The Uniform Commercial Code in Hawaii

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The Uniform Commercial Code (UCC), Article 2, governs all contracts for the sale of goods in Hawaii under Title 27, Chapter 490, Article 2 of the Hawaii Revised Statutes (“HRS”). The purposes of the UCC are:

(1) To simplify, clarify, and modernize the law governing commercial transactions;(2) To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) To make uniform the law among the various jurisdictions. HRS § 490:1-103.

Prior to the creation of the UCC, each state had its own (and sometimes conflicting) laws concerning the sale of goods. The UCC brought ease and consistency to the sale of goods throughout the United States regardless of where the buyer and seller are located. The UCC has been broadly interpreted and amended in order to adapt to changing times. Indeed, 49 of the 50 states have adopted Article 2 of the UCC (sales). Louisiana is the only state that has not fully passed Article 2 of the UCC.

How does a buyer or seller know if the UCC governs its transaction? There must be a valid contract for the sale of goods.

What is a contract? A valid contract requires an offer, acceptance, and consideration. An offer is a commitment communicated to an identified person containing definite terms. Acceptance is agreement to the terms of the offer by a person to whom the offer was made. Consideration is an exchange of the bargain (i.e. goods) for a benefit (ie. money).

What is a sale? The answer to this question and many other are found in the UCC. “A ‘sale’ consists in the passing of title from the seller to the buyer for a price.” HRS § 490:2-106.

What is a good? “Goods means all things (including specially manufactures goods) which are movable at the time of identification to a contract for sale. The term includes the unborn young of animals, and growing crops, and other identified things attached to realty.” HRS § 490:2-105.

As a commercial litigation attorney for over twenty years, I have had many cases involving the UCC. Over the next few weeks, I will address certain UCC issues commonly encountered in Hawaii.