Published On: Mon, Dec 12th, 2016

Commercial Law: Uniform Commercial Code Articles Adopted and Applicable in the State of California

Commercial law is a legal practice area with rules and regulations that govern merchants and other individuals involved in business. The Uniform Commercial Code or UCC is the primary authority governing all commercial transactions.

These transactions include contracts, sale of goods, secured transactions, bulk sales, insurance covers, investment securities, leases, negotiable instruments, letters of credit, and bank deposits and collections.

The UCC, a product of the National Conference of Commissioners on Uniform state Laws and the American Law Institute has adopted the following articles applicable to commercial transactions in the state of California:

Article 1

This is an article on general provisions. It deals with the definitions and all the rules on the interpretations of the provisions of the law.

Article 2

An article on Sales and it applies on all transactions in goods. It doesn’t however apply to the transactions intended to operate as security transactions only. Article 2 of the UCC doesn’t repeal statutory regulations on sales to customers or any other buyers.

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photo by Okan Caliskan via Pixabay

Article 2A

This UCC article covers leases. It is applicable to all and any transactions that create leases regardless of the form of that transaction.

Article 3

This is an article on the laws that govern negotiable instruments. However, Article 3 is not applicable to payment orders governed by article 4A, securities, or money. The regulations of the Board of Governors of the Federal Reserve System and their operating circulars supersede any conflicts between Articles 3 and Article 4.

Article 4

This is the code that governs bank deposits and collections in the state of California. It covers a bank’s liability for action or non-action with respect to handled items. The item could have been handled for the purpose of payment, presentation, or collection. It is applicable at the state that the item is located. If the case of action or inaction is at the bank’s branch or at a separate office, then the liability will be governed by the law of the place where the office or the branch is located.

Article 4A

In commercial law, Article 4A of the UCC governs fund transfers. The rules applicable here begin at the originator’s payment order. The order has to have been made for the purpose of making payment to the order’s beneficiary. This law also governs payment orders issued by intermediary or originator’s banks with the intention of carrying out the originator’s payment order.

Article 5

This article outlines the regulations that govern letters of credit and the rights and/or obligations arising from the transactions that involve the letter of credit.

Article 6

This article lays out the laws applicable to bulk sales made through liquidation of assets or auctions.

Article 7

This UCC code covers laws applicable in warehousing receipt cases, bills of landing, and other Documents of Title. All storage and bailment cases on goods are directed by this article.

Article 8

This UCC Article applies to investment securities. Shares and equity interest issued by any entity registered as an investment company under the federal investment laws has an interest in a unit investment trust registered. This also includes the face-amount certificate that is issued by a face amount certificate company that is registered as such. Insurance and endowment policies aren’t covered.

Article 9

The UCC code on Article 9 applies to agricultural lien, transactions that create security interest on personal property, consignments, sale of accounts, chattels, promissory notes, or a security interest.

In conclusion, if you are a merchant or in business, these laws are important and a lawyer can take you through them. Learning about them or having a lawyer with deep knowledge and experience on these and more articles will protect you and your business.

Author Bio

Henry Morrison is a commercial law attorney working with a renowned San Diego Business law firm. Check out his blog for more information in commercial laws and the UCC.

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