Missouri’s Uniform Commercial Code
Chapter 400 of the Missouri Revised Statutes is known as Missouri’s Uniform Commercial Code (“UCC”). It was enacted in 1963 to simplify the laws governing commercial transactions in Missouri.
I have litigated numerous contract cases since 2005. While Missouri’s Uniform Commercial Code is intended to simplify the rules governing commercial transactions, it is often quite complex. The UCC generally encompasses nine areas of commercial transactions: sales, leases, negotiable instruments, bank deposits and collections, funds transfers, letters of credit, documents of title, investment securities, and secured transactions. This article is the first of a two-part introduction to Missouri’s Uniform Commercial Code. Subsequent articles will discuss each of the nine areas of Missouri’s Uniform Commercial Code.
Supplemental Law
Although the UCC is designed to govern commercial transactions, it is not a comprehensive codification of commercial law. As such, Missouri’s other laws governing commercial transactions supplement the UCC when not specifically displaced by the UCC. For example, Missouri courts have long held that a sale of food for human consumption includes an implied warranty that the food is wholesome, fit for the purpose, and is of merchantable quality. The UCC does not diminish this protection.
Choice of Law
Under Missouri’s Uniform Commercial Code, the parties to a contract may agree as to which state’s or nation’s law shall apply to a transaction. However, the parties may not choose which law to apply to a transaction if the applicable law is provided by the UCC. Specifically, the parties may not alter the applicable law provided by the UCC as related to: the rights of creditors against goods sold, leases, bank deposits and collections, letters of credit, investment securities, or perfection and priority of security interests.
Remedies
The remedies provided by Missouri’s Uniform Commercial Code shall be liberally applied by the courts. The goals is to put an aggrieved party in the same position as if the other party had fully performed. Additionally, an aggrieved party may waive or discharge a claim without receiving consideration in exchange for the waiver or discharge.
Good Faith
Parties may by contract vary the provisions of the UCC, but they may not disclaim any requirement of good faith, diligence, reasonableness, or care. As long as reasonable, the parties may by agreement establish standards of good faith, diligence, reasonableness, or care.
Every contract or duty governed by Missouri’s Uniform Commercial Code must be performed or enforced in good faith. “Good faith” is defined by the UCC as honesty in the conduct or transaction. For example, no such duty applies to a bank demanding payment of a note that is payable upon demand, unless such duty is expressed in the note. However, under the UCC, an acceleration of a note must be done in good faith if the note permits acceleration “at will” or when the holder deems himself insecure. Further, the UCC does not require good faith in renegotiating a contract governed by the UCC.
Breach of the good faith requirement of the UCC gives rise to a contract, not a tort, remedy. However, this does not preclude a party from pursuing a separate common law tort related to the breach. Such tort claim, though, must be based on a breach of good faith as defined by common law.
Time of Performance
Whenever the UCC requires any action to be taken within a reasonable time, such time may be set by the contract, as long is such time is not unreasonable. A reasonable time is determined by the “nature, purposes and circumstances” of the action. An action is taken “seasonably” if it is taken within the time agreed upon. If no time is agreed upon, then the action must be taken within a “reasonable time”. For example, waiting one year to notify the seller of back charges due to defects is unreasonable. Also, knowingly installing defective goods and then waiting two weeks to notify the buyer of an intention to cure is not seasonable.
This article is for general informational purposes only. This information is not intended as legal advice. You should consult an attorney regarding how this information might apply to your specific circumstances.
Michael Sewell, JD, MBA has practice law in Missouri for more than a decade. Sewell Law provides professional legal services in the areas of business formation and transactional litigation. Michael Sewell has formed more than 100 business, and he has litigated more than 100 cases in federal, state and municipal courts.
For a confidential initial consultation at no charge, please contact Michael Sewell at (314) 942-3232 or at michael@sewelllaw.net.
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