The Effects of the Universal Commercial Code - Research Paper Example

Outline of the Commercial and how it affects the Business Services and Operations. Affiliation: The Uniform commercial code draws a set of laws that offer regulations that govern commercial business dealings and transactions. In general, the UCC is an Act that regulates trade laws in the U.S and seeks uniformity across board. The code received its first publication in 1952, and it has been amended several times throughout the years to reflect the ever changing environment. It was created via joint efforts of National Conference of Commissioners on Uniform State Laws (now referred to as the Uniform Law Commissioners (NCCUSL) and the American Law institute with the aim of forming a uniform scheme to regulate the sale of goods and commercial transactions across the US (LawInfo.Com, n.d.). In early 1950s, business transactions were handled differently and ineffective across United States. The purchase and sale of goods among various states drew confusion when legal matters regarding business arose. And, therefore, there was a need to get a policy to streamline interstate business issues. Adoption of the code as remained free of choice among states and each state has the option of adopting or rejecting this law (Liuzzo, 2010). That is, only if the state government adopts the UCC that the law becomes the state’s statutory laws. Note that, the state legislature may rewrite part of the law or adopt it as originally edited. (Miller, n.d.). The Uniform Commercial Code (UCC) is arguably the most significant development of the American Law, which offers comprehensive ways of addressing issues of commercial business. The drafts and text of the code are written by commercial law experts and submitted to the Uniform Law commissioners in collaboration with American Law institute for approval. The approving team is comprised of Attorneys qualified to Practice law, federal and state judges, and university Law professors across the United States. They then, meet and decide whether to endorse the drafts or forward them back to experts for more revision. More often such revisions create many drafts but one has to be adopted, and the agents recommend that the states adopt it. Goals of UCC The system was developed to address two central issues. First was to harmonize varied approaches by state laws that made interstate business transactions difficulty. Secondly was to improve the management of legal and contractual requirements of operating business. The code has nine articles, each with provisions that relate to the particular area of commercial law and therefore, the conduct of business in different states needed to comply with the UCC code. Despite the substantive nature of all commercial acts in all states being the same, there exist structural variations in the laws depending on local customs of each state. One significant effect of the UCC was to strengthening the interstate transactions. The establishment of the Uniform Commercial Code contributed to the formulation of laws governing commercial transactions between states within the US, and this made interstate commerce more efficient, effective and easy to conduct. Before the enactment of the UCC, interstate trade in the United States was accustomed with difficulties because of necessity of dealing with varied legal requirements between individual states as services and goods were traded from one territory to another. The introduction of the uniform reduced such barriers. Today in the United States business is done efficiently because of the leverage brought by the enactment of these statutes. It is only one state- Louisiana that has not adopted fully the universal commercial code stability. Businesses ought to be carried on a sincere and in a professional manner. Therefore, the parties to a transaction need to honor their pledge in business dealings. The Uniform commercial code has upheld this criterion thus providing stronger continued commercial confidence and security. For instance, Article 1 of the UCC recommends that there be a contract for sale of services or goods over $500 in writing. Since the contract is in writing, the likelihood of dispute in terms and conditions of the commercial agreement is minimized remarkably. This fosters stability within the market environment and acts as a source of certainty about business transactions. The surmount effect of the Uniform commercial code is its ability to bring standardized commercial expectations among businesses from one state to the other. It is predictable which direction business dealing is likely to be undertaken and concluded with this code. Such predictability eliminates speculation with business cycles and, therefore, planning and budgeting can be carried out with certainty without an interruption to the research, review and knowledge of different regulations within a particular state in the US (Broemmel, 2014). The objective intention of the framers of the Uniform Commercial code was to regulate trade and easy the mode of commercial transaction. However, this enactment also has grown to serve as a model for other uniform state laws in the US law system. Such particular laws include those of Divorce, custody and probate issues that happen across the United States. The formulation and implementation of these laws have made reference to the Uniform commercial code of 1952. The UCC’s successes have contributed to this referral, and future endorsement is inevitable. Despite the enormous positive effects of the Uniform Commercial code, there is no doubt that the UCC has its demerits. Legislation of law is not uniform from state to state and therefore it becomes a necessity for businesses entities to acknowledge and learn how the law is as legislated in different states (Liuzzo, 2010). These statues do not necessarily maintain their original intention since they can be rewritten according to the individual state’s preference. However, it is enormously clear that UCC’s benefits for business in the United States are a huge boost, and it is important to understand interstate legal dealings. Failure or breach to comply with the signed contract is subject to certain disciplinary in the Universal commercial code. In any event if two or more parties bound by terms of the agreement and one fails to owner its share of contract performance, that part is then in breach of contract. Article 3 of the US’s Uniform Commercial Codes have envisaged such occurrence and provided remedies for any party that is breached against unfairly. A good case to show how disciplinary measures are administered is the case of Susman Godfrey’s judgment against Ronald Perelman in New York Supreme Court in the year 2010 (Godfrey, 2014). The case under consideration was brought on behalf of Applehead pictures- a movie production company to enforce Mr. Perelman’s obligation to make capital remittances to the company such enforcement is a remedy to the breach of contract (Godfrey, 2014) Another major area of jurisdiction in the US where the Universal commercial code has played a significant role is in the Negotiable instruments. These are simply written documents that are intended to promise payment of the specific amount of money. They are of two types; notes and drafts and envisaged in article 3 part 3 of the UCC and explain the law concerning enforceability of a negotiable instrument. In a court case involving Triffin vs. Somerset Valley Bank Case, Robert filed a lawsuit against Hause Company in 2001 involving negotiable instruments. Robert had purchased checks from the company totaling over $8000.00, and the agency cashed them with the expectation that the bank will pay them. However, the checks were denied by the bank and returned marked as stolen check (Clarkson, Miller & Cross, 2012, p. 378). Robert stated that, the check issuing company was negligent in failing to safeguard payroll checks (Meislik & Meislik, 2001) and pleaded to be granted Judgment in the case. The court then decided to grant Robert provision of the judgment for the fact that he showed the company issued the checks in good faith. Despite the appeal made by the company, the court maintained that as a matter of law, the Robert was a holder in due course and entitled to enforce the checks. The universal commercial code has also played a significant role in modern business. The current technological age has completely changed how sales were being held in the past. This generation has witnessed the development of faceless transactions in the United States. Necessary provisions of article 2 of the UCC were designed in a way to embrace a face to face business approach; they have continually become ineffective in modern business environment (Liuzzo, 2010). Such transactions in the early 1950s involved face to face interaction between the buyer and seller. This engagement made it easier for the customer to understand goods being traded as well as the expertise of the seller in case of service provision. This enabled the customer to develop justifiable expectation and could be secured by the warranty of services in case such item fails to measure up to expectation of the client. Contrary to this old way, today’s internet based sales and businesses do not grant the buyers opportunity to understand and appreciate the seller’s products. Most companies in the US currently involve online activities. For instance, companies like Google, EBay, Facebook, and Amazon among other enterprises conduct the transactions over the internet, and the UCC codes do not guarantee the safety to the buyers or sellers. This is a major challenge that universal commercial code regulations never anticipated in their incorporation. Fortunately, a number of amendments are being incorporated in the article 2 of the Universal code that would alleviate these challenges and try to address the current issues surrounding online transactions. This has followed careful analysis of weaknesses of the existing commercial legislation about current internet transactions. Additionally, these proposed changes will tend to uncover several impediments of electronic commerce that include trade interpretation difficulties and the ever changing internet business practice. Another challenge that has clouded the UCC codes is the inadequacy of article 2 in defining what a merchant is. Definition of merchant in the current law does not relate him or her to a particular commercial item. For instance, the clause just identifies any individual that sells in item as a merchant. That way, confusion is created because this definition is not particular of whether the individuals in the trade are engaged professionally or just disposing of their goods. The current definition is ambiguous when considering sellers such as a carpenter who wants to sell his furniture or a software developer intending to sell his software. Even though, such people can be regarded as experts, they are only disposing of their products and in that sense calling them professional merchants is not justifiable. For example the lawsuit of Cohen vs. Hathaway in 1984, is a clear illustration of how ineffective is article 2 of the UCC about merchant explanation. Here the court was presented with two fishermen, who sold their fishing boat which did not meet the buyer’s expectation. In the ruling, the jury found that the fishermen were in the transaction of selling boat and therefore needed not to be regarded as merchants considering the type of commodity they sold. This is particularly important consideration in the proposals of the new UCC. The commissioners and framers of the proposals ought to differentiate between different dealers so as to avoid such contradictions in judgments as that of fishermen. References Broemmel, M. (2014). What Are the Benefits of the Uniform Commercial Code? | eHow. eHow. Retrieved 1 October 2014, from http://www.ehow.com/about_5120614_benefits-uniform-commercial-code.html LawInfo.Com. (n.d.). An Overview of the Uniform Commercial Code. Retrieved from http://resources.lawinfo.com/business-law/an-overview-of-the-uniform-commercial-code.html Liuzzo, A. (2010). Chapter 2. In Essentials of business law (7th ed.). New York, NY: McGraw-Hill Higher Education. Meislik, M. (2001). Triffin v. Somerset Valley Bank. Meislik.com. Retrieved 1 October 2014, from http://www.meislik.com/cases/triffin_v_somerset_valley_bank/ Miller, R. (n.d.). Cengage Advantage Books: Business Law Today: The Essentials. Google Books. Retrieved 1 October 2014, from http://books.google.co.ke/books?id=DabZ6ZzR0ywC&pg=PA3&dq=advantages+of+universal+commercial+code+and+how+it+affects+US+business&hl=en&sa=X&ei=gGIrVLSNHNPYap_pgYgL&ved=0CCEQuwUwAA#v=onepage&q&f=false Triffin v. Automatic Data Processing, Inc. (n.d.). Retrieved from http://www.meislik.com/cases/triffin_v_automatic_data_processing/ Read More