Page images




Washington, D.C. The subcommittee met, pursuant to notice, at 9:30 a.m., in the committee room, Cannon Building, Hon. George Huddleston, Jr. (chairman of the subcommittee) presiding.

Present: Representatives Huddleston, Cohelan, Nelsen, and Schwengel.

Also present: James T. Clark, clerk; Hayden S. Garber, counsel; Donald Tubridy, minority counsel; and Leonard O. Hilder, investigator.

[blocks in formation]

Mr. HUDDLESTON. The next bill for consideration by the subcommittee is H.R. 5338, introduced by Congressman McMillan, chairman of the District Committee, to enact the Uniform Commercial Code for the District of Columbia.

This code was drafted under joint sponsorship of the National Conference of Commissioners on Uniform State Laws and the American Law Institute. The work was begun in 1942 and completed in 1952 when it was approved by the American Bar Association. thus far been adopted by 23 States.

The code is an embodiment of many provisions including the following:

It completely supersedes the Uniform Sales Act in the District of Columbia.

It replaces the Uniform Negotiable Instruments Act.
It deals with bank deposits and collections and letters of credit.
It relates to bulk sales, warehouse receipts, bills of lading, et cetera.
It replaces the Uuiform Stock Transfer Act, et cetera.

At this point I would like to incorporate in the record the bill, H.R. 5338, together with a memorandum prepared by the committee staff on H.R. 5338.

(The bill and memorandum referred to follow:)

(H.R. 5338, 88th Cong. Ist sess.) A BILL To enact the Uniform Commercial Code for the District of Columbia, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Uniform Commercial Code is enacted as Subtitle I of Title 28 of the District of Columbia Code, in which it shall be designated "Subtitle I-Uniform Commercial Code”, and may be cited as “D.C. Code, &", as follows:




28: 1-101 2. SALES.

28: 2-101 3. COMMERCIAL PAPER.


28: 4-101 5. LETTERS OF CREDIT.

28: 5-101 6. BULK TRANSFERS.






PART 1-SHORT TITLE, CONSTRUCTION, APPLICATION AND SURJECT MATTER Sec. 28:1-101. Short title. 28:1–102. Purposes; rules of construction; variation by agreement. 28:1-103. Supplementary general principles of law applicable. 28:1–104. Construction against implicit repeal. 28:1-105. Territorial application of this subtitle; parties' power to choose applicable law. 28:1–106. Remedies to be liberally administered. 28:1-107. Waiver or renunciation of claim or right after breach. 28:1–108, Severability. 28:1–109. Section captions.

PART 2-GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION 28:1–201. General definitions. 28:1--202. Prima facie evidence by third party documents. 28:1--203, Obligation of good faith. 28:1–204. Time; reasonable time; seasonably". 28:1-205. Course of dealing and usage of trade. 28:1–206. Statute of frauds for kinds of personal property not otherwise covered, 28:1–207. Performance or acceptance under reservation of rights. 28:1-208. Option to accelerate at will,


MATTER 8 28:1--101. Short title

This subtitle shall be known and may be cited as Uniform Commercial Code. 8 28:1–102. Purposes; rules of construction; variation by agreement

(1) This subtitle shall be liberally construed and applied to promote its underlying purposes and policies. (2) Underlying purposes and policies of this subtitle are

(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;

(c) to make uniform the law among the various jurisdictions. (3) The effect of provisions of this subtitle may be varied by agreement, except as otherwise provided in this subtitle and except that the obligations of good faith, diligence, reasonableness and care prescribed by this subtitle may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.

(4) The presence in certain provisions of this subtitle of the words "unless otherwise agreed” or words of similar import does not imply that the effect of other provisions may not be varied by agreement under subsection (3). (5) In this subtitle unless the context otherwise requires

(a) words in the singular number include the plural, and in the plural include the singular;

(b) words of the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender may refer to any

gender. $ 28:1—103. Supplementary general principles of law applicable

Unless (lisplaced by the particular provisions of this subtitle, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.

8 28:1–104. Construction against implicit repeal

This subtitle being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided. $ 28:1–105. Territorial application of this subtitle; parties' power to choose

applicable law (1) Except as provided hereafter in this section, when a transaction bears a reasonable relation to the District and also to a state or nation the parties may agree that the law either of the District or of such state or nation shall govern their rights and duties. Failing such agreement this subtitle applies to transactions bearing an appropriate relation to the District.

(2) Where one of the following provisions of this subtitle specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:

Rights of creditors against sold goods. Section 28:2—402.
Applicability of the article on bank deposits and collections. Section
28:4 102.

Bulk transfers subject to the article on bulk transfers. Section 28:6-102,
Applicability of the article on investment securities. Section 28:8–106.

Policy and scope of the article on secured transactions. Sections 28:9—102 and 28:9-103. 28:1–106. Remedies to be liberally administered

(1) The remedies provided by this subtitle shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as specifically provided in this subtitle or by other rule of law.

(2) Any right or obligation declared by this subtitle is enforceable by action unless the provision declaring it specifies a different and limited effect. $ 28:1–107. Waiver or renunciation of claim or right after breach

Any claim or right arising out of an alleged breach can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party. 8 28:1–108. Severability

If any provision or clause of this subtitle or application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of this subtitle which can be given effect without the invalid provision or application, and to this end the provisions of this subtitle are declared to be severable. § 28:1–109. Section captions Section captions are parts of this subtitle. PART 2-GENERAL DEFINITIONS AND PRINCIPLES OF

INTERPRETATION 8 28:1–201. General definitions

Subject to additional definitions contained in the subsequent articles of this subtitle which are applicable to specific articles or parts thereof, and unless the context otherwise requires, in this subtitle:

(1) “Action" in the sense of a judicial proceeding includes recoupment, counterclaim, set-off, suit in equity and any other proceedings in which rights are determined.

(2) “Aggrieved party” means a party entitled to resort to a remedy.

(3) “Agreement” means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this subtitle (sections 28:1–205 and 24208). Whether an agreement has legal consequences is determined by the provisions of this subtitle, if applicable; otherwise by the law of contracts (section 28:1–103). (Compare “Contract”.)

(4) "Bank” means any person engaged in the business of banking.

(5) “Bearer” means the person in possession of an instrument, document of title, or security payable to bearer or indorsed in blank.

(6) "Bill of lading” means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods, and includes an airbill. “Airbill” means a document serving for air transportation as a bill of lading does for marine or rail transportation, and includes an air consignment note or air waybill.

(7) "Branch" includes a separately incorporated foreign branch of a bank.

(8) "Burden of establishing” a fact means the burden of persuading the triers of fact that the existence of the fact is more probable than its non-existence.

(9) “Buyer in ordinary course of business” means a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. "Buying” may be for cash or by exchange of other property or on secured or unsecured credit and includes receiving goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(10) "Conspicuous”: A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: Non-NEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is "conspicuous” if it is in larger or other contrasting type or color. But in a telegram any stated term is "conspicuous”. Whether a term or clause is "conspicuous' or not is for decision by the court.

(11) “Contract” means the total legal obligation which results from the parties' agreement as affected by this subtitle and any other applicable rules of law. (Compare “Agreement”.)

(12) “Creditor" includes a general creditor, a secured creditor, a lien creditor and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy a receiver in equity and an executor or administrator of an insolvent debtor's or assignor's estate.

(13) “Defendant” includes a person in the position of defendant in a crossaction or counterclaim.

(14) “Delivery” with respect to instruments, documents of title, chattel paper or securities means voluntary transfer of possession.

(15) “District” means the District of Columbia; and "state" includes the District.

(16) "Document of title” includes bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers. To be a document of title a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass.

(17) "Fault” means wrongful act, omission or breach.

(18) “Fungible" with respect to goods or securities means goods or securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit. Goods which are not fungible shall be deemed fungible for the purposes of this subtitle to the extent that under a particular agreement or document unlike units are treated as equivalents.

(19) "Genuine” means free of forgery or counterfeiting.

(20) “Good faith" means honesty in fact in the conduct or transaction concerned.

(21) "Holder” means a person who is in possession of a document of title or an instrument or an investment security drawn, issued or indorsed to him or to his order or to bearer or in blank.

(22) To "honor” is to pay or to accept and pay, or where a credit so engages to purchase or discount a draft complying with the terms of the credit.

(23) “Insolvency proceedings" includes any assignment for the benefit of creditors or other proceedings intended to liquidate or rehabilitate the estate of the person involved.

(24) A person is "insolvent” who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due or is insolvent within the meaning of the federal bankruptcy law.

(25) “Money" means a medium of exchange authorized or adopted by a domestic or foreign government as a part of its currency.

(26) A person has "notice" of a fact when

(a) he has actual knowledge of it; or
(b) he has received a notice or notification of it; or

(c) from all the facts and circumstances known to him at the time in question he has reason to know that it exists. A person “knows" or has "knowledge" of a fact when he has actual knowledge of it. "Discover" or "learn” or a word or phrase of similar import refers to knowledge rather than to reason to know. The time and circumstances under which a notice or notification may cease to be effective are not determined by this subtitle.

(27) A person "notifies” or “gives" a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it. A person "receives” a notice or notification when

(a) it comes to his attention; or

(b) it is duly delivered at the place of business through which the contract was made or at any other place held out by him as the place for receipt of

such communications. (28) Notice, knowledge or a notice of notification received by an organization is effective for a particular transaction from the time when it is brought to the attention of the individual conducting that transaction, and in any event from the time when it would have been brought to his attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless such information is part of his regular duties or unless he has reason to know of the transaction and that the transaction would be materially affected by the information.

(29) "Organization" includes a corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(30) "Party", as distinct from "third party", means a person who has engaged in a transaction or made an agreement within this subtitle.

(31) “Person" includes an individual or an organization (see section 28:1-102).

(32) “Presumption" or "presumed” means that the trier of fact must find the existence of the fact presumed unless and until evidence is introduced which would support a finding of its nonexistence.

(33) "Purchase" includes taking by sale, discount, negotiation, mortgage, pledge, lien, issue or re-issue, gift or any other voluntary transaction creating an interest in property.

(34) "Purchaser" means a person who takes by purchase.

(35) “Remedy" means any remedial right to which an aggrieved party is entitled with or without resort to tribunal.

(36) "Representative" includes an agent, an officer of a corporation or association, and a trustee, executor or administrator of an estate, or any other person empowered to act for another.

(37) "Rights" includes remedies.

(38) "Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (section 28:2—401) is limited in effect to a reservation of a "security interest”. The term also includes any interest of a buyer of accounts, chattel paper, or contract rights which is subject to article 9. The special property interest of a buyer of goods on identification of such goods to a contract for sale under section 28:2—401 is not a "security interest”, but a buyer may also acquire a "security interest” by complying with article 9. Unless a lease or consignment is intended as security, reservation of title thereunder is not a "security interest” but a consignment is in any event subject to the provisions on consignment sales (section 28:2-326). Whether a lease is intended as security is to be determined by the facts of each case; however, (a) the inclusion of an option to purchase does not of itself make the lease one intended for security, and (b) an agreement that upon compliance with the terms of the lease the lessee shall become or has the option to become the owner of the property for no additional consideration or for a nominal consideration does make the lease one intended for security.

(39) "Send" in connection with any writing or notice means to deposit in the mail or deliver for transmission by any other usual means of communication with

« PreviousContinue »