Broadly, the Uniform Commercial Code (UCC) has been adopted, in some form, by nearly every state. It governs, by statute, most commercial transactions, from manufacturing to banking. For example (abridged for overview):

– UCC Article 2 – Sales (of Goods)
Unless the context otherwise requires, this Article applies to transactions in goods. Goods are those things that are moveable at the time of sale.

– UCC Article 2A – Leases (of Goods)
This Article applies to any transaction that creates a lease. “Lease” means a transfer of the right to possession and use of goods for a term in return for consideration.

– UCC Article 3 – Negotiable Instruments (see Article 4 or 9 for controlling provisions)
This Article applies to negotiable instruments. Negotiable instruments means an unconditional promise or order to pay a fixed amount of money (with additional specific requirements)

– UCC Article 4 – Bank Deposits (see Article 3)

– UCC Article 4A – Funds Transfers
“Funds transfer” means the series of transactions, made for the purpose of making payment to the beneficiary of the order.

– UCC Article 5 – Letters of Credit
This article applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit. “Letter of Credit” means a definite undertaking by an issuer to a beneficiary at the request to honor a documentary presentation by payment.

– UCC Article 6 – Bulk Transfers and Bulk Sales (Michigan – Repealed – January 4, 1999)

– UCC Article 7 – Bailments (Bill of Ladings and Documents of Title)
This article applies largely to Bailees, meaning a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them.

– UCC Article 8 – Investment Securities
This article applies to securities (and investment companies), meaning an obligation of an issuer that is represented by a security certificate in bearer or registered form, that is one of a class or series, and that (a) is traded on securities exchanges or securities markets; or (b) is a medium for investment and is a security expressly governed by this Article.

– UCC Article 9 – Secured Transactions
This article applies to transactions that creates a security interest in personal property by contract; agricultural liens; sale of accounts (payment intangibles, promissory notes, etc.); and,  consignments. With several other inclusions authorized under the UCC generally, and several other exclusions expressly removed from UCC Article 9.

Several renovations of the Michigan UCC were made July 1, 2013. Each above explanation is a severely abridged and slimmed statement; go directly to the Michigan Uniform Commercial Code (MCL 440.1101 et seq.) for a complete explanation and definition of each Article.

MCL 440.1101 (Article 1),
MCL 440.2101 (Article 2),
MCL 440.3101 (Article 3),.., etc.

In Michigan, when real property is owned by multiple owners, those owners are called co-tenants. Under this method of ownership, each co-tenant has a right to possess all of the property and no co-tenant has the right to an exclusive part of the property. This system has certain rights, privileges, and duties owed to the other co-tenants and the property, including: (1) right to rent and profits; (2) expenses associated with the property; and (3) the duty of fair dealing.

Rents.
Co-tenants out of possession of the property has a right to share in rents from third parties, including profits obtained from the collection of resources. There is a potential right from co-tenants to collect rents from agreements between the other co-tenants and lease agreements.

Expenses.
Each co-tenant, if required by reason and justice, must contribute his or her proportionate share of costs associated with the preservation of the property. A co-tenant who pays more than his or her share of the expense of pay for necessary repairs may seek contribution from co-tenants. The modern theory here is that, since the repair is necessary to maintain the quality of the property, and all co-tenants benefit from that value, that they all should pay. This also applies to Taxes owed to the governmental authority in the locality. Each co-tenant has a duty to pay his or her portion of taxes due on the entire property; generally this is irrespective of possession. Each paying co-tenant may compel the non-paying co-tenants to contribute in these expenses (including taxes and mortgages).

Fair Dealing.
Each co-tenant acting alone, is generally deemed to be acting on behalf of all co-tenants in relation to the property. Each co-tenant must act fairly in all transactions, whether in sale or adverse possession.

When choosing to own property with several other people, consider carefully the method of mutual ownership. Form an agreement with the other co-tenants if necessary, and always consult with an attorney before executing a deed with particular transfer information on it; there are potentially negative and irreversible consequences to transferring property with the wrong conveyance terms.

Traditionally, real estate that is transferred by sale begins several months before the closing date. Negotiations begin, a written purchase agreement is drafted (containing: a property description, the names of seller and buyer, the price, and other important terms), money is transferred into escrow, and inspections (environmental and structural) are ordered.

Although, real estate sales through Land Contracts should be similar to traditional sales, they often take place without legal counsel whereby neither party is protected and without much organization. An agreement is drafted to transfer title if the buyer makes x monthly payments in y amount with z interest until the sale price paid (a final balloon payment is not unusual).

Under both sale types, traditional and land contract, marketable title is implied in every transfer at closing. Marketable title does not mean perfect, rather it means free from unreasonable risk of litigation. Unmarketable title may mean: a defect in the chain of title such as a variation in the legal description or defect in the deed. Encumbrances such as mortgages and liens may be satisfied at closing. Unwaived easements, restrictive covenants, and significant encroachments may render title unmarketable.

Traditional Land Sale: Title must be marketable on closing, and unless an agreement states otherwise, time is not of the essence.

Land Contracts: Title must be marketable when delivery of title occurs (final payment).

If a buyer determines that title is defective (unmarketable), the buyer must notify and allow the seller to cure the defects. Generally, if the seller does not cure unmarketable title the buyer can sue for damages, unless the contract says otherwise.

UNIFORM PARTNERSHIPS
Michigan, like other states, has adopted a version of the Uniform Partnership Act (UPA) MCL 449.1 et seq., as well as the Uniform Limited Partnership Act (ULPA) MCL 449.1101 et seq. The law of contracts and agency serves as a base for partnership law.

JOINT VENTURES
A joint venture is a partnership, although courts often distinguish the two, legally the result is often identical.

Partnerships are defined as an association of two or more persons to carry on as co-owners in a business for profit. Anyone may be a partner, so long as they are capable of signing a contract; however, no written contract is inherently necessary to form a partnership. And unlike a corporation, the debts of the partnership, are the debts of the individual partners. Partnerships may acquire land and partnerships may be sued.

General Property Interest Characteristics
Ownership in any specific parcel of real property held by a partnership is characterized as a tenant in partnership. Unlike tenants in common, joint tenants, or owner fee simple absolute, these ownership interests have unusual “outcomes on event“. Each partner has an equal right with co-partners to possess property, so long as it is used for partnership purposes. The right of one partner to possess property is not assignable to non-partners; likewise one partner may not mortgage the property interest. On the death of a partner, the ownership interest transfers to the surviving partners; therefore, there is no right to a dowery interest in partnership property.

Liability
When deciding to form a partnership, a frequent question around the liability of the partnership in relation to the individual is brought up. In straight partnerships, the partners are liable for the actions of the partnership, and many times the actions of another partner. The partnership, through the partners, must indemnify other partners for payments and personal liabilities incurred in the course of business; similarly, if one partner pays a debt of the partnership, the other partners are compelled to contribute.

Civil Liability (torts and contracts): In general, partners are liable for contracts made or torts committed by a partner or employee during business operations.

Michigan LARA allows the filing of CSCL/CD-401 to file a Limited Partnership (LP); and, CSCL/CD-800 to file a Limited Liability Partnership (LLP). Limited Partnerships are composed of one or more general partners and one or more limited partners; whereby, the limited partners liability is limited to capital contributed, and the general partners are treated no different than any other partnership. Limited Liability Partnerships prohibit vicarious liability for torts of other partners. Limited Liability Limited Partnerships are a hybrid between limited partnerships and limited liability partnerships.

Partnership Tort Liability Conclusion
Partnerships: Partners are liable for torts jointly and severally.
Limited Liability Partnerships: Partners are generally no liable for torts of other partners.
Limited Partnerships: Limited Partners are not liable for torts of other partners.

Liability is one of the biggest reasons most entities suited for partnerships, choose Limited Liability Companies (LLCs).

Earlier in the year an article was written as Part I of contracting; pointed towards businesses who rely on self-drafted contracts. For review, generally contracts are a set of promises, made orally or written, that the law allows a remedy if the promises are breached. The base law of contracting is divided between the Sale of Goods (Uniform Commercial Code Article 2) and common law (or law of the courts).

The Sale of Goods Contracts.
Sales are those contracts that transfer title of movable things, or goods. Therefore, the sale of goods do not include real estate, services, construction contracts, or other intangible things. Article 2 of the Uniform Commercial Code (UCC A2) governs remedies, breaches, warranties, and other aspects of sales involving goods.

The Non-Good Contracts.
Common law governs contracts of everything other than the sale of goods.

Hybrid Contracts.
Where there are services involving goods, such as a mechanic working on a car, the courts will decide which law to apply, though the assistance of several rules used to determine which law to apply (common law or UCC A2). Often times the law applied won’t change the outcome and no decision of law must be made.

The Statute of Frauds.
Most (actual) contracts that are oral will be enforceable. However, there are some contracts that must be written, due to its’ nature. The writing requirement of the statute of frauds does not in actuality require that the contract is written, merely that the material terms are written and signed.  The following agreements must all be evidenced by a writing:

• An executor’s promise to personally pay the debts of an estate.
• Suretyship or a promise to pay the debt of another.
• A promise in consideration of Marriage.
• A promise creating an interest in land.
• An agreement that by its terms cannot be performed within one year.
• The sale of goods in Michigan for $1000 or more.

When contracting in Michigan be certain that you follow the rules of contracting precisely, failure to do so often results in high cost to defend, resolve, or remedy.