UCC Article 2

The Uniform Commercial Code (UCC) is a model law. Versions of it that have been adopted by states govern essentially all commercial transactions in the United States. The UCC was published in 1952 with the goal of harmonizing the law regarding sales and other commercial transactions throughout the U.S. It was hoped that all states would adopt the model law, so the law of commercial transactions would be uniform throughout the nation.

Louisiana and Puerto Rico have never adopted all of the UCC’s articles, and American Samoa has not adopted any of the articles of the UCC. Also, the UCC was not adopted exactly as it was written in all U.S. states. In some cases, there are variations in the versions that states adopted because there were variations in the language in the official version of the UCC itself.

In addition, some state legislatures made changes to the UCC when they adopted it. Lastly, even if the language in any 2 states is the same, each state’s courts interpret the state’s laws, and this may lead to differences in interpretation and application of the law.

Article 2 of the Uniform Commercial Code deals with transactions involving the sale of goods. It defines “goods” as all items that are both identifiable and moveable at the time of the sale. So, the definition excludes contracts that involve services exclusively and real estate. Contracts subject to the UCC must meet its requirements to be enforceable.

Article 2 of the UCC covers the issues involved in the sale of goods between merchants and non-merchants alike. Some common UCC disputes that involve Article 2 include the following:

• Goods: The definition of “goods” is any tangible item that can be moved, so it excludes services, non-tangible securities, and real property. There may be disputes about whether the UCC Article 2 applies to a particular type of good;
• Contract: The UCC offers a definition of a contract. Disputes can involve questions as to whether a contract was made;
• When a Contract Must Be in Writing: A contract for the sale of goods with a price of $500 or more is enforceable in court only if there is a writing that is sufficient to indicate that a contract for sale was made by the parties and signed by the party against whom enforcement is sought. Writing can be sufficient even if it does not include or incorrectly states a term on which the parties agreed.
  • However, a contract cannot be enforced for any quantity of goods that is more than the quantity shown in the writing;
• Formation of a Contract: Disputes can involve issues of offers and acceptances and whether they are sufficient to form enforceable contracts and what the terms of those contracts are;
• Modification of a Contract: Whether modifications to a contract were made so as to be enforceable can be disputed;
• Consideration: The parties may dispute whether there was an exchange of consideration for items of value;
• Missing Terms: A common issue for dispute is whether terms of a contract are missing, such as a provision about quantity, price, or product description, and whether the contract can still be enforced.

What Are Examples of UCC Article 2?

Part 6 of UCC Article 2 deals with breach of contract. Article 2 of the UCC sets forth specific remedies for breach of contracts that come within the application of the UCC. The remedies may be different from those for common law contracts. Most contracts claims for businesses would be covered by Article 2 of the UCC.

If a seller fails to deliver the goods, the buyer can file an action for breach of contract. The UCC provides the buyer with several options for recovering damages for the breach:

• Damages for Non-Delivery: If the seller fails to deliver the goods as promised, the buyer can claim damages that are equal to the difference between the contract price and the market price of the goods at the time when the buyer became aware of the breach. Also, the buyer can seek any incidental and consequential damages permitted by the UCC, less any expenses saved;
• Cover: Cover is when the buyer immediately seeks to buy goods similar to those that have not been delivered by the seller. The buyer may then seek damages for cover, which would be the difference between the contract price of the goods and the price of the cover, plus any incidental and consequential damages permitted by the UCC, less any savings the buyer realized;
• Specific Performance: Under the UCC, a buyer may be entitled to specific performance if the goods are unique.

If a buyer refuses to accept a delivery of goods or pay for goods delivered by the seller, then the seller is entitled to sue for breach of contract. The seller also has a few options for recovering damages from the buyer, as follows:

• Damages for Non-Acceptance: The UCC provides for damages equal to “the difference between the market price at the time and place for tender and the unpaid contract price” together with any incidental damages allowed by the UCC, but less expenses saved in consequence of the buyer’s breach.
  • Also, if these damages are not enough to fully compensate the seller, the seller may seek damages that compensate for the profit that the seller would have made if the buyer had performed fully. There would be due credit for payments or proceeds from resale;
• Resale Damages: If a seller decides to resell goods that a buyer has not accepted, the seller may, in good faith, seek damages for resale. The amount of these damages would be equal to the difference between the contract price and the price the seller got for the resale of the goods. In addition, the seller could recover any incidental damages, less any savings experienced;
• Damages for the Price: If the seller cannot reasonably resell the goods that are the subject of the contract, or if the buyer has accepted or lost the goods, the seller may seek damages for the price of the goods. This would be an amount that is equal to the price of any goods lost or accepted by the buyer or goods identified in the contract.
  • Again, in addition, the seller could recover incidental damages, less any savings they experienced. If the seller pursues this remedy, the seller must hold the goods that were intended for the buyer, and deliver them to the buyer in return for the payment of damages;
• Additional Remedies: The UCC allows a seller to also take other steps with respect to the goods that were directly affected by any breach. Or, if the entire contract was breached, the seller may take steps with respect to the entire undelivered balance of the contract. These remedies could involve such actions as stopping the delivery of the goods or canceling the contract.

If a person is a party to a contract that has been breached by the other party, the person wants to document their communications and the circumstances surrounding the breach. In addition, the person should comply with any contract requirements regarding giving the other party written notice and an opportunity to cure the breach.

In addition, the person should make detailed records of any steps they take to mitigate their damages.

What Else Is Covered in the UCC?

The UCC comprises 9 articles as follows:

• UCC Article 1: General Provisions;
• UCC Article 2: Sales;
• UCC Article 2A: Leases;
• UCC Article 3: Negotiable Instruments;
• UCC Article 4: Bank Deposits and Collections;
• UCC Article 4A: Funds Transfer;
• UCC Article 5: Letters of Credit;
• UCC Article 6: Bulk Sales;
• UCC Article 7: Documents of Title;
• UCC Article 8: Investment Securities;
• UCC Article 9: Secured Transactions.

As can be seen from the list above, the UCC covers a wide variety of transactions, from contracts regarding the sale of goods to negotiable instruments such as promissory notes and drafts, banks, and banking and check collection processes.

Should I Retain a Lawyer for Help With UCC Provisions?

If you want to make a contract that would be covered by your state’s version of the UCC or if you are involved in a dispute about a contract or other type of transaction to which the UCC applies, you need to consult a commercial lawyer.

The UCC and its provisions are a special area of practice that is best handled by a seasoned commercial lawyer. Your lawyer can ensure that any contract you need is expertly drafted. Or if you are involved in an active dispute, your lawyer should be able to negotiate a resolution that is financially favorable to you. Whatever your situation, your rights will be best protected by an experienced commercial lawyer. LegalMatch.com can connect you to the commercial lawyer you need.