Article 1 & The Comprehensive Approach to UCC Transaction

       The introduction of Article 1 provides an excellent place to discuss ‘The Comprehensive Approach’ to Uniform Commercial Code transactions.   This has two separate components.  First, multiple Articles apply to all transactions; second, multiple sections apply to all transactions within each Article.  It is in connection with the first component that the impact of Article 1 can be clearly seen.  Section 1-102 states as follows:

            This article [Article 1] applies to a transaction to the extent that                       it is governed by another article of the Uniform Commercial Code. 

                                                   Section 1-102

       Therefore, regardless of the substantive Article or Articles which govern a particular transaction, Article 1 will also apply.  The impact of the application of Article 1 can be extraordinary, as a litigator, draftsperson, and within the context of the business involved.  These will be explored in subsequent posts. 
 

       The utilization of multiple Articles as part of the comprehensive approach involves more than the application of Article 1 to every transaction.  In addition, it recognizes that an integrated commercial transaction will almost always involve more than one substantive Article.  By way of simple illustration: a sale of goods will activate Article 2; if the goods are shipped via carrier, that will activate Article 7; there will most certainly be a payment system involved which could activate Articles, 3, 4, 4A, or 5, and a possible combination of several of payment Articles; and finally, the goods might be financed at both the wholesale or retail level activating Article 9.
 
       Utilizing the comprehensive approach activates a multitude of sections throughout the applicable Articles of the Code. As these Code sections are linked together, a ‘UCC story’ is told. Facts are then processed through the activated sections, generating potential opportunities and vulnerabilities.  Some sections of course are of greater significance than others, but in this process potential problems will reveal themselves to the draftsperson, and opportunities to enhance litigation strategies will emerge for the litigator.
 
       In addition to the multiple Article aspect of the comprehensive method, there is the activation and application of multiple sections within the primary Article or Articles involved.  This too can have a very powerful impact on drafting and litigation. As a drafting and litigation strategy, the comprehensive approach provides the greatest arsenal available to achieve the most favorable result for the client.  
 

       The next post will contain an illustration of the intra Article application of the comprehensive method.