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What Is the U.C.C.?

The U.C.C. is the common name for the Uniform Commercial Code. This is a very important, comprehensive code that is used in the United States to govern business on many different levels. Some have even called it one of the most fundamentally important parts of the American legal system; that gives you some idea of the vast scope of this code and its impact on businesses at both the corporate and the small-business level. It is important for all business owners to understand how this code applies to them.

How the Code Is Created

Experts who work in the commercial sector and who have studied commercial law will write drafts of the code. These do not go into effect, however, until they are reviewed and approved by the National Conference of Commissioners on Uniform State Laws. This is a collaborative effort between those commissioners and the American Law Institute. Revision requests are sometimes made multiple times before the draft is finally endorsed by the group.

A Model Code

One important legal distinction is that the U.C.C. is not a law in and of itself, but a model code. After a draft has been endorsed, as noted above, it is then recommended to the state governments that they go over the rules and regulations and then put them into action. However, if the state governments decided not to do so, they would be allowed to ignore the code; famously, Article 2 has never been put into use in Louisiana. State governments have to actively create provisions saying that the code will be upheld, or it does not have legal power.

However, the states typically will create these provisions. Every state is using the U.C.C. right now to some extent, though there are some slight variations that occur at the local levels, and some states have adopted part of the code, rather than the whole document. While these distinctions are important, the rule of thumb is that the U.C.C. is used frequently in any area that falls under the government of the United States. In addition to the states, it is used in the Virgin Islands, Puerto Rico, and the District of Columbia.

Areas of Impact

The code is used to govern business actions, though this is a fairly general way of looking at it. Some more direct examples of things that may be impacted by the code include, but are not limited to, the following:

  • Setting up leases for equipment, buildings, goods and the like
  • Borrowing or lending money and other assets
  • Establishing business contracts
  • Selling products, either to individual consumers or to other companies

Because of the way that the business world is always changing —- with the invention of the Internet, for example -— the code is constantly being updated to reflect those changes. As you can see, however, most general areas of business operation are subjected to it.

Development Over Time

As with many laws and regulations, the development of the U.C.C. can be traced back to previous laws. For instance, it has links to common law provisions from England, and it replaced the Uniform Sales Act in the United States. However, the official document originally saw publication back in 1952.

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