The Uniform Commercial Code, or "UCC" for short, is a major body of statutes that governs business and contract matters. It sets forth many different definitions, guidelines, and procedures for dealing with contract claims and lawsuits. Almost all states have adopted the UCC and adhere to its principles and guidelines.
Under the UCC, "goods" are defined as "all things that are moveable". This includes anything natural resources like lumber to man-made items such as computers and clothing.It excludes all land and real estate, and anything attached to the land. However, the term "goods" does include things that were once attached to land but can be removed from it, such as corn and other crops.
The term "goods" also excludes services. Therefore, contracts for services are not covered by the UCC. Intangible objects like stocks are also not considered goods.
The Uniform Commercial Code generally applies to persons who are "merchants." These are persons who are skilled in a field of business or who have specific business knowledge above the level of a normal citizen. This includes persons such as business managers, sales persons, contractors, skilled workers, and other persons.
The UCC applies whenever there is at least one merchant involved in the transaction. Contracts between persons who aren’t merchants generally are not covered by the UCC. This is why it is called a "uniform commercial code" – it is supposed to provide guidelines for official commerce and business activities rather than personal interactions.
The sale of goods is any sale of tangible objects passed from a seller to a buyer for a price. Getting a loan from a bank is not considered a sale of goods because nothing passes from the seller to the buyer. Something is considered a “good” if the item is tangible and movable. Here are some examples of a sale of goods:
- Buying a television from an electronics store
- Selling your used car to another individual
- A coffee company purchasing coffee grounds daily from a Columbian company
- Buying a phone or computer from another individual
Things that are not tangible or movable from a seller to a buyer are not considered a sale of goods. Therefore, the UCC Laws would not apply in these situations and common law would govern the transaction. As stated, Article 2 of the UCC only governs a sale of goods. Here are some transactions that are not considered a sale of goods:
- Selling your home or other real estate (not movable)
- Hiring an attorney (this is a service, not a good)
- Buying shares on a stock market (stocks are not tangible)
The UCC mainly covers sales of goods (moveable objects, not land or real estate). The titles of the Articles help give a picture of what is covered in the code. They are:
- Article 1- General Provisions: Covers many definitions and basic concepts
- Article 2- Sale of goods: Covers sales and also leases of goods.
- Article 3- Commercial Paper: This has to do with money, promissory notes, and other legal tender
- Article 4- Bank Deposits and Collections: Covers issues such as bank deposits, checks, credit lines, and transfers of funds
- Article 5- Letters of Credit: Covers issues with payment of debt obligations
- Article 6- Bulk Transfers: Covers issues like transfers of business assets in their entirety from one company to another
- Article 7- Warehouse receipts, Bills of Lading and other documents of title: Covers risk in situations involving wholesales of goods
- Article 8- Investment Securities: Regulation of non-tangible interests
- Article 9- Secured Transactions: This covers security in transactions involving personal items.
Therefore, the UCC is a broad, comprehensive body that covers many, many different situations. It often serves as a guide by "filling in" information in a contract that is unintentionally left out. Persons who wish to avoid UCC conflicts should therefore be careful that contracts are very clear and don’t leave out important pieces of information.
Unlike most contracts, a sale of goods contract does not need to specify the exact terms and conditions. Instead, many terms can be left open and negotiated between the parties even after the contract is formed. Here are some terms that may be left open:
- Price – the price to pay to buy or sell the goods
- Payment – when, where, and how payment will be made
- Delivery – where to deliver the goods once they are bought
- Quantity – contract may specify a minimum or maximum amount of how much you need to buy
As you might be able to tell, the Uniform Commercial Code can be a daunting body of law to deal with. It’s in your best interests if you need to hire a business lawyer for any type of business or contract needs. This includes topics such as contract drafting and review, negotiations, and resolving contract disputes. Your attorney can provide legal guidance on such matters and can assist you in court during a lawsuit if needed.