Commercial Law

Commercial LawWhat is Commercial Law?

Commercial law supplies the rules and regulations that merchants and others involved in commerce are required to adhere to as they engage in business or commercial transactions. The Uniform Commercial Code (UCC) is the primary authority which governs commercial transactions. It directs the sales of goods and services, negotiable instruments, security interests, leases, principal and agent relationships, many types of contracts, and much more. In a real sense, commercial law encompasses many of the laws business lawyers address every day for their clients and is sometimes used synonymously with “business law”.

Commercial law generally includes legal issues that arise prior to the initiation of a lawsuit. By contrast, once a lawsuit is filed, the same issues are more properly characterized as litigation, which are handled by a business or commercial litigation attorney. Thus, broadly defined, commercial law lawyers help their clients negotiate and enter into business deals, whereas, business and commercial litigation lawyers help their clients defend their interests in court when deals go bad.

Types of Transactions Involved in Commercial Law Include:

  • Contracts
  • Secured Transactions
  • Sales of Goods
  • Leases
  • Bulk Sales
  • Documents of Title
  • Investment Securities
  • Negotiable Instruments
  • Bank Deposits and Collections
  • Letters of Credit
  • Insurance Coverage

The California Commercial Code is not the same as the Uniform Commercial Code (UCC). The UCC is not a federal law, but a product of the National Conference of Commissioners on Uniform State Laws and the American Law Institute. Both of these organizations are private entities that draft and recommend the adopting of UCC statues by state governments. The code was first published in 1952 and has been revised numerous times throughout the years. The UCC is a recommendation of laws that can be, but are not required to be, adopted by the various states. The code has the effect of law only when it is adopted by a particular state.

Independent state legislatures may either adopt UCC verbatim, reject it, or modify it to meet the needs of their particular state. If a state legislature adopts and enacts the UCC, it becomes a state law and is codified in the state statutes. All 50 states and territories have enacted some version of the UCC. California has largely adopted the UCC, with some changes.


Article 1: General Provisions: UCC Article 1 deals with definitions and also the rules of interpretation of the provisions.

Article 2: Sales: UCC Article 2 applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction; nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

Article 2A: Leases: UCC Article 2A applies to any transaction, regardless of form, that creates a lease.

Article 3: Negotiable instruments: UCC Article 3 applies to negotiable instruments.  It does not apply to money, to payment orders governed by Article 4A, or to securities governed by Article 8.  If there is conflict between this Article and Article 4 or 9, Articles 4 and 9 govern. Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this Article to the extent of the inconsistency.

Article 4: Bank Deposits and Collections: UCC Article 4 covers the liability of a bank for action or non-action with respect to an item handled by it for purposes of presentment, payment, or collection is governed by the law of the place where the bank is located.  In the case of action or non-action by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located.

Article 4A: Fund Transfers: UCC Article 4A applies to funds transfers. Beginning with the originator’s payment order, made for the purpose of making payment to the beneficiary of the order.  The article also includes any payment order issued by the originator’s bank or an intermediary bank intended to carry out the originator’s payment order.

Article 5: Letters of Credit: UCC Article 5 applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.

Article 6: Bulk Sales: UCC Article 6 applies to bulk sales auctions and liquidations of assets.

Article 7: Warehouse Receipts, Bills of Lading and Other Documents of Title: UCC Article 7 deals with storage and bailment of goods.

Article 8: Investment Securities: UCC Article 8 applies to a share or similar equity interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered.  Investment company security does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.

Article 9: Secured Transactions; Sales of Accounts and Chattel Paper: UCC Article 9 applies to:

(1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;

(2) an agricultural lien;

(3) a sale of accounts, chattel paper, payment intangibles, or promissory notes;

(4) a consignment; and

(5) a security interest.  However, interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this article does not apply.

See more here.

Contact a Commercial Law Attorney

If you are struggling with a commercial law issue, there is no reason to handle the matter on your own. An experienced commercial law attorney can explain how the law applies to your situation and suggest a course of action designed to protect your legal rights. Contact us for a free evaluation today. If you are engaged in a commercial law dispute, see our Commercial Litigation page for more information.