Lesson 31: Scope of Article 6

Article 6 of the Uniform Commercial Code (UCC) addresses the issue of bulk transfers and bulk sales. This lesson will explore the scope and applications of Article 6.

What are Bulk Transfers/Bulk Sales?

Bulk transfers or bulk sales involve the sale or transfer of a large portion of a business's inventory outside the ordinary course of business. This is intended to prevent business owners from defrauding creditors by selling off business assets without notifying them. For a more in-depth overview of the UCC, visit our Overview of the Uniform Commercial Code lesson.

Key Provisions of Article 6

Article 6 outlines several key provisions, including:

  • Notice Requirements: Businesses must notify creditors of bulk transfers in advance.
  • Inventory Lists: An inventory list should be provided to the buyer and creditors.
  • Creditor Claims: Creditors have the right to claim proceeds from the bulk sale to settle outstanding debts.

Notice of Bulk Sale

Notice is hereby given to all creditors that [Seller's Name], located at [Seller's Address], intends to transfer ownership of a substantial part of their business inventory to [Buyer's Name], located at [Buyer's Address].

Applicability

Not all transactions are covered under Article 6. For instance, sales of assets in the regular course of business or those not involving a substantial portion of a business's inventory generally fall outside the scope of Article 6.

This transfer does not constitute a bulk sale under Article 6 of the UCC as it does not involve the transfer of a substantial portion of the business's inventory.

Mermaid Diagram: Bulk Transfer Notification Process

graph TD; A["Business Decides to Sell"] --> B["Notify Creditors"]; B --> C["Provide Inventory List"]; C --> D["Proceed with Sale"]; D --> E["Creditors Claim Proceeds"];

Practical Insights

Lawyers and business owners should be aware of the implications of bulk sales to ensure compliance with Article 6. Proper notification and documentation are critical to avoid legal complications.

For more information on related topics, check out these lessons:

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