The Uniform Commercial Code (UCC) is a set of statutes that govern various types of commercial transactions, and its principles are meant to be followed uniformly by the various American states. However, the UCC is not completely uniform, because a state may choose not to adopt it or may choose to adopt a modified version in order to accommodate that state’s commercial objectives. Fifty states, the District of Columbia, Guam, and the Virgin Islands follow the UCC; Louisiana has adopted only some parts of the code. In 1942 the American Law Institute and the National Conference of Commissioners on Uniform State Laws began a project to create a set of laws governing commercial transactions that would be followed collectively by all American states. The purpose of the project was to provide organizations with greater certainty as to the laws of commercial transactions across states, so that organizations would be more comfortable with conducting interstate business. In 1952 this project led to the creation of the official text of the UCC. The official text has been revised and amended several times over the years; however, the states are not required to continually adopt revised versions of the UCC. Despite the possibility of differences in the adoption of UCC provisions among states, the code has created greater uniformity in the COMMERCIAL LAWs of the various American states than there was prior to the UCC. As the UCC laws for each state may differ, businesses need to consult its rules, any official comments to the rules (generally printed after each rule), and any corresponding case law for each of the states in which they conduct business before engaging in commercial transactions covered by the UCC. The UCC consists of nine articles.
• Article 1 contains general provisions such as purposes of the UCC; and general definitions, including the definition of good faith.
• Article 2 governs the sale of goods; provides various definitions, including the definitions of goods, merchant, CONTRACT, agreement and termination; and regulates the form and formation of contracts for sales of goods. Article 2 also governs matters related to leases of goods.
• Article 3 governs NEGOTIABLE INSTRUMENTS such as notes, checks, and certificates of deposit (TIME DEPOSITS).
• Article 4 governs bank deposits and collections and attempts to provide uniformity for the collection processes of banks, and specifically deals with ELECTRONIC FUNDS TRANSFERs.
• Article 5 governs matters related to letters of credit issued by banks.
• Article 6 governs matters related to bulk sales of a seller’s inventory whereby the seller will not continue to operate the same or a similar business after the sale of the inventory.
• Article 7 deals with matters related to warehouse receipts, bills of lading, and other documents of title for wholesale transactions.
• Article 8 regulates the transfer and registration various types of INVESTMENT securities.
• Article 9 governs secured transactions, such as liens on PERSONAL PROPERTY and the use of personal property as collateral.
The UCC does not govern the sale of or secure interests in real estate, EMPLOYMENT agreements, or contracts that require the use of significant labor.
See also BILL OF LADING; LEASING; LETTER OF CREDIT; WARRANTY.