What is the Uniform Commercial Code?

Uniform Commercial Code
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Anyone who has ever purchased a business or personal vehicle has most likely signed a UCC-1 statement as part of the transaction. The purchase of a car with a loan from a bank or financing entity is a good example of a Uniform Commercial Code transaction. A UCC-1 is filed and the title is kept by the lender until the loan is paid off.

What is the Uniform Commercial Code? 

Uniform Commercial Code (UCC) laws are established to regulate sales of personal property and other business transactions. For example, transactions such as borrowing money, leasing equipment or vehicles, setting up contracts, and selling goods are all covered by the Uniform Commercial Code. The sale of services and the purchase of real estate is not a UCC transaction. 

Uniform Commercial Code Laws

The UCC laws were set up and are maintained by the National Conference of Commissioners on Uniform State Laws (NCCUSL), (also known as the Uniform Law Commission), which is a non-profit organization. Each state has adopted its own slightly different but basically the same version of the Uniform Commercial Code. While most states have adopted the nine basic articles and procedures (below), California has its own articles

Sections of the Uniform Commercial Code

The Balance/Small Business explains these sections in more depth, but here briefly are the sections of the Uniform Commercial Code

  • Article 1: General Provisions
  • Article 2: Sales and Leases
  • Article 3: Negotiable Instruments, such as ...
  • Article 4: Bank deposits 
  • Article 5: Letters of credit
  • Article 6: Bulk sales, auctions, and liquidations of assets
  • Article 7: Warehouse receipts, bills of lading, and other documents of title
  • Article 8: Investment securities
  • Article 9: Secured transactions, for personal property, agricultural liens, promissory notes, consignments, and security interests. 

The Uniform Commercial Code was set up to make it easier for businesses in different states to do business with each other. You can find a list of the different versions of the UCC in each state on this website from Cornell Law School.

Most Uniform Commercial Code transactions involve secured property, financed by a bank or lender with the title to the property held by the lender as security until the loan is paid off.

UCC-1 Financing Statements 

Under the provisions of state Universal Commercial Code statutes, when personal property (equipment, inventory, and other tangible assets of a business) are used as collateral for borrowing, a UCC-1 statement is prepared, signed, and filed. This process is also called "perfecting the security interest" in the property, and this type of loan is a secured loan. 

For example, when a lender gives a car loan to the person buying the car, a UCC-1 form is filed by the dealer. UCC-1 forms are used for secured transactions (those that have some form of collateral involved). The form includes information about both parties and a description of the property.

UCC-1 financing statement is prepared and signed by both parties. The filing creates a lien against the property, so the borrower may not dispose of the property without paying off the debt.

What a UCC-1 Statement Includes

The parts of a UCC-1 statement are: 

  • Name and address of the debtor or debtors. Additional information is needed if the debtor is an organization. 
  • Name and address of the secured party (person or organization on the other side of the transaction, that holds the security). 
  • Information about the collateral involved (the property pledged against the loan or sale). 

To file a UCC-1 statement, you would need to go to the business division of your state (usually in the Secretary of State office) and search for this form. Many states allow you to file online.