The Uniform Commercial Code and the Sale of Goods
The Uniform Commercial Code (UCC) was intended to create uniform business laws so businesses could operate in any state knowing the rules wouldn't vary depending on the state they were in. Every state except Louisiana has adopted a form of the UCC.
The UCC covers the following areas of law:
- sales (including warranties)
- commercial paper (drafts, checks, certificates of deposit, promissory notes)
- bank deposits and collections
- Letters of Credit
- bulk transfers
- warehouse receipts, bills of lading, and other documents of title
- investment securities, and
- secured transactions.
There are special rules in the UCC which cover contracts for the sale of goods. Specificly, these rules loosen up the requirements for creating a binding contract when goods are being sold.The UCC requires you to produce something in writing if you want to enforce a contract for a sale of goods and the price is $500 or more. However, this writing can be very brief—briefer than a normal written contract and it need only:
- indicate that the parties have agreed on the sale of the goods, and
- state the quantity of goods being sold.
If items such as price, time and place of delivery, or quality of the goods are missing, the UCC fills them in based on customs and practices in the particular industry. However, just because the UCC makes this type of contract for the sale of goods legal doesn’t mean it’s a good idea to routinely use this type of contract. It’s far better to put together a solid written contract that covers more of the essentials required for an enforceable contract under regular law.
If a customer comes to a store, pays for merchandise, and takes it away, there’s no need for a formal written contract—the deal is done. (For larger purchases, it makes sense for the retailer to have the customer sign a receipt acknowledging delivery of the goods.) Under the UCC, having some writing is important when the seller merely promises to deliver the goods.
In most situations, the UCC requires that when a contract must be in writing to be enforceable, it must be signed by the person against whom the other party is seeking to enforce the contract. Stated another way, if A wants to sue B for breach of contract and a writing is required, A must show that B signed something showing an intent to be contractually bound.
But when merchants—people who sell goods—are involved, there doesn’t always have to be a signed document. If a seller sends a confirmation of an order and the buyer doesn’t object in writing within ten days after receiving it, nothing more is required to satisfy the written contract requirement. Where specially manufactured goods are ordered, the UCC says you don’t need something in writing to enforce a sales contract if the seller has already made a significant effort toward completing the terms of the contract.
Checking Out the UCC
Your state laws (statutes) should be available in any law library in your state, in the reference section of many public libraries, and via Nolo’s website at www.nolo.com. The Uniform Commercial Code is probably indexed under Uniform, Commercial, or Commerce. For most small businesses, the section on Sales (Article 2) is the most helpful part of the UCC. The UCC changes fairly often; be sure you have the latest version that’s been adopted in your state.
Excerpted from Legal Guide for Starting and Running A Small Business, by Fred Steingold (Nolo).