Title 47 Commercial Instruments And Transactions

Chapter 1 Uniform Commercial Code — General Provisions

(a) Chapters 1-9 of this title shall be known and may be cited as the Uniform Commercial Code.
(b) This chapter shall be known and may be cited as the “Uniform Commercial Code — General Provisions.”

This chapter applies to a transaction to the extent that it is governed by chapters 2-9 of this title.

§ 47-1-103. Construction of chapters 1-9 to promote their purposes and policies — Applicability of supplemental principles of law.

(a) Chapters 1-9 of this title must be liberally construed and applied to promote its underlying purposes and policies, which are:
1. (1) To simplify, clarify, and modernize the law governing commercial transactions;
2. (2) To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and
3. (3) To make uniform the law among the various jurisdictions.
(b) Unless displaced by the particular provisions of chapters 1-9 of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.
(c) In any dispute as to the proper construction of one (1) or more sections of chapters 1-9 of this title, the Official Comments pertaining to the corresponding sections of the Uniform Commercial Code, Official Text, as adopted by the National Conference of Commissioners on Uniform State Laws and the American Law Institute and as in effect on July 1, 2013, in this state, shall constitute evidence of the purposes and policies underlying such sections, unless:
1. (1) The sections of chapters 1-9 of this title that are applicable to the dispute differ materially from the sections of the Official Text that would be applicable thereto; or
2. (2) The Official Comments are inconsistent with the plain meaning of the applicable sections of chapters 1-9 of this title.

§ 47-1-104. Construction against implied repeal.

Chapters 1-9 of this title being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.

§ 47-1-105. Severability.

If any provision or clause of chapters 1-9 of this title or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of chapters 1-9 of this title that can be given effect without the invalid provision or application, and to this end the provisions of chapters 1-9 of this title are severable.

§ 47-1-106. Use of singular and plural — Gender.

In chapters 1-9 of this title, unless the statutory context otherwise requires:
1. (1) Words in the singular number include the plural, and those in the plural include the singular; and
2. (2) Words of any gender also refer to any other gender.

§ 47-1-107. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001, et seq., except that nothing in this chapter modifies, limits, or supersedes § 7001(c) of that act, codified in 15 U.S.C. § 7001(c), or authorizes electronic delivery of any of the notices described in § 7003(b) of that act, codified in 15 U.S.C. § 7003(b).

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47-10-103(b)(2)

Part 2 General Definitions and Principles of Interpretation

§ 47-1-201. General definitions.

(a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in chapters 2-9 of this title that apply to particular chapters or parts thereof, have the meanings stated.
(b) Subject to definitions contained in chapters 2-9 of this title that apply to particular chapters or parts thereof:
1. (1) “Action”, in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and any other proceeding in which rights are determined;
2. (2) “Aggrieved party” means a party entitled to pursue a remedy;
3. (3) “Agreement”, as distinguished from “contract”, means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in § 47-1-303;
4. (4) “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company;
5. (5) “Bearer” means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or indorsed in blank;
6. (6) “Bill of lading” means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt;
7. (7) “Branch” includes a separately incorporated foreign branch of a bank;
8. (8) “Burden of establishing” a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence;
9. (9) “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under chapter 2 may be a buyer in ordinary course of business. “Buyer in ordinary course of business” does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt;
10. (10) “Conspicuous”, with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court. Conspicuous terms include the following:
  1. (A) A heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and
  2. (B) Language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language;
11. (11) “Consumer” means an individual who enters into a transaction primarily for personal, family, or household purposes;
12. (12) “Contract”, as distinguished from “agreement”, means the total legal obligation that results from the parties’ agreement as determined by chapters 1-9 of this title as supplemented by any other applicable laws;
13. (13) “Creditor” includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor's or assignor's estate;
14. (14) “Defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim;
15. (15) “Delivery”, with respect to an electronic document of title, means voluntary transfer of control and, with respect to an instrument, a tangible document of title, or chattel paper, means voluntary transfer of possession;
16. (16) “Document of title” means:
  1. (A) That document which, in the regular course of business or financing, is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, hold, and dispose of the record and the goods the record covers; and
  2. (B) A record that purports to be issued by or addressed to a bailee and to cover goods in the bailee's possession that are either identified or are fungible portions of an identified mass. The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods. An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium. A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium;
17. (17) “Fault” means a default, breach, or wrongful act or omission;
18. (18) “Fungible goods” means:
  1. (A) Goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or
  2. (B) Goods that by agreement are treated as equivalent;
19. (19) “Genuine” means free of forgery or counterfeiting;
20. (20) “Good faith”, except as otherwise provided in chapter 5 of this title, means honesty in fact in the conduct or transaction concerned;
21. (21) “Holder” means the person:
  1. (A) In possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession;
  2. (B) In possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or
  3. (C) In control of a negotiable electronic document of title;
22. (22) “Insolvency proceeding” includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved;
23. (23) “Insolvent” means:
  1. (A) Having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;
  2. (B) Being unable to pay debts as they become due; or
  3. (C) Being insolvent within the meaning of federal bankruptcy law;
24. (24) “Money” means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two (2) or more countries;
25. (25) “Organization” means a person other than an individual;
26. (26) “Party”, as distinguished from “third party”, means a person that has engaged in a transaction or made an agreement subject to chapters 1-9 of this title;
27. (27) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity;
28. (28) “Present value” means the amount as of a date certain of one (1) or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into;
29. (29) “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property;
30. (30) “Purchaser” means a person that takes by purchase;
31. (31) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
32. (32) “Remedy” means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal;
33. (33) “Representative” means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate;
34. (34) “Right” includes remedy;
35. (35) “Security interest” means an interest in personal property or fixtures that secures payment or performance of an obligation. “Security interest” includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to chapter 9 of this title. “Security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under § 47-2-401, but a buyer may also acquire a “security interest” by complying with chapter 9 of this title. Except as otherwise provided in § 47-2-505, the right of a seller or lessor of goods under chapter 2 or 2A of this title to retain or acquire possession of the goods is not a “security interest”, but a seller or lessor may also acquire a “security interest” by complying with chapter 9 of this title. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under § 47-2-401 is limited in effect to a reservation of a “security interest”. Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to § 47-2-401;
36. (36) “Send” in connection with a writing, record, or notice means:
  1. (A) To deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances; or
  2. (B) In any other way to cause to be received any record or notice within the time it would have arrived if properly sent;
37. (37) “Signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing;
38. (38) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States;
39. (39) “Surety” includes a guarantor or other secondary obligor;
40. (40) “Term” means a portion of an agreement that relates to a particular matter;
41. (41) “Unauthorized signature” means a signature made without actual, implied, or apparent authority. The term includes a forgery;
42. (42) “Warehouse receipt” means a document of title issued by a person engaged in the business of storing goods for hire;
43. (43) “Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning.

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§ 47-1-202. Notice — Knowledge.

(a) Subject to subsection (f), a person has “notice” of a fact if the person:
1. (1) Has actual knowledge of it;
2. (2) Has received a notice or notification of it; or
3. (3) From all the facts and circumstances known to the person at the time in question, has reason to know that it exists.
(b) “Knowledge” means actual knowledge. “Knows” has a corresponding meaning.
(c) “Discover”, “learn”, or words of similar import refer to knowledge rather than to reason to know.
(d) A person “notifies” or “gives” a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.
(e) Subject to subsection (f), a person “receives” a notice or notification when:
1. (1) It comes to that person's attention; or
2. (2) It is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.
(f) Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual's attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.

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47-4A-106(a)

§ 47-1-203. Lease distinguished from security interest.

(a) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.
(b) A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee; and:
1. (1) The original term of the lease is equal to or greater than the remaining economic life of the goods;
2. (2) The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
3. (3) The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or
4. (4) The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.
(c) A transaction in the form of a lease does not create a security interest merely because:
1. (1) The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;
2. (2) The lessee assumes risk of loss of the goods;
3. (3) The lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;
4. (4) The lessee has an option to renew the lease or to become the owner of the goods;
5. (5) The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or
6. (6) The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.
(d) Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:
1. (1) When the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or
2. (2) When the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.
(e) The “remaining economic life of the goods” and “reasonably predictable” fair market rent, fair market value, or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into.

§ 47-1-204. Value.

Except as otherwise provided in chapters 3, 4, and 5 of this title, a person gives value for rights if the person acquires them:
1. (1) In return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;
2. (2) As security for, or in total or partial satisfaction of, a preexisting claim;
3. (3) By accepting delivery under a preexisting contract for purchase; or
4. (4) In return for any consideration sufficient to support a simple contract.

§ 47-1-205. Reasonable time — Seasonableness.

(a) Whether a time for taking an action required by chapters 1-9 of this title is reasonable depends on the nature, purpose, and circumstances of the action.
(b) An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.

§ 47-1-206. Presumptions.

Whenever chapters 1-9 of this title create a “presumption” with respect to a fact, or provide that a fact is “presumed”, the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.

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47-10-103(b)(2)

Part 3 Territorial Applicability and General Rules

§ 47-1-301. Territorial applicability — Parties' power to choose applicable law.

(a) Except as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.
(b) In the absence of an agreement effective under subsection (a), and except as provided in subsection (c), chapters 1-9 of this title apply to transactions bearing an appropriate relation to this state.
(c) If one (1) of the following provisions of chapters 1-9 of this title specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:
1. (1) Section 47-2-402;
2. (2) Sections 47-2A-105 and 47-2A-106;
3. (3) Section 47-4-102;
4. (4) Section 47-4A-507;
5. (5) Section 47-5-116;
6. (6) Section 47-8-110; or
7. (7) Sections 47-9-301 — 47-9-307.

§ 47-1-302. Variation by agreement.

(a) Except as otherwise provided in subsection (b) or elsewhere in chapters 1-9 of this title, the effect of provisions of chapters 1-9 of this title may be varied by agreement.
(b) The obligations of good faith, diligence, reasonableness, and care prescribed by chapters 1-9 of this title may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever chapters 1-9 of this title require an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.
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(c) The presence in certain provisions of chapters 1-9 of this title of the phrase “unless otherwise agreed”, or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.

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47-2A-518(2)
47-2A-519(1)
47-2A-527(2)
47-2A-528(1)
47-5-103(c)

§ 47-1-303. Course of performance, course of dealing, and usage of trade.

(a) A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if:
1. (1) The agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and
2. (2) The other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.
(b) A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
(c) A “usage of trade” is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.
(d) A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
(e) Except as otherwise provided in subsection (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:
1. (1) Express terms prevail over course of performance, course of dealing, and usage of trade;
2. (2) Course of performance prevails over course of dealing and usage of trade; and
3. (3) Course of dealing prevails over usage of trade.
(f) Subject to § 47-2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.
(g) Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.

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§ 47-1-304. Obligation of good faith.

Every contract or duty within chapters 1-9 of this title imposes an obligation of good faith in its performance and enforcement.

§ 47-1-305. Remedies to be liberally administered.

(a) The remedies provided by chapters 1-9 of this title must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in chapters 1-9 of this title or by other rule of law.
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(b) Any right or obligation declared by chapters 1-9 of this title is enforceable by action unless the provision declaring it specifies a different and limited effect.

§ 47-1-306. Waiver or renunciation of claim or right after breach.

A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.

§ 47-1-307. Prima facie evidence by third-party documents.

A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher's or inspector's certificate, consular invoice, or any other document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.

§ 47-1-308. Performance or acceptance under reservation of rights.

(a) A party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as “without prejudice”, “under protest”, or the like are sufficient.
(b) Subsection (a) does not apply to an accord and satisfaction.

§ 47-1-309. Option to accelerate at will.

A term providing that one (1) party or that party's successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or when the party “deems itself insecure”, or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against which the power has been exercised.

§ 47-1-310. Subordinated obligations.

An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated. Subordination does not create a security interest as against either the common debtor or a subordinated creditor.

Chapter 2 Sales

Part 1 Short Title, General Construction and Subject Matter

§ 47-2-101. Short title.

This chapter shall be known and may be cited as Uniform Commercial Code — Sales.

§ 47-2-102. Scope — Certain security and other transactions excluded from this chapter.

Unless the context otherwise requires, this chapter applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this chapter impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

§ 47-2-103. Definitions and index of definitions.

(1) In this chapter unless the context otherwise requires:
1. (a) “Buyer” means a person who buys or contracts to buy goods.
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2. (b) “Good faith” in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
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3. (c) “Receipt” of goods means taking physical possession of them.
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4. (d) “Seller” means a person who sells or contracts to sell goods.
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(2) Other definitions applying to this chapter or to specified parts thereof, and the sections in which they appear are:
1. “Acceptance.” § 47-2-606.
2. “Banker's credit.” § 47-2-325.
3. “Between merchants.” § 47-2-104.
4. “Cancellation.” § 47-2-106(4).
5. “Commercial unit.” § 47-2-105.
6. “Confirmed credit.” § 47-2-325.
7. “Conforming to contract.” § 47-2-106.
8. “Contract for sale.” § 47-2-106.
9. “Cover.” § 47-2-712.
10. “Entrusting.” § 47-2-403.
11. “Financing agency.” § 47-2-104.
12. “Future goods.” § 47-2-105.
13. “Goods.” § 47-2-105.
14. “Identification.” § 47-2-501.
15. “Installment contract.” § 47-2-612.
16. “Letter of credit.” § 47-2-325.
17. “Lot.” § 47-2-105.
18. “Merchant.” § 47-2-104.
19. “Overseas.” § 47-2-323.
20. “Person in position of seller.” § 47-2-707.
21. “Present sale.” § 47-2-106.
22. “Sale.” § 47-2-106.
23. “Sale on approval.” § 47-2-326.
24. “Sale or return.” § 47-2-326.
25. “Termination.” § 47-2-106.
(3) “Control” as provided in § 47-7-106 and the following definitions in other chapters apply to this chapter:
1. “Check.” § 47-3-104.
2. “Consignee.” § 47-7-102.
3. “Consignor.” § 47-7-102.
4. “Consumer goods.” § 47-9-102.
5. “Dishonor.” § 47-3-502.
6. “Draft.” § 47-3-104.
(4) In addition chapter 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this chapter.

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47-7-102(b)(3)

§ 47-2-104. Definitions — “Merchant” — “Financing agency” — “Between merchants.”

(1) “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
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(2) “Financing agency” means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller's draft or making advances against it or by merely taking it for collection whether or not documents of title accompany or associated with the draft. “Financing agency” includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (§ 47-2-707).
(3) “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.
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§ 47-2-105. Definitions — Transferability — “Goods” — “Future goods” — “Lot” — “Commercial unit.”

(1) “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (chapter 8 of this title) and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (§ 47-2-107).
(2) Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are “future goods.” A purported present sale of future goods or of any interest therein operates as a contract to sell.
(3) There may be a sale of a part interest in existing identified goods.
(4) An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the seller's interest in the bulk be sold to the buyer who then becomes an owner in common.
(5) “Lot” means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.
(6) “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.

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47-2-103(2)

§ 47-2-106. Definitions — “Contract” — “Agreement” — “Contract for sale” — “Sale” — “Present sale” — “Conforming to contract” — “Termination” — “Cancellation.”

(1) In this chapter unless the context otherwise requires “contract” and “agreement” are limited to those relating to the present or future sale of goods. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing of title from the seller to the buyer for a price (§ 47-2-401). A “present sale” means a sale which is accomplished by the making of the contract.
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(2) Goods or conduct including any part of a performance are “conforming” or conform to the contract when they are in accordance with the obligations under the contract.
(3) “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On “termination” all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.
(4) “Cancellation” occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of “termination” except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.
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§ 47-2-107. Goods to be severed from realty — Recording.

(1) A contract for the sale of minerals or the like including oil and gas or a structure or its materials to be removed from realty is a contract for the sale of goods within this chapter if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.
(2) A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this chapter whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.
(3) The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer's rights under the contract for sale.

Part 2 Form, Formation and Readjustment of Contract

§ 47-2-201. Formal requirements — Statute of frauds.

(1) Except as otherwise provided in this section, a contract for sale of goods for the price of five hundred dollars ($500) or more is not enforceable by way of action or defense unless there is some writing or record sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing or record is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing or record.
(2) Between merchants if within a reasonable time a writing or record in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten (10) days after it is received.
(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable:
1. (a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
2. (b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
3. (c) with respect to goods for which payment has been made and accepted or which have been received and accepted (§ 47-2-606).

§ 47-2-202. Final written expression — Parol or extrinsic evidence.

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:
1. (a) By course of performance, course of dealing or usage of trade, pursuant to § 47-1-303; and
2. (b) By evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

§ 47-2-203. Seals inoperative.

The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer.

§ 47-2-204. Formation in general.

(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(3) Even though one (1) or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

§ 47-2-205. Firm offers.

An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three (3) months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

§ 47-2-206. Offer and acceptance in formation of contract.

(1) Unless otherwise unambiguously indicated by the language or circumstances:
1. (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
2. (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

§ 47-2-207. Additional terms in acceptance or confirmation.

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
1. (a) the offer expressly limits acceptance to the terms of the offer;
2. (b) they materially alter it; or
3. (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of chapters 1-9 of this title.

§ 47-2-208. [Repealed]

§ 47-2-209. Modification, rescission and waiver.

(1) An agreement modifying a contract within this chapter needs no consideration to be binding.
(2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
(3) The requirements of the statute of frauds section of this chapter (§ 47-2-201) must be satisfied if the contract as modified is within its provisions.
(4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.
(5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

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§ 47-2-210. Delegation of performance — Assignment of rights.

(1) A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.
(2) Except as otherwise provided in § 47-9-406, unless otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreement otherwise.
(3) The creation, attachment, perfection, or enforcement of a security interest in the seller's interest under a contract is not a transfer that materially changes the duty of or increases materially the burden or risk imposed on the buyer or impairs materially the buyer's chance of obtaining return performance within the purview of subsection (2) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the seller. Even in that event, the creation, attachment, perfection, and enforcement of the security interest remain effective, but (i) the seller is liable to the buyer for damages caused by the delegation to the extent that the damages could not reasonably be prevented by the buyer; and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the contract for sale or an injunction against enforcement of the security interest or consummation of the enforcement.
(4) Unless the circumstances indicate the contrary a prohibition of assignment of “the contract” is to be construed as barring only the delegation to the assignee of the assignor's performance.
(5) An assignment of “the contract” or of “all my rights under the contract” or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.
(6) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (§ 47-2-609).

Part 3 General Obligation and Construction of Contract

§ 47-2-301. General obligation of parties.

The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.

§ 47-2-302. Unconscionable contract or clause.

(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

§ 47-2-303. Allocation or division of risks.

Where this chapter allocates a risk or a burden as between the parties “unless otherwise agreed,” the agreement may not only shift the allocation but may also divide the risk or burden.

§ 47-2-304. Price payable in money, goods, realty, or otherwise.

(1) The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.
(2) Even though all or part of the price is payable in an interest in realty the transfer of the goods and the seller's obligations with reference to them are subject to this chapter, but not the transfer of the interest in realty or the transferor's obligations in connection therewith.

§ 47-2-305. Open price term.

(1) The parties, if they so intend, can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if:
1. (a) nothing is said as to price; or
2. (b) the price is left to be agreed by the parties and they fail to agree; or
3. (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one (1) party the other may at his option treat the contract as cancelled or himself fix a reasonable price.
(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

§ 47-2-306. Output, requirements and exclusive dealings.

(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

§ 47-2-307. Delivery in single lot or several lots.

Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot.

§ 47-2-308. Absence of specified place for delivery.

Unless otherwise agreed:
1. (a) the place for delivery of goods is the seller's place of business or if he has none his residence; but
2. (b) in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and
3. (c) documents of title may be delivered through customary banking channels.

§ 47-2-309. Absence of specific time provisions — Notice of termination.

(1) The time for shipment or delivery or any other action under a contract if not provided in this chapter or agreed upon shall be a reasonable time.
(2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.
(3) Termination of a contract by one (1) party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.

§ 47-2-310. Open time for payment or running of credit — Authority to ship under reservation.

Unless otherwise agreed:
1. (a) Payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and
2. (b) If the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (§ 47-2-513); and
3. (c) If delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due regardless of where the goods are to be received (i) at the time and place at which the buyer is to receive delivery of the tangible documents or (ii) at the time the buyer is to receive delivery of the electronic documents and at the seller's place of business or, if none, the seller's residence; and
4. (d) Where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.

§ 47-2-311. Options and cooperation respecting performance.

(1) An agreement for sale which is otherwise sufficiently definite (§ 47-2-204(3)) to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one (1) of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness.
(2) Unless otherwise agreed specifications relating to assortment of the goods are at the buyer's option and except as otherwise provided in § 47-2-319(1)(c) and (3) specifications or arrangements relating to shipment are at the seller's option.
(3) Where such specification would materially affect the other party's performance but is not seasonably made or where one (1) party's cooperation is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies:
1. (a) is excused for any resulting delay in his own performance; and
2. (b) may also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.

§ 47-2-312. Warranty of title and against infringement — Buyer's obligation against infringement.

(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that:
1. (a) the title conveyed shall be good, and its transfer rightful; and
2. (b) the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.
(2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.
(3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

§ 47-2-313. Express warranties by affirmation, promise, description, sample.

(1) Express warranties by the seller are created as follows:
1. (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
2. (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
3. (c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.

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47-18-3101(6)

§ 47-2-314. Implied warranty — Merchantability — Usage of trade.

(1) Unless excluded or modified (§ 47-2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
(2) Goods to be merchantable must be at least such as:
1. (a) pass without objection in the trade under the contract description; and
2. (b) in the case of fungible goods, are of fair average quality within the description; and
3. (c) are fit for the ordinary purposes for which such goods are used; and
4. (d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
5. (e) are adequately contained, packaged, and labeled as the agreement may require; and
6. (f) conform to the promises or affirmations of fact made on the container or label if any.
(3) Unless excluded or modified (§ 47-2-316) other implied warranties may arise from course of dealing or usage of trade.

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47-18-104(b)(19)

§ 47-2-315. Implied warranty — Fitness for particular purpose — Exception for certain livestock.

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose. With respect to the sale of cattle, hogs, sheep, and horses, there shall be no implied warranty that the cattle, hogs, sheep, and horses are free from disease.

§ 47-2-316. Exclusion or modification of warranties.

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this chapter on parol or extrinsic evidence (§ 47-2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.
(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.”
(3) Notwithstanding subsection (2):
1. (a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” “with all faults” or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and
2. (b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
3. (c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
(4) Remedies for breach of warranty can be limited in accordance with the provisions of this chapter on liquidation or limitation of damages and on contractual modification of remedy (§§ 47-2-718 and 47-2-719).
(5) The implied warranties of merchantability and fitness shall not be applicable to a contract for the sale, procurement, processing, distribution or use of human tissues (such as corneas, bones, or organs), whole blood, plasma, blood products, or blood derivatives. Such human tissues, whole blood, plasma, blood products, or blood derivatives shall not be considered commodities subject to sale or barter, and the transplanting, injection, transfusion or other transfer of such substances into the human body shall be considered a medical service.

§ 47-2-317. Cumulation and conflict of warranties express or implied.

Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:
1. (a) Exact or technical specifications displace an inconsistent sample or model or general language of description.
2. (b) A sample from an existing bulk displaces inconsistent general language of description.
3. (c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

§ 47-2-318. Third party beneficiaries of warranties express or implied.

A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.

§ 47-2-319. O.B. and F.A.S. terms.

(1) Unless otherwise agreed the term F.O.B. (which means “free on board”) at a named place, even though used only in connection with the stated price, is a delivery term under which:
1. (a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this chapter (§ 47-2-504) and bear the expense and risk of putting them into the possession of the carrier; or
2. (b) when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this chapter (§ 47-2-503);
3. (c) when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this chapter on the form of bill of lading (§ 47-2-323).
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(2) Unless otherwise agreed the term F.A.S. vessel (which means “free alongside”) at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must:
1. (a) at his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and
2. (b) obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.
(3) Unless otherwise agreed in any case falling within subsection (1)(a) or (c) or subsection (2) the buyer must seasonably give any needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this chapter (§ 47-2-311). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment.
(4) Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

§ 47-2-320. I.F. and C. & F. terms.

(1) The term C.I.F. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. The term C. & F. or C.F. means that the price so includes cost and freight to the named destination.
(2) Unless otherwise agreed and even though used only in connection with the stated price and destination, the term C.I.F. destination or its equivalent requires the seller at his own expense and risk to:
1. (a) put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination; and
2. (b) load the goods and obtain a receipt from the carrier (which may be contained in the bill of lading) showing that the freight has been paid or provided for; and
3. (c) obtain a policy or certificate of insurance, including any war risk insurance, of a kind and on terms then current at the port of shipment in the usual amount, in the currency of the contract, shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern; but the seller may add to the price the amount of the premium for any such war risk insurance; and
4. (d) prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; and
5. (e) forward and tender with commercial promptness all the documents in due form and with any endorsement necessary to perfect the buyer's rights.
(3) Unless otherwise agreed the term C. & F. or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a C.I.F. term except the obligation as to insurance.
(4) Under the term C.I.F. or C. & F. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

§ 47-2-321. I.F. or C. & F. — “Net landed weights” — “Payment on arrival” — Warranty of condition on arrival.

Under a contract containing a term C.I.F. or C. & F.:
1. (1) Where the price is based on or is to be adjusted according to “net landed weights,” “delivered weights,” “out turn” quantity or quality or the like, unless otherwise agreed the seller must reasonably estimate the price. The payment due on tender of the documents called for by the contract is the amount so estimated, but after final adjustment of the price a settlement must be made with commercial promptness.
2. (2) An agreement described in subsection (1) or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage and the like in transportation but has no effect on the place or time of identification to the contract for sale or delivery or on the passing of the risk of loss.
3. (3) Unless otherwise agreed where the contract provides for payment on or after arrival of the goods the seller must before payment allow such preliminary inspection as is feasible; but if the goods are lost, delivery of the documents and payment are due when the goods should have arrived.

§ 47-2-322. Delivery “ex-ship.”

(1) Unless otherwise agreed a term for delivery of goods “ex-ship” (which means from the carrying vessel) or in equivalent language is not restricted to a particular ship and requires delivery from a ship which has reached a place at the named port of destination where goods of the kind are usually discharged.
(2) Under such a term unless otherwise agreed:
1. (a) the seller must discharge all liens arising out of the carriage and furnish the buyer with a direction which puts the carrier under a duty to deliver the goods; and
2. (b) the risk of loss does not pass to the buyer until the goods leave the ship's tackle or are otherwise properly unloaded.

§ 47-2-323. Form of bill of lading required in overseas shipment — “Overseas.”

(1) Where the contract contemplates overseas shipment and contains a term C.I.F. or C. & F. or F.O.B. vessel, the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. & F., received for shipment.
(2) Where in a case within subdivision (1) a tangible bill of lading has been issued in a set of parts, unless otherwise agreed if the documents are not to be sent from abroad the buyer may demand tender of the full set; otherwise only one (1) part of the bill of lading need be tendered. Even if the agreement expressly requires a full set:
1. (a) due tender of a single part is acceptable within the provisions of this chapter on cure of improper delivery (§ 47-2-508(1)); and
2. (b) even though the full set is demanded, if the documents are sent from abroad the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity which the buyer in good faith deems adequate.
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(3) A shipment by water or by air or a contract contemplating such shipment is “overseas” insofar as by usage of trade or agreement it is subject to the commercial, financing or shipping practices characteristic of international deep water commerce.

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47-2-103(2)

§ 47-2-324. “No arrival, no sale” term.

Under a term “no arrival, no sale” or terms of like meaning, unless otherwise agreed:
1. (a) the seller must properly ship conforming goods and if they arrive by any means he must tender them on arrival but he assumes no obligation that the goods will arrive unless he has caused the nonarrival; and
2. (b) where without fault of the seller the goods are in part lost or have so deteriorated as no longer to conform to the contract or arrive after the contract time, the buyer may proceed as if there had been casualty to identified goods (§ 47-2-613).

§ 47-2-325. “Letter of credit” term — “Confirmed credit.”

(1) Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.
(2) The delivery to seller of a proper letter of credit suspends the buyer's obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from him.
(3) Unless otherwise agreed the term “letter of credit” or “banker's credit” in a contract for sale means an irrevocable credit issued by a financing agency of good repute and, where the shipment is overseas, of good international repute. The term “confirmed credit” means that the credit must also carry the direct obligation of such an agency which does business in the seller's financial market.

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47-2-103(2)

§ 47-2-326. Sale on approval and sale or return — Consignment sales and rights of creditors.

(1) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is:
1. (a) a “sale on approval” if the goods are delivered primarily for use, and
2. (b) a “sale or return” if the goods are delivered primarily for resale.
(2) Goods held on approval are not subject to the claims of the buyer's creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer's possession.
(3) Any “or return” term of a contract for sale is to be treated as a separate contract for sale within the Statute of Frauds section of this chapter (§ 47-2-201) and as contradicting the sale aspect of the contract within the provisions of this chapter on parol or extrinsic evidence (§ 47-2-202).

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§ 47-2-327. Special incidents of sale on approval and sale or return.

(1) Under a sale on approval unless otherwise agreed:
1. (a) although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance; and
2. (b) use of the goods consistent with the purpose of trial is not acceptance but failure seasonably to notify the seller of election to return the goods is acceptance, and if the goods conform to the contract acceptance of any part is acceptance of the whole; and
3. (c) after due notification of election to return, the return is at the seller's risk and expense but a merchant buyer must follow any reasonable instructions.
(2) Under a sale or return unless otherwise agreed:
1. (a) the option to return extends to the whole or any commercial unit of the goods while in substantially their original condition, but must be exercised seasonably; and
2. (b) the return is at the buyer's risk and expense.

§ 47-2-328. Sale by auction.

(1) In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.
(2) A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.
(3) Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract his bid until the auctioneer's announcement of completion of the sale, but a bidder's retraction does not revive any previous bid.
(4) If the auctioneer knowingly receives a bid on the seller's behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.

Part 4 Title, Creditors and Good Faith Purchasers

§ 47-2-401. Passing of title — Reservation for security — Limited application of this section.

Each provision of this chapter with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this chapter and matters concerning title become material the following rules apply:
1. (1) Title to goods cannot pass under a contract for sale prior to their identification to the contract (§ 47-2-501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by chapters 1-9 of this title. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the chapter on Secured Transactions (chapter 9 of this title), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed to by the parties.
2. (2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading:
  1. (A) If the contract requires or authorizes the seller to send the goods to the buyer but does not require the seller to deliver them at destination, title passes to the buyer at the time and place of shipment; but
  2. (B) If the contract requires delivery at destination, title passes on tender there.
3. (3) Unless otherwise explicitly agreed where delivery is to be made without moving the goods:
  1. (A) If the seller is to deliver a tangible document of title, title passes at the time when and the place where he delivers such documents and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or
  2. (B) If the goods are at the time of contracting already identified and no documents of title are to be delivered, title passes at the time and place of contracting.
4. (4) A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a “sale.”

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§ 47-2-402. Rights of seller's creditors against sold goods.

(1) Except as provided in subsections (2) and (3), rights of unsecured creditors of the seller with respect to goods which have been identified to a contract for sale are subject to the buyer's rights to recover the goods under this chapter (§§ 47-2-502 and 47-2-716).
(2) A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against him a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are situated, except that retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent.
(3) Nothing in this chapter shall be deemed to impair the rights of creditors of the seller:
1. (a) under the provisions of the chapter on Secured Transactions (chapter 9 of this title); or
2. (b) where identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like and is made under circumstances which under any rule of law of the state where the goods are situated would apart from this chapter constitute the transaction a fraudulent transfer or voidable preference.

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§ 47-2-403. Power to transfer — Good faith purchase of goods — “Entrusting.”

(1) A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though:
1. (a) the transferor was deceived as to the identity of the purchaser, or
2. (b) the delivery was in exchange for a check which is later dishonored, or
3. (c) it was agreed that the transaction was to be a “cash sale,” or
4. (d) the delivery was procured through fraud punishable as larcenous under the criminal law.
(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.
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(3) “Entrusting” includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.
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(4) The rights of other purchasers of goods and of lien creditors are governed by the chapters on Secured Transactions (chapter 9 of this title) and Documents of Title (chapter 7 of this title).

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Part 5 Performance

§ 47-2-501. Insurable interest in goods — Manner of identification of goods.

(1) The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and he has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs:
1. (a) when the contract is made if it is for the sale of goods already existing and identified;
2. (b) if the contract is for the sale of future goods other than those described in paragraph (c), when goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers;
3. (c) when the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within twelve (12) months after contracting or for the sale of crops to be harvested within twelve (12) months or the next normal harvest season after contracting whichever is longer.
(2) The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him and where the identification is by the seller alone he may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified.
(3) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.

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47-2-103(2)

§ 47-2-502. Buyer's right to goods on seller's insolvency.

(1) Subject to subsections (2) and (3) and even though the goods have not been shipped, a buyer who has paid a part or all of the price of goods in which the buyer has a special property under the provisions of the immediately preceding section may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:
1. (a) in the case of goods bought for personal, family, or household purposes, the seller repudiates or fails to deliver as required by the contract; or
2. (b) in all cases, the seller becomes insolvent within ten (10) days after receipt of the first installment on their price.
(2) The buyer's right to recover the goods under subsection (1)(a) vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
(3) If the identification creating the buyer's special property has been made by the buyer, the buyer acquires the right to recover the goods only if they conform to the contract for sale.

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47-2-402(1)

§ 47-2-503. Manner of seller's tender of delivery.

(1) Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this chapter, and in particular:
1. (A) Tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but
2. (B) Unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.
(2) Where the case is within the next section respecting shipment tender requires that the seller comply with its provisions.
(3) Where the seller is required to deliver at a particular destination tender requires that he comply with subsection (1) and also in any appropriate case tender documents as described in subsections (4) and (5) of this section.
(4) Where goods are in the possession of a bailee and are to be delivered without being moved:
1. (A) Tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer's right to possession of the goods; but
2. (B) Tender to the buyer of a non-negotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer reasonably objects, and except as otherwise provided in chapter 9 of this title receipt by the bailee of notification of the buyer's rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the non-negotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.
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(5) Where the contract requires the seller to deliver documents:
1. (A) The seller must tender all such documents in correct form, except as provided in this chapter with respect to bills of lading in a set, pursuant to § 47-2-323(2); and
2. (B) Tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes non-acceptance or rejection.

§ 47-2-504. Shipment by seller.

Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must:
1. (a) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and
2. (b) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and
3. (c) promptly notify the buyer of the shipment.
4. Failure to notify the buyer under paragraph (c) or to make a proper contract under paragraph (a) is a ground for rejection only if material delay or loss ensues.

§ 47-2-505. Seller's shipment under reservation.

(1) Where the seller has identified goods to the contract by or before shipment:
1. (a) his procurement of a negotiable bill of lading to his own order or otherwise reserves in him a security interest in the goods. His procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the seller's expectation of transferring that interest to the person named.
2. (b) a non-negotiable bill of lading to himself or his nominee reserves possession of the goods as security but except in a case of conditional delivery (§ 47-2-507(2)) a non-negotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.
(2) When shipment by the seller with reservation of a security interest is in violation of the contract for sale it constitutes an improper contract for transportation within the preceding section but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the seller's powers as a holder of a negotiable document of title.

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§ 47-2-506. Rights of financing agency.

(1) A financing agency by paying or purchasing for value a draft which relates to a shipment of goods acquires to the extent of the payment or purchase and in addition to its own rights under the draft and any document of title securing it any rights of the shipper in the goods including the right to stop delivery and the shipper's right to have the draft honored by the buyer.
(2) The right to reimbursement of a financing agency which has in good faith honored or purchased the draft under commitment to or authority from the buyer is not impaired by subsequent discovery of defects with reference to any relevant document which was apparently regular.

§ 47-2-507. Effect of seller's tender — Delivery on condition.

(1) Tender of delivery is a condition to the buyer's duty to accept the goods and, unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.
(2) Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due.

§ 47-2-508. Cure by seller of improper tender or delivery — Replacement.

(1) Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.
(2) Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

§ 47-2-509. Risk of loss in the absence of breach.

(1) Where the contract requires or authorizes the seller to ship the goods by carrier:
1. (A) If it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (§ 47-2-505); but
2. (B) If it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.
(2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer:
1. (A) On his receipt of possession or control of a negotiable document of title covering the goods; or
2. (B) On acknowledgment by the bailee of the buyer's right to possession of the goods; or
3. (C) After his receipt of possession or control of a non-negotiable document of title or other direction to deliver in a record, as provided in § 47-2-503(4)(B).
(3) In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.
(4) The provisions of this section are subject to contrary agreement of the parties and to the provisions of this chapter on sale on approval (§ 47-2-327) and on effect of breach on risk of loss (§ 47-2-510).

§ 47-2-510. Effect of breach on risk of loss.

(1) Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.
(2) Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.
(3) Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.

§ 47-2-511. Tender of payment by buyer — Payment by check.

(1) Unless otherwise agreed tender of payment is a condition to the seller's duty to tender and complete any delivery.
(2) Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.
(3) Subject to the provisions of chapters 1-9 of this title on the effect of an instrument on an obligation (§ 47-3-310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.

§ 47-2-512. Payment by buyer before inspection.

(1) Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless:
1. (a) the nonconformity appears without inspection; or
2. (b) despite tender of the required documents the circumstances would justify injunction against honor under the provisions of chapters 1-9 of this title (§ 47-5-109(b)).
(2) Payment pursuant to subsection (1) does not constitute an acceptance of goods or impair the buyer's right to inspect or any of his remedies.

§ 47-2-513. Buyer's right to inspection of goods.

(1) Unless otherwise agreed and subject to subsection (3), where goods are tendered or delivered or identified to the contract for sale, the buyer has a right before payment or acceptance to inspect them at any reasonable place and time and in any reasonable manner. When the seller is required or authorized to send the goods to the buyer, the inspection may be after their arrival.
(2) Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.
(3) Unless otherwise agreed and subject to the provisions of this chapter on C.I.F. contracts (§ 47-2-321(3)), the buyer is not entitled to inspect the goods before payment of the price when the contract provides:
1. (a) for delivery “C.O.D.” or on other like terms; or
2. (b) for payment against documents of title, except where such payment is due only after the goods are to become available for inspection.
(4) A place or method of inspection fixed by the parties is presumed to be exclusive but unless otherwise expressly agreed it does not postpone identification or shift the place for delivery or for passing the risk of loss. If compliance becomes impossible, inspection shall be as provided in this section unless the place or method fixed was clearly intended as an indispensable condition failure of which avoids the contract.

§ 47-2-514. When documents deliverable on acceptance — When on payment.

Unless otherwise agreed documents against which a draft is drawn are to be delivered to the drawee on acceptance of the draft if it is payable more than three (3) days after presentment; otherwise, only on payment.

§ 47-2-515. Preserving evidence of goods in dispute.

In furtherance of the adjustment of any claim or dispute:
1. (a) either party on reasonable notification to the other and for the purpose of ascertaining the facts and preserving evidence has the right to inspect, test and sample the goods including such of them as may be in the possession or control of the other; and
2. (b) the parties may agree to a third party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in any subsequent litigation or adjustment.

Part 6 Breach, Repudiation and Excuse

§ 47-2-601. Buyer's rights on improper delivery.

Subject to the provisions of this chapter on breach in installment contracts (§ 47-2-612) and unless otherwise agreed under the sections on contractual limitations of remedy (§§ 47-2-718 and 47-2-719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:
1. (a) reject the whole; or
2. (b) accept the whole; or
3. (c) accept any commercial unit or units and reject the rest.

§ 47-2-602. Manner and effect of rightful rejection.

(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.
(2) Subject to the provisions of the two (2) following sections on rejected goods (§§ 47-2-603 and 47-2-604):
1. (a) after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and
2. (b) if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this chapter (§ 47-2-711(3)), he is under a duty after rejection to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them; but
3. (c) the buyer has no further obligations with regard to goods rightfully rejected.
(3) The seller's rights with respect to goods wrongfully rejected are governed by the provisions of this chapter on seller's remedies in general (§ 47-2-703).

§ 47-2-603. Merchant buyer's duties as to rightfully rejected goods.

(1) Subject to any security interest in the buyer (§ 47-2-711(3)), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller's account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.
(2) When the buyer sells goods under subsection (1), he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding ten percent (10%) on the gross proceeds.
(3) In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.

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47-2-602(2)

§ 47-2-604. Buyer's options as to salvage of rightfully rejected goods.

Subject to the provisions of the immediately preceding section on perishables if the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller's account or reship them to him or resell them for the seller's account with reimbursement as provided in the preceding section. Such action is not acceptance or conversion.

§ 47-2-605. Waiver of buyer's objections by failure to particularize.

(1) The buyer's failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach:
1. (a) where the seller could have cured it if stated seasonably; or
2. (b) between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.
(2) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.

§ 47-2-606. What constitutes acceptance of goods.

(1) Acceptance of goods occurs when the buyer:
1. (a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or
2. (b) fails to make an effective rejection (§ 47-2-602(1)), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or
3. (c) does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.
(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.

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47-2-103(2)

§ 47-2-607. Effect of acceptance — Notice of breach — Burden of establishing breach after acceptance — Notice of claim or litigation to person answerable over.

(1) The buyer must pay at the contract rate for any goods accepted.
(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this chapter for nonconformity.
(3) Where a tender has been accepted:
1. (a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and
2. (b) if the claim is one for infringement or the like (§ 47-2-312(3)) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.
(4) The burden is on the buyer to establish any breach with respect to the goods accepted.
(5) Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over:
1. (a) he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two (2) litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.
2. (b) if the claim is one for infringement or the like (§ 47-2-312(3)) the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.
(6) The provisions of subsections (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (§ 47-2-312(3)).

§ 47-2-608. Revocation of acceptance in whole or in part.

(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it:
1. (a) on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
2. (b) without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.
(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.
(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

§ 47-2-609. Right to adequate assurance of performance.

(1) A contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.
(2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.
(3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.
(4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty (30) days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

§ 47-2-610. Anticipatory repudiation.

When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may:
1. (a) for a commercially reasonable time await performance by the repudiating party; or
2. (b) resort to any remedy for breach (§ 47-2-703 or § 47-2-711), even though he has notified the repudiating party that he would await the latter's performance and has urged retraction; and
3. (c) in either case suspend his own performance or proceed in accordance with the provisions of this chapter on the seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (§ 47-2-704).

§ 47-2-611. Retraction of anticipatory repudiation.

(1) Until the repudiating party's next performance is due he can retract his repudiation unless the aggrieved party has since the repudiation cancelled or materially changed his position or otherwise indicated that he considers the repudiation final.
(2) Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of this chapter (§ 47-2-609).
(3) Retraction reinstates the repudiating party's rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

§ 47-2-612. “Installment contract” — Breach.

(1) An “installment contract” is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent.
(2) The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.
(3) Whenever nonconformity or default with respect to one (1) or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.

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47-2-103(2)

§ 47-2-613. Casualty to identified goods.

Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a “no arrival, no sale” term (§ 47-2-324) then:
1. (a) if the loss is total the contract is avoided; and
2. (b) if the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.

§ 47-2-614. Substituted performance.

(1) Where without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.
(2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer's obligation unless the regulation is discriminatory, oppressive or predatory.

§ 47-2-615. Excuse by failure of presupposed conditions.

Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
1. (a) Delay in delivery or nondelivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
2. (b) Where the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
3. (c) The seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.

§ 47-2-616. Procedure on notice claiming excuse.

(1) Where the buyer receives notification of a material or indefinite delay or an allocation justified under the preceding section he may by written notification to the seller as to any delivery concerned, and where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this chapter relating to breach of installment contracts (§ 47-2-612), then also as to the whole:
1. (a) terminate and thereby discharge any unexecuted portion of the contract; or
2. (b) modify the contract by agreeing to take his available quota in substitution.
(2) If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding thirty (30) days the contract lapses with respect to any deliveries affected.
(3) The provisions of this section may not be negated by agreement except insofar as the seller has assumed a greater obligation under the preceding section.

Part 7 Remedies

§ 47-2-701. Remedies for breach of collateral contracts not impaired.

Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this chapter.

§ 47-2-702. Seller's remedies on discovery of buyer's insolvency.

(1) Where the seller discovers the buyer to be insolvent he may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this chapter (§ 47-2-705).
(2) Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten (10) days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three (3) months before delivery the ten (10) day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer's fraudulent or innocent misrepresentation of solvency or of intent to pay.
(3) The seller's right to reclaim under subsection (2) is subject to the rights of a buyer in ordinary course or other good faith purchaser or lien creditor under this chapter (§ 47-2-403). Successful reclamation of goods excludes all other remedies with respect to them.

§ 47-2-703. Seller's remedies in general.

Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (§ 47-2-612), then also with respect to the whole undelivered balance, the aggrieved seller may:
1. (a) withhold delivery of such goods;
2. (b) stop delivery by any bailee as hereafter provided (§ 47-2-705);
3. (c) proceed under the next section respecting goods still unidentified to the contract;
4. (d) resell and recover damages as hereafter provided (§ 47-2-706);
5. (e) recover damages for nonacceptance (§ 47-2-708) or in a proper case the price (§ 47-2-709);
6. (f) cancel.

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§ 47-2-704. Seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods.

(1) An aggrieved seller under the preceding section may:
1. (a) identify to the contract conforming goods not already identified if at the time he learned of the breach they are in his possession or control;
2. (b) treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.
(2) Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.

§ 47-2-705. Seller's stoppage of delivery in transit or otherwise.

(1) The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (§ 47-2-702) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.
(2) As against such buyer the seller may stop delivery until:
1. (a) receipt of the goods by the buyer; or
2. (b) acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or
3. (c) such acknowledgment to the buyer by a carrier by reshipment or as a warehouse; or
4. (d) negotiation to the buyer of any negotiable document of title covering the goods.
(3)
1. (a) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
2. (b) After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.
3. (c) If a negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of possession or control of the document.
4. (d) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.

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§ 47-2-706. Seller's resale including contract for resale.

(1) Under the conditions stated in § 47-2-703 on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this chapter (§ 47-2-710), but less expenses saved in consequence of the buyer's breach.
(2) Except as otherwise provided in subsection (3) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.
(3) Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.
(4) Where the resale is at public sale:
1. (a) only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and
2. (b) it must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and
3. (c) if the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and
4. (d) the seller may buy.
(5) A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one (1) or more of the requirements of this section.
(6) The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (§ 47-2-707) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as hereinafter defined (§ 47-2-711(3)).

§ 47-2-707. “Person in the position of a seller”

(1) A “person in the position of a seller” includes as against a principal an agent who has paid or become responsible for the price of goods on behalf of his principal or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.
(2) A person in the position of a seller may as provided in this chapter withhold or stop delivery (§ 47-2-705) and resell (§ 47-2-706) and recover incidental damages (§ 47-2-710).

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47-2-103(2)

§ 47-2-708. Seller's damages for nonacceptance or repudiation.

(1) Subject to subsection (2) and to the provisions of this chapter with respect to proof of market price (§ 47-2-723), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this chapter (§ 47-2-710), but less expenses saved in consequence of the buyer's breach.
(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this chapter (§ 47-2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

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47-2-723(1)

§ 47-2-709. Action for the price.

(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price:
1. (a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and
2. (b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.
(2) Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.
(3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (§ 47-2-610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for nonacceptance under the preceding section.

§ 47-2-710. Seller's incidental damages.

Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach.

§ 47-2-711. Buyer's remedies in general — Buyer's security interest in rejected goods.

(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (§ 47-2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid:
1. (a) cover and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or
2. (b) recover damages for nondelivery as provided in this chapter (§ 47-2-713).
(2) Where the seller fails to deliver or repudiates the buyer may also:
1. (a) if the goods have been identified recover them as provided in this chapter (§ 47-2-502); or
2. (b) in a proper case obtain specific performance or replevy the goods as provided in this chapter (§ 47-2-716).
(3) On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (§ 47-2-706).
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§ 47-2-712. “Cover” — Buyer's procurement of substitute goods.

(1) After a breach within the preceding section the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
(2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (§ 47-2-715), but less expenses saved in consequence of the seller's breach.
(3) Failure of the buyer to effect cover within this section does not bar him from any other remedy.

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47-2-103(2)

§ 47-2-713. Buyer's damages for nondelivery or repudiation.

(1) Subject to the provisions of this chapter with respect to proof of market price (§ 47-2-723), the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this chapter (§ 47-2-715), but less expenses saved in consequence of the seller's breach.
(2) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

§ 47-2-714. Buyer's damages for breach in regard to accepted goods.

(1) Where the buyer has accepted goods and given notification (§ 47-2-607(3)) he may recover as damages for any nonconformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.
(2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
(3) In a proper case any incidental and consequential damages under the next section may also be recovered.

§ 47-2-715. Buyer's incidental and consequential damages.

(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
(2) Consequential damages resulting from the seller's breach include:
1. (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
2. (b) injury to person or property proximately resulting from any breach of warranty.

§ 47-2-716. Buyer's right to specific performance or replevin.

(1) Specific performance may be decreed where the goods are unique or in other proper circumstances.
(2) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
(3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer's right of replevin vests upon acquisition of a special property, even if the seller had not been repudiated or failed to deliver.

§ 47-2-717. Deduction of damages from the price.

The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.

§ 47-2-718. Liquidation or limitation of damages — Deposits.

(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
(2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds:
1. (a) the amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subsection (1), or
2. (b) in the absence of such terms, twenty percent (20%) of the value of the total performance for which the buyer is obligated under the contract or five hundred dollars ($500), whichever is smaller.
(3) The buyer's right to restitution under subsection (2) is subject to offset to the extent that the seller establishes:
1. (a) a right to recover damages under the provisions of this chapter other than subsection (1), and
2. (b) the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.
(4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this chapter on resale by an aggrieved seller (§ 47-2-706).

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§ 47-2-719. Contractual modification or limitation of remedy.

(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages:
1. (a) the agreement may provide for remedies in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and
2. (b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in chapters 1-9 of this title.
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

§ 47-2-720. Effect of “cancellation” or “rescission” on claims for antecedent breach.

Unless the contrary intention clearly appears, expressions of “cancellation” or “rescission” of the contract or the like shall not be construed as a renunciation or discharge of any claim in damages for an antecedent breach.

§ 47-2-721. Remedies for fraud.

Remedies for material misrepresentation or fraud include all remedies available under this chapter for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy.

§ 47-2-722. Who can sue third parties for injury to goods.

Where a third party so deals with goods which have been identified to a contract for sale as to cause actionable injury to a party to that contract:
1. (a) a right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods; and if the goods have been destroyed or converted a right of action is also in the party who either bore the risk of loss under the contract for sale or has since the injury assumed that risk as against the other;
2. (b) if at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the contract for sale and there is no arrangement between them for disposition of the recovery, his suit or settlement is, subject to his own interest, as a fiduciary for the other party to the contract;
3. (c) either party may with the consent of the other sue for the benefit of whom it may concern.

§ 47-2-723. Proof of market price — Time and place.

(1) If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, any damages based on market price (§ 47-2-708 or § 47-2-713) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.
(2) If evidence of a price prevailing at the times or places described in this chapter is not readily available the price prevailing within any reasonable time before or after the time described or at any other place which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the cost of transporting the goods to or from such other place.
(3) Evidence of a relevant price prevailing at a time or place other than the one described in this chapter offered by one (1) party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise.

§ 47-2-724. Admissibility of market quotations.

Whenever the prevailing price or value of any goods regularly bought and sold in any established commodity market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of such market shall be admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility.

§ 47-2-725. Statute of limitations in contracts for sale.

(1) An action for breach of any contract for sale must be commenced within four (4) years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one (1) year but may not extend it.
(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
(3) When an action is commenced within the time limited by subsection (1), but the judgment or decree is rendered against the plaintiff upon any ground not concluding his right of action, or when the judgment or decree is rendered in favor of plaintiff, and is arrested or reversed on appeal, the plaintiff or his representatives or privies as the case may be, may, from time to time, commence a new action within one (1) year after the judgment, reversal or arrest.
(4) This section does not alter the law or tolling of the statute of limitations nor does it apply to causes of action which have accrued before midnight (12:00 midnight) June 30, 1964.
(5) A counterclaim or third-party complaint is not barred by the statute of limitations provided by this section if it was not barred at the time the claims asserted in the complaint were interposed. If a nonsuit is taken as to the original civil action, any counterclaim, cross-claim or third-party complaint arising from such action shall not be terminated but may proceed as an original civil action. However, if a counterclaim, cross-claim or third-party complaint is filed as a civil action as permitted by this subsection and such action does not proceed to an adjudication on the merits of such claim, the defendant shall have the right to file a counterclaim, cross-claim or third-party complaint within the time allowed for the filing of a responsive pleading only if the original action is reinstituted pursuant to § 28-1-105. Any counterclaim, cross-claim or third party complaint arising from an action or suit originally commenced in general sessions court and subsequently recommenced as an original action or as a counterclaim, cross-claim or third party complaint pursuant to this section in circuit or chancery court according to the provisions of § 28-1-105, shall not be subject to the monetary jurisdictional limit originally imposed in general sessions court.

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29-28-103(a)

Chapter 2A Leases

Part 1 General Provisions

§ 47-2A-101. Short title.

This chapter shall be known and may be cited as the Uniform Commercial Code—Leases.

§ 47-2A-102. Scope.

This chapter applies to any transaction, regardless of form, that creates a lease.

§ 47-2A-103. Definitions and index of definitions.

(1) In this chapter unless the context otherwise requires:
1. (a) “Buyer in ordinary course of business” means a person who in good faith and without knowledge that the sale to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. “Buying” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt;
2. (b) “Cancellation” occurs when either party puts an end to the lease contract for default by the other party;
3. (c) “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole;
4. (d) “Conforming” goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract;
5. (e) “Consumer lease” means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose, if the total payments to be made under the lease contract, excluding payments for options to renew or buy, do not exceed twenty-five thousand dollars ($25,000);
6. (f) “Fault” means wrongful act, omission, breach, or default;
7. (g) “Finance lease” means a lease with respect to which:
  1. (i) the lessor does not select, manufacture, or supply the goods;
  2. (ii) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and
  3. (iii) one (1) of the following occurs:
    1. (A) the lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;
    2. (B) the lessee's approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract;
    3. (C) the lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or
    4. (D) if the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (b) that the lessee is entitled under this chapter to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (c) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies;
8. (h) “Goods” means all things that are movable at the time of identification to the lease contract, or are fixtures (§ 47-2A-309), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction. The term also includes the unborn young of animals;
9. (i) “Installment lease contract” means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause “each delivery is a separate lease” or its equivalent;
10. (j) “Lease” means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease;
11. (k) “Lease agreement” means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this chapter. Unless the context clearly indicates otherwise, the term includes a sublease agreement;
12. (l) “Lease contract” means the total legal obligation that results from the lease agreement as affected by this chapter and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract;
13. (m) “Leasehold interest” means the interest of the lessor or the lessee under a lease contract;
14. (n) “Lessee” means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee;
15. (o) “Lessee in ordinary course of business” means a person who in good faith and without knowledge that the lease to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, leases in ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. “Leasing” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a pre-existing lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt;
16. (p) “Lessor” means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor;
17. (q) “Lessor's residual interest” means the lessor's interest in the goods after expiration, termination, or cancellation of the lease contract;
18. (r) “Lien” means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest;
19. (s) “Lot” means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract;
20. (t) “Merchant lessee” means a lessee that is a merchant with respect to goods of the kind subject to the lease;
21. (u) “Present value” means the amount as of a date certain of one (1) or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into;
22. (v) “Purchase” includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods;
23. (w) “Sublease” means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease;
24. (x) “Supplier” means a person from whom a lessor buys or leases goods to be leased under a finance lease;
25. (y) “Supply contract” means a contract under which a lessor buys or leases goods to be leased; and
26. (z) “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.
(2) Other definitions applying to this chapter and the sections in which they appear are:
1. “Accessions.” § 47-2A-310(1);
2. “Construction mortgage.” § 47-2A-309(1)(d);
3. “Encumbrance.” § 47-2A-309(1)(e);
4. “Fixtures.” § 47-2A-309(1)(a);
5. “Fixture filing.” § 47-2A-309(1)(b); and
6. “Purchase money lease.” § 47-2A-309(1)(c).
(3) The following definitions in other chapters apply to this chapter:
1. “Account.” § 47-9-102(a)(2);
2. “Between merchants.” § 47-2-104(3);
3. “Buyer.” § 47-2-103(1)(a);
4. “Chattel paper.” § 47-9-102(a)(11);
5. “Consumer goods.” § 47-9-102(a)(23);
6. “Document.” § 47-9-102(a)(30);
7. “Entrusting.” § 47-2-403(3);
8. “General intangible.” § 47-9-102(a)(42);
9. “Good faith.” § 47-2-103(1)(b);
10. “Instrument.” § 47-9-102(a)(47);
11. “Merchant.” § 47-2-104(1);
12. “Mortgage.” § 47-9-102(a)(55);
13. “Pursuant to commitment.” § 47-9-102(a)(69);
14. “Receipt.” § 47-2-103(1)(c);
15. “Sale.” § 47-2-106(1);
16. “Sale on approval.” § 47-2-326;
17. “Sale or return.” § 47-2-326; and
18. “Seller.” § 47-2-103(1)(d).
(4) In addition chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.

§ 47-2A-104. Leases subject to other law.

(1) A lease, although subject to this chapter, is also subject to any applicable:
1. (a) the certificate of title statutes in title 55;
2. (b) certificate of title statute of another jurisdiction (§ 47-2A-105); or
3. (c) consumer protection statute of this State, or final consumer protection decision of a court of this State existing on July 1, 1994.
(2) In case of conflict between this chapter, other than §§ 47-2A-105, 47-2A-304(3), and 47-2A-305(3), and a statute or decision referred to in subsection (1), the statute or decision controls.
(3) Failure to comply with an applicable law has only the effect specified therein.

§ 47-2A-105. Territorial application of chapter to goods covered by certificate of title.

Subject to the provisions of §§ 47-2A-304(3) and 47-2A-305(3), with respect to goods covered by a certificate of title issued under a statute of this State or of another jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title statute are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until the earlier of (a) surrender of the certificate, or (b) four (4) months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction.

§ 47-2A-106. Limitation on power of parties to consumer lease to choose applicable law and judicial forum.

(1) If the law chosen by the parties to a consumer lease is that of a jurisdiction other than a jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within thirty (30) days thereafter or in which the goods are to be used, the choice is not enforceable.
(2) If the judicial forum chosen by the parties to a consumer lease is a forum that would not otherwise have jurisdiction over the lessee, the choice is not enforceable.

§ 47-2A-107. Waiver or renunciation of claim or right after default.

Any claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.

§ 47-2A-108. Unconscionability.

(1) If the court as a matter of law finds a lease contract or any clause of a lease contract to have been unconscionable at the time it was made the court may refuse to enforce the lease contract, or it may enforce the remainder of the lease contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
(2) With respect to a consumer lease, if the court as a matter of law finds that a lease contract or any clause of a lease contract has been induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from a lease contract, the court may grant appropriate relief.
(3) Before making a finding of unconscionability under subsection (1) or (2), the court, on its own motion or that of a party, shall afford the parties a reasonable opportunity to present evidence as to the setting, purpose, and effect of the lease contract or clause thereof, or of the conduct.
(4) In an action in which the lessee claims unconscionability with respect to a consumer lease:
1. (a) If the court finds unconscionability under subsection (1) or (2), the court shall award reasonable attorney's fees to the lessee.
2. (b) If the court does not find unconscionability and the lessee claiming unconscionability has brought or maintained an action he or she knew to be groundless, the court shall award reasonable attorney's fees to the party against whom the claim is made.
3. (c) In determining attorney's fees, the amount of the recovery on behalf of the claimant under subsections (1) and (2) is not controlling.

§ 47-2A-109. Option to accelerate at will.

(1) A term providing that one party or his or her successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or “when he or she deems himself or herself insecure” or in words of similar import must be construed to mean that he or she has power to do so only if he or she in good faith believes that the prospect of payment or performance is impaired.
(2) With respect to a consumer lease, the burden of establishing good faith under subsection (1) is on the party who exercised the power; otherwise the burden of establishing lack of good faith is on the party against whom the power has been exercised.

§ 47-2A-110. Transactions allowing adjustment of rental price upon sale or disposition.

In the case of motor vehicles, semitrailers, or trailers, as defined in title 55, chapter 1, notwithstanding any other provision of law, a transaction does not create a sale or security interest merely because it provides that the rental price is permitted or required to be adjusted under the agreement either upward or downward by reference to the amount realized upon sale or other disposition of the motor vehicle, semitrailer, or trailer.

§ 47-2A-111. Applicability of chapter.

(a) This chapter shall apply to all leases entered into on or after July 1, 1994. For purposes of this section:
1. (1) Leases that are materially modified or amended in writing on or after July 1, 1994, shall be deemed to have been entered into as of the date of such amendment unless the amendment expressly states otherwise;
2. (2) Each separate schedule or supplement evidencing the leasing of additional items under a master lease agreement shall be deemed to be a separate lease; and
3. (3) A modification or amendment to a master lease agreement shall apply to all schedules or supplements thereto unless expressly or manifestly applicable to fewer than all.
(b) This chapter may be used for guidance in construing leases entered into before July 1, 1994, to the extent that it is not inconsistent with the law of this state existing prior to July 1, 1994.

Part 2 Formation and Construction of Lease Contract

§ 47-2A-201. Statute of frauds.

(1) A lease contract is not enforceable by way of action or defense unless:
1. (a) the total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than one thousand dollars ($1,000); or
2. (b) there is a writing, signed by the party against whom enforcement is sought or by that party's authorized agent, sufficient to indicate that a lease contract has been made between the parties and to describe the goods leased and the lease term.
(2) Any description of leased goods or of the lease term is sufficient and satisfies subsection (1)(b), whether or not it is specific, if it reasonably identifies what is described.
(3) A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under subsection (1)(b) beyond the lease term and the quantity of goods shown in the writing.
(4) A lease contract that does not satisfy the requirements of subsection (1), but which is valid in other respects, is enforceable:
1. (a) if the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale to others in the ordinary course of the lessor's business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement;
2. (b) if the party against whom enforcement is sought admits in that party's pleading, testimony or otherwise in court that a lease contract was made, but the lease contract is not enforceable under this provision beyond the quantity of goods admitted; or
3. (c) with respect to goods that have been received and accepted by the lessee.
(5) The lease term under a lease contract referred to in subsection (4) is:
1. (a) if there is a writing signed by the party against whom enforcement is sought or by that party's authorized agent specifying the lease term, the term so specified;
2. (b) if the party against whom enforcement is sought admits in that party's pleading, testimony, or otherwise in court a lease term, the term so admitted; or
3. (c) a reasonable lease term.

§ 47-2A-202. Final written expression: parol or extrinsic evidence.

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:
1. (a) by course of dealing or usage of trade or by course of performance; and
2. (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

§ 47-2A-203. Seals inoperative.

The affixing of a seal to a writing evidencing a lease contract or an offer to enter into a lease contract does not render the writing a sealed instrument and the law with respect to sealed instruments does not apply to the lease contract or offer.

§ 47-2A-204. Formation in general.

(1) A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a lease contract.
(2) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.
(3) Although one (1) or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy.

§ 47-2A-205. Firm offers.

An offer by a merchant to lease goods to or from another person in a signed writing that by its terms gives assurance it will be held open is not revocable, for lack of consideration, during the time stated or, if no time is stated, for a reasonable time, but in no event may the period of irrevocability exceed three (3) months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

§ 47-2A-206. Offer and acceptance in formation of lease contract.

(1) Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a lease contract must be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.
(2) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

§ 47-2A-207. [Repealed]

§ 47-2A-208. Modification, rescission and waiver.

(1) An agreement modifying a lease contract needs no consideration to be binding.
(2) A signed lease agreement that excludes modification or rescission except by a signed writing may not be otherwise modified or rescinded, but, except as between merchants, such a requirement on a form supplied by a merchant must be separately signed by the other party.
(3) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2), it may operate as a waiver.
(4) A party who has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

§ 47-2A-209. Lessee under finance lease as beneficiary of supply contract.

(1) The benefit of a supplier's promises to the lessor under the supply contract and of all warranties, whether express or implied, including those of any third party provided in connection with or as part of the supply contract, extends to the lessee to the extent of the lessee's leasehold interest under a finance lease related to the supply contract, but is subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom.
(2) The extension of the benefit of a supplier's promises and of warranties to the lessee (subsection (1)) does not: (i) modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or (ii) impose any duty or liability under the supply contract on the lessee.
(3) Any modification or rescission of the supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor is deemed to have assumed, in addition to the obligations of the lessor to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission.
(4) In addition to the extension of the benefit of the supplier's promises and of warranties to the lessee under subsection (1), the lessee retains all rights that the lessee may have against the supplier which arise from an agreement between the lessee and the supplier or under other law.

§ 47-2A-210. Express warranties.

(1) Express warranties by the lessor are created as follows:
1. (a) Any affirmation of fact or promise made by the lessor to the lessee which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise.
2. (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods will conform to the description.
3. (c) Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the lessor use formal words, such as “warrant” or “guarantee,” or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor's opinion or commendation of the goods does not create a warranty.

§ 47-2A-211. Warranties against interference and against infringement — Lessee's obligation against infringement.

(1) There is in a lease contract a warranty that for the lease term no person holds a claim to or interest in the goods that arose from an act or omission of the lessor, other than a claim by way of infringement or the like, which will interfere with the lessee's enjoyment of its leasehold interest.
(2) Except in a finance lease there is in a lease contract by a lessor who is a merchant regularly dealing in goods of the kind a warranty that the goods are delivered free of the rightful claim of any person by way of infringement or the like.
(3) A lessee who furnishes specifications to a lessor or a supplier shall hold the lessor and the supplier harmless against any claim by way of infringement or the like that arises out of compliance with the specifications.

§ 47-2A-212. Implied warranty of merchantability.

(1) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind.
(2) Goods to be merchantable must be at least such as
1. (a) pass without objection in the trade under the description in the lease agreement;
2. (b) in the case of fungible goods, are of fair average quality within the description;
3. (c) are fit for the ordinary purposes for which goods of that type are used;
4. (d) run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;
5. (e) are adequately contained, packaged, and labeled as the lease agreement may require; and
6. (f) conform to any promises or affirmations of fact made on the container or label.
(3) Other implied warranties may arise from course of dealing or usage of trade.

§ 47-2A-213. Implied warranty of fitness for particular purpose.

Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor's skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose. With respect to the leasing of cattle, hogs, sheep and horses, there shall be no implied warranty that the cattle, hogs, sheep and horses are free from disease.

§ 47-2A-214. Exclusion or modification of warranties.

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit a warranty must be construed wherever reasonable as consistent with each other; but, subject to the provisions of § 47-2A-202 on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable.
(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it, the language must mention “merchantability”, be by a writing, and be conspicuous. Subject to subsection (3), to exclude or modify any implied warranty of fitness the exclusion must be by a writing and be conspicuous. Language to exclude all implied warranties of fitness is sufficient if it is in writing, is conspicuous and states, for example, “There is no warranty that the goods will be fit for a particular purpose”.
(3) Notwithstanding subsection (2), but subject to subsection (4),
1. (a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” or “with all faults,” or by other language that in common understanding calls the lessee's attention to the exclusion of warranties and makes plain that there is no implied warranty, if in writing and conspicuous;
2. (b) if the lessee before entering into the lease contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods, there is no implied warranty with regard to defects that an examination ought in the circumstances to have revealed; and
3. (c) an implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade.
(4) To exclude or modify a warranty against interference or against infringement (§ 47-2A-211) or any part of it, the language must be specific, be by a writing, and be conspicuous, unless the circumstances, including course of performance, course of dealing, or usage of trade, give the lessee reason to know that the goods are being leased subject to a claim or interest of any person.

§ 47-2A-215. Cumulation and conflict of warranties express or implied.

Warranties, whether express or implied, must be construed as consistent with each other and as cumulative, but if that construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply:
1. (a) Exact or technical specifications displace an inconsistent sample or model or general language of description.
2. (b) A sample from an existing bulk displaces inconsistent general language of description.
3. (c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

§ 47-2A-216. Third-party beneficiaries of express and implied warranties.

A warranty to or for the benefit of a lessee under this chapter, whether express or implied, extends to any natural person who is in the family or household of the lessee or who is a guest in the lessee's home if it is reasonable to expect that such person may use, consume, or be affected by the goods and who is injured in person by breach of the warranty. This section does not displace § 29-34-104, or any principles of law and equity that extend a warranty to or for the benefit of a lessee to other persons. The operation of this section may not be excluded, modified, or limited, but an exclusion, modification, or limitation of the warranty, including any with respect to rights and remedies, effective against the lessee is also effective against any beneficiary designated under this section.

§ 47-2A-217. Identification.

Identification of goods as goods to which a lease contract refers may be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification occurs:
1. (a) when the lease contract is made if the lease contract is for a lease of goods that are existing and identified;
2. (b) when the goods are shipped, marked, or otherwise designated by the lessor as goods to which the lease contract refers, if the lease contract is for a lease of goods that are not existing and identified; or
3. (c) when the young are conceived, if the lease contract is for a lease of unborn young of animals.

§ 47-2A-218. Insurance and proceeds.

(1) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them.
(2) If a lessee has an insurable interest only by reason of the lessor's identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified.
(3) Notwithstanding a lessee's insurable interest under subsections (1) and (2), the lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee.
(4) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.
(5) The parties by agreement may determine that one (1) or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance.

§ 47-2A-219. Risk of loss.

(1) Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee.
(2) Subject to the provisions of this chapter on the effect of default on risk of loss (§ 47-2A-220), if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply:
1. (a) If the lease contract requires or authorizes the goods to be shipped by carrier
  1. (i) and it does not require delivery at a particular destination, the risk of loss passes to the lessee when the goods are duly delivered to the carrier; but
  2. (ii) if it does require delivery at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the lessee when the goods are there duly so tendered as to enable the lessee to take delivery.
2. (b) If the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the lessee on acknowledgment by the bailee of the lessee's right to possession of the goods.
3. (c) In any case not within subsection (a) or (b), the risk of loss passes to the lessee on the lessee's receipt of the goods if the lessor, or, in the case of a finance lease, the supplier, is a merchant; otherwise the risk passes to the lessee on tender of delivery.

§ 47-2A-220. Effect of default on risk of loss.

(1) Where risk of loss is to pass to the lessee and the time of passage is not stated:
1. (a) If a tender or delivery of goods so fails to conform to the lease contract as to give a right of rejection, the risk of their loss remains with the lessor, or, in the case of a finance lease, the supplier, until cure or acceptance.
2. (b) If the lessee rightfully revokes acceptance, he or she, to the extent of any deficiency in his or her effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning.
(2) Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming goods already identified to a lease contract repudiates or is otherwise in default under the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the extent of any deficiency in his or her effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time.

§ 47-2A-221. Casualty to identified goods.

If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor or the supplier before delivery, or the goods suffer casualty before risk of loss passes to the lessee pursuant to the lease agreement or § 47-2A-219, then:
1. (a) if the loss is total, the lease contract is avoided; and
2. (b) if the loss is partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at his or her option either treat the lease contract as avoided or, except in a finance lease that is not a consumer lease, accept the goods with due allowance from the rent payable for the balance of the lease term for the deterioration or the deficiency in quantity but without further right against the lessor.

Part 3 Effect of Lease Contract

§ 47-2A-301. Enforceability of lease contract.

Except as otherwise provided in this chapter, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods and against creditors of the parties.

§ 47-2A-302. Title to and possession of goods.

Except as otherwise provided in this chapter, each provision of this chapter applies whether the lessor or a third party has title to the goods, and whether the lessor, the lessee, or a third party has possession of the goods, notwithstanding any statute or rule of law that possession or the absence of possession is fraudulent.

§ 47-2A-303. Alienability of party's interest under lease contract or of lessor's residual interest in goods — Delegation of performance — Transfer of rights.

(1) As used in this section, “creation of a security interest” includes the sale of a lease contract that is subject to chapter 9, Secured Transactions, by reason of § 47-9-109(a)(3).
(2) Except as provided in subsection (3) and § 47-9-407, a provision in a lease agreement which (i) prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of an interest of a party under the lease contract or of the lessor's residual interest in the goods, or (ii) makes such a transfer an event of default, gives rise to the rights and remedies provided in subsection (4), but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.
(3) A provision in a lease agreement which (i) prohibits a transfer of a right to damages for default with respect to the whole lease contract or of a right to payment arising out of the transferor's due performance of the transferor's entire obligation, or (ii) makes such a transfer an event of default, is not enforceable, and such a transfer is not a transfer that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract within the purview of subsection (4).
(4) Subject to subsection (3) and § 47-9-407:
1. (a) if a transfer is made which is made an event of default under a lease agreement, the party to the lease contract not making the transfer, unless that party waives the default or otherwise agrees, has the rights and remedies described in § 47-2A-501(2);
2. (b) if paragraph (a) is not applicable and if a transfer is made that (i) is prohibited under a lease agreement or (ii) materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract, unless the party not making the transfer agrees at any time to the transfer in the lease contract or otherwise, then, except as limited by contract, (i) the transferor is liable to the party not making the transfer for damages caused by the transfer to the extent that the damages could not reasonably be prevented by the party not making the transfer and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer.
(5) A transfer of “the lease” or of “all my rights under the lease”, or a transfer in similar general terms, is a transfer of rights and, unless the language or the circumstances, as in a transfer for security, indicate the contrary, the transfer is a delegation of duties by the transferor to the transferee. Acceptance by the transferee constitutes a promise by the transferee to perform those duties. The promise is enforceable by either the transferor or the other party to the lease contract.
(6) Unless otherwise agreed by the lessor and the lessee, a delegation of performance does not relieve the transferor as against the other party of any duty to perform or of any liability for default.
(7) In a consumer lease, to prohibit the transfer of an interest of a party under the lease contract or to make a transfer an event of default, the language must be specific, by a writing, and conspicuous.

§ 47-2A-304. Subsequent lease of goods by lessor.

(1) Subject to § 47-2A-303, a subsequent lessee from a lessor of goods under an existing lease contract obtains, to the extent of the leasehold interest transferred, the leasehold interest in the goods that the lessor had or had power to transfer, and except as provided in subsection (2) and § 47-2A-527(4), takes subject to the existing lease contract. A lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, but only to the extent set forth in the preceding sentence. If goods have been delivered under a transaction of purchase, the lessor has that power even though:
1. (a) the lessor's transferor was deceived as to the identity of the lessor;
2. (b) the delivery was in exchange for a check which is later dishonored;
3. (c) it was agreed that the transaction was to be a “cash sale”; or
4. (d) the delivery was procured through fraud punishable as larcenous under the criminal law.
(2) A subsequent lessee in the ordinary course of business from a lessor who is a merchant dealing in goods of that kind to whom the goods were entrusted by the existing lessee of that lessor before the interest of the subsequent lessee became enforceable against that lessor obtains, to the extent of the leasehold interest transferred, all of that lessor's and the existing lessee's rights to the goods, and takes free of the existing lease contract.
(3) A subsequent lessee from the lessor of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.

§ 47-2A-305. Sale or sublease of goods by lessee.

(1) Subject to the provisions of § 47-2A-303, a buyer or sublessee from the lessee of goods under an existing lease contract obtains, to the extent of the interest transferred, the leasehold interest in the goods that the lessee had or had power to transfer, and except as provided in subsection (2) and § 47-2A-511(4), takes subject to the existing lease contract. A lessee with a voidable leasehold interest has power to transfer a good leasehold interest to a good faith buyer for value or a good faith sublessee for value, but only to the extent set forth in the preceding sentence. When goods have been delivered under a transaction of lease the lessee has that power even though:
1. (a) the lessor was deceived as to the identity of the lessee;
2. (b) the delivery was in exchange for a check which is later dishonored; or
3. (c) the delivery was procured through fraud punishable as larcenous under the criminal law.
(2) A buyer in the ordinary course of business or a sublessee in the ordinary course of business from a lessee who is a merchant dealing in goods of that kind to whom the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the lessor's and lessee's rights to the goods, and takes free of the existing lease contract.
(3) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.

§ 47-2A-306. Priority of certain liens arising by operation of law.

If a person in the ordinary course of his or her business furnishes services or materials with respect to goods subject to a lease contract, a lien upon those goods in the possession of that person given by statute or rule of law for those materials or services takes priority over any interest of the lessor or lessee under the lease contract or this chapter unless the lien is created by statute and the statute provides otherwise or unless the lien is created by rule of law and the rule of law provides otherwise.

§ 47-2A-307. Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.

(1) Except as otherwise provided in § 47-2A-306, a creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) and in §§ 47-2A-306 and 47-2A-308, a creditor of a lessor takes subject to the lease unless the creditor holds a lien that attached to the goods before the lease contract became enforceable.
(3) Except as otherwise provided in §§ 47-9-317, 47-9-321, and 47-9-323, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.

§ 47-2A-308. Special rights of creditors.

(1) A creditor of a lessor in possession of goods subject to a lease contract may treat the lease contract as void if as against the creditor retention of possession by the lessor is fraudulent under any statute or rule of law, but retention of possession in good faith and current course of trade by the lessor for a commercially reasonable time after the lease contract becomes enforceable is not fraudulent.
(2) Nothing in this chapter impairs the rights of creditors of a lessor if the lease contract (a) becomes enforceable, not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security, or the like, and (b) is made under circumstances which under any statute or rule of law apart from this chapter would constitute the transaction a fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor retention of possession by the seller is fraudulent under any statute or rule of law, but retention of possession of the goods pursuant to a lease contract entered into by the seller as lessee and the buyer as lessor in connection with the sale or identification of the goods is not fraudulent if the buyer bought for value and in good faith.

§ 47-2A-309. Lessor's and lessee's rights when goods become fixtures.

(1) In this section:
1. (a) goods are “fixtures” when they become so related to particular real estate that an interest in them arises under real estate law;
2. (b) a “fixture filing” is the filing, in the office where a record of a mortgage on the real estate would be filed or recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of § 47-9-502(a) and (b).
3. (c) a lease is a “purchase money lease” unless the lessee has possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable;
4. (d) a mortgage is a “construction mortgage” to the extent it secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land, if the recorded writing so indicates; and
5. (e) “encumbrance” includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests.
(2) Under this chapter a lease may be of goods that are fixtures or may continue in goods that become fixtures, but no lease exists under this chapter of ordinary building materials incorporated into an improvement on land.
(3) This chapter does not prevent creation of a lease of fixtures pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if:
1. (a) the lease is a purchase money lease, the conflicting interest of the encumbrancer or owner arises before the goods become fixtures, the interest of the lessor is perfected by a fixture filing before the goods become fixtures or within ten (10) days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate; or
2. (b) the interest of the lessor is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the lessor's interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real estate or is in possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not perfected, has priority over the conflicting interest of an encumbrancer or owner of the real estate if:
1. (a) the fixtures are readily removable factory or office machines, readily removable equipment that is not primarily used or leased for use in the operation of the real estate, or readily removable replacements of domestic appliances that are goods subject to a consumer lease, and before the goods become fixtures the lease contract is enforceable; or
2. (b) the conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable; or
3. (c) the encumbrancer or owner has consented in writing to the lease or has disclaimed an interest in the goods as fixtures; or
4. (d) the lessee has a right to remove the goods as against the encumbrancer or owner. If the lessee's right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.
(6) Notwithstanding subsection (4)(a) but otherwise subject to subsections (4) and (5), the interest of a lessor of fixtures, including the lessor's residual interest, is subordinate to the conflicting interest of an encumbrancer of the real estate under a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent given to refinance a construction mortgage, the conflicting interest of an encumbrancer of the real estate under a mortgage has this priority to the same extent as the encumbrancer of the real estate under the construction mortgage.
(7) In cases not within the preceding subsections, priority between the interest of a lessor of fixtures, including the lessor's residual interest, and the conflicting interest of an encumbrancer or owner of the real estate who is not the lessee is determined by the priority rules governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's residual interest, has priority over all conflicting interests of all owners and encumbrancers of the real estate, the lessor or the lessee may (i) on default, expiration, termination, or cancellation of the lease agreement but subject to the agreement and this chapter, or (ii) if necessary to enforce other rights and remedies of the lessor or lessee under this chapter, remove the goods from the real estate, free and clear of all conflicting interests of all owners and encumbrancers of the real estate, but the lessor or lessee must reimburse any encumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in value of the real estate caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.
(9) Even though the lease agreement does not create a security interest, the interest of a lessor of fixtures, including the lessor's residual interest, is perfected by filing a financing statement as a fixture filing for leased goods that are or are to become fixtures in accordance with the relevant provisions of the chapter on secured transactions (chapter 9).

§ 47-2A-310. Lessor's and lessee's rights when goods become accessions.

(1) Goods are “accessions” when they are installed in or affixed to other goods.
(2) The interest of a lessor or a lessee under a lease contract entered into before the goods became accessions is superior to all interests in the whole except as stated in subsection (4).
(3) The interest of a lessor or a lessee under a lease contract entered into at the time or after the goods became accessions is superior to all subsequently acquired interests in the whole except as stated in subsection (4) but is subordinate to interests in the whole existing at the time the lease contract was made unless the holders of such interests in the whole have in writing consented to the lease or disclaimed an interest in the goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease contract described in subsection (2) or (3) is subordinate to the interest of
1. (a) a buyer in the ordinary course of business or a lessee in the ordinary course of business of any interest in the whole acquired after the goods became accessions; or
2. (b) a creditor with a security interest in the whole perfected before the lease contract was made to the extent that the creditor makes subsequent advances without knowledge of the lease contract.
(5) When under subsections (2) or (3) and (4) a lessor or a lessee of accessions holds an interest that is superior to all interests in the whole, the lessor or the lessee may (a) on default, expiration, termination, or cancellation of the lease contract by the other party but subject to the provisions of the lease contract and this chapter, or (b) if necessary to enforce his or her other rights and remedies under this chapter, remove the goods from the whole, free and clear of all interests in the whole, but he or she must reimburse any holder of an interest in the whole who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury but not for any diminution in value of the whole caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.

§ 47-2A-311. Priority subject to subordination.

Nothing in this chapter prevents subordination by agreement by any person entitled to priority.

Part 4 Performance of Lease Contract: Repudiated, Substituted and Excused

§ 47-2A-401. Insecurity — Adequate assurance of performance.

(1) A lease contract imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired.
(2) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable the insecure party may suspend any performance for which he or she has not already received the agreed return.
(3) A repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed thirty (30) days after receipt of a demand by the other party.
(4) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered must be determined according to commercial standards.
(5) Acceptance of any nonconforming delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.

§ 47-2A-402. Anticipatory repudiation.

If either party repudiates a lease contract with respect to a performance not yet due under the lease contract, the loss of which performance will substantially impair the value of the lease contract to the other, the aggrieved party may:
1. (a) for a commercially reasonable time, await retraction of repudiation and performance by the repudiating party;
2. (b) make demand pursuant to § 47-2A-401 and await assurance of future performance adequate under the circumstances of the particular case; or
3. (c) resort to any right or remedy upon default under the lease contract or this chapter, even though the aggrieved party has notified the repudiating party that the aggrieved party would await the repudiating party's performance and assurance and has urged retraction. In addition, whether or not the aggrieved party is pursuing one (1) of the foregoing remedies, the aggrieved party may suspend performance or, if the aggrieved party is the lessor, proceed in accordance with the provisions of this chapter on the lessor's right to identify goods to the lease contract notwithstanding default or to salvage unfinished goods (§ 47-2A-524).

§ 47-2A-403. Retraction of anticipatory repudiation.

(1) Until the repudiating party's next performance is due, the repudiating party can retract the repudiation unless, since the repudiation, the aggrieved party has cancelled the lease contract or materially changed the aggrieved party's position or otherwise indicated that the aggrieved party considers the repudiation final.
(2) Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform under the lease contract and includes any assurance demanded under § 47-2A-401.
(3) Retraction reinstates a repudiating party's rights under a lease contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

§ 47-2A-404. Substituted performance.

(1) If without fault of the lessee, the lessor and the supplier, the agreed berthing, loading, or unloading facilities fail or the agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable, but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted.
(2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation:
1. (a) the lessor may withhold or stop delivery or cause the supplier to withhold or stop delivery unless the lessee provides a means or manner of payment that is commercially a substantial equivalent; and
2. (b) if delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the lessee's obligation unless the regulation is discriminatory, oppressive, or predatory.

§ 47-2A-405. Excused performance.

Subject to § 47-2A-404 on substituted performance, the following rules apply:
1. (a) Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with paragraphs (b) and (c) is not a default under the lease contract if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the lease contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not the regulation or order later proves to be invalid.
2. (b) If the causes mentioned in paragraph (a) affect only part of the lessor's or the supplier's capacity to perform, he or she shall allocate production and deliveries among his or her customers but at his or her option may include regular customers not then under contract for sale or lease as well as his or her own requirements for further manufacture. He or she may so allocate in any manner that is fair and reasonable.
3. (c) The lessor seasonably shall notify the lessee and in the case of a finance lease the supplier seasonably shall notify the lessor and the lessee, if known, that there will be delay or nondelivery and, if allocation is required under paragraph (b), of the estimated quota thus made available for the lessee.

§ 47-2A-406. Procedure on excused performance.

(1) If the lessee receives notification of a material or indefinite delay or an allocation justified under § 47-2A-405, the lessee may by written notification to the lessor as to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (§ 47-2A-510):
1. (a) terminate the lease contract (§ 47-2A-505(2)); or
2. (b) except in a finance lease that is not a consumer lease, modify the lease contract by accepting the available quota in substitution, with due allowance from the rent payable for the balance of the lease term for the deficiency but without further right against the lessor.
(2) If, after receipt of a notification from the lessor under § 47-2A-405, the lessee fails so to modify the lease agreement within a reasonable time not exceeding thirty (30) days, the lease contract lapses with respect to any deliveries affected.

§ 47-2A-407. Irrevocable promises — Finance leases.

(1) In the case of a finance lease that is not a consumer lease the lessee's promises under the lease contract become irrevocable and independent upon the lessee's acceptance of the goods.
(2) A promise that has become irrevocable and independent under subsection (1):
1. (a) is effective and enforceable between the parties, and by or against third parties including assignees of the parties; and
2. (b) is not subject to cancellation, termination, modification, repudiation, excuse, or substitution without the consent of the party to whom the promise runs.
(3) This section does not affect the validity under any other law of a covenant in any lease contract making the lessee's promises irrevocable and independent upon the lessee's acceptance of the goods.

Part 5 Default

A. In General

§ 47-2A-501. Default — Procedure.

(1) Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this chapter.
(2) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement has rights and remedies as provided in this chapter and, except as limited by this chapter, as provided in the lease agreement.
(3) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement may reduce the party's claim to judgment, or otherwise enforce the lease contract by self-help or any available judicial procedure or nonjudicial procedure, including administrative proceeding, arbitration, or the like, in accordance with this chapter.
(4) Except as otherwise provided in § 47-1-305(a) or this chapter or the lease agreement, the rights and remedies referred to in subdivisions (2) and (3) are cumulative.
(5) If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under this part as to the goods, or under other applicable law as to both the real property and the goods in accordance with that party's rights and remedies in respect of the real property, in which case this part does not apply.

§ 47-2A-502. Notice after default.

Except as otherwise provided in this chapter or the lease agreement, the lessor or lessee in default under the lease contract is not entitled to notice of default or notice of enforcement from the other party to the lease agreement.

§ 47-2A-503. Modification or impairment of rights and remedies.

(1) Except as otherwise provided in this chapter, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter.
(2) Resort to a remedy provided under this chapter or in the lease agreement is optional unless the remedy is expressly agreed to be exclusive. If circumstances cause an exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive remedy is unconscionable, remedy may be had as provided in this chapter.
(3) Consequential damages may be liquidated under § 47-2A-504, or may otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion is unconscionable. Limitation, alteration, or exclusion of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation, alteration, or exclusion of damages where the loss is commercial is not prima facie unconscionable.
(4) Rights and remedies on default by the lessor or the lessee with respect to any obligation or promise collateral or ancillary to the lease contract are not impaired by this chapter.

§ 47-2A-504. Liquidation of damages.

(1) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor's residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.
(2) If the lease agreement provides for liquidation of damages, and such provision does not comply with subsection (1), or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this chapter.
(3) If the lessor justifiably withholds or stops delivery of goods because of the lessee's default or insolvency (§ 47-2A-525 or § 47-2A-526), the lessee is entitled to restitution of any amount by which the sum of his or her payments exceeds:
1. (a) the amount to which the lessor is entitled by virtue of terms liquidating the lessor's damages in accordance with subsection (1); or
2. (b) in the absence of those terms, twenty percent (20%) of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or five hundred dollars ($500).
(4) A lessee's right to restitution under subsection (3) is subject to offset to the extent the lessor establishes:
1. (a) a right to recover damages under the provisions of this chapter other than subsection (1); and
2. (b) the amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.

§ 47-2A-505. Cancellation and termination and effect of cancellation, termination, rescission, or fraud on rights and remedies.

(1) On cancellation of the lease contract, all obligations that are still executory on both sides are discharged, but any right based on prior default or performance survives, and the canceling party also retains any remedy for default of the whole lease contract or any unperformed balance.
(2) On termination of the lease contract, all obligations that are still executory on both sides are discharged but any right based on prior default or performance survives.
(3) Unless the contrary intention clearly appears, expressions of “cancellation,” “rescission,” or the like of the lease contract may not be construed as a renunciation or discharge of any claim in damages for an antecedent default.
(4) Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this chapter for default.
(5) Neither rescission nor a claim for rescission of the lease contract nor rejection or return of the goods may bar or be deemed inconsistent with a claim for damages or other right or remedy.

§ 47-2A-506. Statute of limitations.

(1) An action for default under a lease contract, including breach of warranty or indemnity, must be commenced within four (4) years after the cause of action accrued. By the original lease contract the parties may reduce the period of limitation to not less than one (1) year.
(2) A cause of action for default accrues when the act or omission on which the default or breach of warranty is based is or should have been discovered by the aggrieved party, or when the default occurs, whichever is later. A cause of action for indemnity accrues when the act or omission on which the claim for indemnity is based is or should have been discovered by the indemnified party, whichever is later.
(3) When an action is commenced within the time limited by subsection (1), but the judgment or decree is rendered against the plaintiff upon any ground not concluding his right of action, or when the judgment or decree is rendered in favor of plaintiff, and is arrested or reversed on appeal, the plaintiff or his representatives or privies as the case may be, may, from time to time, commence a new action within one (1) year after judgment, reversal or arrest.
(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action that have accrued before this chapter becomes effective.
(5) A counterclaim or third-party complaint is not barred by the statute of limitations provided by this section if it was not barred at the time the claims asserted in the complaint were interposed. If a nonsuit is taken as to the original civil action, any counterclaim, cross-claim or third-party complaint arising from such action shall not be terminated but may proceed as an original civil action. However, if a counterclaim, cross-claim or third-party complaint is filed as a civil action as permitted by this subsection and such action does not proceed to an adjudication on the merits of such claim, the defendant shall have the right to file a counterclaim, cross-claim or third-party complaint within the time allowed for filing of a responsive pleading only if the original action is reinstituted pursuant to § 28-1-105. Any counterclaim, cross-claim or third-party complaint arising from an action or suit originally commenced in general sessions court and subsequently recommenced as an original action or as a counterclaim, cross-claim or third-party complaint pursuant to this section in circuit or chancery court according to the provisions of § 28-1-105, shall not be subject to the monetary jurisdictional limit originally imposed in general sessions court.

§ 47-2A-507. Proof of market rent — Time and place.

(1) Damages based on market rent (§ 47-2A-519 or § 47-2A-528) are determined according to the rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times specified in §§ 47-2A-519 and 47-2A-528.
(2) If evidence of rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times or places described in this chapter is not readily available, the rent prevailing within any reasonable time before or after the time described or at any other place or for a different lease term which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the difference, including the cost of transporting the goods to or from the other place.
(3) Evidence of a relevant rent prevailing at a time or place or for a lease term other than the one described in this chapter offered by one party is not admissible unless and until he or she has given the other party notice the court finds sufficient to prevent unfair surprise.
(4) If the prevailing rent or value of any goods regularly leased in any established market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of that market are admissible in evidence. The circumstances of the preparation of the report may be shown to affect its weight but not its admissibility.

B. Default by Lessor

§ 47-2A-508. Lessee's remedies.

(1) If a lessor fails to deliver the goods in conformity to the lease contract (§ 47-2A-509) or repudiates the lease contract (§ 47-2A-402), or a lessee rightfully rejects the goods (§ 47-2A-509) or justifiably revokes acceptance of the goods (§ 47-2A-517), then with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (§ 47-2A-510), the lessor is in default under the lease contract and the lessee may:
1. (a) cancel the lease contract (§ 47-2A-505(1));
2. (b) recover so much of the rent and security as has been paid and is just under the circumstances;
3. (c) cover and recover damages as to all goods affected whether or not they have been identified to the lease contract (§§ 47-2A-518 and 47-2A-520), or recover damages for nondelivery (§§ 47-2A-519 and 47-2A-520);
4. (d) exercise any other rights or pursue any other remedies provided in the lease contract.
(2) If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also:
1. (a) if the goods have been identified, recover them (§ 47-2A-522); or
2. (b) in a proper case, obtain specific performance or replevy the goods (§ 47-2A-521).
(3) If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease, and in § 47-2A-519(3).
(4) If a lessor has breached a warranty, whether express or implied, the lessee may recover damages (§ 47-2A-519(4)).
(5) On rightful rejection or justifiable revocation of acceptance, a lessee has a security interest in goods in the lessee's possession or control for any rent and security that has been paid and any expenses reasonably incurred in their inspection, receipt, transportation, and care and custody and may hold those goods and dispose of them in good faith and in a commercially reasonable manner, subject to § 47-2A-527(5).
(6) Subject to the provisions of § 47-2A-407, a lessee, on notifying the lessor of the lessee's intention to do so, may deduct all or any part of the damages resulting from any default under the lease contract from any part of the rent still due under the same lease contract.

§ 47-2A-509. Lessee's rights on improper delivery — Rightful rejection.

(1) Subject to the provisions of § 47-2A-510 on default in installment lease contracts, if the goods or the tender or delivery fail in any respect to conform to the lease contract, the lessee may reject or accept the goods or accept any commercial unit or units and reject the rest of the goods.
(2) Rejection of goods is ineffective unless it is within a reasonable time after tender or delivery of the goods and the lessee seasonably notifies the lessor.

§ 47-2A-510. Installment lease contracts — Rejection and default.

(1) Under an installment lease contract a lessee may reject any delivery that is nonconforming if the nonconformity substantially impairs the value of that delivery and cannot be cured or the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (2) and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.
(2) Whenever nonconformity or default with respect to one (1) or more deliveries substantially impairs the value of the installment lease contract as a whole there is a default with respect to the whole. But, the aggrieved party reinstates the installment lease contract as a whole if the aggrieved party accepts a nonconforming delivery without seasonably notifying of cancellation or brings an action with respect only to past deliveries or demands performance as to future deliveries.

§ 47-2A-511. Merchant lessee's duties as to rightfully rejected goods.

(1) Subject to any security interest of a lessee (§ 47-2A-508(5)), if a lessor or a supplier has no agent or place of business at the market of rejection, a merchant lessee, after rejection of goods in his or her possession or control, shall follow any reasonable instructions received from the lessor or the supplier with respect to the goods. In the absence of those instructions, a merchant lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods for the lessor's account if they threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.
(2) If a merchant lessee (subsection (1)) or any other lessee (§ 47-2A-512) disposes of goods, he or she is entitled to reimbursement either from the lessor or the supplier or out of the proceeds for reasonable expenses of caring for and disposing of the goods and, if the expenses include no disposition commission, to such commission as is usual in the trade, or if there is none, to a reasonable sum not exceeding ten percent (10%) of the gross proceeds.
(3) In complying with this section or § 47-2A-512, the lessee is held only to good faith. Good faith conduct hereunder is neither acceptance or conversion nor the basis of an action for damages.
(4) A purchaser who purchases in good faith from a lessee pursuant to this section or § 47-2A-512 takes the goods free of any rights of the lessor and the supplier even though the lessee fails to comply with one (1) or more of the requirements of this chapter.

§ 47-2A-512. Lessee's duties as to rightfully rejected goods.

(1) Except as otherwise provided with respect to goods that threaten to decline in value speedily (§ 47-2A-511) and subject to any security interest of a lessee (§ 47-2A-508(5)):
1. (a) the lessee, after rejection of goods in the lessee's possession, shall hold them with reasonable care at the lessor's or the supplier's disposition for a reasonable time after the lessee's seasonable notification of rejection;
2. (b) if the lessor or the supplier gives no instructions within a reasonable time after notification of rejection, the lessee may store the rejected goods for the lessor's or the supplier's account or ship them to the lessor or the supplier or dispose of them for the lessor's or the supplier's account with reimbursement in the manner provided in § 47-2A-511; but
3. (c) the lessee has no further obligations with regard to goods rightfully rejected.
(2) Action by the lessee pursuant to subsection (1) is not acceptance or conversion.

§ 47-2A-513. Cure by lessor of improper tender or delivery — Replacement.

(1) If any tender or delivery by the lessor or the supplier is rejected because nonconforming and the time for performance has not yet expired, the lessor or the supplier may seasonably notify the lessee of the lessor's or the supplier's intention to cure and may then make a conforming delivery within the time provided in the lease contract.
(2) If the lessee rejects a nonconforming tender that the lessor or the supplier had reasonable grounds to believe would be acceptable with or without money allowance, the lessor or the supplier may have a further reasonable time to substitute a conforming tender if he or she seasonably notifies the lessee.

§ 47-2A-514. Waiver of lessee's objections.

(1) In rejecting goods, a lessee's failure to state a particular defect that is ascertainable by reasonable inspection precludes the lessee from relying on the defect to justify rejection or to establish default:
1. (a) if, stated seasonably, the lessor or the supplier could have cured it (§ 47-2A-513); or
2. (b) between merchants if the lessor or the supplier after rejection has made a request in writing for a full and final written statement of all defects on which the lessee proposes to rely.
(2) A lessee's failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent in the documents.

§ 47-2A-515. Acceptance of goods.

(1) Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and
1. (a) the lessee signifies or acts with respect to the goods in a manner that signifies to the lessor or the supplier that the goods are conforming or that the lessee will take or retain them in spite of their nonconformity; or
2. (b) the lessee fails to make an effective rejection of the goods (§ 47-2A-509(2)).
(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.

§ 47-2A-516. Effect of acceptance of goods — Notice of default — Burden of establishing default after acceptance — Notice of claim or litigation to person answerable over.

(1) A lessee must pay rent for any goods accepted in accordance with the lease contract, with due allowance for goods rightfully rejected or not delivered.
(2) A lessee's acceptance of goods precludes rejection of the goods accepted. In the case of a finance lease, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it. In any other case, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. Acceptance does not of itself impair any other remedy provided by this chapter or the lease agreement for nonconformity.
(3) If a tender has been accepted:
1. (a) within a reasonable time after the lessee discovers or should have discovered any default, the lessee shall notify the lessor and the supplier, if any, or be barred from any remedy against the party not notified;
2. (b) except in the case of a consumer lease, within a reasonable time after the lessee receives notice of litigation for infringement or the like (§ 47-2A-211) the lessee shall notify the lessor or be barred from any remedy over for liability established by the litigation; and
3. (c) the burden is on the lessee to establish any default.
(4) If a lessee is sued for breach of a warranty or other obligation for which a lessor or a supplier is answerable over the following apply:
1. (a) The lessee may give the lessor or the supplier, or both, written notice of the litigation. If the notice states that the person notified may come in and defend and that if the person notified does not do so that person will be bound in any action against that person by the lessee by any determination of fact common to the two (2) litigations, then unless the person notified after seasonable receipt of the notice does come in and defend that person is so bound.
2. (b) The lessor or the supplier may demand in writing that the lessee turn over control of the litigation including settlement if the claim is one for infringement or the like (§ 47-2A-211) or else be barred from any remedy over. If the demand states that the lessor or the supplier agrees to bear all expense and to satisfy any adverse judgment, then unless the lessee after seasonable receipt of the demand does turn over control the lessee is so barred.
(5) Subsections (3) and (4) apply to any obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like (§ 47-2A-211).

§ 47-2A-517. Revocation of acceptance of goods.

(1) A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if the lessee has accepted it:
1. (a) except in the case of a finance lease, on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
2. (b) without discovery of the nonconformity if the lessee's acceptance was reasonably induced either by the lessor's assurances or, except in the case of a finance lease, by the difficulty of discovery before acceptance.
(2) Except in the case of a finance lease that is not a consumer lease, a lessee may revoke acceptance of a lot or commercial unit if the lessor defaults under the lease contract and the default substantially impairs the value of that lot or commercial unit to the lessee.
(3) If the lease agreement so provides, the lessee may revoke acceptance of a lot or commercial unit because of other defaults by the lessor.
(4) Revocation of acceptance must occur within a reasonable time after the lessee discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by the nonconformity. Revocation is not effective until the lessee notifies the lessor.
(5) A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them.

§ 47-2A-518. Cover — Substitute goods.

(1) After a default by a lessor under the lease contract of the type described in § 47-2A-508(1), or, if agreed, after other default by the lessor, the lessee may cover by making any purchase or lease of or contract to purchase or lease goods in substitution for those due from the lessor.
(2) Except as otherwise provided with respect to damages liquidated in the lease agreement (§ 47-2A-504) or otherwise determined pursuant to agreement of the parties (§§ 47-1-302 and 47-2A-503), if a lessee's cover is by a lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages (i) the present value, as of the date of the commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement minus the present value as of the same date of the total rent for the then remaining lease term of the original lease agreement, and (ii) any incidental or consequential damages, less expenses saved in consequence of the lessor's default.
(3) If a lessee's cover is by lease agreement that for any reason does not qualify for treatment under subsection (2), or is by purchase or otherwise, the lessee may recover from the lessor as if the lessee had elected not to cover and § 47-2A-519 governs.

§ 47-2A-519. Lessee's damages for nondelivery, repudiation, default, and breach of warranty in regard to accepted goods.

(1) Except as otherwise provided with respect to damages liquidated in the lease agreement (§ 47-2A-504) or otherwise determined pursuant to agreement of the parties (§§ 47-1-302 and 47-2A-503), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under § 47-2A-518(2), or is by purchase or otherwise, the measure of damages for nondelivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default, of the then market rent minus the present value as of the same date of the original rent, computed for the remaining lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor's default.
(2) Market rent is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
(3) Except as otherwise agreed, if the lessee has accepted goods and given notification (§ 47-2A-516(3)), the measure of damages for nonconforming tender or delivery or other default by a lessor is the loss resulting in the ordinary course of events from the lessor's default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor's default.
(4) Except as otherwise agreed, the measure of damages for breach of warranty is the present value at the time and place of acceptance of the difference between the value of the use of the goods accepted and the value if they had been as warranted for the lease term, unless special circumstances show proximate damages of a different amount, together with incidental and consequential damages, less expenses saved in consequence of the lessor's default or breach of warranty.

§ 47-2A-520. Lessee's incidental and consequential damages.

(1) Incidental damages resulting from a lessor's default include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of goods rightfully rejected or goods the acceptance of which is justifiably revoked, any commercially reasonable charges, expenses or commissions in connection with effecting cover, and any other reasonable expense incident to the default.
(2) Consequential damages resulting from a lessor's default include:
1. (a) any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
2. (b) injury to person or property proximately resulting from any breach of warranty.

§ 47-2A-521. Lessee's right to specific performance or replevin.

(1) Specific performance may be decreed if the goods are unique or in other proper circumstances.
(2) A decree for specific performance may include any terms and conditions as to payment of the rent, damages, or other relief that the court deems just.
(3) A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like for goods identified to the lease contract if after reasonable effort the lessee is unable to effect cover for those goods or the circumstances reasonably indicate that the effort will be unavailing.

§ 47-2A-522. Lessee's right to goods on lessor's insolvency.

(1) Subject to subsection (2) and even though the goods have not been shipped, a lessee who has paid a part or all of the rent and security for goods identified to a lease contract (§ 47-2A-217) on making and keeping good a tender of any unpaid portion of the rent and security due under the lease contract may recover the goods identified from the lessor if the lessor becomes insolvent within ten (10) days after receipt of the first installment of rent and security.
(2) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.

C. Default by Lessee

§ 47-2A-523. Lessor's remedies.

(1) If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a payment when due or repudiates with respect to a part or the whole, then, with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (§ 47-2A-510), the lessee is in default under the lease contract and the lessor may:
1. (a) cancel the lease contract (§ 47-2A-505(1));
2. (b) proceed respecting goods not identified to the lease contract (§ 47-2A-524);
3. (c) withhold delivery of the goods and take possession of goods previously delivered (§ 47-2A-525);
4. (d) stop delivery of the goods by any bailee (§ 47-2A-526);
5. (e) dispose of the goods and recover damages (§ 47-2A-527), or retain the goods and recover damages (§ 47-2A-528), or in a proper case recover rent (§ 47-2A-529);
6. (f) exercise any other rights or pursue any other remedies provided in the lease contract.
(2) If a lessor does not fully exercise a right or obtain a remedy to which the lessor is entitled under subsection (1), the lessor may recover the loss resulting in the ordinary course of events from the lessee's default as determined in any reasonable manner, together with incidental damages, less expenses saved in consequence of the lessee's default.
(3) If a lessee is otherwise in default under a lease contract, the lessor may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease. In addition, unless otherwise provided in the lease contract:
1. (a) if the default substantially impairs the value of the lease contract to the lessor, the lessor may exercise the rights and pursue the remedies provided in subsections (1) or (2); or
2. (b) if the default does not substantially impair the value of the lease contract to the lessor, the lessor may recover as provided in subsection (2).

§ 47-2A-524. Lessor's right to identify goods to lease contract.

(1) After default by the lessee under the lease contract of the type described in § 47-2A-523(1) or § 47-2A-523(3)(a) or, if agreed, after other default by the lessee, the lessor may:
1. (a) identify to the lease contract conforming goods not already identified if at the time the lessor learned of the default they were in the lessor's or the supplier's possession or control; and
2. (b) dispose of goods (§ 47-2A-527(1)) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.
(2) If the goods are unfinished, in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization, an aggrieved lessor or the supplier may either complete manufacture and wholly identify the goods to the lease contract or cease manufacture and lease, sell, or otherwise dispose of the goods for scrap or salvage value or proceed in any other reasonable manner.

§ 47-2A-525. Lessor's right to possession of goods.

(1) If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.
(2) After a default by the lessee under the lease contract of the type described in § 47-2A-523(1) or § 47-2A-523(3)(a) or, if agreed, after other default by the lessee, the lessor has the right to take possession of the goods. If the lease contract so provides, the lessor may require the lessee to assemble the goods and make them available to the lessor at a place to be designated by the lessor which is reasonably convenient to both parties. Without removal, the lessor may render unusable any goods employed in trade or business, and may dispose of goods on the lessee's premises (§ 47-2A-527).
(3) The lessor may proceed under subsection (2) without judicial process if it can be done without breach of the peace or the lessor may proceed by action.

§ 47-2A-526. Lessor's stoppage of delivery in transit or otherwise.

(1) A lessor may stop delivery of goods in the possession of a carrier or other bailee if the lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload, planeload, or larger shipments of express or freight if the lessee repudiates or fails to make a payment due before delivery, whether for rent, security or otherwise under the lease contract, or for any other reason the lessor has a right to withhold or take possession of the goods.
(2) In pursuing its remedies under subdivision (1), the lessor may stop delivery until:
1. (a) receipt of the goods by the lessee;
2. (b) acknowledgment to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or
3. (c) such an acknowledgment to the lessee by a carrier via reshipment or as a warehouse.
(3)
1. (a) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
2. (b) After notification, the bailee shall hold and deliver the goods according to the directions of the lessor, but the lessor is liable to the bailee for any ensuing charges or damages.
3. (c) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.

§ 47-2A-527. Lessor's rights to dispose of goods.

(1) After a default by a lessee under the lease contract of the type described in § 47-2A-523(1) or § 47-2A-523(3)(a) or after the lessor refuses to deliver or takes possession of goods (§ 47-2A-525 or § 47-2A-526), or, if agreed, after other default by a lessee, the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale, or otherwise.
(2) Except as otherwise provided with respect to damages liquidated in the lease agreement (§ 47-2A-504) or otherwise determined pursuant to agreement of the parties (§§ 47-1-302 and 47-2A-503), if the disposition is by lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages (i) accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement, (ii) the present value, as of the same date, of the total rent for the then remaining lease term of the original lease agreement minus the present value, as of the same date, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement, and (iii) any incidental damages allowed under § 47-2A-530, lease expenses saved in consequence of the lessee's default.
(3) If the lessor's disposition is by lease agreement that for any reason does not qualify for treatment under subsection (2), or is by sale or otherwise, the lessor may recover from the lessee as if the lessor had elected not to dispose of the goods and § 47-2A-528 governs.
(4) A subsequent buyer or lessee who buys or leases from the lessor in good faith for value as a result of a disposition under this section takes the goods free of the original lease contract and any rights of the original lessee even though the lessor fails to comply with one (1) or more of the requirements of this chapter.
(5) The lessor is not accountable to the lessee for any profit made on any disposition. A lessee who has rightfully rejected or justifiably revoked acceptance shall account to the lessor for any excess over the amount of the lessee's security interest (§ 47-2A-508(5)).

§ 47-2A-528. Lessor's damages for non-acceptance, failure to pay, repudiation, or other default.

(1) Except as otherwise provided with respect to damages liquidated in the lease agreement (§ 47-2A-504) or otherwise determined pursuant to agreement of the parties (§§ 47-1-302 and 47-2A-503), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and the disposition is by lease agreement that for any reason does not qualify for treatment under § 47-2A-527(2), or is by sale or otherwise, the lessor may recover from the lessee as damages for a default of the type described in § 47-2A-523(1) or § 47-2A-523(3)(a), or, if agreed, for other default of the lessee, (i) accrued and unpaid rent as of the date of default if the lessee has never taken possession of the goods, or, if the lessee has taken possession of the goods, as of the date the lessor repossesses the goods or an earlier date on which the lessee makes a tender of the goods to the lessor, (ii) the present value as of the date determined under clause (i) of the total rent for the then remaining lease term of the original lease agreement minus the present value as of the same date of the market rent at the place where the goods are located computed for the same lease term, and (iii) any incidental damages allowed under § 47-2A-530, less expenses saved in consequence of the lessee's default.
(2) If the measure of damages provided in subsection (1) is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under § 47-2A-530, due allowance for costs reasonably incurred and due credit for payments or proceeds of disposition.

§ 47-2A-529. Lessor's action for the rent.

(1) After default by the lessee under the lease contract of the type described in § 47-2A-523(1) or § 47-2A-523(3)(a) or, if agreed, after other default by the lessee, if the lessor complies with subsection (2), the lessor may recover from the lessee as damages:
1. (a) for goods accepted by the lessee and not repossessed by or tendered to the lessor, and for conforming goods lost or damaged within a commercially reasonable time after risk of loss passes to the lessee (§ 47-2A-219), (i) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (ii) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (iii) any incidental damages allowed under § 47-2A-530, less expenses saved in consequence of the lessee's default; and
2. (b) for goods identified to the lease contract if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that effort will be unavailing, (i) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (ii) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (iii) any incidental damages allowed under § 47-2A-530, less expenses saved in consequence of the lessee's default.
(2) Except as provided in subsection (3), the lessor shall hold for the lessee for the remaining lease term of the lease agreement any goods that have been identified to the lease contract and are in the lessor's control.
(3) The lessor may dispose of the goods at any time before collection of the judgment for damages obtained pursuant to subsection (1). If the disposition is before the end of the remaining lease term of the lease agreement, the lessor's recovery against the lessee for damages is governed by § 47-2A-527 or § 47-2A-528, and the lessor will cause an appropriate credit to be provided against a judgment for damages to the extent that the amount of the judgment exceeds the recovery available pursuant to § 47-2A-527 or § 47-2A-528.
(4) Payment of the judgment for damages obtained pursuant to subsection (1) entitles the lessee to the use and possession of the goods not then disposed of for the remaining lease term of and in accordance with the lease agreement.
(5) After default by the lessee under the lease contract of the type described in § 47-2A-523(1) or § 47-2A-523(3)(a) or, if agreed, after other default by the lessee, a lessor who is held not entitled to rent under this section must nevertheless be awarded damages for non-acceptance under § 47-2A-527 or § 47-2A-528.

§ 47-2A-530. Lessor's incidental damages.

Incidental damages to an aggrieved lessor include any commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the lessee's default, in connection with return or disposition of the goods, or otherwise resulting from the default.

§ 47-2A-531. Standing to sue third parties for injury to goods.

(1) If a third party so deals with goods that have been identified to a lease contract as to cause actionable injury to a party to the lease contract (a) the lessor has a right of action against the third party, and (b) the lessee also has a right of action against the third party if the lessee:
1. (i) has a security interest in the goods;
2. (ii) has an insurable interest in the goods; or
3. (iii) bears the risk of loss under the lease contract or has since the injury assumed that risk as against the lessor and the goods have been converted or destroyed.
(2) If at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the lease contract and there is no arrangement between them for disposition of the recovery, his or her suit or settlement, subject to his or her own interest, is as a fiduciary for the other party to the lease contract.
(3) Either party with the consent of the other may sue for the benefit of whom it may concern.

§ 47-2A-532. Lessor's rights to residual interest.

In addition to any other recovery permitted by this chapter or other law, the lessor may recover from the lessee an amount that will fully compensate the lessor for any loss of or damage to the lessor's residual interest in the goods caused by the default of the lessee.

Chapter 3 Negotiable Instruments

Part 1 General Provisions and Definitions

§ 47-3-101. Short title.

This chapter may be cited as Uniform Commercial Code — Negotiable Instruments.

§ 47-3-102. Subject matter.

(a) This chapter applies to negotiable instruments. It does not apply to money, to payment orders governed by chapter 4A of this title, or to securities governed by chapter 8 of this title.
(b) If there is conflict between this chapter and chapter 4 or 9 of this title, chapters 4 and 9 of this title govern.
(c) Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this chapter to the extent of the inconsistency.

§ 47-3-103. Definitions.

(a) In this chapter:
1. (1) “Acceptor” means a drawee who has accepted a draft;
2. (2) “Drawee” means a person ordered in a draft to make payment;
3. (3) “Drawer” means a person who signs or is identified in a draft as a person ordering payment;
4. (4) “Maker” means a person who signs or is identified in a note as a person undertaking to pay;
5. (5) “Order” means a written instruction to pay money signed by the person giving the instruction. The instruction may be addressed to any person, including the person giving the instruction, or to one (1) or more persons jointly or in the alternative but not in succession. An authorization to pay is not an order unless the person authorized to pay is also instructed to pay;
6. (6) “Ordinary care” in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged. In the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate the bank's prescribed procedures and the bank's procedures do not vary unreasonably from general banking usage not disapproved by this chapter or chapter 4 of this title;
7. (7) “Party” means a party to an instrument;
8. (8) “Promise” means a written undertaking to pay money signed by the person undertaking to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation;
9. (9) “Prove” with respect to a fact means to meet the burden of establishing the fact (§ 47-1-201); and
10. (10) “Remitter” means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.
(b) Other definitions applying to this chapter and the sections in which they appear are:
1. “Acceptance.” § 47-3-409.
2. “Accommodated party.” § 47-3-419.
3. “Accommodation party.” § 47-3-419.
4. “Alteration.” § 47-3-407.
5. “Anomalous endorsement.” § 47-3-205.
6. “Blank endorsement.” § 47-3-205.
7. “Cashier's check.” § 47-3-104.
8. “Certificate of deposit.” § 47-3-104.
9. “Certified check.” § 47-3-409.
10. “Check.” § 47-3-104.
11. “Consideration.” § 47-3-303.
12. “Draft.” § 47-3-104.
13. “Endorsement.” § 47-3-204.
14. “Endorser.” § 47-3-204.
15. “Holder in due course.” § 47-3-302.
16. “Incomplete instrument.” § 47-3-115.
17. “Instrument.” § 47-3-104.
18. “Issue.” § 47-3-105.
19. “Issuer.” § 47-3-105.
20. “Negotiable instrument.” § 47-3-104.
21. “Negotiation.” § 47-3-201.
22. “Note.” § 47-3-104.
23. “Payable at a definite time.” § 47-3-108.
24. “Payable on demand.” § 47-3-108.
25. “Payable to bearer.” § 47-3-109.
26. “Payable to order.” § 47-3-109.
27. “Payee-initiated demand draft.” § 47-3-104.
28. “Payment.” § 47-3-602.
29. “Person entitled to enforce.” § 47-3-301.
30. “Presentment.” § 47-3-501.
31. “Reacquisition.” § 47-3-207.
32. “Special endorsement.” § 47-3-205.
33. “Teller's check.” § 47-3-104.
34. “Transfer of instrument.” § 47-3-203.
35. “Traveler's check.” § 47-3-104.
36. “Value.” § 47-3-303.
(c) The following definitions in other chapters apply to this chapter:
1. “Bank.” § 47-4-105.
2. “Banking day.” § 47-4-104.
3. “Clearing house.” § 47-4-104.
4. “Collecting bank.” § 47-4-105.
5. “Depositary bank.” § 47-4-105.
6. “Documentary draft.” § 47-4-104.
7. “Intermediary bank.” § 47-4-105.
8. “Item.” § 47-4-104.
9. “Payor bank.” § 47-4-105.
10. “Suspends payments.” § 47-4-104.
(d) In addition, chapter 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this chapter.

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§ 47-3-104. Negotiable instrument.

(a) Except as provided in subsections (c) and (d), “negotiable instrument” means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:
1. (1) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
2. (2) Is payable on demand or at a definite time; and
3. (3) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
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(b) “Instrument” means a negotiable instrument.
(c) An order that meets all of the requirements of subsection (a), except paragraph (1), and otherwise falls within the definition of “check” in subsection (f) is a negotiable instrument and a check.
(d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this chapter.
(e) An instrument is a “note” if it is a promise and is a “draft” if it is an order. If an instrument falls within the definition of both “note” and “draft,” a person entitled to enforce the instrument may treat it as either.
(f) “Check” means (i) a draft, other than a documentary draft, payable on demand and drawn on a bank, (ii) a cashier's check or teller's check, or (iii) a payee-initiated demand draft. An instrument may be a check even though it is described on its face by another term, such as “money order.”
(g) “Cashier's check” means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.
(h) “Teller's check” means a draft drawn by a bank (i) on another bank, or (ii) payable at or through a bank.
(i) “Traveler's check” means an instrument that (i) is payable on demand, (ii) is drawn on or payable at or through a bank, (iii) is designated by the term “traveler's check” or by a substantially similar term, and (iv) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.
(j) “Certificate of deposit” means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.
(k) “Payee-initiated demand draft” means a draft that is not signed by a customer, as defined in § 47-4-104(a)(5), and that is created by a third party under the purported authority of the customer for the purpose of charging the customer's account with a bank. A payee-initiated demand draft may contain any or all of the following:
1. (1) The customer's printed or typewritten name or account number;
2. (2) A notation that the customer authorized the draft; or
3. (3) The statement “No signature required,” “Authorization on file,” “Signature on file,” or words to that effect.
A payee-initiated demand draft shall not include a check purportedly drawn by and bearing the signature of a fiduciary, as defined in § 47-3-307(a)(1).

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§ 47-3-105. Issue of instrument.

(a) “Issue” means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.
(b) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.
(c) “Issuer” applies to issued and unissued instruments and means a maker or drawer of an instrument.

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47-3-103(b)

§ 47-3-106. Unconditional promise or order.

(a) Except as provided in this section, for the purposes of § 47-3-104(a), a promise or order is unconditional unless it states (i) an express condition to payment, (ii) that the promise or order is subject to or governed by another writing, or (iii) that rights or obligations with respect to the promise or order are stated in another writing. A reference to another writing does not of itself make the promise or order conditional.
(b) A promise or order is not made conditional (i) by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration, or (ii) because payment is limited to resort to a particular fund or source.
(c) If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of § 47-3-104(a). If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.
(d) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of § 47-3-104(a); but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.
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§ 47-3-107. Instrument payable in foreign money.

Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.

§ 47-3-108. Payable on demand or at definite time.

(a) A promise or order is “payable on demand” if it (i) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or (ii) does not state any time of payment.
(b) A promise or order is “payable at a definite time” if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of (i) prepayment, (ii) acceleration, (iii) extension at the option of the holder, or (iv) extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.
(c) If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.

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47-3-103(b)

§ 47-3-109. Payable to bearer or to order.

(a) A promise or order is payable to bearer if it:
1. (1) states that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;
2. (2) does not state a payee; or
3. (3) states that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.
(b) A promise or order that is not payable to bearer is payable to order if it is payable (i) to the order of an identified person or (ii) to an identified person or order. A promise or order that is payable to order is payable to the identified person.
(c) An instrument payable to bearer may become payable to an identified person if it is specially endorsed pursuant to § 47-3-205(a). An instrument payable to an identified person may become payable to bearer if it is endorsed in blank pursuant to § 47-3-205(b).

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47-3-103(b)

§ 47-3-110. Identification of person to whom instrument is payable.

(a) The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer even if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one (1) person signs in the name or behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one (1) or more of the signers.
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(b) If the signature of the issuer of an instrument is made by automated means, such as a check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.
(c) A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office, or account number. For the purpose of determining the holder of an instrument, the following rules apply:
1. (1) If an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable. If an instrument is payable to an account identified by number and by the name of a person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number.
2. (2) If an instrument is payable to:
  1. (i) a trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named;
  2. (ii) a person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative;
  3. (iii) a fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or
  4. (iv) an office or to a person described as holding an office, the instrument is payable to the named person, the incumbent of the office, or a successor to the incumbent.
(d) If an instrument is payable to two (2) or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two (2) or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two (2) or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.

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47-3-205(a)

§ 47-3-111. Place of payment.

Except as otherwise provided for items in chapter 4 of this title, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the drawee or maker stated in the instrument. If no address is stated, the place of payment is the place of business of the drawee or maker. If a drawee or maker has more than one (1) place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument. If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker.

§ 47-3-112. Interest.

(a) Unless otherwise provided in the instrument, (i) an instrument is not payable with interest, and (ii) interest on an interest-bearing instrument is payable from the date of the instrument.
(b) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.

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47-14-109(a)

§ 47-3-113. Date of instrument.

(a) An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after date. Except as provided in § 47-4-401(c), an instrument payable on demand is not payable before the date of the instrument.
(b) If an instrument is undated, its date is the date of its issue or, in the case of an unissued instrument, the date it first comes into possession of a holder.

§ 47-3-114. Contradictory terms of instrument.

If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.

§ 47-3-115. Incomplete instrument.

(a) “Incomplete instrument” means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.
(b) Subject to subsection (c), if an incomplete instrument is an instrument under § 47-3-104, it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under § 47-3-104, but, after completion, the requirements of § 47-3-104 are met, the instrument may be enforced according to its terms as augmented by completion.
(c) If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under § 47-3-407.
(d) The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority.

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§ 47-3-116. Joint and several liability — Contribution.

(a) Except as otherwise provided in the instrument, two (2) or more persons who have the same liability on an instrument as makers, drawers, acceptors, endorsers who endorse as joint payees, or anomalous endorsers are jointly and severally liable in the capacity in which they sign.
(b) Except as provided in § 47-3-419(e) or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive from any party having the same joint and several liability contribution in accordance with applicable law.
(c) Discharge of one party having joint and several liability by a person entitled to enforce the instrument does not affect the right under subsection (b) of a party having the same joint and several liability to receive contribution from the party discharged.

§ 47-3-117. Other agreements affecting instrument.

Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented, or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented, or nullified by an agreement under this section, the agreement is a defense to the obligation.

§ 47-3-118. Statute of limitations.

(a) Except as provided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six (6) years after the due date or dates stated in the note or, if a due date is accelerated, within six (6) years after the accelerated due date.
(b) Except as provided in subsection (d) or (e), if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six (6) years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten (10) years.
(c) Except as provided in subsection (d), an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three (3) years after dishonor of the draft or ten (10) years after the date of the draft, whichever period expires first.
(d) An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller's check, cashier's check, or traveler's check must be commenced within three (3) years after demand for payment is made to the acceptor or issuer, as the case may be.
(e)
1. (1) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six (6) years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the six-year period begins when a demand for payment is in effect and the due date has passed.
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2. (2) This subsection (e) is subject to the requirements of § 45-2-710.
(f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced (i) within six (6) years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time, or (ii) within six (6) years after the date of the acceptance if the obligation of the acceptor is payable on demand.
(g) Unless governed by other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this chapter and not governed by this section must be commenced within three (3) years after the cause of action accrues.

§ 47-3-119. Notice of right to defend action.

In an action for breach of an obligation for which a third person is answerable over pursuant to this chapter or chapter 4 of this title, the defendant may give the third person written notice of the litigation, and the person notified may then give similar notice to any other person who is answerable over. If the notice states (i) that the person notified may come in and defend and (ii) that failure to do so will bind the person notified in an action later brought by the person giving the notice as to any determination of fact common to the two (2) litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend.

Part 2 Negotiation, Transfer and Endorsement

§ 47-3-201. Negotiation.

(a) “Negotiation” means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.
(b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its endorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.

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47-3-103(b)

§ 47-3-202. Negotiation subject to rescission.

(a) Negotiation is effective even if obtained (i) from an infant, a corporation exceeding its powers, or a person without capacity, (ii) by fraud, duress, or mistake, or (iii) in breach of duty or as part of an illegal transaction.
(b) To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy.

§ 47-3-203. Transfer of instrument — Rights acquired by transfer.

(a) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.
(b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.
(c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of endorsement by the transferor, the transferee has a specifically enforceable right to the unqualified endorsement of the transferor, but negotiation of the instrument does not occur until the endorsement is made.
(d) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this chapter and has only the rights of a partial assignee.

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47-3-103(b)

§ 47-3-204. Endorsement.

(a) “Endorsement” means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (i) negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring endorser's liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an endorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than endorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.
(b) “Endorser” means a person who makes an endorsement.
(c) For the purpose of determining whether the transferee of an instrument is a holder, an endorsement that transfers a security interest in the instrument is effective as an unqualified endorsement of the instrument.
(d) If an instrument is payable to a holder under a name that is not the name of the holder, endorsement may be made by the holder in the name stated in the instrument or in the holder's name or both, but signature in both names may be required by a person paying or taking the instrument for value or collection.

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47-3-103(b)

§ 47-3-205. Special endorsement — Blank endorsement — Anomalous endorsement.

(a) If an endorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the endorsement identifies a person to whom it makes the instrument payable, it is a “special endorsement.” When specially endorsed, an instrument becomes payable to the identified person and may be negotiated only by the endorsement of that person. The principles stated in § 47-3-110 apply to special endorsements.
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(b) If an endorsement is made by the holder of an instrument and it is not a special endorsement, it is a “blank endorsement.” When endorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially endorsed.
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(c) The holder may convert a blank endorsement that consists only of a signature into a special endorsement by writing, above the signature of the endorser, words identifying the person to whom the instrument is made payable.
(d) “Anomalous endorsement” means an endorsement made by a person who is not the holder of the instrument. An anomalous endorsement does not affect the manner in which the instrument may be negotiated.

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47-3-103(b)

§ 47-3-206. Restrictive endorsement.

(a) An endorsement limiting payment to a particular person or otherwise prohibiting further transfer or negotiation of the instrument is not effective to prevent further transfer or negotiation of the instrument.
(b) An endorsement stating a condition to the right of the endorsee to receive payment does not affect the right of the endorsee to enforce the instrument. A person paying the instrument or taking it for value or collection may disregard the condition, and the rights and liabilities of that person are not affected by whether the condition has been fulfilled.
(c) If an instrument bears an endorsement (i) described in § 47-4-201(b), or (ii) in blank or to a particular bank using the words “for deposit,” “for collection,” or other words indicating a purpose of having the instrument collected by a bank for the endorser or for a particular account, the following rules apply:
1. (1) A person, other than a bank, who purchases the instrument when so endorsed converts the instrument unless the amount paid for the instrument is received by the endorser or applied consistently with the endorsement.
2. (2) A depositary bank that purchases the instrument or takes it for collection when so endorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the endorser or applied consistently with the endorsement.
3. (3) A payor bank that is also the depositary bank or that takes the instrument for immediate payment over the counter from a person other than a collecting bank converts the instrument unless the proceeds of the instrument are received by the endorser or applied consistently with the endorsement.
4. (4) Except as otherwise provided in paragraph (3), a payor bank or intermediary bank may disregard the endorsement and is not liable if the proceeds of the instrument are not received by the endorser or applied consistently with the endorsement.
(d) Except for an endorsement covered by subsection (c), if an instrument bears an endorsement using words to the effect that payment is to be made to the endorsee as agent, trustee, or other fiduciary for the benefit of the endorser or another person, the following rules apply:
1. (1) Unless there is notice of breach of fiduciary duty as provided in § 47-3-307, a person who purchases the instrument from the endorsee or takes the instrument from the endorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the endorsee without regard to whether the endorsee violates a fiduciary duty to the endorser.
2. (2) A subsequent transferee of the instrument or person who pays the instrument is neither given notice nor otherwise affected by the restriction in the endorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.
(e) The presence on an instrument of an endorsement to which this section applies does not prevent a purchaser of the instrument from becoming a holder in due course of the instrument unless the purchaser is a converter under subsection (c) or has notice or knowledge of breach of fiduciary duty as stated in subsection (d).
(f) In an action to enforce the obligation of a party to pay the instrument, the obligor has a defense if payment would violate an endorsement to which this section applies and the payment is not permitted by this section.

§ 47-3-207. Reacquisition.

Reacquisition of an instrument occurs if it is transferred to a former holder, by negotiation or otherwise. A former holder who reacquires the instrument may cancel endorsements made after the reacquirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reacquirer or to bearer, the reacquirer may negotiate the instrument. An endorser whose endorsement is cancelled is discharged, and the discharge is effective against any subsequent holder.

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47-3-103(b)

Part 3 Enforcement of Instruments

§ 47-3-301. Person entitled to enforce instrument.

“Person entitled to enforce” an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to § 47-3-309 or § 47-3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

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§ 47-3-302. Holder in due course.

(a) Subject to subsection (c) and § 47-3-106(d), “holder in due course” means the holder of an instrument if:
1. (1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and
2. (2) the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in § 47-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in § 47-3-305(a).
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(b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (a), but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment, or claim to the instrument.
(c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken (i) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding, (ii) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or (iii) as the successor in interest to an estate or other organization.
(d) If, under § 47-3-303(a) (1), the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.
(e) If (i) the person entitled to enforce an instrument has only a security interest in the instrument and (ii) the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
(f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.
(g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.

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§ 47-3-303. Value and consideration.

(a) An instrument is issued or transferred for value if:
1. (1) the instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;
2. (2) the transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;
3. (3) the instrument is issued or transferred as payment of, or as security for, an antecedent claim against any person, whether or not the claim is due;
4. (4) the instrument is issued or transferred in exchange for a negotiable instrument; or
5. (5) the instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument.
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(b) “Consideration” means any consideration sufficient to support a simple contract. The drawer or maker of an instrument has a defense if the instrument is issued without consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the extent performance of the promise is due and the promise has not been performed. If an instrument is issued for value as stated in subsection (a), the instrument is also issued for consideration.

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§ 47-3-304. Overdue instrument.

(a) An instrument payable on demand becomes overdue at the earliest of the following times:
1. (1) on the day after the day demand for payment is duly made;
2. (2) if the instrument is a check, ninety (90) days after its date; or
3. (3) if the instrument is not a check, when the instrument has been outstanding for a period of time after its date which is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.
(b) With respect to an instrument payable at a definite time the following rules apply:
1. (1) If the principal is payable in installments and a due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured.
2. (2) If the principal is not payable in installments and the due date has not been accelerated, the instrument becomes overdue on the day after the due date.
3. (3) If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.
(c) Unless the due date of principal has been accelerated, an instrument does not become overdue if there is default in payment of interest but no default in payment of principal.

§ 47-3-305. Defenses and claims in recoupment.

(a) Except as stated in subsection (b), the right to enforce the obligation of a party to pay an instrument is subject to the following:
1. (1) a defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings;
2. (2) a defense of the obligor stated in another section of this chapter or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and
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3. (3) a claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.
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  - 47-3-411(d)
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- 47-3-302(a)(2)
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(b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in subsection (a)(1), but is not subject to defenses of the obligor stated in subsection (a)(2) or claims in recoupment stated in subsection (a)(3) against a person other than the holder.
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(c) Except as stated in subsection (d), in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument (§ 47-3-306) of another person, but the other person's claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.
(d) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection (a) that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.

§ 47-3-306. Claims to an instrument.

A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.

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§ 47-3-307. Notice of breach of fiduciary duty.

(a) In this section:
1. (1) “Fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument.
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2. (2) “Represented person” means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in paragraph (1) is owed.
(b) If (i) an instrument is taken from a fiduciary for payment or collection or for value, (ii) the taker has knowledge of the fiduciary status of the fiduciary, and (iii) the represented person makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:
1. (1) Notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person.
2. (2) In the case of an instrument payable to the represented person or the fiduciary as such, the taker has notice of the breach of fiduciary duty if the instrument is (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.
3. (3) If an instrument is issued by the represented person or the fiduciary as such, and made payable to the fiduciary personally, the taker does not have notice of the breach of fiduciary duty unless the taker knows of the breach of fiduciary duty.
4. (4) If an instrument is issued by the represented person or the fiduciary as such, to the taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.

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47-3-206(d)(1)

§ 47-3-308. Proof of signatures and status as holder in due course.

(a) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under § 47-3-402(a).
(b) If the validity of signatures is admitted or proved and there is compliance with subsection (a), a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under § 47-3-301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.
(c) The presumption under subsection (a) that a signature is presumed to be authentic and authorized does not apply to language, numbers, or symbols placed on a payee-initiated demand draft in lieu of the drawer's signature. In an action to enforce a payee-initiated demand draft against the drawer, the plaintiff has the burden of establishing that the drawer is liable thereon.

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47-3-309(b)

§ 47-3-309. Enforcement of lost, destroyed, or stolen instrument.

(a) A person not in possession of an instrument is entitled to enforce the instrument if:
1. (1) The person seeking to enforce the instrument:
  1. (A) Was entitled to enforce the instrument when loss of possession occurred; or
  2. (B) Has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;
2. (2) The loss of possession was not the result of a transfer by the person or a lawful seizure; or
3. (3) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amendable to service of process.
(b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, § 47-3-308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

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§ 47-3-310. Effect of instrument on obligation for which taken.

(a) Unless otherwise agreed, if a certified check, cashier's check, or teller's check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an endorser of the instrument.
(b) Unless otherwise agreed and except as provided in subsection (a), if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:
1. (1) In the case of an uncertified check, suspension of the obligation continues until dishonor of the check or until it is paid or certified. Payment or certification of the check results in discharge of the obligation to the extent of the amount of the check.
2. (2) In the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in discharge of the obligation to the extent of the payment.
3. (3) Except as provided in paragraph (4), if the check or note is dishonored and the obligee of the obligation for which the instrument was taken is the person entitled to enforce the instrument, the obligee may enforce either the instrument or the obligation. In the case of an instrument of a third person which is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation.
4. (4) If the person entitled to enforce the instrument taken for an obligation is a person other than the obligee, the obligee may not enforce the obligation to the extent the obligation is suspended. If the obligee is the person entitled to enforce the instrument but no longer has possession of it because it was lost, stolen, or destroyed, the obligation may not be enforced to the extent of the amount payable on the instrument, and to that extent the obligee's rights against the obligor are limited to enforcement of the instrument.
(c) If an instrument other than one described in subsection (a) or (b) is taken for an obligation, the effect is (i) that stated in subsection (a) if the instrument is one on which a bank is liable as maker or acceptor, or (ii) that stated in subsection (b) in any other case.

§ 47-3-311. Accord and satisfaction by use of instrument.

(a) If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply.
(b) Unless subsection (c) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
(c) Subject to subsection (d), a claim is not discharged under subsection (b) if either of the following applies:
1. (1) The claimant, if an organization, proves that (i) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and (ii) the instrument or accompanying communication was not received by that designated person, office, or place.
2. (2) The claimant, whether or not an organization, proves that within ninety (90) days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with paragraph (1)(i).
(d) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.

§ 47-3-312. Lost, destroyed, or stolen cashier's check, teller's check, or certified check.

(a) In this section:
1. (1) “Check” means a cashier's check, teller's check, or certified check.
2. (2) “Claimant” means a person who claims the right to receive the amount of a cashier's check, teller's check, or certified check that was lost, destroyed, or stolen.
3. (3) “Declaration of loss” means a written statement, made under penalty of perjury, to the effect that (i) the declarer lost possession of a check, (ii) the declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier's check or teller's check, (iii) the loss of possession was not the result of a transfer by the declarer or a lawful seizure, and (iv) the declarer cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
4. (4) “Obligated bank” means the issuer of a cashier's check or teller's check or the acceptor of a certified check.
(b) A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check, if (i) the claimant is the drawer or payee of a certified check or the remitter or payee of a cashier's check or teller's check, (ii) the communication contains or is accompanied by a declaration of loss of the claimant with respect to the check, (iii) the communication is received at a time and in a manner affording the bank a reasonable time to act on it before the check is paid, and (iv) the claimant provides reasonable identification if requested by the obligated bank. Delivery of a declaration of loss is a warranty of the truth of the statements made in the declaration. If a claim is asserted in compliance with this subsection, the following rules apply:
1. (1) The claim becomes enforceable at the later of (i) the time the claim is asserted, or (ii) the 90th day following the date of the check, in the case of a cashier's check or teller's check, or the 90th day following the date of the acceptance, in the case of a certified check.
2. (2) Until the claim becomes enforceable, it has no legal effect and the obligated bank may pay the check or, in the case of a teller's check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check.
3. (3) If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check.
4. (4) When the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check. Subject to § 47-4-302(a) (1), payment to the claimant discharges all liability of the obligated bank with respect to the check.
(c) If the obligated bank pays the amount of a check to a claimant under subsection (b) (4) and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to (i) refund the payment to the obligated bank if the check is paid, or (ii) pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.
(d) If a claimant has the right to assert a claim under subsection (b) and is also a person entitled to enforce a cashier's check, teller's check, or certified check which is lost, destroyed, or stolen, the claimant may assert rights with respect to the check either under this section or § 47-3-309.

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47-3-411(c)(1)

Part 4 Liability of Parties

§ 47-3-401. Signature.

(a) A person is not liable on an instrument unless (i) the person signed the instrument, (ii) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under § 47-3-402, or (iii) if the instrument is a payee-initiated draft, the person is the customer on whose account the instrument is drawn and has authorized its creation according to the terms on its face.
(b) A signature may be made (i) manually or by means of a device or machine, and (ii) by the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.

§ 47-3-402. Signature by representative.

(a) If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the “authorized signature of the represented person” and the represented person is liable on the instrument, whether or not identified in the instrument.
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(b) If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, the following rules apply:
1. (1) If the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument.
2. (2) Subject to subsection (c), if (i) the form of the signature does not show unambiguously that the signature is made in a representative capacity or (ii) the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument. With respect to any other person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.
(c) If a representative signs the name of the representative as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.

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47-3-401(a)

§ 47-3-403. Unauthorized signature.

(a) Unless otherwise provided in this chapter or chapter 4 of this title, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this chapter.
(b) If the signature of more than one person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one of the required signatures is lacking.
(c) The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this chapter which makes the unauthorized signature effective for the purposes of this chapter.

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47-4-104(c)

§ 47-3-404. Impostors — Fictitious payees.

(a) If an impostor, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the impostor, or to a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an endorsement of the instrument by any person in the name of the payee is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(b) If (i) a person whose intent determines to whom an instrument is payable (§ 47-3-110(a) or (b)) does not intend the person identified as payee to have any interest in the instrument, or (ii) the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special endorsement:
1. (1) Any person in possession of the instrument is its holder.
2. (2) An endorsement by any person in the name of the payee stated in the instrument is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(c) Under subsection (a) or (b), an endorsement is made in the name of a payee if (i) it is made in a name substantially similar to that of the payee or (ii) the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.

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§ 47-3-405. Employer's responsibility for fraudulent endorsement by employee.

(a) In this section:
1. (1) “Employee” includes an independent contractor and employee of an independent contractor retained by the employer.
2. (2) “Fraudulent endorsement” means (i) in the case of an instrument payable to the employer, a forged endorsement purporting to be that of the employer, or (ii) in the case of an instrument with respect to which the employer is the issuer, a forged endorsement purporting to be that of the person identified as payee.
3. (3) “Responsibility” with respect to instruments means authority (i) to sign or endorse instruments on behalf of the employer, (ii) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition, (iii) to prepare or process instruments for issue in the name of the employer, (iv) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, (v) to control the disposition of instruments to be issued in the name of the employer, or (vi) to act otherwise with respect to instruments in a responsible capacity. “Responsibility” does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.
(b) For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent endorsement of the instrument, the endorsement is effective as the endorsement of the person to whom the instrument is payable if it is made in the name of that person.
(c) Under subsection (b), an endorsement is made in the name of the person to whom an instrument is payable if (i) it is made in a name substantially similar to the name of that person or (ii) the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.

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§ 47-3-406. Negligence contributing to forged signature or alteration of instrument.

(a) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.
(b) Under subsection (a), if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.
(c) Under subsection (a), the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (b), the burden of proving failure to exercise ordinary care is on the person precluded.

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§ 47-3-407. Alteration.

(a) “Alteration” means (i) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or (ii) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.
(b) Except as provided in subsection (c), an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.
(c) A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument (i) according to its original terms, or (ii) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.

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§ 47-3-408. Drawee not liable on unaccepted draft.

A check or other draft does not of itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts it.

§ 47-3-409. Acceptance of draft — Certified check.

(a) “Acceptance” means the drawee's signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee's signature alone. Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.
(b) A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.
(c) If a draft is payable at a fixed period after sight and the acceptor fails to date the acceptance, the holder may complete the acceptance by supplying a date in good faith.
(d) “Certified check” means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in subsection (a) or by a writing on the check which indicates that the check is certified. The drawee of a check has no obligation to certify the check, and refusal to certify is not dishonor of the check.

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§ 47-3-410. Acceptance varying draft.

(a) If the terms of a drawee's acceptance vary from the terms of the draft as presented, the holder may refuse the acceptance and treat the draft as dishonored. In that case, the drawee may cancel the acceptance.
(b) The terms of a draft are not varied by an acceptance to pay at a particular bank or place in the United States, unless the acceptance states that the draft is to be paid only at that bank or place.
(c) If the holder assents to an acceptance varying the terms of a draft, the obligation of each drawer and endorser that does not expressly assent to the acceptance is discharged.

§ 47-3-411. Refusal to pay cashier's checks, teller's checks, and certified checks.

(a) In this section, “obligated bank” means the acceptor of a certified check or the issuer of a cashier's check or teller's check bought from the issuer.
(b) If the obligated bank wrongfully (i) refuses to pay a cashier's check or certified check, (ii) stops payment of a teller's check, or (iii) refuses to pay a dishonored teller's check, the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay within a reasonable time after receiving written notice of particular circumstances giving rise to the damages.
(c) Expenses or consequential damages under subsection (b) are not recoverable if the refusal of the obligated bank to pay occurs or a stop-payment order on a teller's check is issued because (i) the bank suspends payments, (ii) the obligated bank asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument, (iii) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument, or (iv) payment is prohibited by law. For the purposes of this subsection:
1. (1) If the obligated bank has in good faith refused or stopped payment on the basis of a declaration of loss under § 47-3-312, the obligated bank shall be deemed to have a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument.
2. (2) If the instrument was obtained from the obligated bank by fraud, that is a defense the obligated bank has reasonable grounds to believe is available against the person entitled to enforce the instrument.
(d) If a certified check is presented within thirty (30) days of its certification, or if a teller's check purchased by a remitter or a cashier's check is presented for payment within thirty (30) days of its issuance, and if the instrument is dishonored, the obligated bank may not assert a defense on the instrument under § 47-3-305(a)(2) or a claim in recoupment under § 47-3-305(a)(3), unless the instrument was obtained from the obligated bank by fraud.

§ 47-3-412. Obligation of issuer of note or cashier's check.

The issuer of a note or cashier's check or other draft drawn on the drawer is obliged to pay the instrument (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in §§ 47-3-115 and 47-3-407. The obligation is owed to a person entitled to enforce the instrument or to an endorser who paid the instrument under § 47-3-415.

§ 47-3-413. Obligation of acceptor.

(a) The acceptor of a draft is obliged to pay the draft (i) according to its terms at the time it was accepted, even though the acceptance states that the draft is payable “as originally drawn” or equivalent terms, (ii) if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or (iii) if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in §§ 47-3-115 and 47-3-407. The obligation is owed to a person entitled to enforce the draft or to the drawer or an endorser who paid the draft under § 47-3-414 or § 47-3-415.
(b) If the certification of a check or other acceptance of a draft states the amount certified or accepted, the obligation of the acceptor is that amount. If (i) the certification or acceptance does not state an amount, (ii) the amount of the instrument is subsequently raised, and (iii) the instrument is then negotiated to a holder in due course, the obligation of the acceptor is the amount of the instrument at the time it was taken by the holder in due course.

§ 47-3-414. Obligation of drawer.

(a) This section does not apply to cashier's checks or other drafts drawn on the drawer.
(b) If an unaccepted draft is dishonored, the drawer is obliged to pay the draft (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in §§ 47-3-115 and 47-3-407. The obligation is owed to a person entitled to enforce the draft or to an endorser who paid the draft under § 47-3-415.
(c) If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.
(d) If a draft is accepted and the acceptor is not a bank, the obligation of the drawer to pay the draft if the draft is dishonored by the acceptor is the same as the obligation of an endorser under § 47-3-415(a) and (c).
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(e) If a draft states that it is drawn “without recourse” or otherwise disclaims liability of the drawer to pay the draft, the drawer is not liable under subsection (b) to pay the draft if the draft is not a check. A disclaimer of the liability stated in subsection (b) is not effective if the draft is a check.
(f) If (i) a check is not presented for payment or given to a depositary bank for collection within thirty (30) days after its date, (ii) the drawee suspends payments after expiration of the 30-day period without paying the check, and (iii) because of the suspension of payments, the drawer is deprived of funds maintained with the drawee to cover payment of the check, the drawer to the extent deprived of funds may discharge its obligation to pay the check by assigning to the person entitled to enforce the check the rights of the drawer against the drawee with respect to the funds.

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§ 47-3-415. Obligation of endorser.

(a) Subject to subsections (b), (c), (d), and (e) and to § 47-3-419(d), if an instrument is dishonored, an endorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it was endorsed, or (ii) if the endorser endorsed an incomplete instrument, according to its terms when completed, to the extent stated in §§ 47-3-115 and 47-3-407. The obligation of the endorser is owed to a person entitled to enforce the instrument or to a subsequent endorser who paid the instrument under this section.
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- 47-3-414(d)
- 47-3-503(a)
(b) If an endorsement states that it is made “without recourse” or otherwise disclaims liability of the endorser, the endorser is not liable under subsection (a) to pay the instrument.
(c) If notice of dishonor of an instrument is required by § 47-3-503 and notice of dishonor complying with that section is not given to an endorser, the liability of the endorser under subsection (a) is discharged.
(d) If a draft is accepted by a bank after an endorsement is made, the liability of the endorser under subsection (a) is discharged.
(e) If an endorser of a check is liable under subsection (a) and the check is not presented for payment, or given to a depositary bank for collection, within thirty (30) days after the day the endorsement was made, the liability of the endorser under subsection (a) is discharged.

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§ 47-3-416. Transfer warranties.

(a) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by endorsement, to any subsequent transferee that:
1. (1) The warrantor is a person entitled to enforce the instrument;
2. (2) All signatures on the instrument are authentic and authorized;
3. (3) The instrument has not been altered;
4. (4) The instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor;
5. (5) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
6. (6) If the instrument is a payee-initiated demand draft, the creation of the instrument according to the terms on its face was authorized by the person on whose account the instrument is drawn.
(b) A person to whom the warranties under subsection (a) are made and who took the instrument in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach.
(c) The warranties stated in subsection (a) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (b) is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(d) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(e) A warrantor does not make the warranty under subdivision (a)(6) to a transferee who would not under then-applicable law make the same or a substantially identical warranty to the warrantor with respect to a payee-initiated demand draft transferred by the transferee to the warrantor.

§ 47-3-417. Presentment warranties.

(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that:
1. (1) The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
2. (2) The draft has not been altered;
3. (3) The warrantor has no knowledge that the signature of the drawer of the draft is unauthorized; and
4. (4) If the instrument is a payee-initiated demand draft, the creation of the draft according to the terms on its face was authorized by the person on whose account the instrument is drawn.
(b) A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection (b) is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor. If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection (b).
(c) If a drawee asserts a claim for breach of warranty under subsection (a) based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under § 47-3-404 or § 47-3-405 or the drawer is precluded under § 47-3-406 or § 47-4-406 from asserting against the drawee the unauthorized endorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to the drawer or an endorser or (ii) any other instrument is presented for payment to a party obliged to pay the instrument, and (iii) payment is received, the following rules apply:
1. (1) The person obtaining payment and a prior transferor of the instrument warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the instrument, a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument.
2. (2) The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections (a) and (d) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (b) or (d) is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(g) A warrantor does not make the warranty under subdivision (a)(4) to a drawee who would not under then-applicable law make the same or a substantially identical warranty to the warrantor with respect to a payee-initiated demand draft drawn on the warrantor and presented or transferred by the drawee.

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47-3-418(c)

§ 47-3-418. Payment or acceptance by mistake.

(a) Except as provided in subsection (c), if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that (i) payment of the draft had not been stopped pursuant to § 47-4-403 or (ii) the signature of the drawer of the draft was authorized, the drawee may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance. Rights of the drawee under this subsection are not affected by failure of the drawee to exercise ordinary care in paying or accepting the draft.
(b) Except as provided in subsection (c), if an instrument has been paid or accepted by mistake and the case is not covered by subsection (a), the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, (i) recover the payment from the person to whom or for whose benefit payment was made or (ii) in the case of acceptance, may revoke the acceptance.
(c) The remedies provided by subsection (a) or (b) may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided by § 47-3-417 or § 47-4-407.
(d) Notwithstanding § 47-4-215, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under subsection (a) or (b), the instrument is deemed not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.
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§ 47-3-419. Instruments signed for accommodation.

(a) If an instrument is issued for value given for the benefit of a party to the instrument (“accommodated party”) and another party to the instrument (“accommodation party”) signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party “for accommodation.”
(b) An accommodation party may sign the instrument as maker, drawer, acceptor, or endorser and, subject to subsection (d), is obliged to pay the instrument in the capacity in which the accommodation party signs. The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not the accommodation party receives consideration for the accommodation.
(c) A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous endorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument. Except as provided in § 47-3-605, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken by that person that the accommodation party signed the instrument for accommodation.
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- 47-3-605(h)
(d) If the signature of a party to an instrument is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if (i) execution of judgment against the other party has been returned unsatisfied, (ii) the other party is insolvent or in an insolvency proceeding, (iii) the other party cannot be served with process, or (iv) it is otherwise apparent that payment cannot be obtained from the other party.
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- 47-3-415(a)
(e) An accommodation party who pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. An accommodated party who pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.
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47-3-103(b)

§ 47-3-420. Conversion of instrument.

(a) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a copayee.
(b) In an action under subsection (a), the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff's interest in the instrument.
(c) A representative, including a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.

Part 5 Dishonor

§ 47-3-501. Presentment.

(a) “Presentment” means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.
(b) The following rules are subject to chapter 4 of this title, agreement of the parties, and clearing-house rules and the like:
1. (1) Presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written, or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one of two or more makers, acceptors, drawees, or other payors.
2. (2) Upon demand of the person to whom presentment is made, the person making presentment must (i) exhibit the instrument, (ii) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (iii) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.
3. (3) Without dishonoring the instrument, the party to whom presentment is made may (i) return the instrument for lack of a necessary endorsement, or (ii) refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule.
4. (4) The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if the party to whom presentment is made has established a cut-off hour not earlier than two o'clock (2:00) p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cut-off hour.

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§ 47-3-502. Dishonor.

(a) Dishonor of a note is governed by the following rules:
1. (1) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment.
2. (2) If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later.
3. (3) If the note is not payable on demand and paragraph (2) does not apply, the note is dishonored if it is not paid on the day it becomes payable.
(b) Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:
1. (1) If a check is duly presented for payment to the payor bank otherwise than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under § 47-4-301 or § 47-4-302, or becomes accountable for the amount of the check under § 47-4-302.
2. (2) If a draft is payable on demand and paragraph (1) does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment.
3. (3) If a draft is payable on a date stated in the draft, the draft is dishonored if (i) presentment for payment is duly made to the drawee and payment is not made on the day the draft becomes payable or the day of presentment, whichever is later, or (ii) presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment.
4. (4) If a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.
(c) Dishonor of an unaccepted documentary draft occurs according to the rules stated in subsections (b)(2), (3), and (4), except that payment or acceptance may be delayed without dishonor until no later than the close of the third business day of the drawee following the day on which payment or acceptance is required by those paragraphs.
(d) Dishonor of an accepted draft is governed by the following rules:
1. (1) If the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment.
2. (2) If the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day it becomes payable or the day of presentment, whichever is later.
(e) In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under § 47-3-504, dishonor occurs without presentment if the instrument is not duly accepted or paid.
(f) If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.

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47-2-103(3)

§ 47-3-503. Notice of dishonor.

(a) The obligation of an endorser stated in § 47-3-415(a) and the obligation of a drawer stated in § 47-3-414(d) may not be enforced unless (i) the endorser or drawer is given notice of dishonor of the instrument complying with this section or (ii) notice of dishonor is excused under § 47-3-504(b).
(b) Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written, or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor.
(c) Subject to § 47-3-504(c), with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given (i) by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument, or (ii) by any other person within thirty (30) days following the day on which the person receives notice of dishonor. With respect to any other instrument, notice of dishonor must be given within thirty (30) days following the day on which dishonor occurs.

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§ 47-3-504. Excused presentment and notice of dishonor.

(a) Presentment for payment or acceptance of an instrument is excused if:
1. (i) the person entitled to present the instrument cannot with reasonable diligence make presentment;
2. (ii) the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings;
3. (iii) by the terms of the instrument presentment is not necessary to enforce the obligation of endorsers or the drawer;
4. (iv) the drawer or endorser whose obligation is being enforced has waived presentment or otherwise has no reason to expect or right to require that the instrument be paid or accepted; or
5. (v) the drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.
(b) Notice of dishonor is excused if (i) by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or (ii) the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.
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(c) Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.
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47-3-502(e)

§ 47-3-505. Evidence of dishonor.

(a) The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:
1. (1) a document regular in form as provided in subsection (b) which purports to be a protest;
2. (2) a purported stamp or writing of the drawee, payor bank, or presenting bank on or accompanying the instrument stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor;
3. (3) a book or record of the drawee, payor bank, or collecting bank, kept in the usual course of business which shows dishonor, even if there is no evidence of who made the entry.
(b) A protest is a certificate of dishonor made by a United States consul or vice consul, or a notary public or other person authorized to administer oaths by the law of the place where dishonor occurs. It may be made upon information satisfactory to that person. The protest must identify the instrument and certify either that presentment has been made or, if not made, the reason why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been given to some or all parties.

Part 6 Discharge and Payment

§ 47-3-601. Discharge and effect of discharge.

(a) The obligation of a party to pay the instrument is discharged as stated in this chapter or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.
(b) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.

§ 47-3-602. Payment.

(a) Subject to subsection (b), an instrument is paid to the extent payment is made (i) by or on behalf of a party obliged to pay the instrument, and (ii) to a person entitled to enforce the instrument. To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under § 47-3-306 by another person.
(b) The obligation of a party to pay the instrument is not discharged under subsection (a) if:
1. (1) a claim to the instrument under § 47-3-306 is enforceable against the party receiving payment and (i) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or (ii) in the case of an instrument other than a cashier's check, teller's check, or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument; or
2. (2) the person making payment knows that the instrument is a stolen instrument and pays a person it knows is in wrongful possession of the instrument.

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47-3-103(b)

§ 47-3-603. Tender of payment.

(a) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.
(b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.
(c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.

§ 47-3-604. Discharge by cancellation or renunciation.

(a) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument (i) by an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party's signature, or the addition of words to the instrument indicating discharge, or (ii) by agreeing not to sue or otherwise renouncing rights against the party by a signed writing.
(b) Cancellation or striking out of an endorsement pursuant to subsection (a) does not affect the status and rights of a party derived from the endorsement.

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47-3-605(b)

§ 47-3-605. Discharge of endorsers and accommodation parties.

(a) In this section, the term “endorser” includes a drawer having the obligation described in § 47-3-414(d).
(b) Discharge, under § 47-3-604, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having a right of recourse against the discharged party.
(c) If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an endorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent the endorser or accommodation party proves that the extension caused loss to the endorser or accommodation party with respect to the right of recourse.
(d) If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an endorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent the modification causes loss to the endorser or accommodation party with respect to the right of recourse. The loss suffered by the endorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.
(e) If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an endorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent (i) the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or (ii) the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.
(f) If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of any party who is jointly and severally liable with respect to the secured obligation is discharged to the extent the impairment causes the party asserting discharge to pay more than that party would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under subsection (e), the party is deemed to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.
(g) Under subsection (e) or (f), impairing value of an interest in collateral includes (i) failure to obtain or maintain perfection or recordation of the interest in collateral, (ii) release of collateral without substitution of collateral of equal value, (iii) failure to perform a duty to preserve the value of collateral owed, under chapter 9 of this title or other law, to a debtor or surety or other person secondarily liable, or (iv) failure to comply with applicable law in disposing of collateral.
(h) An accommodation party is not discharged under subsection (c), (d), or (e) unless the person entitled to enforce the instrument knows of the accommodation or has notice under § 47-3-419(c) that the instrument was signed for accommodation.
(i) A party is not discharged under this section if (i) the party asserting discharge consents to the event or conduct that is the basis of the discharge, or (ii) the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral.

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47-3-419(c)

Chapter 4 Bank Deposits and Collections

Part 1 General Provisions and Definitions

§ 47-4-101. Short title.

This chapter may be cited as “Uniform Commercial Code — Bank Deposits and Collections.”

§ 47-4-102. Applicability.

(a) To the extent that items within this chapter are also within chapters 3 and 8, they are subject to those chapters. If there is conflict, this chapter governs chapter 3, but chapter 8 governs this chapter.
(b) The liability of a bank for action or non-action with respect to an item handled by it for purposes of presentment, payment, or collection is governed by the law of the place where the bank is located. In the case of action or non-action by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located.

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47-1-301(c)(3)

§ 47-4-103. Variation by agreement; measure of damages; action constituting ordinary care.

(a) The effect of the provisions of this chapter may be varied by agreement, to the extent the agreement does not disclaim a bank's responsibility for its own lack of good faith and is not manifestly unreasonable.
(b) Federal Reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under subsection (a), whether or not specifically assented to by all parties interested in items handled.
(c) Action or non-action approved by this chapter or pursuant to Federal Reserve regulations or operating circular is the exercise of ordinary care and, in the absence of special instructions, action or non-action consistent with clearing-house rules and the like or with a general banking usage not disapproved by this chapter, is prima facie the exercise of ordinary care.
(d) The specification or approval of certain procedures by this chapter is not disapproval of other procedures that may be reasonable under the circumstances.
(e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.

§ 47-4-104. Definitions and index of definitions.

(a) As used in this chapter, unless the context otherwise requires:
1. (1) “Account” means any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;
2. (2) “Afternoon” means the period of a day between twelve o'clock noon (12:00 noon) and twelve o'clock midnight (12:00 midnight);
3. (3) “Banking day” means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions, except that any day that is not a banking day for purposes of federal reserve regulations, Regulation CC (12 C.F.R. 229.1, et seq., as may be amended from time to time) shall not be a banking day for purposes of this chapter or chapter 3 of this title;
4. (4) “Clearing house” means an association of banks or other payors regularly clearing items;
5. (5) “Customer” means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;
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6. (6) “Documentary draft” means a draft to be presented for acceptance or payment if specified documents, certificated securities (§ 47-8-102) or instructions for uncertificated securities (§ 47-8-102), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;
7. (7) “Draft” means a draft as defined in § 47-3-104 or an item, other than an instrument, that is an order;
8. (8) “Drawee” means a person ordered in a draft to make payments;
9. (9) “Item” means an instrument or a promise or order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by chapter 4A of this title or a credit or debit card slip;
10. (10) “Midnight (12:00 midnight) deadline” with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;
11. (11) “Settle” means to pay in cash, by clearing-house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final; and
12. (12) “Suspends payments” with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over, or that it ceases or refuses to make payments in the ordinary course of business.
(b) Other definitions applying to this chapter and the sections in which they appear are:
1. “Agreement for electronic presentment.” § 47-4-110;
2. “Bank.” § 47-4-105;
3. “Collecting bank.” § 47-4-105;
4. “Depositary bank.” § 47-4-105;
5. “Intermediary bank.” § 47-4-105;
6. “Payor bank.” § 47-4-105;
7. “Presenting bank.” § 47-4-105; and
8. “Presentment notice.” § 47-4-110;
(c) “Control” as provided in § 47-7-106 and the following definitions in other chapters apply to this chapter:
1. “Acceptance.” § 47-3-409;
2. “Alteration.” § 47-3-407;
3. “Cashier's check.” § 47-3-104;
4. “Certificate of deposit.” § 47-3-104;
5. “Certified check.” § 47-3-409;
6. “Check.” § 47-3-104;
7. “Holder in due course.” § 47-3-302;
8. “Instrument.” § 47-3-104;
9. “Notice of dishonor.” § 47-3-503;
10. “Order.” § 47-3-103;
11. “Ordinary care.” § 47-3-103;
12. “Person entitled to enforce.” § 47-3-301;
13. “Presentment.” § 47-3-501;
14. “Promise.” § 47-3-103;
15. “Prove.” § 47-3-103;
16. “Teller's check.” § 47-3-104; and
17. “Unauthorized signature.” § 47-3-403.
(d) In addition, chapter 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this chapter.

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§ 47-4-105. “Bank” — “Depositary bank”— “Payor bank” — “Intermediary bank” — “Collecting bank”— “Presenting bank.”

In this chapter:
1. (1) “Bank” means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company.
2. (2) “Depositary bank” means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter;
3. (3) “Payor bank” means a bank that is the drawee of a draft;
4. (4) “Intermediary bank” means a bank to which an item is transferred in course of collection except the depositary or payor bank;
5. (5) “Collecting bank” means a bank handling an item for collection except the payor bank;
6. (6) “Presenting bank” means a bank presenting an item except a payor bank.

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§ 47-4-106. Payable through or payable at bank — Collecting bank.

(a) If an item states that it is “payable through” a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.
(b) If an item states that it is “payable at” a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.
(c) If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a co-drawee or a collecting bank, the bank is a collecting bank.

§ 47-4-107. Separate office of bank.

A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notice or orders must be given under this chapter and under chapter 3 of this title.

§ 47-4-108. Time of receipt of items.

(a) For the purpose of allowing time to process items, prove balances, and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of two o'clock (2:00) p.m. or later as a cutoff hour for the handling of money and items and the making of entries on its books.
(b) An item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.

§ 47-4-109. Delays.

(a) Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of any person involved, may waive, modify, or extend time limits imposed or permitted by chapters 1-9 of this title for a period not exceeding two (2) additional banking days without discharge of drawers or endorsers or liability to its transferor or a prior party.
(b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by chapters 1-9 of this title or by instructions is excused if (i) the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment, or other circumstances beyond the control of the bank, and (ii) the bank exercises such diligence as the circumstances require.

§ 47-4-110. Electronic presentment.

(a) “Agreement for electronic presentment” means an agreement, clearing-house rule, or Federal Reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item (“presentment notice”) rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor, and other matters concerning items subject to the agreement.
(b) Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received.
(c) If presentment is made by presentment notice, a reference to “item” or “check” in this chapter means the presentment notice unless the context otherwise indicates.

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47-4-104(b)

§ 47-4-111. Statute of limitations.

An action to enforce an obligation, duty, or right arising under this chapter must be commenced within three (3) years after the cause of action accrues.

Part 2 Collection of Items — Depositary and Collecting Banks

§ 47-4-201. Status of collecting bank as agent and provisional status of credits — Applicability of chapter — Item endorsed “Pay Any Bank”

(a) Unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or sub-agent of the owner of the item and any settlement given for the item is provisional. This provision applies regardless of the form of endorsement or lack of endorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner to proceeds of the item are subject to rights of a collecting bank, such as those resulting from outstanding advances on the item and rights of recoupment or setoff. If an item is handled by banks for purposes of presentment, payment, collection, or return, the relevant provisions of this chapter apply even though action of the parties clearly establishes that a particular bank has purchased the item and is the owner of it.
(b) After an item has been endorsed with the words “pay any bank” or the like, only a bank may acquire the rights of a holder until the item has been:
1. (1) returned to the customer initiating collection; or
2. (2) specially endorsed by a bank to a person who is not a bank.
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§ 47-4-202. Responsibility for collection or return — When action timely.

(a) A collecting bank must exercise ordinary care in:
1. (1) presenting an item or sending it for presentment;
2. (2) sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank's transferor after learning that the item has not been paid or accepted, as the case may be;
3. (3) settling for an item when the bank receives final settlement; and
4. (4) notifying its transferor of any loss or delay in transit within a reasonable time after discovery thereof.
(b) A collecting bank exercises ordinary care under subsection (a) by taking proper action before its midnight (12:00 midnight) deadline following receipt of an item, notice, or settlement. Taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.
(c) Subject to subdivision (a)(1), a bank is not liable for the insolvency, neglect, misconduct, mistake, or default of another bank or person or for loss or destruction of an item in the possession of others or in transit.

§ 47-4-203. Effect of instructions.

Subject to chapter 3 of this title concerning conversion of instruments (§ 47-3-420) and restrictive endorsements (§ 47-3-206), only a collecting bank's transferor can give instructions that affect the bank or constitute notice to it, and a collecting bank is not liable to prior parties for any action taken pursuant to the instructions or in accordance with any agreement with its transferor.

§ 47-4-204. Methods of sending and presenting — Sending directly to payor bank.

(a) A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of those items on hand, the cost of collection involved, and the method generally used by it or others to present those items.
(b) A collecting bank may send:
1. (1) an item directly to the payor bank;
2. (2) an item to a nonbank payor if authorized by its transferor; and
3. (3) an item other than documentary drafts to a nonbank payor, if authorized by Federal Reserve regulation or operating circular, clearing-house rule, or the like.
(c) Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.

§ 47-4-205. Depositary bank holder of unendorsed item.

If a customer delivers an item to a depositary bank for collection:
1. (1) the depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer endorses the item, and, if the bank satisfies the other requirements of § 47-3-302, it is a holder in due course; and
2. (2) the depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer's account.

§ 47-4-206. Transfer between banks.

Any agreed method that identifies the transferor bank is sufficient for the item's further transfer to another bank.

§ 47-4-207. Transfer warranties.

(a) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:
1. (1) The warrantor is a person entitled to enforce the item;
2. (2) All signatures on the item are authentic and authorized;
3. (3) The item has not been altered;
4. (4) The item is not subject to a defense or claim in recoupment (§ 47-3-305(a)) of any party that can be asserted against the warrantor;
5. (5) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
6. (6) If the item is a payee-initiated demand draft, the creation of the item according to the terms on its face was authorized by the person on whose account the item is drawn.
(b) If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item (i) according to the terms of the item at the time it was transferred, or (ii) if the transfer was of an incomplete item, according to its terms when completed as stated in §§ 47-3-115 and 47-3-407. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection (b) by an endorsement stating that it is made “without recourse” or otherwise disclaiming liability.
(c) A person to whom the warranties under subsection (a) are made and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the item plus expenses and loss of interest incurred as a result of the breach.
(d) The warranties stated in subsection (a) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(e) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(f) A warrantor does not make the warranty under subdivision (a)(6) to a transferee or subsequent collecting bank who would not under then-applicable law make the same or a substantially identical warranty to the warrantor with respect to a payee-initiated draft transferred by the transferee or subsequent collecting bank to the warrantor.

§ 47-4-208. Presentment warranties.

(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that:
1. (1) The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
2. (2) The draft has not been altered;
3. (3) The warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized; and
4. (4) If the instrument is a payee-initiated demand draft, the creation of the draft according to the terms on its face was authorized by the person on whose account the instrument is drawn.
(b) A drawee making payment may recover from a warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft (i) breach of warranty is a defense to the obligation of the acceptor, and (ii) if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty under subsection (a) based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under § 47-3-404 or § 47-3-405 or the drawer is precluded under § 47-3-406 or § 47-4-406 from asserting against the drawee the unauthorized endorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to the drawer or an endorser or (ii) any other item is presented for payment to a party obliged to pay the item, and the item is paid, the person obtaining payment and a prior transferor of the item warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the item, a person entitled to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the item. The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections (a) and (d) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(g) A warrantor does not make the warranty under subdivision (a)(4) to a drawee who would not under then-applicable law make the same or substantially identical warranty to the warrantor with respect to a payee-initiated draft drawn on the warrantor and presented or transferred by the drawee.

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47-4-406(f)

§ 47-4-209. Encoding and retention warranties.

(a) A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payor bank or other payor that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.
(b) A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payor bank or other payor that retention and presentment of the item comply with the agreement. If a customer of a depositary bank undertakes to retain an item, that bank also makes this warranty.
(c) A person to whom warranties are made under this section and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, plus expenses and loss of interest incurred as a result of the breach.

§ 47-4-210. Security interest of collecting bank in items, accompanying documents and proceeds.

(a) A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either:
1. (1) In case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied;
2. (2) In case of an item for which it has given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or
3. (3) If it makes an advance on or against the item.
(b) If credit given for several items received at one time or pursuant to a single agreement is withdrawn or applied in part, the security interest remains upon all the items, any accompanying documents or the proceeds of either. For the purpose of this section, credits first given are first withdrawn.
(c) Receipt by a collecting bank of a final settlement for an item is a realization on its security interest in the item, accompanying documents, and proceeds. So long as the bank does not receive final settlement for the item or give up possession of the item or possession or control of the accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to chapter 9 of this title, but:
1. (1) No security agreement is necessary to make the security interest enforceable (§ 47-9-203(b)(3)(A)).
2. (2) No filing is required to perfect the security interest; and
3. (3) The security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.

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§ 47-4-211. When bank gives value for purposes of holder in due course.

For purposes of determining its status as a holder in due course, a bank has given value to the extent it has a security interest in an item, if the bank otherwise complies with the requirements of § 47-3-302 on what constitutes a holder in due course.

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47-5-102(b)

§ 47-4-212. Presentment by notice of item not payable by, through, or at bank — Liability of drawer or endorser.

(a) Unless otherwise instructed, a collecting bank may present an item not payable by, through, or at a bank by sending to the party to accept or pay a written notice that the bank holds the item for acceptance or payment. The notice must be sent in time to be received on or before the day when presentment is due and the bank must meet any requirement of the party to accept or pay under § 47-3-501 by the close of the bank's next banking day after it knows of the requirement.
(b) If presentment is made by notice and payment, acceptance, or request for compliance with a requirement under § 47-3-501 is not received by the close of business on the day after maturity or, in the case of demand items, by the close of business on the third banking day after notice was sent, the presenting bank may treat the item as dishonored and charge any drawer or endorser by sending it notice of the facts.

§ 47-4-213. Medium and time of settlement by bank.

(a) With respect to settlement by a bank, the medium and time of settlement may be prescribed by Federal Reserve regulations or circulars, clearing-house rules, and the like, or agreement. In the absence of such prescription:
1. (1) the medium of settlement is cash or credit to an account in a Federal Reserve bank of or specified by the person to receive settlement; and
2. (2) the time of settlement, is:
  1. (i) with respect to tender of settlement by cash, a cashier's check, or teller's check, when the cash or check is sent or delivered;
  2. (ii) with respect to tender of settlement by credit in an account in a Federal Reserve Bank, when the credit is made;
  3. (iii) with respect to tender of settlement by a credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or
  4. (iv) with respect to tender of settlement by a funds transfer, when payment is made pursuant to § 47-4A-406(a) to the person receiving settlement.
(b) If the tender of settlement is not by a medium authorized by subsection (a) or the time of settlement is not fixed by subsection (a), no settlement occurs until the tender of settlement is accepted by the person receiving settlement.
(c) If settlement for an item is made by cashier's check or teller's check and the person receiving settlement, before its midnight deadline:
1. (1) presents or forwards the check for collection, settlement is final when the check is finally paid; or
2. (2) fails to present or forward the check for collection, settlement is final at the twelve o'clock midnight (12:00 midnight) deadline of the person receiving settlement.
(d) If settlement for an item is made by giving authority to charge the account of the bank giving settlement in the bank receiving settlement, settlement is final when the charge is made by the bank receiving settlement if there are funds available in the account for the amount of the item.

§ 47-4-214. Right of charge-back or refund — Liability of collecting bank — Return of item.

(a) If a collecting bank has made provisional settlement with its customer for an item and fails by reason of dishonor, suspension of payments by a bank, or otherwise to receive settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer's account, or obtain refund from its customer, whether or not it is able to return the item, if by its twelve o'clock midnight (12:00 midnight) deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. If the return or notice is delayed beyond the bank's midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay. These rights to revoke, charge back, and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final.
(b) A collecting bank returns an item when it is sent or delivered to the bank's customer or transferor or pursuant to its instructions.
(c) A depositary bank that is also the payor may charge back the amount of an item to its customer's account or obtain refund in accordance with the section governing return of an item received by a payor bank for credit on its books (§ 47-4-301).
(d) the right to charge back is not affected by:
1. (1) previous use of a credit given for the item; or
2. (2) failure by any bank to exercise ordinary care with respect to the item, but a bank so failing remains liable.
(e) A failure to charge back or claim refund does not affect other rights of the bank against the customer or any other party.
(f) If credit is given in dollars as the equivalent of the value of an item payable in foreign money, the dollar amount of any charge-back or refund must be calculated on the basis of the bank-offered spot rate for the foreign money prevailing on the day when the person entitled to the charge-back or refund learns that it will not receive payment in ordinary course.

§ 47-4-215. Final payment of item by payor bank — When provisional debits and credits become final — When certain credits become available for withdrawal.

(a) An item is finally paid by a payor bank when the bank has first done any of the following:
1. (1) paid the item in cash;
2. (2) settled for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement; or
3. (3) made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule, or agreement.
(b) If provisional settlement for an item does not become final, the item is not finally paid.
(c) If provisional settlement for an item between the presenting and payor banks is made through a clearing house or by debits or credits in an account between them, then to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor banks or between the presenting and successive prior collecting banks seriatim, they become final upon final payment of the items by the payor bank.
(d) If a collecting bank receives a settlement for an item which is or becomes final, the bank is accountable to its customer for the amount of the item and any provisional credit given for the item in an account with its customer becomes final.
(e) Subject to (i) applicable law stating a time for availability of funds and (ii) any right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in a customer's account becomes available for withdrawal as of right:
1. (1) if the bank has received a provisional settlement for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time;
2. (2) if the bank is both the depositary bank and the payor bank, and the item is finally paid, at the opening of the bank's second banking day following receipt of the item.
(f) Subject to applicable law stating a time for availability of funds and any right of a bank to apply a deposit to an obligation of the depositor, a deposit of money becomes available for withdrawal as of right at the opening of the bank's next banking day after receipt of the deposit.

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47-3-418(d)

§ 47-4-216. Insolvency and preference.

(a) If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid, the item must be returned by the receiver, trustee, or agent in charge of the closed bank to the presenting bank or the closed bank's customer.
(b) If a payor bank finally pays an item and suspends payments without making a settlement for the item with its customer or the presenting bank which settlement is or becomes final, the owner of the item has a preferred claim against the payor bank.
(c) If a payor bank gives or a collecting bank gives or receives a provisional settlement for an item and thereafter suspends payments, the suspension does not prevent or interfere with the settlement's becoming final if the finality occurs automatically upon the lapse of certain time or the happening of certain events.
(d) If a collecting bank receives from subsequent parties settlement for an item, which settlement is or becomes final and the bank suspends payments without making a settlement for the item with its customer which settlement is or becomes final, the owner of the item has a preferred claim against the collecting bank.

Part 3 Collection of Items — Payor Banks

§ 47-4-301. Deferred posting — Recovery of payment by return of items — Time of dishonor — Return of items by payor bank.

(a) If a payor bank settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it:
1. (1) returns the item; or
2. (2) sends written notice of dishonor or nonpayment if the item is unavailable for return.
(b) If a demand item is received by a payor bank for credit on its books, it may return the item or send notice of dishonor and may revoke any credit given or recover the amount thereof withdrawn by its customer, if it acts within the time limit and in the manner specified in subsection (a).
(c) Unless previous notice of dishonor has been sent, an item is dishonored at the time when for purposes of dishonor it is returned or notice sent in accordance with this section.
(d) An item is returned:
1. (1) as to an item presented through a clearing house, when it is delivered to the presenting or last collecting bank or to the clearing house or is sent or delivered in accordance with clearing-house rules; or
2. (2) in all other cases, when it is sent or delivered to the bank's customer or transferor or pursuant to instructions.

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47-3-502(b)(1)

§ 47-4-302. Payor bank's responsibility for late return of item.

(a) If an item is presented to and received by a payor bank, the bank is accountable for the amount of:
1. (1) a demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond midnight (12:00 midnight) of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight (12:00 midnight) deadline; or
2. (2) any other properly payable item unless, within the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.
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(b) The liability of a payor bank to pay an item pursuant to subsection (a) is subject to defenses based on breach of a presentment warranty (§ 47-4-208) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.

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§ 47-4-303. When items subject to notice, stop-payment order, legal process, or setoff — Order in which items may be charged or certified.

(a) Any knowledge, notice, or stop-payment order received by, legal process served upon, or setoff exercised by a payor bank comes too late to terminate, suspend, or modify the bank's right or duty to pay an item or to charge its customer's account for the item if the knowledge, notice, stop-payment order, or legal process is received or served and a reasonable time for the bank to act thereon expires or the setoff is exercised after the earliest of the following:
1. (1) the bank accepts or certifies the item;
2. (2) the bank pays the item in cash;
3. (3) the bank settles for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement;
4. (4) the bank becomes accountable for the amount of the item under § 47-4-302 dealing with the payor bank's responsibility for late return of items; or
5. (5) with respect to checks, a cutoff hour no earlier than one hour after the opening of the next banking day after the banking day on which the bank received the check and no later than the close of that next banking day or, if no cutoff hour is fixed, the close of the next banking day after the banking day on which the bank received the check.
(b) Subject to subsection (a), items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.

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Part 4 Relationship Between Payor Bank and Its Customer

§ 47-4-401. When bank may charge customer's account.

(a) A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.
(b) A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.
(c) A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. The notice is effective for the period stated in § 47-4-403(b) for stop-payment orders, and must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it before the bank takes any action with respect to the check described in § 47-4-303. If a bank charges against the account of a customer a check before the date stated in the notice of postdating, the bank is liable for damages for the loss resulting from its act. The loss may include damages for dishonor of subsequent items under § 47-4-402.
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(d) A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:
1. (1) the original terms of the altered item; or
2. (2) the terms of the completed item, even though the bank knows the item has been completed unless the bank has notice that the completion was improper.

§ 47-4-402. Bank's liability to customer for wrongful dishonor — Time of determining insufficiency of account.

(a) Except as otherwise provided in this chapter, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.
(b) A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. Liability is limited to actual damages proved and may include damages for an arrest or prosecution of the customer or other consequential damages. Whether any consequential damages are proximately caused by the wrongful dishonor is a question of fact to be determined in each case.
(c) A payor bank's determination of the customer's account balance on which a decision to dishonor for insufficiency of available funds is based may be made at any time between the time the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and no more than one determination need be made. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluating the bank's decision to dishonor the item, the account balance at that time is determinative of whether a dishonor for insufficiency of available funds is wrongful.

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§ 47-4-403. Customer's right to stop payment — Burden of proof of loss.

(a) A customer or any person authorized to draw on the account if there is more than one (1) person may stop payment of any item drawn on the customer's account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in § 47-4-303. If the signature of more than one (1) person is required to draw on an account, any of these persons may stop payment or close the account.
(b) A stop-payment order is effective for six (6) months, but it lapses after fourteen (14) calendar days if the original order was oral and was not confirmed in writing within that period. A stop-payment order may be renewed for additional six-month periods by a writing given to the bank within a period during which the stop-payment order is effective.
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- 47-4-401(c)
(c) The burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a stop-payment order or order to close an account is on the customer. The loss from payment of an item contrary to a stop-payment order may include damages for dishonor of subsequent items under § 47-4-402.

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47-3-418(a)

§ 47-4-404. Bank not obliged to pay check more than six months old.

A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six (6) months after its date, but it may charge its customer's account for a payment made thereafter in good faith.

§ 47-4-405. Death or incompetence of customer.

(a) A payor or collecting bank's authority to accept, pay, or collect an item or to account for proceeds of its collection, if otherwise effective, is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is undertaken if the bank does not know of an adjudication of incompetence. Neither death nor incompetence of a customer revokes the authority to accept, pay, collect, or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.
(b) Even with knowledge, a bank may for ten (10) days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.

§ 47-4-406. Customer's duty to review statements of account.

(a) A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonably to identify the items paid. The statement of account provides sufficient information if the item is described by item number, amount, and date of payment.
(b) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of seven (7) years after receipt of the items. A customer may request an item from the bank that paid the item, and that bank must provide in a reasonable time either the item or, if the item has been destroyed or is not otherwise obtainable, a legible copy of the item.
(c) If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether (i) any payment was not authorized because of an alteration of an item or an unauthorized signature purportedly made by or on behalf of the customer, or because the payment was made in an incorrect amount, or (ii) a deposit is missing or has been incorrectly credited. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment or missing or incorrectly credited deposit, the customer must promptly notify the bank of the relevant facts.
(d) If the bank proves that the customer failed, with respect to an item or deposit, to comply with the duties imposed on the customer by subsection (c), the customer is precluded from asserting against the bank:
1. (1) Such payment or missing or incorrectly credited deposit, if the bank also proves that it suffered a loss by reason of the failure; and
2. (2) the customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding thirty (30) days, in which to examine the item or statement of account and notify the bank.
(e) If the customer proves that the bank did not pay the item in good faith, the preclusion under subsection (d) does not apply.
(f) A customer who does not within one (1) year after the statement or items are made available to the customer (subsection (a)) discover and report an occurrence referred in subsection (c) is precluded from asserting against the bank any claim with respect thereto. If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under § 47-4-208 with respect to the unauthorized signature or alteration to which the preclusion applies.

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§ 47-4-407. Payor bank's right to subrogation on improper payment.

If a payor bank has paid an item over the order of the drawer or maker to stop payment, or after an account has been closed, or otherwise under circumstances giving a basis for objection by the drawer or maker, to prevent unjust enrichment and only to the extent necessary to prevent loss to the bank by reason of its payment of the item, the payor bank is subrogated to the rights:
1. (1) of any holder in due course on the item against the drawer or maker;
2. (2) of the payee or any other holder of the item against the drawer or maker either on the item or under the transaction out of which the item arose; and
3. (3) of the drawer or maker against the payee or any other holder of the item with respect to the transaction out of which the item arose.

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47-3-418(c)

Part 5 Collection of Documentary Drafts

§ 47-4-501. Handling of documentary drafts; duty to send for presentment and to notify customer of dishonor.

A bank that takes a documentary draft for collection shall present or send the draft and accompanying documents for presentment and, upon learning that the draft has not been paid or accepted in due course, shall seasonably notify its customer of the fact even though it may have discounted or bought the draft or extended credit available for withdrawal as of right.

§ 47-4-502. Presentment of “on arrival” drafts.

If a draft or the relevant instructions require presentment “on arrival,” “when goods arrive” or the like, the collecting bank need not present until in its judgment a reasonable time for arrival of the goods has expired. Refusal to pay or accept because the goods have not arrived is not dishonor; the bank must notify its transferor of the refusal but need not present the draft again until it is instructed to do so or learns of the arrival of the goods.

§ 47-4-503. Responsibility of presenting bank for documents and goods — Report of reasons for dishonor — Referee in case of need.

Unless otherwise instructed and except as provided in chapter 5 of this title, a bank presenting a documentary draft:
1. (1) must deliver the documents to the drawee on acceptance of the draft if it is payable more than three (3) days after presentment; otherwise, only on payment; and
2. (2) upon dishonor, either in the case of presentment for acceptance or presentment for payment, may seek and follow instructions from any referee in case of need designated in the draft or, if the presenting bank does not choose to utilize the referee's services, it must use diligence and good faith to ascertain the reason for dishonor, must notify its transferor of the dishonor and of the results of its effort to ascertain the reasons therefor, and must request instructions.
3. However the presenting bank is under no obligation with respect to goods represented by the documents except to follow any reasonable instructions seasonably received; it has a right to reimbursement for any expense incurred in following instructions and to prepayment of or indemnity for those expenses.

§ 47-4-504. Privilege of presenting bank to deal with goods — Security interest for expenses.

(a) A presenting bank that, following the dishonor of a documentary draft, has seasonably requested instructions but does not receive them within a reasonable time may store, sell, or otherwise deal with the goods in any reasonable manner.
(b) For its reasonable expenses incurred by action under subsection (a), the presenting bank has a lien upon the goods or their proceeds, which may be foreclosed in the same manner as an unpaid seller's lien.

Chapter 4A Funds Transfers

Part 1 General Provisions and Definitions

§ 47-4A-101. Short title.

This chapter may be cited as Uniform Commercial Code — Funds Transfers.

§ 47-4A-102. Subject matter.

Except as otherwise provided in § 47-4A-108, this chapter applies to funds transfers defined in § 47-4A-104.

§ 47-4A-103. Payment order — Definitions.

(a) In this chapter:
1. (1) “Payment order” means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if:
  1. (i) The instruction does not state a condition to payment to the beneficiary other than time of payment;
  2. (ii) The receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender; and
  3. (iii) The instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank;
2. (2) “Beneficiary” means the person to be paid by the beneficiary's bank;
3. (3) “Beneficiary's bank” means the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account;
4. (4) “Receiving bank” means the bank to which the sender's instruction is addressed; and
5. (5) “Sender” means the person giving the instruction to the receiving bank.
(b) If an instruction complying with subdivision (a)(1) is to make more than one (1) payment to a beneficiary, the instruction is a separate payment order with respect to each payment.
(c) A payment order is issued when it is sent to the receiving bank.

§ 47-4A-104. Funds transfer — Definitions.

In this chapter:
1. (a) “Funds transfer” means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order;
2. (b) “Intermediary bank” means a receiving bank other than the originator's bank or the beneficiary's bank;
3. (c) “Originator” means the sender of the first payment order in a funds transfer; and
4. (d) “Originator's bank” means:
  1. (i) The receiving bank to which the payment order of the originator is issued if the originator is not a bank; or
  2. (ii) The originator if the originator is a bank.

§ 47-4A-105. Other definitions.

(a) In this chapter:
1. (1) “Authorized account” means a deposit account of a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank. If a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account;
2. (2) “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company. A branch or separate office of a bank is a separate bank for purposes of this chapter;
3. (3) “Customer” means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders;
4. (4) “Funds-transfer business day” of a receiving bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders;
5. (5) “Funds-transfer system” means a wire transfer network, automated clearinghouse, or other communication system of a clearinghouse or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed;
6. (6) “Good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing; and
7. (7) “Prove” with respect to a fact means to meet the burden of establishing the fact (§ 47-1-201(b)(8)).
(b) Other definitions applying to this chapter and the sections in which they appear are:
1. “Acceptance” § 47-4A-209
2. “Beneficiary” § 47-4A-103
3. “Beneficiary's bank” § 47-4A-103
4. “Executed” § 47-4A-301
5. “Execution date” § 47-4A-301
6. “Funds transfer” § 47-4A-104
7. “Funds-transfer system rule” § 47-4A-501
8. “Intermediary bank” § 47-4A-104
9. “Originator” § 47-4A-104
10. “Originator's bank” § 47-4A-104
11. “Payment by beneficiary's bank to beneficiary” § 47-4A-405
12. “Payment by originator to beneficiary” § 47-4A-406
13. “Payment by sender to receiving bank” § 47-4A-403
14. “Payment date” § 47-4A-401
15. “Payment order” § 47-4A-103
16. “Receiving bank” § 47-4A-103
17. “Security procedure” § 47-4A-201
18. “Sender” § 47-4A-103
(c) The following definitions in chapter 4 of this title apply to this chapter:
1. “Clearinghouse” § 47-4-104
2. “Item” § 47-4-104
3. “Suspends payments” § 47-4-104
(d) In addition, chapter 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this chapter.

§ 47-4A-106. Time payment order is received.

(a) The time of receipt of a payment order or communication cancelling or amending a payment order is determined by the rules applicable to receipt of a notice stated in § 47-1-202. A receiving bank may fix a cut-off time or times on a funds-transfer business day for the receipt and processing of payment orders and communications cancelling or amending payment orders. Different cut-off times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cut-off time may apply to senders generally or different cut-off times may apply to different senders or categories of payment orders. If a payment order or communication cancelling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cut-off time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day.
(b) If this chapter refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in this chapter.

§ 47-4A-107. Federal reserve regulations and operating circulars.

Regulations of the board of governors of the federal reserve system and operating circulars of the federal reserve banks supersede any inconsistent provision of this chapter to the extent of the inconsistency.

§ 47-4A-108. Relationship to Electronic Fund Transfer Act.

(a) Except as provided in subsection (b), this chapter does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act of 1978 (Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. § 1693 et seq.) as amended from time to time.
(b) This chapter applies to a funds transfer that is a remittance transfer as defined in the Electronic Fund Transfer Act, codified in 15 U.S.C. § 1693o-1, as amended from time to time, unless the remittance transfer is an electronic fund transfer as defined in the Electronic Fund Transfer Act, codified in 15 U.S.C. § 1693a, as amended from time to time.
(c) In a funds transfer to which this chapter applies, in the event of an inconsistency between an applicable provision of this chapter and an applicable provision of the Electronic Fund Transfer Act, the provision of the Electronic Fund Transfer Act governs to the extent of the inconsistency.

Part 2 Issue and Acceptance of Payment Order

§ 47-4A-201. Security procedure.

“Security procedure” means a procedure established by agreement of a customer and a receiving bank for the purpose of:
1. (i) Verifying that a payment order or communication amending or cancelling a payment order is that of the customer; or
2. (ii) Detecting error in the transmission or the content of the payment order or communication.
3. A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, callback procedures, or similar security devices. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.

§ 47-4A-202. Authorized and verified payment orders.

(a) A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency.
(b) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if:
1. (i) The security procedure is a commercially reasonable method of providing security against unauthorized payment orders; and
2. (ii) The bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer. The bank is not required to follow an instruction that violates a written agreement with the customer or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted.
(c) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security procedures in general use by customers and receiving banks similarly situated. A security procedure is deemed to be commercially reasonable if:
1. (i) The security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer; and
2. (ii) The customer expressly agreed in writing to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the security procedure chosen by the customer.
(d) The term “sender” in this chapter includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subsection (a), or it is effective as the order of the customer under subsection (b).
(e) This section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders.
(f) Except as provided in this section and in § 47-4A-203(a)(1), rights and obligations arising under this section or § 47-4A-203 may not be varied by agreement.

§ 47-4A-203. Unenforceability of certain verified payment orders.

(a) If an accepted payment order is not, under § 47-4A-202(a), an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to § 47-4A-202(b), the following rules apply:
1. (1) By express written agreement, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order; and
2. (2) The receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was caused, directly or indirectly, by a person:
  1. (i) Entrusted with duties to act for the receiving bank with respect to payment orders or the security procedure; or
  2. (ii) Who obtained access to communications facilities of the receiving bank or who obtained, from a source controlled by the receiving bank and without authority of the customer, information facilitating breach of the security procedure, regardless of how the information was obtained. Information includes any access device, computer software, or the like.
(b) This section applies to amendments of payment orders to the same extent it applies to payment orders.

§ 47-4A-204. Refund of payment and duty of customer to report with respect to unauthorized payment order.

(a) If a receiving bank accepts a payment order issued in the name of its customer as sender which is:
1. (i) Not authorized and not effective as the order of the customer under § 47-4A-202; or
2. (ii) Not enforceable, in whole or in part, against the customer under § 47-4A-203;
3. the bank shall refund any payment of the payment order received from the customer to the extent the bank is not entitled to enforce payment and shall pay interest on the refundable amount calculated from the date the bank received payment to the date of the refund. However, the customer is not entitled to interest from the bank on the amount to be refunded if the customer fails to exercise ordinary care to determine that the order was not authorized by the customer and to notify the bank of the relevant facts within a reasonable time not exceeding ninety (90) days after the date the customer received notification from the bank that the order was accepted or that the customer's account was debited with respect to the order. The bank is not entitled to any recovery from the customer on account of a failure by the customer to give notification as stated in this section.
(b) Reasonable time under subsection (a) may be fixed by agreement as stated in § 47-1-302(b), but the obligation of a receiving bank to refund payment as stated in subsection (a) may not otherwise be varied by agreement.

§ 47-4A-205. Erroneous payment orders.

(a) If an accepted payment order was transmitted pursuant to a security procedure for the detection of error and the payment order:
1. (i) Erroneously instructed payment to a beneficiary not intended by the sender;
2. (ii) Erroneously instructed payment in an amount greater than the amount intended by the sender; or
3. (iii) Was an erroneously transmitted duplicate of a payment order previously sent by the sender;
4. The following rules apply:
5. (1) If the sender proves that the sender or a person acting on behalf of the sender pursuant to § 47-4A-206 complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obliged to pay the order to the extent stated in subdivisions (a)(2) and (3).
6. (2) If the funds transfer is completed on the basis of an erroneous payment order described in subdivision (a)(i) or (iii), the sender is not obliged to pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution; and
7. (3) If the funds transfer is completed on the basis of a payment order described in subdivision (a)(ii), the sender is not obliged to pay the order to the extent the amount received by the beneficiary is greater than the amount intended by the sender. In that case, the receiving bank is entitled to recover from the beneficiary the excess amount received to the extent allowed by the law governing mistake and restitution.
(b) If:
1. (i) The sender of an erroneous payment order described in subsection (a) is not obliged to pay all or part of the order; and
2. (ii) The sender receives notification from the receiving bank that the order was accepted by the bank or that the sender's account was debited with respect to the order;
3. The sender has a duty to exercise ordinary care, on the basis of information available to the sender, to discover the error with respect to the order and to advise the bank of the relevant facts within a reasonable time, not exceeding ninety (90) days, after the bank's notification was received by the sender. If the bank proves that the sender failed to perform that duty, the sender is liable to the bank for the loss the bank proves it incurred as a result of the failure, but the liability of the sender may not exceed the amount of the sender's order.
(c) This section applies to amendments to payment orders to the same extent it applies to payment orders.

§ 47-4A-206. Transmission of payment order through funds-transfer or other communication system.

(a) If a payment order addressed to a receiving bank is transmitted to a funds-transfer system or other third-party communication system for transmittal to the bank, the system is deemed to be an agent of the sender for the purpose of transmitting the payment order to the bank. If there is a discrepancy between the terms of the payment order transmitted to the system and the terms of the payment order transmitted by the system to the bank, the terms of the payment order of the sender are those transmitted by the system. This section does not apply to a funds-transfer system of the federal reserve banks.
(b) This section applies to cancellations and amendments of payment orders to the same extent it applies to payment orders.

§ 47-4A-207. Misdescription of beneficiary.

(a) Subject to subsection (b), if, in a payment order received by the beneficiary's bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.
(b) If a payment order received by the beneficiary's bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:
1. (1) Except as otherwise provided in subsection (c), if the beneficiary's bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary's bank need not determine whether the name and number refer to the same person; and
2. (2) If the beneficiary's bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary's bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur.
(c) If:
1. (i) A payment order described in subsection (b) is accepted;
2. (ii) The originator's payment order described the beneficiary inconsistently by name and number; and
3. (iii) The beneficiary's bank pays the person identified by number as permitted by subdivision (b)(1);
4. The following rules apply:
5. (1) If the originator is a bank, the originator is obliged to pay its order; or
6. (2) If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator's bank proves that the originator, before acceptance of the originator's order, had notice that payment of a payment order issued by the originator might be made by the beneficiary's bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary. Proof of notice may be made by any admissible evidence. The originator's bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a writing stating the information to which the notice relates.
(d) In a case governed by subdivision (b)(1), if the beneficiary's bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:
1. (1) If the originator is obliged to pay its payment order as stated in subsection (c), the originator has the right to recover; and
2. (2) If the originator is not a bank and is not obliged to pay its payment order, the originator's bank has the right to recover.

§ 47-4A-208. Misdescription of intermediary bank or beneficiary's bank.

(a) This subsection applies to a payment order identifying an intermediary bank or the beneficiary's bank only by an identifying number.
1. (1) The receiving bank may rely on the number as the proper identification of the intermediary or beneficiary's bank and need not determine whether the number identifies a bank.
2. (2) The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.
(b) This subsection applies to a payment order identifying an intermediary bank or the beneficiary's bank both by name and an identifying number if the name and number identify different persons.
1. (1) If the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary's bank if the receiving bank, when it executes the sender's order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person or whether the number refers to a bank. The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.
2. (2) If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary's bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by subdivision (b)(1), as though the sender were a bank. Proof of notice may be made by any admissible evidence. The receiving bank satisfies the burden of proof if it proves that the sender, before the payment order was accepted, signed a writing stating the information to which the notice relates.
3. (3) Regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary or beneficiary's bank if the receiving bank, at the time it executes the sender's order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person.
4. (4) If the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender's payment order is a breach of the obligation stated in § 47-4A-302(a)(1).

§ 47-4A-209. Acceptance of payment order.

(a) Subject to subsection (d), a receiving bank other than the beneficiary's bank accepts a payment order when it executes the order.
(b) Subject to subsections (c) and (d), a beneficiary's bank accepts a payment order at the earliest of the following times:
1. (1) When the bank:
  1. (i) Pays the beneficiary as stated in § 47-4A-405(a) or § 47-4A-405(b); or
  2. (ii) Notifies the beneficiary of receipt of the order or that the account of the beneficiary has been credited with respect to the order, unless the notice indicates that the bank is rejecting the order or that funds with respect to the order may not be withdrawn or used until receipt of payment from the sender of the order;
2. (2) When the bank receives payment of the entire amount of the sender's order pursuant to § 47-4A-403(a)(1) or § 47-4A-403(a)(2); or
3. (3) The opening of the next funds-transfer business day of the bank following the payment date of the order if, at that time, the amount of the sender's order is fully covered by a withdrawable credit balance in an authorized account of the sender or the bank has otherwise received full payment from the sender, unless the order was rejected before that time or is rejected within:
  1. (i) One (1) hour after that time; or
  2. (ii) One (1) hour after the opening of the next business day of the sender following the payment date if that time is later.
  3. If notice of rejection is received by the sender after the payment date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the payment date to the day the sender receives notice or learns that the order was not accepted, counting that day as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest payable is reduced accordingly.
(c) Acceptance of a payment order cannot occur before the order is received by the receiving bank. Acceptance does not occur under subdivision (b)(2) or (3) if the beneficiary of the payment order does not have an account with the receiving bank, the account has been closed, or the receiving bank is not permitted by law to receive credits for the beneficiary's account.
(d) A payment order issued to the originator's bank cannot be accepted until the payment date if the bank is the beneficiary's bank, or the execution date if the bank is not the beneficiary's bank. If the originator's bank executes the originator's payment order before the execution date or pays the beneficiary of the originator's payment order before the payment date and the payment order is subsequently cancelled pursuant to § 47-4A-211(b), the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution.

§ 47-4A-210. Rejection of payment order.

(a) A payment order is rejected by the receiving bank by a notice of rejection transmitted to the sender orally, electronically, or in writing. A notice of rejection need not use any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order. Rejection is effective when the notice is given if transmission is by a means that is reasonable in the circumstances. If notice of rejection is given by a means that is not reasonable, rejection is effective when the notice is received. If an agreement of the sender and receiving bank establishes the means to be used to reject a payment order:
1. (i) Any means complying with the agreement is reasonable; and
2. (ii) Any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.
(b) This subsection applies if a receiving bank other than the beneficiary's bank fails to execute a payment order despite the existence on the execution date of a withdrawable credit balance in an authorized account of the sender sufficient to cover the order. If the sender does not receive notice of rejection of the order on the execution date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the execution date to the earlier of the day the order is cancelled pursuant to § 47-4A-211(d) or the day the sender receives notice or learns that the order was not executed, counting the final day of the period as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest is reduced accordingly.
(c) If a receiving bank suspends payments, all unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments.
(d) Acceptance of a payment order precludes a later rejection of the order. Rejection of a payment order precludes a later acceptance of the order.

§ 47-4A-211. Cancellation and amendment of payment order.

(a) A communication of the sender of a payment order cancelling or amending the order may be transmitted to the receiving bank orally, electronically, or in writing. If a security procedure is in effect between the sender and the receiving bank, the communication is not effective to cancel or amend the order unless the communication is verified pursuant to the security procedure or the bank agrees to the cancellation or amendment.
(b) Subject to subsection (a), a communication by the sender cancelling or amending a payment order is effective to cancel or amend the order if notice of the communication is received at a time and in a manner affording the receiving bank a reasonable opportunity to act on the communication before the bank accepts the payment order.
(c) After a payment order has been accepted, cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank.
1. (1) With respect to a payment order accepted by a receiving bank other than the beneficiary's bank, cancellation or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made.
2. (2) With respect to a payment order accepted by the beneficiary's bank, cancellation or amendment is not effective unless the order was issued in execution of an unauthorized payment order, or because of a mistake by a sender in the funds transfer which resulted in the issuance of a payment order:
  1. (i) That is a duplicate of a payment order previously issued by the sender;
  2. (ii) That orders payment to a beneficiary not entitled to receive payment from the originator; or
  3. (iii) That orders payment in an amount greater than the amount the beneficiary was entitled to receive from the originator.
  4. If the payment order is cancelled or amended, the beneficiary's bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.
(d) An unaccepted payment order is cancelled by operation of law at the close of the fifth funds-transfer business day of the receiving bank after the execution date or payment date of the order.
(e) A cancelled payment order cannot be accepted. If an accepted payment order is cancelled, the acceptance is nullified and no person has any right or obligation based on the acceptance. Amendment of a payment order is deemed to be cancellation of the original order at the time of amendment and issue of a new payment order in the amended form at the same time.
(f) Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the bank's agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney's fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment.
(g) A payment order is not revoked by the death or legal incapacity of the sender unless the receiving bank knows of the death or of an adjudication of incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance of the order.
(h) A funds-transfer system rule is not effective to the extent it conflicts with subdivision (c)(2).

§ 47-4A-212. Liability and duty of receiving bank regarding unaccepted payment order.

If a receiving bank fails to accept a payment order that it is obliged by express agreement to accept, the bank is liable for breach of the agreement to the extent provided in the agreement or in this chapter, but does not otherwise have any duty to accept a payment order or, before acceptance, to take any action, or refrain from taking action, with respect to the order except as provided in this chapter or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in § 47-4A-209, and liability is limited to that provided in this chapter. A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer, and the bank owes no duty to any party to the funds transfer except as provided in this chapter or by express agreement.

Part 3 Execution of Sender's Payment Order by Receiving Bank

§ 47-4A-301. Execution and execution date.

(a) A payment order is “executed” by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank. A payment order received by the beneficiary's bank can be accepted but cannot be executed.
(b) “Execution date” of a payment order means the day on which the receiving bank may properly issue a payment order in execution of the sender's order. The execution date may be determined by instruction of the sender but cannot be earlier than the day the order is received and, unless otherwise determined, is the day the order is received. If the sender's instruction states a payment date, the execution date is the payment date or an earlier date on which execution is reasonably necessary to allow payment to the beneficiary on the payment date.

§ 47-4A-302. Obligations of receiving bank in execution of payment order.

(a) Except as provided in subsections (b)-(d), if the receiving bank accepts a payment order pursuant to § 47-4A-209(a), the bank has the following obligations in executing the order:
1. (1) The receiving bank is obliged to issue, on the execution date, a payment order complying with the sender's order and to follow the sender's instructions concerning:
  1. (i) Any intermediary bank or funds-transfer system to be used in carrying out the funds transfer; or
  2. (ii) The means by which payment orders are to be transmitted in the funds transfer.
  3. If the originator's bank issues a payment order to an intermediary bank, the originator's bank is obliged to instruct the intermediary bank according to the instruction of the originator. An intermediary bank in the funds transfer is similarly bound by an instruction given to it by the sender of the payment order it accepts.
2. (2) If the sender's instruction states that the funds transfer is to be carried out telephonically or by wire transfer or otherwise indicates that the funds transfer is to be carried out by the most expeditious means, the receiving bank is obliged to transmit its payment order by the most expeditious available means, and to instruct any intermediary bank accordingly. If a sender's instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably necessary to allow payment to the beneficiary on the payment date or as soon thereafter as is feasible.
(b) Unless otherwise instructed, a receiving bank executing a payment order may:
1. (1) Use any funds-transfer system if use of that system is reasonable in the circumstances; and
2. (2) Issue a payment order to the beneficiary's bank or to an intermediary bank through which a payment order conforming to the sender's order can expeditiously be issued to the beneficiary's bank if the receiving bank exercises ordinary care in the selection of the intermediary bank.
3. A receiving bank is not required to follow an instruction of the sender designating a funds-transfer system to be used in carrying out the funds transfer if the receiving bank, in good faith, determines that it is not feasible to follow the instruction or that following the instruction would unduly delay completion of the funds transfer.
(c) Unless subdivision (a)(2) applies or the receiving bank is otherwise instructed, the bank may execute a payment order by transmitting its payment order by first class mail or by any means reasonable in the circumstances. If the receiving bank is instructed to execute the sender's order by transmitting its payment order by a particular means, the receiving bank may issue its payment order by the means stated or by any means as expeditious as the means stated.
(d) Unless instructed by the sender:
1. (1) The receiving bank may not obtain payment of its charges for services and expenses in connection with the execution of the sender's order by issuing a payment order in an amount equal to the amount of the sender's order less the amount of the charges; and
2. (2) May not instruct a subsequent receiving bank to obtain payment of its charges in the same manner.

§ 47-4A-303. Erroneous execution of payment order.

(a) A receiving bank that:
1. (i) Executes the payment order of the sender by issuing a payment order in an amount greater than the amount of the sender's order; or
2. (ii) Issues a payment order in execution of the sender's order and then issues a duplicate order;
3. is entitled to payment of the amount of the sender's order under § 47-4A-402(c) if that subsection is otherwise satisfied. The bank is entitled to recover from the beneficiary of the erroneous order the excess payment received to the extent allowed by the law governing mistake and restitution.
(b) A receiving bank that executes the payment order of the sender by issuing a payment order in an amount less than the amount of the sender's order is entitled to payment of the amount of the sender's order under § 47-4A-402(c) if:
1. (i) That subsection is otherwise satisfied; and
2. (ii) The bank corrects its mistake by issuing an additional payment order for the benefit of the beneficiary of the sender's order.
3. If the error is not corrected, the issuer of the erroneous order is entitled to receive or retain payment from the sender of the order it accepted only to the extent of the amount of the erroneous order. This subsection does not apply if the receiving bank executes the sender's payment order by issuing a payment order in an amount less than the amount of the sender's order for the purpose of obtaining payment of its charges for services and expenses pursuant to instruction of the sender.
(c) If a receiving bank executes the payment order of the sender by issuing a payment order to a beneficiary different from the beneficiary of the sender's order and the funds transfer is completed on the basis of that error, the sender of the payment order that was erroneously executed and all previous senders in the funds transfer are not obliged to pay the payment orders they issued. The issuer of the erroneous order is entitled to recover from the beneficiary of the order the payment received to the extent allowed by the law governing mistake and restitution.

§ 47-4A-304. Duty of sender to report erroneously executed payment order.

If the sender of a payment order that is erroneously executed as stated in § 47-4A-303 receives notification from the receiving bank that the order was executed or that the sender's account was debited with respect to the order, the sender has a duty to exercise ordinary care to determine, on the basis of information available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts within a reasonable time not exceeding ninety (90) days after the notification from the bank was received by the sender. If the sender fails to perform that duty, the bank is not obliged to pay interest on any amount refundable to the sender under § 47-4A-402(d) for the period before the bank learns of the execution error. The bank is not entitled to any recovery from the sender on account of a failure by the sender to perform the duty stated in this section.

§ 47-4A-305. Liability for late or improper execution or failure to execute payment order.

(a) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of § 47-4A-302 results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds transfer for the period of delay caused by the improper execution. Except as provided in subsection (c), additional damages are not recoverable.
(b) If execution of a payment order by a receiving bank in breach of § 47-4A-302 results in:
1. (i) Noncompletion of the funds transfer;
2. (ii) Failure to use an intermediary bank designated by the originator; or
3. (iii) Issuance of a payment order that does not comply with the terms of the payment order of the originator,
4. the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by subsection (a), resulting from the improper execution. Except as provided in subsection (c), additional damages are not recoverable.
(c) In addition to the amounts payable under subsections (a) and (b), damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank.
(d) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute. Additional damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank, but are not otherwise recoverable.
(e) Reasonable attorney's fees are recoverable if demand for compensation under subsection (a) or (b) is made and refused before an action is brought on the claim. If a claim is made for breach of an agreement under subsection (d) and the agreement does not provide for damages, reasonable attorney's fees are recoverable if demand for compensation under subsection (d) is made and refused before an action is brought on the claim.
(f) Except as stated in this section, the liability of a receiving bank under subsections (a) and (b) may not be varied by agreement.

Part 4 Payment

§ 47-4A-401. Payment date.

“Payment date” of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary's bank. The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary's bank and, unless otherwise determined, is the day the order is received by the beneficiary's bank.

§ 47-4A-402. Obligation of sender to pay receiving bank.

(a) This section is subject to §§ 47-4A-205 and 47-4A-207.
(b) With respect to a payment order issued to the beneficiary's bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order.
(c) This subsection is subject to subsection (e) and to § 47-4A-303. With respect to a payment order issued to a receiving bank other than the beneficiary's bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender's order. Payment by the sender is not due until the execution date of the sender's order. The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary's bank of a payment order instructing payment to the beneficiary of that sender's payment order.
(d) If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay. Except as provided in §§ 47-4A-204 and 47-4A-304, interest is payable on the refundable amount from the date of payment.
(e) If a funds transfer is not completed as stated in subsection (c) and an intermediary bank is obliged to refund payment as stated in subsection (d) but is unable to do so because not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in § 47-4A-302(a)(1), to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted. The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in subsection (d).
(f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in subsection (c) or to receive refund under subsection (d) may not be varied by agreement.

§ 47-4A-403. Payment by sender to receiving bank.

(a) Payment of the sender's obligation under § 47-4A-402 to pay the receiving bank occurs as follows:
1. (1) If the sender is a bank, payment occurs when the receiving bank receives final settlement of the obligation through a federal reserve bank or through a funds-transfer system;
2. (2) If the sender is a bank and the sender:
  1. (i) Credited an account of the receiving bank with the sender; or
  2. (ii) Caused an account of the receiving bank in another bank to be credited;
  3. Payment occurs when the credit is withdrawn or, if not withdrawn, at midnight (12:00) of the day on which the credit is withdrawable and the receiving bank learns of that fact; or
3. (3) If the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent the debit is covered by a withdrawable credit balance in the account.
(b) If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system. The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender's obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system. The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system. The aggregate balance is determined after the right of setoff stated in the second sentence of this subsection has been exercised.
(c) If two (2) banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under § 47-4A-402 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one (1) bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank. To the extent of the setoff, each bank has made payment to the other.
(d) In a case not covered by subsection (a), the time when payment of the sender's obligation under §§ 47-4A-402(b) or 47-4A-402(c) occurs is governed by applicable principles of law that determine when an obligation is satisfied.

§ 47-4A-404. Obligation of beneficiary's bank to pay and give notice to beneficiary.

(a) Subject to §§ 47-4A-211(e), 47-4A-405(d), and 47-4A-405(e), if a beneficiary's bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day. If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment.
(b) If a payment order accepted by the beneficiary's bank instructs payment to an account of the beneficiary, the bank is obliged to notify the beneficiary of receipt of the order before midnight (12:00) of the next funds-transfer business day following the payment date. If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order. Notice may be given by first-class mail or any other means reasonable in the circumstances. If the bank fails to give the required notice, the bank is obliged to pay interest to the beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank. No other damages are recoverable. Reasonable attorney's fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.
(c) The right of a beneficiary to receive payment and damages as stated in subsection (a) may not be varied by agreement or a funds-transfer system rule. The right of a beneficiary to be notified as stated in subsection (b) may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer.

§ 47-4A-405. Payment by beneficiary's bank to beneficiary.

(a) If the beneficiary's bank credits an account of the beneficiary of a payment order, payment of the bank's obligation under § 47-4A-404(a) occurs when and to the extent:
1. (i) The beneficiary is notified of the right to withdraw the credit;
2. (ii) The bank lawfully applies the credit to a debt of the beneficiary; or
3. (iii) Funds with respect to the order are otherwise made available to the beneficiary by the bank.
(b) If the beneficiary's bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank's obligation under § 47-4A-404(a) occurs is governed by principles of law that determine when an obligation is satisfied.
(c) Except as stated in subsections (d) and (e), if the beneficiary's bank pays the beneficiary of a payment order under a condition to payment or agreement of the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable.
(d) A funds-transfer system rule may provide that payments made to beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary's bank of the payment order it accepted. A beneficiary's bank that makes a payment that is provisional under the rule is entitled to refund from the beneficiary if:
1. (i) The rule requires that both the beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated;
2. (ii) The beneficiary, the beneficiary's bank and the originator's bank agreed to be bound by the rule; and
3. (iii) The beneficiary's bank did not receive payment of the payment order that it accepted.
4. If the beneficiary is obliged to refund payment to the beneficiary's bank, acceptance of the payment order by the beneficiary's bank is nullified and no payment by the originator of the funds transfer to the beneficiary occurs under § 47-4A-406.
(e) This subsection applies to a funds transfer that includes a payment order transmitted over a funds-transfer system that (i) nets obligations multilaterally among participants, and (ii) has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one (1) or more participants that do not meet their settlement obligations. If the beneficiary's bank in the funds transfer accepts a payment order and the system fails to complete settlement pursuant to its rules with respect to any payment order in the funds transfer, (i) the acceptance by the beneficiary's bank is nullified and no person has any right or obligation based on the acceptance, (ii) the beneficiary's bank is entitled to recover payment from the beneficiary, (iii) no payment by the originator to the beneficiary occurs under § 47-4A-406, and (iv) subject to § 47-4A-402(e), each sender in the funds transfer is excused from its obligation to pay its payment order under § 47-4A-402(c) because the funds transfer has not been completed.

§ 47-4A-406. Payment by originator to beneficiary — Discharge of underlying obligation.

(a) Subject to §§ 47-4A-211(e), 47-4A-405(d), and 47-4A-405(e), the originator of a funds transfer pays the beneficiary of the originator's payment order:
1. (i) At the time a payment order for the benefit of the beneficiary is accepted by the beneficiary's bank in the funds transfer; and
2. (ii) In an amount equal to the amount of the order accepted by the beneficiary's bank, but not more than the amount of the originator's order.
(b) If payment under subsection (a) is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless:
1. (i) The payment under subsection (a) was made by a means prohibited by the contract of the beneficiary with respect to the obligation;
2. (ii) The beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary's bank, notified the originator of the beneficiary's refusal of the payment;
3. (iii) Funds with respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary; and
4. (iv) The beneficiary would suffer a loss that could reasonably have been avoided if payment had been made by a means complying with the contract.
5. If payment by the originator does not result in discharge under this section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary's bank under § 47-4A-404(a).
(c) For the purpose of determining whether discharge of an obligation occurs under subsection (b), if the beneficiary's bank accepts a payment order in an amount equal to the amount of the originator's payment order less charges of one (1) or more receiving banks in the funds transfer, payment to the beneficiary is deemed to be in the amount of the originator's order unless upon demand by the beneficiary the originator does not pay the beneficiary the amount of the deducted charges.
(d) Rights of the originator or of the beneficiary of a funds transfer under this section may be varied only by agreement of the originator and the beneficiary.

Part 5 Miscellaneous Provisions

§ 47-4A-501. Variation by agreement and effect of funds-transfer system rule.

(a) Except as otherwise provided in this chapter, the rights and obligations of a party to a funds transfer may be varied by agreement of the affected party.
(b) “Funds-transfer system rule” means a rule of an association of banks:
1. (i) Governing transmission of payment orders by means of a funds-transfer system of the association or rights and obligations with respect to those orders; or
2. (ii) To the extent the rule governs rights and obligations between banks that are parties to a funds transfer in which a federal reserve bank, acting as an intermediary bank, sends a payment order to the beneficiary's bank.
3. Except as otherwise provided in this chapter, a funds-transfer system rule governing rights and obligations between participating banks using the system may be effective even if the rule conflicts with this chapter and indirectly affects another party to the funds transfer who does not consent to the rule. A funds-transfer system rule may also govern rights and obligations of parties other than participating banks using the system to the extent stated in §§ 47-4A-404(c), 47-4A-405(d), and 47-4A-507(c).

§ 47-4A-502. Creditor process served on receiving bank — Setoff by beneficiary's bank.

(a) As used in this section, “creditor process” means levy, attachment, garnishment, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account.
(b) This subsection applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the creditor process, if the receiving bank accepts the payment order the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.
(c) If a beneficiary's bank has received a payment order for payment to the beneficiary's account in the bank, the following rules apply:
1. (1) The bank may credit the beneficiary's account. The amount credited may be set off against an obligation owed by the beneficiary to the bank or may be applied to satisfy creditor process served on the bank with respect to the account;
2. (2) The bank may credit the beneficiary's account and allow withdrawal of the amount credited unless creditor process with respect to the account is served at a time and in a manner affording the bank a reasonable opportunity to act to prevent withdrawal; and
3. (3) If creditor process with respect to the beneficiary's account has been served and the bank has had a reasonable opportunity to act on it, the bank may not reject the payment order except for a reason unrelated to the service of process.
(d) Creditor process with respect to a payment by the originator to the beneficiary pursuant to a funds transfer may be served only on the beneficiary's bank with respect to the debt owed by that bank to the beneficiary. Any other bank served with the creditor process is not obliged to act with respect to the process.

§ 47-4A-503. Injunction or restraining order with respect to funds transfer.

For proper cause and in compliance with applicable law, a court may restrain:
1. (i) A person from issuing a payment order to initiate a funds transfer;
2. (ii) An originator's bank from executing the payment order of the originator; or
3. (iii) The beneficiary's bank from releasing funds to the beneficiary or the beneficiary from withdrawing the funds.
4. A court may not otherwise restrain a person from issuing a payment order, paying or receiving payment of a payment order, or otherwise acting with respect to a funds transfer.

§ 47-4A-504. Order in which items and payment orders may be charged to account — Order of withdrawals from account.

(a) If a receiving bank has received more than one (1) payment order of the sender or one (1) or more payment orders and other items that are payable from the sender's account, the bank may charge the sender's account with respect to the various orders and items in any sequence.
(b) In determining whether a credit to an account has been withdrawn by the holder of the account or applied to a debt of the holder of the account, credits first made to the account are first withdrawn or applied.

§ 47-4A-505. Preclusion of objection to debit of customer's account.

If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer's objection to the payment within one (1) year after the notification was received by the customer.

§ 47-4A-506. Rate of interest.

(a) If, under this chapter, a receiving bank is obliged to pay interest with respect to a payment order issued to the bank, the amount payable may be determined:
1. (i) By agreement of the sender and receiving bank; or
2. (ii) By a funds-transfer system rule if the payment order is transmitted through a funds-transfer system.
(b) If the amount of interest is not determined by an agreement or rule as stated in subsection (a), the amount is calculated by multiplying the applicable federal funds rate by the amount on which interest is payable, and then multiplying the product by the number of days for which interest is payable. The applicable federal funds rate is the average of the federal funds rates published by the federal reserve bank of New York for each of the days for which interest is payable divided by three hundred sixty (360). The federal funds rate for any day on which a published rate is not available is the same as the published rate for the next preceding day for which there is a published rate. If a receiving bank that accepted a payment order is required to refund payment to the sender of the order because the funds transfer was not completed, but the failure to complete was not due to any fault by the bank, the interest payable is reduced by a percentage equal to the reserve requirement on deposits of the receiving bank.

§ 47-4A-507. Choice of law.

(a) The following rules apply unless the affected parties otherwise agree or subsection (c) applies:
1. (1) The rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located;
2. (2) The rights and obligations between the beneficiary's bank and the beneficiary are governed by the law of the jurisdiction in which the beneficiary's bank is located; and
3. (3) The issue of when payment is made pursuant to a funds transfer by the originator to the beneficiary is governed by the law of the jurisdiction in which the beneficiary's bank is located.
(b) If the parties described in each subdivision of subsection (a) have made an agreement selecting the law of a particular jurisdiction to govern rights and obligations between each other, the law of that jurisdiction governs those rights and obligations, whether or not the payment order or the funds transfer bears a reasonable relation to that jurisdiction.
(c) A funds-transfer system rule may select the law of a particular jurisdiction to govern:
1. (1) Rights and obligations between participating banks with respect to payment orders transmitted or processed through the system; or
2. (2) The rights and obligations of some or all parties to a funds transfer any part of which is carried out by means of the system.
3. A choice of law made pursuant to subdivision (c)(i) is binding on participating banks. A choice of law made pursuant to subdivision (c)(ii) is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order. The beneficiary of a funds transfer is bound by the choice of law if, when the funds transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system. The law of a jurisdiction selected pursuant to this subsection may govern, whether or not that law bears a reasonable relation to the matter in issue.
(d) In the event of inconsistency between an agreement under subsection (b) and a choice-of-law rule under subsection (c), the agreement under subsection (b) prevails.
(e) If a funds transfer is made by use of more than one (1) funds-transfer system and there is inconsistency between choice-of-law rules of the systems, the matter in issue is governed by the law of the selected jurisdiction that has the most significant relationship to the matter in issue.

Chapter 5 Letters of Credit

§ 47-5-101. Short title.

This article may be cited as Uniform Commercial Code — Letters of Credit.

§ 47-5-102. Definitions.

(a) In this article:
1. (1) “Adviser” means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been issued, confirmed or amended;
2. (2) “Applicant” means a person at whose request or for whose account a letter of credit is issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer;
3. (3) “Beneficiary” means a person who under the terms of a letter of credit is entitled to have its complying presentation honored. The term includes a person to whom drawing rights have been transferred under a transferable letter of credit;
4. (4) “Confirmer” means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another;
5. (5) “Dishonor” of a letter of credit means failure timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit;
6. (6) “Document” means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion:
  1. (i) which is presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in § 47-5-108(e); and
  2. (ii) which is capable of being examined for compliance with the terms and conditions of the letter of credit.
  3. A document may not be oral;
7. (7) “Good faith” means honesty in fact in the conduct or transaction concerned;
8. (8) “Honor” of a letter of credit means performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, “honor” occurs:
  1. (i) upon payment;
  2. (ii) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment; or
  3. (iii) if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance;
9. (9) “Issuer” means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes;
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10. (10) “Letter of credit” means a definite undertaking that satisfies the requirements of Section 47-5-104 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value;
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11. (11) “Nominated person” means a person whom the issuer:
  1. (i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit; and
  2. (ii) undertakes by agreement or custom and practice to reimburse;
12. (12) “Presentation” means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit;
13. (13) “Presenter” means a person making a presentation as or on behalf of a beneficiary or nominated person;
14. (14) “Record” means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form; and
15. (15) “Successor of a beneficiary” means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator, and receiver.
(b) Definitions in other Articles applying to this article and the sections in which they appear are:
1. “Accept” or “Acceptance” Section 47-3-409
2. “Value” Sections 47-3-303, 47-4-211
(c) Tennessee Code Annotated, Title 47, Chapter 1, contains certain additional general definitions and principles of construction and interpretation applicable throughout this article.

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47-9-102(b)

§ 47-5-103. Scope.

(a) This article applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.
(b) The statement of a rule in this article does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this article.
(c) With the exception of this subsection, subsections (a) and (d), §§ 47-5-102(a)(9) and (10), 47-5-106(d), and 47-5-114(d), and except to the extent prohibited in §§ 47-1-302 and 47-5-117(d), the effect of this article may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this article.
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(d) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.

§ 47-5-104. Formal requirements.

A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated:
1. (i) by a signature; or
2. (ii) in accordance with the agreement of the parties or the standard practice referred to in § 47-5-108(e).

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§ 47-5-105. Consideration.

Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.

§ 47-5-106. Issuance, amendment, cancellation, and duration.

(a) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it so provides.
(b) After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmer, and issuer are not affected by an amendment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent.
(c) If there is no stated expiration date or other provision that determines its duration, a letter of credit expires one (1) year after its stated date of issuance or, if none is stated, after the date on which it is issued.
(d) A letter of credit that states that it is perpetual expires five (5) years after its stated date of issuance, or if none is stated, after the date on which it is issued.
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§ 47-5-107. Confirmer, nominated person, and adviser.

(a) A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at the request and for the account of the issuer.
(b) A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.
(c) A person requested to advise may decline to act as an adviser. An adviser that is not a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation, amendment, or advice received by that person and undertakes to the beneficiary to check the apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit, confirmation, or amendment is enforceable as issued.
(d) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under subsection (c). The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who so notifies.

§ 47-5-108. Issuer's rights and obligations.

(a) Except as otherwise provided in § 47-5-109, an issuer shall honor a presentation that, as determined by the standard practice referred to in subsection (e), appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in § 47-5-113 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.
(b) An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of its receipt of documents:
1. (1) to honor,
2. (2) if the letter of credit provides for honor to be completed more than seven (7) business days after presentation, to accept a draft or incur a deferred obligation, or
3. (3) to give notice to the presenter of discrepancies in the presentation.
(c) Except as otherwise provided in subsection (d), an issuer is precluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given.
(d) Failure to give the notice specified in subsection (b) or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in § 47-5-109(a) or expiration of the letter of credit before presentation.
(e) An issuer shall observe standard practice of financial institutions that regularly issue letters of credit. Determination of the issuer's observance of the standard practice is a matter of interpretation for the court. The court shall offer the parties a reasonable opportunity to present evidence of the standard practice.
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(f) An issuer is not responsible for:
1. (1) the performance or nonperformance of the underlying contract, arrangement, or transaction,
2. (2) an act or omission of others, or
3. (3) observance or knowledge of the usage of a particular trade other than the standard practice referred to in subsection (e).
(g) If an undertaking constituting a letter of credit under § 47-5-102(a)(10) contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.
(h) An issuer that has dishonored a presentation shall return the documents or hold them at the disposal of, and send advice to that effect to, the presenter.
(i) An issuer that has honored a presentation as permitted or required by this article:
1. (1) is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds;
2. (2) takes the documents free of claims of the beneficiary or presenter;
3. (3) is precluded from asserting a right of recourse on a draft under §§ 47-3-414 and 47-3-415;
4. (4) except as otherwise provided in §§ 47-5-110 and 47-5-117, is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender which are apparent on the face of the presentation; and
5. (5) is discharged to the extent of its performance under the letter of credit unless the issuer honored a presentation in which a required signature of a beneficiary was forged.
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§ 47-5-109. Fraud and forgery.

(a) If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant:
1. (1) the issuer shall honor the presentation, if honor is demanded by:
  1. (i) a nominated person who has given value in good faith and without notice of forgery or material fraud;
  2. (ii) a confirmer who has honored its confirmation in good faith;
  3. (iii) a holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person; or
  4. (iv) an assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and
2. (2) the issuer, acting in good faith, may honor or dishonor the presentation in any other case.
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(b) If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that:
1. (1) the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer;
2. (2) a beneficiary, issuer, or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted;
3. (3) all of the conditions to entitle a person to the relief under the law of this state have been met; and
4. (4) on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material fraud and the person demanding honor does not qualify for protection under subsection (a)(1).

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§ 47-5-110. Warranties.

(a) If its presentation is honored, the beneficiary warrants:
1. (1) to the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in § 47-5-109(a); and
2. (2) to the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit.
(b) The warranties in subsection (a) are in addition to warranties arising under chapters 3, 4, 7, and 8 of this title because of the presentation or transfer of documents covered by any of those chapters.

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47-5-108(i)(4)

§ 47-5-111. Remedies.

(a) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation. If the issuer's obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant's election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant's recovery from the issuer must be reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation the claimant need not present any document.
(b) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach.
(c) If an adviser or nominated person other than a confirmer breaches an obligation under this article or an issuer breaches an obligation not covered in subsection (a) or (b), a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and subsections (a) and (b).
(d) An issuer, nominated person, or adviser who is found liable under subsection (a), (b), or (c) shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date.
(e) Reasonable attorney's fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this article.
(f) Damages that would otherwise be payable by a party for breach of an obligation under this article may be liquidated by agreement or undertaking, but only in an amount or by a formula that is reasonable in light of the harm anticipated.

§ 47-5-112. Transfer of letter of credit.

(a) Except as otherwise provided in § 47-5-113, unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred.
(b) Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if:
1. (1) the transfer would violate applicable law; or
2. (2) the transferor or transferee has failed to comply with any requirement stated in the letter of credit or any other requirement relating to transfer imposed by the issuer which is within the standard practice referred to in § 47-5-108(e) or is otherwise reasonable under the circumstances.

§ 47-5-113. Transfer by operation of law.

(a) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor.
(b) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in its own name as the disclosed successor of the beneficiary. Except as otherwise provided in subsection (e), an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for its predecessor upon compliance with the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the standard practice referred to in § 47-5-108(e) or, in the absence of such a practice, compliance with other reasonable procedures sufficient to protect the issuer.
(c) An issuer is not obliged to determine whether a purported successor is a successor of a beneficiary or whether the signature of a purported successor is genuine or authorized.
(d) Honor of a purported successor's apparently complying presentation under subsection (a) or (b) has the consequences specified in § 47-5-108(i) even if the purported successor is not the successor of a beneficiary. Documents signed in the name of the beneficiary or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary are forged documents for the purposes of § 47-5-109.
(e) An issuer whose rights of reimbursement are not covered by subsection (d) or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection (b).
(f) A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this section.

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§ 47-5-114. Assignment of proceeds.

(a) In this section, “proceeds of a letter of credit” means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit. The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.
(b) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit.
(c) An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.
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(d) An issuer or nominated person has no obligation to give or withhold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor.
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(e) Rights of a transferee beneficiary or nominated person are independent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds.
(f) Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is governed by chapter 9 of this title or other law. Against persons other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by chapter 9 or other law.

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§ 47-5-115. Statute of limitations.

An action to enforce a right or obligation arising under this article must be commenced within one (1) year after the expiration date of the relevant letter of credit or one (1) year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.

§ 47-5-116. Choice of law and forum.

(a) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in the manner provided in § 47-5-104 or by a provision in the person's letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction.
(b) Unless subsection (a) applies, the liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person's undertaking. If more than one (1) address is indicated, the person is considered to be located at the address from which the person's undertaking was issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under this subsection.
(c) Except as otherwise provided in this subsection, the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice, such as the Uniform Customs and Practice for Documentary Credits, to which the letter of credit, confirmation, or other undertaking is expressly made subject. If:
1. (i) this chapter would govern the liability of an issuer, nominated person, or adviser under subsection (a) or (b);
2. (ii) the relevant undertaking incorporates rules of custom or practice; and
3. (iii) there is conflict between this article and those rules as applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in § 47-5-103(c).
(d) If there is conflict between this chapter and chapter 3, 4, 4A, or 9 of this title, this chapter governs.
(e) The forum for settling disputes arising out of an undertaking within this article may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (a).

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§ 47-5-117. Subrogation of issuer, applicant, and nominated person.

(a) An issuer that honors a beneficiary's presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary and of the applicant to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.
(b) An applicant that reimburses an issuer is subrogated to the rights of the issuer against any beneficiary, presenter, or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the issuer to the rights of the beneficiary stated in subsection (a).
(c) A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of:
1. (1) the issuer against the applicant to the same extent as if the nominated person were a secondary obligor of the obligation owed to the issuer by the applicant;
2. (2) the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and
3. (3) the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.
(d) Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections (a) and (b) do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection (c) do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person, and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense, or excuse.
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47-5-108(i)(4)

§ 47-5-118. Security interest in document issued under a letter of credit.

(a) An issuer or nominated person has a security interest in a document presented under a letter of credit to the extent that the issuer or nominated person honors or gives value for the presentation.
(b) So long as and to the extent that an issuer or nominated person has not been reimbursed or has not otherwise recovered the value given with respect to a security interest in a document under subsection (a), the security interest continues and is subject to Chapter 9, but:
1. (1) a security agreement is not necessary to make the security interest enforceable under § 47-9-203(b)(3);
2. (2) if the document is presented in a medium other than a written or other tangible medium, the security interest is perfected; and
3. (3) if the document is presented in a written or other tangible medium and is not a certificated security, chattel paper, a document of title, an instrument, or a letter of credit, the security interest is perfected and has priority over a conflicting security interest in the document so long as the debtor does not have possession of the document.

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Chapter 6 Bulk Transfers [Repealed]

§ 47-6-101 — 47-6-111. [Repealed]

Chapter 7 Uniform Commercial Code — Documents of Title

Part 1 General Provisions

§ 47-7-101. Short title.

This chapter shall be known and may be cited as the “Uniform Commercial Code — Documents of Title.”

§ 47-7-102. Chapter definitions.

(a) As used in this chapter, unless the context otherwise requires:
1. (1) “Bailee” means a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them;
2. (2) “Carrier” means a person that issues a bill of lading;
3. (3) “Consignee” means a person named in a bill of lading to which or to whose order the bill promises delivery;
4. (4) “Consignor” means a person named in a bill of lading as the person from which the goods have been received for shipment;
5. (5) “Delivery order” means a record that contains an order to deliver goods directed to a warehouse, carrier, or other person that in the ordinary course of business issues warehouse receipts or bills of lading;
6. (6) “Good faith” means honesty in fact in the conduct or transaction concerned;
7. (7) “Goods” means all things that are treated as movable for the purposes of a contract for storage or transportation;
8. (8) “Issuer” means a bailee that issues a document of title or, in the case of an unaccepted delivery order, the person that orders the possessor of goods to deliver. The term includes a person for which an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, even if the issuer did not receive any goods, the goods were misdescribed, or in any other respect the agent or employee violated the issuer's instructions;
9. (9) “Person entitled under the document” means the holder, in the case of a negotiable document of title, or the person to which delivery of the goods is to be made by the terms of, or pursuant to instructions in a record under, a nonnegotiable document of title;
10. (10) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
11. (11) “Shipper” means a person that enters into a contract of transportation with a carrier;
12. (12) “Sign” means, with present intent to authenticate or adopt a record:
  1. (A) To execute or adopt a tangible symbol; or
  2. (B) To attach to or logically associate with the record an electronic sound, symbol, or process; and
13. (13) “Warehouse” means a person engaged in the business of storing goods for hire.
(b) Definitions in other chapters applying to this chapter and the sections in which they appear are:
1. (1) “Contract for sale”, § 47-2-106;
2. (2) “Lessee in the ordinary course of business”, § 47-2A-103; and
3. (3) “Receipt” of goods, § 47-2-103.
(c) In addition, chapter 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this chapter.

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§ 47-7-103. Relation of chapter to treaty or statute.

(a) This chapter is subject to any treaty or statute of the United States or regulatory statute of this state to the extent the treaty, statute, or regulatory statute is applicable.
(b) This chapter does not modify or repeal any law prescribing the form or content of a document of title or the services or facilities to be afforded by a bailee, or otherwise regulating a bailee's business in respects not specifically treated in this chapter. However, violation of such a law does not affect the status of a document of title that otherwise is within the definition of a document of title.
(c) This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, compiled in 15 U.S.C. § 7001 et seq., but does not modify, limit, or supersede § 101(c) of that act, codified in 15 U.S.C. § 7001(c), or authorize electronic delivery of any of the notices described in § 103(b) of that act, codified in 15 U.S.C. § 7003(b).
(d) To the extent there is a conflict between this chapter and the Uniform Electronic Transactions Act (UETA), compiled chapter 10, part 1 of this title, this chapter governs.

§ 47-7-104. Negotiable and nonnegotiable document of title.

(a) Except as otherwise provided in subsection (c), a document of title is negotiable if by its terms the goods are to be delivered to bearer or to the order of a named person.
(b) A document of title other than one described in subsection (a) is nonnegotiable. A bill of lading that states that the goods are consigned to a named person is not made negotiable by a provision that the goods are to be delivered only against an order in a record signed by the same or another named person.
(c) A document of title is nonnegotiable if, at the time it is issued, the document has a conspicuous legend, however expressed, that it is nonnegotiable.

§ 47-7-105. Reissuance in alternative medium.

(a) Upon request of a person entitled under an electronic document of title, the issuer of the electronic document may issue a tangible document of title as a substitute for the electronic document if:
1. (1) The person entitled under the electronic document surrenders control of the document to the issuer; and
2. (2) The tangible document when issued contains a statement that it is issued in substitution for the electronic document.
(b) Upon issuance of a tangible document of title in substitution for an electronic document of title in accordance with subsection (a):
1. (1) The electronic document ceases to have any effect or validity; and
2. (2) The person that procured issuance of the tangible document warrants to all subsequent persons entitled under the tangible document that the warrantor was a person entitled under the electronic document when the warrantor surrendered control of the electronic document to the issuer.
(c) Upon request of a person entitled under a tangible document of title, the issuer of the tangible document may issue an electronic document of title as a substitute for the tangible document if:
1. (1) The person entitled under the tangible document surrenders possession of the document to the issuer; and
2. (2) The electronic document when issued contains a statement that it is issued in substitution for the tangible document.
(d) Upon issuance of an electronic document of title in substitution for a tangible document of title in accordance with subsection (c):
1. (1) The tangible document ceases to have any effect or validity; and
2. (2) The person that procured issuance of the electronic document warrants to all subsequent persons entitled under the electronic document that the warrantor was a person entitled under the tangible document when the warrantor surrendered possession of the tangible document to the issuer.

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§ 47-7-106. Control of electronic document of title.

(a) A person has control of an electronic document of title if a system employed for evidencing the transfer of interests in the electronic document reliably establishes that person as the person to which the electronic document was issued or transferred.
(b) A system satisfies subsection (a), and a person is deemed to have control of an electronic document of title, if the document is created, stored, and assigned in such a manner that:
1. (1) A single authoritative copy of the document exists which is unique, identifiable, and, except as otherwise provided in subdivisions (b)(4), (5), and (6), unalterable;
2. (2) The authoritative copy identifies the person asserting control as:
  1. (A) The person to which the document was issued; or
  2. (B) If the authoritative copy indicates that the document has been transferred, the person to which the document was most recently transferred;
3. (3) The authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
4. (4) Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
5. (5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
6. (6) Any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.

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Part 2 Warehouse Receipts: Special Provisions

§ 47-7-201. Person that may issue a warehouse receipt — Storage under bond.

(a) A warehouse receipt may be issued by any warehouse.
(b) If goods, including distilled spirits and agricultural commodities, are stored under a statute requiring a bond against withdrawal or a license for the issuance of receipts in the nature of warehouse receipts, a receipt issued for the goods is deemed to be a warehouse receipt even if issued by a person that is the owner of the goods and is not a warehouse.
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§ 47-7-202. Form of warehouse receipt — Effect of omission.

(a) A warehouse receipt need not be in any particular form.
(b) Unless a warehouse receipt provides for each of the following, the warehouse is liable for damages caused to a person injured by its omission:
1. (1) A statement of the location of the warehouse facility where the goods are stored;
2. (2) The date of issue of the receipt;
3. (3) The unique identification code of the receipt;
4. (4) A statement whether the goods received will be delivered to the bearer, to a named person, or to a named person or its order;
5. (5) The rate of storage and handling charges, unless goods are stored under a field warehousing arrangement, in which case a statement of that fact is sufficient on a nonnegotiable receipt;
6. (6) A description of the goods or the packages containing them;
7. (7) The signature of the warehouse or its agent;
8. (8) If the receipt is issued for goods that the warehouse owns, either solely, jointly, or in common with others, a statement of the fact of that ownership; and
9. (9) A statement of the amount of advances made and of liabilities incurred for which the warehouse claims a lien or security interest, unless the precise amount of advances made or liabilities incurred, at the time of the issue of the receipt, is unknown to the warehouse or to its agent that issued the receipt, in which case a statement of the fact that advances have been made or liabilities incurred and the purpose of the advances or liabilities is sufficient.
(c) A warehouse may insert in its receipt any terms that are not contrary to chapters 1-9 of this title and do not impair its obligation of delivery under § 47-7-403 or its duty of care under § 47-7-204. Any contrary provision is ineffective.

§ 47-7-203. Liability for nonreceipt or misdescription.

A party to or purchaser for value in good faith of a document of title, other than a bill of lading, that relies upon the description of the goods in the document may recover from the issuer damages caused by the nonreceipt or misdescription of the goods, except to the extent that:
1. (1) The document conspicuously indicates that the issuer does not know whether all or part of the goods in fact were received or conform to the description, such as a case in which the description is in terms of marks or labels or kind, quantity, or condition, or the receipt or description is qualified by “contents, condition, and quality unknown”, “said to contain”, or words of similar import, if the indication is true; or
2. (2) The party or purchaser otherwise has notice of the nonreceipt or misdescription.

§ 47-7-204. Duty of care — Contractual limitation of warehouse's liability.

(a) A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.
(b) Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable. Such a limitation is not effective with respect to the warehouse's liability for conversion to its own use. On request of the bailor in a record at the time of signing the storage agreement or within a reasonable time after receipt of the warehouse receipt, the warehouse's liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods.
(c) Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the bailment may be included in the warehouse receipt or storage agreement.

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47-7-202(c)

§ 47-7-205. Title under warehouse receipt defeated in certain cases.

A buyer in ordinary course of business of fungible goods sold and delivered by a warehouse that is also in the business of buying and selling such goods takes the goods free of any claim under a warehouse receipt even if the receipt is negotiable and has been duly negotiated.

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47-7-502(a)

§ 47-7-206. Termination of storage at warehouse's option.

(a) A warehouse, by giving notice to the person on whose account the goods are held and any other person known to claim an interest in the goods, may require payment of any charges and removal of the goods from the warehouse at the termination of the period of storage fixed by the document of title or, if a period is not fixed, within a stated period not less than thirty (30) days after the warehouse gives notice. If the goods are not removed before the date specified in the notice, the warehouse may sell them pursuant to § 47-7-210.
(b) If a warehouse in good faith believes that goods are about to deteriorate or decline in value to less than the amount of its lien within the time provided in subsection (a) and § 47-7-210, the warehouse may specify in the notice given under subsection (a) any reasonable shorter time for removal of the goods and, if the goods are not removed, may sell them at public sale held not less than one (1) week after a single advertisement or posting.
(c) If, as a result of a quality or condition of the goods of which the warehouse did not have notice at the time of deposit, the goods are a hazard to other property, the warehouse facilities, or other persons, the warehouse may sell the goods at public or private sale without advertisement or posting on reasonable notification to all persons known to claim an interest in the goods. If the warehouse, after a reasonable effort, is unable to sell the goods, it may dispose of them in any lawful manner and does not incur liability by reason of that disposition.
(d) A warehouse shall deliver the goods to any person entitled to them under this chapter upon due demand made at any time before sale or other disposition under this section.
(e) A warehouse may satisfy its lien from the proceeds of any sale or disposition under this section but shall hold the balance for delivery on the demand of any person to which the warehouse would have been bound to deliver the goods.

§ 47-7-207. Goods must be kept separate — Fungible goods.

(a) Unless the warehouse receipt provides otherwise, a warehouse shall keep separate the goods covered by each receipt so as to permit at all times identification and delivery of those goods. However, different lots of fungible goods may be commingled.
(b) If different lots of fungible goods are commingled, the goods are owned in common by the persons entitled thereto and the warehouse is severally liable to each owner for that owner's share. If, because of overissue, a mass of fungible goods is insufficient to meet all the receipts the warehouse has issued against it, the persons entitled include all holders to which overissued receipts have been duly negotiated.

§ 47-7-208. Altered warehouse receipts.

If a blank in a negotiable tangible warehouse receipt has been filled in without authority, a good-faith purchaser for value and without notice of the lack of authority may treat the insertion as authorized. Any other unauthorized alteration leaves any tangible or electronic warehouse receipt enforceable against the issuer according to its original tenor.

§ 47-7-209. Lien of warehouse.

(a) A warehouse has a lien against the bailor on the goods covered by a warehouse receipt or storage agreement or on the proceeds thereof in its possession for charges for storage or transportation, including demurrage and terminal charges, insurance, labor, or other charges, present or future, in relation to the goods, and for expenses necessary for preservation of the goods or reasonably incurred in their sale pursuant to law. If the person on whose account the goods are held is liable for similar charges or expenses in relation to other goods whenever deposited and it is stated in the warehouse receipt or storage agreement that a lien is claimed for charges and expenses in relation to other goods, the warehouse also has a lien against the goods covered by the warehouse receipt or storage agreement or on the proceeds thereof in its possession for those charges and expenses, whether or not the other goods have been delivered by the warehouse. However, as against a person to which a negotiable warehouse receipt is duly negotiated, a warehouse's lien is limited to charges in an amount or at a rate specified in the warehouse receipt or, if no charges are so specified, to a reasonable charge for storage of the specific goods covered by the receipt subsequent to the date of the receipt.
(b) A warehouse may also reserve a security interest against the bailor for the maximum amount specified on the receipt for charges other than those specified in subsection (a), such as for money advanced and interest. The security interest is governed by chapter 9 of this title.
(c) A warehouse's lien for charges and expenses under subsection (a) or a security interest under subsection (b) is also effective against any person that so entrusted the bailor with possession of the goods that a pledge of them by the bailor to a good-faith purchaser for value would have been valid. However, the lien or security interest is not effective against a person that before issuance of a document of title had a legal interest or a perfected security interest in the goods and that did not:
1. (1) Deliver or entrust the goods or any document of title covering the goods to the bailor or the bailor's nominee with:
  1. (A) Actual or apparent authority to ship, store, or sell;
  2. (B) Power to obtain delivery under § 47-7-403; or
  3. (C) Power of disposition under § 47-2A-304(2), § 47-2A-305(2), § 47-9-320, or § 47-9-321(c) or other statute or rule of law; or
2. (2) Acquiesce in the procurement by the bailor or its nominee of any document.
(d) A warehouse's lien on household goods for charges and expenses in relation to the goods under subsection (a) is also effective against all persons if the depositor was the legal possessor of the goods at the time of deposit. In this subsection (d), “household goods” means furniture, furnishings, or personal effects used by the depositor in a dwelling.
(e) A warehouse loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.

§ 47-7-210. Enforcement of warehouse's lien.

(a) Except as otherwise provided in subsection (b), a warehouse's lien may be enforced by public or private sale of the goods, in bulk or in packages, at any time or place and on any terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. The notification must include a statement of the amount due, the nature of the proposed sale, and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or in a method different from that selected by the warehouse is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The warehouse sells in a commercially reasonable manner if the warehouse sells the goods in the usual manner in any recognized market therefore, sells at the price current in that market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable, except in cases covered by the preceding sentence.
(b) A warehouse may enforce its lien on goods, other than goods stored by a merchant in the course of its business, only if the following requirements are satisfied:
1. (1) All persons known to claim an interest in the goods must be notified;
2. (2) The notification must include an itemized statement of the claim, a description of the goods subject to the lien, a demand for payment within a specified time not less than 10 (ten) days after receipt of the notification, and a conspicuous statement that unless the claim is paid within that time the goods will be advertised for sale and sold by auction at a specified time and place;
3. (3) The sale must conform to the terms of the notification;
4. (4) The sale must be held at the nearest suitable place to where the goods are held or stored; and
5. (5) After the expiration of the time given in the notification, an advertisement of the sale must be published once a week for two (2) weeks consecutively in a newspaper of general circulation where the sale is to be held. The advertisement must include a description of the goods, the name of the person on whose account the goods are being held, and the time and place of the sale. The sale must take place at least fifteen (15) days after the first publication. If there is no newspaper of general circulation where the sale is to be held, the advertisement must be posted at least ten (10) days before the sale in not fewer than six (6) conspicuous places in the neighborhood of the proposed sale.
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(c) Before any sale pursuant to this section, any person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in complying with this section. In that event, the goods may not be sold but must be retained by the warehouse subject to the terms of the receipt and this chapter.
(d) A warehouse may buy at any public sale held pursuant to this section.
(e) A purchaser in good faith of goods sold to enforce a warehouse's lien takes the goods free of any rights of persons against which the lien was valid, despite the warehouse's noncompliance with this section.
(f) A warehouse may satisfy its lien from the proceeds of any sale pursuant to this section but shall hold the balance, if any, for delivery on demand to any person to which the warehouse would have been bound to deliver the goods.
(g) The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor.
(h) If a lien is on goods stored by a merchant in the course of its business, the lien may be enforced in accordance with subsection (a) or (b).
(i) A warehouse is liable for damages caused by failure to comply with the requirements for sale under this section and, in case of willful violation, is liable for conversion.

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Part 3 Bills of Lading: Special Provisions

§ 47-7-301. Liability for nonreceipt or misdescription — “Said to contain” — “Shipper's weight, load, and count” — Improper handling.

(a) A consignee of a nonnegotiable bill of lading which has given value in good faith, or a holder to which a negotiable bill has been duly negotiated, relying upon the description of the goods in the bill or upon the date shown in the bill, may recover from the issuer damages caused by the misdating of the bill or the nonreceipt or misdescription of the goods, except to the extent that the bill indicates that the issuer does not know whether any part or all of the goods in fact were received or conform to the description, such as in a case in which the description is in terms of marks or labels or kind, quantity, or condition or the receipt or description is qualified by “contents or condition of contents of packages unknown”, “said to contain”, “shipper's weight, load, and count,” or words of similar import, if that indication is true.
(b) If goods are loaded by the issuer of a bill of lading:
1. (1) The issuer shall count the packages of goods if shipped in packages and ascertain the kind and quantity if shipped in bulk; and
2. (2) Words such as “shipper's weight, load, and count,” or words of similar import indicating that the description was made by the shipper are ineffective except as to goods concealed in packages.
(c) If bulk goods are loaded by a shipper that makes available to the issuer of a bill of lading adequate facilities for weighing those goods, the issuer shall ascertain the kind and quantity within a reasonable time after receiving the shipper's request in a record to do so. In that case, “shipper's weight” or words of similar import are ineffective.
(d) The issuer of a bill of lading, by including in the bill the words “shipper's weight, load, and count,” or words of similar import, may indicate that the goods were loaded by the shipper, and, if that statement is true, the issuer is not liable for damages caused by the improper loading. However, omission of such words does not imply liability for damages caused by improper loading.
(e) A shipper guarantees to an issuer the accuracy at the time of shipment of the description, marks, labels, number, kind, quantity, condition, and weight, as furnished by the shipper, and the shipper shall indemnify the issuer against damage caused by inaccuracies in those particulars. This right of indemnity does not limit the issuer's responsibility or liability under the contract of carriage to any person other than the shipper.

§ 47-7-302. Through bills of lading and similar documents of title.

(a) The issuer of a through bill of lading, or other document of title embodying an undertaking to be performed in part by a person acting as its agent or by a performing carrier, is liable to any person entitled to recover on the bill or other document for any breach by the other person or the performing carrier of its obligation under the bill or other document. However, to the extent that the bill or other document covers an undertaking to be performed overseas or in territory not contiguous to the continental United States or an undertaking including matters other than transportation, this liability for breach by the other person or the performing carrier may be varied by agreement of the parties.
(b) If goods covered by a through bill of lading or other document of title embodying an undertaking to be performed in part by a person other than the issuer are received by that person, the person is subject, with respect to its own performance while the goods are in its possession, to the obligation of the issuer. The person's obligation is discharged by delivery of the goods to another person pursuant to the bill or other document and does not include liability for breach by any other person or by the issuer.
(c) The issuer of a through bill of lading or other document of title described in subsection (a) is entitled to recover from the performing carrier, or other person in possession of the goods when the breach of the obligation under the bill or other document occurred:
1. (1) The amount it may be required to pay to any person entitled to recover on the bill or other document for the breach, as may be evidenced by any receipt, judgment, or transcript of judgment; and
2. (2) The amount of any expense reasonably incurred by the issuer in defending any action commenced by any person entitled to recover on the bill or other document for the breach.

§ 47-7-303. Diversion — Reconsignment — Change of instructions.

(a) Unless the bill of lading otherwise provides, a carrier may deliver the goods to a person or destination other than that stated in the bill or may otherwise dispose of the goods, without liability for misdelivery, on instructions from:
1. (1) The holder of a negotiable bill;
2. (2) The consignor on a nonnegotiable bill, even if the consignee has given contrary instructions;
3. (3) The consignee on a nonnegotiable bill in the absence of contrary instructions from the consignor, if the goods have arrived at the billed destination or if the consignee is in possession of the tangible bill or in control of the electronic bill; or
4. (4) The consignee on a nonnegotiable bill, if the consignee is entitled as against the consignor to dispose of the goods.
(b) Unless instructions described in subsection (a) are included in a negotiable bill of lading, a person to which the bill is duly negotiated may hold the bailee according to the original terms.

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47-7-403(a)(5)

§ 47-7-304. Tangible bills of lading in a set.

(a) Except as customary in international transportation, a tangible bill of lading may not be issued in a set of parts. The issuer is liable for damages caused by violation of this subsection (a).
(b) If a tangible bill of lading is lawfully issued in a set of parts, each of which contains an identification code and is expressed to be valid only if the goods have not been delivered against any other part, the whole of the parts constitutes one (1) bill.
(c) If a tangible negotiable bill of lading is lawfully issued in a set of parts and different parts are negotiated to different persons, the title of the holder to which the first due negotiation is made prevails as to both the document of title and the goods even if any later holder may have received the goods from the carrier in good faith and discharged the carrier's obligation by surrendering its part.
(d) A person that negotiates or transfers a single part of a tangible bill of lading issued in a set is liable to holders of that part as if it were the whole set.
(e) The bailee shall deliver in accordance with part 4 of this chapter against the first presented part of a tangible bill of lading lawfully issued in a set. Delivery in this manner discharges the bailee's obligation on the whole bill.

§ 47-7-305. Destination bills.

(a) Instead of issuing a bill of lading to the consignor at the place of shipment, a carrier, at the request of the consignor, may procure the bill to be issued at destination or at any other place designated in the request.
(b) Upon request of any person entitled as against a carrier to control the goods while in transit and on surrender of possession or control of any outstanding bill of lading or other receipt covering the goods, the issuer, subject to § 47-7-105, may procure a substitute bill to be issued at any place designated in the request.

§ 47-7-306. Altered bills of lading.

An unauthorized alteration or filling in of a blank in a bill of lading leaves the bill enforceable according to its original tenor.

§ 47-7-307. Lien of carrier.

(a) A carrier has a lien on the goods covered by a bill of lading or on the proceeds thereof in its possession for charges after the date of the carrier's receipt of the goods for storage or transportation, including demurrage and terminal charges, and for expenses necessary for preservation of the goods incident to their transportation or reasonably incurred in their sale pursuant to law. However, against a purchaser for value of a negotiable bill of lading, a carrier's lien is limited to charges stated in the bill or the applicable tariffs or, if no charges are stated, a reasonable charge.
(b) A lien for charges and expenses under subsection (a) on goods that the carrier was required by law to receive for transportation is effective against the consignor or any person entitled to the goods unless the carrier had notice that the consignor lacked authority to subject the goods to those charges and expenses. Any other lien under subsection (a) is effective against the consignor and any person that permitted the bailor to have control or possession of the goods unless the carrier had notice that the bailor lacked authority.
(c) A carrier loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.

§ 47-7-308. Enforcement of carrier's lien.

(a) A carrier's lien on goods may be enforced by public or private sale of the goods, in bulk or in packages, at any time or place and on any terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. The notification must include a statement of the amount due, the nature of the proposed sale, and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or in a method different from that selected by the carrier is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The carrier sells goods in a commercially reasonable manner if the carrier sells the goods in the usual manner in any recognized market therefor, sells at the price current in that market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable, except in cases covered by the preceding sentence.
(b) Before any sale pursuant to this section, any person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in complying with this section. In that event, the goods may not be sold but must be retained by the carrier, subject to the terms of the bill of lading and this chapter.
(c) A carrier may buy at any public sale pursuant to this section.
(d) A purchaser in good faith of goods sold to enforce a carrier's lien takes the goods free of any rights of persons against which the lien was valid, despite the carrier's noncompliance with this section.
(e) A carrier may satisfy its lien from the proceeds of any sale pursuant to this section but shall hold the balance, if any, for delivery on demand to any person to which the carrier would have been bound to deliver the goods.
(f) The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor.
(g) A carrier's lien may be enforced pursuant to either subsection (a) or the procedure set forth in § 47-7-210(b).
(h) A carrier is liable for damages caused by failure to comply with the requirements for sale under this section and, in case of willful violation, is liable for conversion.

§ 47-7-309. Duty of care — Contractual limitation of carrier's liability.

(a) A carrier that issues a bill of lading, whether negotiable or nonnegotiable, shall exercise the degree of care in relation to the goods which a reasonably careful person would exercise under similar circumstances. This subsection (a) does not affect any statute, regulation, or rule of law that imposes liability upon a common carrier for damages not caused by its negligence.
(b) Damages may be limited by a term in the bill of lading or in a transportation agreement that the carrier's liability may not exceed a value stated in the bill or transportation agreement if the carrier's rates are dependent upon value and the consignor is afforded an opportunity to declare a higher value and the consignor is advised of the opportunity. However, such a limitation is not effective with respect to the carrier's liability for conversion to its own use.
(c) Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the shipment may be included in a bill of lading or a transportation agreement.

Part 4 Warehouse Receipts and Bills of Lading: General Obligations

§ 47-7-401. Irregularities in issue of receipt or bill or conduct of issuer.

The obligations imposed by this chapter on an issuer apply to a document of title even if:
1. (1) The document does not comply with the requirements of this chapter or of any other statute, rule, or regulation regarding its issuance, form, or content;
2. (2) The issuer violated laws regulating the conduct of its business;
3. (3) The goods covered by the document were owned by the bailee when the document was issued; or
4. (4) The person issuing the document is not a warehouse but the document purports to be a warehouse receipt.

§ 47-7-402. Duplicate document of title — Overissue.

A duplicate or any other document of title purporting to cover goods already represented by an outstanding document of the same issuer does not confer any right in the goods, except as provided in the case of tangible bills of lading in a set of parts, overissue of documents for fungible goods, substitutes for lost, stolen, or destroyed documents, or substitute documents issued pursuant to § 47-7-105. The issuer is liable for damages caused by its overissue or failure to identify a duplicate document by a conspicuous notation.

§ 47-7-403. Obligation of bailee to deliver — Excuse.

(a) A bailee shall deliver the goods to a person entitled under a document of title if the person complies with subsections (b) and (c), unless and to the extent that the bailee establishes any of the following:
1. (1) Delivery of the goods to a person whose receipt was rightful as against the claimant;
2. (2) Damage to or delay, loss, or destruction of the goods for which the bailee is not liable;
3. (3) Previous sale or other disposition of the goods in lawful enforcement of a lien or on a warehouse's lawful termination of storage;
4. (4) The exercise by a seller of its right to stop delivery pursuant to § 47-2-705 or by a lessor of its right to stop delivery pursuant to § 47-2A-526;
5. (5) A diversion, reconsignment, or other disposition pursuant to § 47-7-303;
6. (6) Release, satisfaction, or any other personal defense against the claimant; or
7. (7) Any other lawful excuse.
(b) A person claiming goods covered by a document of title shall satisfy the bailee's lien if the bailee so requests or if the bailee is prohibited by law from delivering the goods until the charges are paid.
(c) Unless a person claiming the goods is a person against which the document of title does not confer a right under § 47-7-503(a):
1. (1) The person claiming under a document shall surrender possession or control of any outstanding negotiable document covering the goods for cancellation or indication of partial deliveries; and
2. (2) The bailee shall cancel the document or conspicuously indicate in the document the partial delivery or the bailee is liable to any person to which the document is duly negotiated.

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§ 47-7-404. No liability for good-faith delivery pursuant to document of title.

A bailee that in good faith has received goods and delivered or otherwise disposed of the goods according to the terms of a document of title or pursuant to this chapter is not liable for the goods even if:
1. (1) The person from which the bailee received the goods did not have authority to procure the document or to dispose of the goods; or
2. (2) The person to which the bailee delivered the goods did not have authority to receive the goods.

Part 5 Warehouse Receipts and Bills of Lading: Negotiation and Transfer

§ 47-7-501. Form of negotiation and requirements of due negotiation.

(a) The following rules apply to a negotiable tangible document of title:
1. (1) If the document's original terms run to the order of a named person, the document is negotiated by the named person's indorsement and delivery. After the named person's indorsement in blank or to bearer, any person may negotiate the document by delivery alone;
2. (2) If the document's original terms run to bearer, it is negotiated by delivery alone;
3. (3) If the document's original terms run to the order of a named person and it is delivered to the named person, the effect is the same as if the document had been negotiated;
4. (4) Negotiation of the document after it has been indorsed to a named person requires indorsement by the named person and delivery; and
5. (5) A document is duly negotiated if it is negotiated in the manner stated in this subsection (a) to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a monetary obligation.
(b) The following rules apply to a negotiable electronic document of title:
1. (1) If the document's original terms run to the order of a named person or to bearer, the document is negotiated by delivery of the document to another person. Indorsement by the named person is not required to negotiate the document;
2. (2) If the document's original terms run to the order of a named person and the named person has control of the document, the effect is the same as if the document had been negotiated; and
3. (3) A document is duly negotiated if it is negotiated in the manner stated in this subsection (b) to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves taking delivery of the document in settlement or payment of a monetary obligation.
(c) Indorsement of a nonnegotiable document of title neither makes it negotiable nor adds to the transferee's rights.
(d) The naming in a negotiable bill of lading of a person to be notified of the arrival of the goods does not limit the negotiability of the bill or constitute notice to a purchaser of the bill of any interest of that person in the goods.

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47-10-116(d)

§ 47-7-502. Rights acquired by due negotiation.

(a) Subject to §§ 47-7-205 and 47-7-503, a holder to which a negotiable document of title has been duly negotiated acquires thereby:
1. (1) Title to the document;
2. (2) Title to the goods;
3. (3) All rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and
4. (4) The direct obligation of the issuer to hold or deliver the goods according to the terms of the document free of any defense or claim by the issuer except those arising under the terms of the document or under this chapter, but in the case of a delivery order, the bailee's obligation accrues only upon the bailee's acceptance of the delivery order and the obligation acquired by the holder is that the issuer and any indorser will procure the acceptance of the bailee.
(b) Subject to § 47-7-503, title and rights acquired by due negotiation are not defeated by any stoppage of the goods represented by the document of title or by surrender of the goods by the bailee and are not impaired even if:
1. (1) The due negotiation or any prior due negotiation constituted a breach of duty;
2. (2) Any person has been deprived of possession of a negotiable tangible document or control of a negotiable electronic document by misrepresentation, fraud, accident, mistake, duress, loss, theft, or conversion; or
3. (3) A previous sale or other transfer of the goods or document has been made to a third person.

§ 47-7-503. Document of title to goods defeated in certain cases.

(a) A document of title confers no right in goods against a person that before issuance of the document had a legal interest or a perfected security interest in the goods and that did not:
1. (1) Deliver or entrust the goods or any document of title covering the goods to the bailor or the bailor's nominee with:
  1. (A) Actual or apparent authority to ship, store, or sell;
  2. (B) Power to obtain delivery under § 47-7-403; or
  3. (C) Power of disposition under § 47-2-403, § 47-2A-304(2), § 47-2A-305(2), § 47-9-320, or § 47-9-321(c) or other statute or rule of law; or
2. (2) Acquiesce in the procurement by the bailor or its nominee of any document.
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- 47-7-403(c)
(b) Title to goods based upon an unaccepted delivery order is subject to the rights of any person to which a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. That title may be defeated under § 47-7-504 to the same extent as the rights of the issuer or a transferee from the issuer.
(c) Title to goods based upon a bill of lading issued to a freight forwarder is subject to the rights of any person to which a bill issued by the freight forwarder is duly negotiated. However, delivery by the carrier in accordance with part 4 of this chapter pursuant to its own bill of lading discharges the carrier's obligation to deliver.

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§ 47-7-504. Rights acquired in absence of due negotiation — Effect of diversion — Stoppage of delivery.

(a) A transferee of a document of title, whether negotiable or nonnegotiable, to which the document has been delivered but not duly negotiated, acquires the title and rights that its transferor had or had actual authority to convey.
(b) In the case of a transfer of a nonnegotiable document of title, until but not after the bailee receives notice of the transfer, the rights of the transferee may be defeated:
1. (1) By those creditors of the transferor which could treat the transfer as void under § 47-2-402 or § 47-2A-308;
2. (2) By a buyer from the transferor in ordinary course of business if the bailee has delivered the goods to the buyer or received notification of the buyer's rights;
3. (3) By a lessee from the transferor in ordinary course of business if the bailee has delivered the goods to the lessee or received notification of the lessee's rights; or
4. (4) As against the bailee, by good-faith dealings of the bailee with the transferor.
(c) A diversion or other change of shipping instructions by the consignor in a nonnegotiable bill of lading which causes the bailee not to deliver the goods to the consignee defeats the consignee's title to the goods if the goods have been delivered to a buyer in ordinary course of business or a lessee in ordinary course of business and, in any event, defeats the consignee's rights against the bailee.
(d) Delivery of the goods pursuant to a nonnegotiable document of title may be stopped by a seller under § 47-2-705 or a lessor under § 47-2A-526, subject to the requirements of due notification in those sections. A bailee that honors the seller's or lessor's instructions is entitled to be indemnified by the seller or lessor against any resulting loss or expense.

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47-7-503(b)

§ 47-7-505. Indorser not guarantor for other parties.

The indorsement of a tangible document of title issued by a bailee does not make the indorser liable for any default by the bailee or previous indorsers.

§ 47-7-506. Delivery without indorsement — Right to compel indorsement.

The transferee of a negotiable tangible document of title has a specifically enforceable right to have its transferor supply any necessary indorsement, but the transfer becomes a negotiation only as of the time the indorsement is supplied.

§ 47-7-507. Warranties on negotiation or delivery of document of title.

If a person negotiates or delivers a document of title for value, otherwise than as a mere intermediary under § 47-7-508, unless otherwise agreed, the transferor, in addition to any warranty made in selling or leasing the goods, warrants to its immediate purchaser only that:
1. (1) The document is genuine;
2. (2) The transferor does not have knowledge of any fact that would impair the document's validity or worth; and
3. (3) The negotiation or delivery is rightful and fully effective with respect to the title to the document and the goods it represents.

§ 47-7-508. Warranties of collecting bank as to documents of title.

A collecting bank or other intermediary known to be entrusted with documents of title on behalf of another or with collection of a draft or other claim against delivery of documents warrants by the delivery of the documents only its own good faith and authority even if the collecting bank or other intermediary has purchased or made advances against the claim or draft to be collected.

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47-7-507

§ 47-7-509. Adequate compliance with commercial contract.

Whether a document of title is adequate to fulfill the obligations of a contract for sale, a contract for lease, or the conditions of a letter of credit is determined by chapter 2, 2A, or 5 of this title.

Part 6 Warehouse Receipts and Bills of Lading: Miscellaneous Provisions

§ 47-7-601. Lost, stolen, or destroyed documents of title.

(a) If a document of title is lost, stolen, or destroyed, a court may order delivery of the goods or issuance of a substitute document and the bailee may without liability to any person comply with the order. If the document was negotiable, a court may not order delivery of the goods or issuance of a substitute document without the claimant's posting security unless it finds that any person that may suffer loss as a result of nonsurrender of possession or control of the document is adequately protected against the loss. If the document was nonnegotiable, the court may require security. The court may also order payment of the bailee's reasonable costs and attorney's fees in any action under this subsection (a).
(b) A bailee that, without a court order, delivers goods to a person claiming under a missing negotiable document of title is liable to any person injured thereby. If the delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith is not conversion if the claimant posts security with the bailee in an amount at least double the value of the goods at the time of posting to indemnify any person injured by the delivery which files a notice of claim within one (1) year after the delivery.

§ 47-7-602. Judicial process against goods covered by negotiable document of title.

Unless a document of title was originally issued upon delivery of the goods by a person that did not have power to dispose of them, a lien does not attach by virtue of any judicial process to goods in the possession of a bailee for which a negotiable document of title is outstanding unless possession or control of the document is first surrendered to the bailee or the document's negotiation is enjoined. The bailee may not be compelled to deliver the goods pursuant to process until possession or control of the document is surrendered to the bailee or to the court. A purchaser of the document for value without notice of the process or injunction takes free of the lien imposed by judicial process.

§ 47-7-603. Conflicting claims — Interpleader.

If more than one (1) person claims title to or possession of the goods, the bailee is excused from delivery until the bailee has a reasonable time to ascertain the validity of the adverse claims or to commence an action for interpleader. The bailee may assert an interpleader either in defending an action for nondelivery of the goods or by original action.

Part 7 Miscellaneous Provisions

§ 47-7-701. Effective date.

This chapter takes effect on July 1, 2008.

§ 47-7-702. Repeals.

Existing chapter 7 and § 47-10-104 of the Uniform Commercial Code are repealed.

§ 47-7-703. Applicability.

This chapter applies to a document of title that is issued or a bailment that arises on or after July 1, 2008. This chapter does not apply to a document of title that is issued or a bailment that arises before July 1, 2008, even if the document of title or bailment would be subject to this chapter if the document of title had been issued or bailment had arisen on or after July 1, 2008. This chapter does not apply to a right of action that has accrued before July 1, 2008.

§ 47-7-704. Savings clause.

A document of title issued or a bailment that arises before July 1, 2008 and the rights, obligations, and interests flowing from that document or bailment are governed by any statute or other rule amended or repealed by this chapter as if amendment or repeal had not occurred and may be terminated, completed, consummated, or enforced under that statute or other rule.

Chapter 8 Investment Securities

Part 1 Short Title and General Matters

§ 47-8-101. Short title.

This chapter may be cited as Uniform Commercial Code — Investment Securities.

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35-15-1012(e)

§ 47-8-102. Definitions.

(a) In this chapter:
1. (1) “Adverse claim” means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or deal with the financial asset.
2. (2) “Bearer form”, as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an endorsement.
3. (3) “Broker” means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity.
4. (4) “Certificated security” means a security that is represented by a certificate.
5. (5) “Clearing corporation” means:
  1. (i) A person that is registered as a “clearing agency” under the federal securities laws;
  2. (ii) A federal reserve bank; or
  3. (iii) Any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority.
6. (6) “Communicate” means to:
  1. (i) Send a signed writing; or
  2. (ii) Transmit information by any mechanism agreed upon by the persons transmitting and receiving the information.
7. (7) “Entitlement holder” means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security entitlement by virtue of § 47-8-501(b)(2) or (3), that person is the entitlement holder.
8. (8) “Entitlement order” means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement.
9. (9) “Financial asset”, except as otherwise provided in Section 47-8-103, means:
  1. (i) A security;
  2. (ii) An obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or
  3. (iii) Any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this chapter.
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    47-8-103(g)
  4. As context requires, the term means either the interest itself or the means by which a person's claim to it is evidenced, including a certificated or uncertificated security, a security certificate, or a security entitlement.
10. (10) “Good faith”, for purposes of the obligation of good faith in the performance or enforcement of contracts or duties within this chapter, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
11. (11) “Endorsement” means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring, or redeeming the security or granting a power to assign, transfer, or redeem it.
12. (12) “Instruction” means a notification communicated to the issuer of an uncertificated security which directs that the transfer of the security be registered or that the security be redeemed.
13. (13) “Registered form”, as applied to a certificated security, means a form in which:
  1. (i) The security certificate specifies a person entitled to the security; and
  2. (ii) A transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer, or the security certificate so states.
14. (14) “Securities intermediary” means:
  1. (i) A clearing corporation; or
  2. (ii) A person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.
15. (15) “Security”, except as otherwise provided in § 47-8-103, means an obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer:
  1. (i) Which is represented by a security certificate in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer;
  2. (ii) Which is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations; and
  3. (iii) Which:
    1. (A) is, or is of a type, dealt in or traded on securities exchanges or securities markets; or
    2. (B) is a medium for investment and by its terms expressly provides that it is a security governed by this chapter.
16. (16) “Security certificate” means a certificate representing a security.
17. (17) “Security entitlement” means the rights and property interest of an entitlement holder with respect to a financial asset specified in part 5.
18. (18) “Uncertificated security” means a security that is not represented by a certificate.
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(b) Other definitions applying to this chapter and the sections in which they appear are:
1. “Appropriate person.” § 47-8-107
2. “Control.” § 47-8-106
3. “Delivery.” § 47-8-301
4. “Investment company security.” § 47-8-103
5. “Issuer.” § 47-8-201
6. “Overissue.” § 47-8-210
7. “Protected purchaser.” § 47-8-303
8. “Securities account.” § 47-8-501
(c) In addition, chapter 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this chapter.
(d) The characterization of a person, business, or transaction for purposes of this chapter does not determine the characterization of the person, business, or transaction for purposes of any other law, regulation, or rule.

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§ 47-8-103. Rules for determining whether certain obligations and interests are securities or financial assets.

(a) A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security.
(b) An “investment company security” is a security. “Investment company security” means a share or similar equity interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered. Investment company security does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.
(c) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this chapter, or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.
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- 48-215-101(b)
- 48-249-502(b)
(d) A writing that is a security certificate is governed by this chapter and not by chapter 3 of this title, even though it also meets the requirements of that chapter. However, a negotiable instrument governed by chapter 3 of this title is a financial asset if it is held in a securities account.
(e) An option or similar obligation issued by a clearing corporation to its participants is not a security, but is a financial asset.
(f) A commodity contract, as defined in § 47-9-102(a)(15), is not a security or a financial asset.
(g) A document of title is not a financial asset unless § 47-8-102(a)(9)(iii) applies.

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§ 47-8-104. Acquisition of security or financial asset or interest therein.

(a) A person acquires a security or an interest therein, under this chapter, if:
1. (1) the person is a purchaser to whom a security is delivered pursuant to § 47-8-301; or
2. (2) the person acquires a security entitlement to the security pursuant to § 47-8-501.
(b) A person acquires a financial asset, other than a security, or an interest therein, under this chapter, if the person acquires a security entitlement to the financial asset.
(c) A person who acquires a security entitlement to a security or other financial asset has the rights specified in part 5, but is a purchaser of any security, security entitlement, or other financial asset held by the securities intermediary only to the extent provided in § 47-8-503.
(d) Unless the context shows that a different meaning is intended, a person who is required by other law, regulation, rule, or agreement to transfer, deliver, present, surrender, exchange, or otherwise put in the possession of another person a security or financial asset satisfies that requirement by causing the other person to acquire an interest in the security or financial asset pursuant to subsection (a) or (b).

§ 47-8-105. Notice of adverse claim.

(a) A person has notice of an adverse claim if:
1. (1) the person knows of the adverse claim;
2. (2) the person is aware of facts sufficient to indicate that there is a significant probability that the adverse claim exists and deliberately avoids information that would establish the existence of the adverse claim; or
3. (3) the person has a duty, imposed by statute or regulation, to investigate whether an adverse claim exists, and the investigation so required would establish the existence of the adverse claim.
(b) Having knowledge that a financial asset or interest therein is or has been transferred by a representative imposes no duty of inquiry into the rightfulness of a transaction and is not notice of an adverse claim. However, a person who knows that a representative has transferred a financial asset or interest therein in a transaction that is, or whose proceeds are being used, for the individual benefit of the representative or otherwise in breach of duty has notice of an adverse claim.
(c) An act or event that creates a right to immediate performance of the principal obligation represented by a security certificate or sets a date on or after which the certificate is to be presented or surrendered for redemption or exchange does not itself constitute notice of an adverse claim except in the case of a transfer more than:
1. (1) one (1) year after a date set for presentment or surrender for redemption or exchange; or
2. (2) six (6) months after a date set for payment of money against presentation or surrender of the certificate, if money was available for payment on that date.
(d) A purchaser of a certificated security has notice of an adverse claim if the security certificate:
1. (1) whether in bearer or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer; or
2. (2) is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate is not such a statement.
(e) Filing of a financing statement under chapter 9 of this title is not notice of an adverse claim to a financial asset.

§ 47-8-106. Control.

(a) A purchaser has “control” of a certificated security in bearer form if the certificated security is delivered to the purchaser.
(b) A purchaser has “control” of a certificated security in registered form if the certificated security is delivered to the purchaser, and:
1. (1) the certificate is endorsed to the purchaser or in blank by an effective endorsement; or
2. (2) the certificate is registered in the name of the purchaser, upon original issue or registration of transfer by the issuer.
(c) A purchaser has “control” of an uncertificated security if:
1. (1) the uncertificated security is delivered to the purchaser; or
2. (2) the issuer has agreed that it will comply with instructions originated by the purchaser without further consent by the registered owner.
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  - 47-8-107(b)(2)
(d) A purchaser has “control” of a security entitlement if:
1. (1) The purchaser becomes the entitlement holder;
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  - 47-8-510(c)(1)
  - 47-9-328(2)(B)(i)
2. (2) The securities intermediary has agreed that it will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder; or
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  - 47-8-510(c)(2)
  - 47-9-328(2)(B)(ii)
3. (3) Another person has control of the security entitlement on behalf of the purchaser, or having previously acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser.
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  - 47-8-510(c)(3)
  - 47-9-328(2)(B)(iii)
(e) If an interest in a security entitlement is granted by the entitlement holder to the entitlement holder's own securities intermediary, the securities intermediary has control.
(f) A purchaser who has satisfied the requirements of subdivision (c) or (d) has control even if the registered owner in the case of subdivision (c) or the entitlement holder in the case of subdivision (d) retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary, or otherwise to deal with the uncertificated security or security entitlement.
(g) An issuer or a securities intermediary may not enter into an agreement of the kind described in subdivision (c)(2) or (d)(2) without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so directs. An issuer or securities intermediary that has entered into such an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder.

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§ 47-8-107. Whether endorsement, instruction, or entitlement order is effective.

(a) “Appropriate person” means:
1. (1) with respect to an endorsement, the person specified by a security certificate or by an effective special endorsement to be entitled to the security;
2. (2) with respect to an instruction, the registered owner of an uncertificated security;
3. (3) with respect to an entitlement order, the entitlement holder;
4. (4) if the person designated in paragraph (1), (2), or (3) is deceased, the designated person's successor taking under other law or the designated person's personal representative acting for the estate of the decedent; or
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  - 47-8-402(a)(3)
5. (5) if the person designated in paragraph (1), (2), or (3) lacks capacity, the designated person's guardian, conservator, or other similar representative who has power under other law to transfer the security or financial asset.
(b) An endorsement, instruction, or entitlement order is effective if:
1. (1) it is made by the appropriate person;
2. (2) it is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of the appropriate person, including, in the case of an instruction or entitlement order, a person who has control under § 47-8-106(c)(2) or (d)(2); or
3. (3) the appropriate person has ratified it or is otherwise precluded from asserting its ineffectiveness.
(c) An endorsement, instruction, or entitlement order made by a representative is effective even if:
1. (1) the representative has failed to comply with a controlling instrument or with the law of the state having jurisdiction of the representative relationship, including any law requiring the representative to obtain court approval of the transaction; or
2. (2) the representative's action in making the endorsement, instruction, or entitlement order or using the proceeds of the transaction is otherwise a breach of duty.
(d) If a security is registered in the name of or specially endorsed to a person described as a representative, or if a securities account is maintained in the name of a person described as a representative, an endorsement, instruction, or entitlement order made by the person is effective even though the person is no longer serving in the described capacity.
(e) Effectiveness of an endorsement, instruction, or entitlement order is determined as of the date the endorsement, instruction, or entitlement order is made, and an endorsement, instruction, or entitlement order does not become ineffective by reason of any later change of circumstances.

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47-8-102(b)

§ 47-8-108. Warranties in direct holding.

(a) A person who transfers a certificated security to a purchaser for value warrants to the purchaser, and an endorser, if the transfer is by endorsement, warrants to any subsequent purchaser, that:
1. (1) the certificate is genuine and has not been materially altered;
2. (2) the transferor or endorser does not know of any fact that might impair the validity of the security;
3. (3) there is no adverse claim to the security;
4. (4) the transfer does not violate any restriction on transfer;
5. (5) if the transfer is by endorsement, the endorsement is made by an appropriate person, or if the endorsement is by an agent, the agent has actual authority to act on behalf of the appropriate person; and
6. (6) the transfer is otherwise effective and rightful.
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- 47-8-109(b)
- 47-8-109(c)
(b) A person who originates an instruction for registration of transfer of an uncertificated security to a purchaser for value warrants to the purchaser that:
1. (1) the instruction is made by an appropriate person, or if the instruction is by an agent, the agent has actual authority to act on behalf of the appropriate person;
2. (2) the security is valid;
3. (3) there is no adverse claim to the security; and
4. (4) at the time the instruction is presented to the issuer:
  1. (i) the purchaser will be entitled to the registration of transfer;
  2. (ii) the transfer will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction;
  3. (iii) the transfer will not violate any restriction on transfer; and
  4. (iv) the requested transfer will otherwise be effective and rightful.
(c) A person who transfers an uncertificated security to a purchaser for value and does not originate an instruction in connection with the transfer warrants that:
1. (1) the uncertificated security is valid;
2. (2) there is no adverse claim to the security;
3. (3) the transfer does not violate any restriction on transfer; and
4. (4) the transfer is otherwise effective and rightful.
(d) A person who endorses a security certificate warrants to the issuer that:
1. (1) there is no adverse claim to the security; and
2. (2) the endorsement is effective.
(e) A person who originates an instruction for registration of transfer of an uncertificated security warrants to the issuer that:
1. (1) the instruction is effective; and
2. (2) at the time the instruction is presented to the issuer, the purchaser will be entitled to the registration of transfer.
(f) A person who presents a certificated security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment, or exchange, but a purchaser for value and without notice of adverse claims to whom transfer is registered warrants only that the person has no knowledge of any unauthorized signature in a necessary endorsement.
(g) If a person acts as agent of another in delivering a certificated security to a purchaser, the identity of the principal was known to the person to whom the certificate was delivered, and the certificate delivered by the agent was received by the agent from the principal or received by the agent from another person at the direction of the principal, the person delivering the security certificate warrants only that the delivering person has authority to act for the principal and does not know of any adverse claim to the certificated security.
(h) A secured party who redelivers a security certificate received, or after payment and on order of the debtor delivers the security certificate to another person, makes only the warranties of an agent under subsection (g).
(i) Except as otherwise provided in subsection (g), a broker acting for a customer makes to the issuer and a purchaser the warranties provided in subsections (a)-(f). A broker that delivers a security certificate to its customer, or causes its customer to be registered as the owner of an uncertificated security, makes to the customer the warranties provided in subsection (a) or (b), and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker acting as an agent are in addition to applicable warranties given by and in favor of the customer.

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§ 47-8-109. Warranties in indirect holding.

(a) A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that:
1. (1) the entitlement order is made by an appropriate person, or if the entitlement order is by an agent, the agent has actual authority to act on behalf of the appropriate person; and
2. (2) there is no adverse claim to the security entitlement.
(b) A person who delivers a security certificate to a securities intermediary for credit to a securities account or originates an instruction with respect to an uncertificated security directing that the uncertificated security be credited to a securities account makes to the securities intermediary the warranties specified in § 47-8-108(a) or (b).
(c) If a securities intermediary delivers a security certificate to its entitlement holder or causes its entitlement holder to be registered as the owner of an uncertificated security, the securities intermediary makes to the entitlement holder the warranties specified in § 47-8-108(a) or (b).

§ 47-8-110. Applicability — Choice of law.

(a) The local law of the issuer's jurisdiction, as specified in subsection (d), governs:
1. (1) the validity of a security;
2. (2) the rights and duties of the issuer with respect to registration of transfer;
3. (3) the effectiveness of registration of transfer by the issuer;
4. (4) whether the issuer owes any duties to an adverse claimant to a security; and
5. (5) whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.
(b) The local law of the securities intermediary's jurisdiction, as specified in subsection (e), governs:
1. (1) acquisition of a security entitlement from the securities intermediary;
2. (2) the rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement;
3. (3) whether the securities intermediary owes any duties to an adverse claimant to a security entitlement; and
4. (4) whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a person who purchases a security entitlement or interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered.
(d) “Issuer's jurisdiction” means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in subsection (a)(2) through (5).
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(e) The following rules determine a “securities intermediary's jurisdiction” for purposes of this section:
1. (1) If an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the securities intermediary's jurisdiction for purposes of chapters 1-9 of this title, that jurisdiction is the securities intermediary's jurisdiction.
2. (2) If (1) does not apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.
3. (3) If neither (1) nor (2) apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.
4. (4) If none of the preceding apply, the securities intermediary's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder's account is located.
5. (5) If none of the preceding apply, the securities intermediary's jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located.
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(f) A securities intermediary's jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other record keeping concerning the account.

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47-1-301(c)(6)

§ 47-8-111. Clearing corporation rules.

A rule adopted by a clearing corporation governing rights and obligations among the clearing corporation and its participants in the clearing corporation is effective even if the rule conflicts with this chapter and affects another party who does not consent to the rule.

§ 47-8-112. Creditor's legal process.

(a) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in subsection (d). However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in subsection (d).
(c) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor's securities account is maintained, except as otherwise provided in subsection (d).
(d) The interest of a debtor in a certificated security for which the certificate is in the possession of a secured party, or in an uncertificated security registered in the name of a secured party, or a security entitlement maintained in the name of a secured party, may be reached by a creditor by legal process upon the secured party.
(e) A creditor whose debtor is the owner of a certificated security, uncertificated security, or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security, or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process.

§ 47-8-113. Statute of frauds inapplicable.

Notwithstanding the provisions of § 29-2-101, a contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one (1) year of its making.

§ 47-8-114. Evidentiary rules concerning certificated securities.

The following rules apply in an action on a certificated security against the issuer:
1. (1) Unless specifically denied in the pleadings, each signature on a security certificate or in a necessary endorsement is admitted.
2. (2) If the effectiveness of a signature is put in issue, the burden of establishing effectiveness is on the party claiming under the signature, but the signature is presumed to be genuine or authorized.
3. (3) If signatures on a security certificate are admitted or established, production of the certificate entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security.
4. (4) If it is shown that a defense or defect exists, the plaintiff has the burden of establishing that the plaintiff or some person under whom the plaintiff claims is a person against whom the defense or defect cannot be asserted.

§ 47-8-115. Securities intermediary and others not liable to adverse claimant.

A securities intermediary that has transferred a financial asset pursuant to an effective entitlement order, or a broker or other agent or bailee that has dealt with a financial asset at the direction of its customer or principal, is not liable to a person having an adverse claim to the financial asset, unless the securities intermediary, or broker or other agent or bailee:
1. (1) took the action after it had been served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order, or other legal process; or
2. (2) acted in collusion with the wrongdoer in violating the rights of the adverse claimant; or
3. (3) in the case of a security certificate that has been stolen, acted with notice of the adverse claim.

§ 47-8-116. Securities intermediary as purchaser for value.

A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of the financial asset. A securities intermediary that acquires a security entitlement to a financial asset from another securities intermediary acquires the security entitlement for value if the securities intermediary acquiring the security entitlement establishes a security entitlement to the financial asset in favor of an entitlement holder.

Part 2 Issue and Issuer

§ 47-8-201. Issuer.

(a) With respect to an obligation on or a defense to a security, an “issuer” includes a person that:
1. (1) places or authorizes the placing of its name on a security certificate, other than as authenticating trustee, registrar, transfer agent, or the like, to evidence a share, participation, or other interest in its property or in an enterprise, or to evidence its duty to perform an obligation represented by the certificate;
2. (2) creates a share, participation, or other interest in its property or in an enterprise, or undertakes an obligation, that is an uncertificated security;
3. (3) directly or indirectly creates a fractional interest in its rights or property, if the fractional interest is represented by a security certificate; or
4. (4) becomes responsible for, or in place of, another person described as an issuer in this section.
(b) With respect to an obligation on or defense to a security, a guarantor is an issuer to the extent of its guaranty, whether or not its obligation is noted on a security certificate.
(c) With respect to a registration of a transfer, issuer means a person on whose behalf transfer books are maintained.

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§ 47-8-202. Issuer's responsibility and defenses — Notice of defect or defense.

(a) Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture, or document or to a constitution, statute, ordinance, rule, regulation, order, or the like, to the extent the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in any instrument, indenture, or document or in a constitution, statute, ordinance, rule, regulation, order, or the like, pursuant to which the security is issued.
(b) The following rules apply if an issuer asserts that a security is not valid:
1. (1) A security other than one issued by a government or governmental subdivision, agency, or instrumentality, even though issued with a defect going to its validity, is valid in the hands of a purchaser for value and without notice of the particular defect unless the defect involves a violation of a constitutional provision. In that case, the security is valid in the hands of a purchaser for value and without notice of the defect, other than one who takes by original issue.
2. (2) Paragraph (1) applies to an issuer that is a government or governmental subdivision, agency, or instrumentality only if there has been substantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security.
(c) Except as otherwise provided in § 47-8-205, lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice.
(d) All other defenses of the issuer of a security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken the certificated security without notice of the particular defense.
(e) This section does not affect the right of a party to cancel a contract for a security “when, as and if issued” or “when distributed” in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement pursuant to which the security is to be issued or distributed.
(f) If a security is held by a securities intermediary against whom an entitlement holder has a security entitlement with respect to the security, the issuer may not assert any defense that the issuer could not assert if the entitlement holder held the security directly.

§ 47-8-203. Staleness as notice of defect or defense.

After an act or event, other than a call that has been revoked, creating a right to immediate performance of the principal obligation represented by a certificated security or setting a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in its issue or defense of the issuer, if the act or event:
1. (1) requires the payment of money, the delivery of a certificated security, the registration of transfer of an uncertificated security, or any of them on presentation or surrender of the security certificate, the money or security is available on the date set for payment or exchange, and the purchaser takes the security more than one (1) year after that date; or
2. (2) is not covered by paragraph (1) and the purchaser takes the security more than two (2) years after the date set for surrender or presentation or the date on which performance became due.

§ 47-8-204. Effect of issuer's restriction on transfer.

A restriction on transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless:
1. (1) the security is certificated and the restriction is noted conspicuously on the security certificate; or
2. (2) the security is uncertificated and the registered owner has been notified of the restriction.

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47-8-401(a)(5)

§ 47-8-205. Effect of unauthorized signature on security certificate.

An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the signature is effective in favor of a purchaser for value of the certificated security if the purchaser is without notice of the lack of authority and the signing has been done by:
1. (1) an authenticating trustee, registrar, transfer agent, or other person entrusted by the issuer with the signing of the security certificate or of similar security certificates, or the immediate preparation for signing of any of them; or
2. (2) an employee of the issuer, or of any of the persons listed in paragraph (1), entrusted with responsible handling of the security certificate.

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47-8-202(c)

§ 47-8-206. Completion or alteration of security certificate.

(a) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in any other respect:
1. (1) any person may complete it by filling in the blanks as authorized; and
2. (2) even if the blanks are incorrectly filled in, the security certificate as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.
(b) A complete security certificate that has been improperly altered, even if fraudulently, remains enforceable, but only according to its original terms.

§ 47-8-207. Rights and duties of issuer with respect to registered owners.

(a) Before due presentment for registration of transfer of a certificated security in registered form or of an instruction requesting registration of transfer of an uncertificated security, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, receive notifications, and otherwise exercise all the rights and powers of an owner.
(b) This chapter does not affect the liability of the registered owner of a security for a call, assessment, or the like.

§ 47-8-208. Effect of signature of authenticating trustee, registrar, or transfer agent.

(a) A person signing a security certificate as authenticating trustee, registrar, transfer agent, or the like, warrants to a purchaser for value of the certificated security, if the purchaser is without notice of a particular defect, that:
1. (1) the certificate is genuine;
2. (2) the person's own participation in the issue of the security is within the person's capacity and within the scope of the authority received by the person from the issuer; and
3. (3) the person has reasonable grounds to believe that the certificated security is in the form and within the amount the issuer is authorized to issue.
(b) Unless otherwise agreed, a person signing under subsection (a) does not assume responsibility for the validity of the security in other respects.

§ 47-8-209. Issuer's lien.

A lien in favor of an issuer upon a certificated security is valid against a purchaser only if the right of the issuer to the lien is noted conspicuously on the security certificate.

§ 47-8-210. Overissue.

(a) In this section, “overissue” means the issue of securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue.
(b) Except as otherwise provided in subsections (c) and (d), the provisions of this chapter which validate a security or compel its issue or reissue do not apply to the extent that validation, issue, or reissue would result in overissue.
(c) If an identical security not constituting an overissue is reasonably available for purchase, a person entitled to issue or validation may compel the issuer to purchase the security and deliver it if certificated or register its transfer if uncertificated, against surrender of any security certificate the person holds.
(d) If a security is not reasonably available for purchase, a person entitled to issue or validation may recover from the issuer the price the person or the last purchaser for value paid for it with interest from the date of the person's demand.

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Part 3 Transfer of Certificated and Uncertificated Securities

§ 47-8-301. Delivery.

(a) Delivery of a certificated security to a purchaser occurs when:
1. (1) The purchaser acquires possession of the security certificate;
2. (2) Another person, other than a securities intermediary, either acquires possession of the security certificate on behalf of the purchaser or, having previously acquired possession of the certificate, acknowledges that it holds for the purchaser; or
3. (3) A securities intermediary acting on behalf of the purchaser acquires possession of the security certificate, only if the certificate is in registered form and is (i) registered in the name of the purchaser; (ii) payable to the order of the purchaser; or (iii) specially indorsed to the purchaser by an effective endorsement and has not been indorsed to the securities intermediary or in blank.
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(b) Delivery of an uncertificated security to a purchaser occurs when:
1. (1) The issuer registers the purchaser as the registered owner, upon original issue or registration of transfer; or
2. (2) Another person, other than a securities intermediary, either becomes the registered owner of the uncertificated security on behalf of the purchaser or, having previously become the registered owner, acknowledges that it holds for the purchaser.

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§ 47-8-302. Rights of purchaser.

(a) Except as otherwise provided in subsections (b) and (c), a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer.
(b) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.
(c) A purchaser of a certificated security who as a previous holder had notice of an adverse claim does not improve its position by taking from a protected purchaser.

§ 47-8-303. Protected purchaser.

(a) “Protected purchaser” means a purchaser of a certificated or uncertificated security, or of an interest therein, who:
1. (1) gives value;
2. (2) does not have notice of any adverse claim to the security; and
3. (3) obtains control of the certificated or uncertificated security.
(b) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires its interest in the security free of any adverse claim.

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47-8-102(b)

§ 47-8-304. Endorsement.

(a) An endorsement may be in blank or special. An endorsement in blank includes an endorsement to bearer. A special endorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank endorsement to a special endorsement.
(b) An endorsement purporting to be only of part of a security certificate representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.
(c) An endorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on which it appears or, if the endorsement is on a separate document, until delivery of both the document and the certificate.
(d) If a security certificate in registered form has been delivered to a purchaser without a necessary endorsement, the purchaser may become a protected purchaser only when the endorsement is supplied. However, against a transferor, a transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.
(e) An endorsement of a security certificate in bearer form may give notice of an adverse claim to the certificate, but it does not otherwise affect a right to registration that the holder possesses.
(f) Unless otherwise agreed, a person making an endorsement assumes only the obligations provided in § 47-8-108 and not an obligation that the security will be honored by the issuer.

§ 47-8-305. Instruction.

(a) If an instruction has been originated by an appropriate person but is incomplete in any other respect, any person may complete it as authorized and the issuer may rely on it as completed, even though it has been completed incorrectly.
(b) Unless otherwise agreed, a person initiating an instruction assumes only the obligations imposed by § 47-8-108 and not an obligation that the security will be honored by the issuer.

§ 47-8-306. Effect of guaranteeing signature, endorsement, or instruction.

(a) A person who guarantees a signature of an endorser of a security certificate warrants that at the time of signing:
1. (1) the signature was genuine;
2. (2) the signer was an appropriate person to endorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and
3. (3) the signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator of an instruction warrants that at the time of signing:
1. (1) the signature was genuine;
2. (2) the signer was an appropriate person to originate the instruction, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person, if the person specified in the instruction as the registered owner was, in fact, the registered owner, as to which fact the signature guarantor does not make a warranty; and
3. (3) the signer had legal capacity to sign.
(c) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under subsection (b) and also warrants that at the time the instruction is presented to the issuer:
1. (1) the person specified in the instruction as the registered owner of the uncertificated security will be the registered owner; and
2. (2) the transfer of the uncertificated security requested in the instruction will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction.
(d) A guarantor under subsections (a) and (b) or a special guarantor under subsection (c) does not otherwise warrant the rightfulness of the transfer.
(e) A person who guarantees an endorsement of a security certificate makes the warranties of a signature guarantor under subsection (a) and also warrants the rightfulness of the transfer in all respects.
(f) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under subsection (c) and also warrants the rightfulness of the transfer in all respects.
(g) An issuer may not require a special guaranty of signature, a guaranty of endorsement, or a guaranty of instruction as a condition to registration of transfer.
(h) The warranties under this section are made to a person taking or dealing with the security in reliance on the guaranty, and the guarantor is liable to the person for loss resulting from their breach. An endorser or originator of an instruction whose signature, endorsement, or instruction has been guaranteed is liable to a guarantor for any loss suffered by the guarantor as a result of breach of the warranties of the guarantor.

§ 47-8-307. Purchaser's right to requisites for registration of transfer.

Unless otherwise agreed, the transferor of a security on due demand shall supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer of the security, but if the transfer is not for value, a transferor need not comply unless the purchaser pays the necessary expenses. If the transferor fails within a reasonable time to comply with the demand, the purchaser may reject or rescind the transfer.

Part 4 Registration

§ 47-8-401. Duty of issuer to register transfer.

(a) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security, the issuer shall register the transfer as requested if:
1. (1) under the terms of the security the person seeking registration of transfer is eligible to have the security registered in its name;
2. (2) the endorsement or instruction is made by the appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;
3. (3) reasonable assurance is given that the endorsement or instruction is genuine and authorized (§ 47-8-402);
4. (4) any applicable law relating to the collection of taxes has been complied with;
5. (5) the transfer does not violate any restriction on transfer imposed by the issuer in accordance with § 47-8-204;
6. (6) a demand that the issuer not register transfer has not become effective under § 47-8-403, or the issuer has complied with § 47-8-403(b) but no legal process or indemnity bond is obtained as provided in § 47-8-403(d); and
7. (7) the transfer is in fact rightful or is to a protected purchaser.
(b) If an issuer is under a duty to register a transfer of a security, the issuer is liable to a person presenting a certificated security or an instruction for registration or to the person's principal for loss resulting from unreasonable delay in registration or failure or refusal to register the transfer.

§ 47-8-402. Assurance that endorsement or instruction is effective.

(a) An issuer may require the following assurance that each necessary endorsement or each instruction is genuine and authorized:
1. (1) in all cases, a guaranty of the signature of the person making an endorsement or originating an instruction including, in the case of an instruction, reasonable assurance of identity;
2. (2) if the endorsement is made or the instruction is originated by an agent, appropriate assurance of actual authority to sign;
3. (3) if the endorsement is made or the instruction is originated by a fiduciary pursuant to § 47-8-107(a)(4) or (a)(5), appropriate evidence of appointment or incumbency;
4. (4) if there is more than one (1) fiduciary, reasonable assurance that all who are required to sign have done so; and
5. (5) if the endorsement is made or the instruction is originated by a person not covered by another provision of this subsection, assurance appropriate to the case corresponding as nearly as may be to the provisions of this subsection.
(b) An issuer may elect to require reasonable assurance beyond that specified in this section.
(c) In this section:
1. (1) “Guaranty of the signature” means a guaranty signed by or on behalf of a person reasonably believed by the issuer to be responsible. An issuer may adopt standards with respect to responsibility if they are not manifestly unreasonable.
2. (2) “Appropriate evidence of appointment or incumbency” means:
  1. (i) in the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of the court or an officer thereof and dated within sixty (60) days before the date of presentation for transfer; or
  2. (ii) in any other case, a copy of a document showing the appointment or a certificate issued by or on behalf of a person reasonably believed by an issuer to be responsible or, in the absence of that document or certificate, other evidence the issuer reasonably considers appropriate.

§ 47-8-403. Demand that issuer not register transfer.

(a) A person who is an appropriate person to make an endorsement or originate an instruction may demand that the issuer not register transfer of a security by communicating to the issuer a notification that identifies the registered owner and the issue of which the security is a part and provides an address for communications directed to the person making the demand. The demand is effective only if it is received by the issuer at a time and in a manner affording the issuer reasonable opportunity to act on it.
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(b) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security after a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to (i) the person who initiated the demand at the address provided in the demand and (ii) the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer a notification stating that:
1. (1) the certificated security has been presented for registration of transfer or the instruction for registration of transfer of the uncertificated security has been received;
2. (2) a demand that the issuer not register transfer had previously been received; and
3. (3) the issuer will withhold registration of transfer for a period of time stated in the notification in order to provide the person who initiated the demand an opportunity to obtain legal process or an indemnity bond.
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(c) The period described in subsection (b)(3) may not exceed thirty (30) days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable.
(d) An issuer is not liable to a person who initiated a demand that the issuer not register transfer for any loss the person suffers as a result of registration of a transfer pursuant to an effective endorsement or instruction if the person who initiated the demand does not, within the time stated in the issuer's communication, either:
1. (1) obtain an appropriate restraining order, injunction, or other process from a court of competent jurisdiction enjoining the issuer from registering the transfer; or
2. (2) file with the issuer an indemnity bond, sufficient in the issuer's judgment to protect the issuer and any transfer agent, registrar, or other agent of the issuer involved from any loss it or they may suffer by refusing to register the transfer.
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(e) This section does not relieve an issuer from liability for registering transfer pursuant to an endorsement or instruction that was not effective.

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47-8-401(a)(6)

§ 47-8-404. Wrongful registration.

(a) Except as otherwise provided in § 47-8-406, an issuer is liable for wrongful registration of transfer if the issuer has registered a transfer of a security to a person not entitled to it, and the transfer was registered:
1. (1) pursuant to an ineffective endorsement or instruction;
2. (2) after a demand that the issuer not register transfer became effective under § 47-8-403(a) and the issuer did not comply with § 47-8-403(b);
3. (3) after the issuer had been served with an injunction, restraining order, or other legal process enjoining it from registering the transfer, issued by a court of competent jurisdiction, and the issuer had a reasonable opportunity to act on the injunction, restraining order, or other legal process; or
4. (4) by an issuer acting in collusion with the wrongdoer.
(b) An issuer that is liable for wrongful registration of transfer under subsection (a) on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration. If an overissue would result, the issuer's liability to provide the person with a like security is governed by § 47-8-210.
(c) Except as otherwise provided in subsection (a) or in a law relating to the collection of taxes, an issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a security if registration was made pursuant to an effective endorsement or instruction.

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47-8-406

§ 47-8-405. Replacement of lost, destroyed, or wrongfully taken security certificate.

(a) If an owner of a certificated security, whether in registered or bearer form, claims that the certificate has been lost, destroyed, or wrongfully taken, the issuer shall issue a new certificate if the owner: (1) so requests before the issuer has notice that the certificate has been acquired by a protected purchaser; (2) files with the issuer a sufficient indemnity bond; and (3) satisfies other reasonable requirements imposed by the issuer.
(b) If, after the issue of a new security certificate, a protected purchaser of the original certificate presents it for registration of transfer, the issuer shall register the transfer unless an overissue would result. In that case, the issuer's liability is governed by § 47-8-210. In addition to any rights on the indemnity bond, an issuer may recover the new certificate from a person to whom it was issued or any person taking under that person, except a protected purchaser.

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§ 47-8-406. Obligation to issuer of destroyed, or wrongfully taken security certificate.

If a security certificate has been lost, apparently destroyed, or wrongfully taken, and the owner fails to notify the issuer of that fact within a reasonable time after the owner has notice of it and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for registering the transfer under § 47-8-404 or a claim to a new security certificate under § 47-8-405.

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47-8-404(a)

§ 47-8-407. Authenticating trustee, transfer agent, and registrar.

A person acting as authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the issuer has in regard to those functions.

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35-15-1012(e)

Part 5 Security Entitlements

§ 47-8-501. Securities account — Acquisition of security entitlement from securities intermediary.

(a) “Securities account” means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
(b) Except as otherwise provided in subsections (d) and (e), a person acquires a security entitlement if a securities intermediary:
1. (1) indicates by book entry that a financial asset has been credited to the person's securities account;
2. (2) receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts it for credit to the person's securities account; or
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3. (3) becomes obligated under other law, regulation, or rule to credit a financial asset to the person's securities account.
(c) If a condition of subsection (b) has been met, a person has a security entitlement even though the securities intermediary does not itself hold the financial asset.
(d) If a securities intermediary holds a financial asset for another person, and the financial asset is registered in the name of, payable to the order of, or specially endorsed to the other person, and has not been endorsed to the securities intermediary or in blank, the other person is treated as holding the financial asset directly rather than as having a security entitlement with respect to the financial asset.
(e) Issuance of a security is not establishment of a security entitlement.

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§ 47-8-502. Assertion of adverse claim against entitlement holder.

An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who acquires a security entitlement under § 47-8-501 for value and without notice of the adverse claim.

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47-8-510(b)

§ 47-8-503. Property interest of entitlement holder in financial asset held by securities intermediary.

(a) To the extent necessary for a securities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in § 47-8-511.
(b) An entitlement holder's property interest with respect to a particular financial asset under subsection (a) is a pro rata property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset.
(c) An entitlement holder's property interest with respect to a particular financial asset under subsection (a) may be enforced against the securities intermediary only by exercise of the entitlement holder's rights under §§ 47-8-505 — 47-8-508.
(d) An entitlement holder's property interest with respect to a particular financial asset under subsection (a) may be enforced against a purchaser of the financial asset or interest therein only if:
1. (1) insolvency proceedings have been initiated by or against the securities intermediary;
2. (2) the securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of its entitlement holders to that financial asset;
3. (3) the securities intermediary violated its obligations under § 47-8-504 by transferring the financial asset or interest therein to the purchaser; and
4. (4) the purchaser is not protected under subsection (e).
5. The trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not to pursue that right, an entitlement holder whose security entitlement remains unsatisfied has the right to recover its interest in the financial asset from the purchaser.
(e) An action based on the entitlement holder's property interest with respect to a particular financial asset under subsection (a), whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary's obligations under § 47-8-504.

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47-8-104(c)

§ 47-8-504. Duty of securities intermediary to maintain financial asset.

(a) A securities intermediary shall promptly obtain and thereafter maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements it has established in favor of its entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets directly or through one (1) or more other securities intermediaries.
(b) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant any security interests in a financial asset it is obligated to maintain pursuant to subsection (a).
(c) A securities intermediary satisfies the duty in subsection (a) if:
1. (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
2. (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to obtain and maintain the financial asset.
(d) This section does not apply to a clearing corporation that is itself the obligor of an option or similar obligation to which its entitlement holders have security entitlements.

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§ 47-8-505. Duty of securities intermediary with respect to payments and distributions.

(a) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if:
1. (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
2. (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to attempt to obtain the payment or distribution.
(b) A securities intermediary is obligated to its entitlement holder for a payment or distribution made by the issuer of a financial asset if the payment or distribution is received by the securities intermediary.

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47-8-503(c)

§ 47-8-506. Duty of securities intermediary to exercise rights as directed by entitlement holder.

A securities intermediary shall exercise rights with respect to a financial asset if directed to do so by an entitlement holder. A securities intermediary satisfies the duty if:
1. (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
2. (2) in the absence of agreement, the securities intermediary either places the entitlement holder in a position to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.

§ 47-8-507. Duty of securities intermediary to comply with entitlement order.

(a) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportunity to comply with the entitlement order. A securities intermediary satisfies the duty if:
1. (1) the securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
2. (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to comply with the entitlement order.
(b) If a securities intermediary transfers a financial asset pursuant to an ineffective entitlement order, the securities intermediary shall reestablish a security entitlement in favor of the person entitled to it, and pay or credit any payments or distributions that the person did not receive as a result of the wrongful transfer. If the securities intermediary does not reestablish a security entitlement, the securities intermediary is liable to the entitlement holder for damages.

§ 47-8-508. Duty of securities intermediary to change entitlement holder's position to other form of security holding.

A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible, or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if:
1. (1) the securities intermediary acts as agreed upon by the entitlement holder and the securities intermediary; or
2. (2) in the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.

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§ 47-8-509. Specification of duties of securities intermediary by other statute or regulation — Manner of performance of duties of securities intermediary and exercise of rights of entitlement holder.

(a) If the substance of a duty imposed upon a securities intermediary by §§ 47-8-504 — 47-8-508 is the subject of other statute, regulation, or rule, compliance with that statute, regulation, or rule satisfies the duty.
(b) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation, or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform its duties and the entitlement holder shall exercise its rights in a commercially reasonable manner.
(c) The obligation of a securities intermediary to perform the duties imposed by §§ 47-8-504 — 47-8-508 is subject to:
1. (1) rights of the securities intermediary arising out of a security interest under a security agreement with the entitlement holder or otherwise; and
2. (2) rights of the securities intermediary under other law, regulation, rule, or agreement to withhold performance of its duties as a result of unfulfilled obligations of the entitlement holder to the securities intermediary.
(d) Sections 47-8-504 — 47-8-508 do not require a securities intermediary to take any action that is prohibited by other statute, regulation, or rule.

§ 47-8-510. Rights of purchaser of security entitlement from entitlement holder.

(a) In a case not covered by the priority rules in chapter 9 of this title or the rules stated in subsection (c), an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.
(b) If an adverse claim could not have been asserted against an entitlement holder under § 47-8-502, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.
(c) In a case not covered by the priority rules in chapter 9 of this title, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Except as otherwise provided in subsection (d), purchasers who have control rank according to priority in time of:
1. (1) The purchaser's becoming the person for whom the securities account, in which the security entitlement is carried, is maintained, if the purchaser obtained control under § 47-8-106(d)(1);
2. (2) The securities intermediary's agreement to comply with the purchaser's entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried, if the purchaser obtained control under § 47-8-106(d)(2); or
3. (3) If the purchaser obtained control through another person under § 47-8-106(d)(3), the time on which priority would be based under this subsection if the other person were the secured party.
(d) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.

§ 47-8-511. Priority among security interests and entitlement holders.

(a) Except as otherwise provided in subsections (b) and (c), if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.
(b) A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary's entitlement holders who have security entitlements with respect to that financial asset if the creditor has control over the financial asset.
(c) If a clearing corporation does not have sufficient financial assets to satisfy both its obligations to entitlement holders who have security entitlements with respect to a financial asset and its obligation to a creditor of the clearing corporation who has a security interest in that financial asset, the claim of the creditor has priority over the claims of entitlement holders.

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47-8-503(a)

Part 6 Transition Provisions for Revised Article 8

§ 47-8-601. Savings clause.

(a) This chapter does not affect an action or proceeding commenced before this chapter takes effect.
(b) If a security interest in a security is perfected on January 1, 1998, and the action by which the security interest was perfected would suffice to perfect a security interest under this chapter, no further action is required to continue perfection. If a security interest in a security is perfected on January 1, 1998, but the action by which the security interest was perfected would not suffice to perfect a security interest under this chapter, the security interest remains perfected for a period of one (1) year after January 1, 1998, and continues perfected thereafter if appropriate action to perfect under this chapter is taken within that period. If a security interest is perfected on January 1, 1998, and the security interest can be perfected by filing under this chapter, a financing statement signed by the secured party instead of the debtor may be filed within that period to continue perfection or thereafter to perfect. A financing statement securing only investment property filed during the one-year period permitted in this section shall not be subject to the indebtedness tax on recorded instruments imposed under § 67-4-409(b).

Chapter 9 Secured Transactions

Part 1 General Provisions

1. Short Title, Definitions, and General Concepts

§ 47-9-101. Short title.

This chapter may be cited as “Uniform Commercial Code — Secured Transactions.”

§ 47-9-102. Definitions and index of definitions.

(a) Chapter 9 definitions. In this chapter:
1. (1) “Accession” means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost.
2. (2) “Account,” except as used in “account for,” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state. The term includes health-care-insurance receivables. The term does not include (i) rights to payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, or (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card.
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3. (3) “Account debtor” means a person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper.
4. (4) “Accounting,” except as used in “accounting for,” means a record:
  1. (A) Authenticated by a secured party;
  2. (B) Indicating the aggregate unpaid secured obligations as of a date not more than 35 days earlier or 35 days later than the date of the record; and
  3. (C) Identifying the components of the obligations in reasonable detail.
5. (5) “Agricultural lien” means an interest, other than a security interest, in farm products:
  1. (A) Which secures payment or performance of an obligation for:
    1. (i) Goods or services furnished in connection with a debtor's farming operation; or
    2. (ii) Rent on real property leased by a debtor in connection with its farming operation;
  2. (B) Which is created by statute in favor of a person that:
    1. (i) In the ordinary course of its business furnished goods or services to a debtor in connection with a debtor's farming operation; or
    2. (ii) Leased real property to a debtor in connection with the debtor's farming operation; and
  3. (C) Whose effectiveness does not depend on the person's possession of the personal property.
  4. “Agricultural lien” does not include interests or liens created or arising under (i) title 66, chapter 12; (ii) § 66-15-101; (iii) title 66, chapter 20; and (iv) § 43-6-426.
6. (6) “As-extracted collateral” means:
  1. (A) Oil, gas, or other minerals that are subject to a security interest that:
    1. (i) Is created by a debtor having an interest in the minerals before extraction; and
    2. (ii) Attaches to the minerals as extracted; or
  2. (B) Accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction.
7. (7) “Authenticate” means:
  1. (A) To sign; or
  2. (B) With present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.
8. (8) “Bank” means an organization that is engaged in the business of banking. The term includes savings banks, savings and loan associations, credit unions, and trust companies.
9. (9) “Cash proceeds” means proceeds that are money, checks, deposit accounts, or the like.
10. (10) “Certificate of title” means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral.
11. (11) “Chattel paper” means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. In this subdivision (a)(11), “monetary obligation” means a monetary obligation secured by the goods or owed under a lease of the goods and includes a monetary obligation with respect to software used in the goods. The term does not include (i) charters or other contracts involving the use or hire of a vessel or (ii) records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.
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12. (12) “Collateral” means the property subject to a security interest or agricultural lien. The term includes:
  1. (A) Proceeds to which a security interest attaches;
  2. (B) Accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and
  3. (C) Goods that are the subject of a consignment.
13. (13) “Commercial tort claim” means a claim arising in tort with respect to which:
  1. (A) The claimant is an organization; or
  2. (B) The claimant is an individual and the claim:
    1. (i) Arose in the course of the claimant's business or profession; and
    2. (ii) Does not include damages arising out of personal injury to or the death of an individual.
14. (14) “Commodity account” means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.
15. (15) “Commodity contract” means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is:
  1. (A) Traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to federal commodities laws; or
  2. (B) Traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.
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16. (16) “Commodity customer” means a person for which a commodity intermediary carries a commodity contract on its books.
17. (17) “Commodity intermediary” means a person that:
  1. (A) Is registered as a futures commission merchant under federal commodities law; or
  2. (B) In the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.
18. (18) “Communicate” means:
  1. (A) To send a written or other tangible record;
  2. (B) To transmit a record by any means agreed upon by the persons sending and receiving the record; or
  3. (C) In the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing-office rule.
19. (19) “Consignee” means a merchant to which goods are delivered in a consignment.
20. (20) “Consignment” means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:
  1. (A) The merchant:
    1. (i) Deals in goods of that kind under a name other than the name of the person making delivery;
    2. (ii) Is not an auctioneer; and
    3. (iii) Is not generally known by its creditors to be substantially engaged in selling the goods of others;
  2. (B) With respect to each delivery, the aggregate value of the goods is one thousand dollars ($1,000) or more at the time of delivery;
  3. (C) The goods are not consumer goods immediately before delivery; and
  4. (D) The transaction does not create a security interest that secures an obligation.
21. (21) “Consignor” means a person that delivers goods to a consignee in a consignment.
22. (22) “Consumer debtor” means a debtor in a consumer transaction.
23. (23) “Consumer goods” means goods that are used or bought for use primarily for personal, family, or household purposes.
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24. (24) “Consumer-goods transaction” means a consumer transaction in which:
  1. (A) An individual incurs an obligation primarily for personal, family, or household purposes; and
  2. (B) A security interest in consumer goods secures the obligation.
25. (25) “Consumer obligor” means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family, or household purposes.
26. (26) “Consumer transaction” means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer-goods transactions.
27. (27) “Continuation statement” means an amendment of a financing statement which:
  1. (A) Identifies, by its file number, the initial financing statement to which it relates; and
  2. (B) Indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.
28. (28) “Debtor” means:
  1. (A) A person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor;
  2. (B) A seller of accounts, chattel paper, payment intangibles, or promissory notes; or
  3. (C) A consignee.
29. (29) “Deposit account” means a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument.
30. (30) “Document” means a document of title or a receipt of the type described in § 47-7-201(b).
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31. (31) “Electronic chattel paper” means chattel paper evidenced by a record or records consisting of information stored in an electronic medium.
32. (32) “Encumbrance” means a right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property.
33. (33) “Equipment” means goods other than inventory, farm products, or consumer goods.
34. (34) “Farm products” means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:
  1. (A) Crops grown, growing, or to be grown, including:
    1. (i) Crops produced on trees, vines, and bushes; and
    2. (ii) Aquatic goods produced in aquacultural operations;
  2. (B) Livestock, born or unborn, including aquatic goods produced in aquacultural operations;
  3. (C) Supplies used or produced in a farming operation; or
  4. (D) Products of crops or livestock in their unmanufactured states.
35. (35) “Farming operation” means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.
36. (36) “File number” means the number (or book and page number, if applicable, for a record described in § 47-9-502(b)) assigned to an initial financing statement pursuant to § 47-9-519(a).
37. (37) “Filing office” means an office designated in § 47-9-501 as the place to file a financing statement.
38. (38) “Filing-office rule” means a rule adopted pursuant to § 47-9-526.
39. (39) “Financing statement” means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement.
40. (40) “Fixture filing” means the filing of a financing statement covering goods that are or are to become fixtures and satisfying § 47-9-502(a) and (b). The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.
41. (41) “Fixtures” means goods that have become so related to particular real property that an interest in them arises under real property law.
42. (42) “General intangible” means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.
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43. (43) “Good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing.
44. (44) “Goods” means all things that are movable when a security interest attaches. The term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such a manner that it customarily is considered part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.
45. (45) “Governmental unit” means a subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country. The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States.
46. (46) “Health-care-insurance receivable” means an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health-care goods or services provided or to be provided.
47. (47) “Instrument” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment. The term does not include (i) investment property, (ii) letters of credit, or (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.
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48. (48) “Inventory” means goods, other than farm products, which:
  1. (A) Are leased by a person as lessor;
  2. (B) Are held by a person for sale or lease or to be furnished under a contract of service;
  3. (C) Are furnished by a person under a contract of service; or
  4. (D) Consist of raw materials, work in process, or materials used or consumed in a business.
49. (49) “Investment property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.
50. (50) “Jurisdiction of organization,” with respect to a registered organization, means the jurisdiction under whose law the organization is formed or organized.
51. (51) “Letter-of-credit right” means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.
52. (52) “Lien creditor” means:
  1. (A) A creditor that has acquired a lien on the property involved by attachment, levy, or the like;
  2. (B) An assignee for benefit of creditors from the time of assignment;
  3. (C) A trustee in bankruptcy from the date of the filing of the petition; or
  4. (D) A receiver in equity from the time of appointment.
53. (53) “Manufactured home” means a structure, transportable in one (1) or more sections, which, in the traveling mode, is eight (8′) body feet or more in width or forty (40′) body feet or more in length, or, when erected on site, is three hundred twenty (320) or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein. The term includes any structure that meets all of the requirements of this subdivision (a)(53), except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States secretary of housing and urban development and complies with the standards established under title 42 of the United States Code.
54. (54) “Manufactured-home transaction” means a secured transaction:
  1. (A) That creates a purchase-money security interest in a manufactured home, other than a manufactured home held as inventory; or
  2. (B) In which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.
55. (55) “Mortgage” means a consensual interest in real property, including fixtures, which secures payment or performance of an obligation.
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56. (56) “New debtor” means a person that becomes bound as debtor under § 47-9-203(d) by a security agreement previously entered into by another person.
57. (57) “New value” means (i) money, (ii) money's worth in property, services, or new credit, or (iii) release by a transferee of an interest in property previously transferred to the transferee. The term does not include an obligation substituted for another obligation.
58. (58) “Noncash proceeds” means proceeds other than cash proceeds.
59. (59) “Obligor” means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (i) owes payment or other performance of the obligation, (ii) has provided property other than the collateral to secure payment or other performance of the obligation, or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.
60. (60) “Original debtor,” except as used in § 47-9-310(c), means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under § 47-9-203(d).
61. (61) “Payment intangible” means a general intangible under which the account debtor's principal obligation is a monetary obligation.
62. (62) “Person related to,” with respect to an individual, means:
  1. (A) The spouse of the individual;
  2. (B) A brother, brother-in-law, sister, or sister-in-law of the individual;
  3. (C) An ancestor or lineal descendant of the individual or the individual's spouse; or
  4. (D) Any other relative, by blood or marriage, of the individual or the individual's spouse who shares the same home with the individual.
63. (63) “Person related to,” with respect to an organization, means:
  1. (A) A person directly or indirectly controlling, controlled by, or under common control with the organization;
  2. (B) An officer or director of, or a person performing similar functions with respect to, the organization;
  3. (C) An officer or director of, or a person performing similar functions with respect to, a person described in subdivision (63)(A);
  4. (D) The spouse of an individual described in subdivision (63)(A), (63)(B), or (63)(C); or
  5. (E) An individual who is related by blood or marriage to an individual described in subdivision (63)(A), (63)(B), (63)(C), or (63)(D) and shares the same home with the individual.
64. (64) “Proceeds,” except as used in § 47-9-609(b), means the following property:
  1. (A) Whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;
  2. (B) Whatever is collected on, or distributed on account of, collateral;
  3. (C) Rights arising out of collateral;
  4. (D) To the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral; or
  5. (E) To the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.
65. (65) “Promissory note” means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.
66. (66) “Proposal” means a record authenticated by a secured party which includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to §§ 47-9-620, 47-9-621, and 47-9-622.
67. (67) “Public-finance transaction” means a secured transaction in connection with which:
  1. (A) Debt securities are issued;
  2. (B) All or a portion of the securities issued have an initial stated maturity of at least twenty (20) years; and
  3. (C) The debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation, or assignor or assignee of a security interest is a state or a governmental unit of a state.
68. (68) “Public organic record” means a record that is available to the public for inspection and is:
  1. (A) A record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States which amends or restates the initial record;
  2. (B) An organic record of a business trust consisting of the record initially filed with a state and any record filed with the state which amends or restates the initial record, if a statute of the state governing business trusts requires that the record be filed with the state; or
  3. (C) A record consisting of legislation enacted by the legislature of a state or the congress of the United States which forms or organizes an organization, any record amending the legislation, and any record filed with or issued by the state or the United States which amends or restates the name of the organization.
69. (69) “Pursuant to commitment,” with respect to an advance made or other value given by a secured party, means pursuant to the secured party's obligation, whether or not a subsequent event of default or other event not within the secured party's control has relieved or may relieve the secured party from its obligation.
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70. (70) “Record,” except as used in “for record,” “of record,” “record or legal title,” and “record owner,” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.
71. (71) “Registered organization” means an organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or the United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust's organic record be filed with the state.
72. (72) “Secondary obligor” means an obligor to the extent that:
  1. (A) The obligor's obligation is secondary; or
  2. (B) The obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.
73. (73) “Secured party” means:
  1. (A) A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;
  2. (B) A person that holds an agricultural lien;
  3. (C) A consignor;
  4. (D) A person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;
  5. (E) A trustee, indenture trustee, agent, collateral agent or other representative in whose favor a security interest or agricultural lien is created or provided for; or
  6. (F) A person that holds a security interest arising under § 47-2-401, § 47-2-505, § 47-2-711(3), § 47-2A-508(5), § 47-4-210, or § 47-5-118.
74. (74) “Security agreement” means an agreement that creates or provides for a security interest.
75. (75) “Send,” in connection with a record or notification, means:
  1. (A) To deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances; or
  2. (B) To cause the record or notification to be received within the time that it would have been received if properly sent under subdivision (75)(A).
76. (76) “Software” means a computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods.
77. (77) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
78. (78) “Supporting obligation” means a letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property.
79. (79) “Tangible chattel paper” means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.
80. (80) “Termination statement” means an amendment of a financing statement which:
  1. (A) Identifies, by its file number, the initial financing statement to which it relates; and
  2. (B) Indicates either that it is a termination statement or that the identified financing statement is no longer effective.
81. (81) “Transmitting utility” means a person primarily engaged in the business of:
  1. (A) Operating a railroad, subway, street railway, or trolley bus;
  2. (B) Transmitting communications electrically, electromagnetically, or by light;
  3. (C) Transmitting goods by pipeline or sewer; or
  4. (D) Transmitting or producing and transmitting electricity, steam, gas, or water.
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(b) Definitions in other chapters. “Control” as provided in § 47-7-106 and the following definitions in other chapters apply to this chapter:
1. “Applicant”§ 47-5-102
2. “Beneficiary”§ 47-5-102
3. “Broker”§ 47-8-102
4. “Certificated security”§ 47-8-102
5. “Check”§ 47-3-104
6. “Clearing corporation”§ 47-8-102
7. “Contract for sale”§ 47-2-106
8. “Customer”§ 47-4-104
9. “Entitlement holder”§ 47-8-102
10. “Financial asset”§ 47-8-102
11. “Holder in due course”§ 47-3-302
12. “Issuer” (with respect to a letter of credit or letter-of-credit right)§ 47-5-102
13. “Issuer” (with respect to a security)§ 47-8-201
14. “Issuer” (with respect to a document of title)§ 47-7-102
15. “Lease”§ 47-2A-103
16. “Lease agreement”§ 47-2A-103
17. “Lease contract”§ 47-2A-103
18. “Leasehold interest”§ 47-2A-103
19. “Lessee”§ 47-2A-103
20. “Lessee in ordinary course of business”§ 47-2A-103
21. “Lessor”§ 47-2A-103
22. “Lessor's residual interest”§ 47-2A-103
23. “Letter of credit”§ 47-5-102
24. “Merchant”§ 47-2-104
25. “Negotiable instrument”§ 47-3-104
26. “Nominated person”§ 47-5-102
27. “Note”§ 47-3-104
28. “Proceeds of a letter of credit”§ 47-5-114
29. “Prove”§ 47-3-103
30. “Sale”§ 47-2-106
31. “Securities account”§ 47-8-501
32. “Securities intermediary”§ 47-8-102
33. “Security”§ 47-8-102
34. “Security certificate”§ 47-8-102
35. “Security entitlement”§ 47-8-102
36. “Uncertificated security”§ 47-8-102
(c) Chapter 1 definitions and principles. Chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.

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§ 47-9-103. Purchase-money security interest; application of payments; burden of establishing.

(a) Definitions. In this section:
1. (1) “purchase-money collateral” means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and
2. (2) “purchase-money obligation” means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.
(b) Purchase-money security interest in goods. A security interest in goods is a purchase-money security interest:
1. (1) to the extent that the goods are purchase-money collateral with respect to that security interest;
2. (2) if the security interest is in inventory that is or was purchase-money collateral, also to the extent that the security interest secures a purchase-money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and
3. (3) also to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.
(c) Purchase-money security interest in software. A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:
1. (1) the debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and
2. (2) the debtor acquired its interest in the software for the principal purpose of using the software in the goods.
(d) Consignor's inventory purchase-money security interest. The security interest of a consignor in goods that are the subject of a consignment is a purchase-money securty interest in inventory.
(e) Application of payment.
1. (1) In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:
  1. (A) in accordance with any reasonable method of application to which the parties agree;
  2. (B) in the absence of the parties' agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or
  3. (C) in the absence of an agreement to a reasonable method and a timely manifestation of the obligor's intention, in the following order:
    1. (i) to obligations that are not secured; and
    2. (ii) if more than one (1) obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.
2. (2) In a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation:
  1. (A) the payment must be applied so that the secured party retains no purchase money security interest in any property as to which the secured party has recovered payments aggregating the amount of the sale price including any finance charges attributable thereto; and
  2. (B) for the purposes of this subsection (e) only, in the case of items purchased on different dates, the first item purchased shall be deemed the first paid for, and in the case of items purchased on the same date, the lowest priced item shall be deemed first paid for.
(f) No loss of status of purchase-money security interest in non-consumer-goods transaction. In a transaction other than a consumer-goods transaction, a purchase-money security interest does not lose its status as such, even if:
1. (1) the purchase-money collateral also secures an obligation that is not a purchase-money obligation;
2. (2) collateral that is not purchase-money collateral also secures the purchase-money obligation; or
3. (3) the purchase-money obligation has been renewed, refinanced, consolidated, or restructured.
(g) Burden of proof in non-consumer-goods transaction. In a transaction other than a consumer-goods transaction, a secured party claiming a purchase-money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.
(h) Non-consumer-goods transactions; no inference. The limitation of the rules in subsections (e)(1), (f), and (g) to transactions other than consumer-goods transactions is intended to leave to the court the determination of the proper rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods transactions and may continue to apply established approaches.

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§ 47-9-104. Control of deposit account.

(a) Requirements for control. A secured party has control of a deposit account if:
1. (1) the secured party is the bank with which the deposit account is maintained;
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2. (2) the debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or
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3. (3) the secured party becomes the bank's customer with respect to the deposit account.
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(b) Debtor's right to direct disposition. A secured party that has satisfied subsection (a) has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.

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§ 47-9-105. Control of electronic chattel paper.

(a) General rule: control of electronic chattel paper. A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.
(b) Specific facts giving control. A system satisfies subsection (a) if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that:
1. (1) A single authoritative copy of the record or records exists which is unique, identifiable and, except as otherwise provided in subdivisions (b)(4), (5), and (6), unalterable;
2. (2) The authoritative copy identifies the secured party as the assignee of the record or records;
3. (3) The authoritative copy is communicated to and maintained by the secured party or its designated custodian;
4. (4) Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the secured party;
5. (5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
6. (6) Any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.

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§ 47-9-106. Control of investment property.

(a) Control under 47-8-106. A person has control of a certificated security, uncertificated security, or security entitlement as provided in § 47-8-106.
(b) Control of commodity contract. A secured party has control of a commodity contract if:
1. (1) the secured party is the commodity intermediary with which the commodity contract is carried; or
2. (2) the commodity customer, secured party, and commodity intermediary have agreed that the commodity intermediary will apply any value distributed on account of the commodity contract as directed by the secured party without further consent by the commodity customer.
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(c) Effect of control of securities account or commodity account. A secured party having control of all security entitlements or commodity contracts carried in a securities account or commodity account has control over the securities account or commodity account.

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§ 47-9-107. Control of letter-of-credit right.

A secured party has control of a letter-of-credit right to the extent of any right to payment or performance by the issuer or any nominated person if the issuer or nominated person has consented to an assignment of proceeds of the letter of credit under § 47-5-114(c) or otherwise applicable law or practice.

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§ 47-9-108. Sufficiency of description.

(a) Sufficiency of description. Except as otherwise provided in subsections (c), (d), (e) and (f), a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.
(b) Examples of reasonable identification. Except as otherwise provided in subsection (d), a description of collateral reasonably identifies the collateral if it identifies the collateral by:
1. (1) specific listing;
2. (2) category;
3. (3) except as otherwise provided in subsection (e), a type of collateral defined in the Uniform Commercial Code;
4. (4) quantity;
5. (5) computational or allocational formula or procedure; or
6. (6) except as otherwise provided in subsection (c), any other method, if the identity of the collateral is objectively determinable.
(c) Supergeneric description not sufficient. A description of collateral as “all the debtor's assets” or “all the debtor's personal property” or using words of similar import does not reasonably identify the collateral.
(d) Investment property. Except as otherwise provided in subsection (e), a description of a security entitlement, securities account, or commodity account is sufficient if it describes:
1. (1) the collateral by those terms or as investment property; or
2. (2) the underlying financial asset or commodity contract.
(e) When description by type insufficient. A description only by type of collateral defined in the Uniform Commercial Code is an insufficient description of:
1. (1) a commercial tort claim; or
2. (2) in a consumer transaction, consumer goods, a security entitlement, a securities account, or a commodity account.
(f) Crops. A description of crops growing or to be grown at a specific location is sufficient if the description of the location references the United States Department of Agriculture, Farm Services Agency, Farm Serial Number (FSA Farm Serial Number) of the tract or parcel of real property where such crops are growing or are to be grown. A description of crops growing or to be grown without reference to an FSA Farm Serial Number shall serve as a description of all the debtor's crops growing or to be grown at all locations.

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47-9-504(1)

2. Applicability of Chapter

§ 47-9-109. Scope.

(a) General scope of chapter. Except as otherwise provided in subsections (c) and (d), this chapter applies to:
1. (1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;
2. (2) an agricultural lien;
3. (3) a sale of accounts, chattel paper, payment intangibles, or promissory notes;
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4. (4) a consignment;
5. (5) a security interest arising under § 47-2-401, § 47-2-505, § 47-2-711(3), or § 47-2A-508(5), as provided in § 47-9-110; and
6. (6) a security interest arising under § 47-4-210 or § 47-5-118.
(b) Security interest in secured obligation. The application of this chapter to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this chapter does not apply.
(c) Extent to which chapter does not apply. This chapter does not apply to the extent that:
1. (1) a statute, regulation, or treaty of the United States preempts this chapter;
2. (2) another statute of this state expressly governs the creation, perfection, priority, or enforcement of a security interest created by this state or a governmental unit of this state, including, but not limited to, title 9, chapter 22;
3. (3) a statute of another state, a foreign country, or a governmental unit of another state or a foreign country, other than a statute generally applicable to security interests, expressly governs creation, perfection, priority, or enforcement of a security interest created by the state, country, or governmental unit; or
4. (4) the rights of a transferee beneficiary or nominated person under a letter of credit are independent and superior under § 47-5-114.
(d) Inapplicability of chapter. This chapter does not apply to:
1. (1) a landlord's lien, other than an agricultural lien;
2. (2) a lien, other than an agricultural lien, given by statute or other rule of law for services or materials, but § 47-9-333 applies with respect to priority of the lien;
3. (3) an assignment of a claim for wages, salary, or other compensation of an employee;
4. (4) a sale of accounts, chattel paper, payment intangibles, or promissory notes as part of a sale of the business out of which they arose;
5. (5) an assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only;
6. (6) an assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract;
7. (7) an assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness;
8. (8) a transfer of an interest in or an assignment of a claim under a policy of insurance, other than an assignment by or to a health-care provider of a health-care-insurance receivable and any subsequent assignment of the right to payment, but §§ 47-9-315 and 47-9-322 apply with respect to proceeds and priorities in proceeds;
9. (9) an assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral;
10. (10) a right of recoupment or set-off, but:
  1. (A) § 47-9-340 applies with respect to the effectiveness of rights of recoupment or set-off against deposit accounts; and
  2. (B) § 47-9-404 applies with respect to defenses or claims of an account debtor;
11. (11) the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for:
  1. (A) liens on real property in § 47-9-203 and § 47-9-308;
  2. (B) fixtures in § 47-9-334;
  3. (C) fixture filings in § 47-9-501, § 47-9-502, § 47-9-512, § 47-9-516, and § 47-9-519; and
  4. (D) security agreements covering personal and real property in § 47-9-604;
12. (12) an assignment of a claim arising in tort, other than a commercial tort claim, but §§ 47-9-315 and 47-9-322 apply with respect to proceeds and priorities in proceeds;
13. (13) an assignment of a deposit account in a consumer transaction, but §§ 47-9-315 and 47-9-322 apply with respect to proceeds and priorities in proceeds;
14. (14) an assignment of a claim or right to receive compensation for injuries or sickness as described in 26 U.S.C. § 104(a)(1) or (2), as amended from time to time; or
15. (15) an assignment of a claim or right to receive benefits under a special needs trust described in 42 U.S.C. § 1396p(d)(4), as amended from time to time.

§ 47-9-110. Security interests arising under Chapter 2 or 2A.

A security interest arising under § 47-2-401, § 47-2-505, § 47-2-711(3), or § 47-2A-508(5) is subject to this chapter. However, until the debtor obtains possession of the goods:
1. (1) the security interest is enforceable, even if § 47-9-203(b)(3) has not been satisfied;
2. (2) filing is not required to perfect the security interest;
3. (3) the rights of the secured party after default by the debtor are governed by Chapter 2 or 2A; and
4. (4) the security interest has priority over a conflicting security interest created by the debtor.

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Part 2 Effectiveness of Security Agreement; Attachment of Security Interest; Rights of Parties to Security Agreement

1. Effectiveness and Attachment

§ 47-9-201. General effectiveness of security agreement.

(a) General effectiveness. Except as otherwise provided in the Uniform Commercial Code, a security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors.
(b) Applicable consumer laws and other law. A transaction subject to this chapter is subject to any applicable rule of law which establishes a different rule for consumers and to appropriate statutes regulating loans and retail installment sales, insofar as any such statute by its terms applies to the transaction.
(c) Other applicable law controls. In case of conflict between this chapter and a rule of law, statute, or regulation described in subsection (b), the rule of law, statute, or regulation controls. Failure to comply with a statute or regulation described in subsection (b) has only the effect the statute or regulation specifies.
(d) Further deference to other applicable law. This chapter does not:
1. (1) validate any rate, charge, agreement, or practice that violates a rule of law, statute, or regulation described in subsection (b); or
2. (2) extend the application of the rule of law, statute, or regulation to a transaction not otherwise subject to it.

§ 47-9-202. Title to collateral immaterial.

Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles, or promissory notes, the provisions of this chapter with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.

§ 47-9-203. Attachment and enforceability of security interest — Proceeds — Supporting obligations; formal requisites.

(a) Attachment. A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.
(b) Enforceability. Except as otherwise provided in subsections (c) through (i), a security interest is enforceable against the debtor and third parties with respect to the collateral only if:
1. (1) value has been given;
2. (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and
3. (3) one (1) of the following conditions is met:
  1. (A) the debtor has authenticated a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;
  2. (B) the collateral is not a certificated security and is in the possession of the secured party under § 47-9-313 pursuant to the debtor's security agreement;
  3. (C) the collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under § 47-8-301 pursuant to the debtor's security agreement; or
  4. (D) the collateral is deposit accounts, electronic chattel paper, investment property, or letter-of-credit rights, or electronic documents, and the secured party has control under § 47-7-106, § 47-9-104, § 47-9-105, § 47-9-106, or § 47-9-107 pursuant to the debtor's security agreement.
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(c) Other UCC provisions. Subsection (b) is subject to § 47-4-210 on the security interest of a collecting bank, § 47-5-118 on the security interest of a letter-of-credit issuer or nominated person, § 47-9-110 on a security interest arising under Chapter 2 or 2A, and § 47-9-206 on security interests in investment property.
(d) When person becomes bound by another person's security agreement. A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this chapter or by contract:
1. (1) the security agreement becomes effective to create a security interest in the person's property; or
2. (2) the person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.
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(e) Effect of new debtor becoming bound. If a new debtor becomes bound as debtor by a security agreement entered into by another person:
1. (1) the agreement satisfies subsection (b)(3) with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and
2. (2) another agreement is not necessary to make a security interest in the property enforceable.
(f) Proceeds and supporting obligations. The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by § 47-9-315 and is also attachment of a security interest in a supporting obligation for the collateral.
(g) Lien securing right to payment. The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.
(h) Security entitlement carried in securities account. The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.
(i) Commodity contracts carried in commodity account. The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.

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§ 47-9-204. After-acquired property — Future advances.

(a) After-acquired collateral. Except as otherwise provided in subsection (b), a security agreement may create or provide for a security interest in after-acquired collateral.
(b) When after-acquired property clause not effective. A security interest does not attach under a term constituting an after-acquired property clause to:
1. (1) consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within ten (10) days after the secured party gives value; or
2. (2) a commercial tort claim.
(c) Future advances and other value. A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.

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43-31-103(d)

§ 47-9-205. Use or disposition of collateral permissible.

(a) When security interest not invalid or fraudulent. A security interest is not invalid or fraudulent against creditors solely because:
1. (1) the debtor has the right or ability to:
  1. (A) use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods;
  2. (B) collect, compromise, enforce, or otherwise deal with collateral;
  3. (C) accept the return of collateral or make repossessions; or
  4. (D) use, commingle, or dispose of proceeds; or
2. (2) the secured party fails to require the debtor to account for proceeds or replace collateral.
(b) Requirements of possession not relaxed. This section does not relax the requirements of possession if attachment, perfection, or enforcement of a security interest depends upon possession of the collateral by the secured party.

§ 47-9-206. Security interest arising in purchase or delivery of financial asset.

(a) Security interest when person buys through securities intermediary. A security interest in favor of a securities intermediary attaches to a person's security entitlement if:
1. (1) the person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase; and
2. (2) the securities intermediary credits the financial asset to the buyer's securities account before the buyer pays the securities intermediary.
(b) Security interest secures obligation to pay for financial asset. The security interest described in subsection (a) secures the person's obligation to pay for the financial asset.
(c) Security interest in payment against delivery transaction. A security interest in favor of a person that delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if:
1. (1) the security or other financial asset:
  1. (A) in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment; and
  2. (B) is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and
2. (2) the agreement calls for delivery against payment.
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- 47-9-309(9)
(d) Security interest secures obligation to pay for delivery. The security interest described in subsection (c) secures the obligation to make payment for the delivery.

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47-9-203(c)

2. Rights and Duties

§ 47-9-207. Rights and duties of secured party having possession or control of collateral.

(a) Duty of care when secured party in possession. Except as otherwise provided in subsection (d), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party's possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.
(b) Expenses, risks, duties, and rights when secured party in possession. Except as otherwise provided in subsection (d), if a secured party has possession of collateral:
1. (1) reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral;
2. (2) the risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;
3. (3) the secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and
4. (4) the secured party may use or operate the collateral:
  1. (A) for the purpose of preserving the collateral or its value;
  2. (B) as permitted by an order of a court having competent jurisdiction; or
  3. (C) except in the case of consumer goods, in the manner and to the extent agreed by the debtor.
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    47-9-602(1)
(c) Duties and rights when secured party in possession or control. Except as otherwise provided in subsection (d), a secured party having possession of collateral or control of collateral under § 47-7-106, § 47-9-104, § 47-9-105, § 47-9-106, or § 47-9-107:
1. (1) may hold as additional security any proceeds, except money or funds, received from the collateral;
2. (2) shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and
3. (3) may create a security interest in the collateral.
(d) Buyer of certain rights to payment. If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:
1. (1) subsection (a) does not apply unless the secured party is entitled under an agreement:
  1. (A) to charge back uncollected collateral; or
  2. (B) otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and
2. (2) subsections (b) and (c) do not apply.

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47-9-601(b)

§ 47-9-208. Additional duties of secured party having control of collateral.

(a) Applicability of section. This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.
(b) Duties of secured party after receiving demand from debtor. Within 10 days after receiving an authenticated demand by the debtor:
1. (1) A secured party having control of a deposit account under § 47-9-104(a)(2) shall send to the bank with which the deposit account is maintained an authenticated statement that releases the bank from any further obligation to comply with instructions originated by the secured party;
2. (2) A secured party having control of a deposit account under § 47-9-104(a)(3) shall:
  1. (A) Pay the debtor the balance on deposit in the deposit account; or
  2. (B) Transfer the balance on deposit into a deposit account in the debtor's name;
3. (3) A secured party, other than a buyer, having control of electronic chattel paper under § 47-9-105 shall:
  1. (A) Communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;
  2. (B) If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and
  3. (C) Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;
4. (4) A secured party having control of investment property under § 47-8- 106(d)(2) or § 47-9-106(b) shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party;
5. (5) A secured party having control of a letter-of-credit right under § 47-9-107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated release from any further obligation to pay or deliver proceeds of the letter of credit to the secured party; and
6. (6) A secured party having control of an electronic document shall:
  1. (A) Give control of the electronic document to the debtor or its designated custodian;
  2. (B) If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and
  3. (C) Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party.

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47-9-625(e)(1)

§ 47-9-209. Duties of secured party if account debtor has been notified of assignment.

(a) Applicability of section. Except as otherwise provided in subsection (c), this section applies if:
1. (1) there is no outstanding secured obligation; and
2. (2) the secured party is not committed to make advances, incur obligations, or otherwise give value.
(b) Duties of secured party after receiving demand from debtor. Within 10 days after receiving an authenticated demand by the debtor, a secured party shall send to an account debtor that has received notification of an assignment to the secured party as assignee under § 47-9-406(a) an authenticated record that releases the account debtor from any further obligation to the secured party.
(c) Inapplicability to sales. This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.

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47-9-625(e)(2)

§ 47-9-210. Request for accounting; request regarding list of collateral or statement of account.

(a) Definitions. In this section:
1. (1) “Request” means a record of a type described in paragraph (2), (3), or (4).
2. (2) “Request for an accounting” means a record authenticated by a debtor requesting that the recipient provide an accounting of the unpaid obligations secured by collateral and reasonably identifying the transaction or relationship that is the subject of the request.
3. (3) “Request regarding a list of collateral” means a record authenticated by a debtor requesting that the recipient approve or correct a list of what the debtor believes to be the collateral securing an obligation and reasonably identifying the transaction or relationship that is the subject of the request.
4. (4) “Request regarding a statement of account” means a record authenticated by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.
(b) Duty to respond to requests. Subject to subsections (c), (d), (e), and (f), a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, shall comply with a request within 14 days after receipt:
1. (1) in the case of a request for an accounting, by authenticating and sending to the debtor an accounting; and
2. (2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.
(c) Request regarding list of collateral; statement concerning type of collateral. A secured party that claims a security interest in all of a particular type of collateral owned by the debtor may comply with a request regarding a list of collateral by sending to the debtor an authenticated record including a statement to that effect within 14 days after receipt.
(d) Request regarding list of collateral; no interest claimed. A person that receives a request regarding a list of collateral, claims no interest in the collateral when it receives the request, and claimed an interest in the collateral at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record:
1. (1) disclaiming any interest in the collateral; and
2. (2) if known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient's interest in the collateral.
(e) Request for accounting or regarding statement of account; no interest in obligation claimed. A person that receives a request for an accounting or a request regarding a statement of account, claims no interest in the obligations when it receives the request, and claimed an interest in the obligations at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record:
1. (1) disclaiming any interest in the obligations; and
2. (2) if known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient's interest in the obligations.
(f) Charges for responses. A debtor is entitled without charge to one (1) response to a request under this section during any six-month period. The secured party may require payment of a charge not exceeding twenty-five dollars ($25.00) for each additional response.

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Part 3 Perfection and Priority

1. Law Governing Perfection and Priority

§ 47-9-301. Law governing perfection and priority of security interests.

Except as otherwise provided in §§ 47-9-303 through 47-9-306, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:
1. (1) Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.
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2. (2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.
3. (3) Except as otherwise provided in paragraph (4), while tangible negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:
  1. (A) perfection of a security interest in the goods by filing a fixture filing;
  2. (B) perfection of a security interest in timber to be cut; and
  3. (C) the effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.
4. (4) The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as-extracted collateral.

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47-1-301(c)(7)

§ 47-9-302. Law governing perfection and priority of agricultural liens.

While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products.

§ 47-9-303. Law governing perfection and priority of security interests in goods covered by a certificate of title.

(a) Applicability of section. This section applies to goods covered by a certificate of title, even if there is no other relationship between the jurisdiction under whose certificate of title the goods are covered and the goods or the debtor.
(b) When goods covered by certificate of title. Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority. Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.
(c) Applicable law. The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title.

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47-9-301

§ 47-9-304. Law governing perfection and priority of security interests in deposit accounts.

(a) Law of bank's jurisdiction governs. The local law of a bank's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a deposit account maintained with that bank.
(b) Bank's jurisdiction. The following rules determine a bank's jurisdiction for purposes of this part:
1. (1) If an agreement between the bank and the debtor governing the deposit account expressly provides that a particular jurisdiction is the bank's jurisdiction for purposes of this part, this chapter, or the Uniform Commercial Code, that jurisdiction is the bank's jurisdiction.
2. (2) If paragraph (1) does not apply and an agreement between the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank's jurisdiction.
3. (3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the bank and its customer governing the deposit account expressly provides that the deposit account is maintained at an office in a particular jurisdiction, that jurisdiction is the bank's jurisdiction.
4. (4) If none of the preceding paragraphs applies, the bank's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer's account is located.
5. (5) If none of the preceding paragraphs applies, the bank's jurisdiction is the jurisdiction in which the chief executive office of the bank is located.

§ 47-9-305. Law governing perfection and priority of security interests in investment property.

(a) Governing law: general rules. Except as otherwise provided in subsection (c), the following rules apply:
1. (1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby.
2. (2) The local law of the issuer's jurisdiction as specified in § 47-8-110(d) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security.
3. (3) The local law of the securities intermediary's jurisdiction as specified in § 47-8-110(e) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account.
4. (4) The local law of the commodity intermediary's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account.
(b) Commodity intermediary's jurisdiction. The following rules determine a commodity intermediary's jurisdiction for purposes of this part:
1. (1) If an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that a particular jurisdiction is the commodity intermediary's jurisdiction for purposes of this part, this chapter, or the Uniform Commercial Code, that jurisdiction is the commodity intermediary's jurisdiction.
2. (2) If paragraph (1) does not apply and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
3. (3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
4. (4) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer's account is located.
5. (5) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.
(c) When perfection governed by law of jurisdiction where debtor located. The local law of the jurisdiction in which the debtor is located governs:
1. (1) perfection of a security interest in investment property by filing;
2. (2) automatic perfection of a security interest in investment property created by a broker or securities intermediary; and
3. (3) automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.
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§ 47-9-306. Law governing perfection and priority of security interests in letter-of-credit rights.

(a) Governing law: issuer's or nominated person's jurisdiction. Subject to subsection (c), the local law of the issuer's jurisdiction or a nominated person's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a letter-of-credit right if the issuer's jurisdiction or nominated person's jurisdiction is a state.
(b) Issuer's or nominated person's jurisdiction. For purposes of this part, an issuer's jurisdiction or nominated person's jurisdiction is the jurisdiction whose law governs the liability of the issuer or nominated person with respect to the letter-of-credit right as provided in § 47-5-116.
(c) When section not applicable. This section does not apply to a security interest that is perfected only under § 47-9-308(d).

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47-9-301

§ 47-9-307. Location of debtor

(a) “Place of business.” In this section, “place of business” means a place where a debtor conducts its affairs.
(b) Debtor's location: general rules. Except as otherwise provided in this section, the following rules determine a debtor's location:
1. (1) A debtor who is an individual is located at the individual's principal residence.
2. (2) A debtor that is an organization and has only one (1) place of business is located at its place of business.
3. (3) A debtor that is an organization and has more than one (1) place of business is located at its chief executive office.
(c) Limitation of applicability of subsection (b). Subsection (b) applies only if a debtor's residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording, or registration system as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. If subsection (b) does not apply, the debtor is located in the District of Columbia.
(d) Continuation of location: cessation of existence, etc. A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by subsections (b) and (c).
(e) Location of registered organization organized under state law. A registered organization that is organized under the law of a state is located in that state.
(f) Location of registered organization organized under federal law; bank branches and agencies. Except as otherwise provided in subsection (i), a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a state are located:
1. (1) In the state that the law of the United States designates, if the law designates a state of location;
2. (2) In the state that the registered organization, branch, or agency designates, if the law of the United States authorizes the registered organization, branch, or agency to designate its state of location, including by designating its main office, home office, or other comparable office; or
3. (3) In the District of Columbia, if neither subdivision (f)(1) nor (f)(2) applies.
(g) Continuation of location: change in status of registered organization. A registered organization continues to be located in the jurisdiction specified by subsection (e) or (f) notwithstanding:
1. (1) The suspension, revocation, forfeiture, or lapse of the registered organization's status as such in its jurisdiction of organization; or
2. (2) The dissolution, winding up, or cancellation of the existence of the registered organization.
(h) Location of United States. The United States is located in the District of Columbia.
(i) Location of foreign bank branch or agency if licensed in only one state. A branch or agency of a bank that is not organized under the law of the United States or a state is located in the state in which the branch or agency is licensed, if all branches and agencies of the bank are licensed in only one (1) state.
(j) Location of foreign air carrier. A foreign air carrier under the Federal Aviation Act of 1958, as amended, is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.
(k) Section applies only to this part. This section applies only for purposes of this part.

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2. Perfection

§ 47-9-308. When security interest or agricultural lien is perfected; continuity of perfection.

(a) Perfection of security interest. Except as otherwise provided in this section and § 47-9-309, a security interest is perfected if it has attached and all of the applicable requirements for perfection in §§ 47-9-310 through 47-9-316 have been satisfied. A security interest is perfected when it attaches if the applicable requirements are satisfied before the security interest attaches.
(b) Perfection of agricultural lien. An agricultural lien is perfected if it has become effective and all of the applicable requirements for perfection in § 47-9-310 have been satisfied. An agricultural lien is perfected when it becomes effective if the applicable requirements are satisfied before the agricultural lien becomes effective.
(c) Continuous perfection; perfection by different methods. A security interest or agricultural lien is perfected continuously if it is originally perfected by one (1) method under this chapter and is later perfected by another method under this chapter, without an intermediate period when it was unperfected.
(d) Supporting obligation. Perfection of a security interest in collateral also perfects a security interest in a supporting obligation for the collateral.
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(e) Lien securing right to payment. Perfection of a security interest in a right to payment or performance also perfects a security interest in a security interest, mortgage, or other lien on personal or real property securing the right.
(f) Security entitlement carried in securities account. Perfection of a security interest in a securities account also perfects a security interest in the security entitlements carried in the securities account.
(g) Commodity contract carried in commodity account. Perfection of a security interest in a commodity account also perfects a security interest in the commodity contracts carried in the commodity account.

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§ 47-9-309. Security interest perfected upon attachment.

The following security interests are perfected when they attach:
1. (1) a purchase-money security interest in consumer goods, except as otherwise provided in § 47-9-311(b) with respect to consumer goods that are subject to a statute or treaty described in § 47-9-311(a);
2. (2) an assignment of accounts or payment intangibles which does not by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor's outstanding accounts or payment intangibles;
3. (3) a sale of a payment intangible;
4. (4) a sale of a promissory note;
5. (5) a security interest created by the assignment of a health-care-insurance receivable to the provider of the health-care goods or services;
6. (6) a security interest arising under § 47-2-401, § 47-2-505, § 47-2-711(3), or § 47-2A-508(5), until the debtor obtains possession of the collateral;
7. (7) a security interest of a collecting bank arising under § 47-4-210;
8. (8) a security interest of an issuer or nominated person arising under § 47-5-118;
9. (9) a security interest arising in the delivery of a financial asset under § 47-9-206(c);
10. (10) a security interest in investment property created by a broker or securities intermediary;
11. (11) a security interest in a commodity contract or a commodity account created by a commodity intermediary;
12. (12) an assignment for the benefit of all creditors of the transferor and subsequent transfers by the assignee thereunder; and
13. (13) a security interest created by an assignment of a beneficial interest in a decedent's estate.

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§ 47-9-310. When filing required to perfect security interest or agricultural lien — Security interests and agricultural liens to which filing provisions do not apply.

(a) General rule: perfection by filing. Except as otherwise provided in subsection (b) and § 47-9-312(b), a financing statement must be filed to perfect all security interests and agricultural liens.
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- 47-9-311(a)(1)
(b) Exceptions: filing not necessary. The filing of a financing statement is not necessary to perfect a security interest:
1. (1) that is perfected under § 47-9-308(d), (e), (f), or (g);
2. (2) that is perfected under § 47-9-309 when it attaches;
3. (3) in property subject to a statute, regulation, or treaty described in § 47-9-311(a);
4. (4) in goods in possession of a bailee which is perfected under § 47-9-312(d)(1) or (2);
5. (5) in certificated securities, documents, goods, or instruments which is perfected without filing, control or possession under § 47-9-312(e), (f), or (g);
6. (6) in collateral in the secured party's possession under § 47-9-313;
7. (7) in a certificated security which is perfected by delivery of the security certificate to the secured party under § 47-9-313;
8. (8) in deposit accounts, electronic chattel paper, electronic documents, investment property or letter-of-credit rights which is perfected by control under § 47-9-314;
9. (9) in proceeds which is perfected under § 47-9-315; or
10. (10) that is perfected under § 47-9-316.
(c) Assignment of perfected security interest. If a secured party assigns a perfected security interest or agricultural lien, a filing under this chapter is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.
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- 47-9-102(a)(60)

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§ 47-9-311. Perfection of security interests in property subject to certain statutes, regulations, and treaties.

(a) Security interest subject to other law. Except as otherwise provided in subsection (d), the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:
1. (1) A statute, regulation, or treaty of the United States whose requirements for a security interest's obtaining priority over the rights of a lien creditor with respect to the property preempt § 47-9-310(a);
2. (2)
  1. (A) A certificate-of-title statute of this state, covering automobiles, trailers, mobile homes, vehicles or the like, which provides for a security interest to be indicated on a certificate of title as a condition or result of perfection, under title 55, chapter 3, or
  2. (B) Section 55-3-126(f), which allows temporary perfection; or
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  - 47-9-334(e)(4)(B)
3. (3) A statute of another jurisdiction which provides for a security interest to be indicated on a certificate of title as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the property.
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(b) Compliance with other law. Compliance with the requirements of a statute, regulation, or treaty described in subsection (a) for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under this chapter. Except as otherwise provided in subsection (d) and § 47-9-313 and § 47-9-316(d) and (e) for goods covered by a certificate of title, a security interest in property subject to a statute, regulation, or treaty described in subsection (a) may be perfected only by compliance with those requirements, and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of possession of the collateral.
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(c) Duration and renewal of perfection. Except as otherwise provided in subsection (d) and § 47-9-316(d) and (e), duration and renewal of perfection of a security interest perfected by compliance with the requirements prescribed by a statute, regulation, or treaty described in subsection (a) are governed by the statute, regulation, or treaty. In other respects, the security interest is subject to this chapter.
(d) Inapplicability to certain inventory. During any period in which collateral subject to a statute specified in subdivision (a)(2) is inventory held for sale or lease by a person or leased by that person as lessor and that person is in the business of selling goods of that kind, this section does not apply to a security interest in that collateral created by that person.
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- 55-3-126(d)

§ 47-9-312. Perfection of security interests in chattel paper, deposit accounts, documents, goods covered by documents, instruments, investment property, letter-of-credit rights, and money — Perfection by permissive filing — Temporary perfection without filing or transfer of possession.

(a) Perfection by filing permitted. A security interest in chattel paper, negotiable documents, instruments, or investment property may be perfected by filing.
(b) Control or possession of certain collateral. Except as otherwise provided in § 47-9-315(c) and (d) for proceeds:
1. (1) a security interest in a deposit account may be perfected only by control under § 47-9-314; and
2. (2) except as otherwise provided in § 47-9-308(d), a security interest in a letter-of-credit right may be perfected only by control under § 47-9- 314; and
3. (3) a security interest in money may be perfected only by the secured party's taking possession under § 47-9-313.
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- 47-9-310(a)
(c) Goods covered by negotiable document. While goods are in the possession of a bailee that has issued a negotiable document covering the goods:
1. (1) a security interest in the goods may be perfected by perfecting a security interest in the document; and
2. (2) a security interest perfected in the document has priority over any security interest that becomes perfected in the goods by another method during that time.
(d) Goods covered by nonnegotiable document. While goods are in the possession of a bailee that has issued a nonnegotiable document covering the goods, a security interest in the goods may be perfected by:
1. (1) issuance of a document in the name of the secured party;
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  - 47-9-310(b)(4)
2. (2) the bailee's receipt of notification of the secured party's interest; or
3. (3) filing as to the goods.
(e) Temporary perfection: new value. A security interest in certificated securities, negotiable documents, or instruments is perfected without filing or the taking of possession or control for a period of twenty (20) days from the time it attaches to the extent that it arises for new value given under an authenticated security agreement.
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(f) Temporary perfection: goods or documents made available to debtor. A perfected security interest in a negotiable document or goods in possession of a bailee, other than one that has issued a negotiable document for the goods, remains perfected for twenty (20) days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of:
1. (1) ultimate sale or exchange; or
2. (2) loading, unloading, storing, shipping, transshipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary to their sale or exchange.
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- 47-9-324(c)(2)
- 47-9-324(e)(2)
(g) Temporary perfection: delivery of security certificate or instrument to debtor. A perfected security interest in a certificated security or instrument remains perfected for twenty (20) days without filing if the secured party delivers the security certificate or instrument to the debtor for the purpose of:
1. (1) ultimate sale or exchange; or
2. (2) presentation, collection, enforcement, renewal, or registration of transfer.
(h) Expiration of temporary perfection. After the 20-day period specified in subsection (e), (f), or (g) expires, perfection depends upon compliance with this chapter.

§ 47-9-313. When possession by or delivery to secured party perfects security interest without filing.

(a) Perfection by possession or delivery. Except as otherwise provided in subsection (b), a secured party may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under § 47-8-301.
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- 47-9-328(5)
(b) Goods covered by certificate of title. With respect to goods covered by a certificate of title issued by this state, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in § 47-9-316(d).
(c) Collateral in possession of person other than debtor. With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's business, when:
1. (1) the person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party's benefit; or
2. (2) the person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party's benefit.
(d) Time of perfection by possession; continuation of perfection. If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.
(e) Time of perfection by delivery; continuation of perfection. A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under § 47-8-301 and remains perfected by delivery until the debtor obtains possession of the security certificate.
(f) Acknowledgment not required. A person in possession of collateral is not required to acknowledge that it holds possession for a secured party's benefit.
(g) Effectiveness of acknowledgment; no duties or confirmation. If a person acknowledges that it holds possession for the secured party's benefit:
1. (1) the acknowledgment is effective under subsection (c) or § 47-8-301(a), even if the acknowledgment violates the rights of a debtor; and
2. (2) unless the person otherwise agrees or law other than this chapter otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.
(h) Secured party's delivery to person other than debtor. A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor's business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:
1. (1) to hold possession of the collateral for the secured party's benefit; or
2. (2) to redeliver the collateral to the secured party.
(i) Effect of delivery under subsection (h); no duties or confirmation. A secured party does not relinquish possession, even if a delivery under subsection (h) violates the rights of a debtor. A person to which collateral is delivered under subsection (h) does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this chapter otherwise provides.

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§ 47-9-314. Perfection by control.

(a) Perfection by control. A security interest in investment property, deposit accounts, letter-of-credit rights, electronic chattel paper, or electronic documents may be perfected by control of the collateral under § 47-7-106, § 47-9-104, § 47-9-105, § 47-9-106, or § 47-9-107.
(b) Specified collateral: time of perfection by control; continuation of perfection. A security interest in deposit accounts, electronic chattel paper, letter-of-credit rights, or electronic documents is perfected by control under § 47-7-106, § 47-9-104, § 47-9-105, or § 47-9-107 when the secured party obtains control and remains perfected by control only while the secured party retains control.
(c) Investment property: time of perfection by control; continuation of perfection. A security interest in investment property is perfected by control under § 47-9-106 from the time the secured party obtains control and remains perfected by control until:
1. (1) the secured party does not have control; and
2. (2) one (1) of the following occurs:
  1. (A) if the collateral is a certificated security, the debtor has or acquires possession of the security certificate;
  2. (B) if the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner; or
  3. (C) if the collateral is a security entitlement, the debtor is or becomes the entitlement holder.

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§ 47-9-315. Secured party's rights on disposition of collateral and in proceeds.

(a) Disposition of collateral: continuation of security interest or agricultural lien; proceeds. Except as otherwise provided in this chapter and in § 47-2-403(2):
1. (1) a security interest or agricultural lien continues in collateral notwithstanding sale, lease, license, exchange, or other disposition thereof unless the secured party authorized the disposition free of the security interest or agricultural lien; and
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  - 47-9-343(n)(2)
  - 47-9-509(c)
2. (2) a security interest attaches to any identifiable proceeds of collateral.
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  - 47-9-509(b)(2)
  - 47-9-509(c)
(b) When commingled proceeds identifiable. Proceeds that are commingled with other property are identifiable proceeds:
1. (1) if the proceeds are goods, to the extent provided by § 47-9-336; and
2. (2) if the proceeds are not goods, to the extent that the secured party identifies the proceeds by a method of tracing, including application of equitable principles, that is permitted under law other than this chapter with respect to commingled property of the type involved.
(c) Perfection of security interest in proceeds. A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected.
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- 47-9-312(b)
(d) Continuation of perfection. A perfected security interest in proceeds becomes unperfected on the 21st day after the security interest attaches to the proceeds unless:
1. (1) the following conditions are satisfied:
  1. (A) a filed financing statement covers the original collateral;
  2. (B) the proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed; and
  3. (C) the proceeds are not acquired with cash proceeds;
2. (2) the proceeds are identifiable cash proceeds; or
3. (3) the security interest in the proceeds is perfected other than under subsection (c) when the security interest attaches to the proceeds or within 20 days thereafter.
(e) When perfected security interest in proceeds becomes unperfected. If a filed financing statement covers the original collateral, a security interest in proceeds which remains perfected under subsection (d)(1) becomes unperfected at the later of:
1. (1) when the effectiveness of the filed financing statement lapses under § 47-9-515 or is terminated under § 47-9-513; or
2. (2) the 21st day after the security interest attaches to the proceeds.

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§ 47-9-316. Effect of change in governing law.

(a) General rule: effect on perfection of change in governing law. A security interest perfected pursuant to the law of the jurisdiction designated in § 47-9-301(1) or § 47-9-305(c) remains perfected until the earliest of:
1. (1) The time perfection would have ceased under the law of that jurisdiction;
2. (2) The expiration of four (4) months after a change of the debtor's location to another jurisdiction; or
3. (3) The expiration of one (1) year after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction.
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- 47-9-320(c)
(b) Security interest perfected or unperfected under law of new jurisdiction. If a security interest described in subsection (a) becomes perfected under the law of the other jurisdiction before the earliest time or event described in that subsection (a), it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(c) Possessory security interest in collateral moved to new jurisdiction. A possessory security interest in collateral, other than goods covered by a certificate of title and as-extracted collateral consisting of goods, remains continuously perfected if:
1. (1) The collateral is located in one (1) jurisdiction and subject to a security interest perfected under the law of that jurisdiction;
2. (2) Thereafter the collateral is brought into another jurisdiction; and
3. (3) Upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.
(d) Goods covered by certificate of title from this state. Except as otherwise provided in subsection (e), a security interest in goods covered by a certificate of title which is perfected by any method under the law of another jurisdiction when the goods become covered by a certificate of title from this state remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.
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(e) When subsection (d) security interest becomes unperfected against purchasers. A security interest described in subsection (d) becomes unperfected as against a purchaser of the goods for value and is deemed never to have been perfected as against a purchaser of the goods for value if the applicable requirements for perfection under § 47-9-311(b) or § 47-9-313 are not satisfied before the earlier of:
1. (1) The time the security interest would have become unperfected under the law of the other jurisdiction had the goods not become covered by a certificate of title from this state; or
2. (2) The expiration of four (4) months after the goods had become so covered.
(f) Change in jurisdiction of bank, issuer, nominated person, securities intermediary, or commodity intermediary. A security interest in deposit accounts, letter-of-credit rights, or investment property which is perfected under the law of the bank's jurisdiction, the issuer's jurisdiction, a nominated person's jurisdiction, the securities intermediary's jurisdiction, or the commodity intermediary's jurisdiction, as applicable, remains perfected until the earlier of:
1. (1) The time the security interest would have become unperfected under the law of that jurisdiction; or
2. (2) The expiration of four (4) months after a change of the applicable jurisdiction to another jurisdiction.
(g) Subsection (f) security interest perfected or unperfected under law of new jurisdiction. If a security interest described in subsection (f) becomes perfected under the law of the other jurisdiction before the earlier of the time or the end of the period described in that subsection (f), it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(h) Effect on filed financing statement of change in governing law. The following rules apply to collateral to which a security interest attaches within four (4) months after the debtor changes its location to another jurisdiction:
1. (1) A financing statement filed before the change pursuant to the law of the jurisdiction designated in § 47-9-301(1) or § 47-9-305(c) is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral had the debtor not changed its location.
2. (2) If a security interest perfected by a financing statement that is effective under subdivision (h)(1) becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in § 47-9-301(1) or § 47-9-305(c) or the expiration of the four-month period, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(i) Effect of change in governing law on financing statement filed against original debtor. If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in § 47-9-301(1) or § 47-9-305(c) and the new debtor is located in another jurisdiction, the following rules apply:
1. (1) The financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four (4) months after, the new debtor becomes bound under § 47-9-203(d), if the financing statement would have been effective to perfect a security interest in the collateral had the collateral been acquired by the original debtor.
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  - 47-9-326(a)
2. (2) A security interest perfected by the financing statement and which becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in § 47-9-301(1) or § 47-9-305(c) or the expiration of the four-month period remains perfected thereafter. A security interest that is perfected by the financing statement but which does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

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3. Priority

§ 47-9-317. Interests that take priority over or take free of security interest or agricultural lien.

(a) Conflicting security interests and rights of lien creditors. A security interest or agricultural lien is subordinate to the rights of:
1. (1) A person entitled to priority under § 47-9-322; and
2. (2) Except as otherwise provided in subsection (e), a person that becomes a lien creditor before the earlier of the time:
  1. (A) The security interest or agricultural lien is perfected; or
  2. (B) One (1) of the conditions specified in § 47-9-203(b)(3) is met and a financing statement covering the collateral is filed.
(b) Buyers that receive delivery. Except as otherwise provided in subsection (e), a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, or a certificated security takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.
(c) Lessees that receive delivery. Except as otherwise provided in subsection (e), a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.
(d) Licensees and buyer of certain collateral. A licensee of a general intangible or a buyer, other than a secured party, of collateral other than tangible chattel paper, tangible documents, goods, instruments, or a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.
(e) Purchase-money security interest. Except as otherwise provided in §§ 47-9-320 and 47-9-321, if a person files a financing statement with respect to a purchase-money security interest before or within thirty (30) days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.

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47-2A-307(3)
47-9-343(g)(2)

§ 47-9-318. No interest retained in right to payment that is sold — Rights and title of seller of account or chattel paper with respect to creditors and purchasers.

(a) Seller retains no interest. A debtor that has sold an account, chattel paper, payment intangible, or promissory note does not retain a legal or equitable interest in the collateral sold.
(b) Deemed rights of debtor if buyer's security interest unperfected. For purposes of determining the rights of creditors of, and purchasers for value of an account or chattel paper from, a debtor that has sold an account or chattel paper, while the buyer's security interest is unperfected, the debtor is deemed to have rights and title to the account or chattel paper identical to those the debtor sold.

§ 47-9-319. Rights and title of consignee with respect to creditors and purchasers.

(a) Consignee has consignor's rights. Except as otherwise provided in subsection (b), for purposes of determining the rights of creditors of, and purchasers for value of goods from, a consignee, while the goods are in the possession of the consignee, the consignee is deemed to have rights and title to the goods identical to those the consignor had or had power to transfer.
(b) Applicability of other law. For purposes of determining the rights of a creditor of a consignee, law other than this chapter determines the rights and title of a consignee while goods are in the consignee's possession if, under this part, a perfected security interest held by the consignor would have priority over the rights of the creditor.

§ 47-9-320. Buyer of goods.

(a) Buyer in ordinary course of business. Except as otherwise provided in subsection (e), a buyer in ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence. A buyer in ordinary course of business buying farm products from a person engaged in farming operations would take free of a security interest created by the buyer's seller as provided in Section 1324 of the federal Food Security Act of 1985, 7 U.S.C. § 1631.
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- 47-9-343(f)
- 47-9-343(n)(1)
(b) Buyer of consumer goods. Except as otherwise provided in subsection (e), a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:
1. (1) without knowledge of the security interest;
2. (2) for value;
3. (3) primarily for the buyer's personal, family, or household purposes; and
4. (4) before the filing of a financing statement covering the goods.
(c) Effectiveness of filing for subsection (b). To the extent that it affects the priority of a security interest over a buyer of goods under subsection (b), the period of effectiveness of a filing made in the jurisdiction in which the seller is located is governed by § 47-9-316(a) and (b).
(d) Buyer in ordinary course of business at wellhead or minehead. A buyer in ordinary course of business buying oil, gas, or other minerals at the wellhead or minehead or after extraction takes free of an interest arising out of an encumbrance.
(e) Possessory security interest not affected. Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under § 47-9-313.

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§ 47-9-321. Licensee of general intangible and lessee of goods in ordinary course of business.

(a) “Licensee in ordinary course of business.” In this section, “licensee in ordinary course of business” means a person that becomes a licensee of a general intangible in good faith, without knowledge that the license violates the rights of another person in the general intangible, and in the ordinary course from a person in the business of licensing general intangibles of that kind. A person becomes a licensee in the ordinary course if the license to the person comports with the usual or customary practices in the kind of business in which the licensor is engaged or with the licensor's own usual or customary practices.
(b) Rights of licensee in ordinary course of business. A licensee in ordinary course of business takes its rights under a nonexclusive license free of a security interest in the general intangible created by the licensor, even if the security interest is perfected and the licensee knows of its existence.
(c) Rights of lessee in ordinary course of business. A lessee in ordinary course of business takes its leasehold interest free of a security interest in the goods created by the lessor, even if the security interest is perfected and the lessee knows of its existence.
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- 47-7-209(c)(1)(C)
- 47-7-503(a)(1)(C)

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47-2A-307(3)
47-9-317(e)

§ 47-9-322. Priorities among conflicting security interests in and agricultural liens on same collateral.

(a) General priority rules. Except as otherwise provided in this section, priority among conflicting security interests and agricultural liens in the same collateral is determined according to the following rules:
1. (1) Conflicting perfected security interests and agricultural liens rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfection.
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  - 47-9-323(a)
2. (2) A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien.
3. (3) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.
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(b) Time of perfection: proceeds and supporting obligations. For the purposes of subdivision (a)(1):
1. (1) the time of filing or perfection as to a security interest in collateral is also the time of filing or perfection as to a security interest in proceeds; and
2. (2) the time of filing or perfection as to a security interest in collateral supported by a supporting obligation is also the time of filing or perfection as to a security interest in the supporting obligation.
(c) Special priority rules: proceeds and supporting obligations. Except as otherwise provided in subsection (f), a security interest in collateral which qualifies for priority over a conflicting security interest under § 47-9-327, § 47-9-328, § 47-9-329, § 47-9-330, or § 47-9-331 also has priority over a conflicting security interest in:
1. (1) any supporting obligation for the collateral; and
2. (2) proceeds of the collateral if:
  1. (A) the security interest in proceeds is perfected;
  2. (B) the proceeds are cash proceeds or of the same type as the collateral; and
  3. (C) in the case of proceeds that are proceeds of proceeds, all intervening proceeds are cash proceeds, proceeds of the same type as the collateral, or an account relating to the collateral.
(d) First-to-file priority rule for certain collateral. Subject to subsection (e) and except as otherwise provided in subsection (f), if a security interest in chattel paper, deposit accounts, negotiable documents, instruments, investment property, or letter-of-credit rights is perfected by a method other than filing, conflicting perfected security interests in proceeds of the collateral rank according to priority in time of filing.
(e) Applicability of subsection (d). Subsection (d) applies only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property, or letter-of-credit rights.
(f) Limitations on subsections (a)-(e). Subsections (a)-(e) are subject to:
1. (1) subsection (g) and the other provisions of this part;
2. (2) Section 47-4-210 with respect to a security interest of a collecting bank;
3. (3) Section 47-5-118 with respect to a security interest of an issuer or nominated person; and
4. (4) Section 47-9-110 with respect to a security interest arising under chapter 2 or 2A of this title.
(g) Priority under agricultural lien statute. A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.

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§ 47-9-323. Future advances.

(a) When priority based on time of advance. Except as otherwise provided in subsection (c), for purposes of determining the priority of a perfected security interest under § 47-9-322(a)(1), perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that:
1. (1) is made while the security interest is perfected only:
  1. (A) under § 47-9-309 when it attaches; or
  2. (B) temporarily under § 47-9-312(e), (f), or (g); and
2. (2) is not made pursuant to a commitment entered into before or while the security interest is perfected by a method other than under § 47-9-309 or § 47-9-312(e), (f), or (g).
(b) Lien creditor. Except as otherwise provided in subsection (c), a security interest is subordinate to the rights of a person that becomes a lien creditor to the extent that the security interest secures an advance made more than 45 days after the person becomes a lien creditor unless the advance is made:
1. (1) without knowledge of the lien; or
2. (2) pursuant to a commitment entered into without knowledge of the lien.
(c) Buyer of receivables. Subsections (a) and (b) do not apply to a security interest held by a secured party that is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor.
(d) Buyer of goods. Except as otherwise provided in subsection (e), a buyer of goods other than a buyer in ordinary course of business takes free of a security interest to the extent that it secures advances made after the earlier of:
1. (1) the time the secured party acquires knowledge of the buyer's purchase; or
2. (2) 45 days after the purchase.
(e) Advances made pursuant to commitment: priority of buyer of goods. Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer's purchase and before the expiration of the 45-day period.
(f) Lessee of goods. Except as otherwise provided in subsection (g), a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of:
1. (1) the time the secured party acquires knowledge of the lease; or
2. (2) 45 days after the lease contract becomes enforceable.
(g) Advances made pursuant to commitment: priority of lessee of goods. Subsection (f) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the 45-day period.

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47-2A-307(3)
47-9-328(7)

§ 47-9-324. Priority of purchase-money security interests.

(a) General rule: purchase-money priority. Except as otherwise provided in subsection (g), a perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in § 47-9-327, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within thirty (30) days thereafter.
(b) Inventory purchase-money priority. Subject to subsection (c) and except as otherwise provided in subsection (g), a perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in § 47-9-330, and, except as otherwise provided in § 47-9-327, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if:
1. (1) the purchase-money security interest is perfected when the debtor receives possession of the inventory;
2. (2) the purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
3. (3) the holder of the conflicting security interest receives the notification within five (5) years before the debtor receives possession of the inventory; and
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  - 47-9-343(g)(1)
4. (4) the notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory.
(c) Holders of conflicting inventory security interests to be notified. Subsections (b)(2) through (4) apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory:
1. (1) if the purchase-money security interest is perfected by filing, before the date of the filing; or
2. (2) if the purchase-money security interest is temporarily perfected without filing or possession under § 47-9-312(f), before the beginning of the 20- day period thereunder.
(d) Livestock purchase-money priority. Subject to subsection (e) and except as otherwise provided in subsection (g), a perfected purchase-money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in § 47-9-327, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:
1. (1) the purchase-money security interest is perfected when the debtor receives possession of the livestock;
2. (2) the purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
3. (3) the holder of the conflicting security interest receives the notification within six (6) months before the debtor receives possession of the livestock; and
4. (4) the notification states that the person sending the notification has or expects to acquire a purchase-money security interest in livestock of the debtor and describes the livestock.
(e) Holders of conflicting livestock security interests to be notified. Subsections (d)(2) through (4) apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock:
1. (1) if the purchase-money security interest is perfected by filing, before the date of the filing; or
2. (2) if the purchase-money security interest is temporarily perfected without filing or possession under § 47-9-312(f), before the beginning of the 20-day period thereunder.
(f) Software purchase-money priority. Except as otherwise provided in subsection (g), a perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in § 47-9-327, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase-money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.
(g) Conflicting purchase-money security interests. If more than one (1) security interest qualifies for priority in the same collateral under subsection (a), (b), (d), or (f):
1. (1) a security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and
2. (2) in all other cases, § 47-9-322(a) applies to the qualifying security interests.

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§ 47-9-325. Priority of security interests in transferred collateral.

(a) Subordination of security interest in transferred collateral. Except as otherwise provided in subsection (b), a security interest created by a debtor is subordinate to a security interest in the same collateral created by another person if:
1. (1) the debtor acquired the collateral subject to the security interest created by the other person;
2. (2) the security interest created by the other person was perfected when the debtor acquired the collateral; and
3. (3) there is no period thereafter when the security interest is unperfected.
(b) Limitation of subsection (a) subordination. Subsection (a) subordinates a security interest only if the security interest:
1. (1) otherwise would have priority solely under § 47-9-322(a) or § 47-9-324; or
2. (2) arose solely under § 47-2-711(3) or § 47-2A-508(5).

§ 47-9-326. Priority of security interests created by new debtor.

(a) Subordination of security interest created by new debtor. Subject to subsection (b), a security interest that is created by a new debtor in collateral in which the new debtor has or acquires rights and is perfected solely by a filed financing statement that would be ineffective to perfect the security interest but for the application of § 47-9-316(i)(1) or § 47-9-508 is subordinate to a security interest in the same collateral which is perfected other than by such a filed financing statement.
(b) Priority under other provisions; multiple original debtors. The other provisions of this part determine the priority among conflicting security interests in the same collateral perfected by filed financing statements described in subsection (a). However, if the security agreements to which a new debtor became bound as debtor were not entered into by the same original debtor, the conflicting security interests rank according to priority in time of the new debtor's having become bound.

§ 47-9-327. Priority of security interests in deposit account.

The following rules govern priority among conflicting security interests in the same deposit account:
1. (1) A security interest held by a secured party having control of the deposit account under § 47-9-104 has priority over a conflicting security interest held by a secured party that does not have control.
2. (2) Except as otherwise provided in paragraphs (3) and (4), security interests perfected by control under § 47-9-314 rank according to priority in time of obtaining control.
3. (3) Except as otherwise provided in paragraph (4), a security interest held by the bank with which the deposit account is maintained has priority over a conflicting security interest held by another secured party.
4. (4) A security interest perfected by control under § 47-9-104(a)(3) has priority over a security interest held by the bank with which the deposit account is maintained.

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§ 47-9-328. Priority of security interests in investment property.

The following rules govern priority among conflicting security interests in the same investment property:
1. (1) A security interest held by a secured party having control of investment property under § 47-9-106 has priority over a security interest held by a secured party that does not have control of the investment property.
2. (2) Except as otherwise provided in paragraphs (3) and (4), conflicting security interests held by secured parties each of which has control under § 47-9-106 rank according to priority in time of:
  1. (A) if the collateral is a security, obtaining control;
  2. (B) if the collateral is a security entitlement carried in a securities account and:
    1. (i) if the secured party obtained control under § 47-8-106(d)(1), the secured party's becoming the person for which the securities account is maintained;
    2. (ii) if the secured party obtained control under § 47-8-106(d)(2), the securities intermediary's agreement to comply with the secured party's entitlement orders with respect to security entitlements carried or to be carried in the securities account; or
    3. (iii) if the secured party obtained control through another person under § 47-8-106(d)(3), the time on which priority would be based under this paragraph if the other person were the secured party; or
  3. (C) if the collateral is a commodity contract carried with a commodity intermediary, the satisfaction of the requirement for control specified in § 47-9-106(b)(2) with respect to commodity contracts carried or to be carried with the commodity intermediary.
3. (3) A security interest held by a securities intermediary in a security entitlement or a securities account maintained with the securities intermediary has priority over a conflicting security interest held by another secured party.
4. (4) A security interest held by a commodity intermediary in a commodity contract or a commodity account maintained with the commodity intermediary has priority over a conflicting security interest held by another secured party.
5. (5) A security interest in a certificated security in registered form which is perfected by taking delivery under § 47-9-313(a) and not by control under § 47-9-314 has priority over a conflicting security interest perfected by a method other than control.
6. (6) Conflicting security interests created by a broker, securities intermediary, or commodity intermediary which are perfected without control under § 47-9-106 rank equally.
7. (7) In all other cases, priority among conflicting security interests in investment property is governed by §§ 47-9-322 and 47-9-323.

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47-9-322(c)

§ 47-9-329. Priority of security interests in letter-of-credit right.

The following rules govern priority among conflicting security interests in the same letter-of-credit right:
1. (1) A security interest held by a secured party having control of the letter-of-credit right under § 47-9-107 has priority to the extent of its control over a conflicting security interest held by a secured party that does not have control.
2. (2) Security interests perfected by control under § 47-9-314 rank according to priority in time of obtaining control.

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47-9-322(c)

§ 47-9-330. Priority of purchaser of chattel paper or instrument.

(a) Purchaser's priority: security interest claimed merely as proceeds. A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed merely as proceeds of inventory subject to a security interest if:
1. (1) in good faith and in the ordinary course of the purchaser's business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under § 47-9-105; and
2. (2) the chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.
(b) Purchaser's priority: other security interests. A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under § 47-9-105 in good faith, in the ordinary course of the purchaser's business, and without knowledge that the purchase violates the rights of the secured party.
(c) Chattel paper purchaser's priority in proceeds. Except as otherwise provided in § 47-9-327, a purchaser having priority in chattel paper under subsection (a) or (b) also has priority in proceeds of the chattel paper to the extent that:
1. (1) § 47-9-322 provides for priority in the proceeds; or
2. (2) the proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser's security interest in the proceeds is unperfected.
(d) Instrument purchaser's priority. Except as otherwise provided in § 47-9-331(a), a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.
(e) Holder of purchase-money security interest gives new value. For purposes of subsections (a) and (b), the holder of a purchase-money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.
(f) Indication of assignment gives knowledge. For purposes of subsections (b) and (d), if chattel paper or an instrument indicates that it has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party.

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§ 47-9-331. Priority of rights of purchasers of instruments, documents, and securities under other chapters — Priority of interests in financial assets and security entitlements under Chapter 8.

(a) Rights under Chapters 3, 7, and 8 not limited. This chapter does not limit the rights of a holder in due course of a negotiable instrument, a holder to which a negotiable document of title has been duly negotiated, or a protected purchaser of a security. These holders or purchasers take priority over an earlier security interest, even if perfected, to the extent provided in Chapters 3, 7, and 8.
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- 47-9-330(d)
(b) Protection under Chapter 8. This chapter does not limit the rights of or impose liability on a person to the extent that the person is protected against the assertion of a claim under Chapter 8.
(c) Filing not notice. Filing under this chapter does not constitute notice of a claim or defense to the holders, or purchasers, or persons described in subsections (a) and (b).

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47-9-322(c)

§ 47-9-332. Transfer of money; transfer of funds from deposit account.

(a) Transferee of money. A transferee of money takes the money free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of the secured party.
(b) Transferee of funds from deposit account. A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts in collusion with the debtor in violating the rights of the secured party.

§ 47-9-333. Priority of certain liens arising by operation of law.

(a) “Possessory lien”. In this section, “possessory lien” means an interest, other than a security interest or an agricultural lien:
1. (1) which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person's business;
2. (2) which is created by statute or rule of law in favor of the person; and
3. (3) whose effectiveness depends on the person's possession of the goods.
(b) Priority of possessory lien. A possessory lien on goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise.

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§ 47-9-334. Priority of security interests in fixtures and crops.

(a) Security interest in fixtures under this chapter. A security interest under this chapter may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this chapter in ordinary building materials incorporated into an improvement on land.
(b) Security interest in fixtures under real property law. This chapter does not prevent creation of an encumbrance upon fixtures under real property law.
(c) General rule: subordination of security interest in fixtures. In cases not governed by subsections (d) through (h), a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.
(d) Fixtures purchase-money priority. Except as otherwise provided in subsection (h), a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and:
1. (1) the security interest is a purchase-money security interest;
2. (2) the interest of the encumbrancer or owner arises before the goods become fixtures; and
3. (3) the security interest is perfected by a fixture filing before the goods become fixtures or within twenty (20) days thereafter.
(e) Priority of security interest in fixtures over interests in real property. A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:
1. (1) the debtor has an interest of record in the real property or is in possession of the real property and the security interest:
  1. (A) is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; and
  2. (B) has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;
2. (2) before the goods become fixtures, the security interest is perfected by any method permitted by this chapter and the fixtures are readily removable:
  1. (A) factory or office machines;
  2. (B) equipment that is not primarily used or leased for use in the operation of the real property; or
  3. (C) replacements of domestic appliances that are consumer goods;
3. (3) the conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this chapter; or
4. (4) the security interest is:
  1. (A) created in a manufactured home in a manufactured-home transaction; and
  2. (B) perfected pursuant to a statute described in § 47-9-311(a)(2).
(f) Priority based on consent, disclaimer, or right to remove. A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if:
1. (1) the encumbrancer or owner has, in an authenticated record, consented to the security interest or disclaimed an interest in the goods as fixtures; or
2. (2) the debtor has a right to remove the goods as against the encumbrancer or owner.
(g) Continuation of paragraph (f)(2) priority. The priority of the security interest under paragraph (f)(2) continues for a reasonable time if the debtor's right to remove the goods as against the encumbrancer or owner terminates.
(h) Priority of construction mortgage. A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates. Except as otherwise provided in subsections (e) and (f), a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.
(i) Priority of security interest in crops. Except for the liens granted to landlords and laborers by title 66, a perfected security interest in crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property.

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47-9-109(d)(11)(B)

§ 47-9-335. Accessions.

(a) Creation of security interest in accession. A security interest may be created in an accession and continues in collateral that becomes an accession.
(b) Perfection of security interest. If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.
(c) Priority of security interest. Except as otherwise provided in subsection (d), the other provisions of this part determine the priority of a security interest in an accession.
(d) Compliance with certificate-of-title statute. A security interest in an accession is subordinate to a security interest in the whole which is perfected by compliance with the requirements of a certificate-of-title statute under § 47-9-311(b).
(e) Removal of accession after default. After default, subject to Part 6, a secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole.
(f) Reimbursement following removal. A secured party that removes an accession from other goods under subsection (e) shall promptly reimburse any holder of a security interest or other lien on, or owner of, the whole or of the other goods, other than the debtor, for the cost of repair of any physical injury to the whole or the other goods. The secured party need not reimburse the holder or owner for any diminution in value of the whole or the other goods caused by the absence of the accession removed or by any necessity for replacing it. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.

§ 47-9-336. Commingled goods.

(a) “Commingled goods”. In this section, “commingled goods” means goods that are physically united with other goods in such a manner that their identity is lost in a product or mass.
(b) No security interest in commingled goods as such. A security interest does not exist in commingled goods as such. However, a security interest may attach to a product or mass that results when goods become commingled goods.
(c) Attachment of security interest to product or mass. If collateral becomes commingled goods, a security interest attaches to the product or mass.
(d) Perfection of security interest. If a security interest in collateral is perfected before the collateral becomes commingled goods, the security interest that attaches to the product or mass under subsection (c) is perfected.
(e) Priority of security interest. Except as otherwise provided in subsection (f), the other provisions of this part determine the priority of a security interest that attaches to the product or mass under subsection (c).
(f) Conflicting security interests in product or mass. If more than one (1) security interest attaches to the product or mass under subsection (c), the following rules determine priority:
1. (1) A security interest that is perfected under subsection (d) has priority over a security interest that is unperfected at the time the collateral becomes commingled goods.
2. (2) If more than one (1) security interest is perfected under subsection (d), the security interests rank equally in proportion to the value of the collateral at the time it became commingled goods.

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§ 47-9-337. Priority of security interests in goods covered by certificate of title.

If, while a security interest in goods is perfected by any method under the law of another jurisdiction, this state issues a certificate of title that does not show that the goods are subject to the security interest or contain a statement that they may be subject to security interests not shown on the certificate:
1. (1) a buyer of the goods, other than a person in the business of selling goods of that kind, takes free of the security interest if the buyer gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest; and
2. (2) the security interest is subordinate to a conflicting security interest in the goods that attaches, and is perfected under § 47-9-311(b), after issuance of the certificate and without the conflicting secured party's knowledge of the security interest.

§ 47-9-338. Priority of security interest or agricultural lien perfected by filed financing statement providing certain incorrect information.

If a security interest or agricultural lien is perfected by a filed financing statement providing information described in § 47-9-516(b)(5) which is incorrect at the time the financing statement is filed:
1. (1) the security interest or agricultural lien is subordinate to a conflicting perfected security interest in the collateral to the extent that the holder of the conflicting security interest gives value in reasonable reliance upon the incorrect information; and
2. (2) a purchaser, other than a secured party, of the collateral takes free of the security interest or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the purchaser gives value and, in the case of tangible chattel paper, documents, goods, instruments, or a security certificate, receives delivery of the collateral.

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47-9-520(c)

§ 47-9-339. Priority subject to subordination.

This chapter does not preclude subordination by agreement by a person entitled to priority.

4. Rights of Bank

§ 47-9-340. Effectiveness of right of recoupment or set-off against deposit account.

(a) Exercise of recoupment or set-off. Except as otherwise provided in subsection (c), a bank with which a deposit account is maintained may exercise any right of recoupment or set-off against a secured party that holds a security interest in the deposit account.
(b) Recoupment or set-off not affected by security interest. Except as otherwise provided in subsection (c), the application of this chapter to a security interest in a deposit account does not affect a right of recoupment or set-off of the secured party as to a deposit account maintained with the secured party.
(c) When set-off ineffective. The exercise by a bank of a set-off against a deposit account is ineffective against a secured party that holds a security interest in the deposit account which is perfected by control under § 47-9-104(a)(3), if the set-off is based on a claim against the debtor.
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47-9-109(d)(10)(A)

§ 47-9-341. Bank's rights and duties with respect to deposit account.

Except as otherwise provided in § 47-9-340(c), and unless the bank otherwise agrees in an authenticated record, a bank's rights and duties with respect to a deposit account maintained with the bank are not terminated, suspended, or modified by:
1. (1) the creation, attachment, or perfection of a security interest in the deposit account;
2. (2) the bank's knowledge of the security interest; or
3. (3) the bank's receipt of instructions from the secured party.

§ 47-9-342. Bank's right to refuse to enter into or disclose existence of control agreement.

This chapter does not require a bank to enter into an agreement of the kind described in § 47-9-104(a)(2), even if its customer so requests or directs. A bank that has entered into such an agreement is not required to confirm the existence of the agreement to another person unless requested to do so by its customer.

§ 47-9-343. Security interest in favor of interest owners to secure obligations of the first purchaser of oil and gas production to pay the purchase price.

(a) As used in this section, unless the context otherwise requires:
1. (1) “First purchaser” means the first person who purchases oil or gas production from an operator or interest owner after the production is severed, or an operator that receives production proceeds from a third-party purchaser who acts in good faith under a division order or other agreement authenticated by the operator under which the operator collects proceeds of production on behalf of other interest owners. To the extent the operator receives proceeds attributable to the interest of other interest owners from a third-party purchaser who acts in good faith under a division order or other agreement authenticated by such operator, the operator is considered to be the first purchaser of the production for all purposes under this section, notwithstanding the characterization of other persons as first purchasers under other laws or regulations. To the extent the operator has not received from the third-party purchaser proceeds attributable to the operator's interest and the interest of other interest owners, the operator is not considered the first purchaser for the purposes of this section and is entitled to all rights and benefits under this section. Nothing in this section impairs or affects any rights otherwise held by a royalty owner to take its share of oil in kind or to receive payment directly from a third-party purchaser for the royalty owner's share of oil production, with or without a previously made agreement;
2. (2) “Interest owner” means a person owning an entire or fractional interest, of any kind or nature, in oil or gas production at the time of severance, or a person who has an express, implied, or constructive right to receive a monetary payment determined by the value of oil or gas production or by the amount of production;
3. (3) “Oil and gas production” means any oil, natural gas, condensate of either, natural gas liquids, other gaseous, liquid, or dissolved hydrocarbons, sulfur, or helium, or other substance produced as a by-product or adjunct to their production, or any combination of these, that is severed, extracted, or produced from the ground within the jurisdiction of this state. Any such substance, including recoverable or recovered natural gas liquids, that is transported to or in a natural gas pipeline or natural gas gathering system, or otherwise transported or sold for use as natural gas, or is transported or sold for the extraction of helium or natural gas liquids, is “gas production.” Any such substance that is transported or sold to persons and for purposes not included in the natural gas definition is “oil production;” and
4. (4) “Operator” means a person engaged in the business of severing oil or gas production from the ground, whether for the person alone, only for other persons, or for the person and others.
(b) This section provides a security interest in favor of interest owners, as secured parties, to secure the obligations of the first purchaser of oil and gas production, as debtor, to pay the purchase price. An authenticated record giving the interest owner a right operates as a security agreement created under this chapter. The act of the first purchaser in signing an agreement to purchase oil or gas production, in issuing a division order, or in making any other voluntary communication to the interest owner or any governmental agency recognizing the interest owner's right operates as an authentication of a security agreement in accordance with § 47-9-203(b) for purposes of this chapter.
(c) The security interest provided by this section is perfected automatically without the filing of a financing statement. If the interest of the secured party is evidenced by a deed, mineral deed, reservation in either, oil or gas lease, assignment, or any other such record recorded in the real property records of a register of deeds, that record is effective as a filed financing statement for purposes of this chapter, but no fee is required, except a fee that is otherwise required by the register of deeds, and there is no requirement of refiling every five (5) years to maintain effectiveness of the filing.
(d) The security interest exists in oil and gas production, and also in the identifiable proceeds of that production owned by, received by, or due to the first purchaser:
1. (1) For an unlimited time, if:
  1. (A) The proceeds are oil or gas production, inventory of raw, refined, or manufactured oil or gas production, or rights to or products of any of those, although the sale of those proceeds by a first purchaser to a buyer in the ordinary course of business, as provided in subsection (f), cuts off the security interest in those proceeds;
  2. (B) The proceeds are accounts, chattel paper, instruments, documents, or payment intangibles; or
  3. (C) The proceeds are cash proceeds, as defined in § 47-9-102; and
2. (2) For the length of time provided in § 47-9-315 for all other proceeds.
(e) This section creates a lien that secures the payment of all taxes that are or should be withheld or paid by the first purchaser, and a lien that secures the rights of any person who would be entitled to a security interest under subsection (b), except for lack of any adoption of a security agreement by the first purchaser, or for a lack of possession or record required by § 47-9-203 for the security interest to be enforceable.
(f) The security interests and liens created by this section have priority over any purchaser who is not a buyer in the ordinary course of the first purchaser's business, but are cut off by the sale to a buyer from the first purchaser who is in the ordinary course of the first purchaser's business under § 47-9-320(a). In either case, whether or not the buyer from the first purchaser is in ordinary course, a security interest will continue in the proceeds of the sale by the first purchaser, as provided in subsection (d).
(g) The security interests and all liens created by this section have the following priorities over other security interests created by this chapter:
1. (1) A security interest created by this section is treated as a purchase-money security interest for purposes of determining its relative priority under § 47-9-324 over other security interests not provided for by this section. A holder of a security interest created under this section is not required to give the written notice every five (5) years as provided in § 47-9-324(b)(3) to have purchase-money priority over a security interest with a prior financing statement covering inventory; and
2. (2) A statutory lien is subordinate to all other perfected security interests created by this chapter, and has priority over unperfected security interests created by this chapter and the lien creditors, buyers, and transferees mentioned in § 47-9-317.
(h) The security interests and liens created by this section have the following priorities among themselves:
1. (1) If a record effective as a filed financing statement under subsection (c) exists, the security interests perfected by that record have priority over a security interest automatically perfected without filing under subsection (c). If several security interests perfected by records exist, they have the same priority among themselves as established by law for interests in oil and gas in place. If property law establishes no priority among them, they share priority pro rata;
2. (2) A security interest perfected automatically without filing under subsection (c) has priority over a lien created under subsection (e); and
3. (3) A nontax lien under subsection (e) has priority over a lien created under subsection (e) that secures the payment of taxes.
(i) The priorities for statutory liens mentioned in § 47-9-333 do not apply to any security interest or statutory lien created by this section, but if a pipeline common carrier has a statutory or tariff lien that is effective and enforceable against a trustee in bankruptcy and not invalidated by the federal Tax Lien Act, that lien has priority over the security interests and statutory liens created by this section.
(j) If oil or gas production in which there are security interests or statutory liens created by this section is commingled with inventory or other production, the rules of § 47-9-336 apply.
(k) A security interest or statutory lien created by this section remains effective against the debtor and perfected against the debtor's creditors, even if assigned, regardless of whether the assignment is perfected against the assignor's creditors. If a deed, mineral deed, assignment of oil and gas lease, or other such record evidencing the assignment is filed in the real property records of the county, the filing will have the same effect as filing an amended financing statement under § 47-9-514.
(l) This section does not impair an operator's right to set off or withhold funds from other interest owners as security for, or in satisfaction of, any debt or security interest. In case of a dispute between an operator and another interest owner, a good faith tender of funds by anyone to the person whom the operator and other interest owner agree on, to a person who otherwise shows that person to be the one entitled to the funds, or to a court of competent jurisdiction in the event of litigation or bankruptcy, operates as a tender of the funds to both.
(m) A first purchaser who acts in good faith may terminate an interest owner's security interest or statutory lien under this section by paying, or by making and keeping open a tender of, the amount the first purchaser believes to be due to the interest owner:
1. (1) If the interest owner's rights are to oil or gas production or its proceeds, either to the operator alone, in which event the operator is considered the first purchaser, or to some combination of the interest owner and the operator, as the first purchaser chooses;
2. (2) Whatever the nature of the production to which the interest owner has rights, to the person whom the interest owner agreed to or acquiesced in; or
3. (3) To a court of competent jurisdiction in the event of litigation or bankruptcy.
(n) A person who buys from a first purchaser can ensure that the person buys free and clear of an interest owner's security interest or statutory lien under this section:
1. (1) By buying in the ordinary course of the first purchaser's business from the first purchaser under § 47-9-320(a);
2. (2) By obtaining the interest owner's consent to the sale under § 47-9-315(a)(1);
3. (3) By ensuring that the first purchaser has paid the interest owner, or, provided that gas production is involved, the interest owner has so agreed or acquiesced, by ensuring that the first purchaser has paid the interest owner's operator; or
4. (4) By ensuring that the person or the first purchaser or some other person has withheld funds sufficient to pay amounts in dispute and has maintained a tender of those funds to whoever shows that person to be the person entitled.
(o) If a tender under subdivision (n)(4) that is valid thereafter fails, the security interest and liens governed by this section remain effective.
(p) In addition to the usual remedy of sequestration available to secured parties, the holders of security interests and liens created by this section have available to them, to the extent constitutionally permitted, the remedies of replevin, attachment, and garnishment to assist them in realizing upon their rights.
(q) The rights of any person claiming under a security interest or lien created by this section are governed by the other provisions of this chapter, except to the extent that this section necessarily displaces those provisions. This section does not invalidate or otherwise affect the interests of any person in any real property before severance of any oil or gas production.

Part 4 Rights of Third Parties

§ 47-9-401. Alienability of debtor's rights.

(a) Other law governs alienability; exceptions. Except as otherwise provided in subsection (b) and § 47-9-406, § 47-9-407, § 47-9-408, and § 47-9-409, whether a debtor's rights in collateral may be voluntarily or involuntarily transferred is governed by law other than this chapter.
(b) Agreement does not prevent transfer. An agreement between the debtor and secured party which prohibits a transfer of the debtor's rights in collateral or makes the transfer a default does not prevent the transfer from taking effect.

§ 47-9-402. Secured party not obligated on contract of debtor or in tort.

The existence of a security interest, agricultural lien, or authority given to a debtor to dispose of or use collateral, without more, does not subject a secured party to liability in contract or tort for the debtor's acts or omissions.

§ 47-9-403. Agreement not to assert defenses against assignee.

(a) “Value”. In this section, “value” has the meaning provided in § 47-3-303(a).
(b) Agreement not to assert claim or defense. Except as otherwise provided in this section, an agreement between an account debtor and an assignor not to assert against an assignee any claim or defense that the account debtor may have against the assignor is enforceable by an assignee that takes an assignment:
1. (1) for value;
2. (2) in good faith;
3. (3) without notice of a claim of a property or possessory right to the property assigned; and
4. (4) without notice of a defense or claim in recoupment of the type that may be asserted against a person entitled to enforce a negotiable instrument under § 47-3-305(a).
(c) When subsection (b) not applicable. Subsection (b) does not apply to defenses of a type that may be asserted against a holder in due course of a negotiable instrument under § 47-3-305(b).
(d) Omission of required statement in consumer transaction. In a consumer transaction, if a record evidences the account debtor's obligation, law other than this chapter requires that the record include a statement to the effect that the rights of an assignee are subject to claims or defenses that the account debtor could assert against the original obligee, and the record does not include such a statement:
1. (1) the record has the same effect as if the record included such a statement; and
2. (2) the account debtor may assert against an assignee those claims and defenses that would have been available if the record included such a statement.
(e) Rule for individual under other law. This section is subject to law other than this chapter 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.
(f) Other law not displaced. Except as otherwise provided in subsection (d), this section does not displace law other than this chapter which gives effect to an agreement by an account debtor not to assert a claim or defense against an assignee.

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47-9-706(b)(1)

§ 47-9-404. Rights acquired by assignee — Claims and defenses against assignee.

(a) Assignee's rights subject to terms, claims, and defenses; exceptions. Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) through (e), the rights of an assignee are subject to:
1. (1) all terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; and
2. (2) any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives a notification of the assignment authenticated by the assignor or the assignee.
(b) Account debtor's claim reduces amount owed to assignee. Subject to subsection (c) and except as otherwise provided in subsection (d), the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) only to reduce the amount the account debtor owes.
(c) Rule for individual under other law. This section is subject to law other than this chapter 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.
(d) Omission of required statement in consumer transaction. In a consumer transaction, if a record evidences the account debtor's obligation, law other than this chapter requires that the record include a statement to the effect that the account debtor's recovery against an assignee with respect to claims and defenses against the assignor may not exceed amounts paid by the account debtor under the record, and the record does not include such a statement, the extent to which a claim of an account debtor against the assignor may be asserted against an assignee is determined as if the record included such a statement.
(e) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.

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47-9-109(d)(10)(B)

§ 47-9-405. Modification of assigned contract.

(a) Effect of modification on assignee. A modification of or substitution for an assigned contract is effective against an assignee if made in good faith. The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that the modification or substitution is a breach of contract by the assignor. This subsection (a) is subject to subsections (b)-(d).
(b) Applicability of subsection (a). Subsection (a) applies to the extent that:
1. (1) the right to payment or a part thereof under an assigned contract has not been fully earned by performance; or
2. (2) the right to payment or a part thereof has been fully earned by performance and the account debtor has not received notification of the assignment under § 47-9-406(a).
(c) Rule for individual under other law. This section is subject to law other than this chapter 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.
(d) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.

§ 47-9-406. Discharge of account debtor — Notification of assignment — Identification and proof of assignment — Restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective.

(a) Discharge of account debtor; effect of notification. Subject to subsections (b) through (i), an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.
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- 47-9-209(b)
- 47-9-405(b)(2)
(b) When notification ineffective. Subject to subsection (h), notification is ineffective under subsection (a):
1. (1) If it does not reasonably identify the rights assigned;
2. (2) To the extent that an agreement between an account debtor and a 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 chapter; or
3. (3) At the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee, even if:
  1. (A) Only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee;
  2. (B) A portion has been assigned to another assignee; or
  3. (C) The account debtor knows that the assignment to that assignee is limited.
(c) Proof of assignment. Subject to subsection (h), if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor, even if the account debtor has received a notification under subsection (a).
(d) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (e) and §§ 47-2A-303 and 47-9-407, and subject to subsection (h), a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:
1. (1) Prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account, chattel paper, payment intangible, or promissory note; or
2. (2) Provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account, chattel paper, payment intangible, or promissory note.
(e) Inapplicability of subsection (d) to certain sales. Subsection (d) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under § 47-9-610 or an acceptance of collateral under § 47-9-620.
(f) Legal restrictions on assignment generally ineffective. Except as otherwise provided in §§ 47-2A-303 and 47-9-407 and subject to subsections (h) and (i), a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:
1. (1) Prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in the account or chattel paper; or
2. (2) Provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account or chattel paper.
(g) Subdivision (b)(3) not waivable. Subject to subsection (h), an account debtor may not waive or vary its option under subdivision (b)(3).
(h) Rule for individual under other law. This section is subject to law other than this chapter 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.
(i) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.
(j) Section prevails over specified inconsistent law. This section prevails over any inconsistent provisions of an existing or future statute, rule, or regulation of this state unless the provision is contained in a statute of this state, refers expressly to this section and states that the provision prevails over this section.

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§ 47-9-407. Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest.

(a) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (b), a term in a lease agreement is ineffective to the extent that it:
1. (1) prohibits, restricts, or requires the consent of a party to the lease to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, an interest of a party under the lease contract or in the lessor's residual interest in the goods; or
2. (2) provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the lease.
(b) Effectiveness of certain terms. Except as otherwise provided in § 47-2A-303(7), a term described in subdivision (a)(2) is effective to the extent that there is:
1. (1) a transfer by the lessee of the lessee's right of possession or use of the goods in violation of the term; or
2. (2) a delegation of a material performance of either party to the lease contract in violation of the term.
(c) Security interest not material impairment. The creation, attachment, perfection, or enforcement of a security interest in the lessor's interest under the lease contract or the lessor's residual interest in the goods is not a transfer that materially impairs the lessee's prospect of obtaining return performance or materially changes the duty of or materially increases the burden or risk imposed on the lessee within the purview of § 47-2A-303(4) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the lessor.

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47-2A-303(2)
47-2A-303(4)
47-9-401(a)
47-9-406(d)
47-9-406(f)

§ 47-9-408. Restrictions on assignment of promissory notes, health-care-insurance receivables, and certain general intangibles ineffective.

(a) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (b), a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of a security interest in, the promissory note, health-care-insurance receivable, or general intangible, is ineffective to the extent that the term:
1. (1) Would impair the creation, attachment, or perfection of a security interest; or
2. (2) Provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.
(b) Applicability of subsection (a) to sales of certain rights to payment. Subsection (a) applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note, other than a sale pursuant to a disposition under § 47-9-610 or an acceptance of collateral under § 47-9-620.
(c) Legal restrictions on assignment generally ineffective. A rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health-care-insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:
1. (1) Would impair the creation, attachment, or perfection of a security interest; or
2. (2) Provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.
(d) Limitation on ineffectiveness under subsections (a) and (c). To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or general intangible or a rule of law, statute, or regulation described in subsection (c) would be effective under law other than this chapter but is ineffective under subsection (a) or (c), the creation, attachment, or perfection of a security interest in the promissory note, health-care-insurance receivable, or general intangible:
1. (1) Is not enforceable against the person obligated on the promissory note or the account debtor;
2. (2) Does not impose a duty or obligation on the person obligated on the promissory note or the account debtor;
3. (3) Does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party;
4. (4) Does not entitle the secured party to use or assign the debtor's rights under the promissory note, health-care-insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health-care-insurance receivable, or general intangible;
5. (5) Does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor; and
6. (6) Does not entitle the secured party to enforce the security interest in the promissory note, health-care-insurance receivable, or general intangible.
(e) Section prevails over specified inconsistent law. This section prevails over any inconsistent provisions of an existing or future statute, rule or regulation of this state unless the provision is contained in a statute of this state, refers expressly to this section and states that the provision prevails over this section.

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47-9-401(a)

§ 47-9-409. Restrictions on assignment of letter-of-credit rights ineffective.

(a) Term or law restricting assignment generally ineffective. A term in a letter of credit or a rule of law, statute, regulation, custom, or practice applicable to the letter of credit which prohibits, restricts, or requires the consent of an applicant, issuer, or nominated person to a beneficiary's assignment of or creation of a security interest in a letter-of-credit right is ineffective to the extent that the term or rule of law, statute, regulation, custom, or practice:
1. (1) would impair the creation, attachment, or perfection of a security interest in the letter-of-credit right; or
2. (2) provides that the assignment or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the letter-of-credit right.
(b) Limitation on ineffectiveness under subsection (a). To the extent that a term in a letter of credit is ineffective under subsection (a) but would be effective under law other than this chapter or a custom or practice applicable to the letter of credit, to the transfer of a right to draw or otherwise demand performance under the letter-of-credit, or to the assignment of a right to proceeds of the letter-of-credit, the creation, attachment, or perfection of a security interest in the letter-of-credit right:
1. (1) is not enforceable against the applicant, issuer, nominated person, or transferee beneficiary;
2. (2) imposes no duties or obligations on the applicant, issuer, nominated person, or transferee beneficiary; and
3. (3) does not require the applicant, issuer, nominated person, or transferee beneficiary to recognize the security interest, pay or render performance to the secured party, or accept payment or other performance from the secured party.

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47-9-401(a)

Part 5 Filing

1. Filing Office; Contents and Effectiveness of Financing Statement

§ 47-9-501. Filing office.

(a) Filing offices. Except as otherwise provided in subsection (b), if the local law of this state governs perfection of a security interest or agricultural lien, the office in which to file a financing statement to perfect the security interest or agricultural lien is:
1. (1) the office designated for the filing or recording of a record of a mortgage on the related real property, if:
  1. (A) the collateral is as-extracted collateral or timber to be cut; or
  2. (B) the financing statement is filed as a fixture filing and the collateral is goods that are or are to become fixtures; or
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2. (2) the office of the secretary of state, in all other cases, including a case in which the collateral is goods that are or are to become fixtures and the financing statement is not filed as a fixture filing.
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(b) Filing office for transmitting utilities. The office in which to file a financing statement to perfect a security interest in collateral, including fixtures, of a transmitting utility is the office of the secretary of state. The financing statement also constitutes a fixture filing as to the collateral indicated in the financing statement which is or is to become fixtures.
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- 47-9-502(b)

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§ 47-9-502. Contents of financing statement — Record of mortgage as financing statement — Time of filing financing statement.

(a) Sufficiency of financing statement. Subject to subsection (b) a financing statement is sufficient only if it:
1. (1) Provides the name of the debtor;
2. (2) Provides the name of the secured party or a representative of the secured party; and
3. (3) Indicates the collateral covered by the financing statement.
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- 47-2A-309(1)(b)
- 47-9-102(a)(40)
- 47-9-520(c)
(b) Real-property-related financing statements. Except as otherwise provided in § 47-9-501(b), to be sufficient, a financing statement that covers as-extracted collateral or timber to be cut, or which is filed as a fixture filing and covers goods that are or are to become fixtures, must satisfy subsection (a) and also:
1. (1) Indicate that it covers this type of collateral;
2. (2) Indicate that it is to be filed in the real property records;
3. (3) Provide a description of the real property to which the collateral is related; and
4. (4) If the debtor does not have an interest of record in the real property, provide the name of a record owner.
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- 47-9-512(a)(2)
(c) Record of mortgage as financing statement. A record of a mortgage is effective, from the date of recording, as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut only if:
1. (1) The record indicates the goods or accounts that it covers;
2. (2) The goods are or are to become fixtures related to the real property described in the record or the collateral is related to the real property described in the record and is as-extracted collateral or timber to be cut;
3. (3) The record satisfies the requirements for a financing statement in this section, but:
  1. (A) The record need not indicate that it is to be filed in the real property records; and
  2. (B) The record sufficiently provides the name of a debtor who is an individual if it provides the individual name of the debtor or the surname and first personal name of the debtor, even if the debtor is an individual to whom § 47-9-503(a)(4) applies; and
4. (4) The record is duly recorded.
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(d) Filing before security agreement or attachment. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches.

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§ 47-9-503. Name of debtor and secured party

(a) Sufficiency of debtor's name. A financing statement sufficiently provides the name of the debtor:
1. (1) Except as otherwise provided in subdivision (a)(3), if the debtor is a registered organization or the collateral is held in a trust that is a registered organization, only if the financing statement provides the name that is stated to be the registered organization's name on the public organic record most recently filed with or issued or enacted by the registered organization's jurisdiction of organization which purports to state, amend, or restate the registered organization's name;
2. (2) Subject to subsection (f), if the collateral is being administered by the personal representative of a decedent, only if the financing statement provides, as the name of the debtor, the name of the decedent and, in a separate part of the financing statement, indicates that the collateral is being administered by a personal representative;
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  - 47-9-805(e)
3. (3) If the collateral is held in a trust that is not a registered organization, only if the financing statement:
  1. (A) Provides, as the name of the debtor:
    1. (i) If the organic record of the trust specifies a name for the trust, the name specified; or
    2. (ii) If the organic record of the trust does not specify a name for the trust, the name of the settlor or testator; and
  2. (B) In a separate part of the financing statement:
    1. (i) If the name is provided in accordance with subdivision (a)(3)(A)(i), indicates that the collateral is held in a trust; or
    2. (ii) If the name is provided in accordance with subdivision (a)(3)(A)(ii), provides additional information sufficient to distinguish the trust from other trusts having one (1) or more of the same settlors or the same testator and indicates that the collateral is held in a trust, unless the additional information so indicates;
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  - 47-9-805(e)
4. (4) Subject to subsection (g), if the debtor is an individual to whom this state has issued a driver license or a photo identification license (pursuant to § 55-50-336) that has not expired, only if the financing statement provides the name of the individual which is indicated on the driver license or photo identification license;
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5. (5) If the debtor is an individual to whom subdivision (a)(4) does not apply, only if the financing statement provides the individual name of the debtor or the surname and first personal name of the debtor; and
6. (6) In other cases:
  1. (A) If the debtor has a name, only if the financing statement provides the organizational name of the debtor; and
  2. (B) If the debtor does not have a name, only if it provides the names of the partners, members, associates, or other persons comprising the debtor, in a manner that each name provided would be sufficient if the person named were the debtor.
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(b) Additional debtor-related information. A financing statement that provides the name of the debtor in accordance with subsection (a) is not rendered ineffective by the absence of:
1. (1) A trade name or other name of the debtor; or
2. (2) Unless required under subdivision (a)(6)(B), names of partners, members, associates, or other persons comprising the debtor.
(c) Debtor's trade name insufficient. A financing statement that provides only the debtor's trade name does not sufficiently provide the name of the debtor.
(d) Representative capacity. Failure to indicate the representative capacity of a secured party or representative of a secured party does not affect the sufficiency of a financing statement.
(e) Multiple debtors and secured parties. A financing statement may provide the name of more than one (1) debtor and the name of more than one (1) secured party.
(f) Name of decedent. The name of the decedent indicated on the order appointing the personal representative of the decedent issued by the court having jurisdiction over the collateral is sufficient as the “name of the decedent” under subsection (a)(2).
(g) Multiple driver licenses or photo identification licenses. If this state has issued to an individual more than one (1) driver license or photo identification license of a kind described in subdivision (a)(4), the one that was issued most recently is the one to which subdivision (a)(4) refers.
(h) Definition.
1. In this section, the “name of the settlor or testator” means:
  1. (1) If the settlor is a registered organization, the name that is stated to be the settlor's name on the public organic record most recently filed with or issued or enacted by the settlor's jurisdiction of organization which purports to state, amend, or restate the settlor's name; or
  2. (2) In other cases, the name of the settlor or testator indicated in the trust's organic record.

§ 47-9-504. Indication of collateral.

A financing statement sufficiently indicates the collateral that it covers if the financing statement provides:
1. (1) a description of the collateral pursuant to § 47-9-108; or
2. (2) an indication that the financing statement covers all assets or all personal property.

§ 47-9-505. Filing and compliance with other statutes and treaties for consignments, leases, other bailments, and other transactions.

(a) Use of terms other than “debtor” and “secured party”. A consignor, lessor, or other bailor of goods, a licensor, or a buyer of a payment intangible or promissory note may file a financing statement, or may comply with a statute or treaty described in § 47-9-311(a), using the terms “consignor”, “consignee”, “lessor”, “lessee”, “bailor”, “bailee”, “licensor”, “licensee”, “owner”, “registered owner”, “buyer”, “seller”, or words of similar import, instead of the terms “secured party” and “debtor”.
(b) Effect of financing statement under subsection (a). This part applies to the filing of a financing statement under subsection (a) and, as appropriate, to compliance that is equivalent to filing a financing statement under § 47-9-311(b), but the filing or compliance is not of itself a factor in determining whether the collateral secures an obligation. If it is determined for another reason that the collateral secures an obligation, a security interest held by the consignor, lessor, bailor, licensor, owner, or buyer which attaches to the collateral is perfected by the filing or compliance.

§ 47-9-506. Effect of errors or omissions.

(a) Minor errors and omissions. A financing statement substantially satisfying the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.
(b) Financing statement seriously misleading. Except as otherwise provided in subsection (c), a financing statement that fails sufficiently to provide the name of the debtor in accordance with § 47-9-503(a) is seriously misleading.
(c) Financing statement not seriously misleading. If a search of the records of the filing office under the debtor's correct name, using the filing office's standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with § 47-9-503(a), the name provided does not make the financing statement seriously misleading.
(d) “Debtor's correct name”. For purposes of § 47-9-508(b), the “debtor's correct name” in subsection (c) means the correct name of the new debtor.

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§ 47-9-507. Effect of certain events of effectiveness of financing statement.

(a) Disposition. A filed financing statement remains effective with respect to collateral that is sold, exchanged, leased, licensed, or otherwise disposed of and in which a security interest or agricultural lien continues, even if the secured party knows of or consents to the disposition.
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- 47-9-508(c)
(b) Information becoming seriously misleading. Except as otherwise provided in subsection (c) and § 47-9-508, a financing statement is not rendered ineffective if, after the financing statement is filed, the information provided in the financing statement becomes seriously misleading under § 47-9-506.
(c) Change in debtor's name. If the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under § 47-9-503(a) so that the financing statement becomes seriously misleading under § 47-9-506:
1. (1) The financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four (4) months after, the filed financing statement becomes seriously misleading; and
2. (2) The financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four (4) months after the filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four (4) months after the financing statement became seriously misleading.

§ 47-9-508. Effectiveness of financing statement if new debtor becomes bound by security agreement.

(a) Financing statement naming original debtor. Except as otherwise provided in this section, a filed financing statement naming an original debtor is effective to perfect a security interest in collateral in which a new debtor has or acquires rights to the extent that the financing statement would have been effective had the original debtor acquired rights in the collateral.
(b) Financing statement becoming seriously misleading. If the difference between the name of the original debtor and that of the new debtor causes a filed financing statement that is effective under subsection (a) to be seriously misleading under § 47-9-506:
1. (1) the financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four (4) months after, the new debtor becomes bound under § 47-9-203(d); and
2. (2) the financing statement is not effective to perfect a security interest in collateral acquired by the new debtor more than four (4) months after the new debtor becomes bound under § 47-9-203(d) unless an initial financing statement providing the name of the new debtor is filed before the expiration of that time.
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- 47-9-506(d)
(c) When section not applicable. This section does not apply to collateral as to which a filed financing statement remains effective against the new debtor under § 47-9-507(a).

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§ 47-9-509. Persons entitled to file a record.

(a) Person entitled to file record. A person may file an initial financing statement, amendment that adds collateral covered by a financing statement, or amendment that adds a debtor to a financing statement only if:
1. (1) the debtor authorizes the filing in an authenticated record or pursuant to subsection (b) or (c); or
2. (2) the person holds an agricultural lien that has become effective at the time of filing and the financing statement covers only collateral in which the person holds an agricultural lien.
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- 47-9-625(e)(3)
(b) Security agreement as authorization. By authenticating or becoming bound as debtor by a security agreement, a debtor or new debtor authorizes the filing of an initial financing statement, and an amendment, covering:
1. (1) the collateral described in the security agreement; and
2. (2) property that becomes collateral under § 47-9-315(a)(2), whether or not the security agreement expressly covers proceeds.
(c) Acquisition of collateral as authorization. By acquiring collateral in which a security interest or agricultural lien continues under § 47-9-315(a)(1), a debtor authorizes the filing of an initial financing statement, and an amendment, covering the collateral and property that becomes collateral under § 47-9-315(a)(2).
(d) Person entitled to file certain amendments. A person may file an amendment other than an amendment that adds collateral covered by a financing statement or an amendment that adds a debtor to a financing statement only if:
1. (1) the secured party of record authorizes the filing; or
2. (2) the amendment is a termination statement for a financing statement as to which the secured party of record has failed to file or send a termination statement as required by § 47-9-513(a) or (c), the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed.
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- 47-9-518(c)
- 47-9-518(d)(3)
(e) Multiple secured parties of record. If there is more than one (1) secured party of record for a financing statement, each secured party of record may authorize the filing of an amendment under subsection (d).

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§ 47-9-510. Effectiveness of filed record.

(a) Filed record effective if authorized. A filed record is effective only to the extent that it was filed by a person that may file it under § 47-9-509.
(b) Authorization by one (1) secured party of record. A record authorized by one secured party of record does not affect the financing statement with respect to another secured party of record.
(c) Continuation statement not timely filed. A continuation statement that is not filed within the six-month period prescribed by § 47-9-515(d) is ineffective.

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§ 47-9-511. Secured party of record.

(a) Secured party of record. A secured party of record with respect to a financing statement is a person whose name is provided as the name of the secured party or a representative of the secured party in an initial financing statement that has been filed. If an initial financing statement is filed under § 47-9-514(a), the assignee named in the initial financing statement is the secured party of record with respect to the financing statement.
(b) Amendment naming secured party of record. If an amendment of a financing statement which provides the name of a person as a secured party or a representative of a secured party is filed, the person named in the amendment is a secured party of record. If an amendment is filed under § 47-9-514(b), the assignee named in the amendment is a secured party of record.
(c) Amendment deleting secured party of record. A person remains a secured party of record until the filing of an amendment of the financing statement which deletes the person.

§ 47-9-512. Amendment of financing statement.

(a) Amendment of information in financing statement. Subject to § 47-9-509, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or, subject to subsection (e), otherwise amend the information provided in a financing statement by filing an amendment that:
1. (1) identifies, by its file number, the initial financing statement to which the amendment relates; and
2. (2) if the amendment relates to an initial financing statement filed or recorded in a filing office described in § 47-9-501(a)(1), provides the information specified in § 47-9-502(b).
(b) Period of effectiveness not affected. Except as otherwise provided in § 47-9-515, the filing of an amendment does not extend the period of effectiveness of the financing statement.
(c) Effectiveness of amendment adding collateral. A financing statement that is amended by an amendment that adds collateral is effective as to the added collateral only from the date of the filing of the amendment.
(d) Effectiveness of amendment adding debtor. A financing statement that is amended by an amendment that adds a debtor is effective as to the added debtor only from the date of the filing of the amendment.
(e) Certain amendments ineffective. An amendment is ineffective to the extent it:
1. (1) purports to delete all debtors and fails to provide the name of a debtor to be covered by the financing statement; or
2. (2) purports to delete all secured parties of record and fails to provide the name of a new secured party of record.

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§ 47-9-513. Termination statement.

(a) Consumer goods. A secured party shall cause the secured party of record for a financing statement to file a termination statement for the financing statement if the financing statement covers consumer goods and:
1. (1) there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; or
2. (2) the debtor did not authorize the filing of the initial financing statement.
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- 47-9-509(d)(2)
- 47-9-625(e)(4)(A)
(b) Time for compliance with subsection (a). To comply with subsection (a), a secured party shall cause the secured party of record to file the termination statement:
1. (1) within one (1) month after there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; or
2. (2) if earlier, within twenty (20) days after the secured party receives an authenticated demand from a debtor.
(c) Other collateral. In cases not governed by subsection (a), within 20 days after a secured party receives an authenticated demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if:
1. (1) except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that are the subject of a consignment, there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value;
2. (2) the financing statement covers accounts or chattel paper that has been sold but as to which the account debtor or other person obligated has discharged its obligation;
3. (3) the financing statement covers goods that were the subject of a consignment to the debtor but are not in the debtor's possession; or
4. (4) the debtor did not authorize the filing of the initial financing statement.
(d) Effect of filing termination statement.
1. (1) Except as otherwise provided in § 47-9-510, upon the filing of a termination statement with the filing office, the financing statement to which the termination statement relates ceases to be effective.
2. (2) Except as otherwise provided in § 47-9-510, for purposes of Sections 47-9-519(g), 47-9-522(a), and 47-9-523(c), the filing with the filing office of a termination statement relating to a financing statement that indicates that the debtor is a transmitting utility also causes the effectiveness of the financing statement to lapse.
(e)
1. (1) As used in this subsection (e), “public official” means:
  1. (A) An individual who is a current or retired elected or appointed government official, including a state, county, metropolitan, or municipal official;
  2. (B) An individual who is the head of a division or major unit or department within an agency or office of the executive, judicial, or legislative branch of state, county, metropolitan, or municipal government, regardless of the title of the position, and who, as a substantial part of the individual's duties, provides meaningful input on the development of policy goals or the implementation of policy;
  3. (C) A high-ranking employee within the executive, judicial, or legislative branch of state, county, metropolitan, or municipal government who has a primary responsibility for one (1) or more of the following functions:
    1. (i) Public information and legislative affairs;
    2. (ii) Fiscal, budget, and audit matters;
    3. (iii) Legal, security, or internal affairs;
    4. (iv) Information technology systems; and
    5. (v) Human resources;
  4. (D) A first responder, as defined in § 29-34-203; or
  5. (E) A law enforcement officer, as defined in § 39-11-106.
2. (2)
  1. (A) A public official who is identified as a debtor in a filed financing statement may file a notarized affidavit, signed under penalty of perjury, which contains:
    1. (i) The Uniform Commercial Code financing statement file number of the financing statement;
    2. (ii) The affiant's mailing address;
    3. (iii) A statement that the affiant is a public official; and
    4. (iv) A statement that the affiant believes that the filed record identifying the affiant as a debtor was filed without any reasonable basis or legal cause, and the affiant's factual basis for why the filed record lacks any reasonable basis or legal cause.
  2. (B) The secretary of state shall adopt a form of affidavit for use under subdivision (e)(2)(A).
3. (3) Once an affidavit is filed with the filing office pursuant to subdivision (e)(2)(A), the filing office shall indicate on the Uniform Commercial Code financing statement that the underlying financing statement is “Contested — Under Review.”
4. (4)
  1. (A) Within three (3) business days of receipt of an affidavit filed pursuant to subdivision (e)(2)(A), the filing office shall send a copy of the affidavit, by registered or certified mail, with return receipt requested, addressed to the secured party of record for the financing statement to which the affidavit relates.
  2. (B) The copy of the affidavit shall be deemed delivered upon:
    1. (i) Acceptance by the addressee;
    2. (ii) A showing that the addressee refused to accept delivery and it is so stated in the return receipt of the United States postal service; or
    3. (iii) The United States postal service returning the affidavit as undeliverable or unclaimed.
  3. (C) The refusal or failure of a secured party to accept delivery of the registered or certified mail, or the refusal or failure to sign the return receipt, shall not affect the validity of delivery of the affidavit, and a secured party who refuses or fails to accept delivery of such registered or certified mail shall be charged with knowledge of the contents of the affidavit.
  4. (D) Once the filing office receives the return receipt, notice of refusal or failure to sign the return receipt, or notice that the affidavit is undeliverable, the twenty (20) business days referenced in subdivision (e)(5) will commence.
5. (5)
  1. (A) Within twenty (20) business days of delivery of the affidavit to the secured party, a secured party who believes in good faith that the filed financing statement was filed with a reasonable basis or legal cause, may file with the filing office a petition for review by an administrative judge pursuant to the contested case procedures of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3.
  2. (B) A petition for review must set forth the factual basis showing that the filed record was filed with a reasonable basis or legal cause, and must be accompanied by a cost bond in the amount of two hundred dollars ($200), the form of which shall be determined through rule by the secretary of state. The cost bond required pursuant to this subdivision (e)(5)(B) does not apply to any financial institution that is insured by the federal deposit insurance corporation, insured by the national credit union administration, or regulated by the farm credit administration.
  3. (C) Within three (3) business days of receipt of the petition for review and cost bond by the filing office, the filing office shall forward the petition to the administrative procedures division of the office of the secretary of state, along with a request for a hearing.
  4. (D) Within ten (10) business days of receipt of the petition for review from the filing office, an administrative law judge shall notify the parties identified in the petition of the hearing date and location.
  5. (E) The venue for all hearings under this subsection (e) shall be Davidson County.
  6. (F) Should circumstances require such, the administrative law judge may permit all or part of a hearing to be conducted by telephone.
  7. (G) Nothing in this subsection (e) shall be construed as requiring the hearing to take place within the ten (10) business day period described in subdivision (e)(5)(D).
  8. (H) The administrative law judge shall make a determination as to whether the financing statement was filed with any reasonable basis or legal cause and shall issue an order that complies with § 4-5-314(c) within thirty (30) days of the close of the record of the proceedings.
  9. (I) Section 4-5-322 shall provide the exclusive method of review of the administrative law judge's order.
6. (6) If the filing office has not received a petition and cost bond from the secured party of record, within twenty (20) business days of delivery of the affidavit under subdivisions (e)(5)(A) and (B), the filing office shall void and remove from the public record the financing statement, along with all other documents associated with the financing statement, including the affidavit.
7. (7) If, following a contested case hearing of a petition for review filed by a secured party under subdivision (e)(5), an administrative law judge determines that there is reasonable basis or legal cause for the financing statement, the filing office shall remove the “Contested — Under Review” indication from the Uniform Commercial Code financing statement and the effectiveness of the financing statement will be reflected as the original date of filing.
8. (8) If, following a contested case hearing of a petition for review filed by a secured party under subdivision (e)(5), an administrative judge determines that the financing statement was filed without any reasonable basis or legal cause, the filing office shall void and remove from the public record the financing statement along with all other documents associated with the financing statement upon the administrative judge's order becoming effective and no longer subject to review pursuant to § 4-5-322.
9. (9) In a contested case hearing of a petition for review filed by a secured party to determine whether the financing statement was filed with any reasonable basis or legal cause, the prevailing party may recover costs and expenses, including reasonable attorneys' fees that are incurred in the review action.
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- 66-21-105(j)

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§ 47-9-514. Assignment of powers of secured party of record.

(a) Assignment reflected on initial financing statement. Except as otherwise provided in subsection (c), an initial financing statement may reflect an assignment of all of the secured party's power to authorize an amendment to the financing statement by providing the name and mailing address of the assignee as the name and address of the secured party.
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(b) Assignment of filed financing statement. Except as otherwise provided in subsection (c), a secured party of record may assign of record all or part of its power to authorize an amendment to a financing statement by filing in the filing office an amendment of the financing statement which:
1. (1) identifies, by its file number, the initial financing statement to which it relates;
2. (2) provides the name of the assignor; and
3. (3) provides the name and mailing address of the assignee.
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(c) Assignment of record of mortgage. An assignment of record of a security interest in a fixture covered by a record of a mortgage which is effective as a financing statement filed as a fixture filing under § 47-9-502(c) may be made only by an assignment of record of the mortgage in the manner provided by law of this state other than the Uniform Commercial Code.

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§ 47-9-515. Duration and effectiveness of financing statement; effect of lapsed financing statement.

(a) Five-year effectiveness. Except as otherwise provided in subsections (b), (e), (f) and (g), a filed financing statement is effective for a period of five (5) years after the date of filing.
(b) Public-finance or manufactured-home transaction. Except as otherwise provided in subsections (e), (f), and (g), an initial financing statement filed in connection with a public-finance transaction or manufactured-home transaction is effective for a period of thirty (30) years after the date of filing if it indicates that it is filed in connection with a public-finance transaction or manufactured-home transaction.
(c) Lapse and continuation of financing statement. The effectiveness of a filed financing statement lapses on the expiration of the period of its effectiveness unless before the lapse a continuation statement is filed pursuant to subsection (d). Upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the financing statement becomes unperfected, unless the security interest is perfected otherwise. If the security interest or agricultural lien becomes unperfected upon lapse, it is deemed never to have been perfected as against a purchaser of the collateral for value.
(d) When continuation statement may be filed. A continuation statement may be filed only within six (6) months before the expiration of the five-year period specified in subsection (a) or the 30-year period specified in subsection (b), whichever is applicable.
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- 47-9-510(c)
- 47-9-516(b)(7)
(e) Effect of filing continuation statement. Except as otherwise provided in § 47-9-510, upon timely filing of a continuation statement, the effectiveness of the initial financing statement continues for a period of five (5) years commencing on the day on which the financing statement would have become ineffective in the absence of the filing. Upon the expiration of the five-year period, the financing statement lapses in the same manner as provided in subsection (c), unless, before the lapse, another continuation statement is filed pursuant to subsection (d). Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the initial financing statement.
(f) Transmitting utility financing statement. If a debtor is a transmitting utility and a filed initial financing statement so indicates, the financing statement is effective until a termination statement is filed.
(g) Record of mortgage as financing statement. A record of a mortgage that is effective as a financing statement filed as a fixture filing under § 47-9-502(c) remains effective as a financing statement filed as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real property.

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§ 47-9-516. What constitutes filing — Effectiveness of filing.

(a) What constitutes filing. Except as otherwise provided in subsection (b), communication of a record to a filing office and tender of the filing fee or acceptance of the record by the filing office constitutes filing.
(b) Refusal to accept record; filing does not occur. Filing does not occur with respect to a record that a filing office refuses to accept because:
1. (1) The record is not communicated by a method or medium of communication authorized by the filing office;
2. (2) The amount that is tendered is not equal to or greater than the sum of the applicable filing fee plus recording tax under § 67-4-409(b), if any, based on the representation of indebtedness required thereunder;
3. (3) The filing office is unable to index the record because:
  1. (A) In the case of an initial financing statement, the record does not provide a name for the debtor;
  2. (B) In the case of an amendment or information statement, the record:
    1. (i) Does not identify the initial financing statement as required by § 47-9-512 or § 47-9-518, as applicable; or
    2. (ii) Identifies an initial financing statement whose effectiveness has lapsed under § 47-9-515;
  3. (C) In the case of an initial financing statement that provides the name of a debtor identified as an individual or an amendment that provides a name of a debtor identified as an individual which was not previously provided in the financing statement to which the record relates, the record does not identify the debtor's surname; or
  4. (D) In the case of a record filed in the filing office described in § 47-9-501(a)(1), the record does not provide the name of the debtor and a sufficient description of the real property to which it relates;
4. (4) In the case of an initial financing statement or an amendment that adds a secured party of record, the record does not provide a name and mailing address for the secured party of record;
5. (5) In the case of an initial financing statement or an amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates, the record does not:
  1. (A) Provide a mailing address for the debtor; or
  2. (B) Indicate whether the name provided as the name of the debtor is the name of an individual or an organization;
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  - 47-9-338
  - 47-9-520(c)
6. (6) In the case of an assignment reflected in an initial financing statement under § 47-9-514(a) or an amendment filed under § 47-9-514(b), the record does not provide a name and mailing address for the assignee;
7. (7) In the case of a continuation statement, the record is not filed within the six-month period prescribed by § 47-9-515(d); or
8. (8) The record does not contain, either on its face or in an accompanying sworn statement, the language required under § 67-4-409(b)(6)(C) with respect to the recording tax imposed under § 67-4-409(b), if any.
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(c) Rules applicable to subsection (b). For purposes of subsection (b):
1. (1) A record does not provide information if the filing office is unable to read or decipher the information; and
2. (2) A record that does not indicate that it is an amendment or identify an initial financing statement to which it relates, as required by § 47-9-512, § 47-9-514, or § 47-9-518, is an initial financing statement.
(d) Refusal to accept record; record effective as filed record. A record that is communicated to the filing office with tender of the filing fee, but which the filing office refuses to accept for a reason other than one set forth in subsection (b), is effective as a filed record except as against a purchaser of the collateral which gives value in reasonable reliance upon the absence of the record from the files.

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47-9-109(d)(11)(C)

§ 47-9-517. Effect of indexing errors.

The failure of the filing office to index a record correctly does not affect the effectiveness of the filed record.

§ 47-9-518. Claim concerning inaccurate or wrongfully filed record.

(a) Statement with respect to record indexed under person's name. A person may file in the filing office an information statement with respect to a record indexed there under the person's name if the person believes that the record is inaccurate or was wrongfully filed.
(b) Contents of statement under subsection (a): An information statement under subsection (a) must:
1. (1) Identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;
2. (2) Indicate that it is an information statement; and
3. (3) Provide the basis for the person's belief that the record is inaccurate and indicate the manner in which the person believes the record should be amended to cure any inaccuracy or provide the basis for the person's belief that the record was wrongfully filed.
(c) Statement by secured party of record. A person may file in the filing office an information statement with respect to a record filed there if the person is a secured party of record with respect to the financing statement to which the record relates and believes that the person that filed the record was not entitled to do so under § 47-9-509(d).
(d) Contents of statement under subsection (c). An information statement under subsection (c) must:
1. (1) Identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;
2. (2) Indicate that it is an information statement; and
3. (3) Provide the basis for the person's belief that the person that filed the record was not entitled to do so under § 47-9-509(d).
(e) Record not affected by information statement. The filing of an information statement does not affect the effectiveness of an initial financing statement or other filed record.

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2. Duties and Operation of Filing Office

§ 47-9-519. Numbering, maintaining, and indexing records — Communicating information provided in records.

(a) Filing office duties. For each record filed in a filing office, the filing office shall:
1. (1) Assign a unique number to the filed record;
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2. (2) Create a record that bears the number assigned to the filed record and the date and time of filing;
3. (3) Maintain the filed record for public inspection; and
4. (4) Index the filed record in accordance with subsections (c), (d), and (e).
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- 47-9-102(a)(36)
(b) File number. Except as otherwise provided in subsection (i), a file number assigned after January 1, 2002, must include a digit that:
1. (1) Is mathematically derived from or related to the other digits of the file number; and
2. (2) Aids the filing office in determining whether a number communicated as the file number includes a single-digit or transpositional error.
(c) Indexing: general. Except as otherwise provided in subsections (d) and (e), the filing office shall:
1. (1) Index an initial financing statement according to the name of the debtor and index all filed records relating to the initial financing statement in a manner that associates with one another an initial financing statement and all filed records relating to the initial financing statement; and
2. (2) Index a record that provides a name of a debtor which was not previously provided in the financing statement to which the record relates also according to the name that was not previously provided.
(d) Indexing: real-property-related financing statement. If a financing statement is filed as a fixture filing or covers as-extracted collateral or timber to be cut, it must be filed for record and the filing office shall index it:
1. (1) Under the names of the debtor and of each owner of record shown on the financing statement as if they were the mortgagors under a mortgage of the real property described; and
2. (2) To the extent that the law of this state provides for indexing of records of mortgages under the name of the mortgagee, under the name of the secured party as if the secured party were the mortgagee thereunder, or, if indexing is by description, as if the financing statement were a record of a mortgage of the real property described.
(e) Indexing: real-property-related assignment. If a financing statement is filed as a fixture filing or covers as-extracted collateral or timber to be cut, the filing office shall index an assignment filed under § 47-9-514(a) or an amendment filed under § 47-9-514(b):
1. (1) Under the name of the assignor as grantor; and
2. (2) To the extent that the law of this state provides for indexing a record of the assignment of a mortgage under the name of the assignee.
(f) Retrieval and association capability. The filing office shall maintain a capability:
1. (1) To retrieve a record by the name of the debtor and by the file number assigned to the initial financing statement to which the record relates; and
2. (2) To associate and retrieve with one another an initial financing statement and each filed record relating to the initial financing statement.
(g) Removal of debtor's name. The filing office may not remove a debtor's name from the index until one (1) year after the effectiveness of a financing statement naming the debtor lapses under § 47-9-515 with respect to all secured parties of record.
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- 47-9-513(d)(2)
(h) Timeliness of filing office performance. Except as otherwise provided in subsection (i), the filing office shall perform the acts required by subsections (a) through (e) at the time and in the manner prescribed by filing- office rule, but not later than two (2) business days after the filing office receives the record in question.
(i) Inapplicability to real-property-related filing office. Subsections (b) and (h) do not apply to a filing office described in § 47-9-501(a)(1).

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§ 47-9-520. Acceptance and refusal to accept record.

(a) Mandatory refusal to accept record. A filing office described in § 47-9-501(a)(2) shall refuse to accept a record for filing for a reason set forth in § 47-9-516(b), and a filing office may refuse to accept a record for filing only for a reason set forth in § 47-9-516(b).
(b) Communication concerning refusal. If a filing office refuses to accept a record for filing, it shall communicate to the person that presented the record the fact of and reason for the refusal and the date and time the record would have been filed had the filing office accepted it. The communication must be made at the time and in the manner prescribed by filing-office rule but, in the case of a filing office described in § 47-9-501(a)(2), in no event more than two (2) business days after the filing office receives the record.
(c) When filed financing statement effective. A filed financing statement satisfying § 47-9-502(a) and (b) is effective, even if the filing office is required to refuse to accept it for filing under subsection (a). However, § 47-9-338 applies to a filed financing statement providing information described in § 47-9-516(b)(5) which is incorrect at the time the financing statement is filed.
(d) Separate application to multiple debtors. If a record communicated to a filing office provides information that relates to more than one (1) debtor, this part applies as to each debtor separately.

§ 47-9-521. Uniform form of written financing statement and amendment.

(a) Initial Financing Statement Form. A filing office that accepts written records may not refuse to accept a written initial financing statement in the following form and format except for a reason set forth in § 47-9-516(b):
(b) Amendment form. A filing office that accepts written records may not refuse to accept a written record in the following form and format except for a reason set forth in § 47-9-516(b):

§ 47-9-522. Maintenance and destruction of records.

(a) Post-lapse maintenance and retrieval of information. The filing office shall maintain a record of the information provided in a filed financing statement for at least one (1) year after the effectiveness of the financing statement has lapsed under § 47-9-515 with respect to all secured parties of record. The record must be retrievable by using the name of the debtor and by using the file number assigned to the initial financing statement to which the record relates.
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- 47-9-513(d)(2)
- 47-9-523(c)(1)(C)
(b) Destruction of written records. Except to the extent that a statute governing disposition of public records provides otherwise, the filing office immediately may destroy any written record evidencing a financing statement. However, if the filing office destroys a written record, it shall maintain another record of the financing statement which complies with subsection (a).

§ 47-9-523. Information from filing office — Sale or license of records.

(a) Acknowledgment of filing written record. If a person that files a written record requests an acknowledgment of the filing, the filing office shall send to the person an image of the record showing the number assigned to the record pursuant to § 47-9-519(a)(1) and the date and time of the filing of the record. However, if the person furnishes a copy of the record to the filing office, the filing office may instead:
1. (1) note upon the copy the number assigned to the record pursuant to § 47-9-519(a)(1) and the date and time of the filing of the record; and
2. (2) send the copy to the person.
(b) Acknowledgment of filing other record. If a person files a record other than a written record, the filing office shall communicate to the person an acknowledgment that provides:
1. (1) the information in the record;
2. (2) the number assigned to the record pursuant to § 47-9-519(a)(1); and
3. (3) the date and time of the filing of the record.
(c) Communication of requested information. A filing office described in § 47-9-501(a)(2) shall, and a filing office described in § 47-9-501(a)(1) may, communicate or otherwise make available in a record the following information to any person that requests it:
1. (1) whether there is on file on a date and time specified by the filing office, but not a date earlier than three (3) business days before the filing office receives the request, any financing statement that:
  1. (A) designates a particular debtor or, if the request so states, designates a particular debtor at the address specified in the request;
  2. (B) has not lapsed under § 47-9-515 with respect to all secured parties of record; and
  3. (C) if the request so states, has lapsed under § 47-9-515 and a record of which is maintained by the filing office under § 47-9-522(a);
2. (2) the date and time of filing of each financing statement; and
3. (3) the information provided in each financing statement.
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(d) Medium for communicating information. In complying with its duty under subsection (c), the filing office may communicate information in any medium. However, if requested, the filing office shall communicate information by issuing a record that can be admitted into evidence in the courts of this state without extrinsic evidence of its authenticity.
(e) Timeliness of filing office performance. The filing office described in § 47-9-501(a)(2) shall perform the acts required by subsections (a) through (d) at the time and in the manner prescribed by filing office rule, but not later than two (2) business days after the filing office receives the request.
(f) Public availability of records. At least weekly, the secretary of state shall offer to sell or license to the public on a nonexclusive basis, in bulk, copies of all records filed in it under this part, in every medium from time to time available to the filing office described in § 47-9-501(a)(2).

§ 47-9-524. Delay by filing office.

Delay by the filing office beyond a time limit prescribed by this part is excused if:
1. (1) the delay is caused by interruption of communication or computer facilities, war, emergency conditions, failure of equipment, or other circumstances beyond control of the filing office; and
2. (2) the filing office exercises reasonable diligence under the circumstances.

§ 47-9-525. Fees.

(a) Initial financing statement. Except as otherwise provided in subsection (d), the uniform fee for filing and indexing a record under this part is:
1. (1) fifteen dollars ($15.00) if the record is communicated in writing and consists of ten (10) or fewer pages; or
2. (2) fifteen dollars ($15.00) plus fifty cents (50¢) per page in excess of ten (10) pages, if the record is communicated in writing and consists of more than ten (10) pages.
3. (3) an amount as established by filing-office rule adopted and promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, if the record is communicated by another medium authorized by the filing office.
(b) Number of names. Except as otherwise provided in subsection (e), if a record is communicated in writing, the uniform fee for each name more than one required to be indexed is fifteen dollars ($15.00).
(c) Response to information request.
1. (1) The uniform fee for responding to a written request for information from the filing office, including for issuing a certificate showing whether there is on file any financing statement naming a particular debtor, is fifteen dollars ($15.00). Upon request, the filing office shall furnish a copy of any filed financing statement for a uniform fee of one dollar ($1.00) per page.
2. (2) The filing office may establish a uniform fee for responding to a request for information communicated by another medium authorized by the filing office, including issuing a certificate showing whether there is on file any financing statement naming a particular debtor and including a per page fee, by rule adopted and promulgated in accordance with the Uniform Administrative Procedures Act.
(d) Record of mortgage. This section does not require a fee with respect to a record of a mortgage which is effective as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut under § 47-9-502(c). However, the recording and satisfaction fees that otherwise would be applicable to the record of the mortgage apply.
(e) Tennessee Recording Tax. In addition to the fees described above, tax may be payable under § 67-4-409(b), upon the filing of a financing statement. The filing officer may accept the representation on the financing statement, or in an accompanying sworn statement, of the amount of indebtedness for recording tax purposes, and need not verify the computation of the amount of such tax. The amount tendered to the filing officer shall be applied first to the filing fee and then to any tax imposed on the filing. No statement of indebtedness prescribed by law on or accompanying a financing statement shall limit the amount of any security interest perfected by filing the financing statement or shall otherwise impair its effectiveness.

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43-31-105(c)

§ 47-9-526. Filing-office rules.

(a) Adoption of filing-office rules. The secretary of state shall adopt and publish rules to implement this chapter. The filing-office rules must be:
1. (1) consistent with this chapter; and
2. (2) adopted and published in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
(b) Harmonization of rules. To keep the filing-office rules and practices of the filing office in harmony with the rules and practices of filing offices in other jurisdictions that enact substantially this part, and to keep the technology used by the filing office compatible with the technology used by filing offices in other jurisdictions that enact substantially this part, the secretary of state, so far as is consistent with the purposes, policies, and provisions of this chapter, in adopting, amending, and repealing filing-office rules, shall:
1. (1) consult with filing offices in other jurisdictions that enact substantially this part; and
2. (2) consult the most recent version of the Model Rules promulgated by the International Association of Corporate Administrators or any successor organization; and
3. (3) take into consideration the rules and practices of, and the technology used by, filing offices in other jurisdictions that enact substantially this part.

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47-9-102(a)(38)

§ 47-9-527. Duty to report.

The secretary of state shall report annually on or before February 1 to the governor and general assembly on the operation of the filing office. The report must contain a statement of the extent to which:
1. (1) the filing-office rules are not in harmony with the rules of filing offices in other jurisdictions that enact substantially this part and the reasons for these variations; and
2. (2) the filing-office rules are not in harmony with the most recent version of the Model Rules promulgated by the International Association of Corporate Administrators, or any successor organization, and the reasons for these variations.

Part 6 Default

1. Default and Enforcement of Security Interest

§ 47-9-601. Rights after default — Judicial enforcement — Consignor or buyer of accounts, chattel paper, payment intangibles, or promissory notes.

(a) Rights of secured party after default. After default, a secured party has the rights provided in this part and, except as otherwise provided in § 47-9-602, those provided by agreement of the parties. A secured party:
1. (1) May reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure; and
2. (2) If the collateral is documents, may proceed either as to the documents or as to the goods they cover.
(b) Rights and duties of secured party in possession or control. A secured party in possession of collateral or control of collateral under § 47-7-106, § 47-9-104, § 47-9-105, § 47-9-106, or § 47-9-107 has the rights and duties provided in § 47-9-207.
(c) Rights cumulative; simultaneous exercise. The rights under subsections (a) and (b) are cumulative and may be exercised simultaneously.
(d) Rights of debtor and obligor. Except as otherwise provided in subsection (g) and § 47-9-605, after default, a debtor and an obligor have the rights provided in this part and by agreement of the parties.
(e) Lien of levy after judgment. If a secured party has reduced its claim to judgment, the lien of any levy that may be made upon the collateral by virtue of an execution based upon the judgment relates back to the earliest of:
1. (1) The date of perfection of the security interest or agricultural lien in the collateral;
2. (2) The date of filing a financing statement covering the collateral; or
3. (3) Any date specified in a statute under which the agricultural lien was created.
(f) Execution sale. A sale pursuant to an execution is a foreclosure of the security interest or agricultural lien by judicial procedure within the meaning of this section. A secured party may purchase at the sale and thereafter hold the collateral free of any other requirements of this chapter.
(g) Consignor or buyer of certain rights to payment. Except as otherwise provided in § 47-9-607(c), this part imposes no duties upon a secured party that is a consignor or is a buyer of accounts, chattel paper, payment intangibles, or promissory notes.
(h) Foreclosure under this chapter is not deemed to be debt collection.

§ 47-9-602. Waiver and variance of rights and duties.

Except as otherwise provided in § 47-9-624, to the extent that they give rights to a debtor or obligor and impose duties on a secured party, the debtor or obligor may not waive or vary the rules stated in the following listed sections:
1. (1) Section 47-9-207(b)(4)(C), which deals with use and operation of the collateral by the secured party;
2. (2) Section 47-9-210, which deals with requests for an accounting and requests concerning a list of collateral and statement of account;
3. (3) Section 47-9-607(c), which deals with collection and enforcement of collateral;
4. (4) Sections 47-9-608(a) and 47-9-615(c) to the extent that they deal with application or payment of noncash proceeds of collection, enforcement, or disposition;
5. (5) Sections 47-9-608(a) and 47-9-615(d) to the extent that they require accounting for or payment of surplus proceeds of collateral;
6. (6) Section 47-9-609 to the extent that it imposes upon a secured party that takes possession of collateral without judicial process the duty to do so without breach of the peace;
7. (7) Sections 47-9-610(b), 47-9-611, 47-9-613, and 47-9-614, which deal with disposition of collateral;
8. (8) Section 47-9-615(f), which deals with calculation of a deficiency or surplus when a disposition is made to the secured party, a person related to the secured party, or a secondary obligor;
9. (9) Section 47-9-616, which deals with explanation of the calculation of a surplus or deficiency;
10. (10) Sections 47-9-620, 47-9-621, and 47-9-622, which deal with acceptance of collateral in satisfaction of obligation;
11. (11) Section 47-9-623, which deals with redemption of collateral;
12. (12) Section 47-9-624, which deals with permissible waivers; and
13. (13) Sections 47-9-625 and 47-9-626, which deal with the secured party's liability for failure to comply with this chapter.

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§ 47-9-603. Agreement on standards concerning rights and duties.

(a) Agreed standards. The parties may determine by agreement the standards measuring the fulfillment of the rights of a debtor or obligor and the duties of a secured party under a rule stated in § 47-9-602 if the standards are not manifestly unreasonable.
(b) Agreed standards inapplicable to breach of peace. Subsection (a) does not apply to the duty under § 47-9-609 to refrain from breaching the peace.

§ 47-9-604. Procedure if security agreement covers real property or fixtures.

(a) Enforcement: personal and real property. If a security agreement covers both personal and real property, a secured party may proceed:
1. (1) under this part as to the personal property without prejudicing any rights with respect to the real property; or
2. (2) as to both the personal property and the real property in accordance with the rights with respect to the real property, in which case the other provisions of this part do not apply.
(b) Enforcement: fixtures. Subject to subsection (c), if a security agreement covers goods that are or become fixtures, a secured party may proceed:
1. (1) under this part; or
2. (2) in accordance with the rights with respect to real property, in which case the other provisions of this part do not apply.
(c) Removal of fixtures. Subject to the other provisions of this part, if a secured party holding a security interest in fixtures has priority over all owners and encumbrancers of the real property, the secured party, after default, may remove the collateral from the real property.
(d) Injury caused by removal. A secured party that removes collateral shall promptly reimburse any encumbrancer or owner of the real property, other than the debtor, for the cost of repair of any physical injury caused by the removal. The secured party need not reimburse the encumbrancer or owner for any diminution in value of the real property caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.

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47-9-109(d)(11)(D)

§ 47-9-605. Unknown debtor or secondary obligor.

A secured party does not owe a duty based on its status as secured party:
1. (1) to a person that is a debtor or obligor, unless the secured party knows:
  1. (A) that the person is a debtor or obligor;
  2. (B) the identity of the person; and
  3. (C) how to communicate with the person; or
2. (2) to a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:
  1. (A) that the person is a debtor; and
  2. (B) the identity of the person.

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47-9-601(d)

§ 47-9-606. Time of default for agricultural lien.

For purposes of this part, a default occurs in connection with an agricultural lien at the time the secured party becomes entitled to enforce the lien in accordance with the statute under which it was created.

§ 47-9-607. Collection and enforcement by secured party.

(a) Collection and enforcement generally. If so agreed, and in any event after default, a secured party:
1. (1) May notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party;
2. (2) May take any proceeds to which the secured party is entitled under § 47-9-315;
3. (3) May enforce the obligations of an account debtor or other person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor, and with respect to any property that secures the obligations of the account debtor or other person obligated on the collateral;
4. (4) If it holds a security interest in a deposit account perfected by control under § 47-9-104(a)(1), may apply the balance of the deposit account to the obligation secured by the deposit account; and
5. (5) If it holds a security interest in a deposit account perfected by control under § 47-9-104(a)(2) or (3), may instruct the bank to pay the balance of the deposit account to or for the benefit of the secured party.
(b) Nonjudicial enforcement of mortgage. If necessary to enable a secured party to exercise under subdivision (a)(3) the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which a record of the mortgage is recorded:
1. (1) A copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and
2. (2) The secured party's sworn affidavit in recordable form stating that:
  1. (A) A default has occurred with respect to the obligation secured by the mortgage; and
  2. (B) The secured party is entitled to enforce the mortgage nonjudicially.
(c) Commercially reasonable collection and enforcement. A secured party shall proceed in a commercially reasonable manner if the secured party:
1. (1) Undertakes to collect from or enforce an obligation of an account debtor or other person obligated on collateral; and
2. (2) Is entitled to charge back uncollected collateral or otherwise to full or limited recourse against the debtor or a secondary obligor.
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(d) Expenses of collection and enforcement. A secured party may deduct from the collections made pursuant to subsection (c) reasonable expenses of collection and enforcement, including reasonable attorney's fees and legal expenses incurred by the secured party.
(e) Duties to secured party not affected. This section does not determine whether an account debtor, bank, or other person obligated on collateral owes a duty to a secured party.

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§ 47-9-608. Application of proceeds of collection or enforcement; liability for deficiency and right to surplus.

(a) Application of proceeds, surplus, and deficiency if obligation secured. If a security interest or agricultural lien secures payment or performance of an obligation, the following rules apply:
1. (1) A secured party shall apply or pay over for application the cash proceeds of collection or enforcement under Section 47-9-607 in the following order to:
  1. (A) the reasonable expenses of collection and enforcement and, to the extent provided for by agreement and not prohibited by law, reasonable attorney's fees and legal expenses incurred by the secured party;
  2. (B) the satisfaction of obligations secured by the security interest or agricultural lien under which the collection or enforcement is made; and
  3. (C) the satisfaction of obligations secured by any subordinate security interest in or other lien on the collateral subject to the security interest or agricultural lien under which the collection or enforcement is made if the secured party receives an authenticated demand for proceeds before distribution of the proceeds is completed.
2. (2) If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder complies, the secured party need not comply with the holder's demand under paragraph (1)(C).
3. (3) A secured party need not apply or pay over for application noncash proceeds of collection and enforcement under Section 47-9-607 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
4. (4) A secured party shall account to and pay a debtor for any surplus, and the obligor is liable for any deficiency.
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(b) No surplus or deficiency in sales of certain rights to payment. If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency.

§ 47-9-609. Secured party's right to take possession after default.

(a) Possession; rendering equipment unusable; disposition on debtor's premises. After default, a secured party:
1. (1) may take possession of the collateral; and
2. (2) without removal, may render equipment unusable and dispose of collateral on a debtor's premises under § 47-9-610.
(b) Judicial and nonjudicial process. A secured party may proceed under subsection (a):
1. (1) pursuant to judicial process; or
2. (2) without judicial process, if it proceeds without breach of the peace.
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(c) Assembly of collateral. If so agreed, and in any event after default, a secured party may require the debtor to assemble the collateral and make it available to the secured party at a place to be designated by the secured party which is reasonably convenient to both parties.

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§ 47-9-610. Disposition of collateral after default.

(a) Disposition after default. After default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.
(b) Commercially reasonable disposition. Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable. If commercially reasonable, a secured party may dispose of collateral by public or private proceedings, by one (1) or more contracts, as a unit or in parcels, and at any time and place and on any terms.
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(c) Purchase by secured party. A secured party may purchase collateral:
1. (1) at a public disposition; or
2. (2) at a private disposition only if the collateral is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations.
(d) Warranties on disposition. A contract for sale, lease, license, or other disposition includes the warranties relating to title, possession, quiet enjoyment, and the like which by operation of law accompany a voluntary disposition of property of the kind subject to the contract.
(e) Disclaimer of warranties. A secured party may disclaim or modify warranties under subsection (d):
1. (1) in a manner that would be effective to disclaim or modify the warranties in a voluntary disposition of property of the kind subject to the contract of disposition; or
2. (2) by communicating to the purchaser a record evidencing the contract for disposition and including an express disclaimer or modification of the warranties.
(f) Record sufficient to disclaim warranties. A record is sufficient to disclaim warranties under subsection (e) if it indicates “There is no warranty relating to title, possession, quiet enjoyment, or the like in this disposition” or uses words of similar import.

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§ 47-9-611. Notification before disposition of collateral.

(a) “Notification date”. In this section, “notification date” means the earlier of the date on which:
1. (1) A secured party sends to the debtor and any secondary obligor an authenticated notification of disposition; or
2. (2) The debtor and any secondary obligor waive the right to notification.
(b) Notification of disposition required. Except as otherwise provided in subsection (d), a secured party that disposes of collateral under § 47-9-610 shall send to the persons specified in subsection (c) a reasonable authenticated notification of disposition.
(c) Persons to be notified. To comply with subsection (b), the secured party shall send an authenticated notification of disposition to:
1. (1) The debtor;
2. (2) Any secondary obligor; and
3. (3) If the collateral is other than consumer goods:
  1. (A) Any other person from which the secured party has received, before the notification date, an authenticated notification of a claim of an interest in the collateral;
  2. (B) Any other secured party or lienholder that, ten (10) days before the notification date, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:
    1. (i) Identified the collateral;
    2. (ii) Was indexed under the debtor's name as of that date; and
    3. (iii) Was filed in the office in which to file a financing statement against the debtor covering the collateral as of that date; and
  3. (C) Any other secured party that, ten (10) days before the notification date, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in § 47-9-311(a).
(d) Subsection (b) inapplicable: perishable collateral; recognized market. Subsection (b) does not apply if the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. Notwithstanding the foregoing, the notification requirement of subsection (b) does not require or permit a secured party to send a disposition notification that may violate the automatic stay under the federal bankruptcy code, 11 U.S.C. § 362.
(e) Compliance with subdivision (c)(3)(B). A secured party complies with the requirement for notification prescribed by subdivision (c)(3)(B) if:
1. (1) Not later than twenty (20) days or earlier than thirty (30) days before the notification date, the secured party requests, in a commercially reasonable manner, information concerning financing statements indexed under the debtor's name in the office indicated in subdivision (c)(3)(B); and
2. (2) Before the notification date, the secured party:
  1. (A) Did not receive a response to the request for information; or
  2. (B) Received a response to the request for information and sent an authenticated notification of disposition to each secured party or other lienholder named in that response whose financing statement covered the collateral.

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§ 47-9-612. Timeliness of notification before disposition of collateral.

(a) Reasonable time is question of fact. Except as otherwise provided in subsection (b), whether a notification is sent within a reasonable time is a question of fact.
(b) 10-day period sufficient. A notification of disposition sent after default and ten (10) days or more before the earliest time of disposition set forth in the notification is sent within a reasonable time before the disposition.

§ 47-9-613. Contents and form of notification before disposition of collateral — General.

Except in a consumer-goods transaction, the following rules apply:
1. (1) The contents of a notification of disposition are sufficient if the notification:
  1. (A) describes the debtor and the secured party;
  2. (B) describes the collateral that is the subject of the intended disposition;
  3. (C) states the method of intended disposition;
  4. (D) states that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for an accounting; and
  5. (E) states the time and place of a public disposition or the time after which any other disposition is to be made.
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  - 47-9-614(1)(A)
2. (2) Whether the contents of a notification that lacks any of the information specified in paragraph (1) are nevertheless sufficient is a question of fact.
3. (3) The contents of a notification providing substantially the information specified in paragraph (1) are sufficient, even if the notification includes:
  1. (A) information not specified by that paragraph; or
  2. (B) minor errors that are not seriously misleading.
4. (4) A particular phrasing of the notification is not required.
5. (5) The following form of notification and the form appearing in § 47-9-614(3), when completed, each provides sufficient information:
  2. NOTIFICATION OF DISPOSITION OF COLLATERAL
  3. To: [Name of debtor, obligor, or other person to which the notification is sent]
  4. From: [Name, address, and telephone number of secured party]
  5. Name of Debtor(s): [Include only if debtor(s) are not an addressee]
  6. [For a public disposition:]
  7. We will sell [or lease or license, as applicable] the [describe collateral] [to the highest qualified bidder] in public as follows:
  8. Day and Date:
  9. Time:
  10. Place:
  11. [For a private disposition:]
  12. We will sell [or lease or license, as applicable] the [describe collateral] privately sometime after [day and date].
  13. You are entitled to an accounting of the unpaid indebtedness secured by the property that we intend to sell [or lease or license, as applicable] [for a charge of $ ]. You may request an accounting by calling us at [telephone number]
  15. [End of Form]

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47-9-602(7)

§ 47-9-614. Contents and form of notification before disposition of collateral: Consumer-goods transaction.

In a consumer-goods transaction, the following rules apply:
1. (1) A notification of disposition must provide the following information:
  1. (A) the information specified in § 47-9-613(1);
  2. (B) a description of any liability for a deficiency of the person to which the notification is sent;
  3. (C) a telephone number from which the amount that must be paid to the secured party to redeem the collateral under § 47-9-623 is available; and
  4. (D) a telephone number or mailing address from which additional information concerning the disposition and the obligation secured is available.
2. (2) A particular phrasing of the notification is not required.
3. (3) The following form of notification, when completed, provides sufficient information:
  2. [Name and address of secured party]
  3. [Date]
  4. NOTICE OF OUR PLAN TO SELL PROPERTY
  5. [Name and address of any obligor who is also a debtor]
  7. Subject: [Identification of Transaction]
  9. We have your [describe collateral], because you broke promises in our agreement.
  11. [For a public disposition:]
  13. We will sell [describe collateral] at public sale. A sale could include a lease or license. The sale will be held as follows:
  15. Date:
  17. Time:
  19. Place:
  21. You may attend the sale and bring bidders if you want.
  23. [For a private disposition:]
  25. We will sell [describe collateral] at private sale sometime after [date]. A sale could include a lease or license.
  27. The money that we get from the sale (after paying our costs) will reduce the amount you owe. If we get less money than you owe, you [will or will not, as applicable] still owe us the difference. If we get more money than you owe, you will get the extra money, unless we must pay it to someone else.
  29. You can get the property back at any time before we sell it by paying us the full amount you owe (not just the past due payments), including our expenses. To learn the exact amount you must pay, call us at [telephone number].
  31. If you want us to explain to you in writing how we have figured the amount that you owe us, you may call us at [telephone number] [or write us at [secured party's address] ] and request a written explanation. [We will charge you $ for the explanation if we sent you another written explanation of the amount you owe us within the last six (6) months.]
  33. If you need more information about the sale call us at [telephone number] [or write us at [secured party's address] ].
  35. We are sending this notice to the following other people who have an interest in [describe collateral] or who owe money under your agreement:
  37. [Names of all other debtors and obligors, if any]
  39. [End of Form]
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  - 47-9-613(5)
4. (4) A notification in the form of paragraph (3) is sufficient, even if additional information appears at the end of the form.
5. (5) A notification in the form of paragraph (3) is sufficient, even if it includes errors in information not required by paragraph (1), unless the error is misleading with respect to rights arising under this chapter.
6. (6) If a notification under this section is not in the form of paragraph (3), law other than this chapter determines the effect of including information not required by paragraph (1).

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47-9-602(7)

§ 47-9-615. Application of proceeds of disposition — Liability for deficiency and right to surplus.

(a) Application of proceeds. A secured party shall apply or pay over for application the cash proceeds of disposition under § 47-9-610 in the following order to:
1. (1) the reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney's fees and legal expenses incurred by the secured party;
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  - 47-9-623(b)(2)
2. (2) the satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;
3. (3) the satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:
  1. (A) the secured party receives from the holder of the subordinate security interest or other lien an authenticated demand for proceeds before distribution of the proceeds is completed; and
  2. (B) in a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; and
4. (4) a secured party that is a consignor of the collateral if the secured party receives from the consignor an authenticated demand for proceeds before distribution of the proceeds is completed.
(b) Proof of subordinate interest. If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder's demand under subdivision (a)(3).
(c) Application of noncash proceeds. A secured party need not apply or pay over for application noncash proceeds of disposition under § 47-9-610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
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- 47-9-602(4)
(d) Surplus or deficiency if obligation secured. If the security interest under which a disposition is made secures payment or performance of an obligation, after making the payments and applications required by subsection (a) and permitted by subsection (c):
1. (1) unless subdivision (a)(4) requires the secured party to apply or pay over cash proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus; and
2. (2) the obligor is liable for any deficiency.
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- 47-9-602(5)
(e) No surplus or deficiency in sales of certain rights to payment. If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes:
1. (1) the debtor is not entitled to any surplus; and
2. (2) the obligor is not liable for any deficiency.
(f) Calculation of surplus or deficiency in disposition to person related to secured party. The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this part to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if:
1. (1) the transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; and
2. (2) the amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.
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- 47-9-602(8)
- 47-9-626(5)
(g) Cash proceeds received by junior secured party. A secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:
1. (1) takes the cash proceeds free of the security interest or other lien;
2. (2) is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and
3. (3) is not obligated to account to or pay the holder of the security interest or other lien for any surplus.

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47-9-616(b)

§ 47-9-616. Explanation of calculation of surplus or deficiency.

(a) Definitions. In this section:
1. (1) “Explanation” means a writing that:
  1. (A) States the amount of the surplus or deficiency;
  2. (B) Provides an explanation in accordance with subsection (c) of how the secured party calculated the surplus or deficiency;
  3. (C) States, if applicable, that future debits, credits, charges, including additional credit service charges or interest, rebates, and expenses may affect the amount of the surplus or deficiency; and
  4. (D) Provides a telephone number or mailing address from which additional information concerning the transaction is available; and
2. (2) “Request” means a record:
  1. (A) Authenticated by a debtor or consumer obligor;
  2. (B) Requesting that the recipient provide an explanation; and
  3. (C) Sent after disposition of the collateral under § 47-9-610.
(b) Explanation of calculation. In a consumer-goods transaction in which the debtor is entitled to a surplus or a consumer obligor is liable for a deficiency under § 47-9-615, the secured party shall:
1. (1) Send an explanation to the debtor or consumer obligor, as applicable, after the disposition and:
  1. (A) Before or when the secured party accounts to the debtor and pays any surplus or first makes written demand on the consumer obligor after the disposition for payment of the deficiency; and
  2. (B) Within thirty (30) days after receipt of a request; or
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  - 47-9-625(e)(5)
2. (2) In the case of a consumer obligor who is liable for a deficiency, within thirty (30) days after receipt of a request, send to the consumer obligor a record waiving the secured party's right to a deficiency.
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  - 47-9-625(e)(6)
(c) Required information. To comply with subdivision (a)(1)(B), a writing must provide the following information in the following order:
1. (1) The aggregate amount of obligations secured by the security interest under which the disposition was made, and, if the amount reflects a rebate of unearned interest or credit service charge, an indication of that fact, calculated as of a specified date:
  1. (A) If the secured party takes or receives possession of the collateral after default, not more than thirty-five (35) days before the secured party takes or receives possession; or
  2. (B) If the secured party takes or receives possession of the collateral before default or does not take possession of the collateral, not more than thirty-five (35) days before the disposition;
2. (2) The amount of proceeds of the disposition;
3. (3) The aggregate amount of the obligations after deducting the amount of proceeds;
4. (4) The amount, in the aggregate or by type, and types of expenses, including expenses of retaking, holding, preparing for disposition, processing, and disposing of the collateral, and attorney's fees secured by the collateral which are known to the secured party and relate to the current disposition;
5. (5) The amount, in the aggregate or by type, and types of credits, including rebates of interest or credit service charges, to which the obligor is known to be entitled and which are not reflected in the amount in paragraph (1); and
6. (6) The amount of the surplus or deficiency.
(d) Substantial compliance. A particular phrasing of the explanation is not required. An explanation complying substantially with the requirements of subsection (a) is sufficient, even if it includes minor errors that are not seriously misleading.
(e) Charges for responses. A debtor or consumer obligor is entitled without charge to one (1) response to a request under this section during any six-month period in which the secured party did not send to the debtor or consumer obligor an explanation pursuant to subdivision (b)(1). The secured party may require payment of a charge not exceeding twenty-five dollars ($25.00) for each additional response.

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§ 47-9-617. Rights of transferee of collateral.

(a) Effects of disposition. A secured party's disposition of collateral after default:
1. (1) Transfers to a transferee for value all of the debtor's rights in the collateral;
2. (2) Discharges the security interest under which the disposition is made; and
3. (3) Discharges any subordinate security interest or other subordinate lien.
(b) Rights of good-faith transferee. A transferee that acts in good faith takes free of the rights and interests described in subsection (a), even if the secured party fails to comply with this chapter or the requirements of any judicial proceeding.
(c) Rights of other transferee. If a transferee does not take free of the rights and interests described in subsection (a), the transferee takes the collateral subject to:
1. (1) The debtor's rights in the collateral;
2. (2) The security interest or agricultural lien under which the disposition is made; and
3. (3) Any other security interest or other lien.

§ 47-9-618. Rights and duties of certain secondary obligors.

(a) Rights and duties of secondary obligor. A secondary obligor acquires the rights and becomes obligated to perform the duties of the secured party after the secondary obligor:
1. (1) receives an assignment of a secured obligation from the secured party;
2. (2) receives a transfer of collateral from the secured party and agrees to accept the rights and assume the duties of the secured party; or
3. (3) is subrogated to the rights of a secured party with respect to collateral.
(b) Effect of assignment, transfer, or subrogation. An assignment, transfer, or subrogation described in subsection (a):
1. (1) is not a disposition of collateral under § 47-9-610; and
2. (2) relieves the secured party of further duties under this chapter.

§ 47-9-619. Transfer of record or legal title.

(a) “Transfer statement”. In this section, “transfer statement” means a record authenticated by a secured party stating:
1. (1) that the debtor has defaulted in connection with an obligation secured by specified collateral;
2. (2) that the secured party has exercised its post-default remedies with respect to the collateral;
3. (3) that, by reason of the exercise, a transferee has acquired the rights of the debtor in the collateral; and
4. (4) the name and mailing address of the secured party, debtor, and transferee.
(b) Effect of transfer statement. A transfer statement entitles the transferee to the transfer of record of all rights of the debtor in the collateral specified in the statement in any official filing, recording, registration, or certificate-of-title system covering the collateral. If a transfer statement is presented with the applicable fee and request form to the official or office responsible for maintaining the system, the official or office shall:
1. (1) accept the transfer statement;
2. (2) promptly amend its records to reflect the transfer; and
3. (3) if applicable, issue a new appropriate certificate of title in the name of the transferee.
(c) Transfer not a disposition; no relief of secured party's duties. A transfer of the record or legal title to collateral to a secured party under subsection (b) or otherwise is not of itself a disposition of collateral under this chapter and does not of itself relieve the secured party of its duties under this chapter.

§ 47-9-620. Acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral.

(a) Conditions to acceptance in satisfaction. Except as otherwise provided in subsection (g), a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:
1. (1) the debtor consents to the acceptance under subsection (c);
2. (2) the secured party does not receive, within the time set forth in subsection (d), a notification of objection to the proposal authenticated by:
  1. (A) a person to which the secured party was required to send a proposal under § 47-9-621; or
  2. (B) any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal;
3. (3) if the collateral is consumer goods, the collateral is not in the possession of the debtor when the debtor consents to the acceptance; and
4. (4) subsection (e) does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to § 47-9-624.
(b) Purported acceptance ineffective. A purported or apparent acceptance of collateral under this section is ineffective unless:
1. (1) the secured party consents to the acceptance in an authenticated record or sends a proposal to the debtor; and
2. (2) the conditions of subsection (a) are met.
(c) Debtor's consent. For purposes of this section:
1. (1) a debtor consents to an acceptance of collateral in partial satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default; and
2. (2) a debtor consents to an acceptance of collateral in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default or the secured party:
  1. (A) sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained;
  2. (B) in the proposal, proposes to accept collateral in full satisfaction of the obligation it secures; and
  3. (C) does not receive a notification of objection authenticated by the debtor within twenty (20) days after the proposal is sent.
(d) Effectiveness of notification. To be effective under subdivision (a)(2), a notification of objection must be received by the secured party:
1. (1) in the case of a person to which the proposal was sent pursuant to § 47-9-621, within twenty (20) days after notification was sent to that person; and
2. (2) in other cases:
  1. (A) within twenty (20) days after the last notification was sent pursuant to § 47-9-621; or
  2. (B) if a notification was not sent, before the debtor consents to the acceptance under subsection (c).
(e) Mandatory disposition of consumer goods. A secured party that has taken possession of collateral shall dispose of the collateral pursuant to § 47-9-610 within the time specified in subsection (f) if:
1. (1) Sixty percent (60%) of the cash price has been paid in the case of a purchase-money security interest in consumer goods; or
2. (2) Sixty percent (60%) of the principal amount of the obligation secured has been paid in the case of a non-purchase-money security interest in consumer goods.
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- 47-9-624(b)
(f) Compliance with mandatory disposition requirement. To comply with subsection (e), the secured party shall dispose of the collateral:
1. (1) within ninety (90) days after taking possession; or
2. (2) within any longer period to which the debtor and all secondary obligors have agreed in an agreement to that effect entered into and authenticated after default.
(g) No partial satisfaction in consumer transaction. In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures.

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§ 47-9-621. Notification of proposal to accept collateral.

(a) Persons to whom proposal to be sent. A secured party that desires to accept collateral in full or partial satisfaction of the obligation it secures shall send its proposal to:
1. (1) any person from whom the secured party has received, before the debtor consented to the acceptance, an authenticated notification of a claim of an interest in the collateral;
2. (2) any other secured party or lienholder that, ten (10) days before the debtor consented to the acceptance, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:
  1. (A) identified the collateral;
  2. (B) was indexed under the debtor's name as of that date; and
  3. (C) was filed in the office or offices in which to file a financing statement against the debtor covering the collateral as of that date; and
3. (3) any other secured party that, ten (10) days before the debtor consented to the acceptance, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in § 47-9-311(a).
(b) Proposal to be sent to secondary obligor in partial satisfaction. A secured party that desires to accept collateral in partial satisfaction of the obligation it secures shall send its proposal to any secondary obligor in addition to the persons described in subsection (a).

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§ 47-9-622. Effect of acceptance of collateral.

(a) Effect of acceptance. A secured party's acceptance of collateral in full or partial satisfaction of the obligation it secures:
1. (1) discharges the obligation to the extent consented to by the debtor;
2. (2) transfers to the secured party all of a debtor's rights in the collateral;
3. (3) discharges the security interest or agricultural lien that is the subject of the debtor's consent and any subordinate security interest or other subordinate lien; and
4. (4) terminates any other subordinate interest.
(b) Discharge of subordinate interest notwithstanding noncompliance. A subordinate interest is discharged or terminated under subsection (a), even if the secured party fails to comply with this chapter.

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§ 47-9-623. Right to redeem collateral.

(a) Persons that may redeem. A debtor, any secondary obligor, or any other secured party or lienholder may redeem collateral.
(b) Requirements for redemption. To redeem collateral, a person shall tender:
1. (1) fulfillment of all obligations secured by the collateral; and
2. (2) the reasonable expenses and attorney's fees described in § 47-9-615(a)(1).
(c) When redemption may occur. A redemption may occur at any time before a secured party:
1. (1) has collected collateral under § 47-9-607;
2. (2) has disposed of collateral or entered into a contract for its disposition under § 47-9-610; or
3. (3) has accepted collateral in full or partial satisfaction of the obligation it secures under § 47-9-622.

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§ 47-9-624. Waiver.

(a) Waiver of disposition notification. A debtor or secondary obligor may waive the right to notification of disposition of collateral under § 47-9-611 only by an agreement to that effect entered into and authenticated after default.
(b) Waiver of mandatory disposition. A debtor may waive the right to require disposition of collateral under § 47-9-620(e) only by an agreement to that effect entered into and authenticated after default.
(c) Waiver of redemption right. Except in a consumer-goods transaction, a debtor or secondary obligor may waive the right to redeem collateral under § 47-9-623 only by an agreement to that effect entered into and authenticated after default.

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2. Noncompliance with Chapter

§ 47-9-625. Remedies for secured party's failure to comply with chapter.

(a) Judicial orders concerning noncompliance. If it is established that a secured party is not proceeding in accordance with this chapter, a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.
(b) Damages for noncompliance. Subject to subsections (c), (d), and (f), a person is liable for damages in the amount of any loss caused by a failure to comply with this chapter. Loss caused by a failure to comply may include loss resulting from the debtor's inability to obtain, or increased costs of, alternative financing.
(c) Persons entitled to recover damages; statutory damages in consumer-goods transaction. Except as otherwise provided in § 47-9-628:
1. (1) a person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under subsection (b) for its loss; and
2. (2) if the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this part may recover for that failure in any event an amount not less than the credit service charge plus ten percent (10%) of the principal amount of the obligation or the time-price differential plus ten percent (10%) of the cash price.
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  - 47-9-628(d)
  - 47-9-628(e)
(d) Recovery when deficiency eliminated or reduced. A debtor whose deficiency is eliminated under § 47-9-626 may recover damages for the loss of any surplus. However, a debtor or secondary obligor whose deficiency is eliminated or reduced under § 47-9-626 may not otherwise recover under subsection (b) for noncompliance with this part relating to collection, enforcement, disposition, or acceptance.
(e) Statutory damages: noncompliance with specified provisions. In addition to any damages recoverable under subsection (b), the debtor, consumer obligor, or person named as a debtor in a filed record, as applicable, may recover five hundred dollars ($500) in each case from a person that:
1. (1) fails to comply with § 47-9-208;
2. (2) fails to comply with § 47-9-209;
3. (3) files a record that the person is not entitled to file under § 47-9-509(a) and fails to file a termination statement within ten (10) days after receiving an authenticated demand;
4. (4) fails to cause the secured party of record to file or send a termination statement;
  1. (A) as required by § 47-9-513(a) within ten (10) days after receiving an authenticated demand or
  2. (B) as required by § 47-9-513 (c);
5. (5) fails to comply with § 47-9-616(b)(1) and whose failure is part of a pattern, or consistent with a practice, of noncompliance; or
6. (6) fails to comply with § 47-9-616(b)(2).
(f) Statutory damages: noncompliance with § 47-9-210. A debtor or consumer obligor may recover damages under subsection (b) and, in addition, five hundred dollars ($500) in each case from a person that, without reasonable cause, fails to comply with a request under § 47-9-210. A recipient of a request under § 47-9-210 which never claimed an interest in the collateral or obligations that are the subject of a request under that section has a reasonable excuse for failure to comply with the request within the meaning of this subsection (f).
(g) Limitation of security interest: noncompliance with § 47-9-210. If a secured party fails to comply with a request regarding a list of collateral or a statement of account under § 47-9-210, the secured party may claim a security interest only as shown in the list or statement included in the request as against a person that is reasonably misled by the failure.

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47-9-602(13)

§ 47-9-626. Action in which deficiency or surplus is in issue.

In an action arising from a transaction in which the amount of a deficiency or surplus is in issue, the following rules apply:
1. (1) A secured party need not prove compliance with the provisions of this part relating to collection, enforcement, disposition, or acceptance unless the debtor or a secondary obligor places the secured party's compliance in issue.
2. (2) If the secured party's compliance is placed in issue, the secured party has the burden of establishing that the collection, enforcement, disposition, or acceptance was conducted in accordance with this part.
3. (3) Except as otherwise provided in § 47-9-628, if a secured party fails to prove that the collection, enforcement, disposition, or acceptance was conducted in accordance with this part relating to collection, enforcement, disposition, or acceptance, the liability of a debtor or a secondary obligor for a deficiency is limited to an amount by which the sum of the secured obligation, expenses, and attorney's fees exceeds the greater of:
  1. (A) the proceeds of the collection, enforcement, disposition, or acceptance; or
  2. (B) the amount of proceeds that would have been realized had the noncomplying secured party proceeded in accordance with this part relating to collection, enforcement, disposition, or acceptance.
4. (4) For purposes of paragraph (3)(B), the amount of proceeds that would have been realized is equal to the sum of the secured obligation, expenses, and attorney's fees unless the secured party proves that the amount is less than that sum.
5. (5) If a deficiency or surplus is calculated under § 47-9-615(f), the debtor or obligor has the burden of establishing that the amount of proceeds of the disposition is significantly below the range of prices that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.

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§ 47-9-627. Determination of whether conduct was commercially reasonable.

(a) Greater amount obtainable under other circumstances; no preclusion of commercial reasonableness. The fact that a greater amount could have been obtained by a collection, enforcement, disposition, or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition, or acceptance was made in a commercially reasonable manner.
(b) Dispositions that are commercially reasonable. A disposition of collateral is made in a commercially reasonable manner if the disposition is made:
1. (1) in the usual manner on any recognized market;
2. (2) at the price current in any recognized market at the time of the disposition; or
3. (3) otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.
(c) Approval by court or on behalf of creditors. A collection, enforcement, disposition, or acceptance is commercially reasonable if it has been approved:
1. (1) in a judicial proceeding;
2. (2) by a bona fide creditors' committee;
3. (3) by a representative of creditors; or
4. (4) by an assignee for the benefit of creditors.
(d) Approval under subsection (c) not necessary; absence of approval has no effect. Approval under subsection (c) need not be obtained, and lack of approval does not mean that the collection, enforcement, disposition, or acceptance is not commercially reasonable.

§ 47-9-628. Nonliability and limitation on liability of secured party — Liability of secondary obligor.

(a) Limitation of liability of secured party for noncompliance with chapter. Unless a secured party knows that a person is a debtor or obligor, knows the identity of the person, and knows how to communicate with the person:
1. (1) the secured party is not liable to the person, or to a secured party or lienholder that has filed a financing statement against the person, for failure to comply with this chapter; and
2. (2) the secured party's failure to comply with this chapter does not affect the liability of the person for a deficiency.
(b) Limitation of liability based on status as secured party. A secured party is not liable because of its status as secured party:
1. (1) to a person that is a debtor or obligor, unless the secured party knows:
  1. (A) that the person is a debtor or obligor;
  2. (B) the identity of the person; and
  3. (C) how to communicate with the person; or
2. (2) to a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:
  1. (A) that the person is a debtor; and
  2. (B) the identity of the person.
(c) Limitation of liability if reasonable belief that transaction not a consumer-goods transaction or consumer transaction. A secured party is not liable to any person, and a person's liability for a deficiency is not affected, because of any act or omission arising out of the secured party's reasonable belief that a transaction is not a consumer-goods transaction or a consumer transaction or that goods are not consumer goods, if the secured party's belief is based on its reasonable reliance on:
1. (1) a debtor's representation concerning the purpose for which collateral was to be used, acquired, or held; or
2. (2) an obligor's representation concerning the purpose for which a secured obligation was incurred.
(d) Limitation of liability for statutory damages. A secured party is not liable to any person under § 47-9-625(c)(2) for its failure to comply with § 47-9-616.
(e) Limitation of multiple liability for statutory damages. A secured party is not liable under § 47-9-625(c)(2) more than once with respect to any one (1) secured obligation.

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Part 7 Transition

§ 47-9-701. Effective date.

This act takes effect on July 1, 2001. References in this part to “this act” refer to the legislative enactment by which this chapter is added to Tennessee Code Annotated, Title 47. References in this part to “former Chapter 9” are to Tennessee Code Annotated, Title 47, Chapter 9, as in effect immediately before July 1, 2001.

§ 47-9-702. Savings clause.

(a) Pre-effective-date transactions or liens. Except as otherwise provided in this part, this act applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this act takes effect.
(b) Continuing validity. Except as otherwise provided in subsection (c) and §§ 47-9-703 through 47-9-709:
1. (1) transactions and liens that were not governed by former Chapter 9, were validly entered into or created before July 1, 2001, and would be subject to this act if they had been entered into or created after this act takes effect, and the rights, duties, and interests flowing from those transactions and liens remain valid after July 1, 2001; and
2. (2) the transactions and liens may be terminated, completed, consummated, and enforced as required or permitted by this act or by the law that otherwise would apply if this act had not taken effect.
(c) Pre-effective-date proceedings. This act does not affect an action, case, or proceeding commenced before July 1, 2001.

§ 47-9-703. Security interest perfected before effective date.

(a) Continuing priority over lien creditor: perfection requirements satisfied. A security interest that is enforceable immediately before this act takes effect and would have priority over the rights of a person that becomes a lien creditor at that time is a perfected security interest under this act if, on July 1, 2001, the applicable requirements for enforceability and perfection under this act are satisfied without further action.
(b) Continuing priority over lien creditor: perfection requirements not satisfied. Except as otherwise provided in § 47-9-705, if, immediately before July 1, 2001, a security interest is enforceable and would have priority over the rights of a person that becomes a lien creditor at that time, but the applicable requirements for enforceability or perfection under this act are not satisfied on July 1, 2001, the security interest:
1. (1) is a perfected security interest for one (1) year after this act takes effect;
2. (2) remains enforceable thereafter only if the security interest becomes enforceable under § 47-9-203 before the year expires; and
3. (3) remains perfected thereafter only if the applicable requirements for perfection under this act are satisfied before the year expires.

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47-9-702(b)

§ 47-9-704. Security interest unperfected before effective date.

A security interest that is enforceable immediately before this act takes effect but which would be subordinate to the rights of a person that becomes a lien creditor at that time:
1. (1) remains an enforceable security interest for one (1) year after this act takes effect;
2. (2) remains enforceable thereafter if the security interest becomes enforceable under § 47-9-203 on July 1, 2001 or within one (1) year thereafter; and
3. (3) becomes perfected:
  1. (A) without further action, on July 1, 2001 if the applicable requirements for perfection under this act are satisfied before or at that time; or
  2. (B) when the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.

§ 47-9-705. Effectiveness of action taken before effective date.

(a) Pre-effective-date action; one-year perfection period unless reperfected. If action, other than the filing of a financing statement, is taken before July 1, 2001 and the action would have resulted in priority of a security interest over the rights of a person that becomes a lien creditor had the security interest become enforceable before this act takes effect, the action is effective to perfect a security interest that attaches under this act within one (1) year after July 1, 2001. An attached security interest becomes unperfected one (1) year after July 1, 2001 unless the security interest becomes a perfected security interest under this act before the expiration of that period.
(b) Pre-effective-date filing. The filing of a financing statement before July 1, 2001 is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under this act.
(c) Pre-effective-date filing in jurisdiction formerly governing perfection. This act does not render ineffective an effective financing statement that, before July 1, 2001, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in former § 47-9-103. However, except as otherwise provided in subsections (d) and (e) and § 47-9-706, the financing statement ceases to be effective at the earlier of:
1. (1) the time the financing statement would have ceased to be effective under the law of the jurisdiction in which it is filed; or
2. (2) June 30, 2006.
(d) Continuation statement. The filing of a continuation statement after July 1, 2001 does not continue the effectiveness of the financing statement filed before July 1, 2001. However, upon the timely filing of a continuation statement after July 1, 2001 and in accordance with the law of the jurisdiction governing perfection as provided in Part 3, the effectiveness of a financing statement filed in the same office in that jurisdiction before July 1, 2001 continues for the period provided by the law of that jurisdiction.
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- 47-9-707(d)
(e) Application of subdivision (c)(2) to transmitting utility financing statement. Subdivision (c)(2) applies to a financing statement that, before July 1, 2001, is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in former § 47-9-103 only to the extent that Part 3 provides that the law of a jurisdiction other than the jurisdiction in which the financing statement is filed governs perfection of a security interest in collateral covered by the financing statement.
(f) Application of Part 5. A financing statement that includes a financing statement filed before July 1, 2001 and a continuation statement filed after July 1, 2001 is effective only to the extent that it satisfies the requirements of Part 5 for an initial financing statement.

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47-9-703(b)

§ 47-9-706. When initial financing statement suffices to continue effectiveness of financing statement.

(a) Initial financing statement in lieu of continuation statement. The filing of an initial financing statement in the office specified in § 47-9-501 continues the effectiveness of a financing statement filed before July 1, 2001, if:
1. (1) the filing of an initial financing statement in that office would be effective to perfect a security interest under this act;
2. (2) the pre-effective-date financing statement was filed in an office in another state or another office in this state; and
3. (3) the initial financing statement satisfies subsection (c).
(b) Period of continued effectiveness. The filing of an initial financing statement under subsection (a) continues the effectiveness of the pre-effective-date financing statement:
1. (1) if the initial financing statement is filed before July 1, 2001, for the period provided in former § 47-9-403 with respect to a financing statement; and
2. (2) if the initial financing statement is filed after July 1, 2001, for the period provided in § 47-9-515 with respect to an initial financing statement.
(c) Requirements for initial financing statement under subsection (a). To be effective for purposes of subsection (a), an initial financing statement must:
1. (1) satisfy the requirements of Part 5 for an initial financing statement;
2. (2) identify the pre-effective-date financing statement by indicating the office in which the financing statement was filed and providing the dates of filing and file numbers, if any, of the financing statement and of the most recent continuation statement filed with respect to the financing statement; and
3. (3) indicate that the pre-effective-date financing statement remains effective.
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§ 47-9-707. Amendment of pre-effective-date financing statement.

(a) Pre-effective date financing statement. In this section, “pre-effective-date financing statement” means a financing statement filed before July 1, 2001.
(b) Applicable law. After July 1, 2001, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or otherwise amend the information provided in, a pre-effective-date financing statement only in accordance with the law of the jurisdiction governing perfection as provided in Part 3. However, the effectiveness of a pre-effective-date financing statement also may be terminated in accordance with the law of the jurisdiction in which the financing statement is filed.
(c) Method of amending: general rule. Except as otherwise provided in subsection (d), if the law of this state governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after July 1, 2001 only if:
1. (1) the pre-effective-date financing statement and an amendment are filed in the office specified in § 47-9-501;
2. (2) an amendment is filed in the office specified in § 47-9-501 concurrently with, or after the filing in that office of, an initial financing statement that satisfies § 47-9-706(c); or
3. (3) an initial financing statement that provides the information as amended and satisfies § 47-9-706(c) is filed in the office specified in § 47-9-501.
(d) Method of amending: continuation. If the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement may be continued only under § 47-9-705(d) and (f) or § 47-9-706.
(e) Method of amending: additional termination rule. Whether or not the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement filed in this state may be terminated after July 1, 2001, by filing a termination statement in the office in which the pre-effective-date financing statement is filed, unless an initial financing statement that satisfies § 47-9-706(c) has been filed in the office specified by the law of the jurisdiction governing perfection as provided in part 3 of this chapter as the office in which to file a financing statement.

§ 47-9-708. Persons entitled to file initial financing statement or continuation statement.

A person may file an initial financing statement or a continuation statement under this part if:
1. (1) the secured party of record authorizes the filing; and
2. (2) the filing is necessary under this part:
  1. (A) to continue the effectiveness of a financing statement filed before July 1, 2001; or
  2. (B) to perfect or continue the perfection of a security interest.

§ 47-9-709. Priority.

(a) Law governing priority. This act determines the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before July 1, 2001, former Chapter 9 determines priority.
(b) Priority if security interest becomes enforceable under § 47-9-203. For purposes of § 47-9-322(a), the priority of a security interest that becomes enforceable under § 47-9-203 of this act dates from the time this act takes effect if the security interest is perfected under this act by the filing of a financing statement before July 1, 2001 which would not have been effective to perfect the security interest under former Chapter 9. This subsection (b) does not apply to conflicting security interests each of which is perfected by the filing of such a financing statement.

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§ 47-9-710. Applicability of § 47-9-503 requirements for name of an individual as debtor on financing statement.

(a) Section 47-9-503(a)(4), as it existed pursuant to chapter 648, § 1 of the Public Acts of 2008, applies to initial financing statements and amendments filed on or after May 1, 2008, but before June 13, 2008, that provide the name of an individual as debtor.
(b) If the initial financing statement or amendment provides the name of an individual debtor authorized by chapter 648 of the Public Acts of 2008, the following transition rules apply:
1. (1) The financing statement shall sufficiently provide the name of the debtor if:
  1. (A) The name is the name shown on the individual's driver license or identification license, as provided in § 47-9-503(a)(4); or
  2. (B) The debtor's name is otherwise sufficient as determined in accordance with any other method permitted by law, excluding § 47-9-503(a)(4) as it existed pursuant to chapter 648, § 1 of the Public Acts of 2008;
2. (2) If the financing statement does not sufficiently provide the name of the debtor as set forth in subdivision (b)(1), then the financing statement shall nevertheless be deemed to sufficiently provide the name of the debtor:
  1. (A) For a period of sixty (60) days from June 13, 2008; and
  2. (B) Thereafter, only if an amendment to the financing statement is filed within the sixty-day period to provide the name of the debtor as set forth in subdivision (b)(1); and
3. (3) A financing statement properly amended by an amendment filed pursuant to subdivision (b)(2) shall be deemed to have sufficiently provided the name of the debtor from and after its original filing date.

Part 8 Transition Provisions for 2010 UCC Amendments

§ 47-9-801. Effective date.

This act takes effect on July 1, 2013. References in this part to “this act” refer to the public chapter by which this act is added to this title. References in this part to “this chapter as it existed before amendment” or to an “unamended” provision, or other similar references, are to this chapter as in effect June 30, 2013.

§ 47-9-802. Savings clause.

(a) Pre-effective-date transactions or liens. Except as otherwise provided in this part, this act applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this act takes effect.
(b) Pre-effective-date proceedings. This act does not affect an action, case, or proceeding commenced before this act takes effect.

§ 47-9-803. Security interest perfected before effective date.

(a) Continuing perfection: perfection requirements satisfied. A security interest that is a perfected security interest immediately before this act takes effect is a perfected security interest under this chapter as amended by this act if, when this act takes effect, the applicable requirements for attachment and perfection under this chapter as amended by this act are satisfied without further action.
(b) Continuing perfection: perfection requirements not satisfied. Except as otherwise provided in § 47-9-805, if, immediately before this act takes effect, a security interest is a perfected security interest, but the applicable requirements for perfection under this chapter as amended by this act are not satisfied when this act takes effect, the security interest remains perfected thereafter only if the applicable requirements for perfection under this chapter as amended by this act are satisfied within one (1) year after this act takes effect.

§ 47-9-804. Security interest unperfected before effective date.

A security interest that is an unperfected security interest immediately before this act takes effect becomes a perfected security interest:
1. (1) Without further action, when this act takes effect if the applicable requirements for perfection under this chapter as amended by this act are satisfied before or at that time; or
2. (2) When the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.

§ 47-9-805. Effectiveness of action taken before effective date.

(a) Pre-effective-date filing effective. The filing of a financing statement before this act takes effect is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under this chapter as amended by this act.
(b) When pre-effective-date filing becomes ineffective. This act does not render ineffective an effective financing statement that, before this act takes effect, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in this chapter as it existed before amendment. However, except as otherwise provided in subsections (c) and (d) and § 47-9-806, the financing statement ceases to be effective:
1. (1) If the financing statement is filed in this state, at the time the financing statement would have ceased to be effective had this act not taken effect; or
2. (2) If the financing statement is filed in another jurisdiction, at the earlier of:
  1. (A) The time the financing statement would have ceased to be effective under the law of that jurisdiction; or
  2. (B) June 30, 2018.
(c) Continuation statement. The filing of a continuation statement after this act takes effect does not continue the effectiveness of a financing statement filed before this act takes effect. However, upon the timely filing of a continuation statement after this act takes effect and in accordance with the law of the jurisdiction governing perfection as provided in this chapter as amended by this act, the effectiveness of a financing statement filed in the same office in that jurisdiction before this act takes effect continues for the period provided by the law of that jurisdiction.
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(d) Application of subdivision (b)(2)(B) to transmitting utility financing statement. Subsection (b)(2)(B) applies to a financing statement that, before this act takes effect, is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in this chapter as it existed before amendment, only to the extent that this chapter as amended by this act provides that the law of a jurisdiction other than the jurisdiction in which the financing statement is filed governs perfection of a security interest in collateral covered by the financing statement.
(e) Application of part 5. A financing statement that includes a financing statement filed before this act takes effect and a continuation statement filed after this act takes effect is effective only to the extent that it satisfies the requirements of Part 5 of this chapter as amended by this act for an initial financing statement. A financing statement that indicates that the debtor is a decedent's estate indicates that the collateral is being administered by a personal representative within the meaning of § 47-9-503(a)(2) as amended by this act. A financing statement that indicates that the debtor is a trust or is a trustee acting with respect to property held in trust indicates that the collateral is held in a trust within the meaning of § 47-9-503(a)(3) as amended by this act.

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47-9-803(b)

§ 47-9-806. When initial financing statement suffices to continue effectiveness of financing statement.

(a) Initial financing statement in lieu of continuation statement. The filing of an initial financing statement in the office specified in § 47-9-501 continues the effectiveness of a financing statement filed before this act takes effect if:
1. (1) The filing of an initial financing statement in that office would be effective to perfect a security interest under this chapter as amended by this act;
2. (2) The pre-effective-date financing statement was filed in an office in another state; and
3. (3) The initial financing statement satisfies subsection (c).
(b) Period of continued effectiveness. The filing of an initial financing statement under subsection (a) continues the effectiveness of the pre-effective-date financing statement:
1. (1) If the initial financing statement is filed before this act takes effect, for the period provided in unamended § 47-9-515 with respect to an initial financing statement; and
2. (2) If the initial financing statement is filed after this act takes effect, for the period provided in § 47-9-515 as amended by this act with respect to an initial financing statement.
(c) Requirements for initial financing statement under subsection (a). To be effective for purposes of subsection (a), an initial financing statement must:
1. (1) Satisfy the requirements of Part 5 of this chapter as amended by this act for an initial financing statement;
2. (2) Identify the pre-effective-date financing statement by indicating the office in which the financing statement was filed and providing the dates of filing and file numbers, if any, of the financing statement and of the most recent continuation statement filed with respect to the financing statement; and
3. (3) Indicate that the pre-effective-date financing statement remains effective.
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§ 47-9-807. Amendment of pre-effective-date financing statement.

(a) Pre-effective-date financing statement. In this section, “pre-effective-date financing statement” means a financing statement filed before this act takes effect.
(b) Applicable law. After this act takes effect a person may add or delete collateral covered by, continue or terminate the effectiveness of, or otherwise amend the information provided in, a pre-effective-date financing statement only in accordance with the law of the jurisdiction governing perfection as provided in this chapter as amended by this act. However, the effectiveness of a pre-effective-date financing statement also may be terminated in accordance with the law of the jurisdiction in which the financing statement is filed.
(c) Method of amending: general rule. Except as otherwise provided in subsection (d), if the law of this state governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after this act takes effect only if:
1. (1) The pre-effective-date financing statement and an amendment are filed in the office specified in § 47-9-501;
2. (2) An amendment is filed in the office specified in § 47-9-501 concurrently with, or after the filing in that office of, an initial financing statement that satisfies § 47-9-806(c); or
3. (3) An initial financing statement that provides the information as amended and satisfies § 47-9-806(c) is filed in the office specified in § 47-9-501.
(d) Method of amending: continuation. If the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement may be continued only under § 47-9-805(c) and (e) or § 47-9-806.
(e) Method of amending: additional termination rule. Whether or not the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement filed in this state may be terminated after this act takes effect by filing a termination statement in the office in which the pre-effective-date financing statement is filed, unless an initial financing statement that satisfies § 47-9-806(c) has been filed in the office specified by the law of the jurisdiction governing perfection as provided in this chapter as amended by this act as the office in which to file a financing statement.

§ 47-9-808. Persons entitled to file initial financing statement or continuation statement.

A person may file an initial financing statement or a continuation statement under this part if:
1. (1) The secured party of record authorizes the filing; and
2. (2) The filing is necessary under this part:
  1. (A) To continue the effectiveness of a financing statement filed before this act takes effect; or
  2. (B) To perfect or continue the perfection of a security interest.

§ 47-9-809. Priority.

This act determines the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before this act takes effect, this chapter as it existed before amendment determines priority.

Chapter 10 Uniform Electronic Transactions

Part 1 Uniform Electronic Transactions Act

§ 47-10-101. Short title.

This chapter may be cited as the “Uniform Electronic Transactions Act.”

§ 47-10-102. Chapter definitions.

In this chapter:
1. (1) “Agreement” means the bargain of the parties in fact, as found in their language or inferred from other circumstances and from rules, regulations, and procedures given the effect of agreements under laws otherwise applicable to a particular transaction.
2. (2) “Automated transaction” means a transaction conducted or performed, in whole or in part, by electronic means or electronic records, in which the acts or records of one or both parties are not reviewed by an individual in the ordinary course of forming a contract, performing under an existing contract, or fulfilling an obligation required by the transaction.
3. (3) “Computer program” means a set of statements or instructions to be used directly or indirectly in an information processing system in order to bring about a certain result.
4. (4) “Contract” means the total legal obligation resulting from the parties' agreement as affected by this chapter and other applicable law.
5. (5) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
6. (6) “Electronic agent” means a computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual.
7. (7) “Electronic record” means a record created, generated, sent, communicated, received, or stored by electronic means.
8. (8) “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.
9. (9) “Governmental agency” means an executive, legislative, or judicial agency, department, board, commission, authority, institution, or instrumentality of the federal government, the state, a county, municipality, or other political subdivision of a state.
10. (10) “Information” means data, text, images, sounds, codes, computer programs, software, databases, or the like.
11. (11) “Information processing system” means an electronic system for creating, generating, sending, receiving, storing, displaying, or processing information.
12. (12) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, governmental agency, public corporation, or any other legal or commercial entity.
13. (13) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
14. (14) “Security procedure” means a procedure employed for the purpose of verifying that an electronic signature, record, or performance is that of a specific person or for detecting changes or errors in the information in an electronic record. The term includes a procedure that requires the use of algorithms or other codes, identifying words or numbers, encryption, callback or other acknowledgment procedures.
15. (15) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band, or Alaskan native village, which is recognized by federal law or formally acknowledged by a state.
16. (16) “Transaction” means an action or set of actions occurring between two (2) or more persons relating to the conduct of business, commercial, or governmental affairs.

§ 47-10-103. Scope.

(a) Except as otherwise provided in subsection (b), this chapter applies to electronic records and electronic signatures relating to a transaction.
(b) This chapter does not apply to a transaction to the extent it is governed by:
1. (1) A law governing the creation and execution of wills, codicils, or testamentary trusts; or
2. (2) Chapters 1-9 of this title, excepting §§ 47-1-107, 47-1-206, and chapters 2 and 2A of this title.
(c) This chapter applies to an electronic record or electronic signature otherwise excluded from the application of this chapter under subsection (b) to the extent it is governed by a law other than those specified in subsection (b).
(d) A transaction subject to this chapter is also subject to other applicable substantive law.

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§ 47-10-104. [Repealed]

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§ 47-10-105. Use of electronic records and electronic signatures — Variation by agreement.

(a) This chapter does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form.
(b) This chapter applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct.
(c) A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. The right granted by this subsection (c) may not be waived by agreement.
(d) Except as otherwise provided in this chapter, the effect of any of its provisions may be varied by agreement. The presence in certain provisions of this chapter of the words “unless otherwise agreed,” or words of similar import, does not imply that the effect of other provisions may not be varied by agreement.
(e) Whether an electronic record or electronic signature has legal consequences is determined by this chapter and other applicable law.

§ 47-10-106. Construction and application.

This chapter must be construed and applied to:
1. (1) Facilitate electronic transactions consistent with other applicable law;
2. (2) Be consistent with reasonable practices concerning electronic transactions and with the continued expansion of those practices; and
3. (3) Effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

§ 47-10-107. Legal recognition of electronic records, electronic signatures, and electronic contracts.

(a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.
(c) If a law requires a record to be in writing, an electronic record satisfies the law.
(d) If a law requires a signature, an electronic signature satisfies the law.

§ 47-10-108. Provision of information in writing — Presentation of records.

(a) If parties have agreed to conduct a transaction by electronic means and a law requires a person to provide, send, or deliver information in writing to another person, the requirement is satisfied if the information is provided, sent, or delivered, as the case may be, in an electronic record capable of retention by the recipient at the time of receipt. An electronic record is not capable of retention by the recipient if the sender or its information processing system inhibits the ability of the recipient to print or store the electronic record.
(b) If a law other than this chapter requires a record (i) to be posted or displayed in a certain manner, (ii) to be sent, communicated, or transmitted by a specified method, or (iii) to contain information that is formatted in a certain manner, the following rules apply:
1. (1) The record must be posted or displayed in the manner specified in the other law;
2. (2) Except as otherwise provided in subsection (d)(2), the record must be sent, communicated, or transmitted by the method specified in the other law; and
3. (3) The record must contain the information formatted in the manner specified in the other law.
(c) If a sender inhibits the ability of a recipient to store or print an electronic record, the electronic record is not enforceable against the recipient.
(d) The requirements of this section may not be varied by agreement, but:
1. (1) To the extent a law other than this chapter requires information to be provided, sent, or delivered in writing but permits that requirement to be varied by agreement, the requirement under subsection (a) that the information be in the form of an electronic record capable of retention may also be varied by agreement; and
2. (2) A requirement under a law other than this chapter to send, communicate, or transmit a record by first class mail, postage prepaid or by regular United States mail, may be varied by agreement to the extent permitted by the other law.

§ 47-10-109. Attribution and effect of electronic record and electronic signature.

(a) An electronic record or electronic signature is attributable to a person as if it were the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to whom the electronic record or electronic signature was attributable.
(b) The effect of an electronic record or electronic signature attributed to a person under subsection (a) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties' agreement, if any, and otherwise as provided by law.

§ 47-10-110. Effect of change or error.

If a change or error in an electronic record occurs in a transmission between parties to a transaction, the following rules apply:
1. (1) If the parties have agreed to use a security procedure to detect changes or errors and one party has conformed to the procedure, but the other party has not, and the nonconforming party would have detected the change or error had that party also conformed, the conforming party may avoid the effect of the changed or erroneous electronic record;
2. (2) In an automated transaction involving an individual, the individual may avoid the effect of an electronic record that resulted from an error made by the individual in dealing with the electronic agent of another person if the electronic agent did not provide an opportunity for the prevention or correction of the error and, at the time the individual learns of the error, the individual:
  1. (A) Promptly notifies the other person of the error and that the individual did not intend to be bound by the electronic record received by the other person;
  2. (B) Takes reasonable steps, including steps that conform to the other person's reasonable instructions, to return to the other person or, if instructed by the other person, to destroy the consideration received, if any, as a result of the erroneous electronic record; and
  3. (C) Has not used or received any benefit or value from the consideration, if any, received from the other person;
3. (3) If neither paragraph (1) nor paragraph (2) applies, the change or error has the effect provided by other law, including the law of mistake, and the parties' contract, if any; and
4. (4) Paragraphs (2) and (3) may not be varied by agreement.

§ 47-10-111. Notarization and acknowledgment.

If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to or logically associated with the signature or record.

§ 47-10-112. Retention of electronic records — Originals.

(a) If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which:
1. (1) Accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and
2. (2) Remains accessible for later reference.
(b) A requirement to retain a record in accordance with subsection (a) does not apply to any information the sole purpose of which is to enable the record to be sent, communicated, or received.
(c) A person may satisfy subsection (a) by using the services of another person if the requirements of that subsection are satisfied.
(d) If a law requires a record to be presented or retained in its original form, or provides consequences if the record is not presented or retained in its original form, that law is satisfied by an electronic record retained in accordance with subsection (a).
(e) If a law requires retention of a check, that requirement is satisfied by retention of an electronic record of the information on the front and back of the check in accordance with subsection (a).
(f) A record retained as an electronic record in accordance with subsection (a) satisfies a law requiring a person to retain a record for evidentiary, audit, or like purposes, unless a law enacted after July 1, 2001, specifically prohibits the use of an electronic record for the specified purpose.
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(g) This section does not preclude a governmental agency of this state from specifying additional requirements for the retention of a record subject to the agency's jurisdiction.

§ 47-10-113. Admissibility in evidence.

In a proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form.

§ 47-10-114. Automated transaction.

In an automated transaction, the following rules apply:
1. (1) A contract may be formed by the interaction of electronic agents of the parties, even if no individual was aware of or reviewed the electronic agents' actions or the resulting terms and agreements;
2. (2) A contract may be formed by the interaction of an electronic agent and an individual, acting on the individual's own behalf or for another person, including by an interaction in which the individual performs actions that the individual is free to refuse to perform and which the individual knows or has reason to know will cause the electronic agent to complete the transaction or performance; and
3. (3) The terms of the contract are determined by the substantive law applicable to it.

§ 47-10-115. Time and place of sending and receipt.

(a) Unless otherwise agreed between the sender and the recipient, an electronic record is sent when it:
1. (1) Is addressed properly or otherwise directed properly to an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record;
2. (2) Is in a form capable of being processed by that system; and
3. (3) Enters an information processing system outside the control of the sender or of a person that sent the electronic record on behalf of the sender or enters a region of the information processing system designated or used by the recipient which is under the control of the recipient.
(b) Unless otherwise agreed between a sender and the recipient, an electronic record is received when:
1. (1) It enters an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record; and
2. (2) It is in a form capable of being processed by that system.
(c) Subsection (b) applies even if the place the information processing system is located is different from the place the electronic record is deemed to be received under subsection (d).
(d) Unless otherwise expressly provided in the electronic record or agreed between the sender and the recipient, an electronic record is deemed to be sent from the sender's place of business and to be received at the recipient's place of business. For purposes of this subsection (d), the following rules apply:
1. (1) If the sender or recipient has more than one (1) place of business, the place of business of that person is the place having the closest relationship to the underlying transaction.
2. (2) If the sender or the recipient does not have a place of business, the place of business is the sender's or recipient's residence, as the case may be.
(e) An electronic record is received under subsection (b) even if no individual is aware of its receipt.
(f) Receipt of an electronic acknowledgment from an information processing system described in subsection (b) establishes that a record was received but, by itself, does not establish that the content sent corresponds to the content received.
(g) If a person is aware that an electronic record purportedly sent under subsection (a), or purportedly received under subsection (b), was not actually sent or received, the legal effect of the sending or receipt is determined by other applicable law. Except to the extent permitted by the other law, the requirements of this subsection (g) may not be varied by agreement.

§ 47-10-116. Transferable records.

(a) In this section, “transferable record” means an electronic record that:
1. (1) Would be a note under chapter 3 of this title, or a document under chapter 7 of this title, if the electronic record were in writing; and
2. (2) The issuer of the electronic record expressly has agreed that it is a transferable record.
(b) A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.
(c) A system satisfies subsection (b), and a person is deemed to have control of a transferable record, if the transferable record is created, stored, and assigned in such a manner that:
1. (1) A single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;
2. (2) The authoritative copy identifies the person asserting control as:
  1. (A) The person to which the transferable record was issued; or
  2. (B) If the authoritative copy indicates that the transferable record has been transferred, the person to whom the transferable record was most recently transferred;
3. (3) The authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
4. (4) Copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
5. (5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
6. (6) Any revision of the authoritative copy is readily identifiable as authorized or unauthorized.
(d) Except as otherwise agreed, a person having control of a transferable record is the holder, as defined in § 47-1-201, of the transferable record and has the same rights and defenses as a holder of an equivalent record or writing under chapters 1-9 of this title, including, if the applicable statutory requirements under § 47-3-302(a), § 47-7-501, or § 47-9-308 are satisfied, the rights and defenses of a holder in due course, a holder to which a negotiable document of title has been duly negotiated, or a purchaser, respectively. Delivery, possession, and endorsement are not required to obtain or exercise any of the rights under this subsection (d).
(e) Except as otherwise agreed, an obligor under a transferable record has the same rights and defenses as an equivalent obligor under equivalent records or writings under chapters 1-9 of this title.
(f) If requested by a person against whom enforcement is sought, the person seeking to enforce the transferable record shall provide reasonable proof that the person is in control of the transferable record. Proof may include access to the authoritative copy of the transferable record and related business records sufficient to review the terms of the transferable record and to establish the identity of the person having control of the transferable record.

§ 47-10-117. Creation and retention of electronic records and conversion of written records by governmental agencies.

(a) Except as may otherwise be specifically required or prohibited by applicable law, the information systems council established under § 4-3-5501, shall determine whether, and the extent to which, this state or any of its departments or agencies will create and retain electronic records and convert written records to electronic records.
(b) Except as may otherwise be specifically required or prohibited by applicable law, and subject to § 47-10-120, all local governmental public officials, including but not limited to officials of counties, municipalities, utility districts, other local governmental entities and those offices enumerated under § 8-22-101, shall themselves determine whether, and the extent to which, they will create and retain electronic records and convert written records to electronic records.
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(c) In addition to any requirements established by this chapter, any governmental agency creating and retaining records in electronic format shall do so in accordance with the standards and limitations established in § 10-7-121. Likewise, any county official providing computer access and remote electronic access to governmental records shall do so in accordance with the standards and limitations for such practice established in § 10-7-123. Nothing in this chapter shall be construed as relieving a county official from complying with the provisions of title 10, chapter 7, part 4, regarding the retention of county public records, specifically the provisions of § 10-7-404(d), which requires approval of the county public records commission prior to the destruction of original documents which have been transferred to computer storage media.

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§ 47-10-118. Acceptance and distribution of electronic records by governmental agencies.

(a) Except as may otherwise be specifically required or prohibited by applicable law, and except as otherwise provided in § 47-10-112(f):
1. (1) The information systems council established under § 4-3-5501, shall further determine whether, and the extent to which, this state or any of its agencies and departments will send and accept electronic records and electronic signatures to and from other persons and otherwise create, generate, communicate, store, process, use, and rely upon electronic records and electronic signatures; and
2. (2) Subject to § 47-10-120, any local governmental public official, including but not limited to officials of counties, municipalities, utility districts, other local governmental entities and those offices enumerated under § 8-22-101, making determinations under § 47-10-117(b), shall each themselves further determine whether, and the extent to which, they will send and accept electronic records and electronic signatures to and from other persons and otherwise create, generate, communicate, store, process, use, and rely upon electronic records and electronic signatures.
(b) To the extent that any governmental agency uses electronic records or electronic signatures under subsection (a), the information systems council established under § 4-3-5501, giving due consideration to security, may so specify as set forth below:
1. (1) The manner and format in which the electronic records must be created, generated, sent, communicated, received, and stored and the systems established for those purposes;
2. (2) If electronic records must be signed by electronic means, the type of electronic signature required, the manner and format in which the electronic signature must be affixed to the electronic record, and the identity of, or criteria that must be met by, any third party used by a person filing a document to facilitate the process;
3. (3) Control processes and procedures as appropriate to ensure adequate preservation, disposition, integrity, security, confidentiality, and auditability of electronic records; and
4. (4) Any other required attributes for electronic records which are specified for corresponding non-electronic records or reasonably necessary under the circumstances.
(c) Except as otherwise provided in § 47-10-112(f), this chapter does not require a governmental agency of this state to use or permit the use of electronic records or electronic signatures.

§ 47-10-119. Filing of pre-implementation statement and post-implementation review.

(a) Any local governmental public official including, but not limited to, officials of counties, municipalities, utility districts, other local governmental entities and those offices enumerated under § 8-22-101, implementing an electronic business system that provides for the sending and receiving of electronic records that contain electronic signatures and/or authorizations shall file a statement with the comptroller of the treasury at least thirty (30) days prior to offering such service. The statement shall contain the following information:
1. (1) A description of the computer hardware and software to be utilized;
2. (2) A description of the policies and procedures related to the implementation of the system;
3. (3) Documentation of the internal controls that will ensure the integrity of the system;
4. (4) A description of the local governmental public official's personnel who will be responsible for the implementation of the system;
5. (5) A description of the types of records and transactions to be electronically communicated, as well as a description of the transaction and/or record authorization process including a description of any electronic signatures to be used;
6. (6) The estimated cost of the system including development and implementation costs; and
7. (7) The expected benefits and/or the estimated cost savings, if any, of conducting business by electronic means.
(b) A local governmental public official who implements an electronic business system shall provide to the comptroller of the treasury a post-implementation review of the system between twelve (12) and eighteen (18) months after the date a statement described in this section has been filed with the comptroller. The review shall include:
1. (1) An assessment of the system by the local governmental public official;
2. (2) Responses from a survey of users of the system; and
3. (3) Any recommendations for improvements to the electronic business system.

§ 47-10-120. Interoperability.

The information systems council may encourage and promote consistency and interoperability with similar requirements adopted by other governmental agencies of this and other states, and the federal government and nongovernmental persons interacting with governmental agencies of this state. If appropriate, those standards may specify differing levels of standards from which governmental agencies of this state may choose in implementing the most appropriate standard for a particular application. Any deviation from the standards established by the information systems council by a local governmental public official, including, but not limited to, officials of counties, municipalities, utility districts, other local governmental entities and those offices enumerated under § 8-22-101, shall be subject to the approval of the comptroller of the treasury.

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§ 47-10-121. Severability clause.

If any provision of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

§ 47-10-122. Relationship to the federal E-Sign Act.

(a) Except as provided in subsection (b), this chapter is intended to supercede, to the fullest possible extent, § 101 of the Electronic Signatures in Global and National Commerce Act, United States Public Law 106-229, as permitted under § 102 of that act.
(b) No provision of the Electronic Transaction Act, compiled in this chapter, shall be construed to limit, modify or supercede the requirements of § 101(c), (d) or (e), or to authorize the electronic delivery of any notice of the type described in § 103(b), which is codified in 15 U.S.C. § 7003 of the Electronic Signatures in Global and National Commerce Act.

§ 47-10-123. Relevancy and construction of official commentary.

In any dispute as to the proper construction of one (1) or more sections of the Uniform Electronic Transactions Act, the official comments pertaining to the corresponding sections of the official text, as adopted by the National Conference of Commissioners on Uniform State Laws, and as in effect on July 1, 2001, shall constitute evidence of the purposes and policies underlying such sections unless:
1. (1) The sections of this chapter that are applicable to the dispute differ materially from the sections of the official text that would be applicable thereto; or
2. (2) The official comments are inconsistent with the plain meaning of the applicable sections of this chapter.

Part 2 Distributed ledger technology

§ 47-10-201. Part definitions.

As used in this part:
1. (1) “Distributed ledger technology” means any distributed ledger protocol and supporting infrastructure, including blockchain, that uses a distributed, decentralized, shared, and replicated ledger, whether it be public or private, permissioned or permissionless, and which may include the use of electronic currencies or electronic tokens as a medium of electronic exchange; and
2. (2) “Smart contract” means an event-driven computer program, that executes on an electronic, distributed, decentralized, shared, and replicated ledger that is used to automate transactions, including, but not limited to, transactions that:
  1. (A) Take custody over and instruct transfer of assets on that ledger;
  2. (B) Create and distribute electronic assets;
  3. (C) Synchronize information; or
  4. (D) Manage identity and user access to software applications.

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§ 47-10-202. Cryptographic signature — Electronic records and forms.

(a) A cryptographic signature that is generated and stored through distributed ledger technology is considered to be in an electronic form and to be an electronic signature.
(b) A record or contract that is secured through distributed ledger technology is considered to be in an electronic form and to be an electronic record.
(c) Smart contracts may exist in commerce. No contract relating to a transaction shall be denied legal effect, validity, or enforceability solely because that contract is executed through a smart contract.
(d) Notwithstanding any other law, a person that, in or affecting interstate or foreign commerce, uses distributed ledger technology to secure information that the person owns or has the right to use retains the same rights of ownership or use with respect to that information as before the person secured the information using distributed ledger technology. This subsection (d) does not apply to the use of distributed ledger technology to secure information in connection with a transaction to the extent that the terms of the transaction expressly provide for the transfer of rights of ownership or use with respect to that information.
(e) No implication is made by, and no inference may be drawn from, the enactment of this part as to whether technologies not defined in § 47-10-201 that secure signatures, records, or contracts are considered to be in an electronic form or to be an electronic signature or electronic record, as applicable.

Chapter 11 Retail Installment Sales

§ 47-11-101. Short title.

This chapter may be cited as the “Retail Installment Sales Act.”

§ 47-11-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Cash sale price” means the price for which the seller would have sold or furnished to the buyer, and the buyer would have bought or obtained from the seller, the goods or services which are the subject matter of the retail installment transaction, if such sale had been a sale for cash. The cash sale price may include any applicable taxes and charges for delivery, installation, servicing, repairs, alterations or improvements;
2. (2) “Goods” means all personalty, including certificates issued by a retail seller exchangeable for personalty or services, but not including other choses in action, personalty sold for commercial or industrial use, money, motor vehicles, or mobile homes. “Goods” includes goods which, at the time of the sale or subsequently, are to be so affixed to real property as to become a part thereof, whether or not severable therefrom;
3. (3) “Official fees” means:
  1. (A) The fees prescribed by law for filing, recording or otherwise perfecting or releasing or satisfying any title or lien retained or taken by seller in connection with a retail installment transaction; or
  2. (B) Premiums payable for insurance in lieu of such filing, recording or otherwise perfecting any title or lien retained or taken by seller in connection with a retail installment transaction, if such premium does not exceed the fees and charges described in subdivision (3)(A) which would otherwise be payable;
4. (4) “Retail buyer” or “buyer” means a person who buys goods or obtains services from a retail seller in a retail installment transaction and not principally for the purpose of resale;
5. (5) “Retail charge agreement” means an instrument or instruments prescribing the terms of retail installment transactions which may be made thereafter from time to time pursuant thereto, under which the buyer's total unpaid balance, whenever incurred, is payable in installments over a period of time and under the terms of which a time price differential, as defined in subdivision (10), is to be computed in relation to the buyer's unpaid balance from time to time;
6. (6) “Retail installment contract” or “contract” means an instrument or instruments evidencing one (1) or more retail installment transactions entered into in this state pursuant to which a buyer promises to pay in installments for goods or services. It does not include a retail charge agreement or an instrument evidencing a sale pursuant thereto, nor shall it include a rental-purchase agreement as defined in the Tennessee Rental-Purchase Agreement Act, chapter 18, part 6 of this title;
7. (7) “Retail installment transaction” or “transaction” means a contract to sell or furnish or the sale of or the furnishing of goods or services by a retail seller to a retail buyer pursuant to a retail installment contract or a retail charge agreement. It does not include a rental-purchase agreement as defined in the Tennessee Rental-Purchase Agreement Act, chapter 18, part 6 of this title;
8. (8) “Retail seller” or “seller” means a person regularly engaged in, and whose business consists to a substantial extent of, selling goods to a retail buyer;
9. (9) “Services” means work or labor furnished, whether or not furnished in connection with the delivery, installation, servicing, repair or improvement of goods and includes repairs, alterations or improvements upon or in connection with real property; and
10. (10) “Time price differential” means the amount, however denominated or expressed, which the retail buyer contracts to pay or pays for the privilege of purchasing goods or services to be paid for by the buyer in installments. It does not include the amounts, if any, charged for insurance premiums, delinquency charges, attorney's fees, court costs, or official fees.

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§ 47-11-103. Retail installment contracts.

(a) Form and Contents.
1. (1) Every retail installment contract shall be in writing and shall set forth the following:
  1. (A) The cash price and identification of the goods or services;
  2. (B) The amount of the buyer's down payment, if any, whether made wholly or in part in money or goods;
  3. (C) The difference between subdivisions (a)(1)(A) and (B);
  4. (D) The amount, if any, of official fees and the costs, if any, to the buyer of any insurance the buyer has agreed to procure, if the seller has agreed to purchase the insurance and charge the buyer for the cost thereof;
  5. (E) The principal balance owed on the retail installment contract, which is the sum of subdivisions (a)(1)(C) and (D);
  6. (F) The amount of the time price differential; and
  7. (G) The time balance owed by the buyer to the seller, which is the sum of subdivisions (a)(1)(E) and (F), and except as hereinafter provided, the maximum number of installment payments required and the amount and date of each payment necessary to pay such time balance.
2. (2) The foregoing subdivisions need not be stated in the sequence or order set forth in subdivision (a)(1), and additional items may be included to explain the computations made in determining the amount to be paid by the buyer.
(b) Payments.
1. (1) The maximum number of payments and the amount and date of each payment need not be separately listed if the payments are stated in terms of a series of scheduled amounts, and in such case the amount of the scheduled final payment may be stated as the remaining unpaid balance.
2. (2) The initial date for the payment of the first installment may be a calendar date or may refer to the time of delivery or installation.
(c) Document or Documents Comprising. A retail installment contract need not be contained in a single document. If the contract is contained in more than one (1) document, then one (1) such document may be an original document executed by the retail buyer applicable to purchases of goods or services to be made by the retail buyer from time to time and, in such case, such document, together with the sales slip, account book or other written statement relating to each purchase, a copy of all of which shall be delivered to the buyer, shall set forth all of the information required by subsection (a) and shall constitute the retail installment contract for each such purchase.
(d) Time Price Differential.
1. (1) Notwithstanding any other law, the seller or other holder under a retail installment contract may charge, receive, and collect a time price differential which shall not exceed eleven dollars and seventy-five cents ($11.75) per one hundred dollars ($100) per year on the principal balance of each transaction.
2. (2) The time price differential under this subsection (d) shall be computed on the principal balance of each transaction, as determined under this section, on contracts payable in successive monthly payments substantially equal in amount from the date of the contract to the maturity of the final payment, notwithstanding that the total time balance thereof is required to be paid in one (1) or more deferred payments. When a retail installment contract provides for payment other than in substantially equal successive monthly payments, the time price differential shall not exceed the amount which will provide the same return as is permitted on substantially equal monthly payment contracts, having due regard for the schedule of payments. The time price differential may be computed on the basis of a full month for any fractional portion of a month in excess of fifteen (15) days. A minimum time price differential of twelve dollars and fifty cents ($12.50) may be charged, received and collected on each such contract.
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(e) Copy of Contract, Insurance Policy Given Buyer.
1. (1) The seller shall deliver or mail to the buyer, at the buyer's address as specified by the buyer, a copy of the retail installment contract prior to the date on which the first payment is due under the contract. An acknowledgment of the delivery thereof contained in the body of an instrument signed by the buyer shall be presumptive proof of delivery in any action.
2. (2) The seller under any retail installment contract shall, prior to the date on which the first payment is due thereunder, deliver or mail to the buyer, at the buyer's aforementioned address, any policy of insurance the seller has agreed to purchase in connection therewith, or in lieu of such policy, a certificate of such insurance.
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(f) Receipt Given for Payment; Schedule of Payments.
1. (1) A buyer shall be given a receipt for any payment when made in cash.
2. (2) At any time after the execution of a contract, but not later than two (2) months after the last payment thereunder, the holder shall, upon written request of the buyer, give or forward to the buyer a written statement of the dates and amounts of payments and the total amount, if any, unpaid under the contract. Such a statement shall be supplied by the holder once without charge; if any additional statement is requested by the buyer, the holder shall supply such statement to the buyer at a charge not exceeding one dollar ($1.00) for each additional statement so supplied. “Holder” in this section means the retail seller unless the seller has assigned the contract, in which case “holder” means the assignee of such contract at the time of the determination.
(g) Payment in Full Acknowledged by Instrument. After payment of all sums for which the buyer is obligated under a contract, and upon written demand made by the buyer, the holder shall deliver or mail to the buyer, at the buyer's last known address, one (1) or more good and sufficient instruments to acknowledge payment in full and shall release all security in the goods.
(h) Prepayment; Refund Credit. Notwithstanding the provisions of any retail installment contract to the contrary, any buyer may prepay in full at any time before maturity the unpaid balance of any retail installment contract, and in so paying such unpaid balance shall receive a refund credit thereon for such anticipation of payments. The amount of such refund shall represent at least as great a proportion of the time price differential, after first deducting therefrom an acquisition cost not to exceed the sum of fifteen dollars ($15.00), as the sum of the monthly time balances beginning one (1) month after prepayment is made bears to the sum of all the monthly time balances under the schedule of payments in the contract. Where the amount of such refund credit is less than one dollar ($1.00), no refund need be made.
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§ 47-11-104. Retail charge agreements.

(a) Form and Contents; Delivery to Buyer.
1. (1) Every retail charge agreement shall be in writing and shall be signed by the retail buyer.
2. (2) A retail charge agreement shall be deemed to be signed or accepted by the retail buyer if, after a request for a retail charge account, such agreement or application for a retail charge account is in fact signed by the retail buyer, or if that retail charge account is used by the retail buyer or another person authorized by the retail buyer to use the account. The agreement shall provide that it shall not become effective unless and until the seller or assignee has provided the disclosures required pursuant to the federal Truth-in-Lending Act, compiled in 15 U.S.C. § 1601 et seq., the retail buyer or a person authorized by the retail buyer uses the retail charge account, and the seller or assignee extends credit to the retail buyer for that transaction on the retail charge account.
3. (3) A copy of any such agreement executed on or after March 15, 1961, shall at the request of the buyer be delivered or mailed to the retail buyer by the retail seller prior to the date on which the first payment is due under the agreement. An acknowledgment of the delivery thereof contained in the body of the agreement shall be presumptive proof of delivery in any action.
4. (4) All agreements executed on or after March 15, 1961, shall state the amount of, or the method of calculating, the time price differential to be charged and paid pursuant thereto or shall state that a time price differential not in excess of that permitted by this chapter will be charged and paid accordingly.
(b) Monthly Statements; Payment in Full Privilege.
1. (1) The retail seller under a retail charge agreement shall promptly supply the retail buyer under such agreement with a statement as of the end of each monthly period (which need not be a calendar month) or other regular period agreed upon by the retail seller and the retail buyer, in which there is any unpaid balance thereunder, which shall recite the following:
  1. (A) The unpaid balance under the retail charge agreement at the beginning and end of the period;
  2. (B) Unless otherwise furnished by the retail seller to the retail buyer by sales slip, memorandum, or otherwise, an identification of the goods or services purchased during the period, the cash price, and the date of each purchase;
  3. (C) The payments made by the retail buyer to the retail seller and any other credits to the retail buyer during the period;
  4. (D) The amount of the time price differential, if any; and
  5. (E) A legend to the effect that the retail buyer may at any time pay the total balance, if such legend is not stated in the original contract signed by the buyer.
2. (2) The subdivisions need not be stated in the sequence or order set forth above, and additional items may be included to explain the computations made in determining the amount to be paid by the retail buyer.
(c) Time Price Differential. Notwithstanding any other law, the seller and assignee under a retail charge agreement may charge, receive and collect a time price differential which shall not exceed seventeen and one-half cents (17½¢) per ten dollars ($10.00) per month, computed from month to month (which need not be a calendar month) or other regular period, on all amounts unpaid from time to time under the agreement. The time price differential under this subsection (c) may be computed for all unpaid balances within a range of not in excess of ten dollars ($10.00) on the basis of the median amount within such range, if as so computed such time price differential is applied to all unpaid balances within such range. A minimum time price differential not in excess of seventy cents (70¢) per month may be charged, received and collected under each such agreement.

§ 47-11-105. Mail order and telephone sales.

(a) Retail installment contracts and retail charge agreements negotiated and entered into by mail or telephone without personal solicitation by salespersons or other representatives of the seller, where a catalog of the seller or other printed solicitation of business, which is distributed and made available generally to the public, clearly sets forth the cash price and other terms of sales to be made through such medium, may be made as provided in this section.
(b)
1. (1) All of the provisions of this chapter apply to such sales, except that the seller shall not be required to deliver a copy of the contract to the buyer as provided in § 47-11-103(e) and, if the contract when received by the seller contains any blank spaces, the seller may insert in the appropriate blank space the amounts of money and other terms which are set forth in the seller's catalog or other printed solicitation which is then in effect.
2. (2) In lieu of sending the buyer a copy of the contract as provided in § 47-11-103(e), the seller shall furnish to the buyer a written statement of any items inserted in the blank spaces in the contract received from the buyer.

§ 47-11-106. Transfer of contracts.

Any retail seller may assign, pledge, hypothecate, or otherwise transfer a retail installment contract or retail charge agreement to any person, firm, or corporation on such terms and conditions and for such price as may be mutually agreed upon.

§ 47-11-107. Penalty for violations — Liquidated damages.

(a) An intentional and willful violation of this chapter is a Class C misdemeanor.
(b) In case of an intentional failure to comply with this chapter, or in case the seller shall permit the buyer to sign a contract containing blank spaces not permitted by this chapter, the buyer shall have a right to recover from the person committing such violation, or to set off or counterclaim in any action by such person to enforce a contract or agreement, as liquidated damages, an amount equal to the whole of the original time balance in a contract, and all amounts payable under an agreement with respect to the transaction or transactions to which such violation pertains, together with reasonable attorney's fees.
(c) In case of any other failure to comply with this chapter, the buyer shall have a right to recover from the person committing such violation, or to set off or counterclaim in any action by such person to enforce a contract or agreement, as liquidated damages, an amount equal to two (2) times the time price differential charged to the buyer, together with reasonable attorney's fees.
(d) Notwithstanding this section, no person shall be subject to any penalty for any failure to comply with any provision of this chapter until the retail buyer has notified such person in writing of such failure and unless within thirty (30) days after such notice such failure is not corrected by such person.

§ 47-11-108. Waiver of provisions unenforceable.

Any waiver by the retail buyer of any provisions of this chapter or of any remedies granted to the buyer by this chapter shall be unenforceable and void.

§ 47-11-109. [Obsolete]

§ 47-11-110. Transactions do not constitute loans.

(a) A “retail installment transaction,” as defined in § 47-11-102, or any other conditional sales contract or other agreement covering the time sale of personal property or services, and the assignment thereof, and the business of selling such personal property and services on a time payment basis, and the business of purchasing or acquiring such transactions, contracts, or agreements, whether or not regulated under this chapter, shall not be deemed to be loans or forebearances of money or things of value or the making of same, nor shall they be regulated by or subject to title 45, chapter 5, parts 1-4.
(b) “Personal property” and “services,” as used in this section, include all personal property and services, whether or not purchased for commercial or industrial use, and whether or not such personal property is affixed or to be affixed to real property so as to become a part thereof, whether or not severable from such real property.

§ 47-11-111. Credit life insurance added to retail installment contracts — Authorization required.

(a) The seller under any retail installment contract shall have no authority to collect any fees or charges for a policy of credit life insurance issued in connection with property purchased under a retail installment contract unless the consumer has specifically elected, evidenced by the consumer's signature on such contract, to authorize the addition of the policy of credit life insurance.
(b) If the consumer did not authorize the purchase of such insurance, the consumer shall notify the seller of any unauthorized charges for such insurance that are imposed under the retail installment contract within three (3) months of the initial billing for such insurance.
(c) If the consumer notifies the seller during the three-month period that such consumer did not authorize the purchase of such insurance and the seller cannot provide proof of authorization by such consumer, the seller shall refund an amount equal to a minimum of three (3) months' charges for such insurance, including a refund of any penalty or interest assessed with respect to such charge, if any.
(d) If the consumer notifies the seller during the three-month period that such consumer did not authorize the services and the seller is able to prove authorization by such consumer, no refund shall be issued by the seller.

Chapter 12 Discharge of Sureties

§ 47-12-101. Notice requiring creditor to sue — Creditor's inaction.

(a) When any surety by bill, bond, covenant, or nonnegotiable note for the payment of money or note for specific articles, other than the surety of a guardian, executor, administrator, or public officer, or guarantor of negotiable paper, apprehends that the principal is likely to become insolvent, or to migrate from the state, without previously discharging the debt or obligation, the surety may, if the debt or security be due, by notice in writing, require the creditor forthwith to put it to suit.
(b) Unless, within thirty (30) days thereafter, the creditor commences an action, and proceeds with due diligence in the ordinary course of law to recover judgment for the debt or obligation, and by execution to make the amount due thereon, the creditor shall forfeit the right which the creditor would otherwise have to recover it from the surety.

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§ 47-12-102. Proof of notice.

The surety shall prove by two (2) witnesses the service on the creditor of a copy of the notice required by § 47-12-101.

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47-12-103

§ 47-12-103. Death of parties.

Sections 47-12-101 and 47-12-102 shall extend to the representatives of the parties in case of the death of either, or both.

§ 47-12-104. Assignor or endorser.

The assignor or endorser of any such bond, bill, or note, may pursue the same course with like effect in order to discharge such assignor or endorser from liability to the assignee of the bond, bill, or note.

§ 47-12-105. Creditor's rights against debtor preserved.

The rights and remedies of the creditor against the principal debtor shall be in no way affected by this chapter.

§ 47-12-106. Stay of execution.

When the principal and surety, or endorser, are sued, and the execution is stayed without the request or consent of the surety or endorser, the stayor shall be liable, in default of the principal debtor, to pay the debt and costs of judgment and in priority to the first surety or endorser, unless the first surety or endorser specially and in writing joined with the debtor in procuring the stay.

§ 47-12-107. Continuing guaranty or suretyship agreements — Future obligations.

(a) Notwithstanding any law to the contrary, no continuing guaranty or suretyship agreement which guarantees the performance of all present and future obligations shall be enforceable against a surety unless the individual or organization agrees in writing to guarantee the future obligation; provided, that no additional writing or guarantee shall be required, at the time of the advance, for advances which are permitted pursuant to the terms of the guaranty or suretyship agreement.
(b) This section only applies when the indebtedness of the principal debtor arises from personal obligations, and do not apply when the indebtedness arises from commercial obligations.

Chapter 13 Assignments for Benefit of Creditors

§ 47-13-101. Trustees or assignees for creditors, etc. — Bond — Oath.

Every trustee or assignee to whom property exceeding the value of five hundred dollars ($500) is conveyed in trust for the benefit of creditors, sureties, or other persons, unless by them released, in writing, from the obligations hereinafter prescribed, before entering upon the discharge of such trustee's or assignee's duty, shall give bond, with two (2) or more good and sufficient sureties, or one (1) corporate surety, in an amount equal to the value of the property mentioned in the deed or assignment, payable to the state of Tennessee, conditioned for the faithful performance of all the duties imposed upon the trustee or assignee by law and by the terms of the deed or assignment, and shall take and subscribe, before the person performing the duties of the county clerk of the county in which the trustee or assignee resides, an oath to the effect that the trustee or assignee will:
1. (1) Honestly and faithfully execute and perform all the duties imposed upon such trustee or assignee by law and by the deed or assignment;
2. (2) Cause to be made a full, true, and perfect inventory of the goods, chattels, lands, or other assets, all and singular, contained in the trust deed or assignment which have or may come into the trustee's or assignee's hands or into the hands of any other person for such trustee or assignee; and
3. (3) Return, or cause to be filed in the office of the person performing the duties of the county clerk, a full and true account of all the sales of the effects, and of all moneys received or securities taken.

§ 47-13-102. Filing of bond and oath.

The bond and affidavit shall be filed and preserved by the person performing the duties of the county clerk in such person's office.

§ 47-13-103. Settlement by trustee or assignee.

Any trustee or assignee to whom property has been conveyed in trust for the benefit of creditors, under the provisions of this chapter, shall be required to make settlement with the person performing the duties of the county clerk of the county in which the deed of trust or assignment was made, as soon after qualification as the nature of the deed or assignment will admit, showing what funds the trustee or assignee has received, how the trustee or assignee has disposed of the trust property, what expenses the trustee or assignee has paid out, and what amount of the funds remain in the trustee's or assignee's hands for payment to beneficiaries under the deed or assignment.

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§ 47-13-104. Failure to settle — Citation upon application of interested party.

Should any such trustee or assignee fail or refuse to make settlement as required by § 47-13-103, the person performing the duties of the county clerk shall be required, upon application of anyone interested in the trust property, to issue a citation to such trustee or assignee, requiring the trustee or assignee to appear before the person performing the duties of the county clerk on a given day and make settlement as required by § 47-13-103, a copy of which citation shall be served by the sheriff or any constable of the county at least five (5) days before the day appointed in the citation for such settlement or casting of account.

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§ 47-13-105. Failure to settle — Citation without application.

The person performing the duties of the county clerk, after the expiration of two (2) years from the qualification of such trustee or assignee, shall have power, without application from anyone interested in the trust property, to compel such trustee or assignee to make settlement by citation, as prescribed in § 47-13-104.

§ 47-13-106. Failure to settle — Penalty.

Any such trustee or assignee, who fails or refuses to settle, as above required, after such citation or notice, commits a Class A misdemeanor, and shall be liable to indictment or presentment in the same manner as administrators who fail or refuse to settle as required of them by law.

§ 47-13-107. Failure to settle — Removal of trustee.

(a) In addition to the foregoing penalties for failure to settle, the court having the jurisdiction of the monthly county court has the power, and it is its duty, upon application, by petition, unless satisfactory reasons be shown why the same shall not be done, to revoke the appointment of such trustee and remove the trustee, and appoint another, who shall be subject to §§ 47-13-103 — 47-13-109.
(b) In all such proceedings to remove such trustee or assignee, the trustee or assignee shall have reasonable notice, not less than ten (10) days, of such application and an opportunity to defend same.

§ 47-13-108. Applicability of §§ 47-13-103 — 47-13-109.

Nothing in §§ 47-13-103 — 47-13-109 shall be construed to exempt trustees or assignees from qualifying, giving bond, and returning inventories, as prescribed by law, nor shall these sections be construed to make them applicable to deeds or mortgages given purely as security for money lent or advanced, but the sections apply only to conveyances made for the benefit of creditors.

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47-13-109

§ 47-13-109. Fees for services under §§ 47-13-103 — 47-13-108.

The person performing the duties of the county clerk, and the sheriff or constable, for the services performed by them under §§ 47-13-103 — 47-13-108, shall be entitled to and be allowed the same fees as are allowed them by law for like services in other cases.

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§ 47-13-110. Compensation of trustees.

The court having the jurisdiction of the monthly county court, upon application, or the chancery court, if the trust is administered in the chancery court, may allow a trustee or assignee compensation exceeding the compensation of clerks and masters, if the character of the services rendered entitle the trustee or assignee to such compensation in the opinion of such court, but such compensation in no case shall exceed five percent (5%).

§ 47-13-111. Noncompliance by trustee — Appointment of receiver.

If any trustee or assignee fails or refuses to comply with this chapter, the court having the jurisdiction of the monthly county court, upon application of any person interested, shall, in lieu of the delinquent, appoint a trustee or receiver who, upon executing the bond and taking the oath aforementioned, may execute the trust or assignment.

§ 47-13-112. Death, resignation, or removal of trustee.

The chancery court or the court having the jurisdiction of the monthly county court is empowered, upon suggestion and proof of the death, resignation, or removal beyond the limits of this state, of any trustee named as such in any deed of trust conveying realty or personalty as security for the payment of debts or other obligations, to appoint and qualify a trustee in lieu of the trustee dead, resigned, or removed as aforementioned.

§ 47-13-113. Powers of successor trustee.

Any trustee so appointed and qualified shall be vested with all the power and authority given in the deed of trust to the original trustee and be subject to all the conditions and limitations therein imposed upon the original trustee.

§ 47-13-114. Release of sureties.

The sureties of a trustee or assignee for the benefit of creditors may be released in the manner prescribed in title 29, chapter 33.

§ 47-13-115. General assignments — Preference of creditors.

(a) Preference of creditors in general assignments of all a debtor's property for the benefit of creditors shall be illegal and voidable, and all general assignments shall operate for the benefit of all the debtor's creditors pro rata, whether all the creditors are named in the assignment or not.
(b) The insertion of a clause in the assignment giving a preference shall not render the assignment itself invalid, but the clause only shall be nugatory, and all the debtor's creditors shall share ratably in property assigned.

§ 47-13-116. General assignments — Prior conveyance for benefit of particular creditor.

Any mortgage, deed of trust, security interest under the Uniform Commercial Code, or any other conveyance of a portion of a debtor's property for the benefit of any particular creditor or creditors, made within three (3) months preceding a general assignment and in contemplation of making a general assignment, shall be void in the event a general assignment is made within three (3) months thereafter, and the property conveyed by such conveyance shall be shared ratably by all creditors just as that embraced in general assignments.

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47-13-118

§ 47-13-117. General assignments — Prior judgment by confession or default.

Any confession of judgment by a debtor, or permitting judgment to be taken by default, or by collusion, within three (3) months preceding a general assignment, and in contemplation of such assignment, shall be void, in the event a general assignment is made within three (3) months after the judgment.

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47-13-118

§ 47-13-118. General assignments — Inventory — Trustee's rights to property.

The debtor making a general assignment shall annex thereto a full and complete inventory or schedule under oath of all the debtor's property of every description, and the trustee or assignee shall be entitled to any other property of the debtor not embraced in the assignment, and not exempt from execution, and also to property conveyed in violation of § 47-13-116, and to the property or its proceeds assigned to satisfy judgments rendered in violation of § 47-13-117.

§ 47-13-119. Mortgages, deeds of trust or security agreements.

This chapter shall not prevent any person from making a mortgage, deed of trust, or security agreement under the Uniform Commercial Code to secure the payment for property bought or money lent, or for necessary advancements of supplies, stock, or farming implements to be made, to enable the owner of crops to make and save the same; provided, that the mortgage, deed of trust, or security agreement is executed at the time of buying the property, or borrowing the money, or making the contract for the advancements to be made, if the mortgage, deed of trust, or security agreement fixes the amount of advancement to be made under the contract.

§ 47-13-120. Time for presenting claims — Notice.

(a) A trustee under a general assignment made for the benefit of creditors shall give notice for a reasonable time by advertisement for four (4) consecutive issues in the nearest newspaper to or within the county in which the trustee is qualified, and by posting at the courthouse door of the county, for all persons having claims secured by the assignment to present the claims to the trustee, taking the trustee's receipt therefor, on or before a day fixed in such notice, which day shall not be less than twelve (12) months after the day of notice.
(b) Any claims not presented to the trustee on or before the day so fixed, or before an appropriation of the trust funds, shall be forever barred, both in law and equity.

Chapter 14 Interest Rates Generally

§ 47-14-101. Judgments rendered in dollars and cents.

All verdicts and judgments shall be rendered in dollars and cents, or such parts thereof as the nature of the case may require. Executions thereon, and all bills of costs, shall be issued accordingly.

§ 47-14-102. Definitions.

The following terms have the following meanings, subject to additional definitions, specifications and limitations contained in other statutes relating to particular categories of lenders or of transactions:
1. (1) “Account purchase transaction” means an agreement under which a commercial entity sells accounts, instruments, documents, or chattel paper to another commercial entity subject to a discount or fee, regardless of whether the commercial entity has a repurchase obligation related to the transaction;
2. (2) “Actuarial method” means the method of allocating payments made on a debt between the principal and interest pursuant to which payment is applied first to accumulated interest and any remainder is subtracted from, or any deficiency is added to, the unpaid principal balance of the debt;
3. (3) “Applicable formula rate” at any given time is the greater of:
  1. (A) The “formula rate” in effect at such time; or
  2. (B) The “formula rate” last published in the Tennessee Administrative Register prior to such time, pursuant to § 47-14-105;
4. (4) “Brokerage commissions” includes all fees paid to mortgage bankers, banks, savings and loan associations, savings banks, or other parties regularly engaged in the business of originating and arranging for the placement of loans secured by mortgages or deeds of trust upon real estate for services performed in the origination and placement of such loans with the third party lenders, whether the same are closed directly in the name of the lender or, in the alternative, in the name of such mortgage banker or other party with the intention to sell and transfer the same to such lender; provided, that such sale or a substantial portion thereof is completed within one (1) year from the closing of such loan or the completion of construction, whichever is later;
5. (5) “Commitment fees” are compensation to the lender in return for its conditional or unconditional obligation during a certain period of time to make a loan or loans under specified terms and conditions;
6. (6) “Effective rate of interest” is the simple rate of interest, i.e., the ratio between the interest payable on an obligation and the principal for a period of time, including the result of converting compound, discount, add-on, or other nominal rates of interest into simple rates of interest;
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  - 49-5-207(e)
7. (7) “Formula rate” means an annual rate of interest four (4) percentage points above the average prime loan rate (or the average short-term business loan rate, however denominated) for the most recent week for which such an average rate has been published by the board of governors of the Federal Reserve System, or twenty-four percent (24%) per annum, whichever is less; provided, that in the event that the board of governors ceases to publish the average rate, or in the event that the formula rate should be adjudicated or become inapplicable for any reason whatsoever, the formula rate is, and shall remain, twenty-four percent (24%) per annum until the general assembly otherwise provides. If the board of governors fails to publish the average rate for four (4) consecutive weeks, it shall be deemed to have ceased to publish the average rate;
8. (8) “Interest” is compensation for the use or detention of, or forbearance to collect, money over a period of time, and does not include compensation for other purposes, including, but not limited to, time-price differentials, loan charges, brokerage commissions, or commitment fees. For example, when you borrow money, you pay the lender simple interest (which is like rent) for the use of the money. The amount of interest you pay depends on:
  1. (A) The principal, which is the amount you borrow;
  2. (B) The rate, which is a percent based on a period of time, usually one (1) year; and
  3. (C) The number of periods of time that you have the use of the money.
  4. Thus, interest equals principal × rate × time. Accordingly, to determine the interest charged for borrowing five hundred dollars ($500) for three (3) years if the rate of interest is nine percent (9%) per year, first calculate the interest for one (1) year using the proportion rate equal percent/base, or 9/100 equals I/500; where I stands for interest, interest equals 9 × 500/100 equals forty-five dollars ($45.00). For three (3) years, the interest equals 3 × $45.00 equals $135; or you can combine steps 1 and 2 so that interest for three (3) years equals (9% × $500) × 3 equals one hundred thirty-five dollars ($135), presuming that no payment is made toward the principal of the loan during the three-year period. Notwithstanding this subdivision (8), “interest” does not include any amount of a discount or fee in, or charged under, an account purchase transaction;
9. (9) “Loan charges” are compensation to the lender for services or expenses directly incident to a loan or contract to make a loan, and do not include compensation for other purposes, including, but not limited to, time-price differentials, interest, brokerage commissions, or commitment fees;
10. (10) “Principal” is the total amount of an obligation to pay money on which interest is to be computed. With respect to loans:
  1. (A) Principal is the total amount of money paid to, receivable by, credited to the account of, or payable for the account of, a borrower;
  2. (B) Loan charges and other charges for which the borrower contracts to pay may be included as principal, subject to such limitations as may be imposed by statute; and
  3. (C) Precomputed interest may not be included as principal for the purpose of determining the simple or the effective rate of interest;
11. (11) “Time-price differential” is the difference, however denominated or expressed, between the amount charged on a sale of property, or a charge for services, for cash and the amount charged if payment were to be deferred or if payment were to be made in future installments; provided, that any difference in such amounts charged with respect to the sale of real property to be owned and occupied by the purchaser as the purchaser's principal place of residence for family residential purposes shall be considered to be interest rather than time-price differential; and
12. (12) “Usury” is the collection of interest in excess of the maximum amounts authorized by or pursuant to this chapter or any other statute.

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§ 47-14-103. Maximum effective rates generally.

Except as otherwise expressly provided by this chapter or by other statutes, the maximum effective rates of interest are as follows:
1. (1) For all transactions in which other statutes fix a maximum effective rate of interest for particular categories of creditors, lenders, or transactions, the rate so fixed;
2. (2) For all written contracts, including obligations issued by or on behalf of the state of Tennessee, any county, municipality, or district in the state, or any agency, authority, branch, bureau, commission, corporation, department, or instrumentality thereof, signed by the party to be charged, and not subject to subdivision (1), the applicable formula rate; and
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3. (3) For all other transactions, ten percent (10%) per annum.

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§ 47-14-104. Single payment loans.

(a) Notwithstanding this or other statutes, for all single payment loans for a term of one (1) year or less, in an original principal amount of one thousand dollars ($1,000) or less:
1. (1) The maximum effective rate of interest shall be that rate fixed, from time to time, as fair and reasonable, by rule adopted by the commissioner of financial institutions, but in no event to exceed ten percent (10%) per annum; and
2. (2) A loan charge may be exacted at a rate not to exceed seven dollars and fifty cents ($7.50) on the first one hundred dollars ($100) of principal and one dollar and fifty cents ($1.50) per one hundred dollars ($100) of principal thereafter, up to a maximum of twenty dollars ($20.00) for any loan; provided, that no such loan charge may be assessed upon the renewal of any such loan.
(b) The commissioner shall adopt reasonable rules and regulations to prevent abuses in the collection of interest, loan charges, and any other charges made in connection with or in relation to such single payment loans.

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§ 47-14-105. Announcement and publication of formula rates — Reliance thereon.

(a) Upon the publication by the board of governors of the Federal Reserve System of the average prime loan rate, as described in § 47-14-102, the commissioner of financial institutions shall:
1. (1) Promptly make an official announcement of the formula rate;
2. (2) Cause the dissemination of such announcement to the news media in such manner as the commissioner deems appropriate; and
3. (3) Cause to be published in the Tennessee Administrative Register the formula rate as determined by the average prime loan rate first published during each calendar month.
(b) In contracting for interest pursuant to § 47-14-103(2), any person shall be entitled to rely upon the formula rate thus announced or published by the commissioner; provided, that a formula rate shall not be deemed to have been published until seven (7) days have elapsed following the publication date stated in the issue of the Tennessee Administrative Register containing the announcement of such formula rate.
(c) The determination by the commissioner as provided for herein, for the sole purpose of an announcement under this section, shall not be deemed a “rule” within the meaning of § 4-5-102, and such action of the commissioner shall be exempt from the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

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§ 47-14-106. Contracts for applicable formula rates of interest.

Contracts to which the applicable formula rate provided in § 47-14-103(2) applies may provide for the payment of a fixed rate of interest, a variable rate of interest or any combination of fixed and variable rates in any sequence, subject to this section.
1. (1) A contract may provide for a fixed rate of interest:
  1. (A) Permissible at the time the contract to make the loan is executed;
  2. (B) Permissible at the time the loan is made;
  3. (C) Permissible at the time the interest rate on the loan is converted from a variable to a fixed rate, or from one fixed rate to another fixed rate, whether such conversion is by terms of the contract or by renewal, modification, extension or otherwise; or
  4. (D) Permissible at the time of any renewal or extension of the loan or any note evidencing the loan; or
  5. (E) Permissible by virtue of any combination of any of the foregoing.
2. (2) A contract may provide for a rate of interest that may vary from time to time at such regular or irregular intervals as may be agreed by the parties; provided, that such variable rate shall not exceed the greater of:
  1. (A) That authorized by statute at the agreed time of each variance; or
  2. (B) That authorized at the time of execution of the contract or note evidencing the indebtedness upon which such variable rate is or is to be charged;
3. (3) The parties may agree to a minimum fixed rate of interest to be applicable to a rate which is or may become otherwise variable; provided, that such agreed minimum fixed rate of interest does not exceed the rate permitted at the time the contract to make the loan is executed, or at the time the note is executed, or at the time of any renewal or extension thereof, whichever is greater.

§ 47-14-107. Computation of interest — Installment loans.

(a) This chapter does not limit or restrict the manner or method of contracting for interest, whether by way of add-on, discount, or otherwise, so long as the maximum effective rate of interest does not exceed that authorized by statute.
(b) For installment loans, the maximum effective rate of interest shall:
1. (1) Be determined in accordance with the actuarial method;
2. (2) Be calculated, in the case of a precomputed loan, on the assumption that all scheduled payments will be made as contracted; and
3. (3) Not be affected by the prepayment of the loan, in whole or in part.

§ 47-14-108. Prepayment of loans — Contracts restricting prepayment of loans.

(a) Except as limited by statutory provisions expressly applicable thereto, the privilege of prepayment of a loan, in whole or in part, and any refunds or premiums with respect thereto, shall be governed by contract between the parties.
(b)
1. (1) Any contract for a consumer loan that:
  1. (A) Either prohibits prepayment or imposes a penalty for prepayment; and
  2. (B) Is not subject to the federal Truth in Lending Act, compiled in 15 U.S.C. § 1601 et seq. and its implementing Regulation Z, compiled in 12 CFR 226 et seq.
    1. shall state on its face in at least ten (10) point bold type in language separated from the other language in the contract by bold print dividing lines that it cannot be prepaid or that there is a penalty for prepayment.
2. (2) If such contract does not comply with subdivision (b)(1), the provision prohibiting prepayment or imposing the prepayment penalty shall be unenforceable.
3. (3) For purposes of this subsection (b), “consumer loan” means an extension of credit:
  1. (A) To one (1) or more natural persons;
  2. (B) Primarily for personal, family or household purposes; and
  3. (C) Secured by real property or secured by personal property used or expected to be used as the principal dwelling of the consumer.

§ 47-14-109. When interest accrues.

(a) Interest on negotiable and nonnegotiable instruments shall accrue according to the terms of the instrument; otherwise, interest on the instrument shall accrue as provided in § 47-3-112.
(b) Liquidated and settled accounts, signed by the debtor, shall bear interest from the time they become due, unless it is expressed that interest is not to accrue until a specific time therein mentioned.
(c) In all other cases, the time from which interest is to be computed shall be the day when the debt is payable, unless another day be fixed in the contract itself.

§ 47-14-110. Usury as a defense.

(a) A defendant sued for money may avoid the excess over lawful interest by pleading usury, setting forth the amount of such excess.
(b) In order to sustain a defense of usury, the burden is on the party claiming usury.

§ 47-14-111. Actions to recover usury.

If usury has been paid, it may be recovered by action brought by the party from whom it was taken, or that party's representative, or it may be subjected by any judgment creditor of such party to the satisfaction of that party's debt.

§ 47-14-112. Usury a misdemeanor — Penalty.

The willful collection of usury is a Class A misdemeanor.

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§ 47-14-113. Limitations on loan charges, commitment fees and brokerage commissions.

(a) For all loans in which a provision of this chapter or another statute authorizes or allows loan charges, commitment fees, or brokerage commissions for particular categories of lenders or transactions, the collection of such charges, fees, and commissions shall be limited to the charges, fees, or commissions so authorized or allowed.
(b) For any written contract, signed by the party to be charged, the collection of commitment fees shall be limited to compensation which is fair and reasonable for the detriment suffered or the commitment made by the lender, considering the condition of the money market, the interest rates then prevailing, the credit worthiness of the borrower, the likelihood of the loan being made, and the interest rate and other terms contained in the loan commitment.
(c) The collection of brokerage commissions shall be limited to compensation which is fair and reasonable for the services performed, considering the condition of the money market, the credit worthiness of the borrower, the custom in the market place, the interest rate to be paid, the nature and value of the security, and other relevant factors.
(d) For any written contract, signed by the party to be charged, and not subject to subsection (a), the collection of loan charges shall be limited to those loan charges agreed to in that contract; provided, that no such charges may validly be agreed to in such a contract other than those which are fair and reasonable compensation for some expense incurred or to be incurred, or some service rendered or to be rendered, to or on behalf of the borrower, in connection with a particular loan. In any event, no such loan or contract shall include, except as a part of interest, charges for costs indirectly related to that loan or contract, including, but not limited to, overhead of the lender, loan losses, and charges for services performed by officers or employees of the lender unless such services are rendered directly for:
1. (1) Inspecting and verifying collateral prior to the loan being made;
2. (2) Servicing and verifying the collateral securing the loan; and
3. (3) Collection of the loan.
(e) For all other loans, no such charges or fees may validly be imposed.

§ 47-14-114. Actions to recover excess loan charges, commitment fees, or brokerage commissions.

If loan charges, commitment fees, or brokerage commissions in excess of those authorized have been paid, the amount of such excess charges, fees, or commissions, may be recovered by action brought by the person paying such excess amounts.

§ 47-14-115. Usury or excess charges — Equitable remedies.

(a) The chancery court has jurisdiction, concurrent with courts of law, for the abatement and recovery of usury or excess loan charges.
(b) No person shall be entitled to an equitable remedy with respect to usury or excess loan charges unless the person seeking such remedy does equity by paying, or tendering into court, the principal plus lawful interest and loan charges then due; provided, that any contract may be reformed by suit brought in equity with respect to any regulated loan charges, brokerage commissions, or commitment fees in excess of those authorized by law upon cost bond or, in appropriate cases, on pauper's oath.
(c) Where successful in the reformation of the instrument, the complaining party shall be awarded reasonable attorneys' fees.

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§ 47-14-116. Usury or excessive charges — Reliance on statute, rule, or order.

A claim or defense based on usury or excessive loan charges, commitment fees, or brokerage commissions will not be sustained where the person against whom the claim or defense is made, in computing and making such charges, fees, or commissions, has relied on a statute, or a rule or regulation promulgated by an administrative agency, or on the final order of any such administrative agency in a proceeding involving such person.

§ 47-14-117. Usury or excessive charges — Contracts.

(a) Any contract which on its face requires the payment of usury or excess loan charges, commitment fees, or brokerage commissions shall not be enforceable; but the original lender or creditor may sue to recover the principal actually advanced, plus lawful interest, loan charges, commitment fees, and brokerage commissions.
(b) Where usury or excess loan charges, commitment fees or brokerage commissions do not appear on the face of the contract, but are proved, only the principal, plus lawful interest, loan charges, commitment fees, and brokerage commissions may be recovered.
(c)
1. (1) Where, however, the court finds that the lender or creditor has been guilty of unconscionable conduct in a transaction by taking interest, loan charges, commitment fees, or brokerage commissions in excess of the limitations fixed by statute, that lender or creditor shall not be entitled to recover any interest, loan charges, commitment fees, or brokerage commissions with respect to that transaction, and shall be required to refund to the borrower or debtor any loan charges, commitment fees, or brokerage commissions, and twice the amount of any interest collected with respect to that transaction, and the borrower shall be entitled to recover reasonable attorneys' fees from the lender.
2. (2) As used in this subsection (c), “unconscionable conduct” includes, but is not limited to, any calculated violation of statutory limitations on interest, loan charges, commitment fees, or brokerage commissions with full awareness of those limitations.
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§ 47-14-118. Usury or excessive charges — Statute of limitations.

(a) No action shall be brought on any claim for usury after three (3) years from the date of last payment of the same or foreclosure or court action, whichever ensues first.
(b) No action shall be brought on any claim for excessive loan charges, commitment fees, or brokerage commissions after three (3) years from the date of payment of the charges, fees or commissions.

§ 47-14-119. Choice of laws.

In any transaction otherwise subject to this chapter which is not subject to the disclosure requirements of the federal Consumer Credit Protection Act, where the transaction bears a reasonable relationship to this state and also to another state or nation, the parties may agree in the written contract evidencing such transaction that the laws of this state or of any other such state or nation shall govern their rights and duties with respect to interest, loan charges, commitment fees, and brokerage commissions.

§ 47-14-120. Time-price differential.

(a) The charging of a time-price differential shall not be deemed to bring a transaction within any regulation of interest, loans or loan charges, commitment fees, or brokerage commissions, regardless of whether the seller disposes of the contract containing the time-price differential pursuant to a prearranged agreement, on a recourse or nonrecourse basis, or otherwise.
(b) It shall be permitted to include in a motor vehicle retail installment contract containing the time price differential any amounts actually paid, or to be paid, by a seller pursuant to an agreement with a buyer to discharge a security interest, lien or lease interest on property traded in by a buyer. It shall also be permitted for any lessor of a motor vehicle to include in a lease the outstanding balance of a prior loan or lease of a motor vehicle used as a trade-in, as well as other items that are capitalized or amortized during the lease term without any regulation of interest, loans or loan charges, commitment fees or brokerage commissions, regardless of whether the lessor disposes of the lease containing the payoff balance pursuant to a prearranged agreement, on a recourse basis, or otherwise.

§ 47-14-121. Interest on judgments — Rate.

(a) Except as set forth in subsection (c), the interest rate on judgments per annum in all courts, including decrees, shall:
1. (1) For any judgment entered between July 1 and December 31, be equal to two percent (2%) less than the formula rate per annum published by the commissioner of financial institutions, as required by § 47-14-105, for June of the same year; or
2. (2) For any judgment entered between January 1 and June 30, be equal to two percent (2%) less than the formula rate per annum published by the commissioner of financial institutions, as required by § 47-14-105, for December of the prior year.
(b) To assist parties and the courts in determining and applying the interest rate on judgments set forth in subsection (a) for the six-month period in which a judgment is entered, before or at the beginning of each six-month period the administrative office of the courts:
1. (1) Shall calculate the interest rate on judgments that applies for the new six-month period pursuant to subsection (a);
2. (2) Shall publish that rate on the administrative office of the courts' web site; and
3. (3) Shall maintain and publish on that web site the judgment interest rates for each prior six-month period going back to the rate in effect for the six-month period beginning July 1, 2012.
(c) Notwithstanding subsection (a) or (b), where a judgment is based on a statute, note, contract, or other writing that fixes a rate of interest within the limits provided in § 47-14-103 for particular categories of creditors, lenders or transactions, the judgment shall bear interest at the rate so fixed.

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§ 47-14-122. Interest on judgments — Computation.

Interest shall be computed on every judgment from the day on which the jury or the court, sitting without a jury, returned the verdict without regard to a motion for a new trial.

§ 47-14-123. Prejudgment interest.

Prejudgment interest, i.e., interest as an element of, or in the nature of, damages, as permitted by the statutory and common laws of the state as of April 1, 1979, may be awarded by courts or juries in accordance with the principles of equity at any rate not in excess of a maximum effective rate of ten percent (10%) per annum; provided, that with respect to contracts subject to § 47-14-103, the maximum effective rates of prejudgment interest so awarded shall be the same as set by that section for the particular category of transaction involved. In addition, contracts may expressly provide for the imposition of the same or a different rate of interest to be paid after breach or default within the limits set by § 47-14-103.

§ 47-14-124. Rates fixed by other statutes.

Where any existing statute of this state fixes a rate of interest, but does not do so in terms of a maximum effective rate, the rate so fixed shall be the maximum effective rate for obligations covered thereby.

§ 47-14-125. Compliance with federal Consumer Credit Protection Act.

(a) Compliance with the requirements of the Consumer Credit Protection Act, being Public Law 90-321; 82 Stat. 146 et seq., commonly referred to as the federal Truth in Lending Act, shall be deemed compliance with any requirements of the statutes of Tennessee relating to the disclosure of information in connection with credit transactions.
(b) A credit transaction which is deemed in compliance with the statutes of Tennessee pursuant to subsection (a) shall also be deemed to be a credit transaction which is specifically authorized under the laws of this state and the United States for purposes of application of § 47-18-111(a)(1) to any action brought under the Tennessee Consumer Protection Act of 1977, compiled in chapter 18, part 1 of this title, with respect to disclosure or lack of disclosure of information in connection with such credit transaction.

Chapter 15 Interest on Home Loans

§ 47-15-101. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Home loan” means a loan which is:
  1. (A) Secured by real estate owned and occupied by the borrower for family residential purposes and which may include not more than three (3) additional residential units; and
  2. (B) Amortized over a period greater than one hundred eighty-one (181) months; and
2. (2) Other terms used in this chapter, but not defined in this chapter, have the same meaning given to them by § 47-14-102.

§ 47-15-102. Maximum rates.

(a) The maximum effective rate of interest per annum for home loans is hereby set at an amount equal to two (2) percentage points above the most recent weighted average yield of the accepted offers of the Federal National Mortgage Association's current free market system auction for commitments to purchase conventional home mortgages (FNMA Auction) as determined pursuant to § 47-15-103.
(b) In the event the Federal National Mortgage Association discontinues the conduct of the auction, the maximum effective rate of interest per annum for home loans shall be set at an amount equal to four (4) percentage points above the index of market yields of long term government bonds adjusted to a thirty (30) year maturity by the department of the treasury.
(c) The maximum effective rate of interest per annum for home loans shall not, in any event, exceed eighteen percent (18%) per annum.

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§ 47-15-103. Determination and publication of rates — Reliance thereon.

(a)
1. (1) The rate set in § 47-15-102 shall be determined by the commissioner of financial institutions on or before the twentieth day of each month and shall be in effect during the following calendar month.
2. (2) The commissioner, upon making such determination, shall promptly make an official announcement of such rate and shall publish such announcement in such manner as the commissioner may deem appropriate, thereafter causing the same to be published in the Tennessee Administrative Register.
3. (3) Such rate shall remain in effect until the next official announcement and publication.
(b) The determination by the commissioner as provided herein shall not be deemed a “rule” within the meaning of § 4-5-102, and such action of the commissioner shall be exempt from the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
(c) In contracting for interest pursuant to § 47-15-102, any person shall be entitled to rely upon the formula rate thus announced or published by the commissioner.

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47-15-102(a)

§ 47-15-104. Contract provisions.

(a) Home loan contracts to which this chapter applies may provide for the payment of a fixed rate of interest, a variable rate of interest, or any combination of fixed and variable rates in any sequence, subject to subsection (b).
(b)
1. (1) A contract may provide for a fixed rate of interest:
  1. (A) Permissible at the time the contract to make the loan is executed;
  2. (B) Permissible at the time the loan is made;
  3. (C) Permissible at the time the interest rate on the loan is converted from a variable to a fixed rate, or from one fixed rate to another fixed rate, whether such conversion is by terms of the contract or by renewal, modification, extension or otherwise;
  4. (D) Permissible at the time of any renewal or extension of the loan or any note evidencing the loan; or
  5. (E) Permissible by virtue of any combination of any of the foregoing.
2. (2) A contract may provide for a rate of interest that may vary from time to time at such regular or irregular intervals as may be agreed by the parties; provided, that such variable rate shall not exceed the greater of:
  1. (A) That authorized by statute at the agreed time of each variance; or
  2. (B) That authorized at the time of execution of the contract or note evidencing the indebtedness upon which such variable rate is or is to be charged.
3. (3) The parties may agree to a minimum fixed rate of interest to be applicable to a rate which is or may become otherwise variable; provided, that such agreed minimum fixed rate of interest does not exceed the rate permitted at the time the contract to make the loan is executed, or at the time the note is executed, or at the time of any renewal or extension thereof, whichever is greater.

§ 47-15-105. [Transferred]

§ 47-15-106. [Transferred]

§ 47-15-107. [Transferred]

§ 47-15-108. [Transferred]

§ 47-15-109. [Transferred]

§ 47-15-110. [Transferred]

§ 47-15-111. [Transferred]

§ 47-15-112. [Transferred]

§ 47-15-113. [Transferred]

§ 47-15-114. [Transferred]

§ 47-15-115. [Transferred]

§ 47-15-116. [Transferred]

Chapter 16 Tennessee Litigation Financing Consumer Protection Act

§ 47-16-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Litigation Financing Consumer Protection Act.”

§ 47-16-102. Chapter definitions.

As used in this chapter:
1. (1) “Consumer” means any natural person who resides, is present or is domiciled in this state, or who is or may become a plaintiff or complainant in a dispute in this state;
2. (2) “Litigation financier” means a person, entity or partnership engaged in the business of litigation financing; and
3. (3) “Litigation financing” or “litigation financing transaction”:
  1. (A) Means a non-recourse transaction in which financing is provided to a consumer in return for a consumer assigning to the litigation financier a contingent right to receive an amount of the potential proceeds of the consumer's judgment, award, settlement or verdict obtained with respect to the consumer's legal claim; and
  2. (B) Does not include:
    1. (i) Legal services provided on a contingency fee basis, or advanced legal costs, where such services or costs are provided to or on behalf of a consumer by an attorney representing the consumer in the dispute and in accordance with the Tennessee Rules of Professional Conduct;
    2. (ii) A commercial tort claim as defined by § 47-9-102; or
    3. (iii) A claim under the Workers' Compensation Law, compiled in title 50, chapter 6.

§ 47-16-103. Registration as litigation financier.

(a)
1. (1) No litigation financier shall engage in a litigation financing transaction in this state unless it is registered as a litigation financier in this state.
2. (2) A litigation financier that is a business entity or partnership is registered in this state if:
  1. (A) It is in compliance with the bond requirements of subsection (b);
  2. (B) It has a status of active and in good standing as reflected in the records of the secretary of state; and
  3. (C) Its charter, articles of organization, certificate of limited partnership, or other organizational document, or, if a foreign entity, its Tennessee application for a certificate of authority, contains a statement that it shall be designated as a litigation financier pursuant to this chapter.
3. (3) A litigation financier that is not a business entity or partnership is registered in this state if:
  1. (A) It is in compliance with the bond requirements of subsection (b); and
  2. (B) It files an application for registration as a litigation financier on a form prescribed by the secretary of state, along with a filing fee of one hundred dollars ($100), that contains the following:
    1. (i) Applicant's full legal name;
    2. (ii) Business name of applicant, if any;
    3. (iii) Physical street address and mailing address of the applicant;
    4. (iv) A telephone number through which the applicant can be reached;
    5. (v) The name, physical street address, mailing address, and telephone number for a Tennessee registered agent appointed to accept service of process on behalf of the applicant;
    6. (vi) A statement that the applicant shall be designated as a litigation financier pursuant to this chapter; and
    7. (vii) Any other information the secretary of state deems necessary.
(b)
1. (1) Each litigation financier shall file and have approved by the secretary of state a surety bond in the amount of fifty thousand dollars ($50,000).
2. (2) Such bond shall be payable to this state for the use of the attorney general and reporter and any person who may have a cause of action against the obligor of the bond for any violation of this chapter. The bond shall continue in effect so long as a litigation financier is designated as a litigation financier in the records of the secretary of state.
(c) A litigation financier shall amend its registration with the secretary of state within thirty (30) days whenever the information contained in such record changes or becomes inaccurate or incomplete in any respect. A litigation financier that is not a business entity or partnership may amend its registration with the secretary of state by filing an amendment on a form prescribed by the secretary of state, along with a filing fee of twenty dollars ($20.00).
(d) All documents filed pursuant to this section are public record.
(e) The secretary of state shall collect a fee of twenty dollars ($20.00) for copying all filed documents pursuant to this chapter. All such copies shall be certified or validated by the secretary of state.
(f) The secretary of state, as appropriate, may promulgate rules in implementing this chapter, including but not limited to, the adoption of fees to cover any administrative costs relating to administering this chapter.

§ 47-16-104. Requirements for litigation financing transactions.

A litigation financier shall fulfill each of the following requirements when engaged in litigation financing:
1. (1) The terms of the litigation financing transaction shall be set forth in a written contract that is completely filled-in with no incomplete sections when the contract is offered or presented to the consumer;
2. (2) The litigation financing contract shall contain a right of rescission, allowing the consumer to cancel the litigation financing contract without penalty or further obligation if, within five (5) business days following the consumer's receipt of the funds or goods, or execution of the litigation financing contract, whichever is later, the consumer gives notice of the rescission and returns any money or goods already provided to the consumer by the litigation financier;
3. (3) The litigation financing contract shall contain a written acknowledgment by the consumer of whether the consumer is represented by an attorney in the dispute;
4. (4) If the consumer acknowledges that the consumer is represented by an attorney in the dispute, the litigation financing contract shall include a written acknowledgment executed by the consumer's attorney in the dispute in which the attorney acknowledges all of the following:
  1. (A) The attorney has had the opportunity to review the litigation financing contract on behalf of the consumer;
  2. (B) Whether the attorney is being paid on a contingency basis pursuant to a written fee agreement;
  3. (C) That all proceeds of the legal claim shall be disbursed by either the trust account of the attorney representing the consumer in the dispute or a settlement fund established to receive the proceeds of the dispute from the defendant on behalf of the consumer;
  4. (D) The attorney is representing the consumer with regard to the dispute that is the subject of the litigation financing contract; and
  5. (E) The attorney has neither received nor paid a referral fee or any other consideration from or to the litigation financier, nor will the attorney in the future; and
5. (5) In the event that proceeds are paid into a settlement fund or trust, the litigation financier shall notify the administrator of the fund or trust of any outstanding liens arising from the litigation financing contract.

§ 47-16-105. Prohibited activities.

A litigation financier shall not:
1. (1) Pay or offer to pay commissions, referral fees or other forms of consideration to any attorney, law firm, medical provider, chiropractor, or physical therapist or any of their employees for referring a consumer to a litigation financier;
2. (2) Accept any commissions, referral fees, rebates or other forms of consideration from an attorney, law firm, medical provider, chiropractor, or physical therapist or any of their employees;
3. (3) Advertise false or misleading information regarding its products or services;
4. (4) Refer a consumer or potential consumer to a specific attorney, law firm, medical provider, chiropractor, or physical therapist or any of their employees; provided, that if a consumer does not have legal representation, the provider shall refer the consumer to a local or state bar referral service operated by a bar association or a nonprofit organization;
5. (5) Fail to promptly supply copies of any and all complete litigation financing contracts to the consumer and the attorney representing the consumer in the dispute;
6. (6) Attempt to obtain a waiver of any remedy, including but not limited to, compensatory, statutory, or punitive damages, that the consumer might otherwise have;
7. (7) Attempt to effect mandatory arbitration or otherwise effect waiver of a consumer's right to a trial by jury;
8. (8) Offer or provide legal advice to the consumer regarding the litigation financing or the underlying dispute; or
9. (9) Assign, which includes securitizing, a litigation financing contract, in whole or in part, to a third party; however:
  1. (A) This subdivision (9) does not prevent a litigation financier that retains responsibility for collecting payment, administering, or otherwise enforcing the litigation financing contract from making an assignment that is:
    1. (i) To a wholly owned subsidiary of the litigation financier;
    2. (ii) To an affiliate of the litigation financier that is under common control with the litigation financier; or
    3. (iii) A grant of a security interest that is pursuant to title 47, chapter 9 or is otherwise permitted by law; and
  2. (B) If an assignment is authorized and made pursuant to this subdivision (9), for purposes of this section, “litigation financier” includes a successor-in-interest to a litigation financing contract.

§ 47-16-106. Required disclosures in litigation financing contract.

(a) Litigation financing contracts shall contain the disclosures specified in this section, which shall constitute material terms of the litigation financing contract.
(b) Unless otherwise specified, the disclosures shall be typed in at least fourteen-point, bold font and be placed clearly and conspicuously within the litigation financing contract, as follows:
1. (1) On the front page under appropriate headings in not less than fourteen-point font, language specifying:
  1. (A) The total amount of money to be provided to the consumer by the litigation financier as part of the litigation financing transaction;
  2. (B) The maximum amount the consumer can be required to provide the litigation financier, including but not limited to, all fees, charges, interest or other consideration, under the terms of the litigation financing contract;
  3. (C) The maximum annual percentage fee, which shall include, but not be limited to, all fees, charges, interest or other consideration received by a litigation financier in consideration for litigation financing; provided, that the consumer may be charged for the litigation financing transaction under the terms of the litigation financing contract;
  4. (D) The following:
    1. Consumer's Right to Cancellation: You may cancel this contract without penalty or further obligation within five (5) business days from the date you signed this contract or received financing from [insert name of the litigation financier] by: returning the funds to [insert name, office address and office hours of the litigation financier] or by U.S. mail, [insert name and mailing address of litigation financier]. For purposes of the return deadline by U.S. mail, the postmark date on the returned funds or, if mailed by registered or certified mail, the date of the return receipt requested shall be considered the date of return.
2. (2) Within the body of the litigation financing contract, the following:
  1. The litigation financier agrees that it has no right to and will not make any decisions about the conduct of your lawsuit or dispute and that the right to make those decisions remains solely with you and your attorney;
3. (3) Within the body of the litigation financing contract, in all capital letters contained within a box the following:
  1. IF THERE IS NO RECOVERY OF ANY MONEY FROM YOUR LEGAL CLAIM OR IF THERE IS NOT ENOUGH MONEY TO SATISFY THE PORTION ASSIGNED TO [INSERT NAME OF THE LITIGATION FINANCIER] IN FULL, YOU WILL NOT OWE [INSERT NAME OF THE LITIGATION FINANCIER] ANYTHING IN EXCESS OF YOUR RECOVERY.
4. (4) Located immediately above the place on the litigation financing contract where the consumer's signature is required, the litigation financing contract shall include the following:
  1. Do not sign this contract before you read it completely. If this contract contains any incomplete sections, you are entitled to a completely filled-in copy of the contract prior to signing it. Before you sign this contract, you should obtain the advice of an attorney. Depending on the circumstances you may want to consult a tax advisor, a financial professional or an accountant.

§ 47-16-107. Violation of chapter renders contract unenforceable.

Any violation of this chapter shall make the litigation financing contract unenforceable by the litigation financier, the consumer or any successor-in-interest to the litigation financing contract.

§ 47-16-108. Violation of part constitutes unfair or deceptive practice for purposes of Consumer Protection Act — Enforcement by attorney general and reporter.

(a) Any violation of this chapter shall constitute a violation of the Tennessee Consumer Protection Act of 1977, compiled in chapter 18, part 1 of this title, and shall be enforced solely by the attorney general and reporter at the attorney general's discretion.
(b) For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this chapter shall be construed to be an unfair or deceptive act or practice affecting the conduct, trade or commerce and subject to all sanctions, penalties and remedies provided in that act, including attorneys' fees and costs.
(c) Nothing in this chapter shall be construed to limit the exercise of powers or the performance of the duties of the attorney general and reporter, including those provided by the Tennessee Consumer Protection Act of 1977, which the attorney general and reporter is otherwise authorized or required to exercise or perform by law.

§ 47-16-109. Contingent right to proceeds from legal claim assignable — Priority of liens or rights in proceeds.

(a) The contingent right to receive an amount of the potential proceeds of a legal claim may be assigned by a consumer and that assignment is valid for the purposes of obtaining litigation financing from a litigation financier.
(b) The lien of a litigation financier on a consumer's legal claim has priority over liens that attach and take effect subsequent to the attachment of the litigation financier's lien to the consumer's legal claim, except for the following:
1. (1) Attorney liens, insurance carrier liens, medical provider liens, or liens based upon subrogation interests or rights of reimbursement related to the consumer's legal claim; and
2. (2) Child support, Medicare, tax, or any other statutory or governmental lien.

§ 47-16-110. Annual fee — Limitation on term of transaction — Obligations from one transaction not to be included in subsequent transaction.

(a) All consumers entering into litigation financing transactions shall pay the litigation financier an annual fee of not more than ten percent (10%) of the original amount of money provided to the consumer for the litigation financing transaction.
(b) Litigation financiers shall not charge a consumer the annual fee authorized by subsection (a) more than one (1) time each year with regard to any single legal claim regardless of the number of litigation financing transactions that the litigation financier enters into with the consumer with respect to such legal claim.
(c) Litigation financing transactions shall not exceed a term of three (3) years and are limited to a maximum yearly fee, which shall be calculated to include any underwriting and organization fees, and any other charges, fees, or consideration, not to exceed three hundred sixty dollars ($360) per year, up to a maximum of three (3) years, for each one thousand dollars ($1,000) of the unpaid principal amount of the funds advanced to the consumer. The maximum yearly fee shall not include the annual fee pursuant to subsection (a).
(d) Litigation financiers shall not enter into an agreement with a consumer that has the effect of incorporating the consumer's obligations to the litigation financier that are contained in the original litigation financing transaction into a subsequent litigation financing transaction.

Chapter 17 Tennessee Opioid Abatement Act

§ 47-17-101. Short title.

This chapter is known and may be cited as the “Tennessee Opioid Abatement Act.”

§ 47-17-102. Legislative findings and declarations.

The general assembly finds and declares the following:
1. (1) The opioid crisis presents serious health and safety concerns throughout the state and is a threat to the general welfare of the people of this state;
2. (2) The provision of care, rehabilitation, and treatment for opioid abuse and dependency creates a substantial drain on governmental resources;
3. (3) It is the intention of the general assembly to facilitate statewide opioid settlement agreements that provide a coordinated resolution of state and local governmental claims against entities involved in the manufacture, marketing, distribution, dispensing, or sale of opioids, or related activities, in order to generate funds for opioid abatement programs and remediation; and
4. (4) A statewide coordinated resolution of state and local claims against entities involved in activities related to the manufacture, marketing, distribution, dispensing, or sale of opioids, or related activities, is critical to resolving current litigation and other claims regarding the opioid crisis and maximizing the financial commitment of those entities.

§ 47-17-103. Chapter definitions.

As used in this chapter, unless the context requires otherwise:
1. (1) “Declaration of a statewide opioid settlement agreement release” means a written release approved by the attorney general and reporter for a statewide opioid settlement agreement, which must include or reference the approval of the governor and comptroller of the treasury;
2. (2) “District” means the governmental districts in the state, including, but not limited to, school districts, judicial districts, hospital districts, health districts, utility districts, fire districts, development districts, special districts, and other public districts;
3. (3) “Governmental entity” means:
  1. (A) The state and each of its departments, agencies, divisions, boards, commissions, and other instrumentalities;
  2. (B) Any political or governmental subdivision or other public entity within the boundaries of the state, including, but not limited to, counties, municipalities, districts, and towns and any department, agency, division, board, commission, and other instrumentalities thereof; and
  3. (C) Any governmental official, officer, or employee of the state or of a political or governmental subdivision or other public entity within the boundaries of the state acting in an official capacity;
4. (4) “Released claims” means the causes of action and other claims that are released in a statewide opioid settlement agreement or as set forth in a declaration of such an agreement by the attorney general and reporter, including matters identified as released claims as that term or a comparable term is defined in a statewide opioid settlement agreement;
5. (5) “Released entities” means the entities released in a statewide opioid settlement agreement and pursuant to a declaration of a statewide settlement agreement by the attorney general and reporter, including those identified as released entities as that term or a comparable term is defined in a statewide opioid settlement agreement;
6. (6) “State-subdivision opioid abatement agreement” means an agreement entered into by the state and one (1) or more subdivisions of the state that addresses the allocation of funds dedicated to opioid abatement; and
7. (7) “Statewide opioid settlement agreement” means a settlement agreement entered into by the state and one (1) or more entities involved in activities related to the manufacture, marketing, distribution, dispensing, or sale of opioids in which subdivision claims are addressed.

§ 47-17-104. Distribution of funds — Keeping of settlement agreements on website of attorney general and reporter.

The funds obtained pursuant to a statewide opioid settlement agreement must be distributed pursuant to the agreement and any relevant provisions of a state-subdivision opioid abatement agreement. Copies of statewide opioid settlement agreements, including any amendments to such agreements, must be kept on the website of the attorney general and reporter.

§ 47-17-105. Effect of issuance of settlement agreement release.

Upon the issuance of a declaration of a statewide opioid settlement agreement release by the attorney general and reporter pursuant to § 20-13-203, a governmental entity shall not have the authority to assert, bring, or attempt to enforce a released claim against a released entity in any legal proceeding. Any pending or future litigation brought by a governmental entity asserting released claims against released entities shall be dismissed with prejudice. Copies of declarations of a statewide opioid settlement agreement release must be kept on the website of the attorney general.

Chapter 18 Consumer Protection

Part 1 Consumer Protection Act of 1977

§ 47-18-101. Short title.

This part shall be known and may be cited as the “Tennessee Consumer Protection Act of 1977.”

§ 47-18-102. Purposes.

This part shall be liberally construed to promote the following policies:
1. (1) To simplify, clarify, and modernize state law governing the protection of the consuming public and to conform these laws with existing consumer protection policies;
2. (2) To protect consumers and legitimate business enterprises from those who engage in unfair or deceptive acts or practices in the conduct of any trade or commerce in part or wholly within this state;
3. (3) To encourage and promote the development of fair consumer practices;
4. (4) To declare and to provide for civil legal means for maintaining ethical standards of dealing between persons engaged in business and the consuming public to the end that good faith dealings between buyers and sellers at all levels of commerce be had in this state; and
5. (5) To promote statewide consumer education.

§ 47-18-103. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
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2. (2) “Automatic renewal” means a plan or arrangement in which a paid subscription or purchasing agreement is automatically renewed at the end of a definite term for a subsequent term;
3. (3) “Automatic renewal offer terms” means the following clear and conspicuous disclosures:
  1. (A) That the subscription or purchasing agreement will continue until the consumer cancels;
  2. (B) The description of the cancellation policy that applies to the offer;
  3. (C) The recurring charges that will be charged to the consumer's credit or debit card or payment account with a third party as part of the automatic renewal plan or arrangement, and that the amount of the charge may change, if that is the case, and the amount to which the charge will change, if known;
  4. (D) The length of the automatic renewal term or that the service is continuous, unless the length of the term is chosen by the consumer; and
  5. (E) The minimum purchase obligation, if any;
4. (4) “Bait and switch” or “switch” means advertising items to lure consumers, then inducing the consumers to buy different and more expensive items by failing to make available the goods or services advertised, or by disparaging the less expensive product. Provision of accurate factual information shall not be considered disparagement;
5. (5) “Clear and conspicuous” means in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language. In the case of an audio disclosure, “clear and conspicuous” and “clearly and conspicuously” means in a volume and cadence sufficient to be readily audible and understandable;
6. (6) “Consumer” means any natural person who seeks or acquires by purchase, rent, lease, assignment, award by chance, or other disposition, any goods, services, or property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situated or any person who purchases or to whom is offered for sale a franchise or distributorship agreement or any similar type of business opportunity;
7. (7) “Continuous service” means a plan or arrangement in which a subscription or purchasing agreement continues until the consumer cancels the service;
8. (8) “Contract for home improvement services” means a contractual agreement, written or oral, between a person performing home improvement services and a residential owner, and includes all labor, services and materials to be furnished and performed under such agreement;
9. (9) “Covered file-sharing program” means a computer program, application, or software that enables the computer on which such program, application, or software is installed to designate files as available for searching by and copying to one (1) or more other computers, to transmit such designated files directly to one (1) or more other computers, and to request the transmission of such designated files directly from one (1) or more other computers. “Covered file-sharing program” does not mean a program, application, or software designed primarily to operate as a server that is accessible over the Internet using the Internet domain name system, to transmit or receive email messages, instant messaging, real-time audio or video communications, or real-time voice communications, or to provide network or computer security, network management, hosting and backup services, maintenance, diagnostics, technical support or repair, or to detect or prevent fraudulent activities;
10. (10) [Deleted by 2019 amendment.]
11. (11) “Documentary material” means the original or copy of any book, record, memorandum, paper, communication, tabulation, map, chart, photograph, mechanical transcription, or other tangible document or recording, wherever situated;
12. (12) “Goods” means any tangible chattels leased, bought, or otherwise obtained for use by an individual primarily for personal, family, or household purposes or a franchise, distributorship agreement, or similar business opportunity;
13. (13) “Home improvement services” means the repair, replacement, remodeling, alteration, conversion, modernization, improvement, or addition to any residential property, and includes but is not limited to, the repair, replacement, remodeling, alteration, conversion, modernization, improvement, or addition to driveways, swimming pools, porches, garages, landscaping, fences, fall-out shelters, and roofing;
14. (14) “Home improvement services provider” means any person or entity, whether or not licensed pursuant to title 62, chapter 6, who undertakes to, attempts to, or submits a price or bid or offers to construct, supervise, superintend, oversee, schedule, direct, or in any manner assume charge of the home improvement service for a fee. “Home improvement services provider” specifically includes but is not limited to a “residential contractor” as defined in § 62-6-102 when performing home improvement services and a “home improvement contractor” as defined in § 62-6-501;
15. (15) “Knowingly” or “knowing” means actual awareness of the falsity or deception, but actual awareness may be inferred where objective manifestations indicate that a reasonable person would have known or would have had reason to know of the falsity or deception;
16. (16) “Local telephone directory” means a telephone directory that is distributed by a telephone company or directory publisher, or provided as a service to subscribers located in the local exchanges contained in the directory. “Local telephone directory” includes:
  1. (A) A classified advertising directory, commonly referred to as the yellow pages;
  2. (B) A directory of individual telephone listings, commonly referred to as the white pages, whether identified as “business listings” or combined in listings of residences and businesses in a directory that does not have separate residence and business listings;
  3. (C) A directory that includes listings of more than one (1) telephone company; or
  4. (D) A directory assistance database or similar service, commonly used by dialing “411” and speaking with a live person or through an automated system;
17. (17) “Local telephone number” means a telephone number that has the three (3) number prefix used by the provider of telephone service for telephones physically located within the area covered by the local telephone directory in which the number is listed. “Local telephone number” does not include long distance numbers or 800, 888, or 900 exchange numbers listed in a local telephone directory;
18. (18) “Person” means a natural person, individual, governmental agency, partnership, corporation, trust, estate, incorporated or unincorporated association, and any other legal or commercial entity however organized;
19. (19) “Physical address” means the mailing address, including a zip code, which details the actual location of a person or entity, but does not include a post office box;
20. (20) “Possession” means actual care, custody, control, or management of residential property, but shall not include occupancy of residential property through a lease or rental agreement;
21. (21) “Residential owner” means a person who has possession of residential real property, including any person authorized by such residential owner to act on the residential owner's behalf;
22. (22) “Residential property” means the building structure where a person abides, lodges, resides or establishes a living accommodation or where a residential owner intends to abide, lodge, reside or establish a living accommodation following the completion of home improvement services made pursuant to a contract for home improvement services and includes the land on or adjacent to such building structure;
23. (23) “Services” means any work, labor, or services including services furnished in connection with the sale or repair of goods or real property or improvements thereto; and
24. (24) “Trade,” “commerce,” or “consumer transaction” means the advertising, offering for sale, lease or rental, or distribution of any goods, services, or property, tangible or intangible, real, personal, or mixed, and other articles, commodities, or things of value wherever situated.

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§ 47-18-104. Unfair or deceptive acts prohibited.

(a) Unfair or deceptive acts or practices affecting the conduct of any trade or commerce constitute unlawful acts or practices and are Class B misdemeanors.
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(b) The following unfair or deceptive acts or practices affecting the conduct of any trade or commerce are declared to be unlawful and in violation of this part:
1. (1) Falsely passing off goods or services as those of another;
2. (2) Causing likelihood of confusion or of misunderstanding as to the source, sponsorship, approval or certification of goods or services. This subdivision (b)(2) does not prohibit the private labeling of goods and services;
3. (3) Causing likelihood of confusion or misunderstanding as to affiliation, connection or association with, or certification by, another. This subdivision (b)(3) does not prohibit the private labeling of goods or services;
4. (4) Using deceptive representations or designations of geographic origin in connection with goods or services;
5. (5) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship approval, status, affiliation or connection that such person does not have;
6. (6) Representing that goods are original or new if they are deteriorated, altered to the point of decreasing the value, reconditioned, reclaimed, used or secondhand;
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7. (7) Representing that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another;
8. (8) Disparaging the goods, services or business of another by false or misleading representations of fact;
9. (9) Advertising goods or services with intent not to sell them as advertised;
10. (10) Advertising goods or services with intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity;
11. (11) Making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions;
12. (12) Representing that a consumer transaction confers or involves rights, remedies or obligations that it does not have or involve or which are prohibited by law;
13. (13) Representing that a service, replacement or repair is needed when it is not;
14. (14) Causing confusion or misunderstanding with respect to the authority of a salesperson, representative or agent to negotiate the final terms of a consumer transaction;
15. (15) Failing to disclose that a charge for the servicing of any goods in whole or in part is based on a predetermined rate or charge, or guarantee or warranty, instead of the value of the services actually performed;
16. (16) Disconnecting, turning back, or resetting the odometer of any motor vehicle so as to reduce the number of miles indicated on the odometer gauge, except as provided for in § 39-14-132(b);
17. (17) Advertising of any sale by falsely representing that a person is going out of business;
18. (18) Using or employing a chain referral sales plan in connection with the sale or offer to sell of goods, merchandise, or anything of value, which uses the sales technique, plan, arrangement or agreement in which the buyer or prospective buyer is offered the opportunity to purchase goods or services and, in connection with the purchase, receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the names of other prospective buyers if the receipt of compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods;
19. (19) Representing that a guarantee or warranty confers or involves rights or remedies which it does not have or involve; provided, that nothing in this subdivision (b)(19) shall be construed to alter the implied warranty of merchantability as defined in § 47-2-314;
20. (20) Selling or offering to sell, either directly or associated with the sale of goods or services, a right of participation in a pyramid distributorship. As used in this subdivision (b)(20), a “pyramid distributorship” means any sales plan or operation for the sale or distribution of goods, services or other property wherein a person for a consideration acquires the opportunity to receive a pecuniary benefit, which is not primarily contingent on the volume or quantity of goods, services or other property sold or delivered to consumers, and is based upon the inducement of additional persons, by such person or others, regardless of number, to participate in the same plan or operation;
21. (21) Using statements or illustrations in any advertisement which create a false impression of the grade, quality, quantity, make, value, age, size, color, usability or origin of the goods or services offered, or which may otherwise misrepresent the goods or services in such a manner that later, on disclosure of the true facts, there is a likelihood that the buyer may be switched from the advertised goods or services to other goods or services;
22. (22) Using any advertisement containing an offer to sell goods or services when the offer is not a bona fide effort to sell the advertised goods or services. An offer is not bona fide, even though the true facts are subsequently made known to the buyer, if the first contact or interview is secured by deception;
23. (23) Representing in any advertisement a false impression that the offer of goods has been occasioned by a financial or natural catastrophe when such is not true, or misrepresenting the former price, savings, quality or ownership of any goods sold;
24. (24) Assessing a penalty for the prepayment or early payment of a fee or charge for services by a utility or company which has been issued a franchise license by a municipal governing body to provide services. Nothing in this subdivision (b)(24) shall be construed to prohibit a discount from being offered for early payment of the applicable fee or charge for services. This subdivision (b)(24) does not apply to a utility or company whose billing statement reflects charges both for service previously rendered and in advance of services provided;
25. (25) Discriminating against any disabled individual, as defined by §§ 47-18-802(b) and 55-21-102(3), in violation of the Tennessee Equal Consumer Credit Act of 1974, compiled in part 8 of this chapter. This subdivision (b)(25) does not apply to any creditor or credit card issuer regulated by the department of financial institutions. The attorney general shall refer any complaint against such a creditor or credit card issuer involving the Equal Consumer Credit Act to such department for investigation and disposition;
26. (26) Violating § 65-5-106;
27. (27) Engaging in any other act or practice which is deceptive to the consumer or to any other person; provided, however, that enforcement of this subdivision (b)(27) is vested exclusively in the office of the attorney general and reporter;
28. (28)
  1. (A)
    1. (i) Failing of a motor vehicle repair facility to return to a customer any parts which were removed from the motor vehicle and replaced during the process of repair if the customer, at the time repair work was authorized, requested return of such parts; provided, that any part retained by the motor vehicle repair facility as part of a trade-in agreement or core charge agreement for a reconditioned part need not be returned to the customer unless the customer agrees to pay the facility the additional core charge or other trade-in fee; and provided further, that any part required to be returned to a manufacturer or distributor under a warranty agreement or any part required by any federal or state statute or rule or regulation to be disposed of by the facility need not be returned to the customer; or
    2. (ii) Failing of a motor vehicle repair facility to permit inspection of any parts retained by the repair facility if the customer, at the time repair work was authorized, expressed the customer's desire to inspect such parts; provided, that if, after inspection, the customer requests return of such parts, the restrictions set forth in subdivision (b)(28)(A)(i) shall apply;
  2. (B)
    1. (i) Failing of a motor vehicle repair facility to post in a prominent location notice of the provisions of this subdivision (b)(28); or
    2. (ii) Failing of a motor vehicle repair facility to print on the repair contract notice of the provisions of this subdivision (b)(28);
  3. (C) The motor vehicle repair facility need not retain any parts not returned to the customer after the motor vehicle has been returned to the customer;
29. (29) Advertising that a business is “going out of business” more than ninety (90) days before such business ceases to operate;
30. (30) Failing to comply with §§ 6-55-401 — 6-55-413, where a municipality has adopted the regulations of liquidation sales pursuant to § 6-55-413;
31. (31) Offering lottery winnings in exchange for making a purchase or incurring a monetary obligation pursuant to § 47-18-120;
32. (32)
  1. (A) The act of misrepresenting the geographic location of a person through a business name or listing in a local telephone directory or on the Internet is an unfair or deceptive act or practice affecting the conduct of trade or commerce, if:
    1. (i) The name misrepresents the person's geographic location; or
    2. (ii) The listing fails to clearly and conspicuously identify the locality and state of the person's business;
    3. (iii) Calls to the listed telephone number are routinely forwarded or otherwise transferred to a person's business location that is outside the calling area covered by the local telephone directory, or that is outside the local calling area for the telephone number that is listed on the Internet;
    4. (iv) The person's business location is located in a county that is not contiguous to a county in the calling area covered by the local telephone directory, or is located in a county that is not contiguous to a county in the local calling area for the telephone number that is listed on the Internet; and
    5. (v) The person does not have a business location or branch, or an affiliate or subsidiary of the person does not have a business location or branch, in the calling area or county contiguous to the local calling area.
  2. (B) This subdivision (b)(32) shall not apply:
    1. (i) To a telecommunications service provider, an Internet service provider, or to the publisher or distributor of a local telephone directory unless the act is on behalf of the Internet or telecommunications service provider or on behalf of the publisher or distributor of the local telephone directory; or
    2. (ii) To the act of listing a number for a call center. For purposes of this subdivision (b)(32)(B)(ii), “call center” means a location that utilizes telecommunication services for activities related to an existing customer relationship, including, but not limited to, customer services, reactivating dormant accounts or receiving reservations.
  3. (C) Notwithstanding any other law to the contrary, and without limiting the scope of § 47-18-104, a violation of this subdivision (b)(32) shall be punishable by a nonremedial civil penalty of a minimum of one thousand dollars ($1,000) to a maximum of five thousand dollars ($5,000) per violation. Civil penalties assessed under this subdivision (b)(32) are separate and apart from the remedial civil penalties authorized in § 47-18-108(b)(3).
  4. (D) This subdivision (b)(32) applies only to information supplied to a telephone directory published after July 1, 2008, information that is published on the Internet after July 1, 2008, or to information supplied for entry into a directory assistance database after July 1, 2008;
33. (33) Advertising that a person is an electrician for hire when such person has not been licensed by a local jurisdiction to perform electrical work within such jurisdiction or by the state as a limited licensed electrician or contractor, as appropriate or, if no such licenses are then available, such person is not registered with the state;
34. (34) Unreasonably raising prices or unreasonably restricting supplies of essential goods, commodities or services in direct response to a crime, act of terrorism, war, or natural disaster, regardless of whether such crime, act of terrorism, war, or natural disaster occurred in the state of Tennessee;
35. (35) Representing that a person is a licensed contractor when such person has not been licensed as required by § 62-6-103 or § 62-6-502; or, acting in the capacity of a contractor as defined in § 62-6-102(4)(A), § 62-6-102(7) or § 62-6-501, and related rules and regulations of the state of Tennessee, or any similar statutes, rules and regulations of another state, while not licensed;
36. (36)
  1. (A) Using any advertisement for a workshop, seminar, conference, or other meeting that contains a reference to a living trust or a revocable living trust, or that otherwise offers advice or counsel on estate taxation unless such advertisement also includes the information required in this subdivision (b)(36);
  2. (B) An advertisement as provided in this subdivision (b)(36) shall, at a minimum, include the following:
    1. (i) The maximum exclusion for federal estate tax purposes and the maximum exemption for state inheritance tax purposes for the year in which the advertisement appears;
    2. (ii) Includes a statement that certain property, including real property, insurance proceeds, deposit accounts, stocks and retirement fund, may be taxable or not taxable, depending on how legal title is held or beneficiary designation is made, or both;
    3. (iii) Includes a statement that certain property may be transferred through several different means including, but not limited to, joint ownership of property with rights of survivorship, joint deposit accounts, beneficiary designations or elections permitted under retirement plans, insurance policies, trusts, or wills; and
    4. (iv) A statement that before creating any transfer through a living trust, revocable living trust, or otherwise, the individual should seek advice from an attorney, accountant or other tax professional to determine the true tax impact and ensure that assets are properly transferred into any trust;
  3. (C) The disclosure required in this subdivision (b)(36) shall be printed in not less than 10-point type;
  4. (D) This subdivision (b)(36) shall not apply to an advertisement by any attorney, law firm, bank, savings institution, trust company, or registered securities broker-dealer which is directed to clients or customers of such person with whom such person has had a client or customer relationship within the prior two (2) years. This subdivision (b)(36) shall also not apply to any continuing education seminars or conferences conducted for the benefit of bankers, attorneys, accountants, or other professional financial advisors;
37. (37) Refusing to accept the return of clothing or accessories sold at retail directly to a purchaser, who seeks to return the same for any reason for refund or credit; provided, that:
  1. (A) The purchaser presents the clothing or accessories within the retailer's prescribed period for return of merchandise;
  2. (B) The purchaser presents satisfactory proof of purchase;
  3. (C) The merchandise is, in no way, damaged and exhibits no sign of wear or cleaning;
  4. (D) All tags and stickers affixed or attached to the merchandise at the time of sale remain affixed or attached at the time of return; and
  5. (E) The sale of the merchandise was not marked, advertised or otherwise characterized as “final”, “no return”, “no refunds”, or in any manner reasonably indicating that the merchandise would not be accepted for return;
38. (38)
  1. (A) Requiring the purchaser to present that purchaser's driver license as a prerequisite for accepting the return of clothing or accessories for refund or credit, notwithstanding compliance with the conditions set forth in subdivision (b)(37), unless such a requirement is for the purpose of preventing fraud and abuse;
  2. (B) Notwithstanding any provision of subdivision (b)(37) or (b)(38)(A) to the contrary, return denials are permitted for the purpose of preventing fraud and abuse;
39. (39) Representing that a person, or such person's agent, authorized designee or delegee for hire, has conducted a foreclosure on real property, when such person knew or should have known that a foreclosure was not actually conducted on the real property;
40. (40)
  1. (A) Selling or offering to sell a secondhand mattress in this state or importing secondhand mattresses into this state for the purpose of resale in violation of § 68-15-203(b);
  2. (B) Subdivision (b)(40)(A) shall apply to a mattress manufacturer, wholesaler or retailer. Subdivision (b)(40)(A) shall not apply to an institution or organization that has received a determination of exemption from the internal revenue service under 26 U.S.C. § 501(c)(3), and as described in § 67-6-348. The exemption provided in this subdivision (b)(40)(B) shall be limited to institutions or organizations that are not organized or operated for profit, and no part of the net earnings of which inures to the benefit of any private shareholder or individual;
41. (41)
  1. (A) Knowingly advertising or marketing for sale a newly constructed residence as having more bedrooms than are permitted by the newly constructed residence's subsurface sewage disposal system permit, as defined in § 68-221-402, unless prior to the execution of any sales agreement the permitted number of bedrooms is disclosed in writing to the buyer. The real estate licensee representing the owner may rely upon information furnished by the owner;
  2. (B) If a newly constructed residence is marketed for sale as having more bedrooms than are permitted by the subsurface sewage disposal system permit and no disclosure of the actual number of bedrooms permitted occurs prior to the execution of a sales agreement, then the buyer shall have the right to rescind the sales agreement and may recover treble damages as provided in § 47-18-109;
  3. (C) A subsurface sewage disposal system permit issued in the name of the owner of a newly constructed residence shall serve as constructive notice to that owner of the newly constructed residence for the purpose of establishing knowledge as to the number of bedrooms of the newly constructed residence for the purpose of finding a violation of this subdivision (b)(41). A real estate licensee representing the owner must have actual knowledge transmitted from the owner to the real estate licensee to be in violation of this subdivision (b)(41);
42. (42) Offering, through the mail or by other means, a check that contains an obligation to advertise with a person upon the endorsement of the check. The obligation is effective upon the check being signed and deposited into the consumer's bank account;
43. (43) The act or practice of directly or indirectly:
  1. (A) Making representations that a person will pay or reimburse for a motor vehicle traffic citation for any person who purchases a device or mechanism, passive or active, that can detect or interfere with a radar, laser or other device used to measure the speed of motor vehicles;
  2. (B) Advertising, promoting, selling or offering for sale any radar jamming device that includes any active or passive device, instrument, mechanism, or equipment that interferes with, disrupts, or scrambles the radar or laser that is used by law enforcement agencies and officers to measure the speed of motor vehicles; or
  3. (C) Advertising, promoting, selling or offering for sale any good or service that is illegal or unlawful to sell in the state;
44. (44) Violating § 47-18-5402;
45. (45)
  1. (A) Installing, offering to install, or making available for installation, reinstallation or update a covered file-sharing program onto a computer without being an authorized user of that computer or without first providing clear and conspicuous notice to the authorized user of the computer that the files on that computer will be made available to the public, obtaining consent of the authorized user to installation of the program, and requiring affirmative steps by the authorized user to activate any feature on the program that will make files on that computer available to the public; or
  2. (B) Preventing reasonable efforts to disable or remove, or to block the installation or execution of, a covered file-sharing program on a computer;
46. (46)
  1. (A) The act or practice of directly or indirectly advertising, promoting, selling, or offering for sale international driver's licenses. It is a per se violation of this subdivision (b)(46) to:
    1. (i) Misrepresent that any international driver's license sold or offered for sale confers a privilege to operate a motor vehicle on the streets and highways in this state; or
    2. (ii) Represent that any international driver's license sold or offered for sale is of a particular standard, quality or grade;
  2. (B) For purposes of this subdivision (b)(46), unless the context otherwise requires:
    1. (i) “International driver's license” means a document that purports to confer a privilege to operate a motor vehicle on the streets and highways in this state and is not issued by a governmental entity. Such document may be an imitation of an international driving permit; and
    2. (ii) “International driving permit” means the document issued by a duly authorized automobile association to a holder of a valid driver license which grants such holder the privilege to operate a motor vehicle in countries or international bodies that are signatory parties to Article 24 of the 1949 United Nations Convention on Road Traffic, pursuant to 3 U.S.T. § 3008;
  3. (C) Notwithstanding any other law to the contrary, and without limiting the scope of this section, a violation of this subdivision (b)(46) shall be punishable by a non-remedial civil penalty of a minimum of one thousand dollars ($1,000) to a maximum of three thousand dollars ($3,000) per violation. Civil penalties assessed under this subdivision (b)(46) are separate and apart from the remedial civil penalties authorized in § 47-18-108(b)(3);
47. (47) A home improvement services provider:
  1. (A) Entering into a contract for home improvement services without providing to the residential owner in written form:
    1. (i) That it is a criminal offense for the person entering into the contract for home improvement services with a residential owner to do any of the prohibited acts set out in § 39-14-154(b), by writing out the text of each prohibited act, and providing the penalty and available relief for such; and
    2. (ii) The true and correct name, physical address and telephone number of the home improvement services provider; or
  2. (B) Having complied with subdivision (b)(47)(A), failing to provide to the residential owner in written form a correct current or forwarding address if the person changes the physical address initially provided to the residential owner and any or all work to be performed under the contract has not been completed;
48. (48) Failing to comply with title 62, chapter 6, part 6;
49. (49) Engaging in a Ponzi scheme, defined as a fraudulent investment scheme in which money placed by later investors pays artificially high dividends to the original investor, thereby attracting even larger investments;
50. (50) Making fraudulent statements or intentional omissions in order to induce a consumer to sell securities or other things of value to fund an investment;
51. (51) Advertising services for the provision of a warranty for a motor vehicle, as defined in § 55-8-101, in a deceptive manner that is likely to cause the owner of the motor vehicle to believe that the advertisement originated from the original manufacturer of the motor vehicle or from the dealer that sold the motor vehicle to the owner;
52. (52)
  1. (A)
    1. (1) Using the trade name or trademark, or a confusingly similar trade name or trademark of any place of entertainment, or the name of any event, person, or entity scheduled to perform at a place of entertainment in the domain of a ticket marketplace URL, without written authorization from the place of entertainment, event, person, or entity scheduled to perform at a place of entertainment to use the trade name, trademark, or name in the domain of the URL prior to the use; or
    2. (2) Using or displaying any combination of text, images, website graphics, website display, or website addresses that are substantially similar to the website of an operator with the intent to mislead a potential purchaser, without written authorization from the operator;
  2. (B) For purposes of subdivision (b)(52)(A):
    1. (i) “Domain” means the portion of text in a URL that is to the left of the top-level domains such as .com, .net, or .org;
    2. (ii) “Operator” means an individual, firm, corporation, or other entity, or an agent of such individual, firm, corporation, or other entity that:
      1. (a) Owns, operates, or controls a place of entertainment or that promotes or produces a performance, concert, exhibit, game, athletic event, or contest; and
      2. (b) Offers for sale a first sale ticket to the place of entertainment or performance, concert, exhibit, game, athletic event, or contest;
    3. (iii) “Place of entertainment” means an entertainment facility in this state, such as a theater, stadium, museum, arena, amphitheater, racetrack, or other place where performances, concerts, exhibits, games, athletic events, or contests are held;
    4. (iv) “Ticket” means a printed, electronic, or other type of evidence of the right, option, or opportunity to occupy space at, to enter, or to attend a place of entertainment, even if not evidenced by any physical manifestation of the right, option, or opportunity; and
    5. (v) “Ticket marketplace” means a website that provides a forum for or facilitates the buying and selling, or reselling, of a ticket;
53. (53) A violation of § 33-2-424;
54. (54) A violation of § 33-2-1402(b);
55. (55) A violation of § 33-2-1403(a);
56. (56) Issuing or delivering a home service contract to a consumer in this state that does not specify the merchandise and services to be provided, and any limitations, exceptions, or exclusions;
57. (57) Violating § 47-18-133;
58. (58) A violation of § 47-18-135;
59. (59) Violating § 47-18-3203;
60. (60) Violating § 36-1-108(a) or (b);
61. (61) Violating § 36-1-109; and
62. (62) Providing services related to the placement of a child or children for adoption, including, but not limited to, counseling or facilitating, and the services are provided using false or misleading representations of fact or deceptive representations.
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- 47-18-109(a)(1)
(c) The following are among the acts or practices which will be considered in determining if an offer to sell goods or services is not bona fide:
1. (1) Refusal to reasonably show, demonstrate or sell the goods or services offered in accordance with the terms of the offer;
2. (2) Disparagement by acts or words of the advertised goods or services or disparagement with respect to the guarantee, credit terms, availability of service, repairs or parts, or in any other respect, in connection with the advertised goods or services;
3. (3) Failure to make available at all outlets listed in the advertisement a sufficient quantity of the advertised goods or services to meet reasonably expectable public demand, unless the advertisement clearly and conspicuously discloses that the availability of a particular good is limited and/or the goods or services are available only at designated outlets, or unless the advertisement discloses that a particular good is to be closed out or offered for a limited time. In the event of an inadequate inventory, issuing of “rain checks” for goods or offering comparable or better goods at the sale price may be considered a good faith effort to make the advertised goods available, unless there is a pattern of inadequate inventory or unless the inadequate inventory was intentional. If rain checks are offered, the goods must be delivered within a reasonable time;
4. (4) Refusal to take orders or give rain checks for the advertised goods or services, when the advertisement does not disclose their limited quantity or availability to be delivered within a reasonable period of time;
5. (5) Showing or demonstrating goods or services which are defective, unusable or impractical for the purpose represented or implied in the advertisement when such defective, unusable or impractical nature is not fairly and adequately disclosed in the advertisement; and
6. (6) Use of a sales plan or method of compensating or penalizing salespersons designed to prevent or discourage them from selling the advertised goods or services. This does not prohibit compensating salespersons by use of a commission.
(d) The fact that a seller occasionally sells the advertised goods or services at the advertised price does not constitute a defense when the seller's overall purpose is to engage in bait and switch tactics.
(e) Nothing in § 47-18-103(1) or subdivisions (b)(21)-(23) and subsections (c) and (d) shall prevent a seller from advertising goods and services with the hope that consumers will buy goods or services in addition to those advertised.
(f) For the purposes of subsection (b), investment does not include a security defined in § 48-1-102 or any insurance or annuity contract.

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§ 47-18-105. [Repealed]

§ 47-18-106. Investigations — Requests for information — Penalties for noncompliance.

(a) Whenever the attorney general has reason to believe that a person is engaging in, has engaged in, or, based upon information received from another law enforcement agency, is about to engage in any unlawful act or practice under this part, or has reason to believe it to be in the public interest to conduct an investigation to ascertain whether any person is engaging in, has engaged in, or is about to engage in such act or practice, the attorney general may:
1. (1) Require the person to file a statement or report in writing, under oath or otherwise, as to all the facts and circumstances concerning the alleged violation and to furnish and make available for examination all documentary material and information relevant to the subject matter of the investigation;
2. (2) Examine under oath any person connected to the alleged violation; and
3. (3) Examine any merchandise or any sample of merchandise deemed relevant to the subject matter of the investigation.
(b) At any time prior to the return date specified in the attorney general's request for information pursuant to subsection (a), or within ten (10) days following notice of such a request, whichever is shorter, any person from whom information has been requested may petition the circuit or chancery court of Davidson County, stating good cause, for a protective order to extend the return date for a reasonable time, or to modify or set aside the request. The attorney general shall receive at least one (1) day's notice of such a petition and shall be given an opportunity to respond.
(c) If no protective order from the court is secured and the written request by the attorney general is not complied with by its return date, the attorney general, upon notice to the person requested to provide information, may apply to a court of competent jurisdiction for an order compelling compliance with the request made pursuant to subsection (a).
(d) Any court of competent jurisdiction in this state, upon a showing by the attorney general that there are reasonable grounds to believe that this part is being, has been, or is about to be violated; that the persons who are committing, have committed, or are about to commit such acts or practices or who possess the relevant documentary material have left the state or are about to leave the state; and that such an order is necessary for the enforcement of this part, may order such persons to comply with subsection (a) whether the attorney general has made a prior request for information or not. The court may also, notwithstanding any provision to the contrary, immediately and without notice, forbid the removal from any place, concealment, withholding, destruction, mutilation, falsification, or alteration by any other means of any documentary material in the possession, custody, or control of any person believed by the attorney general to be connected with acts or practices which violate this part.
(e) Any person who has received notice of a request for information pursuant to subsection (a), or of an order pursuant to subsection (c) or (d), and with intent to avoid, evade, or prevent compliance, in whole or in part, with any civil investigation or order under this part, removes from any place, conceals, withholds, destroys, mutilates, falsifies or by any other means alters any documentary material in the possession, custody, or control of any person subject to such notice, shall be subject to a civil penalty of not more than one thousand dollars ($1,000), recoverable by the state in addition to any other appropriate sanction.
(f) Documentary material or merchandise requested pursuant to this section shall be produced for inspection and copying during normal business hours at the principal office or place of business of the person possessing such documentary material or merchandise, or at such other time and place as may be agreed upon by the possessor and the attorney general.
(g) No documentary material, merchandise, or other information, including trade secrets, obtained pursuant to a request under this section, unless otherwise ordered by the court for good cause shown, shall be produced for inspection, copied by, or its contents disclosed to, any person other than an authorized representative of the attorney general or other proper law enforcement official for the purpose of prosecution without the consent of the person who produced the material or information. The attorney general may use copies of the documentary material produced in accordance with this section and merchandise impounded under a court order as it determines necessary in the enforcement of this part, including the presentation before any court; provided, that none of the powers conferred upon the attorney general by this part shall be used for the purpose of compelling any natural person to furnish testimony or evidence which may be protected by such person's right against self-incrimination.
(h) In conducting an inquiry pursuant to this section, the attorney general, whenever such aid is determined to be necessary and desirable, may request the aid of any agency of the state; and any agency, as requested, shall give full aid, support, and cooperation to the attorney general in such investigation.
(i) Service of any notice, order, or request for information by the attorney general may be made in compliance with the Tennessee Rules of Civil Procedure or by:
1. (1) Delivering a duly executed copy of the notice, order, or request for information to the person to be served or to a partner or to any officer or agent authorized by appointment or by law to receive service of process on behalf of that person;
2. (2) Mailing by registered or certified mail a duly executed copy of the notice, order, or request for information addressed to the person, to be served at the person's principal place of business in this state, or if the person has no place of business within this state, to the person's principal office, place of business, home, or last known address; or
3. (3) Personal service, pursuant to §§ 20-2-214 — 20-2-220.

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§ 47-18-107. Assurance of voluntary compliance — Penalty for violation.

(a) In the administration of this part, the attorney general may negotiate and accept an assurance of voluntary compliance with respect to any act or practice considered to violate this part, from any person who allegedly is engaging in, has engaged in, or, based upon information received from another law enforcement agency, is about to engage in the act or practice. The assurance shall be in writing and shall be filed with and subject to the approval of the circuit or chancery court of Davidson County.
(b) The acceptance of an assurance of voluntary compliance may be conditioned on the stipulation that the person considered to be in violation of this part restore to any person in interest any money or property, real, personal, or mixed, which may have been acquired by means of acts or practices which are considered to violate this part.
(c) An assurance of voluntary compliance shall not be considered an admission of prior violation of this part. However, unless an assurance has been rescinded by agreement of the parties or voided by a court for good cause, subsequent failure to comply with the terms of the assurance is prima facie evidence of a violation of this part.
(d) Matters closed by the filing of an assurance of voluntary compliance may be reopened for cause by the attorney general at any time.
(e) Assurance of voluntary compliance shall in no way affect individual rights of action which may exist independent of the recovery of money or property received pursuant to a stipulation in voluntary compliance under subsection (b).
(f) Any knowing violation of the terms of an agreement of voluntary compliance, unless it has been rescinded by agreement of the parties or voided by a court for good cause, shall be punishable by a civil penalty of not more than one thousand dollars ($1,000), recoverable by the state for each violation, in addition to any other appropriate sanction.

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§ 47-18-108. Restraining orders or injunctions — Penalty for violation.

(a)
1. (1) Whenever the attorney general has reason to believe that any person has engaged in, is engaging in, or, based upon information received from another law enforcement agency, is about to engage in any act or practice declared unlawful by this part and that proceedings would be in the public interest, the attorney general may bring an action in the name of the state against such person to restrain by temporary restraining order, temporary injunction, or permanent injunction the use of such act or practice.
2. (2) Unless the attorney general determines in writing that the purposes of this part will be substantially impaired by delay in instituting legal proceedings, the attorney general shall, at least ten (10) days before instituting legal proceedings as provided for in this section, give notice to the person against whom proceedings are contemplated and give such person an opportunity to present reasons why such proceedings should not be instituted.
3. (3) As part of any action brought pursuant to subdivision (a)(1), the attorney general shall certify that the division of consumer affairs complied with § 47-18-5002(2) unless the attorney general determines that the purposes of this part will be substantially impaired by delaying legal proceedings.
4. (4) The action may be brought in a court of competent jurisdiction in the county where the alleged unfair or deceptive act or practice took place or is about to take place or in the county in which such person resides, has such person's principal place of business, conducts, transacts, or has transacted business or, if the person cannot be found in any of the foregoing locations, in the county in which such person can be found.
5. (5) The courts are authorized to issue orders and injunctions to restrain and prevent violations of this part, and such orders and injunctions shall be issued without bond.
6. (6) Whenever any permanent injunction is issued by a court in connection with any action which has become final, reasonable costs shall be awarded to the state.
(b)
1. (1) The court may make such orders or render such judgments as may be necessary to restore to any person who has suffered any ascertainable loss by reason of the use or employment of such unlawful method, act, or practice, any money or property, real, personal, or mixed, or any other article, commodity, or thing of value wherever situated, which may have been acquired by means of any act or practice declared to be unlawful by this part.
2. (2) The court may also enter an order temporarily or permanently revoking a license or certificate authorizing that person to engage in business in this state, if evidence has been presented to the court establishing knowing and persistent violations of this part.
3. (3) The court may also order payment to the state of a civil penalty of not more than one thousand dollars ($1,000) for each violation. In determining the amount of a civil penalty, the court may consider the defendant's participation in the complaint resolution process described in § 47-18-5002(2), and the defendant's restitution efforts prior to the initiation of an action pursuant to subdivision (a)(1), in addition to any other factors.
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  - 47-18-104(b)(32)(C)
  - 47-18-104(b)(46)(C)
4. (4) The court may also order reimbursement to the state for the reasonable costs and expenses of investigation and prosecution of actions under this part, including attorneys' fees.
5. (5) In the course of any action brought pursuant to subdivision (a)(1), the court may order the parties to engage in pre-trial mediation. If a party requests the court to order the parties to mediation, then the requesting party bears the costs associated with the mediation, unless both parties agree to bear the costs.
(c) Any knowing violation of the terms of an injunction or order issued pursuant to subsection (a) or (b) shall be punishable by a civil penalty of not more than two thousand dollars ($2,000), recoverable by the state for each violation, in addition to any other appropriate relief.

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§ 47-18-109. Private right of action — Damages — Notice to attorney general.

(a)
1. (1) Any person who suffers an ascertainable loss of money or property, real, personal, or mixed, or any other article, commodity, or thing of value wherever situated, as a result of the use or employment by another person of an unfair or deceptive act or practice described in § 47-18-104(b) and declared to be unlawful by this part, may bring an action individually to recover actual damages.
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  - 33-2-1402(b)(2)
  - 33-2-1403(b)(2)
2. (2) The action may be brought in a court of competent jurisdiction in the county where the alleged unfair or deceptive act or practice took place, is taking place, or is about to take place, or in the county in which such person resides, has such person's principal place of business, conducts, transacts, or has transacted business, or, if the person cannot be found in any of the foregoing locations, in the county in which such person can be found.
3. (3) If the court finds that the use or employment of the unfair or deceptive act or practice was a willful or knowing violation of this part, the court may award three (3) times the actual damages sustained and may provide such other relief as it considers necessary and proper, except that the court may not award exemplary or punitive damages for the same unfair or deceptive practice.
4. (4) In determining whether treble damages should be awarded, the trial court may consider, among other things:
  1. (A) The competence of the consumer or other person;
  2. (B) The nature of the deception or coercion practiced upon the consumer or other person;
  3. (C) The damage to the consumer or other person; and
  4. (D) The good faith of the person found to have violated this part.
5. (5) This subsection (a) does not apply with respect to alleged violations of the Tennessee Equal Consumer Credit Act of 1974, compiled in part 8 of this chapter.
(b) Without regard to any other remedy or relief to which a person is entitled, anyone affected by a violation of this part may bring an action to obtain a declaratory judgment that the act or practice violates this part and to enjoin the person who has violated, is violating, or who is otherwise likely to violate this part; provided, that such action shall not be filed once the attorney general has commenced a proceeding pursuant to § 47-18-107 or § 47-18-108.
(c)
1. (1) Any person who has been affected by an act or practice declared to be a violation of this part may accept any written reasonable offer of settlement made by the person or persons considered to have violated this part; provided, that the tender of acceptance of such a settlement offer shall not abate any proceeding commenced by the attorney general pursuant to § 47-18-107 or § 47-18-108.
2. (2) Such a settlement may be set aside by a court of competent jurisdiction at the request of the affected person or of the attorney general if such a request is made within one (1) year from the date of the settlement agreement and if the court finds the settlement to be unreasonable.
3. (3) In determining the reasonableness of a settlement, the court shall consider:
  1. (A) The competence of the consumer or other person;
  2. (B) The nature of the deception or coercion practiced upon the consumer or other person;
  3. (C) The value of the consideration received; and
  4. (D) The nature and extent of the legal advice received by the consumer or other person.
  5. If the consumer or other person was not represented by legal counsel at the time of the offer of settlement, the person claiming the benefit of the settlement shall have the burden of establishing that it is reasonable.
4. (4) In any private action commenced under this section, the court may, upon the introduction of proof that the person against whom the action is filed has made a written, reasonable offer of settlement which has been communicated to the affected party, limit the amount of recovery to the terms of the offer of settlement.
(d) Any permanent injunction, judgment, or final court order made pursuant to § 47-18-108, or assurance of voluntary compliance entered into pursuant to § 47-18-107, which has not been complied with, shall be prima facie evidence of the violation of this part in any action brought pursuant to this section.
(e)
1. (1) Upon a finding by the court that a provision of this part has been violated, the court may award to the person bringing such action reasonable attorney's fees and costs.
2. (2) In any private action commenced under this section, upon finding that the action is frivolous, without legal or factual merit, or brought for the purpose of harassment, the court may require the person instituting the action to indemnify the defendant for any damages incurred, including reasonable attorney's fees and costs.
3. (3) This subsection (e) does not apply to an action initiated by the attorney general.
(f)
1. (1) Upon the commencement of any action brought under subsections (a) and (b), the clerk of the court shall mail a copy of the complaint or other initial pleading to the attorney general and, upon the entry of any judgment, order, or decree in the action, shall mail a copy of such judgment, order or decree to the attorney general.
2. (2) A copy of any notice of appeal shall be served by the appellant upon the attorney general, who in the public interest may intervene on appeal.
(g) No class action lawsuit may be brought to recover damages for an unfair or deceptive act or practice declared to be unlawful by this part.
(h) No private right of action shall be commenced under this section for any alleged unfair or deceptive act or practice involving the marketing or sale of a security as defined in the Tennessee Securities Act, § 48-1-102.

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§ 47-18-110. Limitations of actions.

Any action commenced pursuant to § 47-18-109 shall be brought within one (1) year from a person's discovery of the unlawful act or practice, but in no event shall an action under § 47-18-109 be brought more than five (5) years after the date of the consumer transaction giving rise to the claim for relief.

§ 47-18-111. Exemptions.

(a) This part does not apply to:
1. (1) Acts or transactions required or specifically authorized under the laws administered by, or rules and regulations promulgated by, any regulatory bodies or officers acting under the authority of this state or of the United States;
  1 Backlink
  - 47-14-125(b)
2. (2) A publisher, broadcaster, or other person principally engaged in the preparation or dissemination of information or the reproduction of printed or pictorial matter, who has prepared or disseminated such information or matter on behalf of others without notification from the attorney general that the information or matter violates or is being used as a means to violate this part;
3. (3) Credit terms of a transaction which may be otherwise subject to this part, except insofar as the Tennessee Equal Consumer Credit Act of 1974, compiled in part 8 of this chapter may be applicable; or
4. (4) A retailer who has in good faith engaged in the dissemination of claims of a manufacturer or wholesaler without actual knowledge that such claims violated this part.
(b) The burden of proving an exemption from this part, as provided in this section, shall be upon the person claiming the exemption.

§ 47-18-112. Supplementary law.

The powers and remedies provided in this part shall be cumulative and supplementary to all other powers and remedies otherwise provided by law. The invocation of one power or remedy herein shall not be construed as excluding or prohibiting the use of any other available remedy.

§ 47-18-113. Waiver of rights — Restrictions on jurisdiction or venue prohibited.

(a) No provision of this part may be limited or waived by contract, agreement, or otherwise, notwithstanding any other law to the contrary; provided, that this part shall not alter, amend, or repeal the provisions of the Uniform Commercial Code relative to express or implied warranties or the exclusion or modification of such warranties.
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- 56-7-1405(a)(1)
(b) Any provision in any agreement or stipulation, verbal or written, restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state with respect to any claim arising under or relating to the Tennessee Consumer Protection Act of 1977 and related acts set forth in this title is void as a matter of public policy. Further, no action of a consumer or other person can alter, amend, obstruct or abolish the right of the attorney general and reporter to proceed to protect the state of Tennessee and consumers or other persons within this state or from other states who are victims of illegal practices of persons located, wholly or in part, in Tennessee's borders.
(c)
1. (1) No other right or benefit conferred on consumers by any other provision of this code may be waived or otherwise varied except as provided for in this section.
2. (2) Any waiver of a right or benefit described in this subsection (c) must be knowingly and intelligently made.
3. (3) The competence of the consumer, the consumer's actual knowledge of the rights or benefits being waived, or lack thereof, the manner in which the right or benefit was pointed out to the consumer at the time of the consumer transaction, the nature of the deception or coercion practiced upon the consumer, the nature and extent of the legal advice received by the consumer, and the value of consideration received are relevant to the issue of whether the waiver was knowingly and intelligently made.
4. (4) If the consumer was not specifically informed of the effect of the waiver and did not specifically waive such consumer's rights or benefits at the time of the consumer transaction, the party claiming waiver shall have the burden of establishing that the waiver was knowingly and intelligently made.

§ 47-18-114. Powers of attorney general.

The attorney general may bring any appropriate action or proceeding in any court of competent jurisdiction pursuant to this part.

§ 47-18-115. Construction.

This part, being deemed remedial legislation necessary for the protection of the consumers of the state of Tennessee and elsewhere, shall be construed to effectuate the purposes and intent. It is the intent of the general assembly that this part shall be interpreted and construed consistently with the interpretations given by the federal trade commission and the federal courts pursuant to § 5(A)(1) of the Federal Trade Commission Act, codified in 15 U.S.C. § 45(a)(1).

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56-7-1405(a)(1)

§ 47-18-116. Costs.

No costs shall be taxed against the attorney general in actions commenced under this part.

§ 47-18-117. Out-of-state liquor advertisers — Warning.

(a) Any publication of general circulation, at least twenty percent (20%) of the published copies of which are sold or distributed in the state of Tennessee, which publishes any advertisement by or on behalf of any person, firm or corporation selling or distributing alcoholic beverages at retail in a state other than Tennessee, shall publish a notice to consumers as a part of, or immediately adjacent to, each such advertisement.
(b) The notice shall read as follows:
1. WARNING: The importation or transportation of alcoholic beverages into the State of Tennessee by any person not possessing a permit from the Tennessee Alcoholic Beverage Commission is a CRIMINAL OFFENSE which could be punished by FINE or IMPRISONMENT or BOTH.
(c) The notice shall be printed in a space equal to or greater than thirty percent (30%) of the total space devoted to each such advertisement in print no smaller than the largest print type employed in such advertisement.

§ 47-18-118. Failure to respond to request for information.

Upon receipt of a written request from the attorney general, failing to submit written answers concerning the basis upon which the approximate verifiable retail value was determined pursuant to the requirements of § 47-18-120(c)(1)(D) and (E), including supplying the attorney general with copies of invoices, receipts, or other business records that would substantiate the disclosed retail value, shall be a violation of this part.

§ 47-18-119. New passenger motor vehicle.

For the purposes of § 47-18-104(b)(6), any passenger motor vehicle which meets the requirements of the definition for a new passenger car in § 55-5-106(e)(5) shall be construed to be new.

§ 47-18-120. Definitions — Prizes offered as inducements — Unfair or deceptive practices.

(a) As used in this section, unless the context otherwise requires:
1. (1) “Accepts,” “accepted,” or “acceptance” means the positive indication by a consumer or person, in response to an offer, that such person agrees to incur a monetary obligation or otherwise begins performance of the terms of the offer;
2. (2) “Initial offer” means the first contact with a consumer or person, whether verbally or in writing;
3. (3) “Prize” means prize, gift, award, incentive promotion or any thing of value. “Prize” includes, but is not limited to, any thing of value offered in a sweepstakes, contest, drawing, incentive offer, premium promotion or similar promotional offer by whatever name the company uses; and
4. (4) “Travel service” means travel-related or tourist-related services, whether for individuals or groups, through vacation or tour packages, or through lodging or travel certificates, vouchers or other devices.
(b) This section applies to:
1. (1) Any person engaged in trade or commerce, directly or indirectly, by any means, including, but not limited to, by mail, by telephone, by advertisement, or in person, who offers to a consumer or other person, or represents or leads a consumer or person to believe, that the consumer or person will or may receive any prize as an inducement to purchase a good, service or other product or otherwise incur a monetary obligation, visit a business, attend or listen to a sales presentation or otherwise contact a salesperson; or
2. (2) Any person engaged in trade or commerce, directly or indirectly, by any means, who offers to sell travel services, at wholesale or retail, to a consumer or other person.
(c) In addition to and without limiting the prohibitions contained in § 47-18-104, the following unfair or deceptive acts or practices are declared unlawful and in violation of this part:
1. (1) In an initial offer, the offeror is in violation of this part if the offeror:
  1. (A) Fails to clearly and conspicuously state the name and street address of the person making the offer;
  2. (B) Represents or leads a person to believe that, when, in fact, the offer is simply a promotional plan designed to make contact with prospective buyers, the person:
    1. (i) Is or could be a winner, if those contacted have not won or are not eligible to win; or
    2. (ii) Has been “selected” or is otherwise part of a select or special group eligible to receive, claim, or otherwise obtain the prize or travel service, if that person has not been selected or is not part of a select or special group;
  3. (C) Represents that a person has won or could win a prize or travel service, has been selected or is eligible to win a prize or travel service or will receive a prize or travel service, if the receipt of the prize or travel service is conditioned upon listening to or observing a sales promotional effort, making a purchase, or incurring any monetary obligation, unless it is clearly and conspicuously disclosed, at the time of the initial offer of the prize or travel service, that an attempt will be made to induce the consumer or person to incur a monetary obligation, including the amount of that monetary obligation;
  4. (D) Fails to clearly and conspicuously disclose the approximate verifiable retail price of each prize or travel service or the price of any product offered for sale through the promotional program in a position immediately adjacent to the item when the initial offer is in writing. The approximate verifiable retail value is the price at which the person offering the item can substantiate that a substantial number of these items have been sold at retail by another person or, in the event such substantiation is unavailable, an amount equal to no more than three (3) times the amount actually paid by the sponsor or promoter for the item;
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    47-18-118
  5. (E) Fails to clearly and conspicuously disclose each item's approximate verifiable retail value as defined in subdivision (c)(1)(D), when the initial offer is verbal;
  6. (F) Fails to clearly and conspicuously disclose, immediately adjacent to each prize or travel service offered, a statement of the odds, if applicable, in arabic numerals, of receiving each item offered, when the initial offer is in writing. The offeror must also give the recipient a written statement, if applicable, that those offers are not exclusive to the recipient and must disclose to such recipient whether all prizes or travel services will be awarded;
  7. (G) Fails to clearly and conspicuously disclose a statement of odds, if applicable, in arabic numerals, of receiving each item offered if the initial offer is verbal. The offeror must make a verbal statement, if applicable, that those offers are not exclusive to the recipient and must disclose to such recipient whether all prizes or travel services will be awarded;
  8. (H) Fails to give a recipient a general description of the types and categories of restrictions, qualifications, or other conditions, that must be satisfied before the consumer or person is entitled to receive or use the prize or travel service, or product or service offered;
  9. (I) Fails to give a recipient an approximate total of all costs, fees or other monetary obligations that must be satisfied before the consumer or person is entitled to receive or use the prize or travel service, or product or service offered; or
  10. (J) Offers lottery winnings to a consumer in exchange for incurring a monetary obligation or making a purchase;
2. (2) Either in an initial offer or, at a minimum, before an offer can be accepted, the offeror is in violation of this part if the offeror fails to clearly and conspicuously state verbally, or in writing, and upon request, in writing:
  1. (A) A general description of the types and categories of restrictions, qualifications, or other conditions, that must be satisfied before the consumer or person is entitled to receive or use the prize or travel service, or product or service offered, including:
    1. (i) Any deadline by which the recipient must visit the business, attend or listen to the sales presentation or otherwise respond in order to receive the prize or travel service, or product or service offered;
    2. (ii) The date or dates on or before which the prize or travel service, product or service offer will terminate or expire and, if applicable, when the prizes or travel services will be awarded;
    3. (iii) The approximate duration of any mandatory sales presentation or tour, if applicable;
    4. (iv) Any other conditions, such as minimum or maximum age qualifications, financial qualifications, or requirements that, if the recipient is married, both husband and wife must be present or respond in order to receive the prize or travel service, or product or service offered; and
    5. (v) All other material rules, terms or restrictions governing an offer that is an inducement to purchase a good, service or other product or to otherwise incur a monetary obligation;
  2. (B) The refund, exchange or return policies in regard to any offer that is an inducement to purchase a good, service or other product or otherwise incur a monetary obligation; and
  3. (C) The approximate total of costs, fees or other monetary obligations that must be satisfied before the consumer or person is entitled to receive or use the prize or travel service, or product or service offered, including, but not limited to, handling, shipping, delivery, freight, postage or processing fees, charges or other additional costs for the receipt or use of the prize or travel service, or product or service offered. This subdivision (c)(2)(C) shall not be construed to require that foreign tax rates be included;
3. (3) The offeror is in violation of this part if at any time the offeror:
  1. (A) Misrepresents in any manner the rules, terms, restrictions, monetary obligations or conditions of participation in the promotional plan or offer;
  2. (B) Represents that the prize or travel service offered or any product offered for sale through the promotional plan possesses particular features or benefits if it does not, or is of a particular standard, quality, grade, or model, if it is of another;
  3. (C) Makes the receipt of an offered prize or travel service contingent upon the consent of individual winners or recipients to allow their names to be used for promotional purposes, or failing to obtain the express written or oral consent of individual winners or recipients before their names are used for a promotional purpose in connection with a mailing to a third person;
  4. (D) Refuses to disclose or make available, upon request, the names of the recipients of any prizes or travel services within the geographic area wherein the promotional offers were made; or
  5. (E) Fails to award and distribute the prize or travel service, or product or service offered in accordance with the rules, terms and conditions of the offer or promotional program as stated or disclosed in accordance with the above subdivisions;
4. (4)
  1. (A) Either in an initial offer for a prize or travel service or, at a minimum, before an offer can be accepted, the offeror is in violation of this part if the offeror fails to clearly and conspicuously state verbally, or in writing, and upon request in writing, uses or makes a statement or representation in the main, primary or emphasized portion of the text of a solicitation, promotion, advertisement or other offering that is contradicted in a disclosure that is not easily read, readily noticeable or presented in small or fine print.
  2. (B) If a motor vehicle dealer is in compliance with the advertising regulations of the Tennessee motor vehicle commission, as such regulations exist on July 1, 2003, and as amended from time to time thereafter, subdivision (c)(4)(A) shall not apply to such dealer.
(d) In addition to, and without limiting, the foregoing provisions:
1. (1) It is unlawful to require the consumer or person to incur any monetary obligation, excluding nominal postage costs, in order to determine which, if any, prize or travel service the consumer or person is offered or will receive, or to continue to remain eligible to receive any prize or travel service; and
2. (2) Acceptance of an offer is not valid and binding on the consumer unless all of the disclosures required in subsection (c) have been made.
(e) Subdivisions (c)(1)(D), (E), and (I), and (c)(2)(B) and (C) do not apply in a promotion for books, records, videos or magazines when the person has the right to review the merchandise without obligation for at least seven (7) days and the right to return without charge any undamaged merchandise.
(f) This section does not apply to:
1. (1) Advertising and promotional plans of persons covered by the Tennessee Time-Share Act of 1981, compiled in title 66, chapter 32, part 1, and the Membership Camping Act, compiled in title 66, ch. 32, part 3; and
2. (2) Retail promotions which offer savings on consumer goods or services, including “one-cent sales,” “two-for-the-price-of-one sales,” or a manufacturer's “cents-off” coupons, when the consumer accepts the offer on-site.
3. The burden of proving these exemptions is upon the person claiming the exemption.
(g) Notwithstanding any other law, a violation of this section constitutes an unfair deceptive act or practice, and without limiting the scope of § 47-18-104 shall be punishable by a civil penalty of a minimum of one thousand dollars ($1,000) to a maximum of ten (10) times the amount collected or requested by the offeror for each violation.

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§ 47-18-121. Unlicensed motor vehicle dealers to comply with advertising requirements.

(a) Any motor vehicle dealer not currently licensed as a motor vehicle dealer by the state of Tennessee, or any advertising cooperative composed of such unlicensed motor vehicle dealers, shall comply with all advertising requirements of title 55, chapter 17, including any regulations promulgated under that chapter. An unlicensed motor vehicle dealer shall be responsible for any advertising copy bearing its name.
(b) A violation of this section constitutes a violation of the Consumer Protection Act of 1977, compiled in this chapter.

§ 47-18-122. Applicability to violations of part 2.

For the purpose of application of this part, any violation of part 2 of this chapter shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of any trade or commerce and subject to the penalties and remedies as provided by this part.

§ 47-18-123. Products, services or memberships purchased by negotiation of unsolicited negotiable instruments.

(a) Any person who purchases, subscribes to or receives products, services or membership in any organization by negotiating an unsolicited negotiable instrument shall have thirty (30) days from the date of the first statement or bill for such services, products, membership or subscription to:
1. (1) Cancel the services if services have not been rendered;
2. (2) Return the products if products are unused and in the condition received;
3. (3) Cancel the subscription; or
4. (4) Cancel the membership if services have not been rendered pursuant to such membership.
(b) Subsection (a) does not apply to the execution of an unsolicited negotiable instrument that creates a loan or line of credit through a credit or lending institution with which the person has an existing relationship.
(c) For purposes of this section, “unsolicited negotiable instrument” means an unconditional order or promise to pay a specific amount of money, signed by the maker or drawer, payable on demand or at a specific time, payable to order or to the bearer which was received by the bearer without prior notice from the maker or drawer.
(d) A violation of this section constitutes a violation of this part. For purposes of applying this part to this section, a violation of this section shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of any trade or commerce, subject to the penalties and remedies provided in this part.

§ 47-18-124. Prizes — Unfair or deceptive practices.

(a) As used in this section, unless the context otherwise requires:
1. (1) “Prize” means a gift, award, incentive promotion, or other item or service of value. “Prize” includes, but is not limited to, anything of value that is offered or awarded to a participant in a real or purported contest, competition, sweepstakes, puzzle, drawing, incentive offer, premium promotion or similar promotional offer by whatever name the company uses, scheme, plan, or other selection process;
2. (2) “Retail value” of a prize includes:
  1. (A) A price at which the sponsor can substantiate that a substantial number of the goods or services which constitute the prizes have been sold to the public in Tennessee in the preceding year; or
  2. (B) If the sponsor is unable to satisfy the requirement in subdivision (a)(2)(A), then no more than one and one-half (1.5) times the amount the sponsor paid for the prize in a bona fide purchase from an unaffiliated seller; and
3. (3) “Sponsor” includes a corporation, partnership, limited liability company, sole proprietorship, or natural person, that requires a person in Tennessee to pay the sponsor money as a condition of awarding the person a prize, or as a condition of allowing the person to receive, use, compete for, or obtain information about a prize, or that creates the reasonable impression that such a payment is required.
(b) No sponsor shall require a person in Tennessee to pay the sponsor money as a condition of awarding the person a prize, or as a condition of allowing the person to receive, use, compete for, or obtain information about a prize, nor shall a sponsor use any solicitation that creates the reasonable impression that a payment is required, unless the person has first received a written prize notice containing the information required in subsections (c) and (d).
(c) A written prize notice must contain each of the following:
1. (1) The true name or names of the sponsor and the address of the sponsor's actual principal place of business;
2. (2) The retail value of each prize the person receiving the notice has been selected to receive or may be eligible to receive;
3. (3) A statement of the person's odds of receiving each prize identified in the notice;
4. (4) Any requirement that the person pay shipping or handling fees or any other charges to obtain or use a prize, including the nature and amount of the charges;
5. (5) If receipt of the prize is subject to a restriction, a statement that a restriction applies, and a description of the restriction;
6. (6) Any limitations on eligibility; and
7. (7) If a sponsor represents that the person is a “winner,” is a “finalist,” has been “specially selected,” is in “first place,” or is otherwise among a limited group of persons with an enhanced likelihood of receiving a prize, the written prize notice must contain a statement of the maximum number of persons in the group or purported group with this enhanced likelihood of receiving a prize.
(d) The information required by subsection (c) must be presented in the following form:
1. (1) The retail value and the statement of odds required under subdivisions (c)(2) and (3) must be stated in immediate proximity to each identification of a prize on the written notice, and must be in the same size and boldness of type as the reference to the prize;
2. (2) The statement of odds must include for each prize, the total number of prizes to be given away and the total number of written prize notices to be distributed. The number of prizes and written prize notices must be stated in Arabic numerals. The statement of odds must be in the following form:
  1. “ (number of prizes) out of notices distributed”.
3. (3) A statement required under subdivision (c)(7) must appear in immediate proximity to each representation that the person is among a group of persons with an enhanced likelihood of receiving a prize, and must be in the same size and boldness of type as the representation.
(e) A sponsor who represents to a person that the person has been awarded a prize shall, not later than thirty (30) days after making the representation, provide the person with the prize, or with a voucher, certificate, or other document giving the person the unconditional right to receive the prize, or shall provide the person with either of the following items selected by the person:
1. (1) Any other prize listed in the written prize notice that is available and that is of equal or greater value; or
2. (2) The retail value of the prize, as stated in the written notice, in the form of cash, a money order, or a certified check.
(f) Nothing in this section creates liability for acts by the publisher, owner, agent, or employee of a newspaper, periodical, radio station, advertising medium arising out of the publication or dissemination of a solicitation, notice, or promotion governed by this section, unless the publisher, owner, agent, or employee had knowledge that the solicitation, notice, or promotion violated the requirements of this section, or had financial interest in the solicitation, notice, or promotion governed by this section.
(g) This section does not apply to:
1. (1) Advertising and promotional plans of persons covered by the Tennessee Time-Share Act of 1981, compiled in title 66, chapter 32, part 1, or the Membership Camping Act, compiled in title 66, chapter 32, part 3;
2. (2)
  1. (A) Retail promotions which offer savings on consumer goods or services, including “one-cent sales,” “two-for-the-price-of-one sales,” or a manufacturer's “cents-off” coupons, when the consumer accepts the offer on-site.
  2. (B) The burden of proving these exemptions is upon the person claiming the exemption; and
3. (3) This section does not apply to solicitations or representations in connection with the sale or purchase of books, recordings, videocassettes, periodicals, and similar goods through a membership group or club which is regulated by the federal trade commission or to contractual plans or arrangements such as continuity plans, subscription arrangements, standing order arrangements, supplements, single sales, and series arrangements, under which the seller periodically ships merchandise to a consumer who has consented in advance to receive the merchandise on a periodic basis.
(h) Notwithstanding any other law, a violation of this section constitutes an unfair deceptive act or practice and, without limiting the scope of § 47-18-104, shall be punishable by a civil penalty of a minimum of one thousand dollars ($1,000) to a maximum of ten (10) times the amount collected or requested by the offeror for each violation.

§ 47-18-125. Protection of elder persons — Cumulative, additional and supplemental penalties.

(a) Any person who knowingly uses, or has knowingly used, a method, act or practice which targets elderly persons and is in violation of this part is liable to the state for a civil penalty of not more than ten thousand dollars ($10,000) for each violation. Each violation may include but is not limited to, each elder person solicited, each advertisement that was distributed, each misrepresentation or deceptive statement that appeared on a solicitation, each time that an advertisement appeared on television or on radio, each contact, i.e., telephone call, direct mail solicitation or in person solicitation with an elder person to promote or solicit using unfair, misleading or deceptive acts or practices.
(b) In addition, when determining the amount of the civil penalty to be imposed pursuant to this part, the court may consider:
1. (1) The good or bad faith of the violator as it relates to the violations;
2. (2) The injury to the public;
3. (3) The violator's ability to pay;
4. (4) The public's interest in eliminating the benefits derived by the violator from the violations; and
5. (5) The necessity of vindicating the authority of the state and the strong need to defer future violations.
(c) The civil penalties recoverable by the state under this part are supplemental and cumulative to any other available civil penalties and relief available under other laws, regulations and rules, including, but not limited to, those available pursuant to § 47-18-108.
(d) As used in this section, unless the context otherwise requires:
1. (1) “Elder person” means any person who is sixty (60) years of age or older. The elder person need not be a citizen of Tennessee if the company or individual is operating from Tennessee or the court otherwise has jurisdiction over the company or individual for engaging in an unfair, misleading or deceptive act or practice from Tennessee.
2. (2) “Tennessee Consumer Protection Act” means the Tennessee Consumer Protection Act of 1977, compiled in this part and related statutes. Related statutes specifically include any statute that indicates within the law, regulation or rule that a violation of that law, regulation or rule is a violation of the Tennessee Consumer Protection Act of 1977. Without limiting the scope of this definition, related statutes include, but are not limited to: § 47-18-120; part 3 of this chapter; part 5 of this chapter; Home Solicitations Sales Act of 1974, compiled in part 7 of this chapter; Tennessee Credit Services Businesses Act, compiled in part 10 of this chapter; Consumer Telemarketing Protection Act of 1990, compiled in part 15 of this chapter; Unsolicited Telefacsimile Advertising Act [Repealed]; Tennessee Employment Agency Act, compiled in part 17 of this chapter; and Membership Camping Act, compiled in title 66, chapter 32, part 3.

§ 47-18-126. Electronically printed receipts for credit and debit cards — Violations — Application.

(a) Except as otherwise provided in subsection (b), no person that accepts credit cards or debit cards for the transaction of business shall print or cause to be printed more than five (5) digits of the card number or the expiration date upon either the receipt retained by the merchant or the receipt provided to the cardholder at the point of the sale or transaction.
(b) This section shall apply only to receipts that are electronically printed, and shall not apply to transactions in which the sole means of recording a credit card or debit card account number is by handwriting or by an imprint or copy of the card.
(c) A violation of this section is an unfair and deceptive trade practice and punished as provided in this part.
(d)
1. (1) Effective May 13, 2005, this section shall apply to any cash register or other machine or device that electronically prints receipts for credit card or debit card transactions that was first put into use on or after January 1, 2005.
2. (2) Effective January 1, 2007, this section shall apply to any cash register or other machine or device that electronically prints receipts for credit card or debit card transactions that was in use prior to January 1, 2005.

§ 47-18-127. Gift certificates.

(a) Subject to subsection (d), no person or entity shall sell a gift certificate to a purchaser containing an expiration date that is less than two (2) years after the date the gift certificate is issued or shall charge a fee for the issuance of a gift certificate.
(b) No person or entity, within two (2) years after a gift certificate is issued, shall charge service charges or fees relative to the gift certificate, including dormancy fees, latency fees, or administrative fees that have the effect of reducing the total amount for which the holder of the gift certificate may redeem the gift certificate.
(c) A gift certificate or prepaid card, as defined in subsection (e), sold without an expiration date is valid until redeemed or replaced with a new gift certificate or prepaid card.
(d) Subsections (a) and (b) shall not apply to a gift certificate that is:
1. (1) Distributed by the issuer to a consumer pursuant to an awards, loyalty, or promotional program without any money or anything of value being given in exchange for the gift certificate by the consumer;
2. (2) Sold below face value at a volume discount to employers or given or sold below face value to nonprofit or charitable organizations for fundraising purposes;
3. (3) Sold by a nonprofit or charitable organization for fundraising purposes;
4. (4) Given to an employee by an employer, if use of the gift certificate is limited to the employer's business establishment, which may include a group of merchants that are affiliated with the business establishment; or
5. (5) Issued by an employer to an employee in recognition of services performed by the employee.
(e) A gift certificate does not include a prepaid calling card used to make telephone calls or a prepaid card usable at multiple, unaffiliated merchants or at automated teller machines, or both.

§ 47-18-128. Disclosure of holds on debit cards.

(a) Any person providing goods or services who initiates a preauthorized debit card transaction that is more than twenty-five percent (25%) of the actual transaction amount, or fifty dollars ($50.00), whichever is greater, shall disclose at the time and point of sale that a hold will be placed on the customer's debit card account. The person initiating the hold shall disclose the dollar amount of the hold, if the amount is known. If the hold is initiated at an unmanned remote terminal, service device, or gas pump, the disclosure shall be made in conspicuous type at a location proximate to the point of payment. If the hold initiated is subject to a contractual agreement, order of the purchaser, or other written document, the notice shall be placed in conspicuous type in a segregated box on the front of the document.
(b) A violation of this section constitutes an unfair and deceptive act or practice.

§ 47-18-129. Sale or gift of certain novelty lighters prohibited.

(a) No supplier of novelty cigarette lighters in this state, including a manufacturer, distributor, importer, retailer or anyone giving away lighters as prizes or promotions, shall sell or give away an operable novelty lighter. This prohibition does not apply to the transportation of novelty lighters through this state or the storage of novelty lighters in a warehouse or distribution center in this state that is closed to the public for purposes of retail sales.
(b) This section shall not apply to cigarette lighters that were made before January 1, 1980, or that are considered to be collectable items.
(c) “Novelty lighter” means a mechanical or electrical device typically used for lighting cigarettes, cigars, or pipes that has entertaining audio or visual effects, or that resembles, in physical form or function, articles commonly recognized as appealing to or intended for use by children ten (10) years of age or younger. This includes, but is not limited to, lighters that resemble cartoon characters, toys, guns, watches, musical instruments, vehicles, toy animals, food or beverages, or that play musical notes or have flashing lights or other entertaining features. A novelty lighter may operate on any fuel, including butane or liquid fuel.
(d) Any violation of this section is a prohibited practice under § 47-18-104.
(e) The commissioner of commerce and insurance is authorized to promulgate rules and regulations to effectuate the purposes of this section. The rules and regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

§ 47-18-130. Travel promoters — Commingling of funds prohibited — Trust account.

(a) For purposes of this section:
1. (1) “Travel promoter” means a person who:
  1. (A) Maintains one (1) or more business entities or physical business locations in this state; and
  2. (B) Sells, provides, furnishes, contracts for, or arranges travel services on behalf of another person for a fee, commission, or other valuable consideration;
2. (2) “Travel promoter” does not include:
  1. (A) A transportation carrier if the transportation carrier provides, furnishes, contracts for, or arranges only transportation services that are directly provided by the transportation carrier as the substantial portion of the transportation carrier's business; or
  2. (B) A publicly traded company as defined under § 67-4-2008(a)(5)(D);
3. (3) “Travel services”:
  1. (A) Means arranging or booking vacation or travel packages, travel reservations, or travel accommodations; and
  2. (B) Does not include property or estate management services.
(b)
1. (1) A travel promoter shall not commingle in the same account or fund those funds that belong to the travel promoter or the travel promoter's business entity with customer funds that are held for disbursement for payment of travel services.
2. (2) A travel promoter shall deposit into a trust account any funds the travel promoter receives from a customer for disbursement for payment of travel services.
(c)
1. (1) Each travel promoter that conducts business in this state shall establish and maintain a separate general trust account in a state or national bank authorized by law to administer trust funds in this state.
2. (2) Funds required by subsection (b) to be deposited in a trust account must be identified or earmarked with an identifier unique to the customer or transaction for which the funds were deposited and are being held for disbursement.
(d) A violation of this section constitutes an unfair or deceptive act prohibited under § 47-18-104, and is punishable as provided in this part. Each act in violation of this section constitutes a separate violation.

§ 47-18-131. Government Imposter and Deceptive Advertisements Act.

(a) This section shall be known and may be cited as the “Government Impostor and Deceptive Advertisements Act.”
(b) For purposes of this section:
1. (1) “Advertisement” means any written, oral, graphic, or electronic statement, solicitation, marketing, illustration, label, or other depiction, including labeling that is designed or used to create interest in the purchasing of, or consideration for purchase, impart information about the attributes of, publicize the availability of, or affect the sale or use of, goods or services, whether the statement appears in a brochure, newspaper, magazine, free standing insert, marketing kit, leaflet, mailer, book insert, letter, catalogue, poster, chart, billboard, electronic mail, web site, or other digital form, slide, or on the radio, broadcast television, cable television, or commercial or infomercial whether live or recorded or elsewhere; and
2. (2) “Governmental entity” means all units, subdivisions, entities of state, federal, or local government, including, but not limited to, a board, a department, an office, an agency, a military veteran entity, or a military or veteran service organization by whatever name.
(c) The following unfair or deceptive acts or practices constitute a violation of this part:
1. (1) Using or employing in any manner an advertisement for purposes of selling goods or services that:
  1. (A) Simulates a summons, complaint, jury notice, or other court, judicial, or administrative process of any kind; or
  2. (B) Represents, implies, or otherwise causes a likelihood of confusion that the person using or employing the advertisement is a part of or associated with a unit of any governmental entity, when such is not true;
2. (2) Representing, implying, or otherwise causing a likelihood of confusion that goods or services, an advertisement, or an offer was sent or distributed by or has been approved, authorized, or endorsed, in whole or in part, by a governmental entity, when such is not true;
3. (3) Using or employing language, symbols, logos, representations, statements, titles, names, seals, emblems, insignia, trade or brand names, business or control tracking numbers, web site or email addresses, or any other term, symbol, or content that represents or implies or otherwise causes a likelihood of confusion that goods or services, an advertisement, or an offer is from a governmental entity, when such is not true; and
4. (4)
  1. (A) Failing to provide the disclosure described in subdivision (c)(4)(B) either in the largest font type on the entire advertisement, but in no event smaller than bold fourteen (14) point black type, when offering documents that are available free of charge or at a lesser price from a governmental entity:
    1. (i) On the front and outside of the mailing envelope;
    2. (ii) At the top of the e-mail message;
    3. (iii) On each web page; or
    4. (iv) On the top of each page of any advertisement;
  2. (B) The following disclosure shall be displayed in accordance with subdivision (c)(4)(A):
    1. IMPORTANT NOTICE:
    2. The documents offered by this advertisement are available to Tennessee consumers free of charge or for a lesser price from (insert name, telephone number, and mailing address of the applicable governmental entity). You are NOT required to purchase anything from this company and the company is NOT affiliated, endorsed, or approved by any governmental entity. The item offered in this advertisement has NOT been approved or endorsed by any governmental agency, and this offer is NOT being made by an agency of the government.
(d) Notwithstanding any law to the contrary, the attorney general and reporter has the following authority:
1. (1) Investigate potential violations of this section;
2. (2) Issue requests for information consistent with § 47-18-106, regarding potential violations of this section;
3. (3) Settle, including entering into assurances of voluntary compliance consistent with § 47-18-107; and
4. (4) Commence litigation as set forth in § 47-18-108, when a violation of this section has occurred.
(e) Upon receipt of a written request from the attorney general and reporter or the attorney general and reporter's designee, failing to timely submit written responses and answers concerning the alleged prohibited practices or violations in this section, including, but not limited to, supplying the attorney general and reporter with copies of customer lists, invoices, receipts, or other business records, shall be considered a failure to cooperate in a consumer protection investigation and thus be considered a violation of this section.
(f)
1. (1) Any act set out in subsection (c) shall be an unfair and deceptive act or practice affecting the conduct of trade and commerce and subject to the penalties and remedies provided in this part. A violation of subsection (e) shall also be subject to the penalties and remedies provided in this part.
2. (2) In addition to other remedies provided in this part, a court may order:
  1. (A) Payment to the state of up to one hundred dollars ($100) for each person who receives a written or electronic advertisement distributed in violation of this section; and
  2. (B) Reimbursement to the state for the reasonable costs and expenses of investigating and prosecuting a violation of this section, including attorneys' fees.
3. (3) All funds recovered pursuant to this subsection (f) shall be retained by the attorney general and reporter to be used in the enforcement of this section and other consumer protection related activities.

§ 47-18-132. Billing for special healthcare service or costs of supplies, equipment, or other services provided by a healthcare facility.

(a) As used in this section:
1. (1) “Healthcare facility” means a hospital licensed under title 33 or 68;
2. (2) “Healthcare provider” or “provider” means a physician or other healthcare practitioner licensed or certified under title 63 to perform specialty healthcare services consistent with their scope of practice under state law; and
3. (3) “Specialty healthcare service” means anesthesia, pathology, radiology, and emergency services.
(b) A hospital shall not include in any billing statement to a patient any language that indicates or implies that a charge is for a specialty healthcare service that was rendered by a healthcare provider unless:
1. (1) The charge is described in a manner that provides the patient with sufficient information to identify the healthcare provider or the specialty healthcare service rendered; and
2. (2)
  1. (A) The costs of any supplies, equipment, or other services rendered to the patient by or at the hospital are excluded from the amount charged for the healthcare provider or the specialty healthcare service rendered; or
  2. (B) The billing statement includes language or is accompanied by a notice to inform the patient that billed amounts for services do not include charges for healthcare providers who are not employed by the healthcare facility, including anesthesiologists, emergency physicians, pathologists, and radiologists.
(c) If a healthcare provider includes a charge in a billing statement to a patient for the costs of any supplies, equipment, or other services provided by a healthcare facility, then the healthcare provider shall include with the billing statement language or an accompanying notice to inform the patient that those charges are included.
(d) A violation of subsection (b) or (c) constitutes a violation of this part as an unfair or deceptive act or practice affecting the conduct of trade or commerce and is subject to the penalties and remedies as provided by this part. Each act in violation of subsection (b) or (c) constitutes a separate violation of this part.

§ 47-18-133. Automatic renewal of subscription services. [Effective on January 1, 2024. See the version effective until July 1, 2024]

(a) A business that makes an automatic renewal offer or continuous service offer to a consumer in this state shall:
1. (1) Present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled and in visual proximity, or in the case of an offer conveyed by voice, in temporal proximity, to the request for consent to the offer. If the offer also includes a free gift or trial, the offer must include a clear and conspicuous explanation of the price that will be charged after the trial ends or the manner in which the subscription or purchasing agreement pricing will change upon conclusion of the trial;
2. (2) Obtain the consumer's affirmative consent to the agreement containing the automatic renewal offer terms or continuous service offer terms, including the terms of an automatic renewal offer or continuous service offer that is made at a promotional or discounted price for a limited period of time, before charging the consumer's credit or debit card, or the consumer's account with a third party, for an automatic renewal offer or continuous service offer; and
3. (3) Provide an acknowledgment that includes the automatic renewal offer terms or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer. If the automatic renewal offer or continuous service offer includes a free gift or trial, the business shall also disclose in the acknowledgment how to cancel, and allow the consumer to cancel, the automatic renewal or continuous service before the consumer pays for the goods or services.
(b) A business that makes an automatic renewal offer or continuous service offer shall provide a toll-free telephone number, electronic mail address, a postal address if the seller directly bills the consumer, or another cost-effective, timely, and easy-to-use mechanism for cancellation that must be described in the acknowledgment specified in subdivision (a)(3).
(c) A business that allows a consumer to accept an automatic renewal or continuous service offer online shall allow the consumer to terminate the automatic renewal or continuous service exclusively online, which may include a termination email formatted and provided by the business that a consumer can send to the business without additional information.
(d) In the event of a material change in the terms of the automatic renewal or continuous service that has been accepted by a consumer in this state, the business shall provide the consumer with a clear and conspicuous notice of the material change and provide information regarding how to cancel in a manner that is capable of being retained by the consumer.
(e) This section does not apply to the following:
1. (1) A state or national bank or trust company insured by the federal deposit insurance corporation or an operating subsidiary of that bank or trust company;
2. (2) A state or federal credit union insured by the national credit union administration;
3. (3) An individual or entity licensed by the department of financial institutions;
4. (4) A service provided by a business, or its affiliate, pursuant to:
  1. (A) A franchise issued by a political subdivision of this state; or
  2. (B) A license, franchise, certificate, or other authorization issued by the Tennessee public utility commission;
5. (5) An individual or business, or an affiliate of the individual or business, regulated by the Tennessee public utilities commission, the federal communications commission, or the federal energy regulatory commission;
6. (6) A business licensed under title 56 or an affiliate of the business; or
7. (7) A person or entity providing service contracts as defined in § 56-2-126, or an affiliate of the person or entity.
(f) As used in this section, “consumer” means an individual who acquires goods or services for personal, family, or household purposes.

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47-18-104(b)(57)

§ 47-18-133. Automatic renewal of subscription services. [Effective until January 1, 2024. See the version effective on January 1, 2024.]

(a) A business that makes an automatic renewal offer or continuous service offer to a consumer in this state shall:
1. (1) Present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled and in visual proximity, or in the case of an offer conveyed by voice, in temporal proximity, to the request for consent to the offer. If the offer also includes a free gift or trial, the offer must include a clear and conspicuous explanation of the price that will be charged after the trial ends or the manner in which the subscription or purchasing agreement pricing will change upon conclusion of the trial;
2. (2) Obtain the consumer's affirmative consent to the agreement containing the automatic renewal offer terms or continuous service offer terms, including the terms of an automatic renewal offer or continuous service offer that is made at a promotional or discounted price for a limited period of time, before charging the consumer's credit or debit card, or the consumer's account with a third party, for an automatic renewal offer or continuous service offer; and
3. (3) Provide an acknowledgment that includes the automatic renewal offer terms or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer. If the automatic renewal offer or continuous service offer includes a free gift or trial, the business shall also disclose in the acknowledgment how to cancel, and allow the consumer to cancel, the automatic renewal or continuous service before the consumer pays for the goods or services.
(b) A business that makes an automatic renewal offer or continuous service offer shall provide a toll-free telephone number, electronic mail address, a postal address if the seller directly bills the consumer, or another cost-effective, timely, and easy-to-use mechanism for cancellation that must be described in the acknowledgment specified in subdivision (a)(3).
(c) A business that allows a consumer to accept an automatic renewal or continuous service offer online shall allow the consumer to terminate the automatic renewal or continuous service exclusively online, which may include a termination email formatted and provided by the business that a consumer can send to the business without additional information.
(d) In the event of a material change in the terms of the automatic renewal or continuous service that has been accepted by a consumer in this state, the business shall provide the consumer with a clear and conspicuous notice of the material change and provide information regarding how to cancel in a manner that is capable of being retained by the consumer.
(e) This section does not apply to the following:
1. (1) A state or national bank or trust company insured by the federal deposit insurance corporation or an operating subsidiary of that bank or trust company;
2. (2) A state or federal credit union insured by the national credit union administration;
3. (3) An individual or entity licensed by the department of financial institutions;
4. (4) A service provided by a business, or its affiliate, pursuant to:
  1. (A) A franchise issued by a political subdivision of this state; or
  2. (B) A license, franchise, certificate, or other authorization issued by the Tennessee public utility commission;
5. (5) An individual or business, or an affiliate of the individual or business, regulated by the Tennessee public utilities commission, the federal communications commission, or the federal energy regulatory commission; or
6. (6) A business licensed under title 56.
(f) As used in this section, “consumer” means an individual who acquires goods or services for personal, family, or household purposes.

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47-18-104(b)(57)

§ 47-18-134. Unsolicited offer to purchase real property — Acceptance — Cancellation — Violation.

(a) If an offeror makes an unsolicited offer to purchase real property by sending a written agreement or contract for purchase through the mail to an offeree and the offeror does not use the assistance of a broker, as defined in § 62-13-102, who is licensed in this state to make an unsolicited offer, then the offeree may cancel the agreement or contract by mailing written notice of the offeree's election to cancel to the offeror postmarked within thirty (30) days from the date of the confirmation letter described in subdivision (b)(3).
(b) An unsolicited offer to purchase real property by sending a written agreement or contract for purchase through the mail is not deemed accepted by the offeree until:
1. (1) The offeree signs the agreement or contract;
2. (2) The offeror receives the signed agreement or contract;
3. (3) The offeror sends by mail a letter to the offeree that confirms receipt of the signed agreement or contract, describes the offeree's right to cancel the agreement or contract, describes the manner by which the offeree may cancel; and states the date by which the offeree must cancel; and
4. (4) The offeror registers the signed agreement or contract, and the confirmation letter described in subdivision (b)(3), with the register of deeds in the county in which the applicable real property is located.
(c) Cancellation of the agreement or contract under this section is without penalty to the offeree. However, the offeree shall, within thirty (30) days following cancellation under this section, return all payments made by the offeror to the offeree.
(d)
1. (1) The offeree's right to cancellation under this section may not be waived unless evidenced by a sworn affidavit waiving the right to cancellation that is executed by the offeree contemporaneously with the offeree's execution of the deed and other documents of conveyance of title of the real property.
2. (2) An affidavit executed in the manner described in subdivision (d)(1) is conclusive evidence of an offeree's waiver of the right to cancellation under this section.
(e) A third-party buyer who purchases the real property from the offeror prior to the expiration of the offeree's right to cancellation under this section takes title to the real property subject to the offeree's right to cancellation. If the offeree exercises the offeree's right to cancellation under this section, then the title acquired by the third-party buyer is voided and the title immediately returns to the offeree. This subsection (e) does not apply if the offeree waives the right to cancellation pursuant to subsection (d).
(f) A violation of this section by an offeror constitutes an unfair or deceptive act prohibited under § 47-18-104, and is punishable as provided in this part.

§ 47-18-135. Section definitions — Financing company display of telephone number — Violations.

(a) As used in this section:
1. (1) “Financing company”:
  1. (A) Means an entity that provides loans, loan extensions, or lines of credit to finance the purchase of a good or service; and
  2. (B) Does not include a financial institution subject to 12 C.F.R. Part 1005; and
2. (2) “Statement” means a document that shows all of the activity on the account associated with the statement over a specific period of time.
(b) A financing company doing business in this state shall provide on its mailed or emailed statements to a consumer a conspicuously displayed telephone number that a consumer may contact for service.
(c) A violation of this section constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in this part. A violation of this section constitutes an unfair or deceptive act or practice affecting trade or commerce and is subject to the penalties and remedies as provided in this part.

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47-18-104(b)(58)

Part 2 Beauty Pageants [Repealed]

§ 47-18-201. [Repealed]

§ 47-18-202. [Repealed]

§ 47-18-203. [Repealed]

§ 47-18-204. [Repealed]

§ 47-18-205. [Repealed]

§ 47-18-206. [Repealed]

§ 47-18-207. [Repealed]

§ 47-18-208. [Repealed]

§ 47-18-209. [Repealed]

§ 47-18-210. [Repealed]

Part 3 Health Clubs

§ 47-18-301. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Buyer” means a purchaser under a health club agreement;
2. (2) [Deleted by 2016 amendment.]
3. (3) [Deleted by 2015 amendment.]
4. (4)
  1. (A) “Health club” means any enterprise, however styled, which offers on a regular, full-time basis, and pursuant to a health club agreement, services or facilities for the development or preservation of physical fitness through exercise, weight control or athletics;
  2. (B) “Health club” does not include the following:
    1. (i) Any organization primarily operated for the purpose of teaching a particular form of martial arts such as judo or karate;
    2. (ii) Weight loss or control services which do not provide physical exercise services, facilities, or equipment;
    3. (iii) Any nonprofit health club that is exempt from taxation under § 67-6-330(a)(17), or any nonprofit health club operated as part of a licensed nonprofit hospital exempt from taxation under § 67-5-212; or
    4. (iv) Any enterprise, however styled, primarily operating on a scheduled lesson or hourly basis for the purpose of teaching or enjoying physical skills, physical activities, or sports, such as gymnastics, yoga, dance, aerobics, directed high intensity interval training, or other similar activities even though such activities may involve the use of free weights or exercise machines;
5. (5)
  1. (A) “Health club agreement” means an agreement whereby a buyer purchases, or is obligated to purchase, any right to use health club facilities or services; and such services or facilities are for personal, family, employee, or household use; and
  2. (B) “Health club agreement” does not include the following:
    1. (i) Any agreement for personal training services; or
    2. (ii) Any agreement for tangible products sold by the health club;
6. (6) “Operator” means any person, firm, corporation, or business entity which operates a health club.

§ 47-18-302. [Repealed]

§ 47-18-303. Unenforceable health club agreements.

A health club agreement shall be unenforceable against the buyer, and the buyer shall be entitled to a refund less that portion of the total price which represents actual use of the facilities and less the cost of goods and services consumed by the buyer if:
1. (1) The buyer entered into the agreement in reliance upon any false, deceptive, or misleading information, representation, notice, or advertisement; or
2. (2) [Deleted by 2016 amendment.]
3. (3) The agreement fails to conform with this part.

§ 47-18-304. [Repealed]

§ 47-18-305. Requirements for valid agreements.

(a) All health club agreements shall:
1. (1) Be in writing;
2. (2) Be signed by the buyer;
3. (3) Designate the date on which the buyer actually signed the agreement; and
4. (4) Contain in boldface type of at least ten (10) points, in immediate proximity to the space reserved for the signature of the buyer, the following statement:
  1. BUYER'S RIGHT TO CANCEL
    1. YOU (THE BUYER) MAY CANCEL THIS AGREEMENT BY SENDING NOTICE OF YOUR WISH TO CANCEL TO THE HEALTH CLUB BEFORE MIDNIGHT OF THE THIRD DAY (EXCLUDING SATURDAYS, SUNDAYS, AND LEGAL HOLIDAYS) OR, IF THE AGREEMENT IS SUBJECT TO A FINANCE CHARGE, THE SEVENTH DAY AFTER THE DAY YOU SIGNED THE AGREEMENT. THIS NOTICE MUST BE SENT BY REGISTERED MAIL TO THE FOLLOWING ADDRESS:
  2. WITHIN THIRTY (30) DAYS AFTER RECEIPT OF THE NOTICE OF CANCELLATION, THE HEALTH CLUB WILL RETURN ANY PAYMENTS MADE AND ANY NOTE EXECUTED BY YOU IN CONNECTION WITH THE AGREEMENT.
5. (5)
  1. (A) Contain in boldface type of at least ten (10) points, the following statement:
    1. SHOULD YOU (THE BUYER) CHOOSE TO PAY THIS AGREEMENT IN FULL, BE AWARE THAT YOU ARE PAYING FOR FUTURE SERVICES AND MAY BE RISKING LOSS OF YOUR MONEY IN THE EVENT THIS HEALTH CLUB CEASES TO CONDUCT BUSINESS.
  2. (B) Contain in boldface type, the following statements in separated paragraphs:
    1. (i) IN ADDITION TO ANY OTHER REMEDIES PROVIDED BY LAW, IF THIS HEALTH CLUB CEASES OPERATION AND FAILS TO OFFER YOU (THE BUYER) AN ALTERNATE LOCATION WITHIN FIFTEEN (15) MILES, WITH NO ADDITIONAL COST TO YOU, THEN NO FURTHER PAYMENTS SHALL BE DUE TO ANYONE, INCLUDING ANY PURCHASER OF ANY NOTE ASSOCIATED WITH OR CONTAINED IN THIS CONTRACT.
    2. (ii) STATE LAW REQUIRES THAT ANY HEALTH CLUB AGREEMENT THAT IS NOT CANCELLABLE ON THIRTY (30) DAYS' NOTICE OR LESS BE PAYABLE ONLY IN THE FOLLOWING MANNER, AND ANY HEALTH CLUB THAT ENTERS INTO HEALTH CLUB AGREEMENTS SHALL OFFER BOTH PAYMENT OPTIONS AT THE SAME PRICE, EXCLUDING INTEREST OR FINANCE CHARGES OR OTHER EQUIVALENT CHARGES THAT SHALL NOT EXCEED EIGHTEEN PERCENT (18%) OF THE TOTAL CONTRACT PRICE:
      1. (a) Full payment within ninety (90) days after entering into the health club agreement; or
      2. (b) Equal monthly installments with any down payment (unless exempt as provided by law) limited to thirty percent (30%) of the total cost of the agreement. Prepayment is allowed at any time with full refund of unearned finance charges.
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      47-18-305(a)(5)(B)(iv)
    3. (iii) PLEASE READ THIS CONTRACT CAREFULLY. THIS CONTRACT MAY CONTAIN PAYMENTS INCLUDING, BUT NOT LIMITED TO, ENROLLMENT FEES, ANNUAL FEES, MEMBERSHIP FEES, AND OTHER DIRECT PAYMENTS TO THE HEALTH CLUB, INCLUDING FULL PAYMENT FOR THE HEALTH CLUB AGREEMENT OR MONTHLY INSTALLMENT PAYMENTS WITH ANY DOWN PAYMENT (UNLESS EXEMPT AS PROVIDED BY LAW) LIMITED TO THIRTY PERCENT (30%) OF THE TOTAL COST OF THE AGREEMENT, AND, IN THE CASE OF INSTALLMENT PAYMENTS THAT ARE NOT MADE BY ELECTRONIC FUND TRANSFER OR CASH, AN ADMINISTRATIVE CHARGE, NOT TO EXCEED FIVE DOLLARS ($5.00) FOR EACH BILLING PERIOD. ALL SUCH PAYMENTS MUST BE DISCLOSED IN THE CONTRACT.
    4. (iv) THERE ARE NO AUTOMATIC OR LIFETIME RENEWALS OF THE TERM INCIDENT TO THE TERM OF THIS CONTRACT. IF THE HEALTH CLUB PROVIDES FOR A RENEWAL OPTION, THEN, UNLESS SUCH RENEWAL TERM IS CANCELLABLE ON THIRTY (30) DAYS' NOTICE OR LESS, SUCH OPTION MUST BE AFFIRMATIVELY AGREED TO IN WRITING BY THE BUYER AT THE BEGINNING OF THE RENEWAL PERIOD. IF THE HEALTH CLUB FACILITY IS LESS THAN OR EQUAL TO TEN THOUSAND (10,000) SQUARE FEET (GROSS) OF BUILDING SPACE, THEN THE ANNUAL COST OF SUCH RENEWAL SHALL NOT BE LESS THAN THIRTY PERCENT (30%) OF THE ANNUALIZED COST OF THE BASE MEMBERSHIP CONTRACT OR SEVENTY-FIVE DOLLARS ($75), WHICHEVER IS GREATER. HOWEVER, IF THE HEALTH CLUB FACILITY IS GREATER THAN TEN THOUSAND (10,000) SQUARE FEET (GROSS) OF BUILDING SPACE, THEN THE ANNUAL COST OF SUCH RENEWAL SHALL NOT BE LESS THAN THIRTY PERCENT (30%) OF THE ANNUALIZED COST OF THE BASE MEMBERSHIP CONTRACT OR ONE HUNDRED TWENTY-FIVE DOLLARS ($125), WHICHEVER IS GREATER. PAYMENT OF ANY RENEWAL SHALL BE MADE AS REQUIRED BY TENNESSEE CODE ANNOTATED, SECTION 47-18-305(a)(5)(B)(ii).
    5. (v) A CONTRACT OR AGREEMENT MAY HAVE A CONTINUING PROVISION OR STIPULATION THAT PROVIDES FOR A MONTH-TO-MONTH CONTINUATION OF THE INITIAL TERM OF THE AGREEMENT, PROVIDED THE BUYER HAS THE RIGHT TO CANCEL THE CONTINUING PORTION OF THE AGREEMENT AFTER FULFILLING THE ORIGINAL TERM OF THE AGREEMENT BY TENDERING THIRTY (30) DAYS' WRITTEN NOTICE OF SUCH INTENT TO THE OPERATOR BY REGISTERED MAIL. IF SUCH CONTRACTUAL OBLIGATION HAS A CONTINUING PROVISION OR STIPULATION AFTER A REQUIRED INITIAL TERM OF MORE THAN TWO (2) MONTHS, NOTIFICATION MUST BE SENT BY THE HEALTH CLUB OPERATOR TO CONFIRM THAT THE ORIGINAL OBLIGATION WAS FULFILLED AND TO REAFFIRM THE MONTH-TO-MONTH OR CONTINUING PROVISION OR STIPULATION. SUCH NOTIFICATION SHALL ALSO INCLUDE NOTICE OF THE BUYER'S RIGHT TO CANCEL THE CONTINUING MONTH-TO-MONTH OBLIGATION UPON THIRTY (30) DAYS' WRITTEN NOTICE SENT BY THE BUYER TO THE OPERATOR BY REGISTERED MAIL.
    6. (vi) ANY RENEWAL RIGHT GRANTED UNDER THIS CONTRACT SHALL EXPIRE ON THE FINAL DAY OF THE AGREEMENT. HOWEVER, THE BUYER SHALL HAVE A THIRTY (30) DAY GRACE PERIOD FROM THE DATE OF THE EXPIRATION OF THE RENEWAL RIGHT IN WHICH TO EXERCISE ANY RENEWAL RIGHT GRANTED TO THE BUYER UNDER THIS CONTRACT. THE OPERATOR SHALL HAVE THE RIGHT TO CHARGE A LATE PENALTY OF UP TO TWENTY-FIVE DOLLARS ($25) IF THE RENEWAL RIGHTS ARE NOT EXERCISED ON OR BEFORE THE EXPIRATION DATE AS STIPULATED IN THE AGREEMENT OR ANY FUTURE RENEWAL PERIODS.
(b)
1. (1)
  1. (A) A health club shall not enter into or offer to enter into a health club agreement unless the health club facility is fully operational and available for use by prospective buyers.
  2. (B) Subdivision (b)(1)(A) shall not apply to a health club that discloses to the prospective buyer in writing on a form containing only the disclosure of prospective purchase that the health club agreement the prospective buyer is entering into is for the right to use a health club facility that is not yet operational and available for use.
2. (2) If the health club facility for which a prospective buyer entered into a health club agreement pursuant to subdivision (b)(1)(A) is not operational and available for use within thirty (30) days of entering into the health club agreement, then the prospective buyer shall have the right to cancel the health club agreement and receive all money paid to the health club under that health club agreement by providing the health club written notice of such cancellation. The right of cancellation shall expire on the date the health club facility is fully operational. The disclosure shall contain notice of the right of cancellation, be dated and signed by the prospective buyer, and made available to prospective buyers.
(c) It is unlawful for a health club to offer any cash or discounted pre-payment option that exceeds a reduction of the cash value of the highest stated price for any similar period or service-type of agreement:
1. (1) By an excess of ten percent (10%) for any term less than two (2) years duration;
2. (2) By an excess of fourteen percent (14%) for any term of two (2) years duration, but less than three (3) years duration; or
3. (3) By an excess of eighteen percent (18%) for any term of three (3) years duration.
(d) It shall be unlawful for a health club to offer free or no cost periods of enrollment in addition to the initial paid term of the agreement in order to circumvent the discounting provision of subsection (c).
(e) [Deleted by 2016 amendment.]

§ 47-18-306. Duration of agreements.

(a) Unless the buyer is granted a right to cancel the health club agreement as provided in subsection (b), no buyer shall be bound by any health club agreement with a stated initial term greater than thirty-six (36) months.
(b)
1. (1) A health club agreement may include a provision or stipulation that provides for a month-to-month continuation of the agreement, either as an initial agreement between the operator and the buyer or as an extension of an agreement beyond a stated term or duration; provided, that the buyer has the right to cancel the continuing portion of the agreement by providing the health club operator thirty (30) days written notice by registered mail of the buyer's intent to cancel the agreement.
2. (2) A buyer shall have until midnight of the seventh business day after the date on which the first service under the health club agreement is available to cancel if the health club agreement is subject to a finance charge. “Business day” for the purposes of this subdivision (b)(2) means any day the health club is open unless the seventh day is a day the health club is not open for business to the buyer; provided, however, that if the health club is closed on the seventh day, the buyer shall have until midnight of the next day the health club is open to cancel the health club agreement. Cancellation is evidenced by the buyer giving written notice of cancellation to the health club at the address of any facility available for use by the buyer under the health club agreement. The buyer shall deliver the notice by personal delivery or by certified mail delivery, return receipt requested. Personal delivery is effective when delivered to the health club or to the health club's address, whichever comes first. Notice of cancellation by certified mail delivery shall be effective upon the date of post marking. Notice of cancellation need not take a particular form and is sufficient if it indicates, by any form of written expression, the intention of the buyer not to be bound by the contract.

§ 47-18-307. Provisions contrary to public policy.

Any provision in a health club agreement, or in any document signed by the buyer in connection with such agreement, whereby the buyer agrees to waive any requirement of this part, shall be void as contrary to public policy.

§ 47-18-308. Applicability of provisions.

Chapter 460 of the Public Acts of 1989 does not affect rights or duties that matured, liabilities or penalties that were incurred, or proceedings begun before January 1, 1990.

§ 47-18-309. [Repealed]

§ 47-18-310. [Repealed]

§ 47-18-311. [Repealed]

§ 47-18-312. Penalty for violations.

In addition to any other penalty prescribed by this part, violation of any provision of this part, upon conviction, constitutes a Class A misdemeanor.

§ 47-18-313. Responsibility for compliance.

Any individual, firm, corporation, association, or other legal entity that obtains an ownership interest in a health club or its assets shall be responsible for determining that the health club is in compliance with this part.

§ 47-18-314. Compliance exemption — Requirements.

(a) It is an offense to accept a down payment for a health club agreement in excess of thirty percent (30%) of the total cost of the agreement unless, as of January 1 of the year in which the health club agreement was entered into:
1. (1) The health club has a net worth in excess of two hundred fifty thousand dollars ($250,000) per location where health club services or facilities are provided; and
2. (2) The health club has operated under substantially the same ownership and control for at least five (5) years.
(b) For the purpose of calculating net worth as provided in subsection (a), the following are excluded:
1. (1) Assets that represent prepayment for future services; and
2. (2) Accounts receivable due from health club members for future services.
(c) Any health club claiming the exemption pursuant to subsection (a) shall maintain written documentation establishing proof that the requirements of subsection (a) have been met as of January 1 of each year the exemption is claimed. Such proof shall be retained for a minimum of five (5) years from the end of the year in which the exemption is claimed. This documentation shall be made available for examination upon request of any law enforcement agency or the attorney general. A refusal to provide such documentation shall constitute a violation of this part.

§ 47-18-315. [Repealed]

§ 47-18-316. [Repealed]

§ 47-18-317. Violations — Penalties and remedies.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter.
(b) For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of any trade or commerce and subject to the penalties and remedies as provided by that act.
(c) As part of any action brought pursuant to this section, the attorney general shall certify that the division of consumer affairs complied with § 47-18-5002(2) unless the attorney general determines that the purposes of this part will be substantially impaired by delaying legal proceedings.

§ 47-18-318. Surety bond — Applicability — Filing of audited financial statement.

(a) In order to provide a degree of protection to members of health clubs, each health club shall post a bond in an amount of twenty-five thousand dollars ($25,000) for each location doing business in this state. The bond shall be made with a bond issued by a corporate surety authorized to do business in this state.
(b) The bond shall be maintained for two (2) years following the date on which the health club location ceases to conduct business in this state.
(c) In an action brought by the attorney general and reporter pursuant to part 1 of this chapter, the attorney general and reporter shall have the right to request that the total amount of the bond posted by the health club be awarded to the state for consumer restitution. Any person who has entered into a health club agreement that is not fulfilled by the operator may make a claim against the bond.
(d) This section shall not apply to any health club or health club operator that has, for at least seven (7) consecutive years, operated under substantially the same ownership and control. Any health club claiming the exemption pursuant to this subsection (d) shall maintain documentation as of January 1 of each year in which the exemption is claimed demonstrating the required period of ownership. Such proof shall be retained for a period of at least five (5) years from the end of the year in which the exemption is claimed. This documentation shall be made available for examination upon request of any law enforcement agency or the attorney general. A refusal to provide such documentation shall constitute a violation of this part.
(e)
1. (1) In lieu of the surety bond required in this section, a health club may maintain on file a current audited financial statement prepared by a certified public accountant licensed in this state that demonstrates that either the health club or the health club operator has a financial net worth of at least ten million dollars ($10,000,000) available to satisfy any claims.
2. (2) Any health club claiming the exemption pursuant to this subsection (e) shall maintain documentation as of January 1 of each year in which the exemption is claimed demonstrating at least ten million dollars ($10,000,000) available to satisfy any claims. Such proof shall be retained for a period of at least five (5) years from the end of the year in which the exemption is claimed. This documentation shall be made available for examination upon request of any law enforcement agency or the attorney general. A refusal to provide such documentation shall constitute a violation of this part.

§ 47-18-319. [Repealed]

Part 4 True Origin of Goods Act

§ 47-18-401. Short title.

This part shall be known and may be cited as the “True Origin of Goods Act.”

§ 47-18-402. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
2. (2) “Audiovisual work” means the electronic or physical embodiment of motion pictures, television programs, video or computer games, or other audiovisual presentations that consist of related images that are intrinsically intended to be shown by the use of machines or devices such as projectors, viewers, electronic equipment, a computer program, software, or system, together with accompanying sounds, if any;
3. (3) “Commercial recording or audiovisual work” means a recording or audiovisual work whose owner, assignee, authorized agent, or licensee has made or intends to make available for sale, rental, performance, or exhibition to the public under license but does not include an excerpt consisting of less than substantially all of a recording or audiovisual work. A recording or audiovisual work may be commercial, regardless of whether a person who electronically disseminates it seeks commercial advantage or private financial gain from that dissemination;
4. (4) “Consumer” means any natural person who seeks or acquires by purchase, rent, lease, assignment, award by chance, or other disposition, any goods, services, property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situated or any person who purchases or to whom is offered for sale a franchise or distributorship agreement or any similar type of business opportunity;
5. (5) [Deleted by 2019 amendment.]
6. (6) “Electronic dissemination” means initiating a transmission of, making available, or otherwise offering, a commercial recording or audiovisual work for distribution, display, or performance on the Internet or other digital network, regardless of whether someone else had previously electronically disseminated the same commercial recording or audiovisual work;
7. (7) “Goods” means any tangible chattels leased, bought, or otherwise obtained for use by an individual primarily for personal, family, or household purposes or a franchise, distributorship agreement, or similar business opportunity;
8. (8) “Internet” means the global information system that is logically linked together by a globally unique address space based on the Internet Protocol (IP), or its subsequent extension, and is able to support communications using the Transmission Control Protocol/Internet Protocol (TCP/IP) suite, or its subsequent extensions, or other IP-compatible protocols, and that provides, uses, or makes accessible, either publicly or privately, high level services layered on communications and related infrastructure;
9. (9) “Location readily accessible” means a place that is conspicuous, not hidden and capable of being reached quickly and easily by the general public. A web page or screen entitled “about”, “about us”, “contact”, “contact us”, “home”, or “information”, or other place on a web site or online service commonly used to display identifying information to consumers, shall be deemed a “location readily accessible” for purposes of this part;
10. (10) “Online service” means any service available over the Internet, or that connects to the Internet or a wide-area network;
11. (11) “Person” means a natural person, consumer, individual, governmental agency, partnership, corporation, trust, estate, incorporated or unincorporated association, and any other legal or commercial entity however organized;
12. (12) “Physical address” means the mailing address, including a zip code, that details the actual location of a person or entity, but does not include a post office box or email address;
13. (13) “Recording” means the electronic or physical embodiment of any recorded images, sounds, or images and sounds, but does not include audiovisual works or sounds accompanying audiovisual works;
14. (14) “Services” means any work, labor, or services including services furnished in connection with the sale or repair of goods or real property or improvements thereto;
15. (15) “Tennessee Consumer Protection Act” means the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter, and related statutes. Related statutes specifically include any statute that indicates within the law, regulation, or rule that a violation of that law, regulation, or rule is a violation of the Tennessee Consumer Protection Act of 1977;
16. (16) “Web page” means a location that has a single uniform resource locator or other single location with respect to the Internet; and
17. (17) “Web site” means a set of related web pages served from a single web domain.

§ 47-18-403. Applicability of part.

This part applies to any person who owns or operates a web site or online service dealing in the electronic dissemination of commercial recordings or audiovisual works, directly or indirectly, to one (1) or more consumers or other persons in this state.

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47-18-404(a)

§ 47-18-404. Persons subject to part to disclose name, address and telephone number on website — Issuance of subpoena to suspected violators.

(a) It shall be unlawful for any person who is subject to this part under § 47-18-403 to fail to clearly and conspicuously disclose their true and correct name, physical address, and telephone number on their website or online service in a location readily accessible to users of, or visitors to, the website or online service.
(b)
1. (1) If the attorney general cannot, after reasonable investigation, ascertain the information that is required by subsection (a), the attorney general, or a district attorney general of a county in which or from which a violation of subsection (a) is suspected to have been made, at the request of the attorney general, and upon reasonable cause, may issue in writing and cause to be served one (1) or more subpoenas requiring the production of the suspected violator's legal name under which such person conducts business, and the person's physical address and telephone number.
2. (2) A party shall not disclose any information pursuant to a subpoena other than the suspected violator's legal name under which such person conducts business, and the person's physical address and telephone number.
3. (3) At any time before the return date specified on the subpoena, the person summoned may, in the chancery court of the county in which the person resides or does business, petition for an order modifying or quashing the subpoena, or a prohibition of disclosure by a court.
4. (4) If no case or proceeding arises from the production of records or other documentation pursuant to this section within a reasonable time after those records or documentation are produced, the attorney general or district attorney general shall either destroy the records and documentation or return them to the person who produced them.
5. (5) A subpoena issued under this section may be served by any person who is authorized to serve process under the Tennessee Rules of Civil Procedure and such subpoena shall be served in accordance with such rules.

§ 47-18-405. Action by attorney general and reporter or district attorney general to enforce part.

In addition to any other remedies, the attorney general and reporter, or a district attorney general of a county in which or from which a violation of this part is made, may bring an action to enjoin any practice in violation of this part, enforce compliance with this part, and recover the civil penalty and attorney's fees required by § 47-18-406.

§ 47-18-406. Civil penalties.

(a) If a person is found to be in violation of this part in a civil action, the court shall assess a civil penalty against the offending party in an amount up to two thousand five hundred dollars ($2,500).
(b) If a person found to be in violation of this part in a civil action fails to comply with any permanent injunction, judgment, or court order compelling compliance with this part, the court shall assess a civil penalty against the offending party in an amount of no less than five thousand dollars ($5,000) and no more than ten thousand dollars ($10,000) for each day of noncompliance.
(c) Any civil penalty collected pursuant to this section shall be paid into the general fund of the state. The prevailing party in the cause shall be entitled to necessary expenses and reasonable attorney's fees.

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47-18-405

§ 47-18-407. Applicability of Tennessee Consumer Protection Act of 1977 — Action by attorney general.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977.
(b) For the purpose of application of the Tennessee Consumer Protection Act of 1977, a violation of this part constitutes an unfair or deceptive act or practice affecting trade or commerce and is subject to the penalties and remedies as provided in the Tennessee Consumer Protection Act of 1977, in addition to the penalties and remedies set forth in this part. However, no criminal penalty is incurred for violation of this part.
(c) If the attorney general has reason to believe that any person has violated this part, then the attorney general may institute a proceeding under this chapter.

§ 47-18-408. Private cause of action for unlawful electronic dissemination of commercial recording or audiovisual work by website or online service.

(a) An owner, assignee, authorized agent, or exclusive licensee of a commercial recording or audiovisual work electronically disseminated by a website or online service in violation of this part may bring a private cause of action to obtain a declaratory judgment that an act or practice violates this part and obtain an injunction against a person who knowingly has violated, is violating, or is otherwise likely to violate this part. As a condition precedent to filing a civil action under this section, the aggrieved party must provide written notice to an individual alleged to be in violation of this part. The written notice must explain that the individual may be in violation of this part and that failure to cure the violation within fourteen (14) days of receipt of the written notice may result in a civil action filed in a court of competent jurisdiction.
(b) Upon motion of the party instituting the action, the court may make appropriate orders to compel compliance with this part.
(c) The prevailing party in a cause of action under this section is entitled to recover necessary expenses and reasonable attorneys' fees.

Part 5 Buyers' Clubs

§ 47-18-501. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
2. (2) “Business day” means any day other than a Saturday, Sunday, or legal holiday;
3. (3) “Buyer” or “member” means any status by which any natural person is entitled to any of the benefits of a discount buying organization;
4. (4) “Buying service,” “buying club,” or “club” means any person, corporation, partnership, unincorporated association, or other business enterprise operating for profit within the state of Tennessee, the primary purpose of which is to provide benefits to members from the cooperative purchase of services or merchandise;
5. (5) “Contract” means any oral or written agreement by which one becomes a member of a club; and
6. (6) [Deleted by 2019 amendment.]
7. (7) “Prepayment” means any payment greater than fifty dollars ($50.00) for service, merchandise, or membership made before the service is rendered. Money received by a club from a financial institution upon assignment of a contract shall be considered prepayment when and to the extent the member is required to make prepayments to the financial institution pursuant to the contract.

§ 47-18-502. Cancellation of membership.

(a) Any person who has elected to become a member of a club may cancel such membership by giving written notice any time before twelve o'clock (12:00) midnight of the third business day following the date on which membership was attained, subject to § 47-18-503. Such cancellation shall be without liability on the part of the member and shall entitle the member to a refund of the entire consideration paid for the contract.
(b) Notice of cancellation must be in writing and delivered personally or by mail. If given by mail, the notice is effective upon deposit in a mailbox, properly addressed and postage paid. Notice of cancellation need not take a particular form and is sufficient if it indicates, by any form of written expression, the intention of the member not to be bound by the contract. If delivered personally, the notice is to be accepted by any agent or employee of the club, and a receipt for the notice must be given by that agent or employee to the person cancelling.
(c) The entitled refund shall be delivered to the member within fourteen (14) days after notice of cancellation is given.
(d) Rights of cancellation may not be waived or otherwise surrendered.
(e) Cancellation shall not relieve the member from paying for any merchandise or services purchased or ordered prior to the date of cancellation.

§ 47-18-503. Contracts — Notice of right to cancel.

(a) A fully completed copy of every contract shall be delivered to the member at the time the contract is signed. Every contract shall constitute the entire agreement between seller and member, shall be in writing, shall be signed by the member, shall designate the date on which the member signed the contract and shall state, clearly and conspicuously in boldface type of a minimum size of fourteen (14) points, in immediate proximity to the space reserved for the signature of the buyer, the following:
(b) Until the buying club has complied with this section, the member may cancel the contract by notifying the buying club, in any manner and by any means, of the member's intention to cancel and the member is then entitled to a refund of the entire consideration paid for the contract.

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47-18-502(a)

§ 47-18-504. Contracts — Nondelivery of goods — Savings claims.

(a) Every contract shall provide that if any goods, except furniture or custom manufactured goods, ordered by the member from the buying club, are not delivered to the member or available for pick up by the member at the location where the order was placed within six (6) weeks from the date the member placed an order for such goods, then any payment by the member for such goods in advance of delivery shall, upon the member's request, be fully refunded, unless a predetermined delivery date has been furnished to the member in writing at the time the member ordered such goods, and the goods are delivered to the member or available for pick up by that date. Every contract must disclose that delivery dates for furniture or custom manufactured goods cannot be predicted, if such is the case.
(b) Every contract shall provide that all savings claims made by the buying club are based on price comparisons with retailers doing business in the trade area in which the claims are made if the same or comparable items are offered for sale in the trade area and with prices at which the merchandise is actually sold or offered for sale.
(c) Any contract which does not comply with subsections (a) and (b) shall be void and unenforceable.

§ 47-18-505. Contracts — Duration.

No contract shall be valid for a term longer than eighteen (18) months from the date upon which the contract is signed. However, a club may allow a member to convert such member's contract into a contract for a period longer than eighteen (18) months after the member has been a member of the club for a period of at least six (6) months. The duration of the contract shall be clearly and conspicuously disclosed in the contract in boldface type of a minimum size of fourteen (14) points. No contract shall contain an automatic renewal clause; provided, that such an agreement may provide for the buyer to exercise a renewal.

§ 47-18-506. Exemptions.

This part shall not apply to:
1. (1) Any buyers club in which the total consideration paid by each buyer in any manner whatsoever under the contract for discount buying services does not exceed fifty dollars ($50.00) over the expected life of the contract;
2. (2) Any buyers club in which persons receive discount buyer services incidentally as part of a package of services provided to or available to such individuals on account of their membership in such organization, which is not organized for the profit of any person or corporation or which does not have as one (1) of its primary purposes or businesses the provision of discount buying services; and
3. (3) Any buyers club which files with the attorney general a declaration, executed under penalty of perjury by the owner or manager of such club, stating that the club does not require or, in the ordinary course of business, receive prepayment.

§ 47-18-507. Required disclosures — Unfair or deceptive trade practices.

(a) It is unlawful for any buying club to fail to disclose to a prospective member in writing, prior to the sale of any contract for discount buying services:
1. (1) That goods or services can only be bought through catalogs with no opportunity to inspect samples if such is the case;
2. (2) The buyers club's policies regarding warranties or guarantees on goods ordered, return of ordered goods by buyers, procedures for cancellation of merchandise orders by the buyer, and refunds of deposits for the cancellation of orders;
3. (3) Any charges, such as estimated freight costs, handling fees, credit life or disability insurance, suppliers' and buyers clubs' markup, and other costs incidental to the purchase of goods through the buyers club and which are to be paid by the buyer;
4. (4) A list of the categories of merchandise which are available to buyers from cooperating suppliers. If the list includes savings claims based on reference prices, the reference prices must be those at which the same or comparable goods are offered or sold in the trade area;
5. (5) Advice that the contract for discount buying service or incidental retail installments contracts will be transferred, sold, or assigned to a third party if such practice is to be used by the buyers club; and
6. (6) The percentage of the purchase price required as a down payment on merchandise orders of any nature. This prohibition applies in all cases where rebates are offered, regardless of whether such promised rebates are contingent upon the seller's ability to enroll the referred persons into the buyers club.
(b) It is an unfair or deceptive trade practice for a buying club to:
1. (1) Represent that it is affiliated with any other buyers club organization or showroom, unless an affiliation in fact exists and unless the prospective buyer would be legally entitled to services from the allegedly affiliated organization as a result of being a buyer of the subject buyers club. If such an affiliation is claimed by the representative of the buyers club, written proof of such a binding legal right must be given the prospective buyer, including a description of the services available from the affiliated club, before the signing of any contract for discount buying services or application;
2. (2) Represent that the prospective buyer will be entitled to a particular benefit unless that benefit is currently available from the buyers club on a regular basis;
3. (3) Offer any gifts or consideration of any nature to a prospective buyer as a solicitation for such person to attend a buyers club sales presentation or to sign a membership application or a contract for discount buying services where the club fails to honor or deliver the gift or consideration in accordance with the terms of its promise;
4. (4) Represent or suggest in any manner that it offers its buyers the lowest prices, excluding freight and service charges, available on all categories of merchandise handled by the club, unless such is true; or
5. (5) Represent that merchandise is available to the buyer from any particular supplier unless such is true at the time the representation is made. Reference to unavailable suppliers or manufacturers may be made only for purposes of allowing prospective buyers to compare merchandise costs against those manufacturers which are available through the club. No buyers club may represent to a prospective buyer, unless it is true, that the club can purchase any item of merchandise at supplier's cost if the buyer provides the club with the necessary model number for the item.

§ 47-18-508. Requirements nonwaivable.

Any waiver by the member of this part shall be deemed contrary to public policy and shall be void and unenforceable.

§ 47-18-509. Violations of part — Penalties.

A violation of this part shall constitute a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter. For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of any trade or commerce and subject to the penalties and remedies as provided by that act.

Part 6 Rental-Purchase Agreements

§ 47-18-601. Short title.

This part shall be known and may be cited as the “Tennessee Rental-Purchase Agreement Act.”

§ 47-18-602. Legislative findings and purpose.

The general assembly finds that a significant number of consumers have sought to acquire ownership of personal property through rental-purchase agreements. Often, these rental-purchase agreements have been offered without adequate cost disclosures. It is the purpose of this part to assure meaningful disclosure of the terms of rental-purchase agreements, to make consumers aware of the total cost attendant with such agreements, to inform the consumer when ownership will transfer, and to assure accurate disclosures of rental-purchase terms in advertising.

§ 47-18-603. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Advertisement” means a commercial message in any medium that aids, promotes, or assists directly or indirectly a rental-purchase agreement;
2. (2) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
3. (3) “Cash price” means the price at which the lessor would have sold the property to the consumer for cash on the date of the rental-purchase agreement;
4. (4) “Consumer” means a natural person who rents personal property under a rental-purchase agreement;
5. (5) “Consummation” means the time a consumer becomes contractually obligated on a rental-purchase agreement;
6. (6) [Deleted by 2019 amendment.]
7. (7) “Lessor” means a person who, in the ordinary course of business, regularly leases, offers to lease, or arranges for the leasing of property under a rental-purchase agreement; and
8. (8) “Rental-purchase agreement” means an agreement for the use of personal property by a natural person primarily for personal, family, or household purposes, for an initial period of four (4) months or less (whether or not there is any obligation beyond the initial period) that is automatically renewable with each payment and that permits the consumer to become the owner of the property. “Rental-purchase agreement” shall not be construed to be, nor be governed by, any of the following:
  1. (A) A lease or agreement which constitutes a “credit” sale as defined in 12 CFR 226.2(a)(16) and § 1602(g) of the Truth In Lending Act, compiled in 15 U.S.C. § 1601 et seq.;
  2. (B) A lease which constitutes a “consumer lease” as defined in 12 CFR 213.2(e);
  3. (C) Any lease for agricultural, business, or commercial purposes;
  4. (D) Any lease made to an organization;
  5. (E) A lease or agreement which constitutes a “retail installment contract” or “retail installment transaction” as defined in § 47-11-102;
  6. (F) A “security interest” as defined in § 47-1-201; or
  7. (G) A “home solicitation sale” as defined in § 47-18-702.

§ 47-18-604. Required disclosures.

(a) For each rental-purchase agreement, the lessor shall disclose the following items as applicable:
1. (1) A brief description of the leased property, sufficient to identify the property to the consumer and lessor;
2. (2) The number, amount, and timing of all lease payments necessary to acquire ownership of the property;
3. (3) The maximum amount of all initial and periodic payments and other charges to acquire ownership of the property pursuant to the ownership provisions of the rental-purchase agreement;
4. (4) A statement that the consumer will not own the property until the consumer has made the number of payments and the total of payments necessary to acquire ownership;
5. (5) A statement that the total of payments does not include other charges, such as late payment, default, pickup, and reinstatement fees, and that the consumer should see the contract for an explanation of these charges;
6. (6) If applicable, a statement that the consumer is responsible for the fair market value of the property if it is lost, stolen, damaged, or destroyed;
7. (7) A statement indicating whether the property is new or used; however, a statement that indicates new property is used is not a violation of this part;
8. (8) A statement of the cash price of the property. Where the agreement involves a lease for five (5) or more items, a statement of the aggregate cash price of all items shall satisfy this requirement;
9. (9) The total of initial payments required to be paid before consummation of the agreement or delivery of the property, whichever is later;
10. (10) A statement clearly summarizing the terms of the consumer's options to purchase;
11. (11) A statement identifying the party responsible for maintaining or servicing the property while it is being leased, together with the description of that responsibility and a statement that, if any part of a manufacturer's express warranty covers the leased property at the time the consumer acquires ownership of the property, it will be transferred to the consumer, if allowed by the terms of the warranty; and
12. (12) The date of the transaction and the identities of the lessor and consumer.
(b) With respect to matters specifically governed by the federal Consumer Credit Protection Act, compliance with such act satisfies the requirements of this section.
(c) Subsection (a) does not apply to a lessor who complies with the disclosure requirements of Section 182 of the federal Consumer Credit Protection Act, 15 U.S.C. § 1667a, 90 Stat. 258, with respect to a rental-purchase agreement entered into with a consumer.

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§ 47-18-605. Form of disclosures.

(a) The lessor shall disclose to the consumer the information required by this part. In a transaction involving more than one (1) consumer, a lessor need disclose only to one (1) of the consumers who is primarily obligated. In a transaction involving more than one (1) lessor, only one (1) lessor need make the required disclosures.
(b) The disclosures required under this part shall be made no later than the time that the lessor delivers the merchandise to the consumer, or upon consummation of the rental-purchase agreement, whichever is earlier.
(c)
1. (1) The disclosures shall be made using words and phrases of common meaning, in a form that the consumer may keep.
2. (2) The disclosures required under § 47-18-604 may be made a part of the rental-purchase agreement or provided on a separate form.
3. (3) The required disclosures shall be set forth clearly and conspicuously. The disclosures shall be placed all together, on the front side of the rental-purchase agreement or on a separate form. The form setting forth the required disclosures must contain spaces for the consumer's signature and the date appearing immediately below the disclosures. The requirements of this section shall not have been complied with unless the consumer signs the statement and receives, at the time disclosures are made, a legible copy of the signed statement. The inclusion in the required disclosures of a statement that the consumer received a legible copy of those disclosures shall create a rebuttable presumption of receipt thereof.
(d) Information required to be disclosed may be given in the form of estimates and shall be identified as such when the lessor does not know the exact information.
(e) If a disclosure becomes inaccurate as the result of any act, occurrence, or agreement after delivery of the required disclosures, the resulting inaccuracy is not a violation of this part.
(f) At the lessor's option, information in addition to that required by § 47-18-604 may be disclosed if the additional information is not stated, utilized, or placed in a manner which will contradict, obscure, or distract attention from the required information.

§ 47-18-606. Prohibited terms of agreement.

A rental-purchase agreement may not contain a provision:
1. (1) Requiring a confession of judgment;
2. (2) Requiring a garnishment of wages;
3. (3) Granting authorization to the lessor or a person acting on the lessor's behalf to enter unlawfully upon the consumer's premises or to commit any breach of the peace in the repossession of goods;
4. (4) Requiring the consumer to waive any defense, counterclaim, or right of action against the lessor or a person acting on the lessor's behalf in collection of payment under the lease or in the repossession of goods; or
5. (5) Requiring purchase of insurance from the lessor to cover the merchandise.

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47-18-611(a)(1)

§ 47-18-607. Termination and reinstatement provisions.

(a) Each rental-purchase agreement must:
1. (1) Provide that the consumer may terminate the agreement without penalty by voluntarily surrendering or returning the merchandise upon expiration of any lease term; and
2. (2) Contain a provision for reinstatement which, at a minimum:
  1. (A) Permits a consumer who fails to make a timely rental payment to reinstate the agreement, without losing any rights or options which exist under the agreement, by the payment of all past due rental charges, the reasonable costs of pickup, redelivery, any refurbishing and any applicable late fee within five (5) days of the renewal date if the consumer pays monthly, or within two (2) days of the renewal date if the consumer pays more frequently than monthly;
  2. (B) In the case where a consumer, at the request of the lessor or its agent, has returned or voluntarily surrendered the property, other than through judicial process, permits the consumer to reinstate the agreement during a period of not less than thirty (30) days after the date of the return of the property. In the event the consumer has paid not less than sixty percent (60%) of the amount called for under the contract to obtain ownership, the reinstatement period under this subsection (a) shall be extended to a total of ninety (90) days after the date of the return of the property. In the event the consumer has paid not less than eighty percent (80%) of the amount called for under the contract to obtain ownership, the reinstatement period under this subsection (a) shall be extended to a total of one hundred eighty (180) days after the date of the return of the property.
(b) Nothing in this section prevents a lessor from attempting to repossess property during the reinstatement period, but such a repossession does not affect the consumer's right to reinstate. Upon reinstatement, the lessor shall provide the consumer with the same property or substitute property of comparable quality and condition.

§ 47-18-608. Receipts for payments.

A lessor shall provide the consumer with a written receipt for each payment made by cash or money order.

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47-18-611(a)(1)

§ 47-18-609. Renegotiations — Extensions.

(a) A renegotiation occurs when an existing rental-purchase agreement is satisfied and replaced by a new lease agreement undertaken by the same consumer. A renegotiation is a new agreement requiring new disclosures. However, events such as the following shall not be treated as renegotiations:
1. (1) The addition or return of property in a multiple item agreement or the substitution of lease property, if in either case the average payment allocable to a payment period is not changed by more than twenty-five percent (25%);
2. (2) A deferral or extension of one (1) or more periodic payments, or portions of a periodic payment;
3. (3) A reduction in charges in the agreement;
4. (4) An agreement involving a court proceeding; and
5. (5) Any other event described in regulations prescribed by the attorney general.
(b) No disclosures are required for any extension of a rental-purchase agreement.

§ 47-18-610. Advertisements.

(a) If an advertisement for a rental-purchase agreement refers to or states the amount of any payment or the right to acquire ownership for any specific item, the advertisement also must state clearly and conspicuously the following items, as applicable:
1. (1) That the transaction advertised is a rental-purchase agreement;
2. (2) The total of payments necessary to acquire ownership; and
3. (3) That the consumer acquires no ownership rights if the total amount necessary to acquire ownership is not paid.
(b) Any owner or personnel of any medium in which an advertisement appears or through which it is disseminated shall not be liable under this section.
(c) Subsection (a) does not apply to an advertisement which does not refer to a specific item of merchandise. The disclosures also need not be made in an advertisement which does not refer to or state the amount of any payment, and which is published in the yellow pages of a telephone directory or any similar directory of business.
(d) With respect to matters specifically governed by the federal Consumer Credit Protection Act, compliance with such act satisfies the requirements of this section.

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47-18-611(b)

§ 47-18-611. Civil liability.

(a)
1. (1) A lessor who fails to comply with a requirement imposed in § 47-18-604 or §§ 47-18-606 — 47-18-608 with respect to a consumer is liable to the consumer in an amount equal to the greater of:
  1. (A) The actual damages sustained by the customer as a result of the violation; or
  2. (B)
    1. (i) In the case of an individual action, twenty-five percent (25%) of the total of payments necessary to acquire ownership but not less than one hundred dollars ($100) nor greater than one thousand dollars ($1,000); or
    2. (ii) In the case of a class action, the amount the court determines to be appropriate with no minimum recovery as to each member. The total recovery in any class action or series of class actions arising out of the same violation may not be more than the lesser of five hundred thousand dollars ($500,000) or one percent (1%) of the net worth of the lessor. In determining the amount of any award in a class action, the court shall consider, among other relevant factors, the amount of actual damages awarded, the frequency and persistence of the violation, the lessor's resources, and the extent to which the lessor's violation was intentional.
2. (2) Such lessor is also liable to the consumer for the costs of the action and reasonable attorneys' fees as determined by the court.
(b) In the case of an advertisement, any lessor who fails to comply with the requirements of § 47-18-610 with regard to any person is liable to that person for actual damages suffered from the violation, the costs of the action, and reasonable attorneys' fees.
(c) When there are multiple lessors, liability shall be imposed only on the lessor who made the disclosures. When no disclosures have been given, liability shall be imposed on all lessors.
(d) When there are multiple consumers in a rental-purchase agreement, there shall be only one (1) recovery of damages under subsection (a) for a violation of this part.
(e) Multiple violations in connection with a rental-purchase agreement entitle the consumer to a single recovery under this section.
(f) A consumer may not take any action to offset any amount for which a lessor is potentially liable under subsection (a) against any amount owed by the consumer, unless the amount of the lessor's liability has been determined by judgment of a court of competent jurisdiction in an action in which the lessor was a party. This subsection (f) does not bar a consumer then in default on the obligation from asserting a violation of this part as an original action, or as a defense or counterclaim to an action brought by lessor to collect amounts owed by the consumer.
(g) In connection with any transaction covered under this part, the lessor shall preserve evidence of compliance with this part for not less than two (2) years from the date of consummation of the agreement.

§ 47-18-612. Limitation of actions.

An action under this part may be brought in any court of competent jurisdiction within one (1) year of the date of the occurrence of any violation or within six (6) months of the time the rental-purchase agreement, together with any renewals or extensions thereof, ceases to be in effect, whichever is greater. Notwithstanding the above, an action under this part may be maintained by way of recoupment or counterclaim in an action brought against the consumer by the lessor or its assignee.

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47-18-613(a)

§ 47-18-613. Liability — Good faith defenses.

(a) A lessor is not liable under § 47-18-612 for a violation of this part if the lessor shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error, even though the lessor maintained procedures reasonably adapted to avoid such an error. Examples of a bona fide error include, but are not limited to, clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to requirements of this title is not a bona fide error.
(b) A lessor is not liable under this part for any act done or omitted in good faith in conformity with any rule, regulation, or interpretation promulgated by the attorney general or by an official duly authorized by the attorney general. This rule applies even if, after the act or omission has occurred, the rule, regulation, or interpretation is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

§ 47-18-614. Criminal liability.

A willful and intentional violation of this part is a Class C misdemeanor.

Part 7 Home Solicitation Sales

§ 47-18-701. Short title.

This part shall be known and may be cited as the “Tennessee Home Solicitation Sales Act of 1974.”

§ 47-18-702. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Business day” means any calendar day except Sunday, or the following business holidays: New Year's Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day, and Christmas Day;
2. (2) “Buyer” means buyer or lessee;
3. (3) “Goods” means tangible personal property and also includes a merchandise certificate whereby a writing is issued by the seller which is not redeemable in cash and is usable in lieu of cash in exchange for goods or services;
4. (4) “Home solicitation sale” means a consumer sale or lease of goods (other than farm equipment and/or motor vehicles) or services, other than insurance and securities, in which the seller or a person acting for the seller engages in the personal solicitation of the sale or lease at any residence other than that of the seller, and the buyer's agreement or offer to purchase or lease is there given to the seller or a person acting for the seller. It does not include cash sales of less than twenty-five dollars ($25.00), a sale or lease made pursuant to a preexisting revolving charge account, or a sale or lease made pursuant to prior negotiations between the parties. It does not include real estate sales or listing agreements. It does not include sales of farm animals or produce or similar perishable items; and
5. (5) “Seller” means seller or lessor.

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47-18-603(8)(G)

§ 47-18-703. Cancellation — Buyer's rights — Exceptions.

Notwithstanding any other law to the contrary:
1. (1) Except as provided in subdivision (5), in addition to any right otherwise to revoke an offer, the buyer has the right to cancel a home solicitation sale until twelve o'clock midnight (12:00) of the third business day after the day on which the buyer signs an agreement or offer to purchase which complies with § 47-18-704;
2. (2) Cancellation occurs when the buyer gives written notice of cancellation to the seller at the address stated in the agreement or offer to purchase;
3. (3) Notice of cancellation, if given by mail, is given when it is deposited in a mailbox properly addressed and postage prepaid;
4. (4) Notice of cancellation given by the buyer need not take a particular form and is sufficient if it indicates by any form of written expression the intention of the buyer not to be bound by the home solicitation sale;
5. (5) The buyer may not cancel a home solicitation sale if the buyer requests the seller to provide goods or services without delay because of an emergency, and:
  1. (A) The seller in good faith makes a substantial beginning of performance of the contract before the buyer gives notice of cancellation;
  2. (B) In the case of goods, the goods cannot be returned to the seller in substantially as good condition as when received by the buyer; and
  3. (C) The buyer's emergency request is in a dated writing personally signed by the buyer and which expressly states that the buyer understands that the buyer is waiving the buyer's right to cancel the sale under this part;
6. (6) Except as provided in subdivision (5), any waiver or modification of a buyer's right to cancel is void and of no effect. In the event the seller obtains from the buyer a waiver or modification of the buyer's right to cancel, the buyer's right to cancel shall commence on the first business day following the buyer's learning that the waiver or modification is void and of no effect.

§ 47-18-704. Cancellation — Notice to buyer of rights.

(a) In a home solicitation sale, unless the buyer requests the seller to provide goods or services without delay in an emergency, the seller must present to the buyer a receipt if it is a cash or credit card sale or, in the case of a credit sale, obtain the buyer's signature to a written agreement or offer to purchase which designates as the date of the transaction the date on which the buyer actually makes payment in whole or in part or signs. Contained on any such receipt, written agreement, or offer to purchase, there shall be a readily legible statement as described in subsection (b).
(b) The statement required in subsection (a) shall:
1. (1) Appear on the front side of the receipt or contract, or immediately above the buyer's signature, under the conspicuous caption: “BUYER'S RIGHT TO CANCEL”; and
2. (2) Read as follows: “If this agreement was solicited at your residence and you do not want the goods or services, you may cancel this agreement by mailing a notice to the seller. The notice must say that you do not want the goods or services and must be mailed before twelve o'clock midnight (12:00) of the third business day after you sign this agreement. The notice must be mailed to: (insert name and mailing address of seller).”
(c) In lieu of the form of notice required by subsection (b), a seller may comply with the requirements of the federal statutes, rules, or regulations governing the form of notice of the right of cancellation in door-to-door sales.
(d) Until the seller has complied with this section, the buyer may cancel the home solicitation sale by notifying the seller in any manner and by any means of the buyer's intention to cancel.
(e) A home solicitation sale shall be deemed to be in compliance with the notice requirements of this statute if:
1. (1) The buyer may at any time:
  1. (A) Cancel the order;
  2. (B) Refuse to accept delivery of the goods without incurring any obligation to pay for them; or
  3. (C) Return the goods to the seller and receive a full refund for any amount the buyer has paid; and
2. (2) The buyer's right to cancel the order, refuse delivery, or return the goods without obligation or charge at any time is clearly and unmistakably set forth on the face or reverse side of the sales ticket.

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47-18-703(1)

§ 47-18-705. Cancellation — Refund of payments — Lien pending refund.

(a) Except as provided in this section, within ten (10) days after a home solicitation sale has been cancelled or an offer to purchase revoked the seller must tender to the buyer any payments made by the buyer and any note or other evidence of indebtedness.
(b) If the down payment includes goods traded in, the goods must be tendered in substantially as good condition as when received by the seller. If the seller fails to tender the goods as provided by this section, the buyer may elect to recover an amount equal to the trade-in allowance stated in the agreement.
(c) Until the seller has complied with the obligations imposed by this section, the buyer may retain possession of goods delivered to the buyer by the seller and has a lien on the goods in the buyer's possession or control for any recovery to which the buyer is entitled.
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- 47-18-706(a)

§ 47-18-706. Cancellation — Return of goods — Compensation for services.

(a) Except as provided in § 47-18-705(c), within a reasonable time after a home solicitation sale has been cancelled or an offer to purchase revoked, the buyer upon demand must tender to the seller any goods delivered by the seller pursuant to the sale but the buyer is not obligated to tender at any place other than the buyer's residence. If the seller fails to demand possession of goods within twenty (20) days after cancellation or revocation, the goods become the property of the buyer without obligation to pay for them.
(b) The buyer has a duty to take reasonable care of the goods in the buyer's possession before cancellation or revocation and for a reasonable time thereafter, during which time the goods are otherwise at the seller's risk.
(c) If the seller has performed any services pursuant to a home solicitation sale prior to its cancellation, the seller is entitled to compensation only to the extent of the fair market value for any such services performed prior to cancellation.

§ 47-18-707. Misrepresentation of seller's identity.

Notwithstanding any other law, if at the time of a home solicitation a seller or the seller's agent should fail to immediately identify such person as a seller or lessor, or should the seller or agent represent or imply that the seller's or agent's purpose at the time of solicitation is anything other than selling or leasing if that is not substantially true, the buyer shall have a total of thirty (30) days to cancel any home solicitation sales contract there entered into in the same manner and to the same extent as otherwise provided by this chapter; provided, that the goods or merchandise are made available for the seller's repossession and are tendered back to the seller in substantially as good condition as when received by the buyer.

§ 47-18-708. Nonwaivable buyer's rights.

(a) No seller shall use a form or contract in providing goods or services that purports to waive a buyer's right to obtain:
1. (1) Punitive damages;
2. (2) Exemplary damages;
3. (3) Treble damages; or
4. (4) Attorney's fees.
(b) Any form or contract containing a prohibited provision as described above shall be deemed unconscionable and unenforceable as to such provision.

Part 8 Equal Consumer Credit

§ 47-18-801. Short title.

This part shall be known and may be cited as the “Tennessee Equal Consumer Credit Act of 1974.”

§ 47-18-802. Unlawful discrimination.

(a) It is unlawful for any creditor or credit card issuer to discriminate between equally qualified individuals, whether male or female, or whether disabled, or to discriminate solely on account of marital status against any individual, with respect to the approval or denial of terms of credit in connection with any consumer credit sale, whether or not under an open end credit plan, any consumer loan, or any other extension of consumer credit, or with respect to the issuance, renewal, denial, or terms of any credit card.
(b) “Disabled,” as used in this section, means any physically disabled person who meets the requirements for disabled drivers established in § 55-21-102(3) and (4), and any other individual not otherwise covered under this section who is certified as disabled by a physician duly licensed to practice medicine in Tennessee.
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- 47-18-104(b)(25)
(c) Any requirement of a public utility for the continuation of a utility service account in the name of the spouse in whose name the account was originally opened shall not be a violation of this section where both spouses reside in the same household and have the benefit of the utility service.

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47-18-803

§ 47-18-803. Damages and attorney's fees.

Any creditor or credit card issuer who discriminates against any individual in a manner prohibited by § 47-18-802 is liable to such individual in damages in an amount equal to the sum of:
1. (1) In the case of an individual action, not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000);
2. (2) In the case of a class action, not more than ten thousand dollars ($10,000); and
3. (3) In the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney's fee as determined by the court.

§ 47-18-804. Jurisdiction and limitation of actions.

Any action brought under this part may be brought in any court of competent jurisdiction in this state during a period of one (1) year commencing on the date of occurrence of the violation.

§ 47-18-805. Liability of spouse.

Where the applicant for credit is married, the spouse of the applicant shall not be liable, other than to the extent common law liability is imposed for furnishing necessaries, for any debts, charges, or accounts where the spouse has not signed the application for credit.

Part 9 Unsolicited Merchandise

§ 47-18-901. Rights of recipient.

Unless otherwise agreed, where unsolicited goods, wares, or merchandise of a value of less than fifty dollars ($50.00) is delivered by United States mail or United Parcel Service to a person who has not actually ordered or requested it, either orally or in writing, the person has a right to refuse to accept delivery of it, is under no duty to return it to the sender, is under no duty to preserve and safe-keep it, and may at the person's option deem it to be, for all purposes, an outright and unconditional gift and may use or dispose of it in any lawful manner without any obligation on the person's part to the sender.

§ 47-18-902. Defense against action for value or return of goods.

In any action for the monetary value or for the return of such unsolicited goods, wares, or merchandise, it shall be a complete defense that it was delivered voluntarily by the plaintiff and was not actually ordered or requested by the defendant, either orally or in writing.

Part 10 Credit Services Businesses

§ 47-18-1001. Short title.

This part shall be known and may be cited as the “Tennessee Credit Services Businesses Act.”

§ 47-18-1002. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Attorney general” means the office of the attorney general and reporter;
2. (2) “Commissioner” means the commissioner of commerce and insurance;
3. (3) “Consumer” means any individual who is solicited to purchase or who purchases the services of a credit services business;
4. (4)
  1. (A) “Consumer report” means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, which is furnished or is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for:
    1. (i) Credit or insurance to be used primarily for personal, family, or household purposes;
    2. (ii) Employment purposes; or
    3. (iii) Other purposes which shall be limited to the following circumstances:
      1. (a) In response to the order of a court having jurisdiction to issue the order;
      2. (b) In accordance with the written instructions of the consumer to whom the report relates; or
      3. (c) To a person which the agency has reason to believe:
        
        (1) Intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to or review or collection of an account of, the consumer;
        
        (2) Intends to use the information for employment purposes;
        
        (3) Intends to use the information in connection with the underwriting of insurance involving the consumer;
        
        (4) Intends to use the information in connection with a determination of the consumer's eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant's financial responsibility or status; or
        
        (5) Otherwise has a legitimate business need for the information in connection with a business transaction involving the consumer;
  2. (B) “Consumer report” does not include:
    1. (i) Any report containing information solely as to transactions or experiences between the consumer and the person making the report;
    2. (ii) Any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device; or
    3. (iii) Any report in which a person who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer conveys the person's decision with respect to the request, if the third party advises the consumer of the name and address of the person to whom the request was made, and the person makes the disclosures to the consumer as to the exact nature of the request and the effect of the report on its decision to extend credit;
5. (5)
  1. (A) “Consumer reporting agency” means any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and who uses any means or facility of commerce for the purpose of preparing or furnishing consumer reports;
  2. (B) “Consumer reporting agency” does not include a private detective or investigator licensed under title 62, chapter 26;
6. (6)
  1. (A) “Credit services business” means any person who, with respect to the extension of credit by others, sells, provides, or performs, or represents that such person can or will sell, provide, or perform any of the following services in return for the payment of money or other valuable consideration:
    1. (i) Improving a consumer's credit record, history, or rating;
    2. (ii) Obtaining an extension of credit for a consumer; or
    3. (iii) Providing advice or assistance to a consumer with regard to either (i) or (ii) of this subdivision (6)(A);
  2. (B) “Credit services business” does not include:
    1. (i) The making, arranging, or negotiating directly for a loan or extension of credit under the laws of this state or the United States;
    2. (ii) Any bank, trust company, savings bank, or savings institution whose deposits or accounts are eligible for insurance by the federal deposit insurance corporation or any credit union organized and chartered under the laws of this state or the United States;
    3. (iii) Any nonprofit organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code (26 U.S.C. § 501(c)(3));
    4. (iv) Any person licensed as a real estate broker by this state where the person is acting within the course and scope of that license;
    5. (v) Any person licensed to practice law in this state where the person renders services within the course and scope of that person's practice as a lawyer;
    6. (vi) Any broker-dealer registered with the securities and exchange commission or the commodity futures trading commission where the broker-dealer is acting within the course and scope of that regulation; or
    7. (vii) Any consumer reporting agency as defined in the Federal Fair Credit Reporting Act (15 U.S.C. §§ 1681-1681t);
7. (7) “Extension of credit” means the right to defer payment of debt or to incur debt and defer its payment, offered or granted primarily for personal, family, or household purposes;
8. (8) “File,” when used in connection with information on any consumer, means all of the information on that consumer recorded and retained by a consumer reporting agency regardless of how the information is stored;
9. (9) “Investigative consumer report” means a consumer report or portion of it in which information on a consumer's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom the consumer is acquainted, or who may have knowledge concerning any items of information. However, the information does not include specific factual information on a consumer's credit record obtained directly from a creditor of the consumer or from a consumer reporting agency, when the information was obtained directly from a creditor of the consumer or from the consumer; and
10. (10) “Person” includes an individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, two (2) or more persons having a joint or common interest, and any other legal or commercial entity.

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47-18-5503(3)(D)

§ 47-18-1003. Prohibited practices.

A credit services business, and its salespersons, agents and representatives, and independent contractors who sell or attempt to sell the services of a credit services business, shall not do any of the following:
1. (1) Charge or receive any money or other valuable consideration prior to full and complete performance of the services that the credit services business has agreed to perform for or on behalf of the consumer, including all representations made orally or in writing; however, a credit services business may enter an installment plan with the consumer, so long as that installment plan does not exceed six (6) months and is approved by the commissioner or the commissioner's designee. “Full and complete performance” means fulfillment of all items listed in the contract and other solicitations or communications to consumers;
2. (2) Charge or receive any money or other valuable consideration solely for referral of the consumer to a retail seller or to any other credit grantor who will or may extend credit to the consumer, if the credit that is or will be extended to the consumer is upon substantially the same terms as those available to the general public;
3. (3) Make, or counsel or advise any consumer to make, any statement that is untrue or misleading and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, to a consumer reporting agency or to any person who has extended credit to a consumer or to whom a consumer is applying for an extension of credit, with respect to a consumer's creditworthiness, credit standing, or credit capacity;
4. (4) Make or use any untrue or misleading representations in the offer or sale of the services of a credit services business or engage, directly or indirectly, in any act, practice, or course of business which operates or would operate as a fraud or deception upon any person in connection with the offer or sale of the services of a credit services business;
5. (5) Create, or assist or advise the consumer to create a new credit record by using a different name, address, social security number, or employee identification number;
6. (6) Provide, in any manner, the services of a credit services business within this state, without registering a bond consistent with § 47-18-1011;
7. (7) Remove, assist or advise the consumer to remove or otherwise alter adverse information from the consumer's credit record which is accurate or not obsolete;
8. (8) Create, assist or advise the consumer to request that positive information be inserted or included on the consumer's credit record which is false, inaccurate or obsolete;
9. (9) Use a program or plan which uses or employs installment payments featuring payments charged directly to a credit card prior to full and complete performance of the services that the credit services business has agreed to perform for or on behalf of the consumer, except as permitted under subdivision (1); or
10. (10) Engaging in any violation of the federal Consumer Credit Protection Act.

§ 47-18-1004. Information statement required — Record on file.

(a) Before the execution of a contract or agreement between a consumer and a credit services business or the receipt by the credit services business of any money or other valuable consideration, whichever occurs first, the credit services business shall provide the consumer with an information statement in writing containing all of the information required under § 47-18-1005.
(b) The credit services business shall maintain on file or microfilm for a period of two (2) years from the date of the consumer's acknowledgement an exact copy of the information statement personally signed by the consumer acknowledging receipt of a copy of the information statement.

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47-18-1005

§ 47-18-1005. Contents of information statement.

The information statement required under § 47-18-1004 shall include all of the following:
1. (1)
  1. (A) A complete and accurate statement of the consumer's right to review any file on the consumer maintained by any consumer reporting agency, and the right of the consumer to receive a copy of a consumer report containing all information in that file as provided under the federal Fair Credit Reporting Act (15 U.S.C. § 1681g);
  2. (B) A statement that a copy of the consumer report containing all information in the consumer's file will be furnished free of charge by the consumer reporting agency, if requested by the consumer within thirty (30) days from receipt of the consumer's request; and
  3. (C) A statement that a nominal charge, not to exceed eight dollars ($8.00), may be imposed on the consumer by the consumer reporting agency for a copy of the consumer report containing all information in the consumer's file, if the consumer has not been denied credit within sixty (60) days from receipt of the consumer's request.
2. (2) A complete and accurate statement of the consumer's right to dispute the completeness or accuracy of any item contained in any file on the consumer that is maintained by any consumer reporting agency, as provided under the federal Fair Credit Reporting Act (15 U.S.C. § 1681i);
3. (3) A complete and detailed description of the services to be performed by the credit services business for or on behalf of the consumer, and the total amount the consumer will have to pay, or become obligated to pay, for the services;
4. (4)
  1. (A) Name and address of the surety company which issued the bond in accordance with § 47-18-1011;
  2. (B) A statement explaining the consumer's right to proceed against the bond; and
5. (5) A complete and accurate statement of the availability of nonprofit credit counseling.

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47-18-1004(a)

§ 47-18-1006. Contract — Cancellation notice.

(a) Every contract between a consumer and a credit services business for the purchase of the services of the credit services business shall be in writing, dated, signed by the consumer, and shall include all of the following:
1. (1) A conspicuous statement in size equal to at least ten (10) point bold type, in immediate proximity to the space reserved for the signature of the consumer, as follows:
2. (2) The terms and conditions of payment, including the total of all payments to be made by the consumer, whether to the credit services business or to some other person;
3. (3) A complete and detailed description of the services to be performed and the results to be achieved by the credit services business for or on behalf of the consumer, including all guarantees and all promises of full or partial refunds and a list of the adverse information appearing on the consumer's credit report that the credit services business expects to have modified; and
4. (4) The principal business address of the credit services business and the name and address of its agent in this state authorized to receive service of process.
(b)
1. (1) The contract shall be accompanied by a completed form in duplicate, captioned “NOTICE OF CANCELLATION,” which shall be attached to the contract and easily detachable, and which shall contain in at least ten (10) point bold type the following statement:
  1. NOTICE OF CANCELLATION
  3. You may cancel this contract, without any penalty or obligation, at any time prior to twelve o'clock midnight (12:00) of the fifth business day after the date the contract is signed.
  4. If you cancel, any payment made by you under this contract will be returned within ten (10) days following receipt by the seller of your cancellation notice.
  5. To cancel this contract, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice, to (Name of Seller) at (Address of Seller) (Place of Business) not later than twelve o'clock midnight (12:00) (Date)
  7. I HEREBY CANCEL THIS TRANSACTION.
  10. Date (Buyer's Signature)
2. (2) A copy of the fully completed contract and all other documents the credit services business requires the consumer to sign shall be given by the credit services business to the consumer at the time they are signed.

§ 47-18-1007. Violations — Proof of exemption.

(a) Any breach by a credit services business of a contract under this part, or of any obligation arising under it, constitutes a violation of this part.
(b) Any contract for services from a credit services business that does not comply with the applicable provisions of this part shall be void and unenforceable as contrary to the public policy of this state.
(c) Any waiver by a consumer of any of the provisions of this part shall be deemed void and unenforceable by a credit services business as contrary to public policy of this state, and any attempt by a credit services business to have a consumer waive rights given by this part constitutes a violation of this part.
(d) In any proceeding involving this part, the burden of proving an exemption or an exception from the definition is upon the person claiming it.

§ 47-18-1008. Damages, private actions.

(a) In any private action, any credit services business, which willfully fails to comply with any requirement imposed under this part with respect to any consumer, is liable to the consumer in an amount equal to the sum of:
1. (1) Any actual damages sustained by the consumer as a result of the failure, or any amount paid by the person to the credit services business whichever is greater. This remedy is supplemental to any other remedy contained within this chapter.
2. (2) Such amount of punitive damages as the court may allow.
(b) In any private action, any credit services business which is negligent in failing to comply with any requirement imposed under this part with respect to any consumer is liable to that consumer in an amount equal to the sum of any actual damages sustained by the consumer as a result of the failure.

§ 47-18-1009. Limitation of actions.

A private action to enforce any liability created under this part may be brought within two (2) years from the date on which the liability arises, except that where a defendant has materially and willfully misrepresented any information required under this part to be disclosed to a consumer, and the information so misrepresented is material to the establishment of the defendant's liability to that consumer under this part, the action may be brought at any time within two (2) years after discovery by the consumer of the misrepresentation. No action brought by the attorney general and reporter shall be subject to the limitation of actions contained herein.

§ 47-18-1010. Violation of Consumer Protection Act — Institution of proceedings.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter. For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of any trade or commerce and subject to the penalties and remedies as provided by that act.
(b) If the attorney general has reason to believe that any credit services business, or any salesperson, agent, representative, or independent contractor acting on behalf of a credit services business, has violated any provision of this part, the attorney general may institute a proceeding under this chapter.

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47-18-1011(c)

§ 47-18-1011. Bond.

(a)
1. (1) In order to provide a degree of protection to customers of credit services businesses, each credit services business shall post a bond in an amount as determined by the commissioner with the department of commerce and insurance for each location conducting business in this state. The bond shall be made with a bond issued by a corporate surety acceptable to the commissioner.
2. (2) If the commissioner has not promulgated a rule setting the required level of bonding, then the bond shall be in the amount of one hundred thousand dollars ($100,000).
(b) The bond shall be maintained for two (2) years following the date on which the credit services business ceases to conduct business in this state.
(c) In an action brought by the attorney general and reporter pursuant to § 47-18-1010, the attorney general and reporter shall have the right to request that the total amount of the bond posted by the credit services business be awarded to the state for consumer restitution or civil penalties. Further, any person who has been awarded damages for a private action under this part may make a claim against the bond.
(d) Notwithstanding subsection (a), any credit services business that was registered with the division of consumer affairs in the department of commerce and insurance on or before May 1, 1998, shall only be required to post a bond in the amount of ten thousand dollars ($10,000) with the department. The bond may be made through a deposit of cash, a certificate of deposit, securities, or with a bond issued by a corporate surety acceptable to the commissioner.
(e) Receipt of bonds for credit services businesses posted under this part shall be transferred to the division of regulatory boards in the department of commerce and insurance on and after July 1, 2015.
(f) The commissioner may prescribe fees for the filing of a bond with the department of commerce and insurance pursuant to this part. The fees shall be in an amount that provides for the cost of administering the receipt of bonds for credit services businesses. Fees may be adjusted as necessary to provide that the administration of bonds for credit services businesses is fiscally self-sufficient and that revenues from fees do not exceed necessary and required expenditures.

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§ 47-18-1012. Combination of moneys received and expenses incurred pursuant to Tennessee Credit Services Businesses Act and Uniform Debt-Management Services Act into single fund.

The department shall combine all moneys received and expenses incurred pursuant to the Tennessee Credit Services Businesses Act and the Uniform Debt-Management Services Act, compiled in part 55 of this chapter, into a single fund for the purpose of administering the acts.

Part 11 Pyramid Promotional Schemes

§ 47-18-1101. Part definitions.

For purposes of this part:
1. (1) “Appropriate inventory repurchase program” means a program by which a plan or operation repurchases, upon request and upon commercially reasonable terms, when the salesperson's business relationship with the company ends, current and marketable inventory in the possession of the salesperson and purchased by the salesperson for resale, and such plan or operation clearly describes the program in its recruiting literature, sales manual, or contract with independent salespersons, including but not limited to, disclosure of any inventory that is not eligible for repurchase under the program. For purposes of this subdivision (1):
  1. (A) “Commercially reasonable terms” means the repurchase of current and marketable inventory within twelve (12) months from date of purchase at not less than ninety percent (90%) of the original net cost, less appropriate set-offs and legal claims, if any;
  2. (B) “Current and marketable” excludes inventory that:
    1. (i) Is no longer within its commercially reasonable use or shelf-life period;
    2. (ii) Was clearly described to salespersons prior to purchase as seasonal, discontinued, or special promotion products not subject to the plan or operation's inventory repurchase program; or
    3. (iii) Has been used or opened; and
  3. (C) “Inventory” includes both goods and services, including, but not limited to, company-produced promotional materials, sales aids, and sales kits that the plan or operation requires independent salespersons to purchase;
2. (2) “Compensation”:
  1. (A) Means a payment of any money, thing of value, or financial benefit conferred in return for inducing another person to become a participant in a pyramid promotional scheme; and
  2. (B) Does not include payments that are based on sales of goods or services by a person to others, including anyone who is purchasing the goods or services for actual use or consumption, so long as the plan or operation does not promote inventory loading and implements an appropriate inventory repurchase program;
3. (3) “Consideration”:
  1. (A) Means the payment of cash or the purchase of goods, services, or intangible property; and
  2. (B) Does not include:
    1. (i) The purchase of goods or services furnished at cost to be used in making sales and not for resale; or
    2. (ii) Time and effort spent in pursuit of sales or recruiting activities;
4. (4) “Inventory loading” means that the plan or operation requires or encourages its independent salespersons to purchase inventory or services in an amount that unreasonably exceeds what the salesperson can expect to resell for ultimate consumption or consume in a reasonable time period;
5. (5) “Participant” means a person who gives consideration for the opportunity to receive compensation in return for inducing others to join a pyramid promotional scheme;
6. (6) “Person” means an individual, a corporation, a partnership, or any association or unincorporated organization;
7. (7) “Promotes” means to contrive, prepare, establish, plan, operate, advertise, or to otherwise induce or attempt to induce another person to be a participant in a pyramid promotional scheme; and
8. (8)
  1. (A) “Pyramid promotional scheme”:
    1. (i) Means any plan or operation by which a participant gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other persons into the plan or operation rather than from the sale and consumption of goods, services, or intangible property by a participant or other persons introduced into the plan or operation; and
    2. (ii) Includes a plan or operation under which:
      1. (a) The number of persons who may participate is limited either expressly or by the application of conditions affecting the eligibility of a person to receive compensation under the plan or operation; or
      2. (b) A participant, on giving any consideration, obtains any goods, services, or intangible property in addition to the right to receive compensation;
  2. (B) Nothing in this part may be construed to prohibit a plan or operation, or to define a plan or operation as a pyramid promotional scheme, based on the fact that participants in the plan or operation give consideration in return for the right to receive compensation based upon purchases of goods, services, or intangible property by participants for personal use, consumption, or resale so long as the plan or operation does not promote or induce inventory loading and the plan or operation implements an appropriate inventory repurchase program.

§ 47-18-1102. Knowingly establishing, promoting, or operating pyramid promotional scheme — Offense.

(1) It is an offense for any person to knowingly establish, promote, or operate any pyramid promotional scheme in this state.
(2) A limitation as to the number of persons who may participate or the presence of additional conditions affecting eligibility for the opportunity to receive compensation under the plan does not change the identity of the plan as a pyramid promotional scheme nor is it a defense under this section.

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47-18-1104(b)

§ 47-18-1103. Authority to proceed against pyramid promotional schemes for any other violations of state law not limited.

Nothing in this part shall limit the authority of any state official from proceeding against pyramid promotional schemes for other violations of state law.

§ 47-18-1104. Enforcement of part — Civil penalties.

(a) The attorney general and reporter may, upon finding that any person is engaged in or about to engage in any act or practice that constitutes a pyramid promotional scheme in violation of this part, bring an action in the appropriate court of jurisdiction to enjoin such act or practice and to obtain other appropriate relief. Such court may grant a temporary restraining order, or a preliminary or permanent injunction, or other appropriate relief.
(b) Upon a determination by a court that a violation of § 47-18-1102 has occurred, a court may impose by order and collect a civil penalty of not more than ten thousand dollars ($10,000) per violation per person.
(c) The attorney general and reporter may bring actions in circuit court to recover penalties pursuant to this section. In determining the amount of the civil penalty, a court shall consider the magnitude of the offense, prior offenses and compliance history, the good faith of the person charged in attempting to achieve compliance, and other matters as justice may require.
(d) All penalties collected pursuant to this part shall be deposited in the general fund.

§ 47-18-1105. Violation of part is misdemeanor.

A violation of this part is a Class A misdemeanor.

§ 47-18-1106. Participants in scheme not subject to prosecution under part.

A person who only participates in a pyramid promotional scheme may not be prosecuted under this part for any violation of this part. However, a person who knowingly establishes, promotes, or operates a pyramid promotional scheme shall be subject to prosecution pursuant to this part.

Part 12 Water Treatment Devices

§ 47-18-1201. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Contaminant” or “contamination” means any health-related physical, chemical, biological, or radiological substance or matter in water;
2. (2) “Person” means any individual, partnership, firm, corporation or association, or any employee or agent thereof; and
3. (3) “Water treatment device” means any product that:
  1. (A) Is designed to alter the chemical or physical properties or characteristics of drinking water or plumbing, or which the seller, lessor or renter claims can alter the chemical or physical properties or characteristics of drinking water or plumbing; and
  2. (B) Is used or sold, leased or rented for use on residential property.

§ 47-18-1202. Prohibited acts.

It is unlawful for any person to do any of the following in connection with the sale, lease, rental, offer to sell, lease, rent or other disposition of water treatment devices:
1. (1) Make any untrue or misleading oral or written statements regarding the presence of one (1) or more contaminants in drinking water, or the performance of water treatment devices, including, but not limited to, the following oral or written statements:
  1. (A) Any contaminant exists or may exist in the drinking water of any person to whom the statement is directed unless the statement is reasonably based on factual data;
  2. (B) A relationship between water quality and acute or chronic illness exists as a scientific certainty unless that statement is reasonably based on factual data;
  3. (C) The public water system, utility, or treatment plant that supplies drinking water to the person to whom the statement is directed does not test, treat or remove particular contaminants actually present in the water unless the statement is reasonably based on factual data;
  4. (D) The drinking water supplied by the public water system, utility or treatment plant to the person to whom the statement is directed is or may be unsafe to drink unless the statement is reasonably based on factual data;
  5. (E) A water treatment device removes particular contaminants from drinking water unless the statement is reasonably based on factual data in existence at the time the statement is made;
  6. (F) Use news events, reports or descriptions of water problems or health hazards associated with water systems or suppliers in a false or misleading manner;
  7. (G) A water treatment device would provide a health benefit or diminish a health risk unless the statement is reasonably based on factual data; and
  8. (H) A water treatment device will solve or contribute to the solution of any problem unless the statement is reasonably based on factual data;
2. (2) Make any statement about the ability of a water treatment device to remove particular contaminants in such a manner as to imply falsely that any of those contaminants are present in excess of permitted levels in the drinking water of the person to whom the statement is made;
3. (3) Perform tests or demonstrations of the individual consumer's drinking water without also clearly informing the consumer of the results, scope and limits of the test or demonstration;
4. (4) Use pictures, exhibits, graphs, charts, other graphic portrayals, endorsements or testimonials in a false or misleading manner;
5. (5) Fail to disclose clearly and conspicuously, in writing, to the purchaser, lessee or renter, the importance of maintaining the water treatment device according to the manufacturer's instructions, including, if applicable, the replacement of screens and filters. In addition, a separate printed gummed label, tag or other convenient form of reminder of the importance of proper maintenance shall be provided to the purchaser, lessee or renter;
6. (6) Represent expressly or implicitly that the person is authorized by, or associated in any manner with, a governmental agency without the express written authorization of that agency; or
7. (7) Represent an expected life of a water treatment device or component thereof unless it is reasonably based on factual data.

§ 47-18-1203. Prohibited practices under Consumer Protection Act.

Any violation of this part is a prohibited practice under § 47-18-104.

Part 13 Kerosene and Motor Fuels Quality Inspection

§ 47-18-1301. Short title.

This part shall be known and may be cited as the “Kerosene and Motor Fuels Quality Inspection Act of 1989.”

§ 47-18-1302. Legislative intent.

It is the intent of the general assembly, through this enactment, to promote and protect the public health, safety and welfare by ensuring that kerosene and motor fuels:
1. (1) Are adequately labeled and posted; and
2. (2) Meet or exceed certain minimum standards of quality.

§ 47-18-1303. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “American Society for Testing and Materials (ASTM)” means the national scientific and technical organization formed for the development of standards on characteristics and performance of materials, products, systems, and services, and the promotion of related knowledge;
2. (2) “Commissioner” means the Tennessee commissioner of agriculture or a departmental employee designated by the commissioner to act as the commissioner's representative for purposes of this part;
3. (3) “Convey for consumption in Tennessee” means to commercially refine, blend, store, transport, distribute, retail, or otherwise participate in the preparation or transmittal of kerosene or motor fuels for use by consumers within this state;
4. (4) “Department” means the Tennessee department of agriculture;
5. (5) “Diesel fuel” means refined oils commonly used in internal combustion engines where ignition occurs by pressure and not by electric spark, the classification of which shall be defined by the American Society for Testing and Materials;
6. (6) “Field inspector” means an employee of the department, or an employee of a person contracting with the department, whose duties and responsibilities include the collection of kerosene or motor fuel samples for testing and other activities related to enforcement of this part;
7. (7) “Gasoline” means a volatile mixture of liquid hydrocarbons generally containing small amounts of additives suitable for use as a fuel in spark-ignition internal combustion engines;
8. (8) “Gasoline-alcohol blend” means a blend consisting primarily of gasoline and containing by volume at least one percent (1%) ethanol (ethyl alcohol) or methanol (methyl alcohol), or both;
9. (9) “Kerosene” means a refined oil intended for heating or illuminating use, the classification of which shall be defined by the American Society for Testing and Materials;
10. (10) “Motor fuel” means any liquid product used for the generation of power in an internal combustion or turbine engine and includes, but is not necessarily limited to, gasoline, diesel fuel and gasoline-alcohol blends; and
11. (11) “Person” means an individual, partnership, corporation, company, firm, association or other business entity.

§ 47-18-1304. Labeling and posting — Standards — Waiver of standards or alternative standards.

(a) Kerosene and motor fuels conveyed for consumption in Tennessee shall be labeled and posted in accordance with applicable federal and state law.
(b) Kerosene and motor fuels conveyed for consumption in Tennessee shall meet the standards established for such products in the annual book of ASTM standards, and supplements thereto; provided, that by duly promulgated rule:
1. (1) The department may adopt alternative volatility standards for gasoline-alcohol blends; provided, that the alternative standards are consistent with the protection and promotion of public health, safety and welfare; and
2. (2) The department shall adopt as a substitute standard any provision of federal law which imposes requirements in conflict with an ASTM standard.
(c) The commissioner is authorized to waive ASTM standards or to establish alternative standards for a specified period of time when such action is deemed necessary to protect or promote public health, safety and general welfare, and the interests of citizens of Tennessee; provided, that if such waiver or alternative standards remain in effect for more than one (1) year, the commissioner shall promulgate emergency or permanent rules, as the commissioner deems appropriate, pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
(d)
1. (1) Notwithstanding subsection (c) or subdivision (b)(1), for gasoline blended with ethanol, the most recent version of ASTM D4814, Standard Specification for Automotive Spark Ignition Engine Fuel, applies with the following exceptions:
  1. (A) The maximum vapor pressure shall not exceed the ASTM D4814 limit by more than one pound per square inch (1.0 p.s.i.) for blends containing nine percent (9%) to ten percent (10%) (by volume) ethanol from June 1 through September 15, in accordance with 40 CFR Part 80.27(d);
  2. (B) The maximum vapor pressure shall not exceed the ASTM D4814 limit by more than one pound per square inch (1.0 p.s.i.) for blends containing one percent (1%) or more (by volume) ethanol for volatility Classes A, B, C, and D from September 16 through May 31; and
  3. (C) The maximum vapor pressure shall not exceed the ASTM D4814 limit by more than a half pound per square inch (0.5 p.s.i.) for blends containing one percent (1%) or more (by volume) ethanol for volatility Class E from September 16 through May 31.
2. (2) The vapor pressure exceptions in subdivisions (d)(1)(B) and (C) shall remain in effect until ASTM incorporates changes to the vapor pressure maximums for ethanol blends after April 7, 2017.

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§ 47-18-1305. Inspections and testing.

(a)
1. (1) The commissioner shall implement and administer an inspection and testing program to enforce compliance with § 47-18-1304. The commissioner is authorized to contract for the performance of all, or any portion of, required on-site inspections, sample collection, sample transportation and sample testing.
2. (2) The test results of kerosene and motor fuel analyses shall constitute open records and shall be available for public inspection at the commissioner's office during regular business hours.
3. (3) At the request of any person, the department may test samples collected and delivered by the person to the department. No such test shall interfere with the testing of samples collected pursuant to subdivision (a)(1). Such tests shall be performed only after payment of a fee determined by the commissioner to be sufficient to reimburse the department for its cost in performing such tests.
(b)
1. (1) The department shall, at least once each year, inspect and collect at least one (1) sample for testing from each location from which a person conveys kerosene or motor fuel for consumption in Tennessee. Subject to availability of resources, the department may inspect any such location more frequently than once each year and may test a greater number of samples. If transactions occurring at a particular location total an average of less than three hundred (300) gallons per month, then annual inspection and testing of the location shall not be required.
2. (2) When, in the discretion of the commissioner, promotion or protection of the public health, safety, or welfare so necessitates, inspection and testing in addition to the requirements of subdivision (b)(1) shall be performed with regard to:
  1. (A) A person or business location which has been previously found by the department to be in violation of § 47-18-1304; and
  2. (B) Any person or business location which refines, blends, stores, transports, or distributes kerosene or motor fuel to or for the person or business location referred to in subdivision (b)(2)(A).
3. (3) Upon receiving a consumer complaint alleging a violation of § 47-18-1304, which, in the discretion of the commissioner, indicates that the public health, safety or welfare may be threatened, inspection and testing in addition to that required by subdivision (b)(1) shall be performed with regard to:
  1. (A) The person or business location which is the subject of the complaint; and
  2. (B) Any person or business location which refines, blends, stores, transports, or distributes kerosene or motor fuel to or for the person or business location referred to in subdivision (b)(3)(A).
4. (4) The commissioner shall maintain a toll-free telephone line for the purpose of encouraging and receiving consumer complaints pertaining to kerosene and motor fuel quality. The commissioner shall undertake such actions and activities as may be necessary to inform and periodically remind consumers of the existence and purpose of the toll-free telephone number. A log of consumer complaints pertaining to kerosene and motor fuel quality shall be maintained at the commissioner's office. The log shall constitute an open record and shall be available for public inspection during regular business hours.

§ 47-18-1306. Samples for testing — Testing of ethanol or methanol.

(a) Upon request of a field inspector, a person who conveys kerosene or motor fuel for consumption in Tennessee shall immediately provide the department, free of cost, samples of kerosene or motor fuel. Samples shall be pumped, pulled, drawn, or otherwise procured in the presence of the field inspector.
(b) The department shall test the samples for compliance with the requirements of § 47-18-1304.
(c) The department may test ethanol or methanol, intended for blending with gasoline, separate from and prior to the time at which such ethanol or methanol is blended with gasoline.

§ 47-18-1307. Sanctions for violations — Penalties.

(a)
1. (1) If a person or the person's agent or employee conveys, or offers to convey, kerosene or motor fuel in violation of § 47-18-1304, then the person shall be subject to an administrative fine, to issuance of a stop-sale order, or to both, in the discretion of the commissioner. A stop-sale order shall be issued by the commissioner either as a Class One stop-sale order or as a Class Two stop-sale order. A Class One stop-sale order shall be issued for a specified period of time. A Class Two stop-sale order shall be issued until conditions identified within the order have been remedied.
2. (2)
  1. (A) A Class One stop-sale order may not be issued by the commissioner for a specified period greater than twenty-four (24) hours unless the violation:
    1. (i) Threatens public health or safety;
    2. (ii) Is knowingly and intentionally committed; or
    3. (iii) Reflects a continuing and repetitive pattern of disregard for the requirements of § 47-18-1304.
  2. (B) A Class One stop-sale order duly issued by the commissioner for a specified period greater than twenty-four (24) hours may be issued for any period not in excess of two hundred forty (240) hours.
3. (3)
  1. (A) An administrative fine may not be assessed by the commissioner in an amount greater than one thousand dollars ($1,000) unless the violation:
    1. (i) Threatens public health or safety;
    2. (ii) Is knowingly and intentionally committed; or
    3. (iii) Reflects a continuing and repetitive pattern of disregard for the requirements of § 47-18-1304.
  2. (B) An administrative fine duly assessed by the commissioner in an amount greater than one thousand dollars ($1,000) may be assessed for any amount not in excess of ten thousand dollars ($10,000).
(b)
1. (1) If a person who conveys kerosene or motor fuel for consumption in Tennessee, or an agent or employee of such person, refuses during regular business hours to promptly provide, upon request, a sample for inspection and testing, then the refusal shall constitute a knowing and intentional violation of § 47-18-1304, and the person shall be subject to imposition of the appropriate penalties set forth in subsection (a).
2. (2) If a person who conveys kerosene or motor fuel for consumption in Tennessee, or an agent or employee of such person, interferes or attempts to interfere with the reasonable efforts of a field inspector or departmental official or employee to perform any duty or responsibility assigned pursuant to this part, then the interference or attempted interference shall constitute a knowing and intentional violation of § 47-18-1304, and the person shall be subject to imposition of the appropriate penalties set forth in subsection (a).
3. (3) If a person who conveys kerosene or motor fuel for consumption in Tennessee fails to register with the department as required by § 47-18-1304, then the person shall be subject to imposition of the penalties set forth in subsection (a).
4. (4) If a person who conveys kerosene or motor fuel for consumption in Tennessee violates a rule duly promulgated by the department under the authority of this part, then the violation shall constitute a violation of § 47-18-1304 and shall be subject to imposition of the penalties set forth in subsection (a).
(c) If a person unknowingly receives kerosene or motor fuel that does not comply with the requirements of § 47-18-1304, and if as a result thereof the person is sanctioned pursuant to this section, then such person shall have the right to proceed in civil court to collect damages from those persons who, in violation of § 47-18-1304, conveyed the kerosene or motor fuel for consumption in Tennessee.

§ 47-18-1308. Officials or employees administering or enforcing part — Reports of interests in conveyances — Restrictions on use of samples.

(a) Each official and employee within the department, and each official and employee of a person contracting with the department, who is directly or indirectly involved in the administration or enforcement of this part, and who has a direct or indirect interest in the conveyance of kerosene or motor fuel for consumption in Tennessee, shall annually file a written statement summarizing the official's or employee's involvement in the administration or enforcement of this part as well as the official's or employee's interest in the conveyance of kerosene or motor fuel for consumption in Tennessee. The statements shall constitute open records, shall be kept on file in the commissioner's office, and shall be available for public inspection during the department's regular business hours.
(b) No official or employee within the department and no official or employee of a person contracting with the department shall take away or appropriate for the official's or employee's own use any sample collected by or submitted to the department for testing. By duly promulgated rule, the department shall establish policies and procedures governing the use, disposal, or sale of any samples remaining unused after testing thereon is completed.

§ 47-18-1309. Rules and regulations — Contested cases.

(a) In accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, the department shall promulgate such rules as may be necessary to effectively and efficiently administer and enforce this part.
(b) Such rules shall include, but shall not necessarily be limited to:
1. (1) Registration and disclosure procedures and requirements mandated by § 47-18-1304;
2. (2) Identification and statement of current, applicable federal and state labeling and posting requirements, compliance with which is mandated by § 47-18-1304;
3. (3) Identification and statement of current, applicable ASTM standards or federal standards, compliance with which is mandated by § 47-18-1304; and
4. (4) Description of any deviations from ASTM standards, permitted by the department without imposition of sanction, in order to equitably reflect the margin of error for test analyses.
(c) A person who is aggrieved by a proposed departmental order to enforce this part, or any rule promulgated under the authority of this part, shall be entitled to a contested case hearing to be conducted in accordance with the Uniform Administrative Procedures Act. Except under circumstances in which the public health or safety would be jeopardized by delay, any such hearing shall be conducted prior to the time at which an administrative fine is imposed or a stop-sale order becomes effective.

§ 47-18-1310. Report to governor and general assembly.

Each year, on or before September 15, the commissioner shall distribute to the governor and to the chairs of the transportation committee of the house of representatives and the transportation and safety committee of the senate a report entitled, “Annual Report on the Quality of Kerosene and Motor Fuel in Tennessee.” The report shall summarize, for the preceding fiscal year, the activities of the department in performing the duties and responsibilities assigned by this part. The report shall identify:
1. (1) The total number of inspections performed and samples collected by the department;
2. (2) The total number of inspections performed and samples respectively collected from refiners, blenders, storage facilities, transporters, wholesalers, retailers and others;
3. (3) The results of inspections and tests conducted, including the number and categories of violations as well as enforcement activities undertaken with respect to such violations;
4. (4) The geographical distribution by county of violations;
5. (5) The number and categories of consumer complaints, alleging violations of this part, received by the department;
6. (6) A summary of investigations conducted in response to consumer complaints;
7. (7) The costs of conducting the inspection and testing program;
8. (8) Legislative recommendations for improving compliance with this part;
9. (9) Other information that would be useful in evaluating the quality of kerosene and motor fuel in Tennessee; and
10. (10) Other information that would be useful in evaluating programmatic effectiveness and efficiency.

§ 47-18-1311. Funding.

Implementation and administration of this part shall be subject to an annual appropriation for such purpose as contained within the general appropriations act. The commissioner of finance and administration shall transfer from highway user tax revenues allocated to the highway fund an amount sufficient to support the annual appropriation for implementation and administration of this part.

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Part 14 Consumer Protection Warranty Extension

§ 47-18-1401. Short title.

This part shall be known and may be cited as the “Tennessee Consumer Protection Warranty Extension Act.”

§ 47-18-1402. Warranty extension period.

Any written warranty or service contract purchased in this state on or after July 1, 1989, and in effect when there is a failure of the product under such written warranty or service contract shall be extended as follows:
1. (1) The number of days the consumer is deprived of the use of the product by reason of the product being in repair; plus
2. (2) Two (2) additional working days.

§ 47-18-1403. Working days — Definition.

For the purposes of this part, working days shall not include Saturdays, Sundays or legal holidays pursuant to § 15-1-101.

§ 47-18-1404. Applicability.

This part shall not apply to a written warranty or a service contract for a new or used motor vehicle.

Part 15 Consumer Telemarketing Protection

§ 47-18-1501. Short title — Part definitions.

(a) This part shall be known as the “Consumer Telemarketing Protection Act of 1990.”
(b) As used in this part, unless the context otherwise requires:
1. (1) “ADAD equipment” means any device or system of devices which is used, whether alone or in conjunction with other equipment, for the purpose of automatically selecting or dialing telephone numbers and disseminating recorded messages to the numbers so selected or dialed;
2. (2) “Commission” means the Tennessee public utility commission, created by § 65-1-101; and
3. (3) “Telephone access line” means any seven-digit telephone number for each call to which a fee is charged.

§ 47-18-1502. Unlawful use of ADAD equipment — Consent to calls.

(a) It is unlawful for any person to use, to employ or direct another person to use, or to contract for the use of ADAD equipment for the purpose of advertising or offering for sale, lease, rental or as a gift any goods, services or property, either real or personal, primarily for personal, family or household use or for the purpose of conducting polls or soliciting information where:
1. (1) Consent is not received prior to the initiation of the calls as specified in subsection (b);
2. (2) Such use is other than between the hours of eight o'clock a.m. (8:00 a.m.) and nine o'clock p.m. (9:00 p.m.);
3. (3) The ADAD equipment will operate unattended, or is not so designed and equipped with an automatic clock and calendar device that it will not operate unattended, even in the event of power failures;
4. (4) Such use involves either the random or sequential dialing of telephone numbers;
5. (5) The telephone number required to be stated in subdivision (a)(7) is not, during normal business hours, promptly and personally answered by someone who:
  1. (A) Is an agent of the person or organization in whose behalf the automatic calls are made; and
  2. (B) Is willing and able to provide information concerning the automatic calls;
6. (6) The automatic dialing and recorded message player does not automatically and immediately terminate its connection with any telephone call within ten (10) seconds after the person called:
  1. (A) Fails to give consent for the playing of a recorded message; or
  2. (B) Replaces the receiver on the person's telephone;
7. (7) The recorded message fails to state clearly the name and telephone number of the person or organization initiating the call within the first twenty-five (25) seconds of the call and at the conclusion of the call; or
8. (8) Such use involves calls to:
  1. (A) Telephone numbers which, at the request of the customer, have been omitted from the telephone directory published by the telephone company or cooperative serving the customer; or
  2. (B) Hospitals, nursing homes, fire protection agencies, or law enforcement agencies.
(b)
1. (1) A person may give consent to a call made with ADAD equipment when a live operator introduces the call and states an intent to play a recorded message. Any such consent shall apply only to a particular call and shall not constitute prior consent to receive further calls through the use of such ADAD equipment.
2. (2)
  1. (A) Any person wishing to receive telephone calls through the use of ADAD equipment shall give written consent to the person using, employing, directing another person to use, or contracting for the use of such ADAD equipment.
  2. (B) Any form used for such written consent by any person using, employing, directing another person to use, or contracting for the use of such ADAD equipment shall clearly and conspicuously state its purpose and effect, and clearly and conspicuously give notice of how such consent may be withdrawn.
  3. (C) A record of such written consent shall be maintained by the person to whom consent is given, and shall be made available to the commission or its authorized representative, without further action, during normal business hours and following reasonable notice.
  4. (D) Such consent shall, unless withdrawn, be valid for a period of two (2) years from the date on which it is executed; and such record of written consent shall be maintained by the person to whom consent is given for at least the same period of time.
  5. (E) Any consent to receive telephone calls through the use of ADAD equipment shall be void and withdrawn on the fifteenth day following the receipt of a letter withdrawing such consent. It is unlawful for any person to whom written consent is given to fail to maintain the record of such written consent for the time required by this subdivision (b)(2)(E), or to prevent or hinder the commission or its authorized representative from inspecting any such record of written consent.

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47-18-1508

§ 47-18-1503. Registration requirements — Issuance and revocation of permits.

(a) Prior to the utilization of ADAD equipment to call telephone numbers located in this state, any company or individual utilizing this equipment shall register the following with the commission to receive a permit as provided in this part:
1. (1) Name, address and telephone number of the company or individual utilizing the equipment;
2. (2) Name and address of a designated agent for service of process located in Tennessee for the ADAD operator;
3. (3) A surety bond executed by the ADAD operator from a surety company authorized to do business in this state for the sum of ten thousand dollars ($10,000) to be maintained continuously in full force and effect. The commission may waive the bond requirement for any operator demonstrating financial responsibility by the submission of a letter of credit from an accredited financial institution or by other means as the commission by rule may prescribe.
(b) The commission shall promulgate rules and regulations to govern the issuance of and the revocation or suspension of permits for ADAD operators utilizing equipment to call telephone numbers located in Tennessee.
(c) Failure to obtain a permit from the commission prior to utilization of ADAD equipment to call numbers located in Tennessee, and failure to abide by commission rules governing ADAD operations is a violation of this part.

§ 47-18-1504. Unlawful to connect ADAD equipment to telephone line without permit — Renewal of permit.

(a) It is unlawful for any person to connect any ADAD equipment to any telephone line in this state for the purpose of making telephone calls to persons in this state through the use of ADAD equipment unless a permit has been issued for such ADAD equipment by the commission.
(b) Any person desiring to use ADAD equipment in this state shall make application for a permit to the commission on forms prescribed by the commission, and shall pay a fee as prescribed by the commission for such permit. Permits shall be renewed biennially as prescribed by the commission and upon payment of a renewal fee. The fees charged shall cover the administrative cost for the issuance of such permits.
(c) Permits shall be subject to suspension or revocation by the commission for any violation of this part.

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47-18-1508

§ 47-18-1505. Unlawful use of telephone access line.

It is unlawful for any person making use of a telephone access line to use, to employ or direct another person to use, or to contract for the use of ADAD equipment or the United States mail for the purpose of soliciting any person to call such telephone access line.

§ 47-18-1506. Telephone companies and cooperatives — Withdrawal of access to a telephone access line.

No telephone company or cooperative shall provide access to a telephone access line to any person who solicits calls to such number through the use of ADAD equipment or through the use of the United States mail. A telephone company or cooperative shall, upon the order of the commission, withdraw access to a telephone access line from any person if calls to such number are solicited by ADAD equipment or through the use of the United States mail.

§ 47-18-1507. Permissible use of ADAD equipment.

Nothing in this part shall prohibit the use of ADAD equipment to make calls with recorded messages when such calls:
1. (1) Are made in response to calls initiated by the person to whom the automatic call or recorded message is directed;
2. (2) Concern goods or services that have been previously ordered or purchased;
3. (3) Relate to collection of lawful debts; or
4. (4) Are made by a public school, kindergarten through grade twelve (K-12), as part of a program to regulate and control absenteeism of students.

§ 47-18-1508. Penalty — Criminal.

Any person who violates any provision of §§ 47-18-1502 — 47-18-1504 commits a Class A misdemeanor.

§ 47-18-1509. Injunctive relief — Recovery of damages.

(a) The district attorney general of the county in which or from which automated calls in violation of this part are made may seek injunctive relief to enforce this part and recover such statutory damages and attorney's fees as are set out in § 47-18-1510.
(b) Any individual or group of individuals receiving such automated calls may also seek injunctive relief to enforce this part on behalf of others similarly situated.

§ 47-18-1510. Penalty — Civil.

(a) If an individual or corporation is found to be in violation of this part in a civil action, a court shall assess a civil penalty against the offending party in the amount of one thousand dollars ($1,000) for each call made in violation of this part.
(b) Any civil penalty collected pursuant to this section shall be paid into the general fund of the state. The prevailing party in the cause shall be entitled to necessary expenses and reasonable attorney's fees.

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47-18-1509(a)

§ 47-18-1511. Offense of using ADAD equipment to intentionally conceal or misrepresent telephone number of the equipment — Exceptions.

(a) It is an offense for any person to utilize any ADAD equipment to intentionally:
1. (1) Dial telephone numbers with area codes within the state; and
2. (2) Conceal or misrepresent the telephone number utilized by the ADAD equipment on the call recipient's telephone or other equipment that is technically capable of displaying the number by:
  1. (A) Displaying a telephone number other than the telephone number utilized by the ADAD equipment;
  2. (B) Not displaying the telephone number utilized by the ADAD equipment; or
  3. (C) Displaying an “unknown number” message or similar message instead of the telephone number utilized by the ADAD equipment.
(b) A violation of this section is a Class A misdemeanor punishable only by a fine not to exceed two thousand five hundred dollars ($2,500) for each violation. For purposes of criminal liability, a court shall deem each call made in violation of this section as a separate offense.
(c) It shall not be a violation of this section to display a phone number, different from the phone number being utilized by the ADAD equipment, on behalf of a person if:
1. (1) The phone number displayed on behalf of the person has a Tennessee area code or is a toll-free number;
2. (2) The phone number displayed on behalf of the person is answered during regular business hours by a designated representative of such person; and
3. (3) The person's name is displayed along with the phone number described in subdivisions (c)(1) and (2).
(d) The offenses described in this section shall not apply to a telecommunications, broadband, or voice-over-Internet services provider acting solely as an intermediary for a transmission of telephone service between a caller and a recipient.

§ 47-18-1512 — 47-18-1525. [Reserved.]

§ 47-18-1526. Telephone solicitations prohibited.

(a) As used in this section, unless the context otherwise requires:
1. (1) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
2. (2) “Consumer” means an actual or prospective purchaser, lessee, or recipient of consumer goods or services;
3. (3) “Telephone solicitor” means any natural person, firm, organization, partnership, association or corporation, or a subsidiary or affiliate thereof, doing business in this state, who makes or causes to be made a telephonic sales call, including, but not limited to, calls made by use of automated dialing or recorded message devices;
4. (4) “Telephonic sales call” means a call made by a telephone solicitor to a consumer, for the purpose of soliciting a sale of any consumer goods or services, or for the purpose of soliciting an extension of credit for consumer goods or services, or for the purpose of obtaining information that will or may be used by the solicitor or a third party for the direct solicitation of a sale of consumer goods or services or an extension of credit for such purposes or in connection with prizes, gifts or awards presentations; and
5. (5) “Unsolicited telephonic sales call” means a telephonic sales call other than a call made:
  1. (A) In response to an express request of the person called;
  2. (B) Primarily in connection with an existing debt or contract, payment or performance of which has not been completed at the time of such call; or
  3. (C) To any person with whom the telephone solicitor has a prior or existing business relationship.
(b) No telephone solicitor shall make or cause to be made any unsolicited telephonic sales call to any residential, mobile or telephonic paging device telephone number unless such person or entity has instituted procedures for maintaining a list of persons who do not wish to receive telephone solicitations made by or on behalf of that person or entity, in compliance with 47 CFR 64 or 16 CFR 310.
(c)
1. (1) No telephonic sales calls shall be made by a telephone solicitor to a consumer from a telephone if the telephone number of the caller is unlisted, or if the telephone solicitor is using telephone equipment which blocks the caller ID function on the telephone or telephone equipment of the number dialed so that the telephone number of the caller is not displayed on the telephone or telephone equipment which is technically capable of displaying the telephone number of the caller.
2. (2)
  1. (A) In addition to any other penalty provided by this section, it is an offense for a person owning or directing the use of telephones or telephone equipment in violation of subdivision (c)(1) to use or intentionally employ or direct a telephone solicitor to use, or to contract for the use of, telephones or telephone equipment to make telephonic sales calls in violation of subdivision (c)(1).
  2. (B) A violation of this subdivision (c)(2) is a Class A misdemeanor, punishable only by a fine not to exceed two thousand five hundred dollars ($2,500) for each violation.
(d) The attorney general shall investigate any complaints received concerning violations of this section pursuant to § 47-18-106. The civil penalty shall not exceed one thousand dollars ($1,000) per violation. This civil penalty may be recovered in any action brought under this part by the attorney general, or the attorney general may terminate any investigation or action upon agreement by the person to pay a stipulated civil penalty. The attorney general or the court may waive any civil penalty if the person has previously made full restitution or reimbursement or has paid actual damages to the consumers who have been injured by the violation. It shall be an affirmative defense in any action brought under this subsection (d) that the defendant has established and implemented reasonable practices and procedures to effectively prevent telephone solicitations in violation of the regulations established in this section.

§ 47-18-1527. Credit card charges by telephone solicitation permitted — Unauthorized charges — Refund.

(a) Credit card companies may offer services charged to a credit card to a cardholder by telephone solicitation and such cardholder may elect to authorize or refuse such services.
(b) If the cardholder does not authorize such services, the cardholder shall notify the credit card company of any unauthorized charges that appear on such cardholder's credit card statement within three (3) months of initial billing for such services.
(c) If the cardholder notifies the credit card company during the three-month period that such consumer did not authorize the services and the credit card company cannot provide proof of authorization by such consumer, the credit card company shall refund an amount equal to a minimum of three (3) months charges for services.
(d) If the cardholder notifies the credit card company during the three-month period that such consumer did not authorize the services and the credit card company is able to prove authorization by such cardholder, no refund shall be issued by the credit card company.

Part 16 Fantasy Sports Act [Transferred]

§ 47-18-1601 – 47-18-1612. [Transferred]

Part 17 Employment Agencies

§ 47-18-1701. Short title.

This part shall be known as and may be cited as the “Tennessee Employment Agency Act.”

§ 47-18-1702. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
2. (2) “Candidate” means any person, whether employed or unemployed, seeking or entering into any arrangement for employment or change of employment through the services of an employment agency;
3. (3) [Deleted by 2019 amendment.]
4. (4) “Employer” means any person who engages or seeks to engage candidates for employment;
5. (5) “Employment agency” means any person who, for a fee paid by a candidate or other compensation provided by a candidate:
  1. (A) Places or attempts to place candidates seeking employment where the fee is not paid by the employer;
  2. (B) Recruits or attempts to recruit employees for employers seeking candidates where the fee is not paid by the employer; or
  3. (C) Purports to have access to job leads or compiles and provides lists or information about available jobs, if no fee is charged to the majority of potential employers for inclusion in the listings, and if an office is maintained for the purpose of marketing job information to the public and providing customers with access to that information;
6. (6) “Fee” means anything of value paid or directed to be paid for the services of an employment agency; and
7. (7) “Person” means any individual, company, corporation, partnership, association or firm, including any officer, director or employee of a corporation.

§ 47-18-1703. Prohibited acts.

No employment agency, or employer thereof, shall:
1. (1) Impose any fee on candidates except for furnishing of employment directly or indirectly through the efforts of such employment agency;
2. (2) Impose any fee on any candidate prior to the time at which that candidate has secured a job;
3. (3) Engage or attempt to engage in the splitting or sharing of fees with an employer, or an employee of an employer, to whom employment agency services have been furnished;
4. (4) Impose any fee for employing or training a person as a personnel consultant with such employment agency;
5. (5) Make, give or cause to be made or given to any candidate any false promise, misrepresentation, or inaccurate or misleading statement or information;
6. (6) Procure or attempt to procure the discharge of any person from such person's employment;
7. (7) Induce or attempt to induce any employee placed by the employment agency to leave such employment, except upon request made and initiated by such employee;
8. (8) Knowingly refer any candidate to employment which is prohibited by law, or deleterious to health or morals;
9. (9) Refer any candidate for an interview without having first obtained, either orally or in writing, a bona fide job order or recruiting assignment from an employer for an interview;
10. (10) Make or cause to be made or use any name, sign or advertising device bearing a name which may be reasonably confused with the name of a government agency;
11. (11) Knowingly publish or cause to be published any false, fraudulent, deceptive or misleading information, representation, permission, notice or advertisement;
12. (12) Require any candidate to contract with a specified lending agency to pay employment agency service charges; or
13. (13) Knowingly and willfully violate any law of this state or the United States.

§ 47-18-1704. Refund of fees paid in event of termination.

If a candidate accepts candidate-paid fee employment and is terminated by the employer through no cause of the candidate within four (4) weeks after beginning work, the employment agency shall, within thirty (30) days, refund any fee paid by the candidate. During such thirty (30) days, the employment agency shall, if requested, attempt to place the candidate in similar employment.

§ 47-18-1705. Exemptions.

This part does not apply to:
1. (1) Employee trade associations engaged in the procurement of employment for public school teachers and administrators;
2. (2) Employment services established and operated by this state, any political subdivision of this state or the United States;
3. (3) Labor union organizations;
4. (4) Musician booking agencies;
5. (5) Employee trade associations engaged in the procurement of employment for nurses;
6. (6) Any health care provider who provides health care services and who is licensed pursuant to title 63 or title 68, chapter 11; or
7. (7) Any public or private college or university in the state;
8. provided, that no recruiting fee is exacted from the salary or wages of the employee for services rendered.

§ 47-18-1706. Investigators.

Whenever the attorney general has reason to believe that a person is engaging in, has engaged in, or may be about to engage in a violation of this part or has reason to believe it to be in the public interest to conduct an investigation to ascertain whether any person is engaging in, or has engaged in, or is about to engage in such act or practice, the attorney general may conduct an investigation in accordance with § 47-18-106.

§ 47-18-1707. Enforcement actions.

(a) Whenever it appears to the attorney general that a person has engaged in or is about to engage in any act or practice constituting a violation of this part or any rule or order hereunder, the attorney general may, in the attorney general's discretion, bring an action in the chancery court of any county in this state to enjoin the acts or practices and to enforce compliance with this part or any rule or order hereunder.
(b) Upon a proper showing, a permanent or temporary injunction, restraining order, writ of mandamus, discouragement or other proper equitable relief shall be granted.
(c) The court shall not require the attorney general to post a bond.

§ 47-18-1708. Violations — Penalties.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter.
(b) For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of trade or commerce and subject to the penalties and remedies as provided by such act.

Part 18 Foreign Foods Disclosure

§ 47-18-1801. Short title.

This part shall be known and may be cited as the “Foreign Foods Disclosure Act of 1997.”

§ 47-18-1802. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
2. (2) “Food” means any nourishing substance intended to be eaten by human beings;
3. (3) “Manufacturer” means any person who manufactures, assembles or packages articles containing food of foreign origin. “Manufacturer” does not include wholesalers that repack fresh produce into smaller containers for sale to retail stores or retailers that repack fresh produce into tray-ready packs for sale to consumers; and
4. (4) “Person” means a natural person, individual, governmental agency, partnership, corporation, trust, estate, incorporated or unincorporated association, and any other legal or commercial entity however organized.

§ 47-18-1803. Administration.

The attorney general shall administer this part.

§ 47-18-1804. Labeling requirements.

It is unlawful for any manufacturer to sell any article containing food of foreign origin to a retail or wholesale establishment in Tennessee or for distribution in Tennessee if such article is not marked in accordance with the requirements of 19 U.S.C. § 1304.

§ 47-18-1805. Injunctive relief.

In addition to any other remedies, the attorney general is authorized to apply to the chancery court of Davidson County, and such court shall have jurisdiction upon hearing and for cause shown, to grant a temporary or permanent injunction restraining any person from violating any provision of this part, irrespective of whether or not there exists an adequate remedy at law, without the necessity of posting a bond.

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47-18-1807(e)

§ 47-18-1806. Civil penalties.

The attorney general may seek and the court may impose a maximum civil penalty for a violation of this part of not more than ten thousand dollars ($10,000). For purposes of this section, each unmarked or improperly marked article constitutes a separate violation of this part.

§ 47-18-1807. Civil actions — Damages — Declaratory judgments — Costs.

(a) Any person who manufactures, assembles or packages articles containing food who has suffered or will suffer an ascertainable loss as a result of a violation of this part may commence a civil action against any manufacturer who is alleged to have violated or to be in violation of this part.
(b) The action may be brought in a court of competent jurisdiction in the county where any alleged sale took place, is taking place, or is about to take place, or in the county in which the alleged violator resides, has its principal place of business, conducts, transacts, or has transacted business, or, if the person cannot be found in any of the foregoing locations, in the county in which such person can be found.
(c) If the court finds that the violation was a willful or knowing violation, the court shall award three (3) times the actual damages sustained and provide such other relief as it considers necessary and proper.
(d) A person commencing a civil action under this section shall serve a copy of the action on the attorney general. In any action under this section, the attorney general, if not a party, may intervene as a matter of right at any time in the proceeding.
(e) Without regard to any other remedy or relief to which a person is entitled, anyone affected by a violation of this part may bring an action to obtain a declaratory judgment that the part or practice violates this part and to enjoin the person who has violated, is violating, or who is otherwise likely to violate this part; provided, that such action shall not be filed or shall not be continued if the attorney general has commenced or intervened in a proceeding pursuant to § 47-18-1805.
(f) The court, in issuing any final order in any action brought pursuant to this section, shall award costs of litigation (including reasonable attorney fees) to the prevailing party. The court may, if a temporary restraining order or preliminary injunction is sought, require the filing of a bond or equivalent security in accordance with the Tennessee Rules of Civil Procedure.

§ 47-18-1808. Statute of limitations.

Any action commenced pursuant to this part shall be brought within one (1) year from discovery of the alleged sale of an improperly marked article.

§ 47-18-1809. Construction with federal law.

(a) This part shall be construed in accordance with 19 U.S.C § 1304 and the regulations promulgated and rulings and decisions made thereunder.
(b) Nothing in this part shall alter or amend the applicability to a wholesale or retail grocer of 19 U.S.C. § 1304 and any regulations promulgated thereunder.

Part 19 Wireless Telecommunication Devices

§ 47-18-1901. Minimum service periods — Disclosure required.

In any circumstance in which a written contract for a wireless telecommunications device and service is required by the provider thereof, such contract shall have a separate acknowledgment, either by a separate signature line or by initialing, of any minimum service period.

§ 47-18-1902. Penalties.

The penalties provided in part 1 of this chapter shall be applicable to a violation of this part.

§ 47-18-1903. Applicability to regulated utilities.

This part shall not apply to any device or service sold, leased, or offered for sale or lease by any telephone cooperative or by any public utility that is subject to the jurisdiction of, or to regulation by, the Tennessee public utility commission.

§ 47-18-1904. Applicability to personal, family and household uses.

The remedies provided under this chapter with respect to a violation of this part shall be available with respect to goods or services purchased by an individual primarily for personal, family or household use or purposes.

§ 47-18-1905. Applicability to contracts executed after effective date.

This part shall apply to contracts executed after January 1, 1998, and shall not apply to contracts executed prior to that date.

Part 20 Cigarettes

§ 47-18-2001. Short title.

This part shall be known and may be cited as the “Tennessee Minimum Cigarette Pack Size Act of 1999.”

§ 47-18-2002. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Cigarette retailer” means each and every cigarette vending machine, place, store, booth, concession, truck, vehicle or person that in any way sells or makes available cigarettes or cigarette products directly or indirectly to the ultimate consumer; and
2. (2)
  1. (A) “Tobacco product manufacturer” means an entity that, after May 4, 1999, directly (and not exclusively through any affiliate):
    1. (i) Manufactures cigarettes anywhere that such manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer (except where such importer is an original participating manufacturer as that term is defined in the master settlement agreement) that will be responsible for the payments under the master settlement agreement with respect to such cigarettes as a result of the provisions of subsections II(mm) of the master settlement agreement and that pays the taxes specified in subsection II(z) of the master settlement agreement, and provided that the manufacturer of such cigarettes does not market or advertise such cigarettes in the United States;
    2. (ii) Is the first purchaser anywhere for resale in the United States of cigarettes manufactured anywhere that the manufacturer does not intend to be sold in the United States; or
    3. (iii) Becomes a successor of an entity described in subdivision (2)(A)(i) or (2)(A)(ii); and
  2. (B) “Tobacco product manufacturer” does not include an affiliate of a tobacco product manufacturer unless such affiliate itself falls within subdivision (2)(A)(i), (2)(A)(ii) or (2)(A)(iii).

§ 47-18-2003. Minimum package contents.

No tobacco product manufacturer or cigarette retailer may directly or indirectly, manufacture, sell or distribute in Tennessee any pack or other container of cigarettes containing fewer than twenty (20) cigarettes or, in the case of roll-your-own tobacco, any package of roll-your-own tobacco, containing less than zero point six zero (0.60) ounces of tobacco.

§ 47-18-2004. Purpose — Liberal construction.

(a) The purpose of this part is to prevent tobacco manufacturers or retailers from manufacturing, selling or distributing cigarettes in packs or containers containing fewer than twenty (20) cigarettes. This measure is designed to deter minors from smoking cigarettes.
(b) This part shall be liberally construed to promote such purpose.

§ 47-18-2005. Violation of Consumer Protection Act.

Any violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter. For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting the conduct, trade or commerce and subject to all sanctions, penalties and remedies provided in that act, including attorneys' fees and costs.

§ 47-18-2006. Institution of proceedings — Costs of actions.

(a) The attorney general and reporter may bring any appropriate action or proceeding in any court of competent jurisdiction pursuant to this part against any cigarette manufacturer or cigarette retailer to seek redress, including injunctive relief, for violations of this part.
(b) No costs shall be taxed against the attorney general and reporter or the state in actions commenced under this part.

Part 21 Identity Theft Deterrence

§ 47-18-2101. Short title.

This part shall be known and may be cited as the “Tennessee Identity Theft Deterrence Act of 1999.”

§ 47-18-2102. Definitions.

As used in this part and in the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter, unless the context otherwise requires:
1. (1) “Ascertainable loss” means an identifiable deprivation, detriment or injury arising from the identity theft or from any unfair, misleading or deceptive act or practice even when the precise amount of the loss is not known. Whenever a violation of this part has occurred, an ascertainable loss shall be presumed to exist;
2. (2) “Attorney general” means the office of the Tennessee attorney general and reporter;
3. (3) “Consumer report” has the meaning ascribed to that term by 15 U.S.C. § 1681a(d);
4. (4) “Consumer reporting agency” has the meaning ascribed to that term by 15 U.S.C. § 1681a(f);
5. (5) “Financial document” means any credit card, debit card, check or checking account information or number, savings deposit slip or savings account information or number, or similar financial account or account number, including but not limited to, a money market account, certificate of deposit, or other type of interest generating account with a bank, savings and loan or credit union account, or any other financial institution, mutual fund account, 401K account, individual retirement account, retirement account, or other stock account information, savings bond or other bond, credit line, equity line or other line of credit which the possessor of the account has the right to draw against;
6. (6) “Identification documents” means any card, certificate or document which identifies or purports to identify the bearer of such document, whether or not intended for use as identification, and includes, but is not limited to, documents purporting to be a driver license, nondriver identification cards, birth certificates, marriage certificates, divorce certificates, passports, immigration documents, social security cards, employee identification cards, cards issued by the government to provide benefits of any sort, health care benefit cards, or health benefit organization, insurance company or managed care organization cards for the purpose of identifying a person eligible for services;
7. (7) “Identity theft” means:
  1. (A) Obtaining, possessing, transferring, using or attempting to obtain, possess, transfer or use, for unlawful economic benefit, one (1) or more identification documents or personal identification numbers of another person; or
  2. (B) Otherwise obtaining, possessing, transferring, using or attempting to obtain, possess, transfer or use, for unlawful economic benefit, one (1) or more financial documents of another person;
8. (8) “Person” means a natural person, consumer, individual, governmental agency, partnership, corporation, trust, estate, incorporated or unincorporated association, and any other legal or commercial entity however organized;
9. (9) “Personal identification number” means any number that is assigned by the government to identify a particular person, including, but not limited to, social security number, federal tax payer identification number, Medicaid, Medicare or TennCare number which identifies a particular person eligible for benefits, any number assigned to a person as part of a licensure or registration process, such as a board of professional responsibility number, driver license number and passport number and any number assigned by an insurance company, health maintenance organization, managed care organization or other health benefit organization, for the purposes of identifying a particular person eligible for services; and
10. (10) “Tennessee Consumer Protection Act” means the Tennessee Consumer Protection Act of 1977, as amended, compiled in part 1 of this chapter and related statutes. Related statutes specifically include any statute that indicates within the law, regulation or rule that a violation of that law, regulation or rule is a violation of the Tennessee Consumer Protection Act of 1977. Without limiting the scope of this definition, related statutes include, but are not limited to: § 47-18-120; part 3 of this chapter; part 5 of this chapter; Home Solicitations Sales Act of 1974, compiled in part 7 of this chapter; Tennessee Credit Services Businesses Act, compiled in part 10 of this chapter; Consumer Telemarketing Protection Act of 1990, compiled in part 15 of this chapter; Unsolicited Telefacsimile Advertising Act [repealed]; Tennessee Employment Agency Act, compiled in part 17 of this chapter; and Membership Camping Act, compiled in title 66, chapter 32, part 3.

§ 47-18-2103. Prohibited practices.

It is unlawful for any person to directly or indirectly:
1. (1) Engage in identity theft; or
2. (2) Engage in any unfair, deceptive, misleading act or practice for the purpose of directly or indirectly engaging in identity theft.

§ 47-18-2104. Private rights of action.

(a) Any party commencing a private action pursuant to this part must provide a copy of the complaint and all other initial pleadings to the attorney general and upon entry of any judgment, order or decree of the action, shall mail a copy of such judgment, order or decree to the attorney general within five (5) days of entry of the judgment, order or decree.
(b) A copy of any notice of appeal shall be served by the appellant upon the attorney general, who in the public interest may intervene.
(c) A private action to enforce any liability created under this part may be brought within two (2) years from the date the liability arises, except that where a defendant has concealed the liability to that person, under this part, the action may be brought within two (2) years after discovery by the person of the liability. No action brought by the attorney general shall be subject to the limitation of actions contained herein.
(d) In any private action commenced under this part, if the private party establishes that identity theft was engaged in willfully or knowingly, the court may award three (3) times the actual damages and may provide such other relief as it considers necessary and proper.
(e) The action may be brought in a court of competent jurisdiction in the county where the identity theft or unfair, deceptive or misleading act or practice took place, is taking place, or is about to take place, or in the county in which such person resides, has such person's principal place of business, conducts, transacts, or has transacted business, or, if the person cannot be found in any of the foregoing locations, in the county in which such person can be found.
(f) Without regard to any other remedy or relief to which a person is entitled, anyone affected by a violation of this part may bring an action to obtain a declaratory judgment that the act or practice violates this part and to enjoin the person who has violated, is violating, or who is otherwise likely to violate this part; provided, that such action shall not be filed once the attorney general has commenced a proceeding pursuant to this part or the Tennessee Consumer Protection Act.
(g) Upon a finding by the court that a provision of this part has been violated, the court may award to the person bringing such action reasonable attorneys' fees and costs.

§ 47-18-2105. Civil penalties and remedies.

(a)
1. (1) Whenever the attorney general has reason to believe that a person has engaged in, is engaging in, or based upon information received from another law enforcement agency, is about to engage in any unlawful act or practice under this part and that proceedings would be in the public interest, the attorney general may bring an action in the name of the state against the person to restrain by temporary restraining order, temporary injunction, or permanent injunction the use of such act or practice. Additionally, the state may request an asset freeze or any other appropriate and necessary orders against such person.
2. (2) As part of any action brought pursuant to subdivision (a)(1), the attorney general shall certify that the division of consumer affairs complied with § 47-18-5002(2) unless the attorney general determines that the purposes of this part will be substantially impaired by delaying legal proceedings.
(b) The action may be brought in the chancery or circuit court in Davidson County or in a court of competent jurisdiction where the alleged violation of this part, identity theft, unfair, misleading or deceptive act or practice took place or is about to take place or in the county in which the person resides, has the person's principal place of business, conducts, transacts or has transacted business or, if the person cannot be found, in any of the locations listed in this subsection (b), in the county in which the person can be found.
(c) The courts are authorized to issue orders and injunctions to restrain and prevent violations of this part or issue any other necessary or appropriate relief or orders. Such orders and injunctions shall be issued without bond to the state of Tennessee.
(d) Notwithstanding any other law, a violation of this part shall be punishable by a civil penalty of whichever of the following is greater: ten thousand dollars ($10,000), five thousand dollars ($5,000) per day for each day that a person's identity has been assumed or ten (10) times the amount obtained or attempted to be obtained by the person using the identity theft. This civil penalty is supplemental, cumulative and in addition to any other penalties and relief available under the Tennessee Consumer Protection Act, or other laws, regulations or rules.
(e) In any successful action commenced under this part, any ascertainable loss that a person has incurred as a result of a violation of this part, including, but not limited to, the identity theft or misleading, deceptive or unfair practices used to engage in violations of this part shall be recovered as restitution for each such person. The person shall also be awarded statutory interest on that ascertainable loss.
(f) In any successful action commenced by the attorney general under this part, the court shall also order reimbursement to the attorney general of the reasonable attorneys' fees, costs and expenses of the investigation and prosecution under this part.
(g) No court costs, litigation costs, discretionary costs or attorneys' fees shall be taxed or awarded against the state in an action commenced under this part or under the Tennessee Consumer Protection Act.
(h) Any knowing or willful violation of the terms of an injunction or order issued pursuant to this part in an action commenced by the attorney general shall be punishable by a civil penalty of not more than five thousand dollars ($5,000) for each and every violation of the order recoverable by the state, in addition to any other appropriate relief, including, but not limited to, contempt sanctions and the awarding of attorneys' fees and costs to the state for any filings relating to violations of any order under this part.
(i) An order or judgment issued as a result of an action commenced by the attorney general shall in no way affect individual rights of action which may exist independent of the recovery of money or property received under such order or judgment. If a particular person receives restitution as a result of an action commenced by the attorney general, those funds shall act only as a set-off against any award of money received in the person's private right of action proceedings.

§ 47-18-2106. Violation of Tennessee Consumer Protection Act.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act.
(b) For the purpose of application of the Tennessee Consumer Protection Act, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting trade or commerce and subject to the penalties and remedies as provided in that act, in addition to the penalties and remedies set forth in this part.
(c) If the attorney general has reason to believe that a person has violated this part, then the attorney general may institute a proceeding under this chapter.

§ 47-18-2107. Release of personal consumer information.

(a) As used in this section:
1. (1) “Breach of system security”:
  1. (A) Means the acquisition of the information set out in subdivision (a)(1)(A)(i) or (a)(1)(A)(ii) by an unauthorized person that materially compromises the security, confidentiality, or integrity of personal information maintained by the information holder:
    1. (i) Unencrypted computerized data; or
    2. (ii) Encrypted computerized data and the encryption key; and
  2. (B) Does not include the good faith acquisition of personal information by an employee or agent of the information holder for the purposes of the information holder if the personal information is not used or subject to further unauthorized disclosure;
2. (2) “Encrypted” means computerized data that is rendered unusable, unreadable, or indecipherable without the use of a decryption process or key and in accordance with the current version of the Federal Information Processing Standard (FIPS) 140-2;
3. (3) “Information holder” means any person or business that conducts business in this state, or any agency of this state or any of its political subdivisions, that owns or licenses computerized personal information of residents of this state;
4. (4) “Personal information”:
  1. (A) Means an individual's first name or first initial and last name, in combination with any one (1) or more of the following data elements:
    1. (i) Social security number;
    2. (ii) Driver license number; or
    3. (iii) Account, credit card, or debit card number, in combination with any required security code, access code, or password that would permit access to an individual's financial account; and
  2. (B) Does not include information that is lawfully made available to the general public from federal, state, or local government records or information that has been redacted, or otherwise made unusable; and
5. (5) “Unauthorized person” includes an employee of the information holder who is discovered by the information holder to have obtained personal information with the intent to use it for an unlawful purpose.
(b) Following discovery or notification of a breach of system security by an information holder, the information holder shall disclose the breach of system security to any resident of this state whose personal information was, or is reasonably believed to have been, acquired by an unauthorized person. The disclosure must be made no later than forty-five (45) days from the discovery or notification of the breach of system security, unless a longer period of time is required due to the legitimate needs of law enforcement, as provided in subsection (d).
(c) Any information holder that maintains computerized data that includes personal information that the information holder does not own shall notify the owner or licensee of the information of any breach of system security if the personal information was, or is reasonably believed to have been, acquired by an unauthorized person. The disclosure must be made no later than forty-five (45) days from the discovery or notification of the breach of system security, unless a longer period of time is required due to the legitimate needs of law enforcement, as provided in subsection (d).
(d) The notification required by this section may be delayed if a law enforcement agency determines that the notification will impede a criminal investigation. If the notification is delayed, it must be made no later than forty-five (45) days after the law enforcement agency determines that notification will not compromise the investigation.
(e) For purposes of this section, notice may be provided by one (1) of the following methods:
1. (1) Written notice;
2. (2) Electronic notice, if the notice provided is consistent with the provisions regarding electronic records and signatures set forth in 15 U.S.C. § 7001 or if the information holder's primary method of communication with the resident of this state has been by electronic means; or
3. (3) Substitute notice, if the information holder demonstrates that the cost of providing notice would exceed two hundred fifty thousand dollars ($250,000), that the affected class of subject persons to be notified exceeds five hundred thousand (500,000) persons, or the information holder does not have sufficient contact information and the notice consists of all of the following:
  1. (A) Email notice, when the information holder has an email address for the subject persons;
  2. (B) Conspicuous posting of the notice on the information holder's website, if the information holder maintains a website page; and
  3. (C) Notification to major statewide media.
(f) Notwithstanding subsection (e), if an information holder maintains its own notification procedures as part of an information security policy for the treatment of personal information and if the policy is otherwise consistent with the timing requirements of this section, the information holder is in compliance with the notification requirements of this section, as long as the information holder notifies subject persons in accordance with its policies in the event of a breach of system security.
(g) If an information holder discovers circumstances requiring notification pursuant to this section of more than one thousand (1,000) persons at one (1) time, the information holder must also notify, without unreasonable delay, all consumer reporting agencies, as defined by 15 U.S.C. § 1681a, and credit bureaus that compile and maintain files on consumers on a nationwide basis, of the timing, distribution, and content of the notices.
(h) Any customer of an information holder who is a person or business entity, but who is not an agency of this state or any political subdivision of this state, and who is injured by a violation of this section, may institute a civil action to recover damages and to enjoin the information holder from further action in violation of this section. The rights and remedies available under this section are cumulative to each other and to any other rights and remedies available under law.
(i) This section does not apply to any information holder that is subject to:
1. (1) Title V of the Gramm-Leach-Bliley Act of 1999 (Pub. L. No. 106-102); or
2. (2) The Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), as expanded by the Health Information Technology for Clinical and Economic Health Act (42 U.S.C. § 300jj et seq., and 42 U.S.C. § 17921 et seq.).

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§ 47-18-2108. Security freeze at the request of the consumer.

(a) A Tennessee consumer may place a security freeze on the consumer report of the Tennessee consumer by making a request in writing by certified mail. Beginning on January 31, 2009, a credit reporting agency shall make available an electronic method for requesting a security freeze. A security freeze shall prohibit the consumer reporting agency from releasing the requesting party's consumer report or credit score relating to the extension of credit without the express authorization of the Tennessee consumer. Nothing in this section shall prevent a consumer reporting agency from advising a third party that a security freeze is in effect with respect to a particular consumer report.
(b) A consumer reporting agency shall place a security freeze on a consumer report no later than three (3) business days after receiving the written or electronic request from the Tennessee consumer.
(c) The consumer reporting agency shall send a written confirmation of the security freeze to the Tennessee consumer within ten (10) business days of placing the security freeze on the consumer report, and shall provide the Tennessee consumer with a unique personal identification number or password, other than the Tennessee consumer's federal social security number, to be used by the Tennessee consumer when providing authorization for the release of the consumer report for a specific period of time or for permanently removing the security freeze.
(d) If the Tennessee consumer wishes to allow the consumer report to be accessed for a specific period of time while a freeze is in place, the Tennessee consumer shall contact the consumer reporting agency, request that the freeze be temporarily lifted, and provide the following:
1. (1) Proper identification;
2. (2) The unique personal identification number or password provided by the consumer reporting agency to the Tennessee consumer pursuant to this section; and
3. (3) The information requested by the consumer reporting agency about the period for which the consumer report is to be available.
(e) A consumer reporting agency shall develop procedures involving the use of telephone, the Internet, or other electronic method to receive and process a request from a Tennessee consumer to temporarily lift a freeze on a credit report pursuant to this section in an expedited manner. A consumer reporting agency may develop procedures involving the use of facsimile for this purpose.
(f) A consumer reporting agency shall comply with a request to temporarily lift a freeze previously placed on a consumer report no later than fifteen (15) minutes after receiving the request through an electronic contact method in accordance with this section and the request is received between six o'clock a.m. (6:00 a.m.) and nine-thirty p.m. (9:30 p.m.), seven (7) days per week, eastern or central standard or daylight time as applicable to the consumer. In requesting a temporary removal of the security freeze, a Tennessee consumer shall provide both of the following:
1. (1) Proper identification; and
2. (2) The unique personal identification number or password provided by the consumer reporting agency to the Tennessee consumer pursuant to this section.
(g) A consumer reporting agency is not required to temporarily lift a security freeze within the time provided in subsection (f) if:
1. (1) The consumer fails to meet the requirements of subsection (d); or
2. (2) The consumer reporting agency's ability to temporarily lift the security freeze within fifteen (15) minutes is prevented by:
  1. (A) An act of God, including fire, earthquakes, hurricanes, storms, or similar natural disaster or phenomenon;
  2. (B) Unauthorized or illegal acts by a third party, including terrorism, sabotage, riot, vandalism, labor strikes or disputes disrupting operations, or similar occurrence;
  3. (C) Operational interruption including electrical failure, unanticipated delay in equipment or replacement part delivery, computer hardware or software failures inhibiting response time, or similar disruption;
  4. (D) Governmental action, including emergency orders or regulations, judicial or law enforcement action, or similar directives;
  5. (E) Regularly scheduled maintenance, during other than normal business hours, of, or updates to, the consumer reporting agency's systems; or
  6. (F) Commercially reasonable maintenance of or repair to, the consumer reporting agency's systems that is unexpected or unscheduled.
(h) If a third party requests access to a consumer report on which a security freeze is in effect and the Tennessee consumer does not allow the third party access to the consumer report, the third party may treat any applicable credit application made by the consumer as incomplete.
(i) If a Tennessee consumer requests a security freeze pursuant to this section, the consumer reporting agency shall disclose to the Tennessee consumer the process of placing and temporarily lifting a security freeze and the process for allowing access to information from the consumer report for a specific period of time while the security freeze is in place.
(j) Except as provided in subsections (d), (e), and (f), a security freeze shall remain in place until the Tennessee consumer requests that the security freeze be removed permanently. A consumer reporting agency shall permanently remove a security freeze no later than two (2) business days from the receipt of a request by the agency when a Tennessee consumer makes the request by means involving the use of telephone, the Internet, or other electronic media as provided by the consumer reporting agency. In making the request, the Tennessee consumer shall provide both of the following:
1. (1) Proper identification; and
2. (2) The unique personal identification number or password provided by the consumer reporting agency to the Tennessee consumer pursuant to this section.
(k) If a security freeze is in place, a consumer credit reporting agency shall not change any of the following official information in a consumer credit report without sending a written confirmation of the change to the consumer not later than thirty (30) days of the change being posted to the consumer's file: name, date of birth, social security number, and address. Written confirmation is not required for technical modifications of a consumer's official information, including name and street abbreviations, complete spellings or transposition of numbers or letters. In the case of an address change, the written confirmation shall be sent to both the new address and to the former address.
(l) A consumer report agency shall not charge a Tennessee consumer to place, temporarily lift, or permanently remove a security freeze.
(m) This section, including the security freeze, does not apply to the use of a consumer report by the following:
1. (1) A person, or that person's subsidiary, affiliate, agent or assignee, if the Tennessee consumer has an account, contract, or debtor-creditor relationship with that person, for the purposes of reviewing the account, collecting the financial obligation of the consumer, fraud control or extending additional credit to the Tennessee consumer. For purposes of this subdivision (m)(1), “reviewing the account” includes activities related to account maintenance, monitoring, credit line increases, and account upgrades and enhancements;
2. (2) A subsidiary, affiliate, agent or assignee of a party or parties for whom a security freeze has been temporarily lifted pursuant to this section for the purpose of facilitating the extension of credit or other permissible use;
3. (3) Any person, including, but not limited to, a law enforcement entity, collections officer or private collection agency, acting pursuant to a court order, warrant or subpoena authorizing the use of the consumer report, or acting pursuant to a civil investigative demand or request for consumer protection information;
4. (4) Any department or division of the state that is acting to investigate a child support case, medicaid or TennCare fraud, delinquent taxes or assessments, unpaid court orders or settlements of any sort or type, or to fulfill any of their statutory or other duties;
5. (5) For the purposes of prescreening as provided by the federal Fair Credit Reporting Act, codified in 15 U.S.C. § 1681;
6. (6) Any person for the purpose of providing a credit file monitoring subscription service to which the Tennessee consumer has subscribed;
7. (7) A consumer reporting agency for the sole purpose of providing a Tennessee consumer with a copy of the consumer report upon the Tennessee consumer's request;
8. (8) Any person or entity for the purpose of setting or adjusting a rate, adjusting a claim, or underwriting for insurance purposes;
9. (9) A pension plan acting to determine the Tennessee consumer's eligibility for plan benefits or payments authorized by law or to investigate fraud;
10. (10) Any law enforcement entity or its agent acting to investigate a crime or civil law violation, conduct a criminal background check, conduct a presentence investigation in a criminal matter or use the information for supervision of a paroled offender;
11. (11) A licensed hospital with which the Tennessee consumer has or had a contract or a debtor-creditor relationship for the purpose of reviewing the account or collecting the financial obligation owing for the contract, account, or debt; or
12. (12) An attorney at law duly licensed in Tennessee representing any person, subsidiary, affiliate, agent, assignee, department, division, or other entity to whom this section does not apply.
(n) The following entities are not subject to the requirements of this section; provided, however, that each such entity shall be subject to any security freeze placed on a consumer report by a consumer reporting agency from which it obtains information:
1. (1) A consumer reporting agency that acts only as a reseller of credit information by assembling and merging information contained in the database of another consumer reporting agency or multiple consumer credit reporting agencies, and does not maintain a permanent data base of credit information from which new consumer credit reports are produced; however, a consumer reporting agency acting as a reseller shall honor any security freeze placed on a consumer credit report by another consumer reporting agency;
2. (2) A check services or fraud prevention services company that issues reports on incidents of fraud or authorizations for the purpose of approving or processing negotiable instruments, electronic funds transfers, or similar methods of payments;
3. (3) A deposit account information service company that issues reports regarding account closures due to fraud, substantial overdrafts, ATM abuse, or similar negative information regarding a Tennessee consumer, to inquiring banks or other financial institutions for use only in reviewing a consumer request for a deposit account at the inquiring bank or financial institution; and
4. (4) A consumer reporting agency's database or file that consists of information concerning, and used for, one (1) or more of the following: criminal record information, fraud prevention or detection, personal loss history information, and employment, tenant, or individual background screening.
(o) Exclusive of all other private and nongovernmental remedies that may be imposed, any person who fails to comply with any requirement imposed under this section with respect to any Tennessee consumer is liable to that Tennessee consumer in an amount equal to the sum of:
1. (1)
  1. (A) Any ascertainable losses sustained by the Tennessee consumer as a result of the failure, or damages of not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000), whichever is greater, in addition to any other governmental remedies available at law; or
  2. (B) In the case of liability of a natural person for obtaining a consumer report under false pretenses without a permissible purpose, ascertainable losses sustained by the consumer as a result of the failure or one thousand dollars ($1,000), whichever is greater, in addition to any other governmental remedies available at law;
2. (2) An amount of punitive damages that the court may allow in a private right of action or other nongovernmental action; and
3. (3) In the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorneys' fees as determined by the court.
(p) Any person who obtains a consumer report, requests a security freeze, requests the temporary lift of a freeze, or the removal of a security freeze from a consumer reporting agency under false pretenses or in an attempt to violate federal or state law shall be liable to the consumer reporting agency for ascertainable losses sustained by the consumer reporting agency or one thousand dollars ($1,000), whichever is greater, in addition to any other governmental remedies available at law.
(q) In addition to any other governmental remedies available at law, any person who is negligent in failing to comply with any requirement imposed under this section with respect to any Tennessee consumer is liable to that Tennessee consumer in an amount equal to the sum of:
1. (1) Any ascertainable losses sustained by the Tennessee consumer as a result of the failure; and
2. (2) In the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorneys' fees as determined by the court.
(r) Upon a finding by the court that an unsuccessful, nongovernmental pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorneys' fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.
(s) Notwithstanding any other provision of this section, the sole power to enforce violations of subsection (f) shall be with the attorney general and reporter.

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§ 47-18-2109. Notice to consumer regarding security freeze.

At any time that a Tennessee consumer is required to receive a summary of rights required by 15 U.S.C. § 1681g(d) of the federal Fair Credit Reporting Act, the Tennessee consumer shall also be provided with the following prominent, clear and conspicuous notice in at least twelve (12) point type:
1. 1. You have a right to place a “security freeze” on your credit report, which will prohibit a consumer reporting agency from releasing information in your credit report without your express authorization. A security freeze must be requested in writing by certified mail or by electronic means as provided by a consumer reporting agency. The security freeze is designed to prevent credit, loans, and services from being approved in your name without your consent. If you are actively seeking a new credit, loan, utility, or telephone account, you should understand that the procedures involved in lifting a security freeze may slow your applications for credit. You should plan ahead and lift a freeze in advance of actually applying for new credit. When you place a security freeze on your credit report, you will be provided a personal identification number or password to use if you choose to remove the freeze on your credit report or authorize the release of your credit report for a period of time after the freeze is in place. To provide that authorization you must contact the consumer reporting agency and provide all of the following:
  2. (1) The personal identification number or password;
  3. (2) Proper identification to verify your identity; and
  4. (3) The proper information regarding the period of time for which the report shall be available.
  5. A consumer reporting agency must authorize the release of your credit report no later than fifteen (15) minutes after receiving the above information.
  6. A security freeze does not apply to a person or entity, or its affiliates, or collection agencies acting on behalf of the person or entity, with which you have an existing account, that requests information in your credit report for the purposes of fraud control, or reviewing or collecting the account. Reviewing the account includes activities related to account maintenance.
  7. You should consider filing a complaint regarding your identity theft situation with the federal trade commission and the attorney general and reporter, either in writing or via their web sites.
  8. You have a right to bring civil action against anyone, including a consumer reporting agency, who improperly obtains access to a file, misuses file data, or fails to correct inaccurate file data.

§ 47-18-2110. Protecting social security numbers from disclosure.

(a) On and after January 1, 2008, any person, nonprofit or for profit business entity in this state, including, but not limited to, any sole proprietorship, partnership, limited liability company, or corporation, engaged in any business, including, but not limited to, health care, that has obtained a federal social security number for a legitimate business or governmental purpose shall make reasonable efforts to protect that social security number from disclosure to the public. Social security numbers shall not:
1. (1) Be posted or displayed in public;
2. (2) Be required to be transmitted over the Internet, unless the Internet connection used is secure or the social security number is encrypted;
3. (3) Be required to log onto or access an Internet web site, unless used in combination with a password or other authentication device;
4. (4) Be printed on any materials mailed to a consumer, unless the disclosure is required by law, or the document is a form or application; or
5. (5) Be printed on any check, card, identification, or badge that the consumer must display or present in order to receive a benefit, good, service or other thing of value to which the consumer is entitled based upon the consumer's contract or other agreement with the entity issuing the check, card, identification, or badge.
(b) The requirements established pursuant to subsection (a) shall not apply:
1. (1) To the disclosure of a federal social security number by an entity so long as the disclosure is for a legitimate business or governmental purpose and occurs pursuant to the terms of a business or governmental contract or other lawful legal obligation; or
2. (2) If the:
  1. (A) Person gives permission, in writing;
  2. (B) Disclosure is authorized or required under state or federal law; or
  3. (C) Disclosure is made:
    1. (i) To a consumer reporting agency as defined by the federal Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.);
    2. (ii) To a financial institution subject to the privacy provisions of the federal Gramm-Leach-Bliley Act (15 U.S.C. § 6802); or
    3. (iii) To a financial institution subject to the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 (31 U.S.C. § 5311 et seq.).
(c) On and after January 1, 2009, a violation of subsection (a) is a Class B misdemeanor. Each violation of subsection (a) shall constitute a separate offense.
(d) In addition to the criminal offense created pursuant to subsections (a) and (b), on and after January 1, 2009, it is also a civil violation of this part, subject to the penalty provided in this part, for any person, any nonprofit or for profit business entity in this state, including, but not limited to, any sole proprietorship, partnership, limited liability company, or corporation, engaged in any business, including, but not limited to, health care, to violate any of the prohibitions of subsection (a).
(e) Any state agency or nonprofit or for profit business entity engaged in the provision of health care services under Title XIX, including determining eligibility for Title XIX services, shall be exempted from the requirements of subsections (a) and (b).

§ 47-18-2111. Protected consumer security freeze.

(a) As used in this section:
1. (1) “Protected consumer” means:
  1. (A) An individual who is under sixteen (16) years of age at the time a request for the placement of a security freeze under this section is made; or
  2. (B) An incapacitated person for whom a guardian or conservator has been appointed pursuant to title 34;
2. (2) “Protected consumer security freeze” means:
  1. (A) If a consumer reporting agency does not have a consumer report pertaining to the protected consumer, a restriction that:
    1. (i) Is placed on the protected consumer's record in accordance with this section; and
    2. (ii) Prohibits the consumer reporting agency from releasing the protected consumer's record except as provided in this section; or
  2. (B) If a consumer reporting agency has a consumer report pertaining to the protected consumer, a restriction that:
    1. (i) Is placed on the protected consumer's consumer report in accordance with this section; and
    2. (ii) Prohibits the consumer reporting agency from releasing the protected consumer's consumer report or any information derived from the protected consumer's consumer report except as provided in this section;
3. (3) “Record” means a compilation of information that:
  1. (A) Identifies a protected consumer;
  2. (B) Is created by a consumer reporting agency solely for the purpose of complying with this section; and
  3. (C) Shall not be created or used to consider the protected consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living;
4. (4) “Representative” means a person who provides to a consumer reporting agency sufficient proof of authority to act on behalf of a protected consumer;
5. (5) “Sufficient proof of authority”:
  1. (A) Means documentation that shows a representative has authority to act on behalf of a protected consumer; and
  2. (B) Includes:
    1. (i) An order issued by a court of law;
    2. (ii) A lawfully executed and valid power of attorney; and
    3. (iii) A written, notarized statement signed by a representative that expressly describes the authority of the representative to act on behalf of a protected consumer; and
6. (6) “Sufficient proof of identification”:
  1. (A) Means information or documentation that identifies a protected consumer or the protected consumer's representative; and
  2. (B) Includes:
    1. (i) A social security number or a copy of a social security card issued by the social security administration;
    2. (ii) A certified or official copy of a certificate of birth issued by the entity authorized to issue the certificate of birth pursuant to title 68, chapter 3, part 3;
    3. (iii) A copy of a valid driver license or any other government-issued identification; or
    4. (iv) A copy of a bill, including a bill for telephone, sewer, septic tank, water, electric, oil, or natural gas services, that shows a name and home address.
(b) This section does not apply to:
1. (1) A person administering a consumer report monitoring subscription service to which:
  1. (A) The protected consumer has subscribed; or
  2. (B) The protected consumer's representative has subscribed on behalf of the protected consumer;
2. (2) A person providing the protected consumer or the protected consumer's representative with a copy of the protected consumer's consumer report on request of the protected consumer or the protected consumer's representative;
3. (3) A consumer reporting agency that acts only as a reseller of credit information by assembling and merging information contained in the database of another consumer reporting agency or multiple consumer reporting agencies, and does not maintain a permanent database of credit information from which new consumer credit reports are produced; provided, a consumer reporting agency acting as a reseller shall honor any security freeze placed on a consumer credit report by another consumer reporting agency;
4. (4) A check services or fraud prevention services company that issues reports on incidents of fraud or authorizations for the purpose of approving or processing negotiable instruments, electronic funds transfers, or similar methods of payments;
5. (5) A deposit account information service company that issues reports regarding account closures due to fraud, substantial overdrafts, automatic teller machine abuse, or similar negative information regarding a consumer to inquiring banks or other financial institutions for use only in reviewing a consumer request for a deposit account at the inquiring bank or financial institution; or
6. (6) A consumer reporting agency database or file that consists entirely of consumer information concerning, and used solely for:
  1. (A) Criminal record information;
  2. (B) Personal loss history information;
  3. (C) Fraud prevention or detection;
  4. (D) Employment screening; or
  5. (E) Tenant screening.
(c) A consumer reporting agency shall place a protected consumer security freeze for a protected consumer if:
1. (1) The consumer reporting agency receives a request from the protected consumer's representative for the placement of the security freeze under this section; and
2. (2) The protected consumer's representative:
  1. (A) Submits the request to the consumer reporting agency at the address or other point of contact and in the manner specified by the consumer reporting agency;
  2. (B) Provides to the consumer reporting agency sufficient proof of identification of the protected consumer and the representative;
  3. (C) Provides to the consumer reporting agency sufficient proof of authority to act on behalf of the protected consumer; and
  4. (D) Pays to the consumer reporting agency a fee as provided in subsection (j).
(d) If a consumer reporting agency does not have a consumer report pertaining to a protected consumer when the consumer reporting agency receives a request under subdivision (c)(2), the consumer reporting agency shall create a record for the protected consumer.
(e) Within thirty (30) days after receiving a request that meets the requirements of subdivision (c)(2), a consumer reporting agency shall place a protected consumer security freeze.
(f) Unless a protected consumer security freeze is removed in accordance with subsection (h) or (k), a consumer reporting agency shall not release the protected consumer's consumer report, any information derived from the protected consumer's consumer report, or any record created for the protected consumer.
(g) A protected consumer security freeze placed under subsection (e) shall remain in effect until:
1. (1) The protected consumer or the representative requests the consumer reporting agency to remove the protected consumer security freeze in accordance with subsection (h); or
2. (2) The protected consumer security freeze is removed in accordance with subsection (k).
(h) If a protected consumer or the representative wishes to remove a protected consumer security freeze, the protected consumer or the representative shall:
1. (1) Submit a request for the removal of the protected consumer security freeze to the consumer reporting agency at the address or other point of contact and in the manner specified by the consumer reporting agency;
2. (2) Provide to the consumer reporting agency:
  1. (A) In the case of a request by the protected consumer:
    1. (i) Proof that the sufficient proof of authority for the representative to act on behalf of the protected consumer is no longer valid; and
    2. (ii) Sufficient proof of identification of the protected consumer; or
  2. (B) In the case of a request by the representative:
    1. (i) Sufficient proof of identification of the protected consumer and the representative; and
    2. (ii) Sufficient proof of authority to act on behalf of the protected consumer; and
3. (3) Pay to the consumer reporting agency a fee as provided in subsection (j).
(i) Within thirty (30) days after receiving a request that meets the requirements of subsection (h), the consumer reporting agency shall remove the protected consumer security freeze.
(j)
1. (1) Except as provided in subdivision (j)(2), a consumer reporting agency shall not charge any fee for any service performed under this section.
2. (2) A consumer reporting agency may charge a reasonable fee, not exceeding ten dollars ($10.00), for each placement or removal of a protected consumer security freeze.
3. (3) Notwithstanding subdivision (j)(2), a consumer reporting agency shall not charge any fee under this section if:
  1. (A) The protected consumer's representative:
    1. (i) Has obtained a police report of alleged identity fraud as described in § 39-14-150, and the protected consumer is the alleged victim; and
    2. (ii) Provides a copy of the police report to the consumer reporting agency; or
  2. (B) A request for the placement or removal of a protected consumer security freeze is for a protected consumer who is under sixteen (16) years of age at the time of the request and the consumer reporting agency has a consumer report pertaining to the protected consumer.
(k) A consumer reporting agency may remove a protected consumer security freeze or delete a record of a protected consumer if the protected consumer security freeze was placed, or the record was created, based on a material misrepresentation of fact by the protected consumer or the representative.
(l) If a consumer reporting agency negligently violates subsection (f) by releasing credit information that has been placed under a protected consumer security freeze, the affected protected consumer and representative shall be entitled to all remedies set out in § 47-18-2108 in addition to any other remedies provided for by law.
(m) [Deleted by 2019 amendment.]
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- 68-3-314(1)
- 68-3-314(2)
(n) With regard to security freezes as described in this section, this section supersedes § 47-18-2108.

Part 22 Video Consumer Privacy

§ 47-18-2201. Short title.

This part shall be known and may be cited as the “Video Consumer Privacy Act.”

§ 47-18-2202. Legislature findings and intent.

(a) The general assembly finds and declares that the viewing of rented video tapes and movies in the home is a popular and widespread leisure pastime. Innumerable retail establishments in this state commonly record, often by computer, data containing the identities of consumers who have rented video tapes and movies and the titles of the videos rented.
(b) It is the intent of the general assembly by enactment of this part to protect the personal privacy of individuals and their families who rent video cassette tapes and movies and similar audio visual materials, without unreasonably restricting the ability of video tape service providers to collect and use information as is necessary to conducting their business.

§ 47-18-2203. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Consumer” means any renter, purchaser, or subscriber of goods or services from a video tape service provider or video tape seller;
2. (2) “Informed, written consent of the consumer” means that the video tape service provider, prior to furnishing any video tape services, shall offer the consumer an opportunity to elect not to have personally identifiable information disclosed. Such notice shall be in writing in at least ten point (10 pt.) bold face type, affixed to any membership, subscriber or rental agreement between the consumer and the video tape service provider, and shall be posted on a sign in full and clear view of the consumer at the point of rental transaction, and shall read as follows:
  1. “This video tape service provider from time to time provides to marketers of goods and services, the names and addresses of customers and a description or subject matter of materials rented by video customers. You have the right to elect not to have your name, address or the description or subject matter of any material rented included in such description or subject matter of any material rented included in such lists. This election may be changed by you, in writing, at any time.”;
3. (3) “Ordinary course of business” means only debt collection activities, order fulfillment, request processing, and the transfer of ownership;
4. (4) “Personally identifiable information” means any information which identifies a person as having requested or obtained specific video materials or services from a video tape service provider or video tape seller;
5. (5) “Video tape seller” means any person engaged in the business of selling prerecorded video cassette tapes or similar audio visual materials; and
6. (6) “Video tape service provider” means any person engaged in the business of rental of prerecorded video cassette tapes or similar audio visual materials.

§ 47-18-2204. Disclosure by seller or service provider of personally identifiable information concerning consumers.

(a) A video tape seller or service provider who knowingly discloses, to any person, personally identifiable information concerning any consumer of such provider shall be liable to the aggrieved person for the relief provided in § 47-18-2205.
(b)
1. (1) A video tape seller or service provider shall disclose personally identifiable information concerning any consumer:
  1. (A) To a grand jury pursuant to a grand jury subpoena;
  2. (B) Pursuant to a court order, in a civil proceeding upon a showing of compelling need for the information that cannot be accommodated by any other means, or in a criminal proceeding upon a showing of legitimate need for the information that cannot be accommodated by any other means, if:
    1. (i) The consumer is given reasonable notice, by the person seeking the disclosure, of the court proceeding relevant to the issuance of the court order;
    2. (ii) The consumer is afforded the opportunity to appear and contest the claim of the person seeking the disclosure; and
    3. (iii) The court imposes appropriate safeguards against unauthorized disclosure;
  3. (C) To a law enforcement agency pursuant to a warrant lawfully obtained under the laws of this state or the United States; or
  4. (D) To a court pursuant to a civil action commenced by the video tape seller or service provider or to enforce collection of fines for overdue or unreturned video tapes, and then only to the extent necessary to establish the fact of the rental. Notwithstanding the foregoing, a court shall impose appropriate safeguards against unauthorized disclosure.
2. (2) In addition, if the consumer is a minor under eighteen (18) years of age, a video tape seller or service provider shall disclose to the minor's parent or legal guardian personally identifiable information concerning the minor upon receiving a request from the parent or legal guardian for such information.
(c) A video tape service seller or provider may disclose personally identifiable information concerning any consumer to:
1. (1) The consumer;
2. (2) Any person with the informed, written consent of the consumer; or
3. (3) Any person if the disclosure is incidental to the ordinary course of business of the video tape service provider or seller; and
4. (4) Any person if the disclosure is for the exclusive use of marketing goods and services directly to the consumer, and the video tape service seller or provider has provided the consumer with the opportunity, in a clear and conspicuous manner, to prohibit such disclosure.
(d) Personally identifiable information obtained in any manner other than as provided in this section shall not be received in evidence in any trial, hearing, arbitration, or other proceeding in or before any court, grand jury, department, officer, agency, regulatory body, legislative committee or other authority of the state or any political subdivision thereof.
(e) A person subject to this section shall destroy personally identifiable information as soon as practicable, but no later than one (1) year from the date the information is no longer necessary for the purpose for which it was collected unless a request or order for access to such information under this part is pending.

§ 47-18-2205. Liability for damages.

Any person found to be in violation of this part shall be liable to the aggrieved consumer for all actual damages sustained by such consumer as a result of the violation.

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47-18-2204(a)

Part 23 Caller Identification Spoofing

§ 47-18-2301. Part definitions.

As used in this part:
1. (1) “Automatic number identification”:
  1. (A) Means a system that identifies the billing account for a call; and
  2. (B) Includes an enhanced 911 service capability that enables the automatic display of the ten-digit number used to place a 911 call from a wire line, wireless, interconnected VoIP, or nontraditional telephone service;
2. (2) “Caller identification information” means information provided by a caller identification service regarding the telephone number, or other origination information, of a call or facsimile transmission made using a telecommunications service or an interconnected VoIP service, or of a text message sent using a text messaging service;
3. (3) “Caller identification service”:
  1. (A) Means any service or device designed to provide the user of the service or device with the telephone number, or other origination information, of a call or facsimile transmission made using a telecommunications service or an interconnected VoIP service, or of a text message sent using a text messaging service; and
  2. (B) Includes automatic number identification services;
4. (4) “Interconnected VoIP service” means an interconnected voice over internet protocol service that:
  1. (A) Enables real-time, two-way voice communications;
  2. (B) Requires a broadband internet connection from the user's location;
  3. (C) Requires Internet protocol-compatible customer premises equipment; and
  4. (D) Permits users generally to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network;
5. (5) “Place of primary use” means the street address where a subscriber's use of a telecommunications service or interconnected VoIP service primarily occurs, which shall be:
  1. (A) The residential street address or the primary business street address of the subscriber or, in the case of a subscriber of interconnected VoIP service, the subscriber's registered location; and
  2. (B) Within the licensed service area of the provider;
6. (6) “Provider” means a person or entity that offers telecommunications service or interconnected VoIP service;
7. (7) “Registered location” means the most recent information obtained by an interconnected VoIP service provider that identifies the physical location of an end user;
8. (8) “Subscriber” means a person:
  1. (A) Who subscribes to a caller identification service in connection with a telecommunications service or an interconnected VoIP service; and
  2. (B) Whose place of primary use for the service described in subdivision (8)(A) is located in this state;
9. (9) “Telecommunications service” means the offering of telecommunications for a fee directly to the public, or to classes of users so as to be effectively available directly to the public, regardless of the facilities used;
10. (10) “Text message”:
  1. (A) Means a real-time or near real-time message consisting of text, images, sounds, or other information that is transmitted from or received by a device that is identified as the transmitting or receiving device by means of a telephone number;
  2. (B) Includes a short message service (SMS) message, an enhanced message service (EMS) message, and a multimedia message service (MMS) message; and
  3. (C) Does not include a real-time, two-way voice or video communication; and
11. (11) “Text messaging service” means a service that permits the transmission or receipt of a text message, including a service provided as part of or in connection with a telecommunications service or an interconnected VoIP service.

§ 47-18-2302. Offense of caller identification spoofing.

(a) Except as provided in § 47-18-2303, it is an offense for a person, in connection with a telecommunications service or an interconnected VoIP service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information to a subscriber with the intent to defraud or cause harm to another person or to wrongfully obtain anything of value.
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(b) A violation of subsection (a) is a Class A misdemeanor.
(c) Nothing in this section prohibits:
1. (1) Criminal prosecution under any other law;
2. (2) A civil action brought by the attorney general and reporter pursuant to § 47-18-2304; or
3. (3) A civil action brought by an aggrieved person pursuant to § 47-18-2305.
(d) The transmission of misleading or inaccurate caller identification information to a subscriber is an element of the offense under subsection (a) and occurs where the subscriber's place of primary use for the caller identification service is located.
(e) Pursuant to § 39-11-103 and subsection (d), if a subscriber's place of primary use for the caller identification service is located in this state, an essential element of the offense under subsection (a) is committed in this state and a defendant is subject to prosecution in this state, regardless of whether the defendant was actually physically present in this state when the offense occurred.
(f) Venue for the offense under subsection (a) shall be in any county where an essential element of the offense was committed, regardless of whether the defendant was actually physically present in the county when the offense occurred.
(g) This section shall not apply to a provider; except that, a provider shall remain liable pursuant to this section if the provider acts with the intent to assist, aid, or abet, in the commission or concealment of any person planning or causing a caller identification service to transmit misleading or inaccurate caller identification information to a subscriber while the person has the intent to defraud, cause harm to another person, or wrongfully obtain anything of value.

§ 47-18-2303. Acts not prohibited or restricted.

This part does not prohibit or restrict any of the following:
1. (1) Subject to § 65-4-403, blocking the capability of a caller identification service to transmit caller identification information;
2. (2) Any authorized law enforcement activity;
3. (3) Any lawfully authorized investigative, protective, or intelligence activity of:
  1. (A) The United States or an intelligence agency of the United States;
  2. (B) This state or any political subdivision of this state; or
  3. (C) Any other state or a political subdivision of that state;
4. (4) A court order that specifically authorizes the use of caller identification manipulation; or
5. (5) The right of the attorney general and reporter to bring a civil action under 47 U.S.C. § 227(e)(6) to enforce the federal Truth in Caller ID Act of 2009 (47 U.S.C. § 227).

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47-18-2302(a)

§ 47-18-2304. Action for injunctive relief and civil penalty by attorney general and reporter.

(a) The attorney general and reporter may bring an action against a person who violates § 47-18-2302(a) to enjoin further violations and to recover a civil penalty of up to thirty thousand dollars ($30,000) per violation.
(b)
1. (1) Any civil penalty collected pursuant to this section shall be paid into the general fund of the state.
2. (2) The prevailing party is entitled to reasonable attorney's fees, court costs, and expenses; provided, that no court costs shall be taxed against the attorney general and reporter or this state in actions commenced under this section.
(c) Jurisdiction for an action brought pursuant to this section shall be in the chancery or circuit court of Davidson County.

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47-18-2302(c)(2)

§ 47-18-2305. Private action for injunctive relief and damages.

(a) Except as provided in subsection (d), any person who is aggrieved by a violation of § 47-18-2302(a) may bring an action to enjoin further violations and for the recovery of the person's actual damages and actual expenses incurred, including court costs and attorney's fees, against any person who is responsible for or knowingly participated in the violation. The injunctive relief available under this subsection (a) is in addition to any damages to which a person may be entitled.
(b) If the court finds that the violation of § 47-18-2302(a) was an intentional violation, or that the defendant has engaged in a pattern and practice of violations, the court may award three (3) times the actual damages sustained.
(c) The action may be brought in the chancery or circuit court of Davidson County or in a court of competent jurisdiction where the alleged violation of § 47-18-2302(a) took place.
(d) A person does not have a cause of action against a provider for a violation of § 47-18-2302(a) unless the violation resulted from the provider's gross negligence or intentional wrongdoing.

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47-18-2302(c)(3)

Part 24 Unsolicited Loans

§ 47-18-2401. Notice requirements for unsolicited loans.

Unless otherwise agreed, where unsolicited mail that resembles a check is, upon endorsement by the payee, a loan, the payee is under no duty to repay such loan unless such unsolicited mail has upon its face in boldface letters at least one-half inch (½″) in height the following:
THIS IS A LOAN.

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47-18-2402

§ 47-18-2402. Failure to provide notice a defense to collection action.

In any action for the collection of the balance due on an unsolicited loan received by mail that resembles a check, it shall be a complete defense that such unsolicited loan was not actually requested by the defendant and such mail did not have upon its face the language required by § 47-18-2401.

§ 47-18-2403. Violation of part constituting unfair or deceptive trade practice.

A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter. For the purposes of the application of the Tennessee Consumer Protection Act of 1977, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of any trade or commerce and shall be subject to the penalties and remedies as provided in that act.

§ 47-18-2404. Notices and obligations — Application — Damages.

(a)
1. (1) Any solicitation to lend money to a person for the consolidation or payment of other indebtedness which will result in that person's owner-occupied residence becoming collateral or security for the loan or payment of money shall clearly state, in bold face type at least as large as any used in the solicitation otherwise, or by a separate clearly stated written notice, in bold face type at least ten (10) points, the following:
  1. (A) Failure to make timely payments or to repay the loan will result in the borrower's home being subject to foreclosure; and
  2. (B) [Deleted by 2019 amendment.]
2. (2) Such solicitation shall, in like manner, state either one (1) of the following, as appropriate:
  1. (A) It is the obligation of the lender to make payments to prior lenders; or
  2. (B) It is the obligation of the borrower to make payments to prior lenders.
(b) This section shall apply to all solicitations, whether made through the mails, in person, by telephone, fax, or electronically, or through any other agency or medium to a resident of the state. If the solicitation is made in person or by telephone, then the person making the solicitation shall clearly express the notices and obligations required to be given under subdivisions (a)(1) and (2).
(c) Failure to comply with this section shall subject the lender to damages up to three (3) times the amount of actual damages pursuant to § 47-18-109.
(d) The notices and obligations described in subsection (a) shall be clearly expressed in any debt consolidation contract or loan agreement consolidating such loans, in bold face type of at least ten (10) points, in immediate proximity to the space reserved for the signature of the borrower.
(e) This section shall not apply to any state or national bank, credit union, savings and loan, or to any subsidiary or affiliate of any such state or national bank, credit union, savings and loan or any person or entity licensed by or subject to regulation by the department of financial institutions.

Part 25 Unsolicited Advertising by Electronic Means

§ 47-18-2501. Regulation of unsolicited electronic advertising — Falsification of electronic mail transmission information prohibited — Institution of actions and damages.

(a) No person or entity conducting business in this state shall send by e-mail or cause to be e-mailed, documents consisting of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit unless that person or entity shall establish a toll-free telephone number or return e-mail address that a recipient of the unsolicited e-mailed documents may call to notify the sender not to e-mail the recipient any further unsolicited documents.
(b) Upon notification by a recipient of the recipient's request not to receive any further unsolicited e-mailed documents, no person or entity conducting business in this state shall e-mail or cause to be e-mailed, any unsolicited documents to that recipient.
(c) A person or entity sending an unsolicited email shall establish a toll-free telephone number or valid sender operated return e-mail address that the recipient of the unsolicited documents may call or e-mail to notify the sender not to e-mail any further unsolicited documents.
(d) If e-mail that consists of unsolicited advertising material for the lease, sale, rental, gift offer or other disposition of any realty, goods, services or extension of credit, the subject line of each and every message shall include “ADV:” as the first four (4) characters. If these messages contain information that consists of unsolicited advertising material for the lease, sale, rental, gift offer, or other disposition of any realty, goods, services, or extension of credit, that may only be viewed, purchased, rented, leased, or held in possession by an individual eighteen (18) years of age or older, the subject line of each and every message shall include “ADV:ADLT” as the first eight (8) characters.
(e) In the case of unsolicited bulk e-mail, this section shall apply when the unsolicited e-mailed documents are delivered to a Tennessee resident via an electronic mail service provider's service or equipment located in this state. For these purposes, “electronic mail service provider” means any business or organization qualified to do business in this state that provides individuals, corporations, or other entities the ability to send or receive electronic mail through equipment located in this state and that is an intermediary in sending or receiving electronic mail.
(f) It is unlawful for any person to sell, give or otherwise distribute or possess with the intent to sell, give or distribute software which:
1. (1) Is primarily designed or produced for the purpose of facilitating or enabling the falsification of electronic mail transmission information or other routing information;
2. (2) Has only limited commercially significant purpose or use other than to facilitate or enable the falsification of electronic mail transmission information or other routing information; or
3. (3) Is marketed by that person or another acting in concert with that person with that person's knowledge for use in facilitating or enabling the falsification of electronic mail transmission information or other routing information.
(g) As used in this section, “e-mail” or “cause to be e-mailed” does not include or refer to the transmission of any documents by the telecommunications utility or Internet service provider to the extent that the telecommunications utility or Internet service provider merely carries that transmission over its network.
(h)
1. (1) Any person whose property or person is injured by reason of a violation of any provision of this section may sue therefor and recover for any damages sustained, and the costs of such suit. Without limiting the generality of the term, “damages” includes loss of profits.
2. (2) If the injury arises from the transmission of unsolicited bulk electronic mail, the injured person, other than an electronic mail service provider, may also recover attorneys' fees and costs, and may elect, in lieu of actual damages, to recover the lesser of ten dollars ($10.00) for each and every unsolicited bulk electronic mail message transmitted in violation of this section, or five thousand dollars ($5,000) per day. The injured person shall not have a cause of action against the electronic mail service provider that merely transmitted the unsolicited bulk electronic mail over its computer network.
3. (3) If the injury arises from the transmission of unsolicited bulk electronic mail, an injured electronic mail service provider may also recover attorneys' fees and costs, and may elect, in lieu of actual damages, to recover the greater of ten dollars ($10.00) for each and every unsolicited bulk electronic mail message transmitted in violation of this section, or five thousand dollars ($5,000) per day.
4. (4) At the request of any party to an action brought pursuant to this section, the court may, in its discretion, conduct all legal proceedings in such a way as to protect the secrecy and security of the computer, computer network, computer data, computer program and computer software involved in order to prevent possible recurrence of the same or a similar act by another person and to protect any trade secrets of any party.
5. (5) This subsection (h) shall not be construed to limit any person's right to pursue any additional civil remedy otherwise allowed by law.
(i) This section shall not be construed to restrict or apply to constitutionally protected communications to and from citizens and their elected representatives.
(j) This section, or any part of this section, shall become inoperative on and after the date that federal law is enacted that prohibits or otherwise regulates the transmission of unsolicited advertising by electronic mail (e-mail).

§ 47-18-2502. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Computer network” means a set of related, remotely connected devices and any communications facilities, including more than one (1) computer with the capability to transmit data among them through the communications facilities; and
2. (2) “Without authority” means a person using the computer network of an electronic mail service provider to transmit unsolicited bulk electronic mail in contravention of the authority granted by or in violation of the policies set by the electronic mail service provider. Transmission of electronic mail from an organization to its members shall not be deemed to be unsolicited bulk electronic mail.

Part 26 Structured Settlement Protection

§ 47-18-2601. Short title.

This part shall be known and may be cited as the “Structured Settlement Protection Act.”

§ 47-18-2602. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Annuity insurer” means an insurer that has issued an insurance policy or annuity contract used to fund periodic payments under a structured settlement;
2. (2) “Applicable law” means state or federal statutes of the United States;
3. (3) “Dependents” includes a payee's spouse and minor children and all other family members and other persons for whom the payee is legally obligated to provide support, including alimony;
4. (4) “Discounted present value” means the present value of future payments, as determined by discounting such payments to the present using the most recently published applicable federal rate for determining the present value of an annuity, as issued by the internal revenue service, and the present value of the payments to be transferred by the payee using the actual discount rate applied to the transfer, stated as an annual percentage rate;
5. (5) “Independent professional advice” means advice of an attorney, certified public accountant, actuary or other licensed professional adviser;
6. (6) “Interested parties” means, with respect to any structured settlement, the payee, the annuity issuer, the structured settlement obligor, and any other party to the structured settlement that has continuing rights or obligations to receive or make payments under such structured settlement;
7. (7) “Payee” means an individual who is receiving tax-free damage payments under a structured settlement and proposes to make a transfer of payment rights thereunder;
8. (8) “Qualified assignment agreement” means an agreement providing for a qualified assignment within the meaning of 26 U.S.C. § 130, as amended from time to time;
9. (9) “Responsible administrative authority” means, with respect to a structured settlement, any government authority vested by law with exclusive jurisdiction over the settled claim resolved by such structured settlement;
10. (10) “Settled claim” means the original tort claim;
11. (11) “Structured settlement” means an arrangement for periodic payment of damages for personal injuries established by settlement or judgment in resolution of a tort claim;
12. (12) “Structured settlement agreement” means the agreement, judgment, stipulation, or release embodying the terms of a structured settlement, including the rights of the payee to receive periodic payments;
13. (13) “Structured settlement obligor” means, with respect to any structured settlement, the party that has the continuing periodic payment obligation to the payee under a structured settlement agreement or a qualified assignment agreement;
14. (14) “Structured settlement payment rights” means rights to receive periodic payments (including lump sum payments) under a structured settlement, whether from the settlement obligor or the annuity issuer where:
  1. (A) The payee is domiciled in this state;
  2. (B) The structured settlement agreement was approved by a court or responsible administrative authority in this state; or
  3. (C) The structured settlement agreement is governed by the laws of this state;
15. (15) “Terms of the structured settlement” includes, with respect to any structured settlement, the terms of the structured settlement agreement, the annuity contract, any qualified assignment agreement and any order or approval of any court or responsible administrative authority or other government authority authorizing or approving such structured settlement;
16. (16) “Transfer” means any sale, assignment, pledge, hypothecation, commutation, advance or other form of alienation or encumbrance made by a payee for consideration; and
17. (17) “Transfer agreement” means the agreement providing for transfer of structured settlement payment rights from a payee to a transferee.

§ 47-18-2603. Transfer agreement — Requirements.

No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction or a responsible administrative authority, and complies with all of the following:
1. (1) The transfer complies with the requirements of this part and will not contravene other applicable law;
2. (2) Not less than ten (10) days prior to the date on which the payee executes the transfer agreement, the transferee has provided to the payee a disclosure statement in bold type, no smaller than fourteen (14) points, setting forth:
  1. (A) The amounts and due dates of the structured settlement payments to be transferred;
  2. (B) The aggregate amount of such payments;
  3. (C) The discounted present value of such payments, together with the discount rate used in determining such discounted present value;
  4. (D) The gross amount payable to the payee in exchange for such payments;
  5. (E) An itemized listing of all brokers' commissions, service charges, application fees, processing fees, closing costs, filing fees, administrative fees, notary fees and other commissions, fees, costs, expenses and charges, and a good faith estimate of all legal fees and court costs payable by the payee or deductible from the gross amount otherwise payable to the payee;
  6. (F) The net amount payable to the payee after deduction of all commissions, fees, costs, expenses and charges described in subdivision (2)(E); and
  7. (G) The amount of any penalty and the aggregate amount of any liquidated damages (inclusive of penalties) payable by the payee in the event of any breach of the transfer agreement by the payee;
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  - 47-18-2604(b)(3)
3. (3) The payee has established that the transfer is fair and reasonable and in the best interest of the payee;
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  - 47-18-2604(c)
4. (4) The payee has been advised by the transferee, in writing, to seek independent professional advice regarding the financial, legal and tax implications of the transfer; and
5. (5) The transferee has given written notice of the transferee's name, address and taxpayer identification number to the annuity issuer and the structured settlement obligor and has filed a copy of such notice with the court or responsible administrative authority.

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§ 47-18-2604. Circuit court jurisdiction — Requirements for notice — Best interest standard — Fees.

(a)
1. (1) The circuit court shall have nonexclusive jurisdiction over any approval of a transfer of structured settlement payment rights.
2. (2) An application under this part for approval of transfer of structured settlement payment rights shall be made by the transferee and may be brought:
  1. (A) In the county in which the payee resides or where the settlement was approved or judgment rendered in the underlying tort claim; or
  2. (B) In any court or before any responsible administrative authority that approved the structured settlement agreement.
3. (3)
  1. (A) Upon the filing of an application of approval of a transfer of structured settlement payment rights, any interested party may request a hearing. If a hearing is requested, the court shall conduct a hearing within sixty (60) days from such request.
  2. (B) The payee shall appear in person at the hearing, unless the court determines upon the motion of an interested party that good cause exists to excuse the payee from the hearing.
(b) Not less than twenty (20) days prior to the scheduled hearing on any application for authorization of a transfer of structured settlement payment rights under § 47-18-2603, the transferee shall file with the court or responsible administrative authority and serve on any other government authority which previously approved the structured settlement, and on all interested parties, a notice of the proposed transfer and the application for its authorization, including in such notice:
1. (1) A copy of the transferee's application;
2. (2) A copy of the transfer agreement;
3. (3) A copy of the disclosure statement required under § 47-18-2603(2);
4. (4) Notification that any interested party is entitled to support, oppose or otherwise respond to the transferee's application, either in person or by counsel, by submitting written comments to the court or responsible administrative authority or by participating in the hearing;
5. (5) Notification of the time and place of the hearing and notification of the manner in which and the time by which written responses to the application must be filed (which shall be not less than fifteen (15) days after service of the transferee's notice) in order to be considered by the court or responsible administrative authority; and
6. (6) A sworn statement detailing whether there have been any requested, proposed, or approved transfers of the structured settlement payment rights prior to the instant filing.
(c) In determining whether the transfer is in the payee's best interest under § 47-18-2603(3), the court should consider:
1. (1) The terms of the transfer;
2. (2) Whether the payee has other sources of income, other than the structured settlement payment rights to be transferred;
3. (3) The effect of the transfer, if any, on the payee's dependents and whether the transfer would be likely to result in financial hardship for such dependents; and
4. (4) If a payee is currently required by a court order, judgment, or decree to pay child support or alimony, the effect of the transfer on the payee's ability to continue to pay such support or alimony.
(d) The structured settlement obligor and annuity issuer shall, as to all parties except the transferee, be discharged and released from any and all liability for the transferred payments.
(e) The transferee and any assignee shall be liable to the structured settlement obligor and the annuity issuer for any and all taxes and other costs and liabilities, other than costs incurred in opposing the transfer, incurred as a result of complying with the court order approving the transfer.
(f) Neither the annuity issuer nor the structured settlement obligor may be required to divide any structured settlement payment between the payee and any transferee or assignee or between two (2) or more transferees or assignees.
(g) If any party acting in bad faith withholds consent to the transfer, the court may, in its discretion, award the prevailing party reasonable attorney fees and costs.

§ 47-18-2605. Waiver — Failure to satisfy conditions.

(a) The provisions of this part may not be waived.
(b) No payee who proposes to make a transfer of structured settlement payment rights shall incur any penalty, forfeit any application fee or other payment, or otherwise incur any liability to the proposed transferee based on any failure of such transfer to satisfy the conditions of § 47-18-2603.

§ 47-18-2606. Other statutory provisions remain valid.

Nothing contained in this part shall be construed to authorize any transfer of structured settlement payment rights in contravention of applicable law or to give effect to any transfer of structured settlement payment rights that is invalid under applicable law.

§ 47-18-2607. Applicability.

This part shall apply to any transfer of structured settlement payment rights under a transfer agreement entered into on or after June 23, 2000; provided, that nothing contained herein shall imply that any transfer under a transfer agreement reached prior to June 23, 2000 is ineffective.

Part 27 Health-Related Cash Discounts

§ 47-18-2701. Prohibited activities.

It shall be unlawful and a violation of this part for any person to sell, market, promote, advertise or otherwise distribute any card or other purchasing mechanism or device, which is not insurance, that purports to offer discounts or access to discounts from health care providers in health-related purchases where:
1. (1) Such card or other purchasing mechanism or device does not expressly provide in bold and prominent type that the discounts are not insurance;
2. (2) Such discounts are not specifically authorized in a contract with each health care provider listed in conjunction with the card or other purchasing mechanism or device; or
3. (3) The discounts or access to discounts offered or the range of discounts or access to the range of discounts offered are misleading, deceptive or fraudulent, regardless of the literal wording used.

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56-17-102(b)

§ 47-18-2702. Jurisdiction.

(a) Any person subject to liability under this part shall be deemed, as a matter of law, to have purposefully availed themselves of the privileges of conducting activities within Tennessee, sufficient to subject the person to the personal jurisdiction of the circuit or chancery court hearing an action brought pursuant to this part.
(b) An action for violation of this part may be brought:
1. (1) In the county where the plaintiff resides;
2. (2) In the county where the plaintiff conducts business; or
3. (3) In the county where the card or other purchasing mechanism or device was sold, marketed, promoted, advertised or otherwise distributed.
(c)
1. (1) If, in such action, the court shall find that the defendant is violating or has violated any of the provisions of this part, it shall enjoin the defendant from a continuance thereof.
2. (2) In addition to injunctive relief, the plaintiff in the action shall be entitled to recover from the defendant one hundred dollars ($100) per card or other purchasing mechanism or device sold, marketed, promoted, advertised or otherwise distributed within Tennessee, or ten thousand dollars ($10,000), whichever is greater.
(d) The remedies prescribed in this section are cumulative and in addition to the remedies prescribed in the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter and any other applicable criminal, civil or administrative penalties.

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56-17-102(b)

§ 47-18-2703. Application.

Nothing in this part shall be construed to apply to:
1. (1) Eye or vision care services, glasses or contact lenses provided by an optometrist or ophthalmologist; or
2. (2) Discount cards provided to members of a nonprofit association as an incidental benefit to membership in the association; provided, that membership in such association entitles members to apply for insurance that is available only to members of the association.

§ 47-18-2704. Compliance by issuers.

Any person subject to liability under this part shall be required to issue cards complying with the provisions of this section on July 1, 2001, or upon the issuance of a renewed card before July 1, 2002, whichever is later.

Part 28 Price-Gouging of Vaccines and Inoculations during Medical Emergencies

§ 47-18-2801. Public policy.

Price gouging of vaccines and inoculations during a medical emergency is contrary to the public policy of the state of Tennessee.

§ 47-18-2802. Prohibited acts during medical emergency — Defenses.

(a) Upon the proclamation of a medical emergency by the commissioner of health and continuing until such emergency is terminated, it is unlawful, for any person, including, but not limited to, a distributor, supplier, hospital, clinic, pharmacy or other health care provider, to charge any other person a price for a vaccine or inoculation that is grossly in excess of the price generally charged for the same or similar vaccine or inoculation in the usual course of business in the year prior to the year of the proclaimed medical emergency.
(b) It is an affirmative defense to prosecution under this part, which must be proven by a preponderance of the evidence, that such price increase was directly attributable to:
1. (1) Additional costs for labor or materials used to produce or provide the vaccine or inoculation; or
2. (2) Additional costs imposed on a hospital, clinic, pharmacy or other health care provider by a manufacturer, distributor or supplier of the vaccine.
(c) A medical emergency shall be terminated by proclamation of the commissioner of health when, in the discretion of the commissioner, the medical emergency has ended.

§ 47-18-2803. Violations.

A violation of this part, or any rules and regulations promulgated under this part, constitutes an unfair or deceptive act or practice under § 47-18-104(a). A civil action for violation of this part may be brought under part 1 of this chapter.

§ 47-18-2804. Provisions of part supplemental.

This part is intended to be in addition to and supplemental to part 51 of this chapter.

§ 47-18-2805. Rules and regulations.

The commissioner of health is authorized to promulgate rules and regulations to effectuate this part. All such rules and regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Part 29 Protection of Confidential Information

§ 47-18-2901. Safeguards and procedures for ensuring that confidential information protected on laptop computers and other removable storage devices — Claim for damages.

(a) Each state agency shall create safeguards and procedures for ensuring that confidential information regarding citizens is securely protected on all laptop computers and other removable storage devices used by the state agency.
(b) All municipalities and counties shall create safeguards and procedures for ensuring that confidential information regarding citizens is securely protected on all laptop computers and other removable storage devices used by the municipality or county.
(c) Notwithstanding any other law to the contrary, failure to comply with this section shall create a cause of action or claim for damages against the state, municipality, or county if a citizen of this state proves by clear and convincing evidence that the citizen was a victim of identity theft due to a failure to provide safeguards and procedures regarding that citizen's confidential information.

Part 30 Protected Health Information

§ 47-18-3001. Part definitions.

As used in this part:
1. (1) “Legal advertisement” means a solicitation of legal services through television; radio; internet, including a domain name; newspaper or other periodical; outdoor display; or other written, electronic, or recorded communication;
2. (2) “Person” means an individual or legal entity that advertises legal services or that identifies potential clients for attorneys or law firms;
3. (3) “Protected health information” has the meaning given that term in 45 C.F.R. § 160.103; and
4. (4) “Solicit” means offering to provide legal services by print; video or audio recording; or electronic communication or by personal, telephone, or real-time electronic contact.

§ 47-18-3002. Prohibitions on legal advertisement.

(a) A person shall not do any of the following in a legal advertisement:
1. (1) Fail to disclose at the beginning of any recorded advertisement or display in a conspicuous location on any printed or electronic written legal advertisement that the legal advertisement is a paid advertisement for legal services;
2. (2) Present a legal advertisement as a “medical alert,” “health alert,” “consumer alert,” “public service announcement,” or other similar language;
3. (3) Display the logo of a federal or state government agency in a manner that suggests an affiliation with or the sponsorship by that agency;
4. (4) Use the word “recall” to refer to a product that has not been recalled by a government agency or through an agreement between a manufacturer and government agency;
5. (5) Fail to identify the person responsible for the legal advertisement; or
6. (6) Fail to identify the attorney or law firm that will represent clients, or to disclose that cases may be referred to another attorney or law firm to represent clients if the sponsor of the legal advertisement does not represent persons responding to the legal advertisement.
(b) A person shall not use a legal advertisement to solicit clients who may allege an injury from a prescription drug or medical device approved, cleared, or the subject of a drug monograph authorized by the United States food and drug administration unless the legal advertisement also includes the information required in this section.
(c) A legal advertisement soliciting clients who may allege an injury from a prescription drug approved, cleared, or the subject of a drug monograph authorized by the United States food and drug administration must:
1. (1) Include the following warning: “Do not stop taking a prescribed medication without first consulting with your doctor. Discontinuing a prescribed medication without your doctor's advice can result in injury or death.”; and
2. (2) Disclose that the drug or medical device remains approved by the United States food and drug administration, unless the product has been recalled by a government agency or through an agreement between a manufacturer and government agency.

§ 47-18-3003. Prohibited uses of protected health information for purpose of soliciting individual for legal services.

(a) A person shall not use, cause to be used, obtain, sell, transfer, or disclose protected health information to another person for the purpose of soliciting an individual for legal services without written authorization from the individual who is the subject of the information.
(b) In addition to any other remedy provided by law:
1. (1) A person who willfully and knowingly uses, causes to be used, obtains, sells, transfers, or discloses protected health information in violation of this section commits a Class A misdemeanor, punishable by a fine of one thousand dollars ($1,000), imprisonment, or both; and
2. (2) A person who violates this section with the intent to use, cause to be used, obtain, sell, transfer, or disclose protected health information for the purpose of financial gain commits a Class C felony, punishable by a fine not to exceed two hundred fifty thousand dollars ($250,000), imprisonment of not less than three (3) years nor more than ten (10) years, or both.
(c) This section does not apply to the use or disclosure of protected health information to an individual's legal representative in the course of any judicial or administrative proceeding, or as otherwise permitted or required by law.

§ 47-18-3004. Requirements for words and statements and disclosures.

(a) Any words or statements required by this section to appear in a legal advertisement must be presented clearly and conspicuously.
(b) Written disclosures must be clearly legible and, if televised or displayed electronically, displayed for a sufficient time to enable a viewer to easily see and fully read the disclosure.
(c) Spoken disclosures must be plainly audible and clearly intelligible.

§ 47-18-3005. Violations — Investigative and enforcement authority.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter. Any violation of this part constitutes an unfair or deceptive act or practice affecting trade or commerce and is subject to the penalties and remedies as provided in the Tennessee Consumer Protection Act of 1977, in addition to the penalties and remedies in this part.
(b) The attorney general and reporter has all of the investigative and enforcement authority that the attorney general and reporter has under the Tennessee Consumer Protection Act of 1977 relating to alleged violations of this part. The attorney general and reporter may institute any proceedings involving alleged violations of this part in Davidson County circuit or chancery court or any other venue otherwise permitted by law.
(c) Costs of any kind or nature cannot be taxed against the attorney general and reporter or the state in actions commenced under this part.

§ 47-18-3006. Effect of part.

Nothing in this part:
1. (1) Limits or otherwise affects the authority of the Tennessee Supreme Court to regulate the practice of law, enforce the Rules of Professional Conduct, or discipline persons admitted to the bar; or
2. (2) Creates or implies liability on behalf of a broadcaster who holds a license for over-the-air terrestrial broadcasting from the federal communications commission, or against a cable operator as defined in 47 U.S.C. § 522(5).

Part 31 Protections for Consumers of Farm Machinery

§ 47-18-3101. Part definitions.

As used in this part:
1. (1) “Authorized dealer” means an individual, corporation, or limited liability company authorized by a manufacturer or distributor to sell, barter, or exchange a particular make of new farm machinery;
2. (2) “Clear title” means legal ownership free from a perfected security interest or other perfected lien;
3. (3) “Comparable farm machinery” means an identical or substantially similar replacement piece of farm machinery;
4. (4) “Consumer” means:
  1. (A) A person who purchases or leases a piece of new farm machinery for purposes other than resale; or
  2. (B) A person entitled to enforce the obligations of a warranty during the quality assurance period;
5. (5) “Distributor” means any person who sells or distributes new and unused farm machinery to authorized dealers;
6. (6) “Express warranty” has the same meaning as described in § 47-2-313;
7. (7) “Farm machinery”:
  1. (A) Means self-propelled equipment or machinery primarily designed and used for agricultural purposes purchased or leased by a consumer for the first time from a manufacturer, distributor, or authorized dealer; and
  2. (B) Does not include an off-highway vehicle as defined in § 55-8-101(12) and (13), an all-terrain vehicle as defined in § 55-8-101(1), lawn tractors, or lawn mowers;
8. (8) “Full purchase price” means the cost paid by a consumer, including any collateral charge;
9. (9) “Manufacturer” means a person who manufactures, assembles, or imports new farm machinery;
10. (10) “Manufacturer's warranty” means a warranty given by the manufacturer of farm machinery against defects in the components and workmanship and a promise to cure defects;
11. (11) “Nonconformity” means any defect or condition affecting a piece of farm machinery that:
  1. (A) Does not conform with the terms of an express warranty issued by a manufacturer to a consumer;
  2. (B) Significantly impairs the use, value, or safe operation of the farm machinery; or
  3. (C) Is not the result of abuse, neglect, or failure by a consumer to operate and maintain the farm machinery according to a manufacturer's operator manual or maintenance recommendations;
12. (12) “Person” means a natural person, partnership, corporation, association, trust, estate, or other legal entity;
13. (13) “Quality assurance period” means the earliest of the following:
  1. (A) Twelve (12) months after the date of delivery of new farm machinery to a consumer;
  2. (B) Twelve (12) months after the date of delivery of any comparable farm machinery to a consumer; or
  3. (C) After the first six hundred (600) hours of operation of the farm machinery by a consumer;
14. (14) “Reasonable allowance for use” means an amount attributable to use by a consumer:
  1. (A) Before the consumer's first report of a nonconformity to a manufacturer, distributor, or authorized dealer;
  2. (B) During any period of use of the farm machinery subsequent to the first report of nonconformity if the farm machinery is not out of service by reason of repair of a reported nonconformity; or
  3. (C) Of any comparable farm machinery provided by the manufacturer, distributor, or an authorized dealer to a consumer while the farm machinery purchased by the consumer is out of service for repair of a reported nonconformity, but not less than the fair lease value of the farm machinery;
15. (15) “Reasonable number of repair attempts” means:
  1. (A) Three (3) attempts to repair the same nonconformity, the total cost of which equals at least thirty percent (30%) of the full purchase price of the farm machinery; or
  2. (B) Five (5) attempts to repair any nonconformity, the total cost of which equals at least fifty percent (50%) of the full purchase price of the farm machinery; and
16. (16) “Seller”:
  1. (A) Means a person who sells, or contracts to sell, farm machinery at retail; and
  2. (B) Includes an authorized dealer, distributor, or manufacturer.

§ 47-18-3102. Replacement or refund by manufacturer of farm machinery.

(a) At the consumer's discretion, a manufacturer shall replace farm machinery with comparable farm machinery or accept return of the farm machinery from a consumer and refund to the consumer the full purchase price and related repair costs specific to the machinery, less a reasonable allowance for use and a reasonable offset for physical damage to the farm machinery caused by the consumer, if:
1. (1) The consumer provides written notice by certified mail to the manufacturer, distributor, or authorized dealer that a piece of farm machinery does not conform to an applicable express warranty or manufacturer's warranty during the quality assurance period;
2. (2) The nonconformity substantially impairs the use of the farm machinery; and
3. (3) The manufacturer, its agent, the distributor, or the authorized dealer cannot conform the farm machinery to an applicable express warranty or manufacturer's warranty after a reasonable number of repair attempts.
(b) The consumer shall furnish possession of the nonconforming farm machinery to the manufacturer, distributor, or authorized dealer at the time of a refund or replacement. If a refund is made, then the refund must be made to the consumer, and lien holder or holder of a security interest, if any, as their interest may appear. If a replacement is made, then a consumer, lien holder, or lessor shall furnish clear title to, and possession of, the farm machinery to the manufacturer, distributor, or authorized dealer.

§ 47-18-3103. Affirmative defense.

It is an affirmative defense to a claim under this part that:
1. (1) A defect or condition does not substantially impair the use, value, or safety of the farm machinery;
2. (2) A nonconformity is the result of an accident, abuse, neglect, or unauthorized modification of the farm machinery by a person other than the manufacturer, an agent of a manufacturer, the distributor, or an authorized dealer; or
3. (3) The consumer did not file a claim in good faith.

§ 47-18-3104. Civil action — Recovery of costs and expenses — Mediation.

(a) A consumer may bring a civil action to enforce this part in a court of competent jurisdiction. A consumer must bring a legal action under this section within two (2) years after the date the consumer first reports a nonconformity to a manufacturer, an agent of a manufacturer, or an authorized dealer.
(b) This part does not limit the rights or remedies available to a consumer under any other applicable law.
(c) If a consumer prevails in a legal proceeding under this part, then the consumer may recover, as part of the judgment, a sum equal to the aggregate amount of costs and expenses, including attorney's fees, based on:
1. (1) Actual time expended by an attorney; and
2. (2) Charges reasonably incurred by the consumer in connection with the commencement and prosecution of an action under this section as determined by a court.
(d) Before filing a legal action to enforce this part in a court of competent jurisdiction, the consumer and the manufacturer, distributor, or authorized dealer may, upon mutual agreement and in good faith, attempt to resolve any issue or claim in dispute through the use of an impartial third-party mediator.

Part 32 Booting Consumer Protection Act

§ 47-18-3201. Short title.

This part is known and may be cited as the “Booting Consumer Protection Act.”

§ 47-18-3202. Part definitions.

As used in this part:
1. (1) “Authorized vehicle immobilization device operator” or “operator” means a person authorized by a political subdivision of this state to be engaged in the business of installing vehicle immobilization devices within the jurisdictional area of the political subdivision;
2. (2) “Engaged in the business of installing vehicle immobilization devices” means installing or removing vehicle immobilization devices on motor vehicles in exchange for monetary payment or other valuable consideration, whether such payment or consideration is received for the installation or the removal of the vehicle immobilization device;
3. (3) “Person” means an individual, sole proprietor, independent contractor, partnership, corporation, or similar business entity;
4. (4) “Political subdivision” means a municipality, public corporation, body politic, authority, district, metropolitan government, county, or an agency, department, or board of such entities; and
5. (5) “Vehicle immobilization device” means a mechanical device that is designed or adapted to be attached to a wheel, tire, or other part of a parked motor vehicle to prohibit the motor vehicle's usual manner of movement or operation.

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§ 47-18-3203. Forms of payment to be accepted by company — Employee requirements — Fees — Posting of signage.

(a) A person engaged in the business of installing vehicle immobilization devices on motor vehicles in this state shall:
1. (1) Accept credit cards and debit cards as methods of payment for the removal of a vehicle immobilization device from a motor vehicle; and
2. (2) If the person who is requesting removal of the vehicle immobilization device elects to make the payment by credit card or debit card and the payment cannot be completed by the card without undue delay at the site where the motor vehicle to which the vehicle immobilization device is attached is located, and an optional online payment method as described in subdivision (c)(3) is either unavailable or has been refused by the individual, remove the vehicle immobilization device and issue a billing invoice for payment due:
  1. (A) To the individual who is requesting the removal of the vehicle immobilization device, if such individual provides a valid form of identification; or
  2. (B) By mail to the registered owner of the vehicle.
(b)
1. (1) A person engaged in the business of installing vehicle immobilization devices on motor vehicles shall utilize for the work of installing and removing such devices only those persons who are required to file a W-2 wage and tax statement with the federal internal revenue service for the compensation those persons receive for the work performed.
2. (2) A person engaged in the business of installing vehicle immobilization devices on motor vehicles shall not:
  1. (A) Contract for or engage the services of an independent contractor to install or remove vehicle immobilization devices; or
  2. (B) Compensate employees on a commission basis.
(c)
1. (1) Subsection (a) does not prohibit a person engaged in the business of installing vehicle immobilization devices on motor vehicles from accepting cash or other methods of payment if the person making such payment, in that person's sole discretion, elects to use such alternative payment method.
2. (2) A person engaged in the business of installing vehicle immobilization devices on motor vehicles shall not charge a fee to accept payment by credit card or debit card.
3. (3) A person engaged in the business of installing vehicle immobilization devices on motor vehicles may offer an alternative, online payment service as an optional payment method. If the person making payment for the removal of the vehicle immobilization device elects, in the person's sole discretion, to use the optional online payment method, then the provider of the online payment service may charge a three percent (3%) convenience fee. This subdivision (c)(3) supersedes all local ordinances, rules, or other enactments to the contrary.
4. (4)
  1. (A) If a vehicle immobilization device is placed on a vehicle that is parked on private property due to the vehicle owner's failure to pay the required parking charge, then the owner or operator of the private property may require the owner of the vehicle to pay the applicable immobilization device removal fee and all unpaid parking fines and fees to have the immobilization device removed.
  2. (B) This subdivision (c)(4) supersedes all local ordinances, rules, or other enactments to the contrary.
(d)
1. (1)
  1. (A) An owner, lessee, or other person who has control of a property for which an enforceable agreement exists with a person engaged in the business of installing vehicle immobilization devices to provide parking enforcement services by installing vehicle immobilization devices on motor vehicles on such property shall post signage in a conspicuous location on the property bearing notice:
    1. (i) That the parking policy for the property is strictly enforced;
    2. (ii) That a violator's vehicle will be immobilized with a vehicle immobilization device with the owner of the vehicle having to pay to have the device removed;
    3. (iii) Of the name and phone number of the authorized vehicle immobilization device operator; and
    4. (iv) That consumers are protected from violations of this part and that violations may be reported to the attorney general and reporter.
  2. (B) The sign required by this subdivision (d)(1) must:
    1. (i) Be no less than twenty-four inches (24″) in height and eighteen inches (18″) in width and contain lettering that is no less than two inches (2″) in height; and
    2. (ii)
      1. (a) Be located at each designated entrance to the property where parking prohibitions are in place; or
      2. (b) If there is no designated entrance, be erected in a place that is clearly visible from each parking space.
  3. (C) Notwithstanding subdivisions (d)(1)(A) and (B)(i), if on July 1, 2023 a property has existing signage posted that contains the notice required by subdivisions (d)(1)(A)(i)-(iii), then the signage complies with subdivision (d)(1)(A) and is exempt from the requirements of subdivision (d)(1)(B)(i) if the notice required by subdivision (d)(1)(A)(iv) is permanently affixed adjacent to the existing signage. However, new or replacement signage installed on or after the effective date of this act must comply with subdivisions (d)(1)(A) and (B)(i).
2. (2) A person engaged in the business of installing vehicle immobilization devices shall not install a vehicle immobilization device on a motor vehicle if the motor vehicle is located on property that does not comply with the signage requirements under subdivision (d)(1).

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47-18-104(b)(59)

§ 47-18-3204. Violation of part.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter.
(b) A violation of this part constitutes an unfair or deceptive act or practice affecting trade or commerce and is subject to the penalties and remedies as provided in the Tennessee Consumer Protection Act of 1977, in addition to any penalties and remedies established under this part.
(c) If the attorney general and reporter reasonably believes that any person has violated this part, then the attorney general and reporter may institute a proceeding under this chapter.

§ 47-18-3205. Notice of violation — Revocation of business authorization.

(a) If an authorized vehicle immobilization device operator is found to have violated § 47-18-3202 as part of a final judgment and the operator has no opportunity to appeal the judgment, then the attorney general and reporter shall send notice of the violation to each political subdivision that has authorized the operator to operate within its jurisdictional area.
(b) Upon the receipt of notice from the attorney general and reporter that an operator has committed a third violation of § 47-18-3202, a political subdivision shall permanently revoke the operator's authorization to engage in the business of installing vehicle immobilization devices within the jurisdictional area of the political subdivision.

Part 33 Tennessee Information Protection Act [Effective on July 1, 2025.]

§ 47-18-3301. Short title. [Effective on July 1, 2025.]

This part is known and may be cited as the “Tennessee Information Protection Act.”

§ 47-18-3302. Part definitions. [Effective on July 1, 2025.]

As used in this part:
1. (1) “Affiliate” means a legal entity that controls, is controlled by, or is under common control with another legal entity or shares common branding with another legal entity. As used in this subdivision (1), “control” or “controlled” means:
  1. (A) Ownership of, or the power to vote, more than fifty percent (50%) of the outstanding shares of a class of voting security of a company;
  2. (B) Control in any manner over the election of a majority of the directors or of individuals exercising similar functions; or
  3. (C) The power to exercise controlling influence over the management of a company;
2. (2) “Authenticate” means to verify using reasonable means that a consumer who is entitled to exercise the rights in § 47-18-3304, is the same consumer who is exercising those consumer rights with respect to the personal information at issue;
3. (3) “Biometric data”:
  1. (A) Means data generated by automatic measurement of an individual's biological characteristics, such as a fingerprint, voiceprint, eye retina or iris, or other unique biological patterns or characteristics that are used to identify a specific individual; and
  2. (B) Does not include a physical or digital photograph, video recording, or audio recording or data generated from a photograph or video or audio recording; or information collected, used, or stored for healthcare treatment, payment, or operations under HIPAA;
4. (4) “Business associate” has the same meaning as defined by HIPAA;
5. (5) “Child” means a natural person younger than thirteen (13) years of age;
6. (6) “Consent”:
  1. (A) Means a clear affirmative act signifying a consumer's freely given, specific, informed, and unambiguous agreement to process personal information relating to the consumer; and
  2. (B) May include a written statement, including a statement written by electronic means, or an unambiguous affirmative action;
7. (7) “Consumer”:
  1. (A) Means a natural person who is a resident of this state acting only in a personal context; and
  2. (B) Does not include a natural person acting in a commercial or employment context;
8. (8) “Controller” means the natural or legal person that, alone or jointly with others, determines the purpose and means of processing personal information;
9. (9) “Covered entity” has the same meaning as defined by HIPAA;
10. (10) “Decisions that produce legal or similarly significant effects concerning the consumer” means decisions made by the controller that result in the provision or denial by the controller of financial or lending services, housing, insurance, education enrollment or opportunity, criminal justice, employment opportunities, healthcare services, or access to basic necessities, such as food and water;
11. (11) “De-identified data” means data that cannot reasonably be linked to an identified or identifiable natural person, or a device linked to that individual;
12. (12) “Health record”:
  1. (A) Means a written, printed, or electronically recorded material that:
    1. (i) Was created or is maintained by a healthcare entity described in or licensed under title 68 in the course of providing healthcare services to an individual; and
    2. (ii) Concerns the individual and the services provided; and
  2. (B) Includes the substance of a communication made by an individual to a healthcare entity described in or licensed under title 68 in confidence during or in connection with the provision of healthcare services or information otherwise acquired by the healthcare entity about an individual in confidence and in connection with the provision of healthcare services to the individual;
13. (13) “HIPAA” means the federal Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.);
14. (14) “Identified or identifiable natural person,” “natural person,” and “individual” mean a human being who can be readily identified, whether directly or indirectly;
15. (15) “Institution of higher education” means a public or private institution of higher education;
16. (16) “Nonprofit organization” means:
  1. (A) A corporation organized under the Tennessee Nonprofit Corporation Act, compiled in title 48, chapter 51;
  2. (B) An organization exempt from taxation under the Internal Revenue Code, codified in 26 U.S.C. §§ 501-530;
  3. (C) A public utility organized under the laws of this state; or
  4. (D) An entity owned or controlled by a nonprofit organization;
17. (17) “Personal information”:
  1. (A) Means information that is linked or reasonably linkable to an identified or identifiable natural person; and
  2. (B) Does not include information that is:
    1. (i) Publicly available information; or
    2. (ii) De-identified or aggregate consumer information;
18. (18) “Precise geolocation data”:
  1. (A) Means information derived from technology, including, but not limited to, global positioning system level latitude and longitude coordinates or other mechanisms, that directly identifies the specific location of a natural person with precision and accuracy within a radius of one thousand seven hundred fifty feet (1,750ʹ); and
  2. (B) Does not include:
    1. (i) The content of communications; or
    2. (ii) Data generated by or connected to advanced utility metering infrastructure systems or equipment for use by a utility;
19. (19) “Process” or “processing” means an operation or set of operations performed, whether by manual or automated means, on personal information or on sets of personal information, such as the collection, use, storage, disclosure, analysis, deletion, or modification of personal information;
20. (20) “Processor” means a natural or legal entity that processes personal information on behalf of a controller;
21. (21) “Profiling” means a form of solely automated processing performed on personal information to evaluate, analyze, or predict personal aspects related to an identified or identifiable natural person's economic situation, health, personal preferences, interests, reliability, behavior, location, or movements;
22. (22) “Protected health information” has the same meaning as defined by HIPAA;
23. (23) “Pseudonymous data” means personal information that cannot be attributed to a specific natural person without the use of additional information, so long as the additional information is kept separately and is subject to appropriate technical and organizational measures to ensure that the personal information is not attributed to an identified or identifiable natural person;
24. (24) “Publicly available information” means information that is lawfully made available through federal, state, or local government records, or information that a business has a reasonable basis to believe is lawfully made available to the general public through widely distributed media, by the consumer, or by a person to whom the consumer has disclosed the information, unless the consumer has restricted the information to a specific audience;
25. (25) “Sale of personal information”:
  1. (A) Means the exchange of personal information for valuable monetary consideration by the controller to a third party; and
  2. (B) Does not include:
    1. (i) The disclosure of personal information to a processor that processes the personal information on behalf of the controller;
    2. (ii) The disclosure of personal information to a third party for purposes of providing a product or service requested by the consumer;
    3. (iii) The disclosure or transfer of personal information to an affiliate of the controller;
    4. (iv) The disclosure of information that the consumer:
      1. (a) Intentionally made available to the general public via a channel of mass media; and
      2. (b) Did not restrict to a specific audience; or
    5. (v) The disclosure or transfer of personal information to a third party as an asset that is part of a merger, acquisition, bankruptcy, or other transaction in which the third party assumes control of all or part of the controller's assets;
26. (26) “Sensitive data” means a category of personal information that includes:
  1. (A) Personal information revealing racial or ethnic origin, religious beliefs, mental or physical health diagnosis, sexual orientation, or citizenship or immigration status;
  2. (B) The processing of genetic or biometric data for the purpose of uniquely identifying a natural person;
  3. (C) The personal information collected from a known child; or
  4. (D) Precise geolocation data;
27. (27) “State agency” means an agency, institution, board, bureau, commission, council, or instrumentality of state government in the executive branch;
28. (28) “Targeted advertising”:
  1. (A) Means displaying to a consumer an advertisement that is selected based on personal information obtained from that consumer's activities over time and across nonaffiliated websites or online applications to predict the consumer's preferences or interests; and
  2. (B) Does not include:
    1. (i) Advertisements based on activities within a controller's own websites or online applications;
    2. (ii) Advertisements based on the context of a consumer's current search query, visit to a website, or online application;
    3. (iii) Advertisements directed to a consumer in response to the consumer's request for information or feedback; or
    4. (iv) Personal information processed solely for measuring or reporting advertising performance, reach, or frequency;
29. (29) “Third party” means a natural or legal person, public authority, agency, or body other than the consumer, controller, processor, or an affiliate of the processor or the controller; and
30. (30) “Trade secret” means information, without regard to form, including, but not limited to, technical, nontechnical, or financial data, a formula, pattern, compilation, program, device, method, technique, plan, or process, that:
  1. (A) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from the information's disclosure or use; and
  2. (B) Is the subject of efforts that are reasonable under the circumstances to maintain the information's secrecy.

§ 47-18-3303. Scope. [Effective on July 1, 2025.]

This part applies to persons that conduct business in this state producing products or services that target residents of this state and that:
1. (1) Exceed twenty-five million dollars ($25,000,000) in revenue; and
2. (2)
  1. (A) Control or process personal information of at least twenty-five thousand (25,000) consumers and derive more than fifty percent (50%) of gross revenue from the sale of personal information; or
  2. (B) During a calendar year, control or process personal information of at least one hundred seventy-five thousand (175,000) consumers.

§ 47-18-3304. Personal information rights — Consumers. [Effective on July 1, 2025.]

(a)
1. (1) A consumer may invoke the consumer rights authorized pursuant to subdivision (a)(2) at any time by submitting a request to a controller specifying the consumer rights the consumer wishes to invoke. A known child's parent or legal guardian may invoke the consumer rights authorized pursuant to subdivision (a)(2) on behalf of the child regarding processing personal information belonging to the known child.
2. (2) A controller shall comply with an authenticated consumer request to exercise the right to:
  1. (A) Confirm whether a controller is processing the consumer's personal information and to access the personal information;
  2. (B) Correct inaccuracies in the consumer's personal information, taking into account the nature of the personal information and the purposes of the processing of the consumer's personal information;
  3. (C) Delete personal information provided by or obtained about the consumer. A controller is not required to delete information that it maintains or uses as aggregate or de-identified data; provided, that such data in the possession of the controller is not linked to a specific consumer. A controller that obtained personal information about a consumer from a source other than the consumer is in compliance with a consumer's request to delete such personal information by:
    1. (i)
      1. (a) Retaining a record of the deletion request and the minimum information necessary for the purpose of ensuring that the consumer's personal information remains deleted from the controller's records; and
      2. (b) Not using such retained personal information for any purpose prohibited under this part; or
    2. (ii) Opting the consumer out of the processing of such personal data for any purpose except for those exempted under this part;
  4. (D) Obtain a copy of the consumer's personal information that the consumer previously provided to the controller in a portable and, to the extent technically feasible, readily usable format that allows the consumer to transmit the data to another controller without hindrance, where the processing is carried out by automated means; or
  5. (E) Opt out of a controller's processing of personal information for purposes of:
    1. (i) Selling personal information about the consumer;
    2. (ii) Targeted advertising; or
    3. (iii) Profiling in furtherance of decisions that produce legal or similarly significant effects concerning the consumer.
(b) Except as otherwise provided in this part, a controller shall comply with an authenticated request by a consumer to exercise the consumer rights authorized pursuant to subdivision (a)(2) as follows:
1. (1) A controller shall respond to the consumer without undue delay, but in all cases within forty-five (45) days of receipt of a request submitted pursuant to subsection (a). The response period may be extended once by forty-five (45) additional days when reasonably necessary, taking into account the complexity and number of the consumer's requests, so long as the controller informs the consumer of the extension within the initial forty-five-day response period, together with the reason for the extension;
2. (2) If a controller declines to take action regarding the consumer's request, then the controller shall inform the consumer without undue delay, but in all cases and at the latest within forty-five (45) days of receipt of the request, of the justification for declining to take action and instructions for how to appeal the decision pursuant to subsection (c);
3. (3) Information provided in response to a consumer request must be provided by a controller free of charge, up to twice annually per consumer. If requests from a consumer are manifestly unfounded, technically infeasible, excessive, or repetitive, then the controller may charge the consumer a reasonable fee to cover the administrative costs of complying with the request or decline to act on the request. The controller bears the burden of demonstrating the manifestly unfounded, technically infeasible, excessive, or repetitive nature of the request; and
4. (4) If a controller is unable to authenticate the request using commercially reasonable efforts, then the controller is not required to comply with a request to initiate an action under subsection (a) and may request that the consumer provide additional information reasonably necessary to authenticate the consumer and the consumer's request.
(c) A controller shall establish a process for a consumer to appeal the controller's refusal to take action on a request within a reasonable period of time after the consumer's receipt of the decision pursuant to subdivision (b)(2). The appeal process must be made available to the consumer in a conspicuous manner, must be available at no cost to the consumer, and must be similar to the process for submitting requests to initiate action pursuant to subsection (a). Within sixty (60) days of receipt of an appeal, a controller shall inform the consumer in writing of action taken or not taken in response to the appeal, including a written explanation of the reasons for the decisions. If the appeal is denied, then the controller shall also provide the consumer with an online mechanism, if available, or other method through which the consumer may contact the attorney general and reporter to submit a complaint.

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§ 47-18-3305. Data controller responsibilities — Transparency. [Effective on July 1, 2025.]

(a) A controller shall:
1. (1) Limit the collection of personal information to what is adequate, relevant, and reasonably necessary in relation to the purposes for which the data is processed, as disclosed to the consumer;
2. (2) Except as otherwise provided in this part, not process personal information for purposes that are beyond what is reasonably necessary to and compatible with the disclosed purposes for which the personal information is processed, as disclosed to the consumer, unless the controller obtains the consumer's consent;
3. (3) Establish, implement, and maintain reasonable administrative, technical, and physical data security practices, as described in § 47-18-3314, to protect the confidentiality, integrity, and accessibility of personal information. The data security practices must be appropriate to the volume and nature of the personal information at issue;
4. (4) Not be required to delete information that it maintains or uses as aggregate or de-identified data, provided that such data in the possession of the business is not linked to a specific consumer;
5. (5) Not process personal information in violation of state and federal laws that prohibit unlawful discrimination against consumers. A controller shall not discriminate against a consumer for exercising the consumer rights contained in this part, including denying goods or services, charging different prices or rates for goods or services, or providing a different level of quality of goods and services to the consumer. However, this subdivision (a)(5) does not require a controller to provide a product or service that requires the personal information of a consumer that the controller does not collect or maintain, or prohibit a controller from offering a different price, rate, level, quality, or selection of goods or services to a consumer, including offering goods or services for no fee, if the consumer has exercised the right to opt out pursuant to § 47-18-3304(a)(2)(F) or the offer is related to a consumer's voluntary participation in a bona fide loyalty, rewards, premium features, discounts, or club card program; and
6. (6) Not process sensitive data concerning a consumer without obtaining the consumer's consent, or, in the case of the processing of sensitive data concerning a known child, without processing the data in accordance with the federal Children's Online Privacy Protection Act (15 U.S.C. § 6501 et seq.) and its implementing regulations.
(b) A provision of a contract or agreement that purports to waive or limit the consumer rights described in § 47-18-3304 is contrary to public policy and is void and unenforceable.
(c) A controller shall provide a reasonably accessible, clear, and meaningful privacy notice that includes:
1. (1) The categories of personal information processed by the controller;
2. (2) The purpose for processing personal information;
3. (3) How consumers may exercise their consumer rights pursuant to § 47-18-3304, including how a consumer may appeal a controller's decision with regard to the consumer's request;
4. (4) The categories of personal information that the controller sells to third parties, if any; and
5. (5) The categories of third parties, if any, to whom the controller sells personal information.
(d) If a controller sells personal information to third parties or processes personal information for targeted advertising, then the controller shall clearly and conspicuously disclose the processing, as well as the manner in which a consumer may exercise the right to opt out of the processing.
(e)
1. (1) A controller shall provide, and shall describe in a privacy notice, one (1) or more secure and reliable means for a consumer to submit a request to exercise the consumer rights in § 47-18-3304. Such means must take into account the:
  1. (A) Ways in which a consumer normally interacts with the controller;
  2. (B) Need for secure and reliable communication of such requests; and
  3. (C) Ability of a controller to authenticate the identity of the consumer making the request.
2. (2) A controller shall not require a consumer to create a new account in order to exercise consumer rights in § 47-18-3304, but may require a consumer to use an existing account.

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§ 47-18-3306. Responsibility according to role — Controller and processor. [Effective on July 1, 2025.]

(a) A processor shall adhere to the instructions of a controller and shall assist the controller in meeting its obligations under this part. The assistance must include:
1. (1) Taking into account the nature of processing and the information available to the processor, by appropriate technical and organizational measures, insofar as this is reasonably practicable, to fulfill the controller's obligation to respond to consumer rights requests pursuant to § 47-18-3304; and
2. (2) Providing necessary information to enable the controller to conduct and document data protection assessments pursuant to § 47-18-3307.
(b) A contract between a controller and a processor governs the processor's data processing procedures with respect to processing performed on behalf of the controller. The contract is binding and must clearly set forth instructions for processing data, the nature and purpose of processing, the type of data subject to processing, the duration of processing, and the rights and obligations of both parties. The contract must also include requirements that the processor shall:
1. (1) Ensure that each person processing personal information is subject to a duty of confidentiality with respect to the data;
2. (2) At the controller's direction, delete or return all personal information to the controller as requested at the end of the provision of services, unless retention of the personal information is required by law;
3. (3) Upon the reasonable request of the controller, make available to the controller all information in its possession necessary to demonstrate the processor's compliance with the obligations in this part;
4. (4) Allow, and cooperate with, reasonable assessments by the controller or the controller's designated assessor; alternatively, the processor may arrange for a qualified and independent assessor to conduct an assessment of the processor's policies and technical and organizational measures in support of the obligations under this part using an appropriate and accepted control standard or framework and assessment procedure for the assessments. The processor shall provide a report of each assessment to the controller upon request; and
5. (5) Engage a subcontractor pursuant to a written contract in that requires the subcontractor to meet the obligations of the processor with respect to the personal information.
(c) This section does not relieve a controller or a processor from the liabilities imposed on it by virtue of its role in the processing relationship as described in subsection (b).
(d) Determining whether a person is acting as a controller or processor with respect to a specific processing of data is a fact-based determination that depends upon the context in which personal information is to be processed. A processor that continues to adhere to a controller's instructions with respect to a specific processing of personal information remains a processor.

§ 47-18-3307. Data protection assessments. [Effective on July 1, 2025.]

(a) A controller shall conduct and document a data protection assessment of each of the following processing activities involving personal information:
1. (1) The processing of personal information for purposes of targeted advertising;
2. (2) The sale of personal information;
3. (3) The processing of personal information for purposes of profiling, where the profiling presents a reasonably foreseeable risk of:
  1. (A) Unfair or deceptive treatment of, or unlawful disparate impact on, consumers;
  2. (B) Financial, physical, or reputational injury to consumers;
  3. (C) A physical or other intrusion upon the solitude or seclusion, or the private affairs or concerns, of consumers, where the intrusion would be offensive to a reasonable person; or
  4. (D) Other substantial injury to consumers;
4. (4) The processing of sensitive data; and
5. (5) Processing activities involving personal information that present a heightened risk of harm to consumers.
(b) Data protection assessments conducted pursuant to subsection (a) must identify and weigh the benefits that may flow, directly and indirectly, from the processing to the controller, the consumer, other stakeholders, and the public against the potential risks to the rights of the consumer associated with the processing, as mitigated by safeguards that can be employed by the controller to reduce the risks. The use of de-identified data and the reasonable expectations of consumers, as well as the context of the processing and the relationship between the controller and the consumer whose personal information will be processed, must be factored into this assessment by the controller.
(c) The attorney general and reporter may request pursuant to a civil investigative demand that a controller disclose a data protection assessment that is relevant to an investigation conducted by the attorney general and reporter, and the controller shall make the data protection assessment available to the attorney general and reporter. The attorney general and reporter may evaluate the data protection assessment for compliance with the responsibilities set forth in § 47-18-3305. Data protection assessments are confidential and not open to public inspection and copying. The disclosure of a data protection assessment pursuant to a request from the attorney general and reporter does not constitute a waiver of attorney-client privilege or work product protection with respect to the assessment and information contained in the assessment.
(d) A single data protection assessment may address a comparable set of processing operations that include similar activities.
(e) Data protection assessments conducted by a controller for the purpose of compliance with other laws, rules, or regulations may comply with this section if the assessments have a reasonably comparable scope and effect.
(f) Data protection assessment requirements apply to processing activities created or generated on or after July 1, 2024, and are not retroactive.

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47-18-3306(a)(2)

§ 47-18-3308. Processing de-identified data — Exemptions. [Effective on July 1, 2025.]

(a) The controller in possession of de-identified data shall:
1. (1) Take reasonable measures to ensure that the data cannot be associated with a natural person;
2. (2) Publicly commit to maintaining and using de-identified data without attempting to reidentify the data; and
3. (3) Contractually obligate recipients of the de-identified data to comply with this part.
(b) This section does not require a controller or processor to:
1. (1) Reidentify de-identified data or pseudonymous data;
2. (2) Maintain data in identifiable form, or collect, obtain, retain, or access data or technology, in order to be capable of associating an authenticated consumer request with personal information; or
3. (3) Comply with an authenticated consumer rights request, pursuant to § 47-18-3304, if:
  1. (A) The controller is not reasonably capable of associating the request with the personal information or it would be unreasonably burdensome for the controller to associate the request with the personal information;
  2. (B) The controller does not use the personal information to recognize or respond to the specific consumer who is the subject of the personal information, or associate the personal information with other personal information about the same specific consumer; and
  3. (C) The controller does not sell the personal information to a third party or otherwise voluntarily disclose the personal information to a third party other than a processor, except as otherwise permitted in this section.
(c) The consumer rights contained in §§ 47-18-3304 and 47-18-3305 do not apply to pseudonymous data in cases where the controller is able to demonstrate information necessary to identify the consumer is kept separately and is subject to effective technical and organizational controls that prevent the controller from accessing that information.
(d) A controller that discloses pseudonymous data or de-identified data shall exercise reasonable oversight to monitor compliance with contractual commitments to which the pseudonymous data or de-identified data is subject and shall take appropriate steps to address breaches of those contractual commitments.

§ 47-18-3309. Limitations. [Effective on July 1, 2025.]

(a) This part does not restrict a controller's or processor's ability to:
1. (1) Comply with federal, state, or local laws, rules, or regulations;
2. (2) Comply with a civil, criminal, or regulatory inquiry, investigation, subpoena, or summons by federal, state, local, or other governmental authorities;
3. (3) Cooperate with law enforcement agencies concerning conduct or activity that the controller or processor reasonably and in good faith believes may violate federal, state, or local laws, rules, or regulations;
4. (4) Investigate, establish, exercise, prepare for, or defend legal claims;
5. (5) Provide a product or service specifically requested by a consumer or the parent or legal guardian of a known child, perform a contract to which the consumer is a party, including fulfilling the terms of a written warranty, or take steps at the request of the consumer prior to entering into a contract;
6. (6) Take immediate steps to protect an interest that is essential for the life or physical safety of the consumer or of another natural person, and where the processing cannot be manifestly based on another legal basis;
7. (7) Prevent, detect, protect against, or respond to security incidents, identity theft, fraud, harassment, malicious or deceptive activity, or illegal activity; preserve the integrity or security of systems; or investigate, report, or prosecute those responsible for such action;
8. (8) Engage in public- or peer-reviewed scientific or statistical research in the public interest that adheres to all other applicable ethics and privacy laws and is approved, monitored, and governed by an institutional review board, or similar independent oversight entity that determines whether:
  1. (A) Deletion of the information is likely to provide substantial benefits that do not exclusively accrue to the controller;
  2. (B) The expected benefits of the research outweigh the privacy risks; and
  3. (C) The controller has implemented reasonable safeguards to mitigate privacy risks associated with research, including risks associated with reidentification; or
9. (9) Assist another controller, processor, or third party with the obligations under this part.
(b) The obligations imposed on controllers or processors under this part do not restrict a controller's or processor's ability to collect, use, or retain data to:
1. (1) Conduct internal research to develop, improve, or repair products, services, or technology;
2. (2) Effectuate a product recall;
3. (3) Identify and repair technical errors that impair existing or intended functionality; or
4. (4) Perform internal operations that are reasonably aligned with the expectations of the consumer or reasonably anticipated based on the consumer's existing relationship with the controller or are otherwise compatible with processing data in furtherance of the provision of a product or service specifically requested by a consumer or the performance of a contract to which the consumer is a party.
(c) The obligations imposed on controllers or processors under this part do not apply where compliance by the controller or processor with this part would violate an evidentiary privilege under the laws of this state. This part does not prevent a controller or processor from providing personal information concerning a consumer to a person covered by an evidentiary privilege under the laws of this state as part of a privileged communication.
(d)
1. (1) A controller or processor that discloses personal information to a third-party controller or processor, in compliance with the requirements of this part, is not in violation of this part if:
  1. (A) The third-party controller or processor that receives and processes the personal information is in violation of this part; and
  2. (B) At the time of disclosing the personal information, the disclosing controller or processor did not have actual knowledge that the recipient intended to commit a violation.
2. (2) A third-party controller or processor receiving personal information from a controller or processor in compliance with the requirements of this part is likewise not in violation of this part for the violations of the controller or processor from which it receives such personal information.
(e) This part does not impose an obligation on controllers and processors that adversely affects the rights or freedoms of a person, such as exercising the right of free speech pursuant to the First Amendment to the United States Constitution, or applies to the processing of personal information by a person in the course of a purely personal activity.
(f) A controller shall not process personal information for purposes other than those expressly listed in this section unless otherwise allowed by this part. Personal information processed by a controller pursuant to this section may be processed to the extent that the processing is:
1. (1) Reasonably necessary and proportionate to the purposes listed in this section; and
2. (2) Adequate, relevant, and limited to what is necessary in relation to the specific purposes listed in this section. Personal information collected, used, or retained pursuant to subsection (b) shall, where applicable, take into account the nature and purpose or purposes of the collection, use, or retention. The data is subject to reasonable administrative, technical, and physical measures to protect the confidentiality, integrity, and accessibility of the personal information and to reduce reasonably foreseeable risks of harm to consumers relating to the collection, use, or retention of personal information.
(g) If a controller processes personal information pursuant to an exemption in this section, then the controller bears the burden of demonstrating that the processing qualifies for the exemption and complies with subsection (f).
(h) Processing personal information for the purposes expressly identified in subdivisions (a)(1)-(9) does not solely make an entity a controller with respect to the processing.

§ 47-18-3310. Investigative authority. [Effective on July 1, 2025.]

If the attorney general and reporter has reasonable cause to believe that an individual, controller, or processor has engaged in, is engaging in, or is about to engage in a violation of this part, then the attorney general and reporter may issue a civil investigative demand.

§ 47-18-3311. Exemptions. [Effective on July 1, 2025.]

(a) This part does not apply to:
1. (1) A body, authority, board, bureau, commission, district, or agency of this state or of a political subdivision of this state;
2. (2) A financial institution, an affiliate of a financial institution, or data subject to Title V of the federal Gramm-Leach-Bliley Act (15 U.S.C. § 6801 et seq.);
3. (3) An individual, firm, association, corporation, or other entity that is licensed in this state under title 56 as an insurance company and transacts insurance business;
4. (4) A covered entity or business associate governed by the privacy, security, and breach notification rules issued by the United States department of health and human services, 45 CFR Parts 160 and 164 established pursuant to HIPAA, and the federal Health Information Technology for Economic and Clinical Health Act (P.L. 111-5);
5. (5) A nonprofit organization;
6. (6) An institution of higher education;
7. (7) Protected health information under HIPAA;
8. (8) Health records for purposes of title 68;
9. (9) Patient identifying information for purposes of 42 U.S.C. § 290dd-2;
10. (10) Personal information:
  1. (A) Processed for purposes of:
    1. (i) Research conducted in accordance with the federal policy for the protection of human subjects under 45 CFR Part 46;
    2. (ii) Human subjects research conducted in accordance with good clinical practice guidelines issued by The International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use; or
    3. (iii) Research conducted in accordance with the protection of human subjects under 21 CFR Parts 6, 50, and 56; or
  2. (B) Processed or sold in connection with research conducted in accordance with the requirements set forth in this part, or other research conducted in accordance with applicable law;
11. (11) Information and documents created for purposes of the federal Health Care Quality Improvement Act of 1986 (42 U.S.C. § 11101 et seq.);
12. (12) Patient safety work product for purposes of the federal Patient Safety and Quality Improvement Act (42 U.S.C. § 299b-21 et seq.);
13. (13) Information that is:
  1. (A) Derived from the healthcare-related information listed in this subsection (a) that is de-identified in accordance with the requirements for de-identification pursuant to HIPAA; or
  2. (B) Included in a limited data set as described in 45 CFR 164.514(e), to the extent that the information is used, disclosed, and maintained in the manner specified in 45 CFR 164.514(e);
14. (14) Information originating from, and intermingled to be indistinguishable with, or information treated in the same manner as, information exempt under this subsection (a) that is maintained by a covered entity or business associate as defined by HIPAA or a program or a qualified service organization as defined by 42 U.S.C. § 290dd-2;
15. (15) Information used only for public health activities and purposes as authorized by HIPAA;
16. (16) The collection, maintenance, disclosure, sale, communication, or use of personal information bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living by a consumer reporting agency or furnisher that provides information for use in a consumer report, and by a user of a consumer report, but only to the extent that such activity is regulated by and authorized under the federal Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.);
17. (17) Personal information collected, processed, sold, or disclosed in compliance with the federal Driver's Privacy Protection Act of 1994 (18 U.S.C. § 2721 et seq.);
18. (18) Personal information or educational information regulated by the federal Family Educational Rights and Privacy Act (FERPA) (20 U.S.C. § 1232g et seq.);
19. (19) Personal information collected, processed, sold, or disclosed in compliance with the federal Farm Credit Act (12 U.S.C. § 2001 et seq.);
20. (20) Data processed or maintained:
  1. (A) In the course of an individual applying to, being employed by, or acting as an agent or independent contractor of a controller, processor, or third party, to the extent that the data is collected and used within the context of that role;
  2. (B) As the emergency contact information of an individual under this part used for emergency contact purposes; or
  3. (C) That is necessary to retain to administer benefits for another individual relating to the individual under subdivision (a)(20)(A) and used for the purposes of administering those benefits;
21. (21) Information collected as part of public- or peer-reviewed scientific or statistical research in the public interest;
22. (22) An insurance producer licensed under title 56; or
23. (23) Personal information maintained or used for purposes of compliance with the regulation of listed chemicals under the federal Controlled Substances Act (21 U.S.C. § 830).
(b) Controllers and processors that comply with the verifiable parental consent requirements of the federal Children's Online Privacy Protection Act (15 U.S.C. § 6501 et seq.) are deemed compliant with an obligation to obtain parental consent under this part.
(c) This part does not require a controller, processor, third party, or consumer to disclose trade secrets.

§ 47-18-3312. Contracts. [Effective on July 1, 2025.]

(a) A provision of a contract or agreement that waives or limits a consumer's rights under this part, including, but not limited to, a right to a remedy or means of enforcement, is contrary to public policy, void, and unenforceable.
(b) This part does not prevent a consumer from declining to request information from a controller, declining to opt out of a controller's sale of the consumer's personal information, or authorizing a controller to sell the consumer's personal information after previously opting out.
(c) This part applies to contracts entered into, amended, or renewed on or after the effective date of this act.

§ 47-18-3313. Enforcement — Civil penalty — Expenses. [Effective on July 1, 2025.]

(a) The attorney general and reporter has exclusive authority to enforce this part.
(b) The attorney general and reporter may develop reasonable cause to believe that a controller or processor is in violation of this part, based on the attorney general and reporter's own inquiry or on consumer or public complaints. Prior to initiating an action under this part, the attorney general and reporter shall provide a controller or processor sixty-days' written notice identifying the specific provisions of this part the attorney general and reporter alleges have been or are being violated. If within the sixty-day period, the controller or processor cures the noticed violation and provides the attorney general and reporter an express written statement that the alleged violations have been cured and that no such further violations shall occur, then the attorney general and reporter shall not initiate an action against the controller or processor.
(c) If a controller or processor continues to violate this part following the cure period in subsection (b) or breaches an express written statement provided to the attorney general and reporter under subsection (b), then the attorney general and reporter may bring an action in a court of competent jurisdiction seeking any of the following relief:
1. (1) Declaratory judgment that the act or practice violates this chapter;
2. (2) Injunctive relief, including preliminary and permanent injunctions, to prevent an additional violation of and compel compliance with this part;
3. (3) Civil penalties, as described in subsection (d);
4. (4) Reasonable attorney's fees and investigative costs; or
5. (5) Other relief the court determines appropriate.
(d)
1. (1) A court may impose a civil penalty of up to seven thousand five hundred dollars ($7,500) for each violation of this part.
2. (2) If the court finds the controller or processor willfully or knowingly violated this part, then the court may, in its discretion, award treble damages.
(e) A violation of this part shall not serve as the basis for, or be subject to, a private right of action, including a class action lawsuit, under this part or other law.
(f) The attorney general and reporter may recover reasonable expenses incurred in investigating and preparing a case, including attorney fees, in an action initiated under this part.

§ 47-18-3314. Affirmative defense — Voluntary privacy program. [Effective on July 1, 2025.]

(a) A controller or processor has an affirmative defense to a cause of action for a violation of this part if the controller or processor creates, maintains, and complies with a written privacy policy that:
1. (1)
  1. (A) Reasonably conforms to the National Institute of Standards and Technology (NIST) privacy framework entitled “A Tool for Improving Privacy through Enterprise Risk Management Version 1.0.” or other documented policies, standards, and procedures designed to safeguard consumer privacy; and
  2. (B) Is updated to reasonably conform with a subsequent revision to the NIST or comparable privacy framework within two (2) years of the publication date stated in the most recent revision to the NIST or comparable privacy framework; and
2. (2) Provides a person with the substantive rights required by this part.
(b) The scale and scope of a controller or processor's privacy program under subsection (a) is appropriate if it is based on all of the following factors:
1. (1) The size and complexity of the controller or processor's business;
2. (2) The nature and scope of the activities of the controller or processor;
3. (3) The sensitivity of the personal information processed;
4. (4) The cost and availability of tools to improve privacy protections and data governance; and
5. (5) Compliance with a comparable state or federal law.
(c)
1. (1) In addition to subsections (a) and (b):
  1. (A) A controller may be certified pursuant to the Asia Pacific Economic Cooperation's Cross Border Privacy Rules system; and
  2. (B) A processor may be certified pursuant to the Asia Pacific Economic Cooperation's Privacy Recognition for Processors system.
2. (2) Certifications under subdivision (c)(1) may be considered in addition to the factors in subsection (b).

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47-18-3305(a)(3)

§ 47-18-3315. Preemption of conflicting provisions. [Effective on July 1, 2025.]

This part supersedes and preempts any conflicting provisions of any public or private act and laws, ordinances, resolutions, regulations, or the equivalent adopted by a home rule municipality, county, including a metropolitan government, or city regarding the processing of personal data by controllers or processors. To the extent there exists a conflict, this section does not require the home rule municipality, county, or city to adopt any law, ordinance, resolution, regulation, or the equivalent to modify or repeal such conflicting provisions enacted prior to July 1, 2025.

Part 49 Genetic Information Privacy Act

§ 47-18-4901. Short title.

This part is known as the “Genetic Information Privacy Act.”

§ 47-18-4902. Part definitions.

As used in this part:
1. (1) “Biological sample” means a human material known to contain DNA, including tissue, blood, urine, or saliva;
2. (2) “Consumer” means an individual who is a resident of the state;
3. (3) “Deidentified data” means data that:
  1. (A)
    1. (i) Cannot reasonably be linked to an identifiable individual; or
    2. (ii) Meets the standard for deidentification under the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) (42 U.S.C. § 1320d et seq.) and rules promulgated pursuant to that act; and
  2. (B) Is possessed by a company that:
    1. (i) Takes administrative and technical measures to ensure that the data cannot be associated with a particular consumer;
    2. (ii) Makes a public commitment to maintain and use data in deidentified form and not attempt to reidentify data; and
    3. (iii) Enters into a legally enforceable contractual obligation that prohibits a recipient of the data from attempting to reidentify the data;
4. (4) “Direct-to-consumer genetic testing company” or “company”:
  1. (A) Means an entity that:
    1. (i) Offers consumer genetic testing products or services directly to a consumer; or
    2. (ii) Collects, uses, or analyzes genetic data that resulted from a direct-to-consumer genetic testing product or service and was provided to the company by a consumer; and
  2. (B) Does not include:
    1. (i) A law enforcement agency; or
    2. (ii) An entity that is, and only while, engaged in collecting, using, or analyzing genetic data or biological samples in the context of research, as defined in 45 CFR § 164.501, that is conducted in accordance with:
      1. (a) The Federal Policy for the Protection of Human Subjects, as described in 45 CFR Part 46;
      2. (b) The Good Clinical Practice Guideline issued by the International Council for Harmonization; or
      3. (c) The United States Food and Drug Administration Policy for the Protection of Human Subjects under 21 CFR Parts 50 and 56;
5. (5) “DNA” means deoxyribonucleic acid;
6. (6) “Express consent” means a consumer's affirmative response to a clear, meaningful, and prominent notice regarding the collection, use, or disclosure of genetic data for a specific purpose;
7. (7) “First-party relationship” means the relationship between a company and a consumer from which the company has collected genetic data;
8. (8) “Genetic data” means data, excluding deidentified data, regardless of format, concerning a consumer's genetic characteristics, including:
  1. (A) Raw sequence data that results from sequencing all or a portion of a consumer's extracted DNA;
  2. (B) Genotypic and phenotypic information obtained from analyzing a consumer's raw sequence data; or
  3. (C) Self-reported health information regarding a consumer's health conditions that the consumer provides to a company and that the company:
    1. (i) Uses for scientific research or product development; and
    2. (ii) Analyzes in connection with the consumer's raw sequence data;
9. (9) “Genetic testing” means:
  1. (A) A laboratory test of a consumer's complete DNA, regions of DNA, chromosomes, genes, or gene products to determine the presence of genetic characteristics of the consumer; or
  2. (B) An interpretation of a consumer's genetic data; and
10. (10) “Person” means an individual, corporation, business, partnership, limited liability company, or other business entity.

§ 47-18-4903. Part applicability.

This part does not apply to:
1. (1) Protected health information that is collected by a covered entity or business associate as those terms are defined in 45 CFR Parts 160 and 164;
2. (2) A public or private institution of higher education;
3. (3) An entity owned or operated by a public or private institution of higher education;
4. (4) Biomedical or academic research conducted by a research hospital, academic medical center, or other entity affiliated with such hospital or medical center that is not a direct-to-consumer genetic testing company;
5. (5) Genetic data that is shared with or by a research hospital, academic medical center, or other entity affiliated with such hospital or medical center that is not a direct-to-consumer genetic testing company for the purposes of biomedical or academic research or to find causes of or cures for a disease or medical condition; or
6. (6) The sharing of genetic data that does not require consent pursuant to the Federal Policy for the Protection of Human Subjects, as described in 45 CFR Part 46.

§ 47-18-4904. Required disclosures to consumer — Permissible offers to consumers.

(a) A direct-to-consumer genetic testing company shall:
1. (1) Provide to a consumer:
  1. (A) Essential information about the company's collection, use, and disclosure of genetic data; and
  2. (B) A prominent, publicly available privacy notice that includes information about the company's data collection, consent, use, access, disclosure, transfer, security, retention, and deletion practices;
2. (2) Obtain a consumer's initial express consent for collection, use, or disclosure of the consumer's genetic data that:
  1. (A) Clearly describes the company's use of the genetic data that the company collects through the company's genetic testing product or service;
  2. (B) Specifies who has access to test results; and
  3. (C) Specifies how the company may share the genetic data;
3. (3) If the company engages in the following conduct, obtain a consumer's:
  1. (A) Separate express consent for:
    1. (i) The transfer or disclosure of the consumer's genetic data to a person other than the company's vendors and service providers;
    2. (ii) The use of genetic data beyond the primary purpose of the company's genetic testing product or service; or
    3. (iii) The company's retention of a biological sample provided by the consumer following the company's completion of the initial testing service requested by the consumer;
  2. (B) Informed consent in accordance with the Federal Policy for the Protection of Human Subjects, as described in 45 CFR Part 46, for transfer or disclosure of the consumer's genetic data to a third party for:
    1. (i) Research purposes; or
    2. (ii) Research conducted under the control of the company for the purpose of publication or generalizable knowledge; and
  3. (C) Express consent for:
    1. (i) Marketing to a consumer based on the consumer's genetic data; or
    2. (ii) Marketing by a third-party person to a consumer based on the consumer having ordered or purchased a genetic testing product or service;
4. (4) Require valid legal process for the company's disclosure of a consumer's genetic data to law enforcement or a government entity without the consumer's express written consent;
5. (5) Develop, implement, and maintain a comprehensive security program to protect a consumer's genetic data against unauthorized access, use, or disclosure; and
6. (6) Provide a process for a consumer to:
  1. (A) Access the consumer's genetic data;
  2. (B) Delete the consumer's account and genetic data; and
  3. (C) Destroy the consumer's biological sample.
(b) Notwithstanding subdivision (a)(3)(C), a direct-to-consumer genetic testing company with a first-party relationship to a consumer may, without obtaining the consumer's express consent, provide customized content or offers on the company's website or through the company's application or service.

§ 47-18-4905. Prohibited disclosures — Consumer's written consent required.

A direct-to-consumer genetic testing company shall not disclose a consumer's genetic data without first obtaining the consumer's written consent to:
1. (1) An entity that offers health insurance, life insurance, or long-term care insurance; or
2. (2) An employer of the consumer.

§ 47-18-4906. Duties of division of consumer affairs.

The division of consumer affairs in the office of the attorney general and reporter shall enforce this part. The division shall:
1. (1) Establish a means by which a consumer can submit a complaint for a violation of this part; and
2. (2) Promulgate rules to effectuate this part. The rules must be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Part 50 Consumer Affairs Division

§ 47-18-5001. Office of the attorney general and reporter — Director of consumer affairs.

(a) There is created a division of consumer affairs in the office of the attorney general and reporter.
(b) The division of consumer affairs is headed by a director of consumer affairs who is appointed by, and serves at the pleasure of, the attorney general and reporter.

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47-18-5002(3)

§ 47-18-5002. Power to employ personnel.

The attorney general and reporter has the power to employ such personnel as may be necessary and appropriate to accomplish the purposes of this chapter, and the attorney general and reporter, or the attorney general's designee, shall:
1. (1) Serve as the central coordinating agency for receiving complaints by Tennessee consumers or about Tennessee businesses regarding unfair or deceptive acts or practices;
2. (2) Provide copies to, or otherwise notify, the persons identified in the complaints as engaging in unfair or deceptive practices and allowing them an opportunity to respond, within a reasonable time, to the division with, if appropriate, a proposal to resolve the complaint. Upon receiving a response, the division may share the response with the complainant and may facilitate additional communication between the person identified in the complaint and the complainant in an effort to encourage a mutually agreeable resolution;
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3. (3) Report annually to the general assembly on the activities of the division. The report shall include, but not be limited to, a statement of the investigatory and enforcement procedures and policies of the division, as well as a statement of the number of complaints filed and of investigations or enforcement proceedings instituted and of their disposition. The report shall not identify any person who has not been otherwise publicly identified in enforcement proceedings unless such person consents to identification. The report may include recommendations for proposed legislation designed to remedy specific unfair or deceptive acts or practices. Pursuant to the reporting requirements of this subdivision (3), the director of consumer affairs appointed pursuant to § 47-18-5001 shall provide a written report and testify annually to the commerce and labor committee of the senate and the commerce committee of the house of representatives. The reports made pursuant to this subdivision (3) must be submitted no later than February 1 of each year;
4. (4) Lend assistance to any district attorney general who elects to criminally prosecute any person for any criminal act or practice directed against the consuming public; and
5. (5) Promote consumer education and inform the public of policies, decisions, and legislation affecting consumers.

§ 47-18-5003. Plan to receive and disseminate on attorney general and reporter's website reports of scams, schemes, swindles, and other frauds that target adults.

The director shall develop and implement a plan to receive and disseminate on the attorney general and reporter's website reports of scams, schemes, swindles, and other frauds that target adults, as defined in § 71-6-102.

Part 51 Tennessee Price-Gouging Act of 2002

§ 47-18-5101. Legislative intent.

The general assembly finds and declares that:
1. (1) The threats of terrorism are real and could impose horrific social and economic damage on Tennessee;
2. (2) Terrorist attacks can dismantle the stability of markets and free trade;
3. (3) Pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, but when an abnormal economic disruption for goods and services results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increases in the prices of consumer goods and services should be discouraged;
4. (4) Because of the September 11, 2001, terrorist attacks that took place in New York and Arlington, Virginia, some businesses across Tennessee engaged in the economic practice commonly known as price-gouging;
5. (5) Protecting the public from price-gouging is a vital function of state government in providing for the health, safety, and welfare of consumers;
6. (6) The intent of the general assembly in enacting this part is to protect citizens from excessive and unjustified increases in the prices charged during or shortly after an abnormal economic disruption for goods and services that are vital or necessary for the consumer. Further, it is the intent of the general assembly that this part be liberally construed so that its beneficial purposes may be served.

§ 47-18-5102. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Abnormal economic disruption” means a disruption or anticipated disruption to usual business conditions caused by a natural or man-made disaster or emergency resulting from a terrorist attack, war, strike, civil disturbance, tornado, earthquake, fire, flood, or any other natural disaster or man-made disaster;
2. (2) “Building materials” means lumber, construction tools, windows, and anything else used in the building or rebuilding of property;
3. (3) “Consumer food item” means any article that is used or intended for use for food, drink, confection, or condiment by a person or animal;
4. (4) “Costs” means any expense or expenditure directly or indirectly related to the sale of a good or provision of a service or the operation of the person's business;
5. (5) “Emergency supplies” includes, but is not limited to, water, flashlights, radios, batteries, candles, blankets, soap, diapers, temporary shelters, tape, toiletries, plywood, nails, and hammers;
6. (6) “Gasoline” means any fuel used to power any motor vehicle or power tool;
7. (7) “Goods” has the same meaning as provided in § 47-18-103;
8. (8) “Housing” means any rental housing leased on a month-to-month term;
9. (9) “Medical supplies” includes, but is not limited to, prescription and nonprescription medications, bandages, gauze, isopropyl alcohol, and antibacterial products;
10. (10) “Person” has the same meaning as provided in § 47-18-103;
11. (11) “Repair or reconstruction services” means services performed by any person for repairs to residential or commercial property of any type that is damaged as a result of a disaster or terrorist attack;
12. (12) “Services” has the same meaning as provided in § 47-18-103; and
13. (13) [Deleted by 2018 amendment.]
14. (14) “Transportation, freight, and storage services” means any service that is performed by any company that contracts to move, store, or transport personal or business property or rents equipment for those purposes.

§ 47-18-5103. Prohibited acts during declaration of abnormal economic disruption.

(a)
1. (1) Upon the declaration of an abnormal economic disruption by the governor by proclamation or executive order, and continuing for a maximum of fifteen (15) calendar days, unless extended by a subsequent declaration in any county or municipality covered by the abnormal economic disruption, a person is prohibited from charging any other person a price for the following goods or services that is grossly in excess of the price generally charged for the same or similar goods or services in the usual course of business:
  1. (A) Consumer food items;
  2. (B) Repair or construction services;
  3. (C) Emergency supplies;
  4. (D) Medical supplies;
  5. (E) Building materials;
  6. (F) Gasoline;
  7. (G) Transportation, freight, and storage services;
  8. (H) Housing; or
  9. (I) Temporary healthcare staffing provided by a temporary healthcare staffing agency as defined by § 68-11-2301.
2. (2) A declaration of an abnormal economic disruption by the governor may specify that only certain goods or services are covered by the prohibition described in subdivision (a)(1).
(b) A price increase is not grossly excessive if the increase was directly attributable to:
1. (1) Price increases in applicable regional, national, or international commodity markets;
2. (2) Pricing set forth in any pre-existing agreement, including stored and in-transit inventory;
3. (3) Additional costs imposed on the person by the supplier of the goods or services; or
4. (4) Additional costs for labor, services, or materials used to provide the goods or services, including costs of replacement inventory, additional costs to transport goods or services, and additional labor charges.

§ 47-18-5104. Violation — Unfair or deceptive act or practice — Penalties cumulative.

(a) Violation of any provision of this part, or any rules and regulations promulgated hereunder, constitutes an unfair or deceptive act or practice under § 47-18-104(a); provided, that no criminal penalty shall be incurred for violation of this part. A civil action for violation of this part may be brought under part 1 of this chapter.
(b) The remedies and penalties provided in this section are cumulative. This part preempts any local ordinance prohibiting the same or similar conduct or imposing a more severe penalty for the same or similar conduct prohibited in this part.

Part 52 Anti-Phishing Act of 2006

§ 47-18-5201. Short title.

This part shall be known and may be cited as the “Anti-Phishing Act of 2006.”

§ 47-18-5202. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Ascertainable loss” means an identifiable deprivation, detriment or injury arising from the identity theft or from any unfair, misleading or deceptive act or practice, even when the precise amount of the loss is not known. Whenever a violation of this part has occurred, an ascertainable loss shall be presumed to exist;
2. (2) “Attorney general” means the attorney general and reporter, or the attorney general and reporter's designee;
3. (3) “Electronic mail message” means a message sent to a unique destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox, commonly referred to as the “local part,” and a reference to an Internet domain, commonly referred to as the “domain part,” whether or not displayed, to which an electronic message can be sent or delivered;
4. (4) “Identification documents” means any card, certificate or document that identifies, or purports to identify, the bearer of such document, whether or not intended for use as identification, and includes, but is not limited to, documents purporting to be driver licenses, nondriver identification cards, birth certificates, marriage certificates, divorce certificates, passports, immigration documents, social security cards, employee identification cards, cards issued by the government to provide benefits of any sort, health care benefit cards, or health benefit organization, insurance company or managed care organization cards for the purpose of identifying a person eligible for services;
5. (5) “Identifying information” means, with respect to an individual, any of the following:
  1. (A) Social security number;
  2. (B) Driver license number;
  3. (C) Bank account number;
  4. (D) Credit card or debit card number;
  5. (E) Personal identification number (PIN);
  6. (F) Biometric data;
  7. (G) Private medical information (PMI);
  8. (H) Fingerprints;
  9. (I) Account password; or
  10. (J) Any other piece of information that can be used to access an individual's financial accounts or obtain identification, act as identification, or obtain goods or services;
6. (6) “Internet” means the global information system that is logically linked together by a globally unique address space based on the Internet protocol (IP), or its subsequent extensions, and that is able to support communications using the Transmission Control Protocol/Internet Protocol (TCP/IP) suite, or its subsequent extensions, or other IP-compatible protocols, and that provides, uses, or makes accessible, either publicly or privately, high level services layered on communications and related infrastructure;
7. (7) “Person” means a natural person, consumer, individual, governmental agency, partnership, corporation, trust, estate, incorporated or unincorporated association, and any other legal or commercial entity however organized;
8. (8) “Tennessee Consumer Protection Act” means the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter and related statutes. Related statutes specifically include any statute that indicates within the law, regulation or rule that a violation of that law, regulation or rule is a violation of the Tennessee Consumer Protection Act. Without limiting the scope of this subdivision (8), related statutes include, but are not limited to, the Membership Camping Act, compiled in title 66, chapter 32, part 3;
9. (9) “Web page” means a location that has a single uniform resource locator or other single location with respect to the internet; and
10. (10) “Wireless communication” includes text messages sent and received on smart devices.

§ 47-18-5203. Violation of part.

(a) It shall be unlawful for any person to represent oneself, either directly or by implication, to be another person, without the authorization or permission of such other person, through the use of the Internet, electronic mail messages or any other electronic means, including wireless communication, and to solicit, request, or take any action to induce a resident of this state to provide identifying information or identification documents.
(b) It shall be unlawful for any person without the authorization or permission of the person who is the subject of the identifying information, with the intent to defraud, for such person's own use or the use of a third person, or to sell or distribute the information to another, to:
1. (1) Fraudulently obtain, record or access identifying information that would assist in accessing financial resources, obtaining identification documents, or obtaining benefits of such other person;
2. (2) Obtain goods or services through the use of identifying information of such other person; or
3. (3) Obtain identification documents in such other person's name.
(c) It shall be unlawful for any person with the intent to defraud and without the authorization or permission of the person who is the owner or licensee of a web page or web site to:
1. (1) Knowingly duplicate or mimic all or any portion of the web site or web page;
2. (2) Direct or redirect an electronic mail message from the IP address of a person to any other IP address;
3. (3) Use any trademark, logo, name, or copyright of another person on a web page; or
4. (4) Create an apparent but false link to a web page of a person that is directed or redirected to a web page or IP address other than that of the person represented.
(d) It shall be unlawful for any person to attempt to commit any of the violations enumerated in this section.
(e) In addition to the penalties set forth in § 47-18-5205, a person who knowingly violates:
1. (1) Subsection (a), (b), or (c) commits a Class A misdemeanor; or
2. (2) Subsection (d) commits a Class B misdemeanor.

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§ 47-18-5204. Persons allowed to bring an action for damages.

(a) The following persons may bring an action against a person who violates or is in violation of § 47-18-5203:
1. (1)
  1. (A) A person who:
    1. (i) Is engaged in the business of providing Internet access service to the public, owns a web page, or owns a trademark; and
    2. (ii) Suffers ascertainable loss by a violation of § 47-18-5203.
  2. (B) An action brought under subdivision (a)(1)(A) may seek to recover the greater of actual damages or five hundred thousand dollars ($500,000); or
2. (2)
  1. (A) An individual who suffers an ascertainable loss by a violation of § 47-18-5203 may bring an action, but only against a person who has directly violated § 47-18-5203.
  2. (B) An action brought under subdivision (a)(2)(A) may seek to enjoin further violations of § 47-18-5203 and to recover the greater of three (3) times the amount of actual damages or five thousand dollars ($5,000), per violation.
(b) The attorney general and reporter or a district attorney general may bring an action against a person who violates or is in violation of § 47-18-5203 to enjoin further violations of § 47-18-5203 and to recover a civil penalty of up to two thousand five hundred dollars ($2,500), per violation.
(c) In an action pursuant to this part, a court may, in addition, do either or both of the following:
1. (1) Increase the recoverable damages to an amount up to three (3) times the damages otherwise recoverable under subsection (a) in cases in which the defendant has established a pattern and practice of violating § 47-18-5203; or
2. (2) Award costs of the suit and reasonable attorney's fees to a prevailing plaintiff.
(d) The remedies provided in this part do not preclude the seeking of remedies, including criminal remedies, under any other applicable law.
(e) For purposes of subdivision (a)(1), multiple violations of § 47-18-5203 resulting from any single action or conduct shall constitute one (1) violation.
(f) No provider of an interactive computer service may be held liable under this part or any other state law for identifying, removing, or disabling access to content that resides on an Internet web page or other online location that such provider believes in good faith is used to engage in a violation of this part.

§ 47-18-5205. Violation of part constituting violation of the Tennessee Consumer Protection Act — Application and construction.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act.
(b) For the purpose of application of the Tennessee Consumer Protection Act, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting trade or commerce and subject to the penalties and remedies as provided in such act, in addition to the penalties and remedies set forth in this part.
(c) If the attorney general has reason to believe that a person has violated this part, then the attorney general may institute a proceeding under this chapter.

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47-18-5203(e)

Part 53 Tennessee Truth in Music Advertising Act

§ 47-18-5301. Short title.

This part shall be known and may be cited as the “Tennessee Truth in Music Advertising Act.”

§ 47-18-5302. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Performing group” means a vocal or instrumental group seeking to use the name of another group that has previously released a commercial sound recording under that name;
2. (2) “Recording group” means a vocal or instrumental group at least one (1) of whose members has previously released a commercial sound recording under that group's name and in which the member or members have a legal right by virtue of use or operation under the group name without having abandoned the name or affiliation with the group; and
3. (3) “Sound recording” means a work that results from the fixation on a material object of a series of musical, spoken or other sounds regardless of the nature of the material object, such as a disc, tape, or other phono-record, in which the sounds are embodied.

§ 47-18-5303. Prohibited musical performance or production.

No person shall advertise or conduct a live musical performance or production in this state through the use of a false, deceptive, or misleading affiliation, connection, or association, between a performing group and a recording group. The prohibition contained in this section does not apply if:
1. (1) The performing group is the authorized registrant and owner of a federal service mark for that group registered in the United States patent and trademark office;
2. (2) At least one (1) member of the performing group was a member of the recording group and has a legal right by virtue of use or operation under the group name without having abandoned the name or affiliation with the group;
3. (3) The live musical performance or production is identified in all advertising and promotion as a salute or tribute, and the name of the vocal or instrumental group performing is not so closely related or similar to that used by the recording group that it would tend to confuse or mislead the public;
4. (4) The advertising does not relate to a live musical performance or production taking place in this state; or
5. (5) The performance or production is expressly authorized by the performing group.

§ 47-18-5304. Violations — Application and construction.

(a) A violation of this part constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter.
(b) For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this part shall be construed to constitute an unfair or deceptive act or practice affecting the conduct of trade or commerce and subject to the penalties and remedies as provided by that act. The attorney general may assess a civil penalty of not less than five thousand dollars ($5,000) nor more than fifteen thousand dollars ($15,000) for a violation of this part. For purposes of this part, each performance in violation of this part constitutes a separate violation of this part. The civil penalties recoverable by this state under this part are supplemental and cumulative to any other available civil or criminal penalties and relief available under other laws, regulations and rules, including, but not limited to, those available pursuant to § 47-18-108.

Part 54 Foreclosure-Related Rescue Services

§ 47-18-5401. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Foreclosure-related rescue services” means any service related to or promising assistance in connection with:
  1. (A) Stopping, avoiding or delaying foreclosure proceedings concerning residential real property; or
  2. (B) Curing or otherwise addressing a default or failure to timely pay with respect to a residential mortgage loan obligation;
2. (2) “Foreclosure-rescue consultant” means a person who directly or indirectly makes a solicitation, representation or offer to a homeowner to provide or perform, in return for payment of money or other valuable consideration, foreclosure-related rescue services; provided, that a foreclosure-rescue consultant shall not include:
  1. (A) A person acting under the express authority or written approval of the United States department of housing and urban development or other department or agency of the United States or this state to provide foreclosure-related rescue services; provided, that the person does not solicit, charge, receive or attempt to collect or secure payment, directly or indirectly, for foreclosure-related rescue services except as expressly authorized by federal law, regulation or rule;
  2. (B) A charitable, not-for-profit agency or organization, as determined by the United States internal revenue service under § 501(c)(3) of the Internal Revenue Code, codified in 26 U.S.C. § 501(c)(3), that offers counseling or advice to an owner of residential real property in foreclosure or loan default if the agency or organization does not contract for foreclosure-related rescue services with a for-profit lender or person facilitating or engaging in foreclosure-rescue transactions, and does not solicit, charge, receive or attempt to collect or secure payment, directly or indirectly, for foreclosure-related services;
  3. (C) A person who holds or is owed an obligation secured by a lien on any residential real property in foreclosure if the person performs foreclosure-related rescue services in connection with this obligation or lien and the obligation or lien was not the result of or part of a proposed foreclosure reconveyance or foreclosure-rescue transaction;
  4. (D) A state or national bank or its subsidiary, a state or federal savings institution or its subsidiary, a state or federal credit union, an industrial loan and thrift company or a licensed mortgage loan broker or originator; or
  5. (E) An attorney licensed or otherwise authorized to practice law in this state who is providing legal services to a client;
3. (3) “Foreclosure-rescue transaction” means a transaction that is designed or intended by the parties to stop, avoid or delay foreclosure proceedings against a homeowner's residential real property;
4. (4) “Homeowner” means any record title owner of residential real property that is the subject of foreclosure proceedings; and
5. (5) “Residential real property” means improved real property used or occupied or intended to be used or occupied for residential purposes by the owner.

§ 47-18-5402. Marketing of foreclosure-related rescue services — Agreements and cancellation rights.

(a) In the course of offering or providing foreclosure-related rescue services, no foreclosure-rescue consultant shall:
1. (1) Engage in any unfair, misleading, or deceptive acts or practices during the course of advertising, marketing, offering, selling or contracting for foreclosure-related services;
2. (2) Engage in or initiate foreclosure-related rescue services without first executing a written agreement with the homeowner for foreclosure-related rescue services;
3. (3) Solicit, charge, receive or attempt to collect or secure payment, directly or indirectly, for foreclosure-related rescue services before completing or performing all services contained in the agreement for foreclosure-related rescue services;
4. (4) Induce or attempt to induce any consumer to enter into a contract or agreement that does not fully comply in all respects with this part; or
5. (5) Fail to accept and honor a consumer's request to cancel and provide any related refunds within ten (10) business days.
(b) The written agreement for foreclosure-related rescue services required by subdivision (a)(1) shall be printed in at least 12-point uppercase type and shall be signed by both parties. The agreement shall include the name, physical address, telephone number and electronic mail address of the person providing foreclosure-related rescue services, the exact nature and specific detail of each service to be provided, the total amount and terms of charges to be paid by the homeowner for the services and the date of the agreement. The date of the agreement shall not be earlier than the date the homeowner signed the agreement. The foreclosure-rescue consultant shall give the homeowner a copy of the agreement to review not less than one (1) business day before the homeowner is to sign the agreement.
(c) The homeowner has the right to cancel the written agreement without any penalty or obligation if the homeowner cancels the agreement within three (3) business days after signing the written agreement. The right to cancel may not be waived by the homeowner or limited in any manner by the foreclosure-rescue consultant. If the homeowner cancels the agreement, any payments that have been given to the foreclosure-rescue consultant shall be returned to the homeowner within ten (10) business days after receipt of the notice of cancellation.
(d) An agreement for foreclosure-related rescue services shall contain, immediately above the signature line, a statement in at least 12-point uppercase type that substantially complies with the following:
1. 1. YOU MAY CANCEL THIS AGREEMENT FOR FORECLOSURE-RELATED RESCUE SERVICES WITHOUT ANY PENALTY OR OBLIGATION WITHIN 3 BUSINESS DAYS FOLLOWING THE DATE THIS AGREEMENT IS SIGNED BY YOU. THE FORECLOSURE-RESCUE CONSULTANT IS PROHIBITED BY LAW FROM ACCEPTING ANY MONEY, PROPERTY, OR OTHER FORM OF PAYMENT FROM YOU UNTIL ALL PROMISED SERVICES ARE COMPLETE. IF FOR ANY REASON YOU HAVE PAID THE CONSULTANT BEFORE CANCELLATION, YOUR PAYMENT MUST BE RETURNED TO YOU NO LATER THAN 10 BUSINESS DAYS AFTER THE CONSULTANT RECEIVES YOUR CANCELLATION NOTICE. TO CANCEL THIS AGREEMENT, A SIGNED AND DATED COPY OF A STATEMENT THAT YOU ARE CANCELLING THE AGREEMENT SHOULD BE MAILED (POSTMARKED) OR DELIVERED TO (NAME) AT (PHYSICAL ADDRESS) OR (E-MAIL ADDRESS) NO LATER THAN MIDNIGHT OF (DATE). IMPORTANT: IT IS RECOMMENDED THAT YOU CONTACT YOUR LENDER OR MORTGAGE SERVICER BEFORE SIGNING THIS AGREEMENT. YOUR LENDER OR MORTGAGE SERVICER MAY BE WILLING TO NEGOTIATE A PAYMENT PLAN OR A RESTRUCTURING WITH YOU FREE OF CHARGE.
(e) The inclusion of the statement in subsection (d) does not prohibit the foreclosure-rescue consultant from giving the homeowner more time in which to cancel the agreement than is set forth in the statement; provided, that all other requirements of this section are met.
(f) The foreclosure-rescue consultant shall give the homeowner a copy of the signed agreement within three (3) hours after the homeowner signs the agreement.
(g) Any contract or agreement for foreclosure-related services that does not contain the provisions set forth in this section shall be void and unenforceable as a matter of law and public policy.

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47-18-104(b)(44)

Part 55 Uniform Debt-Management Services Act

§ 47-18-5501. Short title.

This part shall be known and may be cited as the “Uniform Debt-Management Services Act.”

§ 47-18-5502. Part definitions.

In this part:
1. (1) “Administrator” means the commissioner of commerce and insurance;
2. (2) “Affiliate”:
  1. (A) With respect to an individual, means:
    1. (i) The spouse of the individual;
    2. (ii) A sibling of the individual or the spouse of a sibling;
    3. (iii) An individual or the spouse of an individual who is a lineal ancestor or lineal descendant of the individual or the individual's spouse;
    4. (iv) An aunt, uncle, great aunt, great uncle, first cousin, niece, nephew, grandniece, or grandnephew, whether related by the whole or the half blood or adoption, or the spouse of any of them; or
    5. (v) Any other individual occupying the residence of the individual; and
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  2. (B) With respect to an entity, means:
    1. (i) A person that directly or indirectly controls, is controlled by or is under common control with the entity;
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    2. (ii) An officer of, or an individual performing similar functions with respect to, the entity;
    3. (iii) A director of, or an individual performing similar functions with respect to, the entity;
    4. (iv) Subject to adjustment of the dollar amount pursuant to § 47-18-5532(f), a person that receives or received more than twenty-five thousand dollars ($25,000) from the entity in either the current year or the preceding year or a person that owns more than ten percent (10%) of, or an individual who is employed by or is a director of, a person that receives or received more than twenty-five thousand dollars ($25,000) from the entity in either the current year or the preceding year;
    5. (v) An officer or director of, or an individual performing similar functions with respect to, a person described in this subdivision (2)(B);
    6. (vi) The spouse of, or an individual occupying the residence of, an individual described in subdivisions (2)(B)(i)-(v); or
    7. (vii) An individual who has the relationship specified in subdivision (2)(A)(iv) to an individual or the spouse of an individual described in subdivisions (2)(B)(i)-(v);
3. (3) “Agreement” means an agreement between a provider and an individual for the performance of debt-management services;
4. (4) “Bank” means a financial institution, including a commercial bank, savings bank, savings and loan association, credit union and trust company, engaged in the business of banking, chartered under federal or state law, and regulated by a federal or state banking regulatory authority;
5. (5) “Business address” means the physical location of a business, including the name and number of a street;
6. (6) “Certified counselor” means an individual certified by a training program or certifying organization, approved by the administrator, that authenticates the competence of individuals providing education and assistance to other individuals in connection with debt-management services in which an agreement contemplates that creditors will reduce finance charges or fees for late payment, default or delinquency;
7. (7) “Certified debt specialist” means an individual certified by a training program or certifying organization, approved by the administrator, that authenticates the competence of individuals providing education and assistance to other individuals in connection with debt-management services in which an agreement contemplates that creditors will settle debts for less than the full principal amount of debt owed;
8. (8) “Concessions” means assent to repayment of a debt on terms more favorable to an individual than the terms of the contract between the individual and a creditor;
9. (9) “Day” means calendar day;
10. (10) “Debt-management services” means services as an intermediary between an individual and one (1) or more creditors of the individual for the purpose of obtaining concessions, but does not include:
  1. (A) Legal services provided in an attorney-client relationship by an attorney licensed or otherwise authorized to practice law in this state;
  2. (B) Accounting services provided in an accountant-client relationship by a certified public accountant licensed to provide accounting services in this state; or
  3. (C) Financial-planning services provided in a financial planner-client relationship by a member of a financial-planning profession whose members the administrator, by rule, determines are:
    1. (i) Licensed by this state;
    2. (ii) Subject to a disciplinary mechanism;
    3. (iii) Subject to a code of professional responsibility; and
    4. (iv) Subject to a continuing-education requirement;
11. (11) “Entity” means a person other than an individual;
12. (12) “Good faith” means honesty in fact and the observance of reasonable standards of fair dealing;
13. (13) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture or any other legal or commercial entity. The term does not include a public corporation, government or governmental subdivision, agency or instrumentality;
14. (14) “Plan” means a program or strategy in which a provider furnishes debt-management services to an individual and that includes a schedule of payments to be made by or on behalf of the individual and used to pay debts owed by the individual;
15. (15) “Principal amount of the debt” means the amount of a debt at the time of an agreement;
16. (16) “Provider” means a person that provides, offers to provide or agrees to provide debt-management services directly or through others;
17. (17) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
18. (18) “Settlement fee” means a charge imposed on or paid by an individual in connection with a creditor's assent to accept in full satisfaction of a debt an amount less than the principal amount of the debt;
19. (19) “Sign” means, with present intent to authenticate or adopt a record:
  1. (A) To execute or adopt a tangible symbol; or
  2. (B) To attach to or logically associate with the record an electronic sound, symbol or process;
20. (20) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands or any territory or insular possession subject to the jurisdiction of the United States; and
21. (21) “Trust account” means an account held by a provider that is:
  1. (A) Established in an insured bank;
  2. (B) Separate from other accounts of the provider or its designee;
  3. (C) Designated as a trust account or other account designated to indicate that the money in the account is not the money of the provider or its designee; and
  4. (D) Used to hold money of one (1) or more individuals for disbursement to creditors of the individuals.

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§ 47-18-5503. Exempt agreements and persons.

This part does not apply to:
1. (1) An agreement with an individual whom the provider has no reason to know resides in this state at the time of the agreement;
2. (2) A provider to the extent that the provider:
  1. (A) Provides or agrees to provide debt-management, educational or counseling services to an individual whom the provider has no reason to know resides in this state at the time the provider agrees to provide the services; or
  2. (B) Receives no compensation for debt-management services from or on behalf of the individuals to whom it provides the services or from their creditors; or
3. (3) The following persons or their employees when the person or the employee is engaged in the regular course of the person's business or profession:
  1. (A) A judicial officer, a person acting under an order of a court or an administrative agency or an assignee for the benefit of creditors;
  2. (B) A bank;
  3. (C) An affiliate, as defined in § 47-18-5502, of a bank if the affiliate is regulated by a federal or state banking regulatory authority;
  4. (D) Any person who is engaged in the credit services business as defined in § 47-18-1002 but is not engaged in the business of debt counseling, debt management or debt settlement as defined by this part; provided, that the person is registered as a credit services business with the administrator; or
  5. (E) A title insurer, escrow company or other person that provides bill-paying services if the provision of debt-management services is incidental to the bill-paying services.

§ 47-18-5504. Registration required — Maintenance and publication of list of registered providers.

(a) Except as otherwise provided in subsection (b), a provider may not provide debt-management services to an individual whom the provider reasonably should know resides in this state at the time the provider agrees to provide the services, unless the provider is registered under this part.
(b) If a provider is registered under this part, subsection (a) does not apply to an employee or agent of the provider.
(c) The administrator shall maintain and publicize a list of the names of all registered providers.

§ 47-18-5505. Application for registration — Form, fee, and accompanying documents.

(a) An application for registration as a provider must be in a form prescribed by the administrator.
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(b) Subject to adjustment of dollar amounts pursuant to § 47-18-5532(f), an application for registration as a provider must be accompanied by:
1. (1) The fee established by the administrator;
2. (2) The bond required by § 47-18-5513;
3. (3) Identification of all trust accounts required by § 47-18-5522 and an irrevocable consent authorizing the administrator to review and examine the trust accounts;
4. (4) Evidence of insurance in the amount of two hundred fifty thousand dollars ($250,000):
  1. (A) Against the risks of dishonesty, fraud, theft and other misconduct on the part of the applicant or a director, employee or agent of the applicant;
  2. (B) Issued by an insurance company authorized to do business in this state and rated at least “A” or equivalent by a nationally recognized rating organization approved by the administrator;
  3. (C) With a deductible not exceeding five thousand dollars ($5,000);
  4. (D) Payable for the benefit of the applicant, this state and individuals who are residents of this state, as their interests may appear; and
  5. (E) Not subject to cancellation by the applicant or the insurer until sixty (60) days after written notice has been given to the administrator;
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5. (5) A record consenting to the jurisdiction of this state containing:
  1. (A) The name, business address and other contact information of its registered agent in this state for purposes of service of process; or
  2. (B) The appointment of the administrator as agent of the provider for purposes of service of process; and
6. (6) If the applicant is exempt from taxation under the Internal Revenue Code, 26 U.S.C. § 501, evidence of that status.

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§ 47-18-5506. Application for registration — Required information.

An application for registration must be signed under oath and include:
1. (1) The applicant's name, principal business address and telephone number, and all other business addresses in this state, electronic-mail addresses and Internet web site addresses;
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  - 47-18-5507
  - 47-18-5512(2)
2. (2) All names under which the applicant conducts business;
3. (3) The address of each location in this state at which the applicant will provide debt-management services or a statement that the applicant will have no such location;
4. (4) The name and home address of each officer and director of the applicant and each person that owns at least ten percent (10%) of the applicant;
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  - 47-18-5508
  - 47-18-5511(c)
5. (5) Identification of every jurisdiction in which, during the five (5) years immediately preceding the application:
  1. (A) The applicant or any of its officers or directors has been licensed or registered to provide debt-management services; or
  2. (B) Individuals have resided when they received debt-management services from the applicant;
6. (6) A statement describing, to the extent it is known or should be known by the applicant, any material civil or criminal judgment or litigation and any material administrative or enforcement action by a governmental agency in any jurisdiction against the applicant, any of its officers, directors, owners, or agents, or any person who is authorized to have access to the trust account required by § 47-18-5522;
7. (7) The applicant's financial statements, reviewed by a licensed accountant, for each of the two (2) years immediately preceding the application or, if it has not been in operation for the two (2) years preceding the application, for the period of its existence. If the applicant claims nonprofit or tax exempt status, or if the applicant's business practices involve holding, accessing or directing the funds of an individual, the financial statements required by this part shall be audited by a licensed accountant;
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  - 47-18-5508
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8. (8) Evidence of accreditation or certification by an independent accrediting or certifying organization approved by the administrator;
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  - 47-18-5511(b)(3)
9. (9) Evidence that, within twelve (12) months after initial employment, each of the applicant's counselors becomes certified as a certified counselor or certified debt specialist;
10. (10) A description of the three (3) most commonly used educational programs that the applicant provides or intends to provide to individuals who reside in this state and a copy of any materials used or to be used in those programs;
11. (11) A description of the applicant's financial analysis and initial budget plan, including any form or electronic model, used to evaluate the financial condition of individuals;
12. (12) A copy of each form of agreement that the applicant will use with individuals who reside in this state;
13. (13) The schedule of fees and charges that the applicant will use with individuals who reside in this state;
14. (14)
  1. (A) At the applicant's expense, the results of a state and national fingerprint-based criminal history records check conducted by the federal bureau of investigation (FBI) or the Tennessee bureau of investigation (TBI), covering every officer, employee, or agent of the applicant who is authorized to have access to the trust account required by § 47-18-5522;
  2. (B) The applicant shall obtain electronically-scanned fingerprints placed on standard FBI or TBI applicant cards through a company that has contracted with the state to provide a fingerprinting service; provided, however, that the administrator may allow the applicant to instead provide the administrator with three (3) sets of classifiable fingerprints on standard FBI or TBI applicant cards for processing by the FBI or TBI for good cause;
  3. (C) In the event the state no longer contracts with any company to provide an electronic fingerprinting service, the applicant shall submit three (3) classifiable TBI and FBI fingerprint cards to be processed at the applicant's expense;
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  - 47-18-5509(b)
  - 47-18-5511(b)(4)
15. (15) The names and addresses of all employers of each director during the ten (10) years immediately preceding the application;
16. (16) A description of any ownership interest of at least ten percent (10%) by a director, owner or employee of the applicant in:
  1. (A) Any affiliate of the applicant; or
  2. (B) Any entity that provides products or services to the applicant or any individual relating to the applicant's debt-management services;
17. (17) If an applicant claims nonprofit or tax exempt status, or if an applicant's business practices involve holding, accessing or directing the funds of an individual, a statement of the amount of compensation of the applicant's five (5) most highly compensated employees for each of the three (3) years immediately preceding the application or, if the applicant has not been in operation for the three (3) years preceding the application, for the period of the applicant's existence;
18. (18) The identity of each director who is an affiliate, as defined in § 47-18-5502(2)(A) or (2)(B)(i), (ii), (iv), (v), (vi) or (vii), of the applicant; and
19. (19) Any other information that the administrator reasonably requires to perform the administrator's duties under § 47-18-5509.
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  - 47-18-5510(a)

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§ 47-18-5507. Obligation to update information in application for registration.

An applicant or registered provider shall notify the administrator within ten (10) days after a change in the information specified in § 47-18-5505(b)(4) or (b)(6) or § 47-18-5506(1), (3), (6), (12) or (13).

§ 47-18-5508. Public information in application for registration.

Except for the information required by § 47-18-5506(7), (14), and (17), and the addresses required by § 47-18-5506(4), the administrator shall make the information in an application for registration as a provider available to the public.

§ 47-18-5509. Issuance or denial of certificate of registration.

(a) Except as otherwise provided in subsections (c) and (d), the administrator shall issue a certificate of registration as a provider to a person that complies with §§ 47-18-5505 and 47-18-5506.
(b) If an applicant has otherwise complied with §§ 47-18-5505 and 47-18-5506, including a timely effort to obtain the information required by § 47-18-5506(14), but the information has not been received, the administrator may issue a temporary certificate of registration. The temporary certificate shall expire no later than one hundred eighty (180) days after issuance.
(c) The administrator may deny registration if:
1. (1) The application contains information that is materially erroneous or incomplete;
2. (2) An officer, director, or owner of the applicant has been convicted of a crime or suffered a civil judgment involving dishonesty, or the violation of state or federal securities laws;
3. (3) The applicant or any of its officers, directors, or owners has defaulted in the payment of money collected for others;
4. (4) The application is not accompanied by the fee established by the administrator;
5. (5) The administrator finds that the financial responsibility, experience, character, or general fitness of the applicant or its owners, directors, employees, or agents does not warrant belief that the business will be operated in compliance with this part;
6. (6) The applicant or any of its officers, directors, or owners has violated this part or any rule promulgated pursuant to this part; or
7. (7) The applicant or any of its officers, directors, or owners has engaged in any act or violation for which the administrator could suspend or revoke a registration under this part.
(d) The administrator shall deny registration if, with respect to an applicant that is organized as a not-for-profit entity or has obtained tax-exempt status under the Internal Revenue Code, 26 U.S.C. § 501, the applicant's board of directors is not independent of the applicant's employees and agents.
(e) Subject to adjustment of the dollar amount pursuant to § 47-18-5532(f), a board of directors is not independent for purposes of subsection (d) if more than one-fourth (¼) of its members:
1. (1) Are affiliates of the applicant, as defined in § 47-18-5502(2)(A) or § 47-18-5502(2)(B)(i), (ii), (iv), (v), (vi) or (vii); or
2. (2) After the date ten (10) years before first becoming a director of the applicant, were employed by or directors of a person that received from the applicant more than twenty-five thousand dollars ($25,000) in either the current year or the preceding year.

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§ 47-18-5510. Timing of certificate of registration.

(a) The administrator shall approve or deny an initial registration as a provider within one hundred twenty (120) days after an application is filed. In connection with a request pursuant to § 47-18-5506(19) for additional information, the administrator may extend the one hundred twenty-day period for not more than sixty (60) days. Within seven (7) days after denying an application, the administrator, in a record, shall inform the applicant of the reasons for the denial.
(b) If the administrator does not act on an application within the time prescribed in subsection (a), the applicant may appeal and request a hearing pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3.
(c) Subject to §§ 47-18-5511(d) and 47-18-5534, a registration as a provider is valid for one (1) year.

§ 47-18-5511. Renewal of registration.

(a) A provider must obtain a renewal of its registration annually.
(b) An application for renewal of registration as a provider must be in a form prescribed by the administrator, signed under oath; and:
1. (1) Be filed no more than sixty (60) days before the registration expires;
2. (2) Be accompanied by the fee established by the administrator and the bond required by § 47-18-5513;
3. (3) Contain the matter required for initial registration as a provider by § 47-18-5506(8) and (9) and a financial statement, audited by an accountant licensed to conduct audits, for the applicant's fiscal year immediately preceding the application;
4. (4) Disclose any changes in the information contained in the applicant's application for registration or its immediately previous application for renewal, as applicable. If an application is otherwise complete and the applicant has made a timely effort to obtain the information required by § 47-18-5506(14), but the information has not been received, the administrator may issue a temporary renewal of registration. The temporary renewal shall expire no later than one hundred eighty (180) days after issuance;
5. (5) Supply evidence of insurance in an amount equal to the larger of two hundred fifty thousand dollars ($250,000) or the highest daily balance in the trust account required by § 47-18-5522 during the six-month period immediately preceding the application:
  1. (A) Against risks of dishonesty, fraud, theft and other misconduct on the part of the applicant or a director, employee or agent of the applicant;
  2. (B) Issued by an insurance company authorized to do business in this state and rated at least “A” or equivalent by a nationally recognized rating organization approved by the administrator;
  3. (C) With a deductible not exceeding five thousand dollars ($5,000);
  4. (D) Payable for the benefit of the applicant, this state and individuals who are residents of this state, as their interests may appear; and
  5. (E) Not subject to cancellation by the applicant or the insurer until sixty (60) days after written notice has been given to the administrator;
6. (6) Disclose the total amount of money received by the applicant pursuant to plans during the preceding twelve (12) months from or on behalf of individuals who reside in this state and the total amount of money distributed to creditors of those individuals during that period;
7. (7) Disclose, to the best of the applicant's knowledge, the gross amount of money accumulated during the preceding twelve (12) months pursuant to plans by or on behalf of individuals who reside in this state and with whom the applicant has agreements; and
8. (8) Provide any other information that the administrator reasonably requires to perform the administrator's duties under this section.
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- 47-18-5512
(c) Except for the information required by § 47-18-5506(7), (14) and (17) and the addresses required by § 47-18-5506(4), the administrator shall make the information in an application for renewal of registration as a provider available to the public.
(d) If a registered provider files a timely and complete application for renewal of registration, the registration remains effective until the administrator, in a record, notifies the applicant of a denial and states the reasons for the denial.
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- 47-18-5510(c)
(e) If the administrator denies an application for renewal of registration as a provider, the applicant, within thirty (30) days after receiving notice of the denial, may appeal and request a hearing pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3. Subject to § 47-18-5534, while the appeal is pending, the applicant shall continue to provide debt-management services to individuals with whom it has agreements. If the denial is affirmed, subject to the administrator's order and § 47-18-5534, the applicant shall continue to provide debt-management services to individuals with whom it has agreements until, with the approval of the administrator, it transfers the agreements to another registered provider or returns to the individuals all unexpended money that is under the applicant's control.

§ 47-18-5512. Registration in another state.

If a provider holds a license or certificate of registration in another state authorizing it to provide debt-management services, the provider may submit a copy of that license or certificate and the application for it instead of an application in the form prescribed by § 47-18-5505(a), § 47-18-5506 or § 47-18-5511(b). The administrator shall accept the application and the license or certificate from the other state as an application for registration as a provider or for renewal of registration as a provider, as appropriate, in this state if:
1. (1) The application in the other state contains information substantially similar to or more comprehensive than that required in an application submitted in this state;
2. (2) The applicant provides the information required by § 47-18-5506(1), (3), (10), (12) and (13); and
3. (3) The applicant, under oath, certifies that the information contained in the application is current or, to the extent it is not current, supplements the application to make the information current.

§ 47-18-5513. Bond requirement.

(a) Except as otherwise provided in § 47-18-5514, a provider that is required to be registered under this part shall file a surety bond with the administrator, which must:
1. (1) Be in effect during the period of registration and for two (2) years after the provider ceases providing debt-management services to individuals in this state; and
2. (2) Run to this state for the benefit of this state and of individuals who reside in this state when they agree to receive debt-management services from the provider, as their interests may appear.
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- 47-18-5514(b)
(b) Subject to adjustment of the dollar amount pursuant to § 47-18-5532(f), a surety bond filed pursuant to subsection (a) must:
1. (1) Be in the amount of fifty thousand dollars ($50,000) or other larger or smaller amount that the administrator determines is warranted by the financial condition and business experience of the provider, the history of the provider in performing debt-management services, the risk to individuals and any other factor the administrator considers appropriate;
2. (2) Be issued by a bonding, surety or insurance company authorized to do business in this state and rated at least “A” by a nationally recognized rating organization; and
3. (3) Have payment conditioned upon noncompliance of the provider or its agent with this part.
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- 47-18-5514(a)
(c) If the principal amount of a surety bond is reduced by payment of a claim or a judgment, the provider shall immediately notify the administrator and, within thirty (30) days after notice by the administrator, file a new or additional surety bond in an amount set by the administrator. The amount of the new or additional bond must be at least the amount of the bond immediately before payment of the claim or judgment. If for any reason a surety terminates a bond, the provider shall immediately file a new surety bond in the amount of fifty thousand dollars ($50,000) or other amount determined pursuant to subsection (b).
(d) The administrator or an individual may obtain satisfaction out of the surety bond procured pursuant to this section if:
1. (1) The administrator assesses expenses under § 47-18-5532(b)(1), issues a final order under § 47-18-5533(a)(2) or recovers a final judgment under § 47-18-5533(a)(4), (a)(5) or (d); or
2. (2) An individual recovers a final judgment pursuant to § 47-18-5535(a), (b), (c)(1), (c)(2) or (c)(4).
(e) If claims against a surety bond exceed or are reasonably expected to exceed the amount of the bond, the administrator, on the initiative of the administrator or on petition of the surety, shall, unless the proceeds are adequate to pay all costs, judgments and claims, distribute the proceeds in the following order:
1. (1) To satisfaction of a final order or judgment under § 47-18-5533(a)(2), (a)(4), (a)(5) or (d);
2. (2) To final judgments recovered by individuals pursuant to § 47-18-5535(a), (b), (c)(1), (c)(2) or (c)(4), pro rata;
3. (3) To claims of individuals established to the satisfaction of the administrator, pro rata; and
4. (4) If a final order or judgment is issued under § 47-18-5533(a), to the expenses charged pursuant to § 47-18-5532(b)(1).

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§ 47-18-5514. Substitute for bond requirement.

(a) Instead of the surety bond required by § 47-18-5513, a provider may deliver to the administrator, in the amount required by § 47-18-5513(b), and, except as otherwise provided in subdivision (a)(2)(A), payable or available to this state and to individuals who reside in this state when they agree to receive debt-management services from the provider, as their interests may appear, if the provider or its agent does not comply with this part:
1. (1) A certificate of insurance:
  1. (A) Issued by an insurance company authorized to do business in this state and rated at least “A” or equivalent by a nationally recognized rating organization approved by the administrator; and
  2. (B) With no deductible, or if the provider supplies a bond in the amount of five thousand dollars ($5,000), a deductible not exceeding five thousand dollars ($5,000); or
2. (2) With the approval of the administrator:
  1. (A) An irrevocable letter of credit, issued or confirmed by a bank approved by the administrator, payable upon presentation of a certificate by the administrator stating that the provider or its agent has not complied with this part; or
  2. (B) Bonds or other obligations of the United States or guaranteed by the United States or bonds or other obligations of this state or a political subdivision of this state, to be deposited and maintained with a bank approved by the administrator for this purpose.
(b) If a provider furnishes a substitute pursuant to subsection (a), then § 47-18-5513(a), (c), (d) and (e) apply to the substitute.

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§ 47-18-5515. Requirement of good faith.

A provider shall act in good faith in all matters under this part.

§ 47-18-5516. Customer service.

A provider that is required to be registered under this part shall maintain a toll-free communication system, staffed at a level that reasonably permits an individual to speak to a certified counselor, certified debt specialist or customer-service representative, as appropriate, during ordinary business hours.

§ 47-18-5517. Prerequisites for providing debt-management services.

(a) Before providing debt-management services, a registered provider shall give the individual an itemized list of goods and services and the charges for each. The list must be clear and conspicuous, be in a record the individual may keep whether or not the individual assents to an agreement and describe the goods and services the provider offers:
1. (1) Free of additional charge if the individual enters into an agreement;
2. (2) For a charge if the individual does not enter into an agreement; and
3. (3) For a charge if the individual enters into an agreement, using the following terminology, as applicable, and format:
  2. Set up fee
  3. Dollar amount of fee
  4. Monthly service fee
  5. Dollar amount of fee or method of determining amount
  6. Settlement fee
  7. Dollar amount of fee or method of determining amount
  8. Goods and services in addition to those provided in connection with a plan:
  10. (item)Dollar amount of fee or method of determining amount
  12. (item)Dollar amount of fee or method of determining amount
(b) A provider may not furnish debt-management services unless the provider, through the services of a certified counselor or certified debt specialist:
1. (1) Provides the individual with reasonable education about the management of personal finance;
2. (2) Has prepared a financial analysis; and
3. (3) If the individual is to make regular, periodic payments to a creditor or provider:
  1. (A) Has prepared a plan for the individual;
  2. (B) Has made a determination, based on the provider's analysis of the information provided by the individual and otherwise available to it, that the plan is suitable for the individual and the individual will be able to meet the payment obligations under the plan; and
  3. (C) Believes that each creditor of the individual listed as a participating creditor in the plan will accept payment of the individual's debts as provided in the plan.
(c) Before an individual assents to an agreement to engage in a plan, a provider shall:
1. (1) Provide the individual with a copy of the analysis and plan required by subsection (b) in a record that identifies the provider and that the individual may keep whether or not the individual assents to the agreement;
2. (2) Inform the individual of the availability, at the individual's option, of assistance by a toll-free communication system or in person to discuss the financial analysis and plan required by subsection (b); and
3. (3) If a plan contemplates that creditors will reduce finance charges or fees for late payment, default or delinquency, or if the provider's business practices involve holding, accessing or directing the funds of an individual, with respect to all creditors identified by the individual or otherwise known by the provider to be creditors of the individual, provide the individual with a list of:
  1. (A) Creditors that the provider expects to participate in the plan and grant concessions;
  2. (B) Creditors that the provider expects to participate in the plan but not grant concessions;
  3. (C) Creditors that the provider expects not to participate in the plan; and
  4. (D) All other creditors.
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- 47-18-5518(e)
- 47-18-5518(f)
(d) Before an individual assents to an agreement, the provider shall inform the individual, in a separate record that the individual may keep whether or not the individual assents to the agreement:
1. (1) Of the name and business address of the provider;
2. (2) That plans are not suitable for all individuals and the individual may ask the provider about other ways, including bankruptcy, to deal with indebtedness;
3. (3) That establishment of a plan may adversely affect the individual's credit rating or credit scores;
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  - 47-18-5530(b)
4. (4) That nonpayment of debt may lead creditors to increase finance and other charges or undertake collection activity, including litigation;
5. (5) Unless it is not true, that the provider may receive compensation from the creditors of the individual; and
6. (6) That, unless the individual is insolvent, if a creditor settles for less than the full amount of the debt, the plan may result in the creation of taxable income to the individual, even though the individual does not receive any money.
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- 47-18-5518(d)
(e) If a provider may receive payments from an individual's creditors and the plan contemplates that the individual's creditors will reduce finance charges or fees for late payment, default or delinquency, the provider may comply with subsection (d) by providing the following disclosure, surrounded by black lines:
2. IMPORTANT INFORMATION FOR YOU TO CONSIDER
3. (1) Debt-management plans are not right for all individuals, and you may ask us to provide information about other ways, including bankruptcy, to deal with your debts.
4. (2) Using a debt-management plan may make it harder for you to obtain credit.
5. (3) We may receive compensation for our services from your creditors.
7. Name and business address of provider
(f) If a provider will not receive payments from an individual's creditors and the plan contemplates that the individual's creditors will reduce finance charges or fees for late payment, default or delinquency, a provider may comply with subsection (d) by providing the following disclosure, surrounded by black lines:
2. IMPORTANT INFORMATION FOR YOU TO CONSIDER
3. (1) Debt-management plans are not right for all individuals, and you may ask us to provide information about other ways, including bankruptcy, to deal with your debts.
4. (2) Using a debt-management plan may make it harder for you to obtain credit.
6. Name and business address of provider
(g) If an agreement contemplates that creditors will settle debts for less than the full principal amount of debt owed, a provider may comply with subsection (d) by providing the following disclosure, surrounded by black lines:
2. IMPORTANT INFORMATION FOR YOU TO CONSIDER
3. (1) Our program is not right for all individuals, and you may ask us to provide information about bankruptcy and other ways to deal with your debts.
4. (2) Nonpayment of your debts under our program may:
  1. (A) Hurt your credit rating or credit scores;
  2. (B) Lead your creditors to increase finance and other charges; and
  3. (C) Lead your creditors to undertake activity, including lawsuits, to collect the debts.
5. (3) Reduction of debt under our program may result in taxable income to you, even though you will not actually receive any money.
7. Name and business address of provider

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§ 47-18-5518. Communication by electronic or other means.

(a) In this section:
1. (1) “Consumer” means an individual who seeks or obtains goods or services that are used primarily for personal, family or household purposes; and
2. (2) “Federal act” means the electronic signatures in the Global and National Commerce Act, compiled in 15 U.S.C. § 7001 et seq.
(b) A provider may satisfy the requirements of § 47-18-5517, § 47-18-5519, or § 47-18-5527 by means of the Internet or other electronic means if the provider obtains a consumer's consent in the manner provided by 15 U.S.C. § 7001(c)(1).
(c) The disclosures and materials required by §§ 47-18-5517, 47-18-5519 and 47-18-5520 shall be presented in a form that is capable of being accurately reproduced for later reference.
(d) With respect to disclosure by means of an Internet web site, the disclosure of the information required by § 47-18-5517(d) must appear on one (1) or more screens that:
1. (1) Contain no other information; and
2. (2) The individual must see before proceeding to assent to formation of an agreement.
(e) At the time of providing the materials and agreement required by §§ 47-18-5517(c) and (d), 47-18-5519 and 47-18-5527, a provider shall inform the individual that upon electronic, telephonic or written request, it will send the individual a written copy of the materials and shall comply with a request as provided in subsection (f).
(f) If a provider is requested, before the expiration of ninety (90) days after an agreement is completed or terminated, to send a written copy of the materials required by § 47-18-5517(c) and (d), § 47-18-5519, or § 47-18-5527, the provider shall send them at no charge within three (3) business days after the request is received; but the provider need not comply with a request more than once per calendar month or if it reasonably believes the request is made for purposes of harassment. If a request is made more than ninety (90) days after an agreement is completed or terminated, the provider shall send, within a reasonable time, a written copy of the materials requested.
(g) A provider that maintains an Internet web site shall disclose on the home page of its web site or on a page that is clearly and conspicuously connected to the home page by a link that clearly reveals its contents:
1. (1) Its name and all names under which it does business;
2. (2) Its principal business address, telephone number and electronic-mail address, if any; and
3. (3) The names of its principal officers.
(h) Subject to subsection (i), if a consumer who has consented to electronic communication in the manner provided by 15 U.S.C. § 7001 withdraws consent as provided in 15 U.S.C. § 7001, a provider may terminate its agreement with the consumer.
(i) If a provider wishes to terminate an agreement with a consumer pursuant to subsection (h), it shall notify the consumer that it will terminate the agreement unless the consumer, within thirty (30) days after receiving the notification, consents to electronic communication in the manner provided in 15 U.S.C. § 7001(c). If the consumer consents, the provider may terminate the agreement only as permitted by § 47-18-5519(a)(6)(G).

§ 47-18-5519. Form and contents of agreement.

(a) An agreement must:
1. (1) Be in a record;
2. (2) Be dated and signed by the provider and the individual;
3. (3) Include the name of the individual and the address where the individual resides;
4. (4) Include the name, business address and telephone number of the provider;
5. (5) Be delivered to the individual immediately upon formation of the agreement; and
6. (6) Disclose:
  1. (A) The services to be provided;
  2. (B) The amount, or method of determining the amount, of all fees, individually itemized, to be paid by the individual;
  3. (C) The schedule of payments to be made by or on behalf of the individual, including the amount of each payment, the date on which each payment is due and an estimate of the date of the final payment;
  4. (D) If a plan provides for regular periodic payments to creditors:
    1. (i) Each creditor of the individual to which payment will be made, the amount owed to each creditor and any concessions the provider reasonably believes each creditor will offer; and
    2. (ii) The schedule of expected payments to each creditor, including the amount of each payment and the date on which it will be made;
  5. (E) Each creditor that the provider believes will not participate in the plan and to which the provider will not direct payment;
  6. (F) How the provider will comply with its obligations under § 47-18-5527(a);
  7. (G) That the provider may terminate the agreement for good cause, upon return of unexpended money of the individual;
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    47-18-5518(i)
  8. (H) That the individual may cancel the agreement as provided in § 47-18-5520;
  9. (I) That the individual may contact the administrator with any questions or complaints regarding the provider; and
  10. (J) The address, telephone number, and Internet address or web site of the administrator.
(b) For purposes of subdivision (a)(5), delivery of an electronic record occurs when it is made available in a format in which the individual may retrieve, save and print it and the individual is notified that it is available.
(c) If the administrator supplies the provider with any information required under subdivision (a)(6)(J), the provider may comply with that requirement only by disclosing the information supplied by the administrator.
(d) An agreement must provide that:
1. (1) The individual has a right to terminate the agreement at any time, without penalty or obligation, by giving the provider written or electronic notice, in which event:
  1. (A) The provider will refund all unexpended money that the provider or its agent has received from or on behalf of the individual for the reduction or satisfaction of the individual's debt;
  2. (B) With respect to an agreement that contemplates that creditors will settle debts for less than the principal amount of debt, the provider will refund sixty-five percent (65%) of any portion of the set-up fee that has not been credited against the settlement fee; and
  3. (C) All powers of attorney granted by the individual to the provider are revoked and ineffective;
2. (2) The individual authorizes any bank in which the provider or its agent has established a trust account to disclose to the administrator any financial records relating to the trust account; and
3. (3) The provider will notify the individual within five (5) days after learning of a creditor's final decision to reject or withdraw from a plan and that this notice will include:
  1. (A) The identity of the creditor; and
  2. (B) The right of the individual to modify or terminate the agreement.
(e) An agreement may confer on a provider a power of attorney to settle the individual's debt for no more than fifty percent (50%) of the outstanding amount of the debt. An agreement may not confer a power of attorney to settle a debt for more than fifty percent (50%) of that amount, but may confer a power of attorney to negotiate with creditors of the individual on behalf of the individual. An agreement must provide that the provider will obtain the assent of the individual after a creditor has assented to a settlement for more than fifty percent (50%) of the outstanding amount of the debt.
(f) An agreement may not:
1. (1) Provide for application of the law of any jurisdiction other than the United States and this state;
2. (2) Except as permitted by title 29, chapter 5, part 3, or by § 2 of the Federal Arbitration Act, codified in 9 U.S.C. § 2, contain a provision that modifies or limits otherwise available forums or procedural rights, including the right to trial by jury, that are generally available to the individual under law other than this part;
3. (3) Contain a provision that restricts the individual's remedies under this part or law other than this part; or
4. (4) Contain a provision that:
  1. (A) Limits or releases the liability of any person for not performing the agreement or for violating this part; or
  2. (B) Indemnifies any person for liability arising under the agreement or this part.
(g) All rights and obligations specified in subsection (d) and § 47-18-5520 exist even if not provided in the agreement. A provision in an agreement that violates subsection (d), (e) or (f) is void.

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§ 47-18-5520. Cancellation of agreement — Waiver.

(a) An individual may cancel an agreement before midnight of the third business day after the individual assents to it, unless the agreement does not comply with subsection (b) or § 47-18-5519 or § 47-18-5528, in which event the individual may cancel the agreement within thirty (30) days after the individual assents to it. To exercise the right to cancel, the individual must give notice in a record to the provider. Notice by mail is given when mailed.
(b) An agreement must be accompanied by a form that contains in boldface type, surrounded by bold black lines:
2. Notice of Right to Cancel
4. You may cancel this agreement, without any penalty or obligation, at any time before midnight of the third business day that begins the day after you agree to it by electronic communication or by signing it.
6. To cancel this agreement during this period, send an e-mail to
7. E-mail address of provider
8. or mail or deliver a signed, dated copy of this notice, or any other written notice
9. to at
10. Name of provider Address of provider
11. before midnight on . If you cancel this agreement within the
12. Date
13. three-day period, we will refund all money you already have paid us.
15. You also may terminate this agreement at any later time, but we may not be required to refund fees you have paid us.
16. I cancel this agreement,
18. Print your name
20. Signature
22. Date
(c) If a personal financial emergency necessitates the disbursement of an individual's money to one (1) or more of the individual's creditors before the expiration of three (3) days after an agreement is signed, an individual may waive the right to cancel. To waive the right, the individual must send or deliver a signed, dated statement in the individual's own words describing the circumstances that necessitate a waiver. The waiver must explicitly waive the right to cancel. A waiver by means of a standard-form record is void.

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§ 47-18-5521. Required language.

Unless the administrator, by rule, provides otherwise, the disclosures and documents required by this part must be in English. If a provider communicates with an individual primarily in a language other than English, the provider must furnish a translation into the other language of the disclosures and documents required by this part.

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47-18-5535(c)(2)

§ 47-18-5522. Trust account.

(a) All money paid to a provider by or on behalf of an individual for distribution to creditors pursuant to a plan is held in trust. Within two (2) business days after receipt, the provider shall deposit the money in a trust account established for the benefit of individuals to whom the provider is furnishing debt-management services.
(b) Money held in trust by a provider is not property of the provider or its designee. The money is not available to creditors of the provider or designee, except an individual from whom or on whose behalf the provider received money, to the extent that the money has not been disbursed to creditors of the individual.
(c) A provider shall:
1. (1) Maintain separate records of account for each individual to whom the provider is furnishing debt-management services;
2. (2) Disburse money paid by or on behalf of the individual to creditors of the individual as disclosed in the agreement, except that:
  1. (A) The provider may delay payment to the extent that a payment by the individual is not final; and
  2. (B) If a plan provides for regular periodic payments to creditors, the disbursement must comply with the due dates established by each creditor; and
3. (3) Promptly correct any payments that are not made or that are misdirected as a result of an error by the provider or other person in control of the trust account and reimburse the individual for any costs or fees imposed by a creditor as a result of the failure to pay or misdirection.
(d) A provider may not commingle money in a trust account established for the benefit of individuals to whom the provider is furnishing debt-management services with money of other persons.
(e) A trust account must at all times have a cash balance equal to the sum of the balances of each individual's account.
(f) If a provider has established a trust account pursuant to subsection (a), the provider shall reconcile the trust account at least once a month. The reconciliation must compare the cash balance in the trust account with the sum of the balances in each individual's account. If the provider or its designee has more than one (1) trust account, each trust account must be individually reconciled.
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- 47-18-5534(c)
(g) If a provider discovers, or has a reasonable suspicion of, embezzlement or other unlawful appropriation of money held in trust, the provider immediately shall notify the administrator by a method approved by the administrator. Unless the administrator by rule provides otherwise, within five (5) days thereafter, the provider shall give notice to the administrator describing the remedial action taken or to be taken.
(h) If an individual terminates an agreement or it becomes reasonably apparent to a provider that a plan has failed, the provider shall promptly refund to the individual all money paid by or on behalf of the individual that has not been paid to creditors, less fees that are payable to the provider under § 47-18-5523.
(i) Before relocating a trust account from one bank to another, a provider shall inform the administrator of the name, business address and telephone number of the new bank. As soon as practicable, the provider shall inform the administrator of the account number of the trust account at the new bank.

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§ 47-18-5523. Fees and other charges.

(a) A provider may not impose directly or indirectly a fee or other charge on an individual or receive money from or on behalf of an individual for debt-management services except as permitted by this section.
(b) A provider may not impose charges or receive payment for debt-management services until the provider and the individual have signed an agreement that complies with §§ 47-18-5519 and 47-18-5528.
(c) If an individual assents to an agreement, a provider may not impose a fee or other charge for educational or counseling services, or the like, except as otherwise provided in this subsection (c) and § 47-18-5528(d). The administrator may authorize a provider to charge a fee based on the nature and extent of the educational or counseling services furnished by the provider.
(d) Subject to adjustment of dollar amounts pursuant to § 47-18-5532(f), the following rules apply:
1. (1) If an individual assents to a plan that contemplates that creditors will reduce finance charges or fees for late payment, default or delinquency, the provider may charge:
  1. (A) A fee not exceeding fifty dollars ($50.00) for consultation, obtaining a credit report, setting up an account, and the like; and
  2. (B) A monthly service fee, not to exceed ten dollars ($10.00) times the number of creditors remaining in a plan at the time the fee is assessed, but not more than fifty dollars ($50.00) in any month;
2. (2) [Deleted by 2014 amendment, effective July 1, 2014.]
  1 Backlink
  - 47-18-5526(b)(2)
3. (3) [Deleted by 2014 amendment, effective July 1, 2014.]
4. (4) Except as otherwise provided in § 47-18-5528(d), if an individual does not assent to an agreement, a provider may receive for educational and counseling services it provides to the individual a fee not exceeding one hundred dollars ($100) or, with the approval of the administrator, a larger fee. The administrator may approve a fee larger than one hundred dollars ($100) if the nature and extent of the educational and counseling services warrant the larger fee.
(e) If, before the expiration of ninety (90) days after the completion or termination of educational or counseling services, an individual assents to an agreement, the provider shall refund to the individual any fee paid pursuant to subdivision (d)(4).
(f) If an individual assents to an agreement that contemplates that creditors will settle debts for less than the amount of the debt owed at the time of settlement, a provider may not request or receive payment of any fee or consideration until and unless:
1. (1) The provider has renegotiated, settled, reduced or otherwise altered the terms of at least one (1) debt pursuant to a settlement agreement or other valid contractual agreement executed by the individual;
2. (2) The individual has made at least one (1) payment pursuant to that settlement agreement or other valid contractual agreement between the individual and the creditor or debt collector; and
3. (3) To the extent that debts enrolled in a service are renegotiated, settled, reduced or otherwise altered individually, the fee or consideration either:
  1. (A) Bears the same proportional relationship to the total fee for renegotiating, settling, reducing or otherwise altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount. The individual debt amount and the entire debt amount are those owed at the time the debt was enrolled in the service; or
  2. (B) Is a percentage of the amount saved as a result of the renegotiation, settlement, reduction or alteration. The percentage charged cannot change from one individual debt to another. The amount saved is the difference between the amount owed at the time the debt was enrolled in the service and the amount actually paid to satisfy the debt.
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- 47-18-5528(b)(6)
(g) Subject to adjustment of the dollar amount pursuant to § 47-18-5532(f), if a payment to a provider by an individual under this part is dishonored, a provider may impose a reasonable charge on the individual, not to exceed the lesser of twenty-five dollars ($25.00) and the amount permitted by law other than this part.

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§ 47-18-5524. Voluntary contributions.

A provider may not solicit a voluntary contribution from an individual or an affiliate of the individual for any service provided to the individual. A provider may accept voluntary contributions from an individual but, until thirty (30) days after completion or termination of a plan, the aggregate amount of money received from or on behalf of the individual may not exceed the total amount the provider may charge the individual under § 47-18-5523.

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§ 47-18-5525. Voidable agreements.

(a) If a provider imposes a fee or other charge or receives money or other payments not authorized by § 47-18-5523 or § 47-18-5524, the individual may void the agreement and recover as provided in § 47-18-5535.
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- 47-18-5535(b)
(b) If a provider is not registered as required by this part when an individual assents to an agreement, the agreement is voidable by the individual.
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- 47-18-5535(a)
(c) If an individual voids an agreement under subsection (b), the provider does not have a claim against the individual for breach of contract or for restitution.

§ 47-18-5526. Termination of agreements.

(a) If an individual who has entered into an agreement fails for sixty (60) days to make payments required by the agreement, a provider may terminate the agreement.
(b) If a provider or an individual terminates an agreement, the provider shall immediately return to the individual:
1. (1) Any money of the individual held in trust for the benefit of the individual; and
2. (2) Sixty-five percent (65%) of any portion of the set-up fee received pursuant to [former] § 47-18-5523(d)(2) [repealed] that has not been credited against settlement fees.

§ 47-18-5527. Periodic reports and retention of records.

(a) A provider shall provide the accounting required by subsection (b):
1. (1) Upon cancellation or termination of an agreement; and
2. (2) Before cancellation or termination of any agreement:
  1. (A) At least once each month; and
  2. (B) Within five (5) business days after a request by an individual, but the provider need not comply with more than one (1) request in any calendar month.
2 Backlinks
- 47-18-5519(a)(6)(F)
- 47-18-5537(b)(4)
(b) A provider, in a record, shall provide each individual for whom it has established a plan an accounting of the following information:
1. (1) The amount of money received from the individual since the last report;
2. (2) The amounts and dates of disbursements made on the individual's behalf, or by the individual upon the direction of the provider, since the last report to each creditor listed in the plan;
3. (3) The amounts deducted from the amount received from the individual;
4. (4) The amount held in reserve; and
5. (5) If, since the last report, a creditor has agreed to accept as payment in full an amount less than the principal amount of the debt owed by the individual:
  1. (A) The total amount and terms of the settlement;
  2. (B) The amount of the debt when the individual assented to the plan;
  3. (C) The amount of the debt when the creditor agreed to the settlement; and
  4. (D) The calculation of a settlement fee.
(c) A provider shall maintain records for each individual for whom it provides debt-management services for five (5) years after the final payment made by the individual and produce a copy of them to the individual within a reasonable time after a request for them. The provider may use electronic or other means of storage of the records.

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§ 47-18-5528. Prohibited acts and practices.

(a) A provider may not, directly or indirectly:
1. (1) Misappropriate or misapply money held in trust;
2. (2) Settle a debt on behalf of an individual for more than fifty percent (50%) of the outstanding amount of the debt owed a creditor, unless the individual assents to the settlement after the creditor has assented;
3. (3) Take a power of attorney that authorizes it to settle a debt, unless the power of attorney expressly limits the provider's authority to settle debts for not more than fifty percent (50%) of the outstanding amount of the debt owed a creditor;
4. (4) Exercise or attempt to exercise a power of attorney after an individual has terminated an agreement;
5. (5) Initiate a transfer from an individual's account at a bank or with another person unless the transfer is:
  1. (A) A return of money to the individual; or
  2. (B) Before termination of an agreement, properly authorized by the agreement and this part, and for:
    1. (i) Payment to one (1) or more creditors pursuant to an agreement; or
    2. (ii) Payment of a fee;
  1 Backlink
  - 47-18-5535(d)
6. (6) Offer a gift or bonus, premium, reward or other compensation to an individual for executing an agreement;
7. (7) Offer, pay or give a gift or bonus, premium, reward or other compensation to a person for referring a prospective customer, if the person making the referral has a financial interest in the outcome of debt-management services provided to the customer, unless neither the provider nor the person making the referral communicates to the prospective customer the identity of the source of the referral;
8. (8) Receive a bonus, commission or other benefit for referring an individual to a person;
9. (9) Structure a plan in a manner that would result in a negative amortization of any of an individual's debts, unless a creditor that is owed a negatively amortizing debt agrees to refund or waive the finance charge upon payment of the principal amount of the debt;
10. (10) Compensate its employees on the basis of a formula that incorporates the number of individuals the employee induces to enter into agreements;
11. (11) Settle a debt or lead an individual to believe that a payment to a creditor is in settlement of a debt to the creditor unless, at the time of settlement, the individual receives a certification by the creditor that the payment is in full settlement of the debt or is part of a payment plan, the terms of which are included in the certification, that upon completion, will lead to full settlement of the debt;
12. (12) Make a representation that:
  1. (A) The provider will furnish money to pay bills or prevent attachments;
  2. (B) Payment of a certain amount will permit satisfaction of a certain amount or range of indebtedness; or
  3. (C) Participation in a plan will or may prevent litigation, garnishment, attachment, repossession, foreclosure, eviction or loss of employment;
13. (13) Misrepresent that it is authorized or competent to furnish legal advice or perform legal services;
14. (14) Represent in its agreements, disclosures required by this part, advertisements or Internet web site that it is:
  1. (A) A not-for-profit entity unless it is organized and properly operating as a not-for-profit entity under the law of the state in which it was formed; or
  2. (B) A tax-exempt entity unless it has received certification of tax-exempt status from the internal revenue service and is properly operating as a not-for-profit entity under the law of the state in which it was formed;
15. (15) Take a confession of judgment or power of attorney to confess judgment against an individual; or
16. (16) Employ an unfair, unconscionable or deceptive act or practice, including the knowing omission of any material information.
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- 47-18-5535(c)(2)
(b) If a provider furnishes debt-management services to an individual, the provider may not, directly or indirectly:
1. (1) Purchase a debt or obligation of the individual;
2. (2) Receive from or on behalf of the individual:
  1. (A) A promissory note or other negotiable instrument other than a check or a demand draft; or
  2. (B) A post-dated check or demand draft;
3. (3) Lend money or provide credit to the individual, except as a deferral of a settlement fee at no additional expense to the individual;
4. (4) Obtain a mortgage or other security interest from any person in connection with the services provided to the individual;
5. (5) Except as permitted by federal law, disclose the identity or identifying information of the individual or the identity of the individual's creditors, except to:
  1. (A) The administrator, upon proper demand;
  2. (B) A creditor of the individual, to the extent necessary to secure the cooperation of the creditor in a plan; or
  3. (C) The extent necessary to administer the plan;
6. (6) Except as otherwise provided in § 47-18-5523(f), provide the individual less than the full benefit of a compromise of a debt arranged by the provider;
7. (7) Charge the individual for or provide credit or other insurance, coupons for goods or services, membership in a club, access to computers or the Internet, or any other matter not directly related to debt-management services or educational services concerning personal finance except to the extent such services are expressly authorized by the administrator; or
8. (8) Furnish legal advice or perform legal services, unless the person furnishing that advice to or performing those services for the individual is licensed to practice law.
(c) This part does not authorize any person to engage in the practice of law.
(d) A provider may not receive a gift or bonus, premium, reward or other compensation, directly or indirectly, for advising, arranging or assisting an individual in connection with obtaining an extension of credit or other service from a lender or service provider, except for educational or counseling services required in connection with a government-sponsored program.
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- 47-18-5523(c)
- 47-18-5523(d)(4)
(e) Unless a person supplies goods, services or facilities generally and supplies them to the provider at a cost no greater than the cost the person generally charges to others, a provider may not purchase goods, services or facilities from the person if an employee or a person that the provider should reasonably know is an affiliate of the provider:
1. (1) Owns more than ten percent (10%) of the person; or
2. (2) Is an employee or affiliate of the person.

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§ 47-18-5529. Notice of litigation.

No later than thirty (30) days after a provider has been served with notice of a civil action for violation of this part by or on behalf of an individual who resides in this state at either the time of an agreement or the time the notice is served, the provider shall notify the administrator in a record that it has been sued.

§ 47-18-5530. Advertising.

(a) If the agreements of a provider contemplate that creditors will reduce finance charges or fees for late payment, default or delinquency and the provider advertises debt-management services, it shall disclose, in an easily comprehensible manner, that using a debt-management plan may make it harder for the individual to obtain credit.
(b) If the agreements of a provider contemplate that creditors will settle for less than the full principal amount of debt and the provider advertises debt-management services, it shall disclose, in an easily comprehensible manner, the information specified in § 47-18-5517(d)(3) and (4).

§ 47-18-5531. Liability for the conduct of other persons.

If a provider delegates any of its duties or obligations under an agreement or this part to another person, including an independent contractor, the provider is liable for conduct of the person that, if done by the provider, would violate the agreement or this part.

§ 47-18-5532. Powers of administrator.

(a) The administrator may act on its own initiative or in response to complaints and may receive complaints, take action to obtain voluntary compliance with this part, refer cases to the attorney general and reporter, or a district attorney general or other appropriate law enforcement official, and seek or provide remedies as provided in this part.
(b) The administrator may investigate and examine, in this state or elsewhere, by subpoena or otherwise, the activities, books, accounts and records of a person that provides or offers to provide debt-management services, or a person to which a provider has delegated its obligations under an agreement or this part, to determine compliance with this part. Information that identifies individuals who have agreements with the provider shall not be disclosed to the public. In connection with the investigation, the administrator may:
1. (1) Charge the person the reasonable expenses necessarily incurred to conduct the examination;
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  - 47-18-5513(d)(1)
  - 47-18-5513(e)(4)
2. (2) Require or permit a person to file a statement under oath as to all the facts and circumstances of a matter to be investigated; and
  1 Backlink
  - 47-18-5534(b)(4)
3. (3) Seek a court order authorizing seizure from a bank at which the person maintains a trust account required by § 47-18-5522, any or all money, books, records, accounts and other property of the provider that is in the control of the bank and relates to individuals who reside in this state.
(c) The administrator may promulgate rules to administer this part. The rules shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
(d) The administrator may enter into cooperative arrangements with any other federal or state agency having authority over providers and may exchange with any of those agencies information about a provider, including information obtained during an examination of the provider.
(e) The administrator, by rule, shall establish reasonable fees to be paid by providers for the expense of administering this part.
(f) The administrator, by rule, shall adopt dollar amounts instead of those specified in §§ 47-18-5502, 47-18-5505, 47-18-5509, 47-18-5513, 47-18-5523, 47-18-5533 and 47-18-5535 to reflect inflation, as measured by the United States bureau of labor statistics consumer price index for all urban consumers or, if that index is not available, another index adopted by rule by the administrator. The administrator shall adopt a base year and adjust the dollar amounts, effective on July 1 of each year, if the change in the index from the base year, as of December 31 of the preceding year, is at least ten percent (10%). The dollar amount must be rounded to the nearest one hundred dollars ($100), except that the amounts in § 47-18-5523 must be rounded to the nearest dollar.
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(g) The administrator shall notify registered providers of any change in dollar amounts made pursuant to subsection (f) and make that information available to the public.
(h) The administrator shall prescribe fees and penalties under this part such that all fees collectively shall sustain the requirements of this part pursuant to the requirements of § 4-29-121.

§ 47-18-5533. Administrative remedies.

(a) The administrator may enforce this part and rules adopted under this part by taking one (1) or more of the following actions:
1. (1) Ordering a provider or a director, employee or other agent of a provider to cease and desist from any violations;
2. (2) Ordering a provider or a person that has caused a violation to correct the violation, including making restitution of money or property to a person aggrieved by a violation;
  2 Backlinks
  - 47-18-5513(d)(1)
  - 47-18-5513(e)(1)
3. (3) Subject to adjustment of the dollar amount pursuant to § 47-18-5532(f), imposing on a provider or a person who has caused a violation a civil penalty not exceeding ten thousand dollars ($10,000) for each violation of this part or any rule promulgated pursuant to this part;
4. (4) Prosecuting a civil action to:
  1. (A) Enforce an order;
  2. (B) Obtain restitution or an injunction or other equitable relief, or both; or
  1 Backlink
  - 47-18-5513(d)(1)
5. (5) Intervening in an action brought under § 47-18-5535.
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- 47-18-5513(e)(4)
- 47-18-5537(a)
(b) Subject to adjustment of the dollar amount pursuant to § 47-18-5532(f), if a person violates or knowingly authorizes, directs or aids in the violation of a final order issued under subdivision (a)(1) or (a)(2), the administrator may impose a civil penalty not exceeding twenty thousand dollars ($20,000) for each violation.
(c) The administrator may maintain an action to enforce this part in any county.
(d) The administrator may recover the reasonable costs of enforcing this part under subsections (a)-(c), including attorney's fees based on the hours reasonably expended and the hourly rates for attorneys of comparable experience in the community.
(e) In determining the amount of a civil penalty to impose under subsection (a) or (b), the administrator shall consider the seriousness of the violation, the good faith of the violator, any previous violations by the violator, the deleterious effect of the violation on the public and any other factor the administrator considers relevant to the determination of the civil penalty.

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47-18-5532(f)

§ 47-18-5534. Suspension, revocation or nonrenewal of registration.

(a) In this section, “insolvent” means:
1. (1) Having generally ceased to pay debts in the ordinary course of business other than as a result of good faith dispute;
2. (2) Being unable to pay debts as they become due; or
3. (3) Being insolvent within the meaning of the federal bankruptcy law, 11 U.S.C. § 101 et seq.
(b) The administrator may suspend, revoke or deny renewal of a provider's registration if:
1. (1) A fact or condition exists that, if it had existed when the registrant applied for registration as a provider, would have been a reason for denying registration;
2. (2) The provider has committed a material violation of this part or a rule or order of the administrator under this part;
3. (3) The provider is insolvent;
4. (4) The provider or an employee or affiliate of the provider has refused to permit the administrator to make an examination authorized by this part, failed to comply with § 47-18-5532(b)(2) within fifteen (15) days after request or made a material misrepresentation or omission in complying with § 47-18-5532(b)(2); or
5. (5) The provider has not responded within a reasonable time and in an appropriate manner to communications from the administrator.
(c) If a provider does not comply with § 47-18-5522(f) or if the administrator otherwise finds that the public health or safety or general welfare requires emergency action, the administrator may order a summary suspension of the provider's registration, effective on the date specified in the order.
(d) If the administrator suspends, revokes or denies renewal of the registration of a provider, the administrator may seek a court order authorizing seizure of any or all of the money in a trust account required by § 47-18-5522, books, records, accounts and other property of the provider that are located in this state.
(e) If the administrator suspends or revokes a provider's registration, the provider may appeal and request a hearing pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3.

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§ 47-18-5535. Private enforcement.

(a) If an individual voids an agreement pursuant to § 47-18-5525(b), the individual may recover in a civil action all money paid or deposited by or on behalf of the individual pursuant to the agreement, except amounts paid to creditors, in addition to the recovery under subdivisions (c)(3) and (4).
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- 47-18-5513(d)(2)
- 47-18-5513(e)(2)
(b) If an individual voids an agreement pursuant to § 47-18-5525(a), the individual may recover in a civil action three (3) times the total amount of the fees, charges, money and payments made by the individual to the provider, in addition to the recovery under subdivision (c)(4).
(c) Subject to subsection (d), an individual with respect to whom a provider violates this part may recover in a civil action from the provider and any person that caused the violation:
1. (1) Compensatory damages for injury, including noneconomic injury, caused by the violation;
2. (2) Except as otherwise provided in subsection (d) and subject to adjustment of the dollar amount pursuant to § 47-18-5532(f), with respect to a violation of § 47-18-5517, § 47-18-5519, § 47-18-5520, § 47-18-5521, § 47-18-5522, § 47-18-5523, § 47-18-5524, § 47-18-5527 or § 47-18-5528(a), (b), or (d), the greater of the amount recoverable under subdivision (c)(1) or five thousand dollars ($5,000);
3. (3) Punitive damages; and
4. (4) Reasonable attorney's fees and costs.
(d) In a class action, except for a violation of § 47-18-5528(a)(5), the minimum damages provided in subdivision (c)(2) do not apply.
(e) In addition to the remedy available under subsection (c), if a provider violates an individual's rights under § 47-18-5520, the individual may recover in a civil action all money paid or deposited by or on behalf of the individual pursuant to the agreement, except for amounts paid to creditors.
(f) A provider is not liable under this section for a violation of this part if the provider proves that the violation was not intentional and resulted from a good faith error notwithstanding the maintenance of procedures reasonably adapted to avoid the error. An error of legal judgment with respect to a provider's obligations under this part is not a good faith error. If, in connection with a violation, the provider has received more money than authorized by an agreement or this part, the defense provided by this subsection (f) is not available unless the provider refunds the excess within two (2) business days of learning of the violation.
(g) The administrator shall assist an individual in enforcing a judgment against the surety bond or other security provided under § 47-18-5513 or § 47-18-5514.

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§ 47-18-5536. Violation of Consumer Protection Act.

If an act or practice of a provider violates both this part and the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter, an individual may not recover under both for the same act or practice.

§ 47-18-5537. Statute of limitations.

(a) An action or proceeding brought pursuant to § 47-18-5533(a), (b), or (c) shall be commenced within four (4) years after the administrator opens a complaint.
(b) An action brought pursuant to § 47-18-5535 must be commenced within two (2) years after the latest of:
1. (1) The individual's last transmission of money to a provider;
2. (2) The individual's last transmission of money to a creditor at the direction of the provider;
3. (3) The provider's last disbursement to a creditor of the individual;
4. (4) The provider's last accounting to the individual pursuant to § 47-18-5527(a);
5. (5) The date on which the individual discovered or reasonably should have discovered the facts giving rise to the individual's claim; or
6. (6) Termination of actions or proceedings by the administrator with respect to a violation of the part.
(c) The period prescribed in subdivision (b)(5) is tolled during any period during which the provider or, if different, the defendant has materially and willfully misrepresented information required by this part to be disclosed to the individual, if the information so misrepresented is material to the establishment of the liability of the defendant under this part.

§ 47-18-5538. Uniformity of application and construction.

In applying and construing this part, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

§ 47-18-5539. Relation to Electronic Signatures in Global And National Commerce Act.

This part modifies, limits and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq., but does not modify, limit or supersede § 101(c) of that act, codified in 15 U.S.C. § 7001(c), or authorize electronic delivery of any of the notices described in § 103(b) of that act, codified in 15 U.S.C. § 7003(b).

§ 47-18-5540. Transitional provisions — Application to existing transactions.

Transactions entered into before this part takes effect and the rights, duties and interests resulting from them may be completed, terminated or enforced as required or permitted by a law amended, repealed or modified by this part as though the amendment, repeal or modification had not occurred.

§ 47-18-5541. Severability.

If any provision of this part or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this part that can be given effect without the invalid provision or application, and to this end the provisions of this part are severable.

§ 47-18-5542. Transfer of administration to division of regulatory boards.

Beginning on July 1, 2015, administration of this part on behalf of the administrator shall be attached to the division of regulatory boards in the department of commerce and insurance.

§ 47-18-5543. Combination of moneys received and expenses incurred pursuant to Tennessee Credit Services Businesses Act and Uniform Debt-Management Services Act into single fund.

The department shall combine all moneys received and expenses incurred pursuant to the Uniform Debt-Management Services Act and the Tennessee Credit Services Businesses Act, compiled in part 10 of this chapter, into a single fund for the purpose of administering the acts.

Part 56 Air Ambulance Organizations

§ 47-18-5601. Part definitions.

As used in this part:
1. (1) “Air ambulance membership agreement”:
  1. (A) Means an agreement in exchange for consideration to pay for, indemnify, or provide an amount to a person for the cost of air ambulance services; and
  2. (B) Does not include a health insurance plan or policy regulated under title 56;
2. (2) “Air ambulance membership organization” means an individual or entity that provides an air ambulance membership agreement; and
3. (3) “Consumer protection division” or “division” means the consumer protection division of the office of the attorney general and reporter.

§ 47-18-5602. Air ambulance membership restrictions — Notification requirements.

(a) An air ambulance membership organization shall not knowingly sell, offer for sale, or provide an air ambulance membership agreement to an individual who is enrolled in TennCare Medicaid.
(b) If an individual who has purchased an air ambulance membership agreement subsequently enrolls in TennCare Medicaid during the duration of the membership agreement, the enrollee shall notify the air ambulance membership organization of such enrollment within thirty (30) days following the effective date of the enrollment. If the enrollee timely notifies the air ambulance membership organization of such enrollment, the air ambulance membership organization shall provide the enrollee a pro-rated refund of any consideration paid for the period from the effective date of the TennCare Medicaid enrollment through the expiration date of the air ambulance membership agreement. If the enrollee does not timely notify the air ambulance membership organization of such enrollment, the enrollee is not entitled to a pro-rated refund, but the air ambulance membership organization shall still disenroll the enrollee within thirty (30) days of receipt of the notice of the enrollee's enrollment in TennCare Medicaid.

§ 47-18-5603. Marketing requirements — Required disclosures.

(a) All air ambulance membership agreement websites, brochures, and marketing material must include the following disclosures in at least twelve-point Times New Roman font, or, alternatively, a clear and conspicuous hyperlink that leads to the following disclosures:
1. (1) The air ambulance membership agreement is a membership plan and is not insurance coverage;
2. (2) TennCare Medicaid covers air ambulance transport services and requires no out-of-pocket expense by the enrollee for air ambulance transport services; and
3. (3) Some state laws prohibit Medicaid beneficiaries from being offered air ambulance memberships or being accepted into air ambulance membership programs. If an individual submits an air ambulance membership agreement application, the applicant must attest to the fact that the applicant is not currently, nor plans to be, enrolled in Medicaid.
(b) An air ambulance membership agreement application must include the following disclosures in at least twelve-point Times New Roman font:
1. (1) The air ambulance membership agreement is a membership plan and is not insurance coverage;
2. (2) TennCare Medicaid covers air ambulance transport services and requires no out-of-pocket expense by the enrollee for air ambulance transport services; and
3. (3) Some state laws prohibit Medicaid beneficiaries from being offered air ambulance memberships or being accepted into air ambulance membership programs. By submitting this application, the applicant attests to the fact that the applicant is not currently, nor plans to be, enrolled in Medicaid. If the applicant is not currently enrolled in Medicaid, but becomes enrolled at any time during the duration of the membership agreement, then the applicant must notify the air ambulance membership organization within thirty (30) days. If the applicant timely notifies the air ambulance membership organization of such enrollment, then the air ambulance membership organization must provide the applicant a pro-rated refund of any consideration paid for the air ambulance membership agreement.

§ 47-18-5604. Violation — Remedies.

(a) If an enrollee believes that an individual or entity has violated this part, then the enrollee may submit a complaint to the consumer protection division.
(b) If the consumer protection division finds that an individual or entity has violated this part, then the division may seek any remedies available pursuant to the Tennessee Consumer Protection Act of 1977, compiled in part 1 of this chapter.

Chapter 22 Credit Cards

Part 1 Unsolicited Credit Cards and Unauthorized Use

§ 47-22-101. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Credit card” means any card, token, or similar identification device which is issued for the purpose of obtaining money, services, or merchandise pursuant to a credit arrangement;
2. (2) “Person” means any individual, corporation, agency, business association, or similar group;
3. (3) “Unauthorized use of a credit card” means the use of a credit card by any person other than the person to whom it was issued or persons to whom the person has entrusted it; and
4. (4) “Unsolicited credit card” means any credit card issued without an application or other authorization from the person to whom it is issued; provided, that a credit card issued to renew or replace a credit card previously issued by the issuer or the predecessor of the issuer and previously applied for, paid for, or used by the person to whom issued shall not be deemed to be an “unsolicited credit card.”

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§ 47-22-102. Unsolicited credit card — Effect.

(a) If an unsolicited credit card is issued to any person in this state, such person shall not be deemed as having accepted the credit card and being subject to the terms of the agreement governing the use of the credit card, and shall not be liable for its unauthorized use by failing to return the credit card to the issuer.
(b) If the agreement governing the use of the card so provides, use of the card or retention of the card with intention to use it by either the person to whom it was issued or anyone to whom the person entrusts it will result in the person to whom the card was issued being subject to the terms of the agreement and liable for its unauthorized use.

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47-22-103(a)

§ 47-22-103. Unauthorized use of credit card — Liability.

(a) Any person who has assumed liability for a credit card, either by authorizing its issuance, or as provided in § 47-22-102, and who exercises reasonable care in its use and safekeeping, shall not be liable for the unauthorized use of such card.
(b)
1. (1) “Reasonable care” within the meaning of this section requires the person to whom a credit card has been issued to notify promptly the issuer in case of a card which has been lost or stolen.
2. (2) However, failure to notify the issuer shall not result in the liability of more than one hundred dollars ($100) in the unauthorized use of the credit card.
(c) Nothing in this chapter will relieve the card holder of liability if guilty of fraud, misrepresentation, gross negligence, or collusion.

§ 47-22-104. Payment by check — Identification — Use of credit card information — When prohibited — When permissible — Damages.

(a) As used in this section, “person” means any individual, corporation, partnership or association.
(b) Except as otherwise provided in subsection (e), no person shall, as a means of identification or for any other purpose, require that a person produce a credit card number for recordation or record a credit card number in connection with:
1. (1) A sale of goods or services in which a purchaser pays by check; or
2. (2) The acceptance of a check.
(c) A person aggrieved by a violation of this section shall be entitled to institute an action to recover such person's actual damages or one hundred dollars ($100), whichever is greater. Such action shall be brought in the general sessions or circuit court, whichever is appropriate, of the county wherein the defendant resides or has a place of business. In the event the aggrieved party prevails, such party may be awarded reasonable attorney's fees and court costs in addition to any damages awarded.
(d) This section shall not be construed to:
1. (1) Impose liability on any employee or agent of a person, where that employee or agent has acted in accordance with the directions of such employee's or agent's employer;
2. (2) Prohibit a person from requesting a purchaser to display a credit card as an indication of creditworthiness or financial responsibility or as identification, and in these instances the type, the issuer, and the expiration date of the credit card may be recorded; or
3. (3) Require acceptance of a check, whether or not a credit card is presented.
(e) A person may require production of and may record a credit card number as a condition for cashing or accepting a check only where:
1. (1) The person requesting the card number has agreed with the issuer of the card to cash checks as a service to the issuer's cardholders;
2. (2) The issuer of the card has agreed to guarantee cardholder checks cashed by that person; or
3. (3) The cardholder has given actual, apparent or implied authority for use of such cardholder's card number in this manner and for this purpose.

Part 2 Termination of Credit Cards

§ 47-22-201. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Account” means the account between a card issuer and one (1) or more cardholders reflecting the outstanding balance of card transactions;
2. (2) “Account agreement” means the contract between the card issuer and the cardholder(s) governing the parties' respective rights and obligations respecting the account and transactions effected thereunder;
3. (3) “Card issuer” or “issuer” means a person doing business in Tennessee that issues a credit card or that person's agent or assignee with respect to the card;
4. (4) “Card transaction” or “transaction” means a cash advance, purchase, or other extension of credit effected or obtained by means of a credit card or account number;
5. (5) “Card user” means any person authorized by the card issuer and all cardholders on an account to use a card pertaining to the account, but who is not obligated on the account of the issuer;
6. (6) “Cardholder” means a natural person residing in Tennessee who has agreed with a card issuer to pay debts arising from card transactions, whether the card used in such transactions has been issued to the cardholder or to another person;
7. (7) “Credit card” or “card” means any card, plate, coupon book or other single credit device that is issued primarily for consumer credit purposes and that may be used from time to time to obtain credit, including, but not limited to, a card that may be used to effect transactions governed by chapter 11 of this title; and
8. (8) “Multiple-party account” means any account under which two (2) or more cardholders, or one (1) or more cardholders and one (1) or more card users, may effect card transactions.

§ 47-22-202. Cardholder's termination of account — Means.

(a) A cardholder may terminate a multiple-party account to which the cardholder is a party by:
1. (1) Delivery to the issuer of written notice of termination, which shall include:
  1. (A) The account number;
  2. (B) The name(s) and current address(es) of all cardholders and card users on the account; and
  3. (C) The cardholder's certification that the cardholder has sent or delivered a copy of the notice to each cardholder and card user;
2. (2) Sending or delivering a copy of the notice to each other cardholder and to each card user;
3. (3) Unless the issuer otherwise agrees, payment in full of the current balance of the account reflected on the most recent billing statement for the account sent by the issuer or, if less, the actual balance then outstanding; and
4. (4) Surrender to the issuer of all cards in the cardholder's possession or control.
(b) The terminating cardholder's failure to comply with subsection (a) shall not subject the card issuer to any liability as a result of any action or nonaction in reliance on the notice of termination.
(c) If the cardholder's account is not a multiple-party account, the cardholder may terminate it by delivery of written notice of termination, which need merely state the account number and the cardholder's intention to terminate, and surrender of all cards in the cardholder's possession or control.

§ 47-22-203. Notice of cardholder's termination of account.

A cardholder's notice of termination is delivered to the issuer when received at the address designated in the card issuer's most recent billing statement for receipt of notices of billing errors, or, if no such address is designated, at the address designated therein for receipt of payments on the account.

§ 47-22-204. Effect of termination of account — Effective date — Liability.

(a) Termination by a cardholder of an account is effective on the second business day (as to the card issuer) following delivery to the issuer of the notice of termination or on such later date as is specified in the notice. From and after termination, no cardholder or card user may initiate transactions under the account, and each cardholder, other than the terminating cardholder, and each card user shall surrender all cards in that person's possession or control to the issuer immediately upon receiving a copy of the notice of termination.
(b) Termination of an account relieves the issuer of any obligation to extend credit in a card transaction under the account regardless of when the transaction is initiated and, except as provided in subsection (c), relieves each cardholder of any further liability respecting the account.
(c) Notwithstanding termination, each cardholder is liable for:
1. (1) All transactions initiated by any cardholder or card user prior to the effective date of termination;
2. (2) All transactions initiated at any time by or with the authorization of the cardholder against whom the issuer asserts liability, but no cardholder other than the initiating or authorizing cardholder shall be liable for such transaction; and
3. (3) All transactions initiated by any card user at any time.
(d) The account agreement shall remain applicable to any transaction initiated on or after the termination date for which a cardholder is liable, except that the outstanding balance of all such transactions shall, unless the issuer elects otherwise, be due and payable in full.

Part 3 Creditor's Records

§ 47-22-301. Part definitions.

As used in this part:
1. (1) “Account purchase transaction” means an agreement under which a commercial entity sells accounts, instruments, documents, or chattel paper to another commercial entity subject to a discount or fee, regardless of whether the commercial entity has a repurchase obligation related to the transaction;
2. (2) “Acquired” means the obtaining of business records, a credit card account, or an instrument evidencing an outstanding debt through an ownership transfer, including a contractual agreement, an account purchase transaction or assignment in a creditor's regularly conducted business;
3. (3) “Cardholder” means any person who has agreed with a card issuer to pay debts arising from card transactions, whether the card used in such transactions has been issued to the cardholder or to another person;
4. (4) “Credit card account” means any account that can be accessed by a credit card, including a debit card with a credit feature, whereby the cardholder may obtain loans from time to time either by credit card cash advance or by the purchase or satisfactions by the bank of obligations of the cardholder incurred pursuant to a credit card;
5. (5) “Creditor” means the person, business, financial institution or commercial entity that currently owns a credit card account or an instrument evidencing outstanding debt;
6. (6) “Custodian” means and includes an individual, agent, employee, representative, or officer of a creditor, or an individual, agent, employee, representative, or officer of a management company charged with keeping a creditor's records, or any individual familiar with the books and records of a creditor or an appropriately designated person who is an official custodian of records;
7. (7) “Electronic records” means that information evidenced by a record or records consisting of information stored electronically which may be produced tangibly;
8. (8) “Financial institution” means:
  1. (A) A banking institution that is authorized to issue credit cards pursuant to federal or state law;
  2. (B) A banking subsidiary owned by a bank holding company as defined in 12 U.S.C. § 1841, or by a savings and loan holding company as defined in 12 U.S.C. § 1467a(a)(1)(D); or
  3. (C) Any other federally regulated banking institution;
9. (9) “Incorporated” means to integrate into records, to make a part of records, to place within records, or to treat as records;
10. (10) “Issuer” means a person, business, financial institution, commercial entity or authorized agent of a financial institution that currently issues a credit card account or an instrument evidencing outstanding debt;
11. (11) “Original creditor” means the person, business, financial institution or commercial entity that had the original contractual agreement with a cardholder on a credit card account or an instrument evidencing outstanding debt;
12. (12) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, or any other legal entity; and
13. (13) “Succeeding creditor” means any creditor, not the originating creditor, succeeding to an ownership interest in a credit card account or an instrument evidencing outstanding debt by bill of sale or assignment.

§ 47-22-302. Records that are considered records of regularly conducted activity for evidentiary purposes.

(a) A creditor's records shall include, but are not limited to, written or electronic records of an original creditor, issuer, or succeeding creditor that have been acquired by the creditor through a contractual agreement, an account purchase transaction or assignment in the creditor's regularly conducted business and such records are:
1. (1) Incorporated as a business duty into the records of the creditor's regularly maintained records; and
2. (2) Relied upon in the creditor's regularly conducted business activity.
(b)
1. (1) Except as provided in subdivision (b)(2), records described in subsection (a) shall be considered records of the creditor and the creditor's records custodian may testify with respect to such records as if they are records of the creditor.
2. (2) Subdivision (b)(1) shall not apply if the source of information or the method or circumstances of preparation indicate the records described in subsection (a) lack trustworthiness.
(c) The records described in this section may be submitted as records of regularly conducted activity pursuant to Rule 803(6) of the Tennessee Rules of Evidence.

Part 4 Payment Services

§ 47-22-401. Part definitions.

As used in this part:
1. (1) “Agreement” means a contract to provide payment services;
2. (2) “Bank holding company”:
  1. (A) Has the same meaning as defined in 12 U.S.C. § 1841;
  2. (B) Includes any subsidiaries or affiliates, as defined in 12 U.S.C. § 1841, of a bank holding company; and
  3. (C) Includes any federal credit union or state credit union, as those terms are defined in 12 U.S.C. § 1752;
3. (3) “Card issuer” means any person who issues a credit card, debit card, or other payment card, or the agent of the person with respect to the card;
4. (4) “Credit card” means any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit;
5. (5) “Debit card”:
  1. (A) Means any card, or other payment code or device, issued or approved for use through a payment card network to debit an asset account, regardless of the purpose for which the account is established, whether authorization is based on signature, PIN, or other means;
  2. (B) Includes a general-use prepaid card, as defined in 15 U.S.C. § 1693l-1(a)(2)(A); and
  3. (C) Does not include paper checks;
6. (6) “Lease” means a transfer of the right to possession and use of a device for a term in return for consideration;
7. (7) “Merchant” means a person, located in this state, that is in the business of selling property or services and that accepts credit cards, debit cards, or other payment cards as payment for property or services sold;
8. (8) “Other payment card”:
  1. (A) Means any stored-value card, smart card, gift card, or other similar device that enables a person to obtain property or services in a transaction with a merchant, the payment for which is initiated through a payment card network; and
  2. (B) Does not include credit cards or debit cards;
9. (9) “Payment acquirer” means a person that contracts directly with a merchant to provide payment services;
10. (10) “Payment card network” means an entity:
  1. (A) That directly, or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software that route information and data to conduct credit card, debit card, or other payment card transaction authorization, clearance, and settlement; and
  2. (B) That a person uses in order to accept as a form of payment a brand of credit card, debit card, or other payment card;
11. (11) “Payment services” means the acceptance, transmission, collection, or settlement of the merchant's sales receipts for the merchant's credit card, debit card, or other payment card transactions; and
12. (12) “Payment services fee”:
  1. (A) Means any amount:
    1. (i) Charged, established, or received by a payment acquirer, payment card network, or card issuer; and
    2. (ii) Paid by a merchant in relation to a credit card, debit card, or other payment card transaction;
  2. (B) Includes any amount related to the purchase or lease of equipment as part of an agreement to provide payment services used in relationship to credit card, debit card, or other payment card transactions if the amount is charged, established, or received by a payment acquirer, payment card network, or card issuer; and
  3. (C) Does not include any fees for providing deposit account, loan, or other services by a bank holding company.

§ 47-22-402. Information required to be provided by payment acquirer contracting directly with merchant to provide payment services.

Any payment acquirer that contracts directly with a merchant to provide payment services shall:
1. (1) Provide the merchant with information indicating where the merchant may obtain access to the operating rules, regulations, and bylaws applicable under the agreement with the merchant; provided, however, nothing in this subdivision (1) shall require access by the merchant to information made proprietary or confidential by law or contract;
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  - 47-22-403(b)
2. (2) Disclose the following information in any agreement with the merchant:
  1. (A) The effective date of the agreement;
  2. (B) The term of the agreement;
  3. (C) The provisions for early termination or cancellation of the agreement, if any; and
  4. (D) A complete schedule of all payment services fees applicable to the credit card, debit card, or other payment card services under the agreement; and
3. (3) At the regular period agreed upon by the payment acquirer and the merchant, but not less than monthly, promptly supply the merchant with a statement, which may be electronic, that includes:
  1. (A) An itemized list of all payment services fees assessed since the previous statement;
  2. (B) The total value of the transactions processed by the payment acquirer for the merchant during the statement period; and
  3. (C) If the payment acquirer is not a bank holding company, an indication of the aggregate fee percentage, which shall be calculated by dividing the sum of all payment services fees accrued during the statement period by the total value of the transactions processed by the payment acquirer for the merchant during the statement period.

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§ 47-22-403. Remedies of merchant for noncompliance by payment acquirer.

(a) If a payment acquirer fails to comply with § 47-22-402, the merchant may terminate the agreement; provided, however, prior to terminating the agreement, the merchant shall provide the payment acquirer written notice of the payment acquirer's failure to comply with § 47-22-402. The notice required by this subsection (a) shall specify the information the merchant requests under § 47-22-402. If the agreement sets out the manner by which notice pursuant to this subsection (a) shall be given, the terms of the agreement as to the manner in which the notice shall be given shall control.
(b) If noncompliance is based on a failure to disclose information described in § 47-22-402(1) or (3), the payment acquirer shall be given thirty (30) days from the date notice was provided to the payment acquirer pursuant to subsection (a) to comply with § 47-22-402 and provide the information. Notwithstanding subsection (a), if the payment acquirer complies with § 47-22-402(1) or (3) within the thirty-day period, the merchant shall not be allowed to terminate the agreement pursuant to this section.

§ 47-22-404. Information to be included in contract between payment processor and merchant leasing payment card processing devices.

(a) Except as otherwise provided in subsection (b), any person that contracts with a merchant to lease a device that enables credit card, debit card, or other payment card processing shall ensure that the written contract between the payment processor and merchant clearly and conspicuously includes the following information:
1. (1) The cost to lease the device on a monthly basis;
2. (2) A reasonable approximation of the total cost to lease the device over the term of the lease calculated by multiplying the monthly lease cost by the term; provided, however, the total cost shall not include:
  1. (A) Any obligation due a governmental body; or
  2. (B) Any fees or charges incurred by the merchant due to the merchant's noncompliance with the terms of the contract;
3. (3) The minimum time period for which the device may be leased; and
4. (4) If an option to purchase the device is available:
  1. (A) The total cost to purchase the device outright if the merchant were to purchase the device at the time the contract is entered into; or
  2. (B) A toll-free telephone number that the merchant may use in order to learn the total cost to purchase the device outright or to buy out the lease agreement.
(b) The information required in subdivisions (a)(1)-(4) shall be either:
1. (1) Printed clearly and conspicuously on the written contract in at least fourteen-point bold font; or
2. (2) Handwritten clearly and conspicuously in an appropriately designated blank space on a preprinted form contract.

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47-22-405

§ 47-22-405. Termination by merchant for noncompliance with § 47-22-404.

If a person fails to comply with § 47-22-404, the merchant may terminate the contract with the person to lease a device that enables credit card, debit card, or other payment card processing.

Chapter 23 Duties of Mortgagee or Lender

§ 47-23-101. Insurance information confidential.

(a)
1. (1) When a borrower is required to keep real estate insured and to furnish evidence of such insurance to a lender as a condition for obtaining or keeping the loan, then the lender, mortgagee, assignee, or creditor is prohibited from disclosing to other persons or parties, directly or indirectly, information with respect to the expiration dates of such insurance or other insurance policy information so as to enable any person or party to solicit the insurance or any renewal thereof, without first obtaining the written consent of the policyholder for such disclosure to be made.
2. (2) No other person or party shall request the disclosure of such information, so as to facilitate solicitations of the insurance or any renewal thereof, without first obtaining the written consent of the policyholder.
3. (3) No lender, mortgagee, assignee, or creditor shall use any of the information contained in a policy of insurance for the purpose of soliciting insurance business with respect to the insured real property from the borrower.
(b) These prohibitions do not apply when the lender, mortgagee, assignee, or creditor has been advised in writing by the insurer or its agent that the insurance on the property will be cancelled or will not be renewed.
(c) A willful violation of this section by any lender, mortgagee, assignee, or creditor or by any other person or party who may request the disclosure of such information from such lender, mortgagee, assignee, or creditor is a Class A misdemeanor.

§ 47-23-102. Purchase of insurance by mortgagee.

(a)
1. (1) When a borrower is required to keep real estate insured and to furnish evidence of such insurance to a lender or creditor as a condition for obtaining or keeping the loan, then the lender, mortgagee, assignee, creditor, or any person acting on that person's behalf, who receives and holds funds for the purpose of obtaining or renewing such insurance coverage, shall be required to purchase such coverage as instructed by the borrower or the borrower's agent, if such coverage is reasonably available, to the extent of the funds supplied, but in no event later than ten (10) days after expiration of the existing coverage.
2. (2) The lender, mortgagee, assignee, creditor, or any person acting on that person's behalf shall have the right to select acceptable insurance companies as the commissioner of commerce and insurance has provided by rule.
(b)
1. (1) Whenever the commissioner has reason to believe that any person has followed a practice or procedure in violation of this section, the attorney general and reporter, at the request of the commissioner, may bring an action in the name of the state against such person to restrain by temporary restraining order, temporary injunction, or permanent injunction the commission of such violations.
2. (2) The court may make such orders or render such judgments as may be necessary to make whole any person or class of persons who have suffered an ascertainable loss by reason of the violation of this section. The court may also enter an order temporarily or permanently revoking a license or certificate authorizing that person to engage in business in this state if the court finds knowing and persistent violations of this section. In the event that no such license or certificate exists, then the court may enter an order temporarily or permanently enjoining that person from doing business in this state.

§ 47-23-103. [Transferred]

§ 47-23-104. [Transferred]

§ 47-23-105. [Transferred]

§ 47-23-106. Creditor to notify debtor of creditor's change of address.

(a) Each creditor shall notify its debtors of the creditor's change of address, within fifteen (15) days of such change of address, if failure to so notify may result in a debtor being assessed late charges or additional interest for failure to timely submit payment.
(b) Each violation of subsection (a) constitutes an unfair and deceptive act and shall be subject to the procedures and penalties prescribed by chapter 18, part 1 of this title.
(c) This section shall be enforced by the attorney general and reporter, in accordance with the procedures prescribed by chapter 18, part 1 of this title.

Chapter 24 Equity Participations

§ 47-24-101. Definition.

“Equity participations” means loan transactions in which the lender, in addition to interest and other amounts received pursuant to and rights resulting from the loan transaction, has the right, subject to § 47-24-102, to participate in the borrower's enterprise or venture to the extent described in a written agreement between the lender and the borrower, the participation including, but not limited to, having or exercising the right to acquire equity in the enterprise or venture, and having or exercising the right to receive a percentage of the rents, profits, revenues, sales or refinancing proceeds, or other similar assets represented by the borrower's enterprise or venture, as defined in the written agreement between the lender and the borrower; provided, that no equity participation in agricultural land shall be entered into nor shall any equity participation be secured in any part by agricultural land.

§ 47-24-102. Nature of transaction.

(a) A lender has the right to participate in the borrower's enterprise or venture to such extent as may be set forth in a written agreement between the lender and the borrower; provided, that the original principal amount of the funds advanced to the borrower pursuant to the loan transaction shall be not less than five hundred thousand dollars ($500,000), or, alternatively, that there shall be contemplated to be a series of advances of money aggregating not less than five hundred thousand dollars ($500,000).
(b) The consideration or value received by the lender in any such participation, as distinct from interest received pursuant to the loan transaction, shall not be deemed to be interest, loan charges, commitment fees, or brokerage commissions for purposes of chapter 14 of this title, notwithstanding the fact that the parties may describe such consideration or value to be interest or other such charges in a written agreement between the parties.
(c) Nothing herein shall be construed to limit, modify, or otherwise affect rights which the lender may have, including, but not limited to, foreclosure rights, pursuant to the loan transaction.
(d) The lender shall not be deemed to be a partner or joint venturer with the borrower, or otherwise jointly liable as to the financing with the borrower, as a result of such participation, unless the agreement between the lender and borrower shall expressly make the lender so liable.

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Chapter 25 Trade Practices

Part 1 Trusts—Unlawful Restraint of Trade and Discrimination

§ 47-25-101. Trusts, etc., lessening competition or controlling prices unlawful and void.

All arrangements, contracts, agreements, trusts, or combinations between persons or corporations made with a view to lessen, or which tend to lessen, full and free competition in the importation or sale of articles imported into this state, or in the manufacture or sale of articles of domestic growth or of domestic raw material, and all arrangements, contracts, agreements, trusts, or combinations between persons or corporations designed, or which tend, to advance, reduce, or control the price or the cost to the producer or the consumer of any such product or article, are declared to be against public policy, unlawful, and void.

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§ 47-25-102. Price fixing agreements unlawful and void.

Any arrangements, contracts, and agreements that may be made by any corporation or person, or by and between its agents and subagents, to sell and market its products and articles, manufactured in this state, or imported into this state, to any producer or consumer at prices reduced below the cost of production or importation into this state, including the cost of marketing, and a reasonable and just marginal profit, to cover wages or management, and necessary incidentals, as is observed in the usual course of general business, and the continuance of such practice under such contracts and arrangements for an unreasonable length of time, to the injury of full and free competition, or any other arrangements, contracts, or agreements, by and between its agents and subagents, which tend to lessen full and free competition in the sale of all such articles manufactured and imported into the state, and which amount to a subterfuge for the purpose of obtaining the same advantage and purposes are declared to be against public policy, unlawful, and void.

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§ 47-25-103. Criminal penalties for violation of §§ 47-25-101, 47-25-102 — Prosecution.

(a) Any violation of either § 47-25-101 or § 47-25-102 is declared to be destructive of full and free competition and a conspiracy against trade, and any person who engages in any such conspiracy or who, as principal, manager, director, or agent, or in any other capacity, knowingly carries out any of the stipulations, purposes, prices, rates, or orders made in furtherance of such conspiracy, commits a Class E felony.
(b) Any violation of § 47-25-101 or § 47-25-102 by a corporation shall upon conviction be punished by a fine not exceeding one million dollars ($1,000,000).
(c) The attorney general and reporter has the power to institute criminal proceedings against persons and corporations for violations of § 47-25-101 or § 47-25-102, that involve the award of a contract by the state. However, the attorney general and reporter has jurisdiction to institute criminal proceedings that involve violations on contracts awarded by political subdivisions of the state upon the written request of the local district attorney general.

§ 47-25-104. Charter forfeiture, or exclusion of foreign corporations, for violations.

(a) Any corporation chartered under the laws of the state which violates any of the provisions of either § 47-25-101 or § 47-25-102 shall thereby forfeit its charter and its franchise, and its corporate existence shall thereupon cease.
(b) Every foreign corporation which commits such a violation is denied the right to do, and is prohibited from doing, business in this state.
(c) It is the duty of the attorney general and reporter to enforce this section.

§ 47-25-105. Liability for debts of trust, etc.

All persons and corporations, and the officers and the stockholders of all corporations, that become or continue to be members of, or in any way connected with or concerned in, any such trust, contract, agreement, or combination, shall be jointly and severally liable to pay all the debts, obligations, and liabilities of each and every person and corporation that become or continue to be a member thereof, connected therewith, or concerned therein, as fully as if all were partners in the creation of such debts, obligations, and liabilities.

§ 47-25-106. Recovery of consideration as remedy for damages.

Any person who is injured or damaged by any such arrangement, contract, agreement, trust, or combination described in this part may sue for and recover, in any court of competent jurisdiction, from any person operating such trust or combination, the full consideration or sum paid by the person for any goods, wares, merchandise, or articles, the sale of which is controlled by such combination or trust.

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47-25-107(a)

§ 47-25-107. Civil actions under §§ 47-25-101 — 47-25-106 — Evidence.

(a) Upon the trial of any civil action against any person for a violation of any of the provisions of §§ 47-25-101 — 47-25-106, all officers, stockholders, and agents of such corporation, person, or copartnership shall be competent witnesses against the defendant, as such, on trial.
(b) Such officers, stockholders, and agents may be compelled to testify against such defendant, and produce all books and papers in their custody or control pertinent to the issues in such action at or before the time of trial, and shall not be excused from producing any books or papers because they might tend to incriminate such witnesses, but nothing which such witness shall testify to, and no books or papers produced by the witness, shall in any manner be used against the witness in any criminal action to which the witness is a party.

§ 47-25-108. Connection of plaintiff with trust, etc., as defense.

When action at law or suit in equity is commenced in any court, it is lawful, in the defense thereof, to plead in bar or in abatement of the action that the plaintiff, or any other person or corporation interested in the prosecution of the action, is a member or connected with, and the cause of action grows out of, some business or transaction with such trust, pool, contract, arrangement, or combination as described in either § 47-25-101 or § 47-25-102.

§ 47-25-109. Giving away or underpricing goods prohibited — Samples excepted.

(a) It is unlawful for any person engaged in the business of manufacturing in this or any other state to give away or sell for a less price than the cost of manufacture, any manufactured article in this state, with the intent and purpose of destroying honest competition; provided, that nothing in this section shall be construed to prohibit the distribution to consumers of specimens of proprietary articles in good faith as samples.
(b) Any person violating this section commits a Class C misdemeanor.

§ 47-25-110. Agricultural cooperatives — Monopolization or restraint of trade.

(a) If the commissioner of agriculture has reason to believe that any cooperative marketing association, organized or doing business in this state, under title 43, chapter 18, monopolizes or restrains trade to such an extent that the price of any agricultural product is unduly enhanced by reason thereof, the commissioner shall serve upon such association a complaint stating the charge in that respect, to which complaint shall be attached, or contained therein, a notice of hearing, specifying a day and place not less than thirty (30) days after the service thereof, requiring the association to show cause why an order should not be made directing the association to cease and desist from monopolization or restraint of trade.
(b) An association so complained of may, at the time and place so fixed, show cause why such order should not be entered.
(c) The evidence given on such a hearing shall be taken under such rules and regulations as the commissioner may prescribe, reduced to writing, and made a part of the record.
(d) If, upon such hearing, the commissioner is of the opinion that such association monopolizes or restrains trade to such an extent that the price of any agricultural product is unduly enhanced thereby, the commissioner shall issue and cause to be served upon the association an order reciting the facts found by the commissioner, directing such association to cease and desist from monopolization or restraint of trade.
(e) If such association fails or refuses or neglects to obey such order, the attorney general and reporter shall then proceed to take appropriate action against the association so offending, in a court of competent jurisdiction. Such court may, upon the conclusion of the hearing, enforce its decree by injunction or other appropriate remedy, but no injunction or extraordinary process shall issue until such association fails or refuses to comply with the terms and provisions of the warning order of the commissioner.

§ 47-25-111. Coal — Agreement to restrict output.

Any person who, directly or indirectly, enters into a conspiracy or agreement with intent to limit the output of coal in this state, for the purpose of raising the price to the consumer, or to any intermediate dealer, or who enters into any conspiracy or agreement, directly or indirectly, of any nature whatsoever to so raise the price of coal to the consumer or to any intermediate dealer, commits a Class C misdemeanor.

§ 47-25-112. News services, etc. — Discrimination prohibited.

(a) It is unlawful for any person, firm, or corporation, or any association or combination of corporations, firms, or persons, engaged in the business of buying, gathering, or accumulating information or news, or vending, supplying, distributing, or publishing information or news, to refuse to vend, supply, distribute, or publish such information or news to any person, firm, or corporation, conducting a newspaper in this state, offering to pay for the information or news, or to make discrimination in any manner between persons, firms, or corporations conducting newspapers in this state in the vending, supplying, distributing or publishing of such information or news.
(b) It is unlawful for any agent or employee in this state of a person, firm, or corporation, or association or combination of corporations, firms, or persons engaged in the business of gathering, accumulating, vending, supplying, and distributing news or information, to assist in the carrying on or conducting of such business when such person, firm, or corporation, or association of such persons, firms, or corporations, have refused to furnish news or information without discrimination in price, method of supply, or otherwise to any person, firm, or corporation conducting a newspaper in this state and desiring to be supplied with such information or news.
(c) Any person, firm, or corporation violating this section, or aiding or abetting in the violation of this section, commits a Class C misdemeanor. Each violation constitutes a separate offense.

§ 47-25-113. [Transferred]

§ 47-25-114. [Transferred]

§ 47-25-115. [Transferred]

Part 2 Unfair Sales Law

§ 47-25-201. Short title.

This part may be cited as the “Unfair Sales Law.”

§ 47-25-202. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1)
  1. (A) “Cost to the retailer” means whichever is lower of the following:
    1. (i) The purchase price of the product or commodity to the retailer at the retail outlet when the invoice is dated not more than sixty (60) days prior to the sale of such product or commodity by the retailer; or
    2. (ii) The replacement cost of such product or commodity to the retailer at the time of sale in the quantity last purchased by the retailer;
    3. less any legitimate trade discounts, but exclusive of cash discounts for prompt payment, and plus a mark-up amounting to not less than the minimum cost of distribution by the most efficient retailer, which mark-up, in the absence of proof to the contrary, shall be six percent (6%);
  2. (B) In all retail sales involving more than one (1) item or commodity, the retailer's price on individual items or commodities shall be computed on the “cost to the retailer” as herein defined;
  3. (C) “Cost to the retailer” in either of the above definitions includes as a part thereof any and all taxes and/or licenses levied against the item or items by the federal, state, county or municipal government;
  4. (D) “Cost to the retailer” must be bona fide cost, and sales to retailers at prices which cannot be justified by existing market conditions within this state shall not be used as a basis for computing costs with respect to sales by retailers;
2. (2)
  1. (A) “Cost to the wholesaler” means and includes whichever is lower of the following:
    1. (i) The purchase price of the product or commodity to the wholesaler when the invoice is dated not more than sixty (60) days prior to the sale of such product or commodity by the wholesaler; or
    2. (ii) The replacement cost of such product or commodity to the wholesaler at the time of sale in the quantity last purchased by the wholesaler;
    3. less any legitimate trade discounts, but exclusive of cash discounts for prompt payment;
  2. (B) In all wholesale sales involving more than one (1) item or commodity, the wholesaler's selling price on individual items or commodities shall be computed on the “cost to wholesaler,” as herein defined;
  3. (C) “Cost to the wholesaler” must be bona fide cost, and sales to wholesalers at prices which cannot be justified by existing market conditions within this state shall not be used as a basis for computing costs with respect to sales by wholesalers;
3. (3) “Retailer” means and includes every person, partnership, firm, corporation or association engaged in the business of making sales at retail within this state;
4. (4) “Sale at retail,” “sales at retail” or “retail sale” means and includes any transfer, made in the ordinary course of trade or in the usual prosecution of the seller's business, of title to tangible personal property to the purchaser for use or consumption and for a valuable consideration. “Sale at retail,” “sales at retail” or “retail sale” mean any transfer of such property where title is retained as security for the purchase price but is intended to be transferred later;
5. (5) “Sale at wholesale,” “sales at wholesale” or “wholesale sales” means and includes any transfer, for a valuable consideration made in the ordinary course of trade or the usual prosecution of the seller's business, of title to tangible personal property to the purchaser for resale either in its original form or as processed or prepared for resale by hotels, cafes, or hospitals or other institutions. “Sale at wholesale,” “sales at wholesale” or “wholesale sales” mean any transfer of such property where title is retained as security for the purchase price but is intended to be transferred later; and
6. (6) “Wholesaler” means and includes every person, partnership, firm, corporation, or association engaged in the business of making sales at wholesale within this state.

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47-25-602(9)

§ 47-25-203. Legislative policy.

It is declared that advertising, offers to sell, or sales by retailers or wholesalers at less than cost, as defined in this part, with the intent or effect of inducing the purchase of other merchandise or of unfairly diverting trade from a competitor or otherwise injuring a competitor, impair and prevent fair competition, injure public welfare, and are unfair competition and contrary to public policy, where the result of such advertising, offers, or sales is to tend to deceive or mislead any purchaser or prospective purchaser or to substantially lessen competition or unreasonably restrain trade or to tend to create a monopoly in any line of commerce. It is further declared that such advertising, offers, or sales by any retailer or wholesaler with such intent or effect or result are in contravention of the policy of this part.

§ 47-25-204. Exemptions.

This part does not apply to sales at retail or sales at wholesale made:
1. (1) In an isolated transaction and not in the usual course of business;
2. (2) Where merchandise is sold in bona fide clearance sales, if advertised, marked and sold as such;
3. (3) Where highly perishable merchandise must be promptly sold in order to forestall loss;
4. (4) Of imperfect or actually damaged merchandise, or merchandise which is being discontinued, if advertised, marked, and sold as such;
5. (5) Of merchandise sold upon the complete final liquidation of any business;
6. (6) Of merchandise sold for charitable purposes or to unemployment relief agencies;
7. (7) Of merchandise sold on contract to departments of government and governmental institutions;
8. (8) In meeting the legal price of a competitor on merchandise which is the same as to comparable competitive factors, such as weight, quantity, quality, pack, brand, or packaging; or
9. (9) By any officer acting under the order or direction of any court.

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§ 47-25-205. Sales below cost — Penalties — Evidence.

(a) Any retailer who, in contravention of the policy of this part, advertises, offers to sell, or sells at retail any merchandise at less than cost to the retailer, as defined in this part, commits a Class C misdemeanor.
(b) Any wholesaler who, in contravention of the policy of this part, advertises, offers to sell, or sells at wholesale any merchandise at less than cost to the wholesaler, as defined in this part, commits a Class C misdemeanor.
(c) Proof of any such advertising, offer to sell, or sale by any retailer or wholesaler in contravention of the policy of this part shall be prima facie evidence of a violation of this part.

§ 47-25-206. Injunction restraining unlawful sales.

In addition to the penalties provided in this part, the district attorney general of any county or any person damaged, or who is threatened with loss or damage, by reason of a violation of this part, has the right to apply for an injunction, and any court of competent jurisdiction has the power to restrain sales in violation of this part.

Part 3 Unfair Cigarette Sales

§ 47-25-301. Short title.

This part shall be known and may be cited as the “Unfair Retailer's Cigarette Sales Law.”

§ 47-25-302. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Basic cost of cigarettes” means the invoice cost of cigarettes to the retailer or the replacement cost of cigarettes to the retailer within thirty (30) days prior to the date of sale, in the quantity last purchased, whichever is lower, absent any cash or other discounts and/or concessions of any kind, to which shall be added the full face value of any stamps which may be required by any cigarette tax law of this state now in effect or hereafter enacted, and any other taxes or fees imposed by title 67, chapter 4, part 10, if not already included by the manufacturer in this list price;
2. (2) “Commissioner” means the commissioner of revenue;
3. (3) “Cost of doing business by the retailer” is:
  1. (A) Eight percent (8%) of the basic cost of cigarettes to the retailer until June 30, 2015;
  2. (B) Eleven percent (11%) of the basic cost of cigarettes to the retailer beginning July 1, 2015, until June 30, 2016;
  3. (C) Thirteen percent (13%) of the basic cost of cigarettes to the retailer beginning July 1, 2016, until June 30, 2017; and
  4. (D) Fifteen percent (15%) of the basic cost of cigarettes to the retailer beginning July 1, 2017, and thereafter;
4. (4) “Cost to the retailer” means the “basic cost of cigarettes” to the retailer plus the “cost of doing business by the retailer”;
5. (5) “Retailer” has the same meaning ascribed to the words “retail dealer” in § 67-4-1001;
6. (6) “Sell at retail,” “sales at retail” or “retail sales” means and includes any transfer of title to tangible personal property for a valuable consideration made in the ordinary course of trade or usual prosecution of the seller's business, to the purchaser for consumption or use; and
7. (7) “Tobacco distributor” or “person” has the same meaning as ascribed in § 67-4-1001.

§ 47-25-303. Sales below cost — Evidence — Enforcement by department of revenue.

(a) It is a Class C misdemeanor for any retailer, with intent to injure competitors or destroy substantially or lessen competition, to advertise, offer to sell, or sell at retail, cigarettes at less than cost to the retailer.
(b) Evidence of advertisement, offering to sell or sale of cigarettes by any retailer at less than cost to the retailer shall be prima facie evidence of both a violation of the Unfair Retailer's Cigarette Sales Law, compiled in this part, and of intent to injure competitors or destroy substantially or lessen competition.
(c) It is the intention of the general assembly that this part be enforced by the department of revenue.

§ 47-25-304. Liability of officers or agents.

Any individual who, as a director, officer, partner, member, or agent of any person violating this part, assists or aids, directly or indirectly, in such violation, equally with the person for whom such individual acts, commits a Class C misdemeanor.

§ 47-25-305. Contracts in violation of part void.

Any contract, express or implied, made by any person, firm, or corporation in violation of any of the provisions of this part is declared to be an illegal and void contract and no recovery thereon shall be had.

§ 47-25-306. Injunction — Damages.

(a)
1. (1) Any person injured by any violation of this part, or any trade association which is representative of such a person, may maintain an action in any court of equitable jurisdiction to prevent, restrain, or enjoin such violation.
2. (2) If, in such action, a violation of this part shall be established, the court shall enjoin and restrain or otherwise prohibit such violation and, in addition thereto, shall assess in favor of the plaintiff and against the defendant the costs of the suit.
3. (3) In such action, it shall not be necessary that actual damages to the plaintiff be alleged or proved, but where alleged and proved, the plaintiff in the action, in addition to such injunctive relief and costs of suit, shall be entitled to recover from the defendant the amount of actual damages sustained by the plaintiff.
(b) In the event no injunctive relief is sought or required, any person injured by a violation of this part may maintain an action for damages alone in any court of general jurisdiction, and the measure of damages in such action shall be the same as prescribed in subsection (a).

§ 47-25-307. Combined sales, coupon offers, etc.

In all advertisements, offers for sale, or sales involving two (2) or more items, at least one (1) of which items is cigarettes, at a combined price, and in all advertisements, offers for sale, or sales involving the giving of any concession of any kind whatsoever (whether coupons or otherwise), the retailer's selling price shall not be below the cost to the retailer of all articles, products, commodities, and concessions included in such transactions.

§ 47-25-308. Enforcement — Penalties — Hearings.

(a) The department of revenue, through the commissioner, shall administer and enforce this part.
(b)
1. (1) For an initial violation or noncompliance with any provision of this part by a retail dealer, a penalty shall be imposed not to exceed two hundred fifty dollars ($250);
2. (2) For any second violation or noncompliance with any provision of this part by any person who has previously been found in violation of subdivision (b)(1), a penalty shall be imposed not to exceed five hundred dollars ($500); and
3. (3) For any subsequent violation or violations or noncompliance with any provision of this part, by any person who has previously been found in violation of subdivision (b)(2), a penalty shall be imposed not to exceed one thousand dollars ($1,000).
(c) Any person whose license is revoked or suspended under this section, and who continues to engage in the unauthorized sale, distribution or handling of cigarettes in this state, either directly or through any agent or third party acting on behalf of such person, shall be charged with an additional violation of this part and shall also be in violation of § 67-4-1015.
(d) Any person who is adversely affected by a decision of the commissioner may petition the department of revenue for a hearing pursuant to § 67-1-105, which will be held in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, part 3.
(e) In enforcing this part, the commissioner shall consider the cost and effectiveness of administration and endeavor to administer this part in the most cost-efficient manner.

§ 47-25-309. Exemptions.

This part does not apply to sales at retail made where cigarettes are:
1. (1) Advertised, offered for sale, or sold in bona fide clearance sales for the purpose of discontinuing trade in such cigarettes and the advertising, offer to sell, or sale shall state the reason thereof and the quantity of such cigarettes advertised, offered for sale, or to be sold;
2. (2) Advertised, offered for sale, or sold as imperfect or damaged and the advertising, offer to sell, or sale shall state the reason thereof and the quantity of such cigarettes advertised, offered for sale, or to be sold;
3. (3) Sold upon the complete final liquidation of a business; or
4. (4) Advertised, offered for sale, or sold by any fiduciary or other officer acting under the order or direction of any court.

§ 47-25-310. Participation by retailer in certain special programs.

Participation in a manufacturer's incentive program, discount price program or special price program shall not cause a retailer to be in violation of this part.

§ 47-25-311. [Transferred]

§ 47-25-312. [Transferred]

§ 47-25-313. [Transferred]

Part 4 Trademarks on Drugs

§ 47-25-401. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Deceptive imitation” means any imitation calculated or likely to deceive purchasers exercising the care ordinarily exercised in buying;
2. (2) “Drug” includes all preparations recognized in the United States Pharmacopoeia or National Formulary for internal or external use, and any substance or mixture of substances intended to be used for the cure, mitigation, or prevention of diseases of either humans or other animals;
3. (3) “Misbranded” means a drug the container of which bears a counterfeit, copy, or deceptive imitation of any trademark;
4. (4) “Owner” means the person having the right to the use of a trademark. A subsisting certificate of registration under the laws of this state or of the United States shall constitute prima facie evidence of ownership;
5. (5) “Person” includes any individual, partnership, corporation, or association; and
6. (6) “Trademark” includes any trade or identifying mark, term, design, device, label, slogan, dress, or other means by which the goods of any producer, manufacturer, packer, owner, or seller may be identified.

§ 47-25-402. Liability of employer for acts of employees.

In proceedings for the violation of this part, an act or omission of any individual acting for a partnership, corporation, or association, or the act or omission of an officer or employee of any partnership, corporation, or association within the scope of that person's office or employment, shall be deemed to be the act or omission of such partnership, corporation, or association, as well as of the individual.

§ 47-25-403. Prohibited acts.

It is unlawful for any person without the written authority of the owner of a trademark for a drug to do or be concerned in the doing of any of the following acts:
1. (1) Making or causing to be made, selling, possessing, or using commercially any counterfeit, copy, or deceptive imitation of such trademark or any package or label bearing or containing any such counterfeit, copy, or deceptive imitation;
2. (2) Knowingly receiving, keeping or having in the person's possession or under the person's control, selling, offering for sale, or disposing of any drug bearing any counterfeit, copy, or deceptive imitation of such trademark or in any package or under any label bearing any such counterfeit, copy, or deceptive imitation;
3. (3) Making or causing to be made or knowingly possessing, selling, disposing of, delivering, or offering to deliver to any person a die, plate, block, stone, type-face, matrix, or other means of printing, lithographing, or otherwise making a counterfeit, copy, or deceptive imitation of such trademark; or
4. (4) Knowingly misrepresenting orally or by advertisement or artifice the manufacture or origin or commercial sponsorship of any drug sold, offered, or exposed for sale.

§ 47-25-404. Prosecution — Fees of officers.

It is made the duty of the sheriff of any county of this state or health officers, peace officers, inspectors, or boards of pharmacy and other officers to assist and cooperate with the prosecuting attorney in the investigation of any violation of this part, including the procurement of evidence for the support of the prosecution, which may be instituted by the prosecuting attorney, and for such services the sheriff or other officer shall be allowed and paid the same fees for travel and sustenance as are usually allowed in other criminal proceedings.

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8-8-201(b)(1)

§ 47-25-405. Penalty.

Any person violating any of the provisions of this part commits a Class C misdemeanor.

§ 47-25-406. Remedies cumulative.

The remedies provided in this part are cumulative and not alternative.

§ 47-25-407. Legal and equitable remedies unimpaired.

Nothing in this part shall prevent, lessen, impeach, or avoid any remedy at law or in equity which any party aggrieved by any wrongful use of any trademark might have had if this part had not been passed.

§ 47-25-408. [Repealed or transferred]

§ 47-25-409. [Repealed or transferred]

§ 47-25-410. [Repealed or transferred]

§ 47-25-411. [Repealed or transferred]

§ 47-25-412. [Repealed or transferred]

§ 47-25-413. [Repealed or transferred]

§ 47-25-414. [Repealed or transferred]

§ 47-25-415. [Repealed or transferred]

§ 47-25-416. [Repealed or transferred]

§ 47-25-417. [Repealed or transferred]

§ 47-25-418. [Repealed or transferred]

§ 47-25-419. [Repealed or transferred]

§ 47-25-420. [Repealed or transferred]

§ 47-25-421. [Repealed or transferred]

Part 5 Tennessee Trade Mark Act of 2000

§ 47-25-501. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) A mark shall be deemed to be “abandoned” when either of the following occurs:
  1. (A) When its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Non-use for two (2) consecutive years shall constitute prima facie evidence of abandonment; or
  2. (B) When any course of conduct of the owner, including acts of omission as well as commission, causes the mark to lose its significance as a mark.
2. (2) “Applicant” embraces the person filing an application for registration of a mark under this part, and the legal representatives, successors, or assigns of such person;
3. (3) “Dilution” means the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of:
  1. (A) Competition between the owner of the famous mark and other parties; or
  2. (B) Likelihood of confusion, mistake, or deception;
4. (4) “Mark” includes any trademark or service mark, entitled to registration under this part whether registered or not;
5. (5) “Person” and any other word or term used to designate the applicant or other party entitled to a benefit or privilege or rendered liable under this part includes a juristic person as well as a natural person. “Juristic person” includes a firm, partnership, corporation, union, association, or other organization capable of suing and being sued in a court of law;
6. (6) “Registrant” embraces the person to whom the registration of a mark under this part is issued, and the legal representatives, successors, or assigns of such person;
7. (7) “Secretary” means the secretary of state or the designee of the secretary charged with the administration of this part;
8. (8) “Service mark” means any word, name, symbol, or device or any combination thereof used by a person, to identify and distinguish the services of one (1) person, including a unique service, from the services of others, and to indicate the source of the services, even if that source is unknown. Titles, character names used by a person, and other distinctive features of radio or television programs may be registered as service marks notwithstanding that they, or the programs, may advertise the goods of the sponsor;
9. (9) “Trade name” means any name used by a person to identify a business or vocation of such person; and
10. (10) “Trademark” means any word, name, symbol, or device or any combination thereof used by a person to identify and distinguish the goods of such person, including a unique product, from those manufactured or sold by others, and to indicate the source of the goods, even if that source is unknown;
11. (11) “Use” means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For the purposes of this part, a mark shall be deemed to be in use:
  1. (A) On goods when it is placed in any manner on the goods or other containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and the goods are sold or transported in commerce in this state; and
  2. (B) On services when it is used or displayed in the sale or advertising of services and the services are rendered in this state.

§ 47-25-502. Registrability.

A mark by which the goods or services of any applicant for registration may be distinguished from the goods or services of others shall not be registered if it:
1. (1) Consists of or comprises immoral, deceptive, or scandalous matter;
2. (2) Consists of or comprises matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute;
3. (3) Consists of or comprises the flag or coat of arms, or other insignia of the United States, or of any state or municipality, or of any foreign nation, or any simulation thereof;
4. (4) Consists of or comprises the name, signature, or portrait identifying a particular living individual, except with that individual's written consent;
5. (5) Consists of a mark which:
  1. (A) When used on or in connection with the goods or services of the applicant, is merely descriptive or deceptively misdescriptive of them;
  2. (B) When used on or in connection with the goods or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them; or
  3. (C) Is primarily merely a surname;
    1. provided, that nothing in this subdivision (5) shall prevent the registration of a mark used by the applicant which has become distinctive of the applicant's goods or services. The secretary may accept as evidence that the mark has become distinctive, as used on or in connection with the applicant's goods or services, proof of continuous use thereof as a mark by the applicant in this state for the five (5) years before the date on which the claim of distinctiveness is made; or
6. (6) Consists of or comprises a mark which so resembles a mark registered in this state or a mark or trade name previously used by another and not abandoned, as to be likely, when used on or in connection with the goods or services of the applicant, to cause confusion, mistake or deception.

§ 47-25-503. Application for registration.

(a) Subject to the limitations set forth in this part, any person who uses a mark may file in the office of the secretary, in a manner complying with the requirements of the secretary, an application for registration of that mark setting forth, but not limited to, the following information:
1. (1) The name and business address of the person applying for such registration; and, if a corporation, the state of incorporation, or if a partnership, the state in which the partnership is organized and the names of the general partners, as specified by the secretary;
2. (2) The goods or services on or in connection with which the mark is used, the mode or manner in which the mark is used on or in connection with such goods or services and the class in which such goods or services fall;
3. (3) The date when the mark was first used anywhere and the date when it was first used in this state by the applicant or a predecessor in interest; and
4. (4) A statement that the applicant is the owner of the mark, that the mark is in use, and that, to the knowledge of the person verifying the application, no other person has registered, either federally or in this state, or has the right to use such mark either in the identical form thereof or in such near resemblance thereto as to be likely, when applied to the goods or services of such other person, to cause confusion, or to cause mistake, or to deceive.
(b) The secretary may also require a statement as to whether an application to register the mark, or portions or a composite thereof, has been filed by the applicant or a predecessor in interest in the United States patent and trademark office and, if so, the applicant shall provide full particulars with respect thereto including the filing date and serial number of each application, the status thereof and, if any application was finally refused registration or has otherwise not resulted in a registration, the reasons therefor.
(c) The secretary may also require that a drawing of the mark, complying with such requirements as the secretary may specify, accompany the application.
(d) The application shall be signed and verified (by oath, affirmation or declaration subject to perjury laws) by the applicant or by a member of the firm or an officer of the corporation or association applying.
(e) The application shall be accompanied by one (1) specimen showing the mark as actually used and shall be accompanied by the application fee payable to the secretary.

§ 47-25-504. Filing of applications.

(a) Upon the filing of an application for registration and payment of the application fee, the secretary may cause the application to be examined for conformity with this part.
(b) The applicant shall provide any additional pertinent information requested by the secretary, including a description of a design mark, and may make, or authorize the secretary to make, such amendments to the application as may be reasonably requested by the secretary or deemed by the applicant to be advisable to respond to any rejection or objection.
(c) The secretary may require the applicant to disclaim an unregisterable component of a mark otherwise registerable, and an applicant may voluntarily disclaim a component of a mark sought to be registered. No disclaimer shall prejudice or affect the applicant's or registrant's rights then existing or thereafter arising in the disclaimed matter, or the applicant's or registrant's rights of registration on another application if the disclaimed matter is or becomes distinctive of the applicant's or registrant's goods or services.
(d) Amendments may be made by the secretary upon the application submitted by the applicant upon the applicant's agreement; or a fresh application may be required to be submitted.
(e) If the applicant is found not to be entitled to registration, the secretary shall advise the applicant thereof and of the reasons therefor. The applicant shall have a reasonable period of time specified by the secretary in which to reply or to amend the application, in which event the application shall then be reexamined. This procedure may be repeated until:
1. (1) The secretary finally refuses registration of the mark; or
2. (2) The applicant fails to reply or amend within the specified period, whereupon the application shall be deemed to have been abandoned.
(f) If the secretary finally refuses registration of the mark, the applicant may seek a writ of mandamus to compel such registration. Such writ may be granted, but without costs to the secretary, on proof that all the statements in the application are true and that the mark is otherwise entitled to registration.
(g) In the instance of applications concurrently being processed by the secretary seeking registration of the same or confusingly similar marks for the same or related goods or services, the secretary shall grant priority to the applications in order of filing. If a prior-filed application is granted a registration, the other application or applications shall then be rejected. Any rejected applicant may bring an action for cancellation of the registration upon grounds of prior or superior rights to the mark, in accordance with § 47-25-509.

§ 47-25-505. Certificate of registration.

(a)
1. (1) Upon compliance by the applicant with the requirements of this part, the secretary shall cause a certificate of registration to be issued and delivered to the applicant.
2. (2) The certificate of registration shall be issued under the signature of the secretary and the seal of the state, and it shall show:
  1. (A) The name and business address and, if a corporation, the state of incorporation, or if a partnership, the state in which the partnership is organized and the names of the general partners, as specified by the secretary, of the person claiming ownership of the mark;
  2. (B) The date claimed for the first use of the mark anywhere and the date claimed for the first use of the mark in this state;
  3. (C) The class of goods or services and a description of the goods or services on or in connection with which the mark is used;
  4. (D) A reproduction of the mark; and
  5. (E) The registration date and the term of the registration.
(b) Any certificate of registration issued by the secretary under this section or a copy thereof duly certified by the secretary shall be admissible in evidence as competent and sufficient proof of the registration of such mark in any actions or judicial proceedings in any court of this state.

§ 47-25-506. Duration and renewal.

(a) A registration of mark hereunder shall be effective for a term of five (5) years from the date of registration and, upon application filed within six (6) months prior to the expiration of such term, in a manner complying with the requirements of the secretary, the registration may be renewed for a like term from the end of the expiring term. A renewal fee, payable to the secretary, shall accompany the application for renewal of the registration.
(b) A registration may be renewed for successive periods of five (5) years in like manner. Any registration in force on June 4, 2000, shall continue in full force and effect for the unexpired term thereof and may be renewed by filing an application for renewal with the secretary complying with the requirements of the secretary and paying the aforementioned renewal fee therefor within six (6) months prior to the expiration of the registration.
(c) All applications for renewal under this part, whether of registrations made under this part or of registrations effected under any prior act, shall include a verified statement that the mark has been and is still in use and include a specimen showing actual use of the mark on or in connection with the goods or services.

§ 47-25-507. Assignments, changes of name and other instruments.

(a) Any mark and its registration hereunder shall be assignable with the good will of the business in which the mark is used, or with that part of the good will of the business connected with the use of and symbolized by the mark. Assignment shall be by instruments in writing duly executed and may be recorded with the secretary upon the payment of the recording fee payable to the secretary who, upon recording of the assignment, shall issue in the name of the assignee a new certificate for the remainder of the term of the registration or of the last renewal thereof. An assignment of any registration under this part shall be void as against any subsequent purchaser for valuable consideration without notice, unless it is recorded with the secretary within three (3) months after the date thereof or prior to such subsequent purchase.
(b) Any registrant or applicant effecting a change of the name of the person to whom the mark was issued or for whom an application was filed may record a certificate of change of name of the registrant or applicant with the secretary upon the payment of the recording fee. The secretary may issue in the name of the assignee a certificate of registration of an assigned application. The secretary may issue in the name of the assignee a new certificate of registration for the remainder of the term of the registration or last renewal thereof.
(c) Other instruments which relate to a mark registered or application pending pursuant to this part, including, but not limited to, licenses, security interests or mortgages, may be recorded in the discretion of the secretary; provided, that such instrument is in writing and duly executed.
(d) Acknowledgment shall be prima facie evidence of the execution of an assignment or other instrument and, when recorded by the secretary, the record shall be prima facie evidence of execution.
(e) A photocopy of any instrument referred to in subsection (a), (b) or (c) shall be accepted for recording if it is certified by any of the parties thereto, or their successors, to be a true and correct copy of the original.

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47-25-508

§ 47-25-508. Records.

The secretary shall keep for public examination a record of all marks registered or renewed under this part, as well as a record of all documents recorded pursuant to § 47-25-507.

§ 47-25-509. Cancellation.

The secretary shall cancel from the register, in whole or in part:
1. (1) Any registration concerning which the secretary shall receive a voluntary request for cancellation thereof from the registrant or the assignee of record;
2. (2) All registrations granted under this part and not renewed in accordance with this part;
3. (3) Any registration concerning which a court of competent jurisdiction finds that:
  1. (A) The registered mark has been abandoned;
  2. (B) The registrant is not the owner of the mark;
  3. (C) The registration was granted improperly;
  4. (D) The registration was obtained fraudulently;
  5. (E) The mark is or has become the generic name for the goods or services, or a portion thereof, for which it has been registered; or
  6. (F) The registered mark is so similar to a mark registered by another person in the United States patent and trademark office prior to the date of the filing of the application for registration by the registrant hereunder, and which has not been abandoned, as to be likely to cause confusion, mistake or deception; provided, that should the registrant prove that the registrant is the owner of a concurrent registration of a mark in the United States patent and trademark office covering an area including this state, the registration hereunder shall not be cancelled for such area of the state; or
4. (4) When a court of competent jurisdiction shall order cancellation of a registration on any ground.

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47-25-504(g)

§ 47-25-510. Classification.

The secretary shall by regulation establish a classification of goods and services for convenience of administration of this part, but not to limit or extend the applicant's or registrant's rights, and a single application for registration of a mark may include any or all goods upon which, or services with which, the mark is actually being used, indicating the appropriate class or classes of goods or services. When a single application includes goods or services which fall within multiple classes, the secretary may require payment of a fee for each class. To the extent practical, the classification of goods and services should conform to the classification adopted by the United States patent and trademark office.

§ 47-25-511. Fraudulent registration.

Any person who, for the person's own benefit, or on behalf of any other person, procures the filing or registration of any mark in the office of the secretary under this part by knowingly making any false or fraudulent representation or declaration, orally or in writing, or by any other fraudulent means, shall be liable to pay all damages sustained in consequence of such filing or registration, to be recovered by or on behalf of the party injured thereby in any court of competent jurisdiction.

§ 47-25-512. Infringement.

Subject to § 47-25-516, any person who does the following is liable in a civil action by the registrant for any and all of the remedies provided in § 47-25-514, except that under subdivision (2), the registrant is not entitled to recover profits or damages unless the acts have been committed with the intent to cause confusion, mistake, or deception:
1. (1) Uses, without the consent of the registrant, any reproduction, counterfeit, copy, or colorable imitation of a mark registered under this part in connection with the sale, distribution, offering for sale, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, mistake or deception as to the source of origin of such goods or services;
2. (2) Reproduces, counterfeits, copies, or colorably imitates any such mark and applies such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with the sale or other distribution in this state of such goods or services;
3. (3) Uses the trade name or trademark, or a confusingly similar trade name or trademark, of any bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary in a solicitation for the offering of services or products if such use is likely to cause confusion, mistake or deception as to the source of origin, affiliation or sponsorship of such products or services; or, uses the trade name or trademark, or confusingly similar trade name or trademark, of any bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary in any manner in a solicitation for the offering of services or products, unless the solicitation clearly and conspicuously states the following in bold-face type on the front page of the solicitation:
  1. (A) The name, address and telephone number of the person making the solicitation;
  2. (B) A statement that the person making the solicitation is not affiliated with the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary; and
  3. (C) A statement that the solicitation is not authorized or sponsored by the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary;
4. (4) Uses the trade name or trademark, or a confusingly similar trade name or trademark of any place of entertainment, or the name of any event, person, or entity scheduled to perform at a place of entertainment in the domain of a ticket marketplace URL. It is not a violation of this subdivision (4) if the ticket marketplace obtained written authorization from the place of entertainment, event, person, or entity scheduled to perform at a place of entertainment to use the trade name, trademark, or name in the domain of the URL prior to the use. For purposes of this subdivision (4):
  1. (A) “Domain” means the portion of text in a URL that is to the left of the top-level domains such as .com, .net, or .org;
  2. (B) “Place of entertainment” means an entertainment facility in this state, such as a theater, stadium, museum, arena, amphitheater, racetrack, or other place where performances, concerts, exhibits, games, athletic events, or contests are held;
  3. (C) “Ticket” means a printed, electronic, or other type of evidence of the right, option, or opportunity to occupy space at, to enter, or to attend a place of entertainment, even if not evidenced by any physical manifestation of the right, option, or opportunity; and
  4. (D) “Ticket marketplace” means a website that provides a forum for or facilitates the buying and selling, or reselling, of a ticket; or
5. (5) Uses or displays any combination of text, images, website graphics, website display, or website addresses that are substantially similar to the website of an operator with the intent to mislead a potential purchaser, without written authorization. For purposes of this subdivision (5):
  1. (A) “Operator” means an individual, firm, corporation, or other entity, or an agent of such individual, firm, corporation, or other entity that:
    1. (i) Owns, operates, or controls a place of entertainment or that promotes or produces a performance, concert, exhibit, game, athletic event, or contest; and
    2. (ii) Offers for sale a first sale ticket to the place of entertainment or performance, concert, exhibit, game, athletic event, or contest; and
  2. (B) “Place of entertainment” means an entertainment facility in this state, such as a theater, stadium, museum, arena, amphitheater, racetrack, or other place where performances, concerts, exhibits, games, athletic events, or contests are held.

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14-2-102(b)

§ 47-25-513. Determining if mark is distinctive and famous — Remedies.

(a) The owner of a mark which is famous in this state shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this section. In determining whether a mark is distinctive and famous, a court may consider factors including, but not limited to:
1. (1) The degree of inherent or acquired distinctiveness of the mark in this state;
2. (2) The duration and extent of use of the mark in connection with the goods and services with which the mark is used;
3. (3) The duration and extent of advertising and publicity of the mark in this state;
4. (4) The geographical extent of the trading area in which the mark is used;
5. (5) The channels of trade for the goods or services with which the mark is used;
6. (6) The degree of recognition of the mark in the trading areas and channels of trade in this state used by the mark's owner and the person against whom the injunction is sought;
7. (7) The nature and extent of use of the same or similar mark by third parties; and
8. (8) Whether the mark is the subject of a state registration in this state, or a federal registration under the Act of March 3, 1881, or under the Act of February 20, 1905, or on the principal register.
(b) In an action brought under this section, the owner of a famous mark shall be entitled only to injunctive relief in this state, unless the person against whom the injunctive relief is sought willfully intended to trade on the owner's reputation or to cause dilution of the famous mark. If such willful intent is proven, the owner shall also be entitled to the remedies set forth in this chapter, subject to the discretion of the court and the principles of equity.
(c) The following shall not be actionable under this section:
1. (1) Fair use of a famous mark by another person in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark;
2. (2) Noncommercial use of the mark; or
3. (3) All forms of news reporting and news commentary.

§ 47-25-514. Remedies — Penalties for violations.

(a) Any owner of a mark registered under this part may proceed by suit to enjoin the manufacture, use, display or sale of any counterfeits or imitations thereof, and any court of competent jurisdiction may grant injunctions to restrain such manufacture, use, display or sale as such court may deem just and reasonable, and may require the defendants to pay to such owner all profits derived from and/or all damages suffered by reason of such wrongful manufacture, use, display or sale. The court may also order that any such counterfeits or imitations in the possession or under the control of any defendant in such case be delivered to an officer of the court, or to the complainant, to be destroyed. The court, in its discretion, may enter judgment for an amount not to exceed three (3) times such profits and damages and/or reasonable attorneys' fees of the prevailing party in such cases where the court finds the other party committed such wrongful acts with knowledge or in bad faith or otherwise as according to the circumstances of the case.
(b) The enumeration of any right or remedy in this part shall not affect a registrant's right to prosecute under any penal law of this state.

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47-25-512

§ 47-25-515. Forum for actions regarding registration — Service on nonresident registrants.

(a) Actions to require cancellation of a mark registered pursuant to this part or in mandamus to compel registration of a mark pursuant to this part shall be brought in the circuit court of Davidson County. In an action in mandamus, the proceeding shall be based solely upon the record before the secretary. In an action for cancellation, the secretary shall not be made a party to the proceeding but shall be notified of the filing of the complaint by the clerk of the court in which it is filed and shall be given the right to intervene in the action.
(b) In any action brought against a nonresident registrant, service may be effected upon the secretary as agent for service of the registrant in accordance with the procedures established for service upon nonresident corporations and business entities under Tennessee law.

§ 47-25-516. Common law rights.

Nothing in this part shall adversely affect the rights or the enforcement of rights in marks acquired in good faith at any time at common law.

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47-25-512

§ 47-25-517. Fees.

The secretary shall by regulation prescribe the fees payable for the various applications and recording fees and for related services. Unless specified by the secretary, the fees payable under this part are not refundable.

§ 47-25-518. Intent of act.

The intent of this part is to provide a system of state trademark registration and protection substantially consistent with the federal system of trademark registration and protection under the Trademark Act of 1946, as amended. To that end, the construction given the federal act should be examined as persuasive authority for interpreting and construing this part.

Part 6 Petroleum Trade Practices

§ 47-25-601. Short title.

This part shall be known and may be cited as the “Petroleum Trade Practices Act.”

§ 47-25-602. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Cost to the retailer” means the sum of:
  1. (A) The lower of:
    1. (i) The purchase price of petroleum distillates to the retailer, less all trade discounts, allowances, or rebates actually granted to the retailer; or
    2. (ii) The replacement cost of petroleum distillates at the time of retail sale in the quantity last purchased by the retailer;
  2. (B) The cost of transportation of petroleum distillates from the point of purchase by the retailer to the retail location;
  3. (C) All applicable federal, state, or local motor fuel or sales taxes not already included in the purchase price to the retailer; and
  4. (D) The reasonable cost of overhead for petroleum distillates at that location;
2. (2) “Dealer” means any person, firm, corporation, or partnership engaged in the sale of petroleum products to the public at retail;
3. (3) “Distributor” means any person, firm, partnership, or corporation engaged in the sale of petroleum or related products at wholesale to dealers;
4. (4) “Exempt” means those sales at retail exempt by § 47-25-204;
5. (5)
  1. (A) “Franchise” means a contract or agreement between a dealer and a distributor or producer of petroleum products or other related products which grants to the dealer the right and authority to sell or use in connection with the sale of petroleum products, motor fuel, or related products, such as tires, batteries, etc., a petroleum trademark, trade name, service mark, or other identifying symbol or name.
  2. (B) “Franchise” includes a contract or agreement under which such dealer is granted authority to occupy premises owned, leased, or in any way controlled by a producer or distributor, which premises are to be employed for the sale or distribution of petroleum or related products under the producer or distributor's petroleum trademark, trade name, service mark, or other identifying symbol or name which is controlled by the distributor or producer.
  3. (C) “Franchise” does not include contracts and agreements with persons employed directly by a producer or distributor of petroleum and related products to manage, operate, run, or administer the retail sale of such products to the consuming public on premises owned or leased by the producer or distributor;
6. (6) “Petroleum or related products” means all petroleum distillates including, but not limited to, gasoline, motor fuels, and lubricants and those products generally sold at retail outlets in connection with such petroleum products under a trademark, trade name, or symbol including, but not limited to, tires, batteries, and other motor vehicle accessories. Each separate grade or blend of a petroleum distillate shall be considered an individual item, product, and commodity;
7. (7) “Producer” means any person, firm, partnership or corporation engaged in the drilling, pumping, importing, refining, or wholesaling of petroleum and related products under a trademark, trade name, service mark, or other identifying symbol or name whether or not such organization distributes such products to dealers;
8. (8) “Retailer” means a dealer, as defined in this section;
9. (9) “Sale at retail,” “sales at retail” or “retail sale” means sale at retail, sales at retail, or retail sale, as defined in § 47-25-202;
10. (10) “Vertical integration” means the ownership or control of all phases of the production of petroleum products including the drilling, pumping, refining, distribution, and resale of such petroleum products by a person, firm, partnership or corporation or from the well to the gasoline pump; and
11. (11) “Vertically integrated producer” means a producer controlling all phases of petroleum production and sale from the well through distribution to dealers as defined herein.

§ 47-25-603. Purpose.

(a) The purpose of this part is to regulate vertical integration of the petroleum industry in Tennessee, it being the conclusion of the general assembly hereby expressed that vertical integration tends to operate in restraint of free trade and inhibits full and free competition and, therefore, tends to increase the price of petroleum and related products and services as prohibited under part 1 of this chapter.
(b) Independent and small dealers and distributors of petroleum and related products are vital to a healthy, competitive marketplace, but are unable to survive subsidized below-cost pricing at the retail level by others who have other sources of income. Below-cost selling laws have been effective in preserving independent and small retailers and wholesalers in other trades and businesses from subsidized pricing. Subsidized pricing is inherently unfair and destructive to, and reduces competition in, the motor fuel marketing industry, and is a form of predatory pricing. An additional purpose of this part is to prevent and eliminate subsidized pricing of petroleum and related products.

§ 47-25-604. Termination of franchise agreement — Notice — Permissible causes.

(a)
1. (1) Any vertically integrated producer engaged in a franchise agreement with a dealer shall give sixty (60) days' notice to such dealer prior to termination or nonrenewal of such franchise agreement.
2. (2) Such notice shall state the date of issuance and termination and the cause for such termination.
3. (3) The notice provided for in this section shall not be required in emergencies where franchise agreement termination is for cause and the notice requirement would place an unreasonable burden on the vertically integrated producer.
(b) Permissible causes may include, but are not limited to:
1. (1) Substantial breach of the franchise agreement by the dealer;
2. (2) Occurrences rendering performance of the franchise agreement impossible, such as the death of either party or the destruction of the retail petroleum outlet premises;
3. (3) Mutual agreement of the parties; and
4. (4) Bankruptcy of either party.

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47-25-605(a)(1)

§ 47-25-605. Improper franchise termination — Presumption — Damages.

(a) Any vertically integrated producer who:
1. (1) Terminates, fails to renew, or in any manner attempts to cause the cancellation of a franchise agreement with a dealer through the use of price or service discrimination, the imposition of unreasonable hours of operation requirements, or products allocation discrimination, or otherwise attempts to effectuate the termination of a franchise agreement for reasons other than those permitted in § 47-25-604;
2. (2) Has operated under a franchise with such vertically integrated producer for one (1) year or more; and
3. (3) Upon the termination of the franchise agreement, converts the premises into a producer operated facility within two (2) years after the franchise agreement is terminated;
4. shall be presumed to engage in operations, arrangements, or agreements which tend to lessen full and free competition and enhance vertical integration in violation of public policy and this part and in violation of part 1 of this chapter.
(b) Any corporation adjudicated to be in violation of this section shall be liable for the damages and penalties set forth in part 1 of this chapter.
(c) Presumptions arising under the operation of this section are rebuttable and may be overcome by clear and convincing evidence to the contrary.

§ 47-25-606. Injunction — Damages.

Any court of competent jurisdiction hearing a cause of action based on a violation of this part may, in lieu of the damages and penalties set forth in part 1 of this chapter, enjoin franchise termination or award damages to the aggrieved dealer or the dealer's legal representative in an amount which is three (3) times the value of the franchise agreement and the reasonable value of the dealer's good will lost as a consequence of the franchise termination combined, plus punitive damages where warranted.

§ 47-25-607. Action by dealer.

Any dealer aggrieved by violations of this part, or such dealer's legal representative, may bring suit in any court of competent jurisdiction and receive injunctive relief or damages as set forth in this part.

§ 47-25-608 — 47-25-610. [Reserved.]

§ 47-25-611. Sales below cost to retailer.

(a)
1. (1) No dealer shall make, or offer or advertise to make, sales at retail at below cost to the retailer, where the effect is to injure or destroy competition or substantially lessen competition, unless such sales at retail are exempt under § 47-25-204.
2. (2) No dealer shall limit, restrict, condition, or refuse to make sales at retail of petroleum distillates stored at the retail outlet in one hundred (100) gallon or larger containers to another dealer or a distributor at the same or lower price as offered or advertised to the public if such petroleum distillates are offered, advertised, or sold to the public at below cost to the retailer.
3. (3) The burden of proving an exemption from this subsection (a) shall be upon the dealer claiming its sales are exempt.
(b) No vertically integrated producer may sell or transfer a petroleum distillate to its own retail outlet at a price which is less than the price at which that petroleum distillate is offered for sale by the vertically integrated producer to a dealer operating in the same class of trade and within the same competitive area as the retail outlet of the vertically integrated producer. Such sales at retail under this subsection (b) by a vertically integrated producer shall be made in accordance with all other provisions of this section.
(c) Any dealer who violates this section shall be subject to a civil penalty not to exceed one thousand dollars ($1,000) per day for each day during which the act or omission continues or occurs.
(d)
1. (1) Any person having an interest which is or may be adversely affected by a violation or threatened violation of subsection (a) may commence a civil action on such person's own behalf against any dealer who is alleged to be in violation of this section, to recover actual and special damages, for payment of civil penalties, and to enjoin the dealer who has violated, is violating or who is otherwise likely to violate this section. No person whose sales were exempt or who acted in good faith believing such sales were exempt shall be denied injunctive relief, if appropriate.
2. (2) No action may be commenced under subdivision (d)(1) prior to ten (10) days after the plaintiff has given notice by certified mail of the alleged violation to any alleged violator and to the attorney general and reporter.
3. (3) The action may be brought in a court of competent jurisdiction in the county where the alleged or threatened violation of this section took place, is taking place, or is about to take place, or in the county in which such dealer resides, has a principal place of business, or can be found.
4. (4) If the court finds that the violations of subsection (a) were willful or knowing violations, the court may award three (3) times the actual damage sustained and may provide such other relief as it considers necessary and proper. It shall be presumed that retail sales below cost to the retailer by a dealer after the dealer has received the notice required in subdivision (d)(2) are willful and knowing.
5. (5) Upon a finding by the court that this section has been violated, the court may award to the person bringing such action reasonable attorney's fees and costs.
(e) The attorney general and reporter may bring an action in the name of the state in a court as described in subsection (d), for appropriate relief, including civil penalties, temporary restraining order, temporary injunction, or permanent injunction, against any dealer who has violated, is violating, or who is otherwise likely to violate this section.
(f) Any court of competent jurisdiction shall have power to restrain violations of this section, to award appropriate damages, and to apply any appropriate civil penalties under subsection (c).
(g) This section is remedial legislation and shall be liberally construed to promote its purposes. The powers and remedies in this section shall be cumulative and supplementary to all other powers and remedies otherwise provided by law.
(h) Nothing in this section shall prohibit a dealer from making, or offering or advertising to make, sales at retail which are made in good faith to compete with the equally low or lower retail price of a competitor. Such sales at retail under this subsection (h) by a vertically integrated producer shall be made in accordance with subsection (b).
(i) Nothing contained within this section shall be construed to regulate the price of petroleum distillates purchased from a producer or a distributor:
1. (1) By a person solely for use in agricultural production activities on the farm of such person;
2. (2) By an employer for the business use of employees;
3. (3) By any common carrier regulated by the Tennessee public utility commission, the department of safety and/or the department of transportation;
4. (4) By a person for industrial and commercial purposes which do not include the sale of petroleum distillates to the public; or
5. (5) For any other commercial transactions.

§ 47-25-612 — 47-25-620. [Reserved.]

Franchised Dealers and Distributors

§ 47-25-621. Creation of franchise — Franchisor's duty of disclosure.

A franchisor shall disclose in writing to any prospective franchisee, upon request of franchisee, the following information, before any agreement is concluded:
1. (1) The gallonage volume history, if any, of the location under negotiation for and during the three-year period immediately past or for the entire period during which the location has been supplied by the supplier, whichever is shorter;
2. (2) Projections of gallonage consumption, if any, which were used by the franchisor in making a decision to invest in the location under negotiation;
3. (3) The name and last known address of the previous dealers for the last three (3) years, or for the entire period during which the location has been supplied by the supplier, whichever is shorter;
4. (4) Any legally binding commitments for the sale, demolition, or other disposition of the location in effect prior to the termination date of the agreement;
5. (5) The training programs, if any, and the specific goods and services the supplier will provide with or without cost to the dealer;
6. (6) Full disclosure of any and all obligations which will be required of the dealer, including, but not limited to, any obligation to exclusively deal in any of the products of the supplier, its subsidiaries, or any other company or any advertising and promotional items that the dealer must accept; and
7. (7) Full disclosure of all restrictions on the sale, transfer, renewal, and termination of the agreement.

§ 47-25-622. Creation of franchise — Mandatory conditions.

(a) Every franchise agreement as defined herein shall be subject to the nonwaivable provisions set forth in this section, whether or not they are expressly set forth in the agreement.
(b)
1. (1) No agreement shall contain any provision which in any way limits the right of either party to trial by jury, the interposition of counter-claims or cross-claims.
2. (2) The price at which a franchisee sells products shall not be fixed or maintained by a franchisor, nor shall any person seek to do so, nor shall the price of products be subject to enforcement or coercion by any person in any manner. Each agreement shall have the legend, “Nothing herein shall be construed to prohibit a franchisor from suggesting prices and counseling with franchisees concerning prices. Price fixing or mandatory prices for any products covered in this agreement are prohibited. A service station dealer or wholesale distributor may sell any products listed in this agreement for a price which such dealer or distributor alone may decide.”
3. (3) The franchisee may assign the franchise agreement, upon such price and upon such financial terms as the franchisee and the assignee may agree; provided, that the franchisor consents to such assignment, which consent shall not be unreasonably withheld; and provided further, that franchisor must have good cause to withhold such consent.
  1. (A) For the purposes of this section, “good cause” includes, but is not limited to:
    1. (i) Inexperience or lack of qualifications on the part of the assignee;
    2. (ii) Poor credit rating of assignee;
    3. (iii) Inadequate financial resources necessary for the initial investment, the analysis of which shall take into consideration any sums the assignee has agreed to pay the franchisee;
    4. (iv) Criminal record of the assignee; and
    5. (v) The franchisor, for valid business reasons, chooses to eliminate a service station operation at the franchisee's location at the conclusion of the business relationship between franchisor and franchisee.
  2. (B) The franchisee may not exercise the right of assignment after having been duly notified of termination or nonrenewal of the franchise agreement for cause as described in the federal Petroleum Marketing Practices Act.
4. (4) In the event of the death of the franchisee, the surviving spouse or adult children of such franchisee will have first right of refusal to become the new franchisee; provided, that the franchisor consents, which consent shall not be unreasonably withheld; and provided further, that the franchisor must have good cause to withhold such consent. For the purposes of this section, “good cause” as described in subdivision (b)(3) is applicable.
5. (5) If the franchise agreement requires the franchisee to provide a cash deposit in advance for the use of the service station or delivery of fuel, except as advance payment in whole or in part for product ordered, such deposit shall be held by the franchisor, may be used by the franchisor in the franchisor's business, and shall be retained for the term of the agreement unless it is sooner terminated. Interest at a rate of at least six percent (6%) shall be paid to the franchisee at least annually unless agreed otherwise. Within ninety (90) days after the termination of the agreement, the deposit shall be returned, together with any unpaid interest on such deposit, at the rate of at least six percent (6%) per year. The franchisor may deduct from the amount to be returned any amount owed the franchisor by the franchisee at the time of settlement.

§ 47-25-623. Unfair practices generally.

(a)
1. (1) It is unlawful for any refiner, distributor, or producer of petroleum products engaged in business in this state, either directly or indirectly, to discriminate in prices between purchasers for petroleum products of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such petroleum products are sold for use, consumption, or resale within the state of Tennessee, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them; provided, that nothing in this section shall prevent:
  1. (A) Differentials which make only due allowances for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such petroleum products are to such purchasers sold or delivered;
  2. (B) Dealers engaged in selling petroleum products in commerce within the state of Tennessee from selecting their own customers in bona fide transactions and not in restraint of trade;
  3. (C) Price changes from time to time where in response to changing conditions affecting the market for or the marketability of the petroleum products concerned, including, but not limited to, distress sales under court process, or sales in good faith in discontinuance of businesses in the goods concerned; and
  4. (D) A franchisor, distributor, or producer of petroleum products from lowering its price for petroleum products to any purchaser or purchasers when such lower price was made in good faith to meet an equally low price of a competitor.
2. (2) It is unlawful for any refiner, distributor, or producer of petroleum products to refuse to make available, upon written request of any dealer who has a franchise agreement with the refiner, distributor, or producer, a schedule of dealer tank wagon prices then charged dealers of the refiner, distributor, or producer for motor gasoline sold within the state of Tennessee.
(b) A violation of this section is a Class C misdemeanor.
(c) Nothing in this section shall apply to the purchase of petroleum products for their own use by state and local agencies.

§ 47-25-624. Dealer trade associations.

No supplier shall hinder, coerce or threaten any dealer for the purpose of preventing that dealer from joining any trade association made up of dealers.

§ 47-25-625. Credit sales of gasohol, etc.

No retail or wholesale seller of gasoline, diesel fuel, or other motor vehicle fuels who permits purchases or sales on credit of such gasoline, diesel fuel, or other motor vehicle fuels shall refuse to offer and permit similar purchases or sales on credit of gasohol or other fuels containing alcohol equal to at least ten percent (10%) of total volume.

§ 47-25-626. Supplying of gasohol, etc.

(a) No distributor or wholesale dealer who supplies retail dealers with gasoline, diesel fuel, or other motor vehicle fuels shall prohibit or restrict any such supplied retail dealer from voluntarily carrying for sale gasohol or any other fuel containing alcohol equal to at least ten percent (10%) of total volume.
(b) Any such distributor or wholesale dealer who prohibits or restricts or attempts to prohibit or restrict a supplied retail dealer shall be subject to a fine of fifty dollars ($50.00) per day per retail dealer upon conviction of such offense.

Part 7 Motion Picture Fair Competition

§ 47-25-701. Short title.

This part shall be known as the “Tennessee Motion Picture Fair Competition Act.”

§ 47-25-702. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Bid” means a written offer or proposal by an exhibitor to a distributor in response to an invitation to bid for the right to exhibit a motion picture, stating the terms under which the exhibitor will agree to exhibit a motion picture;
2. (2) “Blind bidding” means the bidding for, negotiating for, or offering or agreeing to terms for the licensing or exhibition of a motion picture at any time before such motion picture has either been trade screened or before such motion picture, at the option of the distributor, has otherwise been made available for viewing within Tennessee by all exhibitors from whom the distributor is soliciting bids or with whom the distributor is negotiating for the right to exhibit such motion picture;
3. (3) “Distributor” means any person engaged in the business of distributing or supplying motion pictures to exhibitors by rental, sale, or licensing;
4. (4) “Exhibit” or “exhibition” means showing a motion picture to the public for a charge;
5. (5) “Exhibitor” means any person engaged in the business of operating one (1) or more theatres;
6. (6) “Invitation to bid” means a written or oral solicitation or invitation by a distributor to one (1) or more exhibitors to bid for the right to exhibit a motion picture;
7. (7) “License agreement” means any contract, agreement, understanding, or condition between a distributor and an exhibitor relating to the licensing or exhibition of a motion picture by the exhibitor;
8. (8) “Person” includes one (1) or more individuals, partnerships, associations, societies, trusts, organizations, or corporations;
9. (9) “Run” means the continuous exhibition of a motion picture in a defined geographic area for a specified period of time. “First run” is the first exhibition of a picture in the designated area; “second run” is the second exhibition; and “subsequent runs” are subsequent exhibitions after the second run. “Exclusive run” is any run limited to a single theatre in a defined geographic area, and a “nonexclusive run” is any run in more than one (1) theatre in a defined geographic area;
10. (10) “Theatre” means any establishment in which motion pictures are exhibited to the public regularly for a charge; and
11. (11) “Trade screening” means the showing of a motion picture by a distributor at the location of the film exchange(s) that distributes the distributor's picture(s) in Tennessee, which is open to any exhibitor from whom the distributor intends to solicit bids or with whom the distributor intends to negotiate for the right to exhibit the motion picture.

§ 47-25-703. Blind bidding.

(a) Blind bidding is hereby prohibited within Tennessee. No bids shall be returnable, no negotiations for the exhibition or licensing of a motion picture shall take place, and no license agreement or any of its terms shall be agreed to, for the exhibition of any motion picture before the motion picture has either been trade screened or before such motion picture, at the option of the distributor, has otherwise been made available for viewing within Tennessee by all exhibitors from whom the distributor is soliciting bids or with whom the distributor is negotiating for the right to exhibit the motion picture.
(b) A distributor shall provide reasonable and uniform notice of the trade screening or availability for viewing within Tennessee of any motion picture to those exhibitors within Tennessee, from whom the distributor intends to solicit bids or with whom the distributor intends to negotiate for the right to exhibit that motion picture.
(c) Any purported waiver of the prohibition against blind bidding in this part shall be void and unenforceable.

§ 47-25-704. Enforcement.

In any civil action for damages against a person for violation of this part, the court may award damages to the prevailing party and reasonable attorneys' fees. This part may be enforced by injunction or any other available equitable or legal remedy.

Part 8 Coupon Sales Promotions

§ 47-25-801. Short title.

This part shall be known and may be cited as the “Tennessee Coupon Sales Promotion Act of 1980.”

§ 47-25-802. Part definitions.

As used in this part, except where the context otherwise requires:
1. (1) “Coupon” means any writing, form, ticket, certificate, token, or similar device designed or intended to be sold or offered for sale which is represented as entitling the purchaser or holder to purchase or procure goods or services at a reduced price or free of charge upon presentation thereof to the seller or supplier of such goods or services. “Coupon” includes “coupon book.” “Coupon” does not include:
  1. (A) Coupons sold or offered for sale directly by the coupon sponsor where all proceeds from the sale are returned to the sponsor;
  2. (B) Coupons redeemable only for motor vehicle parking or urban mass transit privileges;
  3. (C) Coupons published by or distributed through newspapers or other periodicals, in advertisements other than their own;
  4. (D) Coupons within, attached to, or a part of any package or container as packed by the original manufacturer and which are redeemed by such manufacturer;
  5. (E) Trading stamps; and
  6. (F) Cents-off or free coupons authorized by the original manufacturer or retailer and distributed in any fashion;
2. (2) “Coupon book” means a group of two (2) or more coupons sold, offered for sale, or otherwise distributed as a single unit;
3. (3) “Person” means any individual, partnership, firm, corporation, association, or other business organization or entity, including charitable or nonprofit organizations and their officers and employees;
4. (4) “Promoter” means any person, and any agent or representative of such person, engaged in the sale or offering or solicitation for sale of coupons; and
5. (5) “Sponsor” means any person represented as being obligated to provide goods, services, or discount privileges to the purchaser or holder of a coupon.

§ 47-25-803. Agreement between promoter and sponsor — Terms and conditions.

(a) No promoter shall sell, offer for sale, or otherwise publish or distribute any coupon without a prior contract or agreement in writing with the coupon sponsor. A copy of such contract shall be furnished to the sponsor at the time of its execution, and shall set forth all terms and conditions under which coupons obligating the sponsor may be published, distributed, or sold and include the following:
1. (1) A specific description, exactly as it is to appear on the coupon, of:
  1. (A) The goods, services, or discount privileges which the sponsor will provide in exchange for each coupon presented for redemption;
  2. (B) The hours during each day and the days during each week when the coupon will be accepted for redemption by the sponsor;
  3. (C) The expiration date of the coupon; and
  4. (D) All purchases required of a coupon holder as a condition of redemption and any other restrictions or limitations imposed on the redemption of the coupons by the sponsor;
2. (2) The maximum number of coupons which may be printed, issued, distributed, or sold by the promoter;
3. (3) The beginning and ending dates of the promotion, before and after which no coupons may be sold or distributed;
4. (4) The amount or percentage of funds, if any, to be returned to the sponsor from the sale of coupons;
5. (5) The personal and business name and address of the promoter executing the contract. Nonresidents shall include their permanent address in their state of residence; and
6. (6) A statement that the coupon sales promotion is regulated by the “Tennessee Coupon Sales Promotion Act.”
(b) The promoter shall not represent, either directly or by implication, that the number of coupons presented to the sponsor for redemption will be less than the total number of coupons printed, sold, or distributed, or make any promises or representation inconsistent with or contrary to the terms of the written contract between the promoter and sponsor.

§ 47-25-804. Information required on coupon.

(a) Every coupon, whether sold or distributed individually or as part of a coupon book, shall clearly and conspicuously set forth, on its face, the name and business address of the coupon sponsor and a specific description, as provided in the agreement between the promoter and the sponsor of:
1. (1) The goods, services, or discount privileges which the sponsor will provide in exchange for the coupon;
2. (2) The hours during each day and the days during each week when the coupon will be accepted for redemption by the sponsor;
3. (3) The expiration date of the coupon; and
4. (4) All purchases required of the coupon holder as a condition of redemption and any other restrictions and limitations imposed on the redemption of the coupons by the sponsor.
(b) Every coupon book, and every coupon sold or distributed individually, shall contain on its face:
1. (1) The name and permanent business address of the promoter; and
2. (2) The following statement in bold face or other conspicuous type or lettering:
  1. “REDEMPTION MAY BE SUBJECT TO CERTAIN CONDITIONS AND LIMITATIONS WHICH MUST BE STATED ON THE COUPON. YOU ARE ENTITLED TO INSPECT EACH COUPON BEFORE PURCHASE.”

§ 47-25-805. Coupons — Restrictions on number, distribution, and terms.

(a) The total number of coupons sold, offered for sale, or otherwise distributed shall not exceed the total number specified in the contract between the promoter and sponsor.
(b) No coupon may be published, sold, distributed, or represented contrary to the terms of the agreement between the promoter and the sponsor, or obligate the sponsor to provide goods, services, or discount privileges other than those specified in the agreement.
(c) No individual coupon shall be redeemable at more than one (1) place of business, unless all places of business at which it is redeemable are owned or operated by the same sponsor.
(d) No coupon may be sold, offered for sale, or otherwise distributed prior to the promotion beginning date or after the promotion ending date specified in the contract between the promoter and sponsor.

§ 47-25-806. Promoter to provide sponsor with distribution information and proceeds.

Within ten (10) days after the promotion ending date or ten (10) days after all coupons have been sold or otherwise distributed, whichever occurs first, the promoter shall inform the sponsor in writing of the total number of coupons sold or distributed, and remit all funds owed to the sponsor from coupon sales under the terms of their agreement.

§ 47-25-807. Agreements authorizing promotional use of name or mark — Liability of persons authorizing use.

(a) All agreements between the promoter and persons authorizing the promoter to use their name, trade name, or trademark in aid of the sale or promotion of the sale of coupons shall be in writing, with a copy being furnished to each such person.
(b) Such agreements shall conspicuously disclose that persons agreeing to the use of their name, trade name, or trademark by the promoter may be held jointly accountable with the promoter for any violation of this part or other applicable laws.

§ 47-25-808. Promoters — Prohibited acts.

(a) No promoter shall misrepresent directly or by implication:
1. (1) That any person is sponsoring, endorsing, or participating in the sale of any coupon;
2. (2) That the promoter is an employee or agent of any person sponsoring, endorsing, or participating in the sale of any coupon or coupon book;
3. (3) That the coupon is not sold for profit or that the price charged for a coupon is solely or primarily to cover actual costs incurred by the promoter in the printing, distribution, or sale of the coupon; or
4. (4) The name, address, or identity of the promoter or of the person or organization whom the promoter represents.
(b) No promoter shall represent, directly or by implication, that:
1. (1) Proceeds from the sale of any coupon will be donated to any charity, civic or religious group, or other nonprofit organization, unless such representation is true, and the amount to be donated is disclosed;
2. (2) An offer is being made to specially selected persons or that the buyer or prospective buyer has been specially selected, unless such representation is true and the specific basis on which such representation is made is concurrently disclosed to the prospective buyer; or
3. (3) A survey, test, contest, or research project is being conducted, when in fact the principal objective is to sell coupons or coupon books or to obtain prospects for coupon sales.
(c) No promoter shall:
1. (1) Sell, offer to sell, or otherwise distribute any coupon in violation of any provisions of this part;
2. (2) Make any representation inconsistent with or contrary to the terms and conditions contained in any coupon or in the agreement between the promoter and sponsor;
3. (3) Advertise or otherwise represent that a coupon has a stated monetary value or will enable the purchaser or holder to save a stated amount of money, without disclosing in connection with such advertisement the total amount which must be paid by the purchaser or holder for the coupon and the total amount of all purchases which must be made by the purchaser or holder as a condition of redemption of the coupon; or
4. (4) Use the name, trade name, or trademark of any person to aid in the sale or promotion of the sale of coupons unless the promoter has entered into a written agreement with the person whose name, trade name, or trademark is being used as required under this part.

§ 47-25-809. Violations — Misdemeanors.

A violation of this part is a Class C misdemeanor.

§ 47-25-810. Civil remedies.

Any person who suffers an ascertainable loss of money or property as a result of a violation of this part may bring an action individually or in a representative capacity to recover actual damages, costs, and reasonable attorney fees. The action may be brought in a court of competent jurisdiction in the county where the alleged practice took place, or is taking place, or in the county where the defendant resides, has principal place of business, conducts, transacts, or has transacted business, or if the person cannot be found in any of the foregoing locations, in the county in which such person can be found.

Part 9 Household Goods—Unlawful Trade Practices

§ 47-25-901. Short title.

This part shall be known as the “Unfair Trade Practice and Advertising Act.”

§ 47-25-902. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Household furniture, appliances, and floor coverings” means such furniture, appliances, and floor coverings as are used in dwelling houses;
2. (2) “Person” means any individual, firm, partnership, corporation, or other organization;
3. (3) “Retail sale” means any sale, except a sale for the purpose of resale in the ordinary course of business;
4. (4) “Sale” or “sell” means any sale, contract for sale, offer of sale, or advertisement thereof;
5. (5) “Wholesale price” means a customary price at which a wholesaler sells merchandise for resale;
6. (6) “Wholesale sale” means any sale other than a retail sale, as defined in this section; and
7. (7) “Wholesaler” means one who sells other than at retail, as defined in this section.

§ 47-25-903. Misrepresentation of sale at wholesale unlawful.

It is an unlawful practice for any seller or transferor of any household furniture, appliances, or floor covering merchandise at retail, whether the seller or transferor stocks the merchandise or not, to advertise, claim, or imply that any sale or other transfer of the merchandise is a sale or transfer at wholesale, unless such sale or transfer is made to the transferee for resale, and unless the state of Tennessee is not entitled to collect upon such sale or transfer the Tennessee state sales tax, as set out in the “Retailers' Sales Tax Act,” compiled in title 67, chapter 6.

§ 47-25-904. Misleading name unlawful — Misrepresenting retail sale unlawful.

(a) It is an unlawful trade practice for any person engaged in selling household furniture, appliances, or floor covering merchandise to an individual consumer, to incorporate in that person's business name, or otherwise to use in describing the business, the words “manufacturer,” “broker,” or “wholesaler,” or any derivative of, or synonym for, any of them, unless such person is, in fact, engaged in such business, in addition to the business of selling the merchandise to individual consumers.
(b) In cases where a person is engaged in manufacturing or wholesaling, and is in addition thereto engaged in making sales at retail to individual consumers, it is an unlawful trade practice for such person to imply, directly or indirectly, in connection with sales to individual consumers, that the selling price is other than a retail price, unless the sale is for resale.

§ 47-25-905. Rescission of sale for unlawful trade practice.

Any person to whom is sold household furniture, appliances, or floor covering merchandise, in the course of an unlawful trade practice, as hereinabove defined, may, at the person's option, or on discovery of such unlawful trade practice, and on due notice to the seller, rescind such sale; sue, and recover back from such seller the price, or any portion thereof, previously paid by such person to such seller; provided, that the right of rescission created herein must have been exercised, if at all, within a period of twelve (12) months subsequent to the complained of sale.

§ 47-25-906. Injunctions — Damages.

Any person is entitled to sue for and have injunctive relief, in any court having jurisdiction over the parties, against threatened loss or damage by a violation of any provision of this part, and any such person is also entitled to recover any actual damage suffered.

§ 47-25-907. Penalty for violations.

A person violating this part commits a Class C misdemeanor.

Part 10 Consignment of Art

§ 47-25-1001. Short title.

This part shall be known and may be cited as the “Tennessee Consignment of Art Act.”

§ 47-25-1002. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Art dealer” means a person engaged in the business of selling works of art, other than a person exclusively engaged in the business of selling goods at public auction;
2. (2) “Artist” means the person who creates a work of art, or, if such person is deceased, such person's heir, legatee, or personal representative;
3. (3) “Consignment” means that no title to, estate in, or right to possession of, the work of art, superior to that of the consignor shall vest in the consignee, notwithstanding the consignee's power or authority to transfer and convey to a third person all of the right, title, and interest of the consignor in and to such work of art;
4. (4) “Co-operative” means an association or group of artists which:
  1. (A) Engages in the business of selling only works of art which are produced or created by such artists;
  2. (B) Jointly owns, operates, and markets such business; and
  3. (C) Accepts such works of art from its members on consignment;
5. (5) “Person” means an individual, partnership, corporation, association, or other group, however organized; and
6. (6) “Work of art” means an original art work which is:
  1. (A) A visual rendition, including a painting, drawing, sculpture, mosaic, or photograph;
  2. (B) A work of calligraphy;
  3. (C) A work of graphic art, including an etching, lithograph, offset print, or silk screen;
  4. (D) A craft work in materials, including clay, textile, fiber, wood, metal, plastic, or glass; or
  5. (E) A work in mixed media, including a collage or a work consisting of any combination of subdivisions (6)(A)-(D).

1 Backlink

12-1-110(a)

§ 47-25-1003. What constitutes consignment.

Notwithstanding any custom, practice, or usage of the trade to the contrary, whenever an artist delivers or causes to be delivered a work of art of the artist's own creation to an art dealer in this state for the purpose of exhibition or sale, or both, on a commission, fee, or other basis of compensation, the delivery to and acceptance of such work of art by the art dealer shall constitute a consignment, unless the delivery to the art dealer is pursuant to an outright sale for which the artist receives or has received full compensation for the work of art upon delivery.

§ 47-25-1004. Effect of consignment.

A consignment of a work of art shall result in all of the following:
1. (1) The art dealer, after delivery of the work of art, shall constitute an agent of the artist for the purpose of sale or exhibition of the consigned work of art within the state of Tennessee;
2. (2) The work of art shall constitute property held in trust by the consignee for the benefit of the consignor and shall not be subject to claim by a creditor of the consignee;
3. (3) The consignee shall be responsible for the loss of, or damage to, the work of art; and
4. (4) The proceeds from the sale of the work of art shall constitute funds held in trust by the consignee for the benefit of the consignor. Such proceeds shall first be applied to pay any balance due to the consignor, unless the consignor expressly agrees otherwise in writing.

§ 47-25-1005. Nature of trust.

(a) A work of art received as a consignment shall remain trust property, notwithstanding the subsequent purchase thereof by the consignee directly or indirectly for the consignee's own account, until the price is paid in full to the consignor. If such work is thereafter resold to a bona fide purchaser before the consignor has been paid in full, the proceeds of the resale received by the consignee shall constitute funds held in trust for the benefit of the consignor to the extent necessary to pay any balance still due to the consignor, and such trusteeship shall continue until the fiduciary obligation of the consignee with respect to such transaction is discharged in full.
(b) No such trust property or trust funds shall be or become subject or subordinate to any claims, liens, or security interests of any kind or nature whatsoever, of the consignee's creditors, anything in the Uniform Commercial Code, § 47-2-326, or any other provision of the Uniform Commercial Code to the contrary notwithstanding.

§ 47-25-1006. Waiver.

Any cooperative may contract with its members to waive liability for the loss of or damage to works of art consigned to such cooperative. Any other provision of a contract or an agreement whereby the consignor purports to waive any provision of this part is void.

Part 11 Protection of Personal Rights

§ 47-25-1101. Short title.

This part shall be known and may be cited as the “Personal Rights Protection Act of 1984.”

§ 47-25-1102. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Definable group” means an assemblage of individuals existing or brought together with or without interrelation, orderly form, or arrangement, including, but not limited to, a crowd at any sporting event, a crowd in any street or public building, the audience at any theatrical or stage production, a glee club, or a baseball team;
2. (2) “Individual” means human being, living or dead;
3. (3) “Likeness” means the use of an image of an individual for commercial purposes;
4. (4) “Person” means any firm, association, partnership, corporation, joint stock company, syndicate, receiver, common law trust, conservator, statutory trust, or any other concern by whatever name known or however organized, formed, or created, and includes not-for-profit corporations, associations, educational and religious institutions, political parties, community, civic, or other organizations; and
5. (5) “Photograph” means any photograph or photographic reproduction, still or moving, or any videotape or live television transmission, of any individual, so that the individual is readily identifiable.

§ 47-25-1103. Property right in use of name, photograph, likeness.

(a) Every individual has a property right in the use of that person's name, photograph, or likeness in any medium in any manner.
(b) The individual rights provided for in subsection (a) constitute property rights and are freely assignable and licensable, and do not expire upon the death of the individual so protected, whether or not such rights were commercially exploited by the individual during the individual's lifetime, but shall be descendible to the executors, assigns, heirs, or devisees of the individual so protected by this part.

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47-25-1104(a)

§ 47-25-1104. Exclusivity and duration of right.

(a) The rights provided for in this part shall be deemed exclusive to the individual, subject to the assignment or licensing of such rights as provided in § 47-25-1103, during such individual's lifetime and to the executors, heirs, assigns, or devisees for a period of ten (10) years after the death of the individual.
(b)
1. (1) Commercial exploitation of the property right by any executor, assignee, heir, or devisee if the individual is deceased shall maintain the right as the exclusive property of the executor, assignee, heir, or devisee until such right is terminated as provided in this subsection (b).
2. (2) The exclusive right to commercial exploitation of the property rights is terminated by proof of the non-use of the name, likeness, or image of any individual for commercial purposes by an executor, assignee, heir, or devisee to such use for a period of two (2) years subsequent to the initial ten (10) year period following the individual's death.

§ 47-25-1105. Unauthorized use prohibited.

(a) Any person who knowingly uses or infringes upon the use of another individual's name, photograph, or likeness in any medium, in any manner directed to any person other than such individual, as an item of commerce for purposes of advertising products, merchandise, goods, or services, or for purposes of fund raising, solicitation of donations, purchases of products, merchandise, goods, or services, without such individual's prior consent, or, in the case of a minor, the prior consent of such minor's parent or legal guardian, or in the case of a deceased individual, the consent of the executor or administrator, heirs, or devisees of such deceased individual, shall be liable to a civil action.
(b) In addition to the civil action authorized by this section and the remedies set out in § 47-25-1106, any person who commits unauthorized use as defined in subsection (a) commits a Class A misdemeanor.
(c) It is no defense to the unauthorized use defined in subsection (a) that the photograph includes more than one (1) individual so identifiable; provided, that the individual or individuals complaining of the use shall be represented as individuals per se rather than solely as members of a definable group represented in the photograph.
(d) If an unauthorized use as defined in subsection (a) is by means of products, merchandise, goods or other tangible personal property, all such property, including all instrumentalities used in connection with the unauthorized use by the person violating this section, is declared contraband and subject to seizure by, and forfeiture to, the state in the same manner as is provided by law for the seizure and forfeiture of other contraband items.

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§ 47-25-1106. Remedies.

(a) The chancery and circuit court having jurisdiction for any action arising pursuant to this part may grant injunctions on such terms as it may deem reasonable to prevent or restrain the unauthorized use of an individual's name, photograph, or likeness. As part of such injunction, the court may authorize the confiscation of all unauthorized items and seize all instrumentalities used in connection with the violation of the individual's rights. All instrumentalities seized pursuant to enforcing an injunction under this subsection (a) shall be liquidated and used to satisfy statutory damages, if damages are recovered by the rights holder.
(b) At any time while an action under this part is pending, the court may order the impounding, on such terms as it may deem reasonable, of all materials or any part thereof claimed to have been made or used in violation of the individual's rights, and such court may enjoin the use of all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such materials may be reproduced.
(c) As part of a final judgment or decree, the court may order the destruction or other reasonable disposition of all materials found to have been made or used in violation of the individual's rights, and of all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such materials may be reproduced.
(d)
1. (1) An individual is entitled to recover the actual damages suffered as a result of the knowing use or infringement of such individual's rights and any profits that are attributable to such use or infringement which are not taken into account in computing the actual damages. Profit or lack thereof by the unauthorized use or infringement of an individual's rights shall not be a criteria of determining liability.
2. (2) An individual is entitled to recover three (3) times the amount to which the individual is entitled under subdivision (d)(1), plus reasonable attorney fees, if a person knowingly uses or infringes the rights of a member of the armed forces in violation of this part. As used in this subdivision (d)(2), “member of the armed forces” means a member of the United States armed forces or a member of a reserve or Tennessee national guard unit who is in, or was called into, active service or active military service of the United States, as defined in § 58-1-102.
(e) The remedies provided for in this section are cumulative and shall be in addition to any others provided for by law.

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47-25-1105(b)

§ 47-25-1107. Exemptions.

(a) It is deemed a fair use and no violation of an individual's rights shall be found, for purposes of this part, if the use of a name, photograph, or likeness is in connection with any news, public affairs, or sports broadcast or account.
(b) The use of a name, photograph, or likeness in a commercial medium does not constitute a use for purposes of advertising or solicitation solely because the material containing such use is commercially sponsored or contains paid advertising. Rather it shall be a question of fact whether or not the use of the complainant individual's name, photograph, or likeness was so directly connected with the commercial sponsorship or with the paid advertising as to constitute a use for purposes of advertising or solicitation.
(c) Nothing in this section applies to the owners or employees of any medium used for advertising, including, but not limited to, newspapers, magazines, radio and television stations, billboards, and transit ads, who have published or disseminated any advertisement or solicitation in violation of this part, unless it is established that such owners or employees had knowledge of the unauthorized use of the individual's name, photograph, or likeness as prohibited by this section.

§ 47-25-1108. Application to individuals protected by “Model Trademark Act.”

This part applies to any individual otherwise entitled to the protection afforded under part 5 of this chapter.

Part 12 Invention Development

§ 47-25-1201. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Contract for invention development services” includes a contract by which an invention developer undertakes to develop or promote an invention for a customer;
2. (2) “Customer” includes any person, firm, corporation, or other entity that is solicited by, inquires about or seeks the services of, or enters into a contract for invention development services with, an invention developer, except:
  1. (A) Any department or agency of the federal, state, or local government;
  2. (B) Any charitable, scientific, educational, religious, or other organization qualified under § 501(c)(3) or described in § 170(b)(1)(a) of the Internal Revenue Code of 1954, as amended; and
  3. (C) Any person, firm, corporation, or other entity regularly engaged in a trade, business, or profession, which has either a net worth of one hundred thousand dollars ($100,000) or more or gross receipts from any source of fifty thousand dollars ($50,000) or more during the calendar year in which any contract for invention development services is signed;
3. (3) “Invention” means:
  1. (A) An invention;
  2. (B) An idea;
  3. (C) A concept; or
  4. (D) Any combination thereof;
4. (4) “Invention developer” means any person, firm, corporation, or association, and the agents, employees, or representatives of such person, firm, corporation, or association that develops or promotes or offers to develop or promote an invention, except:
  1. (A) Any department or agency of the federal, state, or local government;
  2. (B) Any charitable, scientific, educational, religious, or other organization qualified under § 501(c)(3) or described in § 170(b)(1)(a) of the Internal Revenue Code of 1954, as amended;
  3. (C) Any person, firm, corporation, association, or other entity whose gross receipts from contracts for invention development services, as defined in subdivision (5), do not exceed ten percent (10%) of its gross receipts from all sources during the fiscal year preceding the year in which any contract for invention development services is signed; or
  4. (D) Any person, firm, corporation, association, or other entity that does not charge a fee for invention development services. For the purposes of this subdivision (4)(D), “fee” includes any payment made by the customer to such entity, including reimbursements for expenditures made or costs incurred by such entity, but does not include any payment made from a portion of the income received by a customer by virtue of invention development services performed by such entity; and
5. (5) “Invention development services” includes acts required or promised to be performed, or actually performed, or both, by an invention developer for a customer.

§ 47-25-1202. Advertising compliance with law prohibited.

No invention developer shall make, or authorize the making of, any reference to compliance by it with this part in any advertisement.

§ 47-25-1203. Disclosure of fees in advertising.

Every invention developer who charges a fee or requires any consideration for invention development services must clearly and conspicuously disclose such fact in every advertisement of such services.

§ 47-25-1204. Initial disclosures to customer by developer.

In the first oral communication with a customer or in the first written response to an inquiry by a customer, other than an oral communication or written response, the primary purpose of which is to arrange an appointment with the invention developer for presentation of invention development services, the invention developer shall cause the following disclosures to be made to each customer:
1. (1) A statement of the fee charged, if known, or a statement of the approximate range of fees charged; a statement that a portion of the fee charged will be paid as a commission or other similar payment if, in fact, it is intended to be so paid, to a person inducing, directly or indirectly, a customer to contract for the services of the invention developer; and a statement of the approximate portion of the fee charged, if any, that will be expended for services relating to patent matters;
2. (2) A statement that the invention developer does not intend to expend more for the invention development services than the fee charged the customer, if, in fact, it does not, and if it does so intend, a statement of the estimated expenditures of the invention developer in excess of the fee received from the customer;
3. (3) A single statement setting forth both:
  1. (A) The total number of customers who have contracted with the invention developer; provided, that the number need not reflect those customers who have contracted within the last thirty (30) days; and
  2. (B) The number of customers who have received, by virtue of the invention developer's performance of invention development services, an amount of money in excess of the amount of money paid by such customers to the invention developer; and
4. (4) A statement as follows: “Any contract for invention development services between you and our firm will be regulated by law. Our firm is not qualified or permitted to advise you whether protection of your idea or invention is available under the patent, copyright, or trademark laws of the United States or any other law. The contract does not provide any patent, copyright, or trademark protection for your idea or invention. If your idea or invention is patentable, copyrightable, or subject to trademark protection, or infringes an existing valid patent, copyright, or trademark or a patent, copyright, or trademark for which application has been made, your failure to inquire into these matters may affect your rights to your idea or invention.”

§ 47-25-1205. Written contracts required.

(a) Every contract for invention development services shall be in writing and shall be subject to this part. A copy of the written contract shall be given to the customer at the time the customer signs the contract.
(b) If one (1) or more subsequent contracts are contemplated by the invention developer in connection with an invention, or if the invention developer contemplates performance of services in connection with an invention in more than one (1) phase with the performance of each phase covered in one (1) or more subsequent contracts, the invention developer shall so state in writing and shall supply to the customer such writing, together with a copy of such contract or written summary of the general terms of each and every such subsequent contract, including the amount of any fees or other consideration required from the customer, at the time the customer signs the first contract.

§ 47-25-1206. Cancellation option.

(a)
1. (1) Notwithstanding any contractual provision to the contrary, the invention developer and the customer shall each have the right to cancel a contract for invention development services for any reason at any time within seven (7) days of the date the invention developer and the customer sign the contract.
2. (2) Cancellation shall be effected by written notice mailed or delivered to the invention developer or the customer. If the notice is mailed, it must be postmarked by twelve o'clock midnight (12:00) of the last day of the cancellation period. If the notice is delivered, it must be delivered by the end of the invention developer's normal business day. Within five (5) business days after receipt of such notice of cancellation by the customer, the invention developer shall return to the customer, by mail, all moneys paid and all materials provided by the customer.
(b)
1. (1) Subsection (a) shall apply to every contract executed between an invention developer and a customer.
2. (2) Each such contract shall contain the following statement in ten (10) point boldface type immediately above the place at which the customer signs the contract:
  1. “The seven-day period during which you may cancel this contract for any reason by mailing or delivering written notice to the invention developer will expire on (Last date to mail or deliver notice)
  2. If you choose to mail your notice, it must be placed in the United States mail properly addressed first class postage prepaid and postmarked before twelve o'clock midnight (12:00) of this date. If you choose to deliver your notice to the invention developer directly, it must be delivered to that party by the end of that party's normal business day on this date. The invention developer also has the right to cancel this contract by notice similarly mailed or delivered.”

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47-25-1207(1)

§ 47-25-1207. Required contents of contract.

Every contract for invention development services shall set forth in at least ten (10) point boldface type, or equivalent size if handwritten, all of the following:
1. (1) The terms and conditions of payment required by § 47-25-1206;
2. (2) A full and detailed description of the acts or services that the invention developer undertakes to perform for the customer. To the extent that the description of acts or services affords the invention developer discretion to decide what acts or services are to be performed by the invention developer, the invention developer shall exercise that discretion to promote the best interests of the customer;
3. (3) A statement whether the invention developer undertakes to construct one (1) or more prototypes, models, or devices embodying the customer's invention;
4. (4) A statement whether the invention developer undertakes to sell or distribute one (1) or more prototypes, models, or devices embodying the customer's invention;
5. (5) The name of the person or firm contracting to perform the invention development services, the name under which the person or firm is doing or has done business as an invention developer, and the name of any parent, subsidiary, or affiliated company that may engage in performing the invention development services;
6. (6) The invention developer's principal business address and the name and address of its agent in the state of Tennessee authorized to receive service of process;
7. (7) The business form of the invention developer, whether corporate, partnership, or otherwise;
8. (8) A statement of the fee charged, a statement that a portion of the fee charged will be paid as a commission or other similar payment, if, in fact, it is intended to be so paid, to a person inducing, directly or indirectly, a customer to contract for the services of the invention developer, which statement shall specify the names of the person or persons receiving the payment; and a statement of the approximate portion of the fee charged, if any, that will be expended for services relating to patent matters;
9. (9) A statement that the invention developer does not intend to expend more for the invention development services than the fee charged the customer, if, in fact, it does not, and if it does so intend, a statement of the estimated expenditures of the invention developer in excess of the fee received from the customer;
10. (10) If any oral or written representation of estimated or projected customer earnings is made, a statement of such estimation or projection and the data upon which it is based;
11. (11) A single statement setting forth both:
  1. (A) The total number of customers who have contracted with the invention developer; provided, that the number need not reflect those customers who have contracted within the last thirty (30) days; and
  2. (B) The number of customers who have received, by virtue of the invention developer's performance of invention development services, an amount of money in excess of the amount of money paid by such customers to the invention developer;
12. (12) A statement that the invention developer is required to maintain all records and correspondence relating to performance of the invention development services for that customer for a period not less than three (3) years after expiration of the term of the contract for invention development services;
13. (13) The name and address of the custodian of all records and correspondence relating to the performance of the invention development services;
14. (14) A statement that the records and correspondence required to be maintained by subdivision (13) will be made available to the customer or the customer's representative for review and copying at the customer's expense on the invention developer's premises during normal business hours upon seven (7) days' written notice, the time period to begin from the date the notice is placed in the United States mail properly addressed first class postage prepaid;
15. (15) A statement of the expected date of completion of the invention development services; and
16. (16) A statement as follows: “This contract between you and the invention developer is regulated by law. The invention developer is not qualified or permitted to advise you whether protection of your idea or invention is available under the patent, copyright, or trademark laws of the United States or any other law. This contract does not provide any patent, copyright, or trademark protection for your idea or invention. If your idea or invention is patentable, copyrightable, or subject to trademark protection, or infringes an existing valid patent, copyright, or trademark or a patent, copyright, or trademark for which application has been made, your failure to inquire into these matters may affect your rights to your idea or invention.”

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47-25-1221(a)

§ 47-25-1208. Disclosures to be printed on cover of contract.

Each and every contract for invention development services shall carry a distinctive and conspicuous cover sheet with the following notice (and no other) imprinted thereon in boldface type of not less than ten (10) point size:
1. “The following disclosures are required by law:
  1. You have the right to cancel this contract for any reason at any time within seven (7) days from the date you and the invention developer sign the contract and you receive a fully executed copy of it. To exercise this option, you need only mail or deliver to this invention developer written notice of your cancellation. The method and time for notification is set forth in this contract immediately above the place for your signature. Upon cancellation, the invention developer must return by mail, within five (5) business days, all money paid and all materials provided by you.
  2. This contract between you and the invention developer is regulated by law. The invention developer is not qualified or permitted to advise you whether protection of your idea or invention is available under the patent, copyright, or trademark laws of the United States or any other law. This contract does not provide any patent, copyright, or trademark protection for your idea or invention. If your idea or invention is patentable, copyrightable, or subject to trademark protection, or infringes an existing valid patent, copyright, or trademark or a patent, copyright, or trademark for which application has been made, your failure to inquire into these matters may affect your rights to your idea or invention.”

§ 47-25-1209. Acquiring interest in invention by developer.

No invention developer shall acquire any interest, partial or whole, in the title to the customer's invention, unless the invention developer contracts to manufacture the invention and acquires such interest for such purpose at or about the time the contract for manufacture is executed. Nothing in this section shall be construed to prohibit an invention developer from contracting with a customer to receive a portion of any proceeds accruing to the customer as a result of performance of invention development services by the invention developer.

§ 47-25-1210. Right of action against developer.

No contract for invention development services shall require or entail the execution of any note or series of notes by the customer which, when separately negotiated, will cut off as to third parties any right of action or defense which the customer may have against the invention developer.

§ 47-25-1211. Contracts in violation of part void.

Any contract for invention development services which does not comply with the applicable provisions of this part shall be void and unenforceable as contrary to public policy; provided, that no contract shall be void and unenforceable if the invention developer proves that noncompliance was unintentional and resulted from a bona fide error, notwithstanding the use of reasonable procedures adopted to avoid any such errors and makes an appropriate correction.

§ 47-25-1212. Contracts obtained by fraud void.

Any contract for invention development services entered into in reliance upon any willful and false, fraudulent, or misleading representation by the invention developer is void and unenforceable.

§ 47-25-1213. Waiver of customer rights void.

Any waiver by the customer of the provisions of this part is deemed contrary to public policy and is void and unenforceable.

§ 47-25-1214. Failure to disclose — Contract voidable.

Failure to make the disclosures required by this part shall render any contract subsequently entered into between the customer and the invention developer voidable by the customer.

§ 47-25-1215. Progress reports.

With respect to each and every contract for invention development services, the invention developer shall deliver to the customer at the address specified in the contract, at quarterly intervals throughout the term of the contract, a written statement of the services performed to date; provided, that the first such statement need not be delivered until one hundred eighty (180) days after the contract is executed.

§ 47-25-1216. Customer's rights unimpaired by developer's assignments.

Any assignee of the invention developer's rights is subject to all equities and defenses of the customer against the invention developer existing in favor of the customer at the time of the assignment.

§ 47-25-1217. Bond of developer.

(a)
1. (1) Every invention developer rendering or offering to render invention development services in this state shall maintain a bond issued by a surety company admitted to do business in this state.
2. (2) The principal sum of the bond shall be five percent (5%) of the invention developer's gross income from the invention development business in this state during the invention developer's last fiscal year, except that the principal sum of the bond shall not be less than twenty-five thousand dollars ($25,000) in the first or any subsequent year of operations.
3. (3) A copy of such bond shall be filed with the secretary of state prior to the time the invention developer first commences business in this state.
4. (4) The invention developer shall have ninety (90) days after the end of each fiscal year within which to change the bond as may be necessary to conform to the requirements of this section.
(b)
1. (1) The bond required by subsection (a) shall be in favor of the state of Tennessee for the benefit of any person who, after entering into a contract for invention development services with an invention developer, is damaged by fraud or dishonesty or failure to provide the services of the invention developer in performance of the contract.
2. (2) Any person claiming against the bond may maintain an action at law against the invention developer and the surety.
3. (3) The aggregate liability of the surety to all persons for all breaches of conditions of the bond provided herein shall in no event exceed the amount of the bond.

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47-25-1218

§ 47-25-1218. Deposit in lieu of bond.

In lieu of furnishing the bond required by § 47-25-1217, the invention developer may deposit with the secretary of state a cash deposit in the like amount. This cash deposit may be satisfied by any of the following:
1. (1) Certificates of deposit payable to the secretary of state issued by banks doing business in this state and insured by the federal deposit insurance corporation;
2. (2) Investment certificates of share accounts assigned to the secretary of state and issued by a savings and loan association doing business in this state and insured by the federal deposit insurance corporation;
3. (3) Bearer bonds issued by the United States government or by this state; or
4. (4) Cash deposited with the secretary of state.

§ 47-25-1219. Record retention.

Every invention developer shall maintain all records and correspondence relating to performance of each invention development service contract for a period of not less than three (3) years after expiration of the term of each such contract.

§ 47-25-1220. Compliance with other laws required.

This part is not exclusive and does not relieve the parties or the contract subject thereto from compliance with all other applicable law.

§ 47-25-1221. Civil action against developer for violations.

(a) Any person who has been injured by a violation of this part by an invention developer, or by any false or fraudulent statement, representation, or omission of material fact by an invention developer, or by failure of an invention developer to make all the disclosures required by § 47-25-1207, may bring a civil action against the invention developer for the greater of the following amounts:
1. (1) Three thousand dollars ($3,000); or
2. (2) Three (3) times the amount of the actual damages, if any, sustained by the plaintiff.
(b) In addition to the greater of the preceding amounts, the court may award reasonable attorney's fees to the plaintiff.

§ 47-25-1222. Violations — Penalties — Injunctions.

(a) Any invention developer who willfully violates any provision of this part, or willfully enters an invention development contract which omits any duty or disclosure required by this part, commits a Class C misdemeanor.
(b) Any circuit or chancery court of this state has jurisdiction to restrain and enjoin the violation of any of the provisions of this part relating to invention development services and contracts for such services.
(c) The duty to institute actions for violation of such provisions of this part, including proceedings to restrain and enjoin such violations, is hereby vested in the attorney general and reporter, district attorneys general, and city attorneys. The attorney general and reporter, any district attorney general, or any city attorney may prosecute misdemeanor actions or institute equity proceedings or both.
(d) This section shall not be deemed to prohibit the enforcement by any person of any right provided by this or any other law.

Part 13 Repurchase of Terminated Franchise Inventory

§ 47-25-1301. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Current model” means a model listed in the wholesaler's, manufacturer's or distributor's current sales manual or any supplements thereto;
2. (2) “Current net price” means the price listed in the supplier's price list or catalogue in effect at the time the contract is cancelled or discontinued, less any applicable trade and cash discounts;
3. (3) “Inventory” means farm implements and machinery, construction, utility and industrial equipment, consumer products, outdoor power equipment, attachments and repair parts;
4. (4) “Retailer” means any person, firm or corporation engaged in the business of selling and retailing farm implements and machinery, construction, utility and industrial equipment, outdoor power equipment, attachments or repair parts and shall not include retailers of petroleum products;
5. (5) “Superseded part” means any part that will provide the same function as a currently available part as of the date of cancellation; and
6. (6) “Supplier” means any manufacturer, wholesaler, wholesale distributor, or any purchaser of assets or stock of any surviving corporation resulting from a merger or liquidation, any receiver or assignee, or any trustee of the original manufacturer, wholesaler or distributor.

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47-25-1801

§ 47-25-1302. Retail agreement modifications for good cause.

(a) No supplier, directly or through an officer, agent or employee, may terminate, cancel, fail to renew or substantially change the competitive circumstances of a retail agreement without good cause. “Good cause” means failure by a retailer to comply with requirements imposed upon the retailer by the retail agreement if such requirements are not different from those imposed on other retailers similarly situated in this state. In addition, good cause exists whenever:
1. (1) There has been a closeout on the sale of a substantial part of the retailer's assets related to the equipment business, or there has been a commencement of a dissolution or liquidation of the retailer;
2. (2) The retailer has changed its principal place of business or added additional locations without prior approval of the supplier, which shall not be unreasonably withheld;
3. (3) The retailer has substantially defaulted under a chattel mortgage or other security agreement between the retailer and the supplier, or there has been a revocation or discontinuance of a guarantee of a present or future obligation of the retailer to the supplier;
4. (4) The equipment retailer has failed to operate in the normal course of business for seven (7) consecutive days or has otherwise abandoned the business;
5. (5) The retailer has pleaded guilty to or has been convicted of a felony affecting the relationship between the retailer and the supplier; or
6. (6) The retailer transfers an interest in the dealership, or a person with a substantial interest in the ownership or control of the dealership, including an individual proprietor, partner or major shareholder, withdraws from the dealership or dies, or a substantial reduction occurs in the interest of a partner or major shareholder in the dealership. However, good cause does not exist if the supplier consents to an action described in this subsection (a).
(b) Except as otherwise provided herein, a supplier shall provide a retailer with at least ninety (90) days' written notice of termination, cancellation or nonrenewal of the retail agreement and a sixty-day right to cure the deficiency. If the deficiency is cured within the allotted time, the notice is void. In the case where cancellation is enacted due to market penetration, a reasonable period of time shall have existed where the supplier has worked with the dealer to gain the desired market share. The notice shall state all reasons constituting good cause for action. The notice is not required if the reason for termination, cancellation or nonrenewal is a violation under subsection (a).

§ 47-25-1303. Retailer's right to have inventory repurchased.

Whenever any retailer enters into an agreement, evidenced by a written or oral contract, with a supplier wherein the retailer agrees to maintain an inventory of parts and to provide service and the contract is terminated, then the supplier shall repurchase the inventory as provided in this part. The retailer may keep the inventory if the retailer desires. If the retailer has any outstanding debts to the supplier, then the repurchase amount may be set off or credited to the retailer's account.

§ 47-25-1304. Prohibited supplier actions.

No supplier shall:
1. (1) Coerce any retailer to accept delivery of equipment, parts or accessories which the retailer has not ordered voluntarily, except as required by any applicable law, or unless parts or accessories are safety parts or accessories required by the supplier;
2. (2) Condition the sale of additional equipment to a retailer upon a requirement that the retailer also purchase other goods or services, except that a supplier may require the retailer to purchase those parts reasonably necessary to maintain the quality of operation in the field of the equipment used in the trade area;
3. (3) Coerce a retailer into refusing to purchase equipment manufactured by another supplier; or
4. (4) Terminate, cancel or fail to renew or substantially change the competitive circumstances of the retail agreement based on the results of a natural disaster, including a sustained drought or high unemployment in the dealership market area, labor dispute or other similar circumstances beyond the retailer's control.

§ 47-25-1305. Date governing repurchase — Price and associated costs.

The supplier shall repurchase that inventory previously purchased from such supplier and held by the retailer on the date of termination of the contract. The supplier shall pay one hundred percent (100%) of the current net price of all new, unsold, undamaged and complete farm implements and machinery, construction, utility and industrial equipment, outdoor power equipment and attachments, and ninety percent (90%) of the current net price on new, unused and undamaged and superseded repair parts. The supplier shall pay the retailer ten percent (10%) of the current net price on all new, unused and undamaged repair parts returned to cover the cost of handling, packing and loading. The supplier shall have the option of performing the handling, packing and loading in lieu of paying the ten percent (10%) for these services. The supplier shall purchase at its amortized value any specific data processing hardware and software and telecommunications equipment that the supplier required the retailer to purchase within the past five (5) years. The supplier shall also repurchase, at seventy-five percent (75%) of the net cost, specialized repair tools purchased in the previous three (3) years and, at fifty percent (50%) of the net cost, specialized repair tools purchased in the previous four (4) through six (6) years pursuant to the requirements of the supplier and held by the retailer on the date of termination. Such specialized repair tools must be unique to the supplier's product line and must be in complete and resalable condition. Farm implements, machinery, utility and industrial equipment and outdoor power equipment used in demonstrations, including equipment leased primarily for demonstration or lease, shall also be subject to repurchase under this part at its agreed depreciated value; provided, that such equipment is in new condition and has not been abused.

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47-25-1307(3)

§ 47-25-1306. Title to repurchased inventory — Account adjustments.

Upon payment of the repurchase amount to the retailer, the title and right of possession to the repurchased inventory shall transfer to the supplier. Annually, at the end of each calendar year, after termination or cancellation, the retailer's reserve account for recourse, retail sale or lease contracts shall not be debited by a supplier or lender for any deficiency unless the retailer or the heirs of the retailer have been given at least seven (7) business days' notice by certified or registered United States mail, return receipt requested, of any proposed sale of the equipment financed and an opportunity to purchase the equipment. The former retailer or the heirs of the retailer shall be given quarterly status reports on any remaining outstanding recourse contracts. As the recourse contracts are reduced, any reserve account funds shall be returned to the retailer or the heirs of the retailer in direct proportion to the liabilities outstanding.

§ 47-25-1307. Exceptions to repurchase requirement.

This part shall not require the repurchase from a retailer of:
1. (1) Any repair part which, because of its condition, is not resalable as a new part;
2. (2) Any inventory which the retailer desires to keep; provided, that the retailer has a contractual right to do so;
3. (3) Any farm implements and machinery, construction, utility and industrial equipment, outdoor power equipment and attachments which are not current models or which are not in new, unused, undamaged, complete condition; provided, that the equipment used in demonstrations or leased as provided in § 47-25-1305 shall be considered new and unused;
4. (4) Any repair parts which are not in new, unused, undamaged condition;
5. (5) Any farm implements and machinery, construction, utility and industrial equipment, outdoor power equipment or attachments which were purchased more than thirty-six (36) months prior to notice of termination of the contract; or
6. (6) Any inventory which was ordered by the retailer on or after the date of termination of the contract.

§ 47-25-1308. Civil liability for failure to repurchase.

If any supplier fails or refuses to repurchase and pay the retailer for any inventory covered under this part within sixty (60) days after shipment of such inventory, such supplier shall be civilly liable for one hundred percent (100%) of the current net price of the inventory, plus any freight charges paid by the retailer, the retailer's attorney fees, court costs and interest on the current net price computed at the legal interest rate from the sixty-first day after date of shipment.

§ 47-25-1309. Death of retailer or major stockholder — Repurchase option of heirs.

(a) In the event of the death of the retailer or the majority stockholder of a corporation operating as a retailer, the supplier shall, at the option of the heir or heirs, repurchase the inventory from the heir or heirs of the retailer or majority stockholder as if the supplier had terminated the contract. The heir or heirs shall have one (1) year from the date of the death of the retailer or majority stockholder to exercise their options under this part. Nothing in this part shall require the repurchase of any inventory if the heir or heirs and the supplier enter into a new contract retail agreement to operate the retail dealership.
(b) A supplier shall have ninety (90) days in which to consider and make a determination upon a request by a family member to enter into a new retail agreement to operate the retail dealership. As used herein, “family member” means a spouse, child, son-in-law, daughter-in-law or lineal descendant of the dealer or principal owner of the dealership. In the event the supplier determines that the requesting family member is not acceptable, the supplier shall provide the family member with a written notice of its determination with the stated reasons for nonacceptance. This section does not entitle an heir, personal representative or family member to operate a dealership without the specific written consent of the supplier.
(c) Notwithstanding this section, in the event that a supplier and a dealer have previously executed an agreement concerning succession rights prior to the dealer's death and, if such agreement has not been revoked, such agreement shall be observed even if it designates someone other than the surviving spouse or heirs of the decedent as the successor.

§ 47-25-1310. Security interests not affected — Exemption from bulk sales law — Inspection.

This part shall not be construed to affect in any way any security interest which the supplier may have in the inventory of the retailer, and any repurchase hereunder shall not be subject to the bulk sales law. The retailer and supplier shall furnish representatives to inspect all parts and certify their acceptability when packed for shipment. Failure of the supplier to provide a representative within sixty (60) days shall result in automatic acceptance by the supplier of all returned items.

§ 47-25-1311. Actions for civil damages — Injunctions.

(a) A retailer may bring an action for civil damages in a court of competent jurisdiction against any supplier found violating any of the provisions of this part, and may recover damages sustained as a consequence of the supplier's violations together with all costs and attorneys' fees.
(b) The retailer shall be entitled to injunctive relief against unlawful termination, cancellation, nonrenewal or substantial change of competitive circumstances of the retail agreement. The remedies in this section are in addition to any other remedies permitted by law.

§ 47-25-1312. Applicability.

This part shall apply to all contracts and shall apply to all retail agreements in effect which have no expiration date and are a continuing contract, and shall apply to all other contracts entered into, amended, extended, ratified or renewed after May 16, 1977. This part shall apply to and be binding upon all suppliers, all successors in interest or purchasers of assets or stock of suppliers, and all receivers, trustees or assignees of suppliers. Any contractual term restricting the procedural or substantive rights of a retailer under this part, including a choice of law or choice of forum clause, is void.

§ 47-25-1313. Waiver — Severability.

(a) This part shall not be waivable in any contract, and any such attempted waiver shall be null and void.
(b) If any provision or item of this part or the application thereof is held invalid, it shall not affect other provisions, items or applications of this part which can be given effect without the invalid provisions, items or applications, and to this end the provisions of this part are hereby declared severable.

§ 47-25-1314. Applicability of franchise provisions.

Part 15 of this chapter does not apply to retailers, as defined in this part.

Part 14 Disposal of Dies, Molds, and Forms

§ 47-25-1401. Disposal of dies, molds, and forms.

(a) As used in this section, unless the context otherwise requires:
1. (1) “Customer” means any individual or entity who causes or caused a molder to:
  1. (A) Fabricate, cast, or otherwise make a die, mold, or form; or
  2. (B) Use a die, mold, or form to manufacture, assemble, or otherwise make a product or products;
2. (2)
  1. (A) “Molder” means any individual or entity, including, but not limited to, a tool or die maker who:
    1. (i) Fabricates, casts, or otherwise makes a die, mold, or form; or
    2. (ii) Uses a die, mold, or form to manufacture, assemble, or otherwise make a product or products;
  2. (B) “Molder” shall not be construed to include individuals or entities who fabricate, cast, otherwise make or use plates, types, or other such forms in the reproduction of printed or graphic arts material; and
3. (3) “Within three (3) years following the last prior use” includes any period following the last prior use of any die, mold, or form.
(b) This section shall not apply where a molder retains title to and possession of a die, mold, or form. Nothing in this section shall be construed to grant a customer any rights, title, or interest to a die, mold, or form.
(c) Unless otherwise agreed in writing, if a customer does not take possession from a molder of a die, mold, or form situated in this jurisdiction within three (3) years following the last prior use thereof, all of the customer's rights, title, and interest to such die, mold, or form may be transferred by operation of law to the molder for the purpose of destroying such die, mold, or form, consistent with this section.
(d) If a molder chooses to have all rights, title, and interest to any die, mold, or form transferred to the molder by operation of law, the molder shall send written notice by registered mail, return receipt requested, to its customer at the address, if any, indicated in the agreement pursuant to which the molder obtained possession of the die, mold, or form and to the customer's last known address, indicating that the molder intends to terminate all of the customer's rights, title, and interest by having all such rights, title, and interest transferred to the molder by operation of law pursuant to this section; provided, that if the customer designates in writing an address to which the written notice must be sent, the molder must send the notice to such address.
(e) If a customer does not take possession of the particular die, mold, or form within one hundred twenty (120) days following the date the molder receives acknowledgement or nonacknowledgement of the return receipt of such notice, or does not make other contractual arrangements with the molder for taking possession or for the storage thereof, all rights, title, and interest of the customer shall transfer by law to the molder. Thereafter, the molder shall be entitled to destroy the particular die, mold, or form as the molder's own property without any risk of liability to the customer, except that this section shall not be construed in any manner to affect the right of the customer under federal patent or copyright law, or any state or federal law, pertaining to unfair competition.

Part 15 Franchise Terminations, Nonrenewals or Modifications

§ 47-25-1501. Legislative intent.

It is the intent of the general assembly that small businesses operating within Tennessee pursuant to franchise agreements should be provided uniform rights and procedures to prevent arbitrary and capricious business practices by franchisors seeking to terminate or modify their franchise relationships or failing to renew existing franchise relationships.

§ 47-25-1502. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Franchise” means a written or oral agreement for a definite or indefinite period, in which a person grants to another person authority to use a trade name, trademark, service mark or related characteristic within an exclusive territory, or to sell or distribute goods or services, within an exclusive territory, at wholesale, retail, by lease agreement or otherwise; provided, that “franchise” means only such agreement where the franchisee is required to be licensed under § 57-3-203; and provided further, that a franchise is not created by a lease, license or concession granted by a retailer to sell goods or furnish services on or from premises which are occupied by the retailer-grantor primarily for its own merchandising activities;
2. (2) “Franchisee” means a person to whom a franchise is offered or granted only if such person is required to be licensed under § 57-3-203;
3. (3) “Franchisor” means a person who grants a franchise to another person where such person is the holder of a permit issued pursuant to § 57-3-602;
4. (4) “Good cause” means:
  1. (A) Failure by a franchisee to comply substantially with the requirements imposed or sought to be imposed upon the franchisee by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement, and which requirements are not in violation of any law or regulation;
  2. (B) The failure by the franchisee to act in good faith and in a commercially reasonable manner in carrying out the terms of the franchise;
  3. (C) Voluntary abandonment of the franchise;
  4. (D) Conviction of the franchisee in a court of competent jurisdiction of an offense punishable by a term of imprisonment in excess of one (1) year;
  5. (E) Any act by a franchisee which substantially impairs the franchisor's trade name or trademark;
  6. (F) The institution of insolvency or bankruptcy proceedings by or against a franchisee, or any assignment or attempted assignment by a franchisee of the franchise or the assets of the franchise for the benefit of creditors;
  7. (G) Failure of the franchisee to pay to the franchisor within thirty (30) days after receipt of notice any uncontested sums past due the franchisor and relating to the franchise; or
  8. (H) Failure of the franchisee to comply with federal, state or local law or regulations applicable and material to the operation of the franchise which could reasonably impair the franchisee's continued future performance;
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5. (5) “Good faith” means honesty in fact in the conduct or transaction concerned;
6. (6) “Person” means a natural person, corporation, partnership, trust or other entity and, in case of an entity, it includes any other entity which has a majority interest in such entity, or effectively controls such other entity, as well as the individual officers, directors and other persons in active control of the activities of each such entity; and
7. (7) “Sale, transfer or assignment” means any disposition of a franchise or any interest therein, with or without consideration, including, but not limited to, bequests, inheritance, gift, exchange, lease or license.

§ 47-25-1503. Termination of franchises.

(a) Except as otherwise provided by this part, no franchisor may terminate a franchise prior to the expiration of its term, except for good cause asserted in good faith, nor may a franchisor terminate a franchise prior to the expiration of its term without providing written notice of the facts and circumstances establishing good cause, and giving the franchisee a reasonable opportunity of at least thirty (30) days to cure the alleged failure.
(b) Any franchisor who fails to provide services or products to a franchisee located within this state, which services or products are material to the operation of the franchise, on the same terms, conditions and availability as any other franchisee in this state shall be deemed to have terminated such franchise.

§ 47-25-1504. Termination of franchises — Notice of termination without opportunity to cure.

If, during the period in which the franchise is in effect, any of the following events occurs, which event is relevant to the franchise, immediate notice of termination without an opportunity to cure shall be deemed reasonable:
1. (1) The franchisee or the business to which the franchise relates is declared bankrupt or judicially determined to be insolvent, or all or a substantial part of the assets thereof are assigned to or for the benefit of any creditor, or the franchisee admits inability to pay debts as they come due;
2. (2) The franchisee willfully abandons the franchise by failing to operate the business for five (5) consecutive days during which the franchisee is required to operate the business under the terms of the franchise, or any shorter period after which it is not unreasonable under the facts and circumstances for the franchisor to conclude that the franchisee does not intend to continue to operate the franchise, unless such failure to operate is due to fire, flood, earthquake or other similar causes beyond the franchisee's control;
3. (3) The franchisor and franchisee agree in writing to terminate the franchise;
4. (4) The franchisee makes any material misrepresentations relating to the acquisition of the franchise business;
5. (5) The franchised business or business premises of the franchise are seized, taken over or foreclosed by a government official in the exercise of that official's duties, or seized, taken over, or foreclosed by a creditor, lienholder, or lessor; provided, that a final judgment against the franchisee remains unsatisfied for thirty (30) days (unless a supersedeas or other appeal bond has been filed); or a levy of execution has been made upon the license granted by the franchise agreement or upon any property used in the franchise business, and such levy is not discharged or suspended by accommodation agreement, partial payment agreement, compromise or similar agreement entered within five (5) days of such levy;
6. (6) The franchisee is convicted of a felony or any other criminal misconduct which is relevant to the operation of the franchise; or
7. (7) Failure of the franchisee, on two (2) consecutive occasions, to pass minimum health inspections conducted by any state or federal governmental entity.

§ 47-25-1505. Nonrenewal or modification of franchise agreements.

No franchisor may fail to renew a franchise unless such franchisor provides the franchisee at least sixty (60) days' prior written notice of its intention not to renew, such failure to renew is for good cause, and the franchisor has provided written notice of the facts and circumstances upon which it alleges that good cause exists to fail to renew. Any modification of an existing franchise agreement proposed by a franchisor must be disclosed no later than sixty (60) days prior to the proposed effective date of the modification unless the franchisee consents, in writing, within the sixty-day period, to waive such requirement. If failure to renew is for good cause, such nonrenewal may not be effective unless:
1. (1) During the sixty (60) days prior to expiration of the franchise, the franchisor permits the franchisee to sell the business or a portion thereof relating to the franchisee, to a purchaser meeting the franchisor's then current requirements for granting new franchises, or, if the franchisor is not granting a significant number of new franchises, the then current requirements for granting renewal franchises;
2. (2)
  1. (A) The refusal to renew is not for the purpose of converting the franchisee's business premises to operation by employees or agents of the franchisor for such franchisor's own account; provided, that nothing in this subdivision (2)(A) shall prohibit a franchisor from exercising a right of first refusal to purchase the franchisee's business; and
  2. (B) Upon expiration of the franchise, the franchisor agrees not to seek to enforce any covenant of the nonrenewed franchisee not to compete with the franchisor or franchisees of the franchisor;
3. (3) The franchisee and the franchisor agree not to renew the franchise; or
4. (4) The franchisor withdraws from distributing the products or services through franchises in the state of Tennessee for a period of not less than two (2) years; provided, that:
  1. (A) Upon expiration of the franchise, the franchisor agrees not to seek to enforce any covenant of the nonrenewed franchisee not to compete with the franchisor or franchisee of the franchisor; and
  2. (B) The failure to renew is not for the purpose of converting the business conducted by the franchisee pursuant to the franchise agreement to operation by employees or agents of the franchisor for such franchisor's own account.

§ 47-25-1506. Circumstances not constituting “good cause.”

Notwithstanding § 47-25-1502(4), the following circumstances shall not be deemed to constitute “good cause”:
1. (1) Failure of a franchisee to meet a quota of sales or purchases, whether such quota is expressed as a goal, a quota or otherwise;
2. (2) The desire of the franchisor to consolidate its franchises or its distribution pattern without demonstrating a failure of the franchisee to effectively market or distribute its product;
3. (3) The failure of the franchisee to comply with a provision of a contract which is prohibited or invalid under the laws of Tennessee;
4. (4) The failure of the franchisee to comply with a provision of a contract or request of the franchisor which would cause the franchisee to violate any regulation of a regulatory body, or which could reasonably cause a franchisee to jeopardize any license or permit necessary for it to conduct its business; or
5. (5) The loss of the franchisee's right to occupy the premises from which the franchise business is operated, if such loss is directly or indirectly caused by the franchisor or any entity related to or affiliated with the franchisor.

§ 47-25-1507. Waiver of rights — Settlements.

(a) A franchisee may not waive any of the rights granted in any provision of this part, and the provisions of any agreement which would have such an effect shall be null and void.
(b) Nothing in this part shall be construed to limit or prohibit good faith dispute settlements voluntarily entered into by the parties.

§ 47-25-1508. Transfer or assignment of franchisee's business.

(a) Upon giving the franchisor written notice of intent to transfer the franchisee's business, any individual owning or deceased individual who owned an interest in a franchise may transfer or assign the franchisee's business to the spouse, child, grandchild, parent, brother or sister of such individual. The consent or approval of the franchisor shall not be required.
(b) Any individual owning or deceased individual who owned an interest in a franchise may transfer the franchisee's business to a person other than such individual's spouse, child, grandchild, parent, brother or sister; provided, that:
1. (1) Such individual has notified the franchisor in writing of the nature, terms and provisions of such transfer;
2. (2) Such individual has provided the franchisor the opportunity to match the terms and conditions of such offer; and
3. (3) The proposed transferee meets the nondiscriminatory, material, and consistently applied and reasonable qualifications and standards of the franchisor.
(c) If the franchisor disapproves of a transfer as proposed in subsection (b), the consent or approval of the franchisor shall not be required if the franchisor does not elect to match the terms and conditions of such transfer or proposal, within sixty (60) days of notice, and another transferee who meets its requirements matches the terms and conditions of such offer.

§ 47-25-1509. Actions for damages or equitable relief.

Notwithstanding the terms of any franchise, agreement, waiver or other written instrument, any person who is injured by a violation of this part may bring an action for damages and equitable relief, including injunctive relief, reasonable attorney's fees and costs in any court of competent jurisdiction in Tennessee.

§ 47-25-1510. Restriction on release from liability.

No franchisee may prospectively assent to a release, assignment, novation, waiver or estoppel which would relieve any person from any liability or obligation under this part, or would require any controversy between a franchisor or franchisee to be referred to any person other than the duly constituted courts of this state or the United States, or a state regulatory agency charged by law with adjudicating such controversy, if the referral would be binding on the franchisee.

§ 47-25-1511. Part remedial and supplementary — Other protections included — Conflicting provisions.

(a) This part is remedial and is supplementary to any other law of this state which provides rights and protections to franchisees.
(b) Any state law or regulation which provides procedural or substantive protection to any party to a franchise agreement prior to termination or nonrenewal shall be effective and supplementary to this part.
(c) Any state law or regulation which permits or provides for the termination or nonrenewal of any franchise without providing the basic protections of this part shall not be effective.

Part 16 Flea Market Sales

§ 47-25-1601. Part definitions.

(a) As used in this part, unless the context otherwise requires:
1. (1) “Manufacturer's or distributor's representative” means a person who has on the person's person and available for public inspection written proof that such person is authorized by the manufacturer or distributor for the public retail sale of those products which are offered for sale. Such credentials shall include the seller's name and may include a date upon which such authorization shall expire;
2. (2)
  1. (A) “New and unused property” means tangible personal property that was acquired by the new and unused property merchant directly from the producer, manufacturer, wholesaler or retailer in the ordinary course of business which has never been used since its production or manufacturing or which is in its original and unopened package or container, if such personal property was so packaged when originally produced or manufactured;
  2. (B) “New and unused property” does not include:
    1. (i) Property which is in its original and unopened package or container that contains a date or expiration date and such date is not a new date or the date has expired;
    2. (ii) Property which was pre-owned by an individual other than the new and unused property merchant and such individual obtained the property through the ordinary course of business; or
    3. (iii) Property, although never used, whose style, packaging or material clearly indicates that such property was not produced or manufactured within recent times;
3. (3) “New and unused property merchant” means a person who engages in the retail sale of personal property at a wholesale/retail outlet in this state and some of such property offered for sale is new and unused; and
4. (4)
  1. (A) “Wholesale/Retail Outlet” means an event:
    1. (i) At which two (2) or more persons offer personal property for sale or exchange; and
    2. (ii) If the event is held more than six (6) times in any twelve-month period, regardless of the number of persons offering or displaying personal property or the absence of fees, at which such property is offered or displayed for sale or exchange; or
    3. (iii) At which a fee is charged for the privilege of offering or displaying such personal property; or
    4. (iv) At which a fee is charged to prospective buyers for admission to the area where such personal property is offered or displayed for sale.
  2. (B) “Wholesale/retail outlet” is interchangeable with and applicable to “flea market,” “itinerant vendor,” “swap meet,” “indoor swap meet,” or other similar terms regardless of whether these events are held inside a building or outside in the open. The primary characteristic is that these activities involve a series of sales sufficient in number, scope, and character to constitute a regular course of business.
  3. (C) “Wholesale/retail outlet” does not mean nor apply to an event which is organized for the exclusive benefit of any community chest, fund, foundation, association, or corporation organized and operated for religious, educational, or charitable purposes.

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§ 47-25-1602. Recordkeeping — Receipts.

(a) Every new and unused property merchant shall maintain receipts for the acquisition of new and unused property which must contain all of the following information:
1. (1) The date of the transaction on which the property was acquired;
2. (2) The name and address of the person, corporation, or entity from whom the property was acquired;
3. (3) An identification and description of the property acquired;
4. (4) The price paid for such property; and
5. (5) The signatures of the person selling the property and the new and unused property merchant only if the new and unused property merchant acquires the property vis-á-vis the person selling the property if such person is not regularly engaged in the normal course of business of selling such property.
(b) If a new and unused property merchant makes a single purchase of five hundred dollars ($500) or more from an individual or corporation, the bill of sale from such purchase shall be sufficient to satisfy the recordkeeping requirements of this subsection (a).

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§ 47-25-1603. Record maintenance.

The record of each purchase transaction provided for in this part shall be maintained for a period of not less than two (2) years.

§ 47-25-1604. Offenses.

It is an offense for any new and unused property merchant required to maintain receipts under this part to knowingly:
1. (1) Falsify, obliterate or destroy such receipts;
2. (2) Refuse or fail, upon the request of a law enforcement officer, to make such receipts available for inspection within a period of time which is reasonable under the individual circumstances surrounding such request; provided, that nothing contained within this section shall be construed to require the new and unused property merchant to possess such receipt on or about the merchant's person without reasonable notice;
3. (3) Fail to maintain the receipts required by this part for at least two (2) years; or
4. (4) Present credentials pursuant to the requirements of this section which are false, fraudulent, forged, fraudulently obtained or the nature of which is misrepresented.

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§ 47-25-1605. Violations.

(a)
1. (1) For the first violation of § 47-25-1602, the violator shall be issued a warning and informed of the penalty for any subsequent violations.
2. (2) A second and subsequent violation of § 47-25-1602 is a Class C misdemeanor punishable by fine only.
(b)
1. (1) For the first violation of § 47-25-1604, the violator shall be issued a warning and informed of the penalty for any subsequent violations.
2. (2) A second or subsequent violation of § 47-25-1604 is a Class C misdemeanor punishable by fine only.

§ 47-25-1606. Applicability of law.

This part shall apply to all new and unused property purchased or acquired on or after January 1, 1999, which is sold, or to be sold, at a wholesale/retail outlet in this state.

§ 47-25-1607. Sale of food, drugs or cosmetics with past expiration date.

(a) No person shall knowingly sell or offer for sale at a wholesale/retail outlet any food manufactured and packaged for sale for consumption by a child under two (2) years of age, over-the counter drug or medication, or cosmetic which has an expiration date, and such date has expired.
(b) Any person who violates this section commits a Class C misdemeanor, punishable by a fine only, not to exceed one hundred dollars ($100) for each violation.

§ 47-25-1608. Exemptions.

This part shall not apply to:
1. (1) The sale of a motor vehicle or trailer that is required to be registered or is subject to the certificate of title laws of this state;
2. (2) The sale of agricultural products, forestry products or food products, other than food as defined as new and unused property;
3. (3) Business conducted at any industry or association trade show;
4. (4) The sale of arts or crafts by the person who produced such arts and crafts;
5. (5) A manufacturer's or distributor's representative as defined in § 47-25-1601; or
6. (6) Any new and unused property merchant under eighteen (18) years of age.

Part 17 Uniform Trade Secrets Act

§ 47-25-1701. Short title.

This part shall be known and may be cited as “The Uniform Trade Secrets Act.”

§ 47-25-1702. Part definitions.

As used in this part, unless the context requires otherwise:
1. (1) “Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or limit use, or espionage through electronic or other means;
2. (2) “Misappropriation” means:
  1. (A) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
  2. (B) Disclosure or use of a trade secret of another without express or implied consent by a person who:
    1. (i) Used improper means to acquire knowledge of the trade secret; or
    2. (ii) At the time of disclosure or use, knew or had reason to know that that person's knowledge of the trade secret was:
      1. (a) Derived from or through a person who had utilized improper means to acquire it;
      2. (b) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
      3. (c) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
    3. (iii) Before a material change of the person's position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake;
3. (3) “Person” means a natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity;
4. (4) “Trade secret” means information, without regard to form, including, but not limited to, technical, nontechnical or financial data, a formula, pattern, compilation, program, device, method, technique, process, or plan that:
  1. (A) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and
  2. (B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

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§ 47-25-1703. Injunctive relief.

(a) Actual or threatened misappropriation may be enjoined. Upon application to the court an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in appropriate circumstances for reasons including, but not limited to, an elimination of the commercial advantage that otherwise would be derived from the misappropriation, deterrence of willful and malicious misappropriation, or where the trade secret ceases to exist due to the fault of the enjoined party or others by improper means.
(b) In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable.
(c) In appropriate circumstances, affirmative acts to provide a trade secret may be compelled by court order.

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§ 47-25-1704. Damages.

(a) In addition to or in lieu of the relief provided by § 47-25-1703, a complainant is entitled to recover damages for misappropriation except to the extent that defendant can show a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation and such renders a monetary recovery inequitable. Damages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss. In lieu of damages measured by any other methods, the damages caused by misappropriation may be measured by imposition of liability for a reasonable royalty for a misappropriator's unauthorized disclosure or use of a trade secret.
(b) If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subsection (a).

§ 47-25-1705. Attorney's fees.

If:
1. (1) A claim of misappropriation is made in bad faith,
2. (2) A motion to terminate an injunction is made or resisted in bad faith, or
3. (3) Willful and malicious misappropriation exists,
  1. the court may award reasonable attorney's fees to the prevailing party.

§ 47-25-1706. Preservation of secrecy.

In an action under this part, a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.

§ 47-25-1707. Statute of limitations.

An action for misappropriation must be brought within three (3) years after the misappropriation is discovered or, by the exercise of reasonable diligence, should have been discovered. For the purposes of this section, a continuing misappropriation by any person constitutes a single claim against that person, but this section shall be applied separately to any claim against each other person who receives a trade secret from another person who misappropriated that trade secret.

§ 47-25-1708. Effect on other law.

(a) Except as provided in subsection (b), this part displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.
(b) This part does not affect:
1. (1) Contractual remedies, whether or not based upon misappropriation of a trade secret; provided, that a contractual duty to maintain secrecy or limit use of a trade secret shall not be deemed to be void or unenforceable solely for lack of durational or geographical limitation on the duty;
2. (2) Other civil remedies that are not based upon misappropriation of a trade secret; or
3. (3) Criminal remedies, whether or not based upon misappropriation of a trade secret.
(c) In no event shall a written contract be required to maintain an action or recover damages for misappropriation of a trade secret proven under this part.

§ 47-25-1709. Uniformity of application and construction.

This part shall be applied and construed to effectuate its general purpose to make consistent the law with respect to the subject of this act among states enacting it.

Part 18 Warranties for Retailers and Suppliers

§ 47-25-1801. Definitions.

The terms “inventory”, “retailer”, and “supplier” shall have the same meaning as provided in § 47-25-1301.

§ 47-25-1802. Approval of warranty claims — Notice of claim.

(a) Claims by a retailer for payment under warranty agreements pertaining to inventory shall either be approved or disapproved within thirty (30) days of receipt by the supplier. All approved claims shall be paid within thirty (30) days of their approval. When any such claim is disapproved, the supplier shall notify the dealer within thirty (30) days of receipt stating the specific grounds upon which the disapproval is based. If a claim is not specifically disapproved within thirty (30) days of receipt, it shall be deemed approved and payment by the supplier shall follow within thirty (30) days. If said payment is not made within thirty (30) days, the amount of the claim that remains unpaid shall accrue interest beginning on the thirty-first day at the weekly average prime loan rate, as of the thirty-first day, for the most recent week for which such an average rate has been published by the board of governors of the federal reserve system.
(b) Any notice of a warranty claim given to a supplier under this section shall contain the following language in conspicuous type:
1. “If no objections to this claim are made within thirty (30) days of receipt then payment of the claim must be made within thirty (30) days as provided in title 47, chapter 25, part 18.”

§ 47-25-1803. Honoring warranty after termination of contract.

If, after termination of a contract, the retailer submits a claim to the supplier for warranty work performed prior to the effective date of the termination, the supplier shall accept or reject the claim within thirty (30) days of its receipt.

§ 47-25-1804. Compensation.

Warranty work performed by a retailer shall be compensated in accordance with the reasonable and customary amount of time required to complete such work, expressed in hours and fractions thereof multiplied by the retailer's established customer hourly retail labor rate, which shall have previously been made known to the supplier.

§ 47-25-1805. Excluded expenses.

Expenses expressly excluded under the supplier's warranty to the customer shall not be included or required to be paid on requests for compensation from the retailer for warranty work performed.

§ 47-25-1806. Reimbursement to retailer.

All parts used by the retailer in performing such warranty work shall be paid to the retailer in the amount equal to the retailer's net price for such parts, plus a minimum of fifteen percent (15%). This addition is to reimburse the retailer for reasonable costs of doing business in performing such warranty service on the supplier's behalf including, but not limited to, freight and handling costs incurred.

§ 47-25-1807. Right to audit.

The supplier has the right to adjust for errors discovered during audit and, if necessary, to adjust claims paid in error.

§ 47-25-1808. Alternative reimbursement from supplier.

The retailer shall have the right to accept the supplier's reimbursement terms and conditions in lieu of the provisions of this part.

Part 19 Motorcycle and Off-Road Vehicle Dealer Fairness Act

§ 47-25-1901. Short title.

This part shall be known and may be cited as the “Motorcycle and Off-Road Vehicle Dealer Fairness Act.”

§ 47-25-1902. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “All-terrain vehicle” means a motorized vehicle with no less than four (4) nonhighway tires, but no more than six (6) nonhighway tires, that is limited in total dry weight to less than three thousand five hundred pounds (3,500 lbs.), and is eighty inches (80″) or less in width measured from the outside of the tire rim to the outside of the tire rim;
2. (2) “Attachment” means a machine or part of a machine designed to be used on and in conjunction with a motorcycle or off-road vehicle;
3. (3) “Current model” means a model listed in the supplier's, wholesaler's, manufacturer's or distributor's current sales manual or any supplements to the manual;
4. (4) “Current net price” means the price listed in the supplier's price list or catalogue in effect at the time the contract is canceled or discontinued, less any applicable trade and cash discounts;
5. (5) “Dealer” means any person engaged in the business of selling and retailing inventory, who enters into a retail agreement, and who, under the terms of the agreement receives inventory from the supplier. “Dealer” also includes a franchisee who otherwise meets the requirements of a dealer;
6. (6) “Franchise” or “franchise agreement” means a written or oral agreement for a definite or indefinite period, in which a person grants to another person authority to use a trade name, trademark, service mark or related characteristic within an exclusive territory, or to sell or distribute goods or services, within an exclusive territory, at wholesale, retail, by lease agreement or otherwise; provided, that a franchise is not created by a lease, license or concession granted by a dealer to sell goods or furnish services on or from premises that are occupied by the dealer-grantor primarily for its own merchandising activities;
7. (7) “Franchisee” means a person to whom a franchise is offered or granted;
8. (8) “Franchisor” means a person who grants a franchise to another person;
9. (9) “Inventory” means motorcycles, off-road vehicles, attachments and repair parts;
10. (10) “Motorcycle” means a motorcycle as defined in § 55-1-103;
11. (11) “Net cost” means the price the dealer actually paid to the supplier for the inventory, less any applicable trade, volume, or cash bonus discounts, plus freight and set-up expense;
12. (12) “Off-road vehicle” means any off-road motorcycle, all-terrain vehicle, utility vehicle or dune buggy;
13. (13) “Person” means a sole proprietor, partnership, corporation, or any other form of business organization;
14. (14) “Retail agreement” means an agreement, including a franchise agreement that meets the requirements of a retail agreement, whether express, implied, oral, or written, between two (2) or more persons:
  1. (A) By which a person receives the right to:
    1. (i) Sell or lease inventory or services at retail or wholesale; or
    2. (ii) Use a trade name, trademark, service mark, logotype, advertising, or other commercial symbol; and
  2. (B) In which the parties to the agreement have a joint interest, whether equal or unequal, in the offering, selling, or leasing of the inventory or services;
15. (15) “Superseded part” means any part that will provide the same function as a currently available part as of the date of cancellation;
16. (16) “Supplier” means a person who enters into a retail agreement and who, under the terms of the agreement, provides inventory or services to a dealer. “Supplier” includes a:
  1. (A) Wholesaler;
  2. (B) Manufacturer;
  3. (C) Franchisor;
  4. (D) Person that is a parent corporation or an affiliated corporation of a person identified in this subdivision (16); and
  5. (E) A field representative, an officer, an agent, or another direct or indirect representative of a person identified in this subdivision (16); and
17. (17) “Terminate” includes the failure to renew.

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§ 47-25-1903. Retail agreement modifications for good cause.

(a) No supplier, directly or through an officer, agent or employee, may terminate, cancel, fail to renew or substantially change the competitive circumstances of a retail agreement without good cause. “Good cause” means failure by a dealer to comply with requirements imposed upon the dealer by the retail agreement if the requirements are not different from those imposed on other dealers similarly situated in this state. In addition, good cause exists whenever:
1. (1) There has been a closeout on the sale of a substantial part of the dealer's assets related to the business, or there has been a commencement of a dissolution or liquidation of the dealer;
2. (2) The dealer has changed its principal place of business or added additional locations without prior approval of the supplier, which shall not be unreasonably withheld;
3. (3) The dealer has substantially defaulted under a chattel mortgage or other security agreement between the dealer and the supplier, or there has been a revocation or discontinuance of a guarantee of a present or future obligation of the dealer to the supplier;
4. (4) The dealer has failed to operate in the normal course of business for seven (7) consecutive days or has otherwise abandoned the business;
5. (5) The dealer has pleaded guilty to or has been convicted of a felony affecting the relationship between the dealer and the supplier; or
6. (6) The dealer transfers an interest in the dealership, or a person with a substantial interest in the ownership or control of the dealership, including an individual proprietor, partner or major shareholder, withdraws from the dealership or dies, or a substantial reduction occurs in the interest of a partner or major shareholder in the dealership; however, good cause does not exist if the supplier consents to an action described in this subdivision (a)(6).
(b) Except as otherwise provided in this section, a supplier shall provide a dealer with at least ninety (90) days' written notice of termination, cancellation or nonrenewal of the retail agreement and a sixty-day right to cure the deficiency. If the deficiency is cured within the allotted time, the notice is void. In a case where cancellation is enacted due to market penetration, a reasonable period of time shall have existed where the supplier has worked with the dealer to gain the desired market share. The notice shall state all reasons constituting good cause for termination, cancellation or nonrenewal of the retail agreement.

§ 47-25-1904. Retailer's right to have inventory repurchased.

Whenever any dealer enters into a retail agreement with a supplier, evidenced by a written or oral contract, in which the dealer agrees to maintain an inventory of motorcycles, off-road vehicles, and attachments, inventory of parts and to provide service thereon, and the contract is terminated, then the supplier shall repurchase the inventory as provided in § 47-25-1906. The dealer may keep the inventory if the dealer desires. If the dealer has any outstanding debts to the supplier, then the repurchase amount may be set off or credited to the dealer's account.

§ 47-25-1905. Prohibited supplier actions.

No supplier shall:
1. (1) Coerce any dealer to accept delivery of inventory, parts or accessories that the dealer has not ordered voluntarily, except as required by any applicable law, or unless parts or accessories are safety parts or accessories required by the supplier;
2. (2) Condition the sale of additional inventory to a dealer upon a requirement that the dealer also purchase other goods or services, except that a supplier may require the dealer to purchase those parts reasonably necessary to maintain the quality of operation in the field of the inventory used in the trade area;
3. (3) Coerce a dealer into refusing to purchase inventory manufactured by another supplier; or
4. (4) Terminate, cancel or fail to renew or substantially change the competitive circumstances of the retail agreement based on the results of a natural disaster, including a sustained drought or high unemployment in the dealership market area, labor dispute or other similar circumstances beyond the dealer's control.

§ 47-25-1906. Termination and repurchase — Price and associated costs.

(a) A dealer who enters into a written retail agreement with a supplier to maintain a stock of motorcycles, off-road vehicles, or related parts and attachments has the following rights to payment upon repurchase, at the option of the dealer, if the retail agreement is terminated:
1. (1) The supplier shall repurchase, at one hundred percent (100%) of the current net price, all new, unsold, undamaged and complete motorcycles, off-road vehicles and attachments;
2. (2) The supplier shall repurchase, at ninety percent (90%) of the current net price, all new, unused and undamaged and superseded repair parts;
3. (3) The supplier shall repurchase, at ten percent (10%) of the current net price, all new, unused and undamaged repair parts returned to cover the cost of handling, packing and loading. The supplier shall have the option of performing the handling, packing and loading in lieu of paying the ten percent (10%) for these services;
4. (4) The supplier shall purchase, at its amortized value, any specific data processing hardware and software and telecommunications equipment that the supplier required the dealer to purchase within the past five (5) years; and
5. (5) The supplier shall repurchase, at one hundred percent (100%) of the net cost, specialized repair tools purchased in the previous three (3) years and, at seventy-five percent (75%) of the net cost, specialized repair tools purchased in the previous four (4) through six (6) years and, at fifty percent (50%) of the net cost, specialized repair tools purchased more than six (6) years previous pursuant to the requirements of the supplier and held by the dealer on the date of termination. The specialized repair tools must be unique to the supplier's product line and must be in complete and resalable condition.
(b) Motorcycles, off-road vehicles and attachments used in demonstrations, including inventory leased primarily for demonstration or lease, shall also be subject to repurchase under this part at its agreed depreciated value; provided, that the inventory is in new condition and has not been abused.
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§ 47-25-1907. Title to repurchased inventory — Account adjustments.

Upon payment of the repurchase amount to the dealer, the title and right of possession to the repurchased inventory shall transfer to the supplier. Annually, at the end of each calendar year, after termination or cancellation, the dealer's reserve account for recourse, retail sale or lease contracts shall not be debited by a supplier or lender for any deficiency unless the dealer or the heirs of the dealer have been given at least seven (7) business days' notice by certified or registered United States mail, return receipt requested, of any proposed sale of the inventory financed and an opportunity to purchase the inventory. The former dealer or the heirs of the dealer shall be given quarterly status reports on any remaining outstanding recourse contracts. As the recourse contracts are reduced, any reserve account funds shall be returned to the dealer or the heirs of the dealer in direct proportion to the liabilities outstanding.

§ 47-25-1908. Exceptions to repurchase requirement.

This part does not require repurchase from a dealer of:
1. (1) Any repair part that, because of its condition, is not resalable as a new part;
2. (2) Any inventory for which the dealer is unable to furnish evidence of title and ownership in the dealer that is free and clear of all claims, liens and encumbrances to the satisfaction of the supplier;
3. (3) Any inventory that a dealer desires to keep; provided, that the dealer has a contractual right to do so, pursuant to the retail agreement;
4. (4) Any motorcycle, off-road vehicle and attachments that are not in new, unused, undamaged, complete condition; provided, that the inventory used in demonstrations or leased as provided in § 47-25-1906(b) shall be considered new and unused;
5. (5) A repair part that is not in new, unused, or undamaged condition;
6. (6) A motorcycle, off-road vehicle, or attachment that was purchased more than forty-eight (48) months prior to notice of the termination of the retail agreement;
7. (7) Any inventory that was ordered by the dealer on or after the date of notification of termination of the retail agreement; and
8. (8) Any inventory that was acquired by the dealer from a source other than the supplier that is a party to the retail agreement that is being terminated.

§ 47-25-1909. Civil liability for failure to repurchase — Remedies.

(a) If any supplier fails or refuses to repurchase and pay the dealer for any inventory covered under this part within sixty (60) days after shipment of the inventory, the supplier shall be civilly liable for one hundred percent (100%) of the current net price of the inventory, plus any freight charges paid by the dealer, the dealer's attorney fees, court costs and interest on the current net price computed at the legal interest rate from the sixty-first day after date of shipment.
(b) A dealer may bring an action for civil damages in a court of competent jurisdiction against any supplier found violating any of the provisions of this part, and may recover damages sustained as a consequence of the supplier's violations, together with all costs and attorneys' fees.
(c) The dealer shall be entitled to injunctive relief against unlawful termination, cancellation, nonrenewal or substantial change of competitive circumstances of the retail agreement.
(d) The remedies in this section are in addition to any other remedies permitted by law.

§ 47-25-1910. Death of retailer or major stockholder — Repurchase option of heirs — Succession.

(a) In the event of the death of the dealer or the majority stockholder of a corporation operating as a dealer, the supplier shall, at the option of the heir or heirs, repurchase the inventory from the heir or heirs of the dealer or majority stockholder as if the supplier had terminated the contract. The heir or heirs shall have one (1) year from the date of the death of the dealer or majority stockholder to exercise their options under this part. Nothing in this part shall require the repurchase of any inventory if the heir or heirs and the supplier enter into a new contract retail agreement to operate the retail dealership.
(b) A supplier shall have ninety (90) days in which to consider and make a determination upon a request by a family member to enter into a new retail agreement to operate the retail dealership. As used in this subsection (b), “family member” means a spouse, child, son-in-law, daughter-in-law or lineal descendant of the dealer or principal owner of the dealership. In the event the supplier determines that the requesting family member is not acceptable, the supplier shall provide the family member with a written notice of its determination with the stated reasons for nonacceptance. This section does not entitle an heir, personal representative or family member to operate a dealership without the specific written consent of the supplier.
(c) Notwithstanding this section, in the event that a supplier and a dealer have previously executed an agreement concerning succession rights prior to the dealer's death and, if the agreement has not been revoked, the agreement shall be observed even if it designates someone other than the surviving spouse or heirs of the decedent as the successor.

§ 47-25-1911. Security interests not affected — Exemption from bulk sales law — Inspection.

This part shall not be construed to affect in any way any security interest that the supplier may have in the inventory of the dealer, and any repurchase under this part shall not be subject to the bulk sales law. The dealer and supplier shall furnish representatives to inspect all parts and certify their acceptability when packed for shipment. Failure of the supplier to provide a representative within sixty (60) days shall result in automatic acceptance by the supplier of all returned items.

§ 47-25-1912. Applicability.

This part shall apply to all contracts and shall apply to all retail agreements in effect that have no expiration date and are a continuing contract, and shall apply to all other contracts entered into, amended, extended, ratified or renewed after January 1, 2007. This part shall apply to and be binding upon all suppliers, all successors in interest or purchasers of assets or stock of suppliers, and all receivers, trustees or assignees of suppliers.

§ 47-25-1913. Waiver — Severability.

(a) This part shall not be waivable in any contract, and any such attempted waiver shall be null and void.
(b) Any contractual term restricting the procedural or substantive rights of a dealer under this part, including a choice of law or choice of forum clause, is void.
(c) If any provision of this part or the application of this part is held invalid, it shall not affect other provisions, items or applications of this part that can be given effect without the invalid provisions, items or applications, and to this end the provisions of this part are declared severable.

§ 47-25-1914. Applicability of franchise provisions.

(a) Franchise agreements are included in the definition of retail agreements in this part. Although all franchise agreements are considered retail agreements, not every retail agreement constitutes a franchise. Where a relationship qualifies as a franchise under part 15 of this chapter, part 15 shall apply to such franchises. Part 15 of this chapter shall not apply to the retail agreements contained in this part unless the agreement constitutes a franchise.
(b) This part is remedial and supplementary to any other law of this state that provides rights and protections to franchisees.
(c) The provisions of this part that provide procedural or substantive protection to any party to a franchise agreement prior to termination or nonrenewal of the franchise agreement shall be effective and supplementary to part 15 of this chapter, where applicable.
(d) In the event a conflict with respect to franchises exists between part 15 of this chapter and this part, part 15 shall control.

Part 20 Tennessee Renewable Fuels Blending Act of 2009

§ 47-25-2001. Short title.

This part shall be known and may be cited as the “Tennessee Renewable Fuels Blending Act of 2009.”

§ 47-25-2002. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Biodiesel” (biodiesel fuel blending stock) means a fuel comprised of mono-alkyl esters of long chain fatty acids meeting the requirements of ASTM D 6751;
2. (2) “Blending Stock” means any liquid compound used for blending with other liquid compounds, including catalytically reformed products and additives, to produce gasoline and gasoline-oxygenate blends that are consistent with the requirements of chapter 18, part 13 of this title. Blending stock includes such products as sub-octane gasoline, conventional blending stock for oxygenate blending (CBOB) and reformulated blending stock for oxygenate blending (RBOB);
3. (3) “Ethanol,” also known as denatured fuel ethanol, means nominally anhydrous ethyl alcohol meeting ASTM D 4806 standards. Ethanol is intended to be blended with gasoline for use as a fuel in a spark-ignition internal combustion engine. The denatured fuel ethanol is first made unfit for drinking by the addition of the alcohol and tobacco tax and trade bureau (TTB) approved substances before blending with gasoline;
4. (4) “Permissive supplier” means any person that is not subject to the general taxing jurisdiction of this state, but that:
  1. (A) Is a position holder in a federal qualified terminal located outside this state;
  2. (B) Is registered for transactions in taxable motor fuels under § 4101 of the Internal Revenue Code, codified in 26 U.S.C. § 4101, in the bulk transfer/terminal distribution system; and
  3. (C) Acquires products in such out-of-state terminals from position holders in transactions that otherwise qualify as two-party exchanges;
5. (5) “Person” means a natural person, partnership, firm, association, corporation, limited liability company, court appointed representative, state, political subdivision or any other entity, group or syndicate;
6. (6) “Position holder” means the person that holds the inventory position in petroleum products in a terminal, as reflected in the records of the terminal operator. A person holds the inventory position in petroleum products when that person has a contract with the operator for the use of storage facilities and terminaling services for petroleum products at the terminal. “Position holder” includes a terminal operator that owns petroleum products in the terminal;
7. (7) “Refiner” means a person that owns, operates or otherwise controls a refinery within the United States;
8. (8) “Refinery” means a facility used to produce motor fuel from crude oil, unfinished oils, natural gas liquids or other hydrocarbons, and from which motor fuel may be removed by pipeline, by marine vessel or at a rack;
9. (9) “Retail station” means any service station, garage, truck stop or other outlet dispensing motor fuel from a container equipped with a computer-type pump that measures fuel passing through it;
10. (10) “Retailer” means a person that engages in the business of selling or distributing petroleum products to the end user within this state through a retail station;
11. (11) “Supplier” means a person that meets all the following conditions:
  1. (A) Is subject to the general taxing jurisdiction of this state;
  2. (B) Is registered under § 4101 of the Internal Revenue Code for transactions in taxable motor fuels in the bulk transfer/terminal system; and
  3. (C) Is one of the following:
    1. (i) The position holder in a terminal or refinery in this state, or is one that receives fuel from a position holder within a terminal or refinery in this state;
    2. (ii) A person that imports taxable petroleum products into this state from a foreign country;
    3. (iii) A person that acquires taxable petroleum products from a terminal or refinery outside this state for import into this state on such person's account; or
    4. (iv) A person that is the receiving supplier on a two-party exchange;
12. (12) “Terminal” means a storage and distribution facility for taxable motor fuel, supplied by pipeline or marine vessel, that is registered as a qualified terminal by the internal revenue service;
13. (13) “Two-party exchange” means a transaction in which a petroleum product is transferred from one licensed supplier or licensed permissive supplier to another licensed supplier or licensed permissive supplier pursuant to an exchange agreement:
  1. (A) Which transaction includes a transfer from the person that holds the inventory position for taxable motor fuel in the terminal as reflected on the records of the terminal operator; and
  2. (B) The exchange transaction is completed prior to removal of the product from the terminal by the receiving exchange partner; and
14. (14) “Wholesaler” means an entity that acquires petroleum products from a supplier, importer or from another wholesaler for subsequent sale and distribution at wholesale by tank cars, transport trucks or vessels, and subsequently resells to retailers, other wholesalers or to consumers from its own or its wholly owned affiliated retail locations.

§ 47-25-2003. Availability to wholesalers of gasoline, gasoline blending stock or diesel that has not been blended, but is suitable for blending.

All refiners, suppliers and permissive suppliers in this state shall make available to wholesalers gasoline or gasoline blending stock that has not been blended with, but is suitable for blending with, ethanol. All refiners, suppliers and permissive suppliers in this state shall make available to a wholesaler diesel that is suitable for blending with biodiesel. Diesel sold by refiners, suppliers and permissive suppliers to wholesalers may contain up to five percent (5%) biodiesel. Gasoline and gasoline blending stock, as applicable, must be made available with detergent additives in sufficient concentrations such that after the addition of ethanol at the maximum volume percent permitted by state and federal law, the final product meets or exceeds the lowest additive concentrations as required by the federal environmental protection agency (EPA).

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§ 47-25-2004. Contract provisions forbidding, limiting or restricting blending void.

Any contract or provision between a wholesaler and a refiner, supplier or permissive supplier executed or renewed on or after January 1, 2010, that forbids, limits or restricts a wholesaler's ability to blend petroleum products with ethanol or biodiesel shall be void as against public policy. Nothing in this section shall prohibit a franchisor or the holder of a trademark from selecting its own customers in bona fide transactions and not in restraint of trade, and from including in its contracts, franchise or licensing agreements those reasonable terms that allow the franchisor or licensor to require its franchisees or licensees to maintain the quality and integrity of the blended products produced under this part so long as the terms are consistent with the Tennessee Petroleum Trade Practices Act, compiled in part 6 of this chapter, the Federal Petroleum Marketing Practices Act, compiled in 15 U.S.C. § 2801 et seq. and § 47-25-2003.

§ 47-25-2005. Complaints — Fines for noncompliance — Enforcement.

(a) Upon a complaint by a wholesaler and upon investigation by the commissioner of agriculture and after the commissioner determines that a refinery, supplier or permissive supplier in this state is in willful noncompliance with this part, the commissioner of agriculture may assess fines up to five thousand dollars ($5,000) per day for each day of the willful violation. The fines shall be used to pay for the cost of investigation, hearing and other related administrative costs. The remainder of the funds shall be used to fund grants designated by the commissioner of agriculture for the promotion of biofuel research, technology or agricultural development, biofuel production facilities or retail infrastructure and installation for biofuel distribution.
(b) Upon receiving a complaint and initiating an investigation, the commissioner or the commissioner's agent, presenting appropriate credentials, is authorized to enter the place of business of any refiner, supplier or permissive supplier in this state during normal business hours to examine, and obtain samples of, such records as may be necessary to determine compliance with this part. Refiners, suppliers and permissive suppliers in this state shall hold the records open for inspection by all officers or inspectors charged with the enforcement of this part, and shall preserve and retain the records for a period of at least one (1) year. If the owner of any refiner, supplier or permissive supplier, or the owner's agent, refuses to admit the commissioner, or the commissioner's agent, to inspect in accordance with this section, the commissioner is authorized to obtain from any state court a court order directing the owner or the owner's agent to submit the premises described in the warrant to inspection.
(c) A refinery, supplier, or permissive supplier who is aggrieved by a proposed departmental order to enforce provisions of this part shall be entitled to a contested case hearing to be conducted in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

§ 47-25-2006. Standards — Liability.

Wholesalers purchasing gasoline, gasoline blending stock or diesel are responsible for ensuring that their activities result in gasolines and diesels that meet the standards promulgated by the commissioner of agriculture. Refiners, suppliers and permissive suppliers shall not be liable for fines, penalties, injuries or damages arising out of the subsequent blending of gasoline, gasoline blending stock or diesel pursuant to this part.

Chapter 26 Weights and Measures

Part 1 Standards

§ 47-26-101. Promulgation of rules and regulations to establish legal and uniform standard of weights and measures.

The commissioner of agriculture shall promulgate rules to establish a legal and uniform standard of weights and measures for the sale and purchase of products of the farm, orchard, or garden and articles of merchandise. The rules must be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Part 7 Moisture-Measuring Devices

§ 47-26-701. Part definitions.

As used in this part, unless the context requires otherwise:
1. (1) “Agricultural products” means any product of agriculture which is tested for moisture content when offered for sale, processing, or storage;
2. (2) “Commissioner” means the commissioner of agriculture;
3. (3) “Department” means the Tennessee department of agriculture;
4. (4) “Moisture-measuring devices” means any device or instrument used by any person in proving or ascertaining the moisture content of agricultural products; and
5. (5) “Person” means any individual, corporation, partnership, cooperative association, or two (2) or more persons having a joint or common interest in the same venture.

§ 47-26-702. Inspection required.

The department shall inspect or cause to be inspected at least annually every moisture-measuring device used in commerce in this state, except those belonging to the United States or the state, or any subdivision of either, except as may be requested. The department may inspect or cause to be inspected at the convenience of the department any moisture-measuring device upon a request in writing from the owner.

§ 47-26-703. Enforcement — Rules and regulations.

The commissioner is hereby charged with the enforcement of this part and is empowered to promulgate rules, regulations, specifications, standards, and tests as may be necessary in order to secure the efficient administration of this part. The department may from time to time publish such data in connection with the administration of this part as may be of public interest.

§ 47-26-704. Seal of inspection.

(a) If an inspection or comparative test reveals that the moisture-measuring device being inspected or tested conforms to the standards and specifications established by the department, the department shall cause it to be marked with an appropriate seal.
(b) Any moisture-measuring device, which upon inspection is found not to conform with the specifications and standards established by the department, shall be marked with an appropriate seal showing such device to be defective. The seal shall not be altered or removed until the moisture-measuring device is properly repaired and reinspected. The department shall notify the owner or user of such device of its defective condition. Notification shall be made on an inspection form prepared by the department.

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§ 47-26-705. Use of defective measuring devices — Repair — Reinspection.

(a) Any defective moisture-measuring device, while so marked, sealed, or tagged, as provided in § 47-26-704, may be used to ascertain the moisture content of agricultural products offered for sale, processing, or storage, only under the following conditions:
1. (1) The owner or user shall keep a record, open to inspection, of every commercial sample of agricultural products inspected by means of the defective device, showing that an adjustment was made on all such agricultural products tested; and
2. (2) The device shall be repaired to comply with this section within thirty (30) days after inspection and the department thereupon notified that the device has been repaired accordingly.
(b) If, upon reinspection, the device is again rejected under § 47-26-704, such device shall be sealed and shall not be used until repaired and reinspected.

§ 47-26-706. Visible location of device — Operating instructions.

Every moisture-measuring device offered for sale, processing, or storage shall be used in a location visible to the general public, and the detailed procedure for operating a moisture-measuring device shall be displayed in a conspicuous place proximate to the moisture-measuring device.

§ 47-26-707. Use of untested devices.

No person shall use or cause to be used any grain moisture-measuring device which has not been inspected and approved for use by the department; except that a newly purchased grain moisture-measuring device may be used prior to regular inspection and approval if the user of such device has given at least ten (10) days' notice to the department of the purchase prior to the use of such new device.

§ 47-26-708. Violations — Penalties.

Any person who uses or causes to be used a moisture-measuring device in commerce with the knowledge that such device has not been inspected and approved by the department in accordance with this part, commits a Class C misdemeanor.

Part 8 Certified Public Weighers of Natural Resources Products

§ 47-26-801. Short title.

This part shall be known and may be cited as the “Certified Public Weigher Law of 1981.”

§ 47-26-802. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Certified public weigher” means a natural person licensed under this part;
2. (2) “Commissioner” means the commissioner of agriculture or the commissioner's duly appointed representative;
3. (3) “Department” means the Tennessee department of agriculture;
4. (4) “Natural resources product” means crushed stone, sand, gravel, cement, and asphalt related to highway construction and/or other construction projects or construction purposes, so long as materials are produced at a central location for commercial or highway use, and are measured by ton, cubic yard, or metric weights;
5. (5) “Producer and supplier” means any individual, firm, partnership, corporation, company, association, or governmental entity which engages in the production and/or sale of natural resources products;
6. (6) “Seal” means and includes the certified weigher's name, the words “Tennessee Certified Weigher” and the weigher's license number, which can be affixed either manually (by a rubber stamp or with an imprinting type stamp) or electronically; and
7. (7) “Signature” means the certified weigher's written name, which can be generated manually or electronically.

§ 47-26-803. Employment of certified public weighers required.

(a) Every producer and supplier of natural resources products shall have in its employ at least one (1) or more certified public weighers licensed by the department.
(b)
1. (1) All natural resources products sold by such producer and supplier shall be accurately weighed or measured by a certified public weigher licensed by the department.
2. (2) When natural resources products are loaded onto trucks or other vehicles which do not haul or transport such products on any public road, street, highway or right-of-way, then this subsection (b) shall not apply if the invoice for each load of such products is marked to indicate that such load is not to travel on any public way.
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§ 47-26-804. Licensing.

(a) A person may be licensed as a certified public weigher who:
1. (1) Is a citizen of the United States;
2. (2) Is not less than eighteen (18) years of age;
3. (3) Has the ability to weigh accurately and make correct weight or measurement records; and
4. (4) Has received from the commissioner a license as a certified public weigher.
(b) An application for a license as a certified public weigher shall be made upon a form provided by the commissioner and the application shall furnish evidence that the applicant meets the qualifications required by this section.

§ 47-26-805. Action on applications — Rulemaking.

(a)
1. (1) The commissioner shall adopt and establish rules and regulations for determining the qualifications of applicants for license as certified public weigher and to otherwise enforce this part.
2. (2) All rules and regulations under this part shall be promulgated by the commissioner, pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
(b) The commissioner may pass upon the qualifications of the applicant upon the basis of the information supplied in the application, or the commissioner may examine such applicant orally or in writing, or both, for the purpose of determining the applicant's qualifications.
(c) The commissioner shall keep a record of all such applications and of all licenses issued thereon.

§ 47-26-806. Annual license cost.

The annual cost for a certified public weigher license shall be set by rule pursuant to § 43-1-703.

§ 47-26-807. [Repealed]

§ 47-26-808. Oath of weigher — Compensation — Signature and seal.

(a) Each certified public weigher shall, before entering upon such duties, make oath to execute faithfully such duties and file the oath with the commissioner.
(b) The issuance of a license as a certified public weigher shall not oblige the state to pay the licensee any compensation for services as a certified public weigher.
(c) Each certified public weigher shall register with the commissioner a copy of the weigher's official signature and shall, at the weigher's own expense, obtain a seal.

§ 47-26-809. Display of license — Duties of weigher.

(a) The certified public weigher's license shall be posted near the scale beam or indicator in full view at all times.
(b) A certified public weigher shall be the only person allowed to operate the scale or weight recording equipment.
(c) In case of batch weights, the certified weigher shall observe all measurements and count all batches to determine the total gross weight including vehicle.

§ 47-26-810. Record of shipment to be signed and sealed.

The certified public weigher shall sign the weigher's official registered signature and place the weigher's seal on a copy of record. This copy of record shall be the ticket delivered to the purchaser of materials. The seal and signature shall be placed on the copy of record either manually (with a rubber stamp, or with an imprinting type stamp) or electronically.

§ 47-26-811. Inspection of weighing devices.

The producer or supplier shall cause to be inspected, at intervals of not more than six (6) months, each weighing device used by producers and suppliers for the weighing of natural resource products as defined in this part. The inspection of the scales shall be performed by a certified scale technician of a licensed scale company, or by an employee of the Tennessee department of agriculture or department of transportation, whose duty it is to check scales.

§ 47-26-812. Gross weights for trucks and tractor trailers.

Gross weights for truck or tractor trailer vehicles shall be determined by axle limitations as prescribed in § 55-7-203(b)(6), and adding an additional five hundred pounds (500 lbs.) thereto when the natural resources product is transported over a street or highway other than the portion designated as the interstate system. A three percent (3%) tolerance, over the maximum gross weight as prescribed in § 55-7-203(b)(6), may be permitted when the natural resources product is transported over a street or public highway other than the portion designated as the interstate system. A certified public weigher will not be subject to any liability for measurement variance which falls within such three percent (3%) tolerance, but shall be responsible for measurement variance in excess of the three percent (3%) tolerance.

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47-26-813(a)

§ 47-26-813. Violations — Penalties.

(a) It is a violation for a certified weigher to measure trucks in excess of weights as prescribed in § 47-26-812.
(b) It is a violation for a certified weigher to make flagrant or fraudulent recordings of measurements of weight or capacity.
(c) A violation of this part shall be reported to the commissioner of safety.
(d) A penalty of fifty dollars ($50.00) shall be assessed against the certified public weigher for each infraction deemed to be a violation of this part by the commissioner of safety. A certified public weigher's license may be revoked upon a finding of any such violation.
(e) Producers and suppliers of natural resources products which do not weigh or measure such products in accordance with § 47-26-803(b) shall pay a penalty of fifty dollars ($50.00) for each such violation.
(f) The commissioner of safety is responsible for the enforcement of this part, and it is the commissioner's duty to prosecute violations of this part.
(g) If any penalties imposed by this part and assessed by the department of safety, pursuant to any statute or executive order, are not paid within ninety (90) days from the date of assessment notice, such penalties shall be subject to collection by the commissioner of revenue under title 67, chapter 1, part 14. If it becomes necessary for the commissioner of revenue to collect such penalties on behalf of the department of safety, the department of revenue shall retain an administrative fee of two percent (2%) of the gross penalties collected.

§ 47-26-814. Disposition of penalties.

All penalties collected under this part shall be remitted to the department of revenue, as are tax receipts, and treated as such by that department.

Part 9 Weights and Measures

§ 47-26-901. Short title.

This part may be cited as “Testing and Sealing — Use of Weights and Measures.”

§ 47-26-902. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Accurate” means a piece of equipment when its performance or value—that is, its indications, its deliveries, its recorded representations, or its capacity or actual value, etc., as determined by tests, made with suitable standards—conforms to the standard within the applicable tolerances and other performance requirements. Equipment that fails so to conform is “inaccurate”;
2. (2) “Commercial weighing and measuring equipment” means weights and measures and weighing and measuring devices commercially used or employed in establishing the size, quantity, extent, area, or measurement of quantities, things, produce, or articles for distribution or consumption, purchased, offered, or submitted for sale, hire, or award, or in computing any basic charge or payment for services rendered on the basis of weight or measure;
3. (3) “Commissioner” or “state sealer” means the commissioner of agriculture or the commissioner's duly appointed representative;
4. (4) “Cord” means the amount of wood that is contained in a space of one hundred twenty eight (128) cubic feet when the wood is ranked and well stowed. For the purpose of this part, “ranked and well stowed” means that pieces of wood are placed in a line or row, with individual pieces touching and parallel to each other, and stacked in a compact manner;
5. (5) “Correct” as used in connection with weights and measures means conformance to all applicable requirements of this part;
6. (6) “Department” means the Tennessee department of agriculture;
7. (7) “Handbook 44” means National Institute of Standards and Technology Handbook 44, “Specifications, Tolerances, And Other Technical Requirements For Weighing And Measuring Devices”;
8. (8) “International System of Units (SI)” means the modernized metric system as established in 1960 by the general Conference on Weights and Measures and interpreted or modified for the United States by the secretary of commerce;
9. (9) “Net weight” means the weight of a commodity excluding any materials, substances, or items not considered to be part of the commodity. Materials, substances, or items not considered to be part of the commodity include, but are not limited to, containers, conveyances, bags, wrappers, packaging materials, labels, individual piece coverings, decorative accompaniments, and coupons, except that, depending on the type of service rendered, packaging materials may be considered to be part of the service. For example, the service of shipping includes the weight of packing materials;
10. (10) “NIST” means the National Institute of Standards and Technology which is an agency of the United States department of commerce;
11. (11) “Package,” whether standard package or random package, means any commodity:
  1. (A) Enclosed in a container or wrapped in any manner in advance of wholesale or retail sale; or
  2. (B) Whose weight or measure has been determined in advance of wholesale or retail sale.
  3. An individual item or lot of any commodity on which there is marked a selling price based on an established price per unit of weight or of measure, shall be considered a package (or packages);
12. (12) “Person” means both plural and the singular, as the case demands, and includes individuals, partnerships, corporations, companies, societies, and associations;
13. (13) “Primary standards” means the physical standards of the state that serve as the legal reference from which all other standards and weights are derived;
14. (14) “Random weight package” means a package that is one of a lot, shipment, or delivery of packages of the same commodity with no fixed pattern of weights;
15. (15) “Sale from bulk” means the sale of commodities when the quantity is determined at the time of sale;
16. (16) “Secondary standards” means the physical standards that are traceable to the primary standards through comparisons, using acceptable laboratory procedures, and used in the enforcement of weights and measures laws and regulations;
17. (17) “Standard weight package” means a package that is one of a lot, shipment, or delivery of packages of the same commodity with identical net contents declarations; for example, 1-liter bottles or 12 fl. oz. cans of carbonated soda; 500 g. or 5 lb. bags of sugar; 100 m. or 300 ft. packages of rope;
18. (18) “State” means state of Tennessee;
19. (19) “Ton” means a unit of two thousand pounds (2,000 lbs.) avoirdupois weight;
20. (20) “Weight” as used in connection with any commodity or service means net weight. When a commodity is sold by drained weight, “weight” means net drained weight; and
21. (21) “Weight(s) and (or) measure(s)” means all weights and measures of every kind, instruments and devices for weighing and measuring, and any appliance and accessories associated with any or all such instruments and devices.

§ 47-26-903. Systems of weights and measures.

The system of weights and measures in customary use in the United States and the International System of Units (SI), the modernized metric system of weights and measures, are jointly recognized and either one or both of these systems shall be used for all commercial purposes in the state. The definitions of basic units of weight and measure, the tables of weight and measure, and weights and measures equivalents as published by the National Institute of Standards and Technology are recognized and shall govern weighing and measuring equipment and transactions in the state.

§ 47-26-904. Primary standards.

(a) Weights and measures that are traceable to the United States prototype standards supplied by the federal government, or approved as being satisfactory by the National Institute of Standards and Technology (NIST), shall be the state primary standards of weights and measures, and shall be maintained in such calibration as prescribed by the NIST.
(b) The primary standards shall be kept in a place designated by the commissioner and approved by NIST and shall not be removed from such place except for repairs or calibration.
(c) The primary standards shall be used only in verifying the secondary standards and for scientific purposes.

§ 47-26-905. Secondary and field standards.

(a) The commissioner may acquire by purchase at least one set of copies of the primary standards to be kept in a place designated by the commissioner and to be known as secondary standards, and also such field standards and other equipment as may be found necessary to carry out this part.
(b) The secondary standards and field standards shall be verified upon their initial receipt and as often thereafter as deemed necessary by the commissioner.

§ 47-26-906. State sealer of weights and measures — Supervision of local sealers.

(a) The commissioner shall be the state sealer of weights and measures and shall have the custody of the primary standards of weights and measures and of the other standards and equipment provided for in this part.
(b) The commissioner has the general supervision over city sealers of weights and measures, county sealers of weights and measures, and over all weights and measures offered for sale, sold or in use in the state.

§ 47-26-907. Technical requirements for weighing and measuring devices, packaging and labeling, method of sale of commodities, and type evaluation.

(a) The specifications, tolerances, and other technical requirements for commercial, law enforcement, data gathering, and other weighing and measuring devices as adopted by the National Conference on Weights and Measures and published in National Institute of Standards and Technology Handbook 44, “Specifications, Tolerances, and other Technical Requirements for Weighing and Measuring Devices,” and supplements thereto or revisions thereof, shall apply to weighing and measuring devices in the state, except insofar as modified or rejected by regulation.
(b) The Uniform Packaging and Labeling Regulation as adopted by the National Conference on Weights and Measures and published in the National Institute of Standards and Technology Handbook 130, “Uniform Laws and Regulations,” and supplements thereto or revisions thereof, shall apply to packaging and labeling in the state, except insofar as modified or rejected by regulation.
(c) The Uniform Regulation for the Method of Sale of Commodities as adopted by the National Conference on Weights and Measures and published in the National Institute of Standards and Technology Handbook 130, “Uniform Laws and Regulations,” and supplements thereto or revisions thereof, shall apply to the method of sale of commodities in the state, except insofar as modified or rejected by regulation.
(d) The Uniform Regulation for National Type Evaluation as adopted by the National Conference on Weights and Measures and published in the National Institute of Standards and Technology Handbook 130, “Uniform Laws and Regulations,” and supplements thereto or revisions thereof, shall apply to type evaluation in the state, except insofar as modified or rejected by regulation.

§ 47-26-908. State weights and measures agency.

There shall be a weights and measures agency located for administrative purposes within the department of agriculture. This agency is charged with, but not limited to, performing the following functions on behalf of the citizens of the state:
1. (1) Assuring that weights and measures in commercial service within the state are suitable for their intended use, properly installed, and accurate, and are so maintained by their owner or user;
2. (2) Preventing unfair or deceptive dealing by weight or measure in any commodity or service advertised, packaged, sold, or purchased within this state;
3. (3) As deemed necessary, making available to all users of physical standards or weighing and measuring equipment the precision calibration and related metrological certification capabilities of the weights and measures facilities of the agency;
4. (4) Promoting uniformity, to the extent practicable and desirable, between weights and measures requirements of this state and those of other states and federal agencies;
5. (5) Encouraging desirable economic growth while protecting the consumer through the adoption by rule of weights and measures requirements as necessary to assure equity among buyers and sellers; and
6. (6) Maintaining a weights and measures laboratory that meets the requirements of and is traceable to the National Institute of Standards and Technology.

§ 47-26-909. Powers and duties of the commissioner.

The commissioner shall:
1. (1) Maintain traceability of the state standards to the national standards in the possession of the National Institute of Standards and Technology;
2. (2) Enforce this part;
3. (3) Issue reasonable regulations for the enforcement of this part, which regulations shall have the force and effect of law;
4. (4) Establish labeling requirements, establish standards of weight, measure, or count, and reasonable standards of fill for any packaged commodity; and may establish requirements for open dating information and requirements for the presentation of cost-per-unit information;
5. (5) Grant any exemptions from this part or any regulations promulgated pursuant thereto when appropriate to the maintenance of good commercial practices within the state;
6. (6) Conduct investigations to ensure compliance with this part;
7. (7) Delegate to appropriate personnel any of these responsibilities for the proper administration of this office;
8. (8) Test annually the standards of weight and measure used by any city or county weights and measures jurisdiction within the state, and approve the same when found to be correct;
9. (9) Inspect and test, as often as the commissioner deems necessary, weights and measures kept, offered, or exposed for sale;
10. (10) Inspect and test, as often as the commissioner deems necessary, to ascertain if they are correct, weights and measures commercially used:
  1. (A) In determining the weight, measure, or count of commodities or things sold, or offered or exposed for sale, on the basis of weight, measure, or count; or
  2. (B) In computing the basic charge or payment for services rendered on the basis of weight, measure, or count;
11. (11) Test, from time to time, weights and measures used in checking the receipt or disbursement of supplies in institutions, for the maintenance of which funds are appropriated by the general assembly;
12. (12) Approve for use, and may mark, such weights and measures as are found to be correct, and shall reject and mark as rejected such weights and measures as are found to be incorrect. Weights and measures that have been rejected may be seized if not corrected within the time specified or if used or disposed of in a manner not specifically authorized. The commissioner may condemn and may seize the weights and measures found to be incorrect that are not capable of being made correct;
  1. (A) Weights and measures that have been rejected under the authority of the commissioner or of a sealer shall remain subject to the control of the rejecting authority until such time suitable repair or disposition thereof has been made as required by this section;
  2. (B) The owners of such rejected weights and measures shall cause the same to be made correct within the time frame allowed by the rejecting authority; or in lieu of this, may dispose of the same, but only in such manner as is specifically authorized by the rejecting authority;
  3. (C) Weights and measures that have been rejected may only be used again commercially by permission of the rejecting authority until repairs have been completed;
  4. (D) The purpose of this subdivision (12) is to authorize the commissioner to render inoperable such weights and measures as are found to be incorrect, until such time suitable repair or disposition thereof has been made. Nothing in this part shall be construed to authorize the commissioner or the commissioner's representative to confiscate and take actual physical possession of a weight and measure found to be incorrect, except as provided for in § 47-26-910(3);
13. (13) Weigh, measure, or inspect packaged commodities kept, offered, or exposed for sale, sold, or in the process of delivery, to determine whether they contain the amounts represented and whether they are kept, offered, or exposed for sale in accordance with this part or regulations promulgated pursuant thereto. In carrying out this section, the commissioner shall employ recognized sampling procedures such as are designated in the National Institute of Standards and Technology Handbook 133. No person shall:
  1. (A) Sell or keep, offer, or expose for sale any package or commodity or amount of commodity that has been ordered off sale or marked or tagged as provided in this section, unless and until such package or amount of commodity has been brought into full compliance with legal requirements; or
  2. (B) Dispose of any package or amount of commodity that has been ordered off sale or marked or tagged as provided in this section and has not been brought into compliance with legal requirements, in any manner except with the specific approval of the commissioner;
14. (14) Prescribe, by regulation, the appropriate term or unit of weight or measure to be used, whenever the commissioner determines that an existing practice of declaring the quantity of a commodity or setting charges for a service by weight, measure, numerical count, time, or combination thereof, does not facilitate value comparisons by consumers, or offers an opportunity for consumer confusion;
15. (15) Allow reasonable variations from the stated quantity of contents, which shall include those caused by loss or gain of moisture during the course of good distribution practice or by unavoidable deviations in good manufacturing practice only after the commodity has entered intrastate commerce;
16. (16) Provide for the training of weights and measures personnel, and may also establish minimum training and performance requirements which shall then be met by all weights and measures personnel, whether county, city, or state. The commissioner may adopt the training standards of the National Conference on Weights and Measures National Training Program;
17. (17) Investigate complaints made to the commissioner concerning violations of this part and pursuant regulations, and shall, upon the commissioner's own initiative, conduct such investigations as the commissioner deems appropriate and advisable to develop information on prevailing procedures in commercial quantity determination and on possible violations of this part and to promote the general objective of accuracy in the determination and representation of quantity in commercial transactions;
18. (18) Verify advertised prices, price representations, and point-of-sale systems, as deemed necessary, to determine the accuracy of prices and computations and the correct use of the equipment, and if such system utilizes scanning or coding means in lieu of manual entry, the accuracy of prices printed or recalled from a database;
19. (19) Charge fees for services provided by the metrology laboratory pursuant to rules promulgated by the commissioner for tolerance testing, calibration, and certifying any standards and testing equipment as performed by the department of agriculture that is used in the performance of service and testing functions with respect to weighing and measuring devices pursuant to the requirements of this chapter; and
20. (20) Require a fee for commercial weighing and measuring equipment pursuant to the requirements of this part; the fee shall be set by rule pursuant to § 43-1-703.

§ 47-26-910. Special powers.

When necessary for the enforcement of this part or regulations promulgated pursuant thereto, the commissioner is:
1. (1) Authorized to enter any commercial premises during different times of the day, including nights and weekends, except that in the event such premises are not open to the public, the commissioner shall first present the commissioner's credentials and obtain consent before making entry thereto, unless a search warrant has previously been obtained;
2. (2) Empowered to issue rejection, violation, stop-use, hold, removal, condemnation, and seizure orders with respect to any weights and measures commercially used, and stop-sale, hold, condemnation, seizure, and removal orders with respect to any packaged commodities or bulk commodities kept, offered, or exposed for sale. It is unlawful for any person to use, remove from the premises specified, or fail to remove from the premises specified, any weight, measure, or package, or amount of commodity, material, article, device, product, or any other thing being used contrary to the terms of a rejection, violation, stop-use order, hold order, removal order, condemnation order, or seizure order issued under the authority of this section;
3. (3) Empowered to confiscate and take physical possession of, for use as evidence in a civil or criminal proceeding, without formal warrant, any incorrect or unapproved weight, measure, package, or commodity found to be used, retained, offered, or exposed for sale or sold in violation of this part or regulations promulgated pursuant thereto. After the order of the commissioner, or the judgment of any court, including appellate review, becomes final, upholding the seizure or confiscation of such incorrect or unapproved weight, measure, package, or commodity, the same shall be destroyed by the commissioner. If no appeal of such order is taken by law, the property seized or confiscated shall be forfeited without further proceedings and shall be disposed of as herein provided;
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4. (4) Empowered to stop any commercial vehicle and, after presentation of the commissioner's credentials, inspect the contents, require that the person in charge of that vehicle produce any documents in such person's possession concerning the contents, and require such person to proceed with the vehicle to some specified place for inspection;
5. (5) Allowed to transfer the powers and duties given to and imposed upon the commissioner by this part to the commissioner's duly authorized representatives acting under the instructions and at the direction of the commissioner.

§ 47-26-911. Powers and duties of local officials.

(a) The respective cities and counties of this state are authorized to appoint necessary weights and measures officials, including, but not limited to, a sealer of weights and measures and such deputy sealers as may be required. Such sealer, deputy sealers and other weights and measures officials shall be appointed by and serve at the pleasure of the governing body of the city or county.
(b) Any weights and measures official appointed by a county or city shall have the duties and powers enumerated in this part, excepting those duties reserved to the state by law or regulation. These powers and duties shall extend to their respective jurisdictions, except that the jurisdiction of a county official shall not extend to any city for which a weights and measures official has been appointed. No requirement set forth by local agencies may be less stringent than or conflict with the requirements of the state.
(c) Each city sealer and county sealer of weights and measures shall file with the commissioner a fiscal year summary (July 1-June 30) of all weights and measures inspections and activities. The content, format, and due date of this summary shall be determined by the commissioner.
(d) In cities and counties for which sealers of weights and measures have been appointed as provided for in this part, the commissioner shall have concurrent authority to enforce this part.
(e) The powers and duties relevant to weights and measures contained in this part shall be in addition to the powers granted to any such city or county by law or charter.

§ 47-26-912. Misrepresentation of quantity.

No person shall:
1. (1) Sell, or expose for sale less than the quantity represented;
2. (2) Take more than the represented quantity when, as buyer, such person furnishes the weight or measure by means of which the quantity is determined; or
3. (3) Represent the quantity in any manner calculated or tending to mislead or in any way deceive another person.

§ 47-26-913. Misrepresentation of pricing.

No person shall misrepresent the price of any commodity or service sold, offered, exposed, or advertised for sale by weight, measure, or count, nor represent the price in any manner calculated or tending to mislead or in any way deceive a person.

§ 47-26-914. Method of sale.

(a) Except as otherwise provided by the commissioner, or by firmly established trade custom and practice:
1. (1) Commodities in liquid form shall be sold by liquid measure or by weight; and
2. (2) Commodities not in liquid form shall be sold by weight, by measure, or by count.
(b) The method of sale shall provide accurate and adequate quantity information that permits the buyer to make price and quantity comparisons. The commissioner may issue such reasonable regulations as are necessary to assure that amounts of commodity sold are determined in accordance with good commercial practices and are so determined and represented as accurate and informative to all parties at interest.
(c)
1. (1) Natural gas motor fuels shall be sold as follows:
  1. (A) Liquefied natural gas motor fuel shall be sold in diesel gallon equivalents; and
  2. (B) Compressed natural gas motor fuel shall be sold in gasoline gallon equivalents or diesel gallon equivalents.
2. (2) The commissioner shall promulgate reasonable rules as are necessary to establish conversion units from mass to gasoline gallon equivalents and from mass to diesel gallon equivalents. Such rules shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

§ 47-26-915. Sale from bulk.

(a) All bulk sales in which the buyer and seller are not both present to witness the measurement, all bulk deliveries of heating fuel, and all other bulk sales specified by rule or regulation of the commissioner, shall be accompanied by a delivery ticket containing the following information:
1. (1) The name and address of the buyer and seller;
2. (2) The date delivered;
3. (3) The quantity delivered and the quantity upon which the price is based, if this differs from the delivered quantity, for example, when temperature compensated sales are made;
4. (4) The unit price, unless otherwise agreed upon by both buyer and seller;
5. (5) The identity in the most descriptive terms commercially practicable, including any quality representation made in connection with the sale; and
6. (6) The count of individually wrapped packages, if more than one (1), in the instance of commodities bought from bulk but delivered in packages.
(b) One (1) of these tickets shall be retained by the vendor, and the other shall be delivered to the purchaser at the time of the delivery of the commodity, or shall be surrendered, on demand, to the commissioner or the commissioner's authorized representative or a city sealer or a county sealer, who, if such person desires to retain it as evidence, shall issue a similar document in lieu of thereof to the purchaser; provided, that if the purchaser personally carries away the purchase, the vendor shall be required only to give the purchaser at the time of sale a delivery ticket stating the weight, measure, or count of commodity delivered to the purchaser.

§ 47-26-916. Information required on packages.

Except as otherwise provided in this part or by regulations promulgated pursuant thereto, any package, whether a random package or a standard package, kept for the purpose of sale, or offered or exposed for sale shall bear on the outside of the package a definite, plain, and conspicuous declaration of:
1. (1) The identity of the commodity in the package, unless the same can easily be identified through the wrapper or container;
2. (2) The quantity of contents in terms of weight, measure, or count; and
3. (3) The name and place of business of the manufacturer, packer, or distributor, in the case of any package kept, offered, or exposed for sale, or sold in any place other than on the premises where packed.

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47-26-917

§ 47-26-917. Declaration of unit price on random weight packages.

In addition to the declarations required by § 47-26-916, any package being one of a lot containing random weights of the same commodity, at the time it is offered or exposed for sale at retail, shall bear on the outside of the package a plain and conspicuous declaration of the price per kilogram or pound and the total selling price of the package.

§ 47-26-918. Misleading packaging prohibited — Standard of fill.

No commodity in package form shall be so wrapped, nor shall it be in a container so made, formed or filled as to mislead the purchaser as to the quantity of the contents of the package and the contents of a container shall not fall below such reasonable standard of fill as may have been prescribed by the commodity in question by the commissioner.

§ 47-26-919. Advertising.

(a) Whenever a packaged commodity is advertised in any manner with the retail price stated, there shall be closely and conspicuously associated with the retail price a declaration of quantity as is required by law or regulation to appear on the package. There shall not be included as part of the declaration required under this section such qualifying terms as “when packed,” “minimum,” “not less than,” or any other terms of similar import, nor any term qualifying a unit of weight, measure, or count (for example, “jumbo,” “giant,” “full,” and the like) that tends to exaggerate the amount of commodity in the package.
(b)
1. (1) Weights and measures or weighing and measuring equipment shall not be advertised in any manner using the terms “certified,” “state certified,” “approved,” “state approved,” “inspected,” “state inspected,” or terms of similar import.
2. (2) Notwithstanding subdivision (b)(1), a company that was doing business in Tennessee and using the word “certified” as part of its company name, advertising and signage prior to July 1, 1997, may continue to use the word “certified” in advertising and signage for its weights and measures and weighing and measuring equipment; provided, that the company's use of the word “certified”:
  1. (A) Does not intentionally defraud, deceive or mislead the consumer;
  2. (B) Does not give the false impression that the weighing or measuring equipment has met specific criteria and has been officially approved by the weights and measures division of the department of agriculture or any other federal, state or local governmental agency or weights and measures organization; and
  3. (C) The company uses in conjunction with its advertising and signage a disclaimer that states in general terms that the use of the word “certified” does not signify that the weighing or measuring equipment has met specific criteria and has been officially approved by a governmental agency or weights and measures organization.

§ 47-26-920. Meat, poultry, seafood.

All meat, meat products, poultry, fish and seafood offered or exposed for sale or sold as food, shall be offered or exposed for sale and sold by weight unless otherwise designated by regulation.

§ 47-26-921. Prohibited acts.

(a) Any person who, personally or by a servant or agent, or as the servant or agent of another person, performs any of the acts enumerated in this section commits a Class C misdemeanor.
(b) No person shall:
1. (1) Use or have in possession for use in commerce any incorrect weight or measure;
2. (2) Sell or offer for sale for use in commerce any incorrect weight or measure;
3. (3) Remove any tag, seal, or mark from any weight or measure without specific authorization from the proper authority;
4. (4) Hinder or obstruct any weights and measures official in the performance of the official's duties; or
5. (5) Violate any provisions of this part or regulations promulgated under it;
6. (6) Impersonate the commissioner, representative, or sealer;
7. (7) Dispose of any rejected or condemned weight or measure in a manner contrary to law or regulation;
8. (8) Sell or offer or expose for sale, less than the quantity such person represents of any commodity, thing or service;
9. (9) Take more than the quantity such person represents of any commodity, thing or service when, as buyer, such person furnishes the weight and measure by means of which the amount of the commodity, thing or service is determined;
10. (10) Keep for the purpose of sale, advertise or offer or expose for sale, or sell any commodity, thing or service in a condition or manner contrary to law or regulation;
11. (11) Use in retail trade, except in the preparation of packages put up in advance of sale and of medical prescriptions, a weight or measure that is not so positioned that its indications may be accurately read and the weighing or measuring operation observed from some position which may reasonably be assumed by a customer unless the consumer receives a label or ticket printed by the device that includes a declaration of net weight, unit price, and tare weight that has been deducted to obtain the net weight.

§ 47-26-922. Restraining orders and injunctions.

The commissioner is authorized to apply to any court of competent jurisdiction for a restraining order, or a temporary or permanent injunction, restraining any person from violating any provisions of this part.

§ 47-26-923. Warning in lieu of criminal or civil penalties.

Nothing in this part shall be construed as requiring the commissioner to report for the institution of proceedings under this part, minor violations of this part, whenever the commissioner believes that the public interest will be adequately served in the circumstances by a suitable oral or written notice or warning.

§ 47-26-924. Presumptive evidence.

Whenever there shall exist a weight or measure or weighing or measuring device in or about any place in which or from which buying or selling is commonly carried on, there shall be a rebuttable presumption that such weight or measure or weighing or measuring device is regularly used for the business purposes of that place.

§ 47-26-925. Appeal of seizure or confiscation.

In the event of seizure or confiscation under this part, the aggrieved party shall have the right to appeal such action pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

§ 47-26-926. Regulations to be unaffected by repeal of prior enabling statute.

The adoption of this part or any of its provisions shall not affect any regulations promulgated pursuant to the authority of any earlier enabling statute unless inconsistent with this part or modified or revoked by the commissioner.

Part 10 Public Weighmaster

§ 47-26-1001. Short title.

This part may be cited as “Public Weighmaster.”

§ 47-26-1002. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Certificate” means that document or instrument issued by a public weighmaster containing information specified in § 47-26-1012;
2. (2) “Commissioner” means the commissioner of agriculture or the commissioner's duly appointed representative;
3. (3) “Department” means the Tennessee department of agriculture;
4. (4) “Handbook 44” means National Institute of Standards and Technology Handbook 44, “Specifications, Tolerances, and Other Technical Requirements for Weighing and Measuring Devices”;
5. (5) “NIST” means the National Institute of Standards and Technology which is an agency of the United States department of commerce;
6. (6) “Public weighing” means the weighing, measuring, or counting, upon request, of vehicles, property, produce, commodities, or articles other than those that the weigher or the weigher's employer, if any, is either buying or selling;
7. (7) “Public weighmaster” means any person who performs public weighing as defined;
8. (8) “State” means the state of Tennessee;
9. (9) “Vehicle” means any device (except railroad freight cars) in, upon, or by which any property, produce, commodity, or article is or may be transported or drawn; and
10. (10) “Weights and measures official” means any department of agriculture employee acting on behalf of the department and/or appointed by the commissioner.

§ 47-26-1003. Enforcing officer — Rules and regulations.

The commissioner is authorized to enforce this part and may issue from time to time reasonable rules and regulations for the enforcement of this part, which shall have the force and effect of law. All rules and regulations under this part shall be promulgated by the commissioner, pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

§ 47-26-1004. Qualifications for weighmaster.

To receive authorization to act as a public weighmaster, a person must receive a license from the commissioner. In order to qualify for a license, a person must:
1. (1) Be able to weigh or measure accurately;
2. (2) Be able to prepare correct certificates;
3. (3) Be a citizen of the United States;
4. (4) Be at least eighteen (18) years of age; and
5. (5) Possess other qualifications required by regulations promulgated under this part.

§ 47-26-1005. License application.

Using a form provided by the commissioner, the applicant for a license as a public weighmaster shall furnish evidence that the applicant has the qualifications required by this part and regulations promulgated under this part. It shall be the responsibility of an individual to request a license application form prior to engaging in public weighing.

§ 47-26-1006. Evaluation of qualifications of applicants.

(a) The commissioner will determine the qualifications of the applicant based on:
1. (1) The information provided on the application; and
2. (2) Supplementary information as determined by the commissioner.
(b) The commissioner may also determine the qualifications of the applicant based on the results of an examination of the applicant's knowledge. However, any public weighmaster who has been licensed for the last five (5) consecutive years immediately prior to examination and who has not been in violation of any laws, rules, or regulations pertaining to the duties or responsibilities of a public weighmaster shall be exempt from such examination.

§ 47-26-1007. Issuance and records of licenses.

The commissioner will:
1. (1) Grant licenses as public weighmasters to qualified applicants; and
2. (2) Keep a record of all applications submitted and of all licenses issued.

§ 47-26-1008. Annual license cost.

The annual cost for a public weighmaster license shall be set by rule pursuant to § 43-1-703.

§ 47-26-1009. Denial of license.

The commissioner shall reserve the right to limit or reject the application of any public weighmaster whose qualifications and/or past work record does not comply with those requirements outlined in this part or pursuant regulations.

§ 47-26-1010. Expiration and renewal of licenses.

(a) The commissioner shall establish a system of license renewals at alternative intervals throughout the calendar year. Licenses issued under the alternative method are valid for twenty-four (24) months and shall expire on the last day of the last month of the license period. During a transition period, or at any time thereafter, when the commissioner determines that the volume of work for any given interval is unduly burdensome or costly, either the licenses or renewals, or both of them, may be issued for terms of not less than six (6) months nor more than eighteen (18) months. The application fee imposed for any license under the alternative interval method for a period of other than twenty-four (24) months shall be proportionate to the annual fee, except that the proportional fee shall be rounded out to the nearest quarter of a dollar ($0.25). Application fees shall be nonrefundable. While the commissioner will attempt to forward public weighmaster license renewal forms to all currently licensed individuals, it is the licensed individual's ultimate responsibility to ensure that their license remains current.
(b) A thirty-day grace period shall be given to renew licenses. After the grace period expires, a twenty-five dollar ($25.00) late fee (not prorated per day) shall be levied on each renewal application received.

§ 47-26-1011. Employment of public weighmasters required.

Every stockyard, slaughterhouse, tobacco warehouse or loose floor, dairy products plant, cotton gin or compress, and agricultural grain or seed buying/receiving station which buys or sells commodities on a bulk basis shall have in its employ one or more public weighmasters. All livestock, tobacco, milk, cream, cotton, and agricultural grains or seeds which are purchased, processed, or sold on a bulk weight basis at the above mentioned establishments shall be weighed only by a public weighmaster. Any individual acting on behalf of such individual or an establishment that charges a fee, commission, or any type of payment to perform public weighing, shall also be licensed under this part.

§ 47-26-1012. Certificate: required entries.

(a) The certificate, when properly completed and signed, shall be prima facie evidence of the accuracy of the measurements shown.
(b) The design of and the information to be furnished on a weight certificate may be prescribed by the commissioner and will include, but not be limited to, the following:
1. (1) The name and license number of the public weighmaster;
2. (2) The kind of commodity weighed, measured, or counted;
3. (3) The name of the owner, agent, or consignee of the commodity;
4. (4) The name of the recipient of the commodity, if applicable;
5. (5) The date the certificate is issued;
6. (6) The consecutive number of the certificate, if applicable;
7. (7) The identification, including the identification number, if any, of the carrier transporting the commodity, and the identification number or license number of the vehicle, if applicable;
8. (8) Other information needed to distinguish or identify the commodity from a like kind;
9. (9) The number of units of the commodity, if applicable;
10. (10) The measure of the commodity, if applicable;
11. (11) The weight of the commodity and the vehicle or container, if applicable, broken down as follows:
  1. (A) The gross weight of the commodity and the associated vehicle or container;
  2. (B) The tare weight of the unloaded vehicle or container; or
  3. (C) Both the gross and tare weight and the resultant net weight of the commodity; and
12. (12) Signature or initials of the public weighmaster who determined the weight, measure or count.

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47-26-1002(1)

§ 47-26-1013. Certificate: execution, requirements.

(a) When completing a certificate, a public weighmaster shall:
1. (1) Enter the measurement values to clearly show that the measurements were actually determined;
2. (2) Enter only the measurement values personally determined; and
3. (3) Not enter measurement values determined by other persons.
(b) If the certificate provides for entries of gross, tare, or net, the public weighmaster shall:
1. (1) Strike out or otherwise cancel the printed entries for the values not determined; or
2. (2) Enter the scale and date on which the values were determined on the certificate if the values were not determined on the same scale or on the same date shown on the certificate.

§ 47-26-1014. Oath — Compensation — Seal.

(a) Each public weighmaster shall, before entering upon such weighmaster's duties, make oath to execute faithfully such weighmaster's duties and file the same with the commissioner.
(b) The issuance of a public weighmaster license shall not obligate the state to pay to the licensee any compensation for the licensee's services as a public weighmaster.
(c) Each public weighmaster may, at such weighmaster's own expense, provide such weighmaster with an impression seal. Such weighmaster's name and the word “Tennessee” shall be inscribed around the outer margin of the seal and the words “Licensed Weighmaster” or “Public Weighmaster” shall appear in the center thereof. The seal may be impressed upon each weight certificate issued by a public weighmaster.

§ 47-26-1015. Measurement practices and equipment used.

A public weighmaster shall use measurement practices and equipment:
1. (1) In accordance with the requirements of the latest edition of NIST Handbook 44, “Specifications, Tolerances, and Other Technical Requirements for Weighing and Measuring Devices”;
2. (2) Examined, tested, and approved for use by a weights and measures official of this state; and
3. (3) Suitable for the weighing of the amount and kind of material to be weighed.

§ 47-26-1016. Scale used — Capacity, platform size, one-draft weighing.

(a) A public weighmaster shall not weigh a vehicle, or combination of vehicles, when part of the vehicle or connected combination, is not resting fully, completely, and as one (1) entire unit on the scale.
(b) When weighing a combination of vehicles that will not rest fully, completely, and as one (1) complete unit on the scale platform:
1. (1) The combination shall be disconnected and weighed in single drafts; and
2. (2) The weights of the single drafts may be combined in order to issue a single certificate for the combination; provided, that the certificate indicates that the total represents a combination of single draft weighings.

§ 47-26-1017. Scales open to view.

It is the duty of each public weighmaster to permit any interested party to read the indications on the weighing device or on an accurately projected image of the weight indicator when a commodity is weighed. In the event the public weighmaster fails or refuses to permit an interested party to observe the weighing of a commodity at such time, the interested party shall have the right to have the commodity immediately reweighed without any additional charges.

§ 47-26-1018. Copies of certificates.

A public weighmaster shall keep and preserve for a period of at least one (1) year a legible copy of each certificate issued by such weighmaster. The certificates shall be available for inspection by any weights and measures official of this state during normal office hours.

§ 47-26-1019. Reciprocal acceptance of certificates.

The commissioner is authorized to recognize and accept certificates issued by licensed public weighmasters of other states or federal agencies that recognize and accept certificates issued by public weighmasters of this state.

§ 47-26-1020. Optional licensing.

The following persons shall be authorized, but are not required, to obtain licenses as public weighmasters:
1. (1) A law enforcement or weights and measures official, or other qualified employee of a state, city, or county agency or institution when acting within the scope of such person's official duties. The commissioner shall be authorized, but is not required, to waive the registration fee for these individuals;
2. (2) A person weighing property, produce, commodities, or article:
  1. (A) That such person or such person's employer is either buying or selling; or
  2. (B) In conformity with the requirements of federal statutes or the statutes of this state relative to warehousemen or processors.

§ 47-26-1021. Prohibited acts.

It is a prohibited act for any person:
1. (1) Without a valid license to:
  1. (A) Assume the title of public weighmaster, or any title of similar import;
  2. (B) Perform the duties or acts to be performed by a public weighmaster;
  3. (C) Represent oneself to be a public weighmaster;
  4. (D) Issue any certificate, ticket, memorandum, or statement for which a fee is charged; or
  5. (E) Engage in the full-time or part-time business of measuring for hire.
2. (2) To use or operate any device for certification purposes that does not meet, nor in a manner not in accordance with, the requirements of the latest edition of NIST Handbook 44, “Specifications, Tolerances, and Other Technical Requirements for Weighing and Measuring Devices”;
3. (3) To falsify a certificate or to falsely certify any gross, tare, or net weight or measure required by this part to be on the certificate;
4. (4) To refuse without cause to weigh or measure any article or thing which it is the person's duty to weigh or measure, or refuse to state in any certificate anything required to be therein;
5. (5) To hinder or obstruct in any way the commissioner or the commissioner's authorized agent in the performance of the commissioner's official duties under this part;
6. (6) To violate any provision of this part or any regulation promulgated under this part;
7. (7) To delegate such person's authority to any person not licensed as a public weighmaster;
8. (8) To request a false certificate or to request a public weighmaster to weigh, measure, or count any vehicle, property, produce, commodity, or article falsely or incorrectly;
9. (9) To issue a certificate simulating the certificate in this part; or
10. (10) To use or have in such person's possession a device which has been altered to facilitate fraud.

§ 47-26-1022. Suspension and revocation of license.

The commissioner is authorized to suspend or revoke the license of any public weighmaster:
1. (1) When, after a formal or informal hearing held following ten (10) days notice to the licensee, the commissioner is satisfied that the licensee has violated any provision of this part or of any regulation under this part; provided, that:
  1. (A) Upon such hearing the person cited may be heard in person or with counsel, or both, may present evidence, and may cross-examine witnesses;
  2. (B) A full and complete record of such hearing shall be recorded and any party to the proceedings, upon request, shall be supplied with a transcript of such proceedings at the usual cost; and
  3. (C) The commissioner is hereby authorized, at the commissioner's discretion, to appoint and designate a hearing officer who shall preside at the hearing in the place or in the absence of the commissioner. The hearing officer has the power and authority to conduct the same, to administer oaths, and make findings of fact, conclusions of law, and the proposed order based thereon. If the commissioner concurs, the commissioner shall issue the order, or may, upon review of the record, make such findings, conclusions and issue such order as in the commissioner's discretion the record justifies;
2. (2) When the licensee has been convicted in any court of competent jurisdiction of violating any provision of this part or of any regulation under this part; or
3. (3) When the licensee is convicted of any felony.

§ 47-26-1023. Revocation proceedings.

If the commissioner suspends or revokes a public weighmaster license, the revokee may appeal the decision through the appropriate court of law in Davidson County.

§ 47-26-1024. Criminal penalties.

Any person who personally or through such person's servant or agent, or as the servant or agent of another person, commits any prohibited acts enumerated in this part or pursuant regulations or violates any other provision of this part commits a Class C misdemeanor.

§ 47-26-1025. Restraining order and injunction.

The commissioner is authorized to apply to any court of competent jurisdiction for a restraining order, or a temporary or permanent injunction, restraining any person from violating any provision of this part.

§ 47-26-1026. Warning in lieu of criminal or civil penalties.

Nothing in this part shall be construed as requiring the commissioner to report for the institution of proceedings under this part, minor violations of this part, whenever the commissioner believes that the public interest will be adequately served in the circumstances by a suitable oral or written notice or warning.

§ 47-26-1027. Publication of lists of licensed public weighmasters.

The commissioner may publish, from time to time as the commissioner deems appropriate, and may supply upon request, lists of licensed public weighmasters.

Part 11 Serviceperson Registration

§ 47-26-1101. Short title.

This part may be cited as “Serviceperson Registration.”

§ 47-26-1102. Part definitions.

As used in this part, unless the context otherwise requires:
1. (1) “Commercial and law enforcement weighing and measuring device” is construed to include any weight or measure or weighing or measuring device commercially used or employed in establishing the size, quantity, extent, area, or measurement of quantities, things, produce, or articles for distribution or consumption, purchased, offered, or submitted for sale, hire, or award, or in computing any basic charge or payment for service rendered on the basis of weight, measure, or count. It shall also include any accessory attached to or used in connection with a commercial weighing or measuring device when such accessory is so designed or installed that its operation affects the accuracy of the device. It also includes weighing and measuring equipment in official use for the enforcement of laws or for the collection of statistical information by governmental agencies;
2. (2) “Commissioner” means the commissioner of agriculture or the commissioner's duly appointed representative;
3. (3) “Department” means the Tennessee department of agriculture;
4. (4) “Handbook 44” means National Institute of Standards and Technology Handbook 44, “Specifications, Tolerances, and Other Technical Requirements for Weighing and Measuring Devices”;
5. (5) “NIST” means the National Institute of Standards and Technology which is an agency of the United States department of commerce;
6. (6) “Registered service agency” shall be construed to mean any agency, firm, company, or corporation employing more than two (2) registered servicepersons that for hire, award, commission, or any other payment of any kind installs, services, repairs, or reconditions a commercial weighing or measuring device, and that registers itself as such with the commissioner. Under agency registration, identification of individual servicepersons shall be required; and
7. (7) “Registered serviceperson” shall be construed to mean any individual who for hire, award, commission, or any other payment of any kind, installs, services, repairs, or reconditions a commercial weighing or measuring device, and who applies for registration with the commissioner.

§ 47-26-1103. Minimum equipment.

Applicants must have available sufficient standards and equipment to adequately test devices as set forth in the “Notes” section of each applicable code in the most recent edition of NIST Handbook 44, “Specifications, Tolerances, and Other Technical Requirements for Weighing and Measuring Devices.” When applicable, this equipment must meet the specifications of National Institute of Standards and Technology Handbook 105-1, “Specifications and Tolerances for Reference Standards and Field Standard Weights and Measures, Specifications and Tolerances for Field Standard Weights (NIST Class F),” National Institute of Standards and Technology Handbook 105-2, “Specifications and Tolerances for Reference Standards and Field Standard Weights and Measures, Specifications and Tolerances for Field Standard Measuring Flasks,” or National Institute of Standards and Technology Handbook 105-3, “Specifications and Tolerances for Reference Standards and Field Standard Weights and Measures, Specifications and Tolerances for Graduated Neck Type Volumetric Field Standards” or other applicable handbooks, manuals, and technical papers published or referenced by NIST.

§ 47-26-1104. Registration.

(a) An individual or agency qualified by training or experience must apply for registration to service weighing or measuring devices only on an application form supplied by the commissioner. It shall be the individual's or agency's responsibility to request the application form prior to servicing weighing and measuring devices. No person or firm shall engage in this state in the business of installing, servicing, repairing, or reconditioning a commercial weighing or measuring device, without first having registered to do so in accordance with this part. A local, state, or federal government weights and measures regulatory employee shall not be eligible for registration. The form, duly signed and witnessed, shall include certification by the applicant that the individual or agency is fully qualified to install, service, repair, or recondition whatever devices for the service of which competence is being registered; has in possession or available for use, and shall use, all necessary testing equipment and standards; and has full knowledge of all appropriate weights and measures laws, orders, rules, regulations and has a copy of the most recent edition of National Institute of Standards and Technology Handbook 44 or document that replaces it. The commissioner may also determine the qualifications of the applicant based on the results of an examination of the applicant's knowledge. An applicant also shall submit appropriate evidence or references as to qualifications. However, any individual or agency applying for registration to service weighing or measuring devices that has been licensed for the last five (5) consecutive years immediately prior to examination and has not been in violation of any laws, rules, or regulations pertaining to the duties or responsibilities of a registered serviceperson or registered service agency shall be exempt from such examination. The commissioner is authorized to reject or limit any application.
(b) Those individuals or agencies that provide such service to commercial weighing and measuring devices that do not affect the accuracy of measurement of the device, accuracy of charges or fees derived by the use of the device, or the metrological integrity of the device, need not be, but may choose to become, registered with this department. Examples of those services include, but are not limited to, replacement of hoses or nozzles on petroleum dispensers, repairs of leaks around couplings, fittings, etc.

§ 47-26-1105. Certificate of registration.

(a) The commissioner will review and check the qualifications of each applicant. The commissioner shall issue to the applicant a certificate of registration, including an assigned registration number if it is determined that the applicant is qualified. The certificate of registration will expire twenty-four (24) months from the date of issuance.
(b) The commissioner has the authority to designate specific classifications of registration of servicepersons and service agencies in accordance with the type, capacity, etc. of commercial weighing and measuring devices which are to be installed, serviced, repaired, or reconditioned in this state.
(c) For the benefit of the users, manufacturers, and distributors of commercial weighing and measuring devices, it shall be the policy of the commissioner to accept registration of:
1. (1) An individual; and
2. (2) An agency providing acceptable evidence that such individual or agency is fully qualified by training or experience to install, service, repair, or recondition a commercial weighing or measuring device; has a thorough working knowledge of all appropriate weights and measures laws, orders, rules, and regulations; and has possession of or available for use, and will use calibrated weights and measures standards and testing equipment appropriate in design and adequate in amount.
(d) The commissioner shall check the qualifications of each applicant to ensure that each applicant has available sufficient standards and equipment.
(e) It shall also be the policy of the department to issue to qualified applicants, whose applications for registration are approved, a “Certificate of Registration.” This gives authority to remove rejection seals and tags placed on commercial and law enforcement weighing and measuring devices by authorized weights and measures officials, to place in service repaired devices that were rejected, to place in service devices that have been newly installed, and to provide service on commercial weighing and measuring devices.
(f) The commissioner is NOT guaranteeing the work or fair dealing of a registered serviceperson or service agency. The commissioner may, however, remove from the registration list any registered serviceperson or service agency that performs unsatisfactory work or takes unfair advantage of a device owner.
(g) Registration with the commissioner shall be mandatory. The commissioner shall reserve the right to limit or reject the application of any serviceperson or service agency and to revoke such serviceperson's or agency's permit.

§ 47-26-1106. Privileges and responsibilities of a registrant.

A bearer of a Certificate of Registration has the authority to remove an official rejection tag or seal placed on a weighing or measuring device by the authority of the commissioner; place in service, until such time as an official examination can be made, a weighing or measuring device that has been officially rejected; place in service, until such time as an official examination can be made, a new or used weighing or measuring device and to provide service work on commercial weighing and measuring devices. The registered serviceperson or service agency is responsible for installing, repairing, and adjusting devices such that the devices are adjusted as closely as practicable to zero error and comply with all applicable sections of Handbook 44.

§ 47-26-1107. Placed in service reports, equipment rejection/violation notices, reporting of service work.

(a) The commissioner shall furnish each registered serviceperson and registered service agency with a sample report form to be known as “Placed In Service Report.” Such form shall be executed in triplicate, shall include the assigned registration number, and shall be signed by the registered serviceperson who installed the device. This form shall be completed accurately and in its entirety immediately after a new or used device is placed in service, with the original of the properly executed placed in service report to be forwarded to the state weights and measures office within twenty-four (24) hours. The duplicate copy of the report shall be given to the owner or operator of the device, and the triplicate copy of the report shall be retained by the registered serviceperson or agency. This is the only acceptable form for reporting the installation of new or used weighing and measuring devices.
(b) It is the responsibility of any registered or unregistered person or agency that sells or conveys a weighing or measuring device to an individual or establishment in this state, that will be used for commercial purposes, to complete and forward a placed in service report to the state weights and measures office as outlined in subsection (a). The placed in service report shall be completed and forwarded to the state weights and measures office regardless of whether the device is installed and/or calibrated on site by Handbook 44 procedures or factory calibrated and transported to its location for use without any additional installation or calibration procedures.
(c) A registered serviceperson shall complete accurately and in its entirety, the official notice of equipment rejection/violation, or similar form, left at an establishment where a weighing or measuring device has been rejected or found in violation by a state weights and measures official. This form must be returned to the state weights and measures office within twenty-four (24) hours, together with any official rejection tag(s) removed from the device(s) after the device(s) has been brought into compliance.
(d) The commissioner, as the commissioner deems appropriate, may require the reporting or notification by a registered serviceperson or agency of any routine or non-routine service work performed on commercial weighing or measuring devices. Such reporting or notification shall be in a format and on a timeframe as designated by the commissioner.

§ 47-26-1108. Examination and calibration or certification of standards and testing equipment.

A registered serviceperson and a registered service agency shall submit, at least biennially (every two (2) years) to the commissioner, for examination and certification, any standards and testing equipment that is used, or to be used, in the performance of the service and testing functions with respect to weighing and measuring devices for which competence is registered. A registered serviceperson or agency shall not use in servicing commercial weighing or measuring devices any standards or testing equipment that has not been certified by the commissioner. Standards calibrated by another state weights and measures laboratory that can show current traceability to the National Institute of Standards and Technology will also be recognized as standards suitable for use by registered servicepersons or service agencies in this state. Copies of laboratory certificates from another state weights and measures lab must be submitted along with serviceperson license application forms when applying for registration in this state.

§ 47-26-1109. Rejection, removal from use, seizure of equipment.

The commissioner is authorized to reject, remove from use, or seize weighing or measuring devices installed, serviced, repaired, or reconditioned by any licensed or unlicensed individual or agency for good cause which shall include, but not be limited to: taking of unfair advantage of an owner of a device; failure to have test equipment or standards certified; failure to use adequate testing equipment; failure to adjust commercial or law enforcement devices to comply with Handbook 44 subsequent to service, repair, or installation; failure to accurately and completely submit required forms to the state weights and measures office in the manner prescribed.

§ 47-26-1110. Registration fees.

The annual cost to register a serviceperson shall be set by rule pursuant to § 43-1-703. For each service agency employing more than two (2) registered servicepersons, the annual fee shall be set by rule pursuant to § 43-1-703. The service agency registration fee shall not exempt the agency or individual from paying the required serviceperson registration fee. If an agency has more than one (1) office or branch, each office or branch shall be licensed in accordance with this section.

§ 47-26-1111. Reciprocal agreements.

The commissioner may enter into an informal reciprocal agreement with any other state or states with similar registration policies whereby the registered servicepersons and the registered service agencies of the party states are granted reciprocal authority of certification of standards and testing equipment.

§ 47-26-1112. Revocation of certificate of registration.

(a) The commissioner is authorized to suspend or revoke a certificate of registration for good cause, which includes, but is not limited to: taking of unfair advantage of an owner of a device; failure to have test equipment or standards certified; failure to use adequate testing equipment; failure to adjust commercial or law enforcement devices to comply with Handbook 44 subsequent to service, repair, or installation; or failure to accurately and completely submit required forms to the state weights and measures office in the manner prescribed.
(b) The commissioner is authorized to suspend or revoke the license of any registered serviceperson/registered service agency:
1. (1) When, after a formal or informal hearing held following ten (10) days notice to the licensee, the commissioner is satisfied that the licensee has violated any provision of this part or of any regulation under this part; provided, that:
  1. (A) Upon such hearing the person cited may be heard in person or with counsel, or both, may present evidence, and may cross-examine witnesses;
  2. (B) A full and complete record of such hearing shall be recorded and any party to the proceedings, upon request, shall be supplied with a transcript of such proceedings at the usual cost; and
  3. (C) The commissioner is hereby authorized, at the commissioner's discretion, to appoint and designate a hearing officer who shall preside at the hearing in the place or in the absence of the commissioner. The hearing officer has the power and authority to conduct the same, to administer oaths, and make findings of fact, conclusions of law, and the proposed order based thereon. If the commissioner concurs, the commissioner shall issue the order, or may upon review of the record make such findings, conclusions and issue such order as in the commissioner's discretion the record justifies;
2. (2) When the licensee has been convicted in any court of competent jurisdiction of violating any provision of this part or of any regulation under this part; or
3. (3) When the licensee is convicted of any felony.

§ 47-26-1113. Revocation proceedings.

If the commissioner suspends or revokes a serviceperson/service agency license, the revokee may appeal the decision through the appropriate court of law in Davidson County.

§ 47-26-1114. Criminal penalties.

Any person who personally or through such person's servant or agent, or as the servant or agent of another person, commits any prohibited acts in this part or pursuant regulations or violates any other provision of this part commits a Class C misdemeanor.

§ 47-26-1115. Restraining orders and injunctions.

The commissioner is authorized to apply to any court of competent jurisdiction for a restraining order, or a temporary or permanent injunction, restraining any person from violating any provision of this part.

§ 47-26-1116. Warning in lieu of criminal or civil penalties.

Nothing in this part shall be construed as requiring the commissioner to report for the institution of proceedings under this part, minor violations of this part, whenever the commissioner believes that the public interest will be adequately served in the circumstances by a suitable oral or written notice or warning.

§ 47-26-1117. Rulemaking power of commissioner.

The commissioner is authorized to enforce this part and the commissioner may issue from time to time reasonable rules and regulations for the enforcement of this part, which shall have the force and effect of law. All rules and regulations under this part shall be promulgated by the commissioner, pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

§ 47-26-1118. Publications.

The commissioner may publish, from time to time as the commissioner deems appropriate, and may supply upon request, lists of registered servicepersons and registered service agencies.

Chapter 28 Open-End Mortgages and Mortgages Securing Future Advances

§ 47-28-101. Chapter definitions.

(a) As used in this chapter, unless the context otherwise requires:
1. (1) “Borrower” under an open-end credit agreement means all persons having the right under the terms of the agreement to request or demand advances under the agreement;
2. (2) “Credit limit” means the maximum amount of principal indebtedness which may be outstanding at any one time under a revolving credit agreement;
3. (3) “Creditor” includes a state or national bank, a state or federal savings and loan association, a savings bank, a registrant under the Industrial Loan and Thrift Companies Act, compiled in title 45, chapter 5, a state or federal credit union, or any other individual, partnership, trust, corporation, or other legal entity permitted or authorized to enter into credit transactions secured by a mortgage;
4. (4) “Mortgage” includes a mortgage, deed of trust, or other conveyance of real property securing obligations, except instruments creating or perfecting a security interest in fixtures which do not include other real property;
5. (5) “Notice of limitation” under an open-end mortgage means the notice which the borrower may serve on the creditor to reduce the credit limit, as provided by this chapter;
6. (6) “Obligatory advance” means an advance which the creditor is required to make by agreement with the borrower, whether or not a subsequent event beyond the control of the creditor may allow the creditor to cancel the obligation to make such advance. Advances shall be deemed obligatory, even though made pursuant to a credit agreement or mortgage containing some or all of the following provisions:
  1. (A) The right of the creditor to withhold advances on the occurrence of a default until the default is cured, if such default is curable under the terms of the agreement;
  2. (B) The inclusion of a stated or objectively ascertainable date on which the obligation to make further advances ends;
  3. (C) Requirements for procedures to be followed by the borrower to activate the obligation to make advances;
  4. (D) In the case of an open-end mortgage, the right of the creditor, on notice to the borrower, to reduce the credit limit, or to withhold advances, because of a decrease in the value of the collateral or an adverse change in the borrower's credit worthiness; and
  5. (E) In the case of an open-end mortgage, the right of the creditor, on notice to the borrower, to cancel the obligation to make further advances thereunder on grounds stated in the open-end credit agreement or mortgage;
7. (7) “Open-end credit agreement” means a revolving credit agreement that is secured by a mortgage and that is not entered into for commercial purposes. Any such agreement shall be included, incorporated by reference or referred to in the mortgage, and shall prescribe the terms under which advances thereunder are to be made.
8. (8) “Open-end mortgage” means a mortgage securing an open-end credit agreement;
9. (9) “Optional advance” is any advance which is not obligatory; and
10. (10) “Revolving credit agreement” means a written agreement between a creditor and one (1) or more borrowers, under which:
  1. (A) It is contemplated that future advances of money or credit may be made on the request or demand of the borrower;
  2. (B) It is contemplated that the principal balance outstanding may increase or decrease from time to time; and
  3. (C) A maximum limit is fixed on the total amount of principal indebtedness that may be outstanding at any time under the agreement.
(b) A credit agreement or mortgage is for “commercial purposes,” which is entered into:
1. (1) By an individual, partnership, trust, corporation, or other legal entity that is engaged in business or agricultural endeavors; and
2. (2) Solely in order to finance such endeavors.

§ 47-28-102. Securing of future advances authorized.

A mortgage may provide that it secures not only existing indebtednesses or advances made contemporaneously with the execution thereof, but also future advances, whether obligatory, or optional, or both, and whether made under open-end credit agreements or otherwise, to the same extent as if such future advances were made contemporaneously with the execution of the mortgage, even though no advance is made at the time of the execution of the mortgage and even though no indebtedness is outstanding at the time any advance is made.

§ 47-28-103. Priority of advances.

(a) The following advances relate back to the time of the recording of the mortgage, and are prior and superior to subsequent encumbrances and conveyances:
1. (1) All advances, whether obligatory or optional, made under an open-end mortgage in accordance with this chapter;
2. (2) All obligatory advances made under any mortgage securing a revolving credit agreement that is not an open-end credit agreement and under any obligatory or optional extension, renewal or amendment of such revolving credit agreement; provided, that no optional extension, renewal or amendment shall increase the advances entitled to priority under this subdivision (a)(2) above the maximum amount entitled to priority under the original revolving credit agreement; and
3. (3) All obligatory advances made under any other mortgage securing future advances.
(b) All obligatory advances made pursuant to an optional increase in the credit limit of a revolving credit agreement that is not an open-end credit agreement and pursuant to any obligatory or optional extension, renewal or amendment of such increase shall relate back to the time of the recording of the mortgage securing such revolving credit agreement and are prior and superior to subsequent encumbrances and conveyances unless the mortgagee has actual notice of an intervening conveyance or encumbrance prior to increasing the credit limit. If the mortgagee has actual notice of an intervening conveyance or encumbrance prior to increasing the credit limit, all such obligatory advances shall relate back to the time of the increase. For the purpose of this subsection (b), “actual notice” means knowledge in fact from any source by any means.
(c) Optional advances made under any mortgage securing future advances, other than an open-end mortgage, are superior in priority to any intervening conveyance or encumbrance unless the mortgagee has actual notice of the intervening conveyance or encumbrance prior to exercising the mortgagee's option to make the advance. For the purpose of this subsection (c), “actual notice” means knowledge in fact from any source by any means.

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§ 47-28-104. Prerequisites for priority status.

(a) All open-end mortgages, in order to have the priority provided in § 47-28-103, must contain the following:
1. (1) A statement or other notice conspicuously identifying the mortgage as an open-end mortgage;
2. (2) A provision fixing a stated term for the duration of the open-end credit agreement, which term and any extension thereof made pursuant to the provisions of the mortgage shall not exceed a total of thirty (30) years from the date of the original execution thereof;
3. (3) A provision fixing a maximum limit on the total amount of principal indebtedness to be secured by the mortgage at any time, i.e., the credit limit, which limit shall include precomputed interest and other precomputed charges validly included in such principal amount, but shall not include other interest, loan charges, commitment fees, brokerage commissions, and other charges validly made pursuant to the mortgage, including but not limited to, those made or incurred in protecting the efficacy of the security, including, without limitation, payment of taxes or insurance premiums, or expenses incurred in the collection of the debt or the enforcement of the mortgage;
4. (4) A conspicuous notice to the borrower of the borrower's right pursuant to this chapter to reduce the limit on the maximum amount of total principal indebtedness to be secured under the mortgage, but the inclusion of such notice in an open-end credit agreement separate from the mortgage shall be deemed compliance with this subdivision (a)(4); and
5. (5) A provision, either in the mortgage or in the open-end credit agreement, governing the duty of the borrower to return checks, credit cards, or other devices to obtain further advances on the service by the borrower of a notice of limitation, upon notice from the creditor pursuant to the terms of the open-end credit agreement.
(b) All mortgages securing future advances which may be obligatory and which are for commercial purposes, in order to have the priority provided in § 47-28-103, must contain a statement or other notice identifying the mortgage as securing obligatory advances and as being for commercial purposes.

§ 47-28-105. Reduction in credit limit — Notice of limitation.

(a) The credit limit under an open-end mortgage may be reduced by the borrower, whether the advances to be made thereunder are obligatory or optional, to an amount not less than the amount of principal indebtedness shown on the most recent statement of the borrower's account received by the borrower from the creditor, plus the amount of any advances initiated by the borrower subsequent to that statement.
(b)
1. (1) In order to effectuate such a reduction in the credit limit, the borrower must:
  1. (A) Serve a notice of limitation on the creditor substantially in accordance with the provisions of the mortgage and of this chapter; and
  2. (B) On or before the effective date of the notice, file a copy thereof for recordation in the appropriate register's office as an amendment to the mortgage.
2. (2) Upon the recording of a notice of limitation in the appropriate register's office, the notice of limitation becomes irrevocable, and shall not be modified, amended, or rescinded.
(c) In order to be effective, any such notice of limitation must be in substantial compliance with the following requirements:
1. (1) It must name the creditor on whom the notice is served;
2. (2) It must state specifically the reduced credit limit;
3. (3) It must state the effective date of such limitation, which date cannot be sooner than one (1) regular business day after the date of the service of the notice;
4. (4) It must name all parties to the open-end credit agreement and the mortgage securing the same;
5. (5) It must identify with reasonable specificity the real property subject to the mortgage;
6. (6) It must give any account number assigned to the account of the open-end credit agreement; and
7. (7) It must be signed by all persons principally obligated to repay advances under the open-end credit agreement.
(d) From and after the service of such a notice of limitation, the borrower shall not request or demand any further advances under the open-end credit agreement that exceed the credit limit stated in the notice, and the creditor will be relieved and released from any obligation or commitment to make advances thereunder that exceed that reduced credit limit.

§ 47-28-106. Obligations of borrower.

The serving and recording of a notice of limitation shall not relieve the borrower from the obligation to pay any amounts due or to become due the creditor, or from the performance of any other obligations under the open-end mortgage, or the agreement which it secures, or any note evidencing obligations thereunder.

§ 47-28-107. Service of notice.

Under this chapter a notice is served on the creditor when it is in fact received by the creditor at the address specified in the mortgage; or if no address is so specified, in the case of an open-end credit agreement, to the address to which requests or demands for advances are to be sent; and in all other cases to the address at which payments on the mortgage are to be made.

§ 47-28-108. Priority of advances.

(a) Any advance made by the creditor:
1. (1) Before the effective date of any notice of limitation from the borrower, made in accordance with this chapter; or
2. (2) In response to a request or demand initiated by the borrower prior to the service of an effective notice of limitation, made in accordance with this chapter,
3. shall be entitled to the same priority as other advances made under that agreement, even though that advance increases the total amount of principal indebtedness beyond the credit limit fixed in that notice of limitation.
(b) Any advance made by a creditor after the effective date of a notice of limitation (except for advances made in response to requests or demands initiated by the borrower prior to the service of an effective notice of limitation) that exceeds the credit limit stated in the notice shall not be entitled to priority over a conveyance or encumbrance recorded on or before the date of the service of the notice of limitation.
(c) An advance is made by the creditor when the borrower becomes obligated to repay it.

§ 47-28-109. Increases or advances exceeding contract limits or not covered by contract.

Notwithstanding the limitations specified in any mortgage, or imposed by a borrower by means of serving and recording a notice of limitation:
1. (1) Any increase in the principal balance of an indebtedness secured by any mortgage as a result of negative amortization or deferred interest;
2. (2) Any advance which the creditor is obligated under the terms of the mortgage or related agreement or undertaking to make to a third party, or any disbursement made by a creditor pursuant to the terms of the mortgage to protect the efficacy of the creditor's security, including, without limitation, payment of taxes, insurance premiums, or expenses incurred in making repairs to the property or in the collection of the debt or the enforcement of the mortgage;
3. (3) Any advance made under a construction or home improvement loan agreement contained or referred to in the mortgage; and
4. (4) Interest on such advances or disbursements,
5. shall be secured by the mortgage, even though the mortgage does not specifically provide for future advances, or the advances or disbursements cause the amount of the total indebtedness to exceed the principal amounts stated in the mortgage, or to exceed the credit limit under an open-end mortgage. The priority of the lien of the mortgage, including any advance, increase, or disbursement described in this section, shall be the same as if such advance, increase or disbursement was made on the date of the recordation of the mortgage.

§ 47-28-110. Applicability and construction of chapter.

This chapter applies to all loan or credit agreements and mortgages entered into from and after June 30, 1987. No provision herein shall be construed to:
1. (1) Invalidate a provision of any mortgage or contract entered into prior to June 30, 1987;
2. (2) Deny or curtail the right to a release of lien where the obligation it secures has been fully paid or satisfied; or
3. (3) Deny or curtail the right to a partial release except in the case of an open-end mortgage.

Chapter 29 Collection of Bad Checks

§ 47-29-101. Liability for dishonored check — Damages.

(a) A person who, having executed and delivered to another person a check or draft drawn on or payable at a bank or other financial institution, with fraudulent intent, which may be inferred as provided by § 39-14-121, either stops payment on the check or draft, or allows the check or draft to be dishonored by a financial institution because of lack of funds, failure to have an account, or lack of an authorized signature of the drawer or necessary endorser, is, if found liable to the holder on the check or draft in a civil action, liable for:
1. (1) The face amount of the check dishonored;
2. (2) Interest at the rate of ten percent (10%) per annum on the face amount or the remaining unpaid balance of the check or draft from the date of its execution until payment is made in full;
3. (3) Any reasonable service charges incurred by the payee in attempting to obtain payment by the bank or other financial institution;
4. (4) Court costs incurred in bringing the civil action which is brought by the holder to collect on the check or draft; and
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5. (5) Reasonable attorney fees incurred by the holder.
(b) This section does not apply to a person who has so allowed a check or draft to be dishonored if, within ten (10) days after the holder has given notice that the check or draft has not been paid by the financial institution, the person pays to the holder the full amount of the check or draft. Such a payment is effective for all purposes as of the date it is made.
(c) For purposes of this section, notice that a check or draft has not been paid by the financial institution is considered as having been given at the time that the notice was deposited in the regular United States mail, if the notice was addressed to either:
1. (1) The address printed on the check or draft; or
2. (2) The address given by the person in writing to the payee or holder at the time the check or draft was issued or delivered.
(d) If the person who executed and delivered the check does not pay to the holder the full amount of the check or draft within thirty (30) days following certified mailing of written notice that the check or draft has not been paid and that treble damages will be sought, upon finding of fraudulent intent, the person is liable for, and the court shall award judgment for, treble the face amount of the check or draft. However, the amount awarded in addition to the face amount of the check or draft may not exceed five hundred dollars ($500).
(e) A person must elect whether to pursue the claim either under this section or under title 39, chapter 14, part 1.
(f) Subsection (d) does not apply to a person who has allowed a check or draft to be dishonored because of lack of funds, if that person reasonably believed that there were sufficient funds in the account to cover the check or draft or if the insufficiency of funds is caused by the dishonoring of a check or draft from a third party that had been deposited into the account of the person who executed the check.

§ 47-29-102. Handling charge.

When any check, draft, or order is not paid by the drawee because the maker or drawer did not have an account with or sufficient funds on deposit with the financial institution, or the draft, check, or order has an incorrect or insufficient signature thereon, the payee of such check, draft, or order is authorized to assess a handling charge against such maker or drawer in an amount not to exceed thirty dollars ($30.00).

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§ 47-29-103. Remedies cumulative.

The remedies provided under this chapter shall be in addition to and not in lieu of any rights and remedies available under the Uniform Commercial Code as provided in chapters 1-9 of this title.

Chapter 30 Home Equity Conversion Mortgages

§ 47-30-101. Short title.

This chapter shall be known and may be cited as the “Home Equity Conversion Mortgage Act.”

§ 47-30-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Authorized lender” or “lender” means:
  1. (A) A bank, savings and loan association, savings bank, savings institution, or credit union chartered under the laws of the United States or of Tennessee;
  2. (B) The Tennessee housing development agency (THDA); provided, that such agency has authority by THDA board resolution to issue mortgages under this chapter; or
  3. (C) Any other person authorized to make home equity conversion loans by the commissioner of financial institutions;
2. (2) “Borrower” means a natural person who occupies and owns in fee simple individually, or with another borrower as tenants by the entireties or as joint tenants with right of survivorship, an interest in residential real property securing a reverse mortgage loan, and who borrows money under a reverse mortgage loan;
3. (3) “Commissioner” means the commissioner of financial institutions;
4. (4) “Counselor” means either:
  1. (A) An individual who has completed a training curriculum on reverse mortgage counseling provided or approved by HUD and whose name is maintained on HUD's list of approved reverse mortgage counselors; or
  2. (B) A person or entity qualified under Fannie Mae guidelines to serve as a counselor in consumer education;
5. (5) “Equity share” means any compensation, in addition to interest that has accrued on the outstanding balance, that the borrower has paid or agrees to pay to the lender at maturity of a reverse mortgage loan, which is equal to a percentage of the value of the property securing a reverse mortgage loan at maturity;
6. (6) “Fannie Mae” means The Federal National Mortgage Association, a corporation organized and existing under the laws of the United States;
7. (7) “Fannie Mae Reverse Mortgage Loan” means any reverse mortgage loan which complies with Fannie Mae guidelines and is purchased or securitized by Fannie Mae including a Home Keeper Mortgage Loan;
8. (8) “Home equity conversion mortgage loan” means a loan for a definite or indefinite term:
  1. (A) Secured by a first mortgage or first deed of trust on the principal residence of the mortgagor;
  2. (B) The proceeds of which are disbursed to the mortgagor in one (1) or more lump sums, or in equal or unequal installments, either directly by the lender or the lender's agent;
  3. (C) That requires no repayment until a future time, upon the earliest occurrence of one (1) or more events specified in the reverse mortgage loan contract; and
  4. (D) Is labeled clearly on the face of the note and deed of trust or mortgage, if a HUD Loan, “This is a Home Equity Conversion Mortgage Loan pursuant to Tennessee Code Annotated, Title 47, Chapter 30,” or, if it is a Fannie Mae Reverse Mortgage Loan, contains on the face of the note and deed of trust or mortgage the words “Home Keeper Mortgage” or “Fannie Mae Reverse Mortgage,” pursuant to this chapter;
9. (9) “HUD” means the United States department of housing and urban development;
10. (10) “Outstanding balance” means the current net amount of money owed by the borrower to the lender, calculated in accordance with § 47-30-106, whether or not the sum is suspended under the terms of the reverse mortgage loan agreement or is immediately due and payable;
11. (11) “Reverse mortgage” means a mortgage or deed of trust securing a home equity conversion loan or reverse mortgage loan;
12. (12) “Reverse mortgage loan” means a home equity conversion mortgage loan issued under the terms of this chapter;
13. (13) “Securitized” means converting mortgages or deeds of trust into securities that may be purchased by investors;
14. (14) “Shared appreciation” means an agreement by the lender and the borrower that, in addition to any interest accruing on the outstanding balance of a reverse mortgage loan, the lender may collect an additional amount equal to a percentage of any net appreciated value of the property during the term of the reverse mortgage loan; and
15. (15) “Total annual percentage rate” means the annual average rate of interest, which provides the total amount owed at loan maturity when this rate is applied to the loan advances, excluding closing costs not paid to third parties, over the term of the reverse mortgage loan.

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§ 47-30-103. Authorized lenders — Designation — Application.

(a) No person, firm, or corporation shall engage in the business of making reverse mortgage loans, unless such person, firm, or corporation is an authorized lender.
(b) The Tennessee housing development agency, and any bank, savings institution, or credit union, shall be designated an authorized lender by providing notice, not less than thirty (30) days prior to making any home equity conversion loan or reverse mortgage loan, to the commissioner of its intent to make such loans and stating an effective date. This notification shall be made on a form prescribed by the commissioner and shall contain all information required by the commissioner and contain evidence that the applicant is an approved Fannie Mae or HUD lender. The commissioner may object to the notice by denying the designation prior to the effective date and shall state in the objection any reasons therefor.
(c) Any person, firm, or corporation not included in subsection (b) shall file an application for authorization to make reverse mortgage loans, in writing, to the commissioner and in the form prescribed by the commissioner. The application shall contain the name and complete business address or addresses of the applicant and contain evidence that the applicant is an approved Fannie Mae or HUD lender. The application shall also include such information the commissioner deems necessary to evaluate the applicant. Such information may include, but is not limited to, affirmation of financial solvency, all capitalization requirements that are required by the commissioner, and the character, personal experience and business plan of the applicant. The application shall be accompanied by a nonrefundable fee, payable to the commissioner in an amount established by rule. If the commissioner approves the application, the commissioner shall designate the applicant as an authorized lender.
(d) The commissioner shall maintain a list of authorized lenders.

§ 47-30-104. Compliance — Noncomplying loans unenforceable — Counseling.

(a) No authorized lender shall issue a reverse mortgage loan contract unless it complies with all requirements for participation in HUD's Home Equity Conversion Mortgage Program (or other similar federal reverse mortgage loan program from time to time created) and is insured by the federal housing administration or other similar federal agency or is a Fannie Mae Reverse Mortgage Loan.
(b) Any home equity conversion loan, reverse mortgage loan, mortgage or deed of trust which fails to comply with this chapter is unenforceable as to all interest, service fees, and insurance premiums incurred on the loan.
(c) Prior to accepting an application for a home equity conversion loan, an authorized lender shall refer the borrower to a counselor and shall receive certification from the counselor that all borrowers have received counseling.

§ 47-30-105. Contract for the payment of interest.

Notwithstanding any other law to the contrary, the parties to a reverse mortgage loan may contract for the payment of interest at a rate which does not exceed the rate permitted for home loans under chapter 15 of this title. Interest shall be deferred until the earliest occurrence of one (1) or more events specified in the reverse mortgage loan contract. Payment of interest on deferred interest shall be as agreed upon by the parties to the contract. The parties may agree that the deferred interest may be added to the outstanding balance of the loan.

§ 47-30-106. Contract may require borrower to pay certain taxes, premiums and assessments.

A reverse mortgage loan contract may provide that it is the primary obligation of the borrower to pay some or all of the property taxes, hazard insurance premiums, private or federal mortgage insurance premiums, and assessments, in a timely manner, and that the failure of the borrower to make these payments and to provide evidence of payment to the lender may constitute grounds for default of the loan. A reverse mortgage loan contract shall state that if a borrower fails to pay property taxes, insurance premiums, or assessments, the lender may choose, at the lender's option, to pay the amounts due, charge them to the loan, and recalculate regularly scheduled payments under the loan to account for the increased outstanding loan balance.

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§ 47-30-107. Fees — Calculation of outstanding loan balance — Prepayment.

(a) If a reverse mortgage loan contract allows for a change in the payments or payment options, the lender may charge a reasonable fee when payments are recalculated.
(b) The reverse mortgage loan contract may provide for:
1. (1) A monthly service fee;
2. (2) A fee for mortgage insurance premiums, which may be collected monthly or in advance. These fees shall not exceed the monthly service fee or insurance premium permitted by HUD for participation in the Home Equity Conversion Mortgage Program or by Fannie Mae for a Fannie Mae Reverse Mortgage Loan;
3. (3) Repair administration fee, which complies with Fannie Mae guidelines or HUD regulations; and
4. (4) An equity share, including shared appreciation, if the transaction is a Fannie Mae Reverse Mortgage Loan of any principal amount notwithstanding § 47-24-102.
(c) The outstanding loan balance shall be calculated by adding the current totals of items described in subdivisions (c)(1)-(4), and subtracting the current totals of all reverse mortgage loan payments made by the borrower to the lender:
1. (1) The sum of all disbursements made by the lender to the borrower, or to another party on the borrower's behalf;
2. (2) All taxes, assessments, hazard insurance premiums, mortgage insurance premiums, monthly service fees, and other similar charges paid to date by the lender under § 47-30-106 and not reimbursed by the borrower within sixty (60) days of the date payment was made by the lender;
3. (3) All actual closing costs the borrower has deferred, if a deferral provision is contained in the loan agreement; and
4. (4) The total accrued interest to date.
(d) Prepayment of the reverse mortgage loan, in whole or part, is permitted without penalty at any time during the term of the loan.

§ 47-30-108. Amount owed by borrower when loan is due — Enforcement of debt.

(a) When a reverse mortgage loan, other than a Fannie Mae Reverse Mortgage Loan, becomes due, if the borrower mortgaged one hundred percent (100%) of the full value of the house, then the amount owed by the borrower shall not be greater than:
1. (1) The fair market value of the house, minus sale costs; or
2. (2) The outstanding balance of the loan,
3. whichever amount is less.
(b) If the borrower mortgaged less than one hundred percent (100%) of the full value of the house, the amount owed by the borrower shall not be greater than:
1. (1) The outstanding balance of the loan; or
2. (2) The percentage of the fair market value, minus sale costs, as provided in the contract;
3. whichever amount is less.
(c) The lender shall enforce the debt only through the sale of the property and shall not obtain a deficiency judgment against the borrower.

§ 47-30-109. Provision of information to the commissioner.

(a) On forms prescribed by the commissioner, all authorized lenders shall provide all of the following information to the commissioner for dissemination to all counselors who provide counseling to prospective reverse mortgage borrowers:
1. (1) The borrower's rights, obligations, and remedies with respect to the borrower's temporary absence from the home, late payments by the lender, and payment default by the lender;
2. (2) Conditions or events that require the borrower to repay the loan obligation;
3. (3) The right of the borrower to mortgage less than the full value of the home, if permitted by the reverse mortgage loan contract;
4. (4) Either the projected total annual percentage rate, as defined in § 47-30-102, or a table of projected “Total Annual Loan Cost Rates” calculated in accordance with § 226.33 of Regulation Z (12 CFR 226.33) of the Federal Truth in Lending Act, 15 USC § 1601 et seq. applicable under various loan terms and appreciation rates and interest rates applicable at sample ages of borrowers;
5. (5) Standard closing costs;
6. (6) All service fees to be charged during the term of the loan; and
7. (7) Other information required by the commissioner.
(b) Within ten (10) business days after application is made by a borrower, but not less than twenty (20) business days before closing of the loan, lenders shall provide applicants with the same information required in subsection (a), shall inform applicants that reverse mortgage counseling is required before the loan can be closed, and shall provide the names and addresses of counselors listed with HUD or Fannie Mae.

§ 47-30-110. Lender to provide borrower with name of agent to answer inquiries — Annual statement of account.

(a) At the closing of the reverse mortgage loan, the lender shall provide to the borrower the name of the lender's employee or agent who has been designated specifically to respond to inquiries concerning reverse mortgage loans. This information shall be provided by the lender to the borrower at least annually, and whenever the information concerning the designated employee or agent changes.
(b) On an annual basis and when the loan becomes due, the lender shall issue to the borrower, without charge, a statement of account regarding the activity of the mortgage for the preceding calendar year, or for the period since the last statement of account was provided. The statement shall include all of the following information for the preceding year:
1. (1) The outstanding balance of the loan at the beginning of the statement period;
2. (2) Disbursements to the borrower;
3. (3) The total amount of interest added to the outstanding balance of the loan;
4. (4) Any property taxes, hazard insurance premiums, mortgage insurance premiums, or assessments paid by the lender;
5. (5) Payments made to the lender;
6. (6) The total mortgage balance owed to date; and
7. (7) The remaining amount available to the borrower in reverse mortgage loans wherein proceeds have been reserved to be disbursed in one (1) or more lump sum amounts.

§ 47-30-111. Lender's default — Applicability.

(a) A lender's failure to make loan advances to the borrower under the reverse mortgage loan contract shall be deemed the lender's default of the contract. Upon the lender's default, the lender shall forfeit any right to collect interest or service charges under the contract. The lender's right to recovery at loan maturity shall be limited to the outstanding balance as of the date of default, minus all interest. Lenders may also be subject to other default penalties established by the commissioner.
(b) Subsection (a) shall not apply if the lender has previously declared the borrower in default under § 47-30-112, or if the lender makes the required loan advance within the time stated in the mortgage contract or within thirty (30) days of receipt of notice from the borrower that the loan advance was not received.

§ 47-30-112. Borrower's default — Terms and conditions.

A reverse mortgage loan contract may provide for a borrower's default, thereby triggering early repayment of the loan, based only upon one (1) or more of the following terms and conditions:
1. (1) The borrower fails to maintain the residence as required by the contract;
2. (2) The borrower sells or otherwise conveys title to the home to a third party;
3. (3) The borrower dies and the home is not the principal residence of the surviving borrower;
4. (4) The home is not the principal residence of at least one (1) of the borrowers for a period of twelve (12) consecutive months for reasons of physical or mental illness;
5. (5) For reasons other than physical or mental illness, the home ceases, without prior written permission from the lender, to be the principal residence of the borrower for a period of ninety (90) consecutive days and is not the principal residence during such period of another borrower under the loan;
6. (6) The borrower fails to pay property taxes, hazard insurance premiums, mortgage insurance premiums, service fees or assessments under § 47-30-106; or
7. (7) The mortgage or deed of trust ceases to constitute a first lien on the property securing the reverse mortgage loan.

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§ 47-30-113. Notice of foreclosure — Continuation of interest.

When a borrower's obligation to repay the reverse mortgage loan is triggered under § 47-30-112, in addition to all rights conferred upon owners and borrowers under title 35, chapter 5, the lender must give the borrower not less than sixty (60) days' notice of its intent to initiate foreclosure proceedings. If the contract so provides, interest will continue to accrue during the sixty-day period.

§ 47-30-114. Future advances — Exemption from other law.

(a) A reverse mortgage may provide that it secures not only existing indebtedness or advances made contemporaneously with the execution thereof, but also future advances, whether obligatory or optional, or both, and whether made under open-end credit agreements or otherwise, to the same extent as if such future advances were made contemporaneously with the execution of the mortgage, even though no advance is made at the time of the execution of the mortgage and even though no indebtedness is outstanding at the time any advance is made.
(b) All advances made under a reverse mortgage, whether obligatory or optional, relate back to the time of the recording of the mortgage, and are prior and superior to subsequent encumbrances and conveyances, if made in accordance with this chapter.
(c) All reverse mortgages, in order to have the priority provided in this section, must contain a statement or notice essentially equivalent to that set forth in § 47-30-102.
(d) A reverse mortgage or reverse mortgage loan made in accordance with this chapter is exempt from chapter 28 of this title.

§ 47-30-115. Prohibited acts.

Reverse mortgage lenders are prohibited from engaging in any of the following acts in connection with the making, servicing, or collecting of a reverse mortgage loan:
1. (1) Misrepresenting material facts, making false promises, or engaging in a course of misrepresentation through agents or otherwise;
2. (2) Failing to disburse funds in accordance with the terms of the reverse mortgage loan contract or other written commitment;
3. (3) Improperly refusing to issue a release of a mortgage;
4. (4) Engaging in any action or practice that is unfair or deceptive, or that operates a fraud on any person;
5. (5) Contracting for or receiving shared appreciation, except that this subdivision (5) shall not apply to any Fannie Mae Reverse Mortgage Loan;
6. (6) Closing a reverse mortgage loan without receiving certification from a counselor that the borrower has received counseling on the advisability of a reverse mortgage loan and the appropriate reverse mortgage loan for the borrower; or
7. (7) Failing to comply with this chapter.

§ 47-30-116. Rules — Notice of violation — Penalties — Civil actions.

(a) The commissioner shall adopt rules necessary to implement and enforce this chapter. Upon finding probable cause to believe that an authorized lender or any other person, firm, or corporation is in violation of this chapter, or of any law or any rule or regulation of this state, the United States, or an agency of the state or the United States, the commissioner shall, after affording reasonable notice and opportunity to be heard to the lender, order the lender to cease and desist from the violation.
(b) If a lender fails to comply with or appeal the commissioner's cease and desist order, the lender is subject to a civil penalty of one thousand dollars ($1,000) for each violation that is the subject of the cease and desist order. The penalty imposed under this section is in addition to and not in lieu of penalties available under any other law applicable to a reverse mortgage lender.
(c) Upon a finding that a reverse mortgage lender has violated this chapter, the commissioner may revoke, temporarily or permanently, the authority of the lender to make reverse mortgage loans.
(d) A person damaged by a lender's actions may file an action in civil court to recover actual and punitive damages. Attorneys' fees shall be awarded to a prevailing borrower. Nothing in this chapter shall limit any statutory or common law right of a person to bring an action in court for any act, nor shall this chapter limit the right of the state to punish a person for the violation of any law.

§ 47-30-117. Legislative intent — Construction with other laws.

It is the intent of the general assembly to authorize reverse mortgage loans under the provisions, terms and conditions imposed by this chapter. Nothing in this chapter shall be construed to apply to or restrict any loan, mortgage, or deed of trust which is valid under any other provision.

§ 47-30-118. Fannie Mae Reverse Mortgage Loans.

(a) When a Fannie Mae Reverse Mortgage Loan becomes due, the amount owed by the borrower shall not be greater than:
1. (1) The fair market value of the house; or
2. (2) The outstanding balance of the loan, including any equity share, if applicable under the terms of the contract,
3. whichever is less.
(b) The lender shall enforce the debt only through the sale of the property and shall not obtain a deficiency judgment against the borrower.

Chapter 31 Tobacco Manufacturers' Escrow Fund

§ 47-31-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Tobacco Manufacturers' Escrow Fund Act of 1999.”

§ 47-31-102. Chapter definitions.

As used in this chapter:
1. (1) “Adjusted for inflation” means increased in accordance with the formula for inflation adjustment set forth in exhibit C to the master settlement agreement;
2. (2) “Affiliate” means a person who directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or control with, another person. Solely for purposes of this definition, “owns”, “is owned” and “ownership” mean ownership of an equity interest, or the equivalent thereof, of ten percent (10%) or more, and “person” means an individual, partnership, committee, association, corporation or any other organization or group of persons;
3. (3) “Allocable share” means allocable share as defined in the master settlement agreement;
4. (4)
  1. (A) “Cigarette” means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains:
    1. (i) Any roll of tobacco wrapped in paper or in any substance not containing tobacco;
    2. (ii) Tobacco, in any form, that is functional in the product, which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette; or
    3. (iii) Any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in subdivision (4)(A)(i);
  2. (B) “Cigarette” includes “roll-your-own” (i.e., any tobacco which, because of its appearance, type, packaging, or labeling is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes). For purposes of this definition of “cigarette,” nine hundredths (0.09) ounces of “roll-your-own” tobacco constitutes one (1) individual “cigarette;”
5. (5) “Master settlement agreement” means the settlement agreement, and related documents, entered into in the fall of 1998 by the state and leading United States tobacco product manufacturers;
6. (6) “Qualified escrow fund” means an escrow arrangement with a federally or state chartered financial institution having no affiliation with any tobacco product manufacturer and having assets of at least one billion dollars ($1,000,000,000) where such arrangement requires that such financial institution hold the escrowed funds' principal for the benefit of releasing parties and prohibits the tobacco product manufacturer placing the funds into escrow from using, accessing or directing the use of the funds' principal except as consistent with § 47-31-103(a)(2)(D);
7. (7) “Released claims” means released claims as defined in the master settlement agreement;
8. (8) “Releasing parties” means releasing parties as defined in the master settlement agreement;
9. (9)
  1. (A) “Tobacco product manufacturer” means an entity that after May 26, 1999, directly and not exclusively through any affiliate:
    1. (i) Manufactures cigarettes anywhere that such manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer (except where such importer is an original participating manufacturer (as defined in the master settlement agreement), that will be responsible for the payments under the master settlement agreement with respect to such cigarettes as a result of subsection II(mm) of the master settlement agreement and that pays the taxes specified in subsection II(z) of the master settlement agreement, and provided that the manufacturer of such cigarettes does not market or advertise such cigarettes in the United States);
    2. (ii) Is the first purchaser anywhere for resale in the United States of cigarettes manufactured anywhere that the manufacturer does not intend to be sold in the United States; or
    3. (iii) Becomes a successor of an entity described in subdivision (9)(A)(i) or (ii).
  2. (B) “Tobacco product manufacturer” does not include an affiliate of a tobacco product manufacturer unless such affiliate itself falls within any of subdivisions (9)(A)(i)-(iii); and
10. (10)
  1. (A) “Units sold” means the number of individual cigarettes sold to a consumer in the state by the applicable tobacco product manufacturer, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, during the year in question regardless of whether the state excise tax was due or collected;
  2. (B) “Units sold” does not include cigarettes sold on federal military installations or that are otherwise exempt from state excise tax pursuant to federal law;
  3. (C) For purposes of this part, regarding cigarettes for which the state cigarette or other tobacco product tax is paid, such cigarettes shall be deemed as being sold to a consumer upon the affixing of the state cigarette tax stamp or, for roll your own tobacco, when the state tax on other tobacco products is paid;
  4. (D) The department of revenue shall promulgate rules as are necessary to ascertain the number of units sold by such tobacco product manufacturer for each year. All rules shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

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§ 47-31-103. Requirements of tobacco product manufacturers.

(a) Any tobacco product manufacturer selling cigarettes to consumers within the state of Tennessee, whether directly or through a distributor, retailer or similar intermediary or intermediaries, after May 26, 1999, shall do one of the following:
1. (1) Become a participating manufacturer, as defined in § II(jj) of the master settlement agreement, and generally perform its financial obligations under the master settlement agreement; or
2. (2)
  1. (A) Place into a qualified escrow fund by April 15 of the year following the year in question the following amounts, as such amounts are adjusted for inflation:
    1. (i) 1999: $0.0094241 per unit sold after May 26, 1999;
    2. (ii) 2000: $0.0104712 per unit sold;
    3. (iii) For each of 2001 and 2002: $0.0136125 per unit sold;
    4. (iv) For each of 2003 through 2006: $0.0167539 per unit sold; and
    5. (v) For each of 2007 and each year thereafter: $0.0188482 per unit sold.
  2. (B) The escrow fund deposits required by this section shall be made in quarterly installments following the quarter in which sales took place. For purposes of this section, the calendar year shall be divided into the following quarters: January 1 through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31. Deposits for sales for each quarter shall be made according to the following schedule:
    1. (i) Deposits for sales occurring in the first quarter, January 1 through March 31, are due April 30 of the same year. A certification of the first quarter deposit shall be filed with the attorney general and reporter no later than May 15 of the same year;
    2. (ii) Deposits for sales occurring in the second quarter, April 1 through June 30, are due July 31 of the same year. A certification of the second quarter deposit must be filed with the attorney general and reporter no later than August 15 of the same year;
    3. (iii) Deposits for sales occurring in the third quarter, July 1 through September 30, are due October 31 of the same year. A certification of the third quarter deposit shall be filed with the attorney general and reporter no later than November 15 of the same year; and
    4. (iv) Deposits for sales occurring in the fourth quarter, October 1 through December 31, are due January 31 of the following year. A certification of the fourth quarter deposit shall be filed with the attorney general and reporter no later than February 15 of the year following the year in which the cigarettes were sold.
  3. (C) For each of the quarters, the quarterly deposit shall be based upon units sold in that quarter together with an estimated inflation adjustment provided by the attorney general and reporter. An annual reconciliation deposit shall be made on or before April 15 of the year following the year in which the cigarettes were sold to account for the actual annual inflation adjustment. A statement of the reconciliation deposit and the final reconciled deposit figures shall be included with the annual certification, due on or before April 30 of the year following the year in which the cigarettes were sold. Additionally, the annual certification required under § 67-4-2602 shall include the final reconciled deposit figures.
  4. (D) A tobacco product manufacturer that places funds into escrow pursuant to subdivision (a)(2)(A) shall receive the interest or other appreciation on such funds as earned. Such funds themselves shall be released from escrow only under the following circumstances:
    1. (i) To pay a judgment or settlement on any released claim brought against such tobacco product manufacturer by the state or any releasing party located or residing in the state. Funds shall be released from escrow under this subdivision (a)(2)(D)(i):
      1. (a) In the order in which they were placed into escrow; and
      2. (b) Only to the extent and at the time necessary to make payments required under such judgment or settlement;
    2. (ii) To the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the state in a particular year was greater than the master settlement agreement payments, as determined pursuant to § IX(i) of the master settlement agreement including after final determination of all adjustments, that such manufacturer would have been required to make on account of such units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or
    3. (iii) To the extent not released from escrow under subdivision (a)(2)(D)(i) or (ii), funds shall be released from escrow and revert back to such tobacco product manufacturer twenty-five (25) years after the date on which they were placed into escrow.
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    47-31-102(6)
3. (3) Each tobacco product manufacturer that elects to place funds into escrow pursuant to subdivision (a)(2) shall certify on a quarterly and annual basis to the attorney general and reporter that it is in compliance with subdivision (a)(2). The attorney general and reporter may bring a civil action on behalf of the state against any tobacco product manufacturer that fails to place into escrow the funds required under this section. Any tobacco product manufacturer that fails to place into escrow the funds required under this section shall:
  1. (A) Be required within fifteen (15) days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a violation of subdivision (a)(2), may impose a civil penalty, to be paid to the general fund of the state, in an amount not to exceed five percent (5%) of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed one hundred percent (100%) of the original amount improperly withheld from escrow;
  2. (B) In the case of a knowing violation, be required within fifteen (15) days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a knowing violation of subdivision (a)(2), may impose a civil penalty, to be paid to the general fund of the state, in an amount not to exceed fifteen percent (15%) of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed three hundred percent (300%) of the original amount improperly withheld from escrow; and
  3. (C) In the case of a second knowing violation, be prohibited from selling cigarettes to consumers within the state, whether directly or through a distributor, retailer or similar intermediary, for a period not to exceed two (2) years.
(b) Each failure to make a quarterly or annual deposit required under this section constitutes a separate violation.
(c) In any successful action initiated by the attorney general and reporter, the court shall order reimbursement to the attorney general and reporter for the reasonable costs and expenses of investigation and prosecution of actions under subdivision (a)(3), including attorneys' fees.

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Chapter 32 Residential Closing Funds Distribution Act of 2005

§ 47-32-101. Short title.

This chapter shall be known and may be cited as the “Residential Closing Funds Distribution Act of 2005.”

§ 47-32-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Agricultural land” means land used for agriculture, as defined in § 1-3-105;
2. (2) “Commercial real estate,” for purposes of this chapter only, means any real estate used for any business purpose, including one (1) to four (4) residential units or parcels of unimproved, residential property sold to a person for the purpose of constructing, renovating or developing the property for resale or lease;
3. (3) “Disbursement of loan funds” means the delivery of the loan funds by the mortgage lender to the settlement agent in one (1) or more of the following forms:
  1. (A) Cash;
  2. (B) Federal funds wire transfer including electronic payment, as defined in federal reserve regulation CC (12 CFR 229.2(p));
  3. (C) Checks issued by the state of Tennessee or a political subdivision of the state;
  4. (D) Cashier's check, as defined in 12 CFR 229.2(i);
  5. (E) Teller's check, as defined in 12 CFR 229.2(gg), that is issued by a financial institution and drawn or payable through a financial institution;
  6. (F) Checks issued by an instrumentality of the United States organized and existing under the Farm Credit Act of 1971, compiled in 12 U.S.C. § 2001 et seq.;
  7. (G) A direct deposit by a financial institution to the account of a settlement agent held in the same institution; or
  8. (H) Checks issued from the escrow or trust account of a real estate broker licensed pursuant to the Tennessee Real Estate Broker License Act of 1973, compiled in title 62, chapter 13, and drawn on or payable through a financial institution within the same federal reserve check processing region as the location of the settlement agent in an amount not to exceed the earnest money paid by the purchaser and collected in the escrow or trust account;
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  - 47-32-104(a)
  - 47-32-105(a)(2)
4. (4) “Disbursement of settlement proceeds” means the payment of any proceeds of the transaction by the settlement agent to the persons entitled to the proceeds;
5. (5) “Dwelling” means a residential structure or mobile home that contains one (1) to four (4) family housing units, or individual units of condominiums or cooperatives;
6. (6) “Financial institution” means a bank, savings and loan association, or credit union, the accounts of which are insured by the federal deposit insurance corporation or the national credit union administration;
7. (7) “Loan closing” means that time agreed upon by the borrower and lender, when the execution of the loan documents by the borrower occurs;
8. (8) “Loan documents” means the note evidencing the debt due the lender, the deed of trust, or mortgage securing the debt due to the lender, and any other documents required by the lender to be executed by the borrower as a part of the transaction;
9. (9) “Loan funds” means the gross or net proceeds of the loan to be disbursed by the lender, in one (1) of the forms identified in subdivision (3), at loan closing;
10. (10) “Mortgage” means a “mortgage” or “deed of trust” as defined in and allowed pursuant to § 66-5-103;
11. (11) “Mortgage lender” means any person who, in the regular course of business, lends money that is secured by a mortgage or deed of trust on real estate. “Mortgage lender” includes a “mortgage loan broker” and “mortgage loan servicer”;
12. (12) “Mortgage loan” means any loan secured by a mortgage, intended for any purpose;
13. (13) “Mortgage loan broker” means any person who, for compensation or other gain, paid directly or indirectly, or in expectation of compensation or other gain, solicits, processes, places, negotiates or originates mortgage loans for others, or offers to solicit, process, place, negotiate or originate mortgage loans for others, or who close mortgage loans that may be in the mortgage loan broker's own name with funds provided by others and which loans are thereafter assigned to the person providing the funding of such loans; regardless of whether the acts are done directly or indirectly, through contact by telephone, by electric means, by mail, or in person with the borrowers or potential borrowers;
14. (14) “Mortgage loan servicer” means any person who, in the regular course of business, assumes responsibility for servicing and accepting payments for a mortgage loan;
15. (15) “Settlement” means the time when the settlement agent has received the duly executed deed, loan funds, loan documents, and other documents and funds required to carry out the terms of the contract between the parties, and the settlement agent reasonably determines that prerecordation conditions of such contracts have been satisfied. “Parties,” as used in this subdivision (15), means the seller, purchaser, borrower, lender and the settlement agent; and
16. (16) “Settlement agent” means the person, other than a mortgage lender, responsible for conducting the settlement and disbursement of the settlement proceeds, and includes any individual, corporation, partnership, or other entity conducting the settlement, collection and disbursement of loan proceeds.

§ 47-32-103. Application.

(a) This chapter applies to transactions involving loans made by mortgage lenders utilizing settlement agents, which loans shall be secured by deeds of trust or mortgages on real estate, on the following:
1. (1) Dwellings containing not more than four (4) residential units, regardless of the purpose of such dwellings;
2. (2) Vacant lots zoned or designated for use as residential property; or
3. (3) Agricultural land.
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- 47-32-105(a)
(b) This chapter does not apply to transactions involving loans made by mortgage lenders on:
1. (1) Commercial real estate; or
2. (2) Industrial or other real estate not included in subsection (a).

§ 47-32-104. Disbursement of loan funds to settlement agent.

(a) A mortgage lender, mortgage loan broker, mortgage loan servicer, or other person shall, at or before loan closing, cause disbursement of loan funds, in one (1) of the forms identified in § 47-32-102(3), to the settlement agent.
(b) In any transaction in which the borrower may exercise a right of rescission under the federal Truth-in-Lending Act, compiled in 15 U.S.C. § 1601 et seq., and applicable federal regulations and interpretations, a mortgage lender, mortgage loan broker, mortgage loan servicer, or other person, shall cause disbursement of loan funds to the settlement agent not later than the first business day after the expiration of the rescission period.

§ 47-32-105. Disbursement of funds by settlement agent from escrow or settlement account.

(a) No settlement agent shall disburse any funds from an escrow or settlement account in connection with a mortgage loan transaction identified in § 47-32-103(a), until:
1. (1) Disbursement of loan funds, designated for said mortgage loan, has been received by the settlement agent;
2. (2) Such additional funds necessary to be provided by the borrower or other third party to fully fund the transaction have been received. All additional funds required by this subdivision (a)(2) in excess of one thousand dollars ($1,000), shall be provided to the settlement agent in one (1) of the forms identified in § 47-32-102(3); and
3. (3) All documents required to complete the transaction have been executed and are deemed suitable for recording.
(b) In any transaction in which the borrower may exercise a right of rescission under the federal Truth-in-Lending Act, compiled in 15 U.S.C. § 1601 et seq., and the settlement agent has received loan funds prior to or on the first business day after the time the rescission right has expired, the settlement agent shall not disburse any settlement proceeds earlier than the first day after the expiration of the rescission period, and the settlement agent has determined that the borrower has not exercised the right of rescission.

§ 47-32-106. Noncompliance.

Failure to comply with this chapter shall not affect the validity or enforceability of any loan documents.

§ 47-32-107. Violations — Liability — Penalties — Frivolous actions.

(a) Any party violating this chapter is liable to any other party suffering a loss due to such violation, for any actual damages sustained, plus reasonable attorneys' fees. In addition, any party in violation of this chapter shall pay to the other party or parties suffering a loss an amount equal to one thousand dollars ($1,000), or double the amount of interest payable on the mortgage loan for the first sixty (60) days after the loan closing, whichever amount is greater.
(b) Any party may bring an action in chancery court for declaratory or injunctive relief to prevent any violations of this chapter.
(c) In any private action commenced under this chapter, upon finding that the action is frivolous, without legal or factual merit, or brought for the purpose of harassment, the court may require the person instituting the action to indemnify the defendant for any damages incurred, including reasonable attorneys' fees and costs.

Chapter 33 LIBOR Discontinuance and Replacement Act

§ 47-33-101. Short title.

This chapter is known and may be cited as the “LIBOR Discontinuance and Replacement Act.”

§ 47-33-102. Chapter definitions.

As used in this chapter:
1. (1) “Benchmark” means an index of interest rates or dividend rates that is used, in whole or in part, as the basis of, or as a reference for, calculating or determining a valuation, payment, or other measurement under or in respect of a contract, security, or instrument;
2. (2) “Benchmark replacement” means a benchmark, or an interest rate or dividend rate, that may be based in whole or in part on a prior setting of LIBOR, to replace LIBOR or an interest rate or dividend rate based on LIBOR, whether on a temporary, permanent, or indefinite basis, under or in respect of a contract, security, or instrument;
3. (3) “Benchmark replacement conforming changes”:
  1. (A) Means technical, administrative, or operational changes, alterations, or modifications that are associated with and reasonably necessary to the use, adoption, calculation, or implementation of a recommended benchmark replacement and that have been selected or recommended by a relevant recommending body; and
  2. (B) Includes, if, in the reasonable judgment of the calculating person, the benchmark replacement conforming changes selected or recommended pursuant to subdivision (3)(A) do not apply to the contract, security, or instrument or are insufficient to permit administration and calculation of the recommended benchmark replacement, other changes, alterations, or modifications that:
    1. (i) In the reasonable judgment of the calculating person, are necessary to permit administration and calculation of the recommended benchmark replacement under or in respect of the contract, security, or instrument in a manner consistent with market practice for substantially similar contracts, securities, or instruments and, to the extent practicable, the manner in which the contract, security, or instrument was administered immediately prior to the LIBOR replacement date; and
    2. (ii) Would not result in a disposition of the contract, security, or instrument for United States federal income tax purposes;
4. (4) “Calculating person” means, with respect to a contract, security, or instrument, a person responsible for calculating or determining a valuation, payment, or other measurement based on a benchmark, and may be the determining person;
5. (5) “Contract, security, or instrument” means a contract, agreement, mortgage, deed of trust, lease, instrument, other obligation, or security, whether representing debt or equity, and including an interest in a corporation, a partnership, or a limited liability company;
6. (6) “Determining person” means, with respect to a contract, security, or instrument, in the following order of priority:
  1. (A) A person so specified; or
  2. (B) A person with the authority, right, or obligation to do the following:
    1. (i) Determine the benchmark replacement that will take effect on the LIBOR replacement date;
    2. (ii) Calculate or determine a valuation, payment, or other measurement based on a benchmark; or
    3. (iii) Notify other persons of a LIBOR replacement date or a benchmark replacement;
7. (7) “Fallback provisions” means terms in a contract, security, or instrument that set forth a methodology or procedure for determining a benchmark replacement, including terms relating to the date on which the benchmark replacement becomes effective, without regard to whether a benchmark replacement can be determined in accordance with the methodology or procedure;
8. (8) “LIBOR” means, for purposes of the application of this chapter to a particular contract, security, or instrument, United States dollar LIBOR, formerly known as the London Interbank Offered Rate, as administered by ICE Benchmark Administration Limited, or a predecessor or successor thereof, and a tenor thereof, as applicable, that is used in making a calculation or determination thereunder;
9. (9) “LIBOR replacement date”:
  1. (A) Means:
    1. (i) In the case of one-week and two-month tenors of LIBOR, the effective date of this act; and
    2. (ii) In the case of all other tenors of LIBOR, the first London banking day after June 30, 2023, unless the relevant recommending body determines that the other LIBOR tenors will cease to be published or cease to be representative on a different date; and
  2. (B) Does not mean a date that affects one (1) or more tenors of LIBOR with respect to a contract, security, or instrument that:
    1. (i) Provides for only one (1) tenor of LIBOR, if the contract, security, or instrument requires interpolation and the affected tenor can be interpolated from LIBOR tenors that are not so affected; or
    2. (ii) Permits a party to choose from more than one (1) tenor of LIBOR and any of the tenors is not so affected or, if the contract, security, or instrument requires interpolation, the affected tenor can be interpolated from LIBOR tenors that are not so affected;
10. (10) “Recommended benchmark replacement” means a benchmark replacement based on SOFR, including a recommended spread adjustment and benchmark replacement conforming changes, that has been selected or recommended by a relevant recommending body with respect to the type of contract, security, or instrument;
11. (11) “Recommended spread adjustment” means a spread adjustment, or method for calculating or determining the spread adjustment, that:
  1. (A) Has been selected or recommended by a relevant recommending body for a recommended benchmark replacement for a particular type of contract, security, or instrument and for a particular term to account for the effects of the transition or change from LIBOR to a recommended benchmark replacement; and
  2. (B) May be a positive or negative value or zero (0);
12. (12) “Relevant recommending body” means the federal reserve board, the federal reserve bank of New York, or the Alternative Reference Rates Committee, or a successor to those entities; and
13. (13) “SOFR” means with respect to a day, the secured overnight financing rate published for that day by the federal reserve bank of New York, as the administrator of the benchmark, or a successor administrator, on the federal reserve bank of New York's website.

§ 47-33-103. Recommended benchmark replacement for certain contracts, securities, or instruments — Fallback provisions.

(a) On the LIBOR replacement date, the recommended benchmark replacement, by operation of law, is the benchmark replacement for a contract, security, or instrument that uses LIBOR as a benchmark and:
1. (1) Contains no fallback provisions; or
2. (2) Contains fallback provisions that result in a benchmark replacement, other than a recommended benchmark replacement, that is based in any way on a LIBOR value.
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(b) Following the effective date of this act, fallback provisions in a contract, security, or instrument that provide for a benchmark replacement based on or otherwise involving a poll, survey, or inquiries for quotes or information concerning interbank lending rates or an interest rate or dividend rate based on LIBOR must be disregarded as if not included in the contract, security, or instrument and are void.
(c)
1. (1) This subsection (c) applies to a contract, security, or instrument that uses LIBOR as a benchmark and contains fallback provisions that permit or require the selection of a benchmark replacement that:
  1. (A) Is based in any way on a LIBOR value; or
  2. (B) Is the substantive equivalent of § 47-33-104(a)(1), (a)(2), or (a)(3).
2. (2) A determining person has the authority under this chapter, but is not required, to select the recommended benchmark replacement as the benchmark replacement. The selection of the recommended benchmark replacement:
  1. (A) Is irrevocable;
  2. (B) Must be made by the earlier of either the LIBOR replacement date, or the latest date for selecting a benchmark replacement according to the contract, security, or instrument; and
  3. (C) Must be used in determinations of the benchmark under or with respect to the contract, security, or instrument occurring on and after the LIBOR replacement date.
(d) If a recommended benchmark replacement becomes the benchmark replacement for a contract, security, or instrument pursuant to this section, then all benchmark replacement conforming changes that are applicable to the recommended benchmark replacement become an integral part of the contract, security, or instrument by operation of law.
(e) This chapter does not alter or impair the following:
1. (1) A written agreement by all requisite parties that, retrospectively or prospectively, provides, without necessarily referring specifically to this chapter, that a contract, security, or instrument is not subject to this chapter. For purposes of this subdivision (e)(1), “requisite parties” means all parties required to amend the terms and provisions of a contract, security, or instrument that otherwise would be altered or affected by this chapter;
2. (2) A contract, security, or instrument that contains fallback provisions that would result in a benchmark replacement that is not based on LIBOR, including, but not limited to, the prime rate or the federal funds rate, except that the contract, security, or instrument is subject to subsection (b);
3. (3) A contract, security, or instrument subject to subsection (c) as to which a determining person does not elect to use a recommended benchmark replacement or as to which a determining person elects to use a recommended benchmark replacement prior to the effective date of this act, except that the contract, security, or instrument is subject to subsection (b); and
4. (4) The application to a recommended benchmark replacement of a cap, floor, modifier, or spread adjustment to which LIBOR had been subject pursuant to the terms of a contract, security, or instrument.
(f) Notwithstanding the uniform commercial code or another law of this state, this chapter applies to all contracts, securities, and instruments, including contracts with respect to commercial transactions and is not displaced by another law of this state.

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§ 47-33-104. Construction and effect of selection or use of a recommended benchmark replacement — Liability.

(a) The selection or use of a recommended benchmark replacement as a benchmark replacement under or in respect of a contract, security, or instrument by operation of § 47-33-103 constitutes:
1. (1) A commercially reasonable replacement for and a commercially substantial equivalent to LIBOR;
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  - 47-33-103(c)(1)(B)
2. (2) A reasonable, comparable, or analogous term for LIBOR under or in respect of the contract, security, or instrument;
3. (3) A replacement that is based on a methodology or information that is similar or comparable to LIBOR; and
4. (4) Substantial performance by a person of a right or obligation relating to or based on LIBOR under or in respect of a contract, security, or instrument.
(b) A LIBOR replacement date, or an event or condition giving rise to a LIBOR replacement date; the selection or use of a recommended benchmark replacement as a benchmark replacement; or the determination, implementation, or performance of benchmark replacement conforming changes, by operation of § 47-33-103, does not:
1. (1) Impair or affect the right of a person to receive a payment, or affect the amount or timing of the payment, under a contract, security, or instrument;
2. (2) Have the effect of discharging or excusing performance under a contract, security, or instrument for a reason, claim, or defense, including, but not limited to, a force majeure or other provision in a contract, security, or instrument;
3. (3) Have the effect of giving a person the right unilaterally to terminate or suspend performance under a contract, security, or instrument;
4. (4) Have the effect of constituting a breach of a contract, security, or instrument; or
5. (5) Have the effect of voiding a contract, security, or instrument.
(c) A person does not have liability for damages to another person, and is not subject to a claim or request for equitable relief, arising out of or related to the selection or use of a recommended benchmark replacement or the determination, implementation, or performance of benchmark replacement conforming changes, in each case, by operation of § 47-33-103, and the selection or use of the recommended benchmark replacement or the determination, implementation, or performance of benchmark replacement conforming changes does not give rise to a claim or cause of action by a person in law or in equity.
(d) Neither the selection or use of a recommended benchmark replacement nor the determination, implementation, or performance of benchmark replacement conforming changes, by operation of § 47-33-103, amends or modifies a contract, security, or instrument or prejudices, impairs, or affects a person's rights, interests, or obligations under or in respect of a contract, security, or instrument.
(e) Except as provided in § 47-33-103(a) or (c), this chapter does not create a negative inference or negative presumption regarding the validity or enforceability of:
1. (1) A benchmark replacement that is not a recommended replacement benchmark;
2. (2) A spread adjustment, or method for calculating or determining a spread adjustment, that is not a recommended spread adjustment; or
3. (3) A change, alteration, or modification to or in respect of a contract, security, or instrument that is not a benchmark replacement conforming change.

Chapter 50 Miscellaneous Provisions

§ 47-50-101. Private and corporation seals abolished.

The use of seals in or upon written contracts or other instruments of writing, whether of persons or of corporations, is abolished, and the absence of such seal therefrom, or its addition thereto, shall not affect its character or validity or legal effect in any respect.

§ 47-50-102. Assignable instruments — Suit by assignee.

Bonds with collateral conditions, bills or notes for specific articles or the performance of any duty, nonnegotiable notes for money and accepted orders shall be assignable, and suit may be prosecuted by the assignee in the assignee's own name.

§ 47-50-103. Written contracts prima facie evidence of consideration.

All contracts in writing signed by the party to be bound, or the party's authorized agent and attorney, are prima facie evidence of a consideration.

§ 47-50-104. Failure of consideration — Defense.

The want or failure, in whole or in part, of the consideration of a written contract, may be shown as a defense, total or partial, as the case may be, in an action on such contract, brought by anyone who is not an innocent and bona fide holder.

§ 47-50-105. Nonnegotiable orders for payment of money.

(a) When any person, by a nonnegotiable order in writing, signed by the person's proper hand, directs the payment of any money in the hands of another person, to any person whatsoever, or to the bearer, the money shall, by virtue thereof, be due and payable to the person to whom the order is drawn payable.
(b) Such order may be put in suit by the person to whom the money is made payable, against the person who drew the same, or against the person on whom it is drawn, after acceptance.
(c) No holder of such order shall prosecute any suit against the drawer, for the money therein specified, before the order has been first protested for nonacceptance, and notice thereof given to the drawer before action brought. If any such action be brought on any such order before such notice and refusal of payment by the drawer, the plaintiff shall be nonsuited, and pay costs.

§ 47-50-106. Action on instruments may be joint or several.

Upon any note or negotiable instrument, the holder may maintain a joint action against the maker and any one (1) or more of the sureties or endorsers; or a joint and several action against the maker and/or any one (1) or more of the sureties or endorsers.

§ 47-50-107. Action on protested bill may be joint or several.

Any person having a right to demand any sum of money due upon a protested bill of exchange may commence and prosecute an action for principal, interest, and charges of protest, against the drawer, endorsers, or other party, jointly, or against either of them separately.

§ 47-50-108. Effect of epidemic.

(a) Whenever the legally constituted health authorities of any incorporated town or city, or the mayor, in the absence of a board of health, in this state, shall officially announce the prevalence, as an epidemic, within the limits of such town or city, of any contagious or infectious disease of so malignant or dangerous a character as to suspend or seriously interrupt the business transactions of such town or city, as certified to by the health authorities, the owners or holders of any negotiable paper, such as notes, foreign or inland bills of exchange, or any other evidence of debt requiring demand and notice, or demand, notice, and protest, shall be excused from making such demand, giving such notice, and entering such protest while such epidemic prevails.
(b) Such demand, notice, and protest made, given, and entered within fifteen (15) days after such epidemic has been declared at an end by the health authorities or mayor is as binding upon the parties sought to be charged as if the same steps had been taken upon the day of the maturity of the paper.
(c) If any incorporated town or city within this state has lost, or shall lose, its corporate existence by a surrender or repeal of its charter, this section applies, in all respects, so far as may be practicable, to the territory, by whatsoever name it may be known or distinguished, embraced within the former corporate limits of such town or city.

§ 47-50-109. Procurement of breach of contracts unlawful — Damages.

It is unlawful for any person, by inducement, persuasion, misrepresentation, or other means, to induce or procure the breach or violation, refusal or failure to perform any lawful contract by any party thereto; and, in every case where a breach or violation of such contract is so procured, the person so procuring or inducing the same shall be liable in treble the amount of damages resulting from or incident to the breach of the contract. The party injured by such breach may bring suit for the breach and for such damages.

§ 47-50-110. Printed contract forms — Certain extracted products.

(a) Every printed portion of the text of contract forms and papers attached thereto which are used for the purchase or lease of products to be extracted either from the earth or from beneath the earth shall be printed in a type style of common usage and in a type size of not less than ten (10) point so that both the contract forms and attached papers may be clearly legible.
(b) Any printed contract form used after July 1, 1980, which violates this section shall be voidable at the option of the aggrieved party.
(c) This section does not apply to contract forms printed and used by the state of Tennessee.

§ 47-50-111. Direct molding — Unlawful duplication of goods.

(a) It is unlawful for any person to duplicate for the purpose of sale, any manufactured item made by another without the permission of that other person using the direct molding process described in subsection (c).
(b) It is unlawful for any person to sell an item duplicated in violation of subsection (a).
(c) The direct molding processes subject to this section is any direct molding process in which the original manufactured item was itself used as a plug for the making of the mold which is used to manufacture the duplicate item.
(d) Any person injured by a violation of this section may bring an action in a court of competent jurisdiction for an injunction prohibiting such violations. In addition, the injured person shall be entitled to actual damages incurred as a result of such violations, reasonable attorney's fees, and costs.
(e) This section applies only to items duplicated using a mold made on or after July 1, 1983.

§ 47-50-112. Contracts to be enforced as written.

(a) All contracts, including, but not limited to, notes, security agreements, deeds of trust, and installment sales contracts, in writing and signed by the party to be bound, including endorsements thereon, shall be prima facie evidence that the contract contains the true intention of the parties, and shall be enforced as written; provided, that nothing herein shall limit the right of any party to contest the agreement on the basis it was procured by fraud or limit the right of any party to assert any other rights or defense provided by common law or statutory law in regard to contracts.
(b) Any contract, security agreement, note, deed of trust, or other security instrument, in writing and signed or endorsed by the party to be bound, that provides that the security interest granted therein also secures other provisions or future indebtedness, regardless of the class of other indebtedness, be it unsecured, commercial, credit card, or consumer indebtedness, shall be deemed to evidence the true intentions of the parties, and shall be enforced as written; provided, that nothing herein shall limit the right of any party to contest the agreement on the basis that it was procured by fraud or limit the right of any party to assert any other rights or defense provided by common law or statutory law in regard to contracts.
(c) If any such security agreement, note, deed of trust, or other contract contains a provision to the effect that no waiver of any terms or provisions thereof shall be valid unless such waiver is in writing, no court shall give effect to any such waiver unless it is in writing.

§ 47-50-113. Disposition of personal property found in or on repossessed vehicle — Reclamation by owner.

(a) When a vehicle is repossessed in this state, the individual, business or agency involved in the repossession may not abandon any personal property found in or on the vehicle for a period of fourteen (14) days following the repossession; provided further, that the individual, business or agency and any other individual or entity may not sell or otherwise dispose of the personal property during this fourteen-day period, notwithstanding title 45 or this title. If the owner reclaims the personal property within the fourteen-day period, then the owner shall be given possession without payment of any charges or fees.
(b) For purposes of this section:
1. (1) “Personal property” means any and all movable property not permanently affixed to the vehicle; and
2. (2) “Vehicle” includes any:
  1. (A) Motor vehicle as defined in § 55-1-103;
  2. (B) Aircraft as defined in § 42-2-101;
  3. (C) Personal watercraft as defined in § 69-9-501;
  4. (D) Boat as defined in § 69-3-103;
  5. (E) Off-road vehicle as defined in § 47-25-1902;
  6. (F) Farm tractor as defined in § 55-1-104;
  7. (G) Tractor-drawn major farm implement subject to § 39-14-135; and
  8. (H) Industrial equipment operated by means of mechanical power upon which a person or property may be transported.

§ 47-50-114. Sales representatives — Commissions.

(a) As used in this section:
1. (1) “Commission” means compensation accruing to a sales representative for payment by a principal, the rate of which is expressed as a percentage of the dollar amount of orders or sales;
2. (2) “Principal” means a person who:
  1. (A) Manufactures, produces, imports, or distributes a product for wholesale;
  2. (B) Contracts with a sales representative to solicit orders for the product; and
  3. (C) Compensates the sales representative, in whole or in part, by commission;
3. (3) “Sales representative” means a person who contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission, but does not include one who places orders or purchases for such person's own account for resale; and
4. (4) “Termination” means the end of services performed by the sales representative for the principal whether by discharge, resignation, or expiration of a contract.
(b)
1. (1) The terms of the contract between the principal and sales representative shall determine when a commission becomes due.
2. (2) If the time when the commission is due cannot be determined by a contract between the principal and sales representative, the past practices between the parties shall control or, if there are no past practices, the custom and usage prevalent in this state for the business that is the subject of the relationship between the parties shall control.
3. (3) All commissions that are due at the time of termination of a contract between a sales representative and principal shall be paid within fourteen (14) days after the date of termination. Commissions that become due after the termination date shall be paid within fourteen (14) days after the date on which the commissions become due.
(c) When the contract between a sales representative and a principal is terminated and the contract was not reduced to writing, all commissions due shall be paid within fourteen (14) days of termination.
(d) A principal who, acting in bad faith, fails to comply with subsection (c) concerning timely payment may be liable in a civil action for exemplary damages in an amount which does not exceed treble the amount of the commissions owed to the sales representative. Additionally, such principal shall pay the sales representative's reasonable attorney's fees and court costs. If the court determines that an action to collect such exemplary damages has been brought on frivolous grounds, reasonable attorney's fees and court costs shall be awarded to the principal.
(e) A principal who is not a resident of this state and who enters into a contract subject to this chapter is considered to be doing business in this state for purposes of the exercise of personal jurisdiction over the principal.
(f) A provision of this chapter may not be waived, whether by express waiver or by attempt to make a contract or agreement subject to the laws of another state. A waiver of a provision of this chapter is void.
(g) This chapter does not invalidate or restrict any other right or remedy available to a sales representative or preclude a sales representative from seeking to recover in one (1) action on all claims against a principal.

§ 47-50-115. Reimbursement of federal excise taxes.

(a) When a contract calls for one party to reimburse the other party for the federal manufacturer's excise tax levied by Part III of Subchapter A of Chapter 32 of the Internal Revenue Code, whether as a separate item or as part of the price, there shall exist for the party making the reimbursement a contractual right relating to the timing of that payment which can be invoked at the option of such party as provided in subsection (b).
(b) The party making the reimbursement shall not be required to tender payment for such taxes more than one business day prior to the time the other party is required to remit such taxes to the internal revenue service.
(c) Should a party choose to exercise the option provided in subsections (a) and (b), the other party may demand security for the payment of the taxes in proportion to the amount such taxes represent compared to the security demanded on the contract as a whole. Such party, however, may not change the other payment terms of the contract without a valid business reason other than to exercise the option as provided in subsections (a) and (b), except to require the payment of such taxes under such option to be made by electronic transfer of funds.
(d) The party exercising the option set out in subsections (a) and (b) shall notify the other party in writing of the intent to exercise such payment option and the effective date of the exercise which shall be no earlier than thirty (30) days after the notice of intent is received or the beginning of the next federal tax quarter, whichever is later.
(e) This section applies to all contracts in effect on July 1, 1994, which have no expiration date and are continuing contracts, and to all other contracts entered into or renewed after July 1, 1994. Any contract in force and effect July 1, 1994, which, by its own terms, will terminate on a date subsequent thereto, shall be governed by the law as it existed prior to July 1, 1994.
(f) The option set out in subsections (a) and (b) shall not be construed to impair the obligation arising under any contract executed prior to July 1, 1994. Should the option set out in subsections (a) and (b) be exercised, it shall not relieve such party of the obligation to make the reimbursement as provided for in the contract but shall affect only the timing of when that reimbursement must be tendered.
(g) All laws and parts of laws in conflict with this section are repealed.

§ 47-50-116. References to 911 service restricted.

(a) It is unlawful for any individual or entity to make reference to 911 service, as authorized under title 7, chapter 86, in any advertisement if such reference is false, misleading, or deceptive. As used in this section, “advertisement” means any representation disseminated in any manner or by any means, other than by labeling, for the purpose of inducing the purchase of an item or service.
(b) A violation of this section is a Class C misdemeanor punishable only by a fine. An emergency communications district may seek an order from a court with competent jurisdiction enjoining a violator from such unlawful conduct. The court may award reasonable attorney fees and costs to a prevailing district in such case.

§ 47-50-117. Reimbursement of costs associated with clothing anti-theft security tags.

(a) When clothing is purchased that contains an anti-theft security tag and the tag is not removed at the time of purchase, and the customer resides more than a fifteen (15) minute commute from the retailer, the retailer shall reimburse the customer for mailing costs incurred by the customer in returning the item of clothing for removal of the tag. Upon showing proof of purchase of the item and proof of mailing costs, the retailer shall reimburse the customer for such costs.
(b) It is deemed to be an unfair business practice under the Consumer Protection Act, chapter 18 of this title, if a retailer fails to reimburse the customer in accordance with subsection (a).

§ 47-50-118. Refund on purchase price of ticket for cancelled performance or event.

(a) Upon cancellation of any performance or event for which a ticket for admission is sold, the ticketing service company that contracts to sell tickets for such event or performance at retail ticket outlets shall refund to all ticket purchasers the purchase price of the ticket plus any service fees or charges paid by the purchaser for such ticket.
(b) It is deemed to be an unfair business practice under the Consumer Protection Act, chapter 18 of this title, if a ticketing service company fails to refund the purchase price in accordance with subsection (a).
(c) Notwithstanding any law to the contrary, upon cancellation of any performance or event performed or arranged by a nonprofit corporation with an annual payroll of more than one hundred thousand dollars ($100,000) due to an earthquake, tornado, or other such natural disaster, such nonprofit corporation shall offer refunds to all ticket purchasers to such performance or event. After one hundred eighty (180) days after the cancellation of a performance or event due to an earthquake, tornado or other natural disaster, the nonprofit organization shall be entitled to the purchase price of all unclaimed tickets. It is the clear and unequivocal intent of the general assembly that this subsection (c) has retroactive application to January 1, 1998.

§ 47-50-119. Tentative ticket policy — Disclosure — Violation.

(a) A reseller shall not utilize a tentative ticket policy, unless disclosed to a ticket purchaser at the outset of the transaction, under which the reseller sells tickets that are not:
1. (1) Owned by the reseller;
2. (2) Under contract or any other agreement to be transferred to the reseller; or
3. (3) In the reseller's possession at the time of sale.
(b) Disclosure of a tentative ticket policy must include an approximate delivery date and the number of tickets that are guaranteed to be grouped together, including any designation by the venue of an assigned seating zone, section number, or seat number. If the reseller cannot guarantee specific seats because the tickets are not owned by the reseller, under contract or any other type of agreement to be transferred to the reseller, or in the reseller's possession, then the reseller shall disclose this fact to a ticket purchaser at the outset of the transaction. If the reseller is unsuccessful in securing the tentative tickets, then the reseller shall refund any deposit made by the purchaser of those tickets no later than ten (10) days after the date of the ticketed event.
(c) A violation of this section constitutes a violation of the Tennessee Consumer Protection Act of 1977, compiled in chapter 18, part 1 of this title.
(d) For the purpose of application of the Tennessee Consumer Protection Act of 1977, any violation of this section constitutes an unfair or deceptive act or practice affecting the conduct of trade or commerce and is subject to the penalties and remedies as provided by the Tennessee Consumer Protection Act of 1977. Each act in violation of this section constitutes a separate violation.

§ 47-50-120. Section definitions — Payment methods onsite parking — Payment information — Notice of alternative forms of payment.

(a) As used in this section, “on-site” means on the entity's property where the parking services are provided.
(b) If an entity requires on-site payment from a consumer for the parking of a motor vehicle on the entity's property, and the entity only accepts payment by use of a quick response (QR) code or a credit or debit card machine, then, in the event the QR code or the credit or debit card machine fails to operate correctly to process the payment transaction, the entity must:
1. (1) Accept payment from the consumer by cash, by check, or through a system that allows the consumer to provide the consumer's credit or debit card information over the phone; or
2. (2) Allow the consumer to leave the property without providing payment at the time.
(c)
1. (1) The entity may provide information to a consumer enabling the consumer to mail payment to the entity, or provide the consumer's credit or debit card information over the phone for payment of the services at a later date.
2. (2) If the entity does not provide the information described in subdivision (c)(1), then the consumer is not required to provide payment at a later date for the service.
(d) For a parking lot that is temporarily or continuously unattended, the entity shall provide notice of the alternative forms of payment accepted on a prominent sign located on the entity's property where payment is taken.

§ 47-50-121. Section definitions — Required disclosures for third party ticket resellers — Limitations on price changes.

(a) As used in this section:
1. (1) “Entertainment”:
  1. (A) Means a form of diversion, recreation, or show; and
  2. (B) Includes:
    1. (i) Theatrical or operatic performances;
    2. (ii) Concerts;
    3. (iii) Motion pictures;
    4. (iv) Shows or events at fair grounds;
    5. (v) Amusement parks; and
    6. (vi) Athletic games or competition, including football, basketball, baseball, boxing, tennis, hockey, or another sport;
2. (2) “Place of entertainment”:
  1. (A) Means a privately or publicly owned facility for entertainment for which an entry fee is charged; and
  2. (B) Includes a theater, stadium, arena, racetrack, museum, amusement park, or other place where performances, concerts, exhibits, or athletic games or contests are held;
3. (3) “Resale”:
  1. (A) Means a sale of a ticket for entrance to a place of entertainment located within the boundaries of this state, other than a sale by the operator or the operator's agent who is expressly authorized to make first sales of the tickets; and
  2. (B) Includes a sale made in person, or by means of telephone, mail, delivery service, facsimile, internet, email, or other electronic means, where the venue for which the ticket grants admission is located in this state;
4. (4) “Third-party ticket reseller” means an individual, firm, corporation, or other entity that:
  1. (A) Engages in the business of reselling tickets to a place of entertainment;
  2. (B) Operates an internet website or other electronic service that provides a mechanism for two (2) or more parties to participate in a resale transaction;
  3. (C) Facilitates resale transactions by means of an auction; or
  4. (D) Maintains an office, branch of an office, bureau, agency, or other entity for purposes of engaging in the business of reselling tickets to a place of entertainment; and
5. (5) “Ticket” means evidence of the right of entry to a place of entertainment located within this state.
(b) A third-party ticket reseller, ticket broker, ticket issuer, and ticket resale website shall disclose the total cost of a ticket, including all ancillary fees and service charges, to be paid in order to complete the purchase of a ticket, prior to the ticket being selected for purchase.
(c) The information required to be disclosed pursuant to subsection (b) must be disclosed in a clear and conspicuous manner and in dollars. If a ticket is sold through a website, then the information required to be disclosed must be displayed in the ticket listing prior to the ticket being selected for purchase. The information disclosed must not be false or misleading, and must not be presented more prominently, or in the same or larger size font, as the total price.
(d) The price of a ticket sold through a website must not increase after a consumer has selected a ticket for purchase, excluding reasonable fees for delivery of non-electronic tickets based on the delivery method selected by the purchaser prior to payment for the ticket.