In this article, I discuss the current revision of the law of the sale of goods in the United States. This revision is part of a larger project in the United States to revise the various areas of commercial law to reflect both modern business practices as well as the growing globalization of commercial law.
Commercial law in the United States is primarily state, not federal law, and it is independently promulgated in fifty-one separate state jurisdictions. The fifty states in the United States and the District of Columbia. Until the late nineteenth century, American commercial law was based on the English common law, and each state's law evolved independent of the other states' law. Today, although commercial law is still the law of the individual states, commercial law is primarily uniform throughout the United States because of the existence and passage in the various jurisdictions of the Uniform Commercial Code (UCC). The UCC has been adopted in some form by all jurisdictions (Louisiana has not adopted the sales and leases provisions, but has adopted the rest of the UCC).
The UCC is now fifty years old, and the commercial law in America is going through a period of substantial change and revision.[1] The need for the revisions is due to essential changes in business practices, more inclusive and faster methods of communication, and the perceived need for American commercial law to conform to the rising body of international commercial law.
There are two organizations which have developed and continue to revise the UCC: The National Conference of Commissioners for Uniform State Laws (NCCUSL)[2]
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and the American Law Institute (ALI).[3] It is important to note that although NCCUSL is a government organization (the ALI is not), neither organization, nor the combination of the two have the power to create positive law. The UCC, and the subsequent revisions of it, are presented to the various state legislatures for adoption, and the Code only becomes the law of a respective state when it is adopted by that state's legislature. It is also important to note that because the individual states have the power to adopt whatever version or modifications the state pleases, there is a substantial amount of non-uniformity among the states.[4]
Beginning early in the century, several discreet uniform acts were drafted by NCCUSL to codify areas of commercial law. These acts covered negotiable instruments,[5] sales,[6] documents of title,[7] and security rights in personal property.[8] These uniform acts were widely adopted by the various states, and made substantial progress in unifying the commercial law in America.
In 1935, the ALI and NCCUSL, as the two major legal bodies involved in creating private law, entered into an agreement to jointly sponsor the drafting of legislation in the area of commercial law. In 1940, NCCUSL adopted a plan to unify all of the commercial law in one commercial code, and the ALI was invited to join in the task: an invitation which the ALI accepted. The drafting committees consisted of members of NCCUSL, official representatives from the ALI, as well as official representatives from the American Bar Association.[9] As with the current revision of the UCC, the meetings were open, and representatives from trade groups attended in abundance.
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The UCC was completed in 1950 and approved by NCCUSL in 1951. Within a few years, the UCC was adopted in one form by all of the states. The UCC was specifically drafted to conform to actual business practices, and unlike some European and Civilian Codes, is not highly abstract.
The Uniform Commercial Code is divided into the following articles: Article One: General provisions,[10] Article Two: Sales,[11] Article Two A: Leases,[12] Article Two B: Licenses of intangibles,[13] Article Three: Negotiable instruments,[14] Article Four: Bank deposits and collections,[15] Article Four A: Payments by electronic transfers,[16] Article Five: Letters of credit,[17] Article Seven: Documents of title, Article Eight: Investment securities,[18] and Article Nine: Secured transactions.[19]
The law for the sale of goods in the United States has a similar pedigree to the law in other jurisdictions based on the English common law. The law regulating the sale of goods is based primarily on the British Sale of Goods Act of 1893,[20] and thus, there is a high degree of uniformity among the various common law jurisdictions. Likewise, the current sales provisions of the UCC is a revision of the Uniform Sales Act, which was promulgated by NCCUSL in 1906, and was largely based on the British Sale of Goods Act.
In August 1991, NCCUSL formed an Article Two Drafting Committee to revise the Sales articles of the UCC. The committee has been meeting regularly several times a year, and has read drafts before the full body of NCCUSL in the summers of 1995, 1996, and 1997. A final reading is due at the annual meeting of NCCUSL in the summer of 1999, and then the draft will be sent to the ALI for final approval and then presented to the various individual state legislatures for adoption.
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The present Artide Two is limited in scope to the sale of movable goods. After much tinkering with the question of scope, the Drafting Committee resorted to going back to the familiar existing language in current Article Two: "Unless the context otherwise provides, this Article applies to transactions in goods." At various times, the possibility of service contracts has been discussed and played with, but has ultimately been dismissed. Questions pertaining to the extent to which service contracts will be covered in Article Two are left to judicial development.
The path back to the beginning has been long and torturous one for the Drafting Committee. In March 1993, the Drafting Committee discussed at length and recommended to the sponsors of the UCC that a "hub and spoke" approach to the code be taken. In this format, the structure of Article Two would be wholly reworked, and the final product would consist of a core of general contractual principles along with specific code sections for sales, leases, and licenses of goods, with the possibility of sections for service contracts. The Drafting Committee on licenses was grafted on the sales committee, and work began. The project in that format became too unwieldy, and, at the annual NCCUSL meeting in the summer of 1995, the "hub and spoke" version was dismantled. As a result, the licensing committee was spun off as the Article Two B committee, and the sales committee was redirected back to the sale of goods alone.
After much discussion back and forth on this issue, the Drafting Committee determined that service contracts will not be included as a substantive part of Article Two. As with the present law, it is expected that courts will use Article Two by analogy for service contracts in appropriate circumstances, particularly when the contract is a mixed contract of goods and services.
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