Institute Approves UCC Drafts

After overwhelmingly defeating a motion to reject the controversial amendments to Article 2 (Sales) of the Uniform Commercial Code, the Institute at the 2003 Annual Meeting in Chicago gave its final approval to the changes to both Articles 2 and 2A (Leases) previously adopted by the National Conference of Commissioners on Uniform State Laws. The membership also approved the considerably less controversial amendments to Article 7 (Documents of Title) that were presented for the first time at this year’s Annual Meeting and thereby completed its work on the comprehensive revision of the UCC that began nearly two decades ago. Restatement Tentative Drafts for both Torts and Agency were tentatively approved as well, but action was deferred on the first Tentative Draft for the Institute’s International Jurisdiction and Judgments Project, which contained the text of a proposed federal statute supplying uniform standards for the recognition and enforcement of foreign judgments in the United States, and the floor turned instead to debating whether a statute was the most appropriate format for embodying the project’s recommendations. Also reviewed at the 80th Annual Meeting were the latest Discussion Draft of the Transnational Civil Procedure Project and a preliminary Report on the new project on Criminal Sentencing.

During the decade-long course of the effort to revise Article 2, the Institute had twice previously approved a proposed revision only to have the approved version withdrawn or modified by the ALI’s drafting partner, the National Conference of Commissioners on Uniform State Laws. Most recently, in 2001, the version approved by the Institute took no position on whether and to what extent goods containing computerized information, or “smart goods,” are “goods” within the scope of Article 2. In 2002, however, NCCUSL approved a change to the definition of “goods” by specifically excluding “information,” which itself was not defined, but also added an Official Comment indicating that Article 2 does not apply “directly to an electronic transfer of information not associated with goods or to the provision of architectural plans on a computer disk, but it would apply to the sale of ‘smart goods’ such as an automobile even though the goods incorporate computer programs.” This and other changes to the 2001 text necessitated Institute reconsideration of the Proposed Article 2 Amendments. A motion by Professor Jean Braucher of the University of Arizona to disapprove the present draft was vigorously debated but ultimately defeated by a voice vote, and a vote to approve the draft followed. The Article 2A Amendments, integrally related to those of Article 2, were similarly approved, although the Reporters agreed to recommend certain changes proposed in a presubmitted motion by Edwin E. Huddleson, III, of Washington, D.C., to the Drafting Committee. The Article 7 amendments were also approved, subject to the Reporters also agreeing to recommend a minor change to the Drafting Committee; unlike Articles 2 and 2A, however, final approval of Article 7 awaits NCCUSL’s Annual Meeting this summer.

Tentative Draft No. 3 of Restatement Third, Torts: Liability for Physical Harm (Basic Principles) was tentatively approved, subject to the discussion. The bulk of the draft consisted of Chapter 6, on Scope of Liability, but, like last year, most of the controversy revolved around Comment c to § 28, which attempted to delineate the standards for establishing whether harm caused by toxic substances or disease is the result of tortious conduct. The text had been substantially revised in light of both the discussion at last year’s Annual Meeting and review by a special Science, Technology, and Law Panel convened by the National Academy of Sciences, but it was nevertheless criticized by many as being beyond the scope of a Restatement of Torts. A motion to move the entire Comment into the Reporters’ Note, however, was defeated after extensive debate.

Tentative Draft No. 4 of Restatement Third, Agency, was mainly devoted to a new chapter on contracts and other transactions effected by an agent on behalf of a principal, and the new chapter was tentatively approved without difficulty. Sections 5.03 and 5.04, articulating the standards for determining whether an agent’s knowledge or act should be imputed to the principal, which last year were highly controversial, appeared to be much less so this year after having been extensively revised, but since the material was being presented for discussion only, it was not voted upon at this Meeting.

The Tentative Draft of the Proposed Foreign Judgments Recognition and Enforcement Act, prepared for the International Jurisdiction and Judgments Project, contained a new section providing for reciprocity of treatment for judgments by United States courts as a condition for enforcement of foreign judgments in the United States, as called for in a straw vote at the 2002 Annual Meeting. In addition, it included a significantly revised provision dealing with the registration of foreign judgments. There was insufficient time, however, to adequately review the former or even to begin discussing the latter. Because questions had previously been raised about the appropriateness of the project’s statutory format, President Michael Traynor announced at the beginning of the discussion that the final half hour would be set aside for consideration of that question, and it then became apparent that a number of members felt the work would be more effectively presented in the form of a Restatement or Reporters’ Study. Others argued that if it was to remain a statute, considerable redrafting was needed to assure that all matters of substance were found in the statutory text and none merely in the commentary. The Reporters agreed to review the text with this consideration in mind, but were strongly of the view that the form should remain statutory. At the end of the discussion, there was a call for a straw vote on the question of format, but President Traynor concluded that this was a matter to be resolved subsequently by the Council.

Discussion Draft No. 4 of Principles and Rules of Transnational Civil Procedure was discussed constructively, but, as planned, no votes were taken. An extensive series of meetings on the current draft are being held this summer in both Europe and South America, and a revised draft will be submitted for approval by the Council in the fall. Current plans call for final approval to be sought next year from both the Institute and the Council of UNIDROIT.

The first appearance on the Annual Meeting agenda of the Institute’s project to update and revise the sentencing provisions of the Model Penal Code provoked widespread interest and enthusiasm. Reporter Kevin R. Reitz explained the approach to be taken, which is to develop sentencing guidelines based on the work of the more successful state sentencing commissions rather than upon the more rigid approach of the federal guidelines. There was also a presentation by one of the project’s Advisers, Judge Thomas Warren Ross of North Carolina, on how the North Carolina guidelines actually work in practice.

A complete listing of actions taken on the drafts considered at the 2003 Annual Meeting will appear in the fall issue of the Reporter. An edited transcript of the entire Annual Meeting will subsequently be published in the 2003 Proceedings.