Article 4 was completely revised in and amended in View Article 4, Bank Deposits and Collections. Amendments to Article 3, Negotiable Instruments and Article 4, Bank Deposits These amendments to Uniform Commercial Code Articles 3 and 4 update provisions dealing with payment by checks and other paper instruments to provide essential rules for new technologies and practices in payment systems.
Article 4A, Funds Transfers Uniform Commercial Code Article 4A provides a comprehensive body of law on the rights and obligations connected with fund transfers. It was added to the UCC in View Article 4A, Funds Transfers. The amendment was necessary to conform the UCC with the federal law and associated regulations. View Article 4A, Amendments to.
Article 5, Letters of Credit Uniform Commercial Code Article 5 governs letters of credit, which are typically issued by a bank or other financial institution to its business customers in order to facilitate trade. Article 5 was updated in to address advances in technology and modern business practices. View Article 5, Letters of Credit. Article 6, Bulk Sales Uniform Commercial Code Article 6 covers bulk sales - a topic many states have determined is obsolete.
The original version of Article 6 was withdrawn by the Uniform Law Commission and the American Law Institute in and replaced with two options for every state to consider: replace Article 6 with a revised version 6, or repeal Article 6 entirely. The ULC recommends repeal, and nearly every state has followed that recommendation. View Article 6, Bulk Sales.
Article 7, Documents of Title Uniform Commercial Code Article 7 covers documents of title for personal property, including warehouse receipts, bills of lading, and other documents typically used for commercial trade.
Revised Article 7, approved in , updates the original version to provide a framework for the further development of electronic documents of title, and to update the article in light of state, federal and international legal developments. View Article 7, Documents of Title. However, the code requires the insertion of missing provisions with UCC provisions where parties to the agreement are silent or fail to include in the agreement certain critical provisions. The code imposes uniformity and streamlining in transactions such as processing of checks, notes, and other routine commercial paper.
The code also provides different provisions depending on whether one is a merchant or a consumer. The UCC also seeks to minimize the use of legal formalities in making business contracts and tries to rely on the business custom of the particular type of business. This is seen as an effort to avoid legal review being required for each and every transaction. Other than the code, the official comments are treated as authority in the construction of state statutes.
Most UCC transactions involve secured property, financed by a bank or lender with the title to the property held by the lender as security until the loan is paid off. The UCC also eradicated some ambiguities and differences in state laws.
All accepted documents are processed in a timely manner, recorded, filed, and made available to the public upon request. The Code, as the product of private organizations, is not itself law, but a recommendation of a set of laws that should be adopted by the states. Of course, unless such changes are minor, they can affect the purpose and meaning of the Code in promoting uniformity of law among the various states.
The Uniform Commercial Code deals with the following subjects under consecutively numbered Articles:. It does not apply to money, to payment orders governed by Article 4A, or to securities governed by Article 8. If there is conflict between this Article and Article 4 or 9, Articles 4 and 9 govern. Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this Article to the extent of inconsistency.
The law of the place where the bank is located governs. In the case of action or non-action by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located. An investment company security does not include an insurance policy or endowment policy or annuity contract issued by an insurance company. However, interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this article does not apply.
Article Nine is the Article most familiar to businesses since it is by checking with the recording of UCC Statements indicating who has what security interests in the assets of borrowers in business. Note that 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 transactions of commercial transactions.
Article 2 of the UCC deals only with transaction of goods. While the UCC clearly is often relevant to situations involving business sales contracts, such as in the preceding example, there are also other situations where you may find yourself looking to the UCC. For example, the UCC provides rules for how money should move between businesses, including via banks, both in the form of payments for goods and in the form of loans.
These matters are essentially contract issues. The individual sections of the UCC, which state the rules, sometimes can be difficult to understand. In many cases, it is easier to make sense of the rule by also reading the Official Comment related to the section.
The Official Comments are prepared under the authority of the organizations that draft and amend the rules themselves. They are written in relatively plain English and sometimes will provide concrete, explanatory examples. In short, if you find yourself confused when reading a section of the UCC, a good place to look first for clarification is the Official Comment for that section.
This advice applies to state-specific commercial codes. Each state's commercial code is based on an adoption of the model UCC, so the Official Comment generally is a reliable way to further illuminate a UCC section regardless of what state you're dealing with.
Note, however, that the Official Comments are not always readily available without cost. While you should be able to find sections of both your state's commercial code and the model UCC for free online, finding the Official Comment for a particular section may take more digging. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
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