The National Conference of Commissioners on Uniform State Laws creates uniform law models which U.S. states can adopt, or base their own laws on. The Uniform Commercial Code (UCC) is one of these models.
The UCC applies to sales of goods between parties. Parties in different states are constantly doing business with each other. The major reason the UCC was created was to try to create some uniformity among the various states’ laws, by getting them to adopt the UCC as their own.
The UCC provides definitions for basic business terms, and also includes rules for components of sales transactions (such as contract formation and other aspects of negotiation). It will also fill in terms when the parties to a sales agreement do not make all of their terms explicit.
The UCC is applicable in sales, leases, negotiable instruments, bank deposits, funds transfers, letters of credit, bulk transfers and bulk sales, warehouse receipts, bills of lading and other documents of title, investment securities, and secured commercial transactions.
While most states in the U.S. have largely adopted the UCC, and this has helped with sales transactions across state lines, there is still some divergence among states’ laws.
Some states have not adopted all, but only some, of the UCC. In other cases, states have worded parts of the UCC differently in their own laws, or the states’ courts have interpreted the law differently.
Generally speaking, the UCC and its guidelines applies to all contracts involving the sale of goods. Under the UCC, “goods” are defined as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale.”
Thus, goods are any type of property which may be classified as “personal property.” This includes anything from natural resources like lumber, to man-made items such as computers and clothing.
The UCC goes on to say that, “‘Goods’ also includes 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.”
So, the UCC does not apply to transactions for real property, but may apply to items removed from the land. It also do not apply to transactions for services.
Usually, parties to an agreement may “contract out” of the UCC. If parties agree to terms other than what is stated in the UCC, those terms will govern.
Also, there are some cases where the definition of “goods” can be “grey” or ambiguous. For instance, in a construction contract, it may happen that part of the job involves depositing rocks on a plot of land.
In many cases, courts may have a difficult time determining whether this is actually a contract for labor (services), or for materials (goods). Depending on the exact facts, the UCC might not apply in such a case.
“Merchant” is defined under the UCC as “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…”
Merchants, by virtue of their line of work, have more knowledge of sales transactions for the type of goods they sell. They are held to a higher standard under the UCC for this reason.
Laws concerning contracts and the UCC can be quite complicated. You may need a business lawyer for assistance with contract formation and editing. Your attorney can help you understand which laws apply to your situation and how you can avoid a violation. Also, in the event that you need to file suit, an attorney can represent you and inform you of how to proceed.