What is the Uniform Commercial Code?

Companies that do business across state lines must ensure they comply with the Uniform Commercial Code. This nine-article code sets standards for many types of transactions, including loans and banking. Without this code, it would be more difficult for companies to interact with each other if they’re in different states.

All 50 states have adopted the Uniform Commercial Code; however, some have altered it a little. California is one of the states that modified portions of the code. This makes it a bit more of challenge to determine what your company needs to do to comply with it. Fortunately, it is possible to work with professionals who have extensive knowledge of the UCC.

If you plan on leasing equipment, entering into contracts, borrowing money or selling items outside of your home state, you should become familiar with the UCC. One important note about the UCC is that it doesn’t apply to real property transactions, including those involving structures or land.

Many businesses deal with the UCC when they lease items or when they purchase or sell a company. In these cases, there is a UCC-1 statement that notes that the title to the leased item remains in the lender’s hands until the lease is paid in full.

While they aren’t very common, it is possible that a company will face litigation based on a point in the UCC. When this happens, you need to protect your company. Preparing for the court case or other legal proceedings that will ensue is one step. You also need to find out the options that you have for handling the matter.

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