Analysis

Topic: Uniform Commercial Code
Sponsor: Representative Koetje
Date Introduced: March 20, 2001
Date Enrolled: February 13, 2002
Date of Analysis: February 14, 2002

Position: The Department of Consumer and Industry Services supports the bill.

Background: Part 2 of Article 2 of the Uniform Commercial Code is generally known in the legal profession as the Statute of Frauds. Originally enacted by the English Parliament in 1677, the Statute of Frauds requires certain contracts to be in writing in order to be enforceable.

Article 2 of the UCC has been adopted by Michigan and all other states, except Louisiana. Section 2201 states that a contract for the sale of goods for a price of $500 or more is generally not enforceable unless there is a written contract. The dollar amount has reportedly been in the law for 40 years.

Bill Content: The bill increases the minimum amount at which an unwritten contract is enforceable from $500 to $1,000.

Arguments For: Unwritten contracts deserve more protection than is currently provided by Michigan law. The current $500 minimum in Article 2 of the Uniform Commercial Code has been unchanged in 40 years and does not reflect the realities of the 21st Century marketplace.

Arguments Against: The proposed increase is insufficient. If the $500 minimum had been adjusted for inflation since its enactment in 1962, it would be $3,000. Furthermore, a revised Article 2 will soon be available for adoption by the states and it includes a minimum of $5,000. There was even serious discussion in the revised Article 2 drafting process of repealing the Statute of Frauds entirely.

Supporters/Opponents: The bill is supported by the National Federation of Independent Business, Michigan Chapter and the Small Business Association of Michigan. There was no opposition.

Fiscal Impact: The bill will have no fiscal impact on state government.

Administrative Rules Impact: The bill will not require new or revised administrative rules.