Rhode Island is the only state in the union that hasn’t updated the rules governing business contracts — but not for long. A package of legislation that would overhaul the state’s outdated universal commercial code won unanimous approval in the State Senate on April 13. The House version of the legislation is expected to pass before the end of the month, said Rep. Denise Aiken, a Warwick Democrat, who sponsored the House bills.
“I’m looking at these bills, and I can’t see a downside,” she said. “They recognize that we do business a lot differently then we did in the ’50s and ’60s when this was first instituted. Ward Cleaver went to work every day, but he had never heard of a computer.”
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The state’s uniform commercial code, or UCC, is equally ignorant of computers. And that makes it harder for local e-commerce companies and is an unnecessary annoyance for national companies trying to do business here, backers of the legislation said.
“If they have to spend a lot of extra time figuring out how Rhode Island does things because we have 25-year-old laws that none of the other states have, then that’s a good reason for companies not to bother doing business here,” said Giovanni Cicione, a lobbyist for the Rhode Island Economic Development Corp. “I don’t want to overemphasize it. It’s not the deal killer. But it just contributes to the poor perception of Rhode Island’s business market.”
Commercial contracts are recorded at the state secretary of state’s office under the UCC in much the same way that mortgages are recorded at the county land records office, explained Rich Glucksman, deputy chief of staff for Secretary of State James Langevin.
“The same forms that you could file in any other state, now you’ll be able to file here in Rhode Island,” Glucksman said. Like Aiken and Cicione, Glucksman expects the House version of the legislation to pass easily.
But the changes wouldn’t go into effect until July 1, 2001, said state Sen. John Roney, who led the charge to overhaul the code.
“There’s some major changes that will be required, particularly in the secretary of state’s office, to permit computerization and electronic filing,” Roney, a Providence Democrat, said. “So it was thought that the better part of valor would be to push it out to give everybody an opportunity to comply with it.”
Roney said the model legislation was drafted by the National Conference of Uniform State Law Commissioners, but the measures had to be tailored to fit existing Rhode Island laws. A task force of local lawyers assembled by Roney did most of that work. The private lawyers did the work pro bono.
“The attorneys gave literally hundreds of hours into this project,” he said. “It was really an extraordinary gift to the state.”
But supporters of the legislation say the real benefit for the state will come when the outdated UCC laws come off the books. Roney said the changes would make it easier and cheaper for companies to comply with the UCC rules.
“The modern UCC that we are trying to step up to makes it easier to do overseas trade,” agreed EDC’s Cicione. “It’s more effective when applied to the new economy markets–the high-tech and e-commerce transactions.”
The EDC has proposed a uniform electronic transactions law to go along with the updated UCC legislation. The agency’s bill, among other things, would allow for electronic signatures on certain kinds of contracts.
“Internet companies want to be able to contract with their customers over the Internet,” Cicione said. “If you can do everything online except you have to mail out a piece of paper, you’re sort of defeating the purpose of doing it electronically.”
