Some UCC Rights Cannot Be Waived
When I was in law school, the UCC was one of the most dense and arcane pieces of literature it was my misfortune to read. Years later, the same writing has a lot more relevance and meaning, and holds the answer to many of life’s riddles. Take Kraenzler v. Brace (August 5, 2009), for example.
The court of appeals recognized that while the UCC applies to commercial transactions. However, because it was written by lawyers, there is an exception that permits parties to opt out of the UCC when drafting contract terms in a security agreement, waiving its requirements. And also because it was written by lawyers, there are exceptions to the exception, a number of provisions that are unwaivable by stipulation.
[Wis. Stat.] Section 401.102(3) states:
(3) The effect of chs. 401 to 411 may be varied by agreement, except as otherwise provided in chs. 401 to 411 and except that the obligations of good faith, diligence, reasonableness and care prescribed by chs. 401 to 411 may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable. (Emphasis added.)
The provision at issue in this case was just such an exception to the exception:
For the reasons stated above, we hold that the plain language of § 401.102(3) states first an exception that parties may vary the effect of U.C.C. provisions by agreement and, second, an exception to the exception that Wis. Stat. chs. 401 to 411 include provisions that certain rights may not be waived by contract. The subsections in Wis. Stat. § 409.602 are plainly just such an exception to the exception defined in § 401.102(3), so the parties must abide by them.
The unwaivable provisions that the court identified were many:
These include the right to: (a) require that the secured party may use the collateral only in the manner and extent agreed to by the debtor, subsec. (1); (b) request an accounting from the secured party regarding the collateral and any surplus from the sale of the collateral, subsec. (2); (c) require that the secured party proceed in a commercially reasonable manner when enforcing the obligation against the debtor, subsecs. (3) and (4); (d) application of the proceeds from the collateral to the debtor’s obligation under the loan, subsec. (5); (e) receive timely notice upon disposition of the collateral by the secured party, subsec. (7); (f) a calculation and explanation of the surplus or deficiency on disposition of the collateral, subsecs. (8) and (9); (g) redeem the collateral, subsec. (11); and (h) remedies under Wis. Stat. §§ 409.625 and 409.626 when the secured party fails to comply with ch. 409, subsec. (13). Sec. 409.602(1)–(5), (7)-(9), (11), (13).
So read closely, and if you’re in default (or think you are), there are a number of rights that you may retain, despite what your contract says.
