Contracts/Uniform Commercial Code: Difference between revisions

The Uniform Commercial Code is one of the Uniform Acts that attempts to harmonise the law of the fifty U.S. states in the United States of America. It treats the law of sales and commercial transactions in the United States. This was the first of the Uniform Acts to be proposed, and is the longest and most elaborate such act. It is a joint project of the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI), and is colloquially known as the UCC.

The Uniform Commercial Code, in one or another of its several amendments, has been enacted in 49 of the 50 States. Louisiana, the sole holdout, has enacted most of the Code, but because that state's commercial law is based on civil law and the Napoleonic Code rather than on common law, it is difficult to harmonize procedure and terminology with the UCC.

The Uniform Commercial Code deals with the following subjects under consecutively numbered Articles:

1. General provisions, (including most definitions and rules for interpretation);
2. Sales, including article 2A, on leases;
3. Commercial paper, (including negotiable instruments, the validity of endorsements, and the rights of subsequent holders);
4. Bank deposits;
5. Letters of credit;
6. Bulk transfers, (recommended for repeal);
7. Warehouse receipts;
8. Investment securities;
9. Secured transactions (liens and security interests in chattel property);

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Conference of Commissioners on Uniform State Laws recommended that Article 6 of the UCC, dealing with bulk sales, be repealed as obsolete.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.

The controversy surrounding 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. 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 National Conference of Commissioners on Uniform State Laws responded by renaming Article 2B and promulgating it as the Uniform Computer Information Transactions Act. As of October 12, 2004, only Maryland and Virginia have adopted UCITA.

The overriding philosophy of the Uniform Commecial 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.

It 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 is perhaps the most questionable part of its underlying philosophy; it has been 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 they could be sued over.

See also: commercial law