On July 1, 2013, Gov. Deval L. Patrick signed into law Chapter
30 of the Acts of 2013. The new law updates Massachusetts' version
of the Uniform Commercial Code, codified in Chapter 106 of the
General Laws, and adopts the 2010 Amendments to UCC Article 9,
Revised Articles 1 and 7, and a number of other amendments to the
UCC.
The UCC was first enacted in Massachusetts in 1958 and it had been
more than 10 years since any material changes have been made to the
Massachusetts UCC.
Here is what the new UCC amendments will do.
Revised Article 1
The amendments to Massachusetts UCC enact the 2001 revisions to
Article 1 dealing with the general provisions of the code. There
are some key substantive changes.
Scope. Section 1-102 makes explicit that the substantive
rules in Article 1 apply only to transactions within the scope of
the other Articles of the Uniform Commercial Code.
Good faith. Section 1-201(b)(20) replaces the current
definition of "good faith" ("honesty in fact in the conduct or
transaction concerned") with the definition adopted by all but one
of the recently revised Articles of the Uniform Commercial Code -
"honesty in fact and the observance of reasonable commercial
standards of fair dealing."
Course of performance. Section 1-303 adds the concept of
"course of performance," taken from Articles 2 dealing with sales
of goods and 2A dealing with leases of goods, to course of dealing
and usage of trade as contractual interpretive tools.
Statute of Frauds. Revised Article 1 deletes the Statute
of Frauds "for kinds of personal property not otherwise covered"
that appears in current section 1-206.
Revised Article 7
The bill would also enact the 2003 revisions to Article 7 dealing
with documents of title. A few of the key changes effected by the
revisions are set forth below.
Definitions. To permit electronic documents of title in
contrast to paper-based ones (referred to as "tangible" documents
of title), a document of title must be in a "record" as opposed to
a "writing." The issuer of the document determines the format in
which the document is initially issued. To convert a tangible
document to an electronic document or vice-versa, the person
entitled under the document must provide a process by which the
person entitled can request the issuer to reissue the document in
the alternative medium. The substitute document issued in the new
medium will contain a notation that it was previously issued in the
other medium. The person who procures issuance of the document in
the alternative medium must surrender possession or control of the
first document to the issuer and provide a warranty that the person
is the person entitled under the surrendered document.
Control of electronic documents. A concept of "control"
of an electronic document substitutes for the paper-based concepts
of possession and indorsement. The essence of the control
definition is that the system reliably establishes the person who
has rights under the document.
Delivery of electronic documents. A tangible document is
delivered by voluntary transfer of possession, and an electronic
document is delivered by voluntary transfer of control.
Changes in industry practice. The Article 7 revisions
also take into account changes in industry practice. While the
revisions continue the standard of reasonable care that a warehouse
must exercise for stored goods, the warehouse can limit its
liability without stating a limitation per article or per unit of
weight. A warehouse may also, in the warehouse receipt or storage
agreement, place reasonable requirements regarding the manner and
time of presenting claims. A carrier's lien is expanded to proceeds
in the carrier's possession.
Technical corrections to Article 9
The bill would make some technical corrections to conform certain
aspects of the Massachusetts Article 9 to the official text of
Article 9.
Bank obligations with respect of a control agreement. The
bill would clarify that a bank is not required to enter into or
disclose the existence of a control agreement with a secured party
claiming a security interest in a deposit account maintained with
the bank.
Secured party liability arising from the security interest
alone. The bill would also clarify that the existence of a
security interest or the debtor's authority to deal with
collateral, without more, does not subject the secured party to
liability in contract or tort for the debtor's actions.
Re-designating sections of Part 4. The bill would
re-designate sections of Part 4 of Article 9 to coincide with the
Part 5 section references in the Official Text of Article 9 as used
in all other states' Uniform Commercial Codes.
2010 Amendments to Article 9
In addition to providing for the Articles 1 and 7 revisions and
the technical corrections to Article 9 referred to above, the bill
includes the amendments to Article 9 promulgated in 2010. Here is a
brief summary.1
Name to be provided on a financing statement when the debtor
is an individual. If the debtor is an individual whose
principal residence is in Massachusetts and the debtor holds an
unexpired Massachusetts driver's license or identification card,
the debtor's name as shown on the debtor's license or card must be
provided on a financing statement.
Definition of "registered organization." A registered
organization includes an organization whose "birth certificate"
emanates from the act of making a public filing (e.g., a
corporation, limited liability company, limited partnership or
statutory business trust) as well as a Massachusetts business
trust.
Name of registered organization. The name of a registered
organization debtor to be provided on the financing statement must
be the name reflected on the "public organic record" of the
registered organization. In most cases, a registered organization's
"public organic record" is the articles or certificate of
organization or other publicly available record filed with the
state to form or organize the registered organization.
Debtor's change of location; new debtor. If a debtor
changes its location to a new jurisdiction or a new debtor located
in a new jurisdiction becomes bound by the original debtor's
security interest, a financing statement filed in the original
jurisdiction is effective to perfect a security interest in
collateral acquired within the four months after that event. The
secured party can continue the perfection beyond the four-month
period by filing a financing statement or otherwise perfecting
under the law of the new jurisdiction within the four-month
period.
Other changes. The amendments provide for other changes:
(a) only an initial financing statement may indicate that the
debtor is a transmitting utility; (b) a filing office will no
longer be permitted to reject a financing statement that fails to
provide the type of organization of the debtor, the jurisdiction of
organization of the debtor, or the organizational identification
number of the debtor or a statement that the debtor has none; (c)
an information statement may, but need not, be filed by a secured
party of record who believes that an amendment or other record
relating to the financing statement of the secured party of record
was filed by a person not entitled to do so; and (d) the uniform
forms of initial financing statement and amendment have been
updated to reflect the amendments.
Transition rules. The amendments contain their own set of
transition rules with an effective date of July 1, 2013. ¦
Francis C. Morrissey is a partner in Morrissey, Wilson &
Zafiropoulos LLP and teaches secured transactions at New England
School of Law. Edwin E. Smith is a partner in Bingham McCutchen LLP
and is a Uniform Law Commissioner for the Commonwealth of
Massachusetts.
- The 2010 amendments to Article 9 are discussed in greater
detail, with statutory citations and with summaries of changes to
the Official Comments, in Edwin E. Smith, "A Summary of the 2010
Amendments to Article 9 of the Uniform Commercial Code," Uniform
Commercial Code Law Journal, Number 4 (2010).