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SUMMARY |
2003 Amendments
Uniform Commercial Code:
Article 2 - Sales
Article 2 of the Uniform Commercial Code (UCC) was derived from the Uniform Sales Act, originally promulgated by the Uniform Law Commissioners in 1906. The Uniform Sales Act became Article 2 when the UCC was originally promulgated in 1951. Between 1951 and 2003, there were no extensive amendments proposed, only some amendments conforming Article 2 to revisions of other UCC articles. In 2003, a group of modernizing amendments have been promulgated by the American Law Institute and the National Conference of Commissioners on Uniform State Laws. The UCC is a joint enterprise of the ALI and the ULC.
Article 2 provides the fundamental rules of contract for the sale of goods. With key exceptions, such as good faith and reasonableness, the rules of Article 2 are default rules that may be waived or modified by agreement. The rules provide for each stage of a contractual relationship from formation to performance. Included are provisions governing implied and express warranties, risk of loss, statute of frauds and extrinsic evidence, interpretation, auction sales, “gap-filling” terms that apply when parties fail to reach agreement, breaches of contract and remedies for breaches of contract.
Goods are generally tangible, moveable objects that are not real estate, securities, or things in action. A sale is a transfer of title to goods from one person to another for a price. The rules of Article 2 do not govern gifts, leases or secured transactions, though there are provisions that interrelate with other articles of the UCC.
Bringing amendments for Article 2 to conclusion took a long time. The study effort began in the late 1980's. Initially, the integration of Article 2 into a larger article covering more than sales of goods was thoroughly explored. This proved not to be feasible. Then there were many hard issues to address against the fact of a basic statute that serves sales transactions very well. It was decided that a full-scale revision was not merited, but that discrete amendments to address some current issues could improve the functioning of Article 2. That process concluded in the Spring of 2003 with the final approval of amendments by the American Law Institute. The Uniform Law Commissioners had approved them in late-summer 2002.
It is not feasible to cover every amendment in a short summary such as this one. Of course, the basic Article 2 remains sacrosanct. The amendments update the article to accommodate electronic commerce, which is desirable to avoid questions of interrelation with federal law, and also to reflect the development of business practices, changes in other law, and to resolve some interpretive difficulties of practical significance. The following are examples of important amendments:
1. Electronic Transactions. Technology has changed the face of transactions in goods and the law of sales must adapt to that reality. There are amendments that substitute newly defined terms, record and sign, for every requirement for a writing or manual signature in Article 2. The newly defined terms include electronically stored documents and electronic signatures. The 2003 amendments to Article 2 make electronic records and signatures the equivalent for enforcement purposes of paper documents and manual signatures. In addition, amendments provide that an electronic record or signature is attributable to a person if it is that person’s electronic act or the act of that person’s electronic agent. An amendment also provides that an electronic communication has legal effect even if no person is aware of its receipt, and that receipt of an electronic communication establishes that it was received, but not that the content received was the content sent. Contracts may clearly be formed through electronic agents. These are fundamental rules for the conduct of electronic transactions, necessary to make them fully effective. An amendment, also, assures that the rules for electronic transactions will not be preempted by federal law.
2. Conflicts with Other Applicable Law. The range of law affecting sales is much broader and more complex than it was when Article 2 was originally promulgated. There are conflict problems that an amendment attempts to solve. For example, an amendment provides that a transaction under Article 2 is also subject to an applicable certificate of title statute, but not to the extent of affecting the rights of a buyer in the ordinary course of business arising before registration of title in the name of another buyer. Other laws that are recognized to apply are rules governing consumer transactions, and special statutes governing such things as agricultural products, transfer of human blood, and artists’ products. When there is a conflict between Article 2 and a rule so recognized, the other law prevails.
3. Statute of Frauds. Statute of frauds requirements limit the extent to which an oral contract may be enforced. Original Article 2 permitted the enforcement of oral contracts that do not exceed $500.00 in price. An amendment raises the amount to $5000.00.
4. Battle of Forms Rules Simplified. When seller and buyer exchange records incorporating offer and acceptance of a contract, there can be confusion as to the resulting terms. Original Article 2 contained elaborate rules designed to resolve the issues that arise in a forms battle, but they have proved unsatisfactory in practice. The amendments separate the issues of contract formation and contract terms and create a framework for determining the terms of contracts formed in any manner, including by a battle of forms. The terms of a contract are the terms that appear in the records of both parties, terms that the parties agree to even if not in mutual records and terms supplied or incorporated under any provision in Article 2. In a classic forms battle, the rules give no preference to the terms of either party.
5. Consumer Contracts. The amendments create a new category of sales contracts – consumer contracts – and provide certain protections for consumers who enter into such contracts. For example, sellers in consumer contracts that want to disclaim implied warranties of quality must do so in language that plainly conveys to the consumer the nature of the risk being assumed. In some instances, additional flexibility has been added for non-consumer contracts, as by permitting a seller to cure following a buyer’s revocation of acceptance, while retaining the original rule precluding cure in such cases for consumers.
6. Warranties to Remote Purchasers. Article 2 governs implied and express warranties of quality. The existing warranties run to the immediate buyer (or those in some relationship to the immediate buyer other than purchaser from that buyer) of the goods. Much case law has developed, however, relating to warranties to a “remote purchaser,” someone who “buys or leases goods from an immediate buyer or other person in the normal chain of distribution.” Amendments to Article 2 provide two new statutory obligations in the nature of express warranties to remote purchasers. The first establishes a warranty based on any record packaged with or accompanying goods that articulates a remedial promise or an affirmation of fact, promise or description that reasonably could be taken as an obligation. The other warranty is based upon affirmation of fact, promise or description of goods, or recitation of a remedial promise in an advertisement or similar communication to the public.
7. Shipment Terms, F.O.B., F.A.S., C.I.F. There are precise rules respecting certain kinds of shipment terms in Part 3 of Article 2. Obligations under these rules are amply covered as a matter of usage of trade. Because these rules are archaic and do not conform to current practices, they are repealed in the amendments to Article 2.
The 2003 Amendments to Article 2 of the Uniform Commercial Code represent a considerable improvement over existing law and prepare the law of sales for sales of goods in the electronic marketplace.
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