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The purpose of the Uniform Commercial Code (UCC)

THE UNIFORM COMMERCIAL CODE ( UCC )(A model statute covering such issues as the sale of goods, credit, and bank transactions.)

While there are a wide variety of business contracts that are frequently encountered
by hospitality managers, two of the most common are those related to buying the
goods and services needed to operate their businesses (purchase agreements) and
those related to selling goods and services to their customers (sales contracts).
It is important that the hospitality manager become familiar with purchase
agreements and sales contracts, for two reasons: because they are used frequently in
the industry and because a very special code of laws exists to help facilitate business
transactions that are carried out using sales contracts. The Uniform Commercial
Code (UCC) was developed to simplify, modernize, and ensure consistency in the
laws regulating the buying and selling of personal property (as opposed to land),
any loans granted to expedite those sales, and the interests of sellers and lenders.
The rules of the UCC, first developed in 1952, were designed to add fairness to the
process of transferring property, to promote honesty in business transactions, and
to balance the philosophy of caveat emptor (Caveat emptor:  A Latin phrase meaning “let the buyer beware.” The phrase implies that the burden of determining the relative quality and price of a product falls on the buyer, not the seller.)
by giving buyers, sellers, and lenders a
measure of protection under the law.
The main purposes of the UCC are:
1. To simplify, clarify, and modernize the law governing commercial
2. To permit the continued expansion of commercial transactions.
3. To provide for consistency in the law regarding the sale and financing of
personal property in the various jurisdictions (municipalities, counties, and
The UCC comprises eleven articles, or topic areas. These are:
Article 1 General Provisions
Article 2 Sales Contracts
Article 2A Leases
Article 3 Commercial Paper
Article 4 Bank Deposits and Collections
Article 4A Funds Transfers
Article 5 Letters of Credit
Article 6 Bulk Transfers
Article 7 Warehouse Receipts, Bills of Lading, and Other Documents of Title
Article 8 Investment Securities
Article 9 Secured Transactions; Sales of Accounts and Chattel Paper
The UCC governs many aspects of the hospitality manager ’ s work, including the
selling of food and drink, the buying and selling of goods (personal property), and
the borrowing and repayment of money. Accordingly, you need to become familiar
with its basic concepts. For example, when purchasing goods under contract, the
UCC has three basic requirements:
 Sales of more than $ 500 must be in writing and agreed to by both parties.
 The seller has an obligation to provide goods that are not defective and
that meet the criteria and terms set forth in the contract.
 The buyer has an obligation to inspect the goods that were purchased, to
make sure they conform to the terms of the contract, and to notify the
seller immediately of any discrepancies.

[ by Frank at 3-24-2009 07:05 edited ]
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The important thing to keep in mind about the UCC is that it is a law that
requires you to fulfill any promises made in a purchasing or sales contract. If a restaurant
enters into an agreement to buy 50 heads of lettuce from a food wholesaler
on or before a specified date, then that wholesaler is obligated to deliver 50 heads
of lettuce on time, and the restaurant is obligated to pay for it.
The UCC protects the interests of buyers by requiring that goods or products
offered for sale be fit for use and free of any known defects. In other words, the
food wholesaler cannot deliver 50 heads of spoiled lettuce to the restaurant, or it
will not have fulfilled the terms of the sales contract. Likewise, the UCC also protects
the interests of sellers by requiring that buyers inspect all goods after receiving
them and inform the seller immediately of any defects. Thus, the restaurant cannot
claim three months after the fact that the lettuce it received was spoiled, then refuse
to pay the outstanding bill. It must notify the food wholesaler immediately of the
spoiled lettuce or live with the consequences.
The UCC is a very complex law with many requirements that hospitality managers
must be aware of. In following thread , “ Legally Managing Property, ” we will look
closely at other articles when we discuss the legal aspects of buying and selling
property. Then, in following threads , “ Your Responsibilities When Serving Food and
Beverages, ” you will learn how the UCC regulates the wholesomeness of the food
and beverages that are sold in restaurants and other hospitality operations.


The Smoking Bones BBQ restaurant serves an excellent spinach salad as an
accompaniment to its popular chicken and rib dishes. Michelle Brennan,
the restaurant’s manager, purchases, from a local vendor, all of her produce,
including fresh spinach used in the salads.
Unfortunately, one of Michelle’s guests becomes ill after eating at her
restaurant. The source of the illness is traced directly to the fresh spinach
used in the restaurant’s salads. In fact, upon further investigation, it is
determined that the spinach, when delivered to the restaurant’s produce
vendor, was already infected with E. coli bacteria that matched a strain
identified in cattle manure used to fertilize the spinach field.
1. According to the UCC, a seller has a responsibilty not to sell defective
prodcuts. Who, in this example, is the seller?
2. Assume that you were the guest sickened by the bacteria. Who do you
believe should be held responsible for the damages you incurred?
3. What specific steps could Michele take to help prevent incidents such as
the one described here from reoccurring in her restaurant?
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