Problems and Solutions Under UCC Article 2

Document Type

Article

Publication Date

7-2004

Journal Title

UCC Law Journal

ISSN

0041-672X

Abstract

While it is a part of the Uniform Commercial Code (UCC), Article 2 differs from other articles of the UCC to a certain degree. First, its subject matter, transactions in goods (but primarily sales of goods), was the legal subject that prompted the promulgation of the entire UCC when the lack of uniformity concerning Article 2's predecessor, the Uniform Sales Act, generated increasing calls for a federal takeover. To thwart this, Article 2 was prepared and, because its subject cannot exist in isolation, that work led to the promulgation of other articles to govern related commercial law subjects as well. Thus Article 2 is perhaps the oldest article of the UCC. It also is perhaps the most flexible. In general, other articles, such as those governing negotiable instruments and security interests, have more structured rules. Because Article 2 governs so many transactions as diverse as the sale of a candy bar and the acquisition of millions of dollars worth of equipment, and because the rights of third parties occupy a lesser role in its scheme, the general UCC rule of freedom of contract exerts much greater influence. Along the same lines, the drafters promulgated more general rules, trusting the courts to interpret them to fit appropriate contexts in a uniform manner that also was capable of evolution. Accordingly, even though Article 2 is one of the most important articles of the UCC commercially, it was tied for last in being amended or revised (Revised Article 7 also was promulgated in 2003) in the recently completed over-a-decade-long process to modernize the UCC. The amendments to Article 2, as in the case of most changes to the UCC, began with a study. The study was undertaken under the auspices of the Permanent Editorial Board for the UCC (PEB) in 1988 to determine if the article should be amended or revised. Obviously, much had changed since the article was first promulgated, including the advent of electronic commerce and computers, which placed stress on the UCC's requirements for writings and on the proper scope of the article; distribution practices for goods had changed so as to raise issues about the lack of privity between manufacturers and retail users of their products; the doctrine of strict liability in tort had developed raising questions of its relationship with the UCC; cases interpreting the general provisions of Article 2 had not necessarily come out uniformly, thus leading to some significant nonuniformity; and other new bodies of both federal law and state law had developed with questions of supplementation or displacement. Not surprisingly then, the study concluded with a recommendation that Article 2 should be amended to address issues of practical significance, which recommendation was accepted by the co-sponsors of the UCC, NCCUSL and the American Law Institute (ALI), and a drafting committee was formed. The drafting committee perhaps initially embarked on too ambitious an agenda. It had to deal with relationships to (or incorporation of) consumer law and products liability law, and its approaches to these subjects proved extremely controversial, but perhaps there would have been controversy even if the committee had taken a less aggressive approach. The scope issue, particularly as to coverage or noncoverage of computer information associated with goods, also proved to be practically unresolvable, and was complicated by Article 2's proximity first to proposed Article 2B and later to that proposed article's successor, the Uniform Computer Information Transactions Act. Attempts to codify developments dealing with unconscionability resulted in significant controversy, as did other attempts to codify, for example, the treatment of advertisements as warranty-type obligations and the increasing use of contract terms first made available to buyers after payment or delivery. At the end of the day, and it was a very long day, the proposals for amendments to Article 2 had been winnowed down to the point that some asked, particularly given a lack of complete consensus even as to the reduced product, why amend Article 2 at all? This article sets out an answer to that question. It advocates that there are sufficient improvements to the law in the amendments to Article 2, even if they only codify the case law or more clearly state the relationship to other law, that the effort to enact amended Article 2 in all the states should be supported. If the amendments to Article 2 become law, it will be easier to plan transactions, give legal opinions, and advise clients, thus reducing transaction costs and the potential for litigation. However, this article also recognizes that modest adjustments to the proposed amendments could perhaps reduce potential expressed opposition to enactment, or at least the level of opposition effort, and this could occur without a serious reduction in the quality of the law, and thus should be considered as enactment efforts go forward in the various states.

First Page

3

Last Page

48

Num Pages

46

Volume Number

37

Issue Number

1

Publisher

Thomson Reuters

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