Business law- Contracts and leases Essay Example | Topics and Well Written Essays - 1000 words

Business law- Contracts and leases - Essay Example Regardless of the type of business an individual runs, it is important to have an understanding of contract law as it is the key to making sound business agreements that can be enforced legally in the event of a dispute. Normally, a contract is enforced and governed by the laws of the country where it was made. In the United States of America, a contract is governed by two types of state laws, that is, the common law and the Uniform Commercial Code (UCC) (Bagley and Dauchy, 2012). Common Law Common law is a law which governs contracts for services and contracts that are not governed by the Uniform Commercial Code. Most contracts such as employment agreements, general business agreements and leases are controlled by common law. Common law contracts can either be bilateral or unilateral. However, the contracts are valid only if the three elements of common law contract formation are met. The elements of formation are offer, acceptance and consideration (Bagley and Dauchy, 2012). The Un iform Commercial Code (UCC) The uniform commercial code (UCC) governs the contracts between merchants and the sale of goods. The law was written by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI). It was published in 1952 to harmonize the law of sales and other commercial transactions in the United States. Although it has not been fully enacted, some provisions of the code have been adopted by all the fifty states of the US (Fullerton, 2011). Previously, the code was divided into 9 articles; however, after a number of reviews and revisions, the code is now divided into eleven articles with each giving provisions that relate to a particular area of commercial law. Article 1, gives the definitions of terms used in commercial law and the general principles that apply to the UCC. Article 2 covers all contracts pertaining to the sale of goods. Article 2A covers all transactions pertaining to leases of goods. Article 3 covers ne gotiable instruments such as checks and promissory notes. Article 4 governs bank collections of drafts and checks. Article 4A governs the transfer of funds through banks. Article 5 governs letters of credit. Article 6 governs bulk sales. Article 7 covers domestic documents of title. Article 8 covers all transactions in investment securities and article 9 applies to security interests in real property (Bagley and Dauchy, 2012). Differences between Contracts Formed Under Common Law and Contracts Governed By the Uniform Commercial Code (UCC) Although both the common law and the UCC govern contracts, the two laws differ in various ways. The first difference is that, contracts under uniform commercial code apply to various commercial issues such as sale of goods, banking and security interests whereas common law contracts deal with the sale of real estates, employment contracts, insurance, services and sale of intangible assets (Prabhat, 2011). According to the UCC, a good is any item th at is tangible and movable. Therefore, the sale of a home is not a sale of goods since the home is immovable. Also, the sale of a right to a trademark is not a sale of goods since it is not tangible (Cornell University Law School, 2005). The second difference between the two contracts is that, contracts under UCC can be modified without additional considerations as long as they are made in good faith whereas those under common law except