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Uniform Commercial Code
MyWikiBiz, Author Your Legacy — Wednesday June 19, 2013
The Uniform Commercial Code (UCC or the Code) is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America. This objective is deemed important because of the prevalence today of commercial transactions that extend beyond one state (for example, where the goods are manufactured in state A, warehoused in state B, sold from state C and delivered in state D). The UCC deals primarily with transactions involving personal property (moveable property), not real property (immovable property).
The UCC is the longest and most elaborate of the uniform acts. It has been a long-term, joint project of the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI). Judge Herbert F. Goodrich was the Chairman of the Editorial Board of the original 1952 edition , and the Code itself was drafted by some of the top legal scholars in the United States, including such luminaries as Karl N. Llewellyn, Soia Mentschikoff, and Grant Gilmore. The Code, as the product of private organizations, is not itself the law, but only recommendation of the laws that should be adopted in the states. Once enacted in a state by the state's legislature, it becomes true law and is codified into the state’s code of statutes. When the Code is adopted by a state, it may be adopted verbatim as written by ALI/NCCUSL, or may be adopted with specific changes deemed necessary by the state legislature. Unless such changes are minor, they can affect the purpose of the Code in promoting uniformity of law among the various states.
The ALI/NCCUSL have also established a permanent editorial board for the Code. This board has issued a number of official comments and other published papers concerning the Code. Although these commentaries do not have the force of law, courts interpreting the Code often cite them as persuasive authority in determining the effect of one or more provisions. Courts interpreting the Code generally seek to harmonize their interpretations with those of other states that have adopted the same or a similar provision, except where specific aspects of the Code were changed by that state when adopting it, or where other aspects of state law require a different decision.
The Code, in one or another of its several revisions, has been enacted in all of the 50 states, as well as in the District of Columbia, the Commonwealth of Puerto Rico, Guam and the U.S. Virgin Islands. Louisiana has enacted most provisions of the UCC with the exception of Article 2, preferring to maintain its own civil law tradition for governing the sale of goods.
Louisiana jurisprudence refers to the sections of the UCC as “chapters” instead of articles, since the term “articles” is used to refer to provisions of the state’s Civil Code. However, the use of different terms for UCC articles is not unique to Louisiana; neighboring Arkansas also refers to UCC articles as “chapters”, the term for equivalent subdivisions in its code of statutes. (“Article” in that state's law generally refers to a subdivision of the Arkansas Constitution.)
The Uniform Commercial Code deals with the following subjects under consecutively numbered Articles:
|1||General Provisions||Definitions, rules of interpretation|
|2||Sales||Sales of goods|
|2A||Leases||Leases of goods|
|3||Negotiable Instruments||Banknotes and drafts (commercial paper)|
|4||Bank Deposits||Banks and banking, check collection process|
|4A||Funds Transfers||Transfers of money between banks|
|5||Letters of Credit||Transactions involving letters of credit|
|6||Bulk Transfers and Bulk Sales||Auctions and liquidations of assets|
|7||Warehouse Receipts, Bills of Lading and Other Documents of Title||Storage and bailment of goods|
|8||Investment Securities||Securities and financial assets|
|9||Secured Transactions||Transactions secured by security interests|
In 2003, a major revision of Article 2 modernizing many aspects (as well as changes to Article 2A and Article 7) was proposed by the NCCUSL and the ALI. Although being considered, there are no states that have yet adopted the revised version of Article 2.
In 1989, the National Conference of Commissioners on Uniform State Laws recommended that Article 6 of the UCC, dealing with bulk sales, be repealed as obsolete. It remains in force in several jurisdictions.
A major revision of Article 9, dealing primarily with transactions in which personal property is used as security for a loan or extension of credit, was enacted in many states with an effective date of July 1, 2001.
The controversy surrounding with what is now termed the Uniform Computer Information Transactions Act (UCITA) originated in the process of revising Article 2 of the UCC. The provisions of what is now UCITA were originally meant to be "Article 2B" within a revised Article 2 on Sales. As the UCC is the only uniform law that is a joint project of NCCUSL and the ALI, both associations must agree to any revision of the UCC (i.e., the model act; revisions to the law of a particular state only require enactment in that state). The proposed final draft of Article 2B met with controversy within the ALI, and as a consequence the ALI did not grant its assent. The NCCUSL responded by renaming Article 2B and promulgating it as the UCITA. As of October 12, 2004, only Maryland and Virginia have adopted UCITA.
The overriding philosophy of the Uniform Commercial Code is to allow people to make the contracts they want, but to fill in any missing provisions where the agreements they make are silent. The law also seeks to impose uniformity and streamlining of routine transactions like the processing of checks, notes, and other routine commercial paper. The law frequently distinguishes between merchants, who customarily deal in a commodity and are presumed to know well the business they are in, and consumers, who are not.
The UCC also seeks to discourage the use of legal formalities in making business contracts, in order to allow business to move forward without the intervention of lawyers or the preparation of elaborate documents. This last point is perhaps the most questionable part of its underlying philosophy; many in the legal profession have argued that legal formalities discourage litigation by requiring some kind of ritual that provides a clear dividing line that tells people when they have made a final deal over which they could be sued.
Section 2-207 / Battle of the Forms
One of the most tested sections of the UCC, Section 2-207, governs a "battle of the forms" between two business, giving rules as to whose boilerplate terms will survive a commercial transaction where multiple forms are exchanged.
The first step in a "battle of the forms" analysis is determining whether the UCC or the common law governs the transaction. Once it is determined that the UCC governs, courts will usually try to find which form constitutes the "offer." Usually this is a purchase order. Next, the acceptance with varying terms is examined. It is important to note whether the acceptance is expressly conditional to its own terms. If it is expressly conditional, it is a counteroffer, not an acceptance. If performance is completed after the counteroffer, with no express acceptance, then, under 2-207(3), the contract will exist of those terms on which the parties agree, together with UCC gap-fillers.
Assuming that the acceptance does not expressly limit acceptance to its own terms, it counts as an acceptance, even though it contains additional or different terms. The different terms from both the offer and acceptance are commonly "knocked out" of the contract and replaced with UCC gap-fillers. The additional terms go into the contract if they pass a three-part test in 2-207(2). First, the offer must not expressly limit acceptance to the terms of the offer. Second, the terms must not materially alter the contract (see Comments to 2-207). Third, the terms in question must not have been objected to.
The Uniform Commercial Code plays a significant part in the legal theories of far right groups such as the Christian Patriot movement, Sovereign Citizen Movement, and the Posse Comitatus. Their theory is that a secret treaty made in 1930 put the United States and other countries around the world in "bankruptcy" with the "international bankers" being the "creditor/rulers", who prefer commercial law to common law. An alternate theory, held by the Montana Freemen, is that an "affidavit of truth" submitted "in commerce" could create a lien which had to be paid, such as the "draft liens" created by LeRoy Schweitzer, who was eventually convicted of fraud and other federal crimes. The newer "redemption movement" even claims that the Uniform Commercial Code is now "actually the supreme law of the land". Some claim that because the UCC governs all human interaction in the US, using the language contained in §1-207 of UCC such as "without prejudice" or "under protest" protects the signer from being bound by any contract or that the signer is not recognizing a government's jurisdiction over the signer.
- ^ "False Patriots: Profiles of 40 antigovernment leaders — LeRoy Schweitzer". Southern Poverty Law Center Intelligence Report. Summer 2001. http://www.splcenter.org/intel/intelreport/article.jsp?pid=366#36.
- ^ "Beyond Redemption". Southern Poverty Law Center Intelligence Report. Winter 2002. http://www.splcenter.org/intel/intelreport/article.jsp?aid=74&printable=1.
- ^ Constitution Party of Pennsylvania, Accessed 2/5/2008.