UCC Article 1, General Provisions (2001) Summary

Article 1 of the Uniform Commercial Code (UCC) provides definitions and general provisions which, in the absence of conflicting provisions, apply as default rules covering transactions and matters otherwise covered under a different article of the UCC.  As other parts of the UCC have been revised and amended to accommodate changing business practices and development in the law, these modifications need to be reflected in an updated Article 1.  Thus, Article 1 contains many changes of a technical, non-substantive nature, such as reordering and renumbering sections, and adding gender neutral terminology.  In addition, over the years it has been in place, certain provisions of Article 1 have been identified as confusing or imprecise.  Several changes reflect an effort to add greater clarity in light of this experience.  Finally, developments in the law have led to the conclusion that certain changes of a substantive nature needed to be made.

The first substantive change is intended to clarify the scope of Article 1.  Section 1-102 now expressly states that the substantive rules of Article 1 apply only to transactions within the scope of other articles of the UCC.  Second, he statute of frauds requirement that sometimes has been interpreted to govern transactions outside the UCC has been deleted Statute of frauds issues have been resolved article by article in the UCC, and a statute of frauds provision in Aricle 1 has become redundant and not applicable in the UCC.  Third, amended Section 1-103 clarifies the application of supplemental principles of law by establishing UCC rules as primary when there is a conflict.  Fourth, the definition of “good faith”  found in 1-201 is revised to mean “honesty in fact and the observance of reasonable commercial standards of fair dealing”.  This change conforms to the definition of good faith that applies in all of the recently revised UCC articles except Revised Article 5.  Fifth, evidence of “course of performance” may be used to interpret a contract along with course of dealing and usage of trade. 

Perhaps the most important change to Article 1, finally, has to do with default choice-of-law provisions found in 1-301, which replaces previous 1-105.  Under Article 1 before the 2001 amendments, parties to a transaction may agree to be governed by the law of any jurisdiction that bears a reasonable relation to that transaction.  Revised Article 1 provides a different basic rule that applies except for consumer transactions in certain circumstances.

With respect to all transactions, an agreement by the parties to use the law of any state (or in the case of an international transaction, country) is effective, regardless of whether the transaction bears a reasonable relation to that state.  However, if one of the parties to a transaction is a consumer, such a choice-of-law provision in a contract may not deprive the consumer of legal protections afforded by the law of the state or country in which the consumer resides, or of the state or country where the consumer contracts and takes delivery of goods.  Also, with respect to all transactions, an agreement to use the law of a designated state or country is ineffective to the extent that application would violate a fundamental public policy of the state or country which has jurisdiction to adjudicate a dispute arising out of the transaction.  The forum state’s law will govern the transaction if the contract is silent on the issue of choice of law. 

The 2001 Revision of Uniform Commercial Code Article 1 rounds out a complete refurbishment of the Uniform Commercial Code that began in 1985.  New articles have been added.  All the major articles have been either revised or amended.  Article 6 on “Bulk Transfers” may be repealed, by recommendation, shortening the UCC by one article.  The Article 1 Revision merely responds to all of the work and effort on the UCC since 1985.