CO Code § 4-1-103 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 1 - General Provisions|Part 1 - General Provisions|§ 4-1-103. Construction of Act to Promote Its Purposes and Policies - Applicability of Supplemental Principles of Law

  This title shall be liberally construed and applied to promote its underlying purposes and policies, which are:   To simplify, clarify, and modernize the law governing commercial transactions;    To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and    To make uniform the law among the various jurisdictions.       Unless displaced by the particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.     History. Source: L. 2006: Entire article R&RE, p. 457, § 1, effective September 1.    Editor's note:   This section is similar to former §§ 4-1-102 (1) and (2) and 4-1-103 as they existed prior to 2006.   OFFICIAL COMMENT   Source: Former Section 1-102 (1)-(2); Former Section 1-103.   Changes from former law: This Section is derived from subsections (1) and (2) of former Section 1-102 and from former Section 1-103. Subsection (a) of this Section combines subsections (1) and (2) of former Section 1-102. Except for changing the form of reference to the Uniform Commercial Code and minor stylistic changes, its language is the same as subsections (1) and (2) of former Section 1-102. Except for changing the form of reference to the Uniform Commercial Code, subsection (b) of this Section is identical to former Section 1-103. The provisions have been combined in this Section to reflect the interrelationship between them.   1. The Uniform Commercial Code is drawn to provide flexibility so that, since it is intended to be a semi-permanent piece of legislation, it will provide its own machinery for expansion of commercial practices. It is intended to make it possible for the law embodied in the Uniform Commercial Code to be developed by the courts in the light of unforeseen and new circumstances and practices. However, the proper construction of the Uniform Commercial Code requires that its interpretation and application be limited to its reason.   Even prior to the enactment of the Uniform Commercial Code, courts were careful to keep broad acts from being hampered in their effects by later acts of limited scope. [Pacific Wool Growers v. Draper Co., 158 Or. 1, 73 P.2d 1391 , and] compare Section 1-104. The courts recognized the policies embodied in an act as applicable in reason to subject-matter that was not expressly included in the language of the act, [Commercial Nat. Bank of New Orleans v. Canal-Louisiana Bank & Trust Co., 239 U.S. 520, 36 S. Ct. 194, 60 L. Ed. 417 (1916) (bona fide purchase policy of Uniform Warehouse Receipts Act extended to case not covered but of equivalent nature)] and did the same where reason and policy so required, even where the subject-matter had been intentionally excluded from the act in general. [Agar v. Orda, 264 N.Y. 248, 190 N.E. 479 (1934) (Uniform Sales Act change in seller's remedies applied to contract for sale of choses in action even though the general coverage of that Act was intentionally limited to goods “other than things in action.”)] They implemented a statutory policy with liberal and useful remedies not provided in the statutory text. They disregarded a statutory limitation of remedy where the reason of the limitation did not apply. [Fiterman v. J. N. Johnson & Co., 156 Minn. 201, 194 N.W. 399 (1923) (requirement of return of the goods as a condition to rescission for breach of warranty; also, partial rescission allowed).] Nothing in the Uniform Commercial Code stands in the way of the continuance of such action by the courts.   The Uniform Commercial Code should be construed in accordance with its underlying purposes and policies. The text of each section should be read in the light of the purpose and policy of the rule or principle in question, as also of the Uniform Commercial Code as a whole, and the application of the language should be construed narrowly or broadly, as the case may be, in conformity with the purposes and policies involved.   2. Applicability of supplemental principles of law. Subsection (b) states the basic relationship of the Uniform Commercial Code to supplemental bodies of law. The Uniform Commercial Code was drafted against the backdrop of existing bodies of law, including the common law and equity, and relies on those bodies of law to supplement it provisions in many important ways. At the same time, the Uniform Commercial Code is the primary source of commercial law rules in areas that it governs, and its rules represent choices made by its drafters and the enacting legislatures about the appropriate policies to be furthered in the transactions it covers. Therefore, while principles of common law and equity may supplement provisions of the Uniform Commercial Code, they may not be used to supplant its provisions, including the purposes and policies those provisions reflect, unless a specific provision of the Code provides otherwise. In the absence of such a provision, the Uniform Commercial Code preempts principles of common law and equity that are inconsistent with either its provisions, or its purposes and policies.   The language of subsection (b) is intended to reflect both the concept of supplementation and the concept of preemption. Some courts, however, had difficulty in applying the identical language of former Section 1-103 to determine when other law appropriately may be applied to supplement the Code, and when that law has been displaced by the Code. Some decisions applied other law in situations in which that application, while not inconsistent with the text of any particular provision of the Code, clearly was inconsistent with the underlying purposes and policies reflected in the relevant Code provisions. See, e.g., Sheerbonnet, Ltd. v. American Express Bank, Ltd., 951 F. Supp. 403 (S.D.N.Y. 1995). In part, this difficulty arose from comment 1 to former Section 1-103, which stated that “this section indicates the continued applicability to commercial contracts of all supplemental bodies of law except insofar as they are explicitly displaced by this Act.” The “explicitly displaced” language of that comment does not accurately reflect the proper scope of Code preemption, which extends to displacement of other law that is inconsistent with its purposes and policies as well as its text.   3. Application of subsection (b) to statutes. The primary focus of Section 1-103 is on the relationship between the Uniform Commercial Code and principles of common law and equity as developed by the courts. State law, however, increasingly is statutory. Not only are there a growing number of state statutes addressing specific issues that come within the scope of the Uniform Commercial Code, but in some states many general principles of common law and equity have been codified. When the other law relating to a matter within the scope of the Uniform Commercial Code is a statute, the principles of subsection (b) remain relevant to the court's analysis of the relationship between that statute and the Uniform Commercial Code, but will be supplemented by other principles of statutory interpretation that specifically address the interrelationship between statutes. In some situations, the principles of subsection (b) still will be determinative. For example, the mere fact that an equitable principle is stated in statutory form rather than in judicial decisions should not change the court's analysis of whether the principle can be used to supplement the Uniform Commercial Code — under subsection (b), equitable principles may supplement provisions of the Uniform Commercial Code only if they are consistent with the purposes and policies of the Uniform Commercial Code as well as its text. In other situations, however, other interpretive principles addressing the interrelationship between statutes may lead the court to conclude that the other statute is controlling, even though it conflicts with the Uniform Commercial Code. This, for example, would be the result in a situation where the other statute was specifically intended to provide additional protection to a class of individuals engaging in transactions covered by the Uniform Commercial Code.   4. Listing not exclusive. The list of sources of supplemental law in subsection (b) is intended to be merely illustrative of the other law that may supplement the Uniform Commercial Code, and is not exclusive. No listing could be exhaustive. Further, the fact that a particular section of the Uniform Commercial Code makes express reference to other law is not intended to suggest the negation of the general application of the principles of subsection (b). Note also that the word “bankruptcy” in subsection (b), continuing the use of that word from former Section 1-103, should be understood not as a specific reference to federal bankruptcy law but, rather as a reference to general principles of insolvency, whether under federal or state law.   ANNOTATION   Law reviews. For article, “Exclusion and Modification of Warranty under the U.C.C. — How to Succeed in Business Without Being Liable for Not Really Trying”, see 46 Den. L.J. 579 (1969). For article, "Buyer-Secured Party Conflicts Under Section 9-307(1) of the Uniform Commercial Code", see 46 U. Colo. L. Rev. 333 (1974-75).   Annotator's note. Since § 4-1-103 is similar to §§ 4-1-102 and 4-1-103 as they existed prior to the 2006 repeal and reenactment of this article, relevant cases construing those provisions have been included in the annotations to this section.   The parties to a contract may vary the provisions of the Uniform Commercial Code (UCC) by agreement and may provide for remedies in addition to or in substitution for those provided by the UCC. Colorado Interstate Gas Co. v. Chemco, Inc., 854 P.2d 1232 (Colo. 1993).   Evidence of current commercial practices and customs are considered when interpreting the UCC. The practice and custom of this state's real estate closings is that an original note is not presented at the closing. Citywide Banks v. Armijo, 313 P.3d 647 (Colo. App. 2011).   Section 90(1) of the restatement (second) of contracts adopted, which articulates the doctrine of promissory estoppel. Kiely v. St. Germain, 670 P.2d 764 (Colo. 1983).   The UCC does not exclude the application of promissory estoppel. Germain v. Boshouwers, 646 P.2d 952 (Colo. App. 1982), aff'd in part and rev'd in part on other grounds, 670 P.2d 764 (Colo. 1983).   Recovery will be allowed on a theory of promissory estoppel, notwithstanding a statute of frauds defense, if injustice can be avoided only by enforcement of the promise. Germain v. Boshouwers, 646 P.2d 952 (Colo. App. 1982), aff'd in part and rev'd in part on other grounds, 670 P.2d 764 (Colo. 1983).   Elements of promissory estoppel are: (1) A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee; and (2) which does induce such action or forbearance; and (3) if injustice can be avoided only by enforcement of the promise. Germain v. Boshouwers, 646 P.2d 952 (Colo. App. 1982), aff'd in part and rev'd in part on other grounds, 670 P.2d 764 (Colo. 1983).   The doctrine of estoppel was properly applied in a case arising under the secured transaction provisions of the code. First Nat'l Bank v. Ulibarri, 38 Colo. App. 428, 557 P.2d 1221 (1976).   Detrimental reliance upon oral promises. The principle embodied in section 139 of the restatement (second) of contracts that detrimental action performed in justifiable reliance upon oral promises may be sufficient to compel full or partial performance of the promise in spite of the applicability of a statute of frauds defense was applicable in a case involving an oral agreement to sell securities. Kiely v. St. Germain, 670 P.2d 764 (Colo. 1983).   Section 4-3-419 (3) does not explicitly displace common-law cause of action for moneys had and received. Citizens State Bank v. Nat'l Sur. Corp., 199 Colo. 497 , 612 P.2d 70 (1980).   Common-law claim for money had and received is still viable since the uniform commercial code contains no provision dealing with such a claim. Nat'l Sur. Corp. v. Citizens State Bank, 41 Colo. App. 580, 593 P.2d 362 (1978), aff'd, 199 Colo. 497 , 612 P.2d 70 (1980).   The common law of agency supplements the UCC. So, payment to an authorized agent has the same legal effect as payment to the holder. Citywide Banks v. Armijo, 313 P.3d 647 (Colo. App. 2011).   Statute as basis for jurisdiction. Stroh v. Am. Recreation Mobile Home Corp., 35 Colo. App. 196, 530 P.2d 989 (1975).   Applied in Rancher Farmers Livestock Auction Co. v. Honey, 38 Colo. App. 69, 552 P.2d 313 (1976); Midland Bean Co. v. Farmers State Bank, 37 Colo. App. 452, 552 P.2d 317 (1976); Caldwell v. Kats, 38 Colo. App. 156, 555 P.2d 190 (1976); Commercial Credit Corp. v. Univ. Nat'l Bank, 590 F.2d 849 (10th Cir. 1979); Colorado-Ute Elec. Ass'n v. Envirotech Corp., 524 F. Supp. 1152 (D. Colo. 1981 ).