Bill Summary – FastDemocracy

Enrolled, An Act,


 A BILL
AN ACT

Relating to the Uniform Commercial Code; to add
Article 12 to the Uniform Commercial Code to govern the
property rights of certain intangible digital assets
(controllable electronic records), including electronic rights
to payment, to provide for a manner to establish the transfer
and control of those assets, to provide a mechanism for
evidencing certain rights of payment, and to adopt special
rules with regard to the payment obligations and conditions of
discharge of account debtors on controllable accounts and
controllable payment intangibles; to amend Sections 7-1-201,
7-1-204, 7-1-301, 7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202,
7-2-203, 7-2-205, 7-2-209, 7-2A-102, 7-2A-103, 7-2A-107,
7-2A-201, 7-2A-202, 7-2A-203, 7-2A-205, 7-2A-208, 7-3-104,
7-3-105, 7-3-401, 7-3-604, 7-4A-103, 7-4A-201, 7-4A-202,
7-4A-203, 7-4A-207, 7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305,
7-5-104, 7-5-116, 7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106,
7-8-110, 7-8-303, 7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203,
7-9A-204, 7-9A-207, 7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301, 25
7-9A-304, 7-9A-305, 7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314,
7-9A-316, 7-9A-317, 7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331, 27
7-9A-332, 7-9A-334, 7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408,

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7-9A-509, 7-9A-513, 7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611, 29
7-9A-613, 7-9A-614, 7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620,
7-9A-621, 7-9A-624, and 7-9A-628, Code of Alabama 1975, and to
add Sections 7-9A-107A, 7-9A-107B, 7-9A-306A, 7-9A-306B,
7-9A-314A, and 7-9A-326A to the Code of Alabama 1975, to
provide a substantial revision to the Uniform Commercial Code
in conformity with a substantial portion of the Uniform
Commercial Code Amendments (2022), to clarify the meaning of
the term chattel paper and other definitions, to define and
provide for hybrid transactions, and to provide extensive
amendments to the Uniform Commercial Code providing for the
perfection of security interests in controllable electronic
records, documents of title, chattel paper, and other assets;
and to add Article 12A to the Uniform Commercial Code to
provide transitional provisions for the Uniform Commercial
Code Amendments (2022).
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 7-1-201, 7-1-204, 7-1-301,
7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202, 7-2-203, 7-2-205,
7-2-209, 7-2A-102, 7-2A-103, 7-2A-107, 7-2A-201, 7-2A-202,
7-2A-203, 7-2A-205, 7-2A-208, 7-3-104, 7-3-105, 7-3-401,
7-3-604, 7-4A-103, 7-4A-201, 7-4A-202, 7-4A-203, 7-4A-207,
7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305, 7-5-104, 7-5-116,
7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106, 7-8-110, 7-8-303,
7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203, 7-9A-204, 7-9A-207, 53
7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301, 7-9A-304, 7-9A-305,
7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314, 7-9A-316, 7-9A-317, 55
7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331, 7-9A-332, 7-9A-334,

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7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408, 7-9A-509, 7-9A-513, 57
7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611, 7-9A-613, 7-9A-614,
7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620, 7-9A-621, 7-9A-624,
and 7-9A-628, Code of Alabama 1975, are amended to read as
follows:
"§7-1-201.General definitions.
(a) [Reserved].
(b) Subject to additional definitions contained in the
subsequent other articles of this title the Uniform Commercial
Code which are applicable that apply to specific particular
articles or parts thereof, and unless the context otherwise
requires, in this title:
(1) "Action," in the sense of a judicial proceeding,
includes recoupment, counterclaim, set-off, suit in equity,
and any other proceeding in which rights are determined.
(2) "Aggrieved party" means a party entitled to pursue
a remedy.
(3) "Agreement," as distinguished from "contract,"
means the bargain of the parties in fact, as found in their
language or inferred from other circumstances, including
course of performance, course of dealing, or usage of trade as
provided in Section 7-1-303.
(4) "Bank" means a person engaged in the business of
banking and includes a savings bank, savings and loan
association, credit union, and trust company.
(5) "Bearer" means a person in control of a negotiable
electronic document of title or a person in possession of a
negotiable instrument, negotiable tangible document of title,

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or certificated security that is payable to bearer or indorsed
in blank.
(6) "Bill of lading" means a document of title
evidencing the receipt of goods for shipment issued by a
person engaged in the business of transporting or forwarding
goods. The term does not include a warehouse receipt.
(7) "Branch" includes a separately incorporated foreign
branch of a bank.
(8) "Burden of establishing" a fact means the burden of
persuading the trier of fact that the existence of the fact is
more probable than its nonexistence.
(9) "Buyer in ordinary course of business" means a
person that buys goods in good faith, without knowledge that
the sale violates the rights of another person in the goods,
and in the ordinary course from a person, other than a
pawnbroker, in the business of selling goods of that kind. A
person buys goods in the ordinary course if the sale to the
person comports with the usual or customary practices in the
kind of business in which the seller is engaged or with the
seller's own usual or customary practices. A person that sells
oil, gas, or other minerals at the wellhead or mine is a
person in the business of selling goods of that kind. A buyer
in ordinary course of business may buy for cash, by exchange
of other property, or on secured or unsecured credit, and may
acquire goods or documents of title under a preexisting
contract for sale. Only a buyer that takes possession of the
goods or has a right to recover the goods from the seller
under Article 2 may be a buyer in ordinary course of business.

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"Buyer in ordinary course of business" does not include a
person that acquires goods in a transfer in bulk or as
security for or in total or partial satisfaction of a money
debt.
(10) "Conspicuous," with reference to a term, means so
written, displayed, or presented that, based on the totality
of the circumstances, a reasonable person against which it is
to operate ought to have noticed it. Whether a term is
"conspicuous" or not is a decision for the court as a matter
of law. Conspicuous terms include the following:
(A) A heading in capitals equal to or greater in size
than the surrounding text, or in contrasting type, font, or
color to the surrounding text of the same or lesser size; and
(B) Language in the body of a record or display in
larger type than the surrounding text, or in contrasting type,
font, or color to the surrounding text of the same size, or
set off from surrounding text of the same size by symbols or
other marks that call attention to the language.
(11) "Consumer" means an individual who enters into a
transaction primarily for personal, family, or household
purposes.
(12) "Contract," as distinguished from "agreement,"
means the total legal obligation that results from the
parties' agreement as determined by this title as supplemented
by any other applicable laws.
(13) "Creditor" includes a general creditor, a secured
creditor, a lien creditor, and any representative of
creditors, including an assignee for the benefit of creditors,

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a trustee in bankruptcy, a receiver in equity, and an executor
or administrator of an insolvent debtor's or assignor's
estate.
(14) "Defendant" includes a person in the position of
defendant in a counterclaim, cross-claim, or third-party
claim.
(15) "Delivery," with respect to an instrument,
electronic document of title, or chattel paper, means
voluntary transfer of possession control and, with respect to
an instrument, a tangible document of title, or an
authoritative tangible copy of record evidencing chattel
paper, means voluntary transfer of possession.
(16) "Document of title" means a record (i) that in the
regular course of business or financing is treated as
adequately evidencing that the person in possession or control
of the record is entitled to receive, control, hold, and
dispose of the record and the goods the record covers and (ii)
that purports to be issued by or addressed to a bailee and to
cover goods in the bailee's possession which are either
identified or are fungible portions of an identifiable mass.
The term includes bill of lading, transport documents, dock
warrant, dock receipt, warehouse receipt or, and order for the
delivery of goods., and also any other document which in the
regular course of business or financing is treated as
adequately evidencing that the person in possession of it is
entitled to receive, hold, and dispose of the document and the
goods it covers. To be a document of title, a document must
purport to be issued by or addressed to a bailee and purport

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to cover goods in the bailee's possession which are either
identified or are fungible portions of an identified mass. An
electronic document of title means a document of title
evidenced by a record consisting of information stored in an
electronic medium. A tangible document of title means a
document of title evidenced by a record consisting of
information that is inscribed on a tangible medium.
(16A) "Electronic" means relating to technology having
electrical, digital, magnetic, wireless, optical,
electromagnetic, or similar capabilities.
(17) "Fault" means a default, breach, or wrongful act
or omission.
(18) "Fungible goods" means:
(A) Goods of which any unit, by nature or usage of
trade, is the equivalent of any other like unit; or
(B) Goods that by agreement are treated as equivalent.
(19) "Genuine" means free of forgery or counterfeiting.
(20) "Good faith" means honesty in fact in the conduct
or transaction concerned.
(21) "Holder" means:
(A) Thethe person in possession of a negotiable
instrument that is payable either to bearer or to an
identified person that is the person in possession; or
(B) Thethe person in possession of a negotiable
tangible document of title if the goods are deliverable either
to bearer or to the order of the person in possession.; or
(C) the person in control, other than pursuant to
Section 7-7-106(g), of a negotiable electronic document of

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title.
(22) "Insolvency proceeding" includes an assignment for
the benefit of creditors or other proceeding intended to
liquidate or rehabilitate the estate of the person involved.
(23) "Insolvent" means:
(A) Having generally ceased to pay debts in the
ordinary course of business other than as a result of bona
fide dispute;
(B) Being unable to pay debts as they become due; or
(C) Being insolvent within the meaning of federal
bankruptcy law.
(24) "Money" means a medium of exchange that is
currently authorized or adopted by a domestic or foreign
government and is not in an electronic form. The term includes
a monetary unit of account established by an intergovernmental
organization or by pursuant to an agreement between two or
more countries.
(25) "Organization" means a person other than an
individual.
(26) "Party," as distinguished from "third party,"
means a person that has engaged in a transaction or made an
agreement subject to this title.
(27) "Person" means an individual, corporation,
business trust, estate, trust, partnership, limited liability
company, association, joint venture, public corporation,
government, governmental subdivision, agency, or
instrumentality, or any other legal or commercial entity. The
term includes a series or a protected series, however

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denominated, of any entity if the series or protected series
is established under law other than the Uniform Commercial
Code that limits, or limits if conditions specified under the
law are satisfied, the ability of a creditor of the entity or
of any other series or protected series of the entity to
satisfy a claim from assets of the series or protected series.
(28) "Present value" means the amount as of a date
certain of one or more sums payable in the future, discounted
to the date certain by use of either an interest rate
specified by the parties if that rate is not manifestly
unreasonable at the time the transaction is entered into or,
if an interest rate is not so specified, a commercially
reasonable rate that takes into account the facts and
circumstances at the time the transaction is entered into.
(29) "Purchase" means taking by sale, lease, discount,
negotiation, mortgage, pledge, lien, security interest, issue
or reissue, gift, or any other voluntary transaction creating
an interest in property.
(30) "Purchaser" means a person that takes by purchase.
(31) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
(32) "Remedy" means any remedial right to which an
aggrieved party is entitled with or without resort to a
tribunal.
(33) "Representative" means a person empowered to act
for another, including an agent, an officer of a corporation
or association, and a trustee, executor, or administrator of

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an estate.
(34) "Right" includes remedy.
(35) "Security interest" means an interest in personal
property or fixtures which secures payment or performance of
an obligation. "Security interest" includes any interest of a
consignor and a buyer of accounts, chattel paper, a payment
intangible, or a promissory note in a transaction that is
subject to Article 9A. "Security interest" does not include
the special property interest of a buyer of goods on
identification of those goods to a contract for sale under
Section 7-2-401, but a buyer may also acquire a "security
interest" by complying with Article 9A. Except as otherwise
provided in Section 7-2-505, the right of a seller or lessor
of goods under Article 2 or 2A to retain or acquire possession
of the goods is not a "security interest," but a seller or
lessor may also acquire a "security interest" by complying
with Article 9A. The retention or reservation of title by a
seller of goods notwithstanding shipment or delivery to the
buyer under Section 7-2-401 is limited in effect to a
reservation of a "security interest." Whether a transaction in
the form of a lease creates a "security interest" is
determined pursuant to Section 7-1-203.
(36) "Send," in connection with a writing, record, or
notice notification, means:
(A) Toto deposit in the mail, or deliver for
transmission, or transmit by any other usual means of
communication, with postage or cost of transmission provided
for, and properly addressed and, in the case of an instrument,

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to an address specified thereon or otherwise agreed, or if
there be none addressed to any address reasonable under the
circumstances; or
(B) In any other way to cause to be received any record
or notice within the time it would have arrived if properly
sent. to cause the record or notification to be received
within the time it would have been received if properly sent
under subparagraph (A).
(37) "Signed" includes using any symbol executed or
adopted with present intention to adopt or accept a writing.
"Sign" means, with present intent to authenticate or adopt a
record, to:
(A) execute or adopt a tangible symbol; or
(B) attach to or logically associate with the record an
electronic symbol, sound, or process.
"Signed," "signing," and "signature" have corresponding
meanings.
(38) "State" means a State of the United States, the
District of Columbia, Puerto Rico, the United States Virgin
Islands, or any territory or insular possession subject to the
jurisdiction of the United States.
(39) "Surety" includes a guarantor or other secondary
obligor.
(40) "Term" means a portion of an agreement that
relates to a particular matter.
(41) "Unauthorized signature" means a signature made
without actual, implied, or apparent authority. The term
includes a forgery.

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(42) "Warehouse receipt" means a receipt issued by a
person engaged in the business of storing goods for hire.
(43) "Writing" includes printing, typewriting, or any
other intentional reduction to tangible form. "Written" has a
corresponding meaning."
"§7-1-204. Value.
Except as otherwise provided in Articles 3, 4, and 5,
and 12, a person gives value for rights if the person acquires
them:
(1) In return for a binding commitment to extend credit
or for the extension of immediately available credit, whether
or not drawn upon and whether or not a charge-back is provided
for in the event of difficulties in collection;
(2) As security for, or in total or partial
satisfaction of, a preexisting claim;
(3) By accepting delivery under a preexisting contract
for purchase; or
(4) In return for any consideration sufficient to
support a simple contract."
"§7-1-301. Territorial applicability; parties' power to
choose applicable law.
(a) Except as otherwise provided in this section, when
a transaction bears a reasonable relation to this state and
also to another state or nation, the parties may agree that
the law either of this state or of such other state or nation
shall govern their rights and duties.
(b) In the absence of an agreement effective under
subsection (a), and except as provided in subsection (c), this

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