Key Takeaways

  • The UCC defines “goods” as all things movable at the time of identification to the contract for sale.
  • Goods under UCC do not include real estate, services, intangible assets, or money used as payment.
  • Goods must be existing, tangible, and identifiable to be governed by UCC Article 2.
  • The UCC applies primarily to commercial transactions between merchants but can apply to consumers in some cases.
  • Certain transactions involving software, fixtures, or mixed sales (goods + services) may fall outside the scope of UCC.
  • Legal interpretation and case law continue to shape what qualifies as a "good" under UCC 2-105.

The uniform commercial code definition of goods refers to a collection of broad business laws that are used to regulate commercial business services in the United States.

What Is the Uniform Commercial Code?

The Uniform Commercial Code (UCC) covers many commercial business aspects, but it most commonly refers to contracts. The American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL) initially created the code.

The code was created in an attempt to create consistency across business practices in the United States. It also makes commercial laws more simplified, clear, and relatable to current business practices. The Uniform Commercial Code includes:

  • Business term definitions
  • Contract guidelines
  • Contract resolution techniques.

The Uniform Commercial Code is separated into 11 articles:

  • General sales provisions
  • Sale of goods
  • Lease terms and contracts
  • Negotiable instruments
  • Bank deposits and collections
  • Funds transfers
  • Letters of credit
  • Bulk transfers/bulk sales
  • Documents of title
  • Investment securities
  • Secured transactions.

UCC Versions and Amendments

The first copy of the Uniform Commercial Code was created in 1952. Since then, the code has been edited and updated many times to reflect changing business practices better. Additionally, different states implement updates to the UCC on their own schedule.

It is important to remember the UCC is not actually legally binding. It is more of a guide for business owners across the country. Instead, business owners are actually bound under their state commercial codes. Many of the states have legal regulations that are similar to what you will find in the UCC. However, it is important to always check state-specific codes before making business decisions.

Interpreting the Term “Goods” in Legal Disputes

Courts often play a key role in interpreting the definition of goods, especially in disputes where classification is unclear. For example:

  • In hybrid transactions involving both goods and services (e.g., installing custom kitchen cabinetry), courts apply the “predominant factor test” to determine whether the contract primarily concerns goods or services.
  • If the contract cannot be classified neatly as a sale of goods, it may fall outside the UCC and be governed by common law principles instead.
  • Judicial precedents help clarify gray areas, such as the treatment of software, licensing agreements, and digital goods.

Attorneys may reference court decisions and official UCC comments to support their interpretation when negotiating contracts or litigating disputes.

Beyond the Rules: The Official Comments

The Uniform Commercial Code contains both legal terms that some might find difficult to read and official comments. The official comments are used to provide a clear and concise translation of the specific code. Many of the official comments will also include specific case examples. The official comments, however, are not included on every copy of the UCC.

The Uniform Commercial Code › U.C.C. - § 2-105

The UCC clearly stipulates that it applies to contracts used for the sale of commercial goods. Furthermore, the UCC defines the sale of goods as items that are movable. This can refer to:

  • Natural resources
  • Technological equipment
  • Any other tangible item.

The UCC does exclude from its codes the sale of:

  • Real estate or land
  • Services
  • Intangible items.

Money that is used as a payment form is also excluded from being included in the definition of goods. The goods involved in a sale must include the following aspects:

  • The goods must be movable at the time of the contract.
  • The goods must be existing and identifiable before an agreement of purchase is made.
  • The sale can include partial interest in the goods.
  • An undivided share of goods can be sold, and the quantity does not have to be calculated as it does in partial goods.
  • The sale of lots must include a single item or a parcel and is a separate delivery or sale.
  • Commercial units must include goods that are used for commercial usage. Goods for commercial use can be sold as a single item or a number of items.

Expanded UCC Definition of Goods and Practical Implications

Under U.C.C. § 2-105, “goods” are broadly defined as all things (including specially manufactured goods) that are movable at the time of identification to the contract. This includes manufactured items, crops, unborn animals, and other tangible personal property. However, the following elaborations are important for practical application:

  • Movability at the Time of Sale: Goods must be capable of being moved from one place to another. Fixtures attached to real property or items embedded in land (e.g., buildings) are excluded.
  • Tangible and Existing: Future goods or those not yet in existence may still be covered under UCC but differ in treatment. For example, crops to be harvested or goods to be manufactured after the contract are future goods.
  • Specially Manufactured Goods: These are custom items not suitable for sale to others in the ordinary course of the seller’s business and are included under UCC protections.
  • Software and Digital Products: Prepackaged, off-the-shelf software stored on tangible media may qualify as goods. However, downloadable software and purely digital products may fall outside the UCC's scope unless tied to a physical medium or device.

UCC Exclusions to the Sale of Goods

The Uniform Commercial Code regulates the sale of goods. However, there are a few sales situations that the UCC does not include under its code regulations. The UCC only includes the sales from merchants with specialized knowledge. Any sales between two private parties would not be included in the UCC requirements.

The UCC also only applies to the sale of goods. This can be confusing in some industries when there is a question as to whether services or goods are actually being sold. Items such as oil, minerals, and gas can be questionable. But they are often not regulated by the UCC and are included in real estate sales.

When the UCC Does Not Apply to Goods Sales

Although UCC Article 2 governs most sales of goods, it does not apply in every transaction involving tangible items. The UCC does not apply in the following situations:

  • Service-Dominant Transactions: If the primary purpose of the contract is for services, and goods are incidental, the UCC likely won’t govern the agreement. Courts use the “predominant purpose test” to determine whether the goods or services element dominates.
  • Real Estate and Fixtures: Sales involving land, buildings, or items affixed to real property fall outside Article 2. For instance, a contract to sell a home is not governed by the UCC.
  • Intangibles and Intellectual Property: Licensing rights, patents, trademarks, stocks, and bonds are intangible and not classified as goods.
  • Sales Involving Non-Merchants: While the UCC can apply to transactions between non-merchants, many of its provisions are default rules and may be overridden by mutual agreement. However, some provisions are specific to merchant-to-merchant transactions and may not apply to casual or consumer sales.

Do I Need a Lawyer for Help with Contracts for Sales of Goods?

UCC laws can be complex and complicating. A business lawyer can assist with:

  • Researching current UCC state laws.
  • Drafting a contract.
  • Editing existing sales contracts.

A business attorney can also assist you in contract disputes that can lead to lawsuits.

Frequently Asked Questions

  1. What qualifies as a good under the UCC?
    A good is any movable, tangible item identifiable to a sales contract, including manufactured goods, animals, and crops.
  2. Are services covered under the UCC?
    No, services are not considered goods and are not governed by Article 2 of the UCC. Mixed contracts may be partially governed if the sale of goods predominates.
  3. Does software count as a good under the UCC?
    Only software sold on a physical medium may qualify. Downloadable software or licenses generally do not fall under UCC unless embedded in a tangible product.
  4. Can the UCC apply to non-merchant sales?
    Yes, but many merchant-specific rules don’t apply. The UCC can still govern the sale if the subject is classified as a good.
  5. What is the predominant purpose test?
    It’s a legal standard used to determine whether a mixed contract involving both goods and services should fall under UCC rules based on which element is dominant.

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