The Uniform Commercial Code (UCC) is the codification of laws governing commerce in the United States in which matters of selling, borrowing, lending, and other matters of trade are covered. The term UCC 1-308 refers to Article 1, subsection 308 of the Uniform Commercial Code. Subsection 308 addresses the concept of reservation of rights with regard to performance or acceptance of contract terms. Specifically, this code establishes the protection of rights in a commercial setting where contract terms cause unknowing conflict with or risk to certain rights.
The purpose of UCC 1-308, enacted to replace UCC 1-207, is to protect an individual or business entity from unknowingly giving up rights by agreeing to specific contract terms. By signing a document with additional terms such as “without prejudice,” or “under protest,” and referencing this code, the signee establishes the retention of any rights he or she unknowingly or under false pretense agrees to surrender. Such provisions do not allow an individual or business to avoid legally binding contract terms, but rather to accept contract terms without risk to his other rights. Typically, these rights apply to matters of debt and contract performance.
Contracts and contract laws, especially in a commercial setting, can easily become complicated through the use of unclear language or a lack of full disclosure of legal consequences. Many complicated if-then scenarios in a business contract can inadvertently result in the loss of certain legal rights. As such, UCC 1-308 seeks to provide the ability to declare inadvertent contractual consequences null and void. In short, the code establishes that, when agreeing to certain performance or contract terms, if such terms result in a loss of rights to which one party is unaware, performance cannot be forced. The code specifically excludes matters involving accord and satisfaction, where parties agree to augmented or lesser terms than originally agreed to, in order to settle a dispute or breach of contract.
A solid understanding of this rule and its application is necessary to effectively use such provisions. Simply signing a document with terms such as “under protest” or “without prejudice” does not invalidate it.
Such actions only protect signers from inadvertently surrendering their rights or the rights of the corporate entity that they represent. For example, signing a contract with the term “without prejudice” does not automatically invalidate the contract. If, by signing such a document, the company unknowingly surrenders the right to sue for remedies based on non-performance, such notations would help preserve the right to remediation.