Minnesota Legislature
HF 1983
1st Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
Current Version - 1st Engrossment
1.1 A bill for an act 1.2 relating to commerce; enacting the revisions to the 1.3 general provisions of the Uniform Commercial Code and 1.4 enacting a revised Article 7 of the Uniform Commercial 1.5 Code recommended by the National Conference of 1.6 Commissioners on Uniform State Laws; making conforming 1.7 changes; amending provisions in Articles 3 and 4 of 1.8 the Uniform Commercial Code relating to warranties on 1.9 remotely created items; amending Minnesota Statutes 1.10 2002, sections 17.94; 84.787, subdivision 9; 84.797, 1.11 subdivision 10; 84.92, subdivision 6; 86B.820, 1.12 subdivision 12; 168A.01, subdivision 20; 234.27; 1.13 325L.03; 325L.16; 336.2-103; 336.2-104; 336.2-202; 1.14 336.2-310; 336.2-323; 336.2-401; 336.2-503; 336.2-505; 1.15 336.2-506; 336.2-509; 336.2-605; 336.2-705; 1.16 336.2A-103; 336.2A-501; 336.2A-514; 336.2A-518; 1.17 336.2A-519; 336.2A-526; 336.2A-527; 336.2A-528; 1.18 336.4-210; 336.4A-105; 336.4A-106; 336.4A-204; 1.19 336.5-103; 336.8-102; 336.8-103; 336.9-102; 336.9-203; 1.20 336.9-207; 336.9-208; 336.9-301; 336.9-310; 336.9-312; 1.21 336.9-313; 336.9-314; 336.9-317; 336.9-338; 336.9-601; 1.22 513.33, subdivision 1; 514.963, subdivision 9; 1.23 514.965, subdivision 10; 514.973; Minnesota Statutes 1.24 2003 Supplement, sections 336.3-103; 336.3-416; 1.25 336.3-417; 336.4-104; 336.4-207; 336.4-208; proposing 1.26 coding for new law in Minnesota Statutes, chapter 336; 1.27 repealing Minnesota Statutes 2002, sections 336.1-101; 1.28 336.1-102; 336.1-103; 336.1-104; 336.1-105; 336.1-106; 1.29 336.1-107; 336.1-108; 336.1-109; 336.1-110; 336.1-201; 1.30 336.1-202; 336.1-203; 336.1-204; 336.1-205; 336.1-206; 1.31 336.1-207; 336.1-208; 336.1-209; 336.2-208; 1.32 336.2A-207; 336.7-101; 336.7-102; 336.7-103; 1.33 336.7-104; 336.7-105; 336.7-201; 336.7-202; 336.7-203; 1.34 336.7-204; 336.7-205; 336.7-206; 336.7-207; 336.7-208; 1.35 336.7-209; 336.7-210; 336.7-301; 336.7-302; 336.7-303; 1.36 336.7-304; 336.7-305; 336.7-306; 336.7-307; 336.7-308; 1.37 336.7-309; 336.7-401; 336.7-402; 336.7-403; 336.7-404; 1.38 336.7-501; 336.7-502; 336.7-503; 336.7-504; 336.7-505; 1.39 336.7-506; 336.7-507; 336.7-508; 336.7-509; 336.7-601; 1.40 336.7-602; 336.7-603; 336.10-104. 1.41 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.42 ARTICLE 1 1.43 REVISION OF UNIFORM COMMERCIAL CODE 2.1 PART 1 2.2 GENERAL PROVISIONS 2.3 Section 1. [336.1-101] [SHORT TITLES.] 2.4 (a) This chapter may be cited as the Uniform Commercial 2.5 Code. 2.6 (b) This article may be cited as Uniform Commercial Code - 2.7 General Provisions. 2.8 Sec. 2. [336.1-102] [SCOPE OF ARTICLE.] 2.9 This article applies to a transaction to the extent that it 2.10 is governed by another article of the Uniform Commercial Code. 2.11 Sec. 3. [336.1-103] [CONSTRUCTION OF UNIFORM COMMERCIAL 2.12 CODE TO PROMOTE ITS PURPOSES AND POLICIES; APPLICABILITY OF 2.13 SUPPLEMENTAL PRINCIPLES OF LAW.] 2.14 (a) The Uniform Commercial Code must be liberally construed 2.15 and applied to promote its underlying purposes and policies, 2.16 which are: 2.17 (1) to simplify, clarify, and modernize the law governing 2.18 commercial transactions; 2.19 (2) to permit the continued expansion of commercial 2.20 practices through custom, usage, and agreement of the parties; 2.21 and 2.22 (3) to make uniform the law among the various jurisdictions. 2.23 (b) Unless displaced by the particular provisions of the 2.24 Uniform Commercial Code, the principles of law and equity, 2.25 including the law merchant and the law relative to capacity to 2.26 contract, principal and agent, estoppel, fraud, 2.27 misrepresentation, duress, coercion, mistake, bankruptcy, and 2.28 other validating or invalidating cause supplement its provisions. 2.29 Sec. 4. [336.1-104] [CONSTRUCTION AGAINST IMPLIED REPEAL.] 2.30 The Uniform Commercial Code being a general act intended as 2.31 a unified coverage of its subject matter, no part of it shall be 2.32 deemed to be impliedly repealed by subsequent legislation if 2.33 such construction can reasonably be avoided. 2.34 Sec. 5. [336.1-105] [SEVERABILITY.] 2.35 If any provision or clause of the Uniform Commercial Code 2.36 or its application to any person or circumstance is held 3.1 invalid, the invalidity does not affect other provisions or 3.2 applications of the Uniform Commercial Code which can be given 3.3 effect without the invalid provision or application, and to this 3.4 end the provisions of the Uniform Commercial Code are severable. 3.5 Sec. 6. [336.1-106] [USE OF SINGULAR AND PLURAL; GENDER.] 3.6 In the Uniform Commercial Code, unless the statutory 3.7 context otherwise requires: 3.8 (1) words in the singular number include the plural, and 3.9 those in the plural include the singular; and 3.10 (2) words of any gender also refer to any other gender. 3.11 Sec. 7. [336.1-107] [SECTION CAPTIONS.] 3.12 Section captions are part of the Uniform Commercial Code. 3.13 Sec. 8. [336.1-108] [RELATION TO ELECTRONIC SIGNATURES IN 3.14 GLOBAL AND NATIONAL COMMERCE ACT.] 3.15 This chapter modifies, limits, and supersedes the federal 3.16 Electronic Signatures in Global and National Commerce Act (15 3.17 U.S.C. Section 7001, et seq.) but does not modify, limit, or 3.18 supersede Section 101(c) of that act (15 U.S.C. Section 7001(c)) 3.19 or authorize electronic delivery of any of the notices described 3.20 in Section 103(b) of that act (15 U.S.C. Section 7003(b)). 3.21 Sec. 9. [336.1-110] [UNIFORM COMMERCIAL CODE ACCOUNT.] 3.22 The Uniform Commercial Code account is established as an 3.23 account in the state treasury. Fees that are not expressly set 3.24 by statute but are charged by the secretary of state to offset 3.25 the costs of providing a service under this chapter must be 3.26 deposited in the state treasury and credited to the Uniform 3.27 Commercial Code account. 3.28 Fees that are not expressly set by statute but are charged 3.29 by the secretary of state to offset the costs of providing 3.30 information contained in the computerized records maintained by 3.31 the secretary of state must be deposited in the state treasury 3.32 and credited to the Uniform Commercial Code account. 3.33 Money in the Uniform Commercial Code account is 3.34 continuously appropriated to the secretary of state to implement 3.35 and maintain the central filing system under this chapter and to 3.36 provide electronic access to other computerized records 4.1 maintained by the secretary of state. 4.2 PART 2 4.3 GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION 4.4 Sec. 10. [336.1-201] [GENERAL DEFINITIONS.] 4.5 (a) Unless the context otherwise requires, words or phrases 4.6 defined in this section, or in the additional definitions 4.7 contained in other articles of the Uniform Commercial Code that 4.8 apply to particular articles or parts thereof, have the meanings 4.9 stated. 4.10 (b) Subject to definitions contained in other articles of 4.11 the Uniform Commercial Code that apply to particular articles or 4.12 parts thereof: 4.13 (1) "Action," in the sense of a judicial proceeding, 4.14 includes recoupment, counterclaim, set-off, suit in equity, and 4.15 any other proceeding in which rights are determined. 4.16 (2) "Aggrieved party" means a party entitled to pursue a 4.17 remedy. 4.18 (3) "Agreement," as distinguished from "contract," means 4.19 the bargain of the parties in fact, as found in their language 4.20 or inferred from other circumstances, including course of 4.21 performance, course of dealing, or usage of trade as provided in 4.22 section 336.1-303. 4.23 (4) "Bank" means a person engaged in the business of 4.24 banking and includes a savings bank, savings and loan 4.25 association, credit union, and trust company. 4.26 (5) "Bearer" means a person in control of a negotiable 4.27 electronic document of title or a person in possession of a 4.28 negotiable instrument, negotiable tangible document of title, or 4.29 certificated security that is payable to bearer or indorsed in 4.30 blank. 4.31 (6) "Bill of lading" means a document of title evidencing 4.32 the receipt of goods for shipment issued by a person engaged in 4.33 the business of directly or indirectly transporting or 4.34 forwarding goods. The term does not include a warehouse receipt. 4.35 (7) "Branch" includes a separately incorporated foreign 4.36 branch of a bank. 5.1 (8) "Burden of establishing" a fact means the burden of 5.2 persuading the trier of fact that the existence of the fact is 5.3 more probable than its nonexistence. 5.4 (9) "Buyer in ordinary course of business" means a person 5.5 that buys goods in good faith, without knowledge that the sale 5.6 violates the rights of another person in the goods, and in the 5.7 ordinary course from a person, other than a pawnbroker, in the 5.8 business of selling goods of that kind. A person buys goods in 5.9 the ordinary course if the sale to the person comports with the 5.10 usual or customary practices in the kind of business in which 5.11 the seller is engaged or with the seller's own usual or 5.12 customary practices. A person that sells oil, gas, or other 5.13 minerals at the wellhead or minehead is a person in the business 5.14 of selling goods of that kind. A buyer in ordinary course of 5.15 business may buy for cash, by exchange of other property, or on 5.16 secured or unsecured credit, and may acquire goods or documents 5.17 of title under a preexisting contract for sale. Only a buyer 5.18 that takes possession of the goods or has a right to recover the 5.19 goods from the seller under article 2 may be a buyer in ordinary 5.20 course of business. "Buyer in ordinary course of business" does 5.21 not include a person that acquires goods in a transfer in bulk 5.22 or as security for or in total or partial satisfaction of a 5.23 money debt. 5.24 (10) "Conspicuous," with reference to a term, means so 5.25 written, displayed, or presented that a reasonable person 5.26 against which it is to operate ought to have noticed it. 5.27 Whether a term is "conspicuous" or not is a decision for the 5.28 court. Conspicuous terms include the following: 5.29 (A) a heading in capitals equal to or greater in size than 5.30 the surrounding text, or in contrasting type, font, or color to 5.31 the surrounding text of the same or lesser size; and 5.32 (B) language in the body of a record or display in larger 5.33 type than the surrounding text, or in contrasting type, font, or 5.34 color to the surrounding text of the same size, or set off from 5.35 surrounding text of the same size by symbols or other marks that 5.36 call attention to the language. 6.1 (11) "Consumer" means an individual who enters into a 6.2 transaction primarily for personal, family, or household 6.3 purposes. 6.4 (12) "Contract," as distinguished from "agreement," means 6.5 the total legal obligation that results from the parties' 6.6 agreement as determined by the Uniform Commercial Code as 6.7 supplemented by any other applicable laws. 6.8 (13) "Creditor" includes a general creditor, a secured 6.9 creditor, a lien creditor, and any representative of creditors, 6.10 including an assignee for the benefit of creditors, a trustee in 6.11 bankruptcy, a receiver in equity, and an executor or 6.12 administrator of an insolvent debtor's or assignor's estate. 6.13 (14) "Defendant" includes a person in the position of 6.14 defendant in a counterclaim, cross-claim, or third-party claim. 6.15 (15) "Delivery," with respect to an electronic document of 6.16 title means voluntary transfer of control and with respect to an 6.17 instrument, a tangible document of title, or chattel paper, 6.18 means voluntary transfer of possession. 6.19 (16) "Document of title" means a record (i) that in the 6.20 regular course of business or financing is treated as adequately 6.21 evidencing that the person in possession or control of the 6.22 record is entitled to receive, control, hold, and dispose of the 6.23 record and the goods the record covers, and (ii) that purports 6.24 to be issued by or addressed to a bailee and to cover goods in 6.25 the bailee's possession which are either identified or are 6.26 fungible portions of an identified mass. The term includes a 6.27 bill of lading, transport document, dock warrant, dock receipt, 6.28 warehouse receipt, and order for delivery of goods. An 6.29 electronic document of title means a document of title evidenced 6.30 by a record consisting of information stored in an electronic 6.31 medium. A tangible document of title means a document of title 6.32 evidenced by a record consisting of information that is 6.33 inscribed on a tangible medium. 6.34 (17) "Fault" means a default, breach, or wrongful act or 6.35 omission. 6.36 (18) "Fungible goods" means: 7.1 (A) goods of which any unit, by nature or usage of trade, 7.2 is the equivalent of any other like unit; or 7.3 (B) goods that by agreement are treated as equivalent. 7.4 (19) "Genuine" means free of forgery or counterfeiting. 7.5 (20) "Good faith," except as otherwise provided in article 7.6 5, means honesty in fact and the observance of reasonable 7.7 commercial standards of fair dealing. 7.8 (21) "Holder" means: 7.9 (A) the person in possession of a negotiable instrument 7.10 that is payable either to bearer or to an identified person that 7.11 is the person in possession; 7.12 (B) the person in possession of a negotiable tangible 7.13 document of title if the goods are deliverable either to bearer 7.14 or to the order of the person in possession; or 7.15 (C) the person in control of a negotiable electronic 7.16 document of title. 7.17 (22) "Insolvency proceeding" includes an assignment for the 7.18 benefit of creditors or other proceeding intended to liquidate 7.19 or rehabilitate the estate of the person involved. 7.20 (23) "Insolvent" means: 7.21 (A) having generally ceased to pay debts in the ordinary 7.22 course of business other than as a result of bona fide dispute; 7.23 (B) being unable to pay debts as they become due; or 7.24 (C) being insolvent within the meaning of federal 7.25 bankruptcy law. 7.26 (24) "Money" means a medium of exchange currently 7.27 authorized or adopted by a domestic or foreign government. The 7.28 term includes a monetary unit of account established by an 7.29 intergovernmental organization or by agreement between two or 7.30 more countries. 7.31 (25) "Organization" means a person other than an individual. 7.32 (26) "Party," as distinguished from "third party," means a 7.33 person that has engaged in a transaction or made an agreement 7.34 subject to the Uniform Commercial Code. 7.35 (27) "Person" means an individual, corporation, business 7.36 trust, estate, trust, partnership, limited liability company, 8.1 association, joint venture, government, governmental 8.2 subdivision, agency, or instrumentality, public corporation, or 8.3 any other legal or commercial entity. 8.4 (28) "Present value" means the amount as of a date certain 8.5 of one or more sums payable in the future, discounted to the 8.6 date certain by use of either an interest rate specified by the 8.7 parties if that rate is not manifestly unreasonable at the time 8.8 the transaction is entered into or, if an interest rate is not 8.9 so specified, a commercially reasonable rate that takes into 8.10 account the facts and circumstances at the time the transaction 8.11 is entered into. 8.12 (29) "Purchase" means taking by sale, lease, discount, 8.13 negotiation, mortgage, pledge, lien, security interest, issue or 8.14 reissue, gift, or any other voluntary transaction creating an 8.15 interest in property. 8.16 (30) "Purchaser" means a person that takes by purchase. 8.17 (31) "Record" means information that is inscribed on a 8.18 tangible medium or that is stored in an electronic or other 8.19 medium and is retrievable in perceivable form. 8.20 (32) "Remedy" means any remedial right to which an 8.21 aggrieved party is entitled with or without resort to a tribunal. 8.22 (33) "Representative" means a person empowered to act for 8.23 another, including an agent, an officer of a corporation or 8.24 association, and a trustee, executor, or administrator of an 8.25 estate. 8.26 (34) "Right" includes remedy. 8.27 (35) "Security interest" means an interest in personal 8.28 property or fixtures which secures payment or performance of an 8.29 obligation. "Security interest" includes any interest of a 8.30 consignor and a buyer of accounts, chattel paper, a payment 8.31 intangible, or a promissory note in a transaction that is 8.32 subject to article 9. "Security interest" does not include the 8.33 special property interest of a buyer of goods on identification 8.34 of those goods to a contract for sale under section 336.2-401, 8.35 but a buyer may also acquire a "security interest" by complying 8.36 with article 9. Except as otherwise provided in section 9.1 336.2-505, the right of a seller or lessor of goods under 9.2 article 2 or 2A to retain or acquire possession of the goods is 9.3 not a "security interest," but a seller or lessor may also 9.4 acquire a "security interest" by complying with article 9. The 9.5 retention or reservation of title by a seller of goods 9.6 notwithstanding shipment or delivery to the buyer under section 9.7 336.2-401 is limited in effect to a reservation of a "security 9.8 interest." Whether a transaction in the form of a lease creates 9.9 a "security interest" is determined pursuant to section 9.10 336.1-203. 9.11 (36) "Send" in connection with a writing, record, or notice 9.12 means: 9.13 (A) to deposit in the mail or deliver for transmission by 9.14 any other usual means of communication with postage or cost or 9.15 transmission provided for and properly addressed, and in the 9.16 case of an instrument, to an address specified thereon or 9.17 otherwise agreed, or if there be none to any address reasonable 9.18 under the circumstances; or 9.19 (B) in any other way to cause to be received any record or 9.20 notice within the time it would have arrived if properly sent. 9.21 (37) "Signed" includes using any symbol executed or adopted 9.22 with present intention to adopt or accept a writing. 9.23 (38) "State" means a state of the United States, the 9.24 District of Columbia, Puerto Rico, the United States Virgin 9.25 Islands, or any territory or insular possession subject to the 9.26 jurisdiction of the United States. 9.27 (39) "Surety" includes a guarantor or other secondary 9.28 obligor. 9.29 (40) "Term" means a portion of an agreement that relates to 9.30 a particular matter. 9.31 (41) "Unauthorized signature" means a signature made 9.32 without actual, implied, or apparent authority. The term 9.33 includes a forgery. 9.34 (42) "Warehouse receipt" means a document of title issued 9.35 by a person engaged in the business of storing goods for hire. 9.36 (43) "Writing" includes printing, typewriting, or any other 10.1 intentional reduction to tangible form. "Written" has a 10.2 corresponding meaning. 10.3 Sec. 11. [336.1-202] [NOTICE; KNOWLEDGE.] 10.4 (a) Subject to subsection (f), a person has "notice" of a 10.5 fact if the person: 10.6 (1) has actual knowledge of it; 10.7 (2) has received a notice or notification of it; or 10.8 (3) from all the facts and circumstances known to the 10.9 person at the time in question, has reason to know that it 10.10 exists. 10.11 (b) "Knowledge" means actual knowledge. "Knows" has a 10.12 corresponding meaning. 10.13 (c) "Discover," "learn," or words of similar import refer 10.14 to knowledge rather than to reason to know. 10.15 (d) A person "notifies" or "gives" a notice or notification 10.16 to another person by taking such steps as may be reasonably 10.17 required to inform the other person in ordinary course, whether 10.18 or not the other person actually comes to know of it. 10.19 (e) Subject to subsection (f), a person "receives" a notice 10.20 or notification when: 10.21 (1) it comes to that person's attention; or 10.22 (2) it is duly delivered in a form reasonable under the 10.23 circumstances at the place of business through which the 10.24 contract was made or at another location held out by that person 10.25 as the place for receipt of such communications. 10.26 (f) Notice, knowledge, or a notice or notification received 10.27 by an organization is effective for a particular transaction 10.28 from the time it is brought to the attention of the individual 10.29 conducting that transaction and, in any event, from the time it 10.30 would have been brought to the individual's attention if the 10.31 organization had exercised due diligence. An organization 10.32 exercises due diligence if it maintains reasonable routines for 10.33 communicating significant information to the person conducting 10.34 the transaction and there is reasonable compliance with the 10.35 routines. Due diligence does not require an individual acting 10.36 for the organization to communicate information unless the 11.1 communication is part of the individual's regular duties or the 11.2 individual has reason to know of the transaction and that the 11.3 transaction would be materially affected by the information. 11.4 Sec. 12. [336.1-203] [LEASE DISTINGUISHED FROM SECURITY 11.5 INTEREST.] 11.6 (a) Whether a transaction in the form of a lease creates a 11.7 lease or security interest is determined by the facts of each 11.8 case. 11.9 (b) A transaction in the form of a lease creates a security 11.10 interest if the consideration that the lessee is to pay the 11.11 lessor for the right to possession and use of the goods is an 11.12 obligation for the term of the lease and is not subject to 11.13 termination by the lessee, and: 11.14 (1) the original term of the lease is equal to or greater 11.15 than the remaining economic life of the goods; 11.16 (2) the lessee is bound to renew the lease for the 11.17 remaining economic life of the goods or is bound to become the 11.18 owner of the goods; 11.19 (3) the lessee has an option to renew the lease for the 11.20 remaining economic life of the goods for no additional 11.21 consideration or for nominal additional consideration upon 11.22 compliance with the lease agreement; or 11.23 (4) the lessee has an option to become the owner of the 11.24 goods for no additional consideration or for nominal additional 11.25 consideration upon compliance with the lease agreement. 11.26 (c) A transaction in the form of a lease does not create a 11.27 security interest merely because: 11.28 (1) the present value of the consideration the lessee is 11.29 obligated to pay the lessor for the right to possession and use 11.30 of the goods is substantially equal to or is greater than the 11.31 fair market value of the goods at the time the lease is entered 11.32 into; 11.33 (2) the lessee assumes risk of loss of the goods; 11.34 (3) the lessee agrees to pay, with respect to the goods, 11.35 taxes, insurance, filing, recording, or registration fees, or 11.36 service or maintenance costs; 12.1 (4) the lessee has an option to renew the lease or to 12.2 become the owner of the goods; 12.3 (5) the lessee has an option to renew the lease for a fixed 12.4 rent that is equal to or greater than the reasonably predictable 12.5 fair market rent for the use of the goods for the term of the 12.6 renewal at the time the option is to be performed; or 12.7 (6) the lessee has an option to become the owner of the 12.8 goods for a fixed price that is equal to or greater than the 12.9 reasonably predictable fair market value of the goods at the 12.10 time the option is to be performed. 12.11 (d) Additional consideration is nominal if it is less than 12.12 the lessee's reasonably predictable cost of performing under the 12.13 lease agreement if the option is not exercised. Additional 12.14 consideration is not nominal if: 12.15 (1) when the option to renew the lease is granted to the 12.16 lessee, the rent is stated to be the fair market rent for the 12.17 use of the goods for the term of the renewal determined at the 12.18 time the option is to be performed; or 12.19 (2) when the option to become the owner of the goods is 12.20 granted to the lessee, the price is stated to be the fair market 12.21 value of the goods determined at the time the option is to be 12.22 performed. 12.23 (e) The "remaining economic life of the goods" and 12.24 "reasonably predictable" fair market rent, fair market value, or 12.25 cost of performing under the lease agreement must be determined 12.26 with reference to the fact and circumstances at the time the 12.27 transaction is entered into. 12.28 Sec. 13. [336.1-204] [VALUE.] 12.29 Except as otherwise provided in articles 3, 4, and 5, a 12.30 person gives value for rights if the person acquires them: 12.31 (1) in return for a binding commitment to extend credit or 12.32 for the extension of immediately available credit, whether or 12.33 not drawn upon and whether or not a chargeback is provided for 12.34 in the event of difficulties in collection; 12.35 (2) as security for, or in total or partial satisfaction 12.36 of, a preexisting claim; 13.1 (3) by accepting delivery under a preexisting contract for 13.2 purchase; or 13.3 (4) in return for any consideration sufficient to support a 13.4 simple contract. 13.5 Sec. 14. [336.1-205] [REASONABLE TIME; SEASONABLENESS.] 13.6 (a) Whether a time for taking an action required by the 13.7 Uniform Commercial Code is reasonable depends on the nature, 13.8 purpose, and circumstances of the action. 13.9 (b) An action is taken seasonably if it is taken at or 13.10 within the time agreed or, if no time is agreed, at or within a 13.11 reasonable time. 13.12 Sec. 15. [336.1-206] [PRESUMPTIONS.] 13.13 Whenever the Uniform Commercial Code creates a 13.14 "presumption" with respect to a fact, or provides that a fact is 13.15 "presumed," the trier of fact must find the existence of the 13.16 fact unless and until evidence is introduced that supports a 13.17 finding of its nonexistence. 13.18 PART 3 13.19 TERRITORIAL APPLICABILITY AND GENERAL RULES 13.20 Sec. 16. [336.1-301] [TERRITORIAL APPLICABILITY; PARTIES' 13.21 POWER TO CHOOSE APPLICABLE LAW.] 13.22 (a) Except as otherwise provided in this section, when a 13.23 transaction bears a reasonable relation to this state and also 13.24 to another state or nation the parties may agree that the law 13.25 either of this state or of such other state or nation shall 13.26 govern their rights and duties. 13.27 (b) In the absence of an agreement effective under 13.28 subsection (a), and except as provided in subsection (c), the 13.29 Uniform Commercial Code applies to transactions bearing an 13.30 appropriate relation to this state. 13.31 (c) If one of the following provisions of the Uniform 13.32 Commercial Code specifies the applicable law, that provision 13.33 governs and a contrary agreement is effective only to the extent 13.34 permitted by the law so specified: 13.35 (1) section 336.2-402; 13.36 (2) sections 336.2A-105 and 336.2A-106; 14.1 (3) section 336.4-102; 14.2 (4) section 336.4A-507; 14.3 (5) section 336.5-116; 14.4 (6) section 336.8-110; 14.5 (7) sections 336.9-301 through 336.9-307. 14.6 Sec. 17. [336.1-302] [VARIATION BY AGREEMENT.] 14.7 (a) Except as otherwise provided in subsection (b) or 14.8 elsewhere in the Uniform Commercial Code, the effect of 14.9 provisions of the Uniform Commercial Code may be varied by 14.10 agreement. 14.11 (b) The obligations of good faith, diligence, 14.12 reasonableness, and care prescribed by the Uniform Commercial 14.13 Code may not be disclaimed by agreement. The parties, by 14.14 agreement, may determine the standards by which the performance 14.15 of those obligations is to be measured if those standards are 14.16 not manifestly unreasonable. Whenever the Uniform Commercial 14.17 Code requires an action to be taken within a reasonable time, a 14.18 time that is not manifestly unreasonable may be fixed by 14.19 agreement. 14.20 (c) The presence in certain provisions of the Uniform 14.21 Commercial Code of the phrase "unless otherwise agreed," or 14.22 words of similar import, does not imply that the effect of other 14.23 provisions may not be varied by agreement under this section. 14.24 Sec. 18. [336.1-303] [COURSE OF PERFORMANCE, COURSE OF 14.25 DEALING, AND USAGE OF TRADE.] 14.26 (a) A "course of performance" is a sequence of conduct 14.27 between the parties to a particular transaction that exists if: 14.28 (1) the agreement of the parties with respect to the 14.29 transaction involves repeated occasions for performance by a 14.30 party; and 14.31 (2) the other party, with knowledge of the nature of the 14.32 performance and opportunity for objection to it, accepts the 14.33 performance or acquiesces in it without objection. 14.34 (b) A "course of dealing" is a sequence of conduct 14.35 concerning previous transactions between the parties to a 14.36 particular transaction that is fairly to be regarded as 15.1 establishing a common basis of understanding for interpreting 15.2 their expressions and other conduct. 15.3 (c) A "usage of trade" is any practice or method of dealing 15.4 having such regularity of observance in a place, vocation, or 15.5 trade as to justify an expectation that it will be observed with 15.6 respect to the transaction in question. The existence and scope 15.7 of such a usage must be proved as facts. If it is established 15.8 that such a usage is embodied in a trade code or similar record, 15.9 the interpretation of the record is a question of law. 15.10 (d) A course of performance or course of dealing between 15.11 the parties or usage of trade in the vocation or trade in which 15.12 they are engaged or of which they are or should be aware is 15.13 relevant in ascertaining the meaning of the parties' agreement, 15.14 may give particular meaning to specific terms of the agreement, 15.15 and may supplement or qualify the terms of the agreement. A 15.16 usage of trade applicable in the place in which part of the 15.17 performance under the agreement is to occur may be so utilized 15.18 as to that part of the performance. 15.19 (e) Except as otherwise provided in subsection (f), the 15.20 express terms of an agreement and any applicable course of 15.21 performance, course of dealing, or usage of trade must be 15.22 construed whenever reasonable as consistent with each other. If 15.23 such a construction is unreasonable: 15.24 (1) express terms prevail over course of performance, 15.25 course of dealing, and usage of trade; 15.26 (2) course of performance prevails over course of dealing 15.27 and usage of trade; and 15.28 (3) course of dealing prevails over usage of trade. 15.29 (f) Subject to section 336.2-209, a course of performance 15.30 is relevant to show a waiver or modification of any term 15.31 inconsistent with the course of performance. 15.32 (g) Evidence of a relevant usage of trade offered by one 15.33 party is not admissible unless that party has given the other 15.34 party notice that the court finds sufficient to prevent unfair 15.35 surprise to the other party. 15.36 Sec. 19. [336.1-304] [OBLIGATION OF GOOD FAITH.] 16.1 Every contract or duty within the Uniform Commercial Code 16.2 imposes an obligation of good faith in its performance and 16.3 enforcement. 16.4 Sec. 20. [336.1-305] [REMEDIES TO BE LIBERALLY 16.5 ADMINISTERED.] 16.6 (a) The remedies provided by the Uniform Commercial Code 16.7 must be liberally administered to the end that the aggrieved 16.8 party may be put in as good a position as if the other party had 16.9 fully performed but neither consequential or special damages nor 16.10 penal damages may be had except as specifically provided in the 16.11 Uniform Commercial Code or by other rule of law. 16.12 (b) Any right or obligation declared by the Uniform 16.13 commercial Code is enforceable by action unless the provision 16.14 declaring it specifies a different and limited effect. 16.15 Sec. 21. [336.1-306] [WAIVER OR RENUNCIATION OF CLAIM OR 16.16 RIGHT AFTER BREACH.] 16.17 A claim or right arising out of an alleged breach may be 16.18 discharged in whole or in part without consideration by 16.19 agreement of the aggrieved party in an authenticated record. 16.20 Sec. 22. [336.1-307] [PRIMA FACIE EVIDENCE BY THIRD-PARTY 16.21 DOCUMENTS.] 16.22 A document in due form purporting to be a bill of lading, 16.23 policy or certificate of insurance, official weigher's or 16.24 inspector's certificate, consular invoice, or any other document 16.25 authorized or required by the contract to be issued by a third 16.26 party is prima facie evidence of its own authenticity and 16.27 genuineness and of the facts stated in the document by the third 16.28 party. 16.29 Sec. 23. [336.1-308] [PERFORMANCE OR ACCEPTANCE UNDER 16.30 RESERVATION OF RIGHTS.] 16.31 (a) A party that with explicit reservation of rights 16.32 performs or promises performance or assents to performance in a 16.33 manner demanded or offered by the other party does not thereby 16.34 prejudice the rights reserved. Such words as "without 16.35 prejudice," "under protest," or the like are sufficient. 16.36 (b) Subsection (a) does not apply to an accord and 17.1 satisfaction. 17.2 Sec. 24. [336.1-309] [OPTION TO ACCELERATE AT WILL.] 17.3 A term providing that one party or that party's successor 17.4 in interest may accelerate payment or performance or require 17.5 collateral or additional collateral "at will" or when the party 17.6 "deems itself insecure," or words of similar import, means that 17.7 the party has power to do so only if that party in good faith 17.8 believes that the prospect of payment or performance is 17.9 impaired. The burden of establishing lack of good faith is on 17.10 the party against which the power has been exercised. 17.11 Sec. 25. [336.1-310] [SUBORDINATED OBLIGATIONS.] 17.12 An obligation may be issued as subordinated to performance 17.13 of another obligation of the person obligated, or a creditor may 17.14 subordinate its right to performance of an obligation by 17.15 agreement with either the person obligated or another creditor 17.16 of the person obligated. Subordination does not create a 17.17 security interest as against either the common debtor or a 17.18 subordinated creditor. 17.19 Sec. 26. [REPEALER.] 17.20 Minnesota Statutes 2002, sections 336.1-101; 336.1-102; 17.21 336.1-103; 336.1-104; 336.1-105; 336.1-106; 336.1-107; 17.22 336.1-108; 336.1-109; 336.1-110; 336.1-201; 336.1-202; 17.23 336.1-203; 336.1-204; 336.1-205; 336.1-206; 336.1-207; 17.24 336.1-208; and 336.1-209, are repealed. 17.25 ARTICLE 2 17.26 CONFORMING AMENDMENTS TO OTHER UCC ARTICLES 17.27 Section 1. Minnesota Statutes 2002, section 336.2-103, is 17.28 amended to read: 17.29 336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 17.30 (1) In this article unless the context otherwise requires: 17.31 (a) "Buyer" means a person who buys or contracts to buy 17.32 goods. 17.33 (b)"Good faith" in the case of a merchant means honesty in17.34fact and the observance of reasonable commercial standards of17.35fair dealing in the trade.[Reserved.] 17.36 (c) "Receipt" of goods means taking physical possession of 18.1 them. 18.2 (d) "Seller" means a person who sells or contracts to sell 18.3 goods. 18.4 (2) Other definitions applying to this article or to 18.5 specified parts thereof, and the sections in which they appear 18.6 are: 18.7 "Acceptance," section 336.2-606. 18.8 "Banker's credit," section 336.2-325. 18.9 "Between merchants," section 336.2-104. 18.10 "Cancellation," section 336.2-106(4). 18.11 "Commercial unit," section 336.2-105. 18.12 "Confirmed credit," section 336.2-325. 18.13 "Conforming to contract," section 336.2-106. 18.14 "Contract for sale," section 336.2-106. 18.15 "Cover," section 336.2-712. 18.16 "Entrusting," section 336.2-403. 18.17 "Financing agency," section 336.2-104. 18.18 "Future goods," section 336.2-105. 18.19 "Goods," section 336.2-105. 18.20 "Identification," section 336.2-501. 18.21 "Installment contract," section 336.2-612. 18.22 "Letter of credit," section 336.2-325. 18.23 "Lot," section 336.2-105. 18.24 "Merchant," section 336.2-104. 18.25 "Overseas," section 336.2-323. 18.26 "Person in position of seller," section 336.2-707. 18.27 "Present sale," section 336.2-106. 18.28 "Sale," section 336.2-106. 18.29 "Sale on approval," section 336.2-326. 18.30 "Sale or return," section 336.2-326. 18.31 "Termination," section 336.2-106. 18.32 (3) The following definitions in other articles apply to 18.33 this article: 18.34 "Check," section 336.3-104. 18.35 "Consignee," section 336.7-102. 18.36 "Consignor," section 336.7-102. 19.1 "Consumer goods," section 336.9-102. 19.2 "Dishonor," section 336.3-502. 19.3 "Draft," section 336.3-104. 19.4 (4) In addition article 1 contains general definitions and 19.5 principles of construction and interpretation applicable 19.6 throughout this article. 19.7 Sec. 2. Minnesota Statutes 2002, section 336.2-202, is 19.8 amended to read: 19.9 336.2-202 [FINAL WRITTEN EXPRESSION; PAROL OR EXTRINSIC 19.10 EVIDENCE.] 19.11 Terms with respect to which the confirmatory memoranda of 19.12 the parties agree or which are otherwise set forth in a writing 19.13 intended by the parties as a final expression of their agreement 19.14 with respect to such terms as are included therein may not be 19.15 contradicted by evidence of any prior agreement or of a 19.16 contemporaneous oral agreement but may be explained or 19.17 supplemented 19.18 (a) by course of performance, course of dealing, or usage 19.19 of trade (section336.1-205336.1-303)or by course of19.20performance (section 336.2-208); and 19.21 (b) by evidence of consistent additional terms unless the 19.22 court finds the writing to have been intended also as a complete 19.23 and exclusive statement of the terms of the agreement. 19.24 Sec. 3. Minnesota Statutes 2002, section 336.2A-103, is 19.25 amended to read: 19.26 336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 19.27 (1) In this article unless the context otherwise requires: 19.28 (a) "Buyer in ordinary course of business" means a person 19.29 who in good faith and without knowledge that the sale is in 19.30 violation of the ownership rights or security interest or 19.31 leasehold interest of a third party in the goods, buys in 19.32 ordinary course from a person in the business of selling goods 19.33 of that kind but does not include a pawnbroker. "Buying" may be 19.34 for cash or by exchange of other property or on secured or 19.35 unsecured credit and includes receiving goods or documents of 19.36 title under a preexisting contract for sale but does not include 20.1 a transfer in bulk or as security for or in total or partial 20.2 satisfaction of a money debt. 20.3 (b) "Cancellation" occurs when either party puts an end to 20.4 the lease contract for default by the other party. 20.5 (c) "Commercial unit" means a unit of goods that by 20.6 commercial usage is a single whole for purposes of lease and 20.7 division of which materially impairs its character or value on 20.8 the market or in use. A commercial unit may be a single 20.9 article, as a machine, or a set of articles, as a suite of 20.10 furniture or a line of machinery, or a quantity, as a gross or 20.11 carload, or any other unit treated in use or in the relevant 20.12 market as a single whole. 20.13 (d) "Conforming" goods or performance under a lease 20.14 contract means goods or performance that are in accordance with 20.15 the obligations under the lease contract. 20.16 (e) "Consumer lease" means a lease that a lessor regularly 20.17 engaged in the business of leasing or selling makes to a lessee 20.18 who is an individual and who takes under the lease primarily for 20.19 a personal, family, or household purpose, if the total payments 20.20 to be made under the lease contract, excluding payments for 20.21 options to renew or buy, do not exceed $25,000. 20.22 (f) "Fault" means wrongful act, omission, breach, or 20.23 default. 20.24 (g) "Finance lease" means a lease in which 20.25 (1) the lessor does not select, manufacture, or supply the 20.26 goods, 20.27 (2) the lessor acquires the goods or the right to 20.28 possession and use of the goods in connection with the lease, 20.29 and 20.30 (3) either 20.31 (i) the lessee receives a copy of the contract evidencing 20.32 the lessor's purchase of the goods or a disclaimer statement on 20.33 or before signing the lease contract, or 20.34 (ii) the lessee's approval of the contract evidencing the 20.35 lessor's purchase of the goods or a disclaimer statement is a 20.36 condition to effectiveness of the lease contract. 21.1 "Disclaimer statement" means a written statement that is 21.2 part of or separate from the lease contract that discloses all 21.3 warranties and other rights provided to the lessee by the lessor 21.4 and supplier in connection with the lease contract and informs 21.5 the lessee in a conspicuous manner that there are no warranties 21.6 or other rights provided to the lessee by the lessor and 21.7 supplier other than those disclosed in the statement. 21.8 (h) "Goods" means all things that are movable at the time 21.9 of identification to the lease contract, or are fixtures 21.10 (section 336.2A-309), but the term does not include money, 21.11 documents, instruments, accounts, chattel paper, general 21.12 intangibles, or minerals or the like, including oil and gas, 21.13 before extraction. The term also includes the unborn young of 21.14 animals. 21.15 (i) "Installment lease contract" means a lease contract 21.16 that authorizes or requires the delivery of goods in separate 21.17 lots to be separately accepted, even though the lease contract 21.18 contains a clause "each delivery is a separate lease" or its 21.19 equivalent. 21.20 (j) "Lease" means a transfer of the right to possession and 21.21 use of goods for a term in return for consideration, but a sale, 21.22 including a sale on approval or a sale or return, or retention 21.23 or creation of a security interest is not a lease. Unless the 21.24 context clearly indicates otherwise, the term includes a 21.25 sublease. 21.26 (k) "Lease agreement" means the bargain, with respect to 21.27 the lease, of the lessor and the lessee in fact as found in 21.28 their language or by implication from other circumstances 21.29 including course of dealing or usage of trade or course of 21.30 performance as provided in this article. Unless the context 21.31 clearly indicates otherwise, the term includes a sublease 21.32 agreement. 21.33 (l) "Lease contract" means the total legal obligation that 21.34 results from the lease agreement as affected by this article and 21.35 any other applicable rules of law. Unless the context clearly 21.36 indicates otherwise, the term includes a sublease contract. 22.1 (m) "Leasehold interest" means the interest of the lessor 22.2 or the lessee under a lease contract. 22.3 (n) "Lessee" means a person who acquires the right to 22.4 possession and use of goods under a lease. Unless the context 22.5 clearly indicates otherwise, the term includes a sublessee. 22.6 (o) "Lessee in ordinary course of business" means a person 22.7 who in good faith and without knowledge that the lease is in 22.8 violation of the ownership rights or security interest or 22.9 leasehold interest of a third party in the goods leases in 22.10 ordinary course from a person in the business of selling or 22.11 leasing goods of that kind but does not include a pawnbroker. 22.12 "Leasing" may be for cash or by exchange of other property or on 22.13 secured or unsecured credit and includes receiving goods or 22.14 documents of title under a preexisting lease contract but does 22.15 not include a transfer in bulk or as security for or in total or 22.16 partial satisfaction of a money debt. 22.17 (p) "Lessor" means a person who transfers the right to 22.18 possession and use of goods under a lease. Unless the context 22.19 clearly indicates otherwise, the term includes a sublessor. 22.20 (q) "Lessor's residual interest" means the lessor's 22.21 interest in the goods after expiration, termination, or 22.22 cancellation of the lease contract. 22.23 (r) "Lien" means a charge against or interest in goods to 22.24 secure payment of a debt or performance of an obligation, but 22.25 the term does not include a security interest. 22.26 (s) "Lot" means a parcel or a single article that is the 22.27 subject matter of a separate lease or delivery, whether or not 22.28 it is sufficient to perform the lease contract. 22.29 (t) "Merchant lessee" means a lessee that is a merchant 22.30 with respect to goods of the kind subject to the lease. 22.31 (u) "Present value" means the amount as of a date certain 22.32 of one or more sums payable in the future, discounted to the 22.33 date certain. The discount is determined by the interest rate 22.34 specified by the parties if the rate was not manifestly 22.35 unreasonable at the time the transaction was entered into; 22.36 otherwise, the discount is determined by a commercially 23.1 reasonable rate that takes into account the facts and 23.2 circumstances of each case at the time the transaction was 23.3 entered into. 23.4 (v) "Purchase" includes taking by sale, lease, mortgage, 23.5 security interest, pledge, gift, or any other voluntary 23.6 transaction creating an interest in goods. 23.7 (w) "Sublease" means a lease of goods the right to 23.8 possession and use of which was acquired by the lessor as a 23.9 lessee under an existing lease. 23.10 (x) "Supplier" means a person from whom a lessor buys or 23.11 leases goods to be leased under a finance lease. 23.12 (y) "Supply contract" means a contract under which a lessor 23.13 buys or leases goods to be leased. 23.14 (z) "Termination" occurs when either party pursuant to a 23.15 power created by agreement or law puts an end to the lease 23.16 contract otherwise than for default. 23.17 (2) Other definitions applying to this article and the 23.18 sections in which they appear are: 23.19 "Accessions." Section 336.2A-310(1). 23.20 "Construction mortgage." Section 336.2A-309(1)(d). 23.21 "Encumbrance." Section 336.2A-309(1)(e). 23.22 "Fixtures." Section 336.2A-309(1)(a). 23.23 "Fixture filing." Section 336.2A-309(1)(b). 23.24 "Purchase money lease." Section 336.2A-309(1)(c). 23.25 (3) The following definitions in other articles apply to 23.26 this article: 23.27 "Account." Section 336.9-102(a)(2). 23.28 "Between merchants." Section 336.2-104(3). 23.29 "Buyer." Section 336.2-103(1)(a). 23.30 "Chattel paper." Section 336.9-102(a)(11). 23.31 "Consumer goods." Section 336.9-102(a)(23). 23.32 "Document." Section 336.9-102(a)(30). 23.33 "Entrusting." Section 336.2-403(3). 23.34 "General intangible." Section 336.9-102(a)(42). 23.35"Good faith." Section 336.2-103(1)(b).23.36 "Instrument." Section 336.9-102(a)(47). 24.1 "Merchant." Section 336.2-104(1). 24.2 "Mortgage." Section 336.9-102(a)(55). 24.3 "Pursuant to commitment." Section 336.9-102(a)(68). 24.4 "Receipt." Section 336.2-103(1)(c). 24.5 "Sale." Section 336.2-106(1). 24.6 "Sale on approval." Section 336.2-326. 24.7 "Sale or return." Section 336.2-326. 24.8 "Seller." Section 336.2-103(1)(d). 24.9 (4) In addition, sections 336.1-101 to336.1-109336.1-310 24.10 contain general definitions and principles of construction and 24.11 interpretation applicable throughout this article. 24.12 Sec. 4. Minnesota Statutes 2002, section 336.2A-501, is 24.13 amended to read: 24.14 336.2A-501 [DEFAULT; PROCEDURE.] 24.15 (1) Whether the lessor or the lessee is in default under a 24.16 lease contract is determined by the lease agreement and this 24.17 article. 24.18 (2) If the lessor or the lessee is in default under the 24.19 lease contract, the party seeking enforcement has rights and 24.20 remedies as provided in this article and, except as limited by 24.21 this article, as provided in the lease agreement. 24.22 (3) If the lessor or the lessee is in default under the 24.23 lease contract, the party seeking enforcement may reduce the 24.24 party's claim to judgment, or otherwise enforce the lease 24.25 contract by self-help or any available judicial procedure or 24.26 nonjudicial procedure, including administrative proceeding, 24.27 arbitration, or the like, in accordance with this article. 24.28 (4) Except as otherwise provided in 24.29 section336.1-106(1)336.1-305(a) or this article or the lease 24.30 agreement, the rights and remedies referred to in subsections 24.31 (2) and (3) are cumulative. 24.32 (5) If the lease agreement covers both real property and 24.33 goods, the party seeking enforcement may proceed under this part 24.34 as to the goods, or under other applicable law as to both the 24.35 real property and the goods in accordance with that party's 24.36 rights and remedies in respect of the real property, in which 25.1 case this part does not apply. 25.2 Sec. 5. Minnesota Statutes 2002, section 336.2A-518, is 25.3 amended to read: 25.4 336.2A-518 [COVER; SUBSTITUTE GOODS.] 25.5 (1) After a default by a lessor under the lease contract of 25.6 the type described in section 336.2A-508(1), or, if agreed, 25.7 after other default by the lessor, the lessee may cover by 25.8 making any purchase or lease of or contract to purchase or lease 25.9 goods in substitution for those due from the lessor. 25.10 (2) Except as otherwise provided with respect to damages 25.11 liquidated in the lease agreement (section 336.2A-504) or 25.12 otherwise determined pursuant to agreement of the parties 25.13 (sections336.1-102(3)336.1-302 and 336.2A-503), if a lessee's 25.14 cover is by a lease agreement substantially similar to the 25.15 original lease agreement and the new lease agreement is made in 25.16 good faith and in a commercially reasonable manner, the lessee 25.17 may recover from the lessor as damages (i) the present value, as 25.18 of the date of the commencement of the term of the new lease 25.19 agreement, of the rent under the new lease agreement applicable 25.20 to that period of the new lease term which is comparable to the 25.21 then remaining term of the original lease agreement minus the 25.22 present value as of the same date of the total rent for the then 25.23 remaining lease term of the original lease agreement, and (ii) 25.24 any incidental or consequential damages, less expenses saved in 25.25 consequence of the lessor's default. 25.26 (3) If a lessee's cover is by lease agreement that for any 25.27 reason does not qualify for treatment under subsection (2), or 25.28 is by purchase or otherwise, the lessee may recover from the 25.29 lessor as if the lessee had elected not to cover and section 25.30 336.2A-519 governs. 25.31 Sec. 6. Minnesota Statutes 2002, section 336.2A-519, is 25.32 amended to read: 25.33 336.2A-519 [LESSEE'S DAMAGES FOR NONDELIVERY, REPUDIATION, 25.34 DEFAULT, AND BREACH OF WARRANTY IN REGARD TO ACCEPTED GOODS.] 25.35 (1) Except as otherwise provided with respect to damages 25.36 liquidated in the lease agreement (section 336.2A-504) or 26.1 otherwise determined pursuant to agreement of the parties 26.2 (sections336.1-102(3)336.1-302 and 336.2A-503), if a lessee 26.3 elects not to cover or a lessee elects to cover and the cover is 26.4 by lease agreement that for any reason does not qualify for 26.5 treatment under section 336.2A-518(2), or is by purchase or 26.6 otherwise, the measure of damages for nondelivery or repudiation 26.7 by the lessor or for rejection or revocation of acceptance by 26.8 the lessee is the present value, as of the date of the default, 26.9 of the then market rent minus the present value as of the same 26.10 date of the original rent, computed for the remaining lease term 26.11 of the original lease agreement, together with incidental and 26.12 consequential damages, less expenses saved in consequence of the 26.13 lessor's default. 26.14 (2) Market rent is to be determined as of the place for 26.15 tender or, in cases of rejection after arrival or revocation of 26.16 acceptance, as of the place of arrival. 26.17 (3) Except as otherwise agreed, if the lessee has accepted 26.18 goods and given notification (section 336.2A-516(3)), the 26.19 measure of damages for nonconforming tender or delivery or other 26.20 default by a lessor is the loss resulting in the ordinary course 26.21 of events from the lessor's default as determined in any manner 26.22 that is reasonable together with incidental and consequential 26.23 damages, less expenses saved in consequence of the lessor's 26.24 default. 26.25 (4) Except as otherwise agreed, the measure of damages for 26.26 breach of warranty is the present value at the time and place of 26.27 acceptance of the difference between the value of the use of the 26.28 goods accepted and the value if they had been as warranted for 26.29 the lease term, unless special circumstances show proximate 26.30 damages of a different amount, together with incidental and 26.31 consequential damages, less expenses saved in consequence of the 26.32 lessor's default or breach of warranty. 26.33 Sec. 7. Minnesota Statutes 2002, section 336.2A-527, is 26.34 amended to read: 26.35 336.2A-527 [LESSOR'S RIGHTS TO DISPOSE OF GOODS.] 26.36 (1) After a default by a lessee under the lease contract of 27.1 the type described in section 336.2A-523(1) or 336.2A-523(3)(a) 27.2 or after the lessor refuses to deliver or takes possession of 27.3 goods (section 336.2A-525 or 336.2A-526), or, if agreed, after 27.4 other default by a lessee, the lessor may dispose of the goods 27.5 concerned or the undelivered balance by lease, sale, or 27.6 otherwise. 27.7 (2) Except as otherwise provided with respect to damages 27.8 liquidated in the lease agreement (section 336.2A-504) or 27.9 otherwise determined pursuant to agreement of the parties 27.10 (sections336.1-102(3)336.1-302 and 336.2A-503), if the 27.11 disposition is by lease agreement substantially similar to the 27.12 original lease agreement and the new lease agreement is made in 27.13 good faith and in a commercially reasonable manner, the lessor 27.14 may recover from the lessee as damages (i) accrued and unpaid 27.15 rent as of the date of the start of the term of the new lease 27.16 agreement, (ii) the present value, as of the same date, of the 27.17 total rent for the then remaining lease term of the original 27.18 lease agreement minus the present value, as of the same date, of 27.19 the rent under the new lease agreement applicable to that period 27.20 of the new lease term that is comparable to the then remaining 27.21 term of the original lease agreement, and (iii) any incidental 27.22 damages allowed under section 336.2A-530, less expenses saved in 27.23 consequence of the lessee's default. 27.24 (3) If the lessor's disposition is by lease agreement that 27.25 for any reason does not qualify for treatment under subsection 27.26 (2), or is by sale or otherwise, the lessor may recover from the 27.27 lessee as if the lessor had elected not to dispose of the goods 27.28 and section 336.2A-528 governs. 27.29 (4) A subsequent buyer or lessee who buys or leases from 27.30 the lessor in good faith for value as a result of a disposition 27.31 under this section takes the goods free of the original lease 27.32 contract and any rights of the original lessee even though the 27.33 lessor fails to comply with one or more of the requirements of 27.34 this article. 27.35 (5) The lessor is not accountable to the lessee for any 27.36 profit made on any disposition. A lessee who has rightfully 28.1 rejected or justifiably revoked acceptance shall account to the 28.2 lessor for any excess over the amount of the lessee's security 28.3 interest (section 336.2A-508(5)). 28.4 Sec. 8. Minnesota Statutes 2002, section 336.2A-528, is 28.5 amended to read: 28.6 336.2A-528 [LESSOR'S DAMAGES FOR NONACCEPTANCE, FAILURE TO 28.7 PAY, REPUDIATION, OR OTHER DEFAULT.] 28.8 (1) Except as otherwise provided with respect to damages 28.9 liquidated in the lease agreement (section 336.2A-504) or 28.10 otherwise determined pursuant to agreement of the parties 28.11 (sections336.1-102(3)336.1-302 and 336.2A-503), if a lessor 28.12 elects to retain the goods or a lessor elects to dispose of the 28.13 goods and the disposition is by lease agreement that for any 28.14 reason does not qualify for treatment under section 28.15 336.2A-527(2), or is by sale or otherwise, the lessor may 28.16 recover from the lessee as damages for a default of the type 28.17 described in section 336.2A-523(1) or 336.2A-523(3)(a), or, if 28.18 agreed, for other default of the lessee, (i) accrued and unpaid 28.19 rent as of the date of default if the lessee has never taken 28.20 possession of the goods, or, if the lessee has taken possession 28.21 of the goods, as of the date the lessor repossesses the goods or 28.22 an earlier date on which the lessee makes a tender of the goods 28.23 to the lessor, (ii) the present value as of the date determined 28.24 under clause (i) of the total rent for the then remaining lease 28.25 term of the original lease agreement minus the present value as 28.26 of the same date of the market rent at the place where the goods 28.27 are located computed for the same lease term, and (iii) any 28.28 incidental damages allowed under section 336.2A-530, less 28.29 expenses saved in consequence of the lessee's default. 28.30 (2) If the measure of damages provided in subsection (1) is 28.31 inadequate to put a lessor in as good a position as performance 28.32 would have, the measure of damages is the present value of the 28.33 profit, including reasonable overhead, the lessor would have 28.34 made from full performance by the lessee, together with any 28.35 incidental damages allowed under section 336.2A-530, due 28.36 allowance for costs reasonably incurred and due credit for 29.1 payments or proceeds of disposition. 29.2 Sec. 9. Minnesota Statutes 2003 Supplement, section 29.3 336.3-103, is amended to read: 29.4 336.3-103 [DEFINITIONS.] 29.5 (a) In this article: 29.6 (1) "Acceptor" means a drawee who has accepted a draft. 29.7 (2) "Consumer account" means an account established by an 29.8 individual primarily for personal, family, or household purposes. 29.9 (3) "Consumer transaction" means a transaction in which an 29.10 individual incurs an obligation primarily for personal, family, 29.11 or household purposes. 29.12 (4) "Drawee" means a person ordered in a draft to make 29.13 payment. 29.14 (5) "Drawer" means a person who signs or is identified in a 29.15 draft as a person ordering payment. 29.16 (6)"Good faith" means honesty in fact and the observance29.17of reasonable commercial standards of fair dealing.[Reserved.] 29.18 (7) "Maker" means a person who signs or is identified in a 29.19 note as a person undertaking to pay. 29.20 (8) "Order" means a written instruction to pay money signed 29.21 by the person giving the instruction. The instruction may be 29.22 addressed to any person, including the person giving the 29.23 instruction, or to one or more persons jointly or in the 29.24 alternative but not in succession. An authorization to pay is 29.25 not an order unless the person authorized to pay is also 29.26 instructed to pay. 29.27 (9) "Ordinary care" in the case of a person engaged in 29.28 business means observance of reasonable commercial standards, 29.29 prevailing in the area in which the person is located, with 29.30 respect to the business in which the person is engaged. In the 29.31 case of a bank that takes an instrument for processing for 29.32 collection or payment by automated means, reasonable commercial 29.33 standards do not require the bank to examine the instrument if 29.34 the failure to examine does not violate the bank's prescribed 29.35 procedures and the bank's procedures do not vary unreasonably 29.36 from general banking usage not disapproved by this article or 30.1 article 4. 30.2 (10) "Party" means a party to an instrument. 30.3 (11) "Principal obligor," with respect to an instrument, 30.4 means the accommodated party or any other party to the 30.5 instrument against whom a secondary obligor has recourse under 30.6 this article. 30.7 (12) "Promise" means a written undertaking to pay money 30.8 signed by the person undertaking to pay. An acknowledgment of 30.9 an obligation by the obligor is not a promise unless the obligor 30.10 also undertakes to pay the obligation. 30.11 (13) "Prove" with respect to a fact means to meet the 30.12 burden of establishing the fact (section 30.13336.1-201(8)336.1-201(b)(8)). 30.14 (14) "Record" means information that is inscribed on a 30.15 tangible medium or that is stored in an electronic or other 30.16 medium and is retrievable in perceivable form. 30.17 (15) "Remitter" means a person who purchases an instrument 30.18 from its issuer if the instrument is payable to an identified 30.19 person other than the purchaser. 30.20 (16) "Remotely-created item" means an item that is not 30.21 created by the payor bank and does not bear a handwritten or 30.22 facsimile signature purporting to be the signature of the drawer. 30.23 (17) "Secondary obligor," with respect to an instrument, 30.24 means (a) an endorser or an accommodation party, (b) a drawer 30.25 having the obligation described in section 336.3-414(d), or (c) 30.26 any other party to the instrument that has recourse against 30.27 another party to the instrument pursuant to section 336.3-116(b). 30.28 (b) Other definitions applying to this article and the 30.29 sections in which they appear are: 30.30 "Acceptance," section 336.3-409. 30.31 "Accommodated party," section 336.3-419. 30.32 "Accommodation party," section 336.3-419. 30.33 "Account," section 336.4-104. 30.34 "Alteration," section 336.3-407. 30.35 "Anomalous endorsement," section 336.3-205. 30.36 "Blank endorsement," section 336.3-205. 31.1 "Cashier's check," section 336.3-104. 31.2 "Certificate of deposit," section 336.3-104. 31.3 "Certified check," section 336.3-409. 31.4 "Check," section 336.3-104. 31.5 "Consideration," section 336.3-303. 31.6 "Draft," section 336.3-104. 31.7 "Endorsement," section 336.3-204. 31.8 "Endorser," section 336.3-204. 31.9 "Holder in due course," section 336.3-302. 31.10 "Incomplete instrument," section 336.3-115. 31.11 "Instrument," section 336.3-104. 31.12 "Issue," section 336.3-105. 31.13 "Issuer," section 336.3-105. 31.14 "Negotiable instrument," section 336.3-104. 31.15 "Negotiation," section 336.3-201. 31.16 "Note," section 336.3-104. 31.17 "Payable at a definite time," section 336.3-108. 31.18 "Payable on demand," section 336.3-108. 31.19 "Payable to bearer," section 336.3-109. 31.20 "Payable to order," section 336.3-109. 31.21 "Payment," section 336.3-602. 31.22 "Person entitled to enforce," section 336.3-301. 31.23 "Presentment," section 336.3-501. 31.24 "Reacquisition," section 336.3-207. 31.25 "Special endorsement," section 336.3-205. 31.26 "Teller's check," section 336.3-104. 31.27 "Transfer of instrument," section 336.3-203. 31.28 "Traveler's check," section 336.3-104. 31.29 "Value," section 336.3-303. 31.30 (c) The following definitions in other articles apply to 31.31 this article: 31.32 "Bank," section 336.4-105. 31.33 "Banking day," section 336.4-104. 31.34 "Clearinghouse," section 336.4-104. 31.35 "Collecting bank," section 336.4-105. 31.36 "Depositary bank," section 336.4-105. 32.1 "Documentary draft," section 336.4-104. 32.2 "Intermediary bank," section 336.4-105. 32.3 "Item," section 336.4-104. 32.4 "Payor bank," section 336.4-105. 32.5 "Suspends payments," section 336.4-104. 32.6 (d) In addition, article 1 contains general definitions and 32.7 principles of construction and interpretation applicable 32.8 throughout this article. 32.9 Sec. 10. Minnesota Statutes 2003 Supplement, section 32.10 336.4-104, is amended to read: 32.11 336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 32.12 (a) In this article, unless the context otherwise requires: 32.13 (1) "Account" means any deposit or credit account with a 32.14 bank, including a demand, time, savings, passbook, share draft, 32.15 or like account, other than an account evidenced by a 32.16 certificate of deposit; 32.17 (2) "Afternoon" means the period of a day between noon and 32.18 midnight; 32.19 (3) "Banking day" means that part of any day, excluding 32.20 Saturday, Sunday, and holidays, on which a bank is open to the 32.21 public for carrying on substantially all of its banking 32.22 functions; 32.23 (4) "Clearinghouse" means an association of banks or other 32.24 payors regularly clearing items; 32.25 (5) "Customer" means a person having an account with a bank 32.26 or for whom a bank has agreed to collect items, including a bank 32.27 that maintains an account at another bank; 32.28 (6) "Documentary draft" means a draft to be presented for 32.29 acceptance or payment if specified documents, certificated 32.30 securities (section 336.8-102) or instructions for 32.31 uncertificated securities (section 336.8-102), or other 32.32 certificates, statements, or the like are to be received by the 32.33 drawee or other payor before acceptance or payment of the draft; 32.34 (7) "Draft" means a draft as defined in section 336.3-104 32.35 or an item, other than an instrument, that is an order; 32.36 (8) "Drawee" means a person ordered in a draft to make 33.1 payment; 33.2 (9) "Item" means an instrument or a promise or order to pay 33.3 money handled by a bank for collection or payment. The term 33.4 does not include a payment order governed by article 4A or a 33.5 credit or debit card slip; 33.6 (10) "Midnight deadline" with respect to a bank is midnight 33.7 on its next banking day following the banking day on which it 33.8 receives the relevant item or notice or from which the time for 33.9 taking action commences to run, whichever is later; 33.10 (11) "Settle" means to pay in cash, by clearinghouse 33.11 settlement, in a charge or credit or by remittance, or otherwise 33.12 as agreed. A settlement may be either provisional or final; 33.13 (12) "Suspends payments" with respect to a bank means that 33.14 it has been closed by order of the supervisory authorities, that 33.15 a public officer has been appointed to take it over, or that it 33.16 ceases or refuses to make payments in the ordinary course of 33.17 business. 33.18 (b) Other definitions applying to this article and the 33.19 sections in which they appear are: 33.20 "Agreement for electronic presentment," section 336.4-110 33.21 "Bank," section 336.4-105 33.22 "Collecting bank," section 336.4-105 33.23 "Depositary bank," section 336.4-105 33.24 "Intermediary bank," section 336.4-105 33.25 "Payor bank," section 336.4-105 33.26 "Presenting bank," section 336.4-105 33.27 "Presentment notice," section 336.4-110 33.28 (c) The following definitions in other articles apply to 33.29 this article: 33.30 "Acceptance," section 336.3-409 33.31 "Alteration," section 336.3-407 33.32 "Cashier's check," section 336.3-104 33.33 "Certificate of deposit," section 336.3-104 33.34 "Certified check," section 336.3-409 33.35 "Check," section 336.3-104 33.36"Good faith," section 336.3-10334.1 "Holder in due course," section 336.3-302 34.2 "Instrument," section 336.3-104 34.3 "Notice of dishonor," section 336.3-503 34.4 "Order," section 336.3-103 34.5 "Ordinary care," section 336.3-103 34.6 "Person entitled to enforce," section 336.3-301 34.7 "Presentment," section 336.3-501 34.8 "Promise," section 336.3-103 34.9 "Prove," section 336.3-103 34.10 "Record," section 336.3-103 34.11 "Remotely-created item," section 336.3-103 34.12 "Teller's check," section 336.3-104 34.13 "Unauthorized signature," section 336.3-403 34.14 (d) In addition, article 1 contains general definitions and 34.15 principles of construction and interpretation applicable 34.16 throughout this article. 34.17 Sec. 11. Minnesota Statutes 2002, section 336.4A-105, is 34.18 amended to read: 34.19 336.4A-105 [OTHER DEFINITIONS.] 34.20 (a) In this article: 34.21 (1) "Authorized account" means a deposit account of a 34.22 customer in a bank designated by the customer as a source of 34.23 payment of payment orders issued by the customer to the bank. 34.24 If a customer does not so designate an account, any account of 34.25 the customer is an authorized account if payment of a payment 34.26 order from that account is not inconsistent with a restriction 34.27 on the use of that account. 34.28 (2) "Bank" means a person engaged in the business of 34.29 banking and includes a savings bank, savings association, credit 34.30 union, and trust company. A branch or separate office of a bank 34.31 is a separate bank for purposes of this article. 34.32 (3) "Customer" means a person, including a bank, having an 34.33 account with a bank or from whom a bank has agreed to receive 34.34 payment orders. 34.35 (4) "Funds-transfer business day" of a receiving bank means 34.36 the part of a day during which the receiving bank is open for 35.1 the receipt, processing, and transmittal of payment orders and 35.2 cancellations and amendments of payment orders. 35.3 (5) "Funds-transfer system" means a wire transfer network, 35.4 automated clearinghouse, or other communication system of a 35.5 clearinghouse or other association of banks through which a 35.6 payment order by a bank may be transmitted to the bank to which 35.7 the order is addressed. 35.8 (6)"Good faith" means honesty in fact and the observance35.9of reasonable commercial standards of fair dealing.[Reserved.] 35.10 (7) "Prove" with respect to a fact means to meet the burden 35.11 of establishing the fact (section336.1-201(8)336.1-201(b)(8)). 35.12 (b) Other definitions applying to the article and the 35.13 sections in which they appear: 35.14 "Acceptance." Section 336.4A-209. 35.15 "Beneficiary." Section 336.4A-103. 35.16 "Beneficiary's bank." Section 336.4A-103. 35.17 "Executed." Section 336.4A-301. 35.18 "Execution date." Section 336.4A-301. 35.19 "Funds transfer." Section 336.4A-104. 35.20 "Funds-transfer system rule." Section 336.4A-501. 35.21 "Intermediary bank." Section 336.4A-104. 35.22 "Originator." Section 336.4A-104. 35.23 "Originator's bank." Section 336.4A-104. 35.24 "Payment by beneficiary's bank to beneficiary." Section 35.25 336.4A-405. 35.26 "Payment by originator to beneficiary." Section 336.4A-406. 35.27 "Payment by sender to receiving bank." Section 336.4A-403. 35.28 "Payment date." Section 336.4A-401. 35.29 "Payment order." Section 336.4A-103. 35.30 "Receiving bank." Section 336.4A-103. 35.31 "Security procedure." Section 336.4A-201. 35.32 "Sender." Section 336.4A-103. 35.33 (c) The following definitions in article 4 apply to this 35.34 article: 35.35 "Clearinghouse." Section 336.4-104. 35.36 "Item." Section 336.4-104. 36.1 "Suspends payments." Section 336.4-104. 36.2 (d) In addition, sections 336.1-101 to 336.1-209 contain 36.3 general definitions and principles of construction and 36.4 interpretation applicable throughout this article. 36.5 Sec. 12. Minnesota Statutes 2002, section 336.4A-106, is 36.6 amended to read: 36.7 336.4A-106 [TIME PAYMENT ORDER IS RECEIVED.] 36.8 (a) The time of receipt of a payment order or communication 36.9 canceling or amending a payment order is determined by the rules 36.10 applicable to receipt of a notice stated in section 36.11336.1-201(27)336.1-202. A receiving bank may fix a cut-off 36.12 time or times on a funds-transfer business day for the receipt 36.13 and processing of payment orders and communications canceling or 36.14 amending payment orders. Different cut-off times may apply to 36.15 payment orders, cancellations, or amendments, or to different 36.16 categories of payment orders, cancellations, or amendments. A 36.17 cut-off time may apply to senders generally or different cut-off 36.18 times may apply to different senders or categories of payment 36.19 orders. If a payment order or communication canceling or 36.20 amending a payment order is received after the close of a 36.21 funds-transfer business day or after the appropriate cut-off 36.22 time on a funds-transfer business day, the receiving bank may 36.23 treat the payment order or communication as received at the 36.24 opening of the next funds-transfer business day. 36.25 (b) If this article refers to an execution date or payment 36.26 date or states a day on which a receiving bank is required to 36.27 take action, and the date or day does not fall on a 36.28 funds-transfer business day, the next day that is a 36.29 funds-transfer business day is treated as the date or day 36.30 stated, unless the contrary is stated in this article. 36.31 Sec. 13. Minnesota Statutes 2002, section 336.4A-204, is 36.32 amended to read: 36.33 336.4A-204 [REFUND OF PAYMENT AND DUTY OF CUSTOMER TO 36.34 REPORT WITH RESPECT TO UNAUTHORIZED PAYMENT ORDER.] 36.35 (a) If a receiving bank accepts a payment order issued in 36.36 the name of its customer as sender which is (i) not authorized 37.1 and not effective as the order of the customer under section 37.2 336.4A-202, or (ii) not enforceable, in whole or in part, 37.3 against the customer under section 336.4A-203, the bank shall 37.4 refund any payment of the payment order received from the 37.5 customer to the extent the bank is not entitled to enforce 37.6 payment and shall pay interest on the refundable amount 37.7 calculated from the date the bank received payment to the date 37.8 of the refund. However, the customer is not entitled to 37.9 interest from the bank on the amount to be refunded if the 37.10 customer fails to exercise ordinary care to determine that the 37.11 order was not authorized by the customer and to notify the bank 37.12 of the relevant facts within a reasonable time not exceeding 90 37.13 days after the date the customer received notification from the 37.14 bank that the order was accepted or that the customer's account 37.15 was debited with respect to the order. The bank is not entitled 37.16 to any recovery from the customer on account of a failure by the 37.17 customer to give notification as stated in this section. 37.18 (b) Reasonable time under subsection (a) may be fixed by 37.19 agreement as stated in section336.1-204(1)336.1-302(b), but 37.20 the obligation of a receiving bank to refund payment as stated 37.21 in subsection (a) may not otherwise be varied by agreement. 37.22 Sec. 14. Minnesota Statutes 2002, section 336.5-103, is 37.23 amended to read: 37.24 336.5-103 [SCOPE.] 37.25 (a) This article applies to letters of credit and to 37.26 certain rights and obligations arising out of transactions 37.27 involving letters of credit. 37.28 (b) The statement of a rule in this article does not by 37.29 itself require, imply, or negate application of the same or a 37.30 different rule to a situation not provided for, or to a person 37.31 not specified, in this article. 37.32 (c) With the exception of this subsection, subsections (a) 37.33 and (d), sections 336.5-102(a)(9) and (10), 336.5-106(d), and 37.34 336.5-114(d), and except to the extent prohibited in sections 37.35336.1-102(3)336.1-302 and 336.5-117(d), the effect of this 37.36 article may be varied by agreement or by a provision stated or 38.1 incorporated by reference in an undertaking. A term in an 38.2 agreement or undertaking generally excusing liability or 38.3 generally limiting remedies for failure to perform obligations 38.4 is not sufficient to vary obligations prescribed by this article. 38.5 (d) Rights and obligations of an issuer to a beneficiary or 38.6 a nominated person under a letter of credit are independent of 38.7 the existence, performance, or nonperformance of a contract or 38.8 arrangement out of which the letter of credit arises or which 38.9 underlies it, including contracts or arrangements between the 38.10 issuer and the applicant and between the applicant and the 38.11 beneficiary. 38.12 Sec. 15. Minnesota Statutes 2002, section 336.8-102, is 38.13 amended to read: 38.14 336.8-102 [DEFINITIONS.] 38.15 (a) In this article: 38.16 (1) "Adverse claim" means a claim that a claimant has a 38.17 property interest in a financial asset and that it is a 38.18 violation of the rights of the claimant for another person to 38.19 hold, transfer, or deal with the financial asset. 38.20 (2) "Bearer form," as applied to a certificated security, 38.21 means a form in which the security is payable to the bearer of 38.22 the security certificate according to its terms but not by 38.23 reason of an endorsement. 38.24 (3) "Broker" means a person defined as a broker or dealer 38.25 under the federal securities laws, but without excluding a bank 38.26 acting in that capacity. 38.27 (4) "Certificated security" means a security that is 38.28 represented by a certificate. 38.29 (5) "Clearing corporation" means: 38.30 (i) a person that is registered as a "clearing agency" 38.31 under the federal securities laws; 38.32 (ii) a federal reserve bank; or 38.33 (iii) any other person that provides clearance or 38.34 settlement services with respect to financial assets that would 38.35 require it to register as a clearing agency under the federal 38.36 securities laws but for an exclusion or exemption from the 39.1 registration requirement, if its activities as a clearing 39.2 corporation, including promulgation of rules, are subject to 39.3 regulation by a federal or state governmental authority. 39.4 (6) "Communicate" means to: 39.5 (i) send a signed writing; or 39.6 (ii) transmit information by any mechanism agreed upon by 39.7 the persons transmitting and receiving the information. 39.8 (7) "Entitlement holder" means a person identified in the 39.9 records of a securities intermediary as the person having a 39.10 security entitlement against the securities intermediary. If a 39.11 person acquires a security entitlement by virtue of section 39.12 336.8-501(b)(2) or (3), that person is the entitlement holder. 39.13 (8) "Entitlement order" means a notification communicated 39.14 to a securities intermediary directing transfer or redemption of 39.15 a financial asset to which the entitlement holder has a security 39.16 entitlement. 39.17 (9) "Financial asset," except as otherwise provided in 39.18 section 336.8-103, means: 39.19 (i) a security; 39.20 (ii) an obligation of a person or a share, participation, 39.21 or other interest in a person or in property or an enterprise of 39.22 a person, which is, or is of a type, dealt in or traded on 39.23 financial markets, or which is recognized in any area in which 39.24 it is issued or dealt in as a medium for investment; or 39.25 (iii) any property that is held by a securities 39.26 intermediary for another person in a securities account if the 39.27 securities intermediary has expressly agreed with the other 39.28 person that the property is to be treated as a financial asset 39.29 under this article. 39.30 As context requires, the term means either the interest itself 39.31 or the means by which a person's claim to it is evidenced, 39.32 including a certificated or uncertificated security, a security 39.33 certificate, or a security entitlement. 39.34 (10)"Good faith," for purposes of the obligation of good39.35faith in the performance or enforcement of contracts or duties39.36within this article, means honesty in fact and the observance of40.1reasonable commercial standards of fair dealing.[Reserved.] 40.2 (11) "Endorsement" means a signature that alone or 40.3 accompanied by other words is made on a security certificate in 40.4 registered form or on a separate document for the purpose of 40.5 assigning, transferring, or redeeming the security or granting a 40.6 power to assign, transfer, or redeem it. 40.7 (12) "Instruction" means a notification communicated to the 40.8 issuer of an uncertificated security which directs that the 40.9 transfer of the security be registered or that the security be 40.10 redeemed. 40.11 (13) "Registered form," as applied to a certificated 40.12 security, means a form in which: 40.13 (i) the security certificate specifies a person entitled to 40.14 the security; and 40.15 (ii) a transfer of the security may be registered upon 40.16 books maintained for that purpose by or on behalf of the issuer, 40.17 or the security certificate so states. 40.18 (14) "Securities intermediary" means: 40.19 (i) a clearing corporation; or 40.20 (ii) a person, including a bank or broker, that in the 40.21 ordinary course of its business maintains securities accounts 40.22 for others and is acting in that capacity. 40.23 (15) "Security," except as otherwise provided in section 40.24 336.8-103, means an obligation of an issuer or a share, 40.25 participation, or other interest in an issuer or in property or 40.26 an enterprise of an issuer: 40.27 (i) which is represented by a security certificate in 40.28 bearer or registered form, or the transfer of which may be 40.29 registered upon books maintained for that purpose by or on 40.30 behalf of the issuer; 40.31 (ii) which is one of a class or series or by its terms is 40.32 divisible into a class or series of shares, participations, 40.33 interests, or obligations; and 40.34 (iii) which: 40.35 (A) is, or is of a type, dealt in or traded on securities 40.36 exchanges or securities markets; or 41.1 (B) is a medium for investment and by its terms expressly 41.2 provides that it is a security governed by this article. 41.3 (16) "Security certificate" means a certificate 41.4 representing a security. 41.5 (17) "Security entitlement" means the rights and property 41.6 interest of an entitlement holder with respect to a financial 41.7 asset specified in part 5. 41.8 (18) "Uncertificated security" means a security that is not 41.9 represented by a certificate. 41.10 (b) Other definitions applying to this article and the 41.11 sections in which they appear are: 41.12 "Appropriate person," section 336.8-107 41.13 "Control," section 336.8-106 41.14 "Delivery," section 336.8-301 41.15 "Investment company security," section 336.8-103 41.16 "Issuer," section 336.8-201 41.17 "Overissue," section 336.8-210 41.18 "Protected purchaser," section 336.8-303 41.19 "Securities account," section 336.8-501 41.20 (c) In addition, article 1 contains general definitions and 41.21 principles of construction and interpretation applicable 41.22 throughout this article. 41.23 (d) The characterization of a person, business, or 41.24 transaction for purposes of this article does not determine the 41.25 characterization of the person, business, or transaction for 41.26 purposes of any other law, regulation, or rule. 41.27 Sec. 16. Minnesota Statutes 2002, section 336.9-102, is 41.28 amended to read: 41.29 336.9-102 [DEFINITIONS AND INDEX OF DEFINITIONS.] 41.30 (a) [DEFINITIONS.] In this article: 41.31 (1) "Accession" means goods that are physically united with 41.32 other goods in such a manner that the identity of the original 41.33 goods is not lost. 41.34 (2) "Account", except as used in "account for", means a 41.35 right to payment of a monetary obligation, whether or not earned 41.36 by performance, (i) for property that has been or is to be sold, 42.1 leased, licensed, assigned, or otherwise disposed of, (ii) for 42.2 services rendered or to be rendered, (iii) for a policy of 42.3 insurance issued or to be issued, (iv) for a secondary 42.4 obligation incurred or to be incurred, (v) for energy provided 42.5 or to be provided, (vi) for the use or hire of a vessel under a 42.6 charter or other contract, (vii) arising out of the use of a 42.7 credit or charge card or information contained on or for use 42.8 with the card, or (viii) as winnings in a lottery or other game 42.9 of chance operated or sponsored by a state, governmental unit of 42.10 a state, or person licensed or authorized to operate the game by 42.11 a state or governmental unit of a state. The term includes 42.12 health-care-insurance receivables. The term does not include (i) 42.13 rights to payment evidenced by chattel paper or an instrument, 42.14 (ii) commercial tort claims, (iii) deposit accounts, (iv) 42.15 investment property, (v) letter of credit rights or letters of 42.16 credit, or (vi) rights to payment for money or funds advanced or 42.17 sold, other than rights arising out of the use of a credit or 42.18 charge card or information contained on or for use with the card. 42.19 (3) "Account debtor" means a person obligated on an 42.20 account, chattel paper, or general intangible. The term does 42.21 not include persons obligated to pay a negotiable instrument, 42.22 even if the instrument constitutes part of chattel paper. 42.23 (4) "Accounting", except as used in "accounting for", means 42.24 a record: 42.25 (A) authenticated by a secured party; 42.26 (B) indicating the aggregate unpaid secured obligations as 42.27 of a date not more than 35 days earlier or 35 days later than 42.28 the date of the record; and 42.29 (C) identifying the components of the obligations in 42.30 reasonable detail. 42.31 (5) "Agricultural lien" means an interest, other than a 42.32 security interest, in farm products: 42.33 (A) which secures payment or performance of an obligation 42.34 for: 42.35 (i) goods or services furnished in connection with a 42.36 debtor's farming operation; or 43.1 (ii) rent on real property leased by a debtor in connection 43.2 with its farming operation; 43.3 (B) which is created by statute in favor of a person that: 43.4 (i) in the ordinary course of its business furnished goods 43.5 or services to a debtor in connection with a debtor's farming 43.6 operation; or 43.7 (ii) leased real property to a debtor in connection with 43.8 the debtor's farming operation; and 43.9 (C) whose effectiveness does not depend on the person's 43.10 possession of the personal property. 43.11 (6) "As-extracted collateral" means: 43.12 (A) oil, gas, or other minerals that are subject to a 43.13 security interest that: 43.14 (i) is created by a debtor having an interest in the 43.15 minerals before extraction; and 43.16 (ii) attaches to the minerals as extracted; or 43.17 (B) accounts arising out of the sale at the wellhead or 43.18 minehead of oil, gas, or other minerals in which the debtor had 43.19 an interest before extraction. 43.20 (7) "Authenticate" means: 43.21 (A) to sign; or 43.22 (B) to execute or otherwise adopt a symbol, or encrypt or 43.23 similarly process a record in whole or in part, with the present 43.24 intent of the authenticating person to identify the person and 43.25 adopt or accept a record. 43.26 (8) "Bank" means an organization that is engaged in the 43.27 business of banking. The term includes savings banks, savings 43.28 and loan associations, credit unions, and trust companies. 43.29 (9) "Cash proceeds" means proceeds that are money, checks, 43.30 deposit accounts, or the like. 43.31 (10) "Certificate of title" means a certificate of title 43.32 with respect to which a statute provides for the security 43.33 interest in question to be indicated on the certificate as a 43.34 condition or result of the security interest's obtaining 43.35 priority over the rights of a lien creditor with respect to the 43.36 collateral. 44.1 (11) "Chattel paper" means a record or records that 44.2 evidence both a monetary obligation and a security interest in 44.3 specific goods, a security interest in specific goods and 44.4 software used in the goods, a security interest in specific 44.5 goods and license of software used in the goods, a lease of 44.6 specific goods, or a lease of specific goods and license of 44.7 software used in the goods. In this paragraph, "monetary 44.8 obligation" means a monetary obligation secured by the goods or 44.9 owed under a lease of the goods and includes a monetary 44.10 obligation with respect to software used in the goods. The term 44.11 does not include (i) charters or other contracts involving the 44.12 use or hire of a vessel or (ii) records that evidence a right to 44.13 payment arising out of the use of a credit or charge card or 44.14 information contained on or for use with the card. If a 44.15 transaction is evidenced by records that include an instrument 44.16 or series of instruments, the group of records taken together 44.17 constitutes chattel paper. 44.18 (12) "Collateral" means the property subject to a security 44.19 interest or agricultural lien. The term includes: 44.20 (A) proceeds to which a security interest attaches; 44.21 (B) accounts, chattel paper, payment intangibles, and 44.22 promissory notes that have been sold; and 44.23 (C) goods that are the subject of a consignment. 44.24 (13) "Commercial tort claim" means a claim arising in tort 44.25 with respect to which: 44.26 (A) the claimant is an organization; or 44.27 (B) the claimant is an individual and the claim: 44.28 (i) arose in the course of the claimant's business or 44.29 profession; and 44.30 (ii) does not include damages arising out of personal 44.31 injury to or the death of an individual. 44.32 (14) "Commodity account" means an account maintained by a 44.33 commodity intermediary in which a commodity contract is carried 44.34 for a commodity customer. 44.35 (15) "Commodity contract" means a commodity futures 44.36 contract, an option on a commodity futures contract, a commodity 45.1 option, or another contract if the contract or option is: 45.2 (A) traded on or subject to the rules of a board of trade 45.3 that has been designated as a contract market for such a 45.4 contract pursuant to federal commodities law; or 45.5 (B) traded on a foreign commodity board of trade, exchange, 45.6 or market, and is carried on the books of a commodity 45.7 intermediary for a commodity customer. 45.8 (16) "Commodity customer" means a person for which a 45.9 commodity intermediary carries a commodity contract on its books. 45.10 (17) "Commodity intermediary" means a person that: 45.11 (A) is registered as a futures commission merchant under 45.12 federal commodities law; or 45.13 (B) in the ordinary course of its business provides 45.14 clearance or settlement services for a board of trade that has 45.15 been designated as a contract market pursuant to federal 45.16 commodities law. 45.17 (18) "Communicate" means: 45.18 (A) to send a written or other tangible record; 45.19 (B) to transmit a record by any means agreed upon by the 45.20 persons sending and receiving the record; or 45.21 (C) in the case of transmission of a record to or by a 45.22 filing office, to transmit a record by any means prescribed by 45.23 filing office rule. 45.24 (19) "Consignee" means a merchant to which goods are 45.25 delivered in a consignment. 45.26 (20) "Consignment" means a transaction, regardless of its 45.27 form, in which a person delivers goods to a merchant for the 45.28 purpose of sale and: 45.29 (A) the merchant: 45.30 (i) deals in goods of that kind under a name other than the 45.31 name of the person making delivery; 45.32 (ii) is not an auctioneer; and 45.33 (iii) is not generally known by its creditors to be 45.34 substantially engaged in selling the goods of others; 45.35 (B) with respect to each delivery, the aggregate value of 45.36 the goods is $1,000 or more at the time of delivery; 46.1 (C) the goods are not consumer goods immediately before 46.2 delivery; and 46.3 (D) the transaction does not create a security interest 46.4 that secures an obligation. 46.5 (21) "Consignor" means a person that delivers goods to a 46.6 consignee in a consignment. 46.7 (22) "Consumer debtor" means a debtor in a consumer 46.8 transaction. 46.9 (23) "Consumer goods" means goods that are used or bought 46.10 for use primarily for personal, family, or household purposes. 46.11 (24) "Consumer goods transaction" means a consumer 46.12 transaction in which: 46.13 (A) an individual incurs an obligation primarily for 46.14 personal, family, or household purposes; and 46.15 (B) a security interest in consumer goods secures the 46.16 obligation. 46.17 (25) "Consumer obligor" means an obligor who is an 46.18 individual and who incurred the obligation as part of a 46.19 transaction entered into primarily for personal, family, or 46.20 household purposes. 46.21 (26) "Consumer transaction" means a transaction in which (i) 46.22 an individual incurs an obligation primarily for personal, 46.23 family, or household purposes, (ii) a security interest secures 46.24 the obligation, and (iii) the collateral is held or acquired 46.25 primarily for personal, family, or household purposes. The term 46.26 includes consumer goods transactions. 46.27 (27) "Continuation statement" means an amendment of a 46.28 financing statement which: 46.29 (A) identifies, by its file number, the initial financing 46.30 statement to which it relates; and 46.31 (B) indicates that it is a continuation statement for, or 46.32 that it is filed to continue the effectiveness of, the 46.33 identified financing statement. 46.34 (28) "Debtor" means: 46.35 (A) a person having an interest, other than a security 46.36 interest or other lien, in the collateral, whether or not the 47.1 person is an obligor; 47.2 (B) a seller of accounts, chattel paper, payment 47.3 intangibles, or promissory notes; or 47.4 (C) a consignee. 47.5 (29) "Deposit account" means a demand, time, savings, 47.6 passbook, or similar account maintained with a bank. The term 47.7 does not include investment property or accounts evidenced by an 47.8 instrument. 47.9 (30) "Document" means a document of title or a receipt of 47.10 the type described in section 336.7-201(2). 47.11 (31) "Electronic chattel paper" means chattel paper 47.12 evidenced by a record or records consisting of information 47.13 stored in an electronic medium. 47.14 (32) "Encumbrance" means a right, other than an ownership 47.15 interest, in real property. The term includes mortgages and 47.16 other liens on real property. 47.17 (33) "Equipment" means goods other than inventory, farm 47.18 products, or consumer goods. 47.19 (34) "Farm products" means goods, other than standing 47.20 timber, with respect to which the debtor is engaged in a farming 47.21 operation and which are: 47.22 (A) crops grown, growing, or to be grown, including: 47.23 (i) crops produced on trees, vines, and bushes; and 47.24 (ii) aquatic goods produced in aquacultural operations; 47.25 (B) livestock, born or unborn, including aquatic goods 47.26 produced in aquacultural operations; 47.27 (C) supplies used or produced in a farming operation; or 47.28 (D) products of crops or livestock in their unmanufactured 47.29 states. 47.30 (35) "Farming operation" means raising, cultivating, 47.31 propagating, fattening, grazing, or any other farming, 47.32 livestock, or aquacultural operation. 47.33 (36) "File number" means the number assigned to an initial 47.34 financing statement pursuant to section 336.9-519(a). 47.35 (37) "Filing office" means an office designated in section 47.36 336.9-501 as the place to file a financing statement. 48.1 (38) "Filing office rule" means a rule adopted pursuant to 48.2 Laws 2000, chapter 399, article 1, section 139. 48.3 (39) "Financing statement" means a record or records 48.4 composed of an initial financing statement and any filed record 48.5 relating to the initial financing statement. 48.6 (40) "Fixture filing" means the filing of a financing 48.7 statement covering goods that are or are to become fixtures and 48.8 satisfying section 336.9-502(a) and (b). The term includes the 48.9 filing of a financing statement covering goods of a transmitting 48.10 utility which are or are to become fixtures. 48.11 (41) "Fixtures" means goods that have become so related to 48.12 particular real property that an interest in them arises under 48.13 real property law. 48.14 (42) "General intangible" means any personal property, 48.15 including things in action, other than accounts, chattel paper, 48.16 commercial tort claims, deposit accounts, documents, goods, 48.17 instruments, investment property, letter of credit rights, 48.18 letters of credit, money, and oil, gas, or other minerals before 48.19 extraction. The term includes payment intangibles and software. 48.20 (43)"Good faith" means honesty in fact and the observance48.21of reasonable commercial standards of fair dealing.[Reserved.] 48.22 (44) "Goods" means all things that are movable when a 48.23 security interest attaches. The term includes (i) fixtures, 48.24 (ii) standing timber that is to be cut and removed under a 48.25 conveyance or contract for sale, (iii) the unborn young of 48.26 animals, (iv) crops grown, growing, or to be grown, even if the 48.27 crops are produced on trees, vines, or bushes, and (v) 48.28 manufactured homes. The term also includes a computer program 48.29 embedded in goods and any supporting information provided in 48.30 connection with a transaction relating to the program if the 48.31 program is associated with the goods in such a manner that it 48.32 customarily is considered part of the goods, or by becoming the 48.33 owner of the goods, a person acquires a right to use the program 48.34 in connection with the goods. The term does not include a 48.35 computer program embedded in goods that consist solely of the 48.36 medium in which the program is embedded. The term also does not 49.1 include accounts, chattel paper, commercial tort claims, deposit 49.2 accounts, documents, general intangibles, instruments, 49.3 investment property, letter of credit rights, letters of credit, 49.4 money, or oil, gas, or other minerals before extraction. 49.5 (45) "Governmental unit" means a subdivision, agency, 49.6 department, county, parish, municipality, or other unit of the 49.7 government of the United States, a state, or a foreign country. 49.8 The term includes an organization having a separate corporate 49.9 existence if the organization is eligible to issue debt on which 49.10 interest is exempt from income taxation under the laws of the 49.11 United States. 49.12 (46) "Health-care-insurance receivable" means an interest 49.13 in or claim under a policy of insurance which is a right to 49.14 payment of a monetary obligation for health-care goods or 49.15 services provided. 49.16 (47) "Instrument" means a negotiable instrument or any 49.17 other writing that evidences a right to the payment of a 49.18 monetary obligation, is not itself a security agreement or 49.19 lease, and is of a type that in ordinary course of business is 49.20 transferred by delivery with any necessary endorsement or 49.21 assignment. The term does not include (i) investment property, 49.22 (ii) letters of credit, or (iii) writings that evidence a right 49.23 to payment arising out of the use of a credit or charge card or 49.24 information contained on or for use with the card. 49.25 (48) "Inventory" means goods, other than farm products, 49.26 which: 49.27 (A) are leased by a person as lessor; 49.28 (B) are held by a person for sale or lease or to be 49.29 furnished under a contract of service; 49.30 (C) are furnished by a person under a contract of service; 49.31 or 49.32 (D) consist of raw materials, work in process, or materials 49.33 used or consumed in a business. 49.34 (49) "Investment property" means a security, whether 49.35 certificated or uncertificated, security entitlement, securities 49.36 account, commodity contract, or commodity account. 50.1 (50) "Jurisdiction of organization", with respect to a 50.2 registered organization, means the jurisdiction under whose law 50.3 the organization is organized. 50.4 (51) "Letter of credit right" means a right to payment or 50.5 performance under a letter of credit, whether or not the 50.6 beneficiary has demanded or is at the time entitled to demand 50.7 payment or performance. The term does not include the right of 50.8 a beneficiary to demand payment or performance under a letter of 50.9 credit. 50.10 (52) "Lien creditor" means: 50.11 (A) a creditor that has acquired a lien on the property 50.12 involved by attachment, levy, or the like; 50.13 (B) an assignee for benefit of creditors from the time of 50.14 assignment; 50.15 (C) a trustee in bankruptcy from the date of the filing of 50.16 the petition; or 50.17 (D) a receiver in equity from the time of appointment. 50.18 (53) Unless a certificate has been issued, "manufactured 50.19 home" means a structure, transportable in one or more sections, 50.20 which, in the traveling mode, is eight body feet or more in 50.21 width or 40 body feet or more in length, or, when erected on 50.22 site, is 320 or more square feet, and which is built on a 50.23 permanent chassis and designed to be used as a dwelling with or 50.24 without a permanent foundation when connected to the required 50.25 utilities, and includes the plumbing, heating, air-conditioning, 50.26 and electrical systems contained therein. The term includes any 50.27 structure that meets all of the requirements of this paragraph 50.28 except the size requirements and with respect to which the 50.29 manufacturer voluntarily files a certification required by the 50.30 United States Secretary of Housing and Urban Development and 50.31 complies with the standards established under United States 50.32 Code, title 42. 50.33 A manufactured home within the meaning of this section does 50.34 not include a manufactured home for which a certificate of title 50.35 as defined in section 336.9-102(a)(10) has been issued. 50.36 (54) "Manufactured home transaction" means a secured 51.1 transaction: 51.2 (A) that creates a purchase-money security interest in a 51.3 manufactured home, other than a manufactured home held as 51.4 inventory; or 51.5 (B) in which a manufactured home, other than a manufactured 51.6 home held as inventory, is the primary collateral. 51.7 (55) "Mortgage" means a consensual interest in real 51.8 property, including fixtures, which secures payment or 51.9 performance of an obligation. Mortgage includes an executory 51.10 contract for the sale of real property or of an interest in real 51.11 property that entitles the purchaser to possession of the real 51.12 property. 51.13 (56) "New debtor" means a person that becomes bound as 51.14 debtor under section 336.9-203(d) by a security agreement 51.15 previously entered into by another person. 51.16 (57) "New value" means (i) money, (ii) money's worth in 51.17 property, services, or new credit, or (iii) release by a 51.18 transferee of an interest in property previously transferred to 51.19 the transferee. The term does not include an obligation 51.20 substituted for another obligation. 51.21 (58) "Noncash proceeds" means proceeds other than cash 51.22 proceeds. 51.23 (59) "Obligor" means a person that, with respect to an 51.24 obligation secured by a security interest in or an agricultural 51.25 lien on the collateral, (i) owes payment or other performance of 51.26 the obligation, (ii) has provided property other than the 51.27 collateral to secure payment or other performance of the 51.28 obligation, or (iii) is otherwise accountable in whole or in 51.29 part for payment or other performance of the obligation. The 51.30 term does not include issuers or nominated persons under a 51.31 letter of credit. 51.32 (60) "Original debtor", except as used in section 51.33 336.9-310(c), means a person that, as debtor, entered into a 51.34 security agreement to which a new debtor has become bound under 51.35 section 336.9-203(d). 51.36 (61) "Payment intangible" means a general intangible under 52.1 which the account debtor's principal obligation is a monetary 52.2 obligation. 52.3 (62) "Person related to", with respect to an individual, 52.4 means: 52.5 (A) the spouse of the individual; 52.6 (B) a brother, brother-in-law, sister, or sister-in-law of 52.7 the individual; 52.8 (C) an ancestor or lineal descendant of the individual or 52.9 the individual's spouse; or 52.10 (D) any other relative, by blood or marriage, of the 52.11 individual or the individual's spouse who shares the same home 52.12 with the individual. 52.13 (63) "Person related to", with respect to an organization, 52.14 means: 52.15 (A) a person directly or indirectly controlling, controlled 52.16 by, or under common control with the organization; 52.17 (B) an officer or director of, or a person performing 52.18 similar functions with respect to, the organization; 52.19 (C) an officer or director of, or a person performing 52.20 similar functions with respect to, a person described in 52.21 subparagraph (A); 52.22 (D) the spouse of an individual described in subparagraph 52.23 (A), (B), or (C); or 52.24 (E) an individual who is related by blood or marriage to an 52.25 individual described in subparagraph (A), (B), (C), or (D), and 52.26 shares the same home with the individual. 52.27 (64) "Proceeds", except as used in section 336.9-609(b), 52.28 means the following property: 52.29 (A) whatever is acquired upon the sale, lease, license, 52.30 exchange, or other disposition of collateral; 52.31 (B) whatever is collected on, or distributed on account of, 52.32 collateral; 52.33 (C) rights arising out of collateral; 52.34 (D) to the extent of the value of collateral, claims 52.35 arising out of the loss, nonconformity, or interference with the 52.36 use of, defects or infringement of rights in, or damage to, the 53.1 collateral; or 53.2 (E) to the extent of the value of collateral and to the 53.3 extent payable to the debtor or the secured party, insurance 53.4 payable by reason of the loss or nonconformity of, defects or 53.5 infringement of rights in, or damage to, the collateral. 53.6 (65) "Promissory note" means an instrument that evidences a 53.7 promise to pay a monetary obligation, does not evidence an order 53.8 to pay, and does not contain an acknowledgment by a bank that 53.9 the bank has received for deposit a sum of money or funds. 53.10 (66) "Proposal" means a record authenticated by a secured 53.11 party which includes the terms on which the secured party is 53.12 willing to accept collateral in full or partial satisfaction of 53.13 the obligation it secures pursuant to sections 336.9-620, 53.14 336.9-621, and 336.9-622. 53.15 (67) "Public-finance transaction" means a secured 53.16 transaction in connection with which: 53.17 (A) debt securities are issued; 53.18 (B) all or a portion of the securities issued have an 53.19 initial stated maturity of at least 20 years; and 53.20 (C) the debtor, obligor, secured party, account debtor or 53.21 other person obligated on collateral, assignor or assignee of a 53.22 secured obligation, or assignor or assignee of a security 53.23 interest is a state or a governmental unit of a state. 53.24 (68) "Pursuant to commitment", with respect to an advance 53.25 made or other value given by a secured party, means pursuant to 53.26 the secured party's obligation, whether or not a subsequent 53.27 event of default or other event not within the secured party's 53.28 control has relieved or may relieve the secured party from its 53.29 obligation. 53.30 (69) "Record", except as used in "for record", "of record", 53.31 "record or legal title", and "record owner", means information 53.32 that is inscribed on a tangible medium or which is stored in an 53.33 electronic or other medium and is retrievable in perceivable 53.34 form. 53.35 (70) "Registered organization" means an organization 53.36 organized solely under the law of a single state or the United 54.1 States and as to which the state or the United States must 54.2 maintain a public record showing the organization to have been 54.3 organized. 54.4 (71) "Secondary obligor" means an obligor to the extent 54.5 that: 54.6 (A) the obligor's obligation is secondary; or 54.7 (B) the obligor has a right of recourse with respect to an 54.8 obligation secured by collateral against the debtor, another 54.9 obligor, or property of either. 54.10 (72) "Secured party" means: 54.11 (A) a person in whose favor a security interest is created 54.12 or provided for under a security agreement, whether or not any 54.13 obligation to be secured is outstanding; 54.14 (B) a person that holds an agricultural lien; 54.15 (C) a consignor; 54.16 (D) a person to which accounts, chattel paper, payment 54.17 intangibles, or promissory notes have been sold; 54.18 (E) a trustee, indenture trustee, agent, collateral agent, 54.19 or other representative in whose favor a security interest or 54.20 agricultural lien is created or provided for; or 54.21 (F) a person that holds a security interest arising under 54.22 section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5), 54.23 336.4-210, or 336.5-118. 54.24 (73) "Security agreement" means an agreement that creates 54.25 or provides for a security interest. 54.26 (74) "Send", in connection with a record or notification, 54.27 means: 54.28 (A) to deposit in the mail, deliver for transmission, or 54.29 transmit by any other usual means of communication, with postage 54.30 or cost of transmission provided for, addressed to any address 54.31 reasonable under the circumstances; or 54.32 (B) to cause the record or notification to be received 54.33 within the time that it would have been received if properly 54.34 sent under subparagraph (A). 54.35 (75) "Software" means a computer program and any supporting 54.36 information provided in connection with a transaction relating 55.1 to the program. The term does not include a computer program 55.2 that is included in the definition of goods. 55.3 (76) "State" means a state of the United States, the 55.4 District of Columbia, Puerto Rico, the United States Virgin 55.5 Islands, or any territory or insular possession subject to the 55.6 jurisdiction of the United States. 55.7 (77) "Supporting obligation" means a letter of credit right 55.8 or secondary obligation that supports the payment or performance 55.9 of an account, chattel paper, a document, a general intangible, 55.10 an instrument, or investment property. 55.11 (78) "Tangible chattel paper" means chattel paper evidenced 55.12 by a record or records consisting of information that is 55.13 inscribed on a tangible medium. 55.14 (79) "Termination statement" means an amendment of a 55.15 financing statement which: 55.16 (A) identifies, by its file number, the initial financing 55.17 statement to which it relates; and 55.18 (B) indicates either that it is a termination statement or 55.19 that the identified financing statement is no longer effective. 55.20 (80) "Transmitting utility" means a person primarily 55.21 engaged in the business of: 55.22 (A) operating a railroad, subway, street railway, or 55.23 trolley bus; 55.24 (B) transmitting communications electrically, 55.25 electromagnetically, or by light; 55.26 (C) transmitting goods by pipeline or sewer; or 55.27 (D) transmitting or producing and transmitting electricity, 55.28 steam, gas, or water. 55.29 A person filing a financing statement under this article 55.30 and under the authority of sections 300.111 to 300.115 is a 55.31 transmitting utility for purposes of this article. 55.32 (b) [DEFINITIONS IN OTHER ARTICLES.] The following 55.33 definitions in other articles apply to this article: 55.34 "Applicant" Section 336.5-102 55.35 "Beneficiary" Section 336.5-102 55.36 "Broker" Section 336.8-102 56.1 "Certificated security" Section 336.8-102 56.2 "Check" Section 336.3-104 56.3 "Clearing corporation" Section 336.8-102 56.4 "Contract for sale" Section 336.2-106 56.5 "Customer" Section 336.4-104 56.6 "Entitlement holder" Section 336.8-102 56.7 "Financial asset" Section 336.8-102 56.8 "Holder in due course" Section 336.3-302 56.9 "Issuer" (with respect to a 56.10 letter of credit or 56.11 letter of credit right) Section 336.5-102 56.12 "Issuer" (with respect to 56.13 a security) Section 336.8-201 56.14 "Lease" Section 336.2A-103 56.15 "Lease agreement" Section 336.2A-103 56.16 "Lease contract" Section 336.2A-103 56.17 "Leasehold interest" Section 336.2A-103 56.18 "Lessee" Section 336.2A-103 56.19 "Lessee in ordinary course 56.20 of business" Section 336.2A-103 56.21 "Lessor" Section 336.2A-103 56.22 "Lessor's residual interest" Section 336.2A-103 56.23 "Letter of credit" Section 336.5-102 56.24 "Merchant" Section 336.2-104 56.25 "Negotiable instrument" Section 336.3-104 56.26 "Nominated person" Section 336.5-102 56.27 "Note" Section 336.3-104 56.28 "Proceeds of a letter of 56.29 credit" Section 336.5-114 56.30 "Prove" Section 336.3-103 56.31 "Sale" Section 336.2-106 56.32 "Securities account" Section 336.8-501 56.33 "Securities intermediary" Section 336.8-102 56.34 "Security" Section 336.8-102 56.35 "Security certificate" Section 336.8-102 56.36 "Security entitlement" Section 336.8-102 57.1 "Uncertificated security" Section 336.8-102 57.2 (c) [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1 57.3 contains general definitions and principles of construction and 57.4 interpretation applicable throughout this article. 57.5 Sec. 17. [REPEALER.] 57.6 Minnesota Statutes 2002, sections 336.2-208; and 57.7 336.2A-207, are repealed. 57.8 ARTICLE 3 57.9 GENERAL CONFORMING AMENDMENTS 57.10 Section 1. Minnesota Statutes 2002, section 17.94, is 57.11 amended to read: 57.12 17.94 [IMPLIED PROMISE OF GOOD FAITH.] 57.13 There is an implied promise of good faith as defined in 57.14 section 336.1-201, subsection (19)(b)(20), by all parties in all 57.15 agricultural contracts. In an action to recover damages, if the 57.16 court finds that there has been a violation of this provision, 57.17 damages, court costs, and attorney fees may be recovered. 57.18 Sec. 2. Minnesota Statutes 2002, section 84.787, 57.19 subdivision 9, is amended to read: 57.20 Subd. 9. [PERSON.] "Person" has the meaning given it in 57.21 section 336.1-201, subsection (30)(b)(27). 57.22 Sec. 3. Minnesota Statutes 2002, section 84.797, 57.23 subdivision 10, is amended to read: 57.24 Subd. 10. [PERSON.] "Person" has the meaning given in 57.25 section 336.1-201, paragraph (30)(b)(27). 57.26 Sec. 4. Minnesota Statutes 2002, section 84.92, 57.27 subdivision 6, is amended to read: 57.28 Subd. 6. [PERSON.] "Person" means an individual or an 57.29 organization as defined in section 336.1-201, paragraph57.30(30)(b)(27). 57.31 Sec. 5. Minnesota Statutes 2002, section 86B.820, 57.32 subdivision 12, is amended to read: 57.33 Subd. 12. [SECURITY INTEREST.] "Security interest" has the 57.34 meaning given it in section 336.1-201, subsection (37)(b)(35), 57.35 and includes statutory liens for which lien statements are filed. 57.36 Sec. 6. Minnesota Statutes 2002, section 168A.01, 58.1 subdivision 20, is amended to read: 58.2 Subd. 20. [SECURITY INTEREST.] "Security interest" means a 58.3 security interest as defined in section 336.1-201(37)(b)(35). A 58.4 security interest is "perfected" when it is valid against third 58.5 parties generally, subject only to specific statutory exception. 58.6 Sec. 7. Minnesota Statutes 2002, section 234.27, is 58.7 amended to read: 58.8 234.27 [UNIFORM COMMERCIAL CODE TO APPLY.] 58.9 The provisions of article 7 of the Uniform Commercial Code 58.10 relative to the negotiation, transfer, sale, or endorsement of 58.11 warehouse receipts, apply, to the extent possible, to the 58.12 negotiation, transfer, sale, or endorsement of certificates 58.13 under this chapter. 58.14 For the purpose of application of the Uniform Commercial 58.15 Code: 58.16 (a) A certificate authorized by the department which 58.17 evidences the storing of grain under this chapter is a document 58.18 of title as defined in section 336.1-201, clause (15)(b)(16). 58.19 (b) A person who has title to and possession of grain 58.20 stored under this chapter is a warehouse operator as defined in 58.21 section 336.7-102, clause (1)(h). 58.22 Sec. 8. Minnesota Statutes 2002, section 325L.03, is 58.23 amended to read: 58.24 325L.03 [SCOPE.] 58.25 (a) Except as otherwise provided in paragraphs (b) and (e), 58.26 this chapter applies to electronic records and electronic 58.27 signatures relating to a transaction. 58.28 (b) This chapter does not apply to a transaction to the 58.29 extent it is governed by: 58.30 (1) the Uniform Commercial Code other thansections58.31336.1-107 and 336.1-206section 336.1-306, Article 2, and 58.32 Article 2A; and 58.33 (2) section 145C.03, subdivision 1, relating to 58.34 requirements for creation of a health care directive; section 58.35 507.24, relating to requirements for recording any conveyance, 58.36 power of attorney, or other instrument affecting real estate; 59.1 section 523.23, subdivision 3, relating to requirements for 59.2 creation of a statutory short form power of attorney; and 59.3 section 253B.03, subdivision 6b, relating to requirements for 59.4 creation of a declaration of preferences or instructions 59.5 regarding intrusive mental health treatment. 59.6 (c) This chapter applies to an electronic record or 59.7 electronic signature otherwise excluded from the application of 59.8 this chapter under paragraph (b) to the extent it is governed by 59.9 a law other than those specified in paragraph (b). 59.10 (d) A transaction subject to this chapter is also subject 59.11 to other applicable substantive law. 59.12 (e) This chapter does not apply to the creation and 59.13 execution of wills, codicils, or trusts other than trusts 59.14 relating to the conduct of business, commercial, or governmental 59.15 purposes. 59.16 Sec. 9. Minnesota Statutes 2002, section 325L.16, is 59.17 amended to read: 59.18 325L.16 [TRANSFERABLE RECORD.] 59.19 (a) In this section, "transferable record" means an 59.20 electronic record that: 59.21 (1) would be a note under Article 3 of the Uniform 59.22 Commercial Code or a document under Article 7 of the Uniform 59.23 Commercial Code if the electronic record were in writing; and 59.24 (2) the issuer of the electronic record expressly has 59.25 agreed is a transferable record. 59.26 (b) A person has control of a transferable record if a 59.27 system employed for evidencing the transfer of interests in the 59.28 transferable record reliably establishes that person as the 59.29 person to which the transferable record was issued or 59.30 transferred. 59.31 (c) A system satisfies paragraph (b), and a person is 59.32 deemed to have control of a transferable record, if the 59.33 transferable record is created, stored, and assigned in such a 59.34 manner that: 59.35 (1) a single authoritative copy of the transferable record 59.36 exists which is unique, identifiable, and, except as otherwise 60.1 provided in clauses (4), (5), and (6), unalterable; 60.2 (2) the authoritative copy identifies the person asserting 60.3 control as: 60.4 (i) the person to which the transferable record was issued; 60.5 or 60.6 (ii) if the authoritative copy indicates that the 60.7 transferable record has been transferred, the person to which 60.8 the transferable record was most recently transferred; 60.9 (3) the authoritative copy is communicated to and 60.10 maintained by the person asserting control or its designated 60.11 custodian; 60.12 (4) copies or revisions that add or change an identified 60.13 assignee of the authoritative copy can be made only with the 60.14 consent of the person asserting control; 60.15 (5) each copy of the authoritative copy and any copy of a 60.16 copy is readily identifiable as a copy that is not the 60.17 authoritative copy; and 60.18 (6) any revision of the authoritative copy is readily 60.19 identifiable as authorized or unauthorized. 60.20 (d) Except as otherwise agreed, a person having control of 60.21 a transferable record is the holder, as defined in section 60.22 336.1-201(20)(b)(21) of the Uniform Commercial Code, of the 60.23 transferable record and has the same rights and defenses as a 60.24 holder of an equivalent record or writing under the Uniform 60.25 Commercial Code, including, if the applicable statutory 60.26 requirements under section 336.3-302(a), 336.7-501, or 336.9-330 60.27 of the Uniform Commercial Code are satisfied, the rights and 60.28 defenses of a holder in due course, a holder to which a 60.29 negotiable document of title has been duly negotiated, or a 60.30 purchaser, respectively. Delivery, possession, and endorsement 60.31 are not required to obtain or exercise any of the rights under 60.32 this paragraph. 60.33 (e) Except as otherwise agreed, an obligor under a 60.34 transferable record has the same rights and defenses as an 60.35 equivalent obligor under equivalent records or writings under 60.36 the Uniform Commercial Code. 61.1 (f) If requested by a person against which enforcement is 61.2 sought, the person seeking to enforce the transferable record 61.3 shall provide reasonable proof that the person is in control of 61.4 the transferable record. Proof may include access to the 61.5 authoritative copy of the transferable record and related 61.6 business records sufficient to review the terms of the 61.7 transferable record and to establish the identity of the person 61.8 having control of the transferable record. 61.9 Sec. 10. Minnesota Statutes 2002, section 513.33, 61.10 subdivision 1, is amended to read: 61.11 Subdivision 1. [DEFINITIONS.] For the purposes of this 61.12 section, the following terms have the meanings given them: 61.13 (1) "credit agreement" means an agreement to lend or 61.14 forbear repayment of money, goods, or things in action, to 61.15 otherwise extend credit, or to make any other financial 61.16 accommodation; 61.17 (2) "creditor" means a person who extends credit under a 61.18 credit agreement with a debtor; 61.19 (3) "debtor" means a person who obtains credit or seeks a 61.20 credit agreement with a creditor or who owes money to a 61.21 creditor; and 61.22 (4) "signed" has the meaning specified in section 61.23 336.1-201(39)(b)(37). 61.24 Sec. 11. Minnesota Statutes 2002, section 514.963, 61.25 subdivision 9, is amended to read: 61.26 Subd. 9. [PERSON.] "Person" means an individual or an 61.27 organization as defined in section 336.1-201(30)(b)(27). 61.28 Sec. 12. Minnesota Statutes 2002, section 514.965, 61.29 subdivision 10, is amended to read: 61.30 Subd. 10. [PERSON.] "Person" means an individual or an 61.31 organization as defined in section 336.1-201(30)(b)(27). 61.32 ARTICLE 4 61.33 UNIFORM COMMERCIAL CODE 61.34 ARTICLE 7 - DOCUMENTS OF TITLE 61.35 PART 1 61.36 GENERAL 62.1 Section 1. [336.7-101] [SHORT TITLE.] 62.2 This article may be cited as Uniform Commercial Code - 62.3 Documents of Title. 62.4 Sec. 2. [336.7-102] [DEFINITIONS AND INDEX OF 62.5 DEFINITIONS.] 62.6 (a) In this article, unless the context otherwise requires: 62.7 (1) "Bailee" means a person that by a warehouse receipt, 62.8 bill of lading, or other document of title acknowledges 62.9 possession of goods and contracts to deliver them. 62.10 (2) "Carrier" means a person that issues a bill of lading. 62.11 (3) "Consignee" means a person named in a bill of lading to 62.12 which or to whose order the bill promises delivery. 62.13 (4) "Consignor" means a person named in a bill of lading as 62.14 the person from which the goods have been received for shipment. 62.15 (5) "Delivery order" means a record that contains an order 62.16 to deliver goods directed to a warehouse, carrier, or other 62.17 person that in the ordinary course of business issues warehouse 62.18 receipts or bills of lading. 62.19 (6) [RESERVED.] 62.20 (7) "Goods" means all things that are treated as movable 62.21 for the purposes of a contract for storage or transportation. 62.22 (8) "Issuer" means a bailee that issues a document of title 62.23 or, in the case of an unaccepted delivery order, the person that 62.24 orders the possessor of goods to deliver. The term includes a 62.25 person for which an agent or employee purports to act in issuing 62.26 a document if the agent or employee has real or apparent 62.27 authority to issue documents, even if the issuer did not receive 62.28 any goods, the goods were misdescribed, or in any other respect 62.29 the agent or employee violated the issuer's instructions. 62.30 (9) "Person entitled under the document" means the holder, 62.31 in the case of a negotiable document of title, or the person to 62.32 which delivery of the goods is to be made by the terms of, or 62.33 pursuant to instructions in a record under, a nonnegotiable 62.34 document of title. 62.35 (10) [RESERVED.] 62.36 (11) "Sign" means, with present intent to authenticate or 63.1 adopt a record: 63.2 (A) to execute or adopt a tangible symbol; or 63.3 (B) to attach to or logically associate with the record an 63.4 electronic sound, symbol, or process. 63.5 (12) "Shipper" means a person that enters into a contract 63.6 of transportation with a carrier. 63.7 (13) "Warehouse" means a person engaged in the business of 63.8 storing goods for hire. 63.9 (b) Definitions in other articles applying to this article 63.10 and the sections in which they appear are: 63.11 (1) "Contract for sale," section 336.2-106. 63.12 (2) "Lessee in the ordinary course of business," section 63.13 336.2A-103. 63.14 (3) "Receipt" of goods, section 336.2-103. 63.15 (c) In addition, article 1 contains general definitions and 63.16 principles of construction and interpretation applicable 63.17 throughout this article. 63.18 Sec. 3. [336.7-103] [RELATION OF ARTICLE TO TREATY OR 63.19 STATUTE.] 63.20 (a) This article is subject to any treaty or statute of the 63.21 United States or regulatory statute of this state to the extent 63.22 the treaty, statute, or regulatory statute is applicable. 63.23 (b) This article does not modify or repeal any law 63.24 prescribing the form or content of a document of title or the 63.25 services or facilities to be afforded by a bailee, or otherwise 63.26 regulating a bailee's business in respects not specifically 63.27 treated in this article. However, violation of such a law does 63.28 not affect the status of a document of title that otherwise is 63.29 within the definition of a document of title. 63.30 (c) This act modifies, limits, and supersedes the federal 63.31 Electronic Signatures in Global and National Commerce Act (15 63.32 U.S.C. section 7001, et seq.) but does not modify, limit, or 63.33 supersede section 101(c) of that act (15 U.S.C. section 7001(c)) 63.34 or authorize electronic delivery of any of the notices described 63.35 in section 103(b) of that act (15 U.S.C. section 7003(b)). 63.36 (d) To the extent there is a conflict between chapter 325L 64.1 and this article, this article governs. 64.2 Sec. 4. [336.7-104] [NEGOTIABLE AND NONNEGOTIABLE DOCUMENT 64.3 OF TITLE.] 64.4 (a) Except as otherwise provided in subsection (c), a 64.5 document of title is negotiable if by its terms the goods are to 64.6 be delivered to bearer or to the order of a named person. 64.7 (b) A document of title other than one described in 64.8 subsection (a) is nonnegotiable. A bill of lading that states 64.9 that the goods are consigned to a named person is not made 64.10 negotiable by a provision that the goods are to be delivered 64.11 only against an order in a record signed by the same or another 64.12 named person. 64.13 (c) A document of title is nonnegotiable if, at the time it 64.14 is issued, the document has a conspicuous legend, however 64.15 expressed, that it is nonnegotiable. 64.16 Sec. 5. [336.7-105] [REISSUANCE IN ALTERNATIVE MEDIUM.] 64.17 (a) Upon request of a person entitled under an electronic 64.18 document of title, the issuer of the electronic document may 64.19 issue a tangible document of title as a substitute for the 64.20 electronic document if: 64.21 (1) the person entitled under the electronic document 64.22 surrenders control of the document to the issuer; and 64.23 (2) the tangible document when issued contains a statement 64.24 that it is issued in substitution for the electronic document. 64.25 (b) Upon issuance of a tangible document of title in 64.26 substitution for an electronic document of title in accordance 64.27 with subsection (a): 64.28 (1) the electronic document ceases to have any effect or 64.29 validity; and 64.30 (2) the person that procured issuance of the tangible 64.31 document warrants to all subsequent persons entitled under the 64.32 tangible document that the warrantor was a person entitled under 64.33 the electronic document when the warrantor surrendered control 64.34 of the electronic document to the issuer. 64.35 (c) Upon request of a person entitled under a tangible 64.36 document of title, the issuer of the tangible document may issue 65.1 an electronic document of title as a substitute for the tangible 65.2 document if: 65.3 (1) the person entitled under the tangible document 65.4 surrenders possession of the document to the issuer; and 65.5 (2) the electronic document when issued contains a 65.6 statement that it is issued in substitution for the tangible 65.7 document. 65.8 (d) Upon issuance of an electronic document of title in 65.9 substitution for a tangible document of title in accordance with 65.10 subsection (c): 65.11 (1) the tangible document ceases to have any effect or 65.12 validity; and 65.13 (2) the person that procured issuance of the electronic 65.14 document warrants to all subsequent persons entitled under the 65.15 electronic document that the warrantor was a person entitled 65.16 under the tangible document when the warrantor surrendered 65.17 possession of the tangible document to the issuer. 65.18 Sec. 6. [336.7-106] [CONTROL OF ELECTRONIC DOCUMENT OF 65.19 TITLE.] 65.20 (a) A person has control of an electronic document of title 65.21 if a system employed for evidencing the transfer of interests in 65.22 the electronic document reliably establishes that person as the 65.23 person to which the electronic document was issued or 65.24 transferred. 65.25 (b) A system satisfies subsection (a), and a person is 65.26 deemed to have control of an electronic document of title, if 65.27 the document is created, stored, and assigned in such a manner 65.28 that: 65.29 (1) a single authoritative copy of the document exists 65.30 which is unique, identifiable, and, except as otherwise provided 65.31 in paragraphs (4), (5), and (6), unalterable; 65.32 (2) the authoritative copy identifies the person asserting 65.33 control as: 65.34 (A) the person to which the document was issued; or 65.35 (B) if the authoritative copy indicates the document has 65.36 been transferred, the person to which the document was most 66.1 recently transferred; 66.2 (3) the authoritative copy is communicated to and 66.3 maintained by the person asserting control or its designated 66.4 custodian; 66.5 (4) copies or amendments that add or change an identified 66.6 assignee of the authoritative copy can be made only with the 66.7 consent of the person asserting control; 66.8 (5) each copy of the authoritative copy and any copy of a 66.9 copy is readily identifiable as a copy that is not the 66.10 authoritative copy; and 66.11 (6) any amendment of the authoritative copy is readily 66.12 identifiable as authorized or unauthorized. 66.13 PART 2 66.14 WAREHOUSE RECEIPTS: 66.15 SPECIAL PROVISIONS 66.16 Sec. 7. [336.7-201] [PERSON THAT MAY ISSUE A WAREHOUSE 66.17 RECEIPT; STORAGE UNDER BOND.] 66.18 (a) A warehouse receipt may be issued by any warehouse. 66.19 (b) If goods, including distilled spirits and agricultural 66.20 commodities, are stored under a statute requiring a bond against 66.21 withdrawal or a license for the issuance of receipts in the 66.22 nature of warehouse receipts, a receipt issued for the goods is 66.23 deemed to be a warehouse receipt even if issued by a person that 66.24 is the owner of the goods and is not a warehouse. 66.25 Sec. 8. [336.7-202] [FORM OF WAREHOUSE RECEIPT; EFFECT OF 66.26 OMISSION.] 66.27 (a) A warehouse receipt need not be in any particular form. 66.28 (b) Unless a warehouse receipt provides for each of the 66.29 following, the warehouse is liable for damages caused to a 66.30 person injured by its omission: 66.31 (1) a statement of the location of the warehouse facility 66.32 where the goods are stored; 66.33 (2) the date of issue of the receipt; 66.34 (3) the unique identification code of the receipt; 66.35 (4) a statement whether the goods received will be 66.36 delivered to the bearer, to a named person, or to a named person 67.1 or its order; 67.2 (5) the rate of storage and handling charges, unless goods 67.3 are stored under a field warehousing arrangement, in which case 67.4 a statement of that fact is sufficient on a nonnegotiable 67.5 receipt; 67.6 (6) a description of the goods or the packages containing 67.7 them; 67.8 (7) the signature of the warehouse or its agent; 67.9 (8) if the receipt is issued for goods that the warehouse 67.10 owns, either solely, jointly, or in common with others, a 67.11 statement of the fact of that ownership; and 67.12 (9) a statement of the amount of advances made and of 67.13 liabilities incurred for which the warehouse claims a lien or 67.14 security interest, unless the precise amount of advances made or 67.15 liabilities incurred, at the time of the issue of the receipt, 67.16 is unknown to the warehouse or to its agent that issued the 67.17 receipt, in which case a statement of the fact that advances 67.18 have been made or liabilities incurred and the purpose of the 67.19 advances or liabilities is sufficient. 67.20 (c) A warehouse may insert in its receipt any terms that 67.21 are not contrary to the Uniform Commercial Code and do not 67.22 impair its obligation of delivery under section 336.7-403 or its 67.23 duty of care under section 336.7-204. Any contrary provision is 67.24 ineffective. 67.25 Sec. 9. [336.7-203] [LIABILITY FOR NONRECEIPT OR 67.26 MISDESCRIPTION.] 67.27 A party to or purchaser for value in good faith of a 67.28 document of title, other than a bill of lading, that relies upon 67.29 the description of the goods in the document may recover from 67.30 the issuer damages caused by the nonreceipt or misdescription of 67.31 the goods, except to the extent that: 67.32 (1) the document conspicuously indicates that the issuer 67.33 does not know whether all or part of the goods in fact were 67.34 received or conform to the description, such as a case in which 67.35 the description is in terms of marks or labels or kind, 67.36 quantity, or condition, or the receipt or description is 68.1 qualified by "contents, condition, and quality unknown," "said 68.2 to contain," or words of similar import, if the indication is 68.3 true; or 68.4 (2) the party or purchaser otherwise has notice of the 68.5 nonreceipt or misdescription. 68.6 Sec. 10. [336.7-204] [DUTY OF CARE; CONTRACTUAL LIMITATION 68.7 OF WAREHOUSE'S LIABILITY.] 68.8 (a) A warehouse is liable for damages for loss of or injury 68.9 to the goods caused by its failure to exercise care with regard 68.10 to the goods that a reasonably careful person would exercise 68.11 under similar circumstances. Unless otherwise agreed, the 68.12 warehouse is not liable for damages that could not have been 68.13 avoided by the exercise of that care. 68.14 (b) Damages may be limited by a term in the warehouse 68.15 receipt or storage agreement limiting the amount of liability in 68.16 case of loss or damage beyond which the warehouse is not 68.17 liable. Such a limitation is not effective with respect to the 68.18 warehouse's liability for conversion to its own use. On request 68.19 of the bailor in a record at the time of signing the storage 68.20 agreement or within a reasonable time after receipt of the 68.21 warehouse receipt, the warehouse's liability may be increased on 68.22 part or all of the goods covered by the storage agreement or the 68.23 warehouse receipt. In this event, increased rates may be 68.24 charged based on an increased valuation of the goods. 68.25 (c) Reasonable provisions as to the time and manner of 68.26 presenting claims and commencing actions based on the bailment 68.27 may be included in the warehouse receipt or storage agreement. 68.28 Sec. 11. [336.7-205] [TITLE UNDER WAREHOUSE RECEIPT 68.29 DEFEATED IN CERTAIN CASES.] 68.30 A buyer in ordinary course of business of fungible goods 68.31 sold and delivered by a warehouse that is also in the business 68.32 of buying and selling such goods takes the goods free of any 68.33 claim under a warehouse receipt even if the receipt is 68.34 negotiable and has been duly negotiated. 68.35 Sec. 12. [336.7-206] [TERMINATION OF STORAGE AT 68.36 WAREHOUSE'S OPTION.] 69.1 (a) A warehouse, by giving notice to the person on whose 69.2 account the goods are held and any other person known to claim 69.3 an interest in the goods, may require payment of any charges and 69.4 removal of the goods from the warehouse at the termination of 69.5 the period of storage fixed by the document of title or, if a 69.6 period is not fixed, within a stated period not less than 30 69.7 days after the warehouse gives notice. If the goods are not 69.8 removed before the date specified in the notice, the warehouse 69.9 may sell them pursuant to section 336.7-210. 69.10 (b) If a warehouse in good faith believes that goods are 69.11 about to deteriorate or decline in value to less than the amount 69.12 of its lien within the time period provided in subsection (a) 69.13 and section 336.7-210, the warehouse may specify in the notice 69.14 given under subsection (a) any reasonable shorter time for 69.15 removal of the goods and, if the goods are not removed, may sell 69.16 them at public sale held not less than one week after a single 69.17 advertisement or posting. 69.18 (c) If, as a result of a quality or condition of the goods 69.19 of which the warehouse did not have notice at the time of 69.20 deposit, the goods are a hazard to other property, the warehouse 69.21 facilities, or other persons, the warehouse may sell the goods 69.22 at public or private sale without advertisement or posting on 69.23 reasonable notification to all persons known to claim an 69.24 interest in the goods. If the warehouse, after a reasonable 69.25 effort, is unable to sell the goods, it may dispose of them in 69.26 any lawful manner and does not incur liability by reason of that 69.27 disposition. 69.28 (d) A warehouse shall deliver the goods to any person 69.29 entitled to them under this article upon due demand made at any 69.30 time before sale or other disposition under this section. 69.31 (e) A warehouse may satisfy its lien from the proceeds of 69.32 any sale or disposition under this section but shall hold the 69.33 balance for delivery on the demand of any person to which the 69.34 warehouse would have been bound to deliver the goods. 69.35 Sec. 13. [336.7-207] [GOODS MUST BE KEPT SEPARATE; 69.36 FUNGIBLE GOODS.] 70.1 (a) Unless the warehouse receipt provides otherwise, a 70.2 warehouse shall keep separate the goods covered by each receipt 70.3 so as to permit at all times identification and delivery of 70.4 those goods. However, different lots of fungible goods may be 70.5 commingled. 70.6 (b) If different lots of fungible goods are commingled, the 70.7 goods are owned in common by the persons entitled thereto and 70.8 the warehouse is severally liable to each owner for that owner's 70.9 share. If, because of overissue, a mass of fungible goods is 70.10 insufficient to meet all the receipts the warehouse has issued 70.11 against it, the persons entitled include all holders to which 70.12 overissued receipts have been duly negotiated. 70.13 Sec. 14. [336.7-208] [ALTERED WAREHOUSE RECEIPTS.] 70.14 If a blank in a negotiable tangible warehouse receipt has 70.15 been filled in without authority, a good-faith purchaser for 70.16 value and without notice of the lack of authority may treat the 70.17 insertion as authorized. Any other unauthorized alteration 70.18 leaves any tangible or electronic warehouse receipt enforceable 70.19 against the issuer according to its original tenor. 70.20 Sec. 15. [336.7-209] [LIEN OF WAREHOUSE.] 70.21 (a) A warehouse has a lien against the bailor on the goods 70.22 covered by a warehouse receipt or storage agreement or on the 70.23 proceeds thereof in its possession for charges for storage or 70.24 transportation, including demurrage and terminal charges, 70.25 insurance, labor, or other charges, present or future, in 70.26 relation to the goods, and for expenses necessary for 70.27 preservation of the goods or reasonably incurred in their sale 70.28 pursuant to law. If the person on whose account the goods are 70.29 held is liable for similar charges or expenses in relation to 70.30 other goods whenever deposited and it is stated in the warehouse 70.31 receipt or storage agreement that a lien is claimed for charges 70.32 and expenses in relation to other goods, the warehouse also has 70.33 a lien against the goods covered by the warehouse receipt or 70.34 storage agreement or on the proceeds thereof in its possession 70.35 for those charges and expenses, whether or not the other goods 70.36 have been delivered by the warehouse. However, as against a 71.1 person to which a negotiable warehouse receipt is duly 71.2 negotiated, a warehouse's lien is limited to charges in an 71.3 amount or at a rate specified in the warehouse receipt or, if no 71.4 charges are so specified, to a reasonable charge for storage of 71.5 the specific goods covered by the receipt subsequent to the date 71.6 of the receipt. 71.7 (b) A warehouse may also reserve a security interest 71.8 against the bailor for the maximum amount specified on the 71.9 receipt for charges other than those specified in subsection 71.10 (a), such as for money advanced and interest. The security 71.11 interest is governed by article 9. 71.12 (c) A warehouse's lien for charges and expenses under 71.13 subsection (a) or a security interest under subsection (b) is 71.14 also effective against any person that so entrusted the bailor 71.15 with possession of the goods that a pledge of them by the bailor 71.16 to a good-faith purchaser for value would have been valid. 71.17 However, the lien or security interest is not effective against 71.18 a person that before issuance of a document of title had a legal 71.19 interest or a perfected security interest in the goods and that 71.20 did not: 71.21 (1) deliver or entrust the goods or any document of title 71.22 covering the goods to the bailor or the bailor's nominee with: 71.23 (A) actual or apparent authority to ship, store, or sell; 71.24 (B) power to obtain delivery under section 336.7-403; or 71.25 (C) power of disposition under sections 336.2-403, 71.26 336.2A-304(2), 336.2A-305(2), 336.9-320, or 336.9-321(c) or 71.27 other statute or rule of law; or 71.28 (2) acquiesce in the procurement by the bailor or its 71.29 nominee of any document. 71.30 (d) A warehouse's lien on household goods for charges and 71.31 expenses in relation to the goods under subsection (a) is also 71.32 effective against all persons if the depositor was the legal 71.33 possessor of the goods at the time of deposit. In this 71.34 subsection, "household goods" means furniture, furnishings, or 71.35 personal effects used by the depositor in a dwelling. 71.36 (e) A warehouse loses its lien on any goods that it 72.1 voluntarily delivers or unjustifiably refuses to deliver. 72.2 Sec. 16. [336.7-210] [ENFORCEMENT OF WAREHOUSE'S LIEN.] 72.3 (a) Except as otherwise provided in subsection (b), a 72.4 warehouse's lien may be enforced by public or private sale of 72.5 the goods, in bulk or in packages, at any time or place and on 72.6 any terms that are commercially reasonable, after notifying all 72.7 persons known to claim an interest in the goods. The 72.8 notification must include a statement of the amount due, the 72.9 nature of the proposed sale, and the time and place of any 72.10 public sale. The fact that a better price could have been 72.11 obtained by a sale at a different time or in a method different 72.12 from that selected by the warehouse is not of itself sufficient 72.13 to establish that the sale was not made in a commercially 72.14 reasonable manner. The warehouse sells in a commercially 72.15 reasonable manner if the warehouse sells the goods in the usual 72.16 manner in any recognized market therefor, sells at the price 72.17 current in that market at the time of the sale, or otherwise 72.18 sells in conformity with commercially reasonable practices among 72.19 dealers in the type of goods sold. A sale of more goods than 72.20 apparently necessary to be offered to ensure satisfaction of the 72.21 obligation is not commercially reasonable, except in cases 72.22 covered by the preceding sentence. 72.23 (b) A warehouse may enforce its lien on goods, other than 72.24 goods stored by a merchant in the course of its business, only 72.25 if the following requirements are satisfied: 72.26 (1) All persons known to claim an interest in the goods 72.27 must be notified. 72.28 (2) The notification must include an itemized statement of 72.29 the claim, a description of the goods subject to the lien, a 72.30 demand for payment within a specified time not less than 10 days 72.31 after receipt of the notification, and a conspicuous statement 72.32 that unless the claim is paid within that time the goods will be 72.33 advertised for sale and sold by auction at a specified time and 72.34 place. 72.35 (3) The sale must conform to the terms of the notification. 72.36 (4) The sale must be held at the nearest suitable place to 73.1 where the goods are held or stored. 73.2 (5) After the expiration of the time given in the 73.3 notification, an advertisement of the sale must be published 73.4 once a week for two weeks consecutively in a newspaper of 73.5 general circulation where the sale is to be held. The 73.6 advertisement must include a description of the goods, the name 73.7 of the person on whose account the goods are being held, and the 73.8 time and place of the sale. The sale must take place at least 73.9 15 days after the first publication. If there is no newspaper 73.10 of general circulation where the sale is to be held, the 73.11 advertisement must be posted at least 10 days before the sale in 73.12 not fewer than six conspicuous places in the neighborhood of the 73.13 proposed sale. 73.14 (c) Before any sale pursuant to this section, any person 73.15 claiming a right in the goods may pay the amount necessary to 73.16 satisfy the lien and the reasonable expenses incurred in 73.17 complying with this section. In that event, the goods may not 73.18 be sold but must be retained by the warehouse subject to the 73.19 terms of the receipt and this article. 73.20 (d) A warehouse may buy at any public sale held pursuant to 73.21 this section. 73.22 (e) A purchaser in good faith of goods sold to enforce a 73.23 warehouse's lien takes the goods free of any rights of persons 73.24 against which the lien was valid, despite the warehouse's 73.25 noncompliance with this section. 73.26 (f) A warehouse may satisfy its lien from the proceeds of 73.27 any sale pursuant to this section but shall hold the balance, if 73.28 any, for delivery on demand to any person to which the warehouse 73.29 would have been bound to deliver the goods. 73.30 (g) The rights provided by this section are in addition to 73.31 all other rights allowed by law to a creditor against a debtor. 73.32 (h) If a lien is on goods stored by a merchant in the 73.33 course of its business, the lien may be enforced in accordance 73.34 with subsection (a) or (b). 73.35 (i) A warehouse is liable for damages caused by failure to 73.36 comply with the requirements for sale under this section and, in 74.1 case of willful violation, is liable for conversion. 74.2 PART 3 74.3 BILLS OF LADING: SPECIAL PROVISIONS 74.4 Sec. 17. [336.7-301] [LIABILITY FOR NONRECEIPT OR 74.5 MISDESCRIPTION; "SAID TO CONTAIN"; "SHIPPER'S WEIGHT, LOAD, AND 74.6 COUNT"; IMPROPER HANDLING.] 74.7 (a) A consignee of a nonnegotiable bill of lading which has 74.8 given value in good faith, or a holder to which a negotiable 74.9 bill has been duly negotiated, relying upon the description of 74.10 the goods in the bill or upon the date shown in the bill, may 74.11 recover from the issuer damages caused by the misdating of the 74.12 bill or the nonreceipt or misdescription of the goods, except to 74.13 the extent that the bill indicates that the issuer does not know 74.14 whether any part or all of the goods in fact were received or 74.15 conform to the description, such as in a case in which the 74.16 description is in terms of marks or labels or kind, quantity, or 74.17 condition or the receipt or description is qualified by 74.18 "contents or condition of contents of packages unknown," "said 74.19 to contain," "shipper's weight, load, and count," or words of 74.20 similar import, if that indication is true. 74.21 (b) If goods are loaded by the issuer of a bill of lading: 74.22 (1) the issuer shall count the packages of goods if shipped 74.23 in packages and ascertain the kind and quantity if shipped in 74.24 bulk; and 74.25 (2) words such as "shipper's weight, load, and count," or 74.26 words of similar import indicating that the description was made 74.27 by the shipper are ineffective except as to goods concealed in 74.28 packages. 74.29 (c) If bulk goods are loaded by a shipper that makes 74.30 available to the issuer of a bill of lading adequate facilities 74.31 for weighing those goods, the issuer shall ascertain the kind 74.32 and quantity within a reasonable time after receiving the 74.33 shipper's request in a record to do so. In that case, 74.34 "shipper's weight" or words of similar import are ineffective. 74.35 (d) The issuer of a bill of lading, by including in the 74.36 bill the words "shipper's weight, load, and count," or words of 75.1 similar import, may indicate that the goods were loaded by the 75.2 shipper, and, if that statement is true, the issuer is not 75.3 liable for damages caused by the improper loading. However, 75.4 omission of such words does not imply liability for damages 75.5 caused by improper loading. 75.6 (e) A shipper guarantees to an issuer the accuracy at the 75.7 time of shipment of the description, marks, labels, number, 75.8 kind, quantity, condition, and weight, as furnished by the 75.9 shipper, and the shipper shall indemnify the issuer against 75.10 damage caused by inaccuracies in those particulars. This right 75.11 of indemnity does not limit the issuer's responsibility or 75.12 liability under the contract of carriage to any person other 75.13 than the shipper. 75.14 Sec. 18. [336.7-302] [THROUGH BILLS OF LADING AND SIMILAR 75.15 DOCUMENTS OF TITLE.] 75.16 (a) The issuer of a through bill of lading, or other 75.17 document of title embodying an undertaking to be performed in 75.18 part by a person acting as its agent or by a performing carrier, 75.19 is liable to any person entitled to recover on the bill or other 75.20 document for any breach by the other person or the performing 75.21 carrier of its obligation under the bill or other document. 75.22 However, to the extent that the bill or other document covers an 75.23 undertaking to be performed overseas or in territory not 75.24 contiguous to the continental United States or an undertaking 75.25 including matters other than transportation, this liability for 75.26 breach by the other person or the performing carrier may be 75.27 varied by agreement of the parties. 75.28 (b) If goods covered by a through bill of lading or other 75.29 document of title embodying an undertaking to be performed in 75.30 part by a person other than the issuer are received by that 75.31 person, the person is subject, with respect to its own 75.32 performance while the goods are in its possession, to the 75.33 obligation of the issuer. The person's obligation is discharged 75.34 by delivery of the goods to another person pursuant to the bill 75.35 or other document and does not include liability for breach by 75.36 any other person or by the issuer. 76.1 (c) The issuer of a through bill of lading or other 76.2 document of title described in subsection (a) is entitled to 76.3 recover from the performing carrier, or other person in 76.4 possession of the goods when the breach of the obligation under 76.5 the bill or other document occurred: 76.6 (1) the amount it may be required to pay to any person 76.7 entitled to recover on the bill or other document for the 76.8 breach, as may be evidenced by any receipt, judgment, or 76.9 transcript of judgment; and 76.10 (2) the amount of any expense reasonably incurred by the 76.11 issuer in defending any action commenced by any person entitled 76.12 to recover on the bill or other document for the breach. 76.13 Sec. 19. [336.7-303] [DIVERSION; RECONSIGNMENT; CHANGE OF 76.14 INSTRUCTIONS.] 76.15 (a) Unless the bill of lading otherwise provides, a carrier 76.16 may deliver the goods to a person or destination other than that 76.17 stated in the bill or may otherwise dispose of the goods, 76.18 without liability for misdelivery, on instructions from: 76.19 (1) the holder of a negotiable bill; 76.20 (2) the consignor on a nonnegotiable bill, even if the 76.21 consignee has given contrary instructions; 76.22 (3) the consignee on a nonnegotiable bill in the absence of 76.23 contrary instructions from the consignor, if the goods have 76.24 arrived at the billed destination or if the consignee is in 76.25 possession of the tangible bill or in control of the electronic 76.26 bill; or 76.27 (4) the consignee on a nonnegotiable bill, if the consignee 76.28 is entitled as against the consignor to dispose of the goods. 76.29 (b) Unless instructions described in subsection (a) are 76.30 included in a negotiable bill of lading, a person to which the 76.31 bill is duly negotiated may hold the bailee according to the 76.32 original terms. 76.33 Sec. 20. [336.7-304] [TANGIBLE BILLS OF LADING IN A SET.] 76.34 (a) Except as customary in international transportation, a 76.35 tangible bill of lading may not be issued in a set of parts. 76.36 The issuer is liable for damages caused by violation of this 77.1 subsection. 77.2 (b) If a tangible bill of lading is lawfully issued in a 77.3 set of parts, each of which contains an identification code and 77.4 is expressed to be valid only if the goods have not been 77.5 delivered against any other part, the whole of the parts 77.6 constitutes one bill. 77.7 (c) If a tangible negotiable bill of lading is lawfully 77.8 issued in a set of parts and different parts are negotiated to 77.9 different persons, the title of the holder to which the first 77.10 due negotiation is made prevails as to both the document of 77.11 title and the goods even if any later holder may have received 77.12 the goods from the carrier in good faith and discharged the 77.13 carrier's obligation by surrendering its part. 77.14 (d) A person that negotiates or transfers a single part of 77.15 a tangible bill of lading issued in a set is liable to holders 77.16 of that part as if it were the whole set. 77.17 (e) The bailee shall deliver in accordance with Part 4 77.18 against the first presented part of a tangible bill of lading 77.19 lawfully issued in a set. Delivery in this manner discharges 77.20 the bailee's obligation on the whole bill. 77.21 Sec. 21. [336.7-305] [DESTINATION BILLS.] 77.22 (a) Instead of issuing a bill of lading to the consignor at 77.23 the place of shipment, a carrier, at the request of the 77.24 consignor, may procure the bill to be issued at destination or 77.25 at any other place designated in the request. 77.26 (b) Upon request of any person entitled as against a 77.27 carrier to control the goods while in transit and on surrender 77.28 of possession or control of any outstanding bill of lading or 77.29 other receipt covering the goods, the issuer, subject to section 77.30 336.7-105, may procure a substitute bill to be issued at any 77.31 place designated in the request. 77.32 Sec. 22. [336.7-306] [ALTERED BILLS OF LADING.] 77.33 An unauthorized alteration or filling in of a blank in a 77.34 bill of lading leaves the bill enforceable according to its 77.35 original tenor. 77.36 Sec. 23. [336.7-307] [LIEN OF CARRIER.] 78.1 (a) A carrier has a lien on the goods covered by a bill of 78.2 lading or on the proceeds thereof in its possession for charges 78.3 after the date of the carrier's receipt of the goods for storage 78.4 or transportation, including demurrage and terminal charges, and 78.5 for expenses necessary for preservation of the goods incident to 78.6 their transportation or reasonably incurred in their sale 78.7 pursuant to law. However, against a purchaser for value of a 78.8 negotiable bill of lading, a carrier's lien is limited to 78.9 charges stated in the bill or the applicable tariffs or, if no 78.10 charges are stated, a reasonable charge. 78.11 (b) A lien for charges and expenses under subsection (a) on 78.12 goods that the carrier was required by law to receive for 78.13 transportation is effective against the consignor or any person 78.14 entitled to the goods unless the carrier had notice that the 78.15 consignor lacked authority to subject the goods to those charges 78.16 and expenses. Any other lien under subsection (a) is effective 78.17 against the consignor and any person that permitted the bailor 78.18 to have control or possession of the goods unless the carrier 78.19 had notice that the bailor lacked authority. 78.20 (c) A carrier loses its lien on any goods that it 78.21 voluntarily delivers or unjustifiably refuses to deliver. 78.22 Sec. 24. [336.7-308] [ENFORCEMENT OF CARRIER'S LIEN.] 78.23 (a) A carrier's lien on goods may be enforced by public or 78.24 private sale of the goods, in bulk or in packages, at any time 78.25 or place and on any terms that are commercially reasonable, 78.26 after notifying all persons known to claim an interest in the 78.27 goods. The notification must include a statement of the amount 78.28 due, the nature of the proposed sale, and the time and place of 78.29 any public sale. The fact that a better price could have been 78.30 obtained by a sale at a different time or in a method different 78.31 from that selected by the carrier is not of itself sufficient to 78.32 establish that the sale was not made in a commercially 78.33 reasonable manner. The carrier sells goods in a commercially 78.34 reasonable manner if the carrier sells the goods in the usual 78.35 manner in any recognized market therefor, sells at the price 78.36 current in that market at the time of the sale, or otherwise 79.1 sells in conformity with commercially reasonable practices among 79.2 dealers in the type of goods sold. A sale of more goods than 79.3 apparently necessary to be offered to ensure satisfaction of the 79.4 obligation is not commercially reasonable, except in cases 79.5 covered by the preceding sentence. 79.6 (b) Before any sale pursuant to this section, any person 79.7 claiming a right in the goods may pay the amount necessary to 79.8 satisfy the lien and the reasonable expenses incurred in 79.9 complying with this section. In that event, the goods may not 79.10 be sold but must be retained by the carrier, subject to the 79.11 terms of the bill of lading and this article. 79.12 (c) A carrier may buy at any public sale pursuant to this 79.13 section. 79.14 (d) A purchaser in good faith of goods sold to enforce a 79.15 carrier's lien takes the goods free of any rights of persons 79.16 against which the lien was valid, despite the carrier's 79.17 noncompliance with this section. 79.18 (e) A carrier may satisfy its lien from the proceeds of any 79.19 sale pursuant to this section but shall hold the balance, if 79.20 any, for delivery on demand to any person to which the carrier 79.21 would have been bound to deliver the goods. 79.22 (f) The rights provided by this section are in addition to 79.23 all other rights allowed by law to a creditor against a debtor. 79.24 (g) A carrier's lien may be enforced pursuant to either 79.25 subsection (a) or the procedure set forth in section 79.26 336.7-210(b). 79.27 (h) A carrier is liable for damages caused by failure to 79.28 comply with the requirements for sale under this section and, in 79.29 case of willful violation, is liable for conversion. 79.30 Sec. 25. [336.7-309] [DUTY OF CARE; CONTRACTUAL LIMITATION 79.31 OF CARRIER'S LIABILITY.] 79.32 (a) A carrier that issues a bill of lading, whether 79.33 negotiable or nonnegotiable, shall exercise the degree of care 79.34 in relation to the goods which a reasonably careful person would 79.35 exercise under similar circumstances. This subsection does not 79.36 affect any statute, regulation, or rule of law that imposes 80.1 liability upon a common carrier for damages not caused by its 80.2 negligence. 80.3 (b) Damages may be limited by a term in the bill of lading 80.4 or in a transportation agreement that the carrier's liability 80.5 may not exceed a value stated in the bill or transportation 80.6 agreement if the carrier's rates are dependent upon value and 80.7 the consignor is afforded an opportunity to declare a higher 80.8 value and the consignor is advised of the opportunity. However, 80.9 such a limitation is not effective with respect to the carrier's 80.10 liability for conversion to its own use. 80.11 (c) Reasonable provisions as to the time and manner of 80.12 presenting claims and commencing actions based on the shipment 80.13 may be included in a bill of lading or a transportation 80.14 agreement. 80.15 PART 4 80.16 WAREHOUSE RECEIPTS AND BILLS OF LADING: 80.17 GENERAL OBLIGATIONS 80.18 Sec. 26. [336.7-401] [IRREGULARITIES IN ISSUE OF RECEIPT 80.19 OR BILL OR CONDUCT OF ISSUER.] 80.20 The obligations imposed by this article on an issuer apply 80.21 to a document of title even if: 80.22 (1) the document does not comply with the requirements of 80.23 this article or of any other statute, rule, or regulation 80.24 regarding its issuance, form, or content; 80.25 (2) the issuer violated laws regulating the conduct of its 80.26 business; 80.27 (3) the goods covered by the document were owned by the 80.28 bailee when the document was issued; or 80.29 (4) the person issuing the document is not a warehouse but 80.30 the document purports to be a warehouse receipt. 80.31 Sec. 27. [336.7-402] [DUPLICATE DOCUMENT OF TITLE; 80.32 OVERISSUE.] 80.33 A duplicate or any other document of title purporting to 80.34 cover goods already represented by an outstanding document of 80.35 the same issuer does not confer any right in the goods, except 80.36 as provided in the case of tangible bills of lading in a set of 81.1 parts, overissue of documents for fungible goods, substitutes 81.2 for lost, stolen, or destroyed documents, or substitute 81.3 documents issued pursuant to section 336.7-105. The issuer is 81.4 liable for damages caused by its overissue or failure to 81.5 identify a duplicate document by a conspicuous notation. 81.6 Sec. 28. [336.7-403] [OBLIGATION OF BAILEE TO DELIVER; 81.7 EXCUSE.] 81.8 (a) A bailee shall deliver the goods to a person entitled 81.9 under a document of title if the person complies with 81.10 subsections (b) and (c), unless and to the extent that the 81.11 bailee establishes any of the following: 81.12 (1) delivery of the goods to a person whose receipt was 81.13 rightful as against the claimant; 81.14 (2) damage to or delay, loss, or destruction of the goods 81.15 for which the bailee is not liable; 81.16 (3) previous sale or other disposition of the goods in 81.17 lawful enforcement of a lien or on a warehouse's lawful 81.18 termination of storage; 81.19 (4) the exercise by a seller of its right to stop delivery 81.20 pursuant to section 336.2-705 or by a lessor of its right to 81.21 stop delivery pursuant to section 336.2A-526; 81.22 (5) a diversion, reconsignment, or other disposition 81.23 pursuant to section 336.7-303; 81.24 (6) release, satisfaction, or any other personal defense 81.25 against the claimant; or 81.26 (7) any other lawful excuse. 81.27 (b) A person claiming goods covered by a document of title 81.28 shall satisfy the bailee's lien if the bailee so requests or if 81.29 the bailee is prohibited by law from delivering the goods until 81.30 the charges are paid. 81.31 (c) Unless a person claiming the goods is a person against 81.32 which the document of title does not confer a right under 81.33 section 336.7-503(a): 81.34 (1) the person claiming under a document shall surrender 81.35 possession or control of any outstanding negotiable document 81.36 covering the goods for cancellation or indication of partial 82.1 deliveries; and 82.2 (2) the bailee shall cancel the document or conspicuously 82.3 indicate in the document the partial delivery or the bailee is 82.4 liable to any person to which the document is duly negotiated. 82.5 Sec. 29. [336.7-404] [NO LIABILITY FOR GOOD-FAITH DELIVERY 82.6 PURSUANT TO DOCUMENT OF TITLE.] 82.7 A bailee that in good faith has received goods and 82.8 delivered or otherwise disposed of the goods according to the 82.9 terms of a document of title or pursuant to this article is not 82.10 liable for the goods even if: 82.11 (1) the person from which the bailee received the goods did 82.12 not have authority to procure the document or to dispose of the 82.13 goods; or 82.14 (2) the person to which the bailee delivered the goods did 82.15 not have authority to receive the goods. 82.16 PART 5 82.17 WAREHOUSE RECEIPTS AND BILLS OF LADING: 82.18 NEGOTIATION AND TRANSFER 82.19 Sec. 30. [336.7-501] [FORM OF NEGOTIATION AND REQUIREMENTS 82.20 OF DUE NEGOTIATION.] 82.21 (a) The following rules apply to a negotiable tangible 82.22 document of title: 82.23 (1) If the document's original terms run to the order of a 82.24 named person, the document is negotiated by the named person's 82.25 indorsement and delivery. After the named person's indorsement 82.26 in blank or to bearer, any person may negotiate the document by 82.27 delivery alone. 82.28 (2) If the document's original terms run to bearer, it is 82.29 negotiated by delivery alone. 82.30 (3) If the document's original terms run to the order of a 82.31 named person and it is delivered to the named person, the effect 82.32 is the same as if the document had been negotiated. 82.33 (4) Negotiation of the document after it has been indorsed 82.34 to a named person requires indorsement by the named person and 82.35 delivery. 82.36 (5) A document is duly negotiated if it is negotiated in 83.1 the manner stated in this subsection to a holder that purchases 83.2 it in good faith, without notice of any defense against or claim 83.3 to it on the part of any person, and for value, unless it is 83.4 established that the negotiation is not in the regular course of 83.5 business or financing or involves receiving the document in 83.6 settlement or payment of a monetary obligation. 83.7 (b) The following rules apply to a negotiable electronic 83.8 document of title: 83.9 (1) If the document's original terms run to the order of a 83.10 named person or to bearer, the document is negotiated by 83.11 delivery of the document to another person. Indorsement by the 83.12 named person is not required to negotiate the document. 83.13 (2) If the document's original terms run to the order of a 83.14 named person and the named person has control of the document, 83.15 the effect is the same as if the document had been negotiated. 83.16 (3) A document is duly negotiated if it is negotiated in 83.17 the manner stated in this subsection to a holder that purchases 83.18 it in good faith, without notice of any defense against or claim 83.19 to it on the part of any person, and for value, unless it is 83.20 established that the negotiation is not in the regular course of 83.21 business or financing or involves taking delivery of the 83.22 document in settlement or payment of a monetary obligation. 83.23 (c) Indorsement of a nonnegotiable document of title 83.24 neither makes it negotiable nor adds to the transferee's rights. 83.25 (d) The naming in a negotiable bill of lading of a person 83.26 to be notified of the arrival of the goods does not limit the 83.27 negotiability of the bill or constitute notice to a purchaser of 83.28 the bill of any interest of that person in the goods. 83.29 Sec. 31. [336.7-502] [RIGHTS ACQUIRED BY DUE NEGOTIATION.] 83.30 (a) Subject to sections 336.7-205 and 336.7-503, a holder 83.31 to which a negotiable document of title has been duly negotiated 83.32 acquires thereby: 83.33 (1) title to the document; 83.34 (2) title to the goods; 83.35 (3) all rights accruing under the law of agency or 83.36 estoppel, including rights to goods delivered to the bailee 84.1 after the document was issued; and 84.2 (4) the direct obligation of the issuer to hold or deliver 84.3 the goods according to the terms of the document free of any 84.4 defense or claim by the issuer except those arising under the 84.5 terms of the document or under this article, but in the case of 84.6 a delivery order, the bailee's obligation accrues only upon the 84.7 bailee's acceptance of the delivery order and the obligation 84.8 acquired by the holder is that the issuer and any indorser will 84.9 procure the acceptance of the bailee. 84.10 (b) Subject to section 336.7-503, title and rights acquired 84.11 by due negotiation are not defeated by any stoppage of the goods 84.12 represented by the document of title or by surrender of the 84.13 goods by the bailee and are not impaired even if: 84.14 (1) the due negotiation or any prior due negotiation 84.15 constituted a breach of duty; 84.16 (2) any person has been deprived of possession of a 84.17 negotiable tangible document or control of a negotiable 84.18 electronic document by misrepresentation, fraud, accident, 84.19 mistake, duress, loss, theft, or conversion; or 84.20 (3) a previous sale or other transfer of the goods or 84.21 document has been made to a third person. 84.22 Sec. 32. [336.7-503] [DOCUMENT OF TITLE TO GOODS DEFEATED 84.23 IN CERTAIN CASES.] 84.24 (a) A document of title confers no right in goods against a 84.25 person that before issuance of the document had a legal interest 84.26 or a perfected security interest in the goods and that did not: 84.27 (1) deliver or entrust the goods or any document of title 84.28 covering the goods to the bailor or the bailor's nominee with: 84.29 (A) actual or apparent authority to ship, store, or sell; 84.30 (B) power to obtain delivery under section 336.7-403; or 84.31 (C) power of disposition under section 336.2-403, 84.32 336.2A-304(2), 336.2A-305(2), 336.9-320, or 336.9-321(c) or 84.33 other statute or rule of law; or 84.34 (2) acquiesce in the procurement by the bailor or its 84.35 nominee of any document. 84.36 (b) Title to goods based upon an unaccepted delivery order 85.1 is subject to the rights of any person to which a negotiable 85.2 warehouse receipt or bill of lading covering the goods has been 85.3 duly negotiated. That title may be defeated under section 85.4 336.7-504 to the same extent as the rights of the issuer or a 85.5 transferee from the issuer. 85.6 (c) Title to goods based upon a bill of lading issued to a 85.7 freight forwarder is subject to the rights of any person to 85.8 which a bill issued by the freight forwarder is duly 85.9 negotiated. However, delivery by the carrier in accordance with 85.10 Part 4 pursuant to its own bill of lading discharges the 85.11 carrier's obligation to deliver. 85.12 Sec. 33. [336.7-504] [RIGHTS ACQUIRED IN ABSENCE OF DUE 85.13 NEGOTIATION; EFFECT OF DIVERSION; STOPPAGE OF DELIVERY.] 85.14 (a) A transferee of a document of title, whether negotiable 85.15 or nonnegotiable, to which the document has been delivered but 85.16 not duly negotiated, acquires the title and rights that its 85.17 transferor had or had actual authority to convey. 85.18 (b) In the case of a transfer of a nonnegotiable document 85.19 of title, until but not after the bailee receives notice of the 85.20 transfer, the rights of the transferee may be defeated: 85.21 (1) by those creditors of the transferor which could treat 85.22 the transfer as void under section 336.2-402 or 336.2A-308; 85.23 (2) by a buyer from the transferor in ordinary course of 85.24 business if the bailee has delivered the goods to the buyer or 85.25 received notification of the buyer's rights; 85.26 (3) by a lessee from the transferor in ordinary course of 85.27 business if the bailee has delivered the goods to the lessee or 85.28 received notification of the lessee's rights; or 85.29 (4) as against the bailee, by good-faith dealings of the 85.30 bailee with the transferor. 85.31 (c) A diversion or other change of shipping instructions by 85.32 the consignor in a nonnegotiable bill of lading which causes the 85.33 bailee not to deliver the goods to the consignee defeats the 85.34 consignee's title to the goods if the goods have been delivered 85.35 to a buyer in ordinary course of business or a lessee in 85.36 ordinary course of business and, in any event, defeats the 86.1 consignee's rights against the bailee. 86.2 (d) Delivery of the goods pursuant to a nonnegotiable 86.3 document of title may be stopped by a seller under section 86.4 336.2-705 or a lessor under section 336.2A-526, subject to the 86.5 requirements of due notification in those sections. A bailee 86.6 that honors the seller's or lessor's instructions is entitled to 86.7 be indemnified by the seller or lessor against any resulting 86.8 loss or expense. 86.9 Sec. 34. [336.7-505] [INDORSER NOT GUARANTOR FOR OTHER 86.10 PARTIES.] 86.11 The indorsement of a tangible document of title issued by a 86.12 bailee does not make the indorser liable for any default by the 86.13 bailee or previous indorsers. 86.14 Sec. 35. [336.7-506] [DELIVERY WITHOUT INDORSEMENT: RIGHT 86.15 TO COMPEL INDORSEMENT.] 86.16 The transferee of a negotiable tangible document of title 86.17 has a specifically enforceable right to have its transferor 86.18 supply any necessary indorsement, but the transfer becomes a 86.19 negotiation only as of the time the indorsement is supplied. 86.20 Sec. 36. [336.7-507] [WARRANTIES ON NEGOTIATION OR 86.21 DELIVERY OF DOCUMENT OF TITLE.] 86.22 If a person negotiates or delivers a document of title for 86.23 value, otherwise than as a mere intermediary under section 86.24 336.7-508, unless otherwise agreed, the transferor, in addition 86.25 to any warranty made in selling or leasing the goods, warrants 86.26 to its immediate purchaser only that: 86.27 (1) the document is genuine; 86.28 (2) the transferor does not have knowledge of any fact that 86.29 would impair the document's validity or worth; and 86.30 (3) the negotiation or delivery is rightful and fully 86.31 effective with respect to the title to the document and the 86.32 goods it represents. 86.33 Sec. 37. [336.7-508] [WARRANTIES OF COLLECTING BANK AS TO 86.34 DOCUMENTS OF TITLE.] 86.35 A collecting bank or other intermediary known to be 86.36 entrusted with documents of title on behalf of another or with 87.1 collection of a draft or other claim against delivery of 87.2 documents warrants by the delivery of the documents only its own 87.3 good faith and authority even if the collecting bank or other 87.4 intermediary has purchased or made advances against the claim or 87.5 draft to be collected. 87.6 Sec. 38. [336.7-509] [ADEQUATE COMPLIANCE WITH COMMERCIAL 87.7 CONTRACT.] 87.8 Whether a document of title is adequate to fulfill the 87.9 obligations of a contract for sale, a contract for lease, or the 87.10 conditions of a letter of credit is determined by article 2, 2A, 87.11 or 5. 87.12 PART 6 87.13 WAREHOUSE RECEIPTS AND BILLS OF LADING: 87.14 MISCELLANEOUS PROVISIONS 87.15 Sec. 39. [336.7-601] [LOST, STOLEN, OR DESTROYED DOCUMENTS 87.16 OF TITLE.] 87.17 (a) If a document of title is lost, stolen, or destroyed, a 87.18 court may order delivery of the goods or issuance of a 87.19 substitute document and the bailee may without liability to any 87.20 person comply with the order. If the document was negotiable, a 87.21 court may not order delivery of the goods or issuance of a 87.22 substitute document without the claimant's posting security 87.23 unless it finds that any person that may suffer loss as a result 87.24 of nonsurrender of possession or control of the document is 87.25 adequately protected against the loss. If the document was 87.26 nonnegotiable, the court may require security. The court may 87.27 also order payment of the bailee's reasonable costs and 87.28 attorney's fees in any action under this subsection. 87.29 (b) A bailee that, without a court order, delivers goods to 87.30 a person claiming under a missing negotiable document of title 87.31 is liable to any person injured thereby. If the delivery is not 87.32 in good faith, the bailee is liable for conversion. Delivery in 87.33 good faith is not conversion if the claimant posts security with 87.34 the bailee in an amount at least double the value of the goods 87.35 at the time of posting to indemnify any person injured by the 87.36 delivery which files a notice of claim within one year after the 88.1 delivery. 88.2 Sec. 40. [336.7-602] [JUDICIAL PROCESS AGAINST GOODS 88.3 COVERED BY NEGOTIABLE DOCUMENT OF TITLE.] 88.4 Unless a document of title was originally issued upon 88.5 delivery of the goods by a person that did not have power to 88.6 dispose of them, a lien does not attach by virtue of any 88.7 judicial process to goods in the possession of a bailee for 88.8 which a negotiable document of title is outstanding unless 88.9 possession or control of the document is first surrendered to 88.10 the bailee or the document's negotiation is enjoined. The 88.11 bailee may not be compelled to deliver the goods pursuant to 88.12 process until possession or control of the document is 88.13 surrendered to the bailee or to the court. A purchaser of the 88.14 document for value without notice of the process or injunction 88.15 takes free of the lien imposed by judicial process. 88.16 Sec. 41. [336.7-603] [CONFLICTING CLAIMS; INTERPLEADER.] 88.17 If more than one person claims title to or possession of 88.18 the goods, the bailee is excused from delivery until the bailee 88.19 has a reasonable time to ascertain the validity of the adverse 88.20 claims or to commence an action for interpleader. The bailee 88.21 may assert an interpleader either in defending an action for 88.22 nondelivery of the goods or by original action. 88.23 PART 7 88.24 MISCELLANEOUS PROVISIONS 88.25 Sec. 42. [336.7-701] [EFFECTIVE DATE.] 88.26 This act takes effect on August 1, 2004. 88.27 Sec. 43. [336.7-702] [REPEALER.] 88.28 Minnesota Statutes 2002, sections 336.7-101, 336.7-102, 88.29 336.7-103, 336.7-104, 336.7-105, 336.7-201, 336.7-202, 88.30 336.7-203, 336.7-204, 336.7-205, 336.7-206, 336.7-207, 88.31 336.7-208, 336.7-209, 336.7-210, 336.7-301, 336.7-302, 88.32 336.7-303, 336.7-304, 336.7-305, 336.7-306, 336.7-307, 88.33 336.7-308, 336.7-309, 336.7-401, 336.7-402, 336.7-403, 88.34 336.7-404, 336.7-501, 336.7-502, 336.7-503, 336.7-504, 88.35 336.7-505, 336.7-506, 336.7-507, 336.7-508, 336.7-509, 88.36 336.7-601, 336.7-602, 336.7-603, and 336.10-104, are repealed. 89.1 Sec. 44. [336.7-703] [APPLICABILITY.] 89.2 This act applies to a document of title that is issued or a 89.3 bailment that arises on or after the effective date of this 89.4 act. This act does not apply to a document of title that is 89.5 issued or a bailment that arises before the effective date of 89.6 this act even if the document of title or bailment would be 89.7 subject to this act if the document of title had been issued or 89.8 bailment had arisen on or after the effective date of this act. 89.9 This act does not apply to a right of action that has accrued 89.10 before the effective date of this act. 89.11 Sec. 45. [336.7-704] [SAVINGS CLAUSE.] 89.12 A document of title issued or a bailment that arises before 89.13 the effective date of this act and the rights, obligations, and 89.14 interests flowing from that document or bailment are governed by 89.15 any statute or other rule amended or repealed by this act as if 89.16 amendment or repeal had not occurred and may be terminated, 89.17 completed, consummated, or enforced under that statute or other 89.18 rule. 89.19 ARTICLE 5 89.20 UNIFORM COMMERCIAL CODE 89.21 CONFORMING CHANGES 89.22 Section 1. Minnesota Statutes 2002, section 336.2-103, is 89.23 amended to read: 89.24 336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 89.25 (1) In this article unless the context otherwise requires: 89.26 (a) "Buyer" means a person who buys or contracts to buy 89.27 goods. 89.28 (b) "Good faith" in the case of a merchant means honesty in 89.29 fact and the observance of reasonable commercial standards of 89.30 fair dealing in the trade. 89.31 (c) "Receipt" of goods means taking physical possession of 89.32 them. 89.33 (d) "Seller" means a person who sells or contracts to sell 89.34 goods. 89.35 (2) Other definitions applying to this article or to 89.36 specified parts thereof, and the sections in which they appear 90.1 are: 90.2 "Acceptance," section 336.2-606. 90.3 "Banker's credit," section 336.2-325. 90.4 "Between merchants," section 336.2-104. 90.5 "Cancellation," section 336.2-106(4). 90.6 "Commercial unit," section 336.2-105. 90.7 "Confirmed credit," section 336.2-325. 90.8 "Conforming to contract," section 336.2-106. 90.9 "Contract for sale," section 336.2-106. 90.10 "Cover," section 336.2-712. 90.11 "Entrusting," section 336.2-403. 90.12 "Financing agency," section 336.2-104. 90.13 "Future goods," section 336.2-105. 90.14 "Goods," section 336.2-105. 90.15 "Identification," section 336.2-501. 90.16 "Installment contract," section 336.2-612. 90.17 "Letter of credit," section 336.2-325. 90.18 "Lot," section 336.2-105. 90.19 "Merchant," section 336.2-104. 90.20 "Overseas," section 336.2-323. 90.21 "Person in position of seller," section 336.2-707. 90.22 "Present sale," section 336.2-106. 90.23 "Sale," section 336.2-106. 90.24 "Sale on approval," section 336.2-326. 90.25 "Sale or return," section 336.2-326. 90.26 "Termination," section 336.2-106. 90.27 (3) "Control" as provided in section 336.7-106 and the 90.28 following definitions in other articles apply to this article: 90.29 "Check," section 336.3-104. 90.30 "Consignee," section 336.7-102. 90.31 "Consignor," section 336.7-102. 90.32 "Consumer goods," section 336.9-102. 90.33 "Dishonor," section 336.3-502. 90.34 "Draft," section 336.3-104. 90.35 (4) In addition article 1 contains general definitions and 90.36 principles of construction and interpretation applicable 91.1 throughout this article. 91.2 Sec. 2. Minnesota Statutes 2002, section 336.2-104, is 91.3 amended to read: 91.4 336.2-104 [DEFINITIONS: "MERCHANT"; "BETWEEN MERCHANTS"; 91.5 "FINANCING AGENCY".] 91.6 (1) "Merchant" means a person who deals in goods of the 91.7 kind or otherwise by occupation holds out as having knowledge or 91.8 skill peculiar to the practices or goods involved in the 91.9 transaction or to whom such knowledge or skill may be attributed 91.10 by employment of an agent or broker or other intermediary who by 91.11 occupation holds out as having such knowledge or skill. 91.12 (2) "Financing agency" means a bank, finance company or 91.13 other person who in the ordinary course of business makes 91.14 advances against goods or documents of title or who by 91.15 arrangement with either the seller or the buyer intervenes in 91.16 ordinary course to make or collect payment due or claimed under 91.17 the contract for sale, as by purchasing or paying the seller's 91.18 draft or making advances against it or by merely taking it for 91.19 collection whether or not documents of title accompany or are 91.20 associated with the draft. "Financing agency" includes also a 91.21 bank or other person who similarly intervenes between persons 91.22 who are in the position of seller and buyer in respect to the 91.23 goods (section 336.2-707). 91.24 (3) "Between merchants" means in any transaction with 91.25 respect to which both parties are chargeable with the knowledge 91.26 or skill of merchants. 91.27 Sec. 3. Minnesota Statutes 2002, section 336.2-310, is 91.28 amended to read: 91.29 336.2-310 [OPEN TIME FOR PAYMENT OR RUNNING OF CREDIT; 91.30 AUTHORITY TO SHIP UNDER RESERVATION.] 91.31 Unless otherwise agreed 91.32 (a) payment is due at the time and place at which the buyer 91.33 is to receive the goods even though the place of shipment is the 91.34 place of delivery; and 91.35 (b) if the seller is authorized to send the goods the 91.36 seller may ship them under reservation, and may tender the 92.1 documents of title, but the buyer may inspect the goods after 92.2 their arrival before payment is due unless such inspection is 92.3 inconsistent with the terms of the contract (section 336.2-513); 92.4 and 92.5 (c) if delivery is authorized and made by way of documents 92.6 of title otherwise than by subsection (b) then payment is due 92.7 regardless of where the goods are to be received (i) at the time 92.8 and place at which the buyer is to receive delivery of the 92.9 tangible documentsregardless of where the goods are to be92.10receivedor (ii) at the time the buyer is to receive delivery of 92.11 the electronic documents and at the seller's place of business 92.12 or if none, the seller's residence; and 92.13 (d) where the seller is required or authorized to ship the 92.14 goods on credit the credit period runs from the time of shipment 92.15 but postdating the invoice or delaying its dispatch will 92.16 correspondingly delay the starting of the credit period. 92.17 Sec. 4. Minnesota Statutes 2002, section 336.2-323, is 92.18 amended to read: 92.19 336.2-323 [FORM OF BILL OF LADING REQUIRED IN OVERSEAS 92.20 SHIPMENT; "OVERSEAS".] 92.21 (1) Where the contract contemplates overseas shipment and 92.22 contains a term C.I.F. or C.& F. or F.O.B. vessel, the seller 92.23 unless otherwise agreed must obtain a negotiable bill of lading 92.24 stating that the goods have been loaded on board or, in the case 92.25 of a term C.I.F. or C.& F., received for shipment. 92.26 (2) Wherein a case within subsection (1) a tangible bill of 92.27 lading has been issued in a set of parts, unless otherwise 92.28 agreed if the documents are not to be sent from abroad the buyer 92.29 may demand tender of the full set; otherwise only one part of 92.30 the bill of lading need be tendered. Even if the agreement 92.31 expressly requires a full set 92.32 (a) due tender of a single part is acceptable within the 92.33 provisions of this article on cure of improper delivery 92.34 (subsection (1) of section 336.2-508); and 92.35 (b) even though the full set is demanded, if the documents 92.36 are sent from abroad the person tendering an incomplete set may 93.1 nevertheless require payment upon furnishing an indemnity which 93.2 the buyer in good faith deems adequate. 93.3 (3) A shipment by water or by air or a contract 93.4 contemplating such shipment is "overseas" insofar as by usage of 93.5 trade or agreement it is subject to the commercial, financing or 93.6 shipping practices characteristic of international deep water 93.7 commerce. 93.8 Sec. 5. Minnesota Statutes 2002, section 336.2-401, is 93.9 amended to read: 93.10 336.2-401 [PASSING OF TITLE; RESERVATION FOR SECURITY; 93.11 LIMITED APPLICATION OF THIS SECTION.] 93.12 Each provision of this article with regard to the rights, 93.13 obligations and remedies of the seller, the buyer, purchasers or 93.14 other third parties applies irrespective of title to the goods 93.15 except where the provision refers to such title. Insofar as 93.16 situations are not covered by the other provisions of this 93.17 article and matters concerning title become material the 93.18 following rules apply: 93.19 (1) Title to goods cannot pass under a contract for sale 93.20 prior to their identification to the contract (section 93.21 336.2-501), and unless otherwise explicitly agreed the buyer 93.22 acquires by their identification a special property as limited 93.23 by this chapter. Any retention or reservation by the seller of 93.24 the title (property) in goods shipped or delivered to the buyer 93.25 is limited in effect to a reservation of a security interest. 93.26 Subject to these provisions and to the provisions of the article 93.27 on secured transactions (article 9), title to goods passes from 93.28 the seller to the buyer in any manner and on any conditions 93.29 explicitly agreed on by the parties. 93.30 (2) Unless otherwise explicitly agreed title passes to the 93.31 buyer at the time and place at which the seller completes 93.32 performance with reference to the physical delivery of the 93.33 goods, despite any reservation of a security interest and even 93.34 though a document of title is to be delivered at a different 93.35 time or place; and in particular and despite any reservation of 93.36 a security interest by the bill of lading 94.1 (a) if the contract requires or authorizes the seller to 94.2 send the goods to the buyer but does not require the seller to 94.3 deliver them at destination, title passes to the buyer at the 94.4 time and place of shipment; but 94.5 (b) if the contract requires delivery at destination, title 94.6 passes on tender there. 94.7 (3) Unless otherwise explicitly agreed where delivery is to 94.8 be made without moving the goods, 94.9 (a) if the seller is to deliver a tangible document of 94.10 title, title passes at the time when and the place where the 94.11 seller delivers such documents, and if the seller is to deliver 94.12 an electronic document of title, title passes when the seller 94.13 delivers the document; or 94.14 (b) if the goods are at the time of contracting already 94.15 identified and no documents of title are to be delivered, title 94.16 passes at the time and place of contracting. 94.17 (4) A rejection or other refusal by the buyer to receive or 94.18 retain the goods, whether or not justified, or a justified 94.19 revocation of acceptance revests title to the goods in the 94.20 seller. Such revesting occurs by operation of law and is not a 94.21 "sale." 94.22 Sec. 6. Minnesota Statutes 2002, section 336.2-503, is 94.23 amended to read: 94.24 336.2-503 [MANNER OF SELLER'S TENDER OF DELIVERY.] 94.25 (1) Tender of delivery requires that the seller put and 94.26 hold conforming goods at the buyer's disposition and give the 94.27 buyer any notification reasonably necessary to enable the buyer 94.28 to take delivery. The manner, time and place for tender are 94.29 determined by the agreement and this article, and in particular 94.30 (a) tender must be at a reasonable hour, and if it is of 94.31 goods they must be kept available for the period reasonably 94.32 necessary to enable the buyer to take possession; but 94.33 (b) unless otherwise agreed the buyer must furnish 94.34 facilities reasonably suited to the receipt of the goods. 94.35 (2) Where the case is within the next section respecting 94.36 shipment tender requires that the seller comply with its 95.1 provisions. 95.2 (3) Where the seller is required to deliver at a particular 95.3 destination tender requires that the seller comply with 95.4 subsection (1) and also in any appropriate case tender documents 95.5 as described in subsections (4) and (5) of this section. 95.6 (4) Where goods are in the possession of a bailee and are 95.7 to be delivered without being moved 95.8 (a) tender requires that the seller either tender a 95.9 negotiable document of title covering such goods or procure 95.10 acknowledgment by the bailee of the buyer's right to possession 95.11 of the goods; but 95.12 (b) tender to the buyer of a nonnegotiable document of 95.13 title or of awritten directionrecord directing to the bailee 95.14 to deliver is sufficient tender unless the buyer seasonably 95.15 objects, and except as otherwise provided in Article 9 receipt 95.16 by the bailee of notification of the buyer's rights fixes those 95.17 rights as against the bailee and all third persons; but risk of 95.18 loss of the goods and of any failure by the bailee to honor the 95.19 nonnegotiable document of title or to obey the direction remains 95.20 on the seller until the buyer has had a reasonable time to 95.21 present the document or direction, and a refusal by the bailee 95.22 to honor the document or to obey the direction defeats the 95.23 tender. 95.24 (5) Where the contract requires the seller to deliver 95.25 documents 95.26 (a) the seller must tender all such documents in correct 95.27 form, except as provided in this article with respect to bills 95.28 of lading in a set (subsection (2) of section 336.2-323); and 95.29 (b) tender through customary banking channels is sufficient 95.30 and dishonor of a draft accompanying or associated with the 95.31 documents constitutes nonacceptance or rejection. 95.32 Sec. 7. Minnesota Statutes 2002, section 336.2-505, is 95.33 amended to read: 95.34 336.2-505 [SELLER'S SHIPMENT UNDER RESERVATION.] 95.35 (1) Where the seller has identified goods to the contract 95.36 by or before shipment: 96.1 (a) The seller's procurement of a negotiable bill of 96.2 lading to the seller's own order or otherwise reserves in the 96.3 seller a security interest in the goods. The seller's 96.4 procurement of the bill to the order of a financing agency or of 96.5 the buyer indicates in addition only the seller's expectation of 96.6 transferring that interest to the person named. 96.7 (b) A nonnegotiable bill of lading to the seller or the 96.8 seller's nominee reserves possession of the goods as security 96.9 but except in a case of conditional delivery (subsection (2) of 96.10 section 336.2-507) a nonnegotiable bill of lading naming the 96.11 buyer as a consignee reserves no security interest even though 96.12 the seller retains possession or control of the bill of lading. 96.13 (2) When shipment by the seller with reservation of a 96.14 security interest is in violation of the contract for sale it 96.15 constitutes an improper contract for transportation within the 96.16 preceding section but impairs neither the rights given to the 96.17 buyer by shipment and identification of the goods to the 96.18 contract nor the seller's powers as a holder of a negotiable 96.19 document of title. 96.20 Sec. 8. Minnesota Statutes 2002, section 336.2-506, is 96.21 amended to read: 96.22 336.2-506 [RIGHTS OF FINANCING AGENCY.] 96.23 (1) A financing agency by paying or purchasing for value a 96.24 draft which relates to a shipment of goods acquires to the 96.25 extent of the payment or purchase and in addition to its own 96.26 rights under the draft and any document of title securing it any 96.27 rights of the shipper in the goods including the right to stop 96.28 delivery and the shipper's right to have the draft honored by 96.29 the buyer. 96.30 (2) The right to reimbursement of a financing agency which 96.31 has in good faith honored or purchased the draft under 96.32 commitment to or authority from the buyer is not impaired by 96.33 subsequent discovery of defects with reference to any relevant 96.34 document which was apparently regularon its face. 96.35 Sec. 9. Minnesota Statutes 2002, section 336.2-509, is 96.36 amended to read: 97.1 336.2-509 [RISK OF LOSS IN THE ABSENCE OF BREACH.] 97.2 (1) Where the contract requires or authorizes the seller to 97.3 ship the goods by carrier 97.4 (a) if it does not require the seller to deliver them at a 97.5 particular destination, the risk of loss passes to the buyer 97.6 when the goods are duly delivered to the carrier even though the 97.7 shipment is under reservation (section 336.2-505); but 97.8 (b) if it does require the seller to deliver them at a 97.9 particular destination and the goods are there duly tendered 97.10 while in the possession of the carrier, the risk of loss passes 97.11 to the buyer when the goods are there duly so tendered as to 97.12 enable the buyer to take delivery. 97.13 (2) Where the goods are held by a bailee to be delivered 97.14 without being moved, the risk of loss passes to the buyer 97.15 (a) on the buyer's receipt of possession or control of a 97.16 negotiable document of title covering the goods; or 97.17 (b) on acknowledgment by the bailee of the buyer's right to 97.18 possession of the goods; or 97.19 (c) after the buyer's receipt of possession or control of a 97.20 nonnegotiable document of title or otherwrittendirection to 97.21 deliver in a record, as provided in subsection (4) (b) of 97.22 section 336.2-503. 97.23 (3) In any case not within subsection (1) or (2), the risk 97.24 of loss passes to the buyer on receipt of the goods if the 97.25 seller is a merchant; otherwise the risk passes to the buyer on 97.26 tender of delivery. 97.27 (4) The provisions of this section are subject to contrary 97.28 agreement of the parties and to the provisions of this article 97.29 on sale on approval (section 336.2-327) and on effect of breach 97.30 on risk of loss (section 336.2-510). 97.31 Sec. 10. Minnesota Statutes 2002, section 336.2-605, is 97.32 amended to read: 97.33 336.2-605 [WAIVER OF BUYER'S OBJECTIONS BY FAILURE TO 97.34 PARTICULARIZE.] 97.35 (1) The buyer's failure to state in connection with 97.36 rejection a particular defect which is ascertainable by 98.1 reasonable inspection precludes the buyer from relying on the 98.2 unstated defect to justify rejection or to establish breach 98.3 (a) where the seller could have cured it if stated 98.4 seasonably; or 98.5 (b) between merchants when the seller has after rejection 98.6 made a request in writing for a full and final written statement 98.7 of all defects on which the buyer proposes to rely. 98.8 (2) Payment against documents made without reservation of 98.9 rights precludes recovery of the payment for defects apparenton98.10the face ofin the documents. 98.11 Sec. 11. Minnesota Statutes 2002, section 336.2-705, is 98.12 amended to read: 98.13 336.2-705 [SELLER'S STOPPAGE OF DELIVERY IN TRANSIT OR 98.14 OTHERWISE.] 98.15 (1) The seller may stop delivery of goods in the possession 98.16 of a carrier or other bailee on discovering the buyer to be 98.17 insolvent (section 336.2-702) and may stop delivery of carload, 98.18 truckload, planeload or larger shipments of express or freight 98.19 when the buyer repudiates or fails to make a payment due before 98.20 delivery or if for any other reason the seller has a right to 98.21 withhold or reclaim the goods. 98.22 (2) As against such buyer the seller may stop delivery 98.23 until 98.24 (a) receipt of the goods by the buyer; or 98.25 (b) acknowledgment to the buyer by any bailee of the goods 98.26 except a carrier that the bailee holds the goods for the buyer; 98.27 or 98.28 (c) such acknowledgment to the buyer by a carrier by 98.29 reshipment or as a warehouseoperator; or 98.30 (d) negotiation to the buyer of any negotiable document of 98.31 title covering the goods. 98.32 (3) (a) To stop delivery the seller must so notify as to 98.33 enable the bailee by reasonable diligence to prevent delivery of 98.34 the goods. 98.35 (b) After such notification the bailee must hold and 98.36 deliver the goods according to the directions of the seller but 99.1 the seller is liable to the bailee for any ensuing charges or 99.2 damages. 99.3 (c) If a negotiable document of title has been issued for 99.4 goods the bailee is not obliged to obey a notification to stop 99.5 until surrender of possession or control of the document. 99.6 (d) A carrier who has issued a nonnegotiable bill of lading 99.7 is not obliged to obey a notification to stop received from a 99.8 person other than the consignor. 99.9 Sec. 12. Minnesota Statutes 2002, section 336.2A-103, is 99.10 amended to read: 99.11 336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 99.12 (1) In this article unless the context otherwise requires: 99.13 (a) "Buyer in ordinary course of business" means a person 99.14 who in good faith and without knowledge that the sale is in 99.15 violation of the ownership rights or security interest or 99.16 leasehold interest of a third party in the goods, buys in 99.17 ordinary course from a person in the business of selling goods 99.18 of that kind but does not include a pawnbroker. "Buying" may be 99.19 for cash or by exchange of other property or on secured or 99.20 unsecured credit and includesreceivingacquiring goods or 99.21 documents of title under a preexisting contract for sale but 99.22 does not include a transfer in bulk or as security for or in 99.23 total or partial satisfaction of a money debt. 99.24 (b) "Cancellation" occurs when either party puts an end to 99.25 the lease contract for default by the other party. 99.26 (c) "Commercial unit" means a unit of goods that by 99.27 commercial usage is a single whole for purposes of lease and 99.28 division of which materially impairs its character or value on 99.29 the market or in use. A commercial unit may be a single 99.30 article, as a machine, or a set of articles, as a suite of 99.31 furniture or a line of machinery, or a quantity, as a gross or 99.32 carload, or any other unit treated in use or in the relevant 99.33 market as a single whole. 99.34 (d) "Conforming" goods or performance under a lease 99.35 contract means goods or performance that are in accordance with 99.36 the obligations under the lease contract. 100.1 (e) "Consumer lease" means a lease that a lessor regularly 100.2 engaged in the business of leasing or selling makes to a lessee 100.3 who is an individual and who takes under the lease primarily for 100.4 a personal, family, or household purpose, if the total payments 100.5 to be made under the lease contract, excluding payments for 100.6 options to renew or buy, do not exceed $25,000. 100.7 (f) "Fault" means wrongful act, omission, breach, or 100.8 default. 100.9 (g) "Finance lease" means a lease in which 100.10 (1) the lessor does not select, manufacture, or supply the 100.11 goods, 100.12 (2) the lessor acquires the goods or the right to 100.13 possession and use of the goods in connection with the lease, 100.14 and 100.15 (3) either 100.16 (i) the lessee receives a copy of the contract evidencing 100.17 the lessor's purchase of the goods or a disclaimer statement on 100.18 or before signing the lease contract, or 100.19 (ii) the lessee's approval of the contract evidencing the 100.20 lessor's purchase of the goods or a disclaimer statement is a 100.21 condition to effectiveness of the lease contract. 100.22 "Disclaimer statement" means a written statement that is 100.23 part of or separate from the lease contract that discloses all 100.24 warranties and other rights provided to the lessee by the lessor 100.25 and supplier in connection with the lease contract and informs 100.26 the lessee in a conspicuous manner that there are no warranties 100.27 or other rights provided to the lessee by the lessor and 100.28 supplier other than those disclosed in the statement. 100.29 (h) "Goods" means all things that are movable at the time 100.30 of identification to the lease contract, or are fixtures 100.31 (section 336.2A-309), but the term does not include money, 100.32 documents, instruments, accounts, chattel paper, general 100.33 intangibles, or minerals or the like, including oil and gas, 100.34 before extraction. The term also includes the unborn young of 100.35 animals. 100.36 (i) "Installment lease contract" means a lease contract 101.1 that authorizes or requires the delivery of goods in separate 101.2 lots to be separately accepted, even though the lease contract 101.3 contains a clause "each delivery is a separate lease" or its 101.4 equivalent. 101.5 (j) "Lease" means a transfer of the right to possession and 101.6 use of goods for a term in return for consideration, but a sale, 101.7 including a sale on approval or a sale or return, or retention 101.8 or creation of a security interest is not a lease. Unless the 101.9 context clearly indicates otherwise, the term includes a 101.10 sublease. 101.11 (k) "Lease agreement" means the bargain, with respect to 101.12 the lease, of the lessor and the lessee in fact as found in 101.13 their language or by implication from other circumstances 101.14 including course of dealing or usage of trade or course of 101.15 performance as provided in this article. Unless the context 101.16 clearly indicates otherwise, the term includes a sublease 101.17 agreement. 101.18 (l) "Lease contract" means the total legal obligation that 101.19 results from the lease agreement as affected by this article and 101.20 any other applicable rules of law. Unless the context clearly 101.21 indicates otherwise, the term includes a sublease contract. 101.22 (m) "Leasehold interest" means the interest of the lessor 101.23 or the lessee under a lease contract. 101.24 (n) "Lessee" means a person who acquires the right to 101.25 possession and use of goods under a lease. Unless the context 101.26 clearly indicates otherwise, the term includes a sublessee. 101.27 (o) "Lessee in ordinary course of business" means a person 101.28 who in good faith and without knowledge that the lease is in 101.29 violation of the ownership rights or security interest or 101.30 leasehold interest of a third party in the goods leases in 101.31 ordinary course from a person in the business of selling or 101.32 leasing goods of that kind but does not include a pawnbroker. 101.33 "Leasing" may be for cash or by exchange of other property or on 101.34 secured or unsecured credit and includesreceivingacquiring 101.35 goods or documents of title under a preexisting lease contract 101.36 but does not include a transfer in bulk or as security for or in 102.1 total or partial satisfaction of a money debt. 102.2 (p) "Lessor" means a person who transfers the right to 102.3 possession and use of goods under a lease. Unless the context 102.4 clearly indicates otherwise, the term includes a sublessor. 102.5 (q) "Lessor's residual interest" means the lessor's 102.6 interest in the goods after expiration, termination, or 102.7 cancellation of the lease contract. 102.8 (r) "Lien" means a charge against or interest in goods to 102.9 secure payment of a debt or performance of an obligation, but 102.10 the term does not include a security interest. 102.11 (s) "Lot" means a parcel or a single article that is the 102.12 subject matter of a separate lease or delivery, whether or not 102.13 it is sufficient to perform the lease contract. 102.14 (t) "Merchant lessee" means a lessee that is a merchant 102.15 with respect to goods of the kind subject to the lease. 102.16 (u) "Present value" means the amount as of a date certain 102.17 of one or more sums payable in the future, discounted to the 102.18 date certain. The discount is determined by the interest rate 102.19 specified by the parties if the rate was not manifestly 102.20 unreasonable at the time the transaction was entered into; 102.21 otherwise, the discount is determined by a commercially 102.22 reasonable rate that takes into account the facts and 102.23 circumstances of each case at the time the transaction was 102.24 entered into. 102.25 (v) "Purchase" includes taking by sale, lease, mortgage, 102.26 security interest, pledge, gift, or any other voluntary 102.27 transaction creating an interest in goods. 102.28 (w) "Sublease" means a lease of goods the right to 102.29 possession and use of which was acquired by the lessor as a 102.30 lessee under an existing lease. 102.31 (x) "Supplier" means a person from whom a lessor buys or 102.32 leases goods to be leased under a finance lease. 102.33 (y) "Supply contract" means a contract under which a lessor 102.34 buys or leases goods to be leased. 102.35 (z) "Termination" occurs when either party pursuant to a 102.36 power created by agreement or law puts an end to the lease 103.1 contract otherwise than for default. 103.2 (2) Other definitions applying to this article and the 103.3 sections in which they appear are: 103.4 "Accessions." Section 336.2A-310(1). 103.5 "Construction mortgage." Section 336.2A-309(1)(d). 103.6 "Encumbrance." Section 336.2A-309(1)(e). 103.7 "Fixtures." Section 336.2A-309(1)(a). 103.8 "Fixture filing." Section 336.2A-309(1)(b). 103.9 "Purchase money lease." Section 336.2A-309(1)(c). 103.10 (3) The following definitions in other articles apply to 103.11 this article: 103.12 "Account." Section 336.9-102(a)(2). 103.13 "Between merchants." Section 336.2-104(3). 103.14 "Buyer." Section 336.2-103(1)(a). 103.15 "Chattel paper." Section 336.9-102(a)(11). 103.16 "Consumer goods." Section 336.9-102(a)(23). 103.17 "Document." Section 336.9-102(a)(30). 103.18 "Entrusting." Section 336.2-403(3). 103.19 "General intangible." Section 336.9-102(a)(42). 103.20 "Good faith." Section 336.2-103(1)(b). 103.21 "Instrument." Section 336.9-102(a)(47). 103.22 "Merchant." Section 336.2-104(1). 103.23 "Mortgage." Section 336.9-102(a)(55). 103.24 "Pursuant to commitment." Section 336.9-102(a)(68). 103.25 "Receipt." Section 336.2-103(1)(c). 103.26 "Sale." Section 336.2-106(1). 103.27 "Sale on approval." Section 336.2-326. 103.28 "Sale or return." Section 336.2-326. 103.29 "Seller." Section 336.2-103(1)(d). 103.30 (4) In addition, sections 336.1-101 to 336.1-109 contain 103.31 general definitions and principles of construction and 103.32 interpretation applicable throughout this article. 103.33 Sec. 13. Minnesota Statutes 2002, section 336.2A-514, is 103.34 amended to read: 103.35 336.2A-514 [WAIVER OF LESSEE'S OBJECTIONS.] 103.36 (1) In rejecting goods, a lessee's failure to state a 104.1 particular defect that is ascertainable by reasonable inspection 104.2 precludes the lessee from relying on the defect to justify 104.3 rejection or to establish default: 104.4 (a) if, stated seasonably, the lessor or the supplier could 104.5 have cured it (section 336.2A-513); or 104.6 (b) between merchants if the lessor or the supplier after 104.7 rejection has made a request in writing for a full and final 104.8 written statement of all defects on which the lessee proposes to 104.9 rely. 104.10 (2) A lessee's failure to reserve rights when paying rent 104.11 or other consideration against documents precludes recovery of 104.12 the payment for defects apparenton the face ofin the documents. 104.13 Sec. 14. Minnesota Statutes 2002, section 336.2A-526, is 104.14 amended to read: 104.15 336.2A-526 [LESSOR'S STOPPAGE OF DELIVERY IN TRANSIT OR 104.16 OTHERWISE.] 104.17 (1) A lessor may stop delivery of goods in the possession 104.18 of a carrier or other bailee if the lessor discovers the lessee 104.19 to be insolvent and may stop delivery of carload, truckload, 104.20 planeload, or larger shipments of express or freight if the 104.21 lessee repudiates or fails to make a payment due before 104.22 delivery, whether for rent, security or otherwise under the 104.23 lease contract, or for any other reason the lessor has a right 104.24 to withhold or take possession of the goods. 104.25 (2) In pursuing its remedies under subsection (1), the 104.26 lessor may stop delivery until 104.27 (a) receipt of the goods by the lessee; 104.28 (b) acknowledgment to the lessee by any bailee of the 104.29 goods, except a carrier, that the bailee holds the goods for the 104.30 lessee; or 104.31 (c) an acknowledgment to the lessee by a carrier via 104.32 reshipment or as a warehouseoperator. 104.33 (3)(a) To stop delivery, a lessor shall so notify as to 104.34 enable the bailee by reasonable diligence to prevent delivery of 104.35 the goods. 104.36 (b) After notification, the bailee shall hold and deliver 105.1 the goods according to the directions of the lessor, but the 105.2 lessor is liable to the bailee for any ensuing charges or 105.3 damages. 105.4 (c) A carrier who has issued a nonnegotiable bill of lading 105.5 is not obliged to obey a notification to stop received from a 105.6 person other than the consignor. 105.7 Sec. 15. Minnesota Statutes 2003 Supplement, section 105.8 336.4-104, is amended to read: 105.9 336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 105.10 (a) In this article, unless the context otherwise requires: 105.11 (1) "Account" means any deposit or credit account with a 105.12 bank, including a demand, time, savings, passbook, share draft, 105.13 or like account, other than an account evidenced by a 105.14 certificate of deposit; 105.15 (2) "Afternoon" means the period of a day between noon and 105.16 midnight; 105.17 (3) "Banking day" means that part of any day, excluding 105.18 Saturday, Sunday, and holidays, on which a bank is open to the 105.19 public for carrying on substantially all of its banking 105.20 functions; 105.21 (4) "Clearinghouse" means an association of banks or other 105.22 payors regularly clearing items; 105.23 (5) "Customer" means a person having an account with a bank 105.24 or for whom a bank has agreed to collect items, including a bank 105.25 that maintains an account at another bank; 105.26 (6) "Documentary draft" means a draft to be presented for 105.27 acceptance or payment if specified documents, certificated 105.28 securities (section 336.8-102) or instructions for 105.29 uncertificated securities (section 336.8-102), or other 105.30 certificates, statements, or the like are to be received by the 105.31 drawee or other payor before acceptance or payment of the draft; 105.32 (7) "Draft" means a draft as defined in section 336.3-104 105.33 or an item, other than an instrument, that is an order; 105.34 (8) "Drawee" means a person ordered in a draft to make 105.35 payment; 105.36 (9) "Item" means an instrument or a promise or order to pay 106.1 money handled by a bank for collection or payment. The term 106.2 does not include a payment order governed by article 4A or a 106.3 credit or debit card slip; 106.4 (10) "Midnight deadline" with respect to a bank is midnight 106.5 on its next banking day following the banking day on which it 106.6 receives the relevant item or notice or from which the time for 106.7 taking action commences to run, whichever is later; 106.8 (11) "Settle" means to pay in cash, by clearinghouse 106.9 settlement, in a charge or credit or by remittance, or otherwise 106.10 as agreed. A settlement may be either provisional or final; 106.11 (12) "Suspends payments" with respect to a bank means that 106.12 it has been closed by order of the supervisory authorities, that 106.13 a public officer has been appointed to take it over, or that it 106.14 ceases or refuses to make payments in the ordinary course of 106.15 business. 106.16 (b) Other definitions applying to this article and the 106.17 sections in which they appear are: 106.18 "Agreement for electronic presentment," section 336.4-110 106.19 "Bank," section 336.4-105 106.20 "Collecting bank," section 336.4-105 106.21 "Depositary bank," section 336.4-105 106.22 "Intermediary bank," section 336.4-105 106.23 "Payor bank," section 336.4-105 106.24 "Presenting bank," section 336.4-105 106.25 "Presentment notice," section 336.4-110 106.26 (c) "Control" as provided in section 336.7-106 and the 106.27 following definitions in other articles apply to this article: 106.28 "Acceptance," section 336.3-409 106.29 "Alteration," section 336.3-407 106.30 "Cashier's check," section 336.3-104 106.31 "Certificate of deposit," section 336.3-104 106.32 "Certified check," section 336.3-409 106.33 "Check," section 336.3-104 106.34 "Good faith," section 336.3-103 106.35 "Holder in due course," section 336.3-302 106.36 "Instrument," section 336.3-104 107.1 "Notice of dishonor," section 336.3-503 107.2 "Order," section 336.3-103 107.3 "Ordinary care," section 336.3-103 107.4 "Person entitled to enforce," section 336.3-301 107.5 "Presentment," section 336.3-501 107.6 "Promise," section 336.3-103 107.7 "Prove," section 336.3-103 107.8 "Record," section 336.3-103 107.9 "Remotely-created item," section 336.3-103 107.10 "Teller's check," section 336.3-104 107.11 "Unauthorized signature," section 336.3-403 107.12 (d) In addition, article 1 contains general definitions and 107.13 principles of construction and interpretation applicable 107.14 throughout this article. 107.15 Sec. 16. Minnesota Statutes 2002, section 336.4-210, is 107.16 amended to read: 107.17 336.4-210 [SECURITY INTEREST OF COLLECTING BANK IN ITEMS, 107.18 ACCOMPANYING DOCUMENTS, AND PROCEEDS.] 107.19 (a) A collecting bank has a security interest in an item 107.20 and any accompanying documents or the proceeds of either: 107.21 (1) in case of an item deposited in an account, to the 107.22 extent to which credit given for the item has been withdrawn or 107.23 applied; 107.24 (2) in case of an item for which it has given credit 107.25 available for withdrawal as of right, to the extent of the 107.26 credit given, whether or not the credit is drawn upon or there 107.27 is a right of chargeback; or 107.28 (3) if it makes an advance on or against the item. 107.29 (b) If credit given for several items received at one time 107.30 or pursuant to a single agreement is withdrawn or applied in 107.31 part, the security interest remains upon all the items, any 107.32 accompanying documents or the proceeds of either. For the 107.33 purpose of this section, credits first given are first withdrawn. 107.34 (c) Receipt by a collecting bank of a final settlement for 107.35 an item is a realization on its security interest in the item, 107.36 accompanying documents, and proceeds. So long as the bank does 108.1 not receive final settlement for the item or give up possession 108.2 of the item or possession or control of the accompanying 108.3 documents for purposes other than collection, the security 108.4 interest continues to that extent and is subject to article 9, 108.5 but: 108.6 (1) no security agreement is necessary to make the security 108.7 interest enforceable (section 336.9-203(b)(3)(A)); 108.8 (2) no filing is required to perfect the security interest; 108.9 and 108.10 (3) the security interest has priority over conflicting 108.11 perfected security interests in the item, accompanying 108.12 documents, or proceeds. 108.13 Sec. 17. Minnesota Statutes 2002, section 336.8-103, is 108.14 amended to read: 108.15 336.8-103 [RULES FOR DETERMINING WHETHER CERTAIN 108.16 OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.] 108.17 (a) A share or similar equity interest issued by a 108.18 corporation, business trust, joint stock company, or similar 108.19 entity is a security. 108.20 (b) An "investment company security" is a security. 108.21 "Investment company security" means a share or similar equity 108.22 interest issued by an entity that is registered as an investment 108.23 company under the federal investment company laws, an interest 108.24 in a unit investment trust that is so registered, or a 108.25 face-amount certificate issued by a face-amount certificate 108.26 company that is so registered. Investment company security does 108.27 not include an insurance policy or endowment policy or annuity 108.28 contract issued by an insurance company. 108.29 (c) An interest in a partnership or limited liability 108.30 company is a general intangible and is not a security or a 108.31 financial asset, except as follows: 108.32 (1) An interest in a partnership or limited liability 108.33 company is a security and is not a general intangible if it is 108.34 dealt in or traded on a securities exchange or in a securities 108.35 market, its terms expressly provide that it is a security 108.36 governed by this article, or it is an investment company 109.1 security. 109.2 (2) An interest in a partnership or limited liability 109.3 company is a financial asset and is not a general intangible if 109.4 it is held in a securities account. 109.5 (d) A writing that is a security certificate is governed by 109.6 this article and not by article 3, even though it also meets the 109.7 requirements of that article. However, a negotiable instrument 109.8 governed by article 3 is a financial asset if it is held in a 109.9 securities account. 109.10 (e) An option or similar obligation issued by a clearing 109.11 corporation to its participants is not a security, but is a 109.12 financial asset. 109.13 (f) A commodity contract, as defined in section 109.14 336.9-102(a)(15), is not a security or a financial asset. 109.15 (g) A document of title is not a financial asset unless 109.16 section 336.8-102(a)(9)(iii) applies. 109.17 Sec. 18. Minnesota Statutes 2002, section 336.9-102, is 109.18 amended to read: 109.19 336.9-102 [DEFINITIONS AND INDEX OF DEFINITIONS.] 109.20 (a) [DEFINITIONS.] In this article: 109.21 (1) "Accession" means goods that are physically united with 109.22 other goods in such a manner that the identity of the original 109.23 goods is not lost. 109.24 (2) "Account", except as used in "account for", means a 109.25 right to payment of a monetary obligation, whether or not earned 109.26 by performance, (i) for property that has been or is to be sold, 109.27 leased, licensed, assigned, or otherwise disposed of, (ii) for 109.28 services rendered or to be rendered, (iii) for a policy of 109.29 insurance issued or to be issued, (iv) for a secondary 109.30 obligation incurred or to be incurred, (v) for energy provided 109.31 or to be provided, (vi) for the use or hire of a vessel under a 109.32 charter or other contract, (vii) arising out of the use of a 109.33 credit or charge card or information contained on or for use 109.34 with the card, or (viii) as winnings in a lottery or other game 109.35 of chance operated or sponsored by a state, governmental unit of 109.36 a state, or person licensed or authorized to operate the game by 110.1 a state or governmental unit of a state. The term includes 110.2 health-care-insurance receivables. The term does not include (i) 110.3 rights to payment evidenced by chattel paper or an instrument, 110.4 (ii) commercial tort claims, (iii) deposit accounts, (iv) 110.5 investment property, (v) letter of credit rights or letters of 110.6 credit, or (vi) rights to payment for money or funds advanced or 110.7 sold, other than rights arising out of the use of a credit or 110.8 charge card or information contained on or for use with the card. 110.9 (3) "Account debtor" means a person obligated on an 110.10 account, chattel paper, or general intangible. The term does 110.11 not include persons obligated to pay a negotiable instrument, 110.12 even if the instrument constitutes part of chattel paper. 110.13 (4) "Accounting", except as used in "accounting for", means 110.14 a record: 110.15 (A) authenticated by a secured party; 110.16 (B) indicating the aggregate unpaid secured obligations as 110.17 of a date not more than 35 days earlier or 35 days later than 110.18 the date of the record; and 110.19 (C) identifying the components of the obligations in 110.20 reasonable detail. 110.21 (5) "Agricultural lien" means an interest, other than a 110.22 security interest, in farm products: 110.23 (A) which secures payment or performance of an obligation 110.24 for: 110.25 (i) goods or services furnished in connection with a 110.26 debtor's farming operation; or 110.27 (ii) rent on real property leased by a debtor in connection 110.28 with its farming operation; 110.29 (B) which is created by statute in favor of a person that: 110.30 (i) in the ordinary course of its business furnished goods 110.31 or services to a debtor in connection with a debtor's farming 110.32 operation; or 110.33 (ii) leased real property to a debtor in connection with 110.34 the debtor's farming operation; and 110.35 (C) whose effectiveness does not depend on the person's 110.36 possession of the personal property. 111.1 (6) "As-extracted collateral" means: 111.2 (A) oil, gas, or other minerals that are subject to a 111.3 security interest that: 111.4 (i) is created by a debtor having an interest in the 111.5 minerals before extraction; and 111.6 (ii) attaches to the minerals as extracted; or 111.7 (B) accounts arising out of the sale at the wellhead or 111.8 minehead of oil, gas, or other minerals in which the debtor had 111.9 an interest before extraction. 111.10 (7) "Authenticate" means: 111.11 (A) to sign; or 111.12 (B) to execute or otherwise adopt a symbol, or encrypt or 111.13 similarly process a record in whole or in part, with the present 111.14 intent of the authenticating person to identify the person and 111.15 adopt or accept a record. 111.16 (8) "Bank" means an organization that is engaged in the 111.17 business of banking. The term includes savings banks, savings 111.18 and loan associations, credit unions, and trust companies. 111.19 (9) "Cash proceeds" means proceeds that are money, checks, 111.20 deposit accounts, or the like. 111.21 (10) "Certificate of title" means a certificate of title 111.22 with respect to which a statute provides for the security 111.23 interest in question to be indicated on the certificate as a 111.24 condition or result of the security interest's obtaining 111.25 priority over the rights of a lien creditor with respect to the 111.26 collateral. 111.27 (11) "Chattel paper" means a record or records that 111.28 evidence both a monetary obligation and a security interest in 111.29 specific goods, a security interest in specific goods and 111.30 software used in the goods, a security interest in specific 111.31 goods and license of software used in the goods, a lease of 111.32 specific goods, or a lease of specific goods and license of 111.33 software used in the goods. In this paragraph, "monetary 111.34 obligation" means a monetary obligation secured by the goods or 111.35 owed under a lease of the goods and includes a monetary 111.36 obligation with respect to software used in the goods. The term 112.1 does not include (i) charters or other contracts involving the 112.2 use or hire of a vessel or (ii) records that evidence a right to 112.3 payment arising out of the use of a credit or charge card or 112.4 information contained on or for use with the card. If a 112.5 transaction is evidenced by records that include an instrument 112.6 or series of instruments, the group of records taken together 112.7 constitutes chattel paper. 112.8 (12) "Collateral" means the property subject to a security 112.9 interest or agricultural lien. The term includes: 112.10 (A) proceeds to which a security interest attaches; 112.11 (B) accounts, chattel paper, payment intangibles, and 112.12 promissory notes that have been sold; and 112.13 (C) goods that are the subject of a consignment. 112.14 (13) "Commercial tort claim" means a claim arising in tort 112.15 with respect to which: 112.16 (A) the claimant is an organization; or 112.17 (B) the claimant is an individual and the claim: 112.18 (i) arose in the course of the claimant's business or 112.19 profession; and 112.20 (ii) does not include damages arising out of personal 112.21 injury to or the death of an individual. 112.22 (14) "Commodity account" means an account maintained by a 112.23 commodity intermediary in which a commodity contract is carried 112.24 for a commodity customer. 112.25 (15) "Commodity contract" means a commodity futures 112.26 contract, an option on a commodity futures contract, a commodity 112.27 option, or another contract if the contract or option is: 112.28 (A) traded on or subject to the rules of a board of trade 112.29 that has been designated as a contract market for such a 112.30 contract pursuant to federal commodities law; or 112.31 (B) traded on a foreign commodity board of trade, exchange, 112.32 or market, and is carried on the books of a commodity 112.33 intermediary for a commodity customer. 112.34 (16) "Commodity customer" means a person for which a 112.35 commodity intermediary carries a commodity contract on its books. 112.36 (17) "Commodity intermediary" means a person that: 113.1 (A) is registered as a futures commission merchant under 113.2 federal commodities law; or 113.3 (B) in the ordinary course of its business provides 113.4 clearance or settlement services for a board of trade that has 113.5 been designated as a contract market pursuant to federal 113.6 commodities law. 113.7 (18) "Communicate" means: 113.8 (A) to send a written or other tangible record; 113.9 (B) to transmit a record by any means agreed upon by the 113.10 persons sending and receiving the record; or 113.11 (C) in the case of transmission of a record to or by a 113.12 filing office, to transmit a record by any means prescribed by 113.13 filing office rule. 113.14 (19) "Consignee" means a merchant to which goods are 113.15 delivered in a consignment. 113.16 (20) "Consignment" means a transaction, regardless of its 113.17 form, in which a person delivers goods to a merchant for the 113.18 purpose of sale and: 113.19 (A) the merchant: 113.20 (i) deals in goods of that kind under a name other than the 113.21 name of the person making delivery; 113.22 (ii) is not an auctioneer; and 113.23 (iii) is not generally known by its creditors to be 113.24 substantially engaged in selling the goods of others; 113.25 (B) with respect to each delivery, the aggregate value of 113.26 the goods is $1,000 or more at the time of delivery; 113.27 (C) the goods are not consumer goods immediately before 113.28 delivery; and 113.29 (D) the transaction does not create a security interest 113.30 that secures an obligation. 113.31 (21) "Consignor" means a person that delivers goods to a 113.32 consignee in a consignment. 113.33 (22) "Consumer debtor" means a debtor in a consumer 113.34 transaction. 113.35 (23) "Consumer goods" means goods that are used or bought 113.36 for use primarily for personal, family, or household purposes. 114.1 (24) "Consumer goods transaction" means a consumer 114.2 transaction in which: 114.3 (A) an individual incurs an obligation primarily for 114.4 personal, family, or household purposes; and 114.5 (B) a security interest in consumer goods secures the 114.6 obligation. 114.7 (25) "Consumer obligor" means an obligor who is an 114.8 individual and who incurred the obligation as part of a 114.9 transaction entered into primarily for personal, family, or 114.10 household purposes. 114.11 (26) "Consumer transaction" means a transaction in which (i) 114.12 an individual incurs an obligation primarily for personal, 114.13 family, or household purposes, (ii) a security interest secures 114.14 the obligation, and (iii) the collateral is held or acquired 114.15 primarily for personal, family, or household purposes. The term 114.16 includes consumer goods transactions. 114.17 (27) "Continuation statement" means an amendment of a 114.18 financing statement which: 114.19 (A) identifies, by its file number, the initial financing 114.20 statement to which it relates; and 114.21 (B) indicates that it is a continuation statement for, or 114.22 that it is filed to continue the effectiveness of, the 114.23 identified financing statement. 114.24 (28) "Debtor" means: 114.25 (A) a person having an interest, other than a security 114.26 interest or other lien, in the collateral, whether or not the 114.27 person is an obligor; 114.28 (B) a seller of accounts, chattel paper, payment 114.29 intangibles, or promissory notes; or 114.30 (C) a consignee. 114.31 (29) "Deposit account" means a demand, time, savings, 114.32 passbook, or similar account maintained with a bank. The term 114.33 does not include investment property or accounts evidenced by an 114.34 instrument. 114.35 (30) "Document" means a document of title or a receipt of 114.36 the type described in section336.7-201(2)336.7-201(b). 115.1 (31) "Electronic chattel paper" means chattel paper 115.2 evidenced by a record or records consisting of information 115.3 stored in an electronic medium. 115.4 (32) "Encumbrance" means a right, other than an ownership 115.5 interest, in real property. The term includes mortgages and 115.6 other liens on real property. 115.7 (33) "Equipment" means goods other than inventory, farm 115.8 products, or consumer goods. 115.9 (34) "Farm products" means goods, other than standing 115.10 timber, with respect to which the debtor is engaged in a farming 115.11 operation and which are: 115.12 (A) crops grown, growing, or to be grown, including: 115.13 (i) crops produced on trees, vines, and bushes; and 115.14 (ii) aquatic goods produced in aquacultural operations; 115.15 (B) livestock, born or unborn, including aquatic goods 115.16 produced in aquacultural operations; 115.17 (C) supplies used or produced in a farming operation; or 115.18 (D) products of crops or livestock in their unmanufactured 115.19 states. 115.20 (35) "Farming operation" means raising, cultivating, 115.21 propagating, fattening, grazing, or any other farming, 115.22 livestock, or aquacultural operation. 115.23 (36) "File number" means the number assigned to an initial 115.24 financing statement pursuant to section 336.9-519(a). 115.25 (37) "Filing office" means an office designated in section 115.26 336.9-501 as the place to file a financing statement. 115.27 (38) "Filing office rule" means a rule adopted pursuant to 115.28 Laws 2000, chapter 399, article 1, section 139. 115.29 (39) "Financing statement" means a record or records 115.30 composed of an initial financing statement and any filed record 115.31 relating to the initial financing statement. 115.32 (40) "Fixture filing" means the filing of a financing 115.33 statement covering goods that are or are to become fixtures and 115.34 satisfying section 336.9-502(a) and (b). The term includes the 115.35 filing of a financing statement covering goods of a transmitting 115.36 utility which are or are to become fixtures. 116.1 (41) "Fixtures" means goods that have become so related to 116.2 particular real property that an interest in them arises under 116.3 real property law. 116.4 (42) "General intangible" means any personal property, 116.5 including things in action, other than accounts, chattel paper, 116.6 commercial tort claims, deposit accounts, documents, goods, 116.7 instruments, investment property, letter of credit rights, 116.8 letters of credit, money, and oil, gas, or other minerals before 116.9 extraction. The term includes payment intangibles and software. 116.10 (43) "Good faith" means honesty in fact and the observance 116.11 of reasonable commercial standards of fair dealing. 116.12 (44) "Goods" means all things that are movable when a 116.13 security interest attaches. The term includes (i) fixtures, 116.14 (ii) standing timber that is to be cut and removed under a 116.15 conveyance or contract for sale, (iii) the unborn young of 116.16 animals, (iv) crops grown, growing, or to be grown, even if the 116.17 crops are produced on trees, vines, or bushes, and (v) 116.18 manufactured homes. The term also includes a computer program 116.19 embedded in goods and any supporting information provided in 116.20 connection with a transaction relating to the program if the 116.21 program is associated with the goods in such a manner that it 116.22 customarily is considered part of the goods, or by becoming the 116.23 owner of the goods, a person acquires a right to use the program 116.24 in connection with the goods. The term does not include a 116.25 computer program embedded in goods that consist solely of the 116.26 medium in which the program is embedded. The term also does not 116.27 include accounts, chattel paper, commercial tort claims, deposit 116.28 accounts, documents, general intangibles, instruments, 116.29 investment property, letter of credit rights, letters of credit, 116.30 money, or oil, gas, or other minerals before extraction. 116.31 (45) "Governmental unit" means a subdivision, agency, 116.32 department, county, parish, municipality, or other unit of the 116.33 government of the United States, a state, or a foreign country. 116.34 The term includes an organization having a separate corporate 116.35 existence if the organization is eligible to issue debt on which 116.36 interest is exempt from income taxation under the laws of the 117.1 United States. 117.2 (46) "Health-care-insurance receivable" means an interest 117.3 in or claim under a policy of insurance which is a right to 117.4 payment of a monetary obligation for health-care goods or 117.5 services provided. 117.6 (47) "Instrument" means a negotiable instrument or any 117.7 other writing that evidences a right to the payment of a 117.8 monetary obligation, is not itself a security agreement or 117.9 lease, and is of a type that in ordinary course of business is 117.10 transferred by delivery with any necessary endorsement or 117.11 assignment. The term does not include (i) investment property, 117.12 (ii) letters of credit, or (iii) writings that evidence a right 117.13 to payment arising out of the use of a credit or charge card or 117.14 information contained on or for use with the card. 117.15 (48) "Inventory" means goods, other than farm products, 117.16 which: 117.17 (A) are leased by a person as lessor; 117.18 (B) are held by a person for sale or lease or to be 117.19 furnished under a contract of service; 117.20 (C) are furnished by a person under a contract of service; 117.21 or 117.22 (D) consist of raw materials, work in process, or materials 117.23 used or consumed in a business. 117.24 (49) "Investment property" means a security, whether 117.25 certificated or uncertificated, security entitlement, securities 117.26 account, commodity contract, or commodity account. 117.27 (50) "Jurisdiction of organization", with respect to a 117.28 registered organization, means the jurisdiction under whose law 117.29 the organization is organized. 117.30 (51) "Letter of credit right" means a right to payment or 117.31 performance under a letter of credit, whether or not the 117.32 beneficiary has demanded or is at the time entitled to demand 117.33 payment or performance. The term does not include the right of 117.34 a beneficiary to demand payment or performance under a letter of 117.35 credit. 117.36 (52) "Lien creditor" means: 118.1 (A) a creditor that has acquired a lien on the property 118.2 involved by attachment, levy, or the like; 118.3 (B) an assignee for benefit of creditors from the time of 118.4 assignment; 118.5 (C) a trustee in bankruptcy from the date of the filing of 118.6 the petition; or 118.7 (D) a receiver in equity from the time of appointment. 118.8 (53) Unless a certificate has been issued, "manufactured 118.9 home" means a structure, transportable in one or more sections, 118.10 which, in the traveling mode, is eight body feet or more in 118.11 width or 40 body feet or more in length, or, when erected on 118.12 site, is 320 or more square feet, and which is built on a 118.13 permanent chassis and designed to be used as a dwelling with or 118.14 without a permanent foundation when connected to the required 118.15 utilities, and includes the plumbing, heating, air-conditioning, 118.16 and electrical systems contained therein. The term includes any 118.17 structure that meets all of the requirements of this paragraph 118.18 except the size requirements and with respect to which the 118.19 manufacturer voluntarily files a certification required by the 118.20 United States Secretary of Housing and Urban Development and 118.21 complies with the standards established under United States 118.22 Code, title 42. 118.23 A manufactured home within the meaning of this section does 118.24 not include a manufactured home for which a certificate of title 118.25 as defined in section 336.9-102(a)(10) has been issued. 118.26 (54) "Manufactured home transaction" means a secured 118.27 transaction: 118.28 (A) that creates a purchase-money security interest in a 118.29 manufactured home, other than a manufactured home held as 118.30 inventory; or 118.31 (B) in which a manufactured home, other than a manufactured 118.32 home held as inventory, is the primary collateral. 118.33 (55) "Mortgage" means a consensual interest in real 118.34 property, including fixtures, which secures payment or 118.35 performance of an obligation. Mortgage includes an executory 118.36 contract for the sale of real property or of an interest in real 119.1 property that entitles the purchaser to possession of the real 119.2 property. 119.3 (56) "New debtor" means a person that becomes bound as 119.4 debtor under section 336.9-203(d) by a security agreement 119.5 previously entered into by another person. 119.6 (57) "New value" means (i) money, (ii) money's worth in 119.7 property, services, or new credit, or (iii) release by a 119.8 transferee of an interest in property previously transferred to 119.9 the transferee. The term does not include an obligation 119.10 substituted for another obligation. 119.11 (58) "Noncash proceeds" means proceeds other than cash 119.12 proceeds. 119.13 (59) "Obligor" means a person that, with respect to an 119.14 obligation secured by a security interest in or an agricultural 119.15 lien on the collateral, (i) owes payment or other performance of 119.16 the obligation, (ii) has provided property other than the 119.17 collateral to secure payment or other performance of the 119.18 obligation, or (iii) is otherwise accountable in whole or in 119.19 part for payment or other performance of the obligation. The 119.20 term does not include issuers or nominated persons under a 119.21 letter of credit. 119.22 (60) "Original debtor", except as used in section 119.23 336.9-310(c), means a person that, as debtor, entered into a 119.24 security agreement to which a new debtor has become bound under 119.25 section 336.9-203(d). 119.26 (61) "Payment intangible" means a general intangible under 119.27 which the account debtor's principal obligation is a monetary 119.28 obligation. 119.29 (62) "Person related to", with respect to an individual, 119.30 means: 119.31 (A) the spouse of the individual; 119.32 (B) a brother, brother-in-law, sister, or sister-in-law of 119.33 the individual; 119.34 (C) an ancestor or lineal descendant of the individual or 119.35 the individual's spouse; or 119.36 (D) any other relative, by blood or marriage, of the 120.1 individual or the individual's spouse who shares the same home 120.2 with the individual. 120.3 (63) "Person related to", with respect to an organization, 120.4 means: 120.5 (A) a person directly or indirectly controlling, controlled 120.6 by, or under common control with the organization; 120.7 (B) an officer or director of, or a person performing 120.8 similar functions with respect to, the organization; 120.9 (C) an officer or director of, or a person performing 120.10 similar functions with respect to, a person described in 120.11 subparagraph (A); 120.12 (D) the spouse of an individual described in subparagraph 120.13 (A), (B), or (C); or 120.14 (E) an individual who is related by blood or marriage to an 120.15 individual described in subparagraph (A), (B), (C), or (D), and 120.16 shares the same home with the individual. 120.17 (64) "Proceeds", except as used in section 336.9-609(b), 120.18 means the following property: 120.19 (A) whatever is acquired upon the sale, lease, license, 120.20 exchange, or other disposition of collateral; 120.21 (B) whatever is collected on, or distributed on account of, 120.22 collateral; 120.23 (C) rights arising out of collateral; 120.24 (D) to the extent of the value of collateral, claims 120.25 arising out of the loss, nonconformity, or interference with the 120.26 use of, defects or infringement of rights in, or damage to, the 120.27 collateral; or 120.28 (E) to the extent of the value of collateral and to the 120.29 extent payable to the debtor or the secured party, insurance 120.30 payable by reason of the loss or nonconformity of, defects or 120.31 infringement of rights in, or damage to, the collateral. 120.32 (65) "Promissory note" means an instrument that evidences a 120.33 promise to pay a monetary obligation, does not evidence an order 120.34 to pay, and does not contain an acknowledgment by a bank that 120.35 the bank has received for deposit a sum of money or funds. 120.36 (66) "Proposal" means a record authenticated by a secured 121.1 party which includes the terms on which the secured party is 121.2 willing to accept collateral in full or partial satisfaction of 121.3 the obligation it secures pursuant to sections 336.9-620, 121.4 336.9-621, and 336.9-622. 121.5 (67) "Public-finance transaction" means a secured 121.6 transaction in connection with which: 121.7 (A) debt securities are issued; 121.8 (B) all or a portion of the securities issued have an 121.9 initial stated maturity of at least 20 years; and 121.10 (C) the debtor, obligor, secured party, account debtor or 121.11 other person obligated on collateral, assignor or assignee of a 121.12 secured obligation, or assignor or assignee of a security 121.13 interest is a state or a governmental unit of a state. 121.14 (68) "Pursuant to commitment", with respect to an advance 121.15 made or other value given by a secured party, means pursuant to 121.16 the secured party's obligation, whether or not a subsequent 121.17 event of default or other event not within the secured party's 121.18 control has relieved or may relieve the secured party from its 121.19 obligation. 121.20 (69) "Record", except as used in "for record", "of record", 121.21 "record or legal title", and "record owner", means information 121.22 that is inscribed on a tangible medium or which is stored in an 121.23 electronic or other medium and is retrievable in perceivable 121.24 form. 121.25 (70) "Registered organization" means an organization 121.26 organized solely under the law of a single state or the United 121.27 States and as to which the state or the United States must 121.28 maintain a public record showing the organization to have been 121.29 organized. 121.30 (71) "Secondary obligor" means an obligor to the extent 121.31 that: 121.32 (A) the obligor's obligation is secondary; or 121.33 (B) the obligor has a right of recourse with respect to an 121.34 obligation secured by collateral against the debtor, another 121.35 obligor, or property of either. 121.36 (72) "Secured party" means: 122.1 (A) a person in whose favor a security interest is created 122.2 or provided for under a security agreement, whether or not any 122.3 obligation to be secured is outstanding; 122.4 (B) a person that holds an agricultural lien; 122.5 (C) a consignor; 122.6 (D) a person to which accounts, chattel paper, payment 122.7 intangibles, or promissory notes have been sold; 122.8 (E) a trustee, indenture trustee, agent, collateral agent, 122.9 or other representative in whose favor a security interest or 122.10 agricultural lien is created or provided for; or 122.11 (F) a person that holds a security interest arising under 122.12 section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5), 122.13 336.4-210, or 336.5-118. 122.14 (73) "Security agreement" means an agreement that creates 122.15 or provides for a security interest. 122.16 (74) "Send", in connection with a record or notification, 122.17 means: 122.18 (A) to deposit in the mail, deliver for transmission, or 122.19 transmit by any other usual means of communication, with postage 122.20 or cost of transmission provided for, addressed to any address 122.21 reasonable under the circumstances; or 122.22 (B) to cause the record or notification to be received 122.23 within the time that it would have been received if properly 122.24 sent under subparagraph (A). 122.25 (75) "Software" means a computer program and any supporting 122.26 information provided in connection with a transaction relating 122.27 to the program. The term does not include a computer program 122.28 that is included in the definition of goods. 122.29 (76) "State" means a state of the United States, the 122.30 District of Columbia, Puerto Rico, the United States Virgin 122.31 Islands, or any territory or insular possession subject to the 122.32 jurisdiction of the United States. 122.33 (77) "Supporting obligation" means a letter of credit right 122.34 or secondary obligation that supports the payment or performance 122.35 of an account, chattel paper, a document, a general intangible, 122.36 an instrument, or investment property. 123.1 (78) "Tangible chattel paper" means chattel paper evidenced 123.2 by a record or records consisting of information that is 123.3 inscribed on a tangible medium. 123.4 (79) "Termination statement" means an amendment of a 123.5 financing statement which: 123.6 (A) identifies, by its file number, the initial financing 123.7 statement to which it relates; and 123.8 (B) indicates either that it is a termination statement or 123.9 that the identified financing statement is no longer effective. 123.10 (80) "Transmitting utility" means a person primarily 123.11 engaged in the business of: 123.12 (A) operating a railroad, subway, street railway, or 123.13 trolley bus; 123.14 (B) transmitting communications electrically, 123.15 electromagnetically, or by light; 123.16 (C) transmitting goods by pipeline or sewer; or 123.17 (D) transmitting or producing and transmitting electricity, 123.18 steam, gas, or water. 123.19 A person filing a financing statement under this article 123.20 and under the authority of sections 300.111 to 300.115 is a 123.21 transmitting utility for purposes of this article. 123.22 (b) [DEFINITIONS IN OTHER ARTICLES.] "Control" as provided 123.23 in section 336.7-106 and the following definitions in other 123.24 articles apply to this article: 123.25 "Applicant" Section 336.5-102 123.26 "Beneficiary" Section 336.5-102 123.27 "Broker" Section 336.8-102 123.28 "Certificated security" Section 336.8-102 123.29 "Check" Section 336.3-104 123.30 "Clearing corporation" Section 336.8-102 123.31 "Contract for sale" Section 336.2-106 123.32 "Customer" Section 336.4-104 123.33 "Entitlement holder" Section 336.8-102 123.34 "Financial asset" Section 336.8-102 123.35 "Holder in due course" Section 336.3-302 123.36 "Issuer" (with respect to a 124.1 letter of credit or 124.2 letter of credit right) Section 336.5-102 124.3 "Issuer" (with respect to 124.4 a security) Section 336.8-201 124.5 "Issuer" (with respect to 124.6 documents of title) Section 336.7-102 124.7 "Lease" Section 336.2A-103 124.8 "Lease agreement" Section 336.2A-103 124.9 "Lease contract" Section 336.2A-103 124.10 "Leasehold interest" Section 336.2A-103 124.11 "Lessee" Section 336.2A-103 124.12 "Lessee in ordinary course 124.13 of business" Section 336.2A-103 124.14 "Lessor" Section 336.2A-103 124.15 "Lessor's residual interest" Section 336.2A-103 124.16 "Letter of credit" Section 336.5-102 124.17 "Merchant" Section 336.2-104 124.18 "Negotiable instrument" Section 336.3-104 124.19 "Nominated person" Section 336.5-102 124.20 "Note" Section 336.3-104 124.21 "Proceeds of a letter of 124.22 credit" Section 336.5-114 124.23 "Prove" Section 336.3-103 124.24 "Sale" Section 336.2-106 124.25 "Securities account" Section 336.8-501 124.26 "Securities intermediary" Section 336.8-102 124.27 "Security" Section 336.8-102 124.28 "Security certificate" Section 336.8-102 124.29 "Security entitlement" Section 336.8-102 124.30 "Uncertificated security" Section 336.8-102 124.31 (c) [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1 124.32 contains general definitions and principles of construction and 124.33 interpretation applicable throughout this article. 124.34 Sec. 19. Minnesota Statutes 2002, section 336.9-203, is 124.35 amended to read: 124.36 336.9-203 [ATTACHMENT AND ENFORCEABILITY OF SECURITY 125.1 INTEREST; PROCEEDS; SUPPORTING OBLIGATIONS; FORMAL REQUISITES.] 125.2 (a) [ATTACHMENT.] A security interest attaches to 125.3 collateral when it becomes enforceable against the debtor with 125.4 respect to the collateral, unless an agreement expressly 125.5 postpones the time of attachment. 125.6 (b) [ENFORCEABILITY.] Except as otherwise provided in 125.7 subsections (c) through (i), a security interest is enforceable 125.8 against the debtor and third parties with respect to the 125.9 collateral only if: 125.10 (1) value has been given; 125.11 (2) the debtor has rights in the collateral or the power to 125.12 transfer rights in the collateral to a secured party; and 125.13 (3) one of the following conditions is met: 125.14 (A) the debtor has authenticated a security agreement that 125.15 provides a description of the collateral and, if the security 125.16 interest covers timber to be cut, a description of the land 125.17 concerned; 125.18 (B) the collateral is not a certificated security and is in 125.19 the possession of the secured party under section 336.9-313 125.20 pursuant to the debtor's security agreement; 125.21 (C) the collateral is a certificated security in registered 125.22 form and the security certificate has been delivered to the 125.23 secured party under section 336.8-301 pursuant to the debtor's 125.24 security agreement; or 125.25 (D) the collateral is deposit accounts, electronic chattel 125.26 paper, investment property,orletter of credit rights, or 125.27 electronic documents, and the secured party has control under 125.28 section 336.7-106, 336.9-104, 336.9-105, 336.9-106, or 336.9-107 125.29 pursuant to the debtor's security agreement. 125.30 (c) [OTHER UCC PROVISIONS.] Subsection (b) is subject to 125.31 section 336.4-210 on the security interest of a collecting bank, 125.32 section 336.5-118 on the security interest of a letter of credit 125.33 issuer or nominated person, section 336.9-110 on a security 125.34 interest arising under article 2 or 2A, and section 336.9-206 on 125.35 security interests in investment property. 125.36 (d) [WHEN PERSON BECOMES BOUND BY ANOTHER PERSON'S 126.1 SECURITY AGREEMENT.] A person becomes bound as debtor by a 126.2 security agreement entered into by another person if, by 126.3 operation of law other than this article or by contract: 126.4 (1) the security agreement becomes effective to create a 126.5 security interest in the person's property; or 126.6 (2) the person becomes generally obligated for the 126.7 obligations of the other person, including the obligation 126.8 secured under the security agreement, and acquires or succeeds 126.9 to all or substantially all of the assets of the other person. 126.10 (e) [EFFECT OF NEW DEBTOR BECOMING BOUND.] If a new debtor 126.11 becomes bound as debtor by a security agreement entered into by 126.12 another person: 126.13 (1) the agreement satisfies subsection (b)(3) with respect 126.14 to existing or after-acquired property of the new debtor to the 126.15 extent the property is described in the agreement; and 126.16 (2) another agreement is not necessary to make a security 126.17 interest in the property enforceable. 126.18 (f) [PROCEEDS AND SUPPORTING OBLIGATIONS.] The attachment 126.19 of a security interest in collateral gives the secured party the 126.20 rights to proceeds provided by section 336.9-315 and is also 126.21 attachment of a security interest in a supporting obligation for 126.22 the collateral. 126.23 (g) [LIEN SECURING RIGHT TO PAYMENT.] The attachment of a 126.24 security interest in a right to payment or performance secured 126.25 by a security interest or other lien on personal or real 126.26 property is also attachment of a security interest in the 126.27 security interest, mortgage, or other lien. The attachment of a 126.28 security interest in the mortgage or lien on real property does 126.29 not create an interest in real property. 126.30 (h) [SECURITY ENTITLEMENT CARRIED IN SECURITIES ACCOUNT.] 126.31 The attachment of a security interest in a securities account is 126.32 also attachment of a security interest in the security 126.33 entitlements carried in the securities account. 126.34 (i) [COMMODITY CONTRACTS CARRIED IN COMMODITY ACCOUNT.] 126.35 The attachment of a security interest in a commodity account is 126.36 also attachment of a security interest in the commodity 127.1 contracts carried in the commodity account. 127.2 Sec. 20. Minnesota Statutes 2002, section 336.9-207, is 127.3 amended to read: 127.4 336.9-207 [RIGHTS AND DUTIES OF SECURED PARTY HAVING 127.5 POSSESSION OR CONTROL OF COLLATERAL.] 127.6 (a) [DUTY OF CARE WHEN SECURED PARTY IN POSSESSION.] 127.7 Except as otherwise provided in subsection (d), a secured party 127.8 shall use reasonable care in the custody and preservation of 127.9 collateral in the secured party's possession. In the case of 127.10 chattel paper or an instrument, reasonable care includes taking 127.11 necessary steps to preserve rights against prior parties unless 127.12 otherwise agreed. 127.13 (b) [EXPENSES, RISKS, DUTIES, AND RIGHTS WHEN SECURED 127.14 PARTY IN POSSESSION.] Except as otherwise provided in subsection 127.15 (d), if a secured party has possession of collateral: 127.16 (1) reasonable expenses, including the cost of insurance 127.17 and payment of taxes or other charges incurred in the custody, 127.18 preservation, use, or operation of the collateral are chargeable 127.19 to the debtor and are secured by the collateral; 127.20 (2) the risk of accidental loss or damage is on the debtor 127.21 to the extent of a deficiency in any effective insurance 127.22 coverage; 127.23 (3) the secured party shall keep the collateral 127.24 identifiable, but fungible collateral may be commingled; and 127.25 (4) the secured party may use or operate the collateral: 127.26 (A) for the purpose of preserving the collateral or its 127.27 value; 127.28 (B) as permitted by an order of a court having competent 127.29 jurisdiction; or 127.30 (C) except in the case of consumer goods, in the manner and 127.31 to the extent agreed by the debtor. 127.32 (c) [DUTIES AND RIGHTS WHEN SECURED PARTY IN POSSESSION OR 127.33 CONTROL.] Except as otherwise provided in subsection (d), a 127.34 secured party having possession of collateral or control of 127.35 collateral under section 336.7-106, 336.9-104, 336.9-105, 127.36 336.9-106, or 336.9-107: 128.1 (1) may hold as additional security any proceeds, except 128.2 money or funds, received from the collateral; 128.3 (2) shall apply money or funds received from the collateral 128.4 to reduce the secured obligation, unless remitted to the debtor; 128.5 and 128.6 (3) may create a security interest in the collateral. 128.7 (d) [BUYER OF CERTAIN RIGHTS TO PAYMENT.] If the secured 128.8 party is a buyer of accounts, chattel paper, payment 128.9 intangibles, or promissory notes or a consignor: 128.10 (1) subsection (a) does not apply unless the secured party 128.11 is entitled under an agreement: 128.12 (A) to charge back uncollected collateral; or 128.13 (B) otherwise to full or limited recourse against the 128.14 debtor or a secondary obligor based on the nonpayment or other 128.15 default of an account debtor or other obligor on the collateral; 128.16 and 128.17 (2) subsections (b) and (c) do not apply. 128.18 Sec. 21. Minnesota Statutes 2002, section 336.9-208, is 128.19 amended to read: 128.20 336.9-208 [ADDITIONAL DUTIES OF SECURED PARTY HAVING 128.21 CONTROL OF COLLATERAL.] 128.22 (a) [APPLICABILITY OF SECTION.] This section applies to 128.23 cases in which there is no outstanding secured obligation and 128.24 the secured party is not committed to make advances, incur 128.25 obligations, or otherwise give value. 128.26 (b) [DUTIES OF SECURED PARTY AFTER RECEIVING DEMAND FROM 128.27 DEBTOR.] Within ten days after receiving an authenticated demand 128.28 by the debtor: 128.29 (1) a secured party having control of a deposit account 128.30 under section 336.9-104(a)(2) shall send to the bank with which 128.31 the deposit account is maintained an authenticated statement 128.32 that releases the bank from any further obligation to comply 128.33 with instructions originated by the secured party; 128.34 (2) a secured party having control of a deposit account 128.35 under section 336.9-104(a)(3) shall: 128.36 (A) pay the debtor the balance on deposit in the deposit 129.1 account; or 129.2 (B) transfer the balance on deposit into a deposit account 129.3 in the debtor's name; 129.4 (3) a secured party, other than a buyer, having control of 129.5 electronic chattel paper under section 336.9-105 shall: 129.6 (A) communicate the authoritative copy of the electronic 129.7 chattel paper to the debtor or its designated custodian; 129.8 (B) if the debtor designates a custodian that is the 129.9 designated custodian with which the authoritative copy of the 129.10 electronic chattel paper is maintained for the secured party, 129.11 communicate to the custodian an authenticated record releasing 129.12 the designated custodian from any further obligation to comply 129.13 with instructions originated by the secured party and 129.14 instructing the custodian to comply with instructions originated 129.15 by the debtor; and 129.16 (C) take appropriate action to enable the debtor or its 129.17 designated custodian to make copies of or revisions to the 129.18 authoritative copy which add or change an identified assignee of 129.19 the authoritative copy without the consent of the secured party; 129.20 (4) a secured party having control of investment property 129.21 under section 336.8-106(d)(2) or 336.9-106(b) shall send to the 129.22 securities intermediary or commodity intermediary with which the 129.23 security entitlement or commodity contract is maintained an 129.24 authenticated record that releases the securities intermediary 129.25 or commodity intermediary from any further obligation to comply 129.26 with entitlement orders or directions originated by the secured 129.27 party;and129.28 (5) a secured party having control of a letter of credit 129.29 right under section 336.9-107 shall send to each person having 129.30 an unfulfilled obligation to pay or deliver proceeds of the 129.31 letter of credit to the secured party an authenticated release 129.32 from any further obligation to pay or deliver proceeds of the 129.33 letter of credit to the secured party; and 129.34 (6) a secured party having control of an electronic 129.35 document shall: 129.36 (A) give control of the electronic document to the debtor 130.1 or its designated custodian; 130.2 (B) if the debtor designates a custodian that is the 130.3 designated custodian with which the authoritative copy of the 130.4 electronic document is maintained for the secured party, 130.5 communicate to the custodian an authenticated record releasing 130.6 the designated custodian from any further obligation to comply 130.7 with instructions originated by the secured party and 130.8 instructing the custodian to comply with instructions originated 130.9 by the debtor; and 130.10 (C) take appropriate action to enable the debtor or its 130.11 designated custodian to make copies of or revisions to the 130.12 authoritative copy which add or change an identified assignee of 130.13 the authoritative copy without the consent of the secured party. 130.14 Sec. 22. Minnesota Statutes 2002, section 336.9-301, is 130.15 amended to read: 130.16 336.9-301 [LAW GOVERNING PERFECTION AND PRIORITY OF 130.17 SECURITY INTERESTS.] 130.18 Except as otherwise provided in sections 336.9-303 through 130.19 336.9-306, the following rules determine the law governing 130.20 perfection, the effect of perfection or nonperfection, and the 130.21 priority of a security interest in collateral: 130.22 (1) Except as otherwise provided in this section, while a 130.23 debtor is located in a jurisdiction, the local law of that 130.24 jurisdiction governs perfection, the effect of perfection or 130.25 nonperfection, and the priority of a security interest in 130.26 collateral. 130.27 (2) While collateral is located in a jurisdiction, the 130.28 local law of that jurisdiction governs perfection, the effect of 130.29 perfection or nonperfection, and the priority of a possessory 130.30 security interest in that collateral. 130.31 (3) Except as otherwise provided in paragraph (4), while 130.32 tangible negotiable documents, goods, instruments, money, or 130.33 tangible chattel paper is located in a jurisdiction, the local 130.34 law of that jurisdiction governs: 130.35 (A) perfection of a security interest in the goods by 130.36 filing a fixture filing; 131.1 (B) perfection of a security interest in timber to be cut; 131.2 and 131.3 (C) the effect of perfection or nonperfection and the 131.4 priority of a nonpossessory security interest in the collateral. 131.5 (4) The local law of the jurisdiction in which the wellhead 131.6 or minehead is located governs perfection, the effect of 131.7 perfection or nonperfection, and the priority of a security 131.8 interest in as-extracted collateral. 131.9 Sec. 23. Minnesota Statutes 2002, section 336.9-310, is 131.10 amended to read: 131.11 336.9-310 [WHEN FILING REQUIRED TO PERFECT SECURITY 131.12 INTEREST OR AGRICULTURAL LIEN; SECURITY INTERESTS AND 131.13 AGRICULTURAL LIENS TO WHICH FILING PROVISIONS DO NOT APPLY.] 131.14 (a) [GENERAL RULE: PERFECTION BY FILING.] Except as 131.15 otherwise provided in subsection (b) and section 336.9-312(b), a 131.16 financing statement must be filed to perfect all security 131.17 interests and agricultural liens. 131.18 (b) [EXCEPTIONS: FILING NOT NECESSARY.] The filing of a 131.19 financing statement is not necessary to perfect a security 131.20 interest: 131.21 (1) that is perfected under section 336.9-308(d), (e), (f), 131.22 or (g); 131.23 (2) that is perfected under section 336.9-309 when it 131.24 attaches; 131.25 (3) in property subject to a statute, regulation, or treaty 131.26 described in section 336.9-311(a); 131.27 (4) in goods in possession of a bailee which is perfected 131.28 under section 336.9-312(d)(1) or (2); 131.29 (5) in certificated securities, documents, goods, or 131.30 instruments which is perfected without filing, control, or 131.31 possession under section 336.9-312(e), (f), or (g); 131.32 (6) in collateral in the secured party's possession under 131.33 section 336.9-313; 131.34 (7) in a certificated security which is perfected by 131.35 delivery of the security certificate to the secured party under 131.36 section 336.9-313; 132.1 (8) in deposit accounts, electronic chattel 132.2 paper, electronic documents, investment property, or letter of 132.3 credit rights which is perfected by control under section 132.4 336.9-314; 132.5 (9) in proceeds which is perfected under section 336.9-315; 132.6 or 132.7 (10) that is perfected under section 336.9-316. 132.8 (c) [ASSIGNMENT OF PERFECTED SECURITY INTEREST.] If a 132.9 secured party assigns a perfected security interest or 132.10 agricultural lien, a filing under this article is not required 132.11 to continue the perfected status of the security interest 132.12 against creditors of and transferees from the original debtor. 132.13 Sec. 24. Minnesota Statutes 2002, section 336.9-312, is 132.14 amended to read: 132.15 336.9-312 [PERFECTION OF SECURITY INTERESTS IN CHATTEL 132.16 PAPER, DEPOSIT ACCOUNTS, DOCUMENTS, GOODS COVERED BY DOCUMENTS, 132.17 INSTRUMENTS, INVESTMENT PROPERTY, LETTER OF CREDIT RIGHTS, AND 132.18 MONEY; PERFECTION BY PERMISSIVE FILING; TEMPORARY PERFECTION 132.19 WITHOUT FILING OR TRANSFER OF POSSESSION.] 132.20 (a) [PERFECTION BY FILING PERMITTED.] A security interest 132.21 in chattel paper, negotiable documents, instruments, or 132.22 investment property may be perfected by filing. 132.23 (b) [CONTROL OR POSSESSION OF CERTAIN COLLATERAL.] Except 132.24 as otherwise provided in section 336.9-315(c) and (d) for 132.25 proceeds: 132.26 (1) a security interest in a deposit account may be 132.27 perfected only by control under section 336.9-314; 132.28 (2) and except as otherwise provided in section 132.29 336.9-308(d), a security interest in a letter of credit right 132.30 may be perfected only by control under section 336.9-314; and 132.31 (3) a security interest in money may be perfected only by 132.32 the secured party's taking possession under section 336.9-313. 132.33 (c) [GOODS COVERED BY NEGOTIABLE DOCUMENT.] While goods 132.34 are in the possession of a bailee that has issued a negotiable 132.35 document covering the goods: 132.36 (1) a security interest in the goods may be perfected by 133.1 perfecting a security interest in the document; and 133.2 (2) a security interest perfected in the document has 133.3 priority over any security interest that becomes perfected in 133.4 the goods by another method during that time. 133.5 (d) [GOODS COVERED BY NONNEGOTIABLE DOCUMENT.] While goods 133.6 are in the possession of a bailee that has issued a 133.7 nonnegotiable document covering the goods, a security interest 133.8 in the goods may be perfected by: 133.9 (1) issuance of a document in the name of the secured 133.10 party; 133.11 (2) the bailee's receipt of notification of the secured 133.12 party's interest; or 133.13 (3) filing as to the goods. 133.14 (e) [TEMPORARY PERFECTION: NEW VALUE.] A security 133.15 interest in certificated securities, negotiable documents, or 133.16 instruments is perfected without filing or the taking of 133.17 possession or control for a period of 20 days from the time it 133.18 attaches to the extent that it arises for new value given under 133.19 an authenticated security agreement. 133.20 (f) [TEMPORARY PERFECTION: GOODS OR DOCUMENTS MADE 133.21 AVAILABLE TO DEBTOR.] A perfected security interest in a 133.22 negotiable document or goods in possession of a bailee, other 133.23 than one that has issued a negotiable document for the goods, 133.24 remains perfected for 20 days without filing if the secured 133.25 party makes available to the debtor the goods or documents 133.26 representing the goods for the purpose of: 133.27 (1) ultimate sale or exchange; or 133.28 (2) loading, unloading, storing, shipping, transshipping, 133.29 manufacturing, processing, or otherwise dealing with them in a 133.30 manner preliminary to their sale or exchange. 133.31 (g) [TEMPORARY PERFECTION: DELIVERY OF SECURITY 133.32 CERTIFICATE OR INSTRUMENT TO DEBTOR.] A perfected security 133.33 interest in a certificated security or instrument remains 133.34 perfected for 20 days without filing if the secured party 133.35 delivers the security certificate or instrument to the debtor 133.36 for the purpose of: 134.1 (1) ultimate sale or exchange; or 134.2 (2) presentation, collection, enforcement, renewal, or 134.3 registration of transfer. 134.4 (h) [EXPIRATION OF TEMPORARY PERFECTION.] After the 20-day 134.5 period specified in subsection (e), (f), or (g) expires, 134.6 perfection depends upon compliance with this article. 134.7 Sec. 25. Minnesota Statutes 2002, section 336.9-313, is 134.8 amended to read: 134.9 336.9-313 [WHEN POSSESSION BY OR DELIVERY TO SECURED PARTY 134.10 PERFECTS SECURITY INTEREST WITHOUT FILING.] 134.11 (a) [PERFECTION BY POSSESSION OR DELIVERY.] Except as 134.12 otherwise provided in subsection (b), a secured party may 134.13 perfect a security interest in tangible negotiable documents, 134.14 goods, instruments, money, or tangible chattel paper by taking 134.15 possession of the collateral. A secured party may perfect a 134.16 security interest in certificated securities by taking delivery 134.17 of the certificated securities under section 336.8-301. 134.18 (b) [GOODS COVERED BY CERTIFICATE OF TITLE.] With respect 134.19 to goods covered by a certificate of title issued by this state, 134.20 a secured party may perfect a security interest in the goods by 134.21 taking possession of the goods only in the circumstances 134.22 described in section 336.9-316(e). 134.23 (c) [COLLATERAL IN POSSESSION OF PERSON OTHER THAN 134.24 DEBTOR.] With respect to collateral other than certificated 134.25 securities and goods covered by a document, a secured party 134.26 takes possession of collateral in the possession of a person 134.27 other than the debtor, the secured party, or a lessee of the 134.28 collateral from the debtor in the ordinary course of the 134.29 debtor's business, when: 134.30 (1) the person in possession authenticates a record 134.31 acknowledging that it holds possession of the collateral for the 134.32 secured party's benefit; or 134.33 (2) the person takes possession of the collateral after 134.34 having authenticated a record acknowledging that it will hold 134.35 possession of collateral for the secured party's benefit. 134.36 (d) [TIME OF PERFECTION BY POSSESSION; CONTINUATION OF 135.1 PERFECTION.] If perfection of a security interest depends upon 135.2 possession of the collateral by a secured party, perfection 135.3 occurs no earlier than the time the secured party takes 135.4 possession and continues only while the secured party retains 135.5 possession. 135.6 (e) [TIME OF PERFECTION BY DELIVERY; CONTINUATION OF 135.7 PERFECTION.] A security interest in a certificated security in 135.8 registered form is perfected by delivery when delivery of the 135.9 certificated security occurs under section 336.8-301 and remains 135.10 perfected by delivery until the debtor obtains possession of the 135.11 security certificate. 135.12 (f) [ACKNOWLEDGMENT NOT REQUIRED.] A person in possession 135.13 of collateral is not required to acknowledge that it holds 135.14 possession for a secured party's benefit. 135.15 (g) [EFFECTIVENESS OF ACKNOWLEDGMENT; NO DUTIES OR 135.16 CONFIRMATION.] If a person acknowledges that it holds possession 135.17 for the secured party's benefit: 135.18 (1) the acknowledgment is effective under subsection (c) or 135.19 section 336.8-301(a), even if the acknowledgment violates the 135.20 rights of a debtor; and 135.21 (2) unless the person otherwise agrees or law other than 135.22 this article otherwise provides, the person does not owe any 135.23 duty to the secured party and is not required to confirm the 135.24 acknowledgment to another person. 135.25 (h) [SECURED PARTY'S DELIVERY TO PERSON OTHER THAN 135.26 DEBTOR.] A secured party having possession of collateral does 135.27 not relinquish possession by delivering the collateral to a 135.28 person other than the debtor or a lessee of the collateral from 135.29 the debtor in the ordinary course of the debtor's business if 135.30 the person was instructed before the delivery or is instructed 135.31 contemporaneously with the delivery: 135.32 (1) to hold possession of the collateral for the secured 135.33 party's benefit; or 135.34 (2) to redeliver the collateral to the secured party. 135.35 (i) [EFFECT OF DELIVERY UNDER SUBSECTION (H); NO DUTIES OR 135.36 CONFIRMATION.] A secured party does not relinquish possession, 136.1 even if a delivery under subsection (h) violates the rights of a 136.2 debtor. A person to which collateral is delivered under 136.3 subsection (h) does not owe any duty to the secured party and is 136.4 not required to confirm the delivery to another person unless 136.5 the person otherwise agrees or law other than this article 136.6 otherwise provides. 136.7 Sec. 26. Minnesota Statutes 2002, section 336.9-314, is 136.8 amended to read: 136.9 336.9-314 [PERFECTION BY CONTROL.] 136.10 (a) [PERFECTION BY CONTROL.] A security interest in 136.11 investment property, deposit accounts, letter of credit rights, 136.12orelectronic chattel paper, or electronic documents may be 136.13 perfected by control of the collateral under section 336.7-106, 136.14 336.9-104, 336.9-105, 336.9-106, or 336.9-107. 136.15 (b) [SPECIFIED COLLATERAL: TIME OF PERFECTION BY CONTROL; 136.16 CONTINUATION OF PERFECTION.] A security interest in deposit 136.17 accounts, electronic chattel paper,orletter of credit rights, 136.18 or electronic documents is perfected by control under section 136.19 336.7-106, 336.9-104, 336.9-105, or 336.9-107 when the secured 136.20 party obtains control and remains perfected by control only 136.21 while the secured party retains control. 136.22 (c) [INVESTMENT PROPERTY: TIME OF PERFECTION BY CONTROL; 136.23 CONTINUATION OF PERFECTION.] A security interest in investment 136.24 property is perfected by control under section 336.9-106 from 136.25 the time the secured party obtains control and remains perfected 136.26 by control until: 136.27 (1) the secured party does not have control; and 136.28 (2) one of the following occurs: 136.29 (A) if the collateral is a certificated security, the 136.30 debtor has or acquires possession of the security certificate; 136.31 (B) if the collateral is an uncertificated security, the 136.32 issuer has registered or registers the debtor as the registered 136.33 owner; or 136.34 (C) if the collateral is a security entitlement, the debtor 136.35 is or becomes the entitlement holder. 136.36 Sec. 27. Minnesota Statutes 2002, section 336.9-317, is 137.1 amended to read: 137.2 336.9-317 [INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE 137.3 OF SECURITY INTEREST OR AGRICULTURAL LIEN.] 137.4 (a) [CONFLICTING SECURITY INTERESTS AND RIGHTS OF LIEN 137.5 CREDITORS.] A security interest or agricultural lien is 137.6 subordinate to the rights of: 137.7 (1) a person entitled to priority under section 336.9-322; 137.8 and 137.9 (2) except as otherwise provided in subsection (e), a 137.10 person that becomes a lien creditor before the earlier of the 137.11 time: 137.12 (A) the security interest or agricultural lien is 137.13 perfected; or 137.14 (B) one of the conditions specified in section 137.15 336.9-203(b)(3) is met and a financing statement covering the 137.16 collateral is filed. 137.17 (b) [BUYERS THAT RECEIVE DELIVERY.] Except as otherwise 137.18 provided in subsection (e), a buyer, other than a secured party, 137.19 of tangible chattel paper, tangible documents, goods, 137.20 instruments, or a security certificate takes free of a security 137.21 interest or agricultural lien if the buyer gives value and 137.22 receives delivery of the collateral without knowledge of the 137.23 security interest or agricultural lien and before it is 137.24 perfected. 137.25 (c) [LESSEES THAT RECEIVE DELIVERY.] Except as otherwise 137.26 provided in subsection (e), a lessee of goods takes free of a 137.27 security interest or agricultural lien if the lessee gives value 137.28 and receives delivery of the collateral without knowledge of the 137.29 security interest or agricultural lien and before it is 137.30 perfected. 137.31 (d) [LICENSEES AND BUYERS OF CERTAIN COLLATERAL.] A 137.32 licensee of a general intangible or a buyer, other than a 137.33 secured party, of accounts, electronic chattel paper, electronic 137.34 documents, general intangibles, or investment property other 137.35 than a certificated security takes free of a security interest 137.36 if the licensee or buyer gives value without knowledge of the 138.1 security interest and before it is perfected. 138.2 (e) [PURCHASE-MONEY SECURITY INTEREST.] Except as 138.3 otherwise provided in sections 336.9-320 and 336.9-321, if a 138.4 person files a financing statement with respect to a 138.5 purchase-money security interest before or within 20 days after 138.6 the debtor receives delivery of the collateral, the security 138.7 interest takes priority over the rights of a buyer, lessee, or 138.8 lien creditor which arise between the time the security interest 138.9 attaches and the time of filing. 138.10 Sec. 28. Minnesota Statutes 2002, section 336.9-338, is 138.11 amended to read: 138.12 336.9-338 [PRIORITY OF SECURITY INTEREST OR AGRICULTURAL 138.13 LIEN PERFECTED BY FILED FINANCING STATEMENT PROVIDING CERTAIN 138.14 INCORRECT INFORMATION.] 138.15 If a security interest or agricultural lien is perfected by 138.16 a filed financing statement providing information described in 138.17 section 336.9-516(b)(5) which is incorrect at the time the 138.18 financing statement is filed: 138.19 (1) the security interest or agricultural lien is 138.20 subordinate to a conflicting perfected security interest in the 138.21 collateral to the extent that the holder of the conflicting 138.22 security interest gives value in reasonable reliance upon the 138.23 incorrect information; and 138.24 (2) a purchaser, other than a secured party, of the 138.25 collateral takes free of the security interest or agricultural 138.26 lien to the extent that, in reasonable reliance upon the 138.27 incorrect information, the purchaser gives value and, in the 138.28 case of tangible chattel paper, tangible documents, goods, 138.29 instruments, or a security certificate, receives delivery of the 138.30 collateral. 138.31 Sec. 29. Minnesota Statutes 2002, section 336.9-601, is 138.32 amended to read: 138.33 336.9-601 [RIGHTS AFTER DEFAULT; JUDICIAL ENFORCEMENT; 138.34 CONSIGNOR OR BUYER OF ACCOUNTS, CHATTEL PAPER, PAYMENT 138.35 INTANGIBLES, OR PROMISSORY NOTES.] 138.36 (a) [RIGHTS OF SECURED PARTY AFTER DEFAULT.] After 139.1 default, a secured party has the rights provided in this part 139.2 and, except as otherwise provided in section 336.9-602, those 139.3 provided by agreement of the parties. A secured party: 139.4 (1) may reduce a claim to judgment, foreclose, or otherwise 139.5 enforce the claim, security interest, or agricultural lien by 139.6 any available judicial procedure; and 139.7 (2) if the collateral is documents, may proceed either as 139.8 to the documents or as to the goods they cover. 139.9 (b) [RIGHTS AND DUTIES OF SECURED PARTY IN POSSESSION OR 139.10 CONTROL.] A secured party in possession of collateral or control 139.11 of collateral under section 336.7-106, 336.9-104, 336.9-105, 139.12 336.9-106, or 336.9-107 has the rights and duties provided in 139.13 section 336.9-207. 139.14 (c) [RIGHTS CUMULATIVE; SIMULTANEOUS EXERCISE.] The rights 139.15 under subsections (a) and (b) are cumulative and may be 139.16 exercised simultaneously. 139.17 (d) [RIGHTS OF DEBTOR AND OBLIGOR.] Except as otherwise 139.18 provided in subsection (g) and section 336.9-605, after default, 139.19 a debtor and an obligor have the rights provided in this part 139.20 and by agreement of the parties. 139.21 (e) [LIEN OF LEVY AFTER JUDGMENT.] If a secured party has 139.22 reduced its claim to judgment, the lien of any levy that may be 139.23 made upon the collateral by virtue of an execution based upon 139.24 the judgment relates back to the earliest of: 139.25 (1) the date of perfection of the security interest or 139.26 agricultural lien in the collateral; 139.27 (2) the date of filing a financing statement covering the 139.28 collateral; or 139.29 (3) any date specified in a statute under which the 139.30 agricultural lien was created. 139.31 (f) [EXECUTION SALE.] A sale pursuant to an execution is a 139.32 foreclosure of the security interest or agricultural lien by 139.33 judicial procedure within the meaning of this section. A 139.34 secured party may purchase at the sale and thereafter hold the 139.35 collateral free of any other requirements of this article. 139.36 (g) [CONSIGNOR OR BUYER OF CERTAIN RIGHTS TO PAYMENT.] 140.1 Except as otherwise provided in section 336.9-607(c), this part 140.2 imposes no duties upon a secured party that is a consignor or is 140.3 a buyer of accounts, chattel paper, payment intangibles, or 140.4 promissory notes. 140.5 (h) A person may not begin to enforce a security interest 140.6 in collateral that is agricultural property subject to sections 140.7 583.20 to 583.32 that has secured a debt of more than $5,000 140.8 unless: a mediation notice under subsection (i) is served on 140.9 the debtor after a condition of default has occurred in the 140.10 security agreement and a copy served on the director of the 140.11 agricultural extension service; and the debtor and creditor have 140.12 completed mediation under sections 583.20 to 583.32; or as 140.13 otherwise allowed under sections 583.20 to 583.32. 140.14 (i) A mediation notice under subsection (h) must contain 140.15 the following notice with the blanks properly filled in. 140.16 "TO: ...(Name of Debtor)... 140.17 YOU HAVE DEFAULTED ON THE ...(Debt in Default)... SECURED 140.18 BY AGRICULTURAL PROPERTY DESCRIBED AS ...(Reasonable Description 140.19 of Agricultural Property Collateral)... 140.20 AS A SECURED PARTY, ...(Name of Secured Party)... INTENDS 140.21 TO ENFORCE THE SECURITY AGREEMENT AGAINST THE AGRICULTURAL 140.22 PROPERTY DESCRIBED ABOVE BY REPOSSESSING, FORECLOSING ON, OR 140.23 OBTAINING A COURT JUDGMENT AGAINST THE PROPERTY. 140.24 YOU HAVE THE RIGHT TO HAVE THE DEBT REVIEWED FOR 140.25 MEDIATION. IF YOU REQUEST MEDIATION, A DEBT THAT IS IN DEFAULT 140.26 WILL BE MEDIATED ONLY ONCE. IF YOU DO NOT REQUEST MEDIATION, 140.27 THIS DEBT WILL NOT BE SUBJECT TO FUTURE MEDIATION IF THE SECURED 140.28 PARTY ENFORCES THE DEBT. 140.29 IF YOU PARTICIPATE IN MEDIATION, THE DIRECTOR OF THE 140.30 AGRICULTURAL EXTENSION SERVICE WILL PROVIDE AN ORIENTATION 140.31 MEETING AND A FINANCIAL ANALYST TO HELP YOU TO PREPARE FINANCIAL 140.32 INFORMATION. IF YOU DECIDE TO PARTICIPATE IN MEDIATION, IT WILL 140.33 BE TO YOUR ADVANTAGE TO ASSEMBLE YOUR FARM FINANCE AND OPERATION 140.34 RECORDS AND TO CONTACT A COUNTY EXTENSION OFFICE AS SOON AS 140.35 POSSIBLE. MEDIATION WILL ATTEMPT TO ARRIVE AT AN AGREEMENT FOR 140.36 HANDLING FUTURE FINANCIAL RELATIONS. 141.1 TO HAVE THE DEBT REVIEWED FOR MEDIATION YOU MUST FILE A 141.2 MEDIATION REQUEST WITH THE DIRECTOR WITHIN 14 DAYS AFTER YOU 141.3 RECEIVE THIS NOTICE. THE MEDIATION REQUEST FORM IS AVAILABLE AT 141.4 ANY COUNTY RECORDER'S OR COUNTY EXTENSION OFFICE. 141.5 FROM: ...(Name and Address of Secured Party)..." 141.6 ARTICLE 6 141.7 MISCELLANEOUS CONFORMING CHANGES 141.8 Section 1. Minnesota Statutes 2002, section 234.27, is 141.9 amended to read: 141.10 234.27 [UNIFORM COMMERCIAL CODE TO APPLY.] 141.11 The provisions of article 7 of the Uniform Commercial Code 141.12 relative to the negotiation, transfer, sale, or endorsement of 141.13 warehouse receipts, apply, to the extent possible, to the 141.14 negotiation, transfer, sale, or endorsement of certificates 141.15 under this chapter. 141.16 For the purpose of application of the Uniform Commercial 141.17 Code: 141.18 (a) A certificate authorized by the department which 141.19 evidences the storing of grain under this chapter is a document 141.20 of title as defined in section 336.1-201, clause (15). 141.21 (b) A person who has title to and possession of grain 141.22 stored under this chapter is a warehouseoperatoras defined in 141.23 section 336.7-102, clause (1)(h)(a)(3). 141.24 Sec. 2. Minnesota Statutes 2002, section 514.973, is 141.25 amended to read: 141.26 514.973 [ENFORCEMENT OF LIEN.] 141.27 An owner's lien established under sections 514.970 to 141.28 514.979 for a claim that has become due must be enforced in the 141.29 same manner aswarehouse operator'swarehouse's liens under 141.30 section 336.7-210. 141.31 ARTICLE 7 141.32 UNIFORM COMMERCIAL CODE ARTICLES 3 AND 4 141.33 CHANGES INVOLVING WARRANTIES ON REMOTELY CREATED ITEMS 141.34 Section 1. Minnesota Statutes 2003 Supplement, section 141.35 336.3-416, is amended to read: 141.36 336.3-416 [TRANSFER WARRANTIES.] 142.1 (a) A person who transfers an instrument for consideration 142.2 warrants to the transferee and, if the transfer is by 142.3 endorsement, to any subsequent transferee that: 142.4 (1) the warrantor is a person entitled to enforce the 142.5 instrument; 142.6 (2) all signatures on the instrument are authentic and 142.7 authorized; 142.8 (3) the instrument has not been altered; 142.9 (4) the instrument is not subject to a defense or claim in 142.10 recoupment of any party which can be asserted against the 142.11 warrantor; 142.12 (5) the warrantor has no knowledge of any insolvency 142.13 proceeding commenced with respect to the maker or acceptor or, 142.14 in the case of an unaccepted draft, the drawer; and 142.15 (6) with respect to a remotely-created item, the person on 142.16 whose account the item is drawn authorized the issuance of the 142.17 item in the amount for which the item is drawn. 142.18 (b) A person to whom the warranties under subsection (a) 142.19 are made and who took the instrument in good faith may recover 142.20 from the warrantor as damages for breach of warranty an amount 142.21 equal to the loss suffered as a result of the breach, but not 142.22 more than the amount of the instrument plus expenses and loss of 142.23 interest incurred as a result of the breach. 142.24 (c) The warranties stated in subsection (a) cannot be 142.25 disclaimed with respect to checks. Unless notice of a claim for 142.26 breach of warranty is given to the warrantor within 30 days 142.27 after the claimant has reason to know of the breach and the 142.28 identity of the warrantor, the liability of the warrantor under 142.29 subsection (b) is discharged to the extent of any loss caused by 142.30 the delay in giving notice of the claim. 142.31 (d) A cause of action for breach of warranty under this 142.32 section accrues when the claimant has reason to know of the 142.33 breach. 142.34 (e)NoA claim for breach of the warranty in subsection 142.35 (a)(6) is available against aperson to which an item was142.36transferredprevious transferor of the item only to the extent 143.1 that under applicable law (including the applicable 143.2 choice-of-law principles)the person that transferredall 143.3 previous transferors of the itemto that person did not143.4makemade the warranty in subsection (a)(6). 143.5 Sec. 2. Minnesota Statutes 2003 Supplement, section 143.6 336.3-417, is amended to read: 143.7 336.3-417 [PRESENTMENT WARRANTIES.] 143.8 (a) If an unaccepted draft is presented to the drawee for 143.9 payment or acceptance and the drawee pays or accepts the draft, 143.10 (i) the person obtaining payment or acceptance, at the time of 143.11 presentment, and (ii) a previous transferor of the draft, at the 143.12 time of transfer, warrant to the drawee making payment or 143.13 accepting the draft in good faith that: 143.14 (1) the warrantor is, or was, at the time the warrantor 143.15 transferred the draft, a person entitled to enforce the draft or 143.16 authorized to obtain payment or acceptance of the draft on 143.17 behalf of a person entitled to enforce the draft; 143.18 (2) the draft has not been altered; 143.19 (3) the warrantor has no knowledge that the signature of 143.20 the drawer of the draft is unauthorized; and 143.21 (4) with respect to any remotely-created item, the person 143.22 on whose account the item is drawn authorized the issuance of 143.23 the item in the amount for which the item is drawn. 143.24 (b) A drawee making payment may recover from any warrantor 143.25 damages for breach of warranty equal to the amount paid by the 143.26 drawee less the amount the drawee received or is entitled to 143.27 receive from the drawer because of the payment. In addition, 143.28 the drawee is entitled to compensation for expenses and loss of 143.29 interest resulting from the breach. The right of the drawee to 143.30 recover damages under this subsection is not affected by any 143.31 failure of the drawee to exercise ordinary care in making 143.32 payment. If the drawee accepts the draft, breach of warranty is 143.33 a defense to the obligation of the acceptor. If the acceptor 143.34 makes payment with respect to the draft, the acceptor is 143.35 entitled to recover from any warrantor for breach of warranty 143.36 the amounts stated in this subsection. 144.1 (c) If a drawee asserts a claim for breach of warranty 144.2 under subsection (a) based on an unauthorized endorsement of the 144.3 draft or an alteration of the draft, the warrantor may defend by 144.4 proving that the endorsement is effective under section 144.5 336.3-404 or 336.3-405 or the drawer is precluded under section 144.6 336.3-406 or 336.4-406 from asserting against the drawee the 144.7 unauthorized endorsement or alteration. 144.8 (d) If (i) a dishonored draft is presented for payment to 144.9 the drawer or an endorser or (ii) any other instrument is 144.10 presented for payment to a party obliged to pay the instrument, 144.11 and (iii) payment is received, the following rules apply: 144.12 (1) The person obtaining payment and a prior transferor of 144.13 the instrument warrant to the person making payment in good 144.14 faith that the warrantor is, or was, at the time the warrantor 144.15 transferred the instrument, a person entitled to enforce the 144.16 instrument or authorized to obtain payment on behalf of a person 144.17 entitled to enforce the instrument. 144.18 (2) The person making payment may recover from any 144.19 warrantor for breach of warranty an amount equal to the amount 144.20 paid plus expenses and loss of interest resulting from the 144.21 breach. 144.22 (e) The warranties stated in subsections (a) and (d) cannot 144.23 be disclaimed with respect to checks. Unless notice of a claim 144.24 for breach of warranty is given to the warrantor within 30 days 144.25 after the claimant has reason to know of the breach and the 144.26 identity of the warrantor, the liability of the warrantor under 144.27 subsection (b) or (d) is discharged to the extent of any loss 144.28 caused by the delay in giving notice of the claim. 144.29 (f) A cause of action for breach of warranty under this 144.30 section accrues when the claimant has reason to know of the 144.31 breach. 144.32 (g)NoA claim for breach of the warranty in subsection 144.33 (a)(4) is available against aperson to which an item was144.34transferredprevious transferor of the item only to the extent 144.35 that under applicable law (including the applicable 144.36 choice-of-law principles)the person that transferredall 145.1 previous transferors of the itemto that person did not145.2makemade the warranty in subsection (a)(4). 145.3 Sec. 3. Minnesota Statutes 2003 Supplement, section 145.4 336.4-207, is amended to read: 145.5 336.4-207 [TRANSFER WARRANTIES.] 145.6 (a) A customer or collecting bank that transfers an item 145.7 and receives a settlement or other consideration warrants to the 145.8 transferee and to any subsequent collecting bank that: 145.9 (1) the warrantor is a person entitled to enforce the item; 145.10 (2) all signatures on the item are authentic and 145.11 authorized; 145.12 (3) the item has not been altered; 145.13 (4) the item is not subject to a defense or claim in 145.14 recoupment (section 336.3-305(a)) of any party that can be 145.15 asserted against the warrantor; 145.16 (5) the warrantor has no knowledge of any insolvency 145.17 proceeding commenced with respect to the maker or acceptor or, 145.18 in the case of an unaccepted draft, the drawer; and 145.19 (6) with respect to any remotely-created item, the person 145.20 on whose account the item is drawn authorized the issuance of 145.21 the item in the amount for which the item is drawn. 145.22 (b) If an item is dishonored, a customer or collecting bank 145.23 transferring the item and receiving settlement or other 145.24 consideration is obliged to pay the amount due on the item (i) 145.25 according to the terms of the item at the time it was 145.26 transferred, or (ii) if the transfer was of an incomplete item, 145.27 according to its terms when completed as stated in sections 145.28 336.3-115 and 336.3-407. The obligation of a transferor is owed 145.29 to the transferee and to any subsequent collecting bank that 145.30 takes the item in good faith. A transferor cannot disclaim its 145.31 obligation under this subsection by an endorsement stating that 145.32 it is made "without recourse" or otherwise disclaiming liability. 145.33 (c) A person to whom the warranties under subsection (a) 145.34 are made and who took the item in good faith may recover from 145.35 the warrantor as damages for breach of warranty an amount equal 145.36 to the loss suffered as a result of the breach, but not more 146.1 than the amount of the item plus expenses and loss of interest 146.2 incurred as a result of the breach. 146.3 (d) The warranties stated in subsection (a) cannot be 146.4 disclaimed with respect to checks. Unless notice of a claim for 146.5 breach of warranty is given to the warrantor within 30 days 146.6 after the claimant has reason to know of the breach and the 146.7 identity of the warrantor, the warrantor is discharged to the 146.8 extent of any loss caused by the delay in giving notice of the 146.9 claim. 146.10 (e) A cause of action for breach of warranty under this 146.11 section accrues when the claimant has reason to know of the 146.12 breach. 146.13 (f)NoA claim for breach in the warranty in subsection 146.14 (a)(6) is available against aperson to which an item was146.15transferredprevious transferor of the item only to the extent 146.16 that under applicable law (including the applicable 146.17 choice-of-law principles)the person that transferredall 146.18 previous transferors of the itemto that person did not146.19makemade the warranty in subsection (a)(6). 146.20 Sec. 4. Minnesota Statutes 2003 Supplement, section 146.21 336.4-208, is amended to read: 146.22 336.4-208 [PRESENTMENT WARRANTIES.] 146.23 (a) If an unaccepted draft is presented to the drawee for 146.24 payment or acceptance and the drawee pays or accepts the draft, 146.25 (i) the person obtaining payment or acceptance, at the time of 146.26 presentment, and (ii) a previous transferor of the draft, at the 146.27 time of transfer, warrant to the drawee that pays or accepts the 146.28 draft in good faith that: 146.29 (1) the warrantor is, or was, at the time the warrantor 146.30 transferred the draft, a person entitled to enforce the draft or 146.31 authorized to obtain payment or acceptance of the draft on 146.32 behalf of a person entitled to enforce the draft; 146.33 (2) the draft has not been altered; 146.34 (3) the warrantor has no knowledge that the signature of 146.35 the purported drawer of the draft is unauthorized; and 146.36 (4) with respect to any remotely-created item, the person 147.1 on whose account the item is drawn authorized the issuance of 147.2 the item in the amount for which the item is drawn. 147.3 (b) A drawee making payment may recover from a warrantor 147.4 damages for breach of warranty equal to the amount paid by the 147.5 drawee less the amount the drawee received or is entitled to 147.6 receive from the drawer because of the payment. In addition, 147.7 the drawee is entitled to compensation for expenses and loss of 147.8 interest resulting from the breach. The right of the drawee to 147.9 recover damages under this subsection is not affected by any 147.10 failure of the drawee to exercise ordinary care in making 147.11 payment. If the drawee accepts the draft (i) breach of warranty 147.12 is a defense to the obligation of the acceptor, and (ii) if the 147.13 acceptor makes payment with respect to the draft, the acceptor 147.14 is entitled to recover from a warrantor for breach of warranty 147.15 the amounts stated in this subsection. 147.16 (c) If a drawee asserts a claim for breach of warranty 147.17 under subsection (a) based on an unauthorized endorsement of the 147.18 draft or an alteration of the draft, the warrantor may defend by 147.19 proving that the endorsement is effective under section 147.20 336.3-404 or 336.3-405 or the drawer is precluded under section 147.21 336.3-406 or 336.4-406 from asserting against the drawee the 147.22 unauthorized endorsement or alteration. 147.23 (d) If (i) a dishonored draft is presented for payment to 147.24 the drawer or an endorser or (ii) any other item is presented 147.25 for payment to a party obliged to pay the item, and the item is 147.26 paid, the person obtaining payment and a prior transferor of the 147.27 item warrant to the person making payment in good faith that the 147.28 warrantor is, or was, at the time the warrantor transferred the 147.29 item, a person entitled to enforce the item or authorized to 147.30 obtain payment on behalf of a person entitled to enforce the 147.31 item. The person making payment may recover from any warrantor 147.32 for breach of warranty an amount equal to the amount paid plus 147.33 expenses and loss of interest resulting from the breach. 147.34 (e) The warranties stated in subsections (a) and (d) cannot 147.35 be disclaimed with respect to checks. Unless notice of a claim 147.36 for breach of warranty is given to the warrantor within 30 days 148.1 after the claimant has reason to know of the breach and the 148.2 identity of the warrantor, the warrantor is discharged to the 148.3 extent of any loss caused by the delay in giving notice of the 148.4 claim. 148.5 (f) A cause of action for breach of warranty under this 148.6 section accrues when the claimant has reason to know of the 148.7 breach. 148.8 (g)NoA claim for breach of the warranty in subsection 148.9 (a)(4) is available against aperson to which an item was148.10transferredprevious transferor of the item only to the extent 148.11 that under applicable law (including the applicable 148.12 choice-of-law principle)the person that transferredall 148.13 previous transferors of the itemto that person did not148.14makemade the warranty in subsection (a)(4).