MN Legislature

Accessibility menu

Session laws use visual text formatting such as stricken text to denote deleted language, and underlined text to denote new language. For users of the jaws screenreader it is recommended to configure jaws to use the proofreading scheme which will alter the pitch of the reading voice when reading stricken and underlined text. Instructions for configuring your jaws reader are provided by following this link.
If you can not or do not wish to configure your screen reader, deleted language will begin with the phrase "deleted text begin" and be followed by the phrase "deleted text end", new language will begin with the phrase "new text begin" and be followed by "new text end". Skip to text of Chapter 162.

Menu

Revisor of Statutes Menu

Authenticate

Pdf

2004 Minnesota Session Laws

Key: (1) language to be deleted (2) new language

                            CHAPTER 162-H.F.No. 1983 
                  An act relating to commerce; enacting the revisions to 
                  the general provisions of the Uniform Commercial Code 
                  and enacting a revised Article 7 of the Uniform 
                  Commercial Code recommended by the National Conference 
                  of Commissioners on Uniform State Laws; making 
                  conforming changes; amending provisions in Articles 3 
                  and 4 of the Uniform Commercial Code relating to 
                  warranties on remotely created items; amending 
                  Minnesota Statutes 2002, sections 17.94; 84.787, 
                  subdivision 9; 84.797, subdivision 10; 84.92, 
                  subdivision 6; 86B.820, subdivision 12; 168A.01, 
                  subdivision 20; 234.27; 325L.03; 325L.16; 336.2-103; 
                  336.2-104; 336.2-202; 336.2-310; 336.2-323; 336.2-401; 
                  336.2-503; 336.2-505; 336.2-506; 336.2-509; 336.2-605; 
                  336.2-705; 336.2A-103; 336.2A-501; 336.2A-514; 
                  336.2A-518; 336.2A-519; 336.2A-526; 336.2A-527; 
                  336.2A-528; 336.4-210; 336.4A-105; 336.4A-106; 
                  336.4A-204; 336.5-103; 336.8-102; 336.8-103; 
                  336.9-102; 336.9-203; 336.9-207; 336.9-208; 336.9-301; 
                  336.9-310; 336.9-312; 336.9-313; 336.9-314; 336.9-317; 
                  336.9-338; 336.9-601; 513.33, subdivision 1; 514.963, 
                  subdivision 9; 514.965, subdivision 10; 514.973; 
                  Minnesota Statutes 2003 Supplement, sections 
                  336.3-103; 336.3-416; 336.3-417; 336.4-104; 336.4-207; 
                  336.4-208; proposing coding for new law in Minnesota 
                  Statutes, chapter 336; repealing Minnesota Statutes 
                  2002, sections 336.1-101; 336.1-102; 336.1-103; 
                  336.1-104; 336.1-105; 336.1-106; 336.1-107; 336.1-108; 
                  336.1-109; 336.1-110; 336.1-201; 336.1-202; 336.1-203; 
                  336.1-204; 336.1-205; 336.1-206; 336.1-207; 336.1-208; 
                  336.1-209; 336.2-208; 336.2A-207; 336.7-101; 
                  336.7-102; 336.7-103; 336.7-104; 336.7-105; 336.7-201; 
                  336.7-202; 336.7-203; 336.7-204; 336.7-205; 336.7-206; 
                  336.7-207; 336.7-208; 336.7-209; 336.7-210; 336.7-301; 
                  336.7-302; 336.7-303; 336.7-304; 336.7-305; 336.7-306; 
                  336.7-307; 336.7-308; 336.7-309; 336.7-401; 336.7-402; 
                  336.7-403; 336.7-404; 336.7-501; 336.7-502; 336.7-503; 
                  336.7-504; 336.7-505; 336.7-506; 336.7-507; 336.7-508; 
                  336.7-509; 336.7-601; 336.7-602; 336.7-603; 336.10-104.
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
                      REVISION OF UNIFORM COMMERCIAL CODE 
                                     PART 1 
                               GENERAL PROVISIONS 
           Section 1.  [336.1-101] [SHORT TITLES.] 
           (a) This chapter may be cited as the Uniform Commercial 
        Code. 
           (b) This article may be cited as Uniform Commercial Code - 
        General Provisions. 
           Sec. 2.  [336.1-102] [SCOPE OF ARTICLE.] 
           This article applies to a transaction to the extent that it 
        is governed by another article of the Uniform Commercial Code. 
           Sec. 3.  [336.1-103] [CONSTRUCTION OF UNIFORM COMMERCIAL 
        CODE TO PROMOTE ITS PURPOSES AND POLICIES; APPLICABILITY OF 
        SUPPLEMENTAL PRINCIPLES OF LAW.] 
           (a) The Uniform Commercial Code must 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.
           Sec. 4.  [336.1-104] [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. 
           Sec. 5.  [336.1-105] [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. 
           Sec. 6.  [336.1-106] [USE OF SINGULAR AND PLURAL; GENDER.] 
           In the Uniform Commercial Code, unless the statutory 
        context otherwise requires: 
           (1) words in the singular number include the plural, and 
        those in the plural include the singular; and 
           (2) words of any gender also refer to any other gender. 
           Sec. 7.  [336.1-107] [SECTION CAPTIONS.] 
           Section captions are part of the Uniform Commercial Code. 
           Sec. 8.  [336.1-108] [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. Section 7001, et seq.) but does not modify, limit, or 
        supersede Section 101(c) of that act (15 U.S.C. Section 7001(c)) 
        or authorize electronic delivery of any of the notices described 
        in Section 103(b) of that act (15 U.S.C. Section 7003(b)). 
           Sec. 9.  [336.1-110] [UNIFORM COMMERCIAL CODE ACCOUNT.] 
           The Uniform Commercial Code account is established as an 
        account in the state treasury.  Fees that are not expressly set 
        by statute but are charged by the secretary of state to offset 
        the costs of providing a service under this chapter must be 
        deposited in the state treasury and credited to the Uniform 
        Commercial Code account. 
           Fees that are not expressly set by statute but are charged 
        by the secretary of state to offset the costs of providing 
        information contained in the computerized records maintained by 
        the secretary of state must be deposited in the state treasury 
        and credited to the Uniform Commercial Code account. 
           Money in the Uniform Commercial Code account is 
        continuously appropriated to the secretary of state to implement 
        and maintain the central filing system under this chapter and to 
        provide electronic access to other computerized records 
        maintained by the secretary of state. 
                                     PART 2
              GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
           Sec. 10.  [336.1-201] [GENERAL DEFINITIONS.] 
           (a) Unless the context otherwise requires, words or phrases 
        defined in this section, or in the additional definitions 
        contained in other articles of the Uniform Commercial Code that 
        apply to particular articles or parts thereof, have the meanings 
        stated. 
           (b) Subject to definitions contained in other articles of 
        the Uniform Commercial Code that apply to particular articles 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 as provided in 
        section 336.1-303. 
           (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 article 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 (i) 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 (ii) 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 article 
        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 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 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 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 article 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 section 336.2-401, 
        but a buyer may also acquire a "security interest" by complying 
        with article 9.  Except as otherwise provided in section 
        336.2-505, the right of a seller or lessor of goods under 
        article 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 article 9.  The 
        retention or reservation of title by a seller of goods 
        notwithstanding shipment or delivery to the buyer under section 
        336.2-401 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 section 
        336.1-203. 
           (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 or 
        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. 
           Sec. 11.  [336.1-202] [NOTICE; KNOWLEDGE.] 
           (a) Subject to subsection (f), 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), 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.  
           Sec. 12.  [336.1-203] [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 must be determined 
        with reference to the fact and circumstances at the time the 
        transaction is entered into. 
           Sec. 13.  [336.1-204] [VALUE.] 
           Except as otherwise provided in articles 3, 4, and 5, a 
        person gives value for rights if the person acquires them: 
           (1) 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 chargeback is provided for 
        in the event of difficulties in collection; 
           (2) as security for, or in total or partial satisfaction 
        of, a preexisting claim; 
           (3) by accepting delivery under a preexisting contract for 
        purchase; or 
           (4) in return for any consideration sufficient to support a 
        simple contract. 
           Sec. 14.  [336.1-205] [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. 
           Sec. 15.  [336.1-206] [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. 
                                     PART 3
                  TERRITORIAL APPLICABILITY AND GENERAL RULES
           Sec. 16.  [336.1-301] [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 such other state or nation shall 
        govern their rights and duties. 
           (b) In the absence of an agreement effective under 
        subsection (a), and except as provided in subsection (c), 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 336.2-402; 
           (2) sections 336.2A-105 and 336.2A-106; 
           (3) section 336.4-102; 
           (4) section 336.4A-507; 
           (5) section 336.5-116; 
           (6) section 336.8-110; 
           (7) sections 336.9-301 through 336.9-307. 
           Sec. 17.  [336.1-302] [VARIATION BY AGREEMENT.] 
           (a) Except as otherwise provided in subsection (b) 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. 
           Sec. 18.  [336.1-303] [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), 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 336.2-209, 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. 
           Sec. 19.  [336.1-304] [OBLIGATION OF GOOD FAITH.] 
           Every contract or duty within the Uniform Commercial Code 
        imposes an obligation of good faith in its performance and 
        enforcement. 
           Sec. 20.  [336.1-305] [REMEDIES TO BE LIBERALLY 
        ADMINISTERED.] 
           (a) The remedies provided by the Uniform Commercial Code 
        must 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. 
           Sec. 21.  [336.1-306] [WAIVER OR 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. 
           Sec. 22.  [336.1-307] [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. 
           Sec. 23.  [336.1-308] [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) does not apply to an accord and 
        satisfaction. 
           Sec. 24.  [336.1-309] [OPTION TO ACCELERATE AT WILL.] 
           A term providing that one party or that party's successor 
        in interest may accelerate payment or performance or require 
        collateral or additional collateral "at will" or when the party 
        "deems itself insecure," or words of similar import, means that 
        the party has power to do so only if that party in good faith 
        believes that the prospect of payment or performance is 
        impaired.  The burden of establishing lack of good faith is on 
        the party against which the power has been exercised.  
           Sec. 25.  [336.1-310] [SUBORDINATED OBLIGATIONS.] 
           An obligation may be issued as subordinated to performance 
        of another obligation of the person obligated, or a creditor may 
        subordinate its right to performance of an obligation by 
        agreement with either the person obligated or another creditor 
        of the person obligated.  Subordination does not create a 
        security interest as against either the common debtor or a 
        subordinated creditor. 
           Sec. 26.  [REPEALER.] 
           Minnesota Statutes 2002, sections 336.1-101; 336.1-102; 
        336.1-103; 336.1-104; 336.1-105; 336.1-106; 336.1-107; 
        336.1-108; 336.1-109; 336.1-110; 336.1-201; 336.1-202; 
        336.1-203; 336.1-204; 336.1-205; 336.1-206; 336.1-207; 
        336.1-208; and 336.1-209, are repealed. 

                                   ARTICLE 2 
                  CONFORMING AMENDMENTS TO OTHER UCC ARTICLES 
           Section 1.  Minnesota Statutes 2002, section 336.2-103, is 
        amended to read: 
           336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (1) In this article 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. [Reserved.] 
           (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 article or to 
        specified parts thereof, and the sections in which they appear 
        are: 
           "Acceptance," section 336.2-606. 
           "Banker's credit," section 336.2-325. 
           "Between merchants," section 336.2-104. 
           "Cancellation," section 336.2-106(4). 
           "Commercial unit," section 336.2-105. 
           "Confirmed credit," section 336.2-325. 
           "Conforming to contract," section 336.2-106. 
           "Contract for sale," section 336.2-106. 
           "Cover," section 336.2-712. 
           "Entrusting," section 336.2-403. 
           "Financing agency," section 336.2-104. 
           "Future goods," section 336.2-105. 
           "Goods," section 336.2-105. 
           "Identification," section 336.2-501. 
           "Installment contract," section 336.2-612. 
           "Letter of credit," section 336.2-325. 
           "Lot," section 336.2-105. 
           "Merchant," section 336.2-104. 
           "Overseas," section 336.2-323. 
           "Person in position of seller," section 336.2-707. 
           "Present sale," section 336.2-106. 
           "Sale," section 336.2-106. 
           "Sale on approval," section 336.2-326. 
           "Sale or return," section 336.2-326. 
           "Termination," section 336.2-106. 
           (3) The following definitions in other articles apply to 
        this article: 
           "Check," section 336.3-104. 
           "Consignee," section 336.7-102. 
           "Consignor," section 336.7-102. 
           "Consumer goods," section 336.9-102. 
           "Dishonor," section 336.3-502. 
           "Draft," section 336.3-104. 
           (4) In addition article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 2.  Minnesota Statutes 2002, section 336.2-202, is 
        amended to read: 
           336.2-202 [FINAL WRITTEN EXPRESSION; PAROL OR EXTRINSIC 
        EVIDENCE.] 
           Terms with respect to which the confirmatory memoranda of 
        the parties agree or which are otherwise set forth in a writing 
        intended by the parties as a final expression of their agreement 
        with respect to such terms as are included therein may not be 
        contradicted by evidence of any prior agreement or of a 
        contemporaneous oral agreement but may be explained or 
        supplemented 
           (a) by course of performance, course of dealing, or usage 
        of trade (section 336.1-205 336.1-303) or by course of 
        performance (section 336.2-208); and 
           (b) by evidence of consistent additional terms unless the 
        court finds the writing to have been intended also as a complete 
        and exclusive statement of the terms of the agreement.  
           Sec. 3.  Minnesota Statutes 2002, section 336.2A-103, is 
        amended to read: 
           336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (1) In this article 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 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 goods or documents of 
        title under a preexisting 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 a unit of goods that 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 an individual and who takes under the lease primarily for 
        a personal, family, or household purpose, if the total payments 
        to be made under the lease contract, excluding payments for 
        options to renew or buy, do not exceed $25,000. 
           (f) "Fault" means wrongful act, omission, breach, or 
        default. 
           (g) "Finance lease" means a lease in which 
           (1) the lessor does not select, manufacture, or supply the 
        goods, 
           (2) the lessor acquires the goods or the right to 
        possession and use of the goods in connection with the lease, 
        and 
           (3) either 
           (i) the lessee receives a copy of the contract evidencing 
        the lessor's purchase of the goods or a disclaimer statement on 
        or before signing the lease contract, or 
           (ii) the lessee's approval of the contract evidencing the 
        lessor's purchase of the goods or a disclaimer statement is a 
        condition to effectiveness of the lease contract.  
           "Disclaimer statement" means a written statement that is 
        part of or separate from the lease contract that discloses all 
        warranties and other rights provided to the lessee by the lessor 
        and supplier in connection with the lease contract and informs 
        the lessee in a conspicuous manner that there are no warranties 
        or other rights provided to the lessee by the lessor and 
        supplier other than those disclosed in the statement. 
           (h) "Goods" means all things that are movable at the time 
        of identification to the lease contract, or are fixtures 
        (section 336.2A-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 article.  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 article 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 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 goods or 
        documents of title under a preexisting 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 article and the 
        sections in which they appear are: 
           "Accessions."  Section 336.2A-310(1). 
           "Construction mortgage."  Section 336.2A-309(1)(d). 
           "Encumbrance."  Section 336.2A-309(1)(e). 
           "Fixtures."  Section 336.2A-309(1)(a). 
           "Fixture filing."  Section 336.2A-309(1)(b). 
           "Purchase money lease."  Section 336.2A-309(1)(c). 
           (3) The following definitions in other articles apply to 
        this article: 
           "Account."  Section 336.9-102(a)(2). 
           "Between merchants."  Section 336.2-104(3). 
           "Buyer."  Section 336.2-103(1)(a). 
           "Chattel paper."  Section 336.9-102(a)(11). 
           "Consumer goods."  Section 336.9-102(a)(23). 
           "Document."  Section 336.9-102(a)(30). 
           "Entrusting."  Section 336.2-403(3). 
           "General intangible."  Section 336.9-102(a)(42). 
           "Good faith."  Section 336.2-103(1)(b). 
           "Instrument."  Section 336.9-102(a)(47). 
           "Merchant."  Section 336.2-104(1). 
           "Mortgage."  Section 336.9-102(a)(55). 
           "Pursuant to commitment."  Section 336.9-102(a)(68). 
           "Receipt."  Section 336.2-103(1)(c). 
           "Sale."  Section 336.2-106(1). 
           "Sale on approval."  Section 336.2-326. 
           "Sale or return."  Section 336.2-326. 
           "Seller."  Section 336.2-103(1)(d). 
           (4) In addition, sections 336.1-101 to 336.1-109 336.1-310 
        contain general definitions and principles of construction and 
        interpretation applicable throughout this article. 
           Sec. 4.  Minnesota Statutes 2002, section 336.2A-501, is 
        amended to read: 
           336.2A-501 [DEFAULT; PROCEDURE.] 
           (1) Whether the lessor or the lessee is in default under a 
        lease contract is determined by the lease agreement and this 
        article. 
           (2) If the lessor or the lessee is in default under the 
        lease contract, the party seeking enforcement has rights and 
        remedies as provided in this article and, except as limited by 
        this article, as provided in the lease agreement. 
           (3) If the lessor or the lessee is in default under the 
        lease contract, the party seeking enforcement may reduce the 
        party's claim to judgment, or otherwise enforce the lease 
        contract by self-help or any available judicial procedure or 
        nonjudicial procedure, including administrative proceeding, 
        arbitration, or the like, in accordance with this article. 
           (4) Except as otherwise provided in 
        section 336.1-106(1) 336.1-305(a) or this article or the lease 
        agreement, the rights and remedies referred to in subsections 
        (2) and (3) are cumulative. 
           (5) If the lease agreement covers both real property and 
        goods, the party seeking enforcement may proceed under this part 
        as to the goods, or under other applicable law as to both the 
        real property and the goods in accordance with that party's 
        rights and remedies in respect of the real property, in which 
        case this part does not apply. 
           Sec. 5.  Minnesota Statutes 2002, section 336.2A-518, is 
        amended to read: 
           336.2A-518 [COVER; SUBSTITUTE GOODS.] 
           (1) After a default by a lessor under the lease contract of 
        the type described in section 336.2A-508(1), or, if agreed, 
        after other default by the lessor, the lessee may cover by 
        making any purchase or lease of or contract to purchase or lease 
        goods in substitution for those due from the lessor. 
           (2) Except as otherwise provided with respect to damages 
        liquidated in the lease agreement (section 336.2A-504) or 
        otherwise determined pursuant to agreement of the parties 
        (sections 336.1-102(3) 336.1-302 and 336.2A-503), if a lessee's 
        cover is by a lease agreement substantially similar to the 
        original lease agreement and the new lease agreement is made in 
        good faith and in a commercially reasonable manner, the lessee 
        may recover from the lessor as damages (i) the present value, as 
        of the date of the commencement of the term of the new lease 
        agreement, of the rent under the new lease agreement applicable 
        to that period of the new lease term which is comparable to the 
        then remaining term of the original lease agreement minus the 
        present value as of the same date of the total rent for the then 
        remaining lease term of the original lease agreement, and (ii) 
        any incidental or consequential damages, less expenses saved in 
        consequence of the lessor's default. 
           (3) If a lessee's cover is by lease agreement that for any 
        reason does not qualify for treatment under subsection (2), or 
        is by purchase or otherwise, the lessee may recover from the 
        lessor as if the lessee had elected not to cover and section 
        336.2A-519 governs. 
           Sec. 6.  Minnesota Statutes 2002, section 336.2A-519, is 
        amended to read: 
           336.2A-519 [LESSEE'S DAMAGES FOR NONDELIVERY, REPUDIATION, 
        DEFAULT, AND BREACH OF WARRANTY IN REGARD TO ACCEPTED GOODS.] 
           (1) Except as otherwise provided with respect to damages 
        liquidated in the lease agreement (section 336.2A-504) or 
        otherwise determined pursuant to agreement of the parties 
        (sections 336.1-102(3) 336.1-302 and 336.2A-503), if a lessee 
        elects not to cover or a lessee elects to cover and the cover is 
        by lease agreement that for any reason does not qualify for 
        treatment under section 336.2A-518(2), or is by purchase or 
        otherwise, the measure of damages for nondelivery or repudiation 
        by the lessor or for rejection or revocation of acceptance by 
        the lessee is the present value, as of the date of the default, 
        of the then market rent minus the present value as of the same 
        date of the original rent, computed for the remaining lease term 
        of the original lease agreement, together with incidental and 
        consequential damages, less expenses saved in consequence of the 
        lessor's default. 
           (2) Market rent is to be determined as of the place for 
        tender or, in cases of rejection after arrival or revocation of 
        acceptance, as of the place of arrival. 
           (3) Except as otherwise agreed, if the lessee has accepted 
        goods and given notification (section 336.2A-516(3)), the 
        measure of damages for nonconforming tender or delivery or other 
        default by a lessor is the loss resulting in the ordinary course 
        of events from the lessor's default as determined in any manner 
        that is reasonable together with incidental and consequential 
        damages, less expenses saved in consequence of the lessor's 
        default. 
           (4) Except as otherwise agreed, the measure of damages for 
        breach of warranty is the present value at the time and place of 
        acceptance of the difference between the value of the use of the 
        goods accepted and the value if they had been as warranted for 
        the lease term, unless special circumstances show proximate 
        damages of a different amount, together with incidental and 
        consequential damages, less expenses saved in consequence of the 
        lessor's default or breach of warranty. 
           Sec. 7.  Minnesota Statutes 2002, section 336.2A-527, is 
        amended to read: 
           336.2A-527 [LESSOR'S RIGHTS TO DISPOSE OF GOODS.] 
           (1) After a default by a lessee under the lease contract of 
        the type described in section 336.2A-523(1) or 336.2A-523(3)(a) 
        or after the lessor refuses to deliver or takes possession of 
        goods (section 336.2A-525 or 336.2A-526), or, if agreed, after 
        other default by a lessee, the lessor may dispose of the goods 
        concerned or the undelivered balance by lease, sale, or 
        otherwise.  
           (2) Except as otherwise provided with respect to damages 
        liquidated in the lease agreement (section 336.2A-504) or 
        otherwise determined pursuant to agreement of the parties 
        (sections 336.1-102(3) 336.1-302 and 336.2A-503), if the 
        disposition is by lease agreement substantially similar to the 
        original lease agreement and the new lease agreement is made in 
        good faith and in a commercially reasonable manner, the lessor 
        may recover from the lessee as damages (i) accrued and unpaid 
        rent as of the date of the start of the term of the new lease 
        agreement, (ii) the present value, as of the same date, of the 
        total rent for the then remaining lease term of the original 
        lease agreement minus the present value, as of the same date, of 
        the rent under the new lease agreement applicable to that period 
        of the new lease term that is comparable to the then remaining 
        term of the original lease agreement, and (iii) any incidental 
        damages allowed under section 336.2A-530, less expenses saved in 
        consequence of the lessee's default. 
           (3) If the lessor's disposition is by lease agreement that 
        for any reason does not qualify for treatment under subsection 
        (2), or is by sale or otherwise, the lessor may recover from the 
        lessee as if the lessor had elected not to dispose of the goods 
        and section 336.2A-528 governs. 
           (4) A subsequent buyer or lessee who buys or leases from 
        the lessor in good faith for value as a result of a disposition 
        under this section takes the goods free of the original lease 
        contract and any rights of the original lessee even though the 
        lessor fails to comply with one or more of the requirements of 
        this article. 
           (5) The lessor is not accountable to the lessee for any 
        profit made on any disposition.  A lessee who has rightfully 
        rejected or justifiably revoked acceptance shall account to the 
        lessor for any excess over the amount of the lessee's security 
        interest (section 336.2A-508(5)). 
           Sec. 8.  Minnesota Statutes 2002, section 336.2A-528, is 
        amended to read: 
           336.2A-528 [LESSOR'S DAMAGES FOR NONACCEPTANCE, FAILURE TO 
        PAY, REPUDIATION, OR OTHER DEFAULT.] 
           (1) Except as otherwise provided with respect to damages 
        liquidated in the lease agreement (section 336.2A-504) or 
        otherwise determined pursuant to agreement of the parties 
        (sections 336.1-102(3) 336.1-302 and 336.2A-503), if a lessor 
        elects to retain the goods or a lessor elects to dispose of the 
        goods and the disposition is by lease agreement that for any 
        reason does not qualify for treatment under section 
        336.2A-527(2), or is by sale or otherwise, the lessor may 
        recover from the lessee as damages for a default of the type 
        described in section 336.2A-523(1) or 336.2A-523(3)(a), or, if 
        agreed, for other default of the lessee, (i) accrued and unpaid 
        rent as of the date of default if the lessee has never taken 
        possession of the goods, or, if the lessee has taken possession 
        of the goods, as of the date the lessor repossesses the goods or 
        an earlier date on which the lessee makes a tender of the goods 
        to the lessor, (ii) the present value as of the date determined 
        under clause (i) of the total rent for the then remaining lease 
        term of the original lease agreement minus the present value as 
        of the same date of the market rent at the place where the goods 
        are located computed for the same lease term, and (iii) any 
        incidental damages allowed under section 336.2A-530, less 
        expenses saved in consequence of the lessee's default. 
           (2) If the measure of damages provided in subsection (1) is 
        inadequate to put a lessor in as good a position as performance 
        would have, the measure of damages is the present value of the 
        profit, including reasonable overhead, the lessor would have 
        made from full performance by the lessee, together with any 
        incidental damages allowed under section 336.2A-530, due 
        allowance for costs reasonably incurred and due credit for 
        payments or proceeds of disposition. 
           Sec. 9.  Minnesota Statutes 2003 Supplement, section 
        336.3-103, is amended to read: 
           336.3-103 [DEFINITIONS.] 
           (a) In this article: 
           (1) "Acceptor" means a drawee who has accepted a draft. 
           (2) "Consumer account" means an account established by an 
        individual primarily for personal, family, or household purposes.
           (3) "Consumer transaction" means a transaction in which an 
        individual incurs an obligation primarily for personal, family, 
        or household purposes. 
           (4) "Drawee" means a person ordered in a draft to make 
        payment. 
           (5) "Drawer" means a person who signs or is identified in a 
        draft as a person ordering payment. 
           (6) "Good faith" means honesty in fact and the observance 
        of reasonable commercial standards of fair dealing. [Reserved.] 
           (7) "Maker" means a person who signs or is identified in a 
        note as a person undertaking to pay. 
           (8) "Order" means a written instruction to pay money signed 
        by the person giving the instruction.  The instruction may be 
        addressed to any person, including the person giving the 
        instruction, or to one or more persons jointly or in the 
        alternative but not in succession.  An authorization to pay is 
        not an order unless the person authorized to pay is also 
        instructed to pay. 
           (9) "Ordinary care" in the case of a person engaged in 
        business means observance of reasonable commercial standards, 
        prevailing in the area in which the person is located, with 
        respect to the business in which the person is engaged.  In the 
        case of a bank that takes an instrument for processing for 
        collection or payment by automated means, reasonable commercial 
        standards do not require the bank to examine the instrument if 
        the failure to examine does not violate the bank's prescribed 
        procedures and the bank's procedures do not vary unreasonably 
        from general banking usage not disapproved by this article or 
        article 4. 
           (10) "Party" means a party to an instrument. 
           (11) "Principal obligor," with respect to an instrument, 
        means the accommodated party or any other party to the 
        instrument against whom a secondary obligor has recourse under 
        this article. 
           (12) "Promise" means a written undertaking to pay money 
        signed by the person undertaking to pay.  An acknowledgment of 
        an obligation by the obligor is not a promise unless the obligor 
        also undertakes to pay the obligation. 
           (13) "Prove" with respect to a fact means to meet the 
        burden of establishing the fact (section 
        336.1-201(8) 336.1-201(b)(8)). 
           (14) "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. 
           (15) "Remitter" means a person who purchases an instrument 
        from its issuer if the instrument is payable to an identified 
        person other than the purchaser. 
           (16) "Remotely-created item" means an item that is not 
        created by the payor bank and does not bear a handwritten or 
        facsimile signature purporting to be the signature of the drawer.
           (17) "Secondary obligor," with respect to an instrument, 
        means (a) an endorser or an accommodation party, (b) a drawer 
        having the obligation described in section 336.3-414(d), or (c) 
        any other party to the instrument that has recourse against 
        another party to the instrument pursuant to section 336.3-116(b).
           (b) Other definitions applying to this article and the 
        sections in which they appear are: 
           "Acceptance," section 336.3-409. 
           "Accommodated party," section 336.3-419. 
           "Accommodation party," section 336.3-419. 
           "Account," section 336.4-104. 
           "Alteration," section 336.3-407. 
           "Anomalous endorsement," section 336.3-205.  
           "Blank endorsement," section 336.3-205.  
           "Cashier's check," section 336.3-104. 
           "Certificate of deposit," section 336.3-104. 
           "Certified check," section 336.3-409.  
           "Check," section 336.3-104. 
           "Consideration," section 336.3-303. 
           "Draft," section 336.3-104. 
           "Endorsement," section 336.3-204.  
           "Endorser," section 336.3-204. 
           "Holder in due course," section 336.3-302. 
           "Incomplete instrument," section 336.3-115. 
           "Instrument," section 336.3-104. 
           "Issue," section 336.3-105. 
           "Issuer," section 336.3-105. 
           "Negotiable instrument," section 336.3-104. 
           "Negotiation," section 336.3-201. 
           "Note," section 336.3-104. 
           "Payable at a definite time," section 336.3-108. 
           "Payable on demand," section 336.3-108. 
           "Payable to bearer," section 336.3-109. 
           "Payable to order," section 336.3-109. 
           "Payment," section 336.3-602. 
           "Person entitled to enforce," section 336.3-301. 
           "Presentment," section 336.3-501. 
           "Reacquisition," section 336.3-207. 
           "Special endorsement," section 336.3-205.  
           "Teller's check," section 336.3-104. 
           "Transfer of instrument," section 336.3-203. 
           "Traveler's check," section 336.3-104. 
           "Value," section 336.3-303. 
           (c) The following definitions in other articles apply to 
        this article: 
           "Bank," section 336.4-105. 
           "Banking day," section 336.4-104. 
           "Clearinghouse," section 336.4-104. 
           "Collecting bank," section 336.4-105. 
           "Depositary bank," section 336.4-105. 
           "Documentary draft," section 336.4-104. 
           "Intermediary bank," section 336.4-105. 
           "Item," section 336.4-104. 
           "Payor bank," section 336.4-105. 
           "Suspends payments," section 336.4-104. 
           (d) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 10.  Minnesota Statutes 2003 Supplement, section 
        336.4-104, is amended to read: 
           336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (a) In this article, 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 that part of any day, excluding 
        Saturday, Sunday, and holidays, on which a bank is open to the 
        public for carrying on substantially all of its banking 
        functions; 
           (4) "Clearinghouse" 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 (section 336.8-102) or instructions for 
        uncertificated securities (section 336.8-102), 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 section 336.3-104 
        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 article 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 clearinghouse 
        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 article and the 
        sections in which they appear are: 
           "Agreement for electronic presentment," section 336.4-110 
           "Bank," section 336.4-105 
           "Collecting bank," section 336.4-105 
           "Depositary bank," section 336.4-105 
           "Intermediary bank," section 336.4-105 
           "Payor bank," section 336.4-105 
           "Presenting bank," section 336.4-105 
           "Presentment notice," section 336.4-110 
           (c) The following definitions in other articles apply to 
        this article: 
           "Acceptance," section 336.3-409 
           "Alteration," section 336.3-407 
           "Cashier's check," section 336.3-104 
           "Certificate of deposit," section 336.3-104 
           "Certified check," section 336.3-409 
           "Check," section 336.3-104 
           "Good faith," section 336.3-103 
           "Holder in due course," section 336.3-302 
           "Instrument," section 336.3-104 
           "Notice of dishonor," section 336.3-503 
           "Order," section 336.3-103 
           "Ordinary care," section 336.3-103 
           "Person entitled to enforce," section 336.3-301 
           "Presentment," section 336.3-501 
           "Promise," section 336.3-103 
           "Prove," section 336.3-103 
           "Record," section 336.3-103 
           "Remotely-created item," section 336.3-103 
           "Teller's check," section 336.3-104 
           "Unauthorized signature," section 336.3-403 
           (d) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 11.  Minnesota Statutes 2002, section 336.4A-105, is 
        amended to read: 
           336.4A-105 [OTHER DEFINITIONS.] 
           (a) In this article: 
           (1) "Authorized account" means a deposit account of a 
        customer in a bank designated by the customer as a source of 
        payment of payment orders issued by the customer to the bank.  
        If a customer does not so designate an account, any account of 
        the customer is an authorized account if payment of a payment 
        order from that account is not inconsistent with a restriction 
        on the use of that account. 
           (2) "Bank" means a person engaged in the business of 
        banking and includes a savings bank, savings association, credit 
        union, and trust company.  A branch or separate office of a bank 
        is a separate bank for purposes of this article. 
           (3) "Customer" means a person, including a bank, having an 
        account with a bank or from whom a bank has agreed to receive 
        payment orders. 
           (4) "Funds-transfer business day" of a receiving bank means 
        the part of a day during which the receiving bank is open for 
        the receipt, processing, and transmittal of payment orders and 
        cancellations and amendments of payment orders. 
           (5) "Funds-transfer system" means a wire transfer network, 
        automated clearinghouse, or other communication system of a 
        clearinghouse or other association of banks through which a 
        payment order by a bank may be transmitted to the bank to which 
        the order is addressed. 
           (6) "Good faith" means honesty in fact and the observance 
        of reasonable commercial standards of fair dealing. [Reserved.] 
           (7) "Prove" with respect to a fact means to meet the burden 
        of establishing the fact (section 336.1-201(8) 336.1-201(b)(8)). 
           (b) Other definitions applying to the article and the 
        sections in which they appear: 
           "Acceptance." Section 336.4A-209. 
           "Beneficiary." Section 336.4A-103. 
           "Beneficiary's bank." Section 336.4A-103. 
           "Executed." Section 336.4A-301. 
           "Execution date." Section 336.4A-301. 
           "Funds transfer." Section 336.4A-104. 
           "Funds-transfer system rule." Section 336.4A-501. 
           "Intermediary bank." Section 336.4A-104. 
           "Originator." Section 336.4A-104. 
           "Originator's bank." Section 336.4A-104. 
           "Payment by beneficiary's bank to beneficiary." Section 
        336.4A-405. 
           "Payment by originator to beneficiary." Section 336.4A-406. 
           "Payment by sender to receiving bank." Section 336.4A-403. 
           "Payment date." Section 336.4A-401. 
           "Payment order." Section 336.4A-103. 
           "Receiving bank." Section 336.4A-103. 
           "Security procedure." Section 336.4A-201. 
           "Sender." Section 336.4A-103. 
           (c) The following definitions in article 4 apply to this 
        article: 
           "Clearinghouse." Section 336.4-104. 
           "Item." Section 336.4-104. 
           "Suspends payments." Section 336.4-104. 
           (d) In addition, sections 336.1-101 to 336.1-209 contain 
        general definitions and principles of construction and 
        interpretation applicable throughout this article. 
           Sec. 12.  Minnesota Statutes 2002, section 336.4A-106, is 
        amended to read: 
           336.4A-106 [TIME PAYMENT ORDER IS RECEIVED.] 
           (a) The time of receipt of a payment order or communication 
        canceling or amending a payment order is determined by the rules 
        applicable to receipt of a notice stated in section 
        336.1-201(27) 336.1-202.  A receiving bank may fix a cut-off 
        time or times on a funds-transfer business day for the receipt 
        and processing of payment orders and communications canceling or 
        amending payment orders.  Different cut-off times may apply to 
        payment orders, cancellations, or amendments, or to different 
        categories of payment orders, cancellations, or amendments.  A 
        cut-off time may apply to senders generally or different cut-off 
        times may apply to different senders or categories of payment 
        orders.  If a payment order or communication canceling or 
        amending a payment order is received after the close of a 
        funds-transfer business day or after the appropriate cut-off 
        time on a funds-transfer business day, the receiving bank may 
        treat the payment order or communication as received at the 
        opening of the next funds-transfer business day. 
           (b) If this article refers to an execution date or payment 
        date or states a day on which a receiving bank is required to 
        take action, and the date or day does not fall on a 
        funds-transfer business day, the next day that is a 
        funds-transfer business day is treated as the date or day 
        stated, unless the contrary is stated in this article. 
           Sec. 13.  Minnesota Statutes 2002, section 336.4A-204, is 
        amended to read: 
           336.4A-204 [REFUND OF PAYMENT AND DUTY OF CUSTOMER TO 
        REPORT WITH RESPECT TO UNAUTHORIZED PAYMENT ORDER.] 
           (a) If a receiving bank accepts a payment order issued in 
        the name of its customer as sender which is (i) not authorized 
        and not effective as the order of the customer under section 
        336.4A-202, or (ii) not enforceable, in whole or in part, 
        against the customer under section 336.4A-203, the bank shall 
        refund any payment of the payment order received from the 
        customer to the extent the bank is not entitled to enforce 
        payment and shall pay interest on the refundable amount 
        calculated from the date the bank received payment to the date 
        of the refund.  However, the customer is not entitled to 
        interest from the bank on the amount to be refunded if the 
        customer fails to exercise ordinary care to determine that the 
        order was not authorized by the customer and to notify the bank 
        of the relevant facts within a reasonable time not exceeding 90 
        days after the date the customer received notification from the 
        bank that the order was accepted or that the customer's account 
        was debited with respect to the order.  The bank is not entitled 
        to any recovery from the customer on account of a failure by the 
        customer to give notification as stated in this section. 
           (b) Reasonable time under subsection (a) may be fixed by 
        agreement as stated in section 336.1-204(1) 336.1-302(b), but 
        the obligation of a receiving bank to refund payment as stated 
        in subsection (a) may not otherwise be varied by agreement. 
           Sec. 14.  Minnesota Statutes 2002, section 336.5-103, is 
        amended to read: 
           336.5-103 [SCOPE.] 
           (a) This article applies to letters of credit and to 
        certain rights and obligations arising out of transactions 
        involving letters of credit. 
           (b) The statement of a rule in this article does not by 
        itself require, imply, or negate application of the same or a 
        different rule to a situation not provided for, or to a person 
        not specified, in this article. 
           (c) With the exception of this subsection, subsections (a) 
        and (d), sections 336.5-102(a)(9) and (10), 336.5-106(d), and 
        336.5-114(d), and except to the extent prohibited in sections 
        336.1-102(3) 336.1-302 and 336.5-117(d), the effect of this 
        article may be varied by agreement or by a provision stated or 
        incorporated by reference in an undertaking.  A term in an 
        agreement or undertaking generally excusing liability or 
        generally limiting remedies for failure to perform obligations 
        is not sufficient to vary obligations prescribed by this article.
           (d) Rights and obligations of an issuer to a beneficiary or 
        a nominated person under a letter of credit are independent of 
        the existence, performance, or nonperformance of a contract or 
        arrangement out of which the letter of credit arises or which 
        underlies it, including contracts or arrangements between the 
        issuer and the applicant and between the applicant and the 
        beneficiary. 
           Sec. 15.  Minnesota Statutes 2002, section 336.8-102, is 
        amended to read: 
           336.8-102 [DEFINITIONS.] 
           (a) In this article: 
           (1) "Adverse claim" means a claim that a claimant has a 
        property interest in a financial asset and that it is a 
        violation of the rights of the claimant for another person to 
        hold, transfer, or deal with the financial asset. 
           (2) "Bearer form," as applied to a certificated security, 
        means a form in which the security is payable to the bearer of 
        the security certificate according to its terms but not by 
        reason of an endorsement. 
           (3) "Broker" means a person defined as a broker or dealer 
        under the federal securities laws, but without excluding a bank 
        acting in that capacity. 
           (4) "Certificated security" means a security that is 
        represented by a certificate. 
           (5) "Clearing corporation" means: 
           (i) a person that is registered as a "clearing agency" 
        under the federal securities laws; 
           (ii) a federal reserve bank; or 
           (iii) any other person that provides clearance or 
        settlement services with respect to financial assets that would 
        require it to register as a clearing agency under the federal 
        securities laws but for an exclusion or exemption from the 
        registration requirement, if its activities as a clearing 
        corporation, including promulgation of rules, are subject to 
        regulation by a federal or state governmental authority. 
           (6) "Communicate" means to: 
           (i) send a signed writing; or 
           (ii) transmit information by any mechanism agreed upon by 
        the persons transmitting and receiving the information. 
           (7) "Entitlement holder" means a person identified in the 
        records of a securities intermediary as the person having a 
        security entitlement against the securities intermediary.  If a 
        person acquires a security entitlement by virtue of section 
        336.8-501(b)(2) or (3), that person is the entitlement holder. 
           (8) "Entitlement order" means a notification communicated 
        to a securities intermediary directing transfer or redemption of 
        a financial asset to which the entitlement holder has a security 
        entitlement. 
           (9) "Financial asset," except as otherwise provided in 
        section 336.8-103, means: 
           (i) a security; 
           (ii) an obligation of a person or a share, participation, 
        or other interest in a person or in property or an enterprise of 
        a person, which is, or is of a type, dealt in or traded on 
        financial markets, or which is recognized in any area in which 
        it is issued or dealt in as a medium for investment; or 
           (iii) any property that is held by a securities 
        intermediary for another person in a securities account if the 
        securities intermediary has expressly agreed with the other 
        person that the property is to be treated as a financial asset 
        under this article.  
        As context requires, the term means either the interest itself 
        or the means by which a person's claim to it is evidenced, 
        including a certificated or uncertificated security, a security 
        certificate, or a security entitlement. 
           (10) "Good faith," for purposes of the obligation of good 
        faith in the performance or enforcement of contracts or duties 
        within this article, means honesty in fact and the observance of 
        reasonable commercial standards of fair dealing. [Reserved.] 
           (11) "Endorsement" means a signature that alone or 
        accompanied by other words is made on a security certificate in 
        registered form or on a separate document for the purpose of 
        assigning, transferring, or redeeming the security or granting a 
        power to assign, transfer, or redeem it. 
           (12) "Instruction" means a notification communicated to the 
        issuer of an uncertificated security which directs that the 
        transfer of the security be registered or that the security be 
        redeemed. 
           (13) "Registered form," as applied to a certificated 
        security, means a form in which: 
           (i) the security certificate specifies a person entitled to 
        the security; and 
           (ii) a transfer of the security may be registered upon 
        books maintained for that purpose by or on behalf of the issuer, 
        or the security certificate so states. 
           (14) "Securities intermediary" means: 
           (i) a clearing corporation; or 
           (ii) a person, including a bank or broker, that in the 
        ordinary course of its business maintains securities accounts 
        for others and is acting in that capacity. 
           (15) "Security," except as otherwise provided in section 
        336.8-103, means an obligation of an issuer or a share, 
        participation, or other interest in an issuer or in property or 
        an enterprise of an issuer: 
           (i) which is represented by a security certificate in 
        bearer or registered form, or the transfer of which may be 
        registered upon books maintained for that purpose by or on 
        behalf of the issuer; 
           (ii) which is one of a class or series or by its terms is 
        divisible into a class or series of shares, participations, 
        interests, or obligations; and 
           (iii) which: 
           (A) is, or is of a type, dealt in or traded on securities 
        exchanges or securities markets; or 
           (B) is a medium for investment and by its terms expressly 
        provides that it is a security governed by this article. 
           (16) "Security certificate" means a certificate 
        representing a security. 
           (17) "Security entitlement" means the rights and property 
        interest of an entitlement holder with respect to a financial 
        asset specified in part 5. 
           (18) "Uncertificated security" means a security that is not 
        represented by a certificate. 
           (b) Other definitions applying to this article and the 
        sections in which they appear are: 
           "Appropriate person," section 336.8-107 
           "Control," section 336.8-106 
           "Delivery," section 336.8-301 
           "Investment company security," section 336.8-103 
           "Issuer," section 336.8-201 
           "Overissue," section 336.8-210 
           "Protected purchaser," section 336.8-303 
           "Securities account," section 336.8-501 
           (c) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           (d) The characterization of a person, business, or 
        transaction for purposes of this article does not determine the 
        characterization of the person, business, or transaction for 
        purposes of any other law, regulation, or rule. 
           Sec. 16.  Minnesota Statutes 2002, section 336.9-102, is 
        amended to read: 
           336.9-102 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (a)  [DEFINITIONS.] In this article: 
           (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.  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, other than a 
        security 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. 
           (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. 
           (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. 
           (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 law; 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 section 336.7-201(2). 
           (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 section 336.9-519(a). 
           (37) "Filing office" means an office designated in section 
        336.9-501 as the place to file a financing statement. 
           (38) "Filing office rule" means a rule adopted pursuant to 
        Laws 2000, chapter 399, article 1, section 139. 
           (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 section 336.9-502(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. [Reserved.] 
           (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 the 
        program is associated with the goods in such a manner that it 
        customarily is considered part of the goods, or 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. 
           (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 endorsement 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 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) Unless a certificate has been issued, "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 United States 
        Code, title 42.  
           A manufactured home within the meaning of this section does 
        not include a manufactured home for which a certificate of title 
        as defined in section 336.9-102(a)(10) has been issued.  
           (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.  Mortgage includes an executory 
        contract for the sale of real property or of an interest in real 
        property that entitles the purchaser to possession of the real 
        property. 
           (56) "New debtor" means a person that becomes bound as 
        debtor under section 336.9-203(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 section 
        336.9-310(c), means a person that, as debtor, entered into a 
        security agreement to which a new debtor has become bound under 
        section 336.9-203(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 section 336.9-609(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 sections 336.9-620, 
        336.9-621, and 336.9-622. 
           (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. 
           (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 
        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. 
           (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 
        section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5), 
        336.4-210, or 336.5-118. 
           (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, 
        electromagnetically, or by light; 
           (C) transmitting goods by pipeline or sewer; or 
           (D) transmitting or producing and transmitting electricity, 
        steam, gas, or water. 
           A person filing a financing statement under this article 
        and under the authority of sections 300.111 to 300.115 is a 
        transmitting utility for purposes of this article. 
           (b)  [DEFINITIONS IN OTHER ARTICLES.] The following 
        definitions in other articles apply to this article: 
             "Applicant"                    Section 336.5-102
             "Beneficiary"                  Section 336.5-102
             "Broker"                       Section 336.8-102
             "Certificated security"        Section 336.8-102
             "Check"                        Section 336.3-104
             "Clearing corporation"         Section 336.8-102
             "Contract for sale"            Section 336.2-106
             "Customer"                     Section 336.4-104
             "Entitlement holder"           Section 336.8-102
             "Financial asset"              Section 336.8-102
             "Holder in due course"         Section 336.3-302
             "Issuer" (with respect to a    
              letter of credit or
              letter of credit right)       Section 336.5-102
             "Issuer" (with respect to
              a security)                   Section 336.8-201
             "Lease"                        Section 336.2A-103
             "Lease agreement"              Section 336.2A-103
             "Lease contract"               Section 336.2A-103
             "Leasehold interest"           Section 336.2A-103
             "Lessee"                       Section 336.2A-103
             "Lessee in ordinary course
              of business"                  Section 336.2A-103
             "Lessor"                       Section 336.2A-103
             "Lessor's residual interest"   Section 336.2A-103
             "Letter of credit"             Section 336.5-102
             "Merchant"                     Section 336.2-104
             "Negotiable instrument"        Section 336.3-104
             "Nominated person"             Section 336.5-102
             "Note"                         Section 336.3-104
             "Proceeds of a letter of
              credit"                       Section 336.5-114
             "Prove"                        Section 336.3-103
             "Sale"                         Section 336.2-106
             "Securities account"           Section 336.8-501
             "Securities intermediary"      Section 336.8-102
             "Security"                     Section 336.8-102
             "Security certificate"         Section 336.8-102
             "Security entitlement"         Section 336.8-102
             "Uncertificated security"      Section 336.8-102
           (c)  [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1 
        contains general definitions and principles of construction and 
        interpretation applicable throughout this article. 
           Sec. 17.  [REPEALER.] 
           Minnesota Statutes 2002, sections 336.2-208; and 
        336.2A-207, are repealed. 

                                   ARTICLE 3
                         GENERAL CONFORMING AMENDMENTS
           Section 1.  Minnesota Statutes 2002, section 17.94, is 
        amended to read: 
           17.94 [IMPLIED PROMISE OF GOOD FAITH.] 
           There is an implied promise of good faith as defined in 
        section 336.1-201, subsection (19)(b)(20), by all parties in all 
        agricultural contracts.  In an action to recover damages, if the 
        court finds that there has been a violation of this provision, 
        damages, court costs, and attorney fees may be recovered.  
           Sec. 2.  Minnesota Statutes 2002, section 84.787, 
        subdivision 9, is amended to read: 
           Subd. 9.  [PERSON.] "Person" has the meaning given it in 
        section 336.1-201, subsection (30)(b)(27). 
           Sec. 3.  Minnesota Statutes 2002, section 84.797, 
        subdivision 10, is amended to read: 
           Subd. 10.  [PERSON.] "Person" has the meaning given in 
        section 336.1-201, paragraph (30)(b)(27). 
           Sec. 4.  Minnesota Statutes 2002, section 84.92, 
        subdivision 6, is amended to read: 
           Subd. 6.  [PERSON.] "Person" means an individual or an 
        organization as defined in section 336.1-201, paragraph 
        (30)(b)(27).  
           Sec. 5.  Minnesota Statutes 2002, section 86B.820, 
        subdivision 12, is amended to read: 
           Subd. 12.  [SECURITY INTEREST.] "Security interest" has the 
        meaning given it in section 336.1-201, subsection (37)(b)(35), 
        and includes statutory liens for which lien statements are filed.
           Sec. 6.  Minnesota Statutes 2002, section 168A.01, 
        subdivision 20, is amended to read: 
           Subd. 20.  [SECURITY INTEREST.] "Security interest" means a 
        security interest as defined in section 336.1-201(37)(b)(35).  A 
        security interest is "perfected" when it is valid against third 
        parties generally, subject only to specific statutory exception. 
           Sec. 7.  Minnesota Statutes 2002, section 234.27, is 
        amended to read: 
           234.27 [UNIFORM COMMERCIAL CODE TO APPLY.] 
           The provisions of article 7 of the Uniform Commercial Code 
        relative to the negotiation, transfer, sale, or endorsement of 
        warehouse receipts, apply, to the extent possible, to the 
        negotiation, transfer, sale, or endorsement of certificates 
        under this chapter.  
           For the purpose of application of the Uniform Commercial 
        Code:  
           (a) A certificate authorized by the department which 
        evidences the storing of grain under this chapter is a document 
        of title as defined in section 336.1-201, clause (15)(b)(16).  
           (b) A person who has title to and possession of grain 
        stored under this chapter is a warehouse operator as defined in 
        section 336.7-102, clause (1)(h). 
           Sec. 8.  Minnesota Statutes 2002, section 325L.03, is 
        amended to read: 
           325L.03 [SCOPE.] 
           (a) Except as otherwise provided in paragraphs (b) and (e), 
        this chapter applies to electronic records and electronic 
        signatures relating to a transaction. 
           (b) This chapter does not apply to a transaction to the 
        extent it is governed by: 
           (1) the Uniform Commercial Code other than sections 
        336.1-107 and 336.1-206 section 336.1-306, Article 2, and 
        Article 2A; and 
           (2) section 145C.03, subdivision 1, relating to 
        requirements for creation of a health care directive; section 
        507.24, relating to requirements for recording any conveyance, 
        power of attorney, or other instrument affecting real estate; 
        section 523.23, subdivision 3, relating to requirements for 
        creation of a statutory short form power of attorney; and 
        section 253B.03, subdivision 6b, relating to requirements for 
        creation of a declaration of preferences or instructions 
        regarding intrusive mental health treatment. 
           (c) This chapter applies to an electronic record or 
        electronic signature otherwise excluded from the application of 
        this chapter under paragraph (b) to the extent it is governed by 
        a law other than those specified in paragraph (b). 
           (d) A transaction subject to this chapter is also subject 
        to other applicable substantive law. 
           (e) This chapter does not apply to the creation and 
        execution of wills, codicils, or trusts other than trusts 
        relating to the conduct of business, commercial, or governmental 
        purposes. 
           Sec. 9.  Minnesota Statutes 2002, section 325L.16, is 
        amended to read: 
           325L.16 [TRANSFERABLE RECORD.] 
           (a) In this section, "transferable record" means an 
        electronic record that: 
           (1) would be a note under Article 3 of the Uniform 
        Commercial Code or a document under Article 7 of the Uniform 
        Commercial Code if the electronic record were in writing; and 
           (2) the issuer of the electronic record expressly has 
        agreed is a transferable record. 
           (b) A person has control of a transferable record if a 
        system employed for evidencing the transfer of interests in the 
        transferable record reliably establishes that person as the 
        person to which the transferable record was issued or 
        transferred. 
           (c) A system satisfies paragraph (b), and a person is 
        deemed to have control of a transferable record, if the 
        transferable record is created, stored, and assigned in such a 
        manner that: 
           (1) a single authoritative copy of the transferable record 
        exists which is unique, identifiable, and, except as otherwise 
        provided in clauses (4), (5), and (6), unalterable; 
           (2) the authoritative copy identifies the person asserting 
        control as: 
           (i) the person to which the transferable record was issued; 
        or 
           (ii) if the authoritative copy indicates that the 
        transferable record has been transferred, the person to which 
        the transferable record 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 revisions 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 revision of the authoritative copy is readily 
        identifiable as authorized or unauthorized. 
           (d) Except as otherwise agreed, a person having control of 
        a transferable record is the holder, as defined in section 
        336.1-201(20)(b)(21) of the Uniform Commercial Code, of the 
        transferable record and has the same rights and defenses as a 
        holder of an equivalent record or writing under the Uniform 
        Commercial Code, including, if the applicable statutory 
        requirements under section 336.3-302(a), 336.7-501, or 336.9-330 
        of the Uniform Commercial Code are satisfied, the rights and 
        defenses of a holder in due course, a holder to which a 
        negotiable document of title has been duly negotiated, or a 
        purchaser, respectively.  Delivery, possession, and endorsement 
        are not required to obtain or exercise any of the rights under 
        this paragraph. 
           (e) Except as otherwise agreed, an obligor under a 
        transferable record has the same rights and defenses as an 
        equivalent obligor under equivalent records or writings under 
        the Uniform Commercial Code. 
           (f) If requested by a person against which enforcement is 
        sought, the person seeking to enforce the transferable record 
        shall provide reasonable proof that the person is in control of 
        the transferable record.  Proof may include access to the 
        authoritative copy of the transferable record and related 
        business records sufficient to review the terms of the 
        transferable record and to establish the identity of the person 
        having control of the transferable record. 
           Sec. 10.  Minnesota Statutes 2002, section 513.33, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] For the purposes of this 
        section, the following terms have the meanings given them:  
           (1) "credit agreement" means an agreement to lend or 
        forbear repayment of money, goods, or things in action, to 
        otherwise extend credit, or to make any other financial 
        accommodation; 
           (2) "creditor" means a person who extends credit under a 
        credit agreement with a debtor; 
           (3) "debtor" means a person who obtains credit or seeks a 
        credit agreement with a creditor or who owes money to a 
        creditor; and 
           (4) "signed" has the meaning specified in section 
        336.1-201(39)(b)(37). 
           Sec. 11.  Minnesota Statutes 2002, section 514.963, 
        subdivision 9, is amended to read: 
           Subd. 9.  [PERSON.] "Person" means an individual or an 
        organization as defined in section 336.1-201(30)(b)(27). 
           Sec. 12.  Minnesota Statutes 2002, section 514.965, 
        subdivision 10, is amended to read: 
           Subd. 10.  [PERSON.] "Person" means an individual or an 
        organization as defined in section 336.1-201(30)(b)(27). 

                                   ARTICLE 4
                            UNIFORM COMMERCIAL CODE 
                         ARTICLE 7 - DOCUMENTS OF TITLE 
                                     PART 1 
                                    GENERAL 
           Section 1.  [336.7-101] [SHORT TITLE.] 
           This article may be cited as Uniform Commercial Code - 
        Documents of Title. 
           Sec. 2.  [336.7-102] [DEFINITIONS AND INDEX OF 
        DEFINITIONS.] 
           (a) In this article, 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 articles applying to this article 
        and the sections in which they appear are: 
           (1) "Contract for sale," section 336.2-106. 
           (2) "Lessee in the ordinary course of business," section 
        336.2A-103. 
           (3) "Receipt" of goods, section 336.2-103. 
           (c) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 3.  [336.7-103] [RELATION OF ARTICLE TO TREATY OR 
        STATUTE.] 
           (a) This article 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 article 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 article.  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 act modifies, limits, and supersedes the federal 
        Electronic Signatures in Global and National Commerce Act (15 
        U.S.C. section 7001, et seq.) but does not modify, limit, or 
        supersede section 101(c) of that act (15 U.S.C. section 7001(c)) 
        or authorize electronic delivery of any of the notices described 
        in section 103(b) of that act (15 U.S.C. section 7003(b)). 
           (d) To the extent there is a conflict between chapter 325L 
        and this article, this article governs. 
           Sec. 4.  [336.7-104] [NEGOTIABLE AND NONNEGOTIABLE DOCUMENT 
        OF TITLE.] 
           (a) Except as otherwise provided in subsection (c), a 
        document of title is negotiable if by its terms the goods are to 
        be delivered to bearer or to the order of a named person. 
           (b) A document of title other than one described in 
        subsection (a) 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. 
           Sec. 5.  [336.7-105] [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): 
           (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): 
           (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. 
           Sec. 6.  [336.7-106] [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), 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 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. 
                                     PART 2 
                              WAREHOUSE RECEIPTS: 
                               SPECIAL PROVISIONS 
           Sec. 7.  [336.7-201] [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. 
           Sec. 8.  [336.7-202] [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 section 336.7-403 or its 
        duty of care under section 336.7-204.  Any contrary provision is 
        ineffective. 
           Sec. 9.  [336.7-203] [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: 
           (1) 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 
           (2) the party or purchaser otherwise has notice of the 
        nonreceipt or misdescription. 
           Sec. 10.  [336.7-204] [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. 
           Sec. 11.  [336.7-205] [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. 
           Sec. 12.  [336.7-206] [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 section 336.7-210. 
           (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 period provided in subsection (a) 
        and section 336.7-210, the warehouse may specify in the notice 
        given under subsection (a) 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 article 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. 
           Sec. 13.  [336.7-207] [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. 
           Sec. 14.  [336.7-208] [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. 
           Sec. 15.  [336.7-209] [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), such as for money advanced and interest.  The security 
        interest is governed by article 9. 
           (c) A warehouse's lien for charges and expenses under 
        subsection (a) or a security interest under subsection (b) 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 section 336.7-403; or 
           (C) power of disposition under sections 336.2-403, 
        336.2A-304(2), 336.2A-305(2), 336.9-320, or 336.9-321(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) 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. 
           Sec. 16.  [336.7-210] [ENFORCEMENT OF WAREHOUSE'S LIEN.] 
           (a) Except as otherwise provided in subsection (b), 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 must 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 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 
        must be notified. 
           (2) The notification must 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 must be published 
        once a week for two weeks consecutively in a newspaper of 
        general circulation where the sale is to be held.  The 
        advertisement must 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 must 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 must 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 must be retained by the warehouse subject to the 
        terms of the receipt and this article. 
           (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). 
           (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. 
                                     PART 3 
                      BILLS OF LADING: SPECIAL PROVISIONS 
           Sec. 17.  [336.7-301] [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. 
           Sec. 18.  [336.7-302] [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) 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. 
           Sec. 19.  [336.7-303] [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) 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. 
           Sec. 20.  [336.7-304] [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 Part 4 
        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. 
           Sec. 21.  [336.7-305] [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 section 
        336.7-105, may procure a substitute bill to be issued at any 
        place designated in the request. 
           Sec. 22.  [336.7-306] [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. 
           Sec. 23.  [336.7-307] [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) 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) 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. 
           Sec. 24.  [336.7-308] [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 must 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 article. 
           (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) or the procedure set forth in section 
        336.7-210(b). 
           (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. 
           Sec. 25.  [336.7-309] [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. 
                                     PART 4 
                    WAREHOUSE RECEIPTS AND BILLS OF LADING:
                              GENERAL OBLIGATIONS 
           Sec. 26.  [336.7-401] [IRREGULARITIES IN ISSUE OF RECEIPT 
        OR BILL OR CONDUCT OF ISSUER.] 
           The obligations imposed by this article on an issuer apply 
        to a document of title even if: 
           (1) the document does not comply with the requirements of 
        this article or of any other statute, rule, or regulation 
        regarding its issuance, form, or content; 
           (2) the issuer violated laws regulating the conduct of its 
        business; 
           (3) the goods covered by the document were owned by the 
        bailee when the document was issued; or 
           (4) the person issuing the document is not a warehouse but 
        the document purports to be a warehouse receipt. 
           Sec. 27.  [336.7-402] [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 section 336.7-105.  The issuer is 
        liable for damages caused by its overissue or failure to 
        identify a duplicate document by a conspicuous notation. 
           Sec. 28.  [336.7-403] [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), 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 section 336.2-705 or by a lessor of its right to 
        stop delivery pursuant to section 336.2A-526; 
           (5) a diversion, reconsignment, or other disposition 
        pursuant to section 336.7-303; 
           (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 
        section 336.7-503(a): 
           (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. 
           Sec. 29.  [336.7-404] [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 article is not 
        liable for the goods even if: 
           (1) the person from which the bailee received the goods did 
        not have authority to procure the document or to dispose of the 
        goods; or 
           (2) the person to which the bailee delivered the goods did 
        not have authority to receive the goods. 
                                     PART 5 
                    WAREHOUSE RECEIPTS AND BILLS OF LADING: 
                            NEGOTIATION AND TRANSFER 
           Sec. 30.  [336.7-501] [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 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 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. 
           Sec. 31.  [336.7-502] [RIGHTS ACQUIRED BY DUE NEGOTIATION.] 
           (a) Subject to sections 336.7-205 and 336.7-503, 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 article, 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 section 336.7-503, 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. 
           Sec. 32.  [336.7-503] [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 section 336.7-403; or 
           (C) power of disposition under section 336.2-403, 
        336.2A-304(2), 336.2A-305(2), 336.9-320, or 336.9-321(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 section 
        336.7-504 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 
        Part 4 pursuant to its own bill of lading discharges the 
        carrier's obligation to deliver. 
           Sec. 33.  [336.7-504] [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 section 336.2-402 or 336.2A-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 section 
        336.2-705 or a lessor under section 336.2A-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. 
           Sec. 34.  [336.7-505] [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. 
           Sec. 35.  [336.7-506] [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. 
           Sec. 36.  [336.7-507] [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 section 
        336.7-508, 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. 
           Sec. 37.  [336.7-508] [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. 
           Sec. 38.  [336.7-509] [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 article 2, 2A, 
        or 5. 
                                     PART 6
                    WAREHOUSE RECEIPTS AND BILLS OF LADING:
                            MISCELLANEOUS PROVISIONS 
           Sec. 39.  [336.7-601] [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. 
           Sec. 40.  [336.7-602] [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. 
           Sec. 41.  [336.7-603] [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. 
                                     PART 7 
                            MISCELLANEOUS PROVISIONS 
           Sec. 42.  [EFFECTIVE DATE.] 
           This act takes effect on August 1, 2004. 
           Sec. 43.  [REPEALER.] 
           Minnesota Statutes 2002, sections 336.7-101, 336.7-102, 
        336.7-103, 336.7-104, 336.7-105, 336.7-201, 336.7-202, 
        336.7-203, 336.7-204, 336.7-205, 336.7-206, 336.7-207, 
        336.7-208, 336.7-209, 336.7-210, 336.7-301, 336.7-302, 
        336.7-303, 336.7-304, 336.7-305, 336.7-306, 336.7-307, 
        336.7-308, 336.7-309, 336.7-401, 336.7-402, 336.7-403, 
        336.7-404, 336.7-501, 336.7-502, 336.7-503, 336.7-504, 
        336.7-505, 336.7-506, 336.7-507, 336.7-508, 336.7-509, 
        336.7-601, 336.7-602, 336.7-603, and 336.10-104, are repealed. 
           Sec. 44.  [336.7-703] [APPLICABILITY.] 
           This act applies to a document of title that is issued or a 
        bailment that arises on or after the effective date of this 
        act.  This act does not apply to a document of title that is 
        issued or a bailment that arises before the effective date of 
        this act even if the document of title or bailment would be 
        subject to this act if the document of title had been issued or 
        bailment had arisen on or after the effective date of this act.  
        This act does not apply to a right of action that has accrued 
        before the effective date of this act. 
           Sec. 45.  [336.7-704] [SAVINGS CLAUSE.] 
           A document of title issued or a bailment that arises before 
        the effective date of this act and the rights, obligations, and 
        interests flowing from that document or bailment are governed by 
        any statute or other rule amended or repealed by this act as if 
        amendment or repeal had not occurred and may be terminated, 
        completed, consummated, or enforced under that statute or other 
        rule. 

                                   ARTICLE 5 
                            UNIFORM COMMERCIAL CODE
                               CONFORMING CHANGES
           Section 1.  Minnesota Statutes 2002, section 336.2-103, is 
        amended to read: 
           336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (1) In this article 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 article or to 
        specified parts thereof, and the sections in which they appear 
        are: 
           "Acceptance," section 336.2-606. 
           "Banker's credit," section 336.2-325. 
           "Between merchants," section 336.2-104. 
           "Cancellation," section 336.2-106(4). 
           "Commercial unit," section 336.2-105. 
           "Confirmed credit," section 336.2-325. 
           "Conforming to contract," section 336.2-106. 
           "Contract for sale," section 336.2-106. 
           "Cover," section 336.2-712. 
           "Entrusting," section 336.2-403. 
           "Financing agency," section 336.2-104. 
           "Future goods," section 336.2-105. 
           "Goods," section 336.2-105. 
           "Identification," section 336.2-501. 
           "Installment contract," section 336.2-612. 
           "Letter of credit," section 336.2-325. 
           "Lot," section 336.2-105. 
           "Merchant," section 336.2-104. 
           "Overseas," section 336.2-323. 
           "Person in position of seller," section 336.2-707. 
           "Present sale," section 336.2-106. 
           "Sale," section 336.2-106. 
           "Sale on approval," section 336.2-326. 
           "Sale or return," section 336.2-326. 
           "Termination," section 336.2-106. 
           (3) "Control" as provided in section 336.7-106 and the 
        following definitions in other articles apply to this article: 
           "Check," section 336.3-104. 
           "Consignee," section 336.7-102. 
           "Consignor," section 336.7-102. 
           "Consumer goods," section 336.9-102. 
           "Dishonor," section 336.3-502. 
           "Draft," section 336.3-104. 
           (4) In addition article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 2.  Minnesota Statutes 2002, section 336.2-104, is 
        amended to read: 
           336.2-104 [DEFINITIONS:  "MERCHANT"; "BETWEEN MERCHANTS"; 
        "FINANCING AGENCY".] 
           (1) "Merchant" means a person who deals in goods of the 
        kind or otherwise by occupation holds 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 employment of an agent or broker or other intermediary who by 
        occupation holds 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 (section 336.2-707). 
           (3) "Between merchants" means in any transaction with 
        respect to which both parties are chargeable with the knowledge 
        or skill of merchants.  
           Sec. 3.  Minnesota Statutes 2002, section 336.2-310, is 
        amended to read: 
           336.2-310 [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 the 
        seller 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 (section 336.2-513); 
        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 postdating the invoice or delaying its dispatch will 
        correspondingly delay the starting of the credit period.  
           Sec. 4.  Minnesota Statutes 2002, section 336.2-323, is 
        amended to read: 
           336.2-323 [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) Wherein 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 article on cure of improper delivery 
        (subsection (1) of section 336.2-508); 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.  
           Sec. 5.  Minnesota Statutes 2002, section 336.2-401, is 
        amended to read: 
           336.2-401 [PASSING OF TITLE; RESERVATION FOR SECURITY; 
        LIMITED APPLICATION OF THIS SECTION.] 
           Each provision of this article 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 
        article 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 (section 
        336.2-501), and unless otherwise explicitly agreed the buyer 
        acquires by their identification a special property as limited 
        by this chapter.  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 article 
        on secured transactions (article 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 
        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 the seller 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 the 
        seller 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 of title 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."  
           Sec. 6.  Minnesota Statutes 2002, section 336.2-503, is 
        amended to read: 
           336.2-503 [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 the buyer 
        to take delivery.  The manner, time and place for tender are 
        determined by the agreement and this article, 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 the seller 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 nonnegotiable document of 
        title or of a written direction record directing to the bailee 
        to deliver is sufficient tender unless the buyer seasonably 
        objects, and except as otherwise provided in Article 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 
        nonnegotiable 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)  the seller must tender all such documents in correct 
        form, except as provided in this article with respect to bills 
        of lading in a set (subsection (2) of section 336.2-323); and 
           (b) tender through customary banking channels is sufficient 
        and dishonor of a draft accompanying or associated with the 
        documents constitutes nonacceptance or rejection.  
           Sec. 7.  Minnesota Statutes 2002, section 336.2-505, is 
        amended to read: 
           336.2-505 [SELLER'S SHIPMENT UNDER RESERVATION.] 
           (1) Where the seller has identified goods to the contract 
        by or before shipment: 
           (a)  The seller's procurement of a negotiable bill of 
        lading to the seller's own order or otherwise reserves in the 
        seller a security interest in the goods.  The seller's 
        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 nonnegotiable bill of lading to the seller or the 
        seller's nominee reserves possession of the goods as security 
        but except in a case of conditional delivery (subsection (2) of 
        section 336.2-507) a nonnegotiable bill of lading naming the 
        buyer as a 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.  
           Sec. 8.  Minnesota Statutes 2002, section 336.2-506, is 
        amended to read: 
           336.2-506 [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.  
           Sec. 9.  Minnesota Statutes 2002, section 336.2-509, is 
        amended to read: 
           336.2-509 [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 the seller 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 (section 336.2-505); but 
           (b) if it does require the seller 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 the buyer's receipt of possession or control of a 
        negotiable document of title covering the goods; or 
           (b) on acknowledgment by the bailee of the buyer's right to 
        possession of the goods; or 
           (c) after the buyer's receipt of possession or control of a 
        nonnegotiable document of title or other written direction to 
        deliver in a record, as provided in subsection (4) (b) of 
        section 336.2-503. 
           (3) In any case not within subsection (1) or (2), the risk 
        of loss passes to the buyer on 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 article 
        on sale on approval (section 336.2-327) and on effect of breach 
        on risk of loss (section 336.2-510).  
           Sec. 10.  Minnesota Statutes 2002, section 336.2-605, is 
        amended to read: 
           336.2-605 [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 the buyer 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.  
           Sec. 11.  Minnesota Statutes 2002, section 336.2-705, is 
        amended to read: 
           336.2-705 [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 on discovering the buyer to be 
        insolvent (section 336.2-702) 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 a warehouse operator; 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 nonnegotiable bill of lading 
        is not obliged to obey a notification to stop received from a 
        person other than the consignor.  
           Sec. 12.  Minnesota Statutes 2002, section 336.2A-103, is 
        amended to read: 
           336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (1) In this article 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 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 preexisting 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 a unit of goods that 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 an individual and who takes under the lease primarily for 
        a personal, family, or household purpose, if the total payments 
        to be made under the lease contract, excluding payments for 
        options to renew or buy, do not exceed $25,000. 
           (f) "Fault" means wrongful act, omission, breach, or 
        default. 
           (g) "Finance lease" means a lease in which 
           (1) the lessor does not select, manufacture, or supply the 
        goods, 
           (2) the lessor acquires the goods or the right to 
        possession and use of the goods in connection with the lease, 
        and 
           (3) either 
           (i) the lessee receives a copy of the contract evidencing 
        the lessor's purchase of the goods or a disclaimer statement on 
        or before signing the lease contract, or 
           (ii) the lessee's approval of the contract evidencing the 
        lessor's purchase of the goods or a disclaimer statement is a 
        condition to effectiveness of the lease contract.  
           "Disclaimer statement" means a written statement that is 
        part of or separate from the lease contract that discloses all 
        warranties and other rights provided to the lessee by the lessor 
        and supplier in connection with the lease contract and informs 
        the lessee in a conspicuous manner that there are no warranties 
        or other rights provided to the lessee by the lessor and 
        supplier other than those disclosed in the statement. 
           (h) "Goods" means all things that are movable at the time 
        of identification to the lease contract, or are fixtures 
        (section 336.2A-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 article.  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 article 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 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 preexisting 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 article and the 
        sections in which they appear are: 
           "Accessions."  Section 336.2A-310(1). 
           "Construction mortgage."  Section 336.2A-309(1)(d). 
           "Encumbrance."  Section 336.2A-309(1)(e). 
           "Fixtures."  Section 336.2A-309(1)(a). 
           "Fixture filing."  Section 336.2A-309(1)(b). 
           "Purchase money lease."  Section 336.2A-309(1)(c). 
           (3) The following definitions in other articles apply to 
        this article: 
           "Account."  Section 336.9-102(a)(2). 
           "Between merchants."  Section 336.2-104(3). 
           "Buyer."  Section 336.2-103(1)(a). 
           "Chattel paper."  Section 336.9-102(a)(11). 
           "Consumer goods."  Section 336.9-102(a)(23). 
           "Document."  Section 336.9-102(a)(30). 
           "Entrusting."  Section 336.2-403(3). 
           "General intangible."  Section 336.9-102(a)(42). 
           "Good faith."  Section 336.2-103(1)(b). 
           "Instrument."  Section 336.9-102(a)(47). 
           "Merchant."  Section 336.2-104(1). 
           "Mortgage."  Section 336.9-102(a)(55). 
           "Pursuant to commitment."  Section 336.9-102(a)(68). 
           "Receipt."  Section 336.2-103(1)(c). 
           "Sale."  Section 336.2-106(1). 
           "Sale on approval."  Section 336.2-326. 
           "Sale or return."  Section 336.2-326. 
           "Seller."  Section 336.2-103(1)(d). 
           (4) In addition, sections 336.1-101 to 336.1-109 contain 
        general definitions and principles of construction and 
        interpretation applicable throughout this article. 
           Sec. 13.  Minnesota Statutes 2002, section 336.2A-514, is 
        amended to read: 
           336.2A-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 (section 336.2A-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.
           Sec. 14.  Minnesota Statutes 2002, section 336.2A-526, is 
        amended to read: 
           336.2A-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) an acknowledgment to the lessee by a carrier via 
        reshipment or as a warehouse operator. 
           (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. 
           Sec. 15.  Minnesota Statutes 2003 Supplement, section 
        336.4-104, is amended to read: 
           336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (a) In this article, 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 that part of any day, excluding 
        Saturday, Sunday, and holidays, on which a bank is open to the 
        public for carrying on substantially all of its banking 
        functions; 
           (4) "Clearinghouse" 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 (section 336.8-102) or instructions for 
        uncertificated securities (section 336.8-102), 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 section 336.3-104 
        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 article 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 clearinghouse 
        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 article and the 
        sections in which they appear are: 
           "Agreement for electronic presentment," section 336.4-110 
           "Bank," section 336.4-105 
           "Collecting bank," section 336.4-105 
           "Depositary bank," section 336.4-105 
           "Intermediary bank," section 336.4-105 
           "Payor bank," section 336.4-105 
           "Presenting bank," section 336.4-105 
           "Presentment notice," section 336.4-110 
           (c) "Control" as provided in section 336.7-106 and the 
        following definitions in other articles apply to this article: 
           "Acceptance," section 336.3-409 
           "Alteration," section 336.3-407 
           "Cashier's check," section 336.3-104 
           "Certificate of deposit," section 336.3-104 
           "Certified check," section 336.3-409 
           "Check," section 336.3-104 
           "Good faith," section 336.3-103 
           "Holder in due course," section 336.3-302 
           "Instrument," section 336.3-104 
           "Notice of dishonor," section 336.3-503 
           "Order," section 336.3-103 
           "Ordinary care," section 336.3-103 
           "Person entitled to enforce," section 336.3-301 
           "Presentment," section 336.3-501 
           "Promise," section 336.3-103 
           "Prove," section 336.3-103 
           "Record," section 336.3-103 
           "Remotely-created item," section 336.3-103 
           "Teller's check," section 336.3-104 
           "Unauthorized signature," section 336.3-403 
           (d) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 16.  Minnesota Statutes 2002, section 336.4-210, is 
        amended to read: 
           336.4-210 [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 chargeback; 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.  So 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 article 9, 
        but: 
           (1) no security agreement is necessary to make the security 
        interest enforceable (section 336.9-203(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. 
           Sec. 17.  Minnesota Statutes 2002, section 336.8-103, is 
        amended to read: 
           336.8-103 [RULES 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 a general intangible and is not a security or a 
        financial asset, except as follows: 
           (1) An interest in a partnership or limited liability 
        company is a security and is not a general intangible if it is 
        dealt in or traded on a securities exchange or in a securities 
        market, its terms expressly provide that it is a security 
        governed by this article, or it is an investment company 
        security.  
           (2) An interest in a partnership or limited liability 
        company is a financial asset and is not a general intangible if 
        it is held in a securities account. 
           (d) A writing that is a security certificate is governed by 
        this article and not by article 3, even though it also meets the 
        requirements of that article.  However, a negotiable instrument 
        governed by article 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 section 
        336.9-102(a)(15), is not a security or a financial asset. 
           (g) A document of title is not a financial asset unless 
        section 336.8-102(a)(9)(iii) applies. 
           Sec. 18.  Minnesota Statutes 2002, section 336.9-102, is 
        amended to read: 
           336.9-102 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (a)  [DEFINITIONS.] In this article: 
           (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.  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, other than a 
        security 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. 
           (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. 
           (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. 
           (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 law; 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 section 336.7-201(2) 336.7-201(b). 
           (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 section 336.9-519(a). 
           (37) "Filing office" means an office designated in section 
        336.9-501 as the place to file a financing statement. 
           (38) "Filing office rule" means a rule adopted pursuant to 
        Laws 2000, chapter 399, article 1, section 139. 
           (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 section 336.9-502(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 the 
        program is associated with the goods in such a manner that it 
        customarily is considered part of the goods, or 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. 
           (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 endorsement 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 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) Unless a certificate has been issued, "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 United States 
        Code, title 42.  
           A manufactured home within the meaning of this section does 
        not include a manufactured home for which a certificate of title 
        as defined in section 336.9-102(a)(10) has been issued.  
           (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.  Mortgage includes an executory 
        contract for the sale of real property or of an interest in real 
        property that entitles the purchaser to possession of the real 
        property. 
           (56) "New debtor" means a person that becomes bound as 
        debtor under section 336.9-203(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 section 
        336.9-310(c), means a person that, as debtor, entered into a 
        security agreement to which a new debtor has become bound under 
        section 336.9-203(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 section 336.9-609(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 sections 336.9-620, 
        336.9-621, and 336.9-622. 
           (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. 
           (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 
        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. 
           (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 
        section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5), 
        336.4-210, or 336.5-118. 
           (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, 
        electromagnetically, or by light; 
           (C) transmitting goods by pipeline or sewer; or 
           (D) transmitting or producing and transmitting electricity, 
        steam, gas, or water. 
           A person filing a financing statement under this article 
        and under the authority of sections 300.111 to 300.115 is a 
        transmitting utility for purposes of this article. 
           (b)  [DEFINITIONS IN OTHER ARTICLES.] "Control" as provided 
        in section 336.7-106 and the following definitions in other 
        articles apply to this article: 
             "Applicant"                    Section 336.5-102
             "Beneficiary"                  Section 336.5-102
             "Broker"                       Section 336.8-102
             "Certificated security"        Section 336.8-102
             "Check"                        Section 336.3-104
             "Clearing corporation"         Section 336.8-102
             "Contract for sale"            Section 336.2-106
             "Customer"                     Section 336.4-104
             "Entitlement holder"           Section 336.8-102
             "Financial asset"              Section 336.8-102
             "Holder in due course"         Section 336.3-302
             "Issuer" (with respect to a    
              letter of credit or
              letter of credit right)       Section 336.5-102
             "Issuer" (with respect to
              a security)                   Section 336.8-201
             "Issuer" (with respect to
              documents of title)           Section 336.7-102
             "Lease"                        Section 336.2A-103
             "Lease agreement"              Section 336.2A-103
             "Lease contract"               Section 336.2A-103
             "Leasehold interest"           Section 336.2A-103
             "Lessee"                       Section 336.2A-103
             "Lessee in ordinary course
              of business"                  Section 336.2A-103
             "Lessor"                       Section 336.2A-103
             "Lessor's residual interest"   Section 336.2A-103
             "Letter of credit"             Section 336.5-102
             "Merchant"                     Section 336.2-104
             "Negotiable instrument"        Section 336.3-104
             "Nominated person"             Section 336.5-102
             "Note"                         Section 336.3-104
             "Proceeds of a letter of
              credit"                       Section 336.5-114
             "Prove"                        Section 336.3-103
             "Sale"                         Section 336.2-106
             "Securities account"           Section 336.8-501
             "Securities intermediary"      Section 336.8-102
             "Security"                     Section 336.8-102
             "Security certificate"         Section 336.8-102
             "Security entitlement"         Section 336.8-102
             "Uncertificated security"      Section 336.8-102
           (c)  [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1 
        contains general definitions and principles of construction and 
        interpretation applicable throughout this article. 
           Sec. 19.  Minnesota Statutes 2002, section 336.9-203, is 
        amended to read: 
           336.9-203 [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 section 336.9-313 
        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 section 336.8-301 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 
        section 336.7-106, 336.9-104, 336.9-105, 336.9-106, or 336.9-107 
        pursuant to the debtor's security agreement. 
           (c)  [OTHER UCC PROVISIONS.] Subsection (b) is subject to 
        section 336.4-210 on the security interest of a collecting bank, 
        section 336.5-118 on the security interest of a letter of credit 
        issuer or nominated person, section 336.9-110 on a security 
        interest arising under article 2 or 2A, and section 336.9-206 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 article 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 section 336.9-315 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.  The attachment of a 
        security interest in the mortgage or lien on real property does 
        not create an interest in real property.  
           (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. 
           Sec. 20.  Minnesota Statutes 2002, section 336.9-207, is 
        amended to read: 
           336.9-207 [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 section 336.7-106, 336.9-104, 336.9-105, 
        336.9-106, or 336.9-107: 
           (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. 
           Sec. 21.  Minnesota Statutes 2002, section 336.9-208, is 
        amended to read: 
           336.9-208 [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 ten days after receiving an authenticated demand 
        by the debtor: 
           (1) a secured party having control of a deposit account 
        under section 336.9-104(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 section 336.9-104(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 section 336.9-105 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 section 336.8-106(d)(2) or 336.9-106(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 section 336.9-107 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. 
           Sec. 22.  Minnesota Statutes 2002, section 336.9-301, is 
        amended to read: 
           336.9-301 [LAW GOVERNING PERFECTION AND PRIORITY OF 
        SECURITY INTERESTS.] 
           Except as otherwise provided in sections 336.9-303 through 
        336.9-306, 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. 
           Sec. 23.  Minnesota Statutes 2002, section 336.9-310, is 
        amended to read: 
           336.9-310 [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 section 336.9-312(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 section 336.9-308(d), (e), (f), 
        or (g); 
           (2) that is perfected under section 336.9-309 when it 
        attaches; 
           (3) in property subject to a statute, regulation, or treaty 
        described in section 336.9-311(a); 
           (4) in goods in possession of a bailee which is perfected 
        under section 336.9-312(d)(1) or (2); 
           (5) in certificated securities, documents, goods, or 
        instruments which is perfected without filing, control, or 
        possession under section 336.9-312(e), (f), or (g); 
           (6) in collateral in the secured party's possession under 
        section 336.9-313; 
           (7) in a certificated security which is perfected by 
        delivery of the security certificate to the secured party under 
        section 336.9-313; 
           (8) in deposit accounts, electronic chattel 
        paper, electronic documents, investment property, or letter of 
        credit rights which is perfected by control under section 
        336.9-314; 
           (9) in proceeds which is perfected under section 336.9-315; 
        or 
           (10) that is perfected under section 336.9-316. 
           (c)  [ASSIGNMENT OF PERFECTED SECURITY INTEREST.] If a 
        secured party assigns a perfected security interest or 
        agricultural lien, a filing under this article is not required 
        to continue the perfected status of the security interest 
        against creditors of and transferees from the original debtor. 
           Sec. 24.  Minnesota Statutes 2002, section 336.9-312, is 
        amended to read: 
           336.9-312 [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 section 336.9-315(c) and (d) for 
        proceeds: 
           (1) a security interest in a deposit account may be 
        perfected only by control under section 336.9-314; 
           (2) and except as otherwise provided in section 
        336.9-308(d), a security interest in a letter of credit right 
        may be perfected only by control under section 336.9-314; and 
           (3) a security interest in money may be perfected only by 
        the secured party's taking possession under section 336.9-313. 
           (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 article. 
           Sec. 25.  Minnesota Statutes 2002, section 336.9-313, is 
        amended to read: 
           336.9-313 [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 section 336.8-301. 
           (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 section 336.9-316(e). 
           (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 section 336.8-301 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 
        section 336.8-301(a), even if the acknowledgment violates the 
        rights of a debtor; and 
           (2) unless the person otherwise agrees or law other than 
        this article 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 article 
        otherwise provides. 
           Sec. 26.  Minnesota Statutes 2002, section 336.9-314, is 
        amended to read: 
           336.9-314 [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 section 336.7-106, 
        336.9-104, 336.9-105, 336.9-106, or 336.9-107. 
           (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 section 
        336.7-106, 336.9-104, 336.9-105, or 336.9-107 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 section 336.9-106 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. 
           Sec. 27.  Minnesota Statutes 2002, section 336.9-317, is 
        amended to read: 
           336.9-317 [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 section 336.9-322; 
        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 section 
        336.9-203(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 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 sections 336.9-320 and 336.9-321, 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. 
           Sec. 28.  Minnesota Statutes 2002, section 336.9-338, is 
        amended to read: 
           336.9-338 [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 
        section 336.9-516(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. 
           Sec. 29.  Minnesota Statutes 2002, section 336.9-601, is 
        amended to read: 
           336.9-601 [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 section 336.9-602, 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 section 336.7-106, 336.9-104, 336.9-105, 
        336.9-106, or 336.9-107 has the rights and duties provided in 
        section 336.9-207. 
           (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 section 336.9-605, 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 article. 
           (g)  [CONSIGNOR OR BUYER OF CERTAIN RIGHTS TO PAYMENT.] 
        Except as otherwise provided in section 336.9-607(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. 
           (h) A person may not begin to enforce a security interest 
        in collateral that is agricultural property subject to sections 
        583.20 to 583.32 that has secured a debt of more than $5,000 
        unless:  a mediation notice under subsection (i) is served on 
        the debtor after a condition of default has occurred in the 
        security agreement and a copy served on the director of the 
        agricultural extension service; and the debtor and creditor have 
        completed mediation under sections 583.20 to 583.32; or as 
        otherwise allowed under sections 583.20 to 583.32. 
           (i) A mediation notice under subsection (h) must contain 
        the following notice with the blanks properly filled in. 
           "TO:  ...(Name of Debtor)... 
           YOU HAVE DEFAULTED ON THE ...(Debt in Default)... SECURED 
        BY AGRICULTURAL PROPERTY DESCRIBED AS ...(Reasonable Description 
        of Agricultural Property Collateral)... 
           AS A SECURED PARTY, ...(Name of Secured Party)... INTENDS 
        TO ENFORCE THE SECURITY AGREEMENT AGAINST THE AGRICULTURAL 
        PROPERTY DESCRIBED ABOVE BY REPOSSESSING, FORECLOSING ON, OR 
        OBTAINING A COURT JUDGMENT AGAINST THE PROPERTY. 
           YOU HAVE THE RIGHT TO HAVE THE DEBT REVIEWED FOR 
        MEDIATION.  IF YOU REQUEST MEDIATION, A DEBT THAT IS IN DEFAULT 
        WILL BE MEDIATED ONLY ONCE.  IF YOU DO NOT REQUEST MEDIATION, 
        THIS DEBT WILL NOT BE SUBJECT TO FUTURE MEDIATION IF THE SECURED 
        PARTY ENFORCES THE DEBT. 
           IF YOU PARTICIPATE IN MEDIATION, THE DIRECTOR OF THE 
        AGRICULTURAL EXTENSION SERVICE WILL PROVIDE AN ORIENTATION 
        MEETING AND A FINANCIAL ANALYST TO HELP YOU TO PREPARE FINANCIAL 
        INFORMATION.  IF YOU DECIDE TO PARTICIPATE IN MEDIATION, IT WILL 
        BE TO YOUR ADVANTAGE TO ASSEMBLE YOUR FARM FINANCE AND OPERATION 
        RECORDS AND TO CONTACT A COUNTY EXTENSION OFFICE AS SOON AS 
        POSSIBLE.  MEDIATION WILL ATTEMPT TO ARRIVE AT AN AGREEMENT FOR 
        HANDLING FUTURE FINANCIAL RELATIONS. 
           TO HAVE THE DEBT REVIEWED FOR MEDIATION YOU MUST FILE A 
        MEDIATION REQUEST WITH THE DIRECTOR WITHIN 14 DAYS AFTER YOU 
        RECEIVE THIS NOTICE.  THE MEDIATION REQUEST FORM IS AVAILABLE AT 
        ANY COUNTY RECORDER'S OR COUNTY EXTENSION OFFICE. 
           FROM:  ...(Name and Address of Secured Party)..." 

                                   ARTICLE 6 
                        MISCELLANEOUS CONFORMING CHANGES 
           Section 1.  Minnesota Statutes 2002, section 234.27, is 
        amended to read: 
           234.27 [UNIFORM COMMERCIAL CODE TO APPLY.] 
           The provisions of article 7 of the Uniform Commercial Code 
        relative to the negotiation, transfer, sale, or endorsement of 
        warehouse receipts, apply, to the extent possible, to the 
        negotiation, transfer, sale, or endorsement of certificates 
        under this chapter.  
           For the purpose of application of the Uniform Commercial 
        Code:  
           (a) A certificate authorized by the department which 
        evidences the storing of grain under this chapter is a document 
        of title as defined in section 336.1-201, clause (15).  
           (b) A person who has title to and possession of grain 
        stored under this chapter is a warehouse operator as defined in 
        section 336.7-102, clause (1)(h) (a)(3). 
           Sec. 2.  Minnesota Statutes 2002, section 514.973, is 
        amended to read: 
           514.973 [ENFORCEMENT OF LIEN.] 
           An owner's lien established under sections 514.970 to 
        514.979 for a claim that has become due must be enforced in the 
        same manner as warehouse operator's warehouse's liens under 
        section 336.7-210. 

                                   ARTICLE 7 
                    UNIFORM COMMERCIAL CODE ARTICLES 3 AND 4 
             CHANGES INVOLVING WARRANTIES ON REMOTELY CREATED ITEMS 
           Section 1.  Minnesota Statutes 2003 Supplement, section 
        336.3-416, is amended to read: 
           336.3-416 [TRANSFER WARRANTIES.] 
           (a) A person who transfers an instrument for consideration 
        warrants to the transferee and, if the transfer is by 
        endorsement, to any subsequent transferee that:  
           (1) the warrantor is a person entitled to enforce the 
        instrument; 
           (2) all signatures on the instrument are authentic and 
        authorized; 
           (3) the instrument has not been altered; 
           (4) the instrument is not subject to a defense or claim in 
        recoupment of any party which can be asserted against the 
        warrantor; 
           (5) the warrantor has no knowledge of any insolvency 
        proceeding commenced with respect to the maker or acceptor or, 
        in the case of an unaccepted draft, the drawer; and 
           (6) with respect to a remotely-created item, the person on 
        whose account the item is drawn authorized the issuance of the 
        item in the amount for which the item is drawn.  
           (b) A person to whom the warranties under subsection (a) 
        are made and who took the instrument in good faith may recover 
        from the warrantor as damages for breach of warranty an amount 
        equal to the loss suffered as a result of the breach, but not 
        more than the amount of the instrument plus expenses and loss of 
        interest incurred as a result of the breach. 
           (c) The warranties stated in subsection (a) cannot be 
        disclaimed with respect to checks.  Unless notice of a claim for 
        breach of warranty is given to the warrantor within 30 days 
        after the claimant has reason to know of the breach and the 
        identity of the warrantor, the liability of the warrantor under 
        subsection (b) is discharged to the extent of any loss caused by 
        the delay in giving notice of the claim.  
           (d) A cause of action for breach of warranty under this 
        section accrues when the claimant has reason to know of the 
        breach.  
           (e) No A claim for breach of the warranty in subsection 
        (a)(6) is available against a person to which an item was 
        transferred previous transferor of the item only to the extent 
        that under applicable law (including the applicable 
        choice-of-law principles) the person that transferred all 
        previous transferors of the item to that person did not 
        make made the warranty in subsection (a)(6). 
           Sec. 2.  Minnesota Statutes 2003 Supplement, section 
        336.3-417, is amended to read: 
           336.3-417 [PRESENTMENT WARRANTIES.] 
           (a) If an unaccepted draft is presented to the drawee for 
        payment or acceptance and the drawee pays or accepts the draft, 
        (i) the person obtaining payment or acceptance, at the time of 
        presentment, and (ii) a previous transferor of the draft, at the 
        time of transfer, warrant to the drawee making payment or 
        accepting the draft in good faith that:  
           (1) the warrantor is, or was, at the time the warrantor 
        transferred the draft, a person entitled to enforce the draft or 
        authorized to obtain payment or acceptance of the draft on 
        behalf of a person entitled to enforce the draft; 
           (2) the draft has not been altered; 
           (3) the warrantor has no knowledge that the signature of 
        the drawer of the draft is unauthorized; and 
           (4) with respect to any remotely-created item, the person 
        on whose account the item is drawn authorized the issuance of 
        the item in the amount for which the item is drawn.  
           (b) A drawee making payment may recover from any warrantor 
        damages for breach of warranty equal to the amount paid by the 
        drawee less the amount the drawee received or is entitled to 
        receive from the drawer because of the payment.  In addition, 
        the drawee is entitled to compensation for expenses and loss of 
        interest resulting from the breach.  The right of the drawee to 
        recover damages under this subsection is not affected by any 
        failure of the drawee to exercise ordinary care in making 
        payment.  If the drawee accepts the draft, breach of warranty is 
        a defense to the obligation of the acceptor.  If the acceptor 
        makes payment with respect to the draft, the acceptor is 
        entitled to recover from any warrantor for breach of warranty 
        the amounts stated in this subsection.  
           (c) If a drawee asserts a claim for breach of warranty 
        under subsection (a) based on an unauthorized endorsement of the 
        draft or an alteration of the draft, the warrantor may defend by 
        proving that the endorsement is effective under section 
        336.3-404 or 336.3-405 or the drawer is precluded under section 
        336.3-406 or 336.4-406 from asserting against the drawee the 
        unauthorized endorsement or alteration.  
           (d) If (i) a dishonored draft is presented for payment to 
        the drawer or an endorser or (ii) any other instrument is 
        presented for payment to a party obliged to pay the instrument, 
        and (iii) payment is received, the following rules apply:  
           (1) The person obtaining payment and a prior transferor of 
        the instrument warrant to the person making payment in good 
        faith that the warrantor is, or was, at the time the warrantor 
        transferred the instrument, a person entitled to enforce the 
        instrument or authorized to obtain payment on behalf of a person 
        entitled to enforce the instrument.  
           (2) The person making payment may recover from any 
        warrantor for breach of warranty an amount equal to the amount 
        paid plus expenses and loss of interest resulting from the 
        breach.  
           (e) The warranties stated in subsections (a) and (d) cannot 
        be disclaimed with respect to checks.  Unless notice of a claim 
        for breach of warranty is given to the warrantor within 30 days 
        after the claimant has reason to know of the breach and the 
        identity of the warrantor, the liability of the warrantor under 
        subsection (b) or (d) is discharged to the extent of any loss 
        caused by the delay in giving notice of the claim.  
           (f) A cause of action for breach of warranty under this 
        section accrues when the claimant has reason to know of the 
        breach. 
           (g) No A claim for breach of the warranty in subsection 
        (a)(4) is available against a person to which an item was 
        transferred previous transferor of the item only to the extent 
        that under applicable law (including the applicable 
        choice-of-law principles) the person that transferred all 
        previous transferors of the item to that person did not 
        make made the warranty in subsection (a)(4). 
           Sec. 3.  Minnesota Statutes 2003 Supplement, section 
        336.4-207, is amended to read: 
           336.4-207 [TRANSFER WARRANTIES.] 
           (a) A customer or collecting bank that transfers an item 
        and receives a settlement or other consideration warrants to the 
        transferee and to any subsequent collecting bank that:  
           (1) the warrantor is a person entitled to enforce the item; 
           (2) all signatures on the item are authentic and 
        authorized; 
           (3) the item has not been altered; 
           (4) the item is not subject to a defense or claim in 
        recoupment (section 336.3-305(a)) of any party that can be 
        asserted against the warrantor; 
           (5) the warrantor has no knowledge of any insolvency 
        proceeding commenced with respect to the maker or acceptor or, 
        in the case of an unaccepted draft, the drawer; and 
           (6) with respect to any remotely-created item, the person 
        on whose account the item is drawn authorized the issuance of 
        the item in the amount for which the item is drawn.  
           (b) If an item is dishonored, a customer or collecting bank 
        transferring the item and receiving settlement or other 
        consideration is obliged to pay the amount due on the item (i) 
        according to the terms of the item at the time it was 
        transferred, or (ii) if the transfer was of an incomplete item, 
        according to its terms when completed as stated in sections 
        336.3-115 and 336.3-407.  The obligation of a transferor is owed 
        to the transferee and to any subsequent collecting bank that 
        takes the item in good faith.  A transferor cannot disclaim its 
        obligation under this subsection by an endorsement stating that 
        it is made "without recourse" or otherwise disclaiming liability.
           (c) A person to whom the warranties under subsection (a) 
        are made and who took the item in good faith may recover from 
        the warrantor as damages for breach of warranty an amount equal 
        to the loss suffered as a result of the breach, but not more 
        than the amount of the item plus expenses and loss of interest 
        incurred as a result of the breach.  
           (d) The warranties stated in subsection (a) cannot be 
        disclaimed with respect to checks.  Unless notice of a claim for 
        breach of warranty is given to the warrantor within 30 days 
        after the claimant has reason to know of the breach and the 
        identity of the warrantor, the warrantor is discharged to the 
        extent of any loss caused by the delay in giving notice of the 
        claim. 
           (e) A cause of action for breach of warranty under this 
        section accrues when the claimant has reason to know of the 
        breach. 
           (f) No A claim for breach in the warranty in subsection 
        (a)(6) is available against a person to which an item was 
        transferred previous transferor of the item only to the extent 
        that under applicable law (including the applicable 
        choice-of-law principles) the person that transferred all 
        previous transferors of the item to that person did not 
        make made the warranty in subsection (a)(6). 
           Sec. 4.  Minnesota Statutes 2003 Supplement, section 
        336.4-208, is amended to read: 
           336.4-208 [PRESENTMENT WARRANTIES.] 
           (a) If an unaccepted draft is presented to the drawee for 
        payment or acceptance and the drawee pays or accepts the draft, 
        (i) the person obtaining payment or acceptance, at the time of 
        presentment, and (ii) a previous transferor of the draft, at the 
        time of transfer, warrant to the drawee that pays or accepts the 
        draft in good faith that:  
           (1) the warrantor is, or was, at the time the warrantor 
        transferred the draft, a person entitled to enforce the draft or 
        authorized to obtain payment or acceptance of the draft on 
        behalf of a person entitled to enforce the draft; 
           (2) the draft has not been altered; 
           (3) the warrantor has no knowledge that the signature of 
        the purported drawer of the draft is unauthorized; and 
           (4) with respect to any remotely-created item, the person 
        on whose account the item is drawn authorized the issuance of 
        the item in the amount for which the item is drawn.  
           (b) A drawee making payment may recover from a warrantor 
        damages for breach of warranty equal to the amount paid by the 
        drawee less the amount the drawee received or is entitled to 
        receive from the drawer because of the payment.  In addition, 
        the drawee is entitled to compensation for expenses and loss of 
        interest resulting from the breach.  The right of the drawee to 
        recover damages under this subsection is not affected by any 
        failure of the drawee to exercise ordinary care in making 
        payment.  If the drawee accepts the draft (i) breach of warranty 
        is a defense to the obligation of the acceptor, and (ii) if the 
        acceptor makes payment with respect to the draft, the acceptor 
        is entitled to recover from a warrantor for breach of warranty 
        the amounts stated in this subsection.  
           (c) If a drawee asserts a claim for breach of warranty 
        under subsection (a) based on an unauthorized endorsement of the 
        draft or an alteration of the draft, the warrantor may defend by 
        proving that the endorsement is effective under section 
        336.3-404 or 336.3-405 or the drawer is precluded under section 
        336.3-406 or 336.4-406 from asserting against the drawee the 
        unauthorized endorsement or alteration.  
           (d) If (i) a dishonored draft is presented for payment to 
        the drawer or an endorser or (ii) any other item is presented 
        for payment to a party obliged to pay the item, and the item is 
        paid, the person obtaining payment and a prior transferor of the 
        item warrant to the person making payment in good faith that the 
        warrantor is, or was, at the time the warrantor transferred the 
        item, a person entitled to enforce the item or authorized to 
        obtain payment on behalf of a person entitled to enforce the 
        item.  The person making payment may recover from any warrantor 
        for breach of warranty an amount equal to the amount paid plus 
        expenses and loss of interest resulting from the breach.  
           (e) The warranties stated in subsections (a) and (d) cannot 
        be disclaimed with respect to checks.  Unless notice of a claim 
        for breach of warranty is given to the warrantor within 30 days 
        after the claimant has reason to know of the breach and the 
        identity of the warrantor, the warrantor is discharged to the 
        extent of any loss caused by the delay in giving notice of the 
        claim.  
           (f) A cause of action for breach of warranty under this 
        section accrues when the claimant has reason to know of the 
        breach. 
           (g) No A claim for breach of the warranty in subsection 
        (a)(4) is available against a person to which an item was 
        transferred previous transferor of the item only to the extent 
        that under applicable law (including the applicable 
        choice-of-law principle) the person that transferred all 
        previous transferors of the item to that person did not 
        make made the warranty in subsection (a)(4). 
           Presented to the governor April 22, 2004 
           Signed by the governor April 26, 2004, 3:30 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569