Creating the Eyes Through Which to View and Process the Uniform Commercial Code: Part 1

The fact that Article 1 applies to all substantive transactions throughoutUniform Commercial Code, standing alone, is a powerful fact.  When one factors in the actual content of Article 1 in light of that universal application, the massive impact of Article 1 starts to appear.  While all of Article 1 is important, four areas are of particular significance:

1.    Enumerated policies and their impact on drafting and litigation;

2.    Drafting provisions;

3.    Outside bodies of law which are made applicable to the UCC by reason of Article 1;

4.    Key definitions which apply throughout the Code.

The importance of policy is often over looked, particularly at the law student level.  The focus tends to be on learning the black letter law.  The reality is that the accurate meaning of the ‘black letter law’ must be consistent with the policy or policies upon which the particular statutory provision was drafted.  The interactive process between the actual text and the policies will yield the true meaning of the statute.

I was fortunate to have the Associate Chief Reporter in the overall drafting of the Uniform Commercial Code as my UCC professor.  With well over a decade involved in the formal drafting process, Dean Mentschikoff had a unique understanding of the policies upon which the Code was drafted. All of us were fortunate to have the benefit of her unique insight. More than anything else, we were taught the ‘why’, and advised that if any interpretation of a statutory provision of the Code was inconsistent with the policy upon which the provision was drafted, the interpretation was wrong.  The policies become the eyes through which the Uniform Commercial Code was viewed and processed.  Policies will be emphasized accordingly throughout this blog.

Section 1-103 is one of the most important provisions of the Uniform Commercial Code. In the first instance, Section 1-103 (a)(1)(2)(3) delivers a legislative mandate to the courts as to how the courts are to ‘construe and apply’ the Uniform Commercial Code.

.(a) The  Uniform Commercial Code must be liberally construed and applied to   promote its underlying purposes and policies, which are:

(1) to simplify, clarify, and modernize the law governing commercial transactions;

(2) to permit the continued expansion of commercial practices through custom, usage, and  agreement of the parties; and

 (3) to make uniform the law among the various jurisdictions.

            The mandate for the courts to ‘liberally construe and apply’ the Uniform Commercial Code is similarly a guide to any learning or working within the Uniform Commercial Code.  As you learn, the mandate for ‘liberal construction’ encourages the mind to expand.  As a practitioner, you can approach drafting of documents  and litigation with equal creativity and confidence.  In the next post, we will begin our discussion of the application of Section 1-103(a)(1)(2)(3).