Senate File 540 - Introduced
SENATE FILE 540
BY COMMITTEE ON JUDICIARY
(SUCCESSOR TO SSB 1177)
(COMPANION TO HF 618 BY
COMMITTEE ON JUDICIARY)
A BILL FOR
1 An Act relating to commercial transactions, including control
2 and transmission of electronic records and digital assets.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 DIVISION I
2 UNIFORM COMMERCIAL CODE
3 PART A
4 CONTROLLABLE ELECTRONIC RECORDS
5 Section 1. Section 554.14101, Code 2023, is amended to read
6 as follows:
7 554.14101 Short title.
8 This Article may be cited as the Uniform Commercial Code ——
9 Controllable Electronic Records.
10 Sec. 2. Section 554.14102, Code 2023, is amended to read as
11 follows:
12 554.14102 Definitions.
13 1. Article 14 definitions. Article 14 definitions. In this
14 Article:
15 a. “Controllable electronic record” means a record stored
16 in an electronic medium that can be subjected to control under
17 section 554.14105. The term does not include a controllable
18 account, a controllable payment intangible, a deposit account,
19 electronic chattel paper, an electronic copy of a record
20 evidencing chattel paper, an electronic document of title,
21 electronic money, investment property, or a transferable
22 record.
23 b. “Qualifying purchaser” means a purchaser of a
24 controllable electronic record or an interest in the a
25 controllable electronic record that obtains control of the
26 controllable electronic record for value, in good faith,
27 and without notice of a claim of a property right in the
28 controllable electronic record.
29 c. “Transferable record” means has the meaning provided for
30 that term in:
31 (1) “Transferable record”, as defined in the federal Section
32 201(a)(1) of the Electronic Signatures in Global and National
33 Commerce Act, 15 U.S.C. §7021(a)(1), as amended.; or
34 (2) “Transferable record” as defined in the uniform
35 electronic transactions Uniform Electronic Transactions Act,
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1 section 554D.118, subsection 1.
2 d. “Value” has the meaning provided in section 554.3303,
3 subsection 1, as if references in that subsection to an
4 “instrument” were references to a controllable account,
5 controllable electronic record, or controllable payment
6 intangible.
7 2. Definitions in Article 9. Definitions in Article 9. The
8 definitions in Article 9 of “account debtor”, “authenticate”,
9 “controllable account”, “controllable payment intangible”,
10 “chattel paper”, “deposit account”, “electronic chattel paper”,
11 “electronic money”, and “investment property” apply to this
12 Article.
13 3. Article 1 definitions and principles. Article 1 contains
14 general definitions and principles of construction and
15 interpretation applicable throughout this Article.
16 Sec. 3. Section 554.14103, Code 2023, is amended to read as
17 follows:
18 554.14103 Scope Relation to Article 9 and consumer laws.
19 1. Article 9 governs in case of conflict. If there is
20 conflict between this Article and Article 9, Article 9 governs.
21 2. Applicable consumer law and other laws. A transaction
22 subject to this Article is subject to:
23 a. any applicable rule of law that establishes a different
24 rule for consumers, including as provided in chapter 537 and
25 any other consumer protection statute or regulation of this
26 state; and
27 b. any other statute or regulation of this state that
28 regulates the rates, charges, agreements, and practices for
29 loans, credit sales, or other extensions of credit or credit
30 transactions, including as provided in chapter 535.
31 Sec. 4. Section 554.14104, Code 2023, is amended to read as
32 follows:
33 554.14104 Rights in controllable account, controllable
34 electronic record, and controllable payment intangible.
35 1. Applicability of section to controllable account and
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1 controllable payment intangible. This section applies to the
2 acquisition and purchase of rights in a controllable account
3 or controllable payment intangible, including the rights and
4 benefits under subsections 3, 4, 5, 7, and 8 of a purchaser
5 and a qualifying purchaser, and under subsections 3, 4, and 6,
6 and in the same manner this section applies to a controllable
7 electronic record.
8 2. Control of controllable account and controllable payment
9 intangible. To determine whether a purchaser of a controllable
10 account or a controllable payment intangible is a qualifying
11 purchaser, the purchaser obtains control of the account or
12 payment intangible if it obtains control of the controllable
13 electronic record that evidences the account or payment
14 intangible.
15 2. 3. Applicability of other law to acquisition of
16 rights. Except as provided in this section, law other than
17 this Article determines whether a person acquires a right in
18 a controllable electronic record and the right the person
19 acquires.
20 3. 4. Shelter principle and purchase of limited interest. A
21 purchaser of a controllable electronic record acquires
22 all rights in the controllable electronic record that the
23 transferor had or had power to transfer, except that a
24 purchaser of a limited interest in a controllable electronic
25 record acquires rights only to the extent of the interest
26 purchased.
27 4. 5. Rights of qualifying purchaser. A qualifying
28 purchaser acquires its rights in the controllable electronic
29 record free of a claim of a property right in the controllable
30 electronic record.
31 5. 6. Limitation of rights of qualifying purchaser in
32 other property. Except as provided in subsections 1 and 4
33 5 for a controllable accounts account and a controllable
34 payment intangibles intangible or law other than this Article,
35 a qualifying purchaser takes a right to payment, right to
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1 performance, or other interest in property evidenced by the
2 controllable electronic record subject to a claim of a property
3 right in the right to payment, right to performance, or other
4 interest in property.
5 6. 7. No-action protection for qualifying purchaser. An
6 action shall not be asserted against a qualifying purchaser
7 based on both a purchase by the qualifying purchaser of a
8 controllable electronic record and a claim of a property
9 right in another controllable electronic record, whether the
10 action is framed in conversion, replevin, constructive trust,
11 equitable lien, or other theory.
12 7. 8. Filing not notice. Filing of a financing statement
13 under Article 9 is not notice of a claim of a property right in
14 a controllable electronic record.
15 Sec. 5. Section 554.14105, Code 2023, is amended to read as
16 follows:
17 554.14105 Control of controllable electronic record.
18 1. General rule: —— control of controllable electronic
19 record. A person has control of a controllable electronic
20 record if the electronic record, a record attached to or
21 logically associated with the electronic record, or a system in
22 which the electronic record is recorded:
23 a. the electronic record, a record attached to or logically
24 associated with the electronic record, or a system in which the
25 electronic record is recorded gives the person:
26 (1) the power to avail itself of substantially all the
27 benefit from the electronic record; and
28 (2) exclusive power, subject to subsection 2, to:
29 (a) prevent others from availing themselves of
30 substantially all the benefit from the electronic record; and
31 (b) transfer control of the electronic record to another
32 person or cause another person to obtain control of another
33 controllable electronic record as a result of the transfer of
34 the electronic record; and
35 b. the electronic record, a record attached to or logically
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1 associated with the electronic record, or a system in which
2 the electronic record is recorded enables the person readily
3 to identify itself in any way, including by name, identifying
4 number, cryptographic key, office, or account number, as having
5 the powers specified in paragraph “a”.
6 2. Control through another person. A person has control of
7 a controllable electronic record if another person, other than
8 the transferor of an interest in the electronic record:
9 a. has control of the electronic record and acknowledges
10 that it has control on behalf of the person, or
11 b. obtains control of the electronic record after having
12 acknowledged that it will obtain control of the electronic
13 record on behalf of the person.
14 3. 2. Meaning of exclusive. A power specified in Subject
15 to subsection 1 3, paragraph “a”, subparagraph (2), a power is
16 exclusive, under subsection 1, paragraph “a”, subparagraph (2),
17 subparagraph divisions (a) and (b) even if:
18 a. the controllable electronic record, a record attached
19 to or logically associated with the electronic record, or a
20 system in which the electronic record is recorded limits the
21 use of the electronic record or has a protocol programmed to
22 cause a change, including a transfer or loss of control or a
23 modification of benefits afforded by the electronic record; or
24 b. the person has agreed to share the power is shared with
25 another person.
26 3. When power not shared with another person. A power of a
27 person is not shared with another person under subsection 2,
28 paragraph “b” and the person’s power is not exclusive if:
29 a. the person can exercise the power only if the power also
30 is exercised by the other person; and
31 b. the other person:
32 (1) can exercise the power without exercise of the power by
33 the person; or
34 (2) is the transferor to the person of an interest in the
35 controllable electronic record or a controllable account or
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1 controllable payment intangible evidenced by the controllable
2 electronic record.
3 4. Presumption of exclusivity of certain powers. If a
4 person has the powers specified in subsection 1, paragraph “a”,
5 subparagraph (2), subparagraph divisions (a) and (b) the powers
6 are presumed to be exclusive.
7 5. Control through another person. A person has control of
8 a controllable electronic record if another person, other than
9 the transferor to the person of an interest in the controllable
10 electronic record or a controllable account or controllable
11 payment intangible evidenced by the controllable electronic
12 record:
13 a. has control of the electronic record and acknowledges
14 that it has control on behalf of the person; or
15 b. obtains control of the electronic record after having
16 acknowledged that it will obtain control of the electronic
17 record on behalf of the person.
18 6. No requirement to acknowledge. A person that has control
19 under this section is not required to acknowledge that it has
20 control on behalf of another person.
21 7. No duties or confirmation. If a person acknowledges that
22 it has or will obtain control on behalf of another person,
23 unless the person otherwise agrees or law other than this
24 Article or Article 9 otherwise provides, the person does not
25 owe any duty to the other person and is not required to confirm
26 the acknowledgment to any other person.
27 Sec. 6. Section 554.14106, Code 2023, is amended to read as
28 follows:
29 554.14106 Discharge of account debtor on controllable account
30 or controllable payment intangible.
31 1. Discharge of account debtor. An account debtor on a
32 controllable account or controllable payment intangible may
33 discharge its obligation by paying:
34 a. the person having control of the controllable electronic
35 record that evidences the controllable account or controllable
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1 payment intangible; or
2 b. except as provided in subsection 2, a person that
3 formerly had control of the controllable electronic record.
4 2. Effect Content and effect of notification. Subject to
5 subsection 4, an the account debtor shall not discharge its
6 obligation by paying a person that formerly had control of the
7 controllable electronic record if the account debtor receives a
8 notification that:
9 a. is authenticated signed by a person that formerly had
10 control or the person to which control was transferred;
11 b. reasonably identifies the controllable account or
12 controllable payment intangible;
13 c. notifies the account debtor that control of the
14 controllable electronic record that evidences the controllable
15 account or controllable payment intangible was transferred;
16 d. identifies the transferee, in any reasonable way,
17 including by name, identifying number, cryptographic key,
18 office, or account number; and
19 e. provides a commercially reasonable method by which the
20 account debtor is to pay the transferee.
21 3. Discharge following effective notification. After
22 receipt of a notification that complies with subsection 2, the
23 account debtor may discharge its obligation only by paying in
24 accordance with the notification and shall not discharge the
25 obligation by paying a person that formerly had control.
26 4. When notification ineffective. Notification Subject to
27 subsection 8, notification is ineffective under subsection 2:
28 a. unless, before the notification is sent, an the account
29 debtor and the person that, at that time, had control of the
30 controllable electronic record that evidences the controllable
31 account or controllable payment intangible agree in an
32 authenticated a signed record to a commercially reasonable
33 method by which a person must furnish reasonable proof that
34 control has been transferred;
35 b. to the extent an agreement between an the account debtor
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1 and seller of a payment intangible limits the account debtor’s
2 duty to pay a person other than the seller and the limitation
3 is effective under law other than this Article; or
4 c. at the option of an the account debtor, if the
5 notification notifies the account debtor to:
6 (1) divide a payment;
7 (2) make less than the full amount of any an installment or
8 other periodic payment; or
9 (3) pay any part of a payment by more than one method or to
10 more than one person.
11 5. Proof of transfer of control. If Subject to subsection
12 8, if requested by the account debtor, the person giving the
13 notification under subsection 2 seasonably shall furnish
14 reasonable proof, using the agreed method in the agreement
15 referred to in subsection 4, paragraph “a”, that control of the
16 controllable electronic record has been transferred. Unless
17 the person complies with the request, the account debtor may
18 discharge its obligation by paying a person that formerly had
19 control, even if the account debtor has received a notification
20 under subsection 2.
21 6. What constitutes reasonable proof. A person furnishes
22 reasonable proof under subsection 5 that control has been
23 transferred if the person demonstrates, using the agreed method
24 in the agreement referred to in subsection 4, paragraph “a”,
25 that the transferee has the power to:
26 a. avail itself of substantially all the benefit from the
27 controllable electronic record;
28 b. prevent others from availing themselves of substantially
29 all the benefit from the controllable electronic record; and
30 c. transfer the powers mentioned specified in paragraphs “a”
31 and “b” to another person.
32 7. Rights not waivable. An Subject to subsection 8,
33 an account debtor shall not waive or vary its rights under
34 subsection 4, paragraph “a”, and subsection 5 or its option
35 under subsection 4, paragraph “c”.
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