In every state, payment by check and other paper instruments is governed by Articles 3 and 4 of the Uniform Commercial Code., first drafted more than 40 years ago. Article 3 is the most dated article of the UCC. It is merely a revision of the previous uniform act, the Uniform Negotiable Instruments Law, which was drafted in 1896, and is based primarily on 18th and 19th century British case law. Some of the concepts of the concepts of this article are as archaic as the language. Article 4 -- based on the Bank Collection Code -- was written early in the technological revolution brought on by computers, and substantial changes are now needed to modernize this article. It is evident that revision is needed.

Every state should adopt the Article 3 and 4 Revisions because:

UCC 3 AND 4 NEEDS TO BE MODERNIZED

Modernization is necessary to accommodate changing business practices. For example, at the time Articles 3 and 4 were drafted, only banks offered checking. Today, banks, savings and loans, credit unions and other brokerage houses offer accounts upon which checks and other payment orders can be drawn, but only banks and checks are clearly governed now.

Much of the language in present Article 3 is unnecessarily technical and archaic. The revisions replace the language with that which can be understood in the 20th century business world. For instance, the present Part 5 on presentment, notice of dishonor, and protest is both confusing and archaic. The revision reorganizes the material in a more logical sequence and significantly modernizes the area.

UCC 3 AND 4 SHOULD BE CLARIFIED

Revised UCC 3 and 4 will clarify and fix problems that have arisen over the past 40 years of experience with the UCC and negotiable instruments. A principal shortcoming of present Article 3 is its tendency to deal with all instruments in the same way. The revision recognizes that there are two types of instruments -- notes and drafts -- which usually perform different functions and merit different treatment.

The revised UCC3 also clarifies other provisions in the present article. For instance, cashier's, teller's and certified checks are commonly taken as cash equivalents on the assumption that the obligated bank will pay the check. Revised Article 3 makes the obligated bank liable for consequential damages if it refuses to pay. The purpose is to limit consequential damages to cases in which the bank refuses to pay even thought its obligation to pay is clear and it is able to pay.

The Revised Article 4 provides a framework for check truncation, whereby a bank sends forward electronic information rather than the check itself.

UNIFORMITY

The very nature of modern banking and business make it important for every state to adopt Revised Articles 3 and 4. States have interpreted some provisions differently, and a uniform position is needed. If this statute is not kept up-to-date, others will resolve current issues nonuniformly, striking at the long term interest that states have in uniformity.

CONCLUSION

The goal of the UCC is a uniform law which governs commercial transactions within but also among the states. Uniformity and certainty are necessary to facilitate commerce national in nature. Therefore, it is imperative that states adopt Revised Articles 3 and 4 of the UCC. Uniformity of adoption is as important to Revised Articles 3 and 4 as it was 40 years ago to the original UCC.