What is the uniform commercial code?

Anyone who has purchased a commercial or personal vehicle has likely signed a ucc-1 statement as part of the transaction. Buying a car with a loan from a bank or financial institution is a good example of a uniform business code transaction. a ucc-1 is filed and the lender retains the title until the loan is paid off.

What is the uniform commercial code?

Uniform Business 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, establishing contracts, and selling goods are covered by the uniform commercial code. the sale of services and the purchase of real property is not a ucc transaction.

Uniform commercial code laws

The laws of the ucc were established and are maintained by the national conference of commissioners on uniform state laws (nccusl), (also known as the commission on uniform laws), 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

Balance / small business explains these sections in more depth, but here are briefly the uniform business code sections

  • 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 asset liquidations
  • Article 7: warehouse receipts, bills of lading and other title documents
  • Article 8: investment securities
  • Article 9: secured transactions, for personal property, agricultural liens, promissory notes, shipments and security interests.

The Uniform Commercial Code was created to make it easier for companies 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 cornell law school website.

Most uniform commercial code transactions involve secured property, financed by a bank or lender with title to the property held by the lender as collateral until the loan is repaid.

Ucc-1 financial statements

Under the provisions of the state’s universal commercial code statutes, when personal property (equipment, inventory, and other tangible assets of a business) is used as collateral for loans, a ucc-1 statement is prepared, signed, and filed. This process is also called “perfecting security interest” in the property, and this type of loan is a secured loan.

For example, when a lender makes an auto loan to the person who buys it, the dealer files a form ucc-1. The 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.

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

What a ucc-1 declaration includes

The parts of a ucc-1 declaration are:

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

To file a UCC-1 return, you will need to go to your state’s business division (usually the secretary of state’s office) and look for this form. Many states allow you to file online.


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