how the uniform commercial code ucc works
if you ve ever purchased a business or a vehicle chances are you signed a ucc 1 statement the title remains in the lender s possession until the loan is paid off the policies instituted under the uniform commercial code ucc are largely focused on the activities of small businesses and entrepreneurs part of the intent is to clear up confusion over how each state might separately regulate such operations although the ucc code regulates dealings involving personal property it does not govern real property such as land or structures attached to land the ucc code imposes standards for processing checks and other types of commercial paper often it is applied to the property secured by a bank where the title is held until the borrower pays off the balance of the financing companies that conduct business transactions outside of their home state must comply with the applicable ucc law including when leasing equipment selling goods borrowing money and establishing contracts 1ucc articleseach of the nine articles in the code addresses a distinct issue article 1 general provisions establish definitions and certain parameters for how the uniform commercial code ucc is to be applied it was last updated in 2001 article 2 2a the sale of goods excluding real estate and service contracts article 2a covers leases of personal property article 3 checks drafts and other negotiable instruments such as a note a promise to pay money an item is considered negotiable if it can be transferred to another individual and still be enforceable against the original payer article 4 4a bank deposits and collections which covers rules for check processing and automated inter bank collections article 4a focuses on fund transfers article 5 letters of credit issued by a bank for trade facilitation article 6 bulk sales auctions and liquidations of assets most states believe this article to be obsolete the uniform law commission ulc has recommended its repeal and most states have done so article 7 documents of title including warehouse receipts bulk sales and bills of lading bol article 8 investment securities specifically the holding of securities through intermediaries article 9 secured transactions of personal property agricultural liens promissory notes consignments and security interests 1the uniform commercial code ucc undergoes frequent revisions to address specific issues history of the uccthe uniform commercial code ucc was created by private organizations including the uniform law commission ulc which is also known as the national conference of commissioners on uniform state laws nccusl and the american law institute ali 1the ulc was established in 1892 to standardize commercial law the organization established a variety of laws from its founding up until the 1950s in the 1950s along with the ali the ulc compiled all the commercial laws into one set of commercial codes for states to follow 1the ucc was presented to the states in 1951 with pennsylvania being the first to adopt the ucc in 1953 and other states adopting it over time louisiana is the only state that has not fully ratified the code though it has adopted part of it 1special considerationseach state has the option of adopting the code as it is written or adopting and modifying provisions of it louisiana did not adopt article 2 of the uniform commercial code ucc as written the state also did not adopt article 2a which covers the lease and rental of personal property not regarded as real estate 2california has made some modifications as well implementing its own version of the ucc laws the regulation of real estate contracts is an exception to california s adoption of the ucc state laws regulating the purchase of real estate such as a warehouse are covered by other state real estate regulations 3service contracts in california do not follow ucc rules contracts for auto repairs and painting jobs are covered by the state s insurance laws not the ucc 3who does the uniform commercial code protect the uniform commercial code ucc was established to protect all individuals engaged in a business transaction it was created to standardize commerce across the states 