2023 Amendments to the Delaware Uniform Commercial Code

August 31, 2023

Publication| Commercial Transactions

On August 18, 2023, Governor John Carney signed Senate Bill No. 157 (“SB 157”) into law.  SB 157 incorporates amendments, approved by the Uniform Law Commission in 2022, into the Delaware Uniform Commercial Code (“Delaware UCC”).  These 2023 amendments include, but are not limited to:

  • Creating a new Article 12 to address “controllable electronic records” (“CERs”) such as cryptocurrency and non-fungible tokens, “controllable accounts,” and “controllable payment intangibles,” including the means for a secured party to establish control for purposes of enforcing and perfecting its security interest in CERs.
  • Updating various sections throughout the Delaware UCC to be medium-neutral, such as including electronic signatures within the meaning of the term “sign,” substituting the term “record” for “writing,” and redefining the term “conspicuous” more broadly to encompass both paper and electronic contracts.
  • Clarifying that “money” under the Delaware UCC does not include any electronic or virtual currencies that existed before being authorized or adopted by a government, in response to the recent adoption by some governments of virtual currency such as Bitcoin as legal tender.
  • Updating Article 9 to:
    • establish rules governing the perfection and priority of security interests in CERs, controllable accounts, and controllable payment intangibles;
    • address provisions relating to chattel paper, including the expansion of the rules governing control and generally removing any distinction between chattel paper in electronic or tangible form; and
    • establish control as the exclusive means for perfecting a security interest in electronic money.
  • Revising the approach to “hybrid transactions” with respect to the sale of goods under Article 2 such that:
    • where the sale of goods is not the predominant aspect of a transaction, only the provisions of Article 2 that relate primarily to the sale of goods portion of the transaction apply, and any provisions of Article 2 that relate to the transaction as a whole do not apply; and
    • where the sale of goods is the predominant aspect of a transaction, Article 2 as a whole applies to such transaction, but a court may apply other law to aspects of the transaction that do not relate to the sale of goods.
  • Revising Article 2A in a similar manner with respect to “hybrid transactions” that involve the lease of goods, with exceptions identified therein for finance leases.

If you have any questions regarding this update concerning the 2023 amendments to the Delaware UCC or other legal issues, please contact a Richards, Layton & Finger attorney.

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