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Have you ever wondered why, when you buy things, particularly software, there is always a piece of paper with legalese, often in CAPITAL LETTERS, stating exclusions and limitations of warranties? What's up with that? It’s the Uniform Commercial Code (“UCC”).

The UCC imposes certain implied warranties in all sales, however, Section 2-316 allows the seller to exclude implied warranties and limit remedies(i.e. get out of paying damages if sued) as long as the exclusions are in writing and “conspicuous”. CAPITAL LETTERS are deemed “conspicuous”.

That’s just one example of how your life has been affected by the UCC.

Land ownership and agrarian production were once the primary source of wealth and power in the economy and the focus for commercial contract law. Contract law thus initially evolved to cover transactions like buying a horse or an acre of land. The industrial revolution, however, shifted focus to manufactured goods. One might call up a factory and order 2000 right-handed widgets. Upon arrival, the box is opened and it contains 2000 left-handed widgets. Is the buyer stuck with the non-conforming widgets, or can it notify the seller that the shipment was non-conforming, send them back and give the seller an opportunity to send the right widgets? The old common law of contracts, or “law merchant”, did not encourage fixing the problem or point to a solution.

In the 1930’s, law professor Karl N. Llewellyn recognized that the change required a revision of contract law to make its rules relevant to the new economy, rather than the old. Broad institutional support for comprehensive uniform changes in commercial law did not materialize until the 1940’s, however, and a draft uniform law did not emerge until 1952. The creation of the UCC was coordinated and financed by the American Law Institute and its member lawyers, judges and law professors. ALI officials persuaded Karl Llewellyn to join the team as chief reporter. With Llewellyn came his colleague and future wife (and later herself a famous law school professor and law school dean), Soia Mentschikoff, who became the associate chief reporter for the code. Finally in 1952, the comprehensive code, with nearly 400 sections, was promulgated in official form by the ALI, ABA, the National Conference of Commissioners on Uniform State Laws and submitted to all state legislatures. Although loudly resisted for over a decade after it was drafted, the UCC eventually was adopted in all 50 states.

Karl Llewellyn envisioned a statute that was based on a jurisprudential foundation of legal realism. See, Gregory E. Maggs, Karl Llewellyn's Fading Imprint on the Jurisprudence of the Uniform Commercial Code, 71 U. Colo. L. Rev. 541 (2000). In particular, the UCC included five features inspired by legal realism:

  • Favored open-ended standards over firm rules
  • Avoided formalities
  • Required interpretation in light of the “purpose” of a provision
  • directed courts to supplement its rules with general legal and equitable principles
  • Provided a range of remedies that principally served to make injured parties whole.

Id. at 543.

In recent years, the UCC has undergone substantial change: Article 2A on leases of goods and Article 4A on funds transfers have been added. Articles 2A, 3, 4, 5, 6, 8, and 9 have been extensively revised. New versions of Articles 1, 2, and 2A are in progress. Professor Maggs argues that the drafters of these new provisions have fundamentally undermined Llewellyn's jurisprudence: "This article contends that these substantial additions and revisions have done more than merely alter and augment the legal rules in the U.C.C. They have had the additional effect of diminishing Llewellyn's jurisprudential contributions. The modern drafters and revisers of the U.C.C. have not strived to retain the five legislative features identified above. Indeed, in some instances, they specifically have rejected them and the philosophy behind them." Id. at 544.

While some sections of the UCC have generated legal controversy and confusion which, contrary to Llewellyn’s vision, the judiciary has been unable to resolve, as a whole, the UCC has been enormously successful. UCC principles have been extended to new areas of law, such as leases, and uniform laws are in the works for “new economy” transactions, such as electronic sales of goods.

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