as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to commerce; enacting the revised article 5 1.3 of the Uniform Commercial Code; regulating letters of 1.4 credit; making conforming changes; amending Minnesota 1.5 Statutes 1996, sections 336.1-105; 336.2-512; 1.6 336.9-103; 336.9-104; 336.9-105; 336.9-106; 336.9-304; 1.7 and 336.9-305; proposing coding for new law in 1.8 Minnesota Statutes, chapter 336; repealing Minnesota 1.9 Statutes 1996, sections 336.5-101; 336.5-102; 1.10 336.5-103; 336.5-104; 336.5-105; 336.5-106; 336.5-107; 1.11 336.5-108; 336.5-109; 336.5-110; 336.5-111; 336.5-112; 1.12 336.5-113; 336.5-114; 336.5-115; 336.5-116; and 1.13 336.5-117. 1.14 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.15 ARTICLE 1 1.16 UNIFORM COMMERCIAL CODE 1.17 Revised Article 5 1.18 LETTERS OF CREDIT 1.19 Section 1. [336.5-101] [SHORT TITLE.] 1.20 This article may be cited as Uniform Commercial 1.21 Code-Letters of Credit. 1.22 Sec. 2. [336.5-102] [DEFINITIONS.] 1.23 (a) In this article: 1.24 (1) "Adviser" means a person who, at the request of the 1.25 issuer, a confirmer, or another adviser, notifies or requests 1.26 another adviser to notify the beneficiary that a letter of 1.27 credit has been issued, confirmed, or amended. 1.28 (2) "Applicant" means a person at whose request or for 1.29 whose account a letter of credit is issued. The term includes a 2.1 person who requests an issuer to issue a letter of credit on 2.2 behalf of another if the person making the request undertakes an 2.3 obligation to reimburse the issuer. 2.4 (3) "Beneficiary" means a person who under the terms of a 2.5 letter of credit is entitled to have its complying presentation 2.6 honored. The term includes a person to whom drawing rights have 2.7 been transferred under a transferable letter of credit. 2.8 (4) "Confirmer" means a nominated person who undertakes, at 2.9 the request or with the consent of the issuer, to honor a 2.10 presentation under a letter of credit issued by another. 2.11 (5) "Dishonor" of a letter of credit means failure timely 2.12 to honor or to take an interim action, such as acceptance of a 2.13 draft, that may be required by the letter of credit. 2.14 (6) "Document" means a draft or other demand, document of 2.15 title, investment security, certificate, invoice, or other 2.16 record, statement, or representation of fact, law, right, or 2.17 opinion (i) which is presented in a written or other medium 2.18 permitted by the letter of credit or, unless prohibited by the 2.19 letter of credit, by the standard practice referred to in 2.20 section 336.5-108, paragraph (e) and (ii) which is capable of 2.21 being examined for compliance with the terms and conditions of 2.22 the letter of credit. A document may not be oral. 2.23 (7) "Good faith" means honesty in fact in the conduct or 2.24 transaction concerned. 2.25 (8) "Honor" of a letter of credit means performance of the 2.26 issuer's undertaking in the letter of credit to pay or deliver 2.27 an item of value. Unless the letter of credit otherwise 2.28 provides, "honor" occurs 2.29 (i) upon payment, 2.30 (ii) if the letter of credit provides for acceptance, upon 2.31 acceptance of a draft and, at maturity, its payment, or 2.32 (iii) if the letter of credit provides for incurring a 2.33 deferred obligation, upon incurring the obligation and, at 2.34 maturity, its performance. 2.35 (9) "Issuer" means a bank or other person that issues a 2.36 letter of credit, but does not include an individual who makes 3.1 an engagement for personal, family, or household purposes. 3.2 (10) "Letter of credit" means a definite undertaking that 3.3 satisfies the requirements of section 336.5-104 by an issuer to 3.4 a beneficiary at the request or for the account of an applicant 3.5 or, in the case of a financial institution, to itself or for its 3.6 own account, to honor a documentary presentation by payment or 3.7 delivery of an item of value. 3.8 (11) "Nominated person" means a person whom the issuer (i) 3.9 designates or authorizes to pay, accept, negotiate, or otherwise 3.10 give value under a letter of credit and (ii) undertakes by 3.11 agreement or custom and practice to reimburse. 3.12 (12) "Presentation" means delivery of a document to an 3.13 issuer or nominated person for honor or giving of value under a 3.14 letter of credit. 3.15 (13) "Presenter" means a person making a presentation as or 3.16 on behalf of a beneficiary or nominated person. 3.17 (14) "Record" means information that is inscribed on a 3.18 tangible medium, or that is stored in an electronic or other 3.19 medium and is retrievable in perceivable form. 3.20 (15) "Successor of a beneficiary" means a person who 3.21 succeeds to substantially all of the rights of a beneficiary by 3.22 operation of law, including a corporation with or into which the 3.23 beneficiary has been merged or consolidated, an administrator, 3.24 executor, personal representative, trustee in bankruptcy, debtor 3.25 in possession, liquidator, and receiver. 3.26 (b) Definitions in other articles applying to this article 3.27 and the sections in which they appear are: 3.28 "Accept" or "Acceptance" Section 336.3-409 3.29 "Value" Sections 336.3-303, 336.4-211 3.30 (c) Article 1 contains certain additional general 3.31 definitions and principles of construction and interpretation 3.32 applicable throughout this article. 3.33 Sec. 3. [336.5-103] [SCOPE.] 3.34 (a) This article applies to letters of credit and to 3.35 certain rights and obligations arising out of transactions 3.36 involving letters of credit. 4.1 (b) The statement of a rule in this article does not by 4.2 itself require, imply, or negate application of the same or a 4.3 different rule to a situation not provided for, or to a person 4.4 not specified, in this article. 4.5 (c) With the exception of this subsection, subsections (a) 4.6 and (d), sections 336.5-102(a)(9) and (10), 336.5-106(d), and 4.7 336.5-114(d), and except to the extent prohibited in sections 4.8 336.1-102(3) and 336.5-117(d), the effect of this article may be 4.9 varied by agreement or by a provision stated or incorporated by 4.10 reference in an undertaking. A term in an agreement or 4.11 undertaking generally excusing liability or generally limiting 4.12 remedies for failure to perform obligations is not sufficient to 4.13 vary obligations prescribed by this article. 4.14 (d) Rights and obligations of an issuer to a beneficiary or 4.15 a nominated person under a letter of credit are independent of 4.16 the existence, performance, or nonperformance of a contract or 4.17 arrangement out of which the letter of credit arises or which 4.18 underlies it, including contracts or arrangements between the 4.19 issuer and the applicant and between the applicant and the 4.20 beneficiary. 4.21 Sec. 4. [336.5-104] [FORMAL REQUIREMENTS.] 4.22 A letter of credit, confirmation, advice, transfer, 4.23 amendment, or cancellation may be issued in any form that is a 4.24 record and is authenticated (i) by a signature or (ii) in 4.25 accordance with the agreement of the parties or the standard 4.26 practice referred to in section 336.5-108(e). 4.27 Sec. 5. [336.5-105] [CONSIDERATION.] 4.28 Consideration is not required to issue, amend, transfer, or 4.29 cancel a letter of credit, advice, or confirmation. 4.30 Sec. 6. [336.5-106] [ISSUANCE, AMENDMENT, CANCELLATION, 4.31 AND DURATION] 4.32 (a) A letter of credit is issued and becomes enforceable 4.33 according to its terms against the issuer when the issuer sends 4.34 or otherwise transmits it to the person requested to advise or 4.35 to the beneficiary. A letter of credit is revocable only if it 4.36 so provides. 5.1 (b) After a letter of credit is issued, rights and 5.2 obligations of a beneficiary, applicant, confirmer, and issuer 5.3 are not affected by an amendment or cancellation to which that 5.4 person has not consented except to the extent the letter of 5.5 credit provides that it is revocable or that the issuer may 5.6 amend or cancel the letter of credit without that consent. 5.7 (c) If there is no stated expiration date or other 5.8 provision that determines its duration, a letter of credit 5.9 expires one year after its stated date of issuance or, if none 5.10 is stated, after the date on which it is issued. 5.11 (d) A letter of credit that states that it is perpetual 5.12 expires five years after its stated date of issuance, or if none 5.13 is stated, after the date on which it is issued. 5.14 Sec. 7. [336.5-107] [CONFIRMER, NOMINATED PERSON, AND 5.15 ADVISER.] 5.16 (a) A confirmer is directly obligated on a letter of credit 5.17 and has the rights and obligations of an issuer to the extent of 5.18 its confirmation. The confirmer also has rights against and 5.19 obligations to the issuer as if the issuer were an applicant and 5.20 the confirmer had issued the letter of credit at the request and 5.21 for the account of the issuer. 5.22 (b) A nominated person who is not a confirmer is not 5.23 obligated to honor or otherwise give value for a presentation. 5.24 (c) A person requested to advise may decline to act as an 5.25 adviser. An adviser that is not a confirmer is not obligated to 5.26 honor or give value for a presentation. An adviser undertakes 5.27 to the issuer and to the beneficiary accurately to advise the 5.28 terms of the letter of credit, confirmation, amendment, or 5.29 advice received by that person and undertakes to the beneficiary 5.30 to check the apparent authenticity of the request to advise. 5.31 Even if the advice is inaccurate, the letter of credit, 5.32 confirmation, or amendment is enforceable as issued. 5.33 (d) A person who notifies a transferee beneficiary of the 5.34 terms of a letter of credit, confirmation, amendment, or advice 5.35 has the rights and obligations of an adviser under subsection 5.36 (c). The terms in the notice to the transferee beneficiary may 6.1 differ from the terms in any notice to the transferor 6.2 beneficiary to the extent permitted by the letter of credit, 6.3 confirmation, amendment, or advice received by the person who so 6.4 notifies. 6.5 Sec. 8. [336.5-108] [ISSUER'S RIGHTS AND OBLIGATIONS.] 6.6 (a) Except as otherwise provided in section 336.5-109, an 6.7 issuer shall honor a presentation that, as determined by the 6.8 standard practice referred to in subsection (e), appears on its 6.9 face strictly to comply with the terms and conditions of the 6.10 letter of credit. Except as otherwise provided in section 6.11 336.5-113 and unless otherwise agreed with the applicant, an 6.12 issuer shall dishonor a presentation that does not appear so to 6.13 comply. 6.14 (b) An issuer has a reasonable time after presentation, but 6.15 not beyond the end of the seventh business day of the issuer 6.16 after the day of its receipt of documents: 6.17 (1) to honor, 6.18 (2) if the letter of credit provides for honor to be 6.19 completed more than seven business days after presentation, to 6.20 accept a draft or incur a deferred obligation, or 6.21 (3) to give notice to the presenter of discrepancies in the 6.22 presentation. 6.23 (c) Except as otherwise provided in subsection (d), an 6.24 issuer is precluded from asserting as a basis for dishonor any 6.25 discrepancy if timely notice is not given, or any discrepancy 6.26 not stated in the notice if timely notice is given. 6.27 (d) Failure to give the notice specified in subsection (b) 6.28 or to mention fraud, forgery, or expiration in the notice does 6.29 not preclude the issuer from asserting as a basis for dishonor 6.30 fraud or forgery as described in section 336.5-109(a) or 6.31 expiration of the letter of credit before presentation. 6.32 (e) An issuer shall observe standard practice of financial 6.33 institutions that regularly issue letters of credit. 6.34 Determination of the issuer's observance of the standard 6.35 practice is a matter of interpretation for the court. The court 6.36 shall offer the parties a reasonable opportunity to present 7.1 evidence of the standard practice. 7.2 (f) An issuer is not responsible for: 7.3 (1) the performance or nonperformance of the underlying 7.4 contract, arrangement, or transaction, 7.5 (2) an act or omission of others, or 7.6 (3) observance or knowledge of the usage of a particular 7.7 trade other than the standard practice referred to in subsection 7.8 (e). 7.9 (g) If an undertaking constituting a letter of credit under 7.10 section 336.5-102(a)(10) contains nondocumentary conditions, an 7.11 issuer shall disregard the nondocumentary conditions and treat 7.12 them as if they were not stated. 7.13 (h) An issuer that has dishonored a presentation shall 7.14 return the documents or hold them at the disposal of, and send 7.15 advice to that effect to, the presenter. 7.16 (i) An issuer that has honored a presentation as permitted 7.17 or required by this article: 7.18 (1) is entitled to be reimbursed by the applicant in 7.19 immediately available funds not later than the date of its 7.20 payment of funds; 7.21 (2) takes the documents free of claims of the beneficiary 7.22 or presenter; 7.23 (3) is precluded from asserting a right of recourse on a 7.24 draft under sections 336.3-414 and 336.3-415; 7.25 (4) except as otherwise provided in sections 336.5-110 and 7.26 336.5-117, is precluded from restitution of money paid or other 7.27 value given by mistake to the extent the mistake concerns 7.28 discrepancies in the documents or tender which are apparent on 7.29 the face of the presentation; and 7.30 (5) is discharged to the extent of its performance under 7.31 the letter of credit unless the issuer honored a presentation in 7.32 which a required signature of a beneficiary was forged. 7.33 Sec. 9. [336.5-109] [FRAUD AND FORGERY.] 7.34 (a) If a presentation is made that appears on its face 7.35 strictly to comply with the terms and conditions of the letter 7.36 of credit, but a required document is forged or materially 8.1 fraudulent, or honor of the presentation would facilitate a 8.2 material fraud by the beneficiary on the issuer or applicant: 8.3 (1) the issuer shall honor the presentation, if honor is 8.4 demanded by (i) a nominated person who has given value in good 8.5 faith and without notice of forgery or material fraud, (ii) a 8.6 confirmer who has honored its confirmation in good faith, (iii) 8.7 a holder in due course of a draft drawn under the letter of 8.8 credit which was taken after acceptance by the issuer or 8.9 nominated person, or (iv) an assignee of the issuer's or 8.10 nominated person's deferred obligation that was taken for value 8.11 and without notice of forgery or material fraud after the 8.12 obligation was incurred by the issuer or nominated person; and 8.13 (2) the issuer, acting in good faith, may honor or dishonor 8.14 the presentation in any other case. 8.15 (b) If an applicant claims that a required document is 8.16 forged or materially fraudulent or that honor of the 8.17 presentation would facilitate a material fraud by the 8.18 beneficiary on the issuer or applicant, a court of competent 8.19 jurisdiction may temporarily or permanently enjoin the issuer 8.20 from honoring a presentation or grant similar relief against the 8.21 issuer or other persons only if the court finds that: 8.22 (1) the relief is not prohibited under the law applicable 8.23 to an accepted draft or deferred obligation incurred by the 8.24 issuer; 8.25 (2) a beneficiary, issuer, or nominated person who may be 8.26 adversely affected is adequately protected against loss that it 8.27 may suffer because the relief is granted; 8.28 (3) all of the conditions to entitle a person to the relief 8.29 under the law of this state have been met; and 8.30 (4) on the basis of the information submitted to the court, 8.31 the applicant is more likely than not to succeed under its claim 8.32 of forgery or material fraud and the person demanding honor does 8.33 not qualify for protection under subsection (a)(1). 8.34 Sec. 10. [336.5-110] [WARRANTIES.] 8.35 (a) If its presentation is honored, the beneficiary 8.36 warrants: 9.1 (1) to the issuer, any other person to whom presentation is 9.2 made, and the applicant that there is no fraud or forgery of the 9.3 kind described in section 336.5-109(a); and 9.4 (2) to the applicant that the drawing does not violate any 9.5 agreement between the applicant and beneficiary or any other 9.6 agreement intended by them to be augmented by the letter of 9.7 credit. 9.8 (b) The warranties in subsection (a) are in addition to the 9.9 warranties arising under articles 3, 4, 7, and 8 because of the 9.10 presentation or transfer of documents covered by any of those 9.11 articles. 9.12 Sec. 11. [336.5-111] [REMEDIES.] 9.13 (a) If an issuer wrongfully dishonors or repudiates its 9.14 obligation to pay money under a letter of credit before 9.15 presentation, the beneficiary, successor, or nominated person 9.16 presenting on its own behalf may recover from the issuer the 9.17 amount that is the subject of the dishonor or repudiation. If 9.18 the issuer's obligation under the letter of credit is not for 9.19 the payment of money, the claimant may obtain specific 9.20 performance or, at the claimant's selection, recover an amount 9.21 equal to the value of performance from the issuer. In either 9.22 case, the claimant may also recover incidental but not 9.23 consequential damages. The claimant is not obligated to take 9.24 action to avoid damages that might be due from the issuer under 9.25 this subsection. If, although not obligated to do so, the 9.26 claimant avoids damages, the claimant's recovery from the issuer 9.27 must be reduced by the amount of damages avoided. The issuer 9.28 has the burden of proving the amount of damages avoided. In the 9.29 case of repudiation the claimant need not present any document. 9.30 (b) If an issuer wrongfully dishonors a draft or demand 9.31 presented under a letter of credit or honors a draft or demand 9.32 in breach of its obligation to the applicant, the applicant may 9.33 recover damages resulting from the breach, including incidental 9.34 but not consequential damages, less any amount saved as a result 9.35 of the breach. 9.36 (c) If an adviser or nominated person other than a 10.1 confirmer breaches an obligation under this article or an issuer 10.2 breaches an obligation not covered in subsection (a) or (b), a 10.3 person to whom the obligation is owed may recover damages 10.4 resulting from the breach, including incidental but not 10.5 consequential damages, less any amount saved as a result of the 10.6 breach. To the extent of the confirmation, a confirmer has the 10.7 liability of an issuer specified in this subsection and 10.8 subsections (a) and (b). 10.9 (d) An issuer, nominated person, or adviser who is found 10.10 liable under subsection (a), (b), or (c) shall pay interest on 10.11 the amount owned thereunder from the date of wrongful dishonor 10.12 or other appropriate date. 10.13 (e) Reasonable attorney's fees and other expenses of 10.14 litigation must be awarded to the prevailing party in an action 10.15 in which a remedy is sought under this article. 10.16 (f) Damages that would otherwise be payable by a party for 10.17 breach of an obligation under this article may be liquidated by 10.18 agreement or undertaking, but only in an amount or by a formula 10.19 that is reasonable in light of the harm anticipated. 10.20 Sec. 12. [336.5-112] [TRANSFER OF LETTER OF CREDIT.] 10.21 (a) Except as otherwise provided in section 336.5-113, 10.22 unless a letter of credit provides that it is transferable, the 10.23 right of a beneficiary to draw or otherwise demand performance 10.24 under a letter of credit may not be transferred. 10.25 (b) Even if a letter of credit provides that it is 10.26 transferable, the issuer may refuse to recognize or carry out a 10.27 transfer if: 10.28 (1) the transfer would violate applicable law; or 10.29 (2) the transferor or transferee has failed to comply with 10.30 any requirement stated in the letter of credit or any other 10.31 requirement relating to transfer imposed by the issuer which is 10.32 within the standard practice referred to in section 336.5-108(e) 10.33 or is otherwise reasonable under the circumstances. 10.34 Sec. 13. [336.5-113] [TRANSFER BY OPERATION OF LAW.] 10.35 (a) A successor of a beneficiary may consent to amendments, 10.36 sign and present documents, and receive payment or other items 11.1 of value in the name of the beneficiary without disclosing its 11.2 status as a successor. 11.3 (b) A successor of a beneficiary may consent to amendments, 11.4 sign and present documents, and receive payment or other items 11.5 of value in its own name as the disclosed successor of the 11.6 beneficiary. Except as otherwise provided in subsection (e), an 11.7 issuer shall recognize a disclosed successor of a beneficiary as 11.8 beneficiary in full substitution for its predecessor upon 11.9 compliance with the requirements for recognition by the issuer 11.10 of a transfer of drawing rights by operation of law under the 11.11 standard practice referred to in section 336.5-108(e) or, in the 11.12 absence of such a practice, compliance with other reasonable 11.13 procedures sufficient to protect the issuer. 11.14 (c) An issuer is not obliged to determine whether a 11.15 purported successor is a successor of a beneficiary or whether 11.16 the signature of a purported successor is genuine or authorized. 11.17 (d) Honor of a purported successor's apparently complying 11.18 presentation under subsection (a) or (b) has the consequences 11.19 specified in section 336.5-108(i) even if the purported 11.20 successor is not the successor of a beneficiary. Documents 11.21 signed in the name of the beneficiary or of a disclosed 11.22 successor by a person who is neither the beneficiary nor the 11.23 successor of the beneficiary are forged documents for the 11.24 purposes of section 336.5-109. 11.25 (e) An issuer whose rights of reimbursement are not covered 11.26 by subsection (d) or substantially similar law and any confirmer 11.27 or nominated person may decline to recognize a presentation 11.28 under subsection (b). 11.29 (f) A beneficiary whose name is changed after the issuance 11.30 of a letter of credit has the same rights and obligations as a 11.31 successor of a beneficiary under this section. 11.32 Sec. 14. [336.5-114] [ASSIGNMENT OF PROCEEDS.] 11.33 (a) In this section, "proceeds of a letter of credit" means 11.34 the cash, check, accepted draft, or other item of value paid or 11.35 delivered upon honor or giving of value by the issuer or any 11.36 nominated person under the letter of credit. The term does not 12.1 include a beneficiary's drawing rights or documents presented by 12.2 the beneficiary. 12.3 (b) A beneficiary may assign its right to a part or all of 12.4 the proceeds of a letter of credit. The beneficiary may do so 12.5 before presentation as a present assignment of its right to 12.6 receive proceeds contingent upon its compliance with the terms 12.7 and conditions of the letter of credit. 12.8 (c) An issuer or nominated person need not recognize an 12.9 assignment of proceeds of a letter of credit until it consents 12.10 to the assignment. 12.11 (d) An issuer or nominated person has no obligation to give 12.12 or withhold its consent to an assignment of proceeds of a letter 12.13 of credit, but consent may not be unreasonably withheld if the 12.14 assignee possesses and exhibits the letter of credit and 12.15 presentation of the letter of credit is a condition to honor. 12.16 (e) Rights of a transferee beneficiary or nominated person 12.17 are independent of the beneficiary's assignment of the proceeds 12.18 of a letter of credit and are superior to the assignee's right 12.19 to the proceeds. 12.20 (f) Neither the rights recognized by this section between 12.21 an assignee and an issuer, transferee beneficiary, or nominated 12.22 person nor the issuer's or nominated person's payment of 12.23 proceeds to an assignee or a third person affect the rights 12.24 between the assignee and any person other than the issuer, 12.25 transferee beneficiary, or nominated person. The mode of 12.26 creating and perfecting a security interest in or granting an 12.27 assignment of a beneficiary's rights to proceeds is governed by 12.28 article 9 or other law. Against persons other than the issuer, 12.29 transferee beneficiary, or nominated person, the rights and 12.30 obligations arising upon the creation of a security interest or 12.31 other assignment of a beneficiary's right to proceeds and its 12.32 perfection are governed by article 9 or other laws. 12.33 Sec. 15. [336.5-115] [STATUTE OF LIMITATIONS.] 12.34 An action to enforce a right or obligation arising under 12.35 this article must be commenced within one year after the 12.36 expiration date of the relevant letter of credit or one year 13.1 after the claim for relief accrues, whichever occurs later. A 13.2 claim for relief accrues when the breach occurs, regardless of 13.3 the aggrieved party's lack of knowledge of the breach. 13.4 Sec. 16. [336.5-116] [CHOICE OF LAW AND FORUM.] 13.5 (a) The liability of an issuer, nominated person, or 13.6 adviser for action or omission is governed by the law of the 13.7 jurisdiction chosen by an agreement in the form of a record 13.8 signed or otherwise authenticated by the affected parties in the 13.9 manner provided in section 336.5-104 or by a provision in the 13.10 person's letter of credit, confirmation, or other undertaking. 13.11 The jurisdiction whose law is chosen need not bear any relation 13.12 to the transaction. 13.13 (b) Unless subsection (a) applies, the liability of an 13.14 issuer, nominated person, or adviser for action or omission is 13.15 governed by the law of the jurisdiction in which the person is 13.16 located. The person is considered to be located at the address 13.17 indicated in the person's undertaking. If more than one address 13.18 is indicated, the person is considered to be located at the 13.19 address from which the person's undertaking was issued. For the 13.20 purpose of jurisdiction, choice of law, and recognition of 13.21 interbranch letters of credit, but not enforcement of a 13.22 judgment, all branches of a bank are considered separate 13.23 juridical entities and a bank is considered to be located at the 13.24 place where its relevant branch is considered to be located 13.25 under this subsection. 13.26 (c) Except as otherwise provided in this subsection, the 13.27 liability of an issuer, nominated person, or adviser is governed 13.28 by any rules of custom or practice, such as the Uniform Customs 13.29 and Practice for Documentary Credits, to which the letter of 13.30 credit, confirmation, or other undertaking is expressly made 13.31 subject. If (i) this article would govern the liability of an 13.32 issuer, nominated person, or adviser under subsection (a) or 13.33 (b), (ii) the relevant undertaking incorporates rules of custom 13.34 or practice, and (iii) there is conflict between this article 13.35 and those rules as applied to that undertaking, those rules 13.36 govern except to the extent of any conflict with the nonvariable 14.1 provisions specified in section 336.5-103(c). 14.2 (d) If there is conflict between this article and article 14.3 3, 4, 4A, or 9, this article governs. 14.4 (e) The forum for settling disputes arising out of an 14.5 undertaking within this article may be chosen in the manner and 14.6 with the binding effect that governing law may be chosen in 14.7 accordance with subsection (a). 14.8 Sec. 17. [336.5-117] [SUBROGATION OF ISSUER, APPLICANT, 14.9 AND NOMINATED PERSON.] 14.10 (a) An issuer that honors a beneficiary's presentation is 14.11 subrogated to the rights of the beneficiary to the same extent 14.12 as if the issuer were a secondary obligor of the underlying 14.13 obligation owed to the beneficiary and of the applicant to the 14.14 same extent as if the issuer were the secondary obligor of the 14.15 underlying obligation owed to the applicant. 14.16 (b) An applicant that reimburses an issuer is subrogated to 14.17 the rights of the issuer against any beneficiary, presenter, or 14.18 nominated person to the same extent as if the applicant were the 14.19 secondary obligor of the obligations owed to the issuer and has 14.20 the rights of subrogation of the issuer to the rights of the 14.21 beneficiary stated in subsection (a). 14.22 (c) A nominated person who pays or gives value against a 14.23 draft or demand presented under a letter of credit is subrogated 14.24 to the rights of: 14.25 (1) the issuer against the applicant to the same extent as 14.26 if the nominated person were a secondary obligor of the 14.27 obligation owed to the issuer by the applicant; 14.28 (2) the beneficiary to the same extent as if the nominated 14.29 person were a secondary obligor of the underlying obligation 14.30 owed to the beneficiary; and 14.31 (3) the applicant to the same extent as if the nominated 14.32 person were a secondary obligor of the underlying obligation 14.33 owed to the applicant. 14.34 (d) Notwithstanding any agreement or term to the contrary, 14.35 the rights of subrogation stated in subsections (a) and (b) do 14.36 not arise until the issuer honors the letter of credit or 15.1 otherwise pays and the rights in subsection (c) do not arise 15.2 until the nominated person pays or otherwise gives value. Until 15.3 then, the issuer, nominated person, and the applicant do not 15.4 derive under this section present or prospective rights forming 15.5 the basis of a claim, defense, or excuse. 15.6 Sec. 18. [APPLICABILITY.] 15.7 This act applies to a letter of credit that is issued on or 15.8 after the effective date of this act. This act does not apply 15.9 to a transaction, event, obligation, or duty arising out of or 15.10 associated with a letter of credit that was issued before the 15.11 effective date of this act. 15.12 Sec. 19. [SAVINGS CLAUSE.] 15.13 A transaction arising out of or associated with a letter of 15.14 credit that was issued before the effective date of this act and 15.15 the rights, obligations, and interests flowing from that 15.16 transaction are governed by any statute or other law amended or 15.17 repealed by this act as if repeal or amendment had not occurred 15.18 and may be terminated, completed, consummated, or enforced under 15.19 that statute or other law. 15.20 Sec. 20. [REPEALER.] 15.21 Minnesota Statutes 1996, sections 336.5-101; 336.5-102; 15.22 336.5-103; 336.5-104; 336.5-105; 336.5-106; 336.5-107; 15.23 336.5-108; 336.5-109; 336.5-110; 336.5-111; 336.5-112; 15.24 336.5-113; 336.5-114; 336.5-115; 336.5-116; and 336.5-117, are 15.25 repealed. 15.26 ARTICLE 2 15.27 CONFORMING AND MISCELLANEOUS AMENDMENTS 15.28 Section 1. Minnesota Statutes 1996, section 336.1-105, is 15.29 amended to read: 15.30 336.1-105 [TERRITORIAL APPLICATION OF THE CHAPTER; PARTIES' 15.31 POWER TO CHOOSE APPLICABLE LAW.] 15.32 (1) Except as provided hereafter in this section, when a 15.33 transaction bears a reasonable relation to this state and also 15.34 to another state or nation the parties may agree that the law 15.35 either of this state or of such other state or nation shall 15.36 govern their rights and duties. Failing such agreement this 16.1 chapter applies to transactions bearing an appropriate relation 16.2 to this state. 16.3 (2) Where one of the following provisions of this chapter 16.4 specifies the applicable law, that provision governs and a 16.5 contrary agreement is effective only to the extent permitted by 16.6 the law (including the conflict of laws rules) so specified: 16.7 Rights of creditors against sold goods. Section 336.2-402. 16.8 Applicability of the article on leases. Sections 16.9 336.2A-105 and 336.2A-106. 16.10 Applicability of the article on bank deposits and 16.11 collections. Section 336.4-102. 16.12 Governing law in the article on funds transfers. Section 16.13 336.4A-507. 16.14 Letters of Credit. Section 336.5-116. 16.15 Applicability of the article on investment securities. 16.16 Section 336.8-110. 16.17 Perfection provisions of the article on secured 16.18 transactions. Section 336.9-103. 16.19 Sec. 2. Minnesota Statutes 1996, section 336.2-512, is 16.20 amended to read: 16.21 336.2-512 [PAYMENT BY BUYER BEFORE INSPECTION.] 16.22 (1) Where the contract requires payment before inspection 16.23 nonconformity of the goods does not excuse the buyer from so 16.24 making payment unless 16.25 (a) the nonconformity appears without inspection; or 16.26 (b) despite tender of the required documents the 16.27 circumstances would justify injunction against honor under
the16.28 provisions ofthis chapter (section 336.5-114336.5-109(b)). 16.29 (2) Payment pursuant to subsection (1) does not constitute 16.30 an acceptance of goods or impair the buyer's right to inspect or 16.31 any of the buyer's remedies. 16.32 Sec. 3. Minnesota Statutes 1996, section 336.9-103, is 16.33 amended to read: 16.34 336.9-103 [PERFECTION OF SECURITY INTERESTS IN MULTIPLE 16.35 STATE TRANSACTIONS.] 16.36 (1) Documents, instruments, letters of credit, and ordinary 17.1 goods. 17.2 (a) This subsection applies to documents and, instruments, 17.3 rights to proceeds of written letters of credit, and togoods 17.4 other than those covered by a certificate of title described in 17.5 subsection (2), mobile goods described in subsection (3), and 17.6 minerals described in subsection (5). 17.7 (b) Except as otherwise provided in this subsection, 17.8 perfection and the effect of perfection or nonperfection of a 17.9 security interest in collateral are governed by the law of the 17.10 jurisdiction where the collateral is when the last event occurs 17.11 on which is based the assertion that the security interest is 17.12 perfected or unperfected. 17.13 (c) If the parties to a transaction creating a purchase 17.14 money security interest in goods in one jurisdiction understand 17.15 at the time that the security interest attaches that the goods 17.16 will be kept in another jurisdiction, then the law of the other 17.17 jurisdiction governs the perfection and the effect of perfection 17.18 or nonperfection of the security interest from the time it 17.19 attaches until 30 days after the debtor receives possession of 17.20 the goods and thereafter if the goods are taken to the other 17.21 jurisdiction before the end of the 30-day period. 17.22 (d) When collateral is brought into and kept in this state 17.23 while subject to a security interest perfected under the law of 17.24 the jurisdiction from which the collateral was removed, the 17.25 security interest remains perfected, but if action is required 17.26 by part 3 of this article to perfect the security interest, 17.27 (i) if the action is not taken before the expiration of the 17.28 period of perfection in the other jurisdiction or the end of 17.29 four months after the collateral is brought into this state, 17.30 whichever period first expires, the security interest becomes 17.31 unperfected at the end of that period and is thereafter deemed 17.32 to have been unperfected as against a person who became a 17.33 purchaser after removal; 17.34 (ii) if the action is taken before the expiration of the 17.35 period specified in subparagraph (i), the security interest 17.36 continues perfected thereafter; 18.1 (iii) for the purpose of priority over a buyer of consumer 18.2 goods (subsection (2) of section 336.9-307), the period of the 18.3 effectiveness of a filing in the jurisdiction from which the 18.4 collateral is removed is governed by the rules with respect to 18.5 perfection in subparagraphs (i) and (ii). 18.6 (2) Certificate of title. 18.7 (a) This subsection applies to goods covered by a 18.8 certificate of title issued under a statute of this state or of 18.9 another jurisdiction under the law of which indication of a 18.10 security interest on the certificate is required as a condition 18.11 of perfection. 18.12 (b) Except as otherwise provided in this subsection, 18.13 perfection and the effect of perfection or nonperfection of the 18.14 security interest are governed by the law (including the 18.15 conflict of laws rules) of the jurisdiction issuing the 18.16 certificate until four months after the goods are removed from 18.17 that jurisdiction and thereafter until the goods are registered 18.18 in another jurisdiction, but in any event not beyond surrender 18.19 of the certificate. After the expiration of that period, the 18.20 goods are not covered by the certificate of title within the 18.21 meaning of this section. 18.22 (c) Except with respect to the rights of a buyer described 18.23 in the next paragraph, a security interest, perfected in another 18.24 jurisdiction otherwise than by notation on a certificate of 18.25 title, in goods brought into this state and thereafter covered 18.26 by a certificate of title issued by this state is subject to the 18.27 rules stated in paragraph (d) of subsection (1). 18.28 (d) If goods are brought into this state while a security 18.29 interest therein is perfected in any manner under the law of the 18.30 jurisdiction from which the goods are removed and a certificate 18.31 of title is issued by this state and the certificate does not 18.32 show that the goods are subject to the security interest or that 18.33 they may be subject to security interests not shown on the 18.34 certificate, the security interest is subordinate to the rights 18.35 of a buyer of the goods who is not in the business of selling 18.36 goods of that kind to the extent that the buyer gives value and 19.1 receives delivery of the goods after issuance of the certificate 19.2 and without knowledge of the security interest. 19.3 (3) Accounts, general intangibles and mobile goods. 19.4 (a) This subsection applies to accounts (other than an 19.5 account described in subsection (5) on minerals) and general 19.6 intangibles (other than uncertificated securities) and to goods 19.7 which are mobile and which are of a type normally used in more 19.8 than one jurisdiction, such as motor vehicles, trailers, rolling 19.9 stock, airplanes, shipping containers, road building and 19.10 construction machinery and commercial harvesting machinery and 19.11 the like, if the goods are equipment or are inventory leased or 19.12 held for lease by the debtor to others, and are not covered by a 19.13 certificate of title described in subsection (2). 19.14 (b) The law (including the conflict of laws rules) of the 19.15 jurisdiction in which the debtor is located governs the 19.16 perfection and the effect of perfection or nonperfection of the 19.17 security interest. 19.18 (c) If, however, the debtor is located in a jurisdiction 19.19 which is not a part of the United States, and which does not 19.20 provide for perfection of the security interest by filing or 19.21 recording in that jurisdiction, the law of the jurisdiction in 19.22 the United States in which the debtor has its major executive 19.23 office in the United States governs the perfection and the 19.24 effect of perfection or nonperfection of the security interest 19.25 through filing. In the alternative, if the debtor is located in 19.26 a jurisdiction which is not a part of the United States or 19.27 Canada and the collateral is accounts or general intangibles for 19.28 money due or to become due, the security interest may be 19.29 perfected by notification to the account debtor. As used in 19.30 this paragraph, "United States" includes its territories and 19.31 possessions and the Commonwealth of Puerto Rico. 19.32 (d) A debtor shall be deemed located at the debtor's place 19.33 of business if the debtor has one, at the chief executive office 19.34 if there is more than one place of business, otherwise at the 19.35 debtor's residence. If, however, the debtor is a foreign air 19.36 carrier under the Federal Aviation Act of 1958, as amended, it 20.1 shall be deemed located at the designated office of the agent 20.2 upon whom service of process may be made on behalf of the 20.3 foreign air carrier. 20.4 (e) A security interest perfected under the law of the 20.5 jurisdiction of the location of the debtor is perfected until 20.6 the expiration of four months after a change of the debtor's 20.7 location to another jurisdiction, or until perfection would have 20.8 ceased by the law of the first jurisdiction, whichever period 20.9 first expires. Unless perfected in the new jurisdiction before 20.10 the end of that period, it becomes unperfected thereafter and is 20.11 deemed to have been unperfected as against a person who became a 20.12 purchaser after the change. 20.13 (4) Chattel paper. 20.14 The rules stated for goods in subsection (1) apply to a 20.15 possessory security interest in chattel paper. The rules stated 20.16 for accounts in subsection (3) apply to a nonpossessory security 20.17 interest in chattel paper, but the security interest may not be 20.18 perfected by notification to the account debtor. 20.19 (5) Minerals. 20.20 Perfection and the effect of perfection or nonperfection of 20.21 a security interest which is created by a debtor who has an 20.22 interest in minerals or the like (including oil and gas) before 20.23 extraction and which attaches thereto as extracted, or which 20.24 attaches to an account resulting from the sale thereof at the 20.25 wellhead or minehead are governed by the law (including the 20.26 conflict of laws rules) of the jurisdiction wherein the wellhead 20.27 or minehead is located. 20.28 (6) Investment property. 20.29 (a) This subsection applies to investment property. 20.30 (b) Except as otherwise provided in paragraph (f), during 20.31 the time that a security certificate is located in a 20.32 jurisdiction, perfection of a security interest, the effect of 20.33 perfection or nonperfection, and the priority of a security 20.34 interest in the certificated security represented thereby are 20.35 governed by the local law of that jurisdiction. 20.36 (c) Except as otherwise provided in paragraph (f), 21.1 perfection of a security interest, the effect of perfection or 21.2 nonperfection, and the priority of a security interest in an 21.3 uncertificated security are governed by the local law of the 21.4 issuer's jurisdiction as specified in section 336.8-110(d). 21.5 (d) Except as otherwise provided in paragraph (f), 21.6 perfection of a security interest, the effect of perfection or 21.7 nonperfection, and the priority of a security interest in a 21.8 security entitlement or securities account are governed by the 21.9 local law of the securities intermediary's jurisdiction as 21.10 specified in section 336.8-110(e). 21.11 (e) Except as otherwise provided in paragraph (f), 21.12 perfection of a security interest, the effect of perfection or 21.13 nonperfection, and the priority of a security interest in a 21.14 commodity contract or commodity account are governed by the 21.15 local law of the commodity intermediary's jurisdiction. The 21.16 following rules determine a "commodity intermediary's 21.17 jurisdiction" for purposes of this paragraph: 21.18 (i) If an agreement between the commodity intermediary and 21.19 commodity customer specifies that it is governed by the law of a 21.20 particular jurisdiction, that jurisdiction is the commodity 21.21 intermediary's jurisdiction. 21.22 (ii) If an agreement between the commodity intermediary and 21.23 commodity customer does not specify the governing law as 21.24 provided in subparagraph (i), but expressly specifies that the 21.25 commodity account is maintained at an office in a particular 21.26 jurisdiction, that jurisdiction is the commodity intermediary's 21.27 jurisdiction. 21.28 (iii) If an agreement between the commodity intermediary 21.29 and commodity customer does not specify a jurisdiction as 21.30 provided in subparagraph (i) or (ii), the commodity 21.31 intermediary's jurisdiction is the jurisdiction in which is 21.32 located the office identified in an account statement as the 21.33 office serving the commodity customer's account. 21.34 (iv) If an agreement between the commodity intermediary and 21.35 commodity customer does not specify a jurisdiction as provided 21.36 in subparagraph (i) or (ii) and an account statement does not 22.1 identify an office serving the commodity customer's account as 22.2 provided in subparagraph (iii), the commodity intermediary's 22.3 jurisdiction is the jurisdiction in which is located the chief 22.4 executive office of the commodity intermediary. 22.5 (f) Perfection of a security interest by filing, automatic 22.6 perfection of a security interest in investment property granted 22.7 by a broker or securities intermediary, and automatic perfection 22.8 of a security interest in a commodity contract or commodity 22.9 account granted by a commodity intermediary are governed by the 22.10 local law of the jurisdiction in which the debtor is located. 22.11 Sec. 4. Minnesota Statutes 1996, section 336.9-104, is 22.12 amended to read: 22.13 336.9-104 [TRANSACTIONS EXCLUDED FROM ARTICLE.] 22.14 This article does not apply 22.15 (a) to a security interest subject to any statute of the 22.16 United States such as the Ship Mortgage Act, 1920, to the extent 22.17 that such statute governs the rights of parties to and third 22.18 parties affected by transactions in particular types of 22.19 property; or 22.20 (b) to a landlord's lien; or 22.21 (c) to a lien given by statute or other rule of law for 22.22 services or materials except as provided in section 336.9-310 on 22.23 priority of such liens; or 22.24 (d) to a transfer of a claim for wages, salary or other 22.25 compensation of an employee; or 22.26 (e) to a transfer by a government or governmental 22.27 subdivision or agency to the extent that this article conflicts 22.28 with special statutory provisions relating to such a transfer; 22.29 or 22.30 (f) to a sale of accounts or chattel paper as part of a 22.31 sale of the business out of which they arose, or an assignment 22.32 of accounts or chattel paper which is for the purpose of 22.33 collection only, or a transfer of a right to payment under a 22.34 contract to an assignee who is also to do the performance under 22.35 the contract or a transfer of a single account to an assignee in 22.36 whole or partial satisfaction of a preexisting indebtedness; or 23.1 (g) to a transfer of an interest or claim in or under any 23.2 policy of insurance, except as provided with reference to 23.3 proceeds (section 336.9-306) and priorities in proceeds section 23.4 (336.9-312); or 23.5 (h) to a right represented by a judgment (other than a 23.6 judgment taken on a right to payment which was collateral); or 23.7 (i) to any right of setoff; or 23.8 (j) except to the extent that provision is made for 23.9 fixtures in section 336.9-313, to the creation or transfer of an 23.10 interest in or lien on real estate, including a lease or rents 23.11 thereunder; or 23.12 (k) to a transfer in whole or in part of any claim arising 23.13 out of tort; or 23.14 (l) to a transfer of an interest in any deposit account 23.15 (subsection (l) of section 336.9-105), except as provided with 23.16 respect to proceeds (section 336.9-306) and priorities in 23.17 proceeds (section 336.9-312) .; or 23.18 (m) except to the extent this article is not superseded by 23.19 sections 327.61 to 327.67, to the repossession of a manufactured 23.20 home meeting the definition contained in section 327.62; or 23.21 (n) to a transfer of an interest in a letter of credit 23.22 other than the rights to proceeds of a written letter of credit. 23.23 Sec. 5. Minnesota Statutes 1996, section 336.9-105, is 23.24 amended to read: 23.25 336.9-105 [DEFINITIONS AND INDEX OF DEFINITIONS.] 23.26 (1) In this article unless the context otherwise requires: 23.27 (a) "Account debtor" means the person who is obligated on 23.28 an account, chattel paper or general intangible; 23.29 (b) "Chattel paper" means a writing or writings which 23.30 evidence both a monetary obligation and a security interest in 23.31 or a lease of specific goods, but a charter or other contract 23.32 involving the use or hire of a vessel is not chattel paper. 23.33 When a transaction is evidenced both by such a security 23.34 agreement or a lease and by an instrument or a series of 23.35 instruments, the group of writings taken together constitutes 23.36 chattel paper; 24.1 (c) "Collateral" means the property subject to a security 24.2 interest, and includes accounts and chattel paper which have 24.3 been sold; 24.4 (d) "Debtor" means the person who owes payment or other 24.5 performance of the obligation secured, whether or not the person 24.6 owns or has rights in the collateral, and includes the seller of 24.7 accounts or chattel paper. Where the debtor and the owner of 24.8 the collateral are not the same person, the term "debtor" means 24.9 the owner of the collateral in any provision of the article 24.10 dealing with the collateral, the obligor in any provision 24.11 dealing with the obligation, and may include both where the 24.12 context so requires; 24.13 (e) "Deposit account" means a demand, time, savings, 24.14 passbook or like account maintained with a bank, savings 24.15 association, credit union or like organization, other than an 24.16 account evidenced by a certificate of deposit; 24.17 (f) "Document" means document of title as defined in the 24.18 general definitions of article 1 (section 336.1-201) and a 24.19 receipt of the kind described in subsection (2) of section 24.20 336.7-201; 24.21 (g) "Encumbrance" includes real estate mortgages and other 24.22 liens on real estate and all other rights in real estate that 24.23 are not ownership interests; 24.24 (h) "Goods" includes all things which are movable at the 24.25 time the security interest attaches or which are fixtures 24.26 (section 336.9-313), but does not include money, documents, 24.27 instruments, investment property, accounts, chattel paper, 24.28 general intangibles, or minerals or the like (including oil and 24.29 gas) before extraction. "Goods" also include standing timber 24.30 which is to be cut and removed under a conveyance or contract 24.31 for sale, the unborn young of animals and growing crops; 24.32 (i) "Instrument" means a negotiable instrument (defined in 24.33 section 336.3-104) or any other writing which evidences a right 24.34 to the payment of money and is not itself a security agreement 24.35 or lease and is of a type which is in ordinary course of 24.36 business transferred by delivery with any necessary endorsement 25.1 or assignment. The term does not include investment property; 25.2 (j) "Mortgage" means a consensual interest created by a 25.3 real estate mortgage, a trust deed on real estate, or the like; 25.4 (k) An advance is made "pursuant to commitment" if the 25.5 secured party has made a binding promise to make it, whether or 25.6 not a subsequent event of default or other event not within the 25.7 secured party's control has relieved or may relieve the secured 25.8 party from the obligation; 25.9 (l) "Security agreement" means an agreement which creates 25.10 or provides for a security interest; 25.11 (m) "Secured party" means a lender, seller or other person 25.12 in whose favor there is a security interest, including a person 25.13 to whom accounts or chattel paper have been sold. When the 25.14 holders of obligations issued under an indenture of trust, 25.15 equipment trust agreement or the like are represented by a 25.16 trustee or other person, the representative is the secured 25.17 party; and 25.18 (n) "Transmitting utility" means any person engaged in the 25.19 railroad, street railway or trolley bus business, the electric 25.20 or electronics communications transmission business, the 25.21 transmission of goods by pipeline, or the transmission or the 25.22 production and transmission of electricity, steam, gas or water, 25.23 or the provision of sewer service. Any person filing a 25.24 financing statement under this article and under authority of 25.25 the provisions of Minnesota Statutes 1974, Sections 300.111 to 25.26 300.115 shall be deemed a "transmitting utility" hereunder. 25.27 (2) Other definitions applying to this article and the 25.28 sections in which they appear are: 25.29 "Account," section 336.9-106. 25.30 "Attach," section 336.9-203. 25.31 "Commodity contract," section 336.9-115. 25.32 "Commodity customer," section 336.9-115. 25.33 "Commodity intermediary," section 336.9-115. 25.34 "Construction mortgage," section 336.9-313(1). 25.35 "Consumer goods," section 336.9-109(1). 25.36 "Control," section 336.9-115. 26.1 "Equipment," section 336.9-109(2). 26.2 "Farm products," section 336.9-109(3). 26.3 "Fixture," section 336.9-313. 26.4 "Fixture filing," section 336.9-313. 26.5 "General intangibles," section 336.9-106. 26.6 "Inventory," section 336.9-109(4). 26.7 "Investment property," section 336.9-115. 26.8 "Lien creditor," section 336.9-301(3). 26.9 "Motor vehicle," section 336.9-401(7). 26.10 "Proceeds," section 336.9-306(1). 26.11 "Purchase money security interest," section 336.9-107. 26.12 "United States," section 336.9-103. 26.13 (3) The following definitions in other articles apply to 26.14 this article: 26.15 "Broker," section 336.8-102. 26.16 "Certificated security," section 336.8-102. 26.17 "Check," section 336.3-104. 26.18 "Clearing corporation," section 336.8-102. 26.19 "Contract for sale," section 336.2-106. 26.20 "Control," section 336.8-106. 26.21 "Delivery," section 336.8-301. 26.22 "Entitlement holder," section 336.8-102. 26.23 "Financial asset," section 336.8-102. 26.24 "Holder in due course," section 336.3-302. 26.25 "Letter of credit," section 336.5-102. 26.26 "Note," section 336.3-104. 26.27 "Proceeds of a letter of credit," section 336.5-114(a). 26.28 "Sale," section 336.2-106. 26.29 "Securities intermediary," section 336.8-102. 26.30 "Security," section 336.8-102. 26.31 "Security certificate," section 336.8-102. 26.32 "Security entitlement," section 336.8-102. 26.33 "Uncertificated security," section 336.8-102. 26.34 (4) In addition article 1 contains general definitions and 26.35 principles of construction and interpretation applicable 26.36 throughout this article. 27.1 Sec. 6. Minnesota Statutes 1996, section 336.9-106, is 27.2 amended to read: 27.3 336.9-106 [DEFINITIONS: "ACCOUNT"; "GENERAL INTANGIBLES".] 27.4 "Account" means any right to payment for goods sold or 27.5 leased or for services rendered which is not evidenced by an 27.6 instrument or chattel paper whether or not it has been earned by 27.7 performance. "General intangibles" means any personal property 27.8 (including things in action) other than goods, accounts, chattel 27.9 paper, documents, instruments, investment property, rights to 27.10 proceeds of written letters of credit, and money. All rights 27.11 earned or unearned under a charter or other contract involving 27.12 the use or hire of a vessel and all rights incident to the 27.13 charter or contract are accounts. 27.14 Sec. 7. Minnesota Statutes 1996, section 336.9-304, is 27.15 amended to read: 27.16 336.9-304 [PERFECTION OF SECURITY INTEREST IN INSTRUMENTS, 27.17 DOCUMENTS, PROCEEDS OF A WRITTEN LETTER OF CREDIT, AND GOODS 27.18 COVERED BY DOCUMENTS; PERFECTION BY PERMISSIVE FILING; TEMPORARY 27.19 PERFECTION WITHOUT FILING OR TRANSFER OF POSSESSION.] 27.20 (1) A security interest in chattel paper or negotiable 27.21 documents may be perfected by filing. A security interest in 27.22 the rights to proceeds of a written letter of credit can be 27.23 perfected only by the secured party's taking possession of the 27.24 letter of credit. A security interest in money or instruments 27.25 (other than instruments which constitute part of chattel paper) 27.26 can be perfected only by the secured party's taking possession, 27.27 except as provided in subsections (4) and (5) of this section 27.28 and subsections (2) and (3) of section 336.9-306 on proceeds. 27.29 (2) During the period that goods are in the possession of 27.30 the issuer of a negotiable document therefor, a security 27.31 interest in the goods is perfected by perfecting a security 27.32 interest in the document, and any security interest in the goods 27.33 otherwise perfected during such period is subject thereto. 27.34 (3) A security interest in goods in the possession of a 27.35 bailee other than one who has issued a negotiable document 27.36 therefor is perfected by issuance of a document in the name of 28.1 the secured party or by the bailee's receipt of notification of 28.2 the secured party's interest or by filing as to the goods. 28.3 (4) A security interest in instruments, certificated 28.4 securities, or negotiable documents is perfected without filing 28.5 or the taking of possession for a period of 21 days from the 28.6 time it attaches to the extent that it arises for new value 28.7 given under a written security agreement. 28.8 (5) A security interest remains perfected for a period of 28.9 21 days without filing where a secured party having a perfected 28.10 security interest in an instrument, a certificated security, a 28.11 negotiable document, or goods in possession of a bailee other 28.12 than one who has issued a negotiable document therefor: 28.13 (a) makes available to the debtor the goods or documents 28.14 representing the goods for the purpose of ultimate sale or 28.15 exchange or for the purpose of loading, unloading, storing, 28.16 shipping, transshipping, manufacturing, processing or otherwise 28.17 dealing with them in a manner preliminary to their sale or 28.18 exchange but priority between conflicting security interests in 28.19 the goods is subject to subsection (3) of section 336.9-312; or 28.20 (b) delivers the instrument or certificated security to the 28.21 debtor for the purpose of ultimate sale or exchange or of 28.22 presentation, collection, renewal, or registration of transfer. 28.23 (6) After the 21 day period in subsections (4) and (5) 28.24 perfection depends upon compliance with applicable provisions of 28.25 this article. 28.26 Sec. 8. Minnesota Statutes 1996, section 336.9-305, is 28.27 amended to read: 28.28 336.9-305 [WHEN POSSESSION BY SECURED PARTY PERFECTS 28.29 SECURITY INTEREST WITHOUT FILING.] 28.30 A security interest in letters of credit and advices of28.31 credit (subsection (2) (a) of section 336.5-116),goods, 28.32 instruments, money, negotiable documents, or chattel paper may 28.33 be perfected by the secured party's taking possession of the 28.34 collateral. A security interest in the rights to proceeds of a 28.35 written letter of credit may be perfected only by the secured 28.36 party's taking possession of the letter of credit. If such 29.1 collateral other than goods covered by a negotiable document is 29.2 held by a bailee, the secured party is deemed to have possession 29.3 from the time the bailee receives notification of the secured 29.4 party's interest. A security interest is perfected by 29.5 possession from the time possession is taken without relation 29.6 back and continues only so long as possession is retained, 29.7 unless otherwise specified in this article. The security 29.8 interest may be otherwise perfected as provided in this article 29.9 before or after the period of possession by the secured party. 29.10 Sec. 9. [REVISOR'S INSTRUCTION.] 29.11 The revisor shall change the reference to "section 29.12 336.5-103" to "section 336.5-102" wherever it appears in 29.13 Minnesota Statutes, sections 223.17 and 223.177.