CSHB 102(JUD)-UNIFORM COMMERCIAL CODE  2:04:18 PM CHAIR PASKVAN announced CSHB 102(JUD) to be up for consideration. ALLISON LEFINE, staff to Representative Gruenberg, sponsor of HB 102, said it amends Alaska statutes to reflect the recent revisions to Articles 1 and 7 of the Uniform Commercial Code (UCC). The bill has two non-UCC provisions as well. TERRY THURBON, Public Member, Alaska Uniform Law Commission, said updating the UCC is a priority this year in large part because it is cleanup legislation to get Alaska up to date with electronic documents of title with respect to bills of lading and warehouse receipts for the transportation industry. It updates a few other general provisions as well. She said it seems like an overwhelmingly large bill at 60-plus pages, but the Uniform Commercial Code parts, sections 8 and 4, are the only ones she is speaking to. Those provisions are by and large changes in terminology to make the code consistent with a handful of substantive changes that are made. It is divided up into two parts, Article 1, which is general provisions, and covers things like definitions and obligations of good faith, and then Article 7, which has the warehouse receipts, bills of lading and documents of title provisions. 2:08:34 PM MS. THURBON said the revisions in general deal almost entirely with bringing us into the electronic age for shipping and transportation, and how title is transferred amongst parties (Article 7). Some of those provisions were originally developed in the early 1900s and the last update was in 1951. In 2003 the Uniform Law Commission came up with these revisions. Thirty-two states have already adopted these provisions and three other states besides Alaska have introduced legislation this year. The general provisions starting in section 8 of the bill regarding Article 1 are peppered throughout Title 45 and are mainly conforming terminology and amendments, but there are about half dozen substantively important things those do to the UCC. MS. THURBON said some of the changes clarified scope of coverage to make it clear that these provisions are applicable only to UCC-covered transactions. The statute of frauds requirement which governs when an agreement has to be in writing was a little fuzzy and appeared to apply to transactions outside of the UCC; so that was fixed. The rules on choice of law were clarified so that the parties in agreement can choose the law of whichever jurisdiction they want to apply - with some limitations meant to protect consumers so that they can have the protection of their own state's laws. 2:12:13 PM Another substantive change clarified the definition of "good faith" in the context of UCC to mean honesty and fact and the observance of reasonable commercial standards for fair dealing. It clarifies use of evidence of course of performance of a contractual arrangement in addition to the uses of trade and of dealings. The bottom line is that these changes bring Alaska into the fold of the critical mass of nearly all of the states that are using the same version of the UCC in these two areas. 2:13:26 PM PROFESSOR BILL HENNINGS, Alabama Uniform Law Commissioner, said he was executive director of the Uniform Law Commission from 2001-2007, which is when these two acts were finally produced. He teaches in the area of the UCC and works with these provisions every day. PROFESSOR HENNINGS said that over the last 20 years, the UCC has been updated to accommodate electronic transactions. Articles 1 and 7 were the last to be revised, and they found industry was already far ahead of them in terms of using electronic documents, but industry wanted legal provisions that would put them on solid ground to make certain their documents were entirely effective. He said that Article 7 had not been thoroughly revised, but the electronic documents sections were dealt with almost exclusively. 2:16:24 PM Article 1 is general provisions applicable to all the other articles, Professor Hennings explained. After 20 years of revisions there was sort of a disconnect between the other articles mostly in terms of definitions. So the revision of Article 1 is designed to clean everything up and pull the UCC together. 2:17:16 PM SENATOR THOMAS said one area talks about proceeds from goods and possessions being sold. Does someone determine the value of those goods so that if $1,000 is owed and the carrier decides to dispose of $10,000 worth of furniture just to get their $1,000 is there some claim that causes it to be a fair disposal? PROFESSOR HENNINGS replied that no specific procedure is set up requiring commercially reasonable sales like those in Article 7 foreclosures, but the general standards of the UCC, which are good faith and commercial reasonableness are applied. Good faith is honesty; and commercial reasonableness means that you have to comport with standards of fairness that are consistent with other similar entities would do in the commercial world. He has no doubt that a court could regulate that kind of conduct and treat a sale for a ridiculously small amount as something in the nature of a conversion. However, there is no broad structure for that in Article 7, unless he has forgotten it. 2:19:58 PM CHAIR PASKVAN closed public testimony. He added that bringing st Alaska up to the 21 Century is a good thing. SENATOR THOMAS moved to report CSHB 102(JUD), version S, from committee with individual recommendations and attached fiscal note(s). There were no objections and it was so ordered.