        (c) (d) The sale must conform to the terms of the

 

 3  notification.

 

 4        (d) (e) The sale must be held at the nearest suitable place

 

 5  to that where the goods are held or stored.

 

 6        (e) (f) After the expiration of the time given in the

 

 7  notification, an advertisement of the sale must be published once

 

 8  a week for 2 weeks consecutively in a newspaper of general

 

 9  circulation where the sale is to be held. The advertisement must

 

10  include a description of the goods, the name of the person on

 

11  whose account they the goods are being held, and the time and

 

12  place of the sale. The sale must take place at least 15 days

 

13  after the first publication. If there is no newspaper of general

 

14  circulation where the sale is to be held, the advertisement must

 

15  be posted at least 10 days before the sale in not less fewer than

 

16  6 conspicuous places in the neighborhood of the proposed sale.

 

17        (3) Before any sale pursuant to this section, any person

 

18  claiming a right in the goods may pay the amount necessary to

 

19  satisfy the lien and the reasonable expenses incurred under in

 

20  complying with this section. In that event, the goods must may

 

21  not be sold , but must be retained by the warehouseman warehouse

 

22  subject to the terms of the receipt and this article.

 

23        (4) The warehouseman A warehouse may buy at any public sale

 

24  held pursuant to this section.

 

25        (5) A purchaser in good faith of goods sold to enforce a

 

26  warehouseman's warehouse's lien takes the goods free of any

 

27  rights of persons against whom which the lien was valid, despite

 


 1  the warehouse's noncompliance by the warehouseman with the

 

 2  requirements of this section.

 

 3        (6) The warehouseman A warehouse may satisfy his its lien

 

 4  from the proceeds of any sale pursuant to this section but must

 

 5  shall hold the balance, if any, for delivery on demand to any

 

 6  person to whom he which the warehouse would have been bound to

 

 7  deliver the goods.

 

 8        (7) The rights provided by this section shall be are in

 

 9  addition to all other rights allowed by law to a creditor against

 

10  his a debtor.

 

11        (8) Where If a lien is on goods stored by a merchant in the

 

12  course of his its business, the lien may be enforced in

 

13  accordance with either subsection (1) or (2).

 

14        (9) The warehouseman A warehouse is liable for damages

 

15  caused by failure to comply with the requirements for sale under

 

16  this section and, in case of willful violation, is liable for

 

17  conversion.

 

18        Sec. 7301. (1) A consignee of a non-negotiable nonnegotiable

 

19  bill who of lading which has given value in good faith, or a

 

20  holder to whom which a negotiable bill has been duly negotiated,

 

21  relying in either case upon the description therein of the goods

 

22  , in the bill or upon the date therein shown in the bill, may

 

23  recover from the issuer damages caused by the misdating of the

 

24  bill or the nonreceipt or misdescription of the goods, except to

 

25  the extent that the document bill indicates that the issuer does

 

26  not know whether any part or all of the goods in fact were

 

27  received or conform to the description, such as where in a case

 


 1  in which the description is in terms of marks or labels or kind,

 

 2  quantity, or condition or the receipt or description is qualified

 

 3  by "contents or condition of contents of packages unknown", "said

 

 4  to contain", "shipper's weight, load, and count", or the like

 

 5  words of similar import, if such that indication be is true.

 

 6        (2) When All of the following apply if goods are loaded by

 

 7  an the issuer who is a common carrier, the of a bill of lading:

 

 8        (a) The issuer must shall count the packages of goods if

 

 9  package freight shipped in packages and ascertain the kind and

 

10  quantity if shipped in bulk. freight. In such cases

 

11        (b) Words such as "shipper's weight, load, and count", or

 

12  other words of similar import indicating that the description was

 

13  made by the shipper are ineffective except as to freight goods

 

14  concealed by in packages.

 

15        (3) When bulk freight is If bulk goods are loaded by a

 

16  shipper who that makes available to the issuer of a bill of

 

17  lading adequate facilities for weighing such freight, an issuer

 

18  who is a common carrier must those goods, the issuer shall

 

19  ascertain the kind and quantity within a reasonable time after

 

20  receiving the written shipper's request of the shipper in a

 

21  record to do so. In such cases that case, "shipper's weight" or

 

22  other words of like purport similar import are ineffective.

 

23        (4) The issuer may by inserting of a bill of lading, by

 

24  including in the bill the words "shipper's weight, load, and

 

25  count", or other words of like purport similar import, may

 

26  indicate that the goods were loaded by the shipper, ; and, if

 

27  such that statement be is true, the issuer shall is not be liable

 


 1  for damages caused by the improper loading. But their However,

 

 2  omission of those words does not imply liability for such damages

 

 3  caused by improper loading.

 

 4        (5) The shipper shall be deemed to have guaranteed to the A

 

 5  shipper guarantees to an issuer the accuracy at the time of

 

 6  shipment of the description, marks, labels, number, kind,

 

 7  quantity, condition, and weight, as furnished by him; the

 

 8  shipper, and the shipper shall indemnify the issuer against

 

 9  damage caused by inaccuracies in such those particulars. The This

 

10  right of the issuer to such indemnity shall in no way does not

 

11  limit his the issuer's responsibility and or liability under the

 

12  contract of carriage to any person other than the shipper.

 

13        Sec. 7302. (1) The issuer of a through bill of lading or

 

14  other document of title embodying an undertaking to be performed

 

15  in part by persons a person acting as its agents or by connecting

 

16  carriers agent or by a performing carrier, is liable to anyone

 

17  any person entitled to recover on the bill or other document for

 

18  any breach by such the other persons or by a connecting person or

 

19  the performing carrier of its obligation under the bill or other

 

20  document. but However, to the extent that the bill or other

 

21  document covers an undertaking to be performed overseas or in

 

22  territory not contiguous to the continental United States or an

 

23  undertaking including matters other than transportation, this

 

24  liability for breach by the other person or the performing

 

25  carrier may be varied by agreement of the parties.

 

26        (2) Where If goods covered by a through bill of lading or

 

27  other document of title embodying an undertaking to be performed

 


 1  in part by persons a person other than the issuer are received by

 

 2  any such that person, he the person is subject, with respect to

 

 3  his its own performance while the goods are in his its

 

 4  possession, to the obligation of the issuer. His The person's

 

 5  obligation is discharged by delivery of the goods to another such

 

 6  person pursuant to the bill or other document , and does not

 

 7  include liability for breach by any other such persons person or

 

 8  by the issuer.

 

 9        (3) The issuer of such a through bill of lading or other

 

10  document shall be of title described in subsection (1) is

 

11  entitled to recover all of the following from the connecting

 

12  performing carrier, or such other person in possession of the

 

13  goods when the breach of the obligation under the bill or other

 

14  document occurred: , the

 

15        (a) The amount it may be required to pay to anyone any

 

16  person entitled to recover on the bill or other document therefor

 

17  for the breach, as may be evidenced by any receipt, judgment, or

 

18  transcript thereof, and the of judgment.

 

19        (b) The amount of any expense reasonably incurred by it the

 

20  issuer in defending any action brought by anyone commenced by any

 

21  person entitled to recover on the bill or other document therefor

 

22  for the breach.

 

23        Sec. 7303. (1) Unless the bill of lading otherwise provides,

 

24  the a carrier may deliver the goods to a person or destination

 

25  other than that stated in the bill or may otherwise dispose of

 

26  the goods, without liability for misdelivery, on instructions

 

27  from any of the following:

 


 1        (a) the The holder of a negotiable bill. ; or

 

 2        (b) the The consignor on a non-negotiable nonnegotiable

 

 3  bill, notwithstanding even if the consignee has given contrary

 

 4  instructions. from the consignee; or

 

 5        (c) the The consignee on a non-negotiable nonnegotiable bill

 

 6  in the absence of contrary instructions from the consignor, if

 

 7  the goods have arrived at the billed destination or if the

 

 8  consignee is in possession of the tangible bill ; or in control

 

 9  of the electronic bill.

 

10        (d) the The consignee on a non-negotiable nonnegotiable

 

11  bill, if he the consignee is entitled as against the consignor to

 

12  dispose of them the goods.

 

13        (2) Unless such instructions described in subsection (1) are

 

14  noted on included in a negotiable bill of lading, a person to

 

15  whom which the bill is duly negotiated can may hold the bailee

 

16  according to the original terms.

 

17        Sec. 7304. (1) Except where as customary in overseas

 

18  international transportation, a tangible bill of lading must may

 

19  not be issued in a set of parts. The issuer is liable for damages

 

20  caused by violation of this subsection.

 

21        (2) Where If a tangible bill of lading is lawfully drawn

 

22  issued in a set of parts, each of which is numbered and contains

 

23  an identification code and is expressed to be valid only if the

 

24  goods have not been delivered against any other part, the whole

 

25  of the parts constitutes 1 bill.

 

26        (3) Where If a tangible negotiable bill of lading is

 

27  lawfully issued in a set of parts and different parts are

 


 1  negotiated to different persons, the title of the holder to whom

 

 2  which the first due negotiation is made prevails as to both the

 

 3  document of title and the goods even though if any later holder

 

 4  may have received the goods from the carrier in good faith and

 

 5  discharged the carrier's obligation by surrender of his

 

 6  surrendering its part.

 

 7        (4) Any A person who that negotiates or transfers a single

 

 8  part of a tangible bill of lading drawn issued in a set is liable

 

 9  to holders of that part as if it were the whole set.

 

10        (5) The bailee is obliged to shall deliver in accordance

 

11  with part 4 of this article against the first presented part of a

 

12  tangible bill of lading lawfully drawn issued in a set. Such

 

13  delivery Delivery in this manner discharges the bailee's

 

14  obligation on the whole bill.

 

15        Sec. 7305. (1) Instead of issuing a bill of lading to the

 

16  consignor at the place of shipment, a carrier, may at the request

 

17  of the consignor, may procure the bill to be issued at

 

18  destination or at any other place designated in the request.

 

19        (2) Upon request of anyone any person entitled as against

 

20  the a carrier to control the goods while in transit and on

 

21  surrender of possession or control of any outstanding bill of

 

22  lading or other receipt covering such the goods, the issuer,

 

23  subject to section 7105, may procure a substitute bill to be

 

24  issued at any place designated in the request.

 

25        Sec. 7307. (1) A carrier has a lien on the goods covered by

 

26  a bill of lading or on the proceeds of those goods in its

 

27  possession for charges subsequent to after the date of its the

 


 1  carrier's receipt of the goods for storage or transportation, (

 

 2  including demurrage and terminal charges, ) and for expenses

 

 3  necessary for preservation of the goods incident to their

 

 4  transportation or reasonably incurred in their sale pursuant to

 

 5  law. But However, against a purchaser for value of a negotiable

 

 6  bill of lading, a carrier's lien is limited to charges stated in

 

 7  the bill or the applicable tariffs , or, if no charges are

 

 8  stated, then to a reasonable charge.

 

 9        (2) A lien for charges and expenses under subsection (1) on

 

10  goods which that the carrier was required by law to receive for

 

11  transportation is effective against the consignor or any person

 

12  entitled to the goods unless the carrier had notice that the

 

13  consignor lacked authority to subject the goods to such those

 

14  charges and expenses. Any other lien under subsection (1) is

 

15  effective against the consignor and any person who that permitted

 

16  the bailor to have control or possession of the goods unless the

 

17  carrier had notice that the bailor lacked such authority.

 

18        (3) A carrier loses his its lien on any goods which he that

 

19  it voluntarily delivers or which he unjustifiably refuses to

 

20  deliver.

 

21        Sec. 7308. (1) A carrier's lien on goods may be enforced by

 

22  public or private sale of the goods, in bloc bulk or in parcels

 

23  packages, at any time or place and on any terms which that are

 

24  commercially reasonable, after notifying all persons known to

 

25  claim an interest in the goods. Such The notification must

 

26  include a statement of the amount due, the nature of the proposed

 

27  sale, and the time and place of any public sale. The fact that a

 


 1  better price could have been obtained by a sale at a different

 

 2  time or in a method different method from that selected by the

 

 3  carrier is not of itself sufficient to establish that the sale

 

 4  was not made in a commercially reasonable manner. If The carrier

 

 5  sells goods in a commercially reasonable manner if the carrier

 

 6  either sells the goods in the usual manner in any recognized

 

 7  market therefor or if he for that type of goods, sells at the

 

 8  price current in such that market at the time of his the sale, or

 

 9  if he has otherwise sold sells in conformity with commercially

 

10  reasonable practices among dealers in the type of goods sold. he

 

11  has sold in a commercially reasonable manner. A sale of more

 

12  goods than apparently necessary to be offered to ensure

 

13  satisfaction of the obligation is not commercially reasonable

 

14  except in cases covered by the preceding sentence.

 

15        (2) Before any sale pursuant to this section, any person

 

16  claiming a right in the goods may pay the amount necessary to

 

17  satisfy the lien and the reasonable expenses incurred under in

 

18  complying with this section. In that event, the goods must may

 

19  not be sold , but must be retained by the carrier subject to the

 

20  terms of the bill of lading and this article.

 

21        (3) The A carrier may buy at any public sale pursuant to

 

22  this section.

 

23        (4) A purchaser in good faith of goods sold to enforce a

 

24  carrier's lien takes the goods free of any rights of persons

 

25  against whom which the lien was valid, despite the carrier's

 

26  noncompliance by the carrier with the requirements of this

 

27  section.

 


 1        (5) The A carrier may satisfy his its lien from the proceeds

 

 2  of any sale pursuant to this section but must shall hold the

 

 3  balance, if any, for delivery on demand to any person to whom he

 

 4  which the carrier would have been bound to deliver the goods.

 

 5        (6) The rights provided by this section shall be are in

 

 6  addition to all other rights allowed by law to a creditor against

 

 7  his a debtor.

 

 8        (7) A carrier's lien may be enforced in accordance with

 

 9  pursuant to either subsection (1) or the procedure set forth in

 

10  subsection (2) of section 7210 7210(2).

 

11        (8) The A carrier is liable for damages caused by failure to

 

12  comply with the requirements for sale under this section and, in

 

13  case of willful violation, is liable for conversion.

 

14        Sec. 7309. (1) A carrier who that issues a bill of lading,

 

15  whether negotiable or non-negotiable must nonnegotiable, shall

 

16  exercise the degree of care in relation to the goods which a

 

17  reasonably careful man person would exercise under like similar

 

18  circumstances. This subsection does not repeal or change any law

 

19  affect any statute, regulation, or rule of law which that imposes

 

20  liability upon a common carrier for damages not caused by its

 

21  negligence.

 

22        (2) Damages may be limited by a provision term in the bill

 

23  of lading or in a transportation agreement that the carrier's

 

24  liability shall may not exceed a value stated in the document

 

25  bill or transportation agreement if the carrier's rates are

 

26  dependent upon value and the consignor by the carrier's tariff is

 

27  afforded an opportunity to declare a higher value or a value as

 


 1  lawfully provided in the tariff, or where no tariff is filed he

 

 2  is otherwise and the consignor is advised of such the

 

 3  opportunity. ; but no However, such a limitation is not effective

 

 4  with respect to the carrier's liability for conversion to its own

 

 5  use.

 

 6        (3) Reasonable provisions as to the time and manner of

 

 7  presenting claims and instituting commencing actions based on the

 

 8  shipment may be included in a bill of lading or tariff a

 

 9  transportation agreement.

 

10        Sec. 7401. The obligations imposed by this article on an

 

11  issuer apply to a document of title regardless of the fact that

 

12  even if any of the following apply:

 

13        (a) the The document may does not comply with the

 

14  requirements of this article or of any other law statute, rule,

 

15  or regulation regarding its issue issuance, form, or content. ;

 

16  or

 

17        (b) the The issuer may have violated laws regulating the

 

18  conduct of his its business. ; or

 

19        (c) the The goods covered by the document were owned by the

 

20  bailee at the time when the document was issued. ; or

 

21        (d) the The person issuing the document does not come within

 

22  the definition of warehouseman if it is not a warehouse but the

 

23  document purports to be a warehouse receipt.

 

24        Sec. 7402. Neither a A duplicate nor or any other document

 

25  of title purporting to cover goods already represented by an

 

26  outstanding document of the same issuer confers does not confer

 

27  any right in the goods, except as provided in the case of

 


 1  tangible bills of lading in a set of parts, overissue of

 

 2  documents for fungible goods, and substitutes for lost, stolen,

 

 3  or destroyed documents, or substitute documents issued pursuant

 

 4  to section 7105. But the The issuer is liable for damages caused

 

 5  by his its overissue or failure to identify a duplicate document

 

 6  as such by a conspicuous notation. on its face.

 

 7        Sec. 7403. (1) The A bailee must shall deliver the goods to

 

 8  a person entitled under the a document who of title if the person

 

 9  complies with subsections (2) and (3), unless and to the extent

 

10  that the bailee establishes any of the following:

 

11        (a) Delivery of the goods to a person whose receipt was

 

12  rightful as against the claimant. ;

 

13        (b) Damages to or delay, loss, or destruction of the goods

 

14  for which the bailee is not liable. ;

 

15        (c) Previous sale or other disposition of the goods in

 

16  lawful enforcement of a lien or on warehouseman's a warehouse's

 

17  lawful termination of storage. ;

 

18        (d) The exercise by a seller of his its right to stop

 

19  delivery pursuant to section 2705 or by a lessor of its right to

 

20  stop delivery pursuant to the provisions of the article on sales

 

21  (section 2705); section 2A526.

 

22        (e) A diversion, reconsignment, or other disposition

 

23  pursuant to the provisions of this article ( section 7303. ) or

 

24  tariff regulating such right;

 

25        (f) Release, satisfaction, or any other fact affording a

 

26  personal defense against the claimant. ;

 

27        (g) Any other lawful excuse.

 


 1        (2) A person claiming goods covered by a document of title

 

 2  must shall satisfy the bailee's lien where if the bailee so

 

 3  requests or where if the bailee is prohibited by law from

 

 4  delivering the goods until the charges are paid.

 

 5        (3) Unless the a person claiming the goods is one a person

 

 6  against whom which the document confers no of title does not

 

 7  confer a right under section 7503(1), he must surrender for

 

 8  cancellation or notation of partial deliveries both of the

 

 9  following apply:

 

10        (a) The person claiming under a document shall surrender

 

11  possession or control of any outstanding negotiable document

 

12  covering the goods , and the bailee must for cancellation or

 

13  indication of partial deliveries.

 

14        (b) The bailee shall cancel the document or conspicuously

 

15  note indicate in the document the partial delivery thereon or be

 

16  or the bailee is liable to any person to whom which the document

 

17  is duly negotiated.

 

18        (4) "Person entitled under the document" means holder in the

 

19  case of a negotiable document, or the person to whom delivery is

 

20  to be made by the terms of or pursuant to written instructions

 

21  under a non-negotiable document.

 

22        Sec. 7404. A bailee who that in good faith including

 

23  observance of reasonable commercial standards has received goods

 

24  and delivered or otherwise disposed of them the goods according

 

25  to the terms of the a document of title or pursuant to this

 

26  article is not liable therefor. This rule applies even though the

 

27  for the goods even if any of the following apply:

 


 1        (a) The person from whom he which the bailee received the

 

 2  goods had no did not have authority to procure the document or to

 

 3  dispose of the goods. and even though the person to whom he

 

 4        (b) The person to which the bailee delivered the goods had

 

 5  no did not have authority to receive them the goods.

 

 6        Sec. 7501. (1) A All of the following rules apply to a

 

 7  negotiable tangible document of title: running

 

 8        (a) If the document’s original terms run to the order of a

 

 9  named person, the document is negotiated by his the named

 

10  person's indorsement and delivery. After his the named person's

 

11  indorsement in blank or to bearer, any person can may negotiate

 

12  it the document by delivery alone.

 

13        (2)(a) A negotiable document of title is also negotiated by

 

14  delivery alone when by its original terms it runs to bearer;

 

15        (b) If the document’s original terms run to bearer, it is

 

16  negotiated by delivery alone.

 

17        (c) (b) When a document running If the document’s original

 

18  terms run to the order of a named person and it is delivered to

 

19  him the named person, the effect is the same as if the document

 

20  had been negotiated.

 

21        (d) (3) Negotiation of a negotiable the document of title

 

22  after it has been indorsed to a specified named person requires

 

23  indorsement by the special indorsee as well as named person and

 

24  delivery.

 

25        (e) (4) A negotiable document of title is " duly negotiated

 

26  " when if it is negotiated in the manner stated in this section

 

27  subsection to a holder who that purchases it in good faith,

 


 1  without notice of any defense against or claim to it on the part

 

 2  of any person, and for value, unless it is established that the

 

 3  negotiation is not in the regular course of business or financing

 

 4  or involves receiving the document in settlement or payment of a

 

 5  money monetary obligation.

 

 6        (2) All of the following rules apply to a negotiable

 

 7  electronic document of title:

 

 8        (a) If the document’s original terms run to the order of a

 

 9  named person or to bearer, the document is negotiated by delivery

 

10  of the document to another person. Indorsement by the named

 

11  person is not required to negotiate the document.

 

12        (b) If the document’s original terms run to the order of a

 

13  named person and the named person has control of the document,

 

14  the effect is the same as if the document had been negotiated.

 

15        (c) A document is duly negotiated if it is negotiated in the

 

16  manner stated in this subsection to a holder that purchases it in

 

17  good faith, without notice of any defense against or claim to it

 

18  on the part of any person, and for value, unless it is

 

19  established that the negotiation is not in the regular course of

 

20  business or financing or involves taking delivery of the document

 

21  in settlement or payment of a monetary obligation.

 

22        (3) (5) Indorsement of a non-negotiable nonnegotiable

 

23  document neither makes it negotiable nor adds to the transferee's

 

24  rights.

 

25        (4) (6) The naming in a negotiable bill of a person to be

 

26  notified of the arrival of the goods does not limit the

 

27  negotiability of the bill nor or constitute notice to a purchaser

 


 1  thereof of the bill of any interest of such that person in the

 

 2  goods.

 

 3        Sec. 7502. (1) Subject to the following section and to the

 

 4  provisions of section 7205 on fungible goods sections 7205 and

 

 5  7503, a holder to whom which a negotiable document of title has

 

 6  been is duly negotiated acquires thereby all of the following:

 

 7        (a) Title to the document. ;

 

 8        (b) Title to the goods. ;

 

 9        (c) All rights accruing under the law of agency or estoppel,

 

10  including rights to goods delivered to the bailee after the

 

11  document was issued. ; and

 

12        (d) The direct obligation of the issuer to hold or deliver

 

13  the goods according to the terms of the document free of any

 

14  defense or claim by him the issuer except those arising under the

 

15  terms of the document or under this article. In However, in the

 

16  case of a delivery order, the bailee's obligation accrues only

 

17  upon the bailee's acceptance of the delivery order and the

 

18  obligation acquired by the holder is that the issuer and any

 

19  indorser will procure the acceptance of the bailee.

 

20        (2) Subject to the following section 7503, title and rights

 

21  so acquired by due negotiation are not defeated by any stoppage

 

22  of the goods represented by the document of title or by surrender

 

23  of such the goods by the bailee , and are not impaired even

 

24  though the if any of the following occur:

 

25        (a) The due negotiation or any prior due negotiation

 

26  constituted a breach of duty. or even though any

 

27        (b) Any person has been deprived of possession of the a

 


 1  negotiable tangible document or control of a negotiable

 

 2  electronic document by misrepresentation, fraud, accident,

 

 3  mistake, duress, loss, theft, or conversion. , or even though a

 

 4        (c) A previous sale or other transfer of the goods or

 

 5  document has been made to a third person.

 

 6        Sec. 7503. (1) A document of title confers no right in goods

 

 7  against a person who that before issuance of the document had a

 

 8  legal interest or a perfected security interest in them and who

 

 9  the goods and that did neither not do any of the following:

 

10        (a) Delivered or entrusted them Deliver or entrust the goods

 

11  or any document of title covering them the goods to the bailor or

 

12  his or her nominee with actual any of the following:

 

13        (i) Actual or apparent authority to ship, store, or sell. or

 

14  with power

 

15        (ii) Power to obtain delivery under this article ( section

 

16  7403. ) or with power

 

17        (iii) Power of disposition under this act (sections 2403 and

 

18  9320) section 2403, 2A304(2), 2A305(2), 9320, or 9321(3) or other

 

19  statute or rule of law.

 

20        (b) Acquiesced Acquiesce in the procurement by the bailor or

 

21  his or her its nominee of any document. of title.

 

22        (2) Title to goods based upon an unaccepted delivery order

 

23  is subject to the rights of anyone to whom any person to which a

 

24  negotiable warehouse receipt or bill of lading covering the goods

 

25  has been duly negotiated. Such a title may be defeated under the

 

26  next section 7504 to the same extent as the rights of the issuer

 

27  or a transferee from the issuer.

 


 1        (3) Title to goods based upon a bill of lading issued to a

 

 2  freight forwarder is subject to the rights of anyone to whom any

 

 3  person to which a bill issued by the freight forwarder is duly

 

 4  negotiated. ; but However, delivery by the carrier in accordance

 

 5  with part 4 of this article pursuant to its own bill of lading

 

 6  discharges the carrier's obligation to deliver.

 

 7        Sec. 7504. (1) A transferee of a document of title, whether

 

 8  negotiable or non-negotiable nonnegotiable, to whom which the

 

 9  document has been delivered but not duly negotiated, acquires the

 

10  title and rights which his that its transferor had or had actual

 

11  authority to convey.

 

12        (2) In the case of a non-negotiable transfer of a

 

13  nonnegotiable document of title, until but not after the bailee

 

14  receives notification notice of the transfer, the rights of the

 

15  transferee may be defeated by any of the following:

 

16        (a) by By those creditors of the transferor who which could

 

17  treat the sale transfer as void under section 2402 ; or 2A308.

 

18        (b) by By a buyer from the transferor in ordinary course of

 

19  business if the bailee has delivered the goods to the buyer or

 

20  received notification of his the buyer's rights. ; or

 

21        (c) By a lessee from the transferor in ordinary course of

 

22  business if the bailee has delivered the goods to the lessee or

 

23  received notification of the lessee’s rights.

 

24        (d) (c) as As against the bailee, by good-faith dealings of

 

25  the bailee with the transferor.

 

26        (3) A diversion or other change of shipping instructions by

 

27  the consignor in a non-negotiable nonnegotiable bill of lading

 


 1  which causes the bailee not to deliver the goods to the consignee

 

 2  defeats the consignee's title to the goods if they the goods have

 

 3  been delivered to a buyer in ordinary course of business or a

 

 4  leasee in ordinary course of business and, in any event, defeats

 

 5  the consignee's rights against the bailee.

 

 6        (4) Delivery of the goods pursuant to a non-negotiable

 

 7  nonnegotiable document of title may be stopped by a seller under

 

 8  section 2705 , and or a lessor under section 2A526, subject to

 

 9  the requirement requirements of due notification there provided

 

10  in those sections. A bailee honoring that honors the seller's or

 

11  lessor's instructions is entitled to be indemnified by the seller

 

12  or lessor against any resulting loss or expense.

 

13        Sec. 7505. The indorsement of a tangible document of title

 

14  issued by a bailee does not make the indorser liable for any

 

15  default by the bailee or by previous indorsers.

 

16        Sec. 7506. The transferee of a negotiable tangible document

 

17  of title has a specifically enforceable right to have his its

 

18  transferor supply any necessary indorsement, but the transfer

 

19  becomes a negotiation only as of the time the indorsement is

 

20  supplied.

 

21        Sec. 7507. Where If a person negotiates or transfers

 

22  delivers a document of title for value, otherwise than as a mere

 

23  intermediary under the next following section 7508, then unless

 

24  otherwise agreed, he warrants to his immediate purchaser only the

 

25  transferor, in addition to any warranty made in selling or

 

26  leasing the goods, warrants to its immediate purchaser only the

 

27  following:

 


 1        (a) that That the document is genuine. ; and

 

 2        (b) that he has no That the transferor does not have

 

 3  knowledge of any fact which that would impair its the document's

 

 4  validity or worth. ; and

 

 5        (c) that his That the negotiation or transfer delivery is

 

 6  rightful and fully effective with respect to the title to the

 

 7  document and the goods it represents.

 

 8        Sec. 7508. A collecting bank or other intermediary known to

 

 9  be entrusted with documents of title on behalf of another or with

 

10  collection of a draft or other claim against delivery of

 

11  documents warrants by such the delivery of the documents only its

 

12  own good faith and authority . This rule applies even though the

 

13  even if the collecting bank or other intermediary has purchased

 

14  or made advances against the claim or draft to be collected.

 

15        Sec. 7509. The question whether Whether a document of title

 

16  is adequate to fulfill the obligations of a contract for sale, a

 

17  contract for lease, or the conditions of a letter of credit is

 

18  governed by the articles on sales (article 2) and on letters of

 

19  credit (article 5) determined by article 2, 2A, or 5.

 

20        Sec. 7601. (1) If a document has been of title is lost,

 

21  stolen, or destroyed, a court may order delivery of the goods or

 

22  issuance of a substitute document and the bailee may without

 

23  liability to any person comply with such the order. If the

 

24  document was negotiable, the claimant must post security approved

 

25  by the court to indemnify any person who may suffer loss as a

 

26  result of nonsurrender of the document a court may not order

 

27  delivery of the goods or issuance of a substitute document

 


 1  without the claimant’s posting security unless it finds that any

 

 2  person that may suffer loss as a result of nonsurrender of

 

 3  possession or control of the document is adequately protected

 

 4  against the loss. If the document was not negotiable, such

 

 5  security may be required at the discretion of the court

 

 6  nonnegotiable, the court may require security. The court may also

 

 7  in its discretion order payment of the bailee's reasonable costs

 

 8  and counsel fees attorney fees in any action under this

 

 9  subsection.

 

10        (2) A bailee who without that, without a court order,

 

11  delivers goods to a person claiming under a missing negotiable

 

12  document of title is liable to any person injured thereby, and if

 

13  by that delivery. If the delivery is not in good faith, becomes

 

14  the bailee is liable for conversion. Delivery in good faith is

 

15  not conversion if made in accordance with a filed classification

 

16  or tariff or, where no classification or tariff is filed, if the

 

17  claimant posts security with the bailee in an amount at least

 

18  double the value of the goods at the time of posting to indemnify

 

19  any person injured by the delivery who which files a notice of

 

20  claim within 1 year after the delivery.

 

21        Sec. 7602. Except where the document Unless a document of

 

22  title was originally issued upon delivery of the goods by a

 

23  person who had no that did not have power to dispose of them, no

 

24  lien attaches a lien does not attach by virtue of any judicial

 

25  process to goods in the possession of a bailee for which a

 

26  negotiable document of title is outstanding unless the document

 

27  be possession or control of the document is first surrendered to

 


 1  the bailee or its the document's negotiation is enjoined. , and

 

 2  the bailee shall The bailee may not be compelled to deliver the

 

 3  goods pursuant to process until possession or control of the

 

 4  document is surrendered to him or impounded by the bailee or to

 

 5  the court. One who purchases A purchaser of the document for

 

 6  value without notice of the process or injunction takes free of

 

 7  the lien imposed by judicial process.

 

 8        Sec. 7603. If more than one 1 person claims title to or

 

 9  possession of the goods, the bailee is excused from delivery

 

10  until he the bailee has had a reasonable time to ascertain the

 

11  validity of the adverse claims or to bring an action to compel

 

12  all claimants to interplead and may compel such interpleader,

 

13  commence an action for interpleader. The bailee may assert an

 

14  interpleader either in defending an action for nondelivery of the

 

15  goods , or by original action. , whichever is appropriate.

 

16                              PART 7

 

17                     MISCELLANEOUS PROVISIONS

 

18        Sec. 7701. (1) The amendatory act that added this section

 

19  applies to a document of title that is issued or a bailment that

 

20  arises on or after the effective date of that amendatory act.

 

21        (2) The amendatory act that added this section does not

 

22  apply to a document of title that is issued or a bailment that

 

23  arises before the effective date of that amendatory act even if

 

24  the document of title or bailment would be subject to that

 

25  amendatory act if the document of title had been issued or

 

26  bailment had arisen on or after the effective date of that

 

27  amendatory act.

 


 1        (3) The amendatory act that added this section does not

 

 2  apply to a right of action that has accrued before the effective

 

 3  date of that amendatory act.

 

 4        Sec. 7702. A document of title issued or a bailment that

 

 5  arises before the effective date of the amendatory act that added

 

 6  this section and the rights, obligations, and interests flowing

 

 7  from that document or bailment are governed by any statute

 

 8  amended or repealed by that amendatory act as if amendment or

 

 9  repeal had not occurred and may be terminated, completed,

 

10  consummated, or enforced under that statute.

 

11        Sec. 8103. (1) A share or similar equity interest issued by

 

12  a corporation, business trust, joint stock company, or similar

 

13  entity is a security.

 

14        (2) An investment company security is a security.

 

15  "Investment company security" means a share or similar equity

 

16  interest issued by an entity that is registered as an investment

 

17  company under the federal investment company laws, an interest in

 

18  a unit investment trust that is so registered, or a face-amount

 

19  certificate issued by a face-amount certificate company that is

 

20  so registered. Investment company security does not include an

 

21  insurance policy or endowment policy or annuity contract issued

 

22  by an insurance company.

 

23        (3) An interest in a partnership or limited liability

 

24  company is not a security unless it is dealt in or traded on

 

25  securities exchanges or in securities markets, its terms

 

26  expressly provide that it is a security governed by this article,

 

27  or it is an investment company security. However, an interest in

 


 1  a partnership or limited liability company is a financial asset

 

 2  if it is held in a securities account.

 

 3        (4) A writing that is a security certificate is governed by

 

 4  this article and not by article 3, even though it also meets the

 

 5  requirements of that article. However, a negotiable instrument

 

 6  governed by article 3 is a financial asset if it is held in a

 

 7  securities account.

 

 8        (5) An option or similar obligation issued by a clearing

 

 9  corporation to its participants is not a security, but is a

 

10  financial asset.

 

11        (6) A commodity contract, as defined in section 9102(1)(o),

 

12  is not a security or a financial asset.

 

13        (7) A document of title is not a financial asset unless

 

14  section 8102(1)(i)(iii) applies.

 

15        Sec. 9102. (1) As used in this article:

 

16        (a) "Accession" means goods that are physically united with

 

17  other goods in such a manner that the identity of the original

 

18  goods is not lost.

 

19        (b) "Account", except as used in "account for", means a

 

20  right to payment of a monetary obligation, whether or not earned

 

21  by performance, for property that has been or is to be sold,

 

22  leased, licensed, assigned, or otherwise disposed of, for

 

23  services rendered or to be rendered, for a policy of insurance

 

24  issued or to be issued, for a secondary obligation incurred or to

 

25  be incurred, for energy provided or to be provided, for the use

 

26  or hire of a vessel under a charter or other contract, arising

 

27  out of the use of a credit or charge card or information

 


 1  contained on or for use with the card, or as winnings in a

 

 2  lottery or other game of chance operated or sponsored by a state,

 

 3  governmental unit of a state, or person licensed or authorized to

 

 4  operate the game by a state or governmental unit of a state. The

 

 5  term includes health-care-insurance receivables. The term does

 

 6  not include rights to payment evidenced by chattel paper or an

 

 7  instrument, commercial tort claims, deposit accounts, investment

 

 8  property, letter-of-credit rights or letters of credit, or rights

 

 9  to payment for money or funds advanced or sold, other than rights

 

10  arising out of the use of a credit or charge card or information

 

11  contained on or for use with the card.

 

12        (c) "Account debtor" means a person obligated on an account,

 

13  chattel paper, or general intangible. The term does not include

 

14  persons obligated to pay a negotiable instrument, even if the

 

15  instrument constitutes part of chattel paper.

 

16        (d) "Accounting", except as used in "accounting for", means

 

17  a record that meets all of the following requirements:

 

18        (i) Authenticated by a secured party.

 

19        (ii) Indicating the aggregate unpaid secured obligations as

 

20  of a date not more than 35 days earlier or 35 days later than the

 

21  date of the record.

 

22        (iii) Identifying the components of the obligations in

 

23  reasonable detail.

 

24        (e) "Agricultural lien" means an interest, other than a

 

25  security interest, in farm products that meets all of the

 

26  following requirements:

 

27        (i) The interest secures payment or performance of an

 


 1  obligation for 1 or more of the following:

 

 2        (A) Goods or services furnished in connection with a

 

 3  debtor's farming operation.

 

 4        (B) Rent on real property leased by a debtor in connection

 

 5  with its farming operation.

 

 6        (ii) The interest is created by statute in favor of a person

 

 7  that did 1 or more of the following:

 

 8        (A) In the ordinary course of its business furnished goods

 

 9  or services to a debtor in connection with a debtor's farming

 

10  operation.

 

11        (B) Leased real property to a debtor in connection with the

 

12  debtor's farming operation.

 

13        (iii) The effectiveness of the interest does not depend on the

 

14  person's possession of the personal property.

 

15        (f) "As-extracted collateral" means 1 or more of the

 

16  following:

 

17        (i) Oil, gas, or other minerals that are subject to a

 

18  security interest that is created by a debtor having an interest

 

19  in the minerals before extraction and attaches to the minerals as

 

20  extracted.

 

21        (ii) Accounts arising out of the sale at the wellhead or

 

22  minehead of oil, gas, or other minerals in which the debtor had

 

23  an interest before extraction.

 

24        (g) "Authenticate" means 1 of the following:

 

25        (i) To sign.

 

26        (ii) To execute or otherwise adopt a symbol, or encrypt or

 

27  similarly process a record in whole or in part, with the present

 


 1  intent of the authenticating person to identify the person and

 

 2  adopt or accept a record.

 

 3        (h) "Bank" means an organization that is engaged in the

 

 4  business of banking. The term includes savings banks, savings and

 

 5  loan associations, credit unions, and trust companies.

 

 6        (i) "Cash proceeds" means proceeds that are money, checks,

 

 7  deposit accounts, or the like.

 

 8        (j) "Certificate of title" means a certificate of title with

 

 9  respect to which a statute provides for the security interest in

 

10  question to be indicated on the certificate as a condition or

 

11  result of the security interest's obtaining priority over the

 

12  rights of a lien creditor with respect to the collateral.

 

13        (k) "Chattel paper" means a record or records that evidence

 

14  both a monetary obligation and a security interest in specific

 

15  goods, a security interest in specific goods and software used in

 

16  the goods, a security interest in specific goods and license of

 

17  software used in the goods, a lease of specific goods, or a lease

 

18  of specific goods and license of software used in the goods. As

 

19  used in this subdivision, "monetary obligation" means a monetary

 

20  obligation secured by the goods or owed under a lease of the

 

21  goods and includes a monetary obligation with respect to software

 

22  used in the goods. The term does not include charters or other

 

23  contracts involving the use or hire of a vessel, or records that

 

24  evidence a right to payment arising out of the use of a credit or

 

25  charge card or information contained on or for use with the card.

 

26  If a transaction is evidenced by records that include an

 

27  instrument or series of instruments, the group of records taken

 


 1  together constitutes chattel paper.

 

 2        (l) "Collateral" means the property subject to a security

 

 3  interest or agricultural lien. The term includes 1 or more of the

 

 4  following:

 

 5        (i) Proceeds to which a security interest attaches.

 

 6        (ii) Accounts, chattel paper, payment intangibles, and

 

 7  promissory notes that have been sold.

 

 8        (iii) Goods that are the subject of a consignment.

 

 9        (m) "Commercial tort claim" means a claim arising in tort

 

10  with respect to which 1 of the following applies:

 

11        (i) The claimant is an organization.

 

12        (ii) The claimant is an individual and the claim arose in the

 

13  course of the claimant's business or profession and does not

 

14  include damages arising out of personal injury to or the death of

 

15  an individual.

 

16        (n) "Commodity account" means an account maintained by a

 

17  commodity intermediary in which a commodity contract is carried

 

18  for a commodity customer.

 

19        (o) "Commodity contract" means a commodity futures contract,

 

20  an option on a commodity futures contract, a commodity option, or

 

21  another contract if the contract or option is 1 of the following:

 

22        (i) Traded on or subject to the rules of a board of trade

 

23  that has been designated as a contract market for such a contract

 

24  pursuant to federal commodities laws.

 

25        (ii) Traded on a foreign commodity board of trade, exchange,

 

26  or market, and is carried on the books of a commodity

 

27  intermediary for a commodity customer.

 


 1        (p) "Commodity customer" means a person for which a

 

 2  commodity intermediary carries a commodity contract on its books.

 

 3        (q) "Commodity intermediary" means 1 of the following:

 

 4        (i) A person that is registered as a futures commission

 

 5  merchant under federal commodities law.

 

 6        (ii) A person that in the ordinary course of its business

 

 7  provides clearance or settlement services for a board of trade

 

 8  that has been designated as a contract market pursuant to federal

 

 9  commodities law.

 

10        (r) "Communicate" means 1 or more of the following:

 

11        (i) To send a written or other tangible record.

 

12        (ii) To transmit a record by any means agreed upon by the

 

13  persons sending and receiving the record.

 

14        (iii) In the case of transmission of a record to or by a

 

15  filing office, to transmit a record by any means prescribed by

 

16  filing-office rule.

 

17        (s) "Consignee" means a merchant to which goods are

 

18  delivered in a consignment.

 

19        (t) "Consignment" means a transaction, regardless of its

 

20  form, in which a person delivers goods to a merchant for the

 

21  purpose of sale and that meets all of the following:

 

22        (i) The merchant deals in goods of that kind under a name

 

23  other than the name of the person making delivery, is not an

 

24  auctioneer, and is not generally known by its creditors to be

 

25  substantially engaged in selling the goods of others.

 

26        (ii) With respect to each delivery, the aggregate value of

 

27  the goods is $1,000.00 or more at the time of delivery.

 


 1        (iii) The goods are not consumer goods immediately before

 

 2  delivery.

 

 3        (iv) The transaction does not create a security interest that

 

 4  secures an obligation.

 

 5        (u) "Consignor" means a person that delivers goods to a

 

 6  consignee in a consignment.

 

 7        (v) "Consumer debtor" means a debtor in a consumer

 

 8  transaction.

 

 9        (w) "Consumer goods" means goods that are used or bought for

 

10  use primarily for personal, family, or household purposes.

 

11        (x) "Consumer-goods transaction" means a consumer

 

12  transaction in which an individual incurs an obligation primarily

 

13  for personal, family, or household purposes and a security

 

14  interest in consumer goods secures the obligation.

 

15        (y) "Consumer obligor" means an obligor who is an individual

 

16  and who incurred the obligation as part of a transaction entered

 

17  into primarily for personal, family, or household purposes.

 

18        (z) "Consumer transaction" means a transaction in which an

 

19  individual incurs an obligation primarily for personal, family,

 

20  or household purposes, a security interest secures the

 

21  obligation, and the collateral is held or acquired primarily for

 

22  personal, family, or household purposes. The term includes

 

23  consumer-goods transactions.

 

24        (aa) "Continuation statement" means an amendment of a

 

25  financing statement which identifies, by its file number, the

 

26  initial financing statement to which it relates and indicates

 

27  that it is a continuation statement for, or that it is filed to

 


 1  continue the effectiveness of, the identified financing

 

 2  statement.

 

 3        (bb) "Debtor" means 1 of the following:

 

 4        (i) A person having an interest, other than a security

 

 5  interest or other lien, in the collateral, whether or not the

 

 6  person is an obligor.

 

 7        (ii) A seller of accounts, chattel paper, payment

 

 8  intangibles, or promissory notes.

 

 9        (iii) A consignee.

 

10        (cc) "Deposit account" means a demand, time, savings,

 

11  passbook, or similar account maintained with a bank. The term

 

12  does not include investment property or accounts evidenced by an

 

13  instrument.

 

14        (dd) "Document" means a document of title or a receipt of

 

15  the type described in section 7201(2).

 

16        (ee) "Electronic chattel paper" means chattel paper

 

17  evidenced by a record or records consisting of information stored

 

18  in an electronic medium.

 

19        (ff) "Encumbrance" means a right, other than an ownership

 

20  interest, in real property. The term includes mortgages and other

 

21  liens on real property.

 

22        (gg) "Equipment" means goods other than inventory, farm

 

23  products, or consumer goods.

 

24        (hh) "Farm products" means goods, other than standing

 

25  timber, with respect to which the debtor is engaged in a farming

 

26  operation and which are 1 of the following:

 

27        (i) Crops grown, growing, or to be grown, including crops

 


 1  produced on trees, vines, and bushes, and aquatic goods produced

 

 2  in aquacultural operations.

 

 3        (ii) Livestock, born or unborn, including aquatic goods

 

 4  produced in aquacultural operations.

 

 5        (iii) Supplies used or produced in a farming operation.

 

 6        (iv) Products of crops or livestock in their unmanufactured

 

 7  states.

 

 8        (ii) "Farming operation" means raising, cultivating,

 

 9  propagating, fattening, grazing, or any other farming, livestock,

 

10  or aquacultural operation.

 

11        (jj) "File number" means the number assigned to an initial

 

12  financing statement pursuant to section 9519(1).

 

13        (kk) "Filing office" means an office designated in section

 

14  9501 as the place to file a financing statement.

 

15        (ll) "Filing-office rule" means a rule adopted pursuant to

 

16  section 9526.

 

17        (mm) "Financing statement" means a record or records

 

18  composed of an initial financing statement and any filed record

 

19  relating to the initial financing statement.

 

20        (nn) "Fixture filing" means the filing of a financing

 

21  statement covering goods that are or are to become fixtures and

 

22  satisfying section 9502(1) and (2). The term includes the filing

 

23  of a financing statement covering goods of a transmitting utility

 

24  which are or are to become fixtures.

 

25        (oo) "Fixtures" means goods that have become so related to

 

26  particular real property that an interest in them arises under

 

27  real property law.

 


 1        (pp) "General intangible" means any personal property,

 

 2  including things in action, other than accounts, chattel paper,

 

 3  commercial tort claims, deposit accounts, documents, goods,

 

 4  instruments, investment property, letter-of-credit rights,

 

 5  letters of credit, money, and oil, gas, or other minerals before

 

 6  extraction. The term includes payment intangibles and software.

 

 7        (qq) "Good faith" means honesty in fact and the observance

 

 8  of reasonable commercial standards of fair dealing.

 

 9        (rr) "Goods" means all things that are movable when a

 

10  security interest attaches. The term includes fixtures, standing

 

11  timber that is to be cut and removed under a conveyance or

 

12  contract for sale, the unborn young of animals, crops grown,

 

13  growing, or to be grown, even if the crops are produced on trees,

 

14  vines, or bushes, and manufactured homes. The term also includes

 

15  a computer program embedded in goods and any supporting

 

16  information provided in connection with a transaction relating to

 

17  the program if the program is associated with the goods in such a

 

18  manner that it customarily is considered part of the goods, or by

 

19  becoming the owner of the goods, a person acquires a right to use

 

20  the program in connection with the goods. The term does not

 

21  include a computer program embedded in goods that consist solely

 

22  of the medium in which the program is embedded. The term also

 

23  does not include accounts, chattel paper, commercial tort claims,

 

24  deposit accounts, documents, general intangibles, instruments,

 

25  investment property, letter-of-credit rights, letters of credit,

 

26  money, or oil, gas, or other minerals before extraction.

 

27        (ss) "Governmental unit" means a subdivision, agency,

 


 1  department, county, parish, municipality, or other unit of the

 

 2  government of the United States, a state, or a foreign country.

 

 3  The term includes an organization having a separate corporate

 

 4  existence if the organization is eligible to issue debt on which

 

 5  interest is exempt from income taxation under the laws of the

 

 6  United States.

 

 7        (tt) "Health-care-insurance receivable" means an interest in

 

 8  or claim under a policy of insurance which is a right to payment

 

 9  of a monetary obligation for health-care goods or services

 

10  provided.

 

11        (uu) "Instrument" means a negotiable instrument or any other

 

12  writing that evidences a right to the payment of a monetary

 

13  obligation, is not itself a security agreement or lease, and is

 

14  of a type that in ordinary course of business is transferred by

 

15  delivery with any necessary indorsement or assignment. The term

 

16  does not include investment property, letters of credit, or

 

17  writings that evidence a right to payment arising out of the use

 

18  of a credit or charge card or information contained on or for use

 

19  with the card.

 

20        (vv) "Inventory" means goods, other than farm products, that

 

21  meet 1 of the following:

 

22        (i) Are leased by a person as lessor.

 

23        (ii) Are held by a person for sale or lease or to be

 

24  furnished under a contract of service.

 

25        (iii) Are furnished by a person under a contract of service.

 

26        (iv) Consist of raw materials, work in process, or materials

 

27  used or consumed in a business.

 


 1        (ww) "Investment property" means a security, whether

 

 2  certificated or uncertificated, security entitlement, securities

 

 3  account, commodity contract, or commodity account.

 

 4        (xx) "Jurisdiction of organization", with respect to a

 

 5  registered organization, means the jurisdiction under whose law

 

 6  the organization is organized.

 

 7        (yy) "Letter-of-credit right" means a right to payment or

 

 8  performance under a letter of credit, whether or not the

 

 9  beneficiary has demanded or is at the time entitled to demand

 

10  payment or performance. The term does not include the right of a

 

11  beneficiary to demand payment or performance under a letter of

 

12  credit.

 

13        (zz) "Lien creditor" means 1 or more of the following:

 

14        (i) A creditor that has acquired a lien on the property

 

15  involved by attachment, levy, or the like.

 

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

 

17  assignment.

 

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

 

19  the petition.

 

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

 

21        (aaa) "Manufactured home" means a structure, transportable

 

22  in 1 or more sections, which, in the traveling mode, is 8 body

 

23  feet or more in width or 40 body feet or more in length, or when

 

24  erected on site, is 320 or more square feet, and which is built

 

25  on a permanent chassis and designed to be used as a dwelling with

 

26  or without a permanent foundation when connected to the required

 

27  utilities, and includes the plumbing, heating, air-conditioning,

 


 1  and electrical systems contained therein. The term includes any

 

 2  structure that meets all of the requirements of this paragraph

 

 3  except the size requirements and with respect to which the

 

 4  manufacturer voluntarily files a certification required by the

 

 5  secretary of the department of housing and urban development and

 

 6  complies with the standards established under title 42 of the

 

 7  United States Code.

 

 8        (bbb) "Manufactured-home transaction" means a secured

 

 9  transaction that creates a purchase-money security interest in a

 

10  manufactured home, other than a manufactured home held as

 

11  inventory, or in which a manufactured home, other than a

 

12  manufactured home held as inventory, is the primary collateral.

 

13        (ccc) "Mortgage" means a consensual interest in real

 

14  property, including fixtures, which secures payment or

 

15  performance of an obligation.

 

16        (ddd) "New debtor" means a person that becomes bound as

 

17  debtor under section 9203(4) by a security agreement previously

 

18  entered into by another person.

 

19        (eee) "New value" means money, money's worth in property,

 

20  services, or new credit, or release by a transferee of an

 

21  interest in property previously transferred to the transferee.

 

22  The term does not include an obligation substituted for another

 

23  obligation.

 

24        (fff) "Noncash proceeds" means proceeds other than cash

 

25  proceeds.

 

26        (ggg) "Obligor" means a person that, with respect to an

 

27  obligation secured by a security interest in or an agricultural

 


 1  lien on the collateral, owes payment or other performance of the

 

 2  obligation, has provided property other than the collateral to

 

 3  secure payment or other performance of the obligation, or is

 

 4  otherwise accountable in whole or in part for payment or other

 

 5  performance of the obligation. The term does not include issuers

 

 6  or nominated persons under a letter of credit.

 

 7        (hhh) "Original debtor" means, except as used in section

 

 8  9310(3), a person that, as debtor, entered into a security

 

 9  agreement to which a new debtor has become bound under section

 

10  9203(4).

 

11        (iii) "Payment intangible" means a general intangible under

 

12  which the account debtor's principal obligation is a monetary

 

13  obligation.

 

14        (jjj) "Person related to", with respect to an individual,

 

15  means 1 or more of the following:

 

16        (i) The spouse of the individual.

 

17        (ii) A brother, brother-in-law, sister, or sister-in-law of

 

18  the individual.

 

19        (iii) An ancestor or lineal descendant of the individual or

 

20  the individual's spouse.

 

21        (iv) Any other relative, by blood or marriage, of the

 

22  individual or the individual's spouse who shares the same home

 

23  with the individual.

 

24        (kkk) "Person related to", with respect to an organization,

 

25  means 1 or more of the following:

 

26        (i) A person directly or indirectly controlling, controlled

 

27  by, or under common control with the organization.

 


 1        (ii) An officer or director of, or a person performing

 

 2  similar functions with respect to, the organization.

 

 3        (iii) An officer or director of, or a person performing

 

 4  similar functions with respect to, a person described in

 

 5  subparagraph (i).

 

 6        (iv) The spouse of an individual described in subparagraph

 

 7  (i), (ii), or (iii).

 

 8        (v) An individual who is related by blood or marriage to an

 

 9  individual described in subparagraph (i), (ii), (iii), or (iv) and

 

10  shares the same home with the individual.

 

11        (lll) "Proceeds" means, except as used in section 9609(2), 1

 

12  or more of the following property:

 

13        (i) Whatever is acquired upon the sale, lease, license,

 

14  exchange, or other disposition of collateral.

 

15        (ii) Whatever is collected on, or distributed on account of,

 

16  collateral.

 

17        (iii) Rights arising out of collateral.

 

18        (iv) To the extent of the value of collateral, claims arising

 

19  out of the loss, nonconformity, or interference with the use of,

 

20  defects or infringement of rights in, or damage to, the

 

21  collateral.

 

22        (v) To the extent of the value of collateral and to the

 

23  extent payable to the debtor or the secured party, insurance

 

24  payable by reason of the loss or nonconformity of, defects or

 

25  infringement of rights in, or damage to, the collateral.

 

26        (mmm) "Promissory note" means an instrument that evidences a

 

27  promise to pay a monetary obligation, does not evidence an order

 


 1  to pay, and does not contain an acknowledgment by a bank that the

 

 2  bank has received for deposit a sum of money or funds.

 

 3        (nnn) "Proposal" means a record authenticated by a secured

 

 4  party which includes the terms on which the secured party is

 

 5  willing to accept collateral in full or partial satisfaction of

 

 6  the obligation it secures pursuant to sections 9620, 9621, and

 

 7  9622.

 

 8        (ooo) "Pursuant to commitment", with respect to an advance

 

 9  made or other value given by a secured party, means pursuant to

 

10  the secured party's obligation, whether or not a subsequent event

 

11  of default or other event not within the secured party's control

 

12  has relieved or may relieve the secured party from its

 

13  obligation.

 

14        (ppp) "Record", except as used in "for record", "of record",

 

15  "record or legal title", and "record owner", means information

 

16  that is inscribed on a tangible medium or which is stored in an

 

17  electronic or other medium and is retrievable in perceivable

 

18  form.

 

19        (qqq) "Registered organization" means an organization

 

20  organized solely under the law of a single state or the United

 

21  States and as to which the state or the United States must

 

22  maintain a public record showing the organization to have been

 

23  organized.

 

24        (rrr) "Secondary obligor" means an obligor to the extent

 

25  that the obligor's obligation is secondary or the obligor has a

 

26  right of recourse with respect to an obligation secured by

 

27  collateral against the debtor, another obligor, or property of

 


 1  either.

 

 2        (sss) "Secured party" means 1 or more of the following:

 

 3        (i) A person in whose favor a security interest is created or

 

 4  provided for under a security agreement, whether or not any

 

 5  obligation to be secured is outstanding.

 

 6        (ii) A person that holds an agricultural lien.

 

 7        (iii) A consignor.

 

 8        (iv) A person to which accounts, chattel paper, payment

 

 9  intangibles, or promissory notes have been sold.

 

10        (v) A trustee, indenture trustee, agent, collateral agent,

 

11  or other representative in whose favor a security interest or

 

12  agricultural lien is created or provided for.

 

13        (vi) A person that holds a security interest arising under

 

14  section 2401, 2505, 2711(3), 2A508(5), 4210, or 5118.

 

15        (ttt) "Security agreement" means an agreement that creates

 

16  or provides for a security interest.

 

17        (uuu) "Send", in connection with a record or notification,

 

18  means 1 of the following:

 

19        (i) To deposit in the mail, deliver for transmission, or

 

20  transmit by any other usual means of communication, with postage

 

21  or cost of transmission provided for, addressed to any address

 

22  reasonable under the circumstances.

 

23        (ii) To cause the record or notification to be received

 

24  within the time that it would have been received if properly sent

 

25  under subparagraph (i).

 

26        (vvv) "Software" means a computer program and any supporting

 

27  information provided in connection with a transaction relating to

 


 1  the program. The term does not include a computer program that is

 

 2  included in the definition of goods.

 

 3        (www) "State" means a state of the United States, the

 

 4  District of Columbia, Puerto Rico, the United States Virgin

 

 5  Islands, or any territory or insular possession subject to the

 

 6  jurisdiction of the United States.

 

 7        (xxx) "Supporting obligation" means a letter-of-credit right

 

 8  or secondary obligation that supports the payment or performance

 

 9  of an account, chattel paper, a document, a general intangible,

 

10  an instrument, or investment property.

 

11        (yyy) "Tangible chattel paper" means chattel paper evidenced

 

12  by a record or records consisting of information that is

 

13  inscribed on a tangible medium.

 

14        (zzz) "Termination statement" means an amendment of a

 

15  financing statement that identifies, by its file number, the

 

16  initial financing statement to which it relates and indicates

 

17  either that it is a termination statement or that the identified

 

18  financing statement is no longer effective.

 

19        (aaaa) "Transmitting utility" means a person primarily

 

20  engaged in the business of 1 of the following:

 

21        (i) Operating a railroad, subway, street railway, or trolley

 

22  bus.

 

23        (ii) Transmitting communications electrically,

 

24  electromagnetically, or by light.

 

25        (iii) Transmitting goods by pipeline or sewer.

 

26        (iv) Transmitting or producing and transmitting electricity,

 

27  steam, gas, or water.

 


 1        (2) The "Control" as provided in section 7106 and the

 

 2  following definitions in other articles apply to this article:

 

 

     "Applicant"                                     Section 5102

     "Beneficiary"                                   Section 5102

     "Broker"                                        Section 8102

     "Certificated security"                         Section 8102

     "Check"                                         Section 3104

    "Clearing corporation"                          Section 8102

     "Contract for sale"                             Section 2106

10      "Customer"                                      Section 4104

11      "Entitlement holder"                            Section 8102

12      "Financial asset"                               Section 8102

13      "Holder in due course"                          Section 3302

14      "Issuer" (with respect to a document           

15        of title)                                     Section 7102

16      "Issuer" (with respect to a letter             

17        of credit or letter-of-credit right)          Section 5102

18      "Issuer" (with respect to a security)           Section 8201

19      "Lease"                                         Section 2A103

20      "Lease agreement"                               Section 2A103

21      "Lease contract"                                Section 2A103

22      "Leasehold interest"                            Section 2A103

23      "Lessee"                                        Section 2A103

24      "Lessee in ordinary course of business"         Section 2A103

25      "Lessor"                                        Section 2A103

26      "Lessor's residual interest"                    Section 2A103

27      "Letter of credit"                              Section 5102

28      "Merchant"                                      Section 2104

29      "Negotiable instrument"                         Section 3104

30      "Nominated person"                              Section 5102


     "Note"                                          Section 3104

     "Proceeds of a letter of credit"                Section 5114

     "Prove"                                         Section 3103

     "Sale"                                          Section 2106

     "Securities account"                            Section 8501

     "Securities intermediary"                       Section 8102

     "Security"                                      Section 8102

     "Security certificate"                          Section 8102

     "Security entitlement"                          Section 8102

10      "Uncertificated security"                       Section 8102.

 

 

11        (3) Article 1 contains general definitions and principles of

 

12  construction and interpretation applicable throughout this

 

13  article.

 

14        Sec. 9203. (1) A security interest attaches to collateral

 

15  when it becomes enforceable against the debtor with respect to

 

16  the collateral, unless an agreement expressly postpones the time

 

17  of attachment.

 

18        (2) Except as otherwise provided in subsections (3) through

 

19  (9), a security interest is enforceable against the debtor and

 

20  third parties with respect to the collateral only if all of the

 

21  following are met:

 

22        (a) Value has been given.

 

23        (b) The debtor has rights in the collateral or the power to

 

24  transfer rights in the collateral to a secured party.

 

25        (c) One or more of the following conditions are met:

 

26        (i) The debtor has authenticated a security agreement that

 

27  provides a description of the collateral and, if the security

 

28  interest covers timber to be cut, a description of the land


 

 1  concerned.

 

 2        (ii) The collateral is not a certificated security and is in

 

 3  the possession of the secured party under section 9313 pursuant

 

 4  to the debtor's security agreement.

 

 5        (iii) The collateral is a certificated security in registered

 

 6  form and the security certificate has been delivered to the

 

 7  secured party under section 8301 pursuant to the debtor's

 

 8  security agreement.

 

 9        (iv) The collateral is deposit accounts, electronic chattel

 

10  paper, investment property, or letter-of-credit rights, or

 

11  electronic documents, and the secured party has control under

 

12  section 7106, 9104, 9105, 9106, or 9107 pursuant to the debtor's

 

13  security agreement.

 

14        (3) Subsection (2) is subject to section 4210 on the

 

15  security interest of a collecting bank, section 5118 on the

 

16  security interest of a letter-of-credit issuer or nominated

 

17  person, section 9110 on a security interest arising under article

 

18  2 or 2A, and section 9206 on security interests in investment

 

19  property.

 

20        (4) A person becomes bound as debtor by a security agreement

 

21  entered into by another person if, by operation of law other than

 

22  this article or by contract, either of the following occurs:

 

23        (a) The security agreement becomes effective to create a

 

24  security interest in the person's property.

 

25        (b) The person becomes generally obligated for the

 

26  obligations of the other person, including the obligation secured

 

27  under the security agreement, and acquires or succeeds to all or


 

 1  substantially all of the assets of the other person.

 

 2        (5) If a new debtor becomes bound as debtor by a security

 

 3  agreement entered into by another person, the agreement satisfies

 

 4  subsection (2)(c) with respect to existing or after-acquired

 

 5  property of the new debtor to the extent the property is

 

 6  described in the agreement, and another agreement is not

 

 7  necessary to make a security interest in the property

 

 8  enforceable.

 

 9        (6) The attachment of a security interest in collateral

 

10  gives the secured party the rights to proceeds provided by

 

11  section 9315 and is also attachment of a security interest in a

 

12  supporting obligation for the collateral.

 

13        (7) The attachment of a security interest in a right to

 

14  payment or performance secured by a security interest or other

 

15  lien on personal or real property is also attachment of a

 

16  security interest in the security interest, mortgage, or other

 

17  lien.

 

18        (8) The attachment of a security interest in a securities

 

19  account is also attachment of a security interest in the security

 

20  entitlements carried in the securities account.

 

21        (9) The attachment of a security interest in a commodity

 

22  account is also attachment of a security interest in the

 

23  commodity contracts carried in the commodity account.

 

24        Sec. 9207. (1) Except as otherwise provided in subsection

 

25  (4), a secured party shall use reasonable care in the custody and

 

26  preservation of collateral in the secured party's possession. In

 

27  the case of chattel paper or an instrument, reasonable care


 

 1  includes taking necessary steps to preserve rights against prior

 

 2  parties unless otherwise agreed.

 

 3        (2) Except as otherwise provided in subsection (4), if a

 

 4  secured party has possession of collateral all of the following

 

 5  apply:

 

 6        (a) Reasonable expenses, including the cost of insurance and

 

 7  payment of taxes or other charges, incurred in the custody,

 

 8  preservation, use, or operation of the collateral are chargeable

 

 9  to the debtor and are secured by the collateral.

 

10        (b) The risk of accidental loss or damage is on the debtor

 

11  to the extent of a deficiency in any effective insurance

 

12  coverage.

 

13        (c) The secured party shall keep the collateral

 

14  identifiable, but fungible collateral may be commingled.

 

15        (d) The secured party may use or operate the collateral for

 

16  the purpose of preserving the collateral or its value; as

 

17  permitted by an order of a court having competent jurisdiction;

 

18  or except in the case of consumer goods, in the manner and to the

 

19  extent agreed by the debtor.

 

20        (3) Except as otherwise provided in subsection (4), a

 

21  secured party having possession of collateral or control of

 

22  collateral under section 7106, 9104, 9105, 9106, or 9107 may hold

 

23  as additional security any proceeds, except money or funds,

 

24  received from the collateral, shall apply money or funds received

 

25  from the collateral to reduce the secured obligation unless

 

26  remitted to the debtor, and may create a security interest in the

 

27  collateral.


 

 1        (4) If the secured party is a buyer of accounts, chattel

 

 2  paper, payment intangibles, or promissory notes or a consignor,

 

 3  subsections (2) and (3) do not apply, and subsection (1) does not

 

 4  apply unless the secured party is entitled under an agreement to

 

 5  charge back uncollected collateral or otherwise to full or

 

 6  limited recourse against the debtor or a secondary obligor based

 

 7  on the nonpayment or other default of an account debtor or other

 

 8  obligor on the collateral.

 

 9        Sec. 9208. (1) This section applies to cases in which there

 

10  is no outstanding secured obligation and the secured party is not

 

11  committed to make advances, incur obligations, or otherwise give

 

12  value.

 

13        (2) Within 10 days after receiving an authenticated demand

 

14  by the debtor, a secured party shall do all of the following that

 

15  apply to the secured party:

 

16        (a) A secured party having control of a deposit account

 

17  under section 9104(1)(b) shall send to the bank with which the

 

18  deposit account is maintained an authenticated statement that

 

19  releases the bank from any further obligation to comply with

 

20  instructions originated by the secured party.

 

21        (b) A secured party having control of a deposit account

 

22  under section 9104(1)(c) shall pay the debtor the balance on

 

23  deposit in the deposit account or transfer the balance on deposit

 

24  into a deposit account in the debtor's name.

 

25        (c) A secured party, other than a buyer, having control of

 

26  electronic chattel paper under section 9105 shall do all of the

 

27  following:


 

 1        (i) Communicate the authoritative copy of the electronic

 

 2  chattel paper to the debtor or its designated custodian.

 

 3        (ii) If the debtor designates a custodian that is the

 

 4  designated custodian with which the authoritative copy of the

 

 5  electronic chattel paper is maintained for the secured party,

 

 6  communicate to the custodian an authenticated record releasing

 

 7  the designated custodian from any further obligation to comply

 

 8  with instructions originated by the secured party and instructing

 

 9  the custodian to comply with instructions originated by the

 

10  debtor.

 

11        (iii) Take appropriate action to enable the debtor or its

 

12  designated custodian to make copies of or revisions to the

 

13  authoritative copy that add or change an identified assignee of

 

14  the authoritative copy without the consent of the secured party.

 

15        (d) A secured party having control of investment property

 

16  under section 8106(4)(b) or section 9106(2) shall send to the

 

17  securities intermediary or commodity intermediary with which the

 

18  security entitlement or commodity contract is maintained an

 

19  authenticated record that releases the securities intermediary or

 

20  commodity intermediary from any further obligation to comply with

 

21  entitlement orders or directions originated by the secured party.

 

22        (e) A secured party having control of a letter-of-credit

 

23  right under section 9107 shall send to each person having an

 

24  unfulfilled obligation to pay or deliver proceeds of the letter

 

25  of credit to the secured party an authenticated release from any

 

26  further obligation to pay or deliver proceeds of the letter of

 

27  credit to the secured party.


 

 1        (f) A secured party having control of an electronic document

 

 2  shall do all of the following:

 

 3        (i) Give control of the electronic document to the debtor or

 

 4  its designated custodian.

 

 5        (ii) If the debtor designates a custodian that is the

 

 6  designated custodian with which the authoritative copy of the

 

 7  electronic document is maintained for the secured party,

 

 8  communicate to the custodian an authenticated record releasing

 

 9  the designated custodian from any further obligation to comply

 

10  with instructions originated by the secured party and instructing

 

11  the custodian to comply with instructions originated by the

 

12  debtor.

 

13        (iii) Take appropriate action to enable the debtor or its

 

14  designated custodian to make copies of or revisions to the

 

15  authoritative copy which add or change an identified assignee of

 

16  the authoritative copy without the consent of the secured party.

 

17        Sec. 9301. Except as otherwise provided in sections 9303

 

18  through 9306, the following rules determine the law governing

 

19  perfection, the effect of perfection or nonperfection, and the

 

20  priority of a security interest in collateral:

 

21        (a) Except as otherwise provided in this section, while a

 

22  debtor is located in a jurisdiction, the local law of that

 

23  jurisdiction governs perfection, the effect of perfection or

 

24  nonperfection, and the priority of a security interest in

 

25  collateral.

 

26        (b) While collateral is located in a jurisdiction, the local

 

27  law of that jurisdiction governs perfection, the effect of


 

 1  perfection or nonperfection, and the priority of a possessory

 

 2  security interest in that collateral.

 

 3        (c) Except as otherwise provided in subdivision (d), while

 

 4  tangible negotiable documents, goods, instruments, money, or

 

 5  tangible chattel paper is located in a jurisdiction, the local

 

 6  law of that jurisdiction governs perfection of a security

 

 7  interest in the goods by filing a fixture filing, perfection of a

 

 8  security interest in timber to be cut, and the effect of

 

 9  perfection or nonperfection and the priority of a nonpossessory

 

10  security interest in the collateral.

 

11        (d) The local law of the jurisdiction in which the wellhead

 

12  or minehead is located governs perfection, the effect of

 

13  perfection or nonperfection, and the priority of a security

 

14  interest in as-extracted collateral.

 

15        Sec. 9310. (1) Except as otherwise provided in subsection

 

16  (2) and section 9312(2), a financing statement must be filed to

 

17  perfect all security interests and agricultural liens.

 

18        (2) The filing of a financing statement is not necessary to

 

19  perfect 1 or more of the following:

 

20        (a) A security interest that is perfected under section

 

21  9308(4), (5), (6), or (7).

 

22        (b) A security interest that is perfected under section 9309

 

23  when it attaches.

 

24        (c) A security interest in property subject to a statute,

 

25  regulation, or treaty described in section 9311(1).

 

26        (d) A security interest in goods in possession of a bailee

 

27  that is perfected under section 9312(4)(a) or (b).


 

 1        (e) A security interest in certificated securities,

 

 2  documents, goods, or instruments that is perfected without

 

 3  filing, control, or possession under section 9312(5), (6), or

 

 4  (7).

 

 5        (f) A security interest in collateral in the secured party's

 

 6  possession under section 9313.

 

 7        (g) A security interest in a certificated security that is

 

 8  perfected by delivery of the security certificate to the secured

 

 9  party under section 9313.

 

10        (h) A security interest in deposit accounts, electronic

 

11  chattel paper, electronic documents, investment property, or

 

12  letter-of-credit rights that is perfected by control under

 

13  section 9314.

 

14        (i) A security interest in proceeds that is perfected under

 

15  section 9315.

 

16        (j) A security interest that is perfected under section

 

17  9316.

 

18        (3) If a secured party assigns a perfected security interest

 

19  or agricultural lien, a filing under this article is not required

 

20  to continue the perfected status of the security interest against

 

21  creditors of and transferees from the original debtor.

 

22        Sec. 9312. (1) A security interest in chattel paper,

 

23  negotiable documents, instruments, or investment property may be

 

24  perfected by filing.

 

25        (2) Except as otherwise provided in section 9315(3) and (4)

 

26  for proceeds, a security interest in a deposit account, a letter-

 

27  of-credit right, or money may be perfected only as follows:


 

 1        (a) A security interest in a deposit account may be

 

 2  perfected only by control under section 9314.

 

 3        (b) Except as otherwise provided in section 9308(4), a

 

 4  security interest in a letter-of-credit right may be perfected

 

 5  only by control under section 9314.

 

 6        (c) A security interest in money may be perfected only by

 

 7  the secured party's taking possession under section 9313.

 

 8        (3) While goods are in the possession of a bailee that has

 

 9  issued a negotiable document covering the goods, a security

 

10  interest in the goods may be perfected by perfecting a security

 

11  interest in the document, and a security interest perfected in

 

12  the document has priority over any security interest that becomes

 

13  perfected in the goods by another method during that time.

 

14        (4) While goods are in the possession of a bailee that has

 

15  issued a nonnegotiable document covering the goods, a security

 

16  interest in the goods may be perfected by 1 or more of the

 

17  following:

 

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

 

19        (b) The bailee's receipt of notification of the secured

 

20  party's interest.

 

21        (c) Filing as to the goods.

 

22        (5) A security interest in certificated securities,

 

23  negotiable documents, or instruments is perfected without filing

 

24  or the taking of possession or control for a period of 20 days

 

25  from the time it attaches to the extent that it arises for new

 

26  value given under an authenticated security agreement.

 

27        (6) A perfected security interest in a negotiable document


 

 1  or goods in possession of a bailee, other than one that has

 

 2  issued a negotiable document for the goods, remains perfected for

 

 3  20 days without filing if the secured party makes available to

 

 4  the debtor the goods or documents representing the goods for the

 

 5  purpose of ultimate sale or exchange, or for the purpose of

 

 6  loading, unloading, storing, shipping, transshipping,

 

 7  manufacturing, processing, or otherwise dealing with them in a

 

 8  manner preliminary to their sale or exchange:

 

 9        (7) A perfected security interest in a certificated security

 

10  or instrument remains perfected for 20 days without filing if the

 

11  secured party delivers the security certificate or instrument to

 

12  the debtor for the purpose of ultimate sale or exchange or for

 

13  the purpose of presentation, collection, enforcement, renewal, or

 

14  registration of transfer.

 

15        (8) After the 20-day period specified in subsection (5),

 

16  (6), or (7) expires, perfection depends upon compliance with this

 

17  article.

 

18        Sec. 9313. (1) Except as otherwise provided in subsection

 

19  (2), a secured party may perfect a security interest in tangible

 

20  negotiable documents, goods, instruments, money, or tangible

 

21  chattel paper by taking possession of the collateral. A secured

 

22  party may perfect a security interest in certificated securities

 

23  by taking delivery of the certificated securities under section

 

24  8301.

 

25        (2) With respect to goods covered by a certificate of title

 

26  issued by this state, a secured party may perfect a security

 

27  interest in the goods by taking possession of the goods only in


 

 1  the circumstances described in section 9316(5).

 

 2        (3) With respect to collateral other than certificated

 

 3  securities and goods covered by a document, a secured party takes

 

 4  possession of collateral in the possession of a person other than

 

 5  the debtor, the secured party, or a lessee of the collateral from

 

 6  the debtor in the ordinary course of the debtor's business, when

 

 7  the person in possession authenticates a record acknowledging

 

 8  that it holds possession of the collateral for the secured

 

 9  party's benefit, or the person takes possession of the collateral

 

10  after having authenticated a record acknowledging that it will

 

11  hold possession of collateral for the secured party's benefit.

 

12        (4) If the perfection of a security interest depends upon

 

13  possession of the collateral by a secured party, perfection

 

14  occurs no earlier than the time the secured party takes

 

15  possession and continues only while the secured party retains

 

16  possession.

 

17        (5) A security interest in a certificated security in

 

18  registered form is perfected by delivery when delivery of the

 

19  certificated security occurs under section 8301 and remains

 

20  perfected by delivery until the debtor obtains possession of the

 

21  security certificate.

 

22        (6) A person in possession of collateral is not required to

 

23  acknowledge that it holds possession for a secured party's

 

24  benefit.

 

25        (7) If a person acknowledges that it holds possession for

 

26  the secured party's benefit, the acknowledgment is effective

 

27  under subsection (3) or section 8301(1), even if the


 

 1  acknowledgment violates the rights of a debtor, and unless the

 

 2  person otherwise agrees or law other than this article otherwise

 

 3  provides, the person does not owe any duty to the secured party

 

 4  and is not required to confirm the acknowledgment to another

 

 5  person.

 

 6        (8) A secured party having possession of collateral does not

 

 7  relinquish possession by delivering the collateral to a person

 

 8  other than the debtor or a lessee of the collateral from the

 

 9  debtor in the ordinary course of the debtor's business if the

 

10  person was instructed before the delivery or is instructed

 

11  contemporaneously with the delivery to hold possession of the

 

12  collateral for the secured party's benefit, or to redeliver the

 

13  collateral to the secured party.

 

14        (9) A secured party does not relinquish possession, even if

 

15  a delivery under subsection (8) violates the rights of a debtor.

 

16  A person to which collateral is delivered under subsection (8)

 

17  does not owe any duty to the secured party and is not required to

 

18  confirm the delivery to another person unless the person

 

19  otherwise agrees or law other than this article otherwise

 

20  provides.

 

21        Sec. 9314. (1) A security interest in investment property,

 

22  deposit accounts, letter-of-credit rights, or electronic chattel

 

23  paper, or electronic documents may be perfected by control of the

 

24  collateral under section 7106, 9104, 9105, 9106, or 9107.

 

25        (2) A security interest in deposit accounts, electronic

 

26  chattel paper, or letter-of-credit rights, or electronic

 

27  documents is perfected by control under section 7106, 9104, 9105,


 

 1  or 9107 when the secured party obtains control and remains

 

 2  perfected by control only while the secured party retains

 

 3  control.

 

 4        (3) A security interest in investment property is perfected

 

 5  by control under section 9106 from the time the secured party

 

 6  obtains control and remains perfected by control until both of

 

 7  the following occur:

 

 8        (a) The secured party does not have control.

 

 9        (b) One of the following occurs:

 

10        (i) If the collateral is a certificated security, the debtor

 

11  has or acquires possession of the security certificate.

 

12        (ii) If the collateral is an uncertificated security, the

 

13  issuer has registered or registers the debtor as the registered

 

14  owner.

 

15        (iii) If the collateral is a security entitlement, the debtor

 

16  is or becomes the entitlement holder.

 

17        Sec. 9317. (1) A security interest or agricultural lien is

 

18  subordinate to the rights of 1 or more of the following:

 

19        (a) A person entitled to priority under section 9322.

 

20        (b) Except as otherwise provided in subsection (5), a person

 

21  that becomes a lien creditor before the earlier of the following:

 

22        (i) The time the security interest or agricultural lien is

 

23  perfected.

 

24        (ii) The time 1 of the conditions specified in section

 

25  9203(2)(c) is met and a financing statement covering the

 

26  collateral is filed.

 

27        (2) Except as otherwise provided in subsection (5), a buyer,


 

 1  other than a secured party, of tangible chattel paper, tangible

 

 2  documents, goods, instruments, or a security certificate takes

 

 3  free of a security interest or agricultural lien if the buyer

 

 4  gives value and receives delivery of the collateral without

 

 5  knowledge of the security interest or agricultural lien and

 

 6  before it is perfected.

 

 7        (3) Except as otherwise provided in subsection (5), a lessee

 

 8  of goods takes free of a security interest or agricultural lien

 

 9  if the lessee gives value and receives delivery of the collateral

 

10  without knowledge of the security interest or agricultural lien

 

11  and before it is perfected.

 

12        (4) A licensee of a general intangible or a buyer, other

 

13  than a secured party, of accounts, electronic chattel paper,

 

14  electronic documents, general intangibles, or investment property

 

15  other than a certificated security takes free of a security

 

16  interest if the licensee or buyer gives value without knowledge

 

17  of the security interest and before it is perfected.

 

18        (5) Except as otherwise provided in sections 9320 and 9321,

 

19  if a person files a financing statement with respect to a

 

20  purchase-money security interest before or within 20 days after

 

21  the debtor receives delivery of the collateral, the security

 

22  interest takes priority over the rights of a buyer, lessee, or

 

23  lien creditor that arise between the time the security interest

 

24  attaches and the time of filing.

 

25        Sec. 9338. If a security interest or agricultural lien is

 

26  perfected by a filed financing statement providing information

 

27  described in section 9516(2)(e) that is incorrect at the time the


 

 1  financing statement is filed, all of the following apply:

 

 2        (a) The security interest or agricultural lien is

 

 3  subordinate to a conflicting perfected security interest in the

 

 4  collateral to the extent that the holder of the conflicting

 

 5  security interest gives value in reasonable reliance upon the

 

 6  incorrect information.

 

 7        (b) A purchaser, other than a secured party, of the

 

 8  collateral takes free of the security interest or agricultural

 

 9  lien to the extent that, in reasonable reliance upon the

 

10  incorrect information, the purchaser gives value and, in the case

 

11  of tangible chattel paper, tangible documents, goods,

 

12  instruments, or a security certificate, receives delivery of the

 

13  collateral.

 

14        Sec. 9601. (1) After default, a secured party has the rights

 

15  provided in this part and, except as otherwise provided in

 

16  section 9602, those provided by agreement of the parties. A

 

17  secured party may do 1 or more of the following:

 

18        (a) May reduce a claim to judgment, foreclose, or otherwise

 

19  enforce the claim, security interest, or agricultural lien by any

 

20  available judicial procedure.

 

21        (b) If the collateral is documents, may proceed either as to

 

22  the documents or as to the goods they cover.

 

23        (2) A secured party in possession of collateral or control

 

24  of collateral under section 7106, 9104, 9105, 9106, or 9107 has

 

25  the rights and duties provided in section 9207.

 

26        (3) The rights under subsections (1) and (2) are cumulative

 

27  and may be exercised simultaneously.


 

 1        (4) Except as otherwise provided in subsection (7) and

 

 2  section 9605, after default, a debtor and an obligor have the

 

 3  rights provided in this part and by agreement of the parties.

 

 4        (5) If a secured party has reduced its claim to judgment,

 

 5  the lien of any levy that may be made upon the collateral by

 

 6  virtue of an execution based upon the judgment relates back to

 

 7  the earliest of the following:

 

 8        (a) The date of perfection of the security interest or

 

 9  agricultural lien in the collateral.

 

10        (b) The date of filing a financing statement covering the

 

11  collateral.

 

12        (c) Any date specified in a statute under which the

 

13  agricultural lien was created.

 

14        (6) A sale pursuant to an execution is a foreclosure of the

 

15  security interest or agricultural lien by judicial procedure

 

16  within the meaning of this section. A secured party may purchase

 

17  at the sale and thereafter hold the collateral free of any other

 

18  requirements of this article.

 

19        (7) Except as otherwise provided in section 9607(3), this

 

20  part imposes no duties upon a secured party that is a consignor

 

21  or is a buyer of accounts, chattel paper, payment intangibles, or

 

22  promissory notes.

 

23        Enacting section 1. This amendatory act takes effect July 1,

 

24  2013.