The Uniform Commercial Code (“UCC”) is a comprehensive modernization of the law governing commercial transactions[i]. It is designed to simplify the law, clarify it, and to ensure uniformity in the adopting states.
The UCC provides for the uniqueness of commercial law as an appropriate field for achieving uniformity of law. One of the UCC’s primary goals is to promote certainty and predictability in commercial transactions.
The objective of the UCC is to bring all the phases of commercial transactions under one statute and to simplify, clarify, modernize, and make uniform commercial law[ii].
The purposes and policies of the UCC are[iii]:
- to simplify, clarify, and modernize the law governing commercial transactions;
- to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and
- to make uniform the law among the various jurisdictions.
The purpose of the UCC, which is written in terms of current commercial practices, is to meet the contemporary needs of a fast-moving commercial society. The UCC changes and simplifies much of the law which it supplants and also sets forth many safeguards against bad commercial practices[iv].
The freedom to contract norm under the UCC provides both a reasonable opportunity for the parties to structure their licensing agreements and the flexibility needed to inject regulatory interventions where needed.
The broad themes of the UCC include:
- reaffirmation provision which provides that the express terms of an agreement control the contours of the bargain and that most provisions on presumed obligations and risk allocation are subject to contract agreement.
- practical construction of an agreement and an effort to preserve the agreement where possible. Under the UCC more contracts are found to be enforceable than under common law doctrines of interpretation.
- an emphasis on the intent of the parties. Although the UCC provides a lot of gap fillers or default provisions, where the intent of the parties can be determined it usually overrides the UCC default provisions.
- to prevent discriminatory pricing, the UCC prevents suppliers from charging two buyers with identical pricing provisions in their respective contracts different prices for arbitrary or discriminatory reasons.
- all transactions are governed by an assumption of good faith. An obligation of good faith is imposed on the performance and enforcement of every contract or duty within the UCC.
- judicial power to avoid unconscionable terms.
[i] Atlas Thrift Co. v. Horan, 27 Cal. App. 3d 999, 1003 (Cal. App. 3d Dist. 1972)
[ii] Stephenson v. First Union Nat’l Bank (In re Berry), 189 B.R. 82, 85 (Bankr. D.S.C. 1995)
[iii] Uniform Commercial Code § 1-103
[iv] Arcuri v. Weiss, 198 Pa. Super. 506 (Pa. Super. Ct. 1962)