Controllable Electronic Records

KRS tit. XXIX, ch. 355, art. 12

in effect

KRS 355.12-101 Short title

355.12-101. Short title This article may be cited as Uniform Commercial Code -- Controllable Electronic Records. Effective: January 1, 2025 History: Created 2024 Ky. Acts ch. 10, sec. 94, effective January 1, 2025.

KRS 355.12-102 Definitions

355.12-102. Definitions (1) In this article: (a) 1. "Controllable electronic record" means a record stored in an electronic medium that can be subjected to control under KRS 355.12-105. 2. The term does not include: a. A controllable account; b. A controllable payment intangible; c. A deposit account; d. An electronic copy of a record evidencing chattel paper; e. An electronic document of title; f. Electronic money; g. Investment property; or h. A transferable record; (b) "Qualifying purchaser" means a purchaser of a controllable electronic record or an interest in a controllable electronic record that obtains control of the controllable electronic record for value, in good faith, and without notice of a claim of a property right in the controllable electronic record; (c) "Transferable record" has the meaning provided for that term in: 1. The Electronic Signatures in Global and National Commerce Act, 15 U.S.C. sec. 7021, as amended; or 2. The Uniform Electronic Transactions Act, KRS 369.116; and (d) "Value" has the meaning provided in KRS 355.3 -303(1), as if references in that subsection to an "instrument" were references to a controllable account, controllable electronic record, or controllable payment intangible. (2) The following definitions in Article 9 of this chapter apply to this article: (a) "Account debtor"; (b) "Chattel paper"; (c) "Controllable account"; (d) "Controllable payment intangible"; (e) "Deposit account"; (f) "Electronic money"; and (g) "Investment property." (3) Article 1 of this chapter contains general definitions and principles of construction and interpretation applicable throughout this article. Effective: January 1, 2025 History: Created 2024 Ky. Acts ch. 10, sec. 95, effective January 1, 2025.

KRS 355.12-103 Relation to Article 9 and consumer laws

355.12-103. Relation to Article 9 and consumer laws (1) If there is conflict between this article and Article 9 of this chapter, Article 9 governs. (2) A transaction subject to this article is subject to any applicable rule of law that establishes a different rule for consumers. Effective: January 1, 2025 History: Created 2024 Ky. Acts ch. 10, sec. 96, effective January 1, 2025.

KRS 355.12-104 Rights in controllable account, controllable electronic record, and controllable payment intangible

355.12-104. Rights in controllable account, controllable electronic record, and controllable payment intangible (1) This section applies to the acquisition and purchase of rights in a controllable account or controllable payment intangible, including the rights and benefits under subsections (3), (4), (5), (7), and (8) of this section of a purchaser and qualifying purchaser, in the same manner this section applies to a controllable electronic record. (2) To determine whether a purchaser of a controllable account or a controllable payment intangible is a qualifying purchaser, the purchaser obtains control of the account or payment intangible if it obtains control of the controllable electronic record that evidences the account or payment intangible. (3) Except as provided in this section, law other than this article determines whether a person acquires a right in a controllable electronic record and the right the person acquires. (4) A purchaser of a controllable electronic record acquires all righ ts in the controllable electronic record that the transferor had or had power to transfer, except that a purchaser of a limited interest in a controllable electronic record acquires rights only to the extent of the interest purchased. (5) A qualifying purchaser acquires its rights in the controllable electronic record free of a claim of a property right in the controllable electronic record. (6) Except as provided in subsections (1) and (5) of this section for a controllable account and a controllable payment intangible or law other than this article, a qualifying purchaser takes a right to payment, right to performance, or other interest in property evidenced by the controllable electronic record subject to a claim of a property right in the right to paymen t, right to performance, or other interest in property. (7) An action may not be asserted against a qualifying purchaser based on both a purchase by the qualifying purchaser of a controllable electronic record and a claim of a property right in another con trollable electronic record, whether the action is framed in conversion, replevin, constructive trust, equitable lien, or other theory. (8) Filing of a financing statement under Article 9 of this chapter is not notice of a claim of a property right in a controllable electronic record. Effective: January 1, 2025 History: Created 2024 Ky. Acts ch. 10, sec. 97, effective January 1, 2025.

KRS 355.12-105 Control of controllable electronic record

355.12-105. Control of controllable electronic record (1) A person has control of a controllable electronic record if the electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded: (a) Gives the person: 1. Power to avail itself of substantially all the benefit from the electronic record; and 2. Exclusive power, subject to subsection (2) of this section, to: a. Prevent others from availing themselves of substantially all the benefit from the electronic record; and b. Transfer control of the electronic record to another person or cause another person to obtain control of another controllable electronic record as a result of the transfer of the electronic record; and (b) Enables the person to readily identify itself in any way, in cluding by name, identifying number, cryptographic key, office, or account number, as having the powers specified in paragraph (a) of this subsection. (2) Subject to subsection (3) of this section, a power is exclusive under subsection (1)(a)2.a. and b. of this section even if: (a) The controllable electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded limits the use of the electronic record or has a protocol programmed to cause a change, including a transfer or loss of control or a modification of benefits afforded by the electronic record; or (b) The power is shared with another person. (3) A power of a person is not shared with another person under subsection (2)(b) of this section and the person's power is not exclusive if: (a) The person can exercise the power only if the power also is exercised by the other person; and (b) The other person: 1. Can exercise the power without exercise of the power by the person; or 2. Is the transferor to the person of an interest in the controllable electronic record or a controllable account or controllable payment intangible evidenced by the controllable electronic record. (4) If a person has the powers specified in subsection (1)(a)2.a. and b. of this sec tion, the powers are presumed to be exclusive. (5) A person has control of a controllable electronic record if another person, other than the transferor to the person of an interest in the controllable electronic record or a controllable account or control lable payment intangible evidenced by the controllable electronic record: (a) Has control of the electronic record and acknowledges that it has control on behalf of the person; or (b) Obtains control of the electronic record after having acknowledged that it will obtain control of the electronic record on behalf of the person. (6) A person that has control under this section is not required to acknowledge that it has control on behalf of another person. (7) If a person acknowledges that it has or will obtain control on behalf of another person, unless the person otherwise agrees or law other than this article or Article 9 of this chapter otherwise provides, the person does not owe any duty to the other person and is not required to confirm acknowledgment to any other person. Effective: January 1, 2025 History: Created 2024 Ky. Acts ch. 10, sec. 98, effective January 1, 2025.

KRS 355.12-106 Discharge of account debtor on controllable account or controllable payment intangible

355.12-106. Discharge of account debtor on controllable account or controllable payment intangible (1) An account debtor on a controllable account or controllable payment intangible may discharge its obligation by paying: (a) The person having control of the controllable electronic record that evidences the controllable account or controllable payment intangible; or (b) Except as provided in subsection (2) of this section, a person that formerly had control of the controllable electronic record. (2) Subject to subsection (4) of this section, the account debtor may not discharge its obligation by paying a person that formerly had control of the controllable electronic record if the account debtor receives a notification that: (a) Is signed by a person that formerly had control or the person to which control was transferred; (b) Reasonably identifies the controllable account or controllable payment intangible; (c) Notifies the account debtor that control of the controllable electronic record that evidences the controllable account or controllable payment intangible was transferred; (d) Identifies the transferee, in any reasonable way, including by name, identifying number, cryptographic key, office, or account number; and (e) Provides a commercially reasonable method by which the account debtor is to pay the transferee. (3) After receipt of a notification that complies with subsection (2) of this section, the account debtor may discharge its obligation by paying in accordance with the notification and may not discharge the obligation by paying a person that formerly had control. (4) Subject to subsection (8) of this section, notification is ineffective under subsection (2) of this section: (a) Unless, before the notification is sent, the account debtor and the person that, at that time, had control of the controllable electronic record that evidences the controllable account or controllable payment intangible agree in a signed record to a commercially reasonable method by which a person may furnish reasonable proof that control has been transferred; (b) To the extent an agreement between the account debtor and seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than this article; or (c) At the option of the account debtor, if the notification notifies the account debtor to: 1. Divide a payment; 2. Make less than the full amount of an installment or other periodic payment; or 3. Pay any part of a payment by more than one (1) method or to more than one (1) person. (5) Subject to subsection (8) of this section, if requested by the account debtor, the person giving the notification under subsection (2) of this section seasonably shall furnish reasonable proof, using the method in the agreement referred to in subsection (4)(a) of this section, that control of the controllable electronic record has been transferred. Unless the person complies with the request, the account debtor may discharge its obligation by paying a person that formerly had control, even if the account debtor has received a notification under subsection (2) of this section. (6) A person furnishes reasonable proof under subsection (5) of this section that control has been transferred if the person demonstrates, using the method in the agreement referred to in subsection (4)(a) of this section, that the transferee has the power to: (a) Avail itself of substantially all the benefit from the controllable electronic record; (b) Prevent others from availing themselves of substantially all the benefit from the controllable electronic record; and (c) Transfer the powers specified in paragraphs (a) and (b) of this subsection to another person. (7) Subject to subsection (8) of this section, an account debtor may not waive or vary its rights under subsections (4)(a) and (5) of this section or its option under subsection (4)(c) of this section. (8) This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes. Effective: January 1, 2025 History: Created 2024 Ky. Acts ch. 10, sec. 99, effective January 1, 2025.

KRS 355.12-107 Governing law

355.12-107. Governing law (1) Except as provided in subsection (2) of this section, the local law of a controllable electronic record's jurisdiction governs the matters covered by this article. (2) For a controllable electronic record that evidences a controllable account or controllable payment intangible, the local law of the controllable electronic record's jurisdiction governs a matter covered by KRS 355.12-106 unless an effective agreement determines that the local law of another jurisdiction governs. (3) The following rules determine a controllable electronic record's jurisdiction under this section: (a) If the controllable electronic record, or a record attached to or logically associated with the controllable electronic record and readily available for review, expressly provides that a particular jurisdiction is the controllable electronic record's jurisdiction for purposes of this article or chapter, that jurisdiction is the controllable electronic record's jurisdiction; (b) If paragraph (a) of this subsection does not apply and the rules of the system in which the controllable electronic record is recorded are readily available for review and expressly provide that a particular jurisdiction is the controllable electronic record's jurisdiction for purposes of this article or this chapter, that jurisdiction is the controllable electronic record's jurisdiction; (c) If paragraphs (a) and (b) of this subsection do not apply and the controllable electronic record, or a record attached to or logically associated with the controllable electronic record and readily available for review, expressly provides that the controllable electronic record is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record's jurisdiction; (d) If paragraphs (a), (b), and (c) of this subsection do not apply and the rules of the system in which the controllable electronic record is recorded are readily available for review and expressly provide that the controllable electronic record or the system is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record's jurisdiction; and (e) If paragraphs (a) to (d) of this subsection do not apply, the controllable electronic record's jurisdiction is the District of Columbia. (4) (a) If subsection (3)(e) of this section applies and Article 12 is not in effect in the District of Columbia without material modification, the governing law for a matter covered by this article is the law of the District of Columbia as though Article 12 were in effect in the District of Columbia without material modification. (b) In this subsection, "Article 12" means Article 12 of the Uniform Commercial Code Amendments (2022). (5) To the extent subsections (1) and (2) of this section provide that the local law of the controllable electronic record's jurisdiction governs a matter covered by this article, that law governs even if the matter or a transaction to which the matter relates does not bear any relation to the controllable electronic record's jurisdiction. (6) The rights acquired under KRS 355.12-104 by a purchaser or qualifying purchaser are governed by the law applicable under this section at the time of purchase. Effective: January 1, 2025 History: Created 2024 Ky. Acts ch. 10, sec. 100, effective January 1, 2025.

Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=54432Fetched: 10/20/2026