The Uniform Commercial Code (UCC) contains much of the law in commercial transactions. Article 2 of the UCC covers Sales and the rights and remedies of buyers and sellers.  These are too diverse for this forum, but training and orientation is available, if desired.

• Personal guaranties. This is a good spot to point out the importance of a personal guaranty.  When dealing with a proprietorship, the owner is individually liable for the company debts, meaning all of his assets, business and personal, are available to satisfy the debts of the company.  A partnership is similar, in that not only are partnership assets exposed, but also the personal assets of the partners may be as well.  One of the main reasons to incorporate a business to many is to provide a shield against its owners’ personal assets.  Generally, only corporate assets are exposed, so long as the corporate form is not abused by its owners, such as paying personal debts out of the corporation.  From the creditor’s standpoint, this poses a potential problem.  With small corporations without substantial assets, especially start-up companies, how does a creditor protect itself?  The answer is the personal guaranty.  This is a contract whereby someone, usually the owners but can be any entity, guarantee or promise to pay the company’s debt if it cannot.  The larger the corporation, the more difficult it is to obtain a personal guaranty.  Obviously, the CEO of Microsoft is not going to personally guarantee the debts of Microsoft, but the risks of dealing with larger companies are more easily assessed.
  
  
• Suit on an account. This is one of the most basic and common type of commercial litigation.  It describes a suit by a small hardware store that sold nails to a small cabinet maker, to a large supplier of air conditioning compressors to an automobile plant.  It is similar to a suit on a contract, except that oftentimes these transactions are based merely on telephone orders or purchase orders.  The three essential elements in a suit on account are order, delivery and non-payment.  The creditor must be able to prove all three in order to prevail.  Good record keeping is crucial.  Our courts love paper trails in any type of case.  If there is a personal guaranty, the guarantor is usually sued in the same case as the corporation, if possible.  The most common types of evidence are purchase orders, invoices, statements and demand letters.  These days, emails can establish some of the elements, if admissions are made.
  
  
• Account stated. This is a little used and little known type of action.  An account stated is essentially a suit on account where the defendant has admitted the account.
  
  
• Suit on a contract. A suit on a contract almost always involves a written contract, but it is possible to have an enforceable oral contract in certain circumstances. An old legal concept called the Statute of Frauds provides that a contract for more than $500 must be in writing to be enforced.  A common exception is where the contract was relied upon and there has been performance by one party.
  While a suit on a contract sounds simplistic, it encompasses much of our commercial litigation.  For example, a suit between a franchisor and its franchisee is a suit on a contract.  Similarly, so would be a suit between Bosch and Mercedes over a supply contract, or a suit between Hyundai and one of its dealerships.  The complexity and levels of proof obviously escalates with the complexity of the issues.  The evidence can be voluminous. The contract itself is obviously a necessity, but in more complex cases such things as emails, letters, notes, memoranda, and live testimony are required to prosecute and defend a case.
  
  
• Promissory notes. These are covered under Article 3 of the Uniform Commercial Code (UCC) on Commercial Paper.  In short, a promissory note is a written promise to pay a sum certain on a certain date.  It can be a note to pay in full on a particular date in the future, a demand note in which the holder of the note makes demand as to when it is due, or an installment note where payments are made periodically, such as the financing of a truck for a business.  In the latter, it is important to have what is called an acceleration clause, stating that a default as to any one payment entitles the holder of the note to accelerate the balance of the remaining payments.  Without such a clause, the creditor-holder is left with enforcing each month’s payment separately and only as they become due, not a desirable outcome.
  If properly written, these can be dream cases for the plaintiff and nightmares for the defendant, if the note is properly drafted.  The UCC provides that once signature on a note is established, the plaintiff’s case is proven and the burden shifts to the defendant to prove a defense.  Defenses to notes are limited.
  Another important thing to understand about promissory notes is their usefulness in resolving disputes.  For example, in many cases handled by this office a promissory note was given when the debtor fell behind on paying a commercial debt, in return for the creditor giving more time to pay before suing.  When the cases were later sued on the notes, the defendants often raised various defenses, such as the goods not being of good quality, etc.  Fortunately, the courts viewed the promissory note as having settled the account, thus waiving all of the defenses.
  
  
• An unpaid check is essentially a promissory note and is sued as a contract.  The burden of proof is thus much simplified in such cases.
  
  
• Security agreements. A security agreement, like a guaranty, is a method to protect the investment of selling goods or services to someone, be it a person or corporation.  In effect, it is a agreement to provide collateral for the transaction.  Banks and financial entities commonly use security agreements to secure their loans, such as a lien on an automobile or truck, or a security agreement on inventory and fixtures in a manufacturing or retail facility.  The security agreement must be perfected to be enforceable.  This means it must be recorded as provided by law, sometimes different state to state.  The purpose is to let the world know that the property in question is subject to the security agreement, so that others do not also make loans or sales relying upon the same assets.  If not properly perfected, it is possible to lose the protection to a subsequent creditor who does properly perfect its security agreement.  Secured transactions are generally governed by Article 9 of the UCC, adopted by most states, they can be very technical, and an attorney’s advise is recommended.
  Security agreements can be enforced upon default of the underlying obligation, often a promissory note, by foreclosure on the secured property.  This, too, can be technical.  For example, if a personal property foreclosure action is filed, and the property is recovered, how you dispose of it can be extremely important.  An improper disposition can hinder or even prevent the recovery of any deficiency left after selling off the property.