Saturday, May 24, 2008

Tennessee Enacts Revised UCC Article 1; Illinois SB 2080 Makes Further Progress

On May 15, Tennessee Governor Phil Bredensen signed SB 3993, subsequently designated Chapter 930, making Tennessee the thirty-third state to enact Revised UCC Article 1 since the ALI and NCCUSL promulgated it in 2001.

Prospects look reasonably favorable for Illinois to follow suit in the near future. The Illinois Senate unanimously passed SB 2080 on April 9. On May 20, the Illinois House Judiciary Committee recommended passage and the bill was placed on the House's "short debate" calendar. On May 23, the House extended the final action deadline until May 31.

Revised Article 1 is already in effect in twenty-eight states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia. It will take effect in Pennsylvania on June 15 and in Kansas, South Dakota, Tennessee, and Vermont on July 1.

As I have discussed previously, the two primary bones of contention during the enactment process have been uniform R1-301's choice-of-law rules and uniform R1-201(b)(20)'s "good faith" definition. None of the thirty-three enacting states has adopted uniform R1-301; instead, all have chosen to either leave their pre-revised 1-105 in place or to enact a substitute 1-301 with language consistent with pre-revised 1-105. (Louisiana subsequently amended its substitute 1-301 to diminish the distinction between choice-of-law rules applicable to UCC and non-UCC transactions; but, a fuller exploration of that amendment is another topic for another day.) There had been less uniformity with regard to defining "good faith." Twenty-three states have enacted uniform R1-201(b)(20)'s "honesty in fact and the observance of reasonable commercial standards of fair dealing" definition; while ten states — including Tennessee — have retained pre-revised 1-201(19)'s "honesty in fact in the conduct or transaction concerned" definition, reserving the requirement of commercial reasonableness for merchants under 2-103(1)(b) & 2A-103(3). If enacted as it currently reads, Illinois SB 2080 would make uniform R1-301 0-for-34 and would make Illinois the eleventh enacting state to retain the bifurcated good-faith standard.

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