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Uniform Commercial Code

The Uniform Commercial Code (UCC) is a set of laws that provide legal rules and regulations governing commercial or business dealings and transactions.  The UCC regulates the transfer or sale of personal property.  The UCC does not address dealings in real property.  On the whole, the UCC standardizes business laws in the U.S. and seeks uniformity amongst the states.

The code was first published in 1952 and has been revised numerous times throughout the years.  The code is a recommendation of laws that can be adopted by the various states.  The code has the effect of law only when it is adopted by different states.  The UCC has been adopted by all 50 states of the U.S, although with variations.  It is the longest and most elaborate of the uniform acts.  The UCC is applicable to small business people and entrepreneurs.

The UCC can be considered a statutory program under the law of administering, legalizing, and recording contracts and lien instruments.  Collectively, the UCC can be explained as a comprehensive modernization of various statutes relating to commercial transactions.  This includes sales, lease, negotiable instruments, bank deposits and collections, funds transfers, letters of credit, bulk sales, documents of title, investment securities and secured transactions.

The UCC was developed to address two growing problems in U.S. business:

  • the increasingly unmanageable legal and contractual requirements of doing business, and
  • differences in state laws that made it difficult for business people from different states to do business with one another.

The code is divided into nine articles, each containing provisions that relate to a specific area of commercial law.  The UCC deals with sales, leases, negotiable instruments, bank deposits, funds transfers, letters of credit, bulk transfers and bulk sales, warehouse receipts, bills of lading and other documents of title, investment securities, and secured transactions.

The business conducted in different states should comply with the laws of the different states.  This is because even though the substantive nature of all the commercial acts in the states are the same, there are structural differences in the acts based on the local customs of each state.

The UCC allows people to make contracts according to their needs.  However, the code requires the filling of missing provisions with UCC provisions where parties to the agreement are silent or fail to include in the agreement.  The code imposes uniformity and streamlining in transactions like processing of checks, notes, and other routine commercial paper.  The code also provides different provisions depending on whether one is a merchant or a consumer.  This is because merchants are more familiar with commerce than individual  consumers.  The UCC also minimizes the use of legal formalities while making business contracts.  This helps in reducing intervention by lawyers.  The instruments will also be brief and precise if there is minimum legal intervention.  Minimum legal intervention is desired by merchants and customers because it is more efficient.

The UCC is periodically reviewed and revised by the National Conference of Commissioners on Uniform State Laws (NCCUSL), and the American Law Institute (ALI) to meet new needs.  The NCCUSL and ALI include the official comments and cross references from prior uniform acts into the code.  Other than the code, the official comments are treated as authority in the construction of state statutes.

Most UCC transactions involve secured property, financed by a bank or lender with the title to the property held by the lender as security until the loan is paid off.  The UCC also eradicated some ambiguities and differences in state laws.  The code now requires that contracts for sale or purchase of goods worth $500 should be in writing to be enforceable.

The UCC Section (Section) is the central filing office for financing statements and other documents under the UCC.  The Section’s main objective is to review all documents for statutory compliance, then accept or reject the documents.  All accepted documents are processed in a timely manner, recorded, filed, and made available to the public upon request.

Inside Uniform Commercial Code