What is the Uniform Commercial Code (UCC)?

The Uniform Commercial Code (UCC) is a set of standardized rules that applies to most commercial transactions in the United States. It isn’t law in and of itself, but most states have adopted it in some form or another. At least from a functional perspective, this means that it’s more or less binding in most places. Figuring out what the code covers in a specific jurisdiction usually requires some research into how that particular locale has interpreted and implemented the guidelines. In general, though, the UCC sets out a list of rules and best practices governing the sale of goods, consumer protection, and commercial transactions between merchants and financial institutions. Transparency is one of the main goals, such that people doing business anywhere in the country will know what to expect and how to behave.

Overall, the code's objective is to eliminate confusion and conflicts between state laws in the matter of trade and sales. The code includes nine articles, and covers a range of topics including the sale of goods, bank instruments, negotiable instruments, letters of credit, bills of receipts, bulk transfers, investment securities, and secured transactions. These rules also seek to make commercial paper transactions, such as the processing of checks, less complex. They distinguish between merchants, who know their business well, and consumers, who do not.

The Uniform Commercial Code is not itself law, though all states except Louisiana have adopted most if not all of it. Louisiana is an anomaly, and is the only state in the U.S. to maintain a system of civil law that traces its origins to the Napoleonic Code of early France. Louisiana specifies regulations for the sale of goods according to the system of laws it already has in place. Some of these laws are analogous to provisions set out in the UCC, but not all are.

Commerce can be difficult to regulate in a country as large as the United States. Goods often originate in one place, are sold somewhere else, but then are used in a third and completely separate location. If each of these locales has its own laws and regulations, it can be really challenging — as well as really expensive — for companies to do business.

The UCC was first drafted in the 1940s, and is a joint project of the National Conference of Commissioners of Uniform State Laws (NCCUSL), formed in 1892, and the American Law Institute (ALI), formed in 1923. Neither of these groups is a lawmaker in and of itself, but both hold a lot of influence and respect among state and national legislators. The NCCUSL is made up of lawyers and professionals appointed by states and territories who discuss which laws should be the same — or uniform — across the country. Similarly, the purpose of the ALI is to clarify American common law according to changing social needs. ALI members are usually lawyers and judges from around the country.

The first official version of the code was published in 1952, and it has undergone numerous amendments, revisions, and updates since that time, mainly as a way to keep it current with the changes of the marketplace. Some of the most profound revisions in recent years have concerned electronic commerce and the Internet, as well as electronic banking and funds transfers. Not all of these have been “official” inclusions, but all have kept with the spirit of the code, namely, creating a uniform standard that can be anticipated everywhere in the nation.

The Uniform Computer Information Transaction Act (UCITA) is one example. This was an attempt by the NCCUSL to improve Article 2 of the UCC; however, ALI failed to agree to this inclusion. As a result, only Virginia and Maryland adopted the act because it was not formally included into the UCC.

The ALI and NCCUSL are both responsible for maintaining and revising the Uniform Commercial Code, and both will also provide guidance to states that wish to update their individual laws to follow. ALI and NCCUSL have also established an editorial board that provides official comments and papers that aid in the legal interpretations of the code.

Although it the most well known, the UCC is just one of several uniform acts in place and promoted throughout the United States. Other examples include the Uniform Child Custody Jurisdiction Action and the Uniform Foreign Money Claims Act. The goals of all of these are similar, namely, to provide more regularity and predictability for people and corporations doing business in the United States.