The Uniform Commercial Code (UCC), first published in 1952, is one of several uniform acts established as law with the goal of harmonizing the laws of sales and other commercial transactions across the United States through UCC adoption by all 50 states, the District of Columbia, and the territories of the United States.
While largely successful at achieving this ambitious goal, some U.S. jurisdictions (e.g., Louisiana and Puerto Rico) have not adopted all of the articles contained in the UCC, while other U.S. jurisdictions (e.g., American Samoa) have not adopted any articles in the UCC. Also, adoption of the UCC often varies from one U.S. jurisdiction to another. Sometimes this variation is due to alternative language found in the official UCC itself. At other times, adoption of revisions to the official UCC contributes to further variation. Additionally, some jurisdictions deviate from the official UCC by tailoring the language to meet their unique needs and preferences. Lastly, even identical language adopted by any two U.S. jurisdictions may nonetheless be subject to different statutory interpretations by each jurisdiction's courts.
Goals The goal of harmonizing state law is important because of the prevalence of commercial transactions that extend beyond one state. For example, goods may be manufactured in State A, warehoused in State B, sold from State C, and delivered in State D. The UCC achieved the goal of substantial uniformity in commercial laws and, at the same time, allowed the states the flexibility to meet local circumstances by modifying the UCC's text as enacted in each state. The UCC deals primarily with transactions involving personal property (movable property) and not real property (immovable property).
Other goals of the UCC were to modernize contract law and to allow for exceptions from the common law in contracts between merchants.
History
In 1837, U.S. Supreme Court Justice Joseph Story opined that while most of the common law cannot be codified, the law of commercial contracts was sufficiently clear and stable. This collaboration between the American Law Institute and Uniform Law Commission has produced the longest and most elaborate of the uniform acts. NCCUSL and ALI began drafting the first version of the UCC in 1945, following earlier, less comprehensive codification efforts for areas including the sale of goods across state lines.
Judge Herbert F. Goodrich was the chairman of the editorial board of the original 1952 edition, and the Code itself was drafted by legal scholars including Karl N. Llewellyn (the prime leader in the project), William A. Schnader, Soia Mentschikoff, and Grant Gilmore. The UCC contained principles and concepts borrowed from German law, although they were unacknowledged by Llewellyn.
The Code, as the product of private organizations, is not itself the law, but only a recommendation of the laws that should be adopted in the states. Once enacted by a state, the UCC is codified into the state's code of statutes. A state may adopt the UCC verbatim as written by ALI and NCCUSL, or a state may adopt the UCC with specific changes. Unless such changes are minor, they can seriously obstruct the Code's express objective of promoting uniformity of law among the various states. Thus, persons doing business in various states must check local laws.
The ALI and NCCUSL have established a permanent editorial board for the Code. This board has issued a number of official comments and other published papers. 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.
In one or another of its several revisions, the UCC has been fully enacted with only minimal changes in 49 states, as well as in the District of Columbia, Guam, the Northern Mariana Islands,5 C.M.C. § 1101 et seq. and the U.S. Virgin Islands. Louisiana, and Puerto Rico have enacted most of the provisions of the UCC with only minimal changes, except Articles 2 and 2A, preferring instead to maintain their own civil law tradition for governing the sale and lease of goods.La. R.S. 10:101-1 et seq.P.R. Laws Ann. tit. 19, § 401 et seq. Also, some Native American tribes have adopted portions of the UCC, including the Navajo Nation, which has adopted Articles 1, 2, 3, and 9 with only minimal changes.Navajo Nation Code tit. 5A, § 1-101 et seq.
Although the substantive content is largely similar, some states have made structural modifications to conform to local customs. For example, Louisiana jurisprudence refers to the major subdivisions of the UCC as "chapters" instead of articles, since the term "articles" is used in that state to refer to provisions of the Louisiana Civil Code. Arkansas has a similar arrangement as the term "article" in that state's law generally refers to a subdivision of the Arkansas Constitution. In California, they are titled "divisions" instead of articles, because, in California, articles are a third- or fourth-level subdivision of a code, while divisions or parts are always the first-level subdivision. Also, California does not allow the use of hyphens in section numbers because they are reserved for referring to ranges of sections; therefore, the hyphens used in the official UCC section numbers are dropped in the California implementation.
UCC articles The 1952 Uniform Commercial Code was released after ten years of development, and revisions were made to the Code from 1952 to 2022. The Uniform Commercial Code deals with the following subjects under consecutively numbered Articles:
Art. Title Contents 1 General Provisions Definitions, rules of interpretation 2 Sales Sales of goods 2A Leases Leases of goods 3 Negotiable Instruments Promissory notes and drafts (commercial paper) 4 Bank Deposits and Collections 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 interests12 Controllable Electronic Records (CERs) Transactions involving digital assets
In 2003, amendments to Article 2 modernizing many aspects (as well as changes to Article 2A and Article 7) were proposed by the NCCUSL and the ALI. Because no states adopted the amendments and, due to industry opposition, none were likely to, in 2011 the sponsors withdrew the amendments. As a result, the official text of the UCC now corresponds to the law that most states have enacted.What Can We Learn from the Failed 2003-2005 Amendments to UCC Article 2. Miller, F.H. 52 S. Tex. L. Rev. 471 (2010–2011). Retrieved from https://heinonline.org/HOL/LandingPage?handle=hein.journals/stexlr52&div=30&id=&page=.
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. Approximately 45 states have done so. Two others have followed the alternative recommendation of revising Article 6.
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 all states. The revision had a uniform effective date of July 1, 2001, though in a few states it went into effect shortly after that date. In 2010, NCCUSL and the ALI proposed modest amendments to Article 9. Several states have already enacted these amendments, which have a uniform effective date of July 1, 2013.
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" on Licenses 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 had 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 such as 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.
Article 2 Article 2 deals with sales, and Article 2A deals with leases.
Contract formation Firm offers (offers to buy or sell goods and promising to keep the offer open for a period of time) are valid without consideration if signed by the offeror, and are irrevocable for the time stated on the purchase order (but no longer than three months), or, if no time is stated, for a reasonable time. An offer to buy goods for "prompt shipment" invites acceptance by either prompt shipment or a prompt promise to ship. Therefore, this offer is not strictly unilateral. However, this "acceptance by performance" does not even have to be by conforming goods (for example, incomplete sets). Consideration—modifications without consideration may be acceptable in a contract for the sale of goods. Failure to state price—In a contract for the sale of goods, failure to state a price will not prevent the formation of a contract if the parties' original intent was to form a contract. A reasonable price will be determined by the court. Assignments—a requirements contract can be assigned, provided the quantity required by the assignee is not unreasonably disproportionate to the original quantity.
Contract repudiation and breach Nonconforming goods—If non-conforming goods are sent with a note of accommodation, such tender is construed as a counteroffer, and if accepted, forms a new contract and binds the buyer at previous contract price. If the seller refuses to conform and the buyer does not accept, the buyer must return all non-conforming goods at sellers expense within 30 days of receipt. Perfect tender—The buyer however does have a right of "perfect tender" and can accept all, reject all, or accept conforming goods and reject the rest; within a reasonable time after delivery but before acceptance, he must notify the seller of the rejection. If the buyer does not give a specific reason (defect), he cannot rely on the reason later, in legal proceedings (akin to the cure before cover rationale). Also, the contract is not breached per se if the seller delivered the non-conforming goods, however offensive, before the date of performance has hit.