Section 1 Background, Scope, and Policy

• Library: Farm Law 2006

The Uniform Commercial Code (UCC) was created in 1938 by the Commission on Uniform State Laws and was drafted to do exactly what its name implies—create a uniform legal code for dealing with commercial transactions. It has been highly successful in that regard, with every state in the United States adopting at least a portion of the UCC. In Missouri, the UCC has been adopted in Chapter 400, RSMo.

The Missouri UCC covers the following areas:

• Sales and leases
• Negotiable instruments
• Bank deposits and collections, including transfers of funds
• Letters of credit
• Bulk transfers
• Documents of title
• Investment securities
• Secured transactions

With so many different areas, any attempt to write a comprehensive summary in a single chapter would be impractical. Entire works have been dedicated to studying the UCC. Therefore, this chapter is only an attempt to point out provisions of the UCC that refer to agricultural transactions and how the UCC has been applied to those issues. For a thorough scholarly review, see James J. White & Robert S. Summers, Uniform Commercial Code (West 5^th ed. 2005).

Article 2, Sales

(§1.2) Crops and Timber

Section 400.2-102, RSMo 2000, sets forth the scope of Article 2 of the Missouri Uniform Commercial Code (UCC), §§ 400.2-101–400.2-725, RSMo 2000 and Supp. 2005. It states:

Unless the context otherwise requires, this article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

The Missouri UCC goes on to define goods as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale.” Section 400.2-105(1), RSMo 2000. It specifically excludes money in which the price is to be paid, investment securities, and things in action. Id. But it also includes “the unborn young of animals and growing crops and other identified things attached to realty . . . to be severed from realty.” Id. Based on the definitions found in Article 2 of the Missouri UCC, courts have found that a contract for the sale of growing or existing crops capable of identification is a contract for the sale of goods under the UCC. Cargill, Inc. v. Hale, 537 S.W.2d 667 (Mo. App. S.D. 1976) (soybeans are goods); Zolman v. SEMO Produce, Inc., 875 S.W.2d 605 (Mo. App. S.D. 1994) (watermelons are goods). Growing crops to be harvested are considered goods covered by Article 2. Section 400.2-107(2), RSMo 2000.

In many transactions, a question will be whether the contract
was for the sale of goods or for services. If the dominant element of the contract is the service provided, it is likely to fall outside the provisions of Article 2. Mo. Farmers Ass’n v. McBee, 787 S.W.2d 756 (Mo. App. W.D. 1990) (a contract for spraying a farmer’s field by the Missouri Farmers Association (MFA) was a contract for services outside the UCC when MFA selected the chemicals used and the method of spraying).

Timber is a good after being severed from the land. Section 400.2-107(2). Standing timber can be a good if it is to be severed from the land
by the seller. Id.; see also 26 V.A.M.S. §§ 400.2-105 and 400.2-107 cmts. (1994 and Supp. 2006). Standing timber to be cut by a buyer is not a good until severed. Section 400.2-107; see also Leonard v. Am. Walnut Co., 609 S.W.2d 452 (Mo. App. W.D. 1980).

Article 2 is designed to create guidelines for contract creation or modification. It does so by setting forth default rules dealing with situations when an agreement has not been reached. When a contract allows for repeated occasions for performance by either party, any course of performance accepted or allowed without objection is relevant in determining the meaning of the agreement. Section 400.2-208(1), RSMo 2000; see also Zolman, 875 S.W.2d 605.

(§1.3) Farmers as Merchants

Section 400.2-104(1), RSMo 2000, defines a merchant as follows:

“Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in...