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Sunday, July 1, 2007

UCC Article 1 Legislative Update (7/1)

As of July 1, when Indiana SB 419, Iowa SF 535, and Rhode Island SB 105 take effect, Revised Article 1 (except for "uniform" R1-301, which no enacting state has adopted) will be law in a majority of states.  Also enacted earlier this year, North Dakota HB 1035 will take effect August 1, Florida SB 252 will take effect January 1, 2008, and Kansas SB 183 will take effect July 1, 2008.

The aforementioned bills, plus Utah SB 91, which was enacted in March and took effect April 30, bring to seven the number of new Revised Article 1 enactments in 2007.  This matches the number of Revised Article 1 bills enacted in 2002-04 combined (Alabama, Delaware, Hawaii, Idaho, Minnesota, Texas, and Virginia) and in 2005 (Arkansas, Connecticut, Montana, Nebraska, Nevada, New Mexico, and Oklahoma), and is one less enactment than in 2006 (Arizona, California, Colorado, Kentucky, Louisiana, New Hampshire, North Carolina, and West Virginia).  The only bill currently pending is Pennsylvania HB 1152, which idled on the Pennsylvania House Commerce Committee's docket for nearly two months before making it out of that committee and onto the docket of the House Rules Committee, which approved it last week.

As I have discussed several times, the two primary bones of contention during the enactment process have been uniform R1-301's choice-of-law rules and uniform R1-201(b)(20)'s "good faith" definition.  As noted above, none of the twenty-nine enacting states has adopted uniform R1-301; instead, all have chosen to either leave their pre-revision 1-105 in place or to enact a substitute 1-301 with language consistent with pre-revised 1-105.  There had been less uniformity with regard to defining "good faith."  Twenty states have enacted uniform R1-201(b)(20)'s “honesty in fact and the observance of reasonable commercial standards of fair dealing” definition; nine states have retained pre-revised 1-201(19)'s “honesty in fact in the conduct or transaction concerned” definition, reserving the requirement of commercial reasonableness for merchants under 2-103(1)(b) & 2A-103(3).  If enacted as it currently reads, Pennsylvania HB 1152 would make uniform R1-301 0-for-30 and would further tip the balance in favor of uniform R1-201(b)(20), making that tally 21-9.

[Keith A. Rowley]

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