UCC Law Definition: Everything You Need to Know
The UCC law definition is a collection of codified, standardized, and modernized laws which apply to all commercial transactions in the United States.3 min read
2. Legal Enforcement of the UCC
3. Uniform Commercial Code Articles
The UCC law definition is a collection of codified, standardized, and modernized laws which apply to all commercial transactions in the United States, except those pertaining to real property. During the 19th century, there was a movement toward achieving some uniformity between state laws, and the UCC was one of the laws that came about. The National Conference of Commissioners on Uniform State Laws, the American Bar Association, and the American Law Institute helped develop the UCC. Since it was enacted, the UCC continues to undergo regular revisions.
UCC stands for the Uniform Commercial Code. Some examples of commercial transactions covered under the UCC that deal with financial and sales transactions include:
- Sale of goods
- Conduct of business
- Bank transactions
- Loans that are secured by personal property
History of the Uniform Commercial Code
The UCC was created to address two main growing problems in American commercial businesses:
- Legal and contractual requirements of opening and operating a business, which were becoming incredibly cumbersome.
- Disparities in individual state laws that made it challenging for companies domiciled in different states to conduct business with each other.
Business owners and legislators realized that they needed to have assistance to facilitate easier interstate commerce transactions and curtail the trend of extremely detailed contracts. Business owners also voiced support for one set of standardized laws that would apply across the board and cover all goods and services exchanges. These laws could cover any discrepancies in state laws and eliminated the need for business owners adding every detail imaginable to their contracts.
In 1890, the American Bar Association suggested that states create a list of different areas of law that could be more unified between the states. In addition, they requested the states introduce different legislative changes to make them work. In 1892, the NCCUSL, or the National Conference of Commissioners on Uniform State Laws, held their initial meeting in New York. However, there were only seven states represented.
By the 1930s, the commerce governing acts were becoming fragmented, so the UCCUSL proposed a revision of the uniform codes to combine them into one set of model laws. In 1941, the ALI, or American Law Institute, was on board with the discussions, and, over the course of the next few years, they drafted a number of versions of the UCC.
The final draft was completed in 1951, and it was approved by the NCCUSL and ALI, who then got approval from the American Bar Association's House of Delegates. There were some additional changes and a few amendments, but the official version was published in 1952.
Legal Enforcement of the UCC
The Uniform Commercial Code is only a recommendation or model for what a state's commercial code might look like. On its own, the UCC has no legal force. Today, every state has adopted some variation of the UCC, and those are enforceable laws.
Pennsylvania and Massachusetts were the first two states to adopt the Uniform Commercial Code. By 1967, all the states, minus Louisiana and the District of Columbia, adopted the UCC. Some states adopted the whole UCC while others adopted portions. Eventually, Louisiana adopted a majority of it as well.
Uniform Commercial Code Articles
The UCC has 10 articles:
- Article 1 — General provisions and definitions.
- Article 2 — Sales contracts, creditors, legal remedies for breach of contract, and more.
- Article 3 — Covers negotiation and transfer, party liability, rights of a holder, and replaced the Uniform Negotiable Instruments Law.
- Article 4 — Customer relations, collections, deposits, and it incorporated a majority of the Bank Collection Code from the American Bankers Association.
- Article 5 — Letters of credit.
- Article 6 — Bulk transfers.
- Article 7 — Bills of lading, warehouse receipts, and other documents of title.
- Article 8 — Replaced the Uniform Stock Transfer Act and deals with issuing, purchasing, and registering investment securities.
- Article 9 — Account sales, chattel paper, and secured transactions; important for small business owners.
- Article 10 — Gives states the right to set an effective date for enactment and list what specific laws are being repealed once the UCC is enacted.
There is a permanent editorial board for the UCC, and any amendments address new developments in commerce, like personal property leasing and electronic funds transfers. States can then decide whether to adopt the amendments and revisions.
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