The Uniform Commercial Code, often referred to as the UCC, are laws that govern commercial transactions in the United States. The UCC provides definitions for basic business terms and includes rules for components of sales transactions, for example, contract formation, as well as other aspects of negotiation.
The UCC also fills in terms if the parties to a sales agreement do not make all of the terms explicit. The UCC applies to:
- Sales;
- Leases;
- Negotiable instruments;
- Bank deposits;
- Funds transfers;
- Letters of credit;
- Bulk transfers and bulk sales;
- Warehouse receipts;
- Bills of lading and other types of documents of title;
- Investment securities;
- Secured commercial transactions.
The majority of states have adopted the UCC, which helps with sales transactions across state lines. There are, however, some differences between state laws.
For example, some states have only adopted some, but not all, of the UCC. In other states, the state laws have worded portions of the UCC differently. Some state courts have also interpreted the law in different ways.
What Is the UCC Definition of “Goods?”
In general, the UCC and its guidelines apply to all contracts that involve the sale of goods. The UCC definition of goods provides that goods are defined as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale.”
This means that goods include any type of property that may be classified as personal property. This may include anything from a natural resource, such as lumber, to a man-made item, such as a computer or clothing.
The UCC also provides that goods include the “unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty.” The UCC does not apply to transactions for services or transactions for real property.
What Is Considered a Sale of Goods?
A sale of goods happens when the ownership of a good or goods is passed from a seller to a buyer for a price. Obtaining a loan from a bank is not considered to be a sale because nothing is passed from a seller to a buyer.
A good is something that is tangible and movable. The sale of a home is not a sale of goods because the home is not movable. The UCC will only govern when the “goods” criteria are satisfied.
What Are Some Examples of a Sale of Goods?
Examples of a sale of goods include, but are not limited to:
- Buying a television from an electronics store;
- Selling a used car to another individual;
- A coffee company that is purchasing coffee grounds daily from a Colombian company.
Does a Sale of Goods Contract Need to Be In Writing?
Under the UCC, some sale of goods contracts must be in writing to be legally enforceable. These provisions are called the Statute of Frauds.
The Statute of Frauds was created to prevent fraudulent acts that are associated with the sales of goods contracts. These laws may vary by state.
In general, the majority of these types of statutes resemble the standards in the UCC. Examples of contracts that must be in writing include:
- Any contract involving the sale or transfer of land;
- Any contract that involves the sale of goods valued over $500;
- Any contract in which one person promises to pay the debt obligations of another;
- Any contract where performance cannot be completed within one year of the formation of the contract;
- Any contract that involves the consideration of marriage;
- Any contract under which an executor of an estate agrees to personally pay off the debts of an estate.
In general, if the price of goods is over $500, the contract is required to be in writing.
When Does the UCC Apply to Sale of Goods? And When Does the UCC Not Apply to the Sale of Goods?
Typically, the parties to an agreement may contract out of the UCC. If the parties agree to terms other than what is provided under the UCC, those terms will govern.
In addition, there are certain cases where the definition of goods may be ambiguous or gray. In certain cases, a court may have a difficult time determining whether the contract is for labor, services, or for materials, or goods. Depending on the exact facts of the case, the UCC may not apply.
What Are Common Terms Included in a Sale of Goods Contract?
Unlike the majority of other contracts, sale of goods contracts do not have to specify the exact terms and conditions of the agreement that is being recorded by the contract document. Instead, many sale of goods contract terms may be left open and negotiated by the parties to the contract, even after the contract has been formed.
Examples of contract terms in sales of goods contracts that may be left open can include:
- The price to pay to buy or sell the goods;
- How, where, and when payment will be made;
- Where to deliver the goods once they are purchased;
- The quantity of goods, although a contract may specify a minimum or maximum amount of how much must be bought.
Who Must Adhere to the Uniform Commercial Code?
In general, the UCC applies to individuals who are considered to be merchants. This includes individuals who are skilled in a field of business or who have specific business knowledge that is greater than the level of an average citizen.
The UCC applies when there is at least one merchant involved in the sale of goods. Contracts between individuals who are considered to be merchants are typically not covered by the UCC, meaning the UCC does not apply to them.
This UCC is referred to as uniform because it is intended to provide guidelines for official commerce and business activities as opposed to personal interactions. One example of this would be when an individual who is selling their personal vehicle to another individual would not be required to adhere to the UCC unless they were also an automobile salesperson.
Who Is a “Merchant” Under the UCC, and Why Is It Important?
A UCC merchant is “a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.” A merchant, by virtue of their line of work, has more knowledge of sales transactions for the types of goods that they are selling.
For this reason, they are held to a higher standard under the UCC. Common examples of who qualifies as a merchant may include, but are not limited to:
- Business managers;
- Salespeople;
- Contractors;
- Skilled workers.
Do I Need a Lawyer for Help With Contracts for Sale of Goods?
The laws governing contracts and the UCC can be complex and vary by state. If you are forming or revising a contract, it is important to consult with a commercial lawyer.
Your lawyer can advise you on what laws apply to your situation and how to avoid a violation. In addition, if you have to file a lawsuit, your attorney will represent you in court.
