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Wednesday, February 2, 2005

Article 1 update

U.C.C. Article 1 watchdog Keith Rowley sends this update on the latest legislative news:

Versions of Revised Article 1 have been introduced and are currently pending before the legislatures of Arizona (SB 1234), Connecticut (HB 5975), Nebraska (LB 570), and North Dakota (SB 2143).

Connecticut's on-line bill tracking service did not produce the bill's text, so I can't comment on its content.

The Arizona, Nebraska, and North Dakota bills all include uniform R1-201(b)(20), which eliminates the bifurcated good faith standard in Articles 2 and 2A and holds merchants and non-merchants alike to "honesty in fact and the observance of reasonable commercial standards of fair dealing." To date, only three of the seven states (Delaware, Minnesota, and Texas) that have adopted a version of Revised Article 1 have adopted uniform R1-201(b)(20). The other four (Alabama, Hawaii, Idaho, and Virginia) have retained the bifurcated good faith standard by retaining the pre-R1 "honesty in fact in the conduct or transaction concerned" definition in Article 1 and leaving 2-103(1)(b) & 2A-103(3) unchanged.

Of greater import to most observers is that Arizona SB 1234 includes uniform R1-301, which allows the parties to a non-consumer transaction to choose to have their contract governed by the law of a jurisdiction bearing no relation to either the parties or the transaction. All seven states that have adopted Revised Article 1 to date have rejected uniform R1-301, choosing to retain some form of pre-Revised 1-105. The current versions of Nebraska LB 570 and North Dakota SB 2143, likewise, reject R1-301. (Last year, the Massachusetts legislature allowed a bill to die that included uniform R1-301, and Ed Smith reported that the plan was to reintroduce Revised Article 1 this year without uniform R1-301.)

NCCUSL Commissioner Jack Burton of Santa Fe adds that Revised Article 1 is also about to be introduced in New Mexico:  "The draft of the bill contains the uniform version of R1-201 (b) (20) as our state supreme court has already adopted this test as a matter of common law in every contract.  It does not contain the uniform version of 1-301; instead it reenacts the former choice of law provision, with minor stylistic updates."

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