January 29, 2007
Revised Article 1 Feeding Frenzy
With the legislative session's opening gavel yet to fall in several states, six state legislatures are already about the business of considering recently-introduced bills to enact Revised UCC Article 1.
Indiana SB 419, Kansas SB 183, Rhode Island SB 105, South Dakota SB 85, and Utah SB 91 are all before their initial committees. North Dakota HB 1035, by contrast, has already unanimously passed the North Dakota House and is now in the Senate. The Kansas and North Dakota bills represent second chances for Revised Article 1 in those states. Each state's legislature had a Revised Article 1 bill before it during the prior legislative session. In addition to these six new bills, long-suffering Massachusetts HB 3731 appears to still be alive but going nowhere.
To date, all twenty-two states that have enacted Revised Article 1 -- Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Oklahoma, Texas, Virginia, and West Virginia -- have rejected uniform R1-301 in favor of language similar to pre-Revised 1-105. Six enacting states -- Alabama, Arizona, Hawaii, Idaho, Nebraska, and Virginia -- have rejected uniform R1-201(b)(20) in favor or retaining a bifurcated good faith standard that requires only "honesty in fact" from non-Article 2 or 2A merchants.
Of the seven pending bills, Indiana SB 419, Kansas SB 183, South Dakota SB 85, and Utah SB 91 include uniform R1-301, while Massachusetts HB 3731, North Dakota HB 1035, and Rhode Island SB 105 eschew it in favor of pre-Revised 1-105. Kansas SB 183, Massachusetts HB 3731, North Dakota HB 1035, South Dakota SB 85, and Utah SB 91 include uniform R1-201(b)(20). Rhode Island SB 105 retains the bifurcated good faith standard. Indiana SB 419 eliminates the bifurcated good faith standard in a more unique way: it retains the pre-Revised 1-201(19) “honesty in fact in the conduct or transaction concerned” definition and deletes the “honesty in fact and the observance of reasonable commercial standards of fair dealing” standard for merchants from current Article 2.
I will continue to monitor and comment on these and other legislative efforts on my website and will try to keep this blog current, as well. If you are or become aware of unreported developments in any of the foregoing states or legislation in other states, please e-mail me at firstname.lastname@example.org.
[Keith A. Rowley]
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