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Be Careful What You Look For: It Could Be an Authenticated Record

By Mark I. Rabinowitz, Heather Sonnenberg and James Timko
August 05, 2004

A recent bankruptcy court decision out of the District of Delaware found that a document contained on a Web site was an authenticated notice under UCC 9-404 notwithstanding the lack of affirmative action taken by the assignor or assignee. In re Communications Dynamics, Inc. WL 22345713 (Bankr. D. Del. 2003) is the first decision in which the authentication requirement to an account debtor in Section 9-404(a)(2) of the Uniform Commercial Code (UCC) is interpreted. This holding adds a new element to the UCC's definition of authentication and seems to ignore the plain language of the Code. This decision could have an impact on the leasing industry as the definition of an account debtor under Section 9-102(a)(3) of the UCC includes not only a lessee but will also include a lessor in conjunction with its own accounts payable.

'Authenticate' and the UCC

UCC Section 9-102(7) defines “authenticate” as: “(A) to sign; or (B) to execute or otherwise adopt a symbol, or encrypt or similarly process a record with the present intent of the authenticating person to identify the person and adopt or accept a record.” The definition of “authenticate” refers to a “record” which the UCC defines as: “information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.” UCC '9-102(69). According to the Official Comments, the term “authenticate” replaces “sign” and “record” replaces “writing” and “written” in many of the provisions in revised Article 9. UCC '9-102 cmt. 9(a)-(b). The adoption of these terms is meant to modernize the UCC and to deal with rapidly developing technology. UCC '9-102 cmt. 9(a). The UCC is very broad in its approach to the adoption of new technology; even a message left on a “digital voice messaging system” can qualify as a record. Id. The only limitation expressed by the drafters was that “human memory does not qualify as a record.” Id.

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