The Uniform Commercial Code (UCC)

The Uniform Commercial Code Has Been Revised

Historically, the banking community has primarily been held liable for their clients' check fraud losses. This is no longer the case. In 1990, the Uniform Commercial Code (UCC) was revised. Sections 3 and 4 have shifted liability for check fraud losses from the bank to the party in the best position to prevent the loss. Forty-eight states have adopted these revisions, with New York and South Carolina being the two exceptions.

What does this mean to you? There is now a legal basis and financial incentive for a company or municipality to be more aggressive in implementing procedures and controls to reduce its risk of check fraud. As check fraud losses have skyrocketed over the past few years, banks are much less willing to accept losses for the sake of the banking relationship. The revised UCC provides a legal basis for the banks to leave the check fraud loss with their customer, even if it means losing the customer. (See BusinessWeek, August 13, 2001, page 70.)

Cornell Law School has the Revised UCC on its Web site.

Download important excerpts from the Revised UCC in Microsoft Word (doc) and Adobe Acrobat (pdf) formats:

	PDF Document
	Word Document