ARIZONA HOUSE OF REPRESENTATIVES

Fifty-sixth Legislature

First Regular Session

House: COM DP 10-0-0-0


HB 2770: uniform commercial code; 2022 amendments

Sponsor: Representative Wilmeth, LD 2

House Engrossed

Overview

Makes various changes and updates to the Uniform Commercial Code.

History

The Uniform Law Commission (also known as the National Conference of Commissioners on Uniform State Laws) provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.

The Uniform Commercial Code is a comprehensive set of laws governing all commercial transactions in the United States.  The code is not federal law, but a uniformly adopted state law. The 2022 amendments to the Uniform Commercial Code address emerging technologies, providing updated rules for commercial transactions involving virtual currencies, distributed ledger technologies (including blockchain), artificial intelligence and other technological developments. Additionally, the amendments add a new section addressing certain types of digital assets defined as “Controllable Electronic Records” (CERs). 

Arizona's uniform commercial code governs the sales of goods, leases of personal property, negotiable instruments, bank deposits and collections, rights and obligations connected with fund transfers, letters of credit, investment securities and secured transactions.

☐ Prop 105 (45 votes)	     ☐ Prop 108 (40 votes)      ☐ Emergency (40 votes)	☐ Fiscal NoteProvisions

Sales

1.   Outlines the extent to which a hybrid transaction applies to the scope of a sales transaction. (Sec. 6)

2.   Defines hybrid transaction. (Sec. 7)

Leases

3.   Outlines the extent to which a hybrid lease applies to the scope of a lease transaction. (Sec. 13)

4.   Defines hybrid lease. (Sec. 14)

Negotiable Instruments

5.   Adds factors to determine what is considered as a negotiable instrument. (Sec. 21)

6.   Modifies the definition of issue. (Sec. 22)

7.   Removes restrictions relating to signing an instrument. (Sec. 23)

8.   Specifies the obligation of a party to pay a check is not discharged solely by destruction of the check. (Sec. 24)

Funds Transfers

9.   Adds that a security procedure may impose an obligation on the receiving bank or the customer. (Sec. 26)

10.  Clarifies that requiring a payment order to be sent from a known email address, IP address or telephone number is not by itself a security procedure. (Sec. 26)

 

Letters of Credit

11.  Clarifies that a letter of credit may be issued in any form that is a signed record, rather than be authenticated by a signature. (Sec. 34)

12.  Stipulates that a branch of a bank is considered to be located at the address indicated in the branch's undertaking, if more than one address is indicated, at the address from which the undertaking was issued. (Sec. 35)

Documents of Title

13.  Deletes the definition of sign. (Sec. 36)

14.  Provides criteria and conditions in determining whether a person's power is exclusive and has control of an electronic document. (Sec. 37)

Investment Securities

15.  Specifies a controllable account, controllable electronic record or controllable payment intangible is not a financial asset unless specified statutory criteria are applicable. (Sec. 39)

16.  Modifies the conditions that determine whether a purchaser has control of a security entitlement. (Sec. 40)

17.  Specifies a person that has control, relating to investment securities, is not required to acknowledge that the person has control of behalf of a purchaser. (Sec. 40)

18.  Specifies the controlling person does not owe any duty to the purchaser and is not required to confirm the acknowledgment to any other person. (Sec. 40)

19.  Asserts the local law of the issuer's jurisdiction or the securities intermediary's jurisdiction governs a specified matter or transaction. (Sec. 41)

Secured Transactions

20.  Modifies the definition of account and chattel paper. (Sec. 43)

21.  Defines assignee, assignor, controllable account, controllable payment intangible, electronic money, money, and tangible money. (Sec. 43)

22.  Deletes the definition of authenticate, electronic chattel paper, send and tangible chattel paper. (Sec. 43)

23.  Includes a condition in determining if a secured party has control of a deposit account. (Sec. 44)

24.  Outlines certain conditions and criteria in determining if a purchaser has control of an authoritative electronic copy of a record evidencing chattel paper. (Sec. 46)

25.  Outlines certain conditions and criteria in determining if a person has control of electronic money. (Sec. 46)

26.  Specifies a condition in determining if a secured party has control of a controllable account or controllable payment intangible. (Sec. 46)

27.  Specifies a person is not required to acknowledge or confirm if they have control. (Sec. 46)

28.  Includes a condition in determining if a security interest is enforceable against the debtor and third parties with respect to the collateral. (Sec. 47)

29.  Adds that a security interest may attach to consumer goods as proceeds, to a commercial tort claim or under an after-acquired property clause. (Sec. 48)

30.  Adds a requirement for a secured party having control of an authoritative electronic copy of a record evidencing chattel paper, an electronic document, electronic money, or a controllable electronic record to transfer the copy or control to the debtor or a person designated by the debtor. (Sec. 50)

31.  Clarifies law governing perfection and priority of security interests in deposit accounts and investment property in relation to the bank's jurisdiction. (Sec. 54, 55)

32.  Provides regulations of law governing perfection and priority of security interests in chattel paper, controllable accounts, controllable electronic records and controllable payment intangibles. (Sec. 56)

33.  Adds that a security interest in controllable accounts, controllable electronic records, controllable payment intangibles or negotiable documents may be perfected by filing. (Sec. 58)

34.  Includes controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, investment property and letter-of-credit rights to the statutory requirements relating to perfection by control. (Sec. 60)

35.  Includes requirements relating to perfecting security interest in chattel paper by possession and control. (Sec. 61)

36.  Specifies the criteria for a buyer to take free of a security interest of chattel paper, an electronic document, a controllable electronic record, and a controllable account or a controllable payment intangible. (Sec. 63)

37.  Specifies the priority of security interest in controllable accounts, controllable electronic records and controllable payment intangibles. (Sec. 66)

38.  Clarifies the priority of chattel paper relating to tangible copies and electronic copies. (Sec. 67)

39.  stipulates a transferee of electronic money takes the money free of a security interest if the transferee obtains control of the money without acting in collusion with the debtor in violating the rights of the secured party. (Sec. 69)

40.  Provides criteria in determining if a secured party owes a duty based on its status as a secured party to a person. (Sec. 78)

41.  Modifies the contents of the notification of disposition of collateral form. (Sec. 81)

42.  Prescribes instructions applicable to the notification of disposition of collateral form. (Sec. 81)

43.  Modifies the contents of the notification before disposition of collateral form. (Sec. 82)

44.  Prescribes instructions applicable to the notification before disposition of collateral form. (Sec. 82)

45.  Includes certain limitations on liability of a secured party do not apply to limit the liability of a secured party to a person if specified conditions are met. (Sec. 89)

Controllable Electronic Records

Chapter 12 (Sec. 90)

46.  Provides for the acquisition and purchase of rights applicable to a controllable account, controllable electronic record and controllable payment intangible.

47.  Outlines criteria in determining if a person has control of a controllable electronic record, includes the exclusiveness of a power.

48.  Specifies the person, who acknowledges the control of a controllable electronic record, does not owe any duty to the other person and is not required to confirm the acknowledgment.

49.  Provides requirements for the discharge of account debtor on a controllable account or controllable payment intangible.

50.  Specifies the requirements for account debtor are subject to law which establishes a different rule for an account debtor.

51.  Asserts the local law of a controllable electronic record's jurisdiction govern a matter covered by statutory provisions relating to controllable electronic records.

52.  Delineates rules for determining a controllable electronic record's jurisdiction.

53.  Stipules the governing laws with respect to the District of Columbia.

54.  Assert statutory rights by a purchase or qualifying purchaser are governed by the applicable law at the time of purchase

55.  Defines pertinent terms.

Transitional Provisions

Chapter 13 (Sec. 90)

56.  Asserts a transaction validly entered into before the effective date of this Act remain valid and may be terminated, completed, consummated or enforced as required or permitted by law.

57.  Specifies certain statutory changes apply to a transaction, lien or other interest in property regardless of when it was entered into, created or acquired.

58.  Asserts uniform commerce code laws, as amended in 2023, do not affect an action, case or proceeding commenced before the effective date of this Act.

59.  Prescribes the enforceability of a security interest that was perfected or unperfected prior to the effective date of this Act.

60.  Prescribes the effectiveness of actions taken before the effective date of this Act.

61.  Stipulates the filing of a financing statement before the effective date of this Act is effective to perfect a security interest to the extent the filing would satisfy the statutory requirements for perfection.

62.  Specifies the taking of an action before the effective date of this Act is sufficient for the enforceability of a security interest on the effective if the action would satisfy the statutory requirements for enforceability as amended in 2023.

63.  Prescribes requirements in determining the priority of conflicting claims to collateral and the priority of conflicting claims relating to property.

64.  Defines pertinent terms.

Miscellaneous

65.  Defines electronic and sign. (Sec. 2)

66.  Modifies definitions of pertinent terms relating to the uniform commercial code. (Sec. 2)

67.  Makes clarifying and technical changes. (Sec. 1- 5, 8-12, 14-20, 25, 27-33, 35, 37, 38, 42, 43, 47, 49-53, 57-59, 62-65, 68-77, 79, 80, 83-88)

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71.                    HB 2770

72.  Initials PRB           Page 0 House Engrossed

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