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Le Menu: The UCC and Food
The UCC and Food
By Steven O. Weise
To a foodie, food is something special, artistic, aesthetic, and to be savored. To a UCC lawyer, food is just a source of energy and another kind of property subject to commercial laws. When most of us buy or eat food, we don't think much about the UCC, but food is an important type of property that pops up all over the place in the UCC. The UCC affects or facilitates the food distribution change from soup to nuts, or from the farm to the plate. Indeed, without the UCC much of the food that we eat would not make its way to our kitchen tables or would cost a whole bunch more. A lawyer working on a deal involving food should consider how the UCC might affect the deal.

Amuse Bouche
Although we generally think of the UCC as applying to widgets and the like, there are plenty of provisions that often apply to food.

Hors D'Oeuvres
Article 1.

Entrées
Article 2 often applies to food. A seller of food, whether a grocery store or a restaurant, can breach the article 2 warranties if the food is defective. Recall the decision where a customer in a grocery store picked up a bunch of bananas? It turns out that there was a tarantula living among the bananas. It did not like to be disturbed and bit the customer on the way to the check-out stand. The court held that the grocery had not yet made a warranty about the bananas because the customer had not yet bought them. So, the customer could sue only for negligence. CeBuzz, Inc. v. Sniderman, 466 P.2d 457 (Colo. 1970). In the restaurant context, the question that arises is whether the food meets the reasonable expectations of the restaurant customer—i.e., there should not be any bones in the burger.

Letters of credit frequently are used to pay for shipments of food. A supplier of food may sell it to a buyer in another country. The seller wants assurance that the buyer will pay and does not want to take the risk of going after a buyer in another country. Sometimes there is a requirement for a certificate that the shipped food is in good shape. If the food is spoiled, the buyer does not want the seller to be able to draw on the letter of credit. Without article 5's rules on letters of credit, food distributors might not be able to get food from other countries. That's particularly important when buying food not in season in the United States, requiring that it be sent from the other side of the equator, where the seasons are the opposite. No UCC would mean no blueberries in the winter.

Owners of food, such as wheat, store the sheaves of wheat in warehouses. This allows for the accumulation of the wheat from many growers and the efficient disposition of the wheat (or other foodstuffs) through the distribution system. The warehouse issues a warehouse receipt for the wheat. The receipt can be used to transfer ownership of the wheat from producers to distributors to retailers—all without moving the wheat. Enormous costs can be saved and the system has great transparency and certainty. So, once again, the UCC keeps the granola in our breakfast bowls at a reasonable price.

Les Desserts
And then there's the final course of the UCC—article 9.

Article 9 applies to all sorts of personal property and there's nothing more personal than food. But how personal? Consider the apple tree and the gross of apples on it. The apples are crops (while on the tree or still with the farmer before any processing) and the tree may well be a fixture (see state real property law). Crops in turn are farm products. Crops, farm products, and fixtures are personal property, but these categories mean that special rules may apply to perfection and priority.

Article 9 now covers agricultural liens, which are statutory liens on farm products (including crops) arising in favor of someone who provides goods or services to a farmer. The where-to-file rules for perfecting an agricultural lien differ from those for perfecting a security interest, but an agricultural lien might have priority over a security interest. A lawyer working on a secured loan to a farmer should check out these rules.

And then comes foreclosure. As we all know when we examine the nether reaches of our refrigerators and pantries, food can spoil. Article 9 is well aware of this. The notice and timing provisions of article 9's foreclosure rules often provide exceptions if the collateral is food that will spoil if the regular rules are followed. Without those clever exceptions, there would not be anyone at the foreclosure sale and the spoiled food would be wasted.

Les Fromage
So where would we be without the UCC? Hungry!

Weise is a partner at Proskauer Rose LLP in Los Angeles. His e-mail is sweise@proskauer.com.

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