The Uniform Commercial Code (UCC) is a comprehensive set of laws and standards that are designed to provide a legal framework for commercial transactions in the United States. Sometimes called the backbone of American commerce, the UCC has been adopted in some form by every state and allows businesses to conduct their operations nationwide without having to worry about major differences among jurisdictions. This, in turn, allows companies to grow, thrive, and enhance the economy.
Understanding the UCC and how it may impact your business is essential, and it’s why you need dedicated legal counsel to advise you. Your attorney can also explain the role that the UCC plays in lawsuits so you can anticipate the outcome of any litigation in which you may be involved. Count on Levy Goldenberg LLP to guide you and your Manhattan organization.
A Brief History of the UCC
The Uniform Law Commission (ULC) was created in 1892 for the purpose of recommending laws to govern commercial transactions. In 1896, the Uniform Negotiable Instruments Law was drafted and later enacted in each state. What followed were more laws concerning sales, bills of lading, and other matters.
Over the years the ULC decided that these various laws should be codified in a more comprehensive manner – known as the UCC – so it worked with the American Law Institute (ALI) for this purpose. Pennsylvania was the first state to enact the UCC in 1953, and the rest of the states (including New York) followed over the next 20 years. Below are summaries of the major and most commonly used articles of the UCC and what they concern.
Article 1: General Provisions
These are the definitions and various general terms that apply to the rest of the UCC. There have been a few minor changes to this Article since the last revision in 2001. The scope, intended construction and interpretation, applicability, and various other broad matters are covered under this Article.
Article 2: Sales
The sale of goods – and, more specifically, contractual matters – are covered here. Article 2 includes rules on how contracts are formed, terms that should be included (e.g. price, quantity, and delivery), expressed and implied warranties, breaches of contract, and how to recover losses from a breach. Also addressed are creditors’ interests in the goods and the respective performance obligations of the buyer and seller.
Article 2A: Leases
The leases at issue here are those concerning a party who owns a good (the lessor) allowing another party (the lessee) the right to use the good for a certain amount of time in exchange for consideration (something of value, usually money). Examples are leases of equipment and vehicles. There are rules such as:
- When and how a lease is created
- What the terms and conditions of the lease are
- The lessor’s and lessee’s respective performance duties
- What occurs in the event of a default
Article 3: Negotiable Instruments
Checks and promissory notes are in the scope of this Article, with a negotiable instrument being defined as a written promise or order to pay money. Some specific issues include how to create and enforce a negotiable instrument. The obligations of the parties to the instrument are also addressed.
Article 4: Bank Deposits and Collections
These are the rules for bank transactions, such as how to collect, process, remit, and transfer money. The standards that control bank transactions and check processing are also addressed in Article 4. Plus, there are terms for stop-payment orders and sending an image of a check rather than a physical one for payment or processing.
Article 9: Secured Transactions
A secured transaction occurs when someone gives another person or entity (the secured party) a security interest in their collateral. This allows the secured party to claim the collateral for themselves if the party who owns it fails to make payments. In exchange for this, the secured party grants a loan or approves a purchase.
Covered topics include:
- The attachment of security interests
- The perfection of security interests
- The rights of the secured parties
- The priorities of different security interests
- The filing of financing statements
The UCC and Litigation
Because the articles of the UCC affect the rights of parties to different business transactions in New York, they naturally play a substantial role in lawsuits that are filed to enforce those rights. UCC matters are distinct from, and more complex than, common law contract rules. Having skilled legal counsel is vital to navigate the nuances of the UCC and how they could impact your business.
Attorneys who handle UCC matters generally deal with the sale of goods, contracts, and warranties. Other common litigation topics are the ways in which financial institutions handle commercial paper and the commercial leasing of goods. An experienced litigator will not only understand the UCC articles but how courts have interpreted them.
Do you have questions about the UCC and what function it may play in your Manhattan business transactions? Levy Goldenberg LLP has the answers. Contact us today to learn more.
