Continuing on our contract law theme, the June 26 edition of The Business Forum Show covered a subcategory of contracts; namely, contracts for the sale of goods. These types of transactions are governed by Article 2 of the Uniform Commercial Code.
The Uniform Commercial Code, or “UCC” for short, was intended as a uniform model code that might be adopted by every state legislature. Over the years, each state legislature created its own commercial transaction code. The laws in different states can vary widely. As the nation’s economy matured, interstate commerce became increasingly important. The variations in state law became a tremendous problem for businesses and banks dealing across state lines.
Many businesspeople, lawmakers and academics saw a need for a uniform set of laws covering commercial transactions to facilitate interstate commerce. This would promote interstate commerce, create more comfort and security for interstate business transactions, increase competition and lower costs. A national conference of lawmakers, lawyers and college professors worked for years studying the various commercial laws of the 50 states, debating the pros and cons of these variations and drafting what they viewed as the best “Uniform Commercial Code.”
This process has continued for decades. New articles are added over time, and specific sections of existing articles are revised.
The “Uniform Commercial Code” is a model. It is not law in any state unless and until a state legislature adopts it as the law of that state. Any state can decide not to adopt the UCC or can decide to make revisions to the code that satisfies that state’s particular heritage or commercial needs. Minnesota Statutes Chapter 336 contains Minnesota’s version of the UCC.
The Uniform Commercial Code Article 2 on the Sale of Goods is basically a codification of existing commercial law. The UCC drafters tried to write down the generally understood business practices between merchants for the sale of goods. The UCC “fills in the gaps,” providing controlling contract terms where the contracting merchants either didn’t agree or just forgot to discuss the matter. In many commercial transactions, the buyer and seller only discuss how many goods, how much to pay, and perhaps when delivery or payment is due. It is only later, after problems arise, that merchants also will discuss or argue about many more specific terms such as: “Where will the goods be delivered?” or “Is the buyer under any obligation if the goods are slightly defective?” The UCC answers most of these questions by basically providing the parties with a “50-page fine print contract,” whether they know it or not.
For a more in-depth look at UCC Article 2, click here.