ContractsProf Blog

Congress May Close Loophole for Defense Contractors

According to the Associated Press, as reported in the Orlando Sentinel, Congress is moving to close a loophole that until now has permitted military contractors to avoid paying taxes and evade the strictures of U.S. employment law by setting up off-shore shell corporations. 

According to the report, U.S.-based military contractors have been setting up subsidiaries in places like the Cayman Islands.  These subsidiaries then employ U.S. citizens who provide support services for the U.S. military abroad.  As foreign corporations doing work abroad, these subsidiaries do not pay social security or medicare taxes for their workers and need not abide by federal labor and anti-discrimination laws.  The A.P.'s investigation suggests that the off-shore subsidiaries exist only on paper, without an address or phone number. 

The House passed tax legislation two weeks ago that would treat  foreign subsidiaries of U.S. government contractors as U.S. corporations.  The Senate is now considering the measure.  Today's New York Times features an editorial urging passage of the legislation. 

[Jeremy Telman]

Vermont and Pennsylvania Enact Revised Article 1; Tennessee and Illinois Progress Toward Enactment

Governor Jim Douglas signed Vermont HB 563 into law on April 10.  Governor Ed Rendell did likewise to Pennsylvania HB 1152 on April 16.  Pennsylvania HB 1152, by its terms, takes effect on or about June 15, 2008.  Vermont HB 563, along with Kansas SB 183 (enacted last year) and South Dakota SB 93 (enacted earlier this year), will take effect on July 1, 2008.

Vermont HB 563 and Pennsylvania HB 1152 both eschew uniform R1-301 (making it 0-for-32 for those scoring at home) and adopt the uniform R1-201(b)(20) good faith definition (that tally now stands at 23-to-9 in favor of the new unitary standard).

Elsewhere:

The Tennessee Senate and House have approved slightly different versions of Tennessee SB 3993.  The Tennessee Senate is scheduled to vote next Monday (April 21) whether to accept the House's amended version.

The Illinois Senate has unanimously approved Illinois SB 2080, which now awaits a first reading in the Illinois House.

Massachusetts HB 4302 continues to idle.

The bills pending in Tennessee, Illinois, and Massachusetts all reject uniform R1-301.  The Massachusetts bill adopts the uniform R1-201(b)(20) good faith definition, while the bills pending in Tennessee and Illinois retain the bifurcated good faith standard currently in effect by replacing the language of uniform R1-201(b)(20) with "honesty in fact in the conduct or transaction concerned."

[Keith A. Rowley]

South Dakota Makes 30

By affixing his signature to SB 93 on March 13, 2008, Governor Mike Rounds made South Dakota the thirtieth state to enact Revised Article 1.  South Dakota's enactment, along with Kansas's (enacted last year), will take effect on July 1, 2008.

SB 93, like the versions of Revised Article 1 enacted in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia, rejects uniform R1-301.  (To date, only the U.S. Virgin Islands has adopted uniform R1-301.)

SB 93, like the versions of Revised Article 1 enacted in Arkansas, California, Colorado, Connecticut, Delaware, Florida, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Texas, and West Virginia, adopts uniform R1-201(b)(20)'s definition of "good faith."  By contrast, Alabama, Arizona, Hawaii, Idaho, Indiana, Nebraska, Rhode Island, Utah, and Virginia retained the pre-R1 “honesty in fact in the conduct or transaction concerned” definition in Article 1 and left 2-103(1)(b) & 2A-103(3) unchanged.

The bills currently pending in Massachusetts, Pennsylvania, Tennessee, and Vermont do not appear to be making much progress.  But, you can count on your faithful correspondent to alert you if that changes.

[Keith A. Rowley]

UCC Article 1 Legislative Update (2/22)

As of January 1, 2008, Revised UCC Article 1 was in effect in 28 states -- Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia.  Kansas's version of Revised Article 1, enacted last year, will take effect on July 1.  Of the 29 state enactments to date, 0 of 29 include the uniform Revised 1-301 choice of law provision -- each of the 29 enacting state legislatures having opted instead for some variation of its state's pre-revised 1-105 -- and only 20 of 29 include the uniform 1-201(b)(20) definition of "good faith" -- 9 state legislatures opting to retain the pre-revised "honesty in fact" definition in Article 1 and reserve "the observance of reasonable commercial standards of fair dealing" requirement for parties and transactions subject to that standard under another Article.

As of February 22, 2008, bills proposing to enact Revised Article 1 were pending in five states: Massachusetts, Pennsylvania, South Dakota, Tennessee, and Vermont.  Massachusetts HB 4302, which succeeds the previously unsuccessful HB 3731, is currently awaiting a third reading in the Massachusetts House.  Pennsylvania HB 1152, which was tabled last fall after passing the Pennsylvania House, was removed from the table on February 12 and awaits a third reading in the Pennsylvania Senate.  South Dakota SB 93 unanimously passed the South Dakota Senate on January 29, unanimously passed the South Dakota House yesterday, and now awaits Governor Mike Rounds's approval (or lack of disapproval, as the case may be).  Tennessee HB 3949 and SB 3993 were both introduced on January 31 and are currently before their first committees in their respective introducing chambers.  Vermont HB 563 passed the Vermont House on January 24 and is now before the Vermont Senate Economic Development, Housing & General Affairs Committee.  All five currently-pending bills reject the uniform Revised 1-301 choice of law provision (opting instead for some variation of pre-revised 1-105) and embrace the unitary good faith standard of uniform Revised 1-201(b)(20).

[Keith A. Rowley]

UCC Revised Article 1 Update

As of January 1, 2008, Revised UCC Article 1 was in effect in 28 states -- Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia.  Kansas's version of Revised Article 1, enacted last year, will take effect on July 1.  Of the 29 state enactments to date, 0 of 29 include the uniform Revised 1-301 choice of law provision -- each of the 29 enacting state legislatures having opted instead for some variation of its state's pre-revised 1-105 -- and only 20 of 29 include the uniform 1-201(b)(20) definition of "good faith" -- 9 state legislatures opting to retain the pre-revised "honesty in fact" definition in Article 1 and reserve "the observance of reasonable commercial standards of fair dealing" requirement for parties and transactions subject to that standard under another Article.

As of February 12, 2008, bills proposing to enact Revised Article 1 were pending in four states: Massachusetts, Pennsylvania, South Dakota, and Vermont.  Massachusetts HB 4302, which succeeds the previously unsuccessful HB 3731, is currently awaiting a third reading in the Massachusetts House.  Pennsylvania HB 1152, which was tabled last fall after passing the Pennsylvania House, was removed from the table today and awaits a third reading in the Pennsylvania Senate.  South Dakota SB 93 (apparently now with the blessing of the South Dakota Bar Associations Business Law Committee) unanimously passed the South Dakota Senate on January 29 and is now before the South Dakota House Judiciary Committee.  Vermont HB 563 passed the Vermont House on January 24 and is now before the Vermont Senate Economic Development, Housing & General Affairs Committee.  All four currently-pending bills reject the uniform Revised 1-301 choice of law provision (opting instead for some variation of pre-revised 1-105) and embrace the unitary good faith standard of uniform Revised 1-201(b)(20).

[Keith A. Rowley]

Gambling Debts Now Enforceable in U.K.

Britain’s Gambling Act of 2005 -- which comes into effect this year -- has garnered a lot of attention.  But one aspect of the new law hasn’t gotten much play, according to Carl Rohsler of London’s Hammonds. It’s the sentence in the act that says, "the fact that a contract relates to gambling shall not affect its enforcement."

That sweeping statement, says Rohsler, "wipes out over 200 years of precedent . . . not only in the UK but also in most common law jurisdictions around the world, that gambling contracts are debts of honour only."  Gambling houses that once had to demand that gamblers cough up the cash in advance (because they could not collect the debts in court) can now lend money to gamblers and collect their debts in the usual way. Rohsler’s comments on this development are here.  A more general introduction to the Act, by Paul Renney of London’s Campbell Hooper, is here.  (Free registration required for each.)

[Frank Snyder]

U.K. Courts Favoring Arbitration Clauses?

Courts in the U.K. are increasingly willing to enforce dispute resolution clauses in contracts, according to a client report from Jeremy Glover at London’s Fenwick Elliott. LLP. Glover examines the recent High Court decision in Harper v Interchange Group Limited [2007] EWHC 1834. (Free registration required.)

The case involved a dispute about commissions that Interchange was allegedly supposed to pay to Harper. The contract contained rather awkward clause, which provided that if the two parties were unable to reach agreement on the commission amounts:

then the dispute shall be referred, with the agreement of the Purchaser and Mr Harper, or in the absence of such agreement, by the President for the time being of the Institute of Chartered Accountants in England and Wales on the application of either of them, to an independent chartered accountant (being a partner of one of the "big 6" firms) who, once appointed, shall act as an expert (not as arbitrator) and whose decision shall, in the absence of manifest error, be final and binding on the parties.

One of Harper’s arguments was that the clause (presumably because it said that the accountant would not serve as an arbitrator) meant that the expert accountant was only supposed to calculate damages, but that issues of construction of the contract would have to go to the courts. Writing for the court, Mr. Justice Aikens disagreed.

[Frank Snyder]

China Gets New Labor Contract Law

This coming January 1, China will have a new law governing employment contracts. Among the requirements is one that all employees be provided with a written employment contract; failure to do so will turn the relationship into "indefinite" employment which can be terminated only for cause. And failure to specify a term may also lead to creation of "indefinite" employment. And trying to get around the rules by using a series of fixed-term contracts won’t likely work, either.

Samuel Estreicher and Winston Zhao of Cleveland’s Jones Day offer a rundown of the new law here. (Free registration required.)

[Frank Snyder]

UCC Articles 2 & 2A Legislative Update (7/1)

As of July 1, 2007, the 2003 amendments to Article 2 and 2A continue to stagnate.  Bills proposing their enactment have died unceremonious deaths in Kansas and Nevada.

Oklahoma amended Sections 2-105 and 2A-103 of its commercial code to add that the definition of "goods" for purposes of Articles 2 and 2A, respectively, "does not include information," see 12A Okla. Stat. Ann. §§ 2-105(1) & 2A-103(1)(h) (West Supp. 2007), and amended its Section 2-106 to add that "contract for sale" for purposes of Article 2 "does not include a license of information," see id. § 2-106(1).  The net effect is similar to having enacted Amended §§ 2-103(k) & 2A-103(1)(n), both of which exclude information from the meaning of "goods" for purposes of Article 2 and 2A, respectively.

Attempts to further amend Articles 2 and 2A in Oklahoma have been unsuccessful and no other state's legislature has considered a bill proposing to enact the 2003 Article 2 and 2A amendments.

Unless NCCUSL and the ALI return to the drawing board and initiate a legislative full court press (neither of which seems likely in the near future), the only amendments to Articles 2 and 2A likely to be of any relevance in the foreseeable future are conforming amendments required by a state's adoption of Revised Article 1 or 7 or amended Articles 3 and 4.

[Keith A. Rowley]

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]

Still Waiting in Florida, But Rhode Island Makes 28

While Florida SB 252, which was enrolled on May 3, still has not made it to Governor Charlie Crist's in-box, Rhode Island SB 105 was enacted May 23, making Rhode Island the 28th state to adopt a version of Revised Article 1.

Like the 27 other states to have enacted Revised Article 1, SB 105 rejects "uniform" R1-301 in favor of a choice-of-law provision tracking pre-revised 1-105.  SB 105 is the ninth enactment to eschew uniform R1-201(b)(20)'s unitary good faith standard in favor of retaining the bifurcated standard of pre-revised 1-201(19) and 2-103(1)(b).

SB 105 also includes a new statute of frauds designed to retain the "default" personal property statute of frauds in pre-revised 1-206.  The new provision, to be codified at R.I. Gen. Laws § 9-1-4(7), states:

No action shall be brought … [e]xcept in cases to which the Uniform Commercial Code (Title 6A) applies, … to charge any person upon any contract for the sale of personal property beyond five thousand dollars ($5,000) in an amount or value or remedy, unless the promise or agreement upon which the action shall be brought, or some note or memorandum thereof, shall be in writing, and signed by the party to be charged therewith, or by some other person by him or her thereunto lawfully authorized.

Rhode Island is the second enacting state to have codified a new statute of frauds outside of its UCC to fill the gap -- real or perceived -- created by Revised Article 1's narrowed scope provision. Last year, California added a similar provision to its Civil Code (Cal. Civ. Code § 1624.5) as part of its enactment of Revised Article 1.

Rhode Island SB 105 is one of three recent enactments -- along with Indiana SB 419 (enacted May 3, 2007) and Iowa SF 535 (enacted April 4, 2007) -- slated to take effect on July 1, 2007.  Once these three new statutes take effect, Revised Article 1 will be the law in more the one-half of the states.

[Keith A. Rowley]

Meanwhile, on the UNCITRAL Front

The former Yugoslav Republic of Macedonia succeeded to the U.N. Convention on Contracts for the International Sale of Goods (CISG) last November, effective retroactively to November 17, 1991, bringing the number of Contracting States to 70.

Paraguay and the Russian Federation signed on to the U.N. Convention on the Use of Electronic Communications in International Contracts in March and April 2007, respectively, becoming the 9th and 10th signatories.  However, because none of the signatories has yet ratified or acceded to this Convention, it is not yet in force anywhere.

[Keith A. Rowley]

Iowa, Kansas, and (Almost) Florida ... Oh, My!

Iowa Governor Chet Culver signed SF 535 on April 4 and Kansas Governor Kathleen Sebelius signed SB 183 on April 9, bringing to 27 the number of states that have enacted Revised Article 1.  Additionally, both chambers of the Florida legislature have passed SB 252.  However, due to a flurry of end-of-session activity, SB 252 hasn't yet made it to Governor Charlie Crist's desk.

Iowa SF 535, Kansas SB 183, and Florida SB 252 each reject uniform R1-301 in favor of a choice-of-law provision that tracks pre-revised 1-105 and adopt uniform R1-201(b)(20)'s unitary good faith standard.

[Keith A. Rowley]

Kansas Makes 25 (and Counting)

With a stroke (well, perhaps a few strokes) of her pen this past Monday, Governor Kathleen Sibelius made Kansas the 25th state to have enacted a version of Revised Article 1.  Like the versions of Revised Article 1 already in force in 22 states and the two enacted earlier this year in Utah and North Dakota, which will take effect on April 30 and August 1, respectively, Kansas SB 183 rejects "uniform" R1-301 for a choice of law provision similar to the one in pre-Revised 1-105.  (Kansas SB 183 will take effect on July 1, 2008.)  Kansas becomes the eighteenth state to enact uniform R1-201(b)(20)'s unitary good faith standard.

Indiana SB 419 awaits only gubernatorial action (or the running of time for a gubernatorial veto) before it becomes the 26th enactment.  Like Kansas SB 183, Indiana SB 419 rejects uniform R1-301 in favor of retaining the essence of pre-Revised 1-105.  Unlike Kansas SB 183, Indiana SB 419 also rejects uniform R1-201(b)(20) in favor of retaining the bifurcated good faith standard of pre-Revised 1-201(19) and 2-103(1)(b).  If enacted, Indiana SB 419 would take effect on July 1, 2007.

[Keith A. Rowley]

UCC Article 1 Legislative Update (3/17)

By affixing their respective signatures to North Dakota HB 1035 and Utah SB 91, Governors John Hoeven and Jon Hunstman, Jr. made North Dakota and Utah the 23rd and 24th states to enact a version of Revised Article 1.  As do all 22 of their predecessors, North Dakota's and Utah's enactments eschew uniform R1-301 for language tracking pre-Revised 1-105.  North Dakota becomes the 17th enacting state to adopt the unitary good faith standard of uniform R1-201(b)(20); Utah becomes the 7th to retain the bifurcated good faith standard of pre-Revised 1-201(19) and 2-103(1)(b) & 2A-103(3).  Utah's version of Revised Article 1 should take effect on April 30, 2007, while North Dakota's should take effect on August 1, 2007.

Elsewhere, Indiana SB 419 has passed the Indiana Senate and the House Financial Institutions Committee has unanimously recommended its adoption. Kansas SB 183 has passed the Kansas Senate and was the subject of a March 8 hearing before the House Judiciary Committee. As yet, the Kansas Legislature's web site has not reported any action by the committee.  Both bills passed their originating chambers only after the responsible committees amended the introduced bills to replace uniform R1-301 with language tracking pre-Revised 1-105.

Florida HB 151 and SB 252 continue to wend their ways through their respective originating chambers.  No action has been reported on Rhode Island SB 105 since its introduction.  The drafters of South Dakota SB 85 have, for all intents and purposes, withdrawn it.

Knowledgeable sources I spoke to at this week's unseasonably chilly ABA Business Law Section Spring Meeting in Washington, DC told me that new bills were imminent in Massachusetts and Pennsylvania.

Erin go bragh!

[Keith A. Rowley]

UCC Legislative Update (3/2/07)

What looked to be a prolific year for Revised Article 1 -- based on the number of January introductions -- now looks like it might produce fewer adoptions than either 2005 or 2006.

Utah SB 91 has passed both houses, but has not yet made its way to Governor Jon Hunstman, Jr.'s desk.  Indiana SB 419, Kansas SB 183, and North Dakota HB 1035 have each passed one house and are in the other.  Parallel bills Florida HB 151 and SB 252 are slowly progressing through their respective originating houses.  Rhode Island SB 105 has been idling since its mid-January introduction.  South Dakota SB 85 was been tabled until after the legislative session adjourns.

Utah SB 91, Indiana SB 419, and Kansas SB 183 have each been amended to replace uniform R1-301 with choice-of-law language tracking pre-Revised 1-105 -- keeping uniform R1-301's 0-for-22 streak alive.  Kansas SB 183 and North Dakota HB 1035 adopt the uniform R1-201(b)(20) good faith standard.  Indiana SB 419, Rhode Island SB 105, and Utah SB 91 retain the bifurcated good faith standard of pre-Revised 1-201(19), 2-103(1)(b) & 2A-103(3).

Elsewhere on the UCC front ...

Oklahoma HB 2172, proposing adoption of the 2003 amendments to UCC Articles 2 & 2A (along with certain conforming amendments to other articles), was introduced on February 5 and referred to the Oklahoma House Rules Committee on February 6.  No further action has been reported.

Oklahoma HB 2171, proposing adoption of the 2002 amendments to UCC Articles 3 & 4 (along with certain conforming amendments to other articles), was also introduced on February 5 and referred to the Oklahoma House Rules Committee on February 6.  No further action has been reported.

[Keith A. Rowley]

UCC Article 2 & 2A Legislative Update

As of January 31, 2007, only three state legislatures (Kansas, Nevada, and Oklahoma) have considered bills proposing to enact the 2003 amendments to UCC Articles 2 and 2A.  None of the bills were enacted.

During the 2005 legislative session, the Kansas bill was tabled for further study and the Nevada bill died in committee.

During the 2006 legislative session, each house of Oklahoma's legislature passed a version of a bill to enact the Article 2A amendments.  However, the conference committee was unable to reconcile the two versions and the bill died in conference.  Meanwhile, a separate bill proposing to enact the Article 2 amendments died in committee.

Oklahoma 2172, proposing adoption of the 2003 amendments to UCC Articles 2 & 2A (along with certain conforming amendments to other articles), is scheduled to be introduced on February 5, 2007.

This is not to say that none of the content of the 2003 amendments has found its way into any state's law.  In 2005, Oklahoma amended Sections 2-105 and 2A-103 of its Commercial Code to add that the definition of "goods" for purposes of Articles 2 and 2A, respectively, "does not include information," see 12A Okla. Stat. Ann. §§ 2-105(1) & 2A-103(1)(h) (West Supp. 2007), and amended its Section 2-106 to add that "contract for sale" for purposes of Article 2 "does not include a license of information," see id. § 2-106(1).  The net effect is similar to having enacted Amended §§ 2-103(k) & 2A-103(1)(n), both of which exclude information from the meaning of "goods" for purposes of Article 2 and 2A, respectively.

[Keith A. Rowley]

Revised Article 1 Legislative Update (2/1)

Three quick updates to my 1/29 posting about Revised Article 1:

1. Utah SB 91 has been replaced with a substitute bill that abandons uniform R1-301 in favor of language tracking pre-Revised 1-105.  Substitute SB 91 also eschews the unitary good faith standard of uniform R1-201(b)(20) in favor of the bifurcated good faith standard in pre-Revised 1-201(19) & 2-103(1)(b).

2. Informed sources report that South Dakota SB 85 will soon be amended to replace uniform R1-301 with language tracking pre-Revised 1-105.

3. Florida has joined the fray with parallel bills -- SB 252 and HB 151.  The texts of the two bills are identical.  Both reject uniform R1-301 and embrace uniform R1-201(b)(20).

[Keith A. Rowley]

CISG's Critical Mass Continues to Grow

El Salvador and Montenegro have recently become the 68th and 69th countries to have acceded to, accepted, approved, ratified, or succeeded to the CISG.

Montenegro became a Contracting State effective retroactively to June 3, 2006, when the former Serbia and Montenegro notified the United Nations that it would thenceforth be two countries, with the Republic of Serbia succeeding to, inter alia, Serbia and Montenegro's status as a CISG Contracting State.

El Salvador, which acceded to the CISG on November 26, 2006, will become a Contracting State effective December 1, 2007.

In the interim, Paraguay, which acceded to the CISG on January 13, 2006, will become a Contracting State effective February 1, 2007.

Ghana and Venezuela, which signed the CISG in 1980 and 1981, respectively, have yet to accede to, accept, approve, ratify, or succeed to the CISG.  Therefore, they do not qualify as Contracting States for purposes of Article 1(1)(a).

[Keith A. Rowley]

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 keith.rowley@unlv.edu.

[Keith A. Rowley]

UCC Legislative Wrap-up

Governor Arnold Schwarzenegger signed SB 1481 yesterday, making California the 22nd state to have enacted Revised Article 1 and the 24th state to have enacted Revised Article 7.  SB 1481 makes California the 22nd state to reject uniform R1-301 and the sixteenth to adopt uniform R1-201(b)(20).

Massachusetts HB 3731 appears to be going nowhere until at least 2007.  So, barring some unexpected development elsewhere this fall, the enactment of SB 1481 should bring to a close a fairly successful season for Revised Article 1 with eight adoptions (Arizona, California, Colorado, Kentucky, Louisiana, New Hampshire, North Carolina, and West Virginia).

[Keith A. Rowley]

Revised Article 1 Legislative Roundup

With the 2006 legislative season drawing to a close (indeed, it's been over for months in some states), and the 2006-07 academic year about to being (or having just begun at many law schools), here's a wrap-up of legislative action on Revised Article 1 this year:

Seven states -- Arizona, Colorado, Kentucky, Louisiana, New Hampshire, North Carolina, and West Virginia -- have enacted Revised Article 1 thus far this year.  This is the same number of states that enacted Revised Article 1 in 2005 and the aggregate number of states that enacted Revised Article 1 before 2005.  Bringing the total number of enacting states to 21.

Kentucky's, Louisiana's, and West Virginia's revisions are already in effect.  Colorado's take effect on Sept. 1, 2006.  Arizona's take effect on or about Sept. 21, 2006.  North Carolina's takes effect on Oct. 1, 2006.  New Hampshire's takes effect on Jan. 1, 2007.

California appears poised to become the 22nd enacting state.  Just yesterday, the California Senate approved SB 1481 as amended by the Assembly.  That bill is now set for enrollment and should be sent to Governor Schwarzenegger in relatively short order.  Barring a veto, California will become the 22nd state (out of 22) to reject uniform R1-301 and the 16th state to adopt the uniform R1-201(b)(20) good faith definition.  If enacted California's amendments will take effect Jan. 1, 2007.  One interesting aspect about the California bill is the addition, by amendment, of a new non-UCC statutory provision that will have the essential effect of recodifying pre-revised 1-206 to preserve a statute of frauds for sales of personal property that is not subject one of the UCC's Articles.

The Massachusetts legislature continues to largely ignore HB 3731, which was first introduced in early 2005.  Most recently, the Massachusetts House voted to further extend to January 2, 2007 the relevant committee's deadline to report back to the full legislature the committee's recommendation following public hearings held on October 26, 2005.  While the Senate has yet to concur in this most recent extension, it seems clear that Massachusetts will not enact Revised Article 1 this year.

The Florida legislature considered Revised Article 1 in 2006, but allowed both House and Senate bills to die in committee.  Bills that were introduced in 2005 in Illinois and Kansas and then languished went without further action in 2006.

For those who are interested, California SB 1481 will, if enacted, bring the number of Revised Article 7 enactments to 24.  Meanwhile, five states -- Arkansas, Kentucky, Minnesota, Nevada, and Texas -- have enacted the latest Article 3 and 4 amendments, and Massachusetts appears to be progressing toward becoming the sixth.

The 2003 amendments to Article 2 and 2A continue to go nowhere.  They have only been introduced in three states -- Kansas, Nevada, and Oklahoma -- and have died unceremonious deaths in all three.  Unless NCCUSL and the ALI return to the drawing board and initiate a legislative full court press (neither of which seems likely in the near future), the only amendments to Articles 2 and 2A likely to be of any relevance in the foreseeable future are conforming amendments required by a state's adoption of Revised Article 1 or 7 or amended Articles 3 and 4.

[Keith A. Rowley]

Carolina On My Mind ...

This is a bit premature, but I will be out of blog contact for the next week and wanted to alert you that North Carolina is on the cusp of enacting Revised Article 1 (and Revised Article 7).  SB 1555 has passed both houses of the North Carolina legislature without objection and been ratified by the originating house.  All that remains is for Governor Michael F. Easley to sign it or fail to veto it within 10 days from presentation.  (The clock should begin to run today or Monday.)

Enacting SB 1555 will make North Carolina the twenty-first state to have enacted Revised Article 1 (and the twenty-third to have enacted Revised Article 7) and the twenty-first state to have rejected the language of uniform R1-301 in favor of language similar to that found in its version of pre-revised 1-105.  Enacting SB 1555 will make North Carolina the fifteenth state to have adopted the unitary good faith standard of uniform R1-201(b)(20).

Elsewhere, California SB 1481, which had passed the Senate when I last reported on it, still awaits final approval by the Assembly, followed by some conference work to resolve differences between the version of the bill the Senate passed and the version now before the Assembly.

[Keith A. Rowley]

Revised Article 1 Update

Governor Kathleen Babineaux Blanco signed Act 533 on June 22, making Louisiana the 20th state to have enacted a version of Revised Article 1 (and 22nd to have enacted Revised Article 7).  Like the versions of Revised Article 1 enacted earlier this year in Arizona, Colorado, Kentucky, New Hampshire, and West Virginia, Louisiana Act 533 rejects uniform R1-301 in favor of choice-of-law language tracking pre-revised 1-105.  Like the Colorado, Kentucky, New Hampshire, and West Virginia enactments, Louisiana Act 533 adopts R1-201(b)(20)'s uniform "good faith" definition.  (Arizona's enactment retains the bifurcated good faith standard of pre-revised 1-201(19) and 2-103(1)(b).)

Three other bills remain active -- all of which (in their present forms) adopt uniform R1-201(b)(20) and reject uniform R1-301.

California SB 1481 has passed the Senate and received the unanimous support of the Assembly Judiciary Committee. However, the version of the bill coming out of the Assembly Judiciary Committee is not the same one the Senate passed earlier this month. So, it appears there will be some work to be done even if the Assembly follows the committee's recommendation.

Massachusetts HB 3731, introduced more than a year ago, continues to creep its way through the legislative process. The bill was referred to the Joint Committee on Economic Development and Emerging Technologies, which held a public hearing on October 26, 2005. On March 23, 2006, the Massachusetts House extended the committee’s deadline to report on the bill to June 23, 2006. No further action has been reported as of June 30, 2006.

The North Carolina Senate passed SB 1555 on June 7. The bill is presently before the House Judiciary Committee.

An interesting feature of the current version of California SB 1481 is the addition of a new section to the California Civil Code that would, in essence, create a new statute of frauds to replace the one in pre-revised 1-206 that Revised Article 1 eliminates.

[Keith A. Rowley]

New Hampshire Makes Nineteen

As predicted a day or two ago, Governor John Lynch signed HB 719 today (5/25/06), making New Hampshire the 19th state to have enacted Revised UCC Article 1 (and the 19th to have rejected the uniform choice-of-law provision R1-301).  The new law will take effect on January 1, 2007.

[Keith Rowley]

Revised Article 1 Update

As of May 23, 2006, Arizona (SB 1250), Colorado (HB 1247), Kentucky (SB 154), and West Virginia (SB 742) have enacted Revised UCC Article 1, and both houses of the New Hampshire legislature have enrolled HB 719.

All five bills replace uniform R1-301 with language tracking pre-Revised 1-105. The California, Kentucky, New Hampshire, and West Virginia bills opt for the definition of good faith in uniform R1-201(b)(20).  Arizona SB 1250 retains the per-R1 definition of "good faith" -- joining Alabama, Hawaii, Idaho, Nebraska, and Virginia in perpetuating different standards of good faith for merchants and non-merchants.

The Louisiana Senate unanimously passed SB 383 on May 8.  It is now before the Louisiana House Commerce Committee.

The California Senate Commerce Committee unanimously approved SB 1481 on May 9.  It now awaits a third reading and final approval in the Senate before moving to the other house.

Massachusetts HB 3731 continues to languish -- or, at least, that's what the Massachusetts legislature's web site (which is one of the worst this correspondent has had to navigate) indicates.  The Joint Committee on Economic Development and Emerging Technologies, which held a public hearing on the bill on Oct. 26, 2005 (not a typo), has until June 23, 2006 (also not a typo) to report on the bill.  Stay tuned.

[Keith Rowley]

Revised Article 1 Update

Revised UCC Article 1 appears to be on the verge of adoption in Colorado (HB 1247), Kentucky (SB 154), New Hampshire (HB 719), and West Virginia (SB 742), where it has passed both houses, as amended to replace uniform R1-301 with language tracking pre-Revised 1-105. All four bills opt for the definition of good faith in uniform R1-201(b)(20).

A Revised Article 1 bill has also passed one house in Arizona (SB 1250) and appears destined to pass as both minority and majority caucuses in the second house have recommended adoption.  Like the Colorado, Kentucky, New Hampshire, and West Virginia bills, the Arizona bill replaces uniform R1-301 with language tracking pre-Revised 1-105. Unlike its counterparts in 9 of the states in which Revised Article 1 is in effect, and the four states where bills adopting Revised Article 1 await gubernatorial action, Arizona SB 1250 retains the pre-Revised Article 1 definition of good faith -- joining Alabama, Hawaii, Idaho, Nebraska, and Virginia in perpetuating different standards of good faith for merchants and non-merchants.

One unexpected development is that Oklahoma's bill to adopt the 2003 amendments to Article 2A (HB 3084) -- not Article 2, too, just Article 2A -- has passed one house and appears to be progressing through the other.

[Keith Rowley]

New Rules for Retail Leases in Queensland

Retail leases in Queensland will likely be subject to a new set of terms and rules next month, when the new Retail Shop Leases Amendment Act 2006 is expected to come into effect.  The Act has new disclosure requirements for both lessors and lessees, and a variety of non-waivable terms regulating rent, options, and other aspects of the deal.  A client letter from Sydney's Phillips Fox outlines the changes.

[Frank Snyder]

Ontario gets new consumer regs

New regulations under Ontario’s Consumer Protection Act 2002 are expected to come into effect July 30.  They’re a mix of new disclosure provisions, mandatory contract warranty terms, specific measures addressed to individual abuses, and whopping new fines.  William R. MacLean of Toronto’s Borden Ladner Gervais LLP has a run-down of the new rules and suggestions for business compliance.

Turkey promulgates new commercial code

A proposed new Turkish Code of Obligations has been released to the public for comments.  The new law, covers virtually all forms of contractual and debt relations.

Vural Günal of Istanbul’s Pekin & Pekin has an analysis of the key innovations in the bill.

Connecticut Enacts Revised Article 1

Governor M. Jodi Rell signed Connecticut HB 6985 into law on June 7.  Like the versions of Revised Article 1 previously enacted in Alabama, Arkansas, Delaware, Hawaii, Idaho, Minnesota, Montana, Nebraska, Nevada, New Mexico, Oklahoma, Texas, and Virginia, HB 6985 rejects uniform R1-301 in favor of language similar to pre-revised 1-105.  Like the versions previously enacted in Arkansas, Delaware, Minnesota, Montana, Nevada, New Mexico, Oklahoma, and Texas, HB 6985 adopts the uniform good faith definition in R1-201(b)(20). By its terms, HB 6985 will take effect on October 1, 2005.

Nevada Enacts Revised Article 1

Nevada Governor Kenny Guinn signed SB 201 into law last Thursday (6/2).  This makes Nevada the thirteenth state to enact Revised Article 1 (up from seven at the end of last year's legislative sessions).  Like all of its predecessors, SB 201 rejects uniform R1-301 in favor of language tracking pre-revised 1-105.  Nevada becomes the eighth state to enact the uniform good faith definition in R1-102(b)(20).

Connecticut HB 6985 appears to still be making its way to Governor Jodi Rell.  If she signs it as is, the tally will be 14-0 against uniform R1-301 and 9-5 in favor of uniform R1-201(b)(20).

Illinois SB 1647 now appears dead.  It was reassigned by rule to the House Rules Committee on May 13, along with dozens of other bills.  The Rules Committee has scheduled no hearings on any of the bills, and the legislature is fast approaching adjournment.

There has been no progress yet on the petition introduced a month ago in the Massachusetts House.

Revised Article 1 Update (5/25)

As legislative sessions draw near to adjournment in many states, here is a quick update on the status of Revised Article 1. Thus far this year, Arkansas, Montana, Nebraska, New Mexico, and Oklahoma have enacted versions of Revised Article 1, bringing the total number of enacting states to 12. All twelve enacting states have rejected uniform R1-301 in favor of language similar to existing 1-105 and five (Alabama, Hawaii, Idaho, Nebraska, and Virginia) have rejected uniform R1-201(b)(20) in favor of retaining the current definitions of "good faith" in Articles 1, 2, 2A, 3, 4, 4A, 8 & 9. Otherwise, the enacting states have made few if any change to the text of uniform Revised Article 1.

Yesterday (5/24), the Connecticut Senate unanimously approved HB 6985, and today (5/25) the Nevada Assembly did likewise to SB 201, clearing the final legislative hurdle to enactment in their respective states. Once each bill is transmitted to Governors Jodi Rell and Kenny Guinn, respectively, each will have five calendar days (excluding any Sunday or legal holiday falling within the five day period) to sign or veto the bill before it is deemed enacted as a matter of law. Given the looming Memorial Day weekend, it will likely be next week before either governor acts. As do their twelve predecessors, Connecticut HB 6985 and Nevada SB 201 reject uniform R1-301 in favor of language similar to existing 1-105. As do seven of their predecessors, HB 6985 and SB 201 opt for uniform R1-201(b)(20) over retaining the current definitions of "good faith" in Articles 1, 2, 2A, 3, 4, 4A, 8 & 9.

Illinois SB 1647, which the Illinois Senate approved unanimously before either Connecticut HB 6985 or Nevada SB 201 made it out of their originating houses, appears to have stalled. After languishing on the House Executive Committee's docket for more than two weeks, it was re-referred by rule to the Rules Committee, from which it is unlikely to emerge.

The bills introduced earlier this year in Arizona, Kansas, New Hampshire, and West Virginia died on the vine.

Oklahoma Enacts Revised Article 1

Governor Brad Henry signed Oklahoma HB 2028 into law May 5, making Oklahoma the 12th state to enact a version of Revised Article 1.  Like all eleven of its predecessors, Oklahoma's version of Revised Article 1 rejects uniform R1-301 in favor of a choice of law provision closely resembling pre-revised 1-105.  Like six of its predecessors (Arkansas, Delaware, Minnesota, Montana, New Mexico, and Texas), Oklahoma's version of Revised Article 1 adopts uniform R1-201(b)(20).  By its terms, HB 2028 will take effect on January 1, 2006.

California looks at requiring property registration

A bill to establish "an electronic reporting system" for pawn shops and second-hand goods dealers has passed out of a committee in the California legislature. The goal is to have such sellers create electronic records of all the tangible personal property they acquire. Proponents argue it will help combat the problem of stolen property.

The measure exempts most of those groups likely to be able to mount effective lobbying pressure: charitable organizations, swap meets, third-party auctioneers, and gun shows.  Looks like eBay is the only major outfit likely to oppose it, since their sellers will be subject.  The measure will be paid for by fees on the sellers.

Revised Article 1 Update

Governor Brian Schweitzer signed Montana SB 401 into law May 2, making Montana the 11th state to enact a version of Revised Article 1.  Like all ten of its predecessors, Montana's version of Revised Article 1 rejects uniform R1-301 in favor of a choice of law provision closely resembling pre-revised 1-105.  Like five of its predecessors (Arkansas, Delaware, Minnesota, New Mexico, and Texas), Montana's version of Revised Article 1 adopts uniform R1-201(b)(20).  SB 401 will take effect on October 1, 2005.

Elsewhere:

Oklahoma HB 2028 awaits only gubernatorial action, or the end of the day May 7, whichever comes first.  If Governor Brad Henry signs or fails to veto the bill by the end of the day May 7, it will become law.  Like Montana SB 401, Oklahoma HB 2028 rejects uniform R1-301, but embraces uniform R1-201(b)(20). If enacted, HB 2028 will take effect January 1, 2006.

The Illinois Senate unanimously passed SB 1647, as amended by its sponsor to reject both uniform R1-301 and uniform R1-201(b)(20) in favor of their pre-revised counterparts, on April 15.  Amended SB 1647 was read for the first time in the Illinois House on April 26 and referred to the Rules Committee.  It is presently before the House Executive Committee, which had not scheduled as hearing as of May 4 and is not scheduled to meet during the week of May 2-6.  The House must approve the bill by May 20 before it can be presented to Governor Rod Blagojevich for his signature or veto.

On April 20, the Nevada Senate passed SB 201 (amended before it was reported out of committee to reject uniform R1-301 in favor of language closely resembling current 1-105) without opposition.  On April 21, SB 201 was read for the first time in the Assembly and assigned to the Assembly Judiciary Committee, which held a hearing on SB 201 on May 2, but has yet to take any further action on the bill.  The Assembly must pass SB 201 by May 27 before it can be presented to Governor Kenny Guinn for his signature or veto.

Connecticut HB 6985, which supersedes HB 5975 introduced earlier this year, was reported out of the Joint Committee on Judiciary without objection on April 15, but only after the committee amended the bill to replace uniform R1-301 with an interesting substitute that rejects the thus far uniformly rejected unfettered choice of law language in uniform R1-301(c), but retains other elements of uniform R1-301, such as the consumer/non-consumer distinction.  (It is unclear whether the effect of this hybrid of current 1-105 and R1-301 will work any differently in practice than current 1-105; but, that may be a subject for another day.)  After favorable reports from the Office of Legislative Research and Office of Fiscal Analysis, on April 28 the Legislative Commissioners’ Office reported amended HB 6985 favorably back to the House, which placed it on the May 4 “Go List.”  As yet, neither house of the Connecticut legislature has passed HB 6985, although the House may have done so (or may have voted not to pass it) by the time you read this post.

By all appearances, Arizona SB 1234, Kansas HB 2453, New Hampshire HB 719, and West Virginia HB 3095 and SB 660 have run out of time this legislative session.  Whether they will be back next session; and, if so, in what form, remains to be seen.

Nebraska Enacts Revised Article 1

Governor Dave Heineman today signed LB 570, which, by its terms, will take effect on January 1, 2006.  LB 570, like the nine versions of Revised Article 1 already enacted in Alabama, Arkansas, Delaware, Hawaii, Idaho, Minnesota, New Mexico, Texas, and Virginia, rejects uniform R1-301, retaining the basic choice-of-law regime of pre-revised 1-105.  LB 570, like the versions of Revised Article 1 enacted in four other states (Alabama, Hawaii, Idaho, and Virginia), rejects uniform R1-201(b)(20)'s definition of "good faith" as "honesty in fact and the observance of reasonable commercial standards of fair dealing," retaining the definitions set forth in pre-revised 1-201(19) and unamended 2-103(1)(b) and 2A-103(3).

Elsewhere:

The Illinois Senate Judiciary Committee unanimously approved Senator Kirk Dillard's floor amendment to substitute the language of pre-revised 1-105 and unamended 1-201(19) for uniform R1-301 and R1-201(b)(20), respectively.  Thus amended, SB 1647 must now pass a second and third reading in the Illinois Senate by April 15, and must receive House approval by May 20, before it can be submitted to Governor Rod Blagojevich for his signature or veto.

The Oklahoma Senate Judiciary Committee unanimously approved HB 2028, which the House passed on March 16.  The deadline for final reading in the Senate is April 28.  HB 2028, like amended Illinois SB 1647 and the version of Revised Article 1 enacted in the all ten enacting states, rejects uniform R1-301 in favor of language similar to pre-revised 1-105.  HB 2028, unlike amended Illinois SB 1647 and the versions of Revised Article 1 enacted in Alabama, Hawaii, Idaho, Nebraska, and Virginia, adopts uniform R1-201(b)(20)'s "good faith" definition.

New Mexico Enacts Revised Article 1

Governor Bill Richardson today signed HB 834, which, by its terms, will take effect on January 1, 2006.  HB 834, like the eight versions of Revised Article 1 already enacted in Alabama, Arkansas, Delaware, Hawaii, Idaho, Minnesota, Texas, and Virginia, rejects uniform R1-301, retaining the basic choice-of-law regime of pre-revised 1-105.  HB 834, like the versions of Revised Article 1 enacted in four other states (Arkansas, Delaware, Minnesota, and Texas), adopts uniform R1-201(b)(20)'s definition of "good faith" and "honesty in fact and the observance of reasonable commercial standards of fair dealing."

Revised Article 1 Legislative Update (4/1)

As of April 1, 2005, eight states – Alabama, Arkansas, Delaware, Hawaii, Idaho, Minnesota, Texas, and Virginia – have enacted versions of Revised U.C.C. Article 1 (and all but Arkansas's are now in effect), and bills proposing the adoption of Revised Article 1 await further legislative or executive action in Arizona, Connecticut, Illinois, Kansas, Montana, Nebraska, Nevada, New Hampshire, New Mexico, Oklahoma, and West Virginia.