The Uniform Commercial Code (UCC) has been described as one of the most important developments in American law. The code contains legal definitions and guidelines that can be helpful tools for companies.
The Uniform Commercial Code (UCC) was designed to promote interstate commerce by standardizing laws that govern business in the United States and in the U.S. Virgin Islands and the Commonwealth of Puerto Rico. The concept: businesses would be more comfortable and willing to conduct transactions across state lines if statutes were uniform or very similar.
The UCC is a “model” code or guidelines that do not constitute actual law. Each state legislature has to adopt the statutes for the laws to take effect. (Canada has enacted the Personal Property Security Act (PPSA) that contains guidelines similar to the UCC’s. Nine of the country’s ten provinces – Quebec is the exception – and all three territories have adopted versions of the PPSA. Quebec is governed by a Civil Code that is influenced by the French civil law system.)
The UCC comprises 11 articles. Many credit managers and analysts are familiar with article 9 – Secured Transactions – that contains statutes associated with granting and securing credit, as well as establishing priority in the event a debtor defaults. Article 9 also describes secured transactions and how trade creditors may protect their company’s interests if a debtor defaults.