If You Sell Things, You Need To Know About the Uniform Commercial Code

What is the Uniform Commercial Code (UCC)? It’s a statute which governs sales of goods (and a few other things).  Every state has a version, and Washington’s is RCW 62A.

So what kind of stuff does the UCC apply to? It applies to sale of goods, to real estate transactions, commercial paper (e.g., promissory notes), secured transactions (e.g, collateral); warehouse receipts and documents of title.  If you are in a business that uses these items, the UCC applies.  It is what drives the language of contracts for these things whether you realize it or not.

For example, the UCC requires a sale of $500 or more to be in writing:  “a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.”  RCW62A.2-201(1).   In short, you cannot walk into court and ask a judge to enforce an oral agreement to sell or buy any item worth more than $500.  Gotta be written.

Does the UCC apply to an agreement to provide services?  Basically, no. You can orally agree to provide, say, construction services to a customer.  If the customer then breaches the oral contract, you can try to sue.  Suing can be difficult for other reasons, but the UCC won’t stop you.

Why does the UCC matter? As you can see, the UCC protects buyers and sellers alike. To buyers, it provides assurances (warranties) to buyers about the quality of the goods – and a right to sue if the goods don’t meet the right standards.  To sellers, it provides a right to sue if the buyer breaches the contract, and provides a lien process to protect interest in collateral.

Examples of UCC warranties include (1) Warranty of title – that the seller has the right to sell the item.  RCW 62A.2-312;  (2) Implied warranty of merchantability (made to the standards applicable in the industry)  RCW 62A.2-314, and (3) Implied warranty of fitness for particular purpose. RCW 62A.2-315.  These warranties protect consumers, which after all, includes nearly every business. Businesses buy goods for their own use all the time.

But the UCC also protects sellers. For example, if you own a business and buy equipment with financing, the lender can file a lien statement to protect its stake in the collateral. The lien can come up when you seek loans for other items.  Likewise, if you are selling an item and providing financing for the buyer to purchase it, you may be entitled to file a lien to protect your stake in the item.

These are just a few simple examples of what the UCC addresses, so check with your lawyer to make sure you understand your rights and obligations.

© Copyright 2011 Law Office of Susan K. Fuller, PLLC