Proposed Uniform Commercial Code Amendments—In State Legislatures Throughout The Land

By: Donald L Swanson

Proposed 2022 amendments to the Uniform Commercial Code (“UCC”) are being introduced in state legislatures all across the land—providing the first major update to the Uniform Commercial Code in thirteen years.

The proposed UCC amendments address emerging technologies and update commercial transaction rules on virtual currencies, artificial intelligence and other technologies.

Most notably, the proposed amendments add a new Article 12 to the UCC titled, “Controllable Electronic Records.” 

The proposed UCC amendments are lengthy—91 pages without comments. 

My purpose here is to show the extraordinarily thorough, open and intensive process used by the Uniform Law Commission to develop the proposed amendments. 

UCC History

The UCC was initially proposed, back in the 1940s, as a collaborative effort by the Uniform Law Commission and the American Law Institute.  Since then, all fifty states have adopted some version of this Code.

The UCC’s provisions deal with subjects like sales and leases of personal property, banking processes, and secured transactions—all of which are essential to the free-flow of commerce throughout these United States.    

Assuring the UCC’s continued vitality in a changing economy is one of the goals of the Uniform Law Commission and the American Law Institute—and is a driving motivation behind the proposed UCC amendments.

Open and Collaborative Effort

The proposed UCC amendments are the result of an open and collaborative effort between the Uniform Law Commission and the American Law Institute, with input from the American Bar Association and a host of other interested organizations and individuals.

Uniform Law Commission

–Commission History

Established in 1892, the Uniform Law Commission exists to provide states with non-partisan, well-conceived and well-drafted legislation where uniformity among states is advisable. 

The Commission’s function has been described as providing laws that are “boring but necessary” to help a state and its citizens function well.

Nebraska (my home state), for example, has enacted around 125 of the Commission’s uniform acts.

–Usual Drafting Process

The Uniform Law Commission, composed of commissioners from every state, drafts all its uniform acts through a slow, careful and transparent process. 

The Commission’s usual process begins with appointment of a drafting committee, which holds meetings that are open to any and all interested observers.  The drafting committee:

• invites all major stakeholders to participate in the drafting process;
• produces multiple iterations of the proposed act, all of which are posted for review and comments; and
• holds two readings to the entire body of commissioners for final approval.

–Process for Preparing UCC Amendments

The Commission’s Drafting Committee for the proposed UCC amendments followed the usual drafting process.  Except, the UCC Drafting Committee went far beyond that usual process—it became a drafting committee on steroids.   

The Commission’s Drafting Committee met many times, and one of its subcommittees met every week for ten months.

A huge number of people were involved in the process.  More than 300 representatives of a vast array of stakeholders helped evaluate the many, many issues involved and helped prepare the proposed amendments.  These representatives:

• included self-described UCC geeks, technology nerds, crypto aficionados, law professors, bankers and attorneys; and
• spoke on behalf of a highly-diverse group of stakeholders—ranging from large banks to small vendors and from crypto currency organizations to old-school businesses. 

At the last two annual meetings of the Uniform Law Commission, each section of the proposed UCC amendments was read—all 91 pages, line-by-line—and open discussion and debate by the commissioners occurred on each section. 

The final version of the proposed UCC amendments was approved by the Uniform Law Commission at its Annual Meeting in July of 2022.

American Law Institute

Additionally, the proposed UCC amendments are the result of a collaborative effort with the American Law Institute.

The American Law Institute is an organization similar to the Uniform Law Commission—but with a different focus.  The American Law Institute is famous for its Restatements of the common law (e.g., on contracts, torts and trusts) that are frequently cited as authoritative by state and federal judges throughout the land. 

The proposed UCC amendments were formally approved by the American Law Institute in May of 2022. 

Video Interview

For further information on the process of developing the proposed UCC amendments, see this linked video interview with Edwin Smith, Chair of the Uniform Law Commission’s Drafting Committee that produced the proposed UCC amendments.

Conclusion

The levels of care and stakeholder involvements in preparing the proposed UCC amendments were extraordinary.

Accordingly, wide acceptance of the proposed UCC amendments by legislatures throughout the the land is both warranted and expected!

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