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The Uniform Commercial Code is an extensive set of laws governing commercial transactions across the United States. Several Articles make up the system, including Article 2. One section of Article 2 is section 2-201. What does this segment mean?
UCC 2-201 states that, for a contract to be enforceable, the sale of goods involving $500 or more must be put down in writing and signed by the party against whom any enforcement is sought.
If you’re curious about UCC 2-201, you’ve come to the right place. It’s a good idea to know more about this section if you think you will ever use Article 2 for future business endeavors and transactions.
What Is UCC 2-201?
UCC 2-201 deals with the Statute of Fraud in the Uniform Commercial Code. It’s a comprehensive breakdown of this section to handle any legal endeavors that might be associated with fraud.
Here are the things you need to know about UCC 2-201:
- There must be written evidence of a contract over $500 for it to be enforceable between the two parties.
- The contract must be signed by the party against whom the enforcement is sought. There can be a mark, physical signature, or internet signature to complete the process.
- There are some potential exceptions to the agreement. Common exceptions include the legality of an oral contract if one party has fulfilled their portion and the potential enforceability of the contract if it’s completed between two merchants.
There are many moving legal components in this section of Article 2.
UCC 2-201 is a valuable section of Article 2, and most states choose to enforce it. If you face UCC 2-201, it’s helpful to know what the UCC works to protect. Let’s talk about what the Uniform Commercial Code does next
What Does The UCC Protect?
The Universal Commercial Code regulates various transactions and the general sale of personal property. If you’re ever been involved in an investment, such as in a car or other property, you’ve likely written your name down on a UCC-1. It’s a way to ensure everything runs smoothly, even if the transactions occur across state lines.
The Universal Commercial code focuses on items like:
- The activities of entrepreneurs and small businesses
- Clarifying confusion on how each state should participate in these sales
- Imposing standards for checks and other commercial paper
It’s an excellent addition to the professional world.
If a company decides to move out of the state where it is centered, it must follow whatever the UCC restrictions are in that area. These laws apply to borrowing money, establishing contracts, selling goods, leasing equipment, and more.
What Are The Exceptions To The Statute of Frauds?
Under any jurisdiction, some exceptions allow contracts in writing to be enforceable, even if they don’t follow the exact rules and requirements. When it comes to exceptions to the Statute of Fraud, there are three notable considerations to think about when determining the legality of the situation.
The exceptions to the Statute of Fraud include the following:
- Admission under oath: If any party makes an admission under oath in a court of law, the contract is considered legal and binding.
- Part performance: An oral contract can be enforced if the parties or one of the party members has completed a portion of the contract. Most of the time, part performance deals with oral agreements between two parties about the sale of land.
- Promissory estoppel: Last up is the promissory estoppel exception. This section applies when one party relies, to their fault, on the promise of the other party. The individual may put themself in a situation where they will lose everything if the other party does not follow through on the promise.
These are vital to consider in any contract.
Each specific situation must provide proof of the exception, and of course, every transaction is different. However, it’s helpful to have these exceptions in the back of your mind if you are working on a commercial contract.
What Type of Writing Is Required Under the Statute of Fraud?
Although it might seem bad, it’s critical to sign an agreement with the correct method to ensure it’s legal. Under the Statute of Frauds, there are several selections for a valid signature on your paperwork.
The types of writing permitted under the Statute of Frauds include the following:
- Typed, such as on a computer or similar device
- Handwritten, such as with a pen
- Electronic, such as sent through an email or other processing system
These are all acceptable as legal signs for the Statute of Frauds.
As long as the agreement is typed, handwritten, or electronic, the signature is valid for the contract. It’s required for the document to receive a signature from the party against whom the paperwork is being enforced. A signature doesn’t always have to be a name - it can also be a stamp, mark, or seal, among other things.
What Is The One-Year Rule Under the Statute of Frauds?
One provision states that contracts that can’t be performed within a year must be made in writing. Essentially, this one-year rule starts from the first date the contract comes to light between both parties.
The Statute of Frauds will cover any contract that goes beyond this period but will also cover those that do not stretch beyond a year.
There are several rules, regulations, and stipulations involved in the UCC 2-201. It’s ideal to speak with a legal professional if you run into any confusion during the signing process or discussion portions of a contract during any business transaction.
Can A Verbal Agreement Override A Written Contract?
In short, a verbal agreement cannot override a written contract. Anything written and tangible is much easier to enforce and prove than words spoken aloud. There must be extensive proof to ensure oral documentation is legal, whereas a simple glance is often enough to defend the validity of a written version between two parties.
It’s critical to note that verbal agreements are tricky to keep track of as time passes. If an extensive period has passed since the spoken agreement was first made, each side could recount things differently, which can get in the way of discussions and legality in court.
If you have a choice, select a written contract. It’s easier to keep track of and prove if you must in the coming years. It will serve you well if it’s necessary to prove the validity of the contract in the future.
Why Is It Called A Statute of Frauds?
The term “Statute of Frauds” originated in England. It’s a legal concept first from Parliament in England, determining that some agreements must be taken down in writing to ensure there is minimal chance of a perjured testament or fraud during any trial dealing with this format of transaction.
The Statute of Frauds in the United States is the same thing as An Act for Prevention of Frauds and Perjuries in England, woven from the same thread. It was formed to lower the chance of things that can go wrong when attempting to prove a contract in a court of law.
It’s always better to have proof of a legal document or agreement in writing. The Statute of Fraud pushes that necessity to a critical level.
Do All States Have A Statute of Frauds?
Most states in the United States of America have adopted the Statute of Fraud to some degree, though the adoption process may vary depending on your location in the country. It’s critical to note that the Statue of Fraud is generally accepted as an unwritten law in the United States, otherwise known as a common law concept.
Every state has some format of the Statute of Frauds, but you won’t find complete similarities if you examine each state’s acceptance in closer proximity. Differing jurisdictions in different areas will have varying statutes for interested parties in the location.
What Happens If A Contract Does Not Comply With the Statute of Frauds?
Of course, every law can have someone who breaks it, even if it's generally accepted as unwritten law. There is a consequence to breaking the Statute of Fraud that applied in every state, no matter their interpretation of UCC 2-201.
If there is noncompliance with the Statute of Frauds, any contract left unfulfilled is legally unenforceable under the rules and regulations. It is unprotected and may not come through for the parties if it faces a trial in a court of law. The Statute of Fraud is there as a defense, and if it isn’t followed, there are significant repercussions for the users.
If the contract has multiple promises and most can be proven, it only takes one to knock the others off track. The unenforceability of one line of wordage in a contract will render the others unusable if it doesn’t follow the Statute of Frauds to ensure it’s legal.
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"What Is UCC 2-201". Legal Explanations. Accessed on February 23, 2024. https://legal-explanations.com/blog/what-is-ucc-2-201/.
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