Definition of commercial code

What is a commercial code?

A commercial code is a set of laws that regulates and facilitates commercial transactions. In the US, the Uniform Commercial Code is intended to provide a uniform set of standards that market participants can refer to when conducting business and resolving disputes.

Key takeaways

  • A commercial code is a set of laws designed to regulate commerce.
  • Trade codes can facilitate commerce by providing protocols to resolve common challenges and disputes.
  • In the US, a Uniform Commercial Code (UCC) has been adopted in all 50 states.
  • A central theme of the UCC is the resolution of contractual disputes, offering guidelines for the codification of concerns and advice on how to proceed in the event of a breach of contract.

Understanding commercial codes

In the US, all 50 states have adopted a unified body of business law known as the Uniform Commercial Code (UCC). The UCC was developed in 1951 as a result of collaboration between the American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL).

Examples of the types of questions that are addressed in a business code include: When does a contract become legally binding? How do we handle cases where money is transferred to the wrong party? And how do we prove ownership of assets?

The purpose of the UCC is to provide a set of standard national statutes for the governance of business activities. Once a state enacts the UCC, it is codified into the laws of that state. States can adopt the UCC in its original form, or they can modify it to better suit their local interests.

A central theme of the UCC is the resolution of contractual disputes, offering guidelines for the codification of concerns and advice on how to proceed in the event of a breach of contract. Although the UCC covers a wide range of business-related topics, it deals primarily with transactions related to personal property, as opposed to real estate. As such, his articles focus on topics such as sales, leases, fund transfers, bank deposits and withdrawals, depository receipts, and property documents.

The UCC has largely achieved its goal of standardizing American commerce. All 50 states have enacted at least parts of the UCC, as have the territories of Guam, the District of Columbia, the Northern Mariana Islands, the US Virgin Islands, and Puerto Rico.

Some jurisdictions have not adopted all the articles of the UCC, such as Louisiana, Puerto Rico, and the Navajo Nation. In the case of Louisiana and Puerto Rico, the modifications to the UCC referred to the preservation of the traditional civil law statutes related to leases and sales.

Commercial code example

Suppose you own a warehousing and transportation business. One of your truckers receives a bill of lading from a customer, specifying the nature and destination of the goods and authorizing your company to transport them. However, during a routine stop at a gas station, they discover that the bill of lading is missing, allegedly stolen. Technically, you are not allowed to transport the merchandise without the bill of lading. So what do you do? Do you complete the delivery or return the merchandise to your warehouse?

In section 7-601 of Article 7, the UCC provides guidance on what to do if a bill of lading has been lost, stolen or destroyed. It states that a court can order the shipping company that lost possession of the bill of lading to complete the delivery of the goods even though that company is no longer in possession of the original bill of lading. In these circumstances, the transport company would be exempted from any liability associated with the delivery of goods without a bill of lading.

The UCC also states that, if no court order is given, any company that completes delivery without a bill of lading will be liable for any personal injury that occurs during delivery.

With these provisions in mind, you instruct your driver to complete the delivery, but to drive more carefully than usual and remember to lock the door the next time you stop for gas.

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Mark Holland

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