Having the uniform commercial code explained can be very beneficial, since it is such a major set of regulations governing business transactions and dealings involving personal property. Essentially, the uniform commercial code, or UCC, is meant to standardize business laws in the United States and create uniformity across state business law. Its laws mostly apply to entrepreneurs and small business people, and topics covered may include:

  • Sales
  • Leases
  • Bank collections and deposits
  • Negotiable instruments
  • Letters of credit
  • Funds transfers
  • Bulk sales
  • Investment securities
  • Documents of title
  • Secured transactions

The UCC was created in 1952 to address two major problems in U.S. business, with those issues being:

  1. The increasing difficulty in managing the contractual and legal requirements of conducting business in the country.
  2. The differences in state laws that raised difficulties in conducting interstate commerce.

It does not, however, have the force of law but is rather merely a set of recommendations that only has the effect of law in the states it is adopted by. Although, it has, since its inception, come to be adopted in some form by all 50 states, the states being free to vary their laws from the provisions in the UCC.

The UCC’s 9 Articles

There are nine articles that make up the UCC, and they are:

  1. General Provisions. This defines terms to be used in the Code, as well states the rules for interpretation of the provisions to follow.
  2. Sales. This covers the transaction of goods, although it does not cover transactions that involve unconditional contracts of sale, nor does it repeal any statute that regulates sales to farmers, general consumers, or any other specific class of buyer.
  3. Negotiable Instruments. This covers topics concerning negotiations, although it does not cover money, payment orders covered in Article 4, or securities covered in Article 8. It also may be overruled by provisions in Articles 4 through 9, should there be a conflict between Article 3 and those articles. Regulations of the Federal Reserve Banks and Board of Governors of the Federal Reserve System also overrule.
  4. Bank Deposits. This covers what a bank may be liable for in regards to action or non-action relating to an item it handled for presentation, collection, or payment. However, local laws where the bank is located will take precedence.
  5. Letters of Credit. This covers issues related to letters of credit, including obligations and rights relating to transactions that involve letters of credit.
  6. Bulk Transfers. This covers asset liquidation and bulk sales auctions.
  7. Warehouse Receipts, Bills of Lading, and Other Documents of Title. This covers the bailment and storage of goods.
  8. Investment Securities. This covers equity interests or shares issued by registered investment companies regulated by federal investment company laws, interests in unit investment trusts that are similarly registered, or face-amount certificates issued by face-amount certificate companies similarly registered. This does not cover insurance policies, endowment policies, or annuity contracts issued by insurance companies.
  9. Secured Transactions. This covers any transaction that creates a security interest related to fixtures by contract or personal property; agricultural liens; the sale of accounts, payment intangibles, promissory notes, or chattel paper; consignments; and security interests.

These articles are further divided into parts and sections, with each section containing one UCC rule.

UCC Official Comments

Because the UCC’s individual sections can often be difficult to understand for those not well-versed in business law, reading the Official Comments related to that section can be helpful. These are written under the authority of the UCC Permanent Editorial Board in relatively plain English, and often with explanatory examples. Along with being a useful guide to the UCC, they may also be helpful in interpreting a state’s commercial code, as said code will be based on the UCC model. Unfortunately, such commentary may not always be available for free.

UCC Amendments

Since its inception in 1952, the UCC has had many revisions that incorporated many new amendments to it. However, these amendments have not always been adopted by the states, so you should be sure to check your state’s commercial code to see where they stand on UCC amendments.

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