ALABAMA UNIFORM COMMERCIAL CODE AMENDMENTS 2022
Alabama Act #2023-492 effective July 1, 2024 (substantially adopting the Uniform Commercial Code Amendments 2022). The following are my reference materials pertaining to and a summary of the Alabama Act.
Information pertaining to the Uniform Commercial Code Amendments 2022 enactment in other states along with additional substantive information can be found on the Uniform Law Commission's Uniform Commercial Code Amendments 2022 homepage.
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The Alabama Act varies from the uniform act in two areas:
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The proposed Uniform Commercial Code Amendments 2022’s concept of Electronic Money, which included a concept of virtual currencies, was not enacted in Alabama.
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Alabama enacted a specific amendment to Ala Code §7-9A-102(a)(29) prohibiting Central Bank Digital Currencies (a defined term in Ala Code §7-9A-102(a)(9) (CBDCs) from being a deposit account.
December 2023
Article on Alabama UCC Amendments
ACT #2023-492 inserted within Existing Code (with Alabama Comments)
PowerPoint Presentation on Alabama UCC Amendments 2022
Changes Made by the Alabama Act.
The major changes enacted by Alabama Act #2023-492 broken down by the Alabama Article to which they relate is as follows:
Article 12
Article 12 deals with a category of intangible digital assets referred to as “controllable electronic records.” Article 12 provide rules to determine the rights of persons who receive controllable electronic records (or the "controllable accounts" or "controllable payment intangibles" generated by these controllable electronic records) and for the perfection and priority of a security interest in controllable electronic records, based on who has control (the power to receive the benefits, prevent others from receiving the benefits, and transferring the benefits) of the controllable electronic record.
Article 12A
Article 12A contains transition provisions designed to protect the expectations of parties to pre-effective-date transactions. For example, a secured lender who has a priority security interest in collateral under the prior law will retain its priority through a transition period, giving parties to preexisting transactions plenty of time to revise their agreements and if necessary, obtain control to comply with the updated law.
Article 9A
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Chattel paper is now properly recognized as a right to payment as opposed to the record evidencing the right to payment (see revised Ala Code §7-9A-102(a)(11)).
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Standardization of what is meant by “control” to be both consistent with industries’ current practice and to accommodate future realities.
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Ala Code §7-9A-204 was clarified to correct some decisions and interpretations that treated certain proceeds as after acquired collateral and therefore not effective under subsection (b).
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Ala Code §7-9A-613 in the non-consumer space and revised Ala Code §7-9A-614 in the consumer space create new and easier to understand safe harbor forms for notification before collateral dispositions
Article 8
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Standardization what is meant by “control” to be both consistent with industries’ current practice and to accommodate future realities.
Article 7
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Standardization of what is meant by “control” to be both consistent with industries’ current practice and to accommodate future realities.
Article 5
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Electronic signatures on letters of credit are now expressly permitted and the branch separateness doctrine is recognized.
Article 4A
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Ala Code § 7-4A-201 has been amended to permit a security procedure to impose an obligation on the receiving bank or the customer, and to clearly delineate that simply requiring a payment order to be sent from a known email address, IP address or telephone number is not by itself a security procedure.
Article 3
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Electronic signatures are now expressly permitted.
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Certain ministerial terms within an instrument to not affect the instruments’ negotiability.
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Images of certain instruments to be substituted for the instrument in accordance with federal banking regulations.
Article 2A
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Hybrid transaction (where services or licenses of information are supplied in connection with the leasing of the goods) are recognized and Alabama’s prevailing purpose test is now statutorily recognized for determining what portions of Article 2A applies to the hybrid transaction.
Article 2
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Hybrid transaction (where services or licenses of information are supplied in connection with the sale of the goods) are recognized and Alabama’s prevailing purpose test is now statutorily recognized for determining what portions of Article 2A applies to the hybrid transaction.
Article 1
Various terms (i.e. “sign,” “record” and “conspicuous”) are redefined so as to be applicable in both the tangible and electronic world.
Background and Recognition
In 2022 the American Law Institute and the Uniform Law Commission concluded its three-year project and recommended that each state adopt the Uniform Commercial Code Amendments 2022 (with official comments). Prior to submission to the Alabama legislature, the Alabama Law Institute empaneled a study committee composed of Bradley Blair, Hamp Boles, Jackson Colburn (from the Alabama Law Institute), your author (who served as chair), Professor William H. Henning (who served as reporter), Will Hereford, Professor Julie Hill, Riley Key, Judge David Kimberly (from the Alabama Law Institute), Jayna Lamar, Randall Morrow, Howard Neiswender, John Pickering, and Jerry W. Powell. Following this study committee recommendation, the Alabama Law Institute coordinated the forwarding of the Uniform Commercial Code Amendments 2022 adapted to conform to existing Alabama law (see HB348) to the legislature to produce what is now Alabama Act #2023-492(with Alabama comments).