UNIFORM COMMERCIAL CODE



The Uniform Commercial Code (UCC) is a collection of modernized, codified, and standardized laws that apply to all commercial transactions with the exception of real property. The UCC was developed under the direction of the National Conference of Commissioners on Uniform State Laws (NCCUSL), the American Law Institute (ALI), and the American Bar Association (ABA). The purpose of the UCC was to introduce uniformity into state laws affecting business and commerce. To date, all 50 states (Louisiana has adopted articles 1, 3, 4, and 5), the District of Columbia, and the U.S. Virgin Islands have adopted the UCC as state law.

The UCC has a permanent editorial board, and members of the ALI and NCCUSL meet to consider changes to the UCC. Amendments and revisions to the UCC are made to cover new developments in commerce, ranging from electronic funds transfers and the leasing of personal property to electronic filing systems and information technology. Once a revision has been approved by the NCCUSL and the ALI, it is submitted in a form suitable for adoption by individual state legislatures. Each state then has the option of adopting the amendments and revisions to the UCC as state law.

The need for a UCC was recognized as early as 1940, and work on the UCC began in 1945. In 1952 a draft was approved by the NCCUSL, the ALI, and the ABA. Pennsylvania became the first state to enact the UCC, on April 6, 1953, effective July 1, 1954. The UCC editorial board issued a new code in 1957 in response to comments from various states and a special report by the Law Revision Commission of New York State. By 1966 48 states had enacted the code.

The UCC consists of ten articles. Article 10 provides for states to set the effective date of enactment and lists specific acts that should be repealed once the UCC has been enacted. Individual states may also add to the list of repealed acts. When enacted, the UCC replaced the following acts, which are listed in Article 10: Uniform Negotiable Instruments Act, Uniform Warehouse Receipts Act, Uniform Sales Act, Uniform Bills of Lading Act, Uniform Stock Transfer Act, Uniform Conditional Sales Act, and Uniform Trust Receipts Act. In addition, Article 10 recommends repealing any acts regulating bank collections, bulk sales, chattel mortgages, conditional sales, factor's lien acts, farm storage of grain and similar acts, and assignment of accounts receivable. These are all areas covered in the UCC.

Article 1, General Provisions, gives principles of interpretation and general definitions that apply throughout the UCC. Article 2, Sales, superseded the Uniform Sales Act and covers areas such as sales contracts, performance, creditors, good faith purchasers, and remedies. Article 3, Commercial Paper, replaced the Uniform Negotiable Instruments Act and covers transfer and negotiation, rights of a holder, and liability of parties, among other areas. Article 4, Bank Deposits and Collections, incorporated much of the Bank Collection Code developed by the American Bankers Association and covers such areas as collections and deposits and customer relations.

Article 5 is devoted to letters of credit. Article 6 covers bulk transfers. Article 7 covers warehouse receipts, bills of lading, and other documents of title. Article 8, Investment Securities, replaced the Uniform Stock Transfer Act and covers the issuance, purchase, and registration of securities. Article 9 is devoted to secured transactions, sales of accounts, and chattel paper. It replaced the Uniform Trust Receipts Act, the Uniform Conditional Sales Act, the Uniform Chattel Mortgage Act, and a variety of other acts.

REVISIONS TO THE UCC

During the 1990s several revisions made by the ALI and the NCCUSL were accepted by many state legislatures. These included a 1990 revision of Article 2A, a revised Article 3, and 1995 revisions to Article 5. In addition, the ALI and the NCCUSL recommended that Article 6 be repealed; 37 jurisdictions had done so by mid-1998. Alternative recommended revisions to Article 6 were adopted by five jurisdictions. A 1994 revision of Article 8 was adopted by 50 jurisdictions.

Perhaps the most controversial proposed amendment was the writing of Article 2B, which attempted to establish the legal groundwork for transactions involving information and intangible goods such as software. Some analysts felt that the proposed Article 2B unfairly favored the software industry, protecting it from a wide range of product liability issues. In 1997 a coalition of 18 industry associations voiced its opposition to Article 2B, and a vote on final approval by the NCCUSL and the ALI was postponed until 1999. Article 2B, which dealt specifically with the licensing of information and software contracts, would have far-reaching consequences for the way information is accessed, used, and exchanged.

Changes and interpretations of the Uniform Commercial Code appear in Business Lawyer' s "Uniform Commercial Code Annual Survey."

[ David P Bianco ]

FURTHER READING:

Brinkman, Daren R. "Unsecured Creditors' Rights in Sales and Secured Transactions: Is the Revised UCC 'New and Improved' or Just 'New'?" Business Credit, September 1998, 34 37.

Jamtgaard, Laurel. "Licenses and Information Wares: An Update on UCC Article 2B." Information Outlook, November 1998, 31.

"More Suits?" Industry Week, 23 June 1997, 68.

Patchel, Kathleen. "The Uniform Commercial Code Survey: Introduction." Business Lawyer, August 1998, 1457-59.

Williamson, Miryam. "Eye on the Government: IT and the Feds." Computerworld, 29 June 1998, 76-78.



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