UCC Overview

The UCC basics can be very beneficial to understand if you are involved in any business in the United States, as they are the fundamental governing principles of the Uniform Commercial Code, which is the main body of law that governs commercial business within the country.

The UCC was created in 1952 by the National Conference of Commissioners on Uniform State Laws and the American Law Institute as a way to offer a consistent guideline for commerce in the United States. It is not a set of laws, but rather a set of best practice suggestions that each state can adapt and enact as they will. All fifty states have enacted some version of the UCC.

In its form, the UCC is comprised of nine different Articles. The first article defines the terms and rules to be used throughout the Code, while the following eight articles each govern a distinct kind of commerce or branch of commerce law.

UCC Article 2: Sale of Goods

One of the most important articles of the UCC is Article 2, which covers the sale of goods. Goods, as defined by the UCC, are moveable pieces of personal property that exist when the sale in the contract occurs. Items that can be considered goods may include:

  • Any manufactured item.
  • Livestock, including unborn stock in eggs or the womb.
  • Crops, both harvested and growing.

Items that cannot be considered goods may include:

  • Information.
  • Money.
  • Minerals and mined substances.
  • Investment securities, like stock.

Amongst other things, Article 2 suggests placing a greater legal burden on merchants, since they are presumed to have more experience in contract negotiation. It also details specific rules for selling to insolvent buyers, issues related to terms of delivery, the right to inspection, and rejecting unsatisfactory goods.

UCC Article 2A: Leases

Article 2A is a sub-article to Article 2, and it covers the leasing of goods, which are transactions in which the owner of a piece of property allows another party to use that property in exchange for regularly made payments. This article requires certain disclosures to be made to leasing consumers, including:

  • A detailed description of the property to be leased.
  • The amount to be paid in the lease and the payment schedule.
  • How late payments and defaults will be handled.

UCC Article 9: Leases

After Article 2, Article 9 is generally considered the most important article from the UCC, as its purpose is to regulate the rights of creditors and debtors when the extension of credit is made by the use of personal property. Such interests as might be covered by Article 9 could include:

  • Mortgages.
  • Liens.
  • Conditional sales of contracts.
  • Pledges.

Sometimes the same piece of collateral can be the subject of more than one security interest, and in such cases, Article 9 will control which of these interests will have priority. Additionally, Article 9 defines the order by which debts must paid off in bankruptcy or insolvency issues, with high priority debts taking precedence over those of low priority.

Article 9 is known as an especially difficult and intricate article for those without the proper legal training to grasp, but the main elements singled out in this article are attachment, or at what point the security interest was created, and perfection, or at what point the creditor’s interest will be placed within the order of priority. Article 9 details the circumstances necessary for attachment as well as the ways that a security interest can be perfected, which could include a statement of financing with a government agency, such as the Secretary of State.

UCC Article 6: Bulk Sales

Article 6 may be an important article to some business owners in certain circumstances, as it deals with bulk transfers, which is the sale of a business’s entire stock and possessions as might occur when the business is closing down.

UCC Article 8: Investment Securities

This article will be of interest to those who have or are considering having financial investments, as it covers issues related to the ownership and/or transfer of investment securities. These could include:

  • Stocks.
  • Bonds.
  • Shares in mutual funds.
  • Other types of ownership interest.
  • Certificates of deposit.

Aside from these, other sections of the UCC cover such topics as business negotiations, bank deposits, letters of credit, and warehousing issues. If you need help understanding the UCC basics, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.