Uniform Commercial Code and Contracts

UniformCommercial Code and Contracts

Rules of riskof loss

Riskof loss applies in contract law and is used to determine the partyliable for the risk under a contract of sale of goods. The followingfour rules as prescribed in the Uniform Commercial code and arelisted in the order of application.

  1. Agreement rule: the agreement between the parties under the contract shall determine the risk of loss.

  2. Breach rule: The rule holds that the burden of risk rests with the breaching party even if breach and the problem are unrelated. This means that if the breach is delivery and the goods delivered are faulty, the risk of loss rests on the seller.

  3. Delivery by common carrier rule and not seller

  1. when delivery of goods is by carrier the buyer bears the burden of risk

  2. In case of FOB contract, risk burden is seller’s until delivery of the goods to the point of destination under as agreed upon in the contract (Cornell University Law School, n.d).

  3. If the delivery is a normal FOB where the seller ships the goods through a carrier, the buyer assumes the risk upon delivery of goods in a place where the buyer is able to pick them (Cornell University Law School, n.d).

  1. The fourth and last rule is that in case of a merchant seller, the buyer only bears burden of risk upon receiving such goods.

Rules of Negotiable Instruments

Anegotiable instrument is a document used in contracts promisingunconditional payment of a given amount of money in the future ondemand of such amounts. They include bills of exchange, checks, banknote, and promissory notes. The following rules are applicable indetermination of negotiable instruments.

  1. Unconditional promise to pay

  2. The amount promised must be specific even if it includes interest

  3. Payment time must be definite

  4. The instrument must not include any other action other than that of payment

  5. The instrument must only be payable to order or bearer.

Types of Warranties

Warrantiesare of two types as established in the uniform commerce code article2

  1. Implied warranties

  2. Expressed warranties

Types of collateral

Uniformedcommercial code establishes the following four types of collateral tobe used as security in borrowing contracts.

  1. Real Estate

  2. Equipment

  3. Inventory

  4. Accounts receivable


CornellUniversity Law School, (n.d). UniformCommercial Code U.C.C. – ARTICLE 2:Legal Information Institute. Retrieved on November 20, 2015 fromhttps://www.law.cornell.edu/ucc/2/2-509