Bill Text: NJ S2144 | 2012-2013 | Regular Session | Chaptered
Bill Title: Repeals and replaces Chapters 1 and 7 of the Uniform Commercial Code and revises various additional provisions of the code.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Passed) 2013-06-13 - Approved P.L.2013, c.65. [S2144 Detail]
Download: New_Jersey-2012-S2144-Chaptered.html
§§1,2 - Repealer
§50 - Note
An Act concerning certain commercial transactions, replacing Chapters 1 and 7 of Title 12A of the New Jersey Statutes and revising parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Chapter 1 of Title 12A of the New Jersey Statutes (N.J.S.12A:1-101 through 12A:1-209, including any amendments or supplements thereto) is repealed and replaced as follows:
CHAPTER 1 - GENERAL PROVISIONS
12A:1-101. Short Titles.
a. This act may be cited as the Uniform Commercial Code.
b. This Chapter may be cited as the Uniform Commercial Code - General Provisions.
12A:1-102. Scope of Chapter.
This Chapter applies to a transaction to the extent that it is governed by another Chapter of the Uniform Commercial Code.
12A:1-103. Construction of the Uniform Commercial Code to Promote Its Purposes and Policies; Applicability of Supplemental Principles of Law.
a. The Uniform Commercial Code shall be liberally construed and applied to promote its underlying purposes and policies, which are:
(1) to simplify, clarify, and modernize the law governing commercial transactions;
(2) to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and
(3) to make uniform the law among the various jurisdictions.
b. Unless displaced by the particular provisions of the Uniform Commercial Code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.
12A:1-104. Construction Against Implied Repeal.
The Uniform Commercial Code being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.
12A:1-105. Severability.
If any provision or clause of the Uniform Commercial Code or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Uniform Commercial Code which can be given effect without the invalid provision or application, and to this end the provisions of the Uniform Commercial Code are severable.
12A:1-106. Use of Singular and Plural; Gender.
In the Uniform Commercial Code, unless the statutory context otherwise requires:
a. Words in the singular number include the plural, and those in the plural include the singular; and
b. Words of any gender also refer to any other gender.
12A:1-107. Section Captions.
Section captions are part of the Uniform Commercial Code.
12A:1-108. Relation to Electronic Signatures in Global and National Commerce Act.
This Chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. s.7001 et seq., except that nothing in this Chapter modifies, limits, or supersedes section 7001(c) of that act or authorizes electronic delivery of any of the notices described in section 7003(b) of that act.
12A:1-201. General Definitions.
a. Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other Chapters of the Uniform Commercial Code that apply to particular Chapters or parts thereof, have the meanings stated.
b. Subject to definitions contained in other Chapters of the Uniform Commercial Code that apply to particular Chapters or parts thereof:
(1) "Action," in the sense of a judicial proceeding, includes recoupment, counterclaim, set off, suit in equity, and any other proceeding in which rights are determined.
(2) "Aggrieved party" means a party entitled to pursue a remedy.
(3) "Agreement," as distinguished from "contract," means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade.
(4) "Bank" means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.
(5) "Bearer" means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or indorsed in blank.
(6) "Bill of lading" means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt.
(7) "Branch" includes a separately incorporated foreign branch of a bank.
(8) "Burden of establishing" a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.
(9) "Buyer in ordinary course of business" means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Chapter 2 may be a buyer in ordinary course of business. "Buyer in ordinary course of business" does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
(10) "Conspicuous," with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is "conspicuous" or not is a decision for the court. Conspicuous terms include the following:
(a) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and
(b) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.
(11) "Consumer" means an individual who enters into a transaction primarily for personal, family, or household purposes.
(12) "Contract," as distinguished from "agreement," means the total legal obligation that results from the parties' agreement as determined by the Uniform Commercial Code as supplemented by any other applicable laws.
(13) "Creditor" includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor's or assignor's estate.
(14) "Defendant" includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.
(15) "Delivery," with respect to an electronic document of title means voluntary transfer of control and with respect to an instrument, a tangible document of title, or chattel paper, means voluntary transfer of possession.
(16) "Document of title" means a record:
(a) that in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers; and
(b) that purports to be issued by or addressed to a bailee and to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass. The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods. An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium. A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium.
(17) "Fault" means a default, breach, or wrongful act or omission.
(18) "Fungible goods" means:
(a) goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or
(b) goods that by agreement are treated as equivalent.
(19) "Genuine" means free of forgery or counterfeiting.
(20) "Good faith," except as otherwise provided in Chapter 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(21) "Holder" means:
(a) the person in possession of a negotiable instrument that is payable either to the bearer or to an identified person that is the person in possession;
(b) the person in possession of a negotiable tangible document of title if the goods are deliverable either to the bearer or to the order of the person in possession; or
(c) the person in control of a negotiable electronic document of title.
(22) "Insolvency proceeding" includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.
(23) "Insolvent" means:
(a) having generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute;
(b) being unable to pay debts as they become due; or
(c) being insolvent within the meaning of federal bankruptcy law.
(24) "Money" means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.
(25) "Organization" means a person other than an individual.
(26) "Party," as distinguished from "third party," means a person that has engaged in a transaction or made an agreement subject to the Uniform Commercial Code.
(27) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity.
(28) "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.
(29) "Purchase" means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property.
(30) "Purchaser" means a person that takes by purchase.
(31) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(32) "Remedy" means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.
(33) "Representative" means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate.
(34) "Right" includes remedy.
(35) "Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation. "Security interest" includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Chapter 9. "Security interest" does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under 12A:2-401, but a buyer may also acquire a "security interest" by complying with Chapter 9. Except as otherwise provided in 12A:2-505, the right of a seller or lessor of goods under Chapter 2 or 2A to retain or acquire possession of the goods is not a "security interest," but a seller or lessor may also acquire a "security interest" by complying with Chapter 9. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under 12A:2-401 is limited in effect to a reservation of a "security interest." Whether a transaction in the form of a lease creates a "security interest" is determined pursuant to 12A:1-203.
(36) "Send" in connection with a writing, record, or notice means:
(a) to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances; or
(b) in any other way to cause to be received any record or notice within the time it would have arrived if properly sent.
(37) "Signed" includes using any symbol executed or adopted with present intention to adopt or accept a writing.
(38) "State" means a State of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
(39) "Surety" includes a guarantor or other secondary obligor.
(40) "Term" means a portion of an agreement that relates to a particular matter.
(41) "Unauthorized signature" means a signature made without actual, implied, or apparent authority. The term includes a forgery.
(42) "Warehouse receipt" means a document of title issued by a person engaged in the business of storing goods for hire.
(43) "Writing" includes printing, typewriting, or any other intentional reduction to tangible form. "Written" has a corresponding meaning.
12A:1-202. Notice; Knowledge.
a. Subject to subsection f. of this section, a person has "notice" of a fact if the person:
(1) has actual knowledge of it;
(2) has received a notice or notification of it; or
(3) from all the facts and circumstances known to the person at the time in question, has reason to know that it exists.
b. "Knowledge" means actual knowledge. "Knows" has a corresponding meaning.
c. "Discover," "learn," or words of similar import refer to knowledge rather than to reason to know.
d. A person "notifies" or "gives" a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.
e. Subject to subsection f. of this section, a person "receives" a notice or notification when:
(1) it comes to that person's attention; or
(2) it is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.
f. Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual's attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.
12A:1-203. Lease Distinguished from Security Interest.
a. Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.
b. A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:
(1) the original term of the lease is equal to or greater than the remaining economic life of the goods;
(2) the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
(3) the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or
(4) the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.
c. A transaction in the form of a lease does not create a security interest merely because:
(1) the present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;
(2) the lessee assumes risk of loss of the goods;
(3) the lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;
(4) the lessee has an option to renew the lease or to become the owner of the goods;
(5) the lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or
(6) the lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.
d. Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:
(1) when the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or
(2) when the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.
e. The "remaining economic life of the goods" and "reasonably predictable" fair market rent, fair market value, or cost of performing under the lease agreement shall be determined with reference to the facts and circumstances at the time the transaction is entered into.
12A:1-204. Value.
Except as otherwise provided in Chapters 3, 4, 5, and 6, a person gives value for rights if the person acquires them:
a. In return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge back is provided for in the event of difficulties in collection;
b. As security for, or in total or partial satisfaction of, a preexisting claim;
c. By accepting delivery under a preexisting contract for purchase; or
d. In return for any consideration sufficient to support a simple contract.
12A:1-205. Reasonable Time; Seasonableness
a. Whether a time for taking an action required by the Uniform Commercial Code is reasonable depends on the nature, purpose, and circumstances of the action.
b. An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.
12A:1-206. Presumptions.
Whenever the Uniform Commercial Code creates a "presumption" with respect to a fact, or provides that a fact is "presumed," the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.
112A:1-301 Territorial Applicability; Parties' Power to Choose Applicable Law.
a. Except as otherwise provided in this section, when a transaction bears a reasonable relation to this State and also to another state or nation the parties may agree that the law either of this State or of that other state or nation shall govern their rights and duties.
b. In the absence of an agreement effective under subsection a. of this section, and except as provided in subsection c. of this section, the Uniform Commercial Code applies to transactions bearing an appropriate relation to this State.
c. If one of the following provisions of the Uniform Commercial Code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:
(1) section 12A:2-402;
(2) sections 12A:2A-105 and 12A:2A-106;
(3) section 12A:4-102;
(4) section 12A:4A-507;
(5) section 12A:5-116;
(6) section 12A:8-110;
(7) sections 12A:9-301 through 12A:9-307.1
212A:1-302 Variation by Agreement.
a. Except as otherwise provided in subsection b. of this section or elsewhere in the Uniform Commercial Code, the effect of provisions of the Uniform Commercial Code may be varied by agreement.
b. The obligations of good faith, diligence, reasonableness, and care prescribed by the Uniform Commercial Code may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever the Uniform Commercial Code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.
c. The presence in certain provisions of the Uniform Commercial Code of the phrase "unless otherwise agreed," or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.2
212A:1-303 Course of Performance, Course of Dealing, and Usage of Trade.
a. A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if:
(1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and
(2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.
b. A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
c. A "usage of trade" is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.
d. A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
e. Except as otherwise provided in subsection f. of this section, the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:
(1) express terms prevail over course of performance, course of dealing, and usage of trade;
(2) course of performance prevails over course of dealing and usage of trade; and
(3) course of dealing prevails over usage of trade.
f. Subject to section 12A:2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.
g. Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.2
212A:1-304 Obligation of Good Faith.
Every contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement.2
212A:1-305 Remedies to Be Liberally Administered.
a. The remedies provided by the Uniform Commercial Code shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in the Uniform Commercial Code or by other rule of law.
b. Any right or obligation declared by the Uniform Commercial Code is enforceable by action unless the provision declaring it specifies a different and limited effect.2
212A:1-306 Waiver of Renunciation of Claim or Right After Breach.
A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.2
212A:1-307 Prima Facie Evidence by Third Party Documents.
A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher's or inspector's certificate, consular invoice, or any other document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.2
212A:1-308 Performance or Acceptance Under Reservation of Rights.
a. A party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice," "under protest," or the like are sufficient.
b. Subsection a. of this section shall not apply to an accord and satisfaction.2
2. Chapter 7 of Title 12A of the New Jersey Statutes (N.J.S.12A:7-101 through 12A:7-603, including any amendments or supplements thereto) is repealed and replaced as follows:
CHAPTER 7 - DOCUMENTS OF TITLE
12A:7-101. Short title.
This Chapter may be cited as Uniform Commercial Code - Documents of Title.
12A:7-102. Definitions and Index of Definitions.
a. In this Chapter, unless the context otherwise requires:
(1) "Bailee" means a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them.
(2) "Carrier" means a person that issues a bill of lading.
(3) "Consignee" means a person named in a bill of lading to which or to whose order the bill promises delivery.
(4) "Consignor" means a person named in a bill of lading as the person from which the goods have been received for shipment.
(5) "Delivery order" means a record that contains an order to deliver goods directed to a warehouse, carrier, or other person that in the ordinary course of business issues warehouse receipts or bills of lading.
(6) Reserved.
(7) "Goods" means all things that are treated as movable for the purposes of a contract for storage or transportation.
(8) "Issuer" means a bailee that issues a document of title or, in the case of an unaccepted delivery order, the person that orders the possessor of goods to deliver. The term includes a person for which an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, even if the issuer did not receive any goods, the goods were misdescribed, or in any other respect the agent or employee violated the issuer's instructions.
(9) "Person entitled under the document" means the holder, in the case of a negotiable document of title, or the person to which delivery of the goods is to be made by the terms of, or pursuant to instructions in a record under, a nonnegotiable document of title.
(10) Reserved.
(11) "Sign" means, with present intent to authenticate or adopt a record:
(a) to execute or adopt a tangible symbol; or
(b) to attach to or logically associate with the record an electronic sound, symbol, or process.
(12) "Shipper" means a person that enters into a contract of transportation with a carrier.
(13) "Warehouse" means a person engaged in the business of storing goods for hire.
b. Definitions in other aticles applying to this Chapter and the sections in which they appear are:
(1) "Contract for sale," 12A:2-106.
(2) "Lessee in ordinary course of business," 12A:2A-103.
(3) "Receipt" of goods, 12A:2-103.
c. In addition, Chapter 1 of Title 12A of the New Jersey Statues contains general definitions and principles of construction and interpretation applicable throughout this Chapter.
12A:7-103. Relation of Chapter To Treaty or Statute.
a. This Chapter is subject to any treaty or statute of the United States or regulatory statute of this State to the extent the treaty, statute, or regulatory statute is applicable.
b. This Chapter does not modify or repeal any law prescribing the form or content of a document of title or the services or facilities to be afforded by a bailee, or otherwise regulating a bailee's business in respects not specifically treated in this Chapter. However, violation of such a law does not affect the status of a document of title that otherwise is within the definition of a document of title.
c. This Chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. s.7001, et. seq.) but does not modify, limit, or supersede section 101(c) of that act (15 U.S.C. s.7001(c)) or authorize electronic delivery of any of the notices described in section 103(b) of that act (15U.S.C. s.7003(b)).
d. To the extent there is a conflict between the Uniform Electronic Transactions Act and this Chapter, this Chapter governs.
12A:7-104. Negotiable and Nonnegotiable Document of Title
a. Except as otherwise provided in subsection c. of this section, a document of title is negotiable if by its terms the goods are to be delivered to the bearer or to the order of a named person.
b. A document of title other than one described in subsection a. of this section is nonnegotiable. A bill of lading that states that the goods are consigned to a named person is not made negotiable by a provision that the goods are to be delivered only against an order in a record signed by the same or another named person.
c. A document of title is nonnegotiable if, at the time it is issued, the document has a conspicuous legend, however expressed, that it is nonnegotiable.
12A:7-105. Reissuance in Alternative Medium.
a. Upon request of a person entitled under an electronic document of title, the issuer of the electronic document may issue a tangible document of title as a substitute for the electronic document if:
(1) the person entitled under the electronic document surrenders control of the document to the issuer; and
(2) the tangible document when issued contains a statement that it is issued in substitution for the electronic document.
b. Upon issuance of a tangible document of title in substitution for an electronic document of title in accordance with subsection a. of this section:
(1) the electronic document ceases to have any effect or validity; and
(2) the person that procured issuance of the tangible document warrants to all subsequent persons entitled under the tangible document that the warrantor was a person entitled under the electronic document when the warrantor surrendered control of the electronic document to the issuer.
c. Upon request of a person entitled under a tangible document of title, the issuer of the tangible document may issue an electronic document of title as a substitute for the tangible document if:
(1) the person entitled under the tangible document surrenders possession of the document to the issuer; and
(2) the electronic document when issued contains a statement that it is issued in substitution for the tangible document.
d. Upon issuance of an electronic document of title in substitution for a tangible document of title in accordance with subsection c. of this section:
(1) the tangible document ceases to have any effect or validity; and
(2) the person that procured issuance of the electronic document warrants to all subsequent persons entitled under the electronic document that the warrantor was a person entitled under the tangible document when the warrantor surrendered possession of the tangible document to the issuer.
12A:7-106. Control of Electronic Document of Title.
a. A person has control of an electronic document of title if a system employed for evidencing the transfer of interests in the electronic document reliably establishes that person as the person to which the electronic document was issued or transferred.
b. A system satisfies subsection a. of this section, and a person is deemed to have control of an electronic document of title, if the document is created, stored, and assigned in such a manner that:
(1) a single authoritative copy of the document exists which is unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;
(2) the authoritative copy identifies the person asserting control as:
(a) the person to which the document was issued; or
(b) if the authoritative copy indicates that the document has been transferred, the person to which the document was most recently transferred;
(3) the authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
(4) copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
(5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
(6) any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.
WAREHOUSE RECEIPTS: SPECIAL PROVISIONS
12A:7-201. Person That May Issue a Warehouse Receipt; Storage Under Bond.
a. A warehouse receipt may be issued by any warehouse.
b. If goods, including distilled spirits and agricultural commodities, are stored under a statute requiring a bond against withdrawal or a license for the issuance of receipts in the nature of warehouse receipts, a receipt issued for the goods is deemed to be a warehouse receipt even if issued by a person that is the owner of the goods and is not a warehouse.
12A:7-202. Form of Warehouse Receipt; Effect of Omission.
a. A warehouse receipt need not be in any particular form.
b. Unless a warehouse receipt provides for each of the following, the warehouse is liable for damages caused to a person injured by its omission:
(1) a statement of the location of the warehouse facility where the goods are stored;
(2) the date of issue of the receipt;
(3) the unique identification code of the receipt;
(4) a statement whether the goods received will be delivered to the bearer, to a named person, or to a named person or its order;
(5) the rate of storage and handling charges, unless goods are stored under a field warehousing arrangement, in which case a statement of that fact is sufficient on a nonnegotiable receipt;
(6) a description of the goods or the packages containing them;
(7) the signature of the warehouse or its agent;
(8) if the receipt is issued for goods that the warehouse owns, either solely, jointly, or in common with others, a statement of the fact of that ownership; and
(9) a statement of the amount of advances made and of liabilities incurred for which the warehouse claims a lien or security interest, unless the precise amount of advances made or liabilities incurred, at the time of the issue of the receipt, is unknown to the warehouse or to its agent that issued the receipt, in which case a statement of the fact that advances have been made or liabilities incurred and the purpose of the advances or liabilities is sufficient.
c. A warehouse may insert in its receipt any terms that are not contrary to the Uniform Commercial Code and do not impair its obligation of delivery under 12A:7-403 or its duty of care under 12A:7-204. Any contrary provision is ineffective.
12A:7-203. Liability For Nonreceipt or Misdescription.
A party to or purchaser for value in good faith of a document of title, other than a bill of lading, that relies upon the description of the goods in the document may recover from the issuer damages caused by the nonreceipt or misdescription of the goods, except to the extent that:
a. The document conspicuously indicates that the issuer does not know whether all or part of the goods in fact were received or conform to the description, such as a case in which the description is in terms of marks or labels or kind, quantity, or condition, or the receipt or description is qualified by "contents, condition, and quality unknown," "said to contain," or words of similar import, if the indication is true; or
b. The party or purchaser otherwise has notice of the nonreceipt or misdescription.
12A:7-204. Duty of Care; Contractual Limitation of Warehouse's Liability.
a. A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.
b. Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable. Such a limitation is not effective with respect to the warehouse's liability for conversion to its own use. On request of the bailor in a record at the time of signing the storage agreement or within a reasonable time after receipt of the warehouse receipt, the warehouse's liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods.
c. Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the bailment may be included in the warehouse receipt or storage agreement.
d. This section does not modify or repeal any statute that imposes a higher responsibility upon the warehouse or invalidates a contractual limitation that would be permissible under this Chapter.
12A:7-205. Title Under Warehouse Receipt Defeated in Certain Cases.
A buyer in ordinary course of business of fungible goods sold and delivered by a warehouse that is also in the business of buying and selling such goods takes the goods free of any claim under a warehouse receipt even if the receipt is negotiable and has been duly negotiated.
12A:7-206. Termination of Storage At Warehouse's Option.
a. A warehouse, by giving notice to the person on whose account the goods are held and any other person known to claim an interest in the goods, may require payment of any charges and removal of the goods from the warehouse at the termination of the period of storage fixed by the document of title or, if a period is not fixed, within a stated period not less than 30 days after the warehouse gives notice. If the goods are not removed before the date specified in the notice, the warehouse may sell them pursuant to 12A:7-210.
b. If a warehouse in good faith believes that goods are about to deteriorate or decline in value to less than the amount of its lien within the time provided in subsection a. of this section and 12A:7-210, the warehouse may specify in the notice given under subsection a. of this section any reasonable shorter time for removal of the goods and, if the goods are not removed, may sell them at public sale held not less than one week after a single advertisement or posting.
c. If, as a result of a quality or condition of the goods of which the warehouse did not have notice at the time of deposit, the goods are a hazard to other property, the warehouse facilities, or other persons, the warehouse may sell the goods at public or private sale without advertisement or posting on reasonable notification to all persons known to claim an interest in the goods. If the warehouse, after a reasonable effort, is unable to sell the goods, it may dispose of them in any lawful manner and does not incur liability by reason of that disposition.
d. A warehouse shall deliver the goods to any person entitled to them under this Chapter upon due demand made at any time before sale or other disposition under this section.
e. A warehouse may satisfy its lien from the proceeds of any sale or disposition under this section but shall hold the balance for delivery on the demand of any person to which the warehouse would have been bound to deliver the goods.
12A:7-207. Goods Must Be Kept Separate; Fungible Goods.
a. Unless the warehouse receipt provides otherwise, a warehouse shall keep separate the goods covered by each receipt so as to permit at all times identification and delivery of those goods. However, different lots of fungible goods may be commingled.
b. If different lots of fungible goods are commingled, the goods are owned in common by the persons entitled thereto and the warehouse is severally liable to each owner for that owner's share. If, because of overissue, a mass of fungible goods is insufficient to meet all the receipts the warehouse has issued against it, the persons entitled include all holders to which overissued receipts have been duly negotiated.
12A:7-208. Altered Warehouse Receipts.
If a blank in a negotiable tangible warehouse receipt has been filled in without authority, a good-faith purchaser for value and without notice of the lack of authority may treat the insertion as authorized. Any other unauthorized alteration leaves any tangible or electronic warehouse receipt enforceable against the issuer according to its original tenor.
12A:7-209. Lien of Warehouse.
a. A warehouse has a lien against the bailor on the goods covered by a warehouse receipt or storage agreement or on the proceeds thereof in its possession for charges for storage or transportation, including demurrage and terminal charges, insurance, labor, or other charges, present or future, in relation to the goods, and for expenses necessary for preservation of the goods or reasonably incurred in their sale pursuant to law. If the person on whose account the goods are held is liable for similar charges or expenses in relation to other goods whenever deposited and it is stated in the warehouse receipt or storage agreement that a lien is claimed for charges and expenses in relation to other goods, the warehouse also has a lien against the goods covered by the warehouse receipt or storage agreement or on the proceeds thereof in its possession for those charges and expenses, whether or not the other goods have been delivered by the warehouse. However, as against a person to which a negotiable warehouse receipt is duly negotiated, a warehouse's lien is limited to charges in an amount or at a rate specified in the warehouse receipt or, if no charges are so specified, to a reasonable charge for storage of the specific goods covered by the receipt subsequent to the date of the receipt.
b. A warehouse may also reserve a security interest against the bailor for the maximum amount specified on the receipt for charges other than those specified in subsection a. of this section, such as for money advanced and interest. The security interest is governed by Chapter 9.
c. A warehouse's lien for charges and expenses under subsection a. of this section or a security interest under subsection b. of this section is also effective against any person that so entrusted the bailor with possession of the goods that a pledge of them by the bailor to a good-faith purchaser for value would have been valid. However, the lien or security interest is not effective against a person that before issuance of a document of title had a legal interest or a perfected security interest in the goods and that did not:
(1) deliver or entrust the goods or any document of title covering the goods to the bailor or the bailor's nominee with:
(a) actual or apparent authority to ship, store, or sell;
(b) power to obtain delivery under 12A:7-403; or
(c) power of disposition under 12A:2-403, 12A:2A-304(2), 12A:2A-305(2), 12A:9-320, or 12A:9-321(c) or other statute or rule of law; or
(2) acquiesce in the procurement by the bailor or its nominee of any document.
d. A warehouse's lien on household goods for charges and expenses in relation to the goods under subsection a. of this section is also effective against all persons if the depositor was the legal possessor of the goods at the time of deposit. In this subsection, "household goods" means furniture, furnishings, or personal effects used by the depositor in a dwelling.
e. A warehouse loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.
12A:7-210. Enforcement of Warehouse's Lien
a. Except as otherwise provided in subsection b. of this section, a warehouse's lien may be enforced by public or private sale of the goods, in bulk or in packages, at any time or place and on any terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. The notification shall include a statement of the amount due, the nature of the proposed sale, and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or in a method different from that selected by the warehouse is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The warehouse sells goods in a commercially reasonable manner if the warehouse sells the goods in the usual manner in any recognized market therefor, sells at the price current in that market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable, except in cases covered by the preceding sentence.
b. A warehouse may enforce its lien on goods, other than goods stored by a merchant in the course of its business, only if the following requirements are satisfied:
(1) All persons known to claim an interest in the goods shall be notified.
(2) The notification shall include an itemized statement of the claim, a description of the goods subject to the lien, a demand for payment within a specified time not less than 10 days after receipt of the notification, and a conspicuous statement that unless the claim is paid within that time the goods will be advertised for sale and sold by auction at a specified time and place.
(3) The sale must conform to the terms of the notification.
(4) The sale must be held at the nearest suitable place to where the goods are held or stored.
(5) After the expiration of the time given in the notification, an advertisement of the sale shall be published once a week for two weeks consecutively in a newspaper of general circulation where the sale is to be held. The advertisement shall include a description of the goods, the name of the person on whose account the goods are being held, and the time and place of the sale. The sale shall take place at least 15 days after the first publication. If there is no newspaper of general circulation where the sale is to be held, the advertisement shall be posted at least 10 days before the sale in not fewer than six conspicuous places in the neighborhood of the proposed sale.
c. Before any sale pursuant to this section, any person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in complying with this section. In that event, the goods may not be sold but shall be retained by the warehouse subject to the terms of the receipt and this Chapter.
d. A warehouse may buy at any public sale held pursuant to this section.
e. A purchaser in good faith of goods sold to enforce a warehouse's lien takes the goods free of any rights of persons against which the lien was valid, despite the warehouse's noncompliance with this section.
f. A warehouse may satisfy its lien from the proceeds of any sale pursuant to this section but shall hold the balance, if any, for delivery on demand to any person to which the warehouse would have been bound to deliver the goods.
g. The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor.
h. If a lien is on goods stored by a merchant in the course of its business, the lien may be enforced in accordance with subsection a. or b. of this section.
i. A warehouse is liable for damages caused by failure to comply with the requirements for sale under this section and, in case of willful violation, is liable for conversion.
BILLS OF LADING: SPECIAL PROVISIONS
12A:7-301. Liability For Nonreceipt or Misdescription; "Said To Contain;" "Shipper's Weight, Load, and Count;" Improper Handling.
a. A consignee of a nonnegotiable bill of lading which has given value in good faith, or a holder to which a negotiable bill has been duly negotiated, relying upon the description of the goods in the bill or upon the date shown in the bill, may recover from the issuer damages caused by the misdating of the bill or the nonreceipt or misdescription of the goods, except to the extent that the bill indicates that the issuer does not know whether any part or all of the goods in fact were received or conform to the description, such as in a case in which the description is in terms of marks or labels or kind, quantity, or condition or the receipt or description is qualified by "contents or condition of contents of packages unknown," "said to contain," "shipper's weight, load, and count," or words of similar import, if that indication is true.
b. If goods are loaded by the issuer of a bill of lading:
(1) the issuer shall count the packages of goods if shipped in packages and ascertain the kind and quantity if shipped in bulk; and
(2) words such as "shipper's weight, load, and count," or words of similar import indicating that the description was made by the shipper are ineffective except as to goods concealed in packages.
c. If bulk goods are loaded by a shipper that makes available to the issuer of a bill of lading adequate facilities for weighing those goods, the issuer shall ascertain the kind and quantity within a reasonable time after receiving the shipper's request in a record to do so. In that case, "shipper's weight" or words of similar import are ineffective.
d. The issuer of a bill of lading, by including in the bill the words "shipper's weight, load, and count," or words of similar import, may indicate that the goods were loaded by the shipper, and, if that statement is true, the issuer is not liable for damages caused by the improper loading. However, omission of such words does not imply liability for damages caused by improper loading.
e. A shipper guarantees to an issuer the accuracy at the time of shipment of the description, marks, labels, number, kind, quantity, condition, and weight, as furnished by the shipper, and the shipper shall indemnify the issuer against damage caused by inaccuracies in those particulars. This right of indemnity does not limit the issuer's responsibility or liability under the contract of carriage to any person other than the shipper.
12A:7-302. Through Bills of Lading And Similar Documents of Title.
a. The issuer of a through bill of lading, or other document of title embodying an undertaking to be performed in part by a person acting as its agent or by a performing carrier, is liable to any person entitled to recover on the bill or other document for any breach by the other person or the performing carrier of its obligation under the bill or other document. However, to the extent that the bill or other document covers an undertaking to be performed overseas or in territory not contiguous to the continental United States or an undertaking including matters other than transportation, this liability for breach by the other person or the performing carrier may be varied by agreement of the parties.
b. If goods covered by a through bill of lading or other document of title embodying an undertaking to be performed in part by a person other than the issuer are received by that person, the person is subject, with respect to its own performance while the goods are in its possession, to the obligation of the issuer. The person's obligation is discharged by delivery of the goods to another person pursuant to the bill or other document and does not include liability for breach by any other person or by the issuer.
c. The issuer of a through bill of lading or other document of title described in subsection a. of this section is entitled to recover from the performing carrier, or other person in possession of the goods when the breach of the obligation under the bill or other document occurred:
(1) the amount it may be required to pay to any person entitled to recover on the bill or other document for the breach, as may be evidenced by any receipt, judgment, or transcript of judgment; and
(2) the amount of any expense reasonably incurred by the issuer in defending any action commenced by any person entitled to recover on the bill or other document for the breach.
12A:7-303. Diversion; Reconsignment; Change of Instructions.
a. Unless the bill of lading otherwise provides, a carrier may deliver the goods to a person or destination other than that stated in the bill or may otherwise dispose of the goods, without liability for misdelivery, on instructions from:
(1) the holder of a negotiable bill;
(2) the consignor on a nonnegotiable bill, even if the consignee has given contrary instructions;
(3) the consignee on a nonnegotiable bill in the absence of contrary instructions from the consignor, if the goods have arrived at the billed destination or if the consignee is in possession of the tangible bill or in control of the electronic bill; or
(4) the consignee on a nonnegotiable bill, if the consignee is entitled as against the consignor to dispose of the goods.
b. Unless instructions described in subsection a. of this section are included in a negotiable bill of lading, a person to which the bill is duly negotiated may hold the bailee according to the original terms.
12A: 7-304. Tangible Bills of Lading In A Set.
a. Except as customary in international transportation, a tangible bill of lading may not be issued in a set of parts. The issuer is liable for damages caused by violation of this subsection.
b. If a tangible bill of lading is lawfully issued in a set of parts, each of which contains an identification code and is expressed to be valid only if the goods have not been delivered against any other part, the whole of the parts constitutes one bill.
c. If a tangible negotiable bill of lading is lawfully issued in a set of parts and different parts are negotiated to different persons, the title of the holder to which the first due negotiation is made prevails as to both the document of title and the goods even if any later holder may have received the goods from the carrier in good faith and discharged the carrier's obligation by surrendering its part.
d. A person that negotiates or transfers a single part of a tangible bill of lading issued in a set is liable to holders of that part as if it were the whole set.
e. The bailee shall deliver in accordance with Subchapter 4 of this Chapter against the first presented part of a tangible bill of lading lawfully issued in a set. Delivery in this manner discharges the bailee's obligation on the whole bill.
12A:7-305. Destination Bills.
a. Instead of issuing a bill of lading to the consignor at the place of shipment, a carrier, at the request of the consignor, may procure the bill to be issued at destination or at any other place designated in the request.
b. Upon request of any person entitled as against a carrier to control the goods while in transit and on surrender of possession or control of any outstanding bill of lading or other receipt covering the goods, the issuer, subject to 12A:7-105, may procure a substitute bill to be issued at any place designated in the request.
12A:7-306. Altered Bills of Lading.
An unauthorized alteration or filling in of a blank in a bill of lading leaves the bill enforceable according to its original tenor.
12A:7-307. Lien Of Carrier.
a. A carrier has a lien on the goods covered by a bill of lading or on the proceeds thereof in its possession for charges after the date of the carrier's receipt of the goods for storage or transportation, including demurrage and terminal charges, and for expenses necessary for preservation of the goods incident to their transportation or reasonably incurred in their sale pursuant to law. However, against a purchaser for value of a negotiable bill of lading, a carrier's lien is limited to charges stated in the bill or the applicable tariffs or, if no charges are stated, a reasonable charge.
b. A lien for charges and expenses under subsection a. of this section on goods that the carrier was required by law to receive for transportation is effective against the consignor or any person entitled to the goods unless the carrier had notice that the consignor lacked authority to subject the goods to those charges and expenses. Any other lien under subsection a. of this section is effective against the consignor and any person that permitted the bailor to have control or possession of the goods unless the carrier had notice that the bailor lacked authority.
c. A carrier loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.
12A:7-308. Enforcement of Carrier's Lien.
a. A carrier's lien on goods may be enforced by public or private sale of the goods, in bulk or in packages, at any time or place and on any terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. The notification shall include a statement of the amount due, the nature of the proposed sale, and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or in a method different from that selected by the carrier is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The carrier sells goods in a commercially reasonable manner if the carrier sells the goods in the usual manner in any recognized market therefor, sells at the price current in that market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable, except in cases covered by the preceding sentence.
b. Before any sale pursuant to this section, any person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in complying with this section. In that event, the goods may not be sold but must be retained by the carrier, subject to the terms of the bill of lading and this Chapter.
c. A carrier may buy at any public sale pursuant to this section.
d. A purchaser in good faith of goods sold to enforce a carrier's lien takes the goods free of any rights of persons against which the lien was valid, despite the carrier's noncompliance with this section.
e. A carrier may satisfy its lien from the proceeds of any sale pursuant to this section but shall hold the balance, if any, for delivery on demand to any person to which the carrier would have been bound to deliver the goods.
f. The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor.
g. A carrier's lien may be enforced pursuant to either subsection a. of this section or the procedure set forth in 12A:7-210b.
h. A carrier is liable for damages caused by failure to comply with the requirements for sale under this section and, in case of willful violation, is liable for conversion.
12A:7-309. Duty of Care; Contractual Limitation of Carrier's Liability.
a. A carrier that issues a bill of lading, whether negotiable or nonnegotiable, shall exercise the degree of care in relation to the goods which a reasonably careful person would exercise under similar circumstances. This subsection does not affect any statute, regulation, or rule of law that imposes liability upon a common carrier for damages not caused by its negligence.
b. Damages may be limited by a term in the bill of lading or in a transportation agreement that the carrier's liability may not exceed a value stated in the bill or transportation agreement if the carrier's rates are dependent upon value and the consignor is afforded an opportunity to declare a higher value and the consignor is advised of the opportunity. However, such a limitation is not effective with respect to the carrier's liability for conversion to its own use.
c. Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the shipment may be included in a bill of lading or a transportation agreement.
WAREHOUSE RECEIPTS AND BILLS OF LADING:
GENERAL OBLIGATIONS
12A:7-401. Irregularities In Issue of Receipt or Bill or Conduct of Issuer.
The obligations imposed by this Chapter on an issuer apply to a document of title even if:
a. The document does not comply with the requirements of this Chapter or of any other statute, rule, or regulation regarding its issuance, form, or content;
b. The issuer violated laws regulating the conduct of its business;
c. The goods covered by the document were owned by the bailee when the document was issued; or
d. The person issuing the document is not a warehouse but the document purports to be a warehouse receipt.
12A:7-402. Duplicate Document of Title; Overissue.
A duplicate or any other document of title purporting to cover goods already represented by an outstanding document of the same issuer does not confer any right in the goods, except as provided in the case of tangible bills of lading in a set of parts, overissue of documents for fungible goods, substitutes for lost, stolen, or destroyed documents, or substitute documents issued pursuant to 12A:7-105. The issuer is liable for damages caused by its overissue or failure to identify a duplicate document by a conspicuous notation.
12A:7-403. Obligation of Bailee To Deliver; Excuse.
a. A bailee shall deliver the goods to a person entitled under a document of title if the person complies with subsections b. and c. of this section, unless and to the extent that the bailee establishes any of the following:
(1) delivery of the goods to a person whose receipt was rightful as against the claimant;
(2) damage to or delay, loss, or destruction of the goods for which the bailee is not liable;
(3) previous sale or other disposition of the goods in lawful enforcement of a lien or on a warehouse's lawful termination of storage;
(4) the exercise by a seller of its right to stop delivery pursuant to 12A:2-705 or by a lessor of its right to stop delivery pursuant to 12A:2A-526;
(5) a diversion, reconsignment, or other disposition pursuant to 12A:7-303;
(6) release, satisfaction, or any other personal defense against the claimant; or
(7) any other lawful excuse.
b. A person claiming goods covered by a document of title shall satisfy the bailee's lien if the bailee so requests or if the bailee is prohibited by law from delivering the goods until the charges are paid.
c. Unless a person claiming the goods is a person against which the document of title does not confer a right under subsection a. of 12A:7-503:
(1) the person claiming under a document shall surrender possession or control of any outstanding negotiable document covering the goods for cancellation or indication of partial deliveries; and
(2) the bailee shall cancel the document or conspicuously indicate in the document the partial delivery or the bailee is liable to any person to which the document is duly negotiated.
12A:7-404. No Liability For Good-Faith Delivery Pursuant To Document of Title.
A bailee that in good faith has received goods and delivered or otherwise disposed of the goods according to the terms of a document of title or pursuant to this Chapter is not liable for the goods even if:
a. the person from which the bailee received the goods did not have authority to procure the document or to dispose of the goods; or
b. the person to which the bailee delivered the goods did not have authority to receive the goods.
WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION AND TRANSFER
12A:7-501. Form of Negotiation and Requirements of Due Negotiation.
a. The following rules apply to a negotiable tangible document of title:
(1) If the document's original terms run to the order of a named person, the document is negotiated by the named person's indorsement and delivery. After the named person's indorsement in blank or to bearer, any person may negotiate the document by delivery alone.
(2) If the document's original terms run to bearer, it is negotiated by delivery alone.
(3) If the document's original terms run to the order of a named person and it is delivered to the named person, the effect is the same as if the document had been negotiated.
(4) Negotiation of the document after it has been indorsed to a named person requires indorsement by the named person and delivery.
(5) A document is duly negotiated if it is negotiated in the manner stated in this subsection a. to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a monetary obligation.
b. The following rules apply to a negotiable electronic document of title:
(1) If the document's original terms run to the order of a named person or to bearer, the document is negotiated by delivery of the document to another person. Indorsement by the named person is not required to negotiate the document.
(2) If the document's original terms run to the order of a named person and the named person has control of the document, the effect is the same as if the document had been negotiated.
(3) A document is duly negotiated if it is negotiated in the manner stated in this subsection b. to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves taking delivery of the document in settlement or payment of a monetary obligation.
c. Indorsement of a nonnegotiable document of title neither makes it negotiable nor adds to the transferee's rights.
d. The naming in a negotiable bill of lading of a person to be notified of the arrival of the goods does not limit the negotiability of the bill or constitute notice to a purchaser of the bill of any interest of that person in the goods.
12A:7-502. Rights Acquired By Due Negotiation.
a. Subject to 12A:7-205 and 12A:7-503, a holder to which a negotiable document of title has been duly negotiated acquires thereby:
(1) title to the document;
(2) title to the goods;
(3) all rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and
(4) the direct obligation of the issuer to hold or deliver the goods according to the terms of the document free of any defense or claim by the issuer, except those arising under the terms of the document or under this Chapter, but in the case of a delivery order, the bailee's obligation accrues only upon the bailee's acceptance of the delivery order and the obligation acquired by the holder is that the issuer and any indorser will procure the acceptance of the bailee.
b. Subject to 12A:7-503, title and rights acquired by due negotiation are not defeated by any stoppage of the goods represented by the document of title or by surrender of the goods by the bailee and are not impaired even if:
(1) the due negotiation or any prior due negotiation constituted a breach of duty;
(2) any person has been deprived of possession of a negotiable tangible document or control of a negotiable electronic document by misrepresentation, fraud, accident, mistake, duress, loss, theft, or conversion; or
(3) a previous sale or other transfer of the goods or document has been made to a third person.
12A:7-503. Document of Title To Goods Defeated In Certain Cases.
a. A document of title confers no right in goods against a person that before issuance of the document had a legal interest or a perfected security interest in the goods and that did not:
(1) deliver or entrust the goods or any document of title covering the goods to the bailor or the bailor's nominee with:
(a) actual or apparent authority to ship, store, or sell;
(b) power to obtain delivery under 12A:7-403; or
(c) power of disposition under 12A:2-403, 12A:2A-304(2), 12A:2A-305(2), 12A:9-320, or 12A:9-321(c) or other statute or rule of law; or
(2) acquiesce in the procurement by the bailor or its nominee of any document.
b. Title to goods based upon an unaccepted delivery order is subject to the rights of any person to which a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. That title may be defeated under 12A:7-504 to the same extent as the rights of the issuer or a transferee from the issuer.
c. Title to goods based upon a bill of lading issued to a freight forwarder is subject to the rights of any person to which a bill issued by the freight forwarder is duly negotiated. However, delivery by the carrier in accordance with Subchapter 4 of this Chapter pursuant to its own bill of lading discharges the carrier's obligation to deliver.
12A:7-504. Rights Acquired In Absence of Due Negotiation; Effect of Diversion; Stoppage of Delivery.
a. A transferee of a document of title, whether negotiable or nonnegotiable, to which the document has been delivered but not duly negotiated, acquires the title and rights that its transferor had or had actual authority to convey.
b. In the case of a transfer of a nonnegotiable document of title, until but not after the bailee receives notice of the transfer, the rights of the transferee may be defeated:
(1) by those creditors of the transferor which could treat the transfer as void under 12A:2-402 or 12A:2A-308;
(2) by a buyer from the transferor in ordinary course of business if the bailee has delivered the goods to the buyer or received notification of the buyer's rights;
(3) by a lessee from the transferor in ordinary course of business if the bailee has delivered the goods to the lessee or received notification of the lessee's rights; or
(4) as against the bailee, by good-faith dealings of the bailee with the transferor.
c. A diversion or other change of shipping instructions by the consignor in a nonnegotiable bill of lading which causes the bailee not to deliver the goods to the consignee defeats the consignee's title to the goods if the goods have been delivered to a buyer in ordinary course of business or a lessee in ordinary course of business and, in any event, defeats the consignee's rights against the bailee.
d. Delivery of the goods pursuant to a nonnegotiable document of title may be stopped by a seller under 12A:2-705 or a lessor under 12A:2A-526, subject to the requirements of due notification in those sections. A bailee that honors the seller's or lessor's instructions is entitled to be indemnified by the seller or lessor against any resulting loss or expense.
12A:7-505. Indorser Not Guarantor For Other Parties.
The indorsement of a tangible document of title issued by a bailee does not make the indorser liable for any default by the bailee or previous indorsers.
12A:7-506. Delivery Without Indorsement: Right To Compel Indorsement.
The transferee of a negotiable tangible document of title has a specifically enforceable right to have its transferor supply any necessary indorsement, but the transfer becomes a negotiation only as of the time the indorsement is supplied.
12A:7-507. Warranties On Negotiation or Delivery of Document of Title.
If a person negotiates or delivers a document of title for value, otherwise than as a mere intermediary under 12A:7-508, unless otherwise agreed, the transferor, in addition to any warranty made in selling or leasing the goods, warrants to its immediate purchaser only that:
(1) the document is genuine;
(2) the transferor does not have knowledge of any fact that would impair the document's validity or worth; and
(3) the negotiation or delivery is rightful and fully effective with respect to the title to the document and the goods it represents.
12A:7-508. Warranties of Collecting Bank As To Documents of Title.
A collecting bank or other intermediary known to be entrusted with documents of title on behalf of another or with collection of a draft or other claim against delivery of documents warrants by the delivery of the documents only its own good faith and authority even if the collecting bank or other intermediary has purchased or made advances against the claim or draft to be collected.
12A:7-509. Adequate Compliance With Commercial Contract.
Whether a document of title is adequate to fulfill the obligations of a contract for sale, a contract for lease, or the conditions of a letter of credit is determined by Chapter 2, 2A, or 5.
WAREHOUSE RECEIPTS AND BILLS OF LADING: MISCELLANEOUS PROVISIONS
12A:7-601. Lost, Stolen, or Destroyed Documents of Title.
a. If a document of title is lost, stolen, or destroyed, a court may order delivery of the goods or issuance of a substitute document and the bailee may without liability to any person comply with the order. If the document was negotiable, a court may not order delivery of the goods or issuance of a substitute document without the claimant's posting security unless it finds that any person that may suffer loss as a result of nonsurrender of possession or control of the document is adequately protected against the loss. If the document was nonnegotiable, the court may require security. The court may also order payment of the bailee's reasonable costs and attorney's fees in any action under this subsection.
b. A bailee that, without a court order, delivers goods to a person claiming under a missing negotiable document of title is liable to any person injured thereby. If the delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith is not conversion if the claimant posts security with the bailee in an amount at least double the value of the goods at the time of posting to indemnify any person injured by the delivery which files a notice of claim within one year after the delivery.
12A:7-602. Judicial Process Against Goods Covered By Negotiable Document of Title.
Unless a document of title was originally issued upon delivery of the goods by a person that did not have power to dispose of them, a lien does not attach by virtue of any judicial process to goods in the possession of a bailee for which a negotiable document of title is outstanding unless possession or control of the document is first surrendered to the bailee or the document's negotiation is enjoined. The bailee may not be compelled to deliver the goods pursuant to process until possession or control of the document is surrendered to the bailee or to the court. A purchaser of the document for value without notice of the process or injunction takes free of the lien imposed by judicial process.
12A:7-603. Conflicting Claims; Interpleader.
If more than one person claims title to or possession of the goods, the bailee is excused from delivery until the bailee has a reasonable time to ascertain the validity of the adverse claims or to commence an action for interpleader. The bailee may assert an interpleader either in defending an action for nondelivery of the goods or by original action.
MISCELLANEOUS PROVISIONS
12A:7-701. Applicability.
This Chapter applies to a document of title that is issued or a bailment that arises on or after the effective date of this Chapter. This Chapter does not apply to a document of title that is issued or a bailment that arises before the effective date of this Chapter even if the document of title or bailment would be subject to this Chapter if the document of title had been issued or bailment had arisen on or after the effective date of this Chapter. This Chapter does not apply to a right of action that has accrued before the effective date of this Chapter.
3. N.J.S.12A:9-102 is amended to read as follows:
12A:9-102. Definitions and Index of Definitions.
(a) Chapter 9 definitions. In this chapter:
(1) "Accession" means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost.
(2) "Account", except as used in "account for", means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. The term includes health-care-insurance receivables and bondable transition property. The term does not include (i) rights to payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, or (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card.
(3) "Account debtor" means a person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper.
(4) "Accounting", except as used in "accounting for", means a record:
(A) authenticated by a secured party;
(B) indicating the aggregate unpaid secured obligations as of a date not more than 35 days earlier or 35 days later than the date of the record; and
(C) identifying the components of the obligations in reasonable detail.
(5) "Agricultural lien" means an interest in farm products:
(A) which secures payment or performance of an obligation for:
(i) goods or services furnished in connection with a debtor's farming operation; or
(ii) rent on real property leased by a debtor in connection with its farming operation;
(B) which is created by statute in favor of a person that:
(i) in the ordinary course of its business furnished goods or services to a debtor in connection with a debtor's farming operation; or
(ii) leased real property to a debtor in connection with the debtor's farming operation; and
(C) whose effectiveness does not depend on the person's possession of the personal property.
(6) "As-extracted collateral" means:
(A) oil, gas, or other minerals that are subject to a security interest that:
(i) is created by a debtor having an interest in the minerals before extraction; and
(ii) attaches to the minerals as extracted; or
(B) accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction.
(7) "Authenticate" means:
(A) to sign; or
(B) [to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part,] with [the] present intent [of the authenticating person] to [identify the person and] adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.
(8) "Bank" means an organization that is engaged in the business of banking. The term includes savings banks, savings and loan associations, credit unions, and trust companies.
(8.1) "Bondable transition property" shall have the meaning set forth in section 3 of P.L.1999, c.23 (C.48:3-51).
(9) "Cash proceeds" means proceeds that are money, checks, deposit accounts, or the like.
(10) "Certificate of title" means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral.
(11) "Chattel paper" means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. In this paragraph, "monetary obligation" means a monetary obligation secured by the goods or owed under a lease of the goods and includes a monetary obligation with respect to software used in the goods. The term does not include (i) charters or other contracts involving the use or hire of a vessel or (ii) records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.
(12) "Collateral" means the property subject to a security interest or agricultural lien. The term includes:
(A) proceeds to which a security interest attaches;
(B) accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and
(C) goods that are the subject of a consignment.
(13) "Commercial tort claim" means a claim arising in tort with respect to which:
(A) the claimant is an organization; or
(B) the claimant is an individual and the claim:
(i) arose in the course of the claimant's business or profession; and
(ii) does not include damages arising out of personal injury to or the death of an individual.
(14) "Commodity account" means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.
(15) "Commodity contract" means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is:
(A) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to federal commodities laws; or
(B) traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.
(16) "Commodity customer" means a person for which a commodity intermediary carries a commodity contract on its books.
(17) "Commodity intermediary" means a person that:
(A) is registered as a futures commission merchant under federal commodities law; or
(B) in the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.
(18) "Communicate" means:
(A) to send a written or other tangible record;
(B) to transmit a record by any means agreed upon by the persons sending and receiving the record; or
(C) in the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing-office rule.
(19) "Consignee" means a merchant to which goods are delivered in a consignment.
(20) "Consignment" means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a name other than the name of the person making delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its creditors to be substantially engaged in selling the goods of others;
(B) with respect to each delivery, the aggregate value of the goods is $1,000 or more at the time of delivery;
(C) the goods are not consumer goods immediately before delivery; and
(D) the transaction does not create a security interest that secures an obligation.
(21) "Consignor" means a person that delivers goods to a consignee in a consignment.
(22) "Consumer debtor" means a debtor in a consumer transaction.
(23) "Consumer goods" means goods that are used or bought for use primarily for personal, family, or household purposes.
(24) "Consumer-goods transaction" means a consumer transaction in which:
(A) an individual incurs an obligation primarily for personal, family, or household purposes; and
(B) a security interest in consumer goods secures the obligation.
(25) "Consumer obligor" means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family, or household purposes.
(26) "Consumer transaction" means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer-goods transactions.
(27) "Continuation statement" means an amendment of a financing statement which:
(A) identifies, by its file number, the initial financing statement to which it relates; and
(B) indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.
(28) "Debtor" means:
(A) a person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor;
(B) a seller of accounts, chattel paper, payment intangibles, or promissory notes; or
(C) a consignee.
(29) "Deposit account" means a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument.
(30) "Document" means a document of title or a receipt of the type described in [12A:7-201(2)] 12A:7-201b.
(31) "Electronic chattel paper" means chattel paper evidenced by a record or records consisting of information stored in an electronic medium.
(32) "Encumbrance" means a right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property.
(33) "Equipment" means goods other than inventory, farm products, or consumer goods.
(34) "Farm products" means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:
(A) crops grown, growing, or to be grown, including:
(i) crops produced on trees, vines, and bushes; and
(ii) aquatic goods produced in aquacultural operations;
(B) livestock, born or unborn, including aquatic goods produced in aquacultural operations;
(C) supplies used or produced in a farming operation; or
(D) products of crops or livestock in their unmanufactured states.
(35) "Farming operation" means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.
(36) "File number" means the number assigned to an initial financing statement pursuant to 12A:9-519 (a).
(37) "Filing office" means an office designated in 12A:9-501 as the place to file a financing statement.
(38) "Filing-office rule" means a rule adopted pursuant to 12A:9-526.
(39) "Financing statement" means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement.
(40) "Fixture filing" means the filing of a financing statement covering goods that are or are to become fixtures and satisfying 12A:9-502 (a) and (b). The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related to particular real property that an interest in them arises under real property law.
(42) "General intangible" means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.
(43) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(44) "Goods" means all things that are movable when a security interest attaches. The term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such a manner that it customarily is considered part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.
(45) "Governmental unit" means a subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country. The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States.
(46) "Health-care-insurance receivable" means an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health-care goods or services provided or to be provided.
(47) "Instrument" means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment. The term does not include (i) investment property, (ii) letters of credit, or (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.
(48) "Inventory" means goods, other than farm products, which:
(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or to be furnished under a contract of service;
(C) are furnished by a person under a contract of service; or
(D) consist of raw materials, work in process, or materials used or consumed in a business.
(49) "Investment property" means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.
(50) "Jurisdiction of organization", with respect to a registered organization, means the jurisdiction under whose law the organization is formed or organized.
(51) "Letter-of-credit right" means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.
(52) "Lien creditor" means:
(A) a creditor that has acquired a lien on the property involved by attachment, levy, or the like;
(B) an assignee for benefit of creditors from the time of assignment;
(C) a trustee in bankruptcy from the date of the filing of the petition; or
(D) a receiver in equity from the time of appointment.
(53) "Manufactured home" means a structure, transportable in one or more sections, which, in the traveling mode, is eight body feet or more in width or 40 body feet or more in length, or, when erected on site, is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein. The term includes any structure that meets all of the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States Secretary of Housing and Urban Development and complies with the standards established under Title 42 of the United States Code.
(54) "Manufactured-home transaction" means a secured transaction:
(A) that creates a purchase-money security interest in a manufactured home, other than a manufactured home held as inventory; or
(B) in which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.
(55) "Mortgage" means a consensual interest in real property, including fixtures, which secures payment or performance of an obligation.
(56) "New debtor" means a person that becomes bound as debtor under 12A:9-203 (d) by a security agreement previously entered into by another person.
(57) "New value" means (i) money, (ii) money's worth in property, services, or new credit, or (iii) release by a transferee of an interest in property previously transferred to the transferee. The term does not include an obligation substituted for another obligation.
(58) "Noncash proceeds" means proceeds other than cash proceeds.
(59) "Obligor" means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (i) owes payment or other performance of the obligation, (ii) has provided property other than the collateral to secure payment or other performance of the obligation, or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.
(60) "Original debtor", except as used in 12A:9-310(c), means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under 12A:9-203 (d).
(61) "Payment intangible" means a general intangible under which the account debtor's principal obligation is a monetary obligation.
(62) "Person related to", with respect to an individual, means:
(A) the spouse of the individual;
(B) a brother, brother-in-law, sister, or sister-in-law of the individual;
(C) an ancestor or lineal descendant of the individual or the individual's spouse; or
(D) any other relative, by blood or marriage, of the individual or the individual's spouse who shares the same home with the individual.
(63) "Person related to", with respect to an organization, means:
(A) a person directly or indirectly controlling, controlled by, or under common control with the organization;
(B) an officer or director of, or a person performing similar functions with respect to, the organization;
(C) an officer or director of, or a person performing similar functions with respect to, a person described in subparagraph (A);
(D) the spouse of an individual described in subparagraph (A), (B) or (C); or
(E) an individual who is related by blood or marriage to an individual described in subparagraph (A), (B) (C) or (D) and shares the same home with the individual.
(64) "Proceeds", except as used in 12A:9-609(b), means the following property:
(A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;
(B) whatever is collected on, or distributed on account of, collateral;
(C) rights arising out of collateral;
(D) to the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral; or
(E) to the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a secured party which includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to 12A:9-620, 12A:9-621, and 12A:9-622.
(67) "Public-finance transaction" means a secured transaction in connection with which:
(A) debt securities are issued;
(B) all or a portion of the securities issued have an initial stated maturity of at least 20 years; and
(C) the debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation, or assignor or assignee of a security interest is a state or a governmental unit of a state.
(67.1) "Public organic record" means a record that is available to the public for inspection and is:
(A) a record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States which amends or restates the initial record;
(B) an organic record of a business trust consisting of the record initially filed with a state and any record filed with the state which amends or restates the initial record, if a statute of the state governing business trusts requires that the record be filed with the state; or
(C) a record consisting of legislation enacted by the legislature of a state or the Congress of the United States which forms or organizes an organization, any record amending the legislation, and any record filed with or issued by the state or the United States which amends or restates the name of the organization.
(68) "Pursuant to commitment", with respect to an advance made or other value given by a secured party, means pursuant to the secured party's obligation, whether or not a subsequent event of default or other event not within the secured party's control has relieved or may relieve the secured party from its obligation.
(69) "Record", except as used in "for record", "of record", "record or legal title", and "record owner", means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.
(70) "Registered organization" means an organization formed or organized solely under the law of a single state or the United States [and as to which the state or the United States must maintain a public record showing the organization to have been organized] by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or the United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust's organic record be filed with the state.
(71) "Secondary obligor" means an obligor to the extent that:
(A) the obligor's obligation is secondary; or
(B) the obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.
(72) "Secured party" means:
(A) a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;
(E) a trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for; or
(F) a person that holds a security interest arising under 12A:2-401, 12A:2-505, 12A:2-711(3), 12A:2A-508(5), 12A:4-210, or 12A:5-118.
(73) "Security agreement" means an agreement that creates or provides for a security interest.
(74) "Send", in connection with a record or notification, means:
(A) to deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances; or
(B) to cause the record or notification to be received within the time that it would have been received if properly sent under subparagraph (A).
(75) "Software" means a computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods.
(76) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
(77) "Supporting obligation" means a letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property.
(78) "Tangible chattel paper" means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.
(79) "Termination statement" means an amendment of a financing statement which:
(A) identifies, by its file number, the initial financing statement to which it relates; and
(B) indicates either that it is a termination statement or that the identified financing statement is no longer effective.
(80) "Transmitting utility" means a person primarily engaged in the business of:
(A) operating a railroad, subway, street railway, or trolley bus;
(B) transmitting communications electrically, electromagnetic-ally, or by light;
(C) transmitting goods by pipeline or sewer; or
(D) transmitting or producing and transmitting electricity, steam, gas, or water.
(b) Definitions in other chapters. The following definitions in other chapters apply to this chapter:
"Applicant" 12A:5-102.
"Beneficiary" 12A:5-102.
"Broker" 12A:8-102.
"Certificated security" 12A:8-102.
"Check" 12A:3-104.
"Clearing corporation" 12A:8-102.
"Contract for sale" 12A:2-106.
"Control" 12A:7-106.
"Customer" 12A:4-104.
"Entitlement holder" 12A:8-102.
"Financial asset" 12A:8-102.
"Holder in due course" 12A:3-302.
"Issuer" (with respect to a letter of
credit or letter-of-credit right) 12A:5-102.
"Issuer" (with respect to a security) 12A:8-201.
"Issuer" (with respect to documents
of title) 12A:7-102.
"Lease" 12A:2A-103.
"Lease agreement" 12A:2A-103.
"Lease contract" 12A:2A-103.
"Leasehold interest" 12A:2A-103.
"Lessee" 12A:2A-103.
"Lessee in ordinary course of
business" 12A:2A-103.
"Lessor" 12A:2A-103.
"Lessor's residual interest" 12A:2A-103.
"Letter of credit" 12A:5-102.
"Merchant" 12A:2-104.
"Negotiable instrument" 12A:3-104.
"Nominated person" 12A:5-102.
"Note" 12A:3-104.
"Proceeds of a letter of credit" 12A:5-114.
"Prove" 12A:3-103.
"Sale" 12A:2-106.
"Securities account" 12A:8-501.
"Securities intermediary" 12A:8-102.
"Security" 12A:8-102.
"Security certificate" 12A:8-102.
"Security entitlement" 12A:8-102.
"Uncertificated security" 12A:8-102.
(c) Chapter 1 definitions and principles. Chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.
(cf: P.L.2001, c.386, s.1)
4. N.J.S.12A:9-105 is amended to read as follows:
12A:9-105 Control of Electronic Chattel Paper.
(a) A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.
(b) A system satisfies subsection (a) if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that:
(1) a single authoritative copy of the record or records exists which is unique, identifiable and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;
(2) the authoritative copy identifies the secured party as the assignee of the record or records;
(3) the authoritative copy is communicated to and maintained by the secured party or its designated custodian;
(4) copies or [revisions] amendments that add or change an identified assignee of the authoritative copy can be made only with the [participation] consent of the secured party;
(5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
(6) any [revision] amendment of the authoritative copy is readily identifiable as [an] authorized or unauthorized [revision].
(cf: P.L.2001, c.386, s.4)
5. N.J.S.12A:9-203 is amended to read as follows:
12A:9-203. Attachment and Enforceability of Security Interest; Proceeds; Supporting Obligations; Formal Requisites.
(a) Attachment. A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.
(b) Enforceability. Except as otherwise provided in subsections (c) through (i), a security interest is enforceable against the debtor and third parties with respect to the collateral only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and
(3) one of the following conditions is met:
(A) the debtor has authenticated a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;
(B) the collateral is not a certificated security and is in the possession of the secured party under 12A:9-313 pursuant to the debtor's security agreement;
(C) the collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under 12A:8-301 pursuant to the debtor's security agreement; or
(D) the collateral is deposit accounts, electronic chattel paper, investment property, [or] letter-of-credit rights, or electronic documents, and the secured party has control under 12A:7-106, 12A:9-104, 12A:9-105, 12A:9-106, or 12A:9-107 pursuant to the debtor's security agreement.
(c) Other Uniform Commercial Code provisions. Subsection (b) is subject to 12A:4-210 on the security interest of a collecting bank, 12A:5-118 on the security interest of a letter-of-credit issuer or nominated person, 12A:9-110 on a security interest arising under Chapter 2 or 2A, and 12A:9-206 on security interests in investment property.
(d) When person becomes bound by another person's security agreement. A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this chapter or by contract:
(1) the security agreement becomes effective to create a security interest in the person's property; or
(2) the person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.
(e) Effect of new debtor becoming bound. If a new debtor becomes bound as debtor by a security agreement entered into by another person:
(1) the agreement satisfies subsection (b) (3) with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and
(2) another agreement is not necessary to make a security interest in the property enforceable.
(f) Proceeds and supporting obligations. The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by 12A:9-315 and is also attachment of a security interest in a supporting obligation for the collateral.
(g) Lien securing right to payment. The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.
(h) Security entitlement carried in securities account. The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.
(i) Commodity contracts carried in commodity account. The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.
(j) Bondable transition property. Bondable transition property is presently existing property for all purposes, including for purposes of subsection (b) (2), whether or not the revenues and proceeds arising under the property have accrued and notwithstanding that the value of the property may depend upon customer use of electricity or performance of service by electric public utilities, or both.
(cf: P.L.2001, c.386, s.9)
6. N.J.S.12A:9-207 is amended to read as follows:
12A:9-207. Rights and Duties of Secured Party Having Possession or Control of Collateral.
(a) Duty of care when secured party in possession. Except as otherwise provided in subsection (d), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party's possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.
(b) Expenses, risks, duties, and rights when secured party in possession. Except as otherwise provided in subsection (d), if a secured party has possession of collateral:
(1) reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use or operation of the collateral are chargeable to the debtor and are secured by the collateral;
(2) the risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;
(3) the secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and
(4) the secured party may use or operate the collateral:
(A) for the purpose of preserving the collateral or its value;
(B) as permitted by an order of a court having competent jurisdiction; or
(C) except in the case of consumer goods, in the manner and to the extent agreed by the debtor.
(c) Duties and rights when secured party in possession or control. Except as otherwise provided in subsection (d), a secured party having possession of collateral or control of collateral under 12A:7-106, 12A:9-104, 12A:9-105, 12A:9-106, or 12A:9-107:
(1) may hold as additional security any proceeds, except money or funds, received from the collateral;
(2) shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and
(3) may create a security interest in the collateral.
(d) Buyer of certain rights to payment. If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:
(1) subsection (a) does not apply unless the secured party is entitled under an agreement:
(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and
(2) subsections (b) and (c) do not apply.
(cf: P.L.2001, c.386, ss.13,14)
7. N.J.S.12A:9-208 is amended to read as follows:
12A:9-208. Additional Duties of Secured Party Having Control of Collateral.
(a) Applicability of section. This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.
(b) Duties of secured party after receiving demand from debtor. Within 10 days after receiving an authenticated demand by the debtor:
(1) a secured party having control of a deposit account under 12A:9-104 (a) (2) shall send to the bank with which the deposit account is maintained an authenticated statement that releases the bank from any further obligation to comply with instructions originated by the secured party;
(2) a secured party having control of a deposit account under 12A:9-104 (a) (3) shall:
(A) pay the debtor the balance on deposit in the deposit account; or
(B) transfer the balance on deposit into a deposit account in the debtor's name;
(3) a secured party, other than a buyer, having control of electronic chattel paper under 12A:9-105 shall:
(A) communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;
(B) if the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and
(C) take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;
(4) a secured party having control of investment property under 12A:8-106 d. (2) or 12A:9-106 (b) shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party; [and]
(5) a secured party having control of a letter-of-credit right under 12A:9-107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated release from any further obligation to pay or deliver proceeds of the letter of credit to the secured party; and
(6) a secured party having control of an electronic document shall:
(A) give control of the electronic document to the debtor or its designated custodian;
(B) if the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and
(C) take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party.
(cf: P.L.2001, c.386, ss.14, 15)
8. N.J.S.12A:9-301 is amended to read as follows:
12A:9-301. Law Governing Perfection and Priority of Security Interests.
Except as otherwise provided in sections 12A:9-303 through 12A:9-306, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:
(1) Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.
(2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.
(3) Except as otherwise provided in paragraph (4), while tangible negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:
(A) perfection of a security interest in the goods by filing a fixture filing;
(B) perfection of a security interest in timber to be cut; and
(C) the effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.
(4) The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as-extracted collateral.
(5) Notwithstanding paragraph (1), the local law of this State shall govern the perfection, the effect of perfection or nonperfection, and the priority of a security interest in bondable transition property.
(cf: P.L.2001, c.386, s.18)
9. N.J.S.12A:9-307 is amended to read as follows:
12A:9-307 Location of Debtor.
(a) "Place of business." In this section, "place of business" means a place where a debtor conducts its affairs.
(b) Debtor's location: general rules. Except as otherwise provided in this section, the following rules determine a debtor's location:
(1) A debtor who is an individual is located at the individual's principal residence.
(2) A debtor that is an organization and has only one place of business is located at its place of business.
(3) A debtor that is an organization and has more than one place of business is located at its chief executive office.
(c) Limitation of applicability of subsection (b). Subsection (b) applies only if a debtor's residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording, or registration system as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. If subsection (b) does not apply, the debtor is located in the District of Columbia.
(d) Continuation of location: cessation of existence, etc. A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by subsections (b) and (c).
(e) Location of registered organization organized under state law. A registered organization that is organized under the law of a state is located in that state.
(f) Location of registered organization organized under federal law; bank branches and agencies. Except as otherwise provided in subsection (i), a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a state are located:
(1) in the state that the law of the United States designates, if the law designates a state of location;
(2) in the state that the registered organization, branch, or agency designates, if the law of the United States authorizes the registered organization, branch, or agency to designate its state of location, including by designating its main office, home office, or other comparable office; or
(3) in the District of Columbia, if neither paragraph (1) nor paragraph (2) applies.
(g) Continuation of location: change in status of registered organization. A registered organization continues to be located in the jurisdiction specified by subsection (e) or (f) notwithstanding:
(1) the suspension, revocation, forfeiture, or lapse of the registered organization's status as such in its jurisdiction of organization; or
(2) the dissolution, winding up, or cancellation of the existence of the registered organization.
(h) Location of United States. The United States is located in the District of Columbia.
(i) Location of foreign bank branch or agency if licensed in only one state. A branch or agency of a bank that is not organized under the law of the United States or a state is located in the state in which the branch or agency is licensed, if all branches and agencies of the bank are licensed in only one state.
(j) Location of foreign air carrier. A foreign air carrier under the Federal Aviation Act of 1958, as amended (49 U.S.C. s.1301 et seq.), is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.
(k) Section applies only to this part. This section applies only for purposes of this part.
(cf: P.L.2001, c.386, s.23)
10. N.J.S.12A:9-310 is amended to read as follows:
12A:9-310. When Filing Required to Perfect Security Interest or Agricultural Lien; Security Interests and Agricultural Liens to Which Filing Provisions Do Not Apply.
(a) General rule: perfection by filing. Except as otherwise provided in subsection (b) and 12A:9-312 (b), a financing statement must be filed to perfect all security interests and agricultural liens.
(b) Exceptions: filing not necessary. The filing of a financing statement is not necessary to perfect a security interest:
(1) that is perfected under 12A:9-308 (d), (e), (f) or (g);
(2) that is perfected under 12A:9-309 when it attaches;
(3) in property subject to a statute, regulation, or treaty described in of 12A:9-311 (a);
(4) in goods in possession of a bailee which is perfected under 12A:9-312 (d) (1) or (2);
(5) in certificated securities, documents, goods, or instruments which is perfected without filing, control, or possession under 12A:9-312 (e), (f) or (g);
(6) in collateral in the secured party's possession under 12A:9-313;
(7) in a certificated security which is perfected by delivery of the security certificate to the secured party under 12A:9-313;
(8) in deposit accounts, electronic chattel paper, electronic documents, investment property, or letter-of-credit rights which is perfected by control under 12A:9-314;
(9) in proceeds which is perfected under 12A:9-315; or
(10) that is perfected under 12A:9-316.
(c) Assignment of perfected security interest. If a secured party assigns a perfected security interest or agricultural lien, a filing under this chapter is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.
(cf: P.L.2001, c.386, s.26)
11. N.J.S.12A:9-311 is amended to read as follows:
12A:9-311 Perfection of Security Interests in Property Subject to Certain Statutes, Regulations, and Treaties.
(a) Security interest subject to other law. Except as otherwise provided in subsection (d), the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:
(1) a statute, regulation, or treaty of the United States whose requirements for a security interest's obtaining priority over the rights of a lien creditor with respect to the property preempt 12A:9-310(a);
(2) the "motor vehicle certificate of ownership law," R.S.39:10-1 et seq. and the "Boat Ownership Certificate Act," P.L.1984, c.152 (C.12:7A-1 et seq.) or successor statutes or law or
(3) a [certificate-of-title] statute of another jurisdiction which provides for a security interest to be indicated on [the] a certificate of title as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the property.
(b) Compliance with other law. Compliance with the requirements of a statute, regulation, or treaty described in subsection (a) for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under this chapter. Except as otherwise provided in subsection (d), 12A:9-313 and 12A:9-316(d) and (e) for goods covered by a certificate of title, a security interest in property subject to a statute, regulation, or treaty described in subsection (a) may be perfected only by compliance with those requirements, and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of possession of the collateral.
(c) Duration and renewal of perfection. Except as otherwise provided in subsection (d) and 12A:9-316(d) and (e), duration and renewal of perfection of a security interest perfected by compliance with the requirements prescribed by a statute, regulation, or treaty described in subsection (a) are governed by the statute, regulation, or treaty. In other respects, the security interest is subject to this chapter.
(d) Inapplicability to certain inventory. During any period in which collateral subject to a statute specified in subsection (a) (2) is inventory held for sale or lease by a person or leased by that person as lessor and that person is in the business of selling goods of that kind, this section does not apply to a security interest in that collateral created by that person.
(cf: P.L.2001, c.386, s.27)
12. N.J.S.12A:9-312 is amended to read as follows:
12A:9-312. Perfection of Security Interests in Chattel Paper, Deposit Accounts, Documents, Goods Covered by Documents, Instruments, Investment Property, Letter-of-credit Rights, and Money; Perfection by Permissive Filing; Temporary Perfection Without Filing or Transfer of Possession.
(a) Perfection by filing permitted. A security interest in chattel paper, negotiable documents, instruments, or investment property may be perfected by filing.
(b) Control or possession of certain collateral. Except as otherwise provided in 12A:9-315 (c) and (d) for proceeds:
(1) a security interest in a deposit account may be perfected only by control under 12A:9-314;
(2) and except as otherwise provided in 12A:9-308 (d), a security interest in a letter-of-credit right may be perfected only by control under 12A:9-314; and
(3) a security interest in money may be perfected only by the secured party's taking possession under 12A:9-313.
(c) Goods covered by negotiable document. While goods are in the possession of a bailee that has issued a negotiable document covering the goods:
(1) a security interest in the goods may be perfected by perfecting a security interest in the document; and
(2) a security interest perfected in the document has priority over any security interest that becomes perfected in the goods by another method during that time.
(d) Goods covered by nonnegotiable document. While goods are in the possession of a bailee that has issued a nonnegotiable document covering the goods, a security interest in the goods may be perfected by:
(1) issuance of a document in the name of the secured party;
(2) the bailee's receipt of notification of the secured party's interest; or
(3) filing as to the goods.
(e) Temporary perfection: new value. A security interest in certificated securities, negotiable documents, or instruments is perfected without filing or the taking of possession or control for a period of 20 days from the time it attaches to the extent that it arises for new value given under an authenticated security agreement.
(f) Temporary perfection: goods or documents made available to debtor. A perfected security interest in a negotiable document or goods in possession of a bailee, other than one that has issued a negotiable document for the goods, remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of:
(1) ultimate sale or exchange; or
(2) loading, unloading, storing, shipping, transshipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary to their sale or exchange.
(g) Temporary perfection: delivery of security certificate or instrument to debtor. A perfected security interest in a certificated security or instrument remains perfected for 20 days without filing if the secured party delivers the security certificate or instrument to the debtor for the purpose of:
(1) ultimate sale or exchange; or
(2) presentation, collection, enforcement, renewal, or registration of transfer.
(h) Expiration of temporary perfection. After the 20-day period specified in subsection (e), (f) or (g) expires, perfection depends upon compliance with this chapter.
(cf: P.L.2001, c.386, s.28)
13. N.J.S.12A:9-313 is amended to read as follows:
12A:9-313. When Possession by or Delivery to Secured Party Perfects Security Interest Without Filing.
(a) Perfection by possession or delivery. Except as otherwise provided in subsection (b), a secured party may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under 12A:8-301.
(b) Goods covered by certificate of title. With respect to goods covered by a certificate of title issued by this State, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in 12A:9-316 (d).
(c) Collateral in possession of person other than debtor. With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's business, when:
(1) the person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party's benefit; or
(2) the person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party's benefit.
(d) Time of perfection by possession; continuation of perfection. If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.
(e) Time of perfection by delivery; continuation of perfection. A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under 12A:8-301 and remains perfected by delivery until the debtor obtains possession of the security certificate.
(f) Acknowledgment not required. A person in possession of collateral is not required to acknowledge that it holds possession for a secured party's benefit.
(g) Effectiveness of acknowledgment; no duties or confirmation. If a person acknowledges that it holds possession for the secured party's benefit:
(1) the acknowledgment is effective under subsection (c) or 12A:8-301 (a), even if the acknowledgment violates the rights of a debtor; and
(2) unless the person otherwise agrees or law other than this chapter otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.
(h) Secured party's delivery to person other than debtor. A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor's business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:
(1) to hold possession of the collateral for the secured party's benefit; or
(2) to redeliver the collateral to the secured party.
(i) Effect of delivery under subsection (h); no duties or confirmation. A secured party does not relinquish possession, even if a delivery under subsection (h) violates the rights of a debtor. A person to which collateral is delivered under subsection (h) does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this chapter otherwise provides.
(cf: P.L.2001, c.386, s.29)
14. N.J.S.12A:9-314 is amended to read as follows:
12A:9-314. Perfection by Control.
(a) Perfection by control. A security interest in investment property, deposit accounts, letter-of-credit rights, [or] electronic chattel paper, or electronic documents may be perfected by control of the collateral under 12A:7-106, 12A:9-104, 12A:9-105, 12A:9-106 or 12A:9-107.
(b) Specified collateral: time of perfection by control; continuation of perfection. A security interest in deposit accounts, electronic chattel paper, [or] letter-of-credit rights, or electronic documents is perfected by control under 12A:7-106, 12A:9-104, 12A:9-105 or 12A:9-107 when the secured party obtains control and remains perfected by control only while the secured party retains control.
(c) Investment property: time of perfection by control; continuation of perfection. A security interest in investment property is perfected by control under 12A:9-106 from the time the secured party obtains control and remains perfected by control until:
(1) the secured party does not have control; and
(2) one of the following occurs:
(A) if the collateral is a certificated security, the debtor has or acquires possession of the security certificate;
(B) if the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner; or
(C) if the collateral is a security entitlement, the debtor is or becomes the entitlement holder.
(cf: P.L.2001, c.386, s.30)
15. N.J.S.12A:9-316 is amended to read as follows:
12A:9-316. [Continued Perfection of Security Interest Following] Effect of Change in Governing Law.
(a) General rule: effect on perfection of change in governing law. A security interest perfected pursuant to the law of the jurisdiction designated in 12A:9-301 (1) or 12A:9-305 (c) remains perfected until the earliest of:
(1) the time perfection would have ceased under the law of that jurisdiction;
(2) the expiration of four months after a change of the debtor's location to another jurisdiction; or
(3) the expiration of one year after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction.
(b) Security interest perfected or unperfected under law of new jurisdiction. If a security interest described in subsection (a) becomes perfected under the law of the other jurisdiction before the earliest time or event described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(c) Possessory security interest in collateral moved to new jurisdiction. A possessory security interest in collateral, other than goods covered by a certificate of title and as-extracted collateral consisting of goods, remains continuously perfected if:
(1) the collateral is located in one jurisdiction and subject to a security interest perfected under the law of that jurisdiction;
(2) thereafter the collateral is brought into another jurisdiction; and
(3) upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.
(d) Goods covered by certificate of title from this State. Except as otherwise provided in subsection (e), a security interest in goods covered by a certificate of title which is perfected by any method under the law of another jurisdiction when the goods become covered by a certificate of title from this State remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.
(e) When subsection (d) security interest becomes unperfected against purchasers. A security interest described in subsection (d) becomes unperfected as against a purchaser of the goods for value and is deemed never to have been perfected as against a purchaser of the goods for value if the applicable requirements for perfection under 12A:9-311 (b) or 12A:9-313 are not satisfied before the earlier of:
(1) the time the security interest would have become unperfected under the law of the other jurisdiction had the goods not become covered by a certificate of title from this State; or
(2) the expiration of four months after the goods had become so covered.
(f) Change in jurisdiction of bank, issuer, nominated person, securities intermediary, or commodity intermediary. A security interest in deposit accounts, letter-of-credit rights, or investment property which is perfected under the law of the bank's jurisdiction, the issuer's jurisdiction, a nominated person's jurisdiction, the securities intermediary's jurisdiction, or the commodity intermediary's jurisdiction, as applicable, remains perfected until the earlier of:
(1) the time the security interest would have become unperfected under the law of that jurisdiction; or
(2) the expiration of four months after a change of the applicable jurisdiction to another jurisdiction.
(g) Subsection (f) security interest perfected or unperfected under law of new jurisdiction. If a security interest described in subsection (f) becomes perfected under the law of the other jurisdiction before the earlier of the time or the end of the period described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(h) Effect on filed financing statement of change in governing law. The following rules apply to collateral to which a security interest attaches within four months after the debtor changes its location to another jurisdiction:
(1) A financing statement filed before the change pursuant to the law of the jurisdiction designated in 12A:9-301(1) or 12A:9-305(c) is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral had the debtor not changed its location.
(2) If a security interest perfected by a financing statement that is effective under paragraph (1) becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in 12A:9-301(1) or 12A:9-305(c) or the expiration of the four-month period, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(i) Effect of change in governing law on financing statement filed against original debtor. If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in 12A:9-301(1) or 12A:9-305(c) and the new debtor is located in another jurisdiction, the following rules apply:
(1) The financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four months after, the new debtor becomes bound under 12A:9-203(d), if the financing statement would have been effective to perfect a security interest in the collateral had the collateral been acquired by the original debtor.
(2) A security interest perfected by the financing statement and which becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in 12A:9-301(1) or 12A:9-305(c) or the expiration of the four-month period remains perfected thereafter. A security interest that is perfected by the financing statement but which does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(cf: P.L.2001, c.386, s.32)
16. N.J.S.12A:9-317 is amended to read as follows:
12A:9-317 Interests That Take Priority Over or Take Free of Security Interest or Agricultural Lien.
(a) Conflicting security interests and rights of lien creditors. A security interest or agricultural lien is subordinate to the rights of:
(1) a person entitled to priority under 12A:9-322; and
(2) except as otherwise provided in subsection (e), a person that becomes a lien creditor before the earlier of the time:
(A) the security interest or agricultural lien is perfected; or
(B) one of the conditions specified in 12A:9-203 (b)(3) is met and a financing statement covering the collateral is filed.
(b) Buyers that receive delivery. Except as otherwise provided in subsection (e), a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, or a certificated security [certificate] takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.
(c) Lessees that receive delivery. Except as otherwise provided in subsection (e), a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.
(d) Licensees and buyers of certain collateral. A licensee of a general intangible or a buyer, other than a secured party, of accounts, electronic chattel paper, electronic documents, general intangibles, or investment property other than a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.
(e) Purchase-money security interest. Except as otherwise provided in 12A:9-320 and 12A:9-321, if a person files a financing statement with respect to a purchase-money security interest before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.
(cf: P.L.2001, c.386, s.33)
17. N.J.S.12:9-326 is amended to read as follows:
12A:9-326. Priority of Security Interests Created by New Debtor.
(a) Subordination of security interest created by new debtor. Subject to subsection (b), a security interest that is created by a new debtor [which is perfected by a filed financing statement that is effective solely under 12A:9-508] in collateral in which [a] the new debtor has or acquires rights and is perfected solely by a filed financing statement that would be ineffective to perfect the security interest but for the application of 12A:9-316(i)(1) and 12A:9-508 is subordinate to a security interest in the same collateral which is perfected other than by such a filed financing statement [that is effective solely under 12A:9-508].
(b) Priority under other provisions; multiple original debtors. The other provisions of this part determine the priority among conflicting security interests in the same collateral perfected by filed financing statements [that are effective solely under 12A:9-508] described in subsection (a). However, if the security agreements to which a new debtor became bound as debtor were not entered into by the same original debtor, the conflicting security interests rank according to priority in time of the new debtor's having become bound.
(cf: P.L.2001, c.386, s.42)
18. N.J.S.12A:9-338 is amended to read as follows:
12A:9-338. Priority of Security Interest or Agricultural Lien Perfected by Filed Financing Statement Providing Certain Incorrect Information.
If a security interest or agricultural lien is perfected by a filed financing statement providing information described in 12A:9-516 (b) (5) which is incorrect at the time the financing statement is filed:
(1) the security interest or agricultural lien is subordinate to a conflicting perfected security interest in the collateral to the extent that the holder of the conflicting security interest gives value in reasonable reliance upon the incorrect information; and
(2) a purchaser, other than a secured party, of the collateral takes free of the security interest or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the purchaser gives value and, in the case of tangible chattel paper, tangible documents, goods, instruments, or a security certificate, receives delivery of the collateral.
(cf: P.L.2001, c.386, s.54)
19. N.J.S.12A:9-406 is amended to read as follows:
12A:9-406 Discharge of Account Debtor; Notification of Assignment; Identification and Proof of Assignment; Restrictions on Assignment of Accounts, Chattel Paper, Payment Intangibles, and Promissory Notes Ineffective.
(a) Discharge of account debtor; effect of notification. Subject to subsections (b) through (i), an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.
(b) When notification ineffective. Subject to subsection (h), notification is ineffective under subsection (a):
(1) if it does not reasonably identify the rights assigned;
(2) to the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than this chapter; or
(3) at the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee, even if:
(A) only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee;
(B) a portion has been assigned to another assignee; or
(C) the account debtor knows that the assignment to that assignee is limited.
(c) Proof of assignment. Subject to subsection (h), if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor, even if the account debtor has received a notification under subsection (a).
(d) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (e), 12A:2A-303 and 12A:9-407, and subject to subsection (h), a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:
(1) prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account, chattel paper, payment intangible, or promissory note; or
(2) provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account, chattel paper, payment intangible, or promissory note.
(e) Inapplicability of subsection (d) to certain sales. Subsection (d) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under 12A:9-610 or an acceptance of collateral under 12A:9-620.
(f) Legal restrictions on assignment generally ineffective. Except as otherwise provided in 12A:2A-303 and 12A:9-407 and subject to subsections (h), (i) and (j), a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:
(1) prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in the account or chattel paper; or
(2) provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account or chattel paper.
(g) Subsection (b) (3) not waivable. Subject to subsection (h), an account debtor may not waive or vary its option under subsection (b) (3).
(h) Rule for individual under other law. This section is subject to law other than this chapter which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.
(i) Inapplicability. This section does not apply to an assignment of a health-care-insurance receivable. Subsection (f) does not apply to an assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, a right the transfer of which is prohibited or restricted by any of the following statutes to the extent that the statute is inconsistent with subsection (f): R.S.34:15-29 (workers' compensation claims); section 13 of P.L.1970, c.13 (C.5:9-13) (State lottery winnings); and P.L.2001, c.139 (C.2A:16-63 et seq.) (structured settlement agreements).
(j) Section prevails over specified inconsistent law. Except to the extent otherwise provided in subsection (i), this section prevails over any inconsistent provision of an existing or future statute, rule or regulation of this State, unless the provision is contained in a statute of this State, refers expressly to this section and states that the provision prevails over this section.
(cf: P.L.2001, c.386, s.62)
20. N.J.S.12A:9-408 is amended to read as follows:
12A:9-408 Restrictions on Assignment of Promissory Notes, Health-care-insurance Receivables, and Certain General Intangibles Ineffective.
(a) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (b), a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of a security interest in, the promissory note, health-care-insurance receivable, or general intangible, is ineffective to the extent that the term:
(1) would impair the creation, attachment, or perfection of a security interest; or
(2) provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.
(b) Applicability of subsection (a) to sales of certain rights to payment. Subsection (a) applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note, other than a sale pursuant to a disposition under 12A:9-610 or an acceptance of collateral under 12A:9-620.
(c) Legal restrictions on assignment generally ineffective. Except as provided in subsection (e), a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health-care-insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:
(1) would impair the creation, attachment, or perfection of a security interest; or
(2) provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.
(d) Limitation on ineffectiveness under subsections (a) and (c). To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or general intangible or a rule of law, statute, or regulation described in subsection (c) would be effective under law other than this chapter but is ineffective under subsection (a) or (c), the creation, attachment, or perfection of a security interest in the promissory note, health-care-insurance receivable, or general intangible:
(1) is not enforceable against the person obligated on the promissory note or the account debtor;
(2) does not impose a duty or obligation on the person obligated on the promissory note or the account debtor;
(3) does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party;
(4) does not entitle the secured party to use or assign the debtor's rights under the promissory note, health-care-insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health-care-insurance receivable, or general intangible;
(5) does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor; and
(6) does not entitle the secured party to enforce the security interest in the promissory note, health-care-insurance receivable, or general intangible.
(e) Section prevails over specified inconsistent law. Except to the extent otherwise provided in subsection (f), this section prevails over any inconsistent provision of an existing or future statute, rule or regulation of this State, unless the provision is contained in a statute of this State, refers expressly to this section and states that the provision prevails over this section.
(f) Inapplicability. Subsection (c) does not apply to an assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, a right the transfer of which is prohibited or restricted by any of the following statutes to the extent that the statute is inconsistent with subsection (c): R.S.34:15-29 (workers' compensation claims); section 13 of P.L.1970, c.13 (C.5:9-13) (State lottery winnings); and P.L.2001, c.139 (C.2A:16-63 et seq.) (structured settlement agreements).
(cf: P.L.2001, c.386, s.64)
21. N.J.S.12A:9-502 is amended to read as follows:
12A:9-502 Contents of Financing Statement; Record of Mortgage as Financing Statement; Time of Filing Financing Statement.
(a) Sufficiency of financing statement. Subject to subsection (b), a financing statement is sufficient only if it:
(1) provides the name of the debtor;
(2) provides the name of the secured party or a representative of the secured party; and
(3) indicates the collateral covered by the financing statement.
(b) Real-property-related financing statements. Except as otherwise provided in 12A:9-501(b), to be sufficient, a financing statement that covers as-extracted collateral or timber to be cut, or which is filed as a fixture filing and covers goods that are or are to become fixtures, must satisfy subsection (a) and also:
(1) indicate that it covers this type of collateral;
(2) indicate that it is to be filed in the real property records;
(3) provide a description of the real property to which the collateral is related [sufficient to give constructive notice of a mortgage under the law of this State if the description were contained in a record of the mortgage of the real property]; and
(4) if the debtor does not have an interest of record in the real property, provide the name of a record owner.
(c) Record of mortgage as financing statement. A record of a mortgage is effective, from the date of recording, as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut only if:
(1) the record indicates the goods or accounts that it covers;
(2) the goods are or are to become fixtures related to the real property described in the record or the collateral is related to the real property described in the record and is as-extracted collateral or timber to be cut;
(3) the record satisfies the requirements for a financing statement in this section [other than an indication] , but:
(A) the record need not indicate that it is to be filed in the real property records; and
(B) the record sufficiently provides the name of a debtor who is an individual if it provides the individual name of the debtor or the surname and first personal name of the debtor, even if the debtor is an individual to whom 12A:9-503(a) (4) applies; and
(4) the record is recorded.
(d) Filing before security agreement or attachment. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches.
(cf: P.L.2001, c.386, s.67)
22. N.J.S.12A:9-503 is amended to read as follows:
12A:9-503 Name of Debtor and Secured Party.
(a) Sufficiency of debtor's name. A financing statement sufficiently provides the name of the debtor:
(1) except as otherwise provided in paragraph (3), if the debtor is a registered organization or the collateral is held in a trust that is a registered organization, only if the financing statement provides the name [of the debtor indicated] that is stated to be the registered organization's name on the public organic record [of the debtor's] most recently filed with or issued or enacted by the registered organization's jurisdiction of organization which [shows the debtor to have been organized] purports to state, amend, or restate the registered organization's name;
(2) subject to subsection (f), if the [debtor is a decedent's estate] collateral is being administered by the personal representative of a decedent, only if the financing statement provides, as the name of the debtor, the name of the decedent and, in a separate part of the financing statement, indicates that the [debtor is an estate] collateral is being administered by a personal representative;
(3) if the [debtor is a trust or a trustee acting with respect to property] collateral is held in a trust that is not a registered organization, only if the financing statement:
(A) [provides the name specified for the trust in its organic documents or, if no name is specified, provides the name of the settlor and additional information sufficient to distinguish the debtor from other trusts having one or more of the same settlors] provides, as the name of the debtor:
(i) if the organic record of the trust specifies a name for the trust, the name specified; or
(ii) if the organic record of the trust does not specify a name for the trust, the name of the settlor or testator; and
(B) [indicates, in the debtor's name or otherwise, that the debtor is a trust or is a trustee acting with respect to property held in trust] in a separate part of the financing statement:
(i) if the name is provided in accordance with subparagraph (A) (i), indicates that the collateral is held in a trust; or
(ii) if the name is provided in accordance with subparagraph (A) (ii), provides additional information sufficient to distinguish the trust from other trusts having one or more of the same settlors or the same testator and indicates that the collateral is held in a trust, unless the additional information so indicates;
(4) subject to subsection (g), if the debtor is an individual to whom this State has issued a driver's license that has not expired, only if the financing statement provides the name of the individual which is indicated on the driver's license;
(5) if the debtor is an individual to whom paragraph (4) does not apply, only if the financing statement provides the individual name of the debtor or the surname and first personal name of the debtor; and
[(4)] (6) in other cases:
(A) if the debtor has a name, only if [it] the financing statement provides the [individual or] organizational name of the debtor; and
(B) if the debtor does not have a name, only if it provides the names of the partners, members, associates, or other persons comprising the debtor, in a manner that each name provided would be sufficient if the person named were the debtor.
(b) Additional debtor-related information. A financing statement that provides the name of the debtor in accordance with subsection (a) is not rendered ineffective by the absence of:
(1) a trade name or other name of the debtor; or
(2) unless required under subsection [(a)(4)(B)] (a)(6)(B), names of partners, members, associates, or other persons comprising the debtor.
(c) Debtor's trade name insufficient. A financing statement that provides only the debtor's trade name does not sufficiently provide the name of the debtor.
(d) Representative capacity. Failure to indicate the representative capacity of a secured party or representative of a secured party does not affect the sufficiency of a financing statement.
(e) Multiple debtors and secured parties. A financing statement may provide the name of more than one debtor and the name of more than one secured party.
(f) Name of decedent. The name of the decedent indicated on the order appointing the personal representative of the decedent issued by the court having jurisdiction over the collateral is sufficient as the "name of the decedent" under subsection (a)(2).
(g) Multiple driver's licenses. If this State has issued to an individual more than one driver's license of a kind described in subsection (a)(4), the one that was issued most recently is the one to which subsection (a)(4) refers.
(h) Definition. In this section, the "name of the settlor or testator" means:
(1) if the settlor is a registered organization, the name that is stated to be the settlor's name on the public organic record most recently filed with or issued or enacted by the settlor's jurisdiction of organization which purports to state, amend, or restate the settlor's name; or
(2) in other cases, the name of the settlor or testator indicated in the trust's organic record.
(cf: P.L.2001, c.386, s.68)
23. 12A:9-507 is amended to read as follows:
12A:9-507. Effect of Certain Events on Effectiveness of Financing Statement.
(a) Disposition. A filed financing statement remains effective with respect to collateral that is sold, exchanged, leased, licensed, or otherwise disposed of and in which a security interest or agricultural lien continues, even if the secured party knows of or consents to the disposition.
(b) Information becoming seriously misleading. Except as otherwise provided in subsection (c) and 12A:9-508, a financing statement is not rendered ineffective if, after the financing statement is filed, the information provided in the financing statement becomes seriously misleading under 12A:9-506.
(c) Change in debtor's name. If [a debtor so changes its] the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under 12A:9-503 (a) so that the financing statement becomes seriously misleading under 12A:9-506:
(1) the financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four months after, the [change] filed financing statement becomes seriously misleading; and
(2) the financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the [change] filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four months after the [change] filed financing statement becomes seriously misleading.
(cf: P.L.2001, c.386, s.72)
24. N.J.S.12A:9-515 is amended to read as follows:
12A:9-515 Duration and Effectiveness of Financing Statement; Effect of Lapsed Financing Statement.
(a) Five-year effectiveness. Except as otherwise provided in subsections (b), (e), (f) and (g), a filed financing statement is effective for a period of five years after the date of filing.
(b) Public-finance or manufactured-home transaction. Except as otherwise provided in subsections (e), (f) and (g), an initial financing statement filed in connection with a public-finance transaction or manufactured-home transaction is effective for a period of 30 years after the date of filing if it indicates that it is filed in connection with a public-finance transaction or manufactured-home transaction.
(c) Lapse and continuation of financing statement. The effectiveness of a filed financing statement lapses on the expiration of the period of its effectiveness unless before the lapse a continuation statement is filed pursuant to subsection (d). Upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the financing statement becomes unperfected, unless the security interest is perfected otherwise. If the security interest or agricultural lien becomes unperfected upon lapse, it is deemed never to have been perfected as against a purchaser of the collateral for value.
(d) When continuation statement may be filed. A continuation statement may be filed only within six months before the expiration of the five-year period specified in subsection (a) or the 30-year period specified in subsection (b), whichever is applicable.
(e) Effect of filing continuation statement. Except as otherwise provided in 12A:9-510, upon timely filing of a continuation statement, the effectiveness of the initial financing statement continues for a period of five years commencing on the day on which the financing statement would have become ineffective in the absence of the filing. Upon the expiration of the five-year period, the financing statement lapses in the same manner as provided in subsection (c), unless, before the lapse, another continuation statement is filed pursuant to subsection (d). Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the initial financing statement.
(f) Transmitting utility financing statement. If a debtor is a transmitting utility and a filed initial financing statement so indicates, the financing statement is effective until a termination statement is filed.
(g) Record of mortgage as financing statement. A record of mortgage that is effective as a financing statement filed as a fixture filing under 12A:9-502 (c) remains effective as a financing statement filed as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real property.
(h) Bondable transition property. If a filed financing statement relates to a security interest in bondable transition property and the financing statement so states, it is effective until a termination statement is filed.
(cf: P.L.2001, c.386, s.80)
25. Section 12A:9-516 is amended to read as follows:
12A:9-516. What Constitutes Filing; Effectiveness of Filing.
(a) What constitutes filing. Except as otherwise provided in subsection (b), communication of a record to a filing office and tender of the filing fee or acceptance of the record by the filing office constitutes filing.
(b) Refusal to accept record; filing does not occur. Filing does not occur with respect to a record that a filing office refuses to accept because:
(1) the record is not communicated by a method or medium of communication authorized by the filing office;
(2) an amount equal to or greater than the applicable filing fee is not tendered;
(3) the filing office is unable to index the record because:
(A) in the case of an initial financing statement, the record does not provide a name for the debtor;
(B) in the case of an amendment or [correction] information statement, the record:
(i) does not identify the initial financing statement as required by 12A:9-512 or 12A:9-518, as applicable; or
(ii) identifies an initial financing statement whose effectiveness has lapsed under 12A:9-515;
(C) in the case of an initial financing statement that provides the name of a debtor identified as an individual or an amendment that provides a name of a debtor identified as an individual which was not previously provided in the financing statement to which the record relates, the record does not identify the debtor's [last name] surname; or
(D) in the case of a record filed or recorded in the filing office described in 12A:9-501 (a) (1), the record does not provide a sufficient description of the real property to which it relates;
(4) in the case of an initial financing statement or an amendment that adds a secured party of record, the record does not provide a name and mailing address for the secured party of record;
(5) in the case of an initial financing statement or an amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates, the record does not:
(A) provide a mailing address for the debtor; or
(B) indicate whether the name provided as the name of the debtor is the name of an individual or an organization; [or]
(C) [if the financing statement indicates that the debtor is an organization, provide:
(i) a type of organization for the debtor;
(ii) a jurisdiction of organization for the debtor; or
(iii) an organizational identification number for the debtor or indicate that the debtor has none;] Deleted by amendment, P.L. c. .) (pending before the Legislature as this bill)
(6) in the case of an assignment reflected in an initial financing statement under 12A:9-514 (a) or an amendment filed under 12A:9-514 (b), the record does not provide a name and mailing address for the assignee; or
(7) in the case of a continuation statement, the record is not filed within the six-month period prescribed by 12A:9-515 (d).
(c) Rules applicable to subsection (b). For purposes of subsection (b):
(1) a record does not provide information if the filing office is unable to read or decipher the information; and
(2) a record that does not indicate that it is an amendment or identify an initial financing statement to which it relates, as required by 12A:9-512, 12A:9-514, or 12A:9-518, is an initial financing statement.
(d) Refusal to accept record; record effective as filed record. A record that is communicated to the filing office with tender of the filing fee, but which the filing office refuses to accept for a reason other than one set forth in subsection (b), is effective as a filed record except as against a purchaser of the collateral which gives value in reasonable reliance upon the absence of the record from the files.
(cf: P.L.2001, c.386, s.81)
26. N.J.S.12A:9-518 is amended to read as follows:
12A:9-518 Claim Concerning Inaccurate or Wrongfully Filed Record.
(a) [Correction statement.] Statement with respect to record indexed under person's name. A person may file in the filing office [a correction] an information statement with respect to a record indexed there under the person's name if the person believes that the record is inaccurate or was wrongfully filed.
(b) [Sufficiency] Contents of [correction] statement under subsection (a). [A correction] An information statement under subsection (a) must:
(1) identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;
(2) indicate that it is [a correction] an information statement; and
(3) provide the basis for the person's belief that the record is inaccurate and indicate the manner in which the person believes the record should be amended to cure any inaccuracy or provide the basis for the person's belief that the record was wrongfully filed.
(c) Statement by secured party of record. A person may file in the filing office an information statement with respect to a record filed there if the person is a secured party of record with respect to the financing statement to which the record relates and believes that the person that filed the record was not entitled to do so under 12A:9-509(d).
(d) Contents of statement under subsection (c). An information statement under subsection (c) must:
(1) identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;
(2) indicate that it is an information statement; and
(3) provide the basis for the person's belief that the person that filed the record was not entitled to do so under 12A:9-509(d).
(e) Record not affected by [correction] information statement. The filing of [a correction] an information statement does not affect the effectiveness of an initial financing statement or other filed record.
(cf: P.L.2 c.386, s.82)
27. N.J.S.12A:9-601 is amended to read as follows:
12A:9-601. Rights After Default; Judicial Enforcement; Consignor or Buyer of Accounts, Chattel Paper, Payment Intangibles, or Promissory Notes.
(a) Rights of secured party after default. After default, a secured party has the rights provided in this part and, except as otherwise provided in 12A:9-602, those provided by agreement of the parties. A secured party:
(1) may reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure; and
(2) if the collateral is documents, may proceed either as to the documents or as to the goods they cover.
(b) Rights and duties of secured party in possession or control. A secured party in possession of collateral or control of collateral under 12A:7-106, 12A:9-104, 12A:9-105, 12A:9-106 or 12A:9-107 has the rights and duties provided in 12A:9-207.
(c) Rights cumulative; simultaneous exercise. The rights under subsections (a) and (b) are cumulative and may be exercised simultaneously.
(d) Rights of debtor and obligor. Except as otherwise provided in subsection (g) and 12A:9-605, after default, a debtor and an obligor have the rights provided in this part and by agreement of the parties.
(e) Lien of levy after judgment. If a secured party has reduced its claim to judgment, the lien of any levy that may be made upon the collateral by virtue of an execution based upon the judgment relates back to the earliest of:
(1) the date of perfection of the security interest or agricultural lien in the collateral;
(2) the date of filing a financing statement covering the collateral; or
(3) any date specified in a statute under which the agricultural lien was created.
(f) Execution sale. A sale pursuant to an execution is a foreclosure of the security interest or agricultural lien by judicial procedure within the meaning of this section. A secured party may purchase at the sale and thereafter hold the collateral free of any other requirements of this chapter.
(g) Consignor or buyer of certain rights to payment. Except as otherwise provided in 12A:9-607 (c), this part imposes no duties upon a secured party that is a consignor or is a buyer of accounts, chattel paper, payment intangibles, or promissory notes.
(cf: P.L.2001, c.386, s.91)
28. N.J.S.12A:9-607 is amended to read as follows:
12A:9-607. Collection and Enforcement by Secured Party.
(a) Collection and enforcement generally. If so agreed, and in any event after default, a secured party:
(1) may notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party;
(2) may take any proceeds to which the secured party is entitled under 12A:9-315;
(3) may enforce the obligations of an account debtor or other person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor, and with respect to any property that secures the obligation of the account debtor or other person obligated on the collateral;
(4) if it holds a security interest in a deposit account perfected by control under 12A:9-104 (a) (1), may apply the balance of the deposit account to the obligation secured by the deposit account; and
(5) if it holds a security interest in a deposit account perfected by control under 12A:9-104 (a) (2) or (3), may instruct the bank to pay the balance of the deposit account to or for the benefit of the secured party.
(b) Nonjudicial enforcement of mortgage. If necessary to enable a secured party to exercise under subsection (a) (3) the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which a record of the mortgage is recorded:
(1) a copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and
(2) the secured party's sworn affidavit in recordable form stating that:
(A) a default has occurred with respect to the obligation secured by the mortgage; and
(B) the secured party is entitled to enforce the mortgage nonjudicially.
(c) Commercially reasonable collection and enforcement. A secured party shall proceed in a commercially reasonable manner if the secured party:
(1) undertakes to collect from or enforce an obligation of an account debtor or other person obligated on collateral; and
(2) is entitled to charge back uncollected collateral or otherwise to full or limited recourse against the debtor or a secondary obligor.
(d) Expenses of collection and enforcement. A secured party may deduct from the collections made pursuant to subsection (c), reasonable expenses of collection and enforcement, including reasonable attorney's fees and legal expenses incurred by the secured party.
(e) Duties to secured party not affected. This section does not determine whether an account debtor, bank, or other person obligated on collateral owes a duty to a secured party.
(cf: P.L.2001, c.386, s.96)
29. N.J.S.12A:9-625 is amended to read as follows:
12A:9-625. Remedies for Secured Party's Failure to Comply with Chapter.
(a) Judicial orders concerning noncompliance. If it is established that a secured party is not proceeding in accordance with this chapter, a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.
(b) Damages for noncompliance. Subject to subsections (c), (d) and (f), a person is liable for damages in the amount of any loss caused by a failure to comply with this chapter. Loss caused by a failure to comply may include loss resulting from the debtor's inability to obtain, or increased costs of, alternative financing.
(c) Persons entitled to recover damages; statutory damages [in consumer-goods transaction] if collateral is consumer goods. Except as otherwise provided in 12A:9-628:
(1) a person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under subsection (b) for its loss; and
(2) if the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this part may recover for that failure in any event an amount not less than the credit service charge plus 10 percent of the principal amount of the obligation or the time-price differential plus 10 percent of the cash price.
(d) Recovery when deficiency eliminated or reduced. A debtor whose deficiency is eliminated under 12A:9-626 may recover damages for the loss of any surplus. However, a debtor or secondary obligor whose deficiency is eliminated or reduced under 12A:9-626 may not otherwise recover under subsection (b) for noncompliance with the provisions of this part relating to collection, enforcement, disposition, or acceptance.
(e) Statutory damages: noncompliance with specified provisions. In addition to any damages recoverable under subsection (b), the debtor, consumer obligor, or person named as a debtor in a filed record, as applicable, may recover $500 in each case from a person that:
(1) fails to comply with 12A:9-207;
(2) fails to comply with 12A:9-208;
(3) files a record that the person is not entitled to file under 12A:9-509 (a);
(4) fails to cause the secured party of record to file or send a termination statement as required by 12A:9-513 (a) or (c);
(5) fails to comply with 12A:9-616 (b) (1) and whose failure is part of a pattern, or consistent with a practice, of noncompliance; or
(6) fails to comply with 12A:9-616 (b) (2).
(f) Statutory damages: noncompliance with 12A:9-210. A debtor or consumer obligor may recover damages under subsection (b) and, in addition, $500 in each case from a person that, without reasonable cause, fails to comply with a request under 12A:9-210. A recipient of a request under 12A:9-210 which never claimed an interest in the collateral or obligations that are the subject of a request under that section has a reasonable excuse for failure to comply with the request within the meaning of this subsection.
(g) Limitation of security interest: noncompliance with 12A:9-210. If a secured party fails to comply with a request regarding a list of collateral or a statement of account under 12A:9-210, the secured party may claim a security interest only as shown in the list or statement included in the request as against a person that is reasonably misled by the failure.
(cf: P.L.2001, c.386, s.114)
30. (New section) Title 12A, Chapter 9 is supplemented as follows:
TRANSITION PROVISIONS
12A:9-801. Effective Date.
This act (P.L. ,c. , ), amends and supplements Chapter 9 of Title 12A of the New Jersey Statutes, and shall take effect on July 1, 2013.
12A:9-802. Savings Clause.
(a) Pre-effective date transactions or liens. Except as otherwise provided in this part, this act applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this act takes effect.
(b) Pre-effective-date proceedings. This act does not affect an action, case, or proceeding commenced before this act takes effect.
12A:9-803. Security Interest Perfected Before Effective Date.
(a) Continuing perfection: perfection requirements satisfied. A security interest that is a perfected security interest immediately before this act takes effect is a perfected security interest under Chapter 9 as amended by this act if, when this act takes effect, the applicable requirements for attachment and perfection under Chapter 9 as amended by this act are satisfied without further action.
(b) Continuing perfection: perfection requirements not satisfied. Except as otherwise provided in 12A:9-805, if, immediately before this act takes effect, a security interest is a perfected security interest, but the applicable requirements for perfection under Chapter 9 as amended by this act are not satisfied when this act takes effect, the security interest remains perfected thereafter only if the applicable requirements for perfection under Chapter 9 as amended by this act are satisfied within one year after this act takes effect.
12A:9-804. Security Interest Unperfected Before Effective Date.
A security interest that is an unperfected security interest immediately before this act takes effect becomes a perfected security interest:
(1) without further action, when this act takes effect if the applicable requirements for perfection under Chapter 9 as amended by this act are satisfied before or at that time; or
(2) when the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.
12A:9-805. Effectiveness of Action Taken Before Effective Date.
(a) Pre-effective-date filing effective. The filing of a financing statement before this act takes effect is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under Chapter 9 as amended by this act.
(b) When pre-effective-date filing becomes ineffective. This act does not render ineffective an effective financing statement that, before this act takes effect, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in Chapter 9 as it existed before amendment. However, except as otherwise provided in subsections (c) and (d) and 12A:9-806, the financing statement ceases to be effective:
(1) if the financing statement is filed in this State, at the time the financing statement would have ceased to be effective had this act not taken effect; or
(2) if the financing statement is filed in another jurisdiction, at the earlier of:
(A) the time the financing statement would have ceased to be effective under the law of that jurisdiction; or
(B) June 30, 2018.
(c) Continuation statement. The filing of a continuation statement after this act takes effect does not continue the effectiveness of a financing statement filed before this act takes effect. However, upon the timely filing of a continuation statement after this act takes effect and in accordance with the law of the jurisdiction governing perfection as provided in Chapter 9 as amended by this act, the effectiveness of a financing statement filed in the same office in that jurisdiction before this act takes effect continues for the period provided by the law of that jurisdiction.
(d) Application of subsection (b)(2)(B) to transmitting utility financing statement. Subsection (b)(2)(B) applies to a financing statement that, before this act takes effect, is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in Chapter 9 as it existed before amendment, only to the extent that Chapter 9 as amended by this act provides that the law of a jurisdiction other than the jurisdiction in which the financing statement is filed governs perfection of a security interest in collateral covered by the financing statement.
(e) Application of Subchapter 5. A financing statement that includes a financing statement filed before this act takes effect and a continuation statement filed after this act takes effect is effective only to the extent that it satisfies the requirements of Subchapter 5 as amended by this act for an initial financing statement. A financing statement that indicates that the debtor is a decedent's estate indicates that the collateral is being administered by a personal representative within the meaning of 12A:9-503(a)(2) as amended by this act. A financing statement that indicates that the debtor is a trust or is a trustee acting with respect to property held in trust indicates that the collateral is held in a trust within the meaning of 12A:9-503(a)(3) as amended by this act.
12A:9-806. When Initial Financing Statement Suffices to Continue Effectiveness of Financing Statement.
(a) Initial financing statement in lieu of continuation statement. The filing of an initial financing statement in the office specified in 12A:9-501 continues the effectiveness of a financing statement filed before this act takes effect if:
(1) the filing of an initial financing statement in that office would be effective to perfect a security interest under Chapter 9 as amended by this act;
(2) the pre-effective-date financing statement was filed in an office in another state; and
(3) the initial financing statement satisfies subsection (c).
(b) Period of continued effectiveness. The filing of an initial financing statement under subsection (a) continues the effectiveness of the pre-effective-date financing statement:
(1) if the initial financing statement is filed before this act takes effect, for the period provided in unamended 12A:9-515 with respect to an initial financing statement; and
(2) if the initial financing statement is filed after this act takes effect, for the period provided in 12A:9-515 as amended by this act with respect to an initial financing statement.
(c) Requirements for initial financing statement under subsection (a). To be effective for purposes of subsection (a), an initial financing statement must:
(1) satisfy the requirements of Subchapter 5 as amended by this act for an initial financing statement;
(2) identify the pre-effective-date financing statement by indicating the office in which the financing statement was filed and providing the dates of filing and file numbers, if any, of the financing statement and of the most recent continuation statement filed with respect to the financing statement; and
(3) indicate that the pre-effective-date financing statement remains effective.
12A:9-807. Amendment of Pre-Effective-Date Financing Statement.
(a) "Pre-effective-date financing statement." In this section, "pre-effective-date financing statement" means a financing statement filed before this act takes effect.
(b) Applicable law. After this act takes effect, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or otherwise amend the information provided in, a pre-effective-date financing statement only in accordance with the law of the jurisdiction governing perfection as provided in Chapter 9 as amended by this act. However, the effectiveness of a pre-effective-date financing statement also may be terminated in accordance with the law of the jurisdiction in which the financing statement is filed.
(c) Method of amending: general rule. Except as otherwise provided in subsection (d), if the law of this State governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after this act takes effect only if:
(1) the pre-effective-date financing statement and an amendment are filed in the office specified in 12A:9-501;
(2) an amendment is filed in the office specified in 12A:9-501 concurrently with, or after the filing in that office of, an initial financing statement that satisfies 12A:9-806 (c); or
(3) an initial financing statement that provides the information as amended and satisfies 12A:9-806 (c) is filed in the office specified in 12A:9-501.
(d) Method of amending: continuation. If the law of this State governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement may be continued only under 12A:9-805 (c) and (e) or 12A:9-806.
(e) Method of amending: additional termination rule. Whether or not the law of this State governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement filed in this State may be terminated after this act takes effect by filing a termination statement in the office in which the pre-effective-date financing statement is filed, unless an initial financing statement that satisfies 12A:9-806 (c) has been filed in the office specified by the law of the jurisdiction governing perfection as provided in Chapter 9 as amended by this act as the office in which to file a financing statement.
12A:9-808. Person Entitled to File Initial Financing Statement or Continuation Statement. A person may file an initial financing statement or a continuation statement under this part if:
(1) the secured party of record authorizes the filing; and
(2) the filing is necessary under this part:
(A) to continue the effectiveness of a financing statement filed before this act takes effect; or
(B) to perfect or continue the perfection of a security interest.
12A:9-809. Priority. This act determines the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before this act takes effect, Chapter 9 as it existed before amendment determines priority.
31. N.J.S.12A:2-103 is amended to read as follows:
12A:2-103. Definitions and index of definitions
(1) In this chapter unless the context otherwise requires:
(a) "Buyer" means a person who buys or contracts to buy goods.
(b) "Good faith" in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
(c) "Receipt" of goods means taking physical possession of them.
(d) "Seller" means a person who sells or contracts to sell goods.
(2) Other definitions applying to this Chapter or to specified Subchapters thereof, and the sections in which they appear are:
"Acceptance" 12A:2-606.
"Banker's credit" 12A:2-325.
"Between merchants" 12A:2-104.
"Cancellation" 12A:2-106(4).
"Commercial unit" 12A:2-105.
"Confirmed credit" 12A:2-325.
"Conforming to contract" 12A:2-106.
"Contract for sale" 12A:2-106.
"Cover" 12A:2-712.
"Entrusting" 12A:2-403.
"Financing agency" 12A:2-104.
"Future goods" 12A:2-105.
"Goods" 12A:2-105.
"Identification" 12A:2-501.
"Installment contract" 12A:2-612.
"Letter of Credit" 12A:2-325.
"Lot" 12A:2-105.
"Merchant" 12A:2-104.
"Overseas" 12A:2-323.
"Person in position of seller" 12A:2-707.
"Present sale" 12A:2-106.
"Sale" 12A:2-106.
"Sale on approval" 12A:2-326.
"Sale or return" 12A:2-326.
"Termination" 12A:2-106.
(3) The following definitions in other Chapters apply to this Chapter:
"Check" 12A:3-104.
"Consignee" 12A:7-102.
"Consignor" 12A:7-102.
"Consumer goods" 12A:9-102.
"Control" 12A:7-106
"Dishonor" 12A:3-502.
"Draft" 12A:3-104.
(4) In addition Chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this Chapter.
(cf: P.L.2001, c.117, s.5)
32. N.J.S.12A:2-104 is amended to read as follows:
12A:2-104. Definitions: "merchant"; "between merchants"; "financing agency"
(1) "Merchant" means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
(2) "Financing agency" means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller's draft or making advances against it or by merely taking it for collection whether or not documents of title accompany or are associated with the draft. "Financing agency" includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (12A:2-707).
(3) "Between merchants" means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.
(cf: N.J.S.12A:2-104)
33. N.J.S.12A:2-310 is amended to read
12A:2-310. Open time for payment or running of credit; authority to ship under reservation
Unless otherwise agreed
(a) payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and
(b) if the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (12A:2-513); and
(c) if delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due regardless of where the goods are to be received: (i) at the time and place at which the buyer is to receive delivery of the tangible documents [regardless of where the goods are to be received]; or (ii) at the time the buyer is to receive delivery of the electronic documents and at the seller's place of business or if none, the seller's residence; and
(d) where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.
(cf: N.J.S.12A:2-310)
34. N.J.S.12A:2-323 is amended to read as follows:
12A:2-323. Form of bill of lading required in overseas shipment; "overseas"
(1) Where the contract contemplates overseas shipment and contains a term C.I.F. or C. & F. or F.O.B. vessel, the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. & F., received for shipment.
(2) Where in a case within subsection (1) a tangible bill of lading has been issued in a set of parts, unless otherwise agreed if the documents are not to be sent from abroad the buyer may demand tender of the full set; otherwise only one part of the bill of lading need be tendered. Even if the agreement expressly requires a full set
(a) due tender of a single part is acceptable within the provisions of this Chapter on cure of improper delivery (subsection (1) of 12A:2-508); and
(b) even though the full set is demanded, if the documents are sent from abroad the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity which the buyer in good faith deems adequate.
(3) A shipment by water or by air or a contract contemplating such shipment is "overseas" insofar as by usage of trade or agreement it is subject to the commercial, financing or shipping practices characteristic of international deep water commerce.
(cf: N.J.S.12A:2-323)
35. N.J.S.12A:2-401 is amended to read as follows:
12A:2-401. Passing of title; reservation for security; limited application of this section
Each provision of this Chapter with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this Chapter and matters concerning title become material the following rules apply:
(1) Title to goods cannot pass under a contract for sale prior to their identification to the contract (12A:2-501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this Act. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the Chapter on Secured Transactions (Chapter 9), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.
(2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading
(a) if the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment; but
(b) if the contract requires delivery at destination, title passes on tender there.
(3) Unless otherwise explicitly agreed where delivery is to be made without moving the goods,
(a) if the seller is to deliver a tangible document of title, title passes at the time when and the place where he delivers such documents and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or
(b) if the goods are at the time of contracting already identified and no documents are to be delivered, title passes at the time and place of contracting.
(4) A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a "sale".
(cf: N.J.S.12A:2-401)
36. N.J.S.12A:2-503 is amended to read as follows:
12A:2-503. Manner of seller's tender of delivery
(1) Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this Chapter, and in particular
(a) tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but
(b) unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.
(2) Where the case is within the next section respecting shipment tender requires that the seller comply with its provisions.
(3) Where the seller is required to deliver at a particular destination tender requires that he comply with subsection (1) and also in any appropriate case tender documents as described in subsections (4) and (5) of this section.
(4) Where goods are in the possession of a bailee and are to be delivered without being moved
(a) tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer's right to possession of the goods; but
(b) tender to the buyer of a non-negotiable document of title or of a [written direction to] record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in Chapter 9 receipt by the bailee of notification of the buyer's rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the non-negotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.
(5) Where the contract requires the seller to deliver documents
(a) he must tender all such documents in correct form, except as provided in this Chapter with respect to bills of lading in a set (subsection (2) of 12A:2-323); and
(b) tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes non-acceptance or rejection.
(cf: N.J.S.12A:2-503)
37. N.J.S.12A:2-505 is amended to read as follows:
12A:2-505. Seller's shipment under reservation.
(1) Where the seller has identified goods to the contract by or before shipment:
(a) his procurement of a negotiable bill of lading to his own order or otherwise reserves in him a security interest in the goods. His procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the seller's expectation of transferring that interest to the person named.
(b) a non-negotiable bill of lading to himself or his nominee reserves possession of the goods as security but except in a case of conditional delivery (subsection (2) of 12A:2-507) a non-negotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.
(2) When shipment by the seller with reservation of a security interest is in violation of the contract for sale it constitutes an improper contract for transportation within the preceding section but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the seller's powers as a holder of a negotiable document of title.
(cf: N.J.S.12A:2-505)
38. N.J.S.12A:2-506 is amended to read as follows:
12A:2-506. Rights of financing agency
(1) A financing agency by paying or purchasing for value a draft which relates to a shipment of goods acquires to the extent of the payment or purchase and in addition to its own rights under the draft and any document of title securing it any rights of the shipper in the goods including the right to stop delivery and the shipper's right to have the draft honored by the buyer.
(2) The right to reimbursement of a financing agency which has in good faith honored or purchased the draft under commitment to or authority from the buyer is not impaired by subsequent discovery of defects with reference to any relevant document which was apparently regular [on its face].
(cf: N.J.S.12A:2-506)
39. N.J.S.12A:2-509 is amended to read as follows:
12A:2-509. Risk of loss in the absence of breach
(1) Where the contract requires or authorizes the seller to ship the goods by carrier
(a) if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (12A:2-505); but
(b) if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.
(2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer
(a) on his receipt of possession or control of a negotiable document of title covering the goods; or
(b) on acknowledgement by the bailee of the buyer's right to possession of the goods; or
(c) after his receipt of possession or control of a non-negotiable document of title or other [written] direction to deliver in a record, as provided in subsection (4)(b) of 12A:2-503.
(3) In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.
(4) The provisions of this section are subject to contrary agreement of the parties and to the provisions of this Chapter on sale on approval (12A:2-327) and on effect of breach on risk of loss (12A:2-510).
(cf: N.J.S.12A:2-509)
40. N.J.S.12A:2-605 is amended to read as follows:
12A:2-605. Waiver of buyer's objections by failure to particularize
(1) The buyer's failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach
(a) where the seller could have cured it if stated seasonably; or
(b) between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.
(2) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent [on the face of] in the documents.
(cf: N.J.S.12A:2-605)
41. N.J.S.12A:2-705 is amended to read as follows:
12A:2-705. Seller's stoppage of delivery in transit or otherwise
(1) The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (12A:2-702) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.
(2) As against such buyer the seller may stop delivery until
(a) receipt of the goods by the buyer; or
(b) acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or
(c) such acknowledgment to the buyer by a carrier by reshipment or as [warehouseman] a warehouse; or
(d) negotiation to the buyer of any negotiable document of title covering the goods.
(3) (a) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
(b) After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.
(c) If a negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of possession or control of the document.
(d) A carrier who has issued a non-negotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
(cf: N.J.S.12A:2-705)
42. N.J.S.12A:2A-103 is amended to read as follows:
12A:2A-103. Definitions and index of definitions.
(1) In this chapter unless the context otherwise requires:
(a) "Buyer in ordinary course of business" means a person who in good faith and without knowledge that the sale to the person is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes [receiving] acquiring goods or documents of title under a pre-existing contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
(b) "Cancellation" occurs when either party puts an end to the lease contract for default by the other party.
(c) "Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole.
(d) "Conforming" goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is a natural person and who takes under the lease primarily for a personal, family, or household purpose.
(f) "Fault" means wrongful act, omission, breach, or default.
(g) "Finance lease" means a lease with respect to which:
(i) the lessor does not select, manufacture, or supply the goods;
(ii) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and
(iii) one of the following occurs:
(A) the lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;
(B) the lessee's approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract;
(C) the lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or
(D) if the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (b) that the lessee is entitled under this chapter to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (c) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time of identification to the lease contract, or are fixtures (12A:2A-309), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction. The term also includes the unborn young of animals.
(i) "Installment lease contract" means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause "each delivery is a separate lease" or its equivalent.
(j) "Lease" means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease.
(k) "Lease agreement" means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this chapter. Unless the context clearly indicates otherwise, the term includes a sublease agreement.
(l) "Lease contract" means the total legal obligation that results from the lease agreement as affected by this chapter and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor or the lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person who in good faith and without knowledge that the lease to the person is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods leases in ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. "Leasing" may be for cash or by exchange of other property or on secured or unsecured credit and includes [receiving] acquiring goods or documents of title under a pre-existing lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
(p) "Lessor" means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's interest in the goods after expiration, termination, or cancellation of the lease contract.
(r) "Lien" means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest.
(s) "Lot" means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant with respect to goods of the kind subject to the lease.
(u) "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.
(v) "Purchase" includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods.
(w) "Sublease" means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor buys or leases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which a lessor buys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.
(2) Other definitions applying to this chapter and the sections in which they appear are:
"Accessions".................................................12A:2A-310(1).
"Construction mortgage"..........................12A:2A-309(1)(d).
"Encumbrance".........................................12A:2A-309(1)(e).
"Fixtures".................................................12A:2A-309(1)(a).
"Fixture filing".........................................12A:2A-309(1)(b).
"Purchase money lease"............................12A:2A-309(1)(c).
(3) The following definitions in other Chapters apply to this Chapter:
"Account"....................................................12A: 9-102(a)(2).
"Between merchants"........................................12A:2-104(3).
"Buyer".........................................................12A:2-103(1)(a).
"Chattel paper"...........[12A:9-102(a)(12)] 12A:9-102(a)(11).
"Consumer goods"......[12A:9-102(a)(24)] 12A:9-102(a)(23).
"Document"...... .......[12A:9-102(a)(31)] 12A:9-102(a)(30).
"Entrusting".......................................................12A:2-403(3).
"General intangible"....................................12A:9-102(a)(42).
"Good faith"....................................................2A:2-103(1)(b).
"Instrument"................................................12A:9-102(a)(47).
"Merchant".........................................................12A:2-104(1).
"Mortgage"...................................................12A:9-102(a)(55).
"Pursuant to commitment"............................12A:9-102(a)(68).
"Receipt"........................................................12A:2-103(1)(c).
"Sale"..................................................................12A:2-106(1).
"Sale on approval"...................................................12A:2-326.
"Sale or return"........................................................12A:2-326.
"Seller"............................................................12A:2-103(1)(d).
(4) In addition chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.
(cf: P.L.2001, c.386, s.131)
43. N.J.S.12A:2A-514 is amended to read as follows:
12A:2A-514. Waiver of lessee's objections.
(1) In rejecting goods, a lessee's failure to state a particular defect that is ascertainable by reasonable inspection precludes the lessee from relying on the defect to justify rejection or to establish default:
(a) if, stated seasonably, the lessor or the supplier could have cured it (12A:2A-513); or
(b) between merchants if the lessor or the supplier after rejection has made a request in writing for a full and final written statement of all defects on which the lessee proposes to rely.
(2) A lessee's failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent [on the face of] in the documents.
(cf: N.J.S.12A:2A-514)
44. N.J.S.12A:2A-526 is amended to read as follows:
12A:2A-526 Lessor's stoppage of delivery in transit or otherwise.
(1) A lessor may stop delivery of goods in the possession of a carrier or other bailee if the lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload, planeload, or larger shipments of express or freight if the lessee repudiates or fails to make a payment due before delivery, whether for rent, security or otherwise under the lease contract, or for any other reason the lessor has a right to withhold or take possession of the goods.
(2) In pursuing its remedies under subsection (1), the lessor may stop delivery until
(a) receipt of the goods by the lessee;
(b) acknowledgment to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or
(c) such an acknowledgment to the lessee by a carrier via reshipment or as [warehouseman] a warehouse.
(3) (a) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
(b) After notification, the bailee shall hold and deliver the goods according to the directions of the lessor, but the lessor is liable to the bailee for any ensuing charges or damages.
(c) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
(cf: N.J.S.12A:2A-526)
45. N.J.S.12A:4-104 is amended to read as follows:
12A:4-104. Definitions and Index of Definitions.
a. In this chapter, unless the context otherwise requires:
(1) "Account" means any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;
(2) "Afternoon" means the period of a day between noon and midnight;
(3) "Banking day" means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;
(4) "Clearing house" means an association of banks or other payors regularly clearing items;
(5) "Customer" means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;
(6) "Documentary draft" means a draft to be presented for acceptance or payment if specified documents, certificated securities (12A:8-102) or instructions for uncertificated securities (12A:8-102), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;
(7) "Draft" means a draft as defined in 12A:3-104 or an item, other than an instrument, that is an order [.];
(8) "Drawee" means a person ordered in a draft to make payment[.];
(9) "Item" means an instrument or a promise or order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by chapter 4A or a credit or debit card slip;
(10) "Midnight deadline" with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;
(11) "Settle" means to pay in cash, by clearing-house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final;
(12) "Suspends payments" with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary course of business.
b. Other definitions applying to this chapter and the sections in which they appear are:
"Agreement for electronic presentment" 12A:4-110.
"Bank" 12A:4-105.
"Collecting bank" 12A:4-105.
"[Depository] Depositary bank" 12A:4-105.
"Intermediary bank" 12A:4-105.
"Payor bank" 12A:4-105.
"Presenting bank" 12A:4-105.
"Presentment notice" 12A:4-110.
c. The following definitions in other chapters apply to this chapter:
"Acceptance" 12A:3-409.
"Alteration" 12A:3-407.
"Cashier's check" 12A:3-104.
"Certificate of deposit" 12A:3-104.
"Certified check" 12A:3-409.
"Check" 12A:3-104.
"Control" 12A:7-106.
"Good faith" 12A:3-103.
"Holder in due course" 12A:3-302.
"Instrument" 12A:3-104.
"Notice of dishonor" 12A:3-503.
"Order" 12A:3-103.
"Ordinary care" 12A:3-103.
"Person entitled to enforce" 12A:3-301.
"Presentment" 12A:3-501.
"Promise" 12A:3-103.
"Prove" 12A:3-103.
"Teller's check" 12A:3-104.
"Unauthorized signature" 12A:3-403.
d. In addition chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.
(cf: P.L.1997, c.252, s.18)
46. N.J.S.12A:4-210 is amended to read as follows:
12A:4-210. Security Interest of Collecting Bank in Items, Accompanying Documents and Proceeds.
a. A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either:
(1) in case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied;
(2) in case of an item for which it has given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or
(3) if it makes an advance on or against the item.
b. If credit given for several items received at one time or pursuant to a single agreement is withdrawn or applied in part, the security interest remains upon all the items, any accompanying documents or the proceeds of either. For the purpose of this section, credits first given are first withdrawn.
c. Receipt by a collecting bank of a final settlement for an item is a realization on its security interest in the item, accompanying documents, and proceeds. As long as the bank does not receive final settlement for the item or give up possession of the item or possession or control of the accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to chapter 9, but:
(1) no security agreement is necessary to make the security interest enforceable (12A:9-203(b)(3)(A));
(2) no filing is required to perfect the security interest; and
(3) the security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.
(cf: P.L.2001, c.117, s.14)
47. N.J.S.12A:8-103 is amended to read as follows:
12A:8-103. Rule for Determining whether Certain Obligations and Interests are Securities or Financial Assets.
a. A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security.
b. An "investment company security" is a security. "Investment company security" means a share or similar equity interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered. Investment company security does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.
c. An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this chapter, or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.
d. A writing that is a security certificate is governed by this chapter and not by chapter 3, even though it also meets the requirements of that chapter. However, a negotiable instrument governed by chapter 3 is a financial asset if it is held in a securities account.
e. An option or similar obligation issued by a clearing corporation to its participants is not a security, but is a financial asset.
f. A commodity contract, as defined in 12A:9-102 (a) (15), is not a security or a financial asset.
g. A document of title is not a financial asset unless 12A:8-102(a)(9)(c) applies.
(cf: P.L.2001, c.386, s.133)
148. N.J.S.12A:4A-108 is amended to read as follows:
12A:4A-108. [Exclusion of consumer transactions governed by federal law.
This] Relationship to Electronic Fund Transfer Act.
a. Except as provided in subsection b. of this section, this chapter does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act [of 1978] (Title XX, Pub. Law 95-630, 92 Stat. 3728, 15U.S.C. s.1693 et seq.) as amended from time to time.
b. This chapter applies to a funds transfer that is a remittance transfer as defined in the Electronic Fund Transfer Act (15 U.S.C.1693o-1) unless the remittance transfer is an electronic fund transfer as defined in the Electronic Fund Transfer Act (15 U.S.C.1693a).
c. In a funds transfer to which this chapter applies, in the event of an inconsistency between an applicable provision of this chapter and an applicable provision of the Electronic Fund Transfer Act, the provision of the Electronic Fund Transfer Act governs to the extent of the inconsistency.1
(N.J.S.12A:4A-108)
249. N.J.S. 12A:9-521 is amended to read as follows:
12A:9-521. Uniform Form of Written Financing Statement and Amendment.
(a) Initial financing statement form. A filing office that accepts written records may not refuse to accept a written initial financing statement [in the following] if filed in the 3[current version of the International Association of Commercial Administrators (IACA)]3 form and format 3set forth in the official text of the 2010 amendments to Article 9 of the Uniform Commercial Code promulgated by the American Law Institute and the Uniform Law Commission, or in such form and format as may be subsequently adopted by the American Law Institute, the Uniform Law Commission, or the International Association of Commercial Administrators (IACA),3 except for a reason set forth in 12A:9-516 (b)[:
(Please refer to the Filing Office Copy - National UCC Financing Statement (Form UCC1) (REV. 07/29/98) and to the Filing Office Copy - National UCC Financing Statement Addendum (Form UCC1Ad) (REV.07/29/98)].
(b) Amendment form. A filing office that accepts written records may not refuse to accept a written record [in the following] if filed in the 3[current version of the International Association of Commercial Administrators (IACA)]3 form and format 3set forth in the official text of the 2010 amendments to Article 9 of the Uniform Commercial Code promulgated by the American Law Institute and the Uniform Law Commission, or in such form and format as may be subsequently adopted by the American Law Institute, the Uniform Law Commission, or the International Association of Commercial Administrators (IACA),3 except for a reason set forth in 12A:9-516 (b) [:
(Please refer to the Filing Office Copy - National UCC Financing Statement (Form UCC3) (REV. 07/29/98) and to the Filing Office Copy - National UCC Financing Statement Addendum (Form UCC3Ad) (REV.07/29/98)].2
(cf. P.L.2001, c.386, s.85)
1[48.] 2[49.1] 50.2 This act shall take effect on July 1, 2013.
Repeals and replaces Chapters 1 and 7 of the Uniform Commercial Code and revises various additional provisions of the code.
