Contracts and Commercial Law

New York's Proposed UCC Amendments: Will New York Pass Legislative Amendments to Bring Its Uniform Commercial Code in Line with the Rest of the Country?

 by Kyle C. Bisceglie Esq., Thomas J. Fleming Esq. and Lori Marks-Esterman Esq.

New York's Antiquated UCC: In June 2013 legislation was proposed that would modernize New York's UCC, making a wholesale modification of Articles 3 and 4 governing negotiable instruments and bank procedures. The proposed changes reflect revisions promulgated by the Uniform Law Commission that have been adopted by every state other than New York.


I. Introduction

In June 2013, proposed legislation—New York Senate Bill S5901 (June 20, 2013)—was introduced to update New York's Uniform Commercial Code. The proposed bill is designed to modernize New York's Uniform Commercial Code, and bring New York up to date with comparable revisions enacted in other states. In particular, the proposed updates include a wholesale modification to Articles 3 and 4 of New York's UCC, which govern negotiable instruments and bank and collection procedures. These proposed amendments reflect revisions promulgated by the Uniform Law Commission in 1990 that have been adopted by every state other than New York. As of the time this Goldbook went to publication, these proposed UCC Amendments were pending before New York's Senate Rules Committee.

This article will focus on Articles 3 and 4 of the New York's Uniform Commercial Code—how New York's current, out-dated UCC differs from the model UCC and the UCC of every other state, how the proposed amendments would harmonize New York's UCC with the code utilized by the rest of the nation, and finally, how Federal legislation adopted in the fifty-plus years since New York's UCC was adopted has preempted and/or relates to the provisions in Articles 3 and 4 of New York's Uniform Commercial Code.

II. The UCC and its History

The Uniform Commercial Code dates back to 1896, when the Uniform Law Commissioners, a non-profit association that provides states with non-partisan drafts of legislation in critical areas of state statutory law, promulgated the Negotiable Instruments Law. The Negotiable Instruments Law was adopted in every state in the country, and was the first successful Uniform Act. In 1951, the Uniform Law Commission and the American Law Institute enacted the model Uniform Commercial Code (the "Code" or the "UCC"), and the old Negotiable Instruments Law was updated slightly and offered as Article 3 of the Code.

Article 3 of the Uniform Commercial Code governs negotiable instruments— checks and some notes. It is almost always considered in conjunction with Article 4, which governs bank deposit and collection procedures, and establishes the legal framework for dealings with banks.

New York enacted its Uniform Commercial Code in 1964, modeled in large part after the model Uniform Commercial Code. New York enacted its Uniform Commercial Code with three overarching goals in mind: "(a) to simplify, clarify and modernize the law governing commercial transactions; (b) to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and (c) to make uniform the law among the varying jurisdictions." One of the most far-reaching impacts of Article 3 of the 1964 UCC was the clarification of investment securities as negotiable instruments, which up until then was an unsettled area of law that had led to inconsistent holdings in various jurisdictions.

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