Uniform Commercial Code in a Nutshell
Authors:
Stone, Bradford / Adams, Kristen David
Edition:
8th
Copyright Date:
2012
15 chapters
have results for commercial paper
Part Three. The Process of Paying for Goods With Negotiable Instruments 22 results (showing 5 best matches)
- that orders or promises payment of money. §§ 3–103(a)(8) and (12), 3–104 Comment 1. A complete signature is not necessary. Instead, a signature can be any symbol executed or adopted with the present intention to adopt or accept a writing. §§ 1–201(b)(37), 3–401. The symbol may be printed, stamped, or written; it may consist of initials or a thumbprint. It may be on any part of the document. No catalog of possible signatures can be complete, so a court must use common sense and commercial experience. § 1–201 Comment 37. “Writing” is also a broad term, including printing, typewriting, or any other intentional reduction to tangible form. § 1–201(b)(43). It appears that the writing could be other than on paper, e.g., auto fenders, brick walls, gravestones, cows, people, etc. However, because negotiable instruments are expected to circulate in commerce more or less freely, the writing will virtually always be on paper. Indeed, Article 3 was formerly entitled, “Commercial Paper.”
- Negotiable instruments law had its modern origins in the Law Merchant, which eventually was absorbed into the common law. In 1882, the English enacted the Bills of Exchange Act. In the United States, this Act inspired the Uniform Negotiable Instruments Law (NIL), which was superseded by UCC Article 3, first entitled Commercial Paper and renamed Negotiable Instruments in 1990.
- That is, the debt is so merged into the paper evidencing the debt that the paper must be treated in many situations as if it were the debt claim itself. Simply stated, an obligor cannot safely discharge its obligation without requiring the party receiving payment to present and surrender the paper. This will assure the obligor that the paper is not in the possession
- Drafts and checks are “three party paper:” (1) Drawer, (2) Drawee, and (3) Payee. Notes and certificates of deposit are “two party paper:” (1) Maker (or Issuer) and (2) Payee.
- Reprinted from King, Barnhizer, Knight, Payne, Starnes & Stone, Commercial Transactions Under the Uniform Commercial Code and Other Laws, with permission. Copyright 2011 Matthew Bender & Company, Inc., a member of the LexisNexis® Group. All rights reserved.
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Part Five. Financing the Sale of Goods: The Secured Transaction 33 results (showing 5 best matches)
- include (i) payment rights evidenced by chattel paper or an instrument (as under former § 9–106), (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights, or (vi) payment rights for money or funds advanced or sold (other than arising out of the use of a credit card). § 9–102(a)(2).
- E.g., a sale of accounts, chattel paper, payment intangibles, or promissory notes as part of the sale of a business out of which they arose. § 9–109(d)(4)–(7) and Comment 12. By their nature, these sales and assignments do not concern commercial financing transactions. Id.
- Indispensable paper.
- Chattel paper
- A security interest in (i) investment property, (ii) deposit accounts, (iii) letter-of-credit rights, (iv) electronic chattel paper, or (v) electronic documents, may be perfected by control. § 9–314(a), § 9–102(a)(29) (“deposit account”), (30) (“document”), (31) (“electronic chattel paper”),
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Part Five. Financing the Sale of Goods: The Secured Transaction Part 2 30 results (showing 5 best matches)
- Chattel paper consists of (i) a monetary obligation, together with (ii) a security interest in, or lease of, specific goods, if the obligation and security interest or lease are evidenced by a . Traditional written chattel paper is included in the definition of chattel paper. (Electronic chattel paper is chattel paper that is stored in an electronic medium instead of in tangible form.) § 9–102(a)(11), (31), (78) and Comment 5.b (“chattel paper,” “electronic chattel paper,” and “tangible chattel paper” defined). See definition of “record,” §§ 9–102(a)(69), 1–201(b)(31).
- is the residual category of personal property collateral (including things in action) that is not included in the other defined types of collateral (e.g., accounts, chattel paper, instruments, investment property, and money). Examples: intellectual property, rights to payment of a loan not evidenced by chattel paper or an instrument, and rights arising under an intellectual-property license. § 9–102(a)(42) and Comment 5.d. The term “payment intangibles” (a loan not evidenced by an instrument or chattel paper) and “software” (a computer program and any supporting information—but not a computer program embedded in goods). § 9–102(a) (42), (61), (75) and Comments 4.a., 5.d. and 25 (“general intangible,” “payment intangible,” and “software” defined). See § 9–109(a)(3), (d) (4) and (5) and (7) (scope of Article 9). The definition has been revised to (i) commercial tort claims, (ii) deposit accounts, and (iii) letter-of-credit rights. § 9–102 Comment 5.d.
- SP–1’s perfecting by possession of the tangible chattel paper or by filing, will give it priority over later arising competing interests (SP–2, LC, B). § 9–322(a); §§ 9–201(a), 9–317(a)(2) and (b). (As to electronic chattel paper, see § 9–317(d).) However, a purchaser of the chattel paper has priority over SP–1’s security interest in the chattel paper if the purchaser gives new value and takes possession of the chattel paper in good faith, in the ordinary course of the purchaser’s business, and without knowledge that the purchase violates the right of SP–1. § 9–330(b) and Comment 6, which states in part, “[A] purchaser of chattel paper … is not required as a matter of good faith to make a search in order to determine the existence of prior security interests…. [I]f a purchaser sees a statement in a financing statement to the effect that a purchase of chattel paper from the debtor would violate the rights of the filed secured party, the purchaser would have such knowledge. Likewise,...
- SP–1 and SP–2 vs. purchaser of chattel paper or instrument.
- “Indispensable paper collateral” includes various categories of paper that are either negotiable or to a greater or lesser extent dealt with as if negotiable, i.e., collateral evidenced by an “indispensable writing.” Former § 9–106 Comment. This means that the claim is so paper evidencing the claim that the paper is treated as if it were the claim itself. Thus, transfer of the claim can be made only by delivery of the paper (often accompanied by an indorsement); discharge of the claim is made by payment of money, delivery of goods, etc., only to the holder of the paper who surrenders it. See, e.g., §§ 3–602(a) (payment), 3–301 (person entitled to enforce instrument), 7–403(a) and (c) (obligation of bailee to deliver), 7–102(a)(9) (“person entitled under the document”). Accordingly, collateral represented by a writing whose delivery operates to transfer the claim is said to be pledgeable. This type of collateral includes instruments, certificated securities, tangible chattel paper,...
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Introduction 14 results (showing 5 best matches)
- 2. The transaction may well involve the giving of a check or draft for all or part of the purchase price. The check or draft may be negotiated and will ultimately pass through one or more banks for collection. This is the subject of Article 3, Commercial Paper (renamed Negotiable Instruments), and Article 4, Bank Deposits and Collections. These articles superseded the Uniform Negotiable Instruments Law and acts regulating bank collections, such as the American Bankers Association Bank Collection Code.
- The present law concerning commercial transactions—the subject of the Uniform Commercial Code—had its modern origins in the law merchant, that is, the system of rules, customs and usages generally recognized and adopted by merchants and traders which constituted the law for the regulation of their transactions and the solution of their controversies. By the end of the seventeenth century, the law merchant had become assimilated by the common law. It should be noted that, in the eighteenth century, many landmark commercial law cases were decided by Lord Mansfield, England’s foremost commercial judge.
- In the early 1940s, it was recognized that the above uniform acts needed substantial revision to keep them in step with modern commercial practices. Further, since each of the above uniform acts had become a segment of the statutory law relating to commercial transactions, there was a need to integrate each of such acts with the others.
- The concept of the Uniform Commercial Code is that “commercial transactions” is a single subject of the law, notwithstanding its many facets:
- In order to permit the continued expansion of commercial practices, the Code drafters adopted a philosophy of open-ended drafting, with room for courts to move in and readjust over the decades. K. Llewellyn, The Common Law Tradition 183, note 186 (1960). Thus, in the main, the Code was not drafted in the manner a conveyancer would. Llewellyn called these persons “The metes and bounds boys.” Instead, as Comment 1 to § 1–103 states, “The Uniform Commercial Code is drawn to provide flexibility so that, since it is intended to be a semi-permanent and infrequently-amended piece of legislation, it will provide its own machinery for expansion of commercial practices. It is intended to make it possible for the law embodied in the Uniform Commercial Code to be applied by the courts in the light of unforeseen and new circumstances and practices. The proper construction of the Uniform Commercial Code requires, of course, that its interpretation and application be limited to its reason.”
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Part Four. Shipping and Storing Goods Covered by Documents of Title 20 results (showing 5 best matches)
- A negotiable warehouse receipt or bill of lading is analogous to an Article 3 promissory note. Article 3 paper involves an engagement to pay money “to order” or “to bearer.” §§ 3–412, 3–104(a). Similarly, Article 7 negotiable paper involves an engagement to deliver identified goods “to order” or “to bearer.” §§ 7–104, 7–403. But note one important distinction: Article 7 paper purports to cover goods; Article 3 paper does
- The above may be diagrammed thus: Copyright © 1997, by Matthew Bender & Co., Inc., and reprinted with permission from King, Kuenzel, Stone, Commercial Transactions Under the Uniform Commercial Code: Cases and Materials, 5th Edition.
- [Prefatory Note: Article 7 was revised in 2003. The 2003 revision provides a framework for the development of electronic documents of title. See § 1–201(b)(16) (document of title, tangible document of title, electronic document of title). For example, a person takes “possession” of a negotiable tangible document of title; a person takes “control” of a negotiable electronic document of title. See § 7–106. Cf. chattel paper, tangible chattel paper, electronic chattel paper. § 9–102(a)(11), (31), (78); §§ 9–105, 9–313(a). “To the extent possible, the rules for electronic documents of title are the same or as similar as possible to the rules for tangible documents of title.” Prefatory Note to Revised Article 7. See § 7–105 (a) and (c). This section allows documents of title issued in one medium to be reissued in another medium, e.g., an issuer of an electronic document may issue a tangible document as a substitute for the electronic document.]
- : To be negotiated, order paper must be indorsed and delivered; bearer paper may be negotiated by delivery alone. See comparable requirements of UCC Article 3. §§ 3–201, 3–204, 3–205 and Part Three, B, 2, B, (2), (a) supra. As to the right to compel indorsement, see § 7–506; cf. §§ 3–203(c) (re: negotiable instruments), 8–307 (re: securities).
- of the document of title is entitled to receive, hold, and dispose of both the document and the goods it covers (invoking the concept of “merger” or “symbolism” whereby the possessor of the paper controls that which the paper represents, e.g., money, goods); (2) a good-faith purchaser of the document may acquire greater rights to the document and the goods it covers than the purchaser’s transferor, thus taking free of the claims and defenses of prior parties.
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- e.g., stocks and bonds. §§ 8–102(a)(15) (“security” defined), former § 8–105(1). Thus, Article 8, which deals with investment paper, may be likened to Article 3, which deals with money paper. That is, negotiable-instruments principles frequently find an analogue in Article 8. For example, (1) certain good-faith purchasers may obtain greater rights to the paper than their transferors had; and (2) the obligee’s claim is so merged into the paper evidencing the claim that the paper must be treated in many situations as if it
- Assume A issues paper to B, who indorses and delivers it to C, who in turn indorses and delivers it to D. Regardless of whether the paper is Article 3 “money paper” or Article 8 “investment paper,” if D is a good-faith purchaser, D takes it free from B’s claims and most of A’s potential defenses. Under Article 3, a good-faith purchaser is called a holder in due course. The analogous Article 8 term is “protected purchaser.”
- the security to A (§ 8–401). To be a “protected purchaser,” C must take delivery of the security (§§ 8–303(a)(3), 8–106(a) and (b) (“control” defined), 8–301(a)(1)) (re: delivery). A creditor of C who wants to attach or levy upon the security must cause it to be seized (§ 8–112(a)). See also, e.g., §§ 8–204 (re: restrictions on transfer), 8–209 (issuer’s lien), 8–301 (delivery). These are manifestations of the concept of merger, that is, C’s right to the shares is so merged into the paper evidencing the claim (e.g., the stock certificate) that the paper is treated as if it were the claim itself. Further, Article 9, Secured Transactions, allows for
- recover the payment from the presenter, notwithstanding the general rule allowing recovery of monies paid by mistake. Reason: Drawee Bank is in a superior position to detect a forgery because it has the drawer’s signature on file (Drawer signed signature card when Drawer opened checking account with Drawee) and is expected to know and compare it. A less fictional rationalization is that it is highly desirable to end the transaction when the instrument is paid rather than reopen and upset a series of commercial transactions at a
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Part Six. The Entire Transaction Made Pursuant to a Letter of Credit 10 results (showing 5 best matches)
- King, Kuenzel, Stone & Knight, Commercial Transactions under the Uniform Commercial Code 382 outlines the above letter-of-credit transaction thus: Reprinted from King, Barnhizer, Knight, Payne, Starnes & Stone, Commercial Transactions Under the Uniform Commercial Code and Other Laws, with permission. Copyright 2011 Matthew Bender & Company, Inc., a member of the LexisNexis® Group. All rights reserved.
- The concept of the Uniform Commercial Code is that “commercial transactions” is a single subject of the law notwithstanding its many facets. This is best illustrated by the commercial transaction made pursuant to a letter of credit, the subject of UCC Article 5. §§ 5–101 and Comment, 5–102(a)(10) (“letter of credit” defined). In this letter-of-credit transaction, the goods are sold per Article 2. A draft is issued per Article 3 and collected per Article 4. A bill of lading is issued per Article 7. The goods are financed per Article 9. Thus, “every phase of commerce involved is but a part of one transaction, namely, the sale of and payment for goods.” General Comment to UCC.
- (1) Seller’s “credit” risk is minimized. Seller knows that, if Seller ships the goods and forwards the appropriate papers to Buyer City Bank, Bank will pay for the goods.
- This nutshell confirms the statement in the General Comment to the Code that “[t]his Act purports to deal with all the phases which may ordinarily arise in the handling of a commercial transaction, from start to finish.” These phases involved (1) selling or leasing goods; (2) paying for goods with negotiable instruments or wire transfers; (3) shipping and storing goods covered by documents of title; (4) financing the sale of goods: the secured transaction; and (5) constructing the entire commercial transaction pursuant to a letter of credit.
- The following discussion will provide an overview of a commercial transaction made pursuant to a letter of credit.
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Part One. The Process of Selling Goods 30 results (showing 5 best matches)
- The UCC rejects both the “lay-dictionary” and the “conveyancer’s” reading of a commercial agreement. Instead, the Code determines the meaning of the agreement by the language the parties used and by their actions, read and interpreted in the light of commercial practices and other surrounding circumstances. The commercial context sets the measure and background for interpretation and may explain and supplement even the language of a formal or final writing. § 1–303 Comment 1.
- Implied warranties may arise from course of dealing or trade usage. §§ 2–314(3), 1–303. See Part One, B, 4 supra. Example: For a pedigreed dog or blooded bull to be considered merchantable, trade usage may require that pedigree papers be produced. § 2–314 Comment 12 (Comment 14 (2003)). CISG 8, 9.
- to conform to the contract, the buyer may (a) reject the goods or (b) opt to accept the goods in spite of the nonconformity. Of course, a buyer who accepts a nonconforming tender does not lose any remedy otherwise available, e.g., damages for breach. §§ 2–601 and Comments, 2–606(1)(a), 2–106(2) (defining “conforming”); see § 2–714 and Part One, F, 3, B infra. Further, the buyer may accept some commercial units and reject the rest. Example: S tenders to B two living room suites of furniture. One couch is torn. B may accept one suite (the undamaged one) and reject the other (the one with the damaged couch). B may not, however, reject the damaged couch but accept the rest of that suite. §§ 2–601(c), 2–606(2) (defining “acceptance” of a commercial unit), 2–105(6) (defining “commercial unit”) [§ 2–105(5) (2003)]. Simply put,
- is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract. The goal is prevention of
- directly to the law of commercial transactions as set forth in the UCC. The Code does recognize, however, that a party with an insurable interest in goods can sue third parties for injury to the goods. § 2–722.
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Preface 4 results
- “The Uniform Commercial Code should be construed in accordance with its underlying purposes and policies. The text of each section should be read in the light of the purpose and policy of the rule or principle in question, as also of the Uniform Commercial Code as a whole, and the application of the language should be construed narrowly or broadly, as the case may be, in conformity with the purposes and policies involved.” Comment 1 to Uniform Commercial Code § 1–103.
- Second, every Code rule and comment stated is backed up by the relevant UCC citation. Accordingly, the reader—whether law student or practitioner—is given entŕee to the Code itself so that an independent judgment may be made as to the rule and application under consideration. Further, the cite will afford ready entŕee to a study in depth. For instance, once a relevant UCC cite is obtained, all reported case law construing the language can be located through such publications as the Uniform Laws Annotated—Uniform Commercial Code and the Uniform Commercial Code Reporting Service. The UCC cite also will give ready entŕee to the massive legal literature that discusses the Code. On occasion this Nutshell will refer to J. White, R. Summers, Handbook of the Law Under the Uniform Commercial Code (6th ed., Student Edition, 2010) (cited as UCC Hornbook), Gregory M. Travalio, Robert J. Nordstrom & Albert L. Clovis, Nordstrom on Sales & Leases of Goods (2d ed., Aspen 2000) (cited as Sales...
- The official text (with comments) of the Uniform Commercial Code embodies more than nine-hundred pages. Its sweeping scope and complexities may appear to discourage summarizing into a Nutshell format. Yet the need to view the Code with some perspective is manifest. This Nutshell endeavors to meet this need.
- of the articles of the Uniform Commercial Code to be revised.)
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Index 1 result
Part Two. The Process of Leasing Goods 5 results
- to conform to the lease contract, the lessee may (a) reject the goods or (b) opt to accept the goods in spite of the nonconformity. Further, Lessee may accept any commercial unit and reject the rest. § 2A–509(1).
- As to revocation of acceptance of a lot or commercial unit, see § 2A–517(2) and (3).
- In May 2011, the American Law Institute withdrew the 2003 Amendments to Article 2A of the Uniform Commercial Code. Consequently, this Part will continue to present pre-2003 Article 2A. In brackets, however, the changes under Amended (2003) Article 2A are set forth for informational purposes. This Part does reflect Revised (2001) Article 1, General Provisions.
- “If the goods are unfinished … an aggrieved lessor or the supplier may either [1] complete manufacture and wholly identify the goods to the lease contract or [2] cease manufacture and lease, sell, or otherwise dispose of the goods for scrap or salvage value or [3] proceed in any other reasonable manner.” § 2A–524(2). This rule is intended to minimize loss and promote effective realization in the exercise of reasonable commercial judgment. Cf. §§ 2–703(c) [2–703(2)(c) (2003)], 2–704 at pp. 122–123.
- are all things that are movable at the time of identification to the lease contract or are fixtures, but not, e.g., money, instruments, chattel paper, or minerals before extraction. §§ 2A–103(1)(h) [2A–103(1)(n) (2003)], 2A–217 (identification). Cf. §§ 2–102 (scope of Article 2), 2–106(1) (“sale” defined), 2–105(1) [2–103(1)(k) (2003)] (“goods” defined) at pp. 2–3.
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Part One. The Process of Selling Goods Part 2 9 results (showing 5 best matches)
- In addition, the UCC demonstrates a more liberal attitude than some courts have shown in connection with specific performance of sales contracts. Thus, in view of UCC Article 2’s emphasis on the commercial feasibility of replacement, a new perspective as to what are “unique” goods has been introduced. First, specific performance is no longer limited to goods already ascertained at the time of contracting; second, the determination of uniqueness must consider the total contract situation. Output and requirements contracts involving a particular or peculiarly available source or market are typical commercial specific performance situations today. § 2–716 Comments 1 and 2; see § 2–306. Example of output contract: “The seller hereby agrees to sell and deliver, and the buyer hereby agrees to purchase, accept, and pay for, all of the seller’s output of [ ...for sale. In the commercial setting, such goods are “unique,” and Buyer should be able to obtain specific performance. CISG 45(1...
- means honesty in fact and the observance of reasonable commercial standards of fair dealing. § 1–201(b)(20) and Comment 20 (See former § 1–201(19).)
- In this situation, A is typically a manufacturer who seeks to sell goods to merchant-dealer B, who would resell the goods. To overcome B’s unwillingness to buy, A might agree to take back any unsold commercial unit of goods in lieu of payment. Goods held by B on “sale or return”
- Former Article 6, Bulk Transfers, dealt with the following situation: S, a merchant, owing debts to creditors, sold out S’s inventory, pocketed the proceeds, and disappeared leaving S’s creditors unpaid. To prevent this kind of commercial fraud, former Article 6 required advance notice to S’s creditors of the impending sale. This advance notice would allow S’s creditors to take steps to impound the proceeds if they thought it necessary. Former § 6–101 Comments.
- ...repudiation or countermand.” This rule was based on the seller’s duty to mitigate damages. Consequently, S was strongly encouraged not to perform further after receiving notice of B’s breach. This could prove to be unfair and lead to economically wasteful results. Thus, the UCC gives the aggrieved S the right to identify to the contract any conforming finished goods in S’s possession or control regardless of their resalability. §§ 2–703(c) [§ 2–703(2)(c) (2003)], 2–704 and Comment 1. Insofar as unfinished goods are concerned, the Code states as follows: “… an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either [1] complete the manufacture and wholly identify the goods to the contract or [2] cease manufacture and resell for scrap or salvage value or [3] proceed in any other reasonable manner.” § 2–704(2). Further, Comment 2 to § 2–704 states that “… the seller is given express power to...
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- Publication Date: May 3rd, 2012
- ISBN: 9780314277442
- Subject: Commercial Law
- Series: Nutshells
- Type: Overviews
- Description: This product provides a concise yet comprehensive introduction to the Uniform Commercial Code for students and practitioners alike. It covers each major topic of the Code, including the process of selling, payment, negotiation, shipping, storage, financing sales, and leasing of goods. In addition, the text makes it possible for readers to see how the various articles of the Code may interact in a single transaction. Wherever practicable, the actual language of the Code and its comments has been used. The comprehensive outline, references to relevant authority, and intuitive system of cross-referencing all contribute to its ease of use. This eighth edition contains the 2010 Amendments to Article 9, with an effective date of July 1, 2013.