1-1 By: Grusendorf (Senate Sponsor - Montford) H.B. No. 1728
1-2 (In the Senate - Received from the House May 11, 1995;
1-3 May 12, 1995, read first time and referred to Committee on Economic
1-4 Development; May 26, 1995, reported favorably by the following
1-5 vote: Yeas 9, Nays 0; May 26, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to negotiable instruments and bank deposits and
1-9 collections, including a revision of Chapter 3 of the Uniform
1-10 Commercial Code.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Chapter 3, Business & Commerce Code, is amended
1-13 to read as follows:
1-14 CHAPTER 3. NEGOTIABLE INSTRUMENTS
1-15 SUBCHAPTER A. GENERAL PROVISIONS AND DEFINITIONS
1-16 Sec. 3.101. SHORT TITLE. This chapter may be cited as
1-17 Uniform Commercial Code--Negotiable Instruments.
1-18 Sec. 3.102. SUBJECT MATTER. (a) This chapter applies to
1-19 negotiable instruments. It does not apply to money, to payment
1-20 orders governed by Chapter 4A, or to securities governed by Chapter
1-21 8.
1-22 (b) If there is conflict between this chapter and Chapter 4
1-23 or 9, Chapters 4 and 9 govern.
1-24 (c) Regulations of the Board of Governors of the Federal
1-25 Reserve System and operating circulars of the Federal Reserve Banks
1-26 supersede any inconsistent provision of this chapter to the extent
1-27 of the inconsistency.
1-28 Sec. 3.103. DEFINITIONS. (a) In this chapter:
1-29 (1) "Acceptor" means a drawee who has accepted a
1-30 draft.
1-31 (2) "Drawee" means a person ordered in a draft to make
1-32 payment.
1-33 (3) "Drawer" means a person who signs or is identified
1-34 in a draft as a person ordering payment.
1-35 (4) "Good faith" means honesty in fact and the
1-36 observance of reasonable commercial standards of fair dealing.
1-37 (5) "Maker" means a person who signs or is identified
1-38 in a note as a person undertaking to pay.
1-39 (6) "Order" means a written instruction to pay money
1-40 signed by the person giving the instruction. The instruction may
1-41 be addressed to any person, including the person giving the
1-42 instruction, or to one or more persons jointly or in the
1-43 alternative but not in succession. An authorization to pay is not
1-44 an order unless the person authorized to pay is also instructed to
1-45 pay.
1-46 (7) "Ordinary care" in the case of a person engaged in
1-47 business means observance of reasonable commercial standards,
1-48 prevailing in the area in which the person is located, with respect
1-49 to the business in which the person is engaged. In the case of a
1-50 bank that takes an instrument for processing for collection or
1-51 payment by automated means, reasonable commercial standards do not
1-52 require the bank to examine the instrument if the failure to
1-53 examine does not violate the bank's prescribed procedures and the
1-54 bank's procedures do not vary unreasonably from general banking
1-55 usage not disapproved by this chapter or Chapter 4.
1-56 (8) "Party" means a party to an instrument.
1-57 (9) "Promise" means a written undertaking to pay money
1-58 signed by the person undertaking to pay. An acknowledgment of an
1-59 obligation by the obligor is not a promise unless the obligor also
1-60 undertakes to pay the obligation.
1-61 (10) "Prove" with respect to a fact means to meet the
1-62 burden of establishing the fact (Section 1.201(8)).
1-63 (11) "Remitter" means a person who purchases an
1-64 instrument from its issuer if the instrument is payable to an
1-65 identified person other than the purchaser.
1-66 (b) Other definitions applying to this chapter and the
1-67 sections in which they appear are:
1-68 "Acceptance" Section 3.409.
2-1 "Accommodated party" Section 3.419.
2-2 "Accommodation party" Section 3.419.
2-3 "Alteration" Section 3.407.
2-4 "Anomalous indorsement" Section 3.205.
2-5 "Blank indorsement" Section 3.205.
2-6 "Cashier's check" Section 3.104.
2-7 "Certificate of deposit" Section 3.104.
2-8 "Certified check" Section 3.409.
2-9 "Check" Section 3.104.
2-10 "Consideration" Section 3.303.
2-11 "Draft" Section 3.104.
2-12 "Holder in due course" Section 3.302.
2-13 "Incomplete instrument" Section 3.115.
2-14 "Indorsement" Section 3.204.
2-15 "Indorser" Section 3.204.
2-16 "Instrument" Section 3.104.
2-17 "Issue" Section 3.105.
2-18 "Issuer" Section 3.105.
2-19 "Negotiable instrument" Section 3.104.
2-20 "Negotiation" Section 3.201.
2-21 "Note" Section 3.104.
2-22 "Payable at a definite time" Section 3.108.
2-23 "Payable on demand" Section 3.108.
2-24 "Payable to bearer" Section 3.109.
2-25 "Payable to order" Section 3.109.
2-26 "Payment" Section 3.602.
2-27 "Person entitled to enforce" Section 3.301.
2-28 "Presentment" Section 3.501.
2-29 "Reacquisition" Section 3.207.
2-30 "Special indorsement" Section 3.205.
2-31 "Teller's check" Section 3.104.
2-32 "Transfer of instrument" Section 3.203.
2-33 "Traveler's check" Section 3.104.
2-34 "Value" Section 3.303.
2-35 (c) The following definitions in other chapters apply to
2-36 this chapter:
2-37 "Bank" Section 4.105.
2-38 "Banking day" Section 4.104.
2-39 "Clearing house" Section 4.104.
2-40 "Collecting bank" Section 4.105.
2-41 "Depositary bank" Section 4.105.
2-42 "Documentary draft" Section 4.104.
2-43 "Intermediary bank" Section 4.105.
2-44 "Item" Section 4.104.
2-45 "Payor bank" Section 4.105.
2-46 "Suspends payments" Section 4.104.
2-47 (d) In addition, Chapter 1 contains general definitions and
2-48 principles of construction and interpretation applicable throughout
2-49 this chapter.
2-50 Sec. 3.104. NEGOTIABLE INSTRUMENT. (a) Except as provided
2-51 in Subsections (c) and (d), "negotiable instrument" means an
2-52 unconditional promise or order to pay a fixed amount of money, with
2-53 or without interest or other charges described in the promise or
2-54 order, if it:
2-55 (1) is payable to bearer or to order at the time it is
2-56 issued or first comes into possession of a holder;
2-57 (2) is payable on demand or at a definite time; and
2-58 (3) does not state any other undertaking or
2-59 instruction by the person promising or ordering payment to do any
2-60 act in addition to the payment of money, but the promise or order
2-61 may contain:
2-62 (A) an undertaking or power to give, maintain,
2-63 or protect collateral to secure payment;
2-64 (B) an authorization or power to the holder to
2-65 confess judgment or realize on or dispose of collateral; or
2-66 (C) a waiver of the benefit of any law intended
2-67 for the advantage or protection of an obligor.
2-68 (b) "Instrument" means a negotiable instrument.
2-69 (c) An order that meets all of the requirements of
2-70 Subsection (a), except Subdivision (1), and otherwise falls within
3-1 the definition of "check" in Subsection (f) is a negotiable
3-2 instrument and a check.
3-3 (d) A promise or order other than a check is not an
3-4 instrument if, at the time it is issued or first comes into
3-5 possession of a holder, it contains a conspicuous statement,
3-6 however expressed, to the effect that the promise or order is not
3-7 negotiable or is not an instrument governed by this chapter.
3-8 (e) An instrument is a "note" if it is a promise and is a
3-9 "draft" if it is an order. If an instrument falls within the
3-10 definition of both "note" and "draft," a person entitled to enforce
3-11 the instrument may treat it as either.
3-12 (f) "Check" means (i) a draft, other than a documentary
3-13 draft, payable on demand and drawn on a bank or (ii) a cashier's
3-14 check or teller's check. An instrument may be a check even though
3-15 it is described on its face by another term, such as "money order."
3-16 (g) "Cashier's check" means a draft with respect to which
3-17 the drawer and drawee are the same bank or branches of the same
3-18 bank.
3-19 (h) "Teller's check" means a draft drawn by a bank:
3-20 (1) on another bank; or
3-21 (2) payable at or through a bank.
3-22 (i) "Traveler's check" means an instrument that:
3-23 (1) is payable on demand;
3-24 (2) is drawn on or payable at or through a bank;
3-25 (3) is designated by the term "traveler's check" or by
3-26 a substantially similar term; and
3-27 (4) requires, as a condition to payment, a
3-28 countersignature by a person whose specimen signature appears on
3-29 the instrument.
3-30 (j) "Certificate of deposit" means an instrument containing
3-31 an acknowledgment by a bank that a sum of money has been received
3-32 by the bank and a promise by the bank to repay the sum of money. A
3-33 certificate of deposit is a note of the bank.
3-34 Sec. 3.105. ISSUE OF INSTRUMENT. (a) "Issue" means the
3-35 first delivery of an instrument by the maker or drawer, whether to
3-36 a holder or nonholder, for the purpose of giving rights on the
3-37 instrument to any person.
3-38 (b) An unissued instrument, or an unissued incomplete
3-39 instrument that is completed, is binding on the maker or drawer,
3-40 but nonissuance is a defense. An instrument that is conditionally
3-41 issued or is issued for a special purpose is binding on the maker
3-42 or drawer, but failure of the condition or special purpose to be
3-43 fulfilled is a defense.
3-44 (c) "Issuer" applies to issued and unissued instruments and
3-45 means a maker or drawer of an instrument.
3-46 Sec. 3.106. UNCONDITIONAL PROMISE OR ORDER. (a) Except as
3-47 provided in this section, for the purposes of Section 3.104(a), a
3-48 promise or order is unconditional unless it states (i) an express
3-49 condition to payment, (ii) that the promise or order is subject to
3-50 or governed by another writing, or (iii) that rights or obligations
3-51 with respect to the promise or order are stated in another writing.
3-52 A reference to another writing does not of itself make the promise
3-53 or order conditional.
3-54 (b) A promise or order is not made conditional (i) by a
3-55 reference to another writing for a statement of rights with respect
3-56 to collateral, prepayment, or acceleration, or (ii) because payment
3-57 is limited to resort to a particular fund or source.
3-58 (c) If a promise or order requires, as a condition to
3-59 payment, a countersignature by a person whose specimen signature
3-60 appears on the promise or order, the condition does not make the
3-61 promise or order conditional for the purposes of Section 3.104(a).
3-62 If the person whose specimen signature appears on an instrument
3-63 fails to countersign the instrument, the failure to countersign is
3-64 a defense to the obligation of the issuer, but the failure does not
3-65 prevent a transferee of the instrument from becoming a holder of
3-66 the instrument.
3-67 (d) If a promise or order at the time it is issued or first
3-68 comes into possession of a holder contains a statement, required by
3-69 applicable statutory or administrative law, to the effect that the
3-70 rights of a holder or transferee are subject to claims or defenses
4-1 that the issuer could assert against the original payee, the
4-2 promise or order is not thereby made conditional for the purposes
4-3 of Section 3.104(a); but if the promise or order is an instrument,
4-4 there cannot be a holder in due course of the instrument.
4-5 Sec. 3.107. INSTRUMENT PAYABLE IN FOREIGN MONEY. Unless the
4-6 instrument otherwise provides, an instrument that states the amount
4-7 payable in foreign money may be paid in the foreign money or in an
4-8 equivalent amount in dollars calculated by using the current
4-9 bank-offered spot rate at the place of payment for the purchase of
4-10 dollars on the day on which the instrument is paid.
4-11 Sec. 3.108. PAYABLE ON DEMAND OR AT DEFINITE TIME. (a) A
4-12 promise or order is "payable on demand" if it:
4-13 (1) states that it is payable on demand or at sight,
4-14 or otherwise indicates that it is payable at the will of the
4-15 holder; or
4-16 (2) does not state any time of payment.
4-17 (b) A promise or order is "payable at a definite time" if it
4-18 is payable on elapse of a definite period of time after sight or
4-19 acceptance or at a fixed date or dates or at a time or times
4-20 readily ascertainable at the time the promise or order is issued,
4-21 subject to rights of:
4-22 (1) prepayment;
4-23 (2) acceleration;
4-24 (3) extension at the option of the holder; or
4-25 (4) extension to a further definite time at the option
4-26 of the maker or acceptor or automatically on or after a specified
4-27 act or event.
4-28 (c) If an instrument, payable at a fixed date, is also
4-29 payable on demand made before the fixed date, the instrument is
4-30 payable on demand until the fixed date and, if demand for payment
4-31 is not made before that date, becomes payable at a definite time on
4-32 the fixed date.
4-33 Sec. 3.109. PAYABLE TO BEARER OR TO ORDER. (a) A promise
4-34 or order is payable to bearer if it:
4-35 (1) states that it is payable to bearer or to the
4-36 order of bearer or otherwise indicates that the person in
4-37 possession of the promise or order is entitled to payment;
4-38 (2) does not state a payee; or
4-39 (3) states that it is payable to or to the order of
4-40 cash or otherwise indicates that it is not payable to an identified
4-41 person.
4-42 (b) A promise or order that is not payable to bearer is
4-43 payable to order if it is payable (i) to the order of an identified
4-44 person, or (ii) to an identified person or order. A promise or
4-45 order that is payable to order is payable to the identified person.
4-46 (c) An instrument payable to bearer may become payable to an
4-47 identified person if it is specially indorsed pursuant to Section
4-48 3.205(a). An instrument payable to an identified person may become
4-49 payable to bearer if it is indorsed in blank pursuant to Section
4-50 3.205(b).
4-51 Sec. 3.110. IDENTIFICATION OF PERSON TO WHOM INSTRUMENT IS
4-52 PAYABLE. (a) The person to whom an instrument is initially
4-53 payable is determined by the intent of the person, whether or not
4-54 authorized, signing as, or in the name or behalf of, the issuer of
4-55 the instrument. The instrument is payable to the person intended
4-56 by the signer even if that person is identified in the instrument
4-57 by a name or other identification that is not that of the intended
4-58 person. If more than one person signs in the name or behalf of the
4-59 issuer of an instrument and all the signers do not intend the same
4-60 person as payee, the instrument is payable to any person intended
4-61 by one or more of the signers.
4-62 (b) If the signature of the issuer of an instrument is made
4-63 by automated means, such as a check-writing machine, the payee of
4-64 the instrument is determined by the intent of the person who
4-65 supplied the name or identification of the payee, whether or not
4-66 authorized to do so.
4-67 (c) A person to whom an instrument is payable may be
4-68 identified in any way, including by name, identifying number,
4-69 office, or account number. For the purpose of determining the
4-70 holder of an instrument, the following rules apply:
5-1 (1) If an instrument is payable to an account and the
5-2 account is identified only by number, the instrument is payable to
5-3 the person to whom the account is payable. If an instrument is
5-4 payable to an account identified by number and by the name of a
5-5 person, the instrument is payable to the named person, whether or
5-6 not that person is the owner of the account identified by number.
5-7 (2) If an instrument is payable to:
5-8 (A) a trust, an estate, or a person described as
5-9 trustee or representative of a trust or estate, the instrument is
5-10 payable to the trustee, the representative, or a successor of
5-11 either, whether or not the beneficiary or estate is also named;
5-12 (B) a person described as agent or similar
5-13 representative of a named or identified person, the instrument is
5-14 payable to the represented person, the representative, or a
5-15 successor of the representative;
5-16 (C) a fund or organization that is not a legal
5-17 entity, the instrument is payable to a representative of the
5-18 members of the fund or organization; or
5-19 (D) an office or to a person described as
5-20 holding an office, the instrument is payable to the named person,
5-21 the incumbent of the office, or a successor to the incumbent.
5-22 (d) If an instrument is payable to two or more persons
5-23 alternatively, it is payable to any of them and may be negotiated,
5-24 discharged, or enforced by any or all of them in possession of the
5-25 instrument. If an instrument is payable to two or more persons not
5-26 alternatively, it is payable to all of them and may be negotiated,
5-27 discharged, or enforced only by all of them. If an instrument
5-28 payable to two or more persons is ambiguous as to whether it is
5-29 payable to the persons alternatively, the instrument is payable to
5-30 the persons alternatively.
5-31 Sec. 3.111. PLACE OF PAYMENT. Except as otherwise provided
5-32 for items in Chapter 4, an instrument is payable at the place of
5-33 payment stated in the instrument. If no place of payment is
5-34 stated, an instrument is payable at the address of the drawee or
5-35 maker stated in the instrument. If no address is stated, the place
5-36 of payment is the place of business of the drawee or maker. If a
5-37 drawee or maker has more than one place of business, the place of
5-38 payment is any place of business of the drawee or maker chosen by
5-39 the person entitled to enforce the instrument. If the drawee or
5-40 maker has no place of business, the place of payment is the
5-41 residence of the drawee or maker.
5-42 Sec. 3.112. INTEREST. (a) Unless otherwise provided in the
5-43 instrument:
5-44 (1) an instrument is not payable with interest; and
5-45 (2) interest on an interest-bearing instrument is
5-46 payable from the date of the instrument.
5-47 (b) Interest may be stated in an instrument as a fixed or
5-48 variable amount of money or it may be expressed as a fixed or
5-49 variable rate or rates. The amount or rate of interest may be
5-50 stated or described in the instrument in any manner and may require
5-51 reference to information not contained in the instrument. If an
5-52 instrument provides for interest, but the amount of interest
5-53 payable cannot be ascertained from the description, interest is
5-54 payable at the judgment rate in effect at the place of payment of
5-55 the instrument and at the time interest first accrues, and the
5-56 instrument shall not by virtue of this sentence be considered to
5-57 violate the provisions of Title 79, Revised Statutes (Article
5-58 5069-1.01 et seq., Vernon's Texas Civil Statutes).
5-59 Sec. 3.113. DATE OF INSTRUMENT. (a) An instrument may be
5-60 antedated or postdated. The date stated determines the time of
5-61 payment if the instrument is payable at a fixed period after date.
5-62 Except as provided in Section 4.401(c), an instrument payable on
5-63 demand is not payable before the date of the instrument.
5-64 (b) If an instrument is undated, its date is the date of its
5-65 issue or, in the case of an unissued instrument, the date it first
5-66 comes into possession of a holder.
5-67 Sec. 3.114. CONTRADICTORY TERMS OF INSTRUMENT. If an
5-68 instrument contains contradictory terms, typewritten terms prevail
5-69 over printed terms, handwritten terms prevail over both, and words
5-70 prevail over numbers.
6-1 Sec. 3.115. INCOMPLETE INSTRUMENT. (a) "Incomplete
6-2 instrument" means a signed writing, whether or not issued by the
6-3 signer, the contents of which show at the time of signing that it
6-4 is incomplete but that the signer intended it to be completed by
6-5 the addition of words or numbers.
6-6 (b) Subject to Subsection (c), if an incomplete instrument
6-7 is an instrument under Section 3.104, it may be enforced according
6-8 to its terms if it is not completed, or according to its terms as
6-9 augmented by completion. If an incomplete instrument is not an
6-10 instrument under Section 3.104, but, after completion, the
6-11 requirements of Section 3.104 are met, the instrument may be
6-12 enforced according to its terms as augmented by completion.
6-13 (c) If words or numbers are added to an incomplete
6-14 instrument without authority of the signer, there is an alteration
6-15 of the incomplete instrument under Section 3.407.
6-16 (d) The burden of establishing that words or numbers were
6-17 added to an incomplete instrument without authority of the signer
6-18 is on the person asserting the lack of authority.
6-19 Sec. 3.116. JOINT AND SEVERAL LIABILITY; CONTRIBUTION. (a)
6-20 Except as otherwise provided in the instrument, two or more persons
6-21 who have the same liability on an instrument as makers, drawers,
6-22 acceptors, indorsers who indorse as joint payees, or anomalous
6-23 indorsers are jointly and severally liable in the capacity in which
6-24 they sign.
6-25 (b) Except as provided in Section 3.419(e) or by agreement
6-26 of the affected parties, a party having joint and several liability
6-27 who pays the instrument is entitled to receive from any party
6-28 having the same joint and several liability contribution in
6-29 accordance with applicable law.
6-30 (c) Discharge of one party having joint and several
6-31 liability by a person entitled to enforce the instrument does not
6-32 affect the right under Subsection (b) of a party having the same
6-33 joint and several liability to receive contribution from the party
6-34 discharged.
6-35 Sec. 3.117. OTHER AGREEMENTS AFFECTING INSTRUMENT. Subject
6-36 to applicable law regarding exclusion of proof of contemporaneous
6-37 or previous agreements, the obligation of a party to an instrument
6-38 to pay the instrument may be modified, supplemented, or nullified
6-39 by a separate agreement of the obligor and a person entitled to
6-40 enforce the instrument, if the instrument is issued or the
6-41 obligation is incurred in reliance on the agreement or as part of
6-42 the same transaction giving rise to the agreement. To the extent
6-43 an obligation is modified, supplemented, or nullified by an
6-44 agreement under this section, the agreement is a defense to the
6-45 obligation.
6-46 Sec. 3.118. STATUTE OF LIMITATIONS. (a) Except as provided
6-47 in Subsection (e), an action to enforce the obligation of a party
6-48 to pay a note payable at a definite time must be commenced within
6-49 six years after the due date or dates stated in the note or, if a
6-50 due date is accelerated, within six years after the accelerated due
6-51 date.
6-52 (b) Except as provided in Subsection (d) or (e), if demand
6-53 for payment is made to the maker of a note payable on demand, an
6-54 action to enforce the obligation of a party to pay the note must be
6-55 commenced within six years after the demand. If no demand for
6-56 payment is made to the maker, an action to enforce the note is
6-57 barred if neither principal nor interest on the note has been paid
6-58 for a continuous period of 10 years.
6-59 (c) Except as provided in Subsection (d), an action to
6-60 enforce the obligation of a party to an unaccepted draft to pay the
6-61 draft must be commenced within three years after dishonor of the
6-62 draft or 10 years after the date of the draft, whichever period
6-63 expires first.
6-64 (d) An action to enforce the obligation of the acceptor of a
6-65 certified check or the issuer of a teller's check, cashier's check,
6-66 or traveler's check must be commenced within three years after
6-67 demand for payment is made to the acceptor or issuer, as the case
6-68 may be.
6-69 (e) An action to enforce the obligation of a party to a
6-70 certificate of deposit to pay the instrument must be commenced
7-1 within six years after demand for payment is made to the maker, but
7-2 if the instrument states a due date and the maker is not required
7-3 to pay before that date, the six-year period begins when a demand
7-4 for payment is in effect and the due date has passed.
7-5 (f) An action to enforce the obligation of a party to pay an
7-6 accepted draft, other than a certified check, must be commenced:
7-7 (1) within six years after the due date or dates
7-8 stated in the draft or acceptance if the obligation of the acceptor
7-9 is payable at a definite time; or
7-10 (2) within six years after the date of the acceptance
7-11 if the obligation of the acceptor is payable on demand.
7-12 (g) Unless governed by other law regarding claims for
7-13 indemnity or contribution, the following actions must be commenced
7-14 within three years after the cause of action accrues:
7-15 (1) an action for conversion of an instrument, an
7-16 action for money had and received, or like action based on
7-17 conversion;
7-18 (2) an action for breach of warranty; or
7-19 (3) an action to enforce an obligation, duty, or right
7-20 arising under this chapter and not governed by this section.
7-21 Sec. 3.119. NOTICE OF RIGHT TO DEFEND ACTION. In an action
7-22 for breach of an obligation for which a third person is answerable
7-23 over pursuant to this chapter or Chapter 4, the defendant may give
7-24 the third person written notice of the litigation, and the person
7-25 notified may then give similar notice to any other person who is
7-26 answerable over. If the notice states (i) that the person notified
7-27 may come in and defend, and (ii) that failure to do so will bind
7-28 the person notified in an action later brought by the person giving
7-29 the notice as to any determination of fact common to the two
7-30 litigations, the person notified is so bound unless after
7-31 seasonable receipt of the notice the person notified does come in
7-32 and defend.
7-33 SUBCHAPTER B. NEGOTIATION, TRANSFER, AND INDORSEMENT
7-34 Sec. 3.201. NEGOTIATION. (a) "Negotiation" means a
7-35 transfer of possession, whether voluntary or involuntary, of an
7-36 instrument by a person other than the issuer to a person who
7-37 thereby becomes its holder.
7-38 (b) Except for negotiation by a remitter, if an instrument
7-39 is payable to an identified person, negotiation requires transfer
7-40 of possession of the instrument and its indorsement by the holder.
7-41 If an instrument is payable to bearer, it may be negotiated by
7-42 transfer of possession alone.
7-43 Sec. 3.202. NEGOTIATION SUBJECT TO RESCISSION. (a)
7-44 Negotiation is effective even if obtained:
7-45 (1) from an infant, a corporation exceeding its
7-46 powers, or a person without capacity;
7-47 (2) by fraud, duress, or mistake; or
7-48 (3) in breach of duty or as part of an illegal
7-49 transaction.
7-50 (b) To the extent permitted by other law, negotiation may be
7-51 rescinded or may be subject to other remedies, but those remedies
7-52 may not be asserted against a subsequent holder in due course or a
7-53 person paying the instrument in good faith and without knowledge of
7-54 facts that are a basis for rescission or other remedy.
7-55 Sec. 3.203. TRANSFER OF INSTRUMENT; RIGHTS ACQUIRED BY
7-56 TRANSFER. (a) An instrument is transferred when it is delivered
7-57 by a person other than its issuer for the purpose of giving to the
7-58 person receiving delivery the right to enforce the instrument.
7-59 (b) Transfer of an instrument, whether or not the transfer
7-60 is a negotiation, vests in the transferee any right of the
7-61 transferor to enforce the instrument, including any right as a
7-62 holder in due course. The transferee cannot acquire rights of a
7-63 holder in due course by a transfer, directly or indirectly, from a
7-64 holder in due course if the transferee engaged in fraud or
7-65 illegality affecting the instrument.
7-66 (c) Unless otherwise agreed, if an instrument is transferred
7-67 for value and the transferee does not become a holder because of
7-68 lack of indorsement by the transferor, the transferee has a
7-69 specifically enforceable right to the unqualified indorsement of
7-70 the transferor, but negotiation of the instrument does not occur
8-1 until the indorsement is made.
8-2 (d) If a transferor purports to transfer less than the
8-3 entire instrument, negotiation of the instrument does not occur.
8-4 The transferee obtains no rights under this chapter and has only
8-5 the rights of a partial assignee.
8-6 Sec. 3.204. INDORSEMENT. (a) "Indorsement" means a
8-7 signature, other than that of a signer as maker, drawer, or
8-8 acceptor, that alone or accompanied by other words is made on an
8-9 instrument for the purpose of (i) negotiating the instrument, (ii)
8-10 restricting payment of the instrument, or (iii) incurring
8-11 indorser's liability on the instrument, but regardless of the
8-12 intent of the signer, a signature and its accompanying words is an
8-13 indorsement unless the accompanying words, terms of the instrument,
8-14 place of the signature, or other circumstances unambiguously
8-15 indicate that the signature was made for a purpose other than
8-16 indorsement. For the purpose of determining whether a signature is
8-17 made on an instrument, a paper affixed to the instrument is a part
8-18 of the instrument.
8-19 (b) "Indorser" means a person who makes an indorsement.
8-20 (c) For the purpose of determining whether the transferee of
8-21 an instrument is a holder, an indorsement that transfers a security
8-22 interest in the instrument is effective as an unqualified
8-23 indorsement of the instrument.
8-24 (d) If an instrument is payable to a holder under a name
8-25 that is not the name of the holder, indorsement may be made by the
8-26 holder in the name stated in the instrument or in the holder's name
8-27 or both, but signature in both names may be required by a person
8-28 paying or taking the instrument for value or collection.
8-29 Sec. 3.205. SPECIAL INDORSEMENT; BLANK INDORSEMENT;
8-30 ANOMALOUS INDORSEMENT. (a) If an indorsement is made by the
8-31 holder of an instrument, whether payable to an identified person or
8-32 payable to bearer, and the indorsement identifies a person to whom
8-33 it makes the instrument payable, it is a "special indorsement."
8-34 When specially indorsed, an instrument becomes payable to the
8-35 identified person and may be negotiated only by the indorsement of
8-36 that person. The principles stated in Section 3.110 apply to
8-37 special indorsements.
8-38 (b) If an indorsement is made by the holder of an instrument
8-39 and it is not a special indorsement, it is a "blank indorsement."
8-40 When indorsed in blank, an instrument becomes payable to bearer and
8-41 may be negotiated by transfer of possession alone until specially
8-42 indorsed.
8-43 (c) The holder may convert a blank indorsement that consists
8-44 only of a signature into a special indorsement by writing, above
8-45 the signature of the indorser, words identifying the person to whom
8-46 the instrument is made payable.
8-47 (d) "Anomalous indorsement" means an indorsement made by a
8-48 person who is not the holder of the instrument. An anomalous
8-49 indorsement does not affect the manner in which the instrument may
8-50 be negotiated.
8-51 Sec. 3.206. RESTRICTIVE INDORSEMENT. (a) An indorsement
8-52 limiting payment to a particular person or otherwise prohibiting
8-53 further transfer or negotiation of the instrument is not effective
8-54 to prevent further transfer or negotiation of the instrument.
8-55 (b) An indorsement stating a condition to the right of the
8-56 indorsee to receive payment does not affect the right of the
8-57 indorsee to enforce the instrument. A person paying the instrument
8-58 or taking it for value or collection may disregard the condition,
8-59 and the rights and liabilities of that person are not affected by
8-60 whether the condition has been fulfilled.
8-61 (c) If an instrument bears an indorsement (i) described in
8-62 Section 4.201(b), or (ii) in blank or to a particular bank using
8-63 the words "for deposit" or "for collection," or other words
8-64 indicating a purpose of having the instrument collected by a bank
8-65 for the indorser or for a particular account, the following rules
8-66 apply:
8-67 (1) a person, other than a bank, who purchases the
8-68 instrument when so indorsed converts the instrument unless the
8-69 amount paid for the instrument is received by the indorser or
8-70 applied consistently with the indorsement;
9-1 (2) a depositary bank that purchases the instrument or
9-2 takes it for collection when so indorsed converts the instrument
9-3 unless the amount paid by the bank with respect to the instrument
9-4 is received by the indorser or applied consistently with the
9-5 indorsement;
9-6 (3) a payor bank that is also the depositary bank or
9-7 that takes the instrument for immediate payment over the counter
9-8 from a person other than a collecting bank converts the instrument
9-9 unless the proceeds of the instrument are received by the indorser
9-10 or applied consistently with the indorsement; and
9-11 (4) except as otherwise provided in Subdivision (3), a
9-12 payor bank or intermediary bank may disregard the indorsement and
9-13 is not liable if the proceeds of the instrument are not received by
9-14 the indorser or applied consistently with the indorsement.
9-15 (d) Except for an indorsement covered by Subsection (c), if
9-16 an instrument bears an indorsement using words to the effect that
9-17 payment is to be made to the indorsee as agent, trustee, or other
9-18 fiduciary for the benefit of the indorser or another person, the
9-19 following rules apply:
9-20 (1) unless there is notice of breach of fiduciary duty
9-21 as provided in Section 3.307, a person who purchases the instrument
9-22 from the indorsee or takes the instrument from the indorsee for
9-23 collection or payment may pay the proceeds of payment or the value
9-24 given for the instrument to the indorsee without regard to whether
9-25 the indorsee violates a fiduciary duty to the indorser; and
9-26 (2) a subsequent transferee of the instrument or
9-27 person who pays the instrument is neither given notice nor
9-28 otherwise affected by the restriction in the indorsement unless the
9-29 transferee or payor knows that the fiduciary dealt with the
9-30 instrument or its proceeds in breach of fiduciary duty.
9-31 (e) The presence on an instrument of an indorsement to which
9-32 this section applies does not prevent a purchaser of the instrument
9-33 from becoming a holder in due course of the instrument unless the
9-34 purchaser is a converter under Subsection (c) or has notice or
9-35 knowledge of breach of fiduciary duty as stated in Subsection (d).
9-36 (f) In an action to enforce the obligation of a party to pay
9-37 the instrument, the obligor has a defense if payment would violate
9-38 an indorsement to which this section applies and the payment is not
9-39 permitted by this section.
9-40 Sec. 3.207. REACQUISITION. Reacquisition of an instrument
9-41 occurs if it is transferred to a former holder, by negotiation or
9-42 otherwise. A former holder who reacquires the instrument may
9-43 cancel indorsements made after the reacquirer first became a holder
9-44 of the instrument. If the cancellation causes the instrument to be
9-45 payable to the reacquirer or to bearer, the reacquirer may
9-46 negotiate the instrument. An indorser whose indorsement is
9-47 canceled is discharged, and the discharge is effective against any
9-48 subsequent holder.
9-49 SUBCHAPTER C. ENFORCEMENT OF INSTRUMENTS
9-50 Sec. 3.301. PERSON ENTITLED TO ENFORCE INSTRUMENT. "Person
9-51 entitled to enforce" an instrument means (i) the holder of the
9-52 instrument, (ii) a nonholder in possession of the instrument who
9-53 has the rights of a holder, or (iii) a person not in possession of
9-54 the instrument who is entitled to enforce the instrument pursuant
9-55 to Section 3.309 or 3.418(d). A person may be a person entitled to
9-56 enforce the instrument even though the person is not the owner of
9-57 the instrument or is in wrongful possession of the instrument.
9-58 Sec. 3.302. HOLDER IN DUE COURSE. (a) Subject to
9-59 Subsection (c) and Section 3.106(d), "holder in due course" means
9-60 the holder of an instrument if:
9-61 (1) the instrument when issued or negotiated to the
9-62 holder does not bear such apparent evidence of forgery or
9-63 alteration or is not otherwise so irregular or incomplete as to
9-64 call into question its authenticity; and
9-65 (2) the holder took the instrument:
9-66 (A) for value;
9-67 (B) in good faith;
9-68 (C) without notice that the instrument is
9-69 overdue or has been dishonored or that there is an uncured default
9-70 with respect to payment of another instrument issued as part of the
10-1 same series;
10-2 (D) without notice that the instrument contains
10-3 an unauthorized signature or has been altered;
10-4 (E) without notice of any claim to the
10-5 instrument described in Section 3.306; and
10-6 (F) without notice that any party has a defense
10-7 or claim in recoupment described in Section 3.305(a).
10-8 (b) Notice of discharge of a party, other than discharge in
10-9 an insolvency proceeding, is not notice of a defense under
10-10 Subsection (a), but discharge is effective against a person who
10-11 became a holder in due course with notice of the discharge. Public
10-12 filing or recording of a document does not of itself constitute
10-13 notice of a defense, claim in recoupment, or claim to the
10-14 instrument.
10-15 (c) Except to the extent a transferor or predecessor in
10-16 interest has rights as a holder in due course, a person does not
10-17 acquire rights of a holder in due course of an instrument taken:
10-18 (1) by legal process or by purchase in an execution,
10-19 bankruptcy, or creditor's sale or similar proceeding;
10-20 (2) by purchase as part of a bulk transaction not in
10-21 ordinary course of business of the transferor; or
10-22 (3) as the successor in interest to an estate or other
10-23 organization.
10-24 (d) If, under Section 3.303(a)(1), the promise of
10-25 performance that is the consideration for an instrument has been
10-26 partially performed, the holder may assert rights as a holder in
10-27 due course of the instrument only to the fraction of the amount
10-28 payable under the instrument equal to the value of the partial
10-29 performance divided by the value of the promised performance.
10-30 (e) If (i) the person entitled to enforce an instrument has
10-31 only a security interest in the instrument, and (ii) the person
10-32 obliged to pay the instrument has a defense, claim in recoupment,
10-33 or claim to the instrument that may be asserted against the person
10-34 who granted the security interest, the person entitled to enforce
10-35 the instrument may assert rights as a holder in due course only to
10-36 an amount payable under the instrument that, at the time of
10-37 enforcement of the instrument, does not exceed the amount of the
10-38 unpaid obligation secured.
10-39 (f) To be effective, notice must be received at a time and
10-40 in a manner that gives a reasonable opportunity to act on it.
10-41 (g) This section is subject to any law limiting status as a
10-42 holder in due course in particular classes of transactions.
10-43 Sec. 3.303. VALUE AND CONSIDERATION. (a) An instrument is
10-44 issued or transferred for value if:
10-45 (1) the instrument is issued or transferred for a
10-46 promise of performance, to the extent the promise has been
10-47 performed;
10-48 (2) the transferee acquires a security interest or
10-49 other lien in the instrument other than a lien obtained by judicial
10-50 proceeding;
10-51 (3) the instrument is issued or transferred as payment
10-52 of, or as security for, an antecedent claim against any person,
10-53 whether or not the claim is due;
10-54 (4) the instrument is issued or transferred in
10-55 exchange for a negotiable instrument; or
10-56 (5) the instrument is issued or transferred in
10-57 exchange for the incurring of an irrevocable obligation to a third
10-58 party by the person taking the instrument.
10-59 (b) "Consideration" means any consideration sufficient to
10-60 support a simple contract. The drawer or maker of an instrument
10-61 has a defense if the instrument is issued without consideration.
10-62 If an instrument is issued for a promise of performance, the issuer
10-63 has a defense to the extent performance of the promise is due and
10-64 the promise has not been performed. If an instrument is issued for
10-65 value as stated in Subsection (a), the instrument is also issued
10-66 for consideration.
10-67 Sec. 3.304. OVERDUE INSTRUMENT. (a) An instrument payable
10-68 on demand becomes overdue at the earliest of the following times:
10-69 (1) on the day after the day demand for payment is
10-70 duly made;
11-1 (2) if the instrument is a check, 90 days after its
11-2 date; or
11-3 (3) if the instrument is not a check, when the
11-4 instrument has been outstanding for a period of time after its date
11-5 that is unreasonably long under the circumstances of the particular
11-6 case in light of the nature of the instrument and usage of the
11-7 trade.
11-8 (b) With respect to an instrument payable at a definite time
11-9 the following rules apply:
11-10 (1) if the principal is payable in installments and a
11-11 due date has not been accelerated, the instrument becomes overdue
11-12 on default under the instrument for nonpayment of an installment,
11-13 and the instrument remains overdue until the default is cured;
11-14 (2) if the principal is not payable in installments
11-15 and the due date has not been accelerated, the instrument becomes
11-16 overdue on the day after the due date; and
11-17 (3) if a due date with respect to principal has been
11-18 accelerated, the instrument becomes overdue on the day after the
11-19 accelerated due date.
11-20 (c) Unless the due date of principal has been accelerated,
11-21 an instrument does not become overdue if there is default in
11-22 payment of interest but no default in payment of principal.
11-23 Sec. 3.305. DEFENSES AND CLAIMS IN RECOUPMENT. (a) Except
11-24 as provided in Subsection (b), the right to enforce the obligation
11-25 of a party to pay an instrument is subject to the following:
11-26 (1) a defense of the obligor based on:
11-27 (A) infancy of the obligor to the extent it is a
11-28 defense to a simple contract;
11-29 (B) duress, lack of legal capacity, or
11-30 illegality of the transaction that, under other law, nullifies the
11-31 obligation of the obligor;
11-32 (C) fraud that induced the obligor to sign the
11-33 instrument with neither knowledge nor reasonable opportunity to
11-34 learn of its character or its essential terms; or
11-35 (D) discharge of the obligor in insolvency
11-36 proceedings;
11-37 (2) a defense of the obligor stated in another section
11-38 of this chapter or a defense of the obligor that would be available
11-39 if the person entitled to enforce the instrument were enforcing a
11-40 right to payment under a simple contract; and
11-41 (3) a claim in recoupment of the obligor against the
11-42 original payee of the instrument if the claim arose from the
11-43 transaction that gave rise to the instrument; but the claim of the
11-44 obligor may be asserted against a transferee of the instrument only
11-45 to reduce the amount owing on the instrument at the time the action
11-46 is brought.
11-47 (b) The right of a holder in due course to enforce the
11-48 obligation of a party to pay the instrument is subject to defenses
11-49 of the obligor stated in Subsection (a)(1), but is not subject to
11-50 defenses of the obligor stated in Subsection (a)(2) or claims in
11-51 recoupment stated in Subsection (a)(3) against a person other than
11-52 the holder.
11-53 (c) Except as provided in Subsection (d), in an action to
11-54 enforce the obligation of a party to pay the instrument, the
11-55 obligor may not assert against the person entitled to enforce the
11-56 instrument a defense, claim in recoupment, or claim to the
11-57 instrument (Section 3.306) of another person, but the other
11-58 person's claim to the instrument may be asserted by the obligor if
11-59 the other person is joined in the action and personally asserts the
11-60 claim against the person entitled to enforce the instrument. An
11-61 obligor is not obliged to pay the instrument if the person seeking
11-62 enforcement of the instrument does not have rights of a holder in
11-63 due course and the obligor proves that the instrument is a lost or
11-64 stolen instrument.
11-65 (d) In an action to enforce the obligation of an
11-66 accommodation party to pay an instrument, the accommodation party
11-67 may assert against the person entitled to enforce the instrument
11-68 any defense or claim in recoupment under Subsection (a) that the
11-69 accommodated party could assert against the person entitled to
11-70 enforce the instrument, except the defenses of discharge in
12-1 insolvency proceedings, infancy, and lack of legal capacity.
12-2 Sec. 3.306. CLAIMS TO AN INSTRUMENT. A person taking an
12-3 instrument, other than a person having rights of a holder in due
12-4 course, is subject to a claim of a property or possessory right in
12-5 the instrument or its proceeds, including a claim to rescind a
12-6 negotiation and to recover the instrument or its proceeds. A
12-7 person having rights of a holder in due course takes free of the
12-8 claim to the instrument.
12-9 Sec. 3.307. NOTICE OF BREACH OF FIDUCIARY DUTY. (a) In
12-10 this section:
12-11 (1) "Fiduciary" means an agent, trustee, partner,
12-12 corporate officer or director, or other representative owing a
12-13 fiduciary duty with respect to an instrument.
12-14 (2) "Represented person" means the principal,
12-15 beneficiary, partnership, corporation, or other person to whom the
12-16 duty stated in Subdivision (1) is owed.
12-17 (b) If (i) an instrument is taken from a fiduciary for
12-18 payment or collection or for value, (ii) the taker has knowledge of
12-19 the fiduciary status of the fiduciary, and (iii) the represented
12-20 person makes a claim to the instrument or its proceeds on the basis
12-21 that the transaction of the fiduciary is a breach of fiduciary
12-22 duty, the following rules apply:
12-23 (1) notice of breach of fiduciary duty by the
12-24 fiduciary is notice of the claim of the represented person;
12-25 (2) in the case of an instrument payable to the
12-26 represented person or the fiduciary as such, the taker has notice
12-27 of the breach of fiduciary duty if the instrument is:
12-28 (A) taken in payment of or as security for a
12-29 debt known by the taker to be the personal debt of the fiduciary;
12-30 (B) taken in a transaction known by the taker to
12-31 be for the personal benefit of the fiduciary; or
12-32 (C) deposited to an account other than an
12-33 account of the fiduciary, as such, or an account of the represented
12-34 person;
12-35 (3) if an instrument is issued by the represented
12-36 person or the fiduciary as such, and made payable to the fiduciary
12-37 personally, the taker does not have notice of the breach of
12-38 fiduciary duty unless the taker knows of the breach of fiduciary
12-39 duty; and
12-40 (4) if an instrument is issued by the represented
12-41 person or the fiduciary as such, to the taker as payee, the taker
12-42 has notice of the breach of fiduciary duty if the instrument is:
12-43 (A) taken in payment of or as security for a
12-44 debt known by the taker to be the personal debt of the fiduciary;
12-45 (B) taken in a transaction known by the taker to
12-46 be for the personal benefit of the fiduciary; or
12-47 (C) deposited to an account other than an
12-48 account of the fiduciary, as such, or an account of the represented
12-49 person.
12-50 Sec. 3.308. PROOF OF SIGNATURES AND STATUS AS HOLDER IN DUE
12-51 COURSE. (a) In an action with respect to an instrument, the
12-52 authenticity of, and authority to make, each signature on the
12-53 instrument are admitted unless specifically denied in the
12-54 pleadings. If the validity of a signature is denied in the
12-55 pleadings, the burden of establishing validity is on the person
12-56 claiming validity, but the signature is presumed to be authentic
12-57 and authorized unless the action is to enforce the liability of the
12-58 purported signer and the signer is dead or incompetent at the time
12-59 of trial of the issue of validity of the signature. If an action
12-60 to enforce the instrument is brought against a person as the
12-61 undisclosed principal of a person who signed the instrument as a
12-62 party to the instrument, the plaintiff has the burden of
12-63 establishing that the defendant is liable on the instrument as a
12-64 represented person under Section 3.402(a).
12-65 (b) If the validity of signatures is admitted or proved and
12-66 there is compliance with Subsection (a), a plaintiff producing the
12-67 instrument is entitled to payment if the plaintiff proves
12-68 entitlement to enforce the instrument under Section 3.301, unless
12-69 the defendant proves a defense or claim in recoupment. If a
12-70 defense or claim in recoupment is proved, the right to payment of
13-1 the plaintiff is subject to the defense or claim, except to the
13-2 extent the plaintiff proves that the plaintiff has rights of a
13-3 holder in due course that are not subject to the defense or claim.
13-4 Sec. 3.309. ENFORCEMENT OF LOST, DESTROYED, OR STOLEN
13-5 INSTRUMENT. (a) A person who is not in possession of an
13-6 instrument is entitled to enforce the instrument if:
13-7 (1) the person was in possession of the instrument and
13-8 entitled to enforce it when loss of possession occurred;
13-9 (2) the loss of possession was not the result of a
13-10 transfer by the person or a lawful seizure; and
13-11 (3) the person cannot reasonably obtain possession of
13-12 the instrument because the instrument was destroyed, its
13-13 whereabouts cannot be determined, or it is in the wrongful
13-14 possession of an unknown person or a person that cannot be found or
13-15 is not amenable to service of process.
13-16 (b) A person seeking enforcement of an instrument under
13-17 Subsection (a) must prove the terms of the instrument and the
13-18 person's right to enforce the instrument. If that proof is made,
13-19 Section 3.308 applies to the case as if the person seeking
13-20 enforcement had produced the instrument. The court may not enter
13-21 judgment in favor of the person seeking enforcement unless it finds
13-22 that the person required to pay the instrument is adequately
13-23 protected against loss that might occur by reason of a claim by
13-24 another person to enforce the instrument. Adequate protection may
13-25 be provided by any reasonable means.
13-26 Sec. 3.310. EFFECT OF INSTRUMENT ON OBLIGATION FOR WHICH
13-27 TAKEN. (a) Unless otherwise agreed, if a certified check,
13-28 cashier's check, or teller's check is taken for an obligation, the
13-29 obligation is discharged to the same extent discharge would result
13-30 if an amount of money equal to the amount of the instrument were
13-31 taken in payment of the obligation. Discharge of the obligation
13-32 does not affect any liability that the obligor may have as an
13-33 indorser of the instrument.
13-34 (b) Unless otherwise agreed and except as provided in
13-35 Subsection (a), if a note or an uncertified check is taken for an
13-36 obligation, the obligation is suspended to the same extent the
13-37 obligation would be discharged if an amount of money equal to the
13-38 amount of the instrument were taken, and the following rules apply:
13-39 (1) In the case of an uncertified check, suspension of
13-40 the obligation continues until dishonor of the check or until it is
13-41 paid or certified. Payment or certification of the check results
13-42 in discharge of the obligation to the extent of the amount of the
13-43 check.
13-44 (2) In the case of a note, suspension of the
13-45 obligation continues until dishonor of the note or until it is
13-46 paid. Payment of the note results in discharge of the obligation
13-47 to the extent of the payment.
13-48 (3) Except as provided in Subdivision (4), if the
13-49 check or note is dishonored and the obligee of the obligation for
13-50 which the instrument was taken is the person entitled to enforce
13-51 the instrument, the obligee may enforce either the instrument or
13-52 the obligation. In the case of an instrument of a third person
13-53 that is negotiated to the obligee by the obligor, discharge of the
13-54 obligor on the instrument also discharges the obligation.
13-55 (4) If the person entitled to enforce the instrument
13-56 taken for an obligation is a person other than the obligee, the
13-57 obligee may not enforce the obligation to the extent the obligation
13-58 is suspended. If the obligee is the person entitled to enforce the
13-59 instrument but no longer has possession of it because it was lost,
13-60 stolen, or destroyed, the obligation may not be enforced to the
13-61 extent of the amount payable on the instrument, and to that extent
13-62 the obligee's rights against the obligor are limited to enforcement
13-63 of the instrument.
13-64 (c) If an instrument other than one described in Subsection
13-65 (a) or (b) is taken for an obligation, the effect is:
13-66 (1) that stated in Subsection (a) if the instrument is
13-67 one for which a bank is liable as maker or acceptor; or
13-68 (2) that stated in Subsection (b) in any other case.
13-69 Sec. 3.311. ACCORD AND SATISFACTION BY USE OF INSTRUMENT.
13-70 (a) Subsections (b)-(d) apply if a person against whom a claim is
14-1 asserted proves that:
14-2 (1) that person in good faith tendered an instrument
14-3 to the claimant as full satisfaction of the claim;
14-4 (2) the amount of the claim was unliquidated or
14-5 subject to a bona fide dispute; and
14-6 (3) the claimant obtained payment of the instrument.
14-7 (b) Unless Subsection (c) applies, the claim is discharged
14-8 if the person against whom the claim is asserted proves that the
14-9 instrument or an accompanying written communication contained a
14-10 conspicuous statement to the effect that the instrument was
14-11 tendered as full satisfaction of the claim.
14-12 (c) Subject to Subsection (d), a claim is not discharged
14-13 under Subsection (b) if either of the following applies:
14-14 (1) The claimant, if an organization, proves that:
14-15 (A) within a reasonable time before the tender,
14-16 the claimant sent a conspicuous statement to the person against
14-17 whom the claim is asserted that communications concerning disputed
14-18 debts, including an instrument tendered as full satisfaction of a
14-19 debt, are to be sent to a designated person, office, or place; and
14-20 (B) the instrument or accompanying communication
14-21 was not received by that designated person, office, or place.
14-22 (2) The claimant, whether or not an organization,
14-23 proves that within 90 days after payment of the instrument, the
14-24 claimant tendered repayment of the amount of the instrument to the
14-25 person against whom the claim is asserted. This subdivision does
14-26 not apply if the claimant is an organization that sent a statement
14-27 complying with Subdivision (1)(A).
14-28 (d) A claim is discharged if the person against whom the
14-29 claim is asserted proves that within a reasonable time before
14-30 collection of the instrument was initiated, the claimant, or an
14-31 agent of the claimant having direct responsibility with respect to
14-32 the disputed obligation, knew that the instrument was tendered in
14-33 full satisfaction of the claim.
14-34 Sec. 3.312. LOST, DESTROYED, OR STOLEN CASHIER'S CHECK,
14-35 TELLER'S CHECK, OR CERTIFIED CHECK. (a) In this section:
14-36 (1) "Check" means a cashier's check, teller's check,
14-37 or certified check.
14-38 (2) "Claimant" means a person who claims the right to
14-39 receive the amount of a cashier's check, teller's check, or
14-40 certified check that was lost, destroyed, or stolen.
14-41 (3) "Declaration of loss" means a written statement,
14-42 made under penalty of perjury, to the effect that:
14-43 (A) the declarer lost possession of a check;
14-44 (B) the declarer is the drawer or payee of the
14-45 check, in the case of a certified check, or the remitter or payee
14-46 of the check, in the case of a cashier's check or teller's check;
14-47 (C) the loss of possession was not the result of
14-48 a transfer by the declarer or a lawful seizure; and
14-49 (D) the declarer cannot reasonably obtain
14-50 possession of the check because the check was destroyed, its
14-51 whereabouts cannot be determined, or it is in the wrongful
14-52 possession of an unknown person or a person that cannot be found or
14-53 is not amenable to service of process.
14-54 (4) "Obligated bank" means the issuer of a cashier's
14-55 check or teller's check or the acceptor of a certified check.
14-56 (b) A claimant may assert a claim to the amount of a check
14-57 by a communication to the obligated bank describing the check with
14-58 reasonable certainty and requesting payment of the amount of the
14-59 check, if (i) the claimant is the drawer or payee of a certified
14-60 check or the remitter or payee of a cashier's check or teller's
14-61 check, (ii) the communication contains or is accompanied by a
14-62 declaration of loss of the claimant with respect to the check,
14-63 (iii) the communication is received at a time and in a manner
14-64 affording the bank a reasonable time to act on it before the check
14-65 is paid, and (iv) the claimant provides reasonable identification
14-66 if requested by the obligated bank. Delivery of a declaration of
14-67 loss is a warranty of the truth of the statements made in the
14-68 declaration. If a claim is asserted in compliance with this
14-69 subsection, the following rules apply:
14-70 (1) The claim becomes enforceable at the later of (i)
15-1 the time the claim is asserted, or (ii) the 90th day following the
15-2 date of the check, in the case of a cashier's check or teller's
15-3 check, or the 90th day following the date of the acceptance, in the
15-4 case of a certified check.
15-5 (2) Until the claim becomes enforceable, it has no
15-6 legal effect and the obligated bank may pay the check or, in the
15-7 case of a teller's check, may permit the drawee to pay the check.
15-8 Payment to a person entitled to enforce the check discharges all
15-9 liability of the obligated bank with respect to the check.
15-10 (3) If the claim becomes enforceable before the check
15-11 is presented for payment, the obligated bank is not obliged to pay
15-12 the check.
15-13 (4) When the claim becomes enforceable, the obligated
15-14 bank becomes obliged to pay the amount of the check to the claimant
15-15 if payment of the check has not been made to a person entitled to
15-16 enforce the check. Subject to Section 4.302(a)(1), payment to the
15-17 claimant discharges all liability of the obligated bank with
15-18 respect to the check.
15-19 (c) If the obligated bank pays the amount of a check to a
15-20 claimant under Subsection (b)(4) and the check is presented for
15-21 payment by a person having rights of a holder in due course, the
15-22 claimant is obliged to:
15-23 (1) refund the payment to the obligated bank if the
15-24 check is paid; or
15-25 (2) pay the amount of the check to the person having
15-26 rights of a holder in due course if the check is dishonored.
15-27 (d) If a claimant has the right to assert a claim under
15-28 Subsection (b) and is also a person who is entitled to enforce a
15-29 cashier's check, teller's check, or certified check that is lost,
15-30 destroyed, or stolen, the claimant may assert rights with respect
15-31 to the check under either this section or Section 3.309.
15-32 SUBCHAPTER D. LIABILITY OF PARTIES
15-33 Sec. 3.401. SIGNATURE. (a) A person is not liable on an
15-34 instrument unless the person:
15-35 (1) signed the instrument; or
15-36 (2) is represented by an agent or representative who
15-37 signed the instrument and the signature is binding on the
15-38 represented person under Section 3.402.
15-39 (b) A signature may be made (i) manually or by means of a
15-40 device or machine, and (ii) by the use of any name, including a
15-41 trade or assumed name, or by a word, mark, or symbol executed or
15-42 adopted by a person with present intention to authenticate a
15-43 writing.
15-44 Sec. 3.402. SIGNATURE BY REPRESENTATIVE. (a) If a person
15-45 acting, or purporting to act, as a representative signs an
15-46 instrument by signing either the name of the represented person or
15-47 the name of the signer, the represented person is bound by the
15-48 signature to the same extent the represented person would be bound
15-49 if the signature were on a simple contract. If the represented
15-50 person is bound, the signature of the representative is the
15-51 "authorized signature of the represented person" and the
15-52 represented person is liable on the instrument, whether or not
15-53 identified in the instrument.
15-54 (b) If a representative signs the name of the representative
15-55 to an instrument and the signature is an authorized signature of
15-56 the represented person, the following rules apply:
15-57 (1) If the form of the signature shows unambiguously
15-58 that the signature is made on behalf of the represented person who
15-59 is identified in the instrument, the representative is not liable
15-60 on the instrument.
15-61 (2) Subject to Subsection (c), the representative is
15-62 liable on the instrument to a holder in due course that took the
15-63 instrument without notice that the representative was not intended
15-64 to be liable on the instrument if (i) the form of the signature
15-65 does not show unambiguously that the signature is made in a
15-66 representative capacity, or (ii) the represented person is not
15-67 identified in the instrument. With respect to any other person,
15-68 the representative is liable on the instrument unless the
15-69 representative proves that the original parties did not intend the
15-70 representative to be liable on the instrument.
16-1 (c) If a representative signs the name of the representative
16-2 as drawer of a check without indication of the representative
16-3 status and the check is payable from an account of the represented
16-4 person who is identified on the check, the signer is not liable on
16-5 the check if the signature is an authorized signature of the
16-6 represented person.
16-7 Sec. 3.403. UNAUTHORIZED SIGNATURE. (a) Unless otherwise
16-8 provided in this chapter or Chapter 4, an unauthorized signature is
16-9 ineffective except as the signature of the unauthorized signer in
16-10 favor of a person who in good faith pays the instrument or takes it
16-11 for value. An unauthorized signature may be ratified for all
16-12 purposes of this chapter.
16-13 (b) If the signature of more than one person is required to
16-14 constitute the authorized signature of an organization, the
16-15 signature of the organization is unauthorized if one of the
16-16 required signatures is lacking.
16-17 (c) The civil or criminal liability of a person who makes an
16-18 unauthorized signature is not affected by any provision of this
16-19 chapter that makes the unauthorized signature effective for the
16-20 purposes of this chapter.
16-21 Sec. 3.404. IMPOSTORS; FICTITIOUS PAYEES. (a) If an
16-22 impostor, by use of the mails or otherwise, induces the issuer of
16-23 an instrument to issue the instrument to the impostor, or to a
16-24 person acting in concert with the impostor, by impersonating the
16-25 payee of the instrument or a person authorized to act for the
16-26 payee, an indorsement of the instrument by any person in the name
16-27 of the payee is effective as the indorsement of the payee in favor
16-28 of a person who, in good faith, pays the instrument or takes it for
16-29 value or for collection.
16-30 (b) If (i) a person whose intent determines to whom an
16-31 instrument is payable (Section 3.110(a) or (b)) does not intend the
16-32 person identified as payee to have any interest in the instrument,
16-33 or (ii) the person identified as payee of an instrument is a
16-34 fictitious person, the following rules apply until the instrument
16-35 is negotiated by special indorsement:
16-36 (1) Any person in possession of the instrument is its
16-37 holder.
16-38 (2) An indorsement by any person in the name of the
16-39 payee stated in the instrument is effective as the indorsement of
16-40 the payee in favor of a person who, in good faith, pays the
16-41 instrument or takes it for value or for collection.
16-42 (c) Under Subsection (a) or (b), an indorsement is made in
16-43 the name of a payee if:
16-44 (1) it is made in a name substantially similar to that
16-45 of the payee; or
16-46 (2) the instrument, whether or not indorsed, is
16-47 deposited in a depositary bank to an account in a name
16-48 substantially similar to that of the payee.
16-49 (d) With respect to an instrument to which Subsection (a) or
16-50 (b) applies, if a person paying the instrument or taking it for
16-51 value or for collection fails to exercise ordinary care in paying
16-52 or taking the instrument and that failure contributes to loss
16-53 resulting from payment of the instrument, the person bearing the
16-54 loss may recover from the person failing to exercise ordinary care
16-55 to the extent the failure to exercise ordinary care contributed to
16-56 the loss.
16-57 Sec. 3.405. EMPLOYER'S RESPONSIBILITY FOR FRAUDULENT
16-58 INDORSEMENT BY EMPLOYEE. (a) In this section:
16-59 (1) "Employee" includes an independent contractor and
16-60 employee of an independent contractor retained by the employer.
16-61 (2) "Fraudulent indorsement" means:
16-62 (A) in the case of an instrument payable to the
16-63 employer, a forged indorsement purporting to be that of the
16-64 employer; or
16-65 (B) in the case of an instrument with respect to
16-66 which the employer is the issuer, a forged indorsement purporting
16-67 to be that of the person identified as payee.
16-68 (3) "Responsibility" with respect to instruments means
16-69 authority (i) to sign or indorse instruments on behalf of the
16-70 employer, (ii) to process instruments received by the employer for
17-1 bookkeeping purposes, for deposit to an account, or for other
17-2 disposition, (iii) to prepare or process instruments for issue in
17-3 the name of the employer, (iv) to supply information determining
17-4 the names or addresses of payees of instruments to be issued in the
17-5 name of the employer, (v) to control the disposition of instruments
17-6 to be issued in the name of the employer, or (vi) to act otherwise
17-7 with respect to instruments in a responsible capacity.
17-8 "Responsibility" does not include authority that merely allows an
17-9 employee to have access to instruments or blank or incomplete
17-10 instrument forms that are being stored or transported or are part
17-11 of incoming or outgoing mail, or similar access.
17-12 (b) For the purpose of determining the rights and
17-13 liabilities of a person who, in good faith, pays an instrument or
17-14 takes it for value or for collection, if an employer entrusted an
17-15 employee with responsibility with respect to the instrument and the
17-16 employee or a person acting in concert with the employee makes a
17-17 fraudulent indorsement of the instrument, the indorsement is
17-18 effective as the indorsement of the person to whom the instrument
17-19 is payable if it is made in the name of that person. If the person
17-20 paying the instrument or taking it for value or for collection
17-21 fails to exercise ordinary care in paying or taking the instrument
17-22 and that failure contributes to loss resulting from the fraud, the
17-23 person bearing the loss may recover from the person failing to
17-24 exercise ordinary care to the extent the failure to exercise
17-25 ordinary care contributed to the loss.
17-26 (c) Under Subsection (b), an indorsement is made in the name
17-27 of the person to whom an instrument is payable if:
17-28 (1) it is made in a name substantially similar to the
17-29 name of that person; or
17-30 (2) the instrument, whether or not indorsed, is
17-31 deposited in a depositary bank to an account in a name
17-32 substantially similar to the name of that person.
17-33 Sec. 3.406. NEGLIGENCE CONTRIBUTING TO FORGED SIGNATURE OR
17-34 ALTERATION OF INSTRUMENT. (a) A person whose failure to exercise
17-35 ordinary care substantially contributes to an alteration of an
17-36 instrument or to the making of a forged signature on an instrument
17-37 is precluded from asserting the alteration or the forgery against a
17-38 person who, in good faith, pays the instrument or takes it for
17-39 value or for collection.
17-40 (b) Under Subsection (a), if the person asserting the
17-41 preclusion fails to exercise ordinary care in paying or taking the
17-42 instrument and that failure contributes to loss, the loss is
17-43 allocated between the person precluded and the person asserting the
17-44 preclusion according to the extent to which the failure of each to
17-45 exercise ordinary care contributed to the loss.
17-46 (c) Under Subsection (a), the burden of proving failure to
17-47 exercise ordinary care is on the person asserting the preclusion.
17-48 Under Subsection (b), the burden of proving failure to exercise
17-49 ordinary care is on the person precluded.
17-50 Sec. 3.407. ALTERATION. (a) "Alteration" means:
17-51 (1) an unauthorized change in an instrument that
17-52 purports to modify in any respect the obligation of a party; or
17-53 (2) an unauthorized addition of words or numbers or
17-54 other change to an incomplete instrument relating to the obligation
17-55 of a party.
17-56 (b) Except as provided in Subsection (c), an alteration
17-57 fraudulently made discharges a party whose obligation is affected
17-58 by the alteration unless that party assents or is precluded from
17-59 asserting the alteration. No other alteration discharges a party,
17-60 and the instrument may be enforced according to its original terms.
17-61 (c) A payor bank or drawee paying a fraudulently altered
17-62 instrument or a person taking it for value, in good faith and
17-63 without notice of the alteration, may enforce rights with respect
17-64 to the instrument:
17-65 (1) according to its original terms; or
17-66 (2) in the case of an incomplete instrument altered by
17-67 unauthorized completion, according to its terms as completed.
17-68 Sec. 3.408. DRAWEE NOT LIABLE ON UNACCEPTED DRAFT. A check
17-69 or other draft does not of itself operate as an assignment of funds
17-70 in the hands of the drawee available for its payment, and the
18-1 drawee is not liable on the instrument until the drawee accepts it.
18-2 Sec. 3.409. ACCEPTANCE OF DRAFT; CERTIFIED CHECK. (a)
18-3 "Acceptance" means the drawee's signed agreement to pay a draft as
18-4 presented. It must be written on the draft and may consist of the
18-5 drawee's signature alone. Acceptance may be made at any time and
18-6 becomes effective when notification pursuant to instructions is
18-7 given or the accepted draft is delivered for the purpose of giving
18-8 rights on the acceptance to any person.
18-9 (b) A draft may be accepted although it has not been signed
18-10 by the drawer, is otherwise incomplete, is overdue, or has been
18-11 dishonored.
18-12 (c) If a draft is payable at a fixed period after sight and
18-13 the acceptor fails to date the acceptance, the holder may complete
18-14 the acceptance by supplying a date in good faith.
18-15 (d) "Certified check" means a check accepted by the bank on
18-16 which it is drawn. Acceptance may be made as stated in Subsection
18-17 (a) or by a writing on the check that indicates that the check is
18-18 certified. The drawee of a check has no obligation to certify the
18-19 check, and refusal to certify is not dishonor of the check.
18-20 Sec. 3.410. ACCEPTANCE VARYING DRAFT. (a) If the terms of
18-21 a drawee's acceptance vary from the terms of the draft as
18-22 presented, the holder may refuse the acceptance and treat the draft
18-23 as dishonored. In that case, the drawee may cancel the acceptance.
18-24 (b) The terms of a draft are not varied by an acceptance to
18-25 pay at a particular bank or place in the United States, unless the
18-26 acceptance states that the draft is to be paid only at that bank or
18-27 place.
18-28 (c) If the holder assents to an acceptance varying the terms
18-29 of a draft, the obligation of each drawer and indorser that does
18-30 not expressly assent to the acceptance is discharged.
18-31 Sec. 3.411. REFUSAL TO PAY CASHIER'S CHECKS, TELLER'S
18-32 CHECKS, AND CERTIFIED CHECKS. (a) In this section, "obligated
18-33 bank" means the acceptor of a certified check or the issuer of a
18-34 cashier's check or teller's check bought from the issuer.
18-35 (b) If the obligated bank wrongfully (i) refuses to pay a
18-36 cashier's check or certified check, (ii) stops payment of a
18-37 teller's check, or (iii) refuses to pay a dishonored teller's
18-38 check, the person asserting the right to enforce the check is
18-39 entitled to compensation for expenses and loss of interest
18-40 resulting from the nonpayment and may recover consequential damages
18-41 if the obligated bank refuses to pay after receiving notice of
18-42 particular circumstances giving rise to the damages.
18-43 (c) Expenses or consequential damages under Subsection (b)
18-44 are not recoverable if the refusal of the obligated bank to pay
18-45 occurs because:
18-46 (1) the obligated bank suspends payments;
18-47 (2) the obligated bank asserts a claim or defense of
18-48 the bank that it has reasonable grounds to believe is available
18-49 against the person entitled to enforce the instrument;
18-50 (3) the obligated bank has a reasonable doubt whether
18-51 the person demanding payment is the person entitled to enforce the
18-52 instrument; or
18-53 (4) payment is prohibited by law.
18-54 Sec. 3.412. OBLIGATION OF ISSUER OF NOTE OR CASHIER'S CHECK.
18-55 The issuer of a note or cashier's check or other draft drawn on the
18-56 drawer is obliged to pay the instrument (i) according to its terms
18-57 at the time it was issued or, if not issued, at the time it first
18-58 came into possession of a holder, or (ii) if the issuer signed an
18-59 incomplete instrument, according to its terms when completed, to
18-60 the extent stated in Sections 3.115 and 3.407. The obligation is
18-61 owed to a person entitled to enforce the instrument or to an
18-62 indorser who paid the instrument under Section 3.415.
18-63 Sec. 3.413. OBLIGATION OF ACCEPTOR. (a) The acceptor of a
18-64 draft is obliged to pay the draft (i) according to its terms at the
18-65 time it was accepted, even though the acceptance states that the
18-66 draft is payable "as originally drawn" or equivalent terms, (ii) if
18-67 the acceptance varies the terms of the draft, according to the
18-68 terms of the draft as varied, or (iii) if the acceptance is of a
18-69 draft that is an incomplete instrument, according to its terms when
18-70 completed, to the extent stated in Sections 3.115 and 3.407. The
19-1 obligation is owed to a person entitled to enforce the draft or to
19-2 the drawer or an indorser who paid the draft under Section 3.414 or
19-3 3.415.
19-4 (b) If the certification of a check or other acceptance of a
19-5 draft states the amount certified or accepted, the obligation of
19-6 the acceptor is that amount. The obligation of the acceptor is the
19-7 amount of the instrument at the time it was taken by the holder in
19-8 due course if:
19-9 (1) the certification or acceptance does not state an
19-10 amount;
19-11 (2) the amount of the instrument is subsequently
19-12 raised; and
19-13 (3) the instrument is then negotiated to a holder in
19-14 due course.
19-15 Sec. 3.414. OBLIGATION OF DRAWER. (a) This section does
19-16 not apply to cashier's checks or other drafts drawn on the drawer.
19-17 (b) If an unaccepted draft is dishonored, the drawer is
19-18 obliged to pay the draft (i) according to its terms at the time it
19-19 was issued or, if not issued, at the time it first came into
19-20 possession of a holder, or (ii) if the drawer signed an incomplete
19-21 instrument, according to its terms when completed, to the extent
19-22 stated in Sections 3.115 and 3.407. The obligation is owed to a
19-23 person entitled to enforce the draft or to an indorser who paid the
19-24 draft under Section 3.415.
19-25 (c) If a draft is accepted by a bank, the drawer is
19-26 discharged, regardless of when or by whom acceptance was obtained.
19-27 (d) If a draft is accepted and the acceptor is not a bank,
19-28 the obligation of the drawer to pay the draft if the draft is
19-29 dishonored by the acceptor is the same as the obligation of an
19-30 indorser under Sections 3.415(a) and (c).
19-31 (e) If a draft states that it is drawn "without recourse" or
19-32 otherwise disclaims liability of the drawer to pay the draft, the
19-33 drawer is not liable under Subsection (b) to pay the draft if the
19-34 draft is not a check. A disclaimer of the liability stated in
19-35 Subsection (b) is not effective if the draft is a check.
19-36 (f) If (i) a check is not presented for payment or given to
19-37 a depositary bank for collection within 30 days after its date,
19-38 (ii) the drawee suspends payments after expiration of the 30-day
19-39 period without paying the check, and (iii) because of the
19-40 suspension of payments, the drawer is deprived of funds maintained
19-41 with the drawee to cover payment of the check, the drawer to the
19-42 extent deprived of funds may discharge its obligation to pay the
19-43 check by assigning to the person entitled to enforce the check the
19-44 rights of the drawer against the drawee with respect to the funds.
19-45 Sec. 3.415. OBLIGATION OF INDORSER. (a) Subject to
19-46 Subsections (b), (c), (d), and (e) and to Section 3.419(d), if an
19-47 instrument is dishonored, an indorser is obliged to pay the amount
19-48 due on the instrument (i) according to the terms of the instrument
19-49 at the time it was indorsed, or (ii) if the indorser indorsed an
19-50 incomplete instrument, according to its terms when completed, to
19-51 the extent stated in Sections 3.115 and 3.407. The obligation of
19-52 the indorser is owed to a person entitled to enforce the instrument
19-53 or to a subsequent indorser who paid the instrument under this
19-54 section.
19-55 (b) If an indorsement states that it is made "without
19-56 recourse" or otherwise disclaims liability of the indorser, the
19-57 indorser is not liable under Subsection (a) to pay the instrument.
19-58 (c) If notice of dishonor of an instrument is required by
19-59 Section 3.503 and notice of dishonor complying with that section is
19-60 not given to an indorser, the liability of the indorser under
19-61 Subsection (a) is discharged.
19-62 (d) If a draft is accepted by a bank after an indorsement is
19-63 made, the liability of the indorser under Subsection (a) is
19-64 discharged.
19-65 (e) If an indorser of a check is liable under Subsection (a)
19-66 and the check is not presented for payment, or given to a
19-67 depositary bank for collection, within 30 days after the day the
19-68 indorsement was made, the liability of the indorser under
19-69 Subsection (a) is discharged.
19-70 Sec. 3.416. TRANSFER WARRANTIES. (a) A person who
20-1 transfers an instrument for consideration warrants to the
20-2 transferee and, if the transfer is by indorsement, to any
20-3 subsequent transferee that:
20-4 (1) the warrantor is a person entitled to enforce the
20-5 instrument;
20-6 (2) all signatures on the instrument are authentic and
20-7 authorized;
20-8 (3) the instrument has not been altered;
20-9 (4) the instrument is not subject to a defense or
20-10 claim in recoupment of any party that can be asserted against the
20-11 warrantor; and
20-12 (5) the warrantor has no knowledge of any insolvency
20-13 proceeding commenced with respect to the maker or acceptor or, in
20-14 the case of an unaccepted draft, the drawer.
20-15 (b) A person to whom the warranties under Subsection (a) are
20-16 made and who took the instrument in good faith may recover from the
20-17 warrantor as damages for breach of warranty an amount equal to the
20-18 loss suffered as a result of the breach, but not more than the
20-19 amount of the instrument plus expenses and loss of interest
20-20 incurred as a result of the breach.
20-21 (c) The warranties stated in Subsection (a) cannot be
20-22 disclaimed with respect to checks. Unless notice of a claim for
20-23 breach of warranty is given to the warrantor within 30 days after
20-24 the claimant has reason to know of the breach and the identity of
20-25 the warrantor, the liability of the warrantor under Subsection (b)
20-26 is discharged to the extent of any loss caused by the delay in
20-27 giving notice of the claim.
20-28 (d) A cause of action for breach of warranty under this
20-29 section accrues when the claimant has reason to know of the breach.
20-30 Sec. 3.417. PRESENTMENT WARRANTIES. (a) If an unaccepted
20-31 draft is presented to the drawee for payment or acceptance and the
20-32 drawee pays or accepts the draft, (i) the person obtaining payment
20-33 or acceptance, at the time of presentment, and (ii) a previous
20-34 transferor of the draft, at the time of transfer, warrant to the
20-35 drawee making payment or accepting the draft in good faith that:
20-36 (1) the warrantor is, or was, at the time the
20-37 warrantor transferred the draft, a person entitled to enforce the
20-38 draft or authorized to obtain payment or acceptance of the draft on
20-39 behalf of a person entitled to enforce the draft;
20-40 (2) the draft has not been altered; and
20-41 (3) the warrantor has no knowledge that the signature
20-42 of the drawer of the draft is unauthorized.
20-43 (b) A drawee making payment may recover from any warrantor
20-44 damages for breach of warranty equal to the amount paid by the
20-45 drawee less the amount the drawee received or is entitled to
20-46 receive from the drawer because of the payment. In addition, the
20-47 drawee is entitled to compensation for expenses and loss of
20-48 interest resulting from the breach. The right of the drawee to
20-49 recover damages under this subsection is not affected by any
20-50 failure of the drawee to exercise ordinary care in making payment.
20-51 If the drawee accepts the draft, breach of warranty is a defense to
20-52 the obligation of the acceptor. If the acceptor makes payment with
20-53 respect to the draft, the acceptor is entitled to recover from any
20-54 warrantor for breach of warranty the amounts stated in this
20-55 subsection.
20-56 (c) If a drawee asserts a claim for breach of warranty under
20-57 Subsection (a) based on an unauthorized indorsement of the draft or
20-58 an alteration of the draft, the warrantor may defend by proving
20-59 that the indorsement is effective under Section 3.404 or 3.405 or
20-60 the drawer is precluded under Section 3.406 or 4.406 from asserting
20-61 against the drawee the unauthorized indorsement or alteration.
20-62 (d) If (i) a dishonored draft is presented for payment to
20-63 the drawer or an indorser, or (ii) any other instrument is
20-64 presented for payment to a party obliged to pay the instrument, and
20-65 (iii) payment is received, the following rules apply:
20-66 (1) The person obtaining payment and a prior
20-67 transferor of the instrument warrant to the person making payment
20-68 in good faith that the warrantor is, or was, at the time the
20-69 warrantor transferred the instrument, a person entitled to enforce
20-70 the instrument or authorized to obtain payment on behalf of a
21-1 person entitled to enforce the instrument.
21-2 (2) The person making payment may recover from any
21-3 warrantor for breach of warranty an amount equal to the amount paid
21-4 plus expenses and loss of interest resulting from the breach.
21-5 (e) The warranties stated in Subsections (a) and (d) cannot
21-6 be disclaimed with respect to checks. Unless notice of a claim for
21-7 breach of warranty is given to the warrantor within 30 days after
21-8 the claimant has reason to know of the breach and the identity of
21-9 the warrantor, the liability of the warrantor under Subsection (b)
21-10 or (d) is discharged to the extent of any loss caused by the delay
21-11 in giving notice of the claim.
21-12 (f) A cause of action for breach of warranty under this
21-13 section accrues when the claimant has reason to know of the breach.
21-14 Sec. 3.418. PAYMENT OR ACCEPTANCE BY MISTAKE. (a) Except
21-15 as provided in Subsection (c), if the drawee of a draft pays or
21-16 accepts the draft and the drawee acted on the mistaken belief that
21-17 (i) payment of the draft had not been stopped pursuant to Section
21-18 4.403, or (ii) the signature of the drawer of the draft was
21-19 authorized, the drawee may recover the amount of the draft from the
21-20 person to whom or for whose benefit payment was made or, in the
21-21 case of acceptance, may revoke the acceptance. Rights of the
21-22 drawee under this subsection are not affected by failure of the
21-23 drawee to exercise ordinary care in paying or accepting the draft.
21-24 (b) Except as provided in Subsection (c), if an instrument
21-25 has been paid or accepted by mistake and the case is not covered by
21-26 Subsection (a), the person paying or accepting may, to the extent
21-27 permitted by the law governing mistake and restitution:
21-28 (1) recover the payment from the person to whom or for
21-29 whose benefit payment was made; or
21-30 (2) in the case of acceptance, revoke the acceptance.
21-31 (c) The remedies provided by Subsection (a) or (b) may not
21-32 be asserted against a person who took the instrument in good faith
21-33 and for value or who in good faith changed position in reliance on
21-34 the payment or acceptance. This subsection does not limit remedies
21-35 provided by Section 3.417 or 4.407.
21-36 (d) Notwithstanding Section 4.215, if an instrument is paid
21-37 or accepted by mistake and the payor or acceptor recovers payment
21-38 or revokes acceptance under Subsection (a) or (b), the instrument
21-39 is deemed not to have been paid or accepted and is treated as
21-40 dishonored, and the person from whom payment is recovered has
21-41 rights as a person entitled to enforce the dishonored instrument.
21-42 Sec. 3.419. INSTRUMENTS SIGNED FOR ACCOMMODATION. (a) If
21-43 an instrument is issued for value given for the benefit of a party
21-44 to the instrument ("accommodated party") and another party to the
21-45 instrument ("accommodation party") signs the instrument for the
21-46 purpose of incurring liability on the instrument without being a
21-47 direct beneficiary of the value given for the instrument, the
21-48 instrument is signed by the accommodation party "for
21-49 accommodation."
21-50 (b) An accommodation party may sign the instrument as maker,
21-51 drawer, acceptor, or indorser. Subject to Subsection (d), the
21-52 accommodation party is obliged to pay the instrument in the
21-53 capacity in which the accommodation party signs. The obligation of
21-54 an accommodation party may be enforced notwithstanding any statute
21-55 of frauds and whether or not the accommodation party receives
21-56 consideration for the accommodation.
21-57 (c) A person signing an instrument is presumed to be an
21-58 accommodation party and there is notice that the instrument is
21-59 signed for accommodation if the signature is an anomalous
21-60 indorsement or is accompanied by words indicating that the signer
21-61 is acting as surety or guarantor with respect to the obligation of
21-62 another party to the instrument. Except as provided in Section
21-63 3.605, the obligation of an accommodation party to pay the
21-64 instrument is not affected by the fact that the person enforcing
21-65 the obligation had notice when the instrument was taken by that
21-66 person that the accommodation party signed the instrument for
21-67 accommodation.
21-68 (d) If the signature of a party to an instrument is
21-69 accompanied by words indicating unambiguously that the party is
21-70 guaranteeing collection rather than payment of the obligation of
22-1 another party to the instrument, the signer is obliged to pay the
22-2 amount due on the instrument to a person entitled to enforce the
22-3 instrument only if:
22-4 (1) execution of judgment against the other party has
22-5 been returned unsatisfied;
22-6 (2) the other party is insolvent or in an insolvency
22-7 proceeding;
22-8 (3) the other party cannot be served with process; or
22-9 (4) it is otherwise apparent that payment cannot be
22-10 obtained from the other party.
22-11 (e) An accommodation party who pays the instrument is
22-12 entitled to reimbursement from the accommodated party and is
22-13 entitled to enforce the instrument against the accommodated party.
22-14 An accommodated party who pays the instrument has no right of
22-15 recourse against, and is not entitled to contribution from, an
22-16 accommodation party.
22-17 Sec. 3.420. CONVERSION OF INSTRUMENT. (a) The law
22-18 applicable to conversion of personal property applies to
22-19 instruments. An instrument is also converted if it is taken by
22-20 transfer, other than a negotiation, from a person not entitled to
22-21 enforce the instrument or a bank makes or obtains payment with
22-22 respect to the instrument for a person not entitled to enforce the
22-23 instrument or receive payment. An action for conversion of an
22-24 instrument may not be brought by:
22-25 (1) the issuer or acceptor of the instrument; or
22-26 (2) a payee or indorsee who did not receive delivery
22-27 of the instrument either directly or through delivery to an agent
22-28 or a co-payee.
22-29 (b) In an action under Subsection (a), the measure of
22-30 liability is presumed to be the amount payable on the instrument,
22-31 but recovery may not exceed the amount of the plaintiff's interest
22-32 in the instrument.
22-33 (c) A representative, other than a depositary bank, who has
22-34 in good faith dealt with an instrument or its proceeds on behalf of
22-35 one who was not the person entitled to enforce the instrument is
22-36 not liable in conversion to that person beyond the amount of any
22-37 proceeds that it has not paid out.
22-38 SUBCHAPTER E. DISHONOR
22-39 Sec. 3.501. PRESENTMENT. (a) "Presentment" means a demand
22-40 made by or on behalf of a person entitled to enforce an instrument
22-41 to:
22-42 (1) pay the instrument made to the drawee or a party
22-43 obliged to pay the instrument or, in the case of a note or accepted
22-44 draft payable at a bank, to the bank; or
22-45 (2) accept a draft made to the drawee.
22-46 (b) The following rules are subject to Chapter 4, agreement
22-47 of the parties, and clearing-house rules and the like:
22-48 (1) Presentment may be made at the place of payment of
22-49 the instrument and must be made at the place of payment if the
22-50 instrument is payable at a bank in the United States. Presentment
22-51 may be made by any commercially reasonable means, including an
22-52 oral, written, or electronic communication. Presentment is
22-53 effective:
22-54 (A) when the demand for payment or acceptance is
22-55 received by the person to whom presentment is made; and
22-56 (B) if made to any one of two or more makers,
22-57 acceptors, drawees, or other payors.
22-58 (2) On demand of the person to whom presentment is
22-59 made, the person making presentment must:
22-60 (A) exhibit the instrument;
22-61 (B) give reasonable identification and, if
22-62 presentment is made on behalf of another person, reasonable
22-63 evidence of authority to do so; and
22-64 (C) sign a receipt on the instrument for any
22-65 payment made or surrender the instrument if full payment is made.
22-66 (3) Without dishonoring the instrument, the party to
22-67 whom presentment is made may:
22-68 (A) return the instrument for lack of a
22-69 necessary indorsement; or
22-70 (B) refuse payment or acceptance for failure of
23-1 the presentment to comply with the terms of the instrument, an
23-2 agreement of the parties, or other applicable law or rule.
23-3 (4) The party to whom presentment is made may treat
23-4 presentment as occurring on the next business day after the day of
23-5 presentment if the party to whom presentment is made has
23-6 established a cutoff hour not earlier than 2 p.m. for the receipt
23-7 and processing of instruments presented for payment or acceptance
23-8 and presentment is made after the cutoff hour.
23-9 Sec. 3.502. DISHONOR. (a) Dishonor of a note is governed
23-10 by the following rules:
23-11 (1) If the note is payable on demand, the note is
23-12 dishonored if presentment is duly made to the maker and the note is
23-13 not paid on the day of presentment.
23-14 (2) If the note is not payable on demand and is
23-15 payable at or through a bank or the terms of the note require
23-16 presentment, the note is dishonored if presentment is duly made and
23-17 the note is not paid on the day it becomes payable or the day of
23-18 presentment, whichever is later.
23-19 (3) If the note is not payable on demand and
23-20 Subdivision (2) does not apply, the note is dishonored if it is not
23-21 paid on the day it becomes payable.
23-22 (b) Dishonor of an unaccepted draft other than a documentary
23-23 draft is governed by the following rules:
23-24 (1) If a check is duly presented for payment to the
23-25 payor bank otherwise than for immediate payment over the counter,
23-26 the check is dishonored if the payor bank makes timely return of
23-27 the check or sends timely notice of dishonor or nonpayment under
23-28 Section 4.301 or 4.302, or becomes accountable for the amount of
23-29 the check under Section 4.302.
23-30 (2) If a draft is payable on demand and Subdivision
23-31 (1) does not apply, the draft is dishonored if presentment for
23-32 payment is duly made to the drawee and the draft is not paid on the
23-33 day of presentment.
23-34 (3) If a draft is payable on a date stated in the
23-35 draft, the draft is dishonored if:
23-36 (A) presentment for payment is duly made to the
23-37 drawee and payment is not made on the day the draft becomes payable
23-38 or the day of presentment, whichever is later; or
23-39 (B) presentment for acceptance is duly made
23-40 before the day the draft becomes payable and the draft is not
23-41 accepted on the day of presentment.
23-42 (4) If a draft is payable on elapse of a period of
23-43 time after sight or acceptance, the draft is dishonored if
23-44 presentment for acceptance is duly made and the draft is not
23-45 accepted on the day of presentment.
23-46 (c) Dishonor of an unaccepted documentary draft occurs
23-47 according to the rules stated in Subsections (b)(2), (3), and (4),
23-48 except that payment or acceptance may be delayed without dishonor
23-49 until not later than the close of the third business day of the
23-50 drawee following the day on which payment or acceptance is required
23-51 by those subdivisions.
23-52 (d) Dishonor of an accepted draft is governed by the
23-53 following rules:
23-54 (1) If the draft is payable on demand, the draft is
23-55 dishonored if presentment for payment is duly made to the acceptor
23-56 and the draft is not paid on the day of presentment.
23-57 (2) If the draft is not payable on demand, the draft
23-58 is dishonored if presentment for payment is duly made to the
23-59 acceptor and payment is not made on the day it becomes payable or
23-60 the day of presentment, whichever is later.
23-61 (e) In any case in which presentment is otherwise required
23-62 for dishonor under this section and presentment is excused under
23-63 Section 3.504, dishonor occurs without presentment if the
23-64 instrument is not duly accepted or paid.
23-65 (f) If a draft is dishonored because timely acceptance of
23-66 the draft was not made and the person entitled to demand acceptance
23-67 consents to a late acceptance, from the time of acceptance the
23-68 draft is treated as never having been dishonored.
23-69 Sec. 3.503. NOTICE OF DISHONOR. (a) The obligation of an
23-70 indorser stated in Section 3.415(a) and the obligation of a drawer
24-1 stated in Section 3.414(d) may not be enforced unless:
24-2 (1) the indorser or drawer is given notice of dishonor
24-3 of the instrument complying with this section; or
24-4 (2) notice of dishonor is excused under Section
24-5 3.504(b).
24-6 (b) Notice of dishonor may be given by any person; may be
24-7 given by any commercially reasonable means, including an oral,
24-8 written, or electronic communication; and is sufficient if it
24-9 reasonably identifies the instrument and indicates that the
24-10 instrument has been dishonored or has not been paid or accepted.
24-11 Return of an instrument given to a bank for collection is
24-12 sufficient notice of dishonor.
24-13 (c) Subject to Section 3.504(c), with respect to an
24-14 instrument taken for collection by a collecting bank, notice of
24-15 dishonor must be given (i) by the bank before midnight of the next
24-16 banking day following the banking day on which the bank receives
24-17 notice of dishonor of the instrument, or (ii) by any other person
24-18 within 30 days following the day on which the person receives
24-19 notice of dishonor. With respect to any other instrument, notice
24-20 of dishonor must be given within 30 days following the day on which
24-21 dishonor occurs.
24-22 Sec. 3.504. EXCUSED PRESENTMENT AND NOTICE OF DISHONOR. (a)
24-23 Presentment for payment or acceptance of an instrument is excused
24-24 if:
24-25 (1) the person entitled to present the instrument
24-26 cannot with reasonable diligence make presentment;
24-27 (2) the maker or acceptor has repudiated an obligation
24-28 to pay the instrument or is dead or in insolvency proceedings;
24-29 (3) by the terms of the instrument presentment is not
24-30 necessary to enforce the obligation of indorsers or the drawer;
24-31 (4) the drawer or indorser whose obligation is being
24-32 enforced has waived presentment or otherwise has no reason to
24-33 expect or right to require that the instrument be paid or accepted;
24-34 or
24-35 (5) the drawer instructed the drawee not to pay or
24-36 accept the draft or the drawee was not obligated to the drawer to
24-37 pay the draft.
24-38 (b) Notice of dishonor is excused if (i) by the terms of the
24-39 instrument notice of dishonor is not necessary to enforce the
24-40 obligation of a party to pay the instrument, or (ii) the party
24-41 whose obligation is being enforced waived notice of dishonor. A
24-42 waiver of presentment is also a waiver of notice of dishonor.
24-43 (c) Delay in giving notice of dishonor is excused if the
24-44 delay was caused by circumstances beyond the control of the person
24-45 giving the notice and the person giving the notice exercised
24-46 reasonable diligence after the cause of the delay ceased to
24-47 operate.
24-48 Sec. 3.505. EVIDENCE OF DISHONOR. (a) The following are
24-49 admissible as evidence and create a presumption of dishonor and of
24-50 any notice of dishonor stated:
24-51 (1) a document regular in form as provided in
24-52 Subsection (b) that purports to be a protest;
24-53 (2) a purported stamp or writing of the drawee, payor
24-54 bank, or presenting bank on or accompanying the instrument stating
24-55 that acceptance or payment has been refused unless reasons for the
24-56 refusal are stated and the reasons are not consistent with
24-57 dishonor;
24-58 (3) a book or record of the drawee, payor bank, or
24-59 collecting bank that is kept in the usual course of business and
24-60 that shows dishonor, even if there is no evidence of who made the
24-61 entry.
24-62 (b) A protest is a certificate of dishonor made by a United
24-63 States consul or vice consul, or a notary public or other person
24-64 authorized to administer oaths by the law of the place where
24-65 dishonor occurs. It may be made on information satisfactory to
24-66 that person. The protest must identify the instrument and certify
24-67 either that presentment has been made or, if not made, the reason
24-68 why it was not made, and that the instrument has been dishonored by
24-69 nonacceptance or nonpayment. The protest may also certify that
24-70 notice of dishonor has been given to some or all parties.
25-1 SUBCHAPTER F. DISCHARGE AND PAYMENT
25-2 Sec. 3.601. DISCHARGE AND EFFECT OF DISCHARGE. (a) The
25-3 obligation of a party to pay the instrument is discharged as stated
25-4 in this chapter or by an act or agreement with the party that would
25-5 discharge an obligation to pay money under a simple contract.
25-6 (b) Discharge of the obligation of a party is not effective
25-7 against a person acquiring rights of a holder in due course of the
25-8 instrument without notice of the discharge.
25-9 Sec. 3.602. PAYMENT. (a) Subject to Subsection (b), an
25-10 instrument is paid to the extent payment is made (i) by or on
25-11 behalf of a party obliged to pay the instrument, and (ii) to a
25-12 person entitled to enforce the instrument. To the extent of the
25-13 payment, the obligation of the party obliged to pay the instrument
25-14 is discharged even though payment is made with knowledge of a claim
25-15 to the instrument under Section 3.306 by another person.
25-16 (b) The obligation of a party to pay the instrument is not
25-17 discharged under Subsection (a) if:
25-18 (1) a claim to the instrument under Section 3.306 is
25-19 enforceable against the party receiving payment and:
25-20 (A) payment is made with knowledge by the payor
25-21 that payment is prohibited by injunction or similar process of a
25-22 court of competent jurisdiction; or
25-23 (B) in the case of an instrument other than a
25-24 cashier's check, teller's check, or certified check, the party
25-25 making payment accepted, from the person having a claim to the
25-26 instrument, indemnity against loss resulting from refusal to pay
25-27 the person entitled to enforce the instrument; or
25-28 (2) the person making payment knows that the
25-29 instrument is a stolen instrument and pays a person it knows is in
25-30 wrongful possession of the instrument.
25-31 Sec. 3.603. TENDER OF PAYMENT. (a) If tender of payment of
25-32 an obligation to pay an instrument is made to a person entitled to
25-33 enforce the instrument, the effect of tender is governed by
25-34 principles of law applicable to tender of payment under a simple
25-35 contract.
25-36 (b) If tender of payment of an obligation to pay an
25-37 instrument is made to a person entitled to enforce the instrument
25-38 and the tender is refused, there is discharge, to the extent of the
25-39 amount of the tender, of the obligation of an indorser or
25-40 accommodation party having a right of recourse with respect to the
25-41 obligation to which the tender relates.
25-42 (c) If tender of payment of an amount due on an instrument
25-43 is made to a person entitled to enforce the instrument, the
25-44 obligation of the obligor to pay interest after the due date on the
25-45 amount tendered is discharged. If presentment is required with
25-46 respect to an instrument and the obligor is able and ready to pay
25-47 on the due date at every place of payment stated in the instrument,
25-48 the obligor is deemed to have made tender of payment on the due
25-49 date to the person entitled to enforce the instrument.
25-50 Sec. 3.604. DISCHARGE BY CANCELLATION OR RENUNCIATION. (a)
25-51 A person entitled to enforce an instrument, with or without
25-52 consideration, may discharge the obligation of a party to pay the
25-53 instrument:
25-54 (1) by an intentional voluntary act, such as surrender
25-55 of the instrument to the party, destruction, mutilation, or
25-56 cancellation of the instrument, cancellation or striking out of the
25-57 party's signature, or the addition of words to the instrument
25-58 indicating discharge; or
25-59 (2) by agreeing not to sue or otherwise renouncing
25-60 rights against the party by a signed writing.
25-61 (b) Cancellation or striking out of an indorsement pursuant
25-62 to Subsection (a) does not affect the status and rights of a party
25-63 derived from the indorsement.
25-64 Sec. 3.605. DISCHARGE OF INDORSERS AND ACCOMMODATION
25-65 PARTIES. (a) In this section, the term "indorser" includes a
25-66 drawer having the obligation described in Section 3.414(d).
25-67 (b) Discharge of the obligation of a party to pay an
25-68 instrument under Section 3.604 does not discharge the obligation of
25-69 an indorser or accommodation party having a right of recourse
25-70 against the discharged party.
26-1 (c) If a person entitled to enforce an instrument agrees,
26-2 with or without consideration, to an extension of the due date of
26-3 the obligation of a party to pay the instrument, the extension
26-4 discharges an indorser or accommodation party having a right of
26-5 recourse against the party whose obligation is extended to the
26-6 extent the indorser or accommodation party proves that the
26-7 extension caused loss to the indorser or accommodation party with
26-8 respect to the right of recourse.
26-9 (d) If a person entitled to enforce an instrument agrees,
26-10 with or without consideration, to a material modification of the
26-11 obligation of a party other than an extension of the due date, the
26-12 modification discharges the obligation of an indorser or
26-13 accommodation party having a right of recourse against the person
26-14 whose obligation is modified to the extent the modification causes
26-15 loss to the indorser or accommodation party with respect to the
26-16 right of recourse. The loss suffered by the indorser or
26-17 accommodation party as a result of the modification is equal to the
26-18 amount of the right of recourse unless the person enforcing the
26-19 instrument proves that no loss was caused by the modification or
26-20 that the loss caused by the modification was an amount less than
26-21 the amount of the right of recourse.
26-22 (e) If the obligation of a party to pay an instrument is
26-23 secured by an interest in collateral and a person entitled to
26-24 enforce the instrument impairs the value of the interest in
26-25 collateral, the obligation of an indorser or accommodation party
26-26 having a right of recourse against the obligor is discharged to the
26-27 extent of the impairment. The value of an interest in collateral
26-28 is impaired to the extent (i) the value of the interest is reduced
26-29 to an amount less than the amount of the right of recourse of the
26-30 party asserting discharge, or (ii) the reduction in value of the
26-31 interest causes an increase in the amount by which the amount of
26-32 the right of recourse exceeds the value of the interest. The
26-33 burden of proving impairment is on the party asserting discharge.
26-34 (f) If the obligation of a party is secured by an interest
26-35 in collateral not provided by an accommodation party and a person
26-36 entitled to enforce the instrument impairs the value of the
26-37 interest in collateral, the obligation of any party who is jointly
26-38 and severally liable with respect to the secured obligation is
26-39 discharged to the extent the impairment causes the party asserting
26-40 discharge to pay more than that party would have been obliged to
26-41 pay, taking into account rights of contribution, if impairment had
26-42 not occurred. If the party asserting discharge is an accommodation
26-43 party not entitled to discharge under Subsection (e), the party is
26-44 deemed to have a right to contribution based on joint and several
26-45 liability rather than a right to reimbursement. The burden of
26-46 proving impairment is on the party asserting discharge.
26-47 (g) Under Subsection (e) or (f), impairing value of an
26-48 interest in collateral includes:
26-49 (1) failure to obtain or maintain perfection or
26-50 recordation of the interest in collateral;
26-51 (2) release of collateral without substitution of
26-52 collateral of equal value;
26-53 (3) failure to perform a duty to preserve the value of
26-54 collateral owed, under Chapter 9 or other law, to a debtor or
26-55 surety or other person secondarily liable; or
26-56 (4) failure to comply with applicable law in disposing
26-57 of collateral.
26-58 (h) An accommodation party is not discharged under
26-59 Subsection (c), (d), or (e) unless the person entitled to enforce
26-60 the instrument knows of the accommodation or has notice under
26-61 Section 3.419(c) that the instrument was signed for accommodation.
26-62 (i) A party is not discharged under this section if:
26-63 (1) the party asserting discharge consents to the
26-64 event or conduct that is the basis of the discharge; or
26-65 (2) the instrument or a separate agreement of the
26-66 party provides for waiver of discharge under this section.
26-67 <CHAPTER 3. COMMERCIAL PAPER>
26-68 <SUBCHAPTER A. SHORT TITLE, FORM AND INTERPRETATION>
26-69 <Sec. 3.101. ><Short Title><. This chapter may be cited as
26-70 Uniform Commercial Code--Commercial Paper.>
27-1 <Sec. 3.102. ><Definitions and Index of Definitions><. (a) In
27-2 this chapter unless the context otherwise requires>
27-3 <(1) "Issue" means the first delivery of an instrument
27-4 to a holder or a remitter.>
27-5 <(2) An "order" is a direction to pay and must be more
27-6 than an authorization or request. It must identify the person to
27-7 pay with reasonable certainty. It may be addressed to one or more
27-8 such persons jointly or in the alternative but not in succession.>
27-9 <(3) A "promise" is an undertaking to pay and must be
27-10 more than an acknowledgment of an obligation.>
27-11 <(4) "Secondary party" means a drawer or indorser.>
27-12 <(5) "Instrument" means a negotiable instrument.>
27-13 <(b) Other definitions applying to this chapter and the
27-14 sections in which they appear are:>
27-15 <"Acceptance". Section 3.410.>
27-16 <"Accommodation party". Section 3.415.>
27-17 <"Alteration". Section 3.407.>
27-18 <"Certificate of deposit". Section 3.104.>
27-19 <"Certification". Section 3.411.>
27-20 <"Check". Section 3.104.>
27-21 <"Definite time". Section 3.109.>
27-22 <"Dishonor". Section 3.507.>
27-23 <"Draft". Section 3.104.>
27-24 <"Holder in due course". Section 3.302.>
27-25 <"Negotiation". Section 3.202.>
27-26 <"Note". Section 3.104.>
27-27 <"Notice of dishonor". Section 3.508.>
27-28 <"On demand". Section 3.108.>
27-29 <"Presentment". Section 3.504.>
27-30 <"Protest". Section 3.509.>
27-31 <"Restrictive Indorsement". Section 3.205.>
27-32 <"Signature". Section 3.401.>
27-33 <(c) The following definitions in other chapters apply to
27-34 this chapter:>
27-35 <"Account". Section 4.104.>
27-36 <"Banking Day". Section 4.104.>
27-37 <"Clearing house". Section 4.104.>
27-38 <"Collecting bank". Section 4.105.>
27-39 <"Customer". Section 4.104.>
27-40 <"Depositary Bank". Section 4.105.>
27-41 <"Documentary Draft". Section 4.104.>
27-42 <"Intermediary Bank". Section 4.105.>
27-43 <"Item". Section 4.104.>
27-44 <"Midnight deadline". Section 4.104.>
27-45 <"Payor bank". Section 4.105.>
27-46 <(d) In addition Chapter 1 contains general definitions and
27-47 principles of construction and interpretation applicable throughout
27-48 this chapter.>
27-49 <Sec. 3.103. ><Limitations on Scope of Chapter><. (a) This
27-50 chapter does not apply to money, documents of title or investment
27-51 securities.>
27-52 <(b) The provisions of this chapter are subject to the
27-53 provisions of the chapter on Bank Deposits and Collections (Chapter
27-54 4) and Secured Transactions (Chapter 9).>
27-55 <Sec. 3.104. ><Form of Negotiable Instruments; "Draft";
27-56 "Check"; "Certificate of Deposit"; "Note"><. (a) Any writing to be
27-57 a negotiable instrument within this chapter must>
27-58 <(1) be signed by the maker or drawer; and>
27-59 <(2) contain an unconditional promise or order to pay
27-60 a sum certain in money and no other promise, order, obligation or
27-61 power given by the maker or drawer except as authorized by this
27-62 chapter; and>
27-63 <(3) be payable on demand or at a definite time; and>
27-64 <(4) be payable to order or to bearer.>
27-65 <(b) A writing which complies with the requirements of this
27-66 section is>
27-67 <(1) a "draft" ("bill of exchange") if it is an order;>
27-68 <(2) a "check" if it is a draft drawn on a bank and
27-69 payable on demand;>
27-70 <(3) a "certificate of deposit" if it is an
28-1 acknowledgment by a bank of receipt of money with an engagement to
28-2 repay it;>
28-3 <(4) a "note" if it is a promise other than a
28-4 certificate of deposit.>
28-5 <(c) As used in other chapters of this title, and as the
28-6 context may require, the terms "draft", "check", "certificate of
28-7 deposit" and "note" may refer to instruments which are not
28-8 negotiable within this chapter as well as to instruments which are
28-9 so negotiable.>
28-10 <Sec. 3.105. ><When Promise or Order Unconditional><. (a) A
28-11 promise or order otherwise unconditional is not made conditional by
28-12 the fact that the instrument>
28-13 <(1) is subject to implied or constructive conditions;
28-14 or>
28-15 <(2) states its consideration, whether performed or
28-16 promised, or the transaction which gave rise to the instrument, or
28-17 that the promise or order is made or the instrument matures in
28-18 accordance with or "as per" such transaction; or>
28-19 <(3) refers to or states that it arises out of a
28-20 separate agreement or refers to a separate agreement for rights as
28-21 to prepayment or acceleration; or>
28-22 <(4) states that it is drawn under a letter of credit;
28-23 or>
28-24 <(5) states that it is secured, whether by mortgage,
28-25 reservation of title or otherwise; or>
28-26 <(6) indicates a particular account to be debited or
28-27 any other fund or source from which reimbursement is expected; or>
28-28 <(7) is limited to payment out of a particular fund or
28-29 the proceeds of a particular source, if the instrument is issued by
28-30 a government or governmental agency or unit; or>
28-31 <(8) is limited to payment out of the entire assets of
28-32 a partnership, unincorporated association, trust or estate by or on
28-33 behalf of which the instrument is issued.>
28-34 <(b) A promise or order is not unconditional if the
28-35 instrument>
28-36 <(1) states that it is subject to or governed by any
28-37 other agreement; or>
28-38 <(2) states that it is to be paid only out of a
28-39 particular fund or source except as provided in this section.>
28-40 <Sec. 3.106. ><Sum Certain><. (a) The sum payable is a sum
28-41 certain even though it is to be paid>
28-42 <(1) with stated interest or by stated installments;
28-43 or>
28-44 <(2) with stated different rates of interest before
28-45 and after default or a specified date; or>
28-46 <(3) with a stated discount or addition if paid before
28-47 or after the date fixed for payment; or>
28-48 <(4) with exchange or less exchange, whether at a
28-49 fixed rate or at the current rate; or>
28-50 <(5) with costs of collection or an attorney's fee or
28-51 both upon default.>
28-52 <(b) Nothing in this section shall validate any term which
28-53 is otherwise illegal.>
28-54 <Sec. 3.107. ><Money><. (a) An instrument is payable in money
28-55 if the medium of exchange in which it is payable is money at the
28-56 time the instrument is made. An instrument payable in "currency"
28-57 or "current funds" is payable in money.>
28-58 <(b) A promise or order to pay a sum stated in a foreign
28-59 currency is for a sum certain in money and, unless a different
28-60 medium of payment is specified in the instrument, may be satisfied
28-61 by payment of that number of dollars which the stated foreign
28-62 currency will purchase at the buying sight rate for that currency
28-63 on the day on which the instrument is payable or, if payable on
28-64 demand, on the day of demand. If such an instrument specifies a
28-65 foreign currency as the medium of payment the instrument is payable
28-66 in that currency.>
28-67 <Sec. 3.108. ><Payable on Demand><. Instruments payable on
28-68 demand include those payable at sight or on presentation and those
28-69 in which no time for payment is stated.>
28-70 <Sec. 3.109. ><Definite Time><. (a) An instrument is payable
29-1 at a definite time if by its terms it is payable>
29-2 <(1) on or before a stated date or at a fixed period
29-3 after a stated date; or>
29-4 <(2) at a fixed period after sight; or>
29-5 <(3) at a definite time subject to any acceleration;
29-6 or>
29-7 <(4) at a definite time subject to extension at the
29-8 option of the holder, or to extension to a further definite time at
29-9 the option of the maker or acceptor or automatically upon or after
29-10 a specified act or event.>
29-11 <(b) An instrument which by its terms is otherwise payable
29-12 only upon an act or event uncertain as to time of occurrence is not
29-13 payable at a definite time even though the act or event has
29-14 occurred.>
29-15 <Sec. 3.110. ><Payable to Order><. (a) An instrument is
29-16 payable to order when by its terms it is payable to the order or
29-17 assigns of any person therein specified with reasonable certainty,
29-18 or to him or his order, or when it is conspicuously designated on
29-19 its face as "exchange" or the like and names a payee. It may be
29-20 payable to the order of>
29-21 <(1) the maker or drawer; or>
29-22 <(2) the drawee; or>
29-23 <(3) a payee who is not maker, drawer or drawee; or>
29-24 <(4) two or more payees together or in the
29-25 alternative; or>
29-26 <(5) an estate, trust or fund, in which case it is
29-27 payable to the order of the representative of such estate, trust or
29-28 fund or his successors; or>
29-29 <(6) an office, or an officer by his title as such in
29-30 which case it is payable to the principal but the incumbent of the
29-31 office or his successors may act as if he or they were the holder;
29-32 or>
29-33 <(7) a partnership or unincorporated association, in
29-34 which case it is payable to the partnership or association and may
29-35 be indorsed or transferred by any person thereto authorized.>
29-36 <(b) An instrument not payable to order is not made so
29-37 payable by such words as "payable upon return of this instrument
29-38 properly indorsed.">
29-39 <(c) An instrument made payable both to order and to bearer
29-40 is payable to order unless the bearer words are handwritten or
29-41 typewritten.>
29-42 <Sec. 3.111. ><Payable to Bearer><. An instrument is payable to
29-43 bearer when by its terms it is payable to>
29-44 <(1) bearer or the order of bearer; or>
29-45 <(2) a specified person or bearer; or>
29-46 <(3) "cash" or the order of "cash", or any other
29-47 indication which does not purport to designate a specific payee.>
29-48 <Sec. 3.112. ><Terms and Omissions Not Affecting
29-49 Negotiability><. (a) The negotiability of an instrument is not
29-50 affected by>
29-51 <(1) the omission of a statement of any consideration
29-52 or of the place where the instrument is drawn or payable; or>
29-53 <(2) a statement that collateral has been given to
29-54 secure obligations either on the instrument or otherwise of an
29-55 obligor on the instrument or that in case of default on those
29-56 obligations the holder may realize on or dispose of the collateral;
29-57 or>
29-58 <(3) a promise or power to maintain or protect
29-59 collateral or to give additional collateral; or>
29-60 <(4) a term authorizing a confession of judgment on
29-61 the instrument if it is not paid when due; or>
29-62 <(5) a term purporting to waive the benefit of any law
29-63 intended for the advantage or protection of any obligor; or>
29-64 <(6) a term in a draft providing that the payee by
29-65 indorsing or cashing it acknowledges full satisfaction of an
29-66 obligation of the drawer; or>
29-67 <(7) a statement in a draft drawn in a set of parts
29-68 (Section 3.801) to the effect that the order is effective only if
29-69 no other part has been honored.>
29-70 <(b) Nothing in this section shall validate any term which
30-1 is otherwise illegal.>
30-2 <Sec. 3.113. ><Seal><. An instrument otherwise negotiable is
30-3 within this chapter even though it is under a seal.>
30-4 <Sec. 3.114. ><Date, Antedating, Postdating><. (a) The
30-5 negotiability of an instrument is not affected by the fact that it
30-6 is undated, antedated or postdated.>
30-7 <(b) Where an instrument is antedated or postdated the time
30-8 when it is payable is determined by the stated date if the
30-9 instrument is payable on demand or at a fixed period after date.>
30-10 <(c) Where the instrument or any signature thereon is dated,
30-11 the date is presumed to be correct.>
30-12 <Sec. 3.115. ><Incomplete Instruments><. (a) When a paper
30-13 whose contents at the time of signing show that it is intended to
30-14 become an instrument is signed while still incomplete in any
30-15 necessary respect it cannot be enforced until completed, but when
30-16 it is completed in accordance with authority given it is effective
30-17 as completed.>
30-18 <(b) If the completion is unauthorized the rules as to
30-19 material alteration apply (Section 3.407), even though the paper
30-20 was not delivered by the maker or drawer; but the burden of
30-21 establishing that any completion is unauthorized is on the party so
30-22 asserting.>
30-23 <Sec. 3.116. ><Instruments Payable to Two or More Persons><. An
30-24 instrument payable to the order of two or more persons>
30-25 <(1) if in the alternative is payable to any one of
30-26 them and may be negotiated, discharged or enforced by any of them
30-27 who has possession of it;>
30-28 <(2) if not in the alternative is payable to all of
30-29 them and may be negotiated, discharged or enforced only by all of
30-30 them.>
30-31 <Sec. 3.117. ><Instruments Payable With Words of Description><.
30-32 An instrument made payable to a named person with the addition of
30-33 words describing him>
30-34 <(1) as agent or officer of a specified person is
30-35 payable to his principal but the agent or officer may act as if he
30-36 were the holder;>
30-37 <(2) as any other fiduciary for a specified person or
30-38 purpose is payable to the payee and may be negotiated, discharged
30-39 or enforced by him;>
30-40 <(3) in any other manner is payable to the payee
30-41 unconditionally and the additional words are without effect on
30-42 subsequent parties.>
30-43 <Sec. 3.118. ><Ambiguous Terms and Rules of Construction><. The
30-44 following rules apply to every instrument:>
30-45 <(1) Where there is doubt whether the instrument is a
30-46 draft or a note the holder may treat it as either. A draft drawn
30-47 on the drawer is effective as a note.>
30-48 <(2) Handwritten terms control typewritten and printed
30-49 terms, and typewritten control printed.>
30-50 <(3) Words control figures except that if the words
30-51 are ambiguous figures control.>
30-52 <(4) Unless otherwise specified a provision for
30-53 interest means interest at the judgment rate at the place of
30-54 payment from the date of the instrument, or if it is undated from
30-55 the date of issue.>
30-56 <(5) Unless the instrument otherwise specifies two or
30-57 more persons who sign as maker, acceptor or drawer or indorser and
30-58 as a part of the same transaction are jointly and severally liable
30-59 even though the instrument contains such words as "I promise to
30-60 pay.">
30-61 <(6) Unless otherwise specified consent to extension
30-62 authorizes a single extension for not longer than the original
30-63 period. A consent to extension, expressed in the instrument, is
30-64 binding on secondary parties and accommodation makers. A holder
30-65 may not exercise his option to extend an instrument over the
30-66 objection of a maker or acceptor or other party who in accordance
30-67 with Section 3.604 tenders full payment when the instrument is due.>
30-68 <Sec. 3.119. ><Other Writings Affecting Instrument><. (a) As
30-69 between the obligor and his immediate obligee or any transferee the
30-70 terms of an instrument may be modified or affected by any other
31-1 written agreement executed as a part of the same transaction,
31-2 except that a holder in due course is not affected by any
31-3 limitation of his rights arising out of the separate written
31-4 agreement if he had no notice of the limitation when he took the
31-5 instrument.>
31-6 <(b) A separate agreement does not affect the negotiability
31-7 of an instrument.>
31-8 <Sec. 3.120. ><Instruments "Payable Through" Bank><. An
31-9 instrument which states that it is "payable through" a bank or the
31-10 like designates that bank as a collecting bank to make presentment
31-11 but does not of itself authorize the bank to pay the instrument.>
31-12 <Sec. 3.121. ><Instruments Payable at Bank><. A note or
31-13 acceptance which states that it is payable at a bank is the
31-14 equivalent of a draft drawn on the bank payable when it falls due
31-15 out of any funds of the maker or acceptor in current account or
31-16 otherwise available for such payment.>
31-17 <Sec. 3.122. ><Accrual of Cause of Action><. (a) A cause of
31-18 action against a maker or an acceptor accrues>
31-19 <(1) in the case of a time instrument on the day after
31-20 maturity;>
31-21 <(2) in the case of a demand instrument upon its date
31-22 or, if no date is stated, on the date of issue.>
31-23 <(b) A cause of action against the obligor of a demand or
31-24 time certificate of deposit accrues upon demand, but demand on a
31-25 time certificate may not be made until on or after the date of
31-26 maturity.>
31-27 <(c) A cause of action against a drawer of a draft or an
31-28 indorser of any instrument accrues upon demand following dishonor
31-29 of the instrument. Notice of dishonor is a demand.>
31-30 <(d) Unless an instrument provides otherwise, interest runs
31-31 at the rate provided by law for a judgment>
31-32 <(1) in the case of a maker, acceptor or other primary
31-33 obligor of a demand instrument, from the date of demand;>
31-34 <(2) in all other cases from the date of accrual of
31-35 the cause of action.>
31-36 <SUBCHAPTER B. TRANSFER AND NEGOTIATION>
31-37 <Sec. 3.201. ><Transfer: Right to Indorsement><. (a) Transfer
31-38 of an instrument vests in the transferee such rights as the
31-39 transferor has therein, except that a transferee who has himself
31-40 been a party to any fraud or illegality affecting the instrument or
31-41 who as a prior holder had notice of a defense or claim against it
31-42 cannot improve his position by taking from a later holder in due
31-43 course.>
31-44 <(b) A transfer of a security interest in an instrument
31-45 vests the foregoing rights in the transferee to the extent of the
31-46 interest transferred.>
31-47 <(c) Unless otherwise agreed any transfer for value of an
31-48 instrument not then payable to bearer gives the transferee the
31-49 specifically enforceable right to have the unqualified indorsement
31-50 of the transferor. Negotiation takes effect only when the
31-51 indorsement is made and until that time there is no presumption
31-52 that the transferee is the owner.>
31-53 <Sec. 3.202. ><Negotiation><. (a) Negotiation is the transfer
31-54 of an instrument in such form that the transferee becomes a holder.
31-55 If the instrument is payable to order it is negotiated by delivery
31-56 with any necessary indorsement; if payable to bearer it is
31-57 negotiated by delivery.>
31-58 <(b) An indorsement must be written by or on behalf of the
31-59 holder and on the instrument or on a paper so firmly affixed
31-60 thereto as to become a part thereof.>
31-61 <(c) An indorsement is effective for negotiation only when
31-62 it conveys the entire instrument or any unpaid residue. If it
31-63 purports to be of less it operates only as a partial assignment.>
31-64 <(d) Words of assignment, condition, waiver, guaranty,
31-65 limitation or disclaimer of liability and the like accompanying an
31-66 indorsement do not affect its character as an indorsement.>
31-67 <Sec. 3.203. ><Wrong or Misspelled Name><. Where an instrument
31-68 is made payable to a person under a misspelled name or one other
31-69 than his own he may indorse in that name or his own or both; but
31-70 signature in both names may be required by a person paying or
32-1 giving value for the instrument.>
32-2 <Sec. 3.204. ><Special Indorsement; Blank Indorsement><. (a) A
32-3 special indorsement specifies the person to whom or to whose order
32-4 it makes the instrument payable. Any instrument specially indorsed
32-5 becomes payable to the order of the special indorsee and may be
32-6 further negotiated only by his indorsement.>
32-7 <(b) An indorsement in blank specifies no particular
32-8 indorsee and may consist of a mere signature. An instrument
32-9 payable to order and indorsed in blank becomes payable to bearer
32-10 and may be negotiated by delivery alone until specially indorsed.>
32-11 <(c) The holder may convert a blank indorsement into a
32-12 special indorsement by writing over the signature of the indorser
32-13 in blank any contract consistent with the character of the
32-14 indorsement.>
32-15 <Sec. 3.205. ><Restrictive Indorsements><. An indorsement is
32-16 restrictive which either>
32-17 <(1) is conditional; or>
32-18 <(2) purports to prohibit further transfer of the
32-19 instrument; or>
32-20 <(3) includes the words "for collection", "for
32-21 deposit", "pay any bank", or like terms signifying a purpose of
32-22 deposit or collection; or>
32-23 <(4) otherwise states that it is for the benefit or
32-24 use of the indorser or of another person.>
32-25 <Sec. 3.206. ><Effect of Restrictive Indorsement><. (a) No
32-26 restrictive indorsement prevents further transfer or negotiation of
32-27 the instrument.>
32-28 <(b) An intermediary bank, or a payor bank which is not the
32-29 depositary bank, is neither given notice nor otherwise affected by
32-30 a restrictive indorsement of any person except the bank's immediate
32-31 transferor or the person presenting for payment.>
32-32 <(c) Except for an intermediary bank, any transferee under
32-33 an indorsement which is conditional or includes the words "for
32-34 collection", "for deposit", "pay any bank", or like terms
32-35 (Subdivisions (1) and (3) of Section 3.205) must pay or apply any
32-36 value given by him for or on the security of the instrument
32-37 consistently with the indorsement and to the extent that he does so
32-38 he becomes a holder for value. In addition such transferee is a
32-39 holder in due course if he otherwise complies with the requirements
32-40 of Section 3.302 on what constitutes a holder in due course.>
32-41 <(d) The first taker under an indorsement for the benefit of
32-42 the indorser or another person (Subdivision (4) of Section 3.205)
32-43 must pay or apply any value given by him for or on the security of
32-44 the instrument consistently with the indorsement and to the extent
32-45 that he does so he becomes a holder for value. In addition such
32-46 taker is a holder in due course if he otherwise complies with the
32-47 requirements of Section 3.302 on what constitutes a holder in due
32-48 course. A later holder for value is neither given notice nor
32-49 otherwise affected by such restrictive indorsement unless he has
32-50 knowledge that a fiduciary or other person has negotiated the
32-51 instrument in any transaction for his own benefit or otherwise in
32-52 breach of duty (Subsection (b) of Section 3.304).>
32-53 <Sec. 3.207. ><Negotiation Effective Although It May Be
32-54 Rescinded><. (a) Negotiation is effective to transfer the
32-55 instrument although the negotiation is>
32-56 <(1) made by an infant, a corporation exceeding its
32-57 powers, or any other person without capacity; or>
32-58 <(2) obtained by fraud, duress or mistake of any kind;
32-59 or>
32-60 <(3) part of an illegal transaction; or>
32-61 <(4) made in breach of duty.>
32-62 <(b) Except as against a subsequent holder in due course
32-63 such negotiation is in an appropriate case subject to rescission,
32-64 the declaration of a constructive trust or any other remedy
32-65 permitted by law.>
32-66 <Sec. 3.208. ><Reacquisition><. Where an instrument is returned
32-67 to or reacquired by a prior party he may cancel any indorsement
32-68 which is not necessary to his title and reissue or further
32-69 negotiate the instrument, but any intervening party is discharged
32-70 as against the reacquiring party and subsequent holders not in due
33-1 course and if his indorsement has been cancelled is discharged as
33-2 against subsequent holders in due course as well.>
33-3 <SUBCHAPTER C. RIGHTS OF A HOLDER>
33-4 <Sec. 3.301. ><Rights of a Holder><. The holder of an
33-5 instrument whether or not he is the owner may transfer or negotiate
33-6 it and, except as otherwise provided in Section 3.603 on payment or
33-7 satisfaction, discharge it or enforce payment in his own name.>
33-8 <Sec. 3.302. ><Holder in Due Course><. (a) A holder in due
33-9 course is a holder who takes the instrument>
33-10 <(1) for value; and>
33-11 <(2) in good faith; and>
33-12 <(3) without notice that it is overdue or has been
33-13 dishonored or of any defense against or claim to it on the part of
33-14 any person.>
33-15 <(b) A payee may be a holder in due course.>
33-16 <(c) A holder does not become a holder in due course of an
33-17 instrument:>
33-18 <(1) by purchase of it at judicial sale or by taking
33-19 it under legal process; or>
33-20 <(2) by acquiring it in taking over an estate; or>
33-21 <(3) by purchasing it as part of a bulk transaction
33-22 not in regular course of business of the transferor.>
33-23 <(d) A purchaser of a limited interest can be a holder in
33-24 due course only to the extent of the interest purchased.>
33-25 <Sec. 3.303. ><Taking for Value><. A holder takes the
33-26 instrument for value>
33-27 <(1) to the extent that the agreed consideration has
33-28 been performed or that he acquires a security interest in or a lien
33-29 on the instrument otherwise than by legal process; or>
33-30 <(2) when he takes the instrument in payment of or as
33-31 security for an antecedent claim against any person whether or not
33-32 the claim is due; or>
33-33 <(3) when he gives a negotiable instrument for it or
33-34 makes an irrevocable commitment to a third person.>
33-35 <Sec. 3.304. ><Notice to Purchaser><. (a) The purchaser has
33-36 notice of a claim or defense if>
33-37 <(1) the instrument is so incomplete, bears such
33-38 visible evidence of forgery or alteration, or is otherwise so
33-39 irregular as to call into question its validity, terms or ownership
33-40 or to create an ambiguity as to the party to pay; or>
33-41 <(2) the purchaser has notice that the obligation of
33-42 any party is voidable in whole or in part, or that all parties have
33-43 been discharged.>
33-44 <(b) The purchaser has notice of a claim against the
33-45 instrument when he has knowledge that a fiduciary has negotiated
33-46 the instrument in payment of or as security for his own debt or in
33-47 any transaction for his own benefit or otherwise in breach of duty.>
33-48 <(c) The purchaser has notice that an instrument is overdue
33-49 if he has reason to know>
33-50 <(1) that any part of the principal amount is overdue
33-51 or that there is an uncured default in payment of another
33-52 instrument of the same series; or>
33-53 <(2) that acceleration of the instrument has been
33-54 made; or>
33-55 <(3) that he is taking a demand instrument after
33-56 demand has been made or more than a reasonable length of time after
33-57 its issue. A reasonable time for a check drawn and payable within
33-58 the states and territories of the United States and the District of
33-59 Columbia is presumed to be thirty days.>
33-60 <(d) Knowledge of the following facts does not of itself
33-61 give the purchaser notice of a defense or claim>
33-62 <(1) that the instrument is antedated or postdated;>
33-63 <(2) that it was issued or negotiated in return for an
33-64 executory promise or accompanied by a separate agreement, unless
33-65 the purchaser has notice that a defense or claim has arisen from
33-66 the terms thereof;>
33-67 <(3) that any party has signed for accommodation;>
33-68 <(4) that an incomplete instrument has been completed,
33-69 unless the purchaser has notice of any improper completion;>
33-70 <(5) that any person negotiating the instrument is or
34-1 was a fiduciary;>
34-2 <(6) that there has been default in payment of
34-3 interest on the instrument or in payment of any other instrument,
34-4 except one of the same series.>
34-5 <(e) The filing or recording of a document does not of
34-6 itself constitute notice within the provisions of this chapter to a
34-7 person who would otherwise be a holder in due course.>
34-8 <(f) To be effective notice must be received at such time
34-9 and in such manner as to give a reasonable opportunity to act on
34-10 it.>
34-11 <Sec. 3.305. ><Rights of a Holder in Due Course><. To the
34-12 extent that a holder is a holder in due course he takes the
34-13 instrument free from>
34-14 <(a) all claims to it on the part of any person; and>
34-15 <(b) all defenses of any party to the instrument with
34-16 whom the holder has not dealt except>
34-17 <(1) infancy, to the extent that it is a defense
34-18 to a simple contract; and>
34-19 <(2) such other incapacity, or duress, or
34-20 illegality of the transaction, as renders the obligation of the
34-21 party a nullity; and>
34-22 <(3) such misrepresentation as has induced the
34-23 party to sign the instrument with neither knowledge nor reasonable
34-24 opportunity to obtain knowledge of its character or its essential
34-25 terms; and>
34-26 <(4) discharge in insolvency proceedings; and>
34-27 <(5) any other discharge of which the holder has
34-28 notice when he takes the instrument.>
34-29 <Sec. 3.306. ><Rights of One Not Holder in Due Course><. Unless
34-30 he has the rights of a holder in due course any person takes the
34-31 instrument subject to>
34-32 <(1) all valid claims to it on the part of any person;
34-33 and>
34-34 <(2) all defenses of any party which would be
34-35 available in an action on a simple contract; and>
34-36 <(3) the defenses of want or failure of consideration,
34-37 non-performance of any condition precedent, non-delivery, or
34-38 delivery for a special purpose (Section 3.408); and>
34-39 <(4) the defense that he or a person through whom he
34-40 holds the instrument acquired it by theft, or that payment or
34-41 satisfaction to such holder would be inconsistent with the terms of
34-42 a restrictive indorsement. The claim of any third person to the
34-43 instrument is not otherwise available as a defense to any party
34-44 liable thereon unless the third person himself defends the action
34-45 for such party.>
34-46 <Sec. 3.307. ><Burden of Establishing Signatures, Defenses and
34-47 Due Course><. (a) Unless specifically denied in the pleadings each
34-48 signature on an instrument is admitted. When the effectiveness of
34-49 a signature is put in issue>
34-50 <(1) the burden of establishing it is on the party
34-51 claiming under the signature; but>
34-52 <(2) the signature is presumed to be genuine or
34-53 authorized except where the action is to enforce the obligation of
34-54 a purported signer who has died or become incompetent before proof
34-55 is required.>
34-56 <(b) When signatures are admitted or established, production
34-57 of the instrument entitles a holder to recover on it unless the
34-58 defendant establishes a defense.>
34-59 <(c) After it is shown that a defense exists a person
34-60 claiming the rights of a holder in due course has the burden of
34-61 establishing that he or some person under whom he claims is in all
34-62 respects a holder in due course.>
34-63 <SUBCHAPTER D. LIABILITY OF PARTIES>
34-64 <Sec. 3.401. ><Signature><. (a) No person is liable on an
34-65 instrument unless his signature appears thereon.>
34-66 <(b) A signature is made by use of any name, including any
34-67 trade or assumed name, upon an instrument, or by any word or mark
34-68 used in lieu of a written signature.>
34-69 <Sec. 3.402. ><Signature in Ambiguous Capacity><. Unless the
34-70 instrument clearly indicates that a signature is made in some other
35-1 capacity it is an indorsement.>
35-2 <Sec. 3.403. ><Signature by Authorized Representative><. (a) A
35-3 signature may be made by an agent or other representative, and his
35-4 authority to make it may be established as in other cases of
35-5 representation. No particular form of appointment is necessary to
35-6 establish such authority.>
35-7 <(b) An authorized representative who signs his own name to
35-8 an instrument>
35-9 <(1) is personally obligated if the instrument neither
35-10 names the person represented nor shows that the representative
35-11 signed in a representative capacity;>
35-12 <(2) except as otherwise established between the
35-13 immediate parties, is personally obligated if the instrument names
35-14 the person represented but does not show that the representative
35-15 signed in a representative capacity, or if the instrument does not
35-16 name the person represented but does show that the representative
35-17 signed in a representative capacity.>
35-18 <(c) Except as otherwise established the name of an
35-19 organization preceded or followed by the name and office of an
35-20 authorized individual is a signature made in a representative
35-21 capacity.>
35-22 <Sec. 3.404. ><Unauthorized Signatures><. (a) Any unauthorized
35-23 signature is wholly inoperative as that of the person whose name is
35-24 signed unless he ratifies it or is precluded from denying it; but
35-25 it operates as the signature of the unauthorized signer in favor of
35-26 any person who in good faith pays the instrument or takes it for
35-27 value.>
35-28 <(b) Any unauthorized signature may be ratified for all
35-29 purposes of this chapter. Such ratification does not of itself
35-30 affect any rights of the person ratifying against the actual
35-31 signer.>
35-32 <Sec. 3.405. ><Imposters; Signature in Name of Payee><. (a) An
35-33 indorsement by any person in the name of a named payee is effective
35-34 if>
35-35 <(1) an imposter by use of the mails or otherwise has
35-36 induced the maker or drawer to issue the instrument to him or his
35-37 confederate in the name of the payee; or>
35-38 <(2) a person signing as or on behalf of a maker or
35-39 drawer intends the payee to have no interest in the instrument; or>
35-40 <(3) an agent or employee of the maker or drawer has
35-41 supplied him with the name of the payee intending the latter to
35-42 have no such interest.>
35-43 <(b) Nothing in this section shall affect the criminal or
35-44 civil liability of the person so indorsing.>
35-45 <Sec. 3.406. ><Negligence Contributing to Alteration or
35-46 Unauthorized Signature><. Any person who by his negligence
35-47 substantially contributes to a material alteration of the
35-48 instrument or to the making of an unauthorized signature is
35-49 precluded from asserting the alteration or lack of authority
35-50 against a holder in due course or against a drawee or other payor
35-51 who pays the instrument in good faith and in accordance with the
35-52 reasonable commercial standards of the drawee's or payor's
35-53 business.>
35-54 <Sec. 3.407. ><Alteration><. (a) Any alteration of an
35-55 instrument is material which changes the contract of any party
35-56 thereto in any respect, including any such change in>
35-57 <(1) the number or relations of the parties; or>
35-58 <(2) an incomplete instrument, by completing it
35-59 otherwise than as authorized; or>
35-60 <(3) the writing as signed, by adding to it or by
35-61 removing any part of it.>
35-62 <(b) As against any person other than a subsequent holder in
35-63 due course>
35-64 <(1) alteration by the holder which is both fraudulent
35-65 and material discharges any party whose contract is thereby changed
35-66 unless that party assents or is precluded from asserting the
35-67 defense;>
35-68 <(2) no other alteration discharges any party and the
35-69 instrument may be enforced according to its original tenor, or as
35-70 to incomplete instruments according to the authority given.>
36-1 <(c) A subsequent holder in due course may in all cases
36-2 enforce the instrument according to its original tenor, and when an
36-3 incomplete instrument has been completed, he may enforce it as
36-4 completed.>
36-5 <Sec. 3.408. ><Consideration><. Want or failure of
36-6 consideration is a defense as against any person not having the
36-7 rights of a holder in due course (Section 3.305), except that no
36-8 consideration is necessary for an instrument or obligation thereon
36-9 given in payment of or as security for an antecedent obligation of
36-10 any kind. Nothing in this section shall be taken to displace any
36-11 statute outside this title under which a promise is enforceable
36-12 notwithstanding lack or failure of consideration. Partial failure
36-13 of consideration is a defense pro tanto whether or not the failure
36-14 is in an ascertained or liquidated amount.>
36-15 <Sec. 3.409. ><Draft Not an Assignment><. (a) A check or other
36-16 draft does not of itself operate as an assignment of any funds in
36-17 the hands of the drawee available for its payment, and the drawee
36-18 is not liable on the instrument until he accepts it.>
36-19 <(b) Nothing in this section shall affect any liability in
36-20 contract, tort or otherwise arising from any letter of credit or
36-21 other obligation or representation which is not an acceptance.>
36-22 <Sec. 3.410. ><Definition and Operation of Acceptance><.
36-23 (a) Acceptance is the drawee's signed engagement to honor the
36-24 draft as presented. It must be written on the draft, and may
36-25 consist of his signature alone. It becomes operative when
36-26 completed by delivery or notification.>
36-27 <(b) A draft may be accepted although it has not been signed
36-28 by the drawer or is otherwise incomplete or is overdue or has been
36-29 dishonored.>
36-30 <(c) Where the draft is payable at a fixed period after
36-31 sight and the acceptor fails to date his acceptance the holder may
36-32 complete it by supplying a date in good faith.>
36-33 <Sec. 3.411. ><Certification of a Check><. (a) Certification
36-34 of a check is acceptance. Where a holder procures certification
36-35 the drawer and all prior indorsers are discharged.>
36-36 <(b) Unless otherwise agreed a bank has no obligation to
36-37 certify a check.>
36-38 <(c) A bank may certify a check before returning it for lack
36-39 of proper indorsement. If it does so the drawer is discharged.>
36-40 <Sec. 3.412. ><Acceptance Varying Draft><. (a) Where the
36-41 drawee's proffered acceptance in any manner varies the draft as
36-42 presented the holder may refuse the acceptance and treat the draft
36-43 as dishonored in which case the drawee is entitled to have his
36-44 acceptance cancelled.>
36-45 <(b) The terms of the draft are not varied by an acceptance
36-46 to pay at any particular bank or place in the United States, unless
36-47 the acceptance states that the draft is to be paid only at such
36-48 bank or place.>
36-49 <(c) Where the holder assents to an acceptance varying the
36-50 terms of the draft each drawer and indorser who does not
36-51 affirmatively assent is discharged.>
36-52 <Sec. 3.413. ><Contract of Maker, Drawer and Acceptor><.
36-53 (a) The maker or acceptor engages that he will pay the instrument
36-54 according to its tenor at the time of his engagement or as
36-55 completed pursuant to Section 3.115 on incomplete instruments.>
36-56 <(b) The drawer engages that upon dishonor of the draft and
36-57 any necessary notice of dishonor or protest he will pay the amount
36-58 of the draft to the holder or to any indorser who takes it up. The
36-59 drawer may disclaim this liability by drawing without recourse.>
36-60 <(c) By making, drawing or accepting the party admits as
36-61 against all subsequent parties including the drawee the existence
36-62 of the payee and his then capacity to indorse.>
36-63 <Sec. 3.414. ><Contract of Indorser; Order of Liability><.
36-64 (a) Unless the indorsement otherwise specifies (as by such words
36-65 as "without recourse") every indorser engages that upon dishonor
36-66 and any necessary notice of dishonor and protest he will pay the
36-67 instrument according to its tenor at the time of his indorsement to
36-68 the holder or to any subsequent indorser who takes it up, even
36-69 though the indorser who takes it up was not obligated to do so.>
36-70 <(b) Unless they otherwise agree indorsers are liable to one
37-1 another in the order in which they indorse, which is presumed to be
37-2 the order in which their signatures appear on the instrument.>
37-3 <Sec. 3.415. ><Contract of Accommodation Party><. (a) An
37-4 accommodation party is one who signs the instrument in any capacity
37-5 for the purpose of lending his name to another party to it.>
37-6 <(b) When the instrument has been taken for value before it
37-7 is due the accommodation party is liable in the capacity in which
37-8 he has signed even though the taker knows of the accommodation.>
37-9 <(c) As against a holder in due course and without notice of
37-10 the accommodation oral proof of the accommodation is not admissible
37-11 to give the accommodation party the benefit of discharges dependent
37-12 on his character as such. In other cases the accommodation
37-13 character may be shown by oral proof.>
37-14 <(d) An indorsement which shows that it is not in the chain
37-15 of title is notice of its accommodation character.>
37-16 <(e) An accommodation party is not liable to the party
37-17 accommodated, and if he pays the instrument has a right of recourse
37-18 on the instrument against such party.>
37-19 <Sec. 3.416. ><Contract of Guarantor><. (a) "Payment
37-20 guaranteed" or equivalent words added to a signature mean that the
37-21 signer engages that if the instrument is not paid when due he will
37-22 pay it according to its tenor without resort by the holder to any
37-23 other party.>
37-24 <(b) "Collection guaranteed" or equivalent words added to a
37-25 signature mean that the signer engages that if the instrument is
37-26 not paid when due he will pay it according to its tenor, but only
37-27 after the holder has reduced his claim against the maker or
37-28 acceptor to judgment and execution has been returned unsatisfied,
37-29 or after the maker or acceptor has become insolvent or it is
37-30 otherwise apparent that it is useless to proceed against him.>
37-31 <(c) Words of guaranty which do not otherwise specify
37-32 guarantee payment.>
37-33 <(d) No words of guaranty added to the signature of a sole
37-34 maker or acceptor affect his liability on the instrument. Such
37-35 words added to the signature of one of two or more makers or
37-36 acceptors create a presumption that the signature is for the
37-37 accommodation of the others.>
37-38 <(e) When words of guaranty are used presentment, notice of
37-39 dishonor and protest are not necessary to charge the user.>
37-40 <(f) Any guaranty written on the instrument is enforceable
37-41 notwithstanding any statute of frauds.>
37-42 <Sec. 3.417. ><Warranties on Presentment and Transfer><.
37-43 (a) Any person who obtains payment or acceptance and any prior
37-44 transferor warrants to a person who in good faith pays or accepts
37-45 that>
37-46 <(1) he has a good title to the instrument or is
37-47 authorized to obtain payment or acceptance on behalf of one who has
37-48 a good title; and>
37-49 <(2) he has no knowledge that the signature of the
37-50 maker or drawer is unauthorized, except that this warranty is not
37-51 given by a holder in due course acting in good faith>
37-52 <(A) to a maker with respect to the maker's own
37-53 signature; or>
37-54 <(B) to a drawer with respect to the drawer's
37-55 own signature, whether or not the drawer is also the drawee; or>
37-56 <(C) to an acceptor of a draft if the holder in
37-57 due course took the draft after the acceptance or obtained the
37-58 acceptance without knowledge that the drawer's signature was
37-59 unauthorized; and>
37-60 <(3) the instrument has not been materially altered,
37-61 except that this warranty is not given by a holder in due course
37-62 acting in good faith>
37-63 <(A) to the maker of a note; or>
37-64 <(B) to the drawer of a draft whether or not the
37-65 drawer is also the drawee; or>
37-66 <(C) to the acceptor of a draft with respect to
37-67 an alteration made prior to the acceptance if the holder in due
37-68 course took the draft after the acceptance, even though the
37-69 acceptance provided "payable as originally drawn" or equivalent
37-70 terms; or>
38-1 <(D) to the acceptor of a draft with respect to
38-2 an alteration made after the acceptance.>
38-3 <(b) Any person who transfers an instrument and receives
38-4 consideration warrants to his transferee and if the transfer is by
38-5 indorsement to any subsequent holder who takes the instrument in
38-6 good faith that>
38-7 <(1) he has a good title to the instrument or is
38-8 authorized to obtain payment or acceptance on behalf of one who has
38-9 a good title and the transfer is otherwise rightful; and>
38-10 <(2) all signatures are genuine or authorized; and>
38-11 <(3) the instrument has not been materially altered;
38-12 and>
38-13 <(4) no defense of any party is good against him; and>
38-14 <(5) he has no knowledge of any insolvency proceeding
38-15 instituted with respect to the maker or acceptor or the drawer of
38-16 an unaccepted instrument.>
38-17 <(c) By transferring "without recourse" the transferor
38-18 limits the obligation stated in Subsection (b)(4) to a warranty
38-19 that he has no knowledge of such a defense.>
38-20 <(d) A selling agent or broker who does not disclose the
38-21 fact that he is acting only as such gives the warranties provided
38-22 in this section, but if he makes such disclosure warrants only his
38-23 good faith and authority.>
38-24 <Sec. 3.418. ><Finality of Payment or Acceptance><. Except for
38-25 recovery of bank payments as provided in the chapter on Bank
38-26 Deposits and Collections (Chapter 4) and except for liability for
38-27 breach of warranty on presentment under the preceding section,
38-28 payment or acceptance of any instrument is final in favor of a
38-29 holder in due course, or a person who has in good faith changed his
38-30 position in reliance on the payment.>
38-31 <Sec. 3.419. ><Conversion of Instrument; Innocent
38-32 Representative><. (a) An instrument is converted when>
38-33 <(1) a drawee to whom it is delivered for acceptance
38-34 refuses to return it on demand; or>
38-35 <(2) any person to whom it is delivered for payment
38-36 refuses on demand either to pay or to return it; or>
38-37 <(3) it is paid on a forged indorsement.>
38-38 <(b) In an action against a drawee under Subsection (a) the
38-39 measure of the drawee's liability is the face amount of the
38-40 instrument. In any other action under Subsection (a) the measure
38-41 of liability is presumed to be the face amount of the instrument.>
38-42 <(c) Subject to the provisions of this title concerning
38-43 restrictive indorsements a representative, including a depositary
38-44 or collecting bank, who has in good faith and in accordance with
38-45 the reasonable commercial standards applicable to the business of
38-46 such representative dealt with an instrument or its proceeds on
38-47 behalf of one who was not the true owner is not liable in
38-48 conversion or otherwise to the true owner beyond the amount of any
38-49 proceeds remaining in his hands.>
38-50 <(d) An intermediary bank or payor bank which is not a
38-51 depositary bank is not liable in conversion solely by reason of the
38-52 fact that proceeds of an item indorsed restrictively (Sections
38-53 3.205 and 3.206) are not paid or applied consistently with the
38-54 restrictive indorsement of an indorser other than its immediate
38-55 transferor.>
38-56 <SUBCHAPTER E. PRESENTMENT, NOTICE OF DISHONOR AND PROTEST>
38-57 <Sec. 3.501. ><When Presentment, Notice of Dishonor, and
38-58 Protest Necessary or Permissible><. (a) Unless excused (Section
38-59 3.511) presentment is necessary to charge secondary parties as
38-60 follows:>
38-61 <(1) presentment for acceptance is necessary to charge
38-62 the drawer and indorsers of a draft where the draft so provides, or
38-63 is payable elsewhere than at the residence or place of business of
38-64 the drawee, or its date of payment depends upon such presentment.
38-65 The holder may at his option present for acceptance any other draft
38-66 payable at a stated date;>
38-67 <(2) presentment for payment is necessary to charge
38-68 any indorser;>
38-69 <(3) in the case of any drawer, the acceptor of a
38-70 draft payable at a bank or the maker of a note payable at a bank,
39-1 presentment for payment is necessary, but failure to make
39-2 presentment discharges such drawer, acceptor or maker only as
39-3 stated in Section 3.502(a)(2).>
39-4 <(b) Unless excused (Section 3.511)>
39-5 <(1) notice of any dishonor is necessary to charge any
39-6 indorser;>
39-7 <(2) in the case of any drawer, the acceptor of a
39-8 draft payable at a bank or the maker of a note payable at a bank,
39-9 notice of any dishonor is necessary, but failure to give such
39-10 notice discharges such drawer, acceptor or maker only as stated in
39-11 Section 3.502(a)(2).>
39-12 <(c) Unless excused (Section 3.511) protest of any dishonor
39-13 is necessary to charge the drawer and indorsers of any draft which
39-14 on its face appears to be drawn or payable outside of the states,
39-15 territories, dependencies and possessions of the United States, the
39-16 District of Columbia and the Commonwealth of Puerto Rico. The
39-17 holder may at his option make protest of any dishonor of any other
39-18 instrument and in the case of a foreign draft may on insolvency of
39-19 the acceptor before maturity make protest for better security.>
39-20 <(d) Notwithstanding any provision of this section, neither
39-21 presentment nor notice of dishonor nor protest is necessary to
39-22 charge an indorser who has indorsed an instrument after maturity.>
39-23 <Sec. 3.502. ><Unexcused Delay; Discharge><. (a) Where without
39-24 excuse any necessary presentment or notice of dishonor is delayed
39-25 beyond the time when it is due>
39-26 <(1) any indorser is discharged; and>
39-27 <(2) any drawer or the acceptor of a draft payable at
39-28 a bank or the maker of a note payable at a bank who because the
39-29 drawee or payor bank becomes insolvent during the delay is deprived
39-30 of funds maintained with the drawee or payor bank to cover the
39-31 instrument may discharge his liability by written assignment to the
39-32 holder of his rights against the drawee or payor bank in respect of
39-33 such funds, but such drawer, acceptor or maker is not otherwise
39-34 discharged.>
39-35 <(b) Where without excuse a necessary protest is delayed
39-36 beyond the time when it is due any drawer or indorser is
39-37 discharged.>
39-38 <Sec. 3.503. ><Time of Presentment><. (a) Unless a different
39-39 time is expressed in the instrument the time for any presentment is
39-40 determined as follows:>
39-41 <(1) where an instrument is payable at or a fixed
39-42 period after a stated date any presentment for acceptance must be
39-43 made on or before the date it is payable;>
39-44 <(2) where an instrument is payable after sight it
39-45 must either be presented for acceptance or negotiated within a
39-46 reasonable time after date or issue whichever is later;>
39-47 <(3) where an instrument shows the date on which it is
39-48 payable presentment for payment is due on that date;>
39-49 <(4) where an instrument is accelerated presentment
39-50 for payment is due within a reasonable time after the acceleration;>
39-51 <(5) with respect to the liability of any secondary
39-52 party presentment for acceptance or payment of any other instrument
39-53 is due within a reasonable time after such party becomes liable
39-54 thereon.>
39-55 <(b) A reasonable time for presentment is determined by the
39-56 nature of the instrument, any usage of banking or trade and the
39-57 facts of the particular case. In the case of an uncertified check
39-58 which is drawn and payable within the United States and which is
39-59 not a draft drawn by a bank the following are presumed to be
39-60 reasonable periods within which to present for payment or to
39-61 initiate bank collection:>
39-62 <(1) with respect to the liability of the drawer,
39-63 thirty days after date or issue whichever is later; and>
39-64 <(2) with respect to the liability of an indorser,
39-65 seven days after his indorsement.>
39-66 <(c) Where any presentment is due on a day which is not a
39-67 full business day for either the person making presentment or the
39-68 party to pay or accept, presentment is due on the next following
39-69 day which is a full business day for both parties.>
39-70 <(d) Presentment to be sufficient must be made at a
40-1 reasonable hour, and if at a bank during its banking day.>
40-2 <Sec. 3.504. ><How Presentment Made><. (a) Presentment is a
40-3 demand for acceptance or payment made upon the maker, acceptor,
40-4 drawee or other payor by or on behalf of the holder.>
40-5 <(b) Presentment may be made>
40-6 <(1) by mail, in which event the time of presentment
40-7 is determined by the time of receipt of the mail; or>
40-8 <(2) through a clearing house; or>
40-9 <(3) at the place of acceptance or payment specified
40-10 in the instrument or if there be none at the place of business or
40-11 residence of the party to accept or pay. If neither the party to
40-12 accept or pay nor anyone authorized to act for him is present or
40-13 accessible at such place presentment is excused.>
40-14 <(c) It may be made>
40-15 <(1) to any one of two or more makers, acceptors,
40-16 drawees or other payors; or>
40-17 <(2) to any person who has authority to make or refuse
40-18 the acceptance or payment.>
40-19 <(d) A draft accepted or a note made payable at a bank in
40-20 the United States must be presented at such bank.>
40-21 <(e) In the cases described in Section 4.210 presentment may
40-22 be made in the manner and with the result stated in that section.>
40-23 <Sec. 3.505. ><Rights of Party to Whom Presentment Is Made><.
40-24 (a) The party to whom presentment is made may without dishonor
40-25 require>
40-26 <(1) exhibition of the instrument; and>
40-27 <(2) reasonable identification of the person making
40-28 presentment and evidence of his authority to make it if made for
40-29 another; and>
40-30 <(3) that the instrument be produced for acceptance or
40-31 payment at a place specified in it, or if there be none at any
40-32 place reasonable in the circumstances; and>
40-33 <(4) a signed receipt on the instrument for any
40-34 partial or full payment and its surrender upon full payment.>
40-35 <(b) Failure to comply with any such requirement invalidates
40-36 the presentment but the person presenting has a reasonable time in
40-37 which to comply and the time for acceptance or payment runs from
40-38 the time of compliance.>
40-39 <Sec. 3.506. ><Time Allowed for Acceptance or Payment><.
40-40 (a) Acceptance may be deferred without dishonor until the close of
40-41 the next business day following presentment. The holder may also
40-42 in a good faith effort to obtain acceptance and without either
40-43 dishonor of the instrument or discharge of secondary parties allow
40-44 postponement of acceptance for an additional business day.>
40-45 <(b) Except as a longer time is allowed in the case of
40-46 documentary drafts drawn under a letter of credit, and unless an
40-47 earlier time is agreed to by the party to pay, payment of an
40-48 instrument may be deferred without dishonor pending reasonable
40-49 examination to determine whether it is properly payable, but
40-50 payment must be made in any event before the close of business on
40-51 the day of presentment.>
40-52 <Sec. 3.507. ><Dishonor; Holder's Right of Recourse; Term
40-53 Allowing Re-Presentment><. (a) An instrument is dishonored when>
40-54 <(1) a necessary or optional presentment is duly made
40-55 and due acceptance or payment is refused or cannot be obtained
40-56 within the prescribed time or in case of bank collections the
40-57 instrument is seasonably returned by the midnight deadline (Section
40-58 4.301); or>
40-59 <(2) presentment is excused and the instrument is not
40-60 duly accepted or paid.>
40-61 <(b) Subject to any necessary notice of dishonor and
40-62 protest, the holder has upon dishonor an immediate right of
40-63 recourse against the drawers and indorsers.>
40-64 <(c) Return of an instrument for lack of proper indorsement
40-65 is not dishonor.>
40-66 <(d) A term in a draft or an indorsement thereof allowing a
40-67 stated time for re-presentment in the event of any dishonor of the
40-68 draft by nonacceptance if a time draft or by nonpayment if a sight
40-69 draft gives the holder as against any secondary party bound by the
40-70 term an option to waive the dishonor without affecting the
41-1 liability of the secondary party and he may present again up to the
41-2 end of the stated time.>
41-3 <Sec. 3.508. ><Notice of Dishonor><. (a) Notice of dishonor
41-4 may be given to any person who may be liable on the instrument by
41-5 or on behalf of the holder or any party who has himself received
41-6 notice, or any other party who can be compelled to pay the
41-7 instrument. In addition an agent or bank in whose hands the
41-8 instrument is dishonored may give notice to his principal or
41-9 customer or to another agent or bank from which the instrument was
41-10 received.>
41-11 <(b) Any necessary notice must be given by a bank before its
41-12 midnight deadline and by any other person before midnight of the
41-13 third business day after dishonor or receipt of notice of dishonor.>
41-14 <(c) Notice may be given in any reasonable manner. It may
41-15 be oral or written and in any terms which identify the instrument
41-16 and state that it has been dishonored. A misdescription which does
41-17 not mislead the party notified does not vitiate the notice.
41-18 Sending the instrument bearing a stamp, ticket or writing stating
41-19 that acceptance or payment has been refused or sending a notice of
41-20 debit with respect to the instrument is sufficient.>
41-21 <(d) Written notice is given when sent although it is not
41-22 received.>
41-23 <(e) Notice to one partner is notice to each although the
41-24 firm has been dissolved.>
41-25 <(f) When any party is in insolvency proceedings instituted
41-26 after the issue of the instrument notice may be given either to the
41-27 party or to the representative of his estate.>
41-28 <(g) When any party is dead or incompetent notice may be
41-29 sent to his last known address or given to his personal
41-30 representative.>
41-31 <(h) Notice operates for the benefit of all parties who have
41-32 rights on the instrument against the party notified.>
41-33 <Sec. 3.509. ><Protest; Noting for Protest><. (a) A protest is
41-34 a certificate of dishonor made under the hand and seal of a United
41-35 States consul or vice-consul or a notary public or other person
41-36 authorized to certify dishonor by the law of the place where
41-37 dishonor occurs. It may be made upon information satisfactory to
41-38 such person.>
41-39 <(b) The protest must identify the instrument and certify
41-40 either that due presentment has been made or the reason why it is
41-41 excused and that the instrument has been dishonored by
41-42 nonacceptance or nonpayment.>
41-43 <(c) The protest may also certify that notice of dishonor
41-44 has been given to all parties or to specified parties.>
41-45 <(d) Subject to Subsection (e) any necessary protest is due
41-46 by the time that notice of dishonor is due.>
41-47 <(e) If, before protest is due, an instrument has been noted
41-48 for protest by the officer to make protest, the protest may be made
41-49 at any time thereafter as of the date of the noting.>
41-50 <Sec. 3.510. ><Evidence of Dishonor and Notice of Dishonor><.
41-51 The following are admissible as evidence and create a presumption
41-52 of dishonor and of any notice of dishonor therein shown:>
41-53 <(1) a document regular in form as provided in the
41-54 preceding section which purports to be a protest;>
41-55 <(2) the purported stamp or writing of the drawee,
41-56 payor bank or presenting bank on the instrument or accompanying it
41-57 stating that acceptance or payment has been refused for reasons
41-58 consistent with dishonor;>
41-59 <(3) any book or record of the drawee, payor bank, or
41-60 any collecting bank kept in the usual course of business which
41-61 shows dishonor, even though there is no evidence of who made the
41-62 entry.>
41-63 <Sec. 3.511. ><Waived or Excused Presentment, Protest or
41-64 Notice of Dishonor or Delay Therein><. (a) Delay in presentment,
41-65 protest or notice of dishonor is excused when the party is without
41-66 notice that it is due or when the delay is caused by circumstances
41-67 beyond his control and he exercises reasonable diligence after the
41-68 cause of the delay ceases to operate.>
41-69 <(b) Presentment or notice or protest as the case may be is
41-70 entirely excused when>
42-1 <(1) the party to be charged has waived it expressly
42-2 or by implication either before or after it is due; or>
42-3 <(2) such party has himself dishonored the instrument
42-4 or has countermanded payment or otherwise has no reason to expect
42-5 or right to require that the instrument be accepted or paid; or>
42-6 <(3) by reasonable diligence the presentment or
42-7 protest cannot be made or the notice given.>
42-8 <(c) Presentment is also entirely excused when>
42-9 <(1) the maker, acceptor or drawee of any instrument
42-10 except a documentary draft is dead or in insolvency proceedings
42-11 instituted after the issue of the instrument; or>
42-12 <(2) acceptance or payment is refused but not for want
42-13 of proper presentment.>
42-14 <(d) Where a draft has been dishonored by nonacceptance a
42-15 later presentment for payment and any notice of dishonor and
42-16 protest for nonpayment are excused unless in the meantime the
42-17 instrument has been accepted.>
42-18 <(e) A waiver of protest is also a waiver of presentment and
42-19 of notice of dishonor even though protest is not required.>
42-20 <(f) Where a waiver of presentment or notice or protest is
42-21 embodied in the instrument itself it is binding upon all parties;
42-22 but where it is written above the signature of an indorser it binds
42-23 him only.>
42-24 <SUBCHAPTER F. DISCHARGE>
42-25 <Sec. 3.601. ><Discharge of Parties><. (a) The extent of the
42-26 discharge of any party from liability on an instrument is governed
42-27 by the sections on>
42-28 <(1) payment or satisfaction (Section 3.603); or>
42-29 <(2) tender of payment (Section 3.604); or>
42-30 <(3) cancellation or renunciation (Section 3.605); or>
42-31 <(4) impairment of right of recourse or of collateral
42-32 (Section 3.606); or>
42-33 <(5) reacquisition of the instrument by a prior party
42-34 (Section 3.208); or>
42-35 <(6) fraudulent and material alteration (Section
42-36 3.407); or>
42-37 <(7) certification of a check (Section 3.411); or>
42-38 <(8) acceptance varying a draft (Section 3.412); or>
42-39 <(9) unexcused delay in presentment or notice of
42-40 dishonor or protest (Section 3.502).>
42-41 <(b) Any party is also discharged from his liability on an
42-42 instrument to another party by any other act or agreement with such
42-43 party which would discharge his simple contract for the payment of
42-44 money.>
42-45 <(c) The liability of all parties is discharged when any
42-46 party who has himself no right of action or recourse on the
42-47 instrument>
42-48 <(1) reacquires the instrument in his own right; or>
42-49 <(2) is discharged under any provision of this
42-50 Chapter, except as otherwise provided with respect to discharge for
42-51 impairment of recourse or of collateral (Section 3.606).>
42-52 <Sec. 3.602. ><Effect of Discharge Against Holder in Due
42-53 Course><. No discharge of any party provided by this chapter is
42-54 effective against a subsequent holder in due course unless he has
42-55 notice thereof when he takes the instrument.>
42-56 <Sec. 3.603. ><Payment or Satisfaction><. (a) The liability of
42-57 any party is discharged to the extent of his payment or
42-58 satisfaction to the holder even though it is made with knowledge of
42-59 a claim of another person to the instrument unless prior to such
42-60 payment or satisfaction the person making the claim either supplies
42-61 indemnity deemed adequate by the party seeking the discharge or
42-62 enjoins payment or satisfaction by order of a court of competent
42-63 jurisdiction in an action in which the adverse claimant and the
42-64 holder are parties. This subsection does not, however, result in
42-65 the discharge of the liability>
42-66 <(1) of a party who in bad faith pays or satisfies a
42-67 holder who acquired the instrument by theft or who (unless having
42-68 the rights of a holder in due course) holds through one who so
42-69 acquired it; or>
42-70 <(2) of a party (other than an intermediary bank or a
43-1 payor bank which is not a depositary bank) who pays or satisfies
43-2 the holder of an instrument which has been restrictively indorsed
43-3 in a manner not consistent with the terms of such restrictive
43-4 indorsement.>
43-5 <(b) Payment or satisfaction may be made with the consent of
43-6 the holder by any person including a stranger to the instrument.
43-7 Surrender of the instrument to such a person gives him the rights
43-8 of a transferee (Section 3.201).>
43-9 <Sec. 3.604. ><Tender of Payment><. (a) Any party making
43-10 tender of full payment to a holder when or after it is due is
43-11 discharged to the extent of all subsequent liability for interest,
43-12 costs and attorney's fees.>
43-13 <(b) The holder's refusal of such tender wholly discharges
43-14 any party who has a right of recourse against the party making the
43-15 tender.>
43-16 <(c) Where the maker or acceptor of an instrument payable
43-17 otherwise than on demand is able and ready to pay at every place of
43-18 payment specified in the instrument when it is due, it is
43-19 equivalent to tender.>
43-20 <Sec. 3.605. ><Cancellation and Renunciation><. (a) The holder
43-21 of an instrument may even without consideration discharge any party>
43-22 <(1) in any manner apparent on the face of the
43-23 instrument or the indorsement, as by intentionally cancelling the
43-24 instrument or the party's signature by destruction or mutilation,
43-25 or by striking out the party's signature; or>
43-26 <(2) by renouncing his rights by a writing signed and
43-27 delivered or by surrender of the instrument to the party to be
43-28 discharged.>
43-29 <(b) Neither cancellation nor renunciation without surrender
43-30 of the instrument affects the title thereto.>
43-31 <Sec. 3.606. ><Impairment of Recourse or of Collateral><.
43-32 (a) The holder discharges any party to the instrument to the
43-33 extent that without such party's consent the holder>
43-34 <(1) without express reservation of rights releases or
43-35 agrees not to sue any person against whom the party has to the
43-36 knowledge of the holder a right of recourse or agrees to suspend
43-37 the right to enforce against such person the instrument or
43-38 collateral or otherwise discharges such person, except that failure
43-39 or delay in effecting any required presentment, protest or notice
43-40 of dishonor with respect to any such person does not discharge any
43-41 party as to whom presentment, protest or notice of dishonor is
43-42 effective or unnecessary; or>
43-43 <(2) unjustifiably impairs any collateral for the
43-44 instrument given by or on behalf of the party or any person against
43-45 whom he has a right of recourse.>
43-46 <(b) By express reservation of rights against a party with a
43-47 right of recourse the holder preserves>
43-48 <(1) all his rights against such party as of the time
43-49 when the instrument was originally due; and>
43-50 <(2) the right of the party to pay the instrument as
43-51 of that time; and>
43-52 <(3) all rights of such party to recourse against
43-53 others.>
43-54 <SUBCHAPTER G. ADVICE OF INTERNATIONAL SIGHT DRAFT>
43-55 <Sec. 3.701. ><Letter of Advice of International Sight Draft><.
43-56 (a) A "letter of advice" is a drawer's communication to the drawee
43-57 that a described draft has been drawn.>
43-58 <(b) Unless otherwise agreed when a bank receives from
43-59 another bank a letter of advice of an international sight draft the
43-60 drawee bank may immediately debit the drawer's account and stop the
43-61 running of interest pro tanto. Such a debit and any resulting
43-62 credit to any account covering outstanding drafts leaves in the
43-63 drawer full power to stop payment or otherwise dispose of the
43-64 amount and creates no trust or interest in favor of the holder.>
43-65 <(c) Unless otherwise agreed and except where a draft is
43-66 drawn under a credit issued by the drawee, the drawee of an
43-67 international sight draft owes the drawer no duty to pay an
43-68 unadvised draft but if it does so and the draft is genuine, may
43-69 appropriately debit the drawer's account.>
43-70 <SUBCHAPTER H. MISCELLANEOUS>
44-1 <Sec. 3.801. ><Drafts in a Set><. (a) Where a draft is drawn
44-2 in a set of parts, each of which is numbered and expressed to be an
44-3 order only if no other part has been honored, the whole of the
44-4 parts constitutes one draft but a taker of any part may become a
44-5 holder in due course of the draft.>
44-6 <(b) Any person who negotiates, indorses or accepts a single
44-7 part of a draft drawn in a set thereby becomes liable to any holder
44-8 in due course of that part as if it were the whole set, but as
44-9 between different holders in due course to whom different parts
44-10 have been negotiated the holder whose title first accrues has all
44-11 rights to the draft and its proceeds.>
44-12 <(c) As against the drawee the first presented part of a
44-13 draft drawn in a set is the part entitled to payment, or if a time
44-14 draft to acceptance and payment. Acceptance of any subsequently
44-15 presented part renders the drawee liable thereon under Subsection
44-16 (b). With respect both to a holder and to the drawer payment of a
44-17 subsequently presented part of a draft payable at sight has the
44-18 same effect as payment of a check notwithstanding an effective stop
44-19 order (Section 4.407).>
44-20 <(d) Except as otherwise provided in this section, where any
44-21 part of a draft in a set is discharged by payment or otherwise the
44-22 whole draft is discharged.>
44-23 <Sec. 3.802. ><Effect of Instrument on Obligation for Which It
44-24 Is Given><. (a) Unless otherwise agreed where an instrument is
44-25 taken for an underlying obligation>
44-26 <(1) the obligation is pro tanto discharged if a bank
44-27 is drawer, maker or acceptor of the instrument and there is no
44-28 recourse on the instrument against the underlying obligor; and>
44-29 <(2) in any other case the obligation is suspended pro
44-30 tanto until the instrument is due or if it is payable on demand
44-31 until its presentment. If the instrument is dishonored action may
44-32 be maintained on either the instrument or the obligation; discharge
44-33 of the underlying obligor on the instrument also discharges him on
44-34 the obligation.>
44-35 <(b) The taking in good faith of a check which is not
44-36 postdated does not of itself so extend the time on the original
44-37 obligation as to discharge a surety.>
44-38 <Sec. 3.803. ><Notice to Third Party><. Where a defendant is
44-39 sued for breach of an obligation for which a third person is
44-40 answerable over under this chapter he may give the third person
44-41 written notice of the litigation, and the person notified may then
44-42 give similar notice to any other person who is answerable over to
44-43 him under this chapter. If the notice states that the person
44-44 notified may come in and defend and that if the person notified
44-45 does not do so he will in any action against him by the person
44-46 giving the notice be bound by any determination of fact common to
44-47 the two litigations, then unless after seasonable receipt of the
44-48 notice the person notified does come in and defend he is so bound.>
44-49 <Sec. 3.804. ><Lost, Destroyed or Stolen Instruments><. The
44-50 owner of an instrument which is lost, whether by destruction, theft
44-51 or otherwise, may maintain an action in his own name and recover
44-52 from any party liable thereon upon due proof of his ownership, the
44-53 facts which prevent his production of the instrument and its terms.
44-54 The court may require security indemnifying the defendant against
44-55 loss by reason of further claims on the instrument.>
44-56 <Sec. 3.805. ><Instruments Not Payable to Order or to Bearer><.
44-57 This chapter applies to any instrument whose terms do not preclude
44-58 transfer and which is otherwise negotiable within this chapter but
44-59 which is not payable to order or to bearer, except that there can
44-60 be no holder in due course of such an instrument.>
44-61 SECTION 2. Sections 1.201(20), (24), (43), and (44),
44-62 Business & Commerce Code, are amended to read as follows:
44-63 (20) "Holder" with respect to a negotiable instrument
44-64 means the person in possession if the instrument is payable to
44-65 bearer or, in the case of an instrument payable to an identified
44-66 person, if the identified person is in possession. "Holder" with
44-67 respect to a document of title means the person in possession if
44-68 the goods are deliverable to bearer or to the order of the person
44-69 in possession <means a person who is in possession of a document of
44-70 title or an instrument or a certificated investment security drawn,
45-1 issued, or indorsed to him or to his order or to bearer or in
45-2 blank>.
45-3 (24) "Money" means a medium of exchange authorized or
45-4 adopted by a domestic or foreign government and includes a monetary
45-5 unit of account established by an intergovernmental organization or
45-6 by agreement between two or more nations <as a part of its
45-7 currency>.
45-8 (43) "Unauthorized" signature <or indorsement> means
45-9 one made without actual, implied, or apparent authority and
45-10 includes a forgery.
45-11 (44) "Value". Except as otherwise provided with
45-12 respect to negotiable instruments and bank collections (Sections
45-13 3.303, 4.210, <4.208> and 4.211 <4.209>) a person gives "value" for
45-14 rights if he acquires them:
45-15 (A) in return for a binding commitment to extend
45-16 credit or for the extension of immediately available credit whether
45-17 or not drawn upon and whether or not a charge-back is provided for
45-18 in the event of difficulties in collection; <or>
45-19 (B) as security for or in total or partial
45-20 satisfaction of a pre-existing claim; <or>
45-21 (C) by accepting delivery pursuant to a
45-22 pre-existing contract for purchase; or
45-23 (D) generally, in return for any consideration
45-24 sufficient to support a simple contract.
45-25 SECTION 3. Section 1.207, Business & Commerce Code, is
45-26 amended to read as follows:
45-27 Sec. 1.207. Performance or Acceptance Under Reservation of
45-28 Rights. (a) A party who, with explicit reservation of rights,
45-29 performs or promises performance or assents to performance in a
45-30 manner demanded or offered by the other party does not thereby
45-31 prejudice the rights reserved. Such words as "without prejudice",
45-32 "under protest", or the like are sufficient.
45-33 (b) Subsection (a) does not apply to an accord and
45-34 satisfaction.
45-35 SECTION 4. Chapter 4, Business & Commerce Code, is amended
45-36 to read as follows:
45-37 CHAPTER 4. BANK DEPOSITS AND COLLECTIONS
45-38 SUBCHAPTER A. GENERAL PROVISIONS AND DEFINITIONS
45-39 Sec. 4.101. SHORT TITLE. This chapter may be cited as
45-40 Uniform Commercial Code--Bank Deposits and Collections.
45-41 Sec. 4.102. APPLICABILITY. (a) To the extent that items
45-42 within this chapter are also within <the scope of> Chapters 3 and
45-43 8, they are subject to <the provisions of> those chapters. If
45-44 there is <In the event of> conflict, <the provisions of> this
45-45 chapter governs <govern those of> Chapter 3, but <the provisions
45-46 of> Chapter 8 governs <govern those of> this chapter.
45-47 (b) The liability of a bank for action or non-action with
45-48 respect to an <any> item handled by it for purposes of presentment,
45-49 payment, or collection is governed by the law of the place where
45-50 the bank is located. In the case of action or non-action by or at
45-51 a branch or separate office of a bank, its liability is governed by
45-52 the law of the place where the branch or separate office is
45-53 located.
45-54 Sec. 4.103. Variation by Agreement; Measure of Damages;
45-55 <Certain> Action Constituting Ordinary Care. (a) The effect of
45-56 the provisions of this chapter may be varied by agreement, but the
45-57 parties to the agreement cannot <except that no agreement can>
45-58 disclaim a bank's responsibility for its <own> lack of good faith
45-59 or failure to exercise ordinary care or <can> limit the measure of
45-60 damages for the <such> lack or failure. However,<; but> the
45-61 parties may determine by agreement <determine> the standards by
45-62 which the bank's <such> responsibility is to be measured if those
45-63 <such> standards are not manifestly unreasonable.
45-64 (b) Federal Reserve regulations and operating circulars
45-65 <letters>, clearing-house <clearing house> rules, and the like<,>
45-66 have the effect of agreements under Subsection (a), whether or not
45-67 specifically assented to by all parties interested in items
45-68 handled.
45-69 (c) Action or non-action approved by this chapter or
45-70 pursuant to Federal Reserve regulations or operating circulars is
46-1 <letters constitutes> the exercise of ordinary care and, in the
46-2 absence of special instructions, action or non-action consistent
46-3 with clearing-house <clearing house> rules and the like or with a
46-4 general banking usage not disapproved by this chapter, is prima
46-5 facie <constitutes> the exercise of ordinary care.
46-6 (d) The specification or approval of certain procedures by
46-7 this chapter is not <does not constitute> disapproval of other
46-8 procedures that <which> may be reasonable under the circumstances.
46-9 (e) The measure of damages for failure to exercise ordinary
46-10 care in handling an item is the amount of the item reduced by an
46-11 amount that <which> could not have been realized by the exercise
46-12 <use> of ordinary care. If<, and where> there is also bad faith,
46-13 it includes any other damages<, if any, suffered by> the party
46-14 suffered as a proximate consequence.
46-15 Sec. 4.104. Definitions and Index of Definitions. (a) In
46-16 this chapter, unless the context otherwise requires:
46-17 (1) "Account" means any deposit or credit account with
46-18 a bank, including a demand, time, savings, passbook, share draft,
46-19 or like account, other than an account evidenced by a certificate
46-20 of deposit. <and includes a checking, time, interest or savings
46-21 account;>
46-22 (2) "Afternoon" means the period of a day between noon
46-23 and midnight.<;>
46-24 (3) "Banking day" means the <that> part of a <any> day
46-25 on which a bank is open to the public for carrying on substantially
46-26 all of its banking functions.<;>
46-27 (4) "Clearing house" means an <any> association of
46-28 banks or other payors regularly clearing items.<;>
46-29 (5) "Customer" means a <any> person having an account
46-30 with a bank or for whom a bank has agreed to collect items,
46-31 including <and includes> a bank that maintains <carrying> an
46-32 account at <with> another bank.<;>
46-33 (6) "Documentary draft" means a draft to be presented
46-34 for acceptance or payment if specified documents, certificated
46-35 securities (Section 8.102) or instructions for uncertificated
46-36 securities (Section 8.308), or other certificates, statements, or
46-37 the like are to be received by the drawee or other payor before
46-38 acceptance or payment of the draft. <any negotiable or
46-39 non-negotiable draft with accompanying documents, securities or
46-40 other papers to be delivered against honor of the draft;>
46-41 (7) "Draft" means a draft as defined in Section 3.104
46-42 or an item, other than an instrument, that is an order.
46-43 (8) "Drawee" means a person ordered in a draft to make
46-44 payment.
46-45 (9) <(7)> "Item" means an instrument or a promise or
46-46 order to pay money handled by a bank for collection or payment.
46-47 The term does not include a payment order governed by Chapter 4A or
46-48 a credit or debit card slip. <any instrument for the payment of
46-49 money even though it is not negotiable but does not include money;>
46-50 (10) <(8)> "Midnight deadline" with respect to a bank
46-51 is midnight on its next banking day following the banking day on
46-52 which it receives the relevant item or notice or from which the
46-53 time for taking action commences to run, whichever is later.<;>
46-54 <(9) "Properly payable" includes the availability of
46-55 funds for payment at the time of decision to pay or dishonor;>
46-56 (11) <(10)> "Settle" means to pay in cash, by
46-57 clearing-house <clearing house> settlement, in a charge or credit
46-58 or by remittance, or otherwise as agreed <instructed>. A
46-59 settlement may be either provisional or final.<;>
46-60 (12) <(11)> "Suspends payments" with respect to a bank
46-61 means that it has been closed by order of the supervisory
46-62 authorities, that a public officer has been appointed to take it
46-63 over, or that it ceases or refuses to make payments in the ordinary
46-64 course of business.
46-65 (b) Other definitions applying to this chapter and the
46-66 sections in which they appear are:
46-67 "Agreement for electronic
46-68 presentment" Section 4.110.
46-69 "Bank" Section 4.105.
46-70 "Collecting bank" Section 4.105.
47-1 "Depositary bank" Section 4.105.
47-2 "Intermediary bank" Section 4.105.
47-3 "Payor bank" Section 4.105.
47-4 "Presenting bank" Section 4.105.
47-5 "Presentment notice" Section 4.110.
47-6 <"Remitting bank"> <Section 4.105.>
47-7 (c) The following definitions in other chapters apply to
47-8 this chapter:
47-9 "Acceptance" Section 3.409 <3.410>.
47-10 "Alteration" Section 3.407.
47-11 "Cashier's check" Section 3.104.
47-12 "Certificate of deposit" Section 3.104.
47-13 "Certified check" Section 3.409.
47-14 <"Certification"> <Section 3.411.>
47-15 "Check" Section 3.104.
47-16 <"Draft"> <Section 3.104.>
47-17 "Good faith" Section 3.103.
47-18 "Holder in due course" Section 3.302.
47-19 "Instrument" Section 3.104.
47-20 "Notice of dishonor" Section 3.503 <3.508>.
47-21 "Order" Section 3.103.
47-22 "Ordinary care" Section 3.103.
47-23 "Person entitled to enforce" Section 3.301.
47-24 "Presentment" Section 3.501 <3.504>.
47-25 "Promise" Section 3.103.
47-26 "Prove" Section 3.103.
47-27 "Teller's check" Section 3.104.
47-28 "Unauthorized signature" Section 3.403.
47-29 <"Protest"> <Section 3.509.>
47-30 <"Secondary party"> <Section 3.102.>
47-31 (d) In addition, Chapter 1 contains general definitions and
47-32 principles of construction and interpretation applicable throughout
47-33 this chapter.
47-34 Sec. 4.105. "BANK"; "Depositary Bank"; "Intermediary Bank";
47-35 "Collecting Bank"; "Payor Bank"; "Presenting Bank"<; "Remitting
47-36 Bank">. In this chapter <unless the context otherwise requires>:
47-37 (1) "Bank" means a person engaged in the business of
47-38 banking, including a savings bank, savings and loan association,
47-39 credit union, or trust company.
47-40 (2) "Depositary bank" means the first bank to take
47-41 <which> an item <is transferred for collection> even though it is
47-42 also the payor bank, unless the item is presented for immediate
47-43 payment over the counter.<;>
47-44 (3) <(2)> "Payor bank" means a bank that is the drawee
47-45 of a draft. <by which an item is payable as drawn or accepted;>
47-46 (4) <(3)> "Intermediary bank" means a <any> bank to
47-47 which an item is transferred in course of collection except the
47-48 depositary or payor bank.<;>
47-49 (5) <(4)> "Collecting bank" means a <any> bank
47-50 handling an <the> item for collection except the payor bank.<;>
47-51 (6) <(5)> "Presenting bank" means a <any> bank
47-52 presenting an item except a payor bank.<;>
47-53 <(6) "Remitting bank" means any payor or intermediary
47-54 bank remitting for an item.>
47-55 Sec. 4.106. PAYABLE THROUGH OR PAYABLE AT BANK; COLLECTING
47-56 BANK. (a) If an item states that it is "payable through" a bank
47-57 identified in the item, the item:
47-58 (1) designates the bank as a collecting bank and does
47-59 not by itself authorize the bank to pay the item; and
47-60 (2) may be presented for payment only by or through
47-61 the bank.
47-62 (b) If an item states that it is "payable at" a bank
47-63 identified in the item, the item is equivalent to a draft drawn on
47-64 the bank.
47-65 (c) If a draft names a nonbank drawee and it is unclear
47-66 whether a bank named in the draft is a co-drawee or a collecting
47-67 bank, the bank is a collecting bank.
47-68 Sec. 4.107 <4.106>. SEPARATE OFFICE OF A BANK. A branch or
47-69 separate office of a bank is a separate bank for the purpose of
47-70 computing the time within which and determining the place at or to
48-1 which action may be taken or notices or orders must <shall> be
48-2 given under this chapter and under Chapter 3.
48-3 Sec. 4.108 <4.107>. TIME OF RECEIPT OF ITEMS. (a) For the
48-4 purpose of allowing time to process items, prove balances, and make
48-5 the necessary entries on its books to determine its position for
48-6 the day, a bank may fix an afternoon hour of two P.M. or later as a
48-7 cutoff <cut-off> hour for the handling of money and items and the
48-8 making of entries on its books.
48-9 (b) An <Any> item or deposit of money received on any day
48-10 after a cutoff <cut-off> hour so fixed or after the close of the
48-11 banking day may be treated as being received at the opening of the
48-12 next banking day.
48-13 Sec. 4.109 <4.108>. DELAYS. (a) Unless otherwise
48-14 instructed, a collecting bank in a good faith effort to secure
48-15 payment <may, in the case> of a specific item drawn on a payor
48-16 other than a bank, <items> and with or without the approval of any
48-17 person involved, may waive, modify, or extend time limits imposed
48-18 or permitted by this title for a period not exceeding two <in
48-19 excess of an> additional banking days <day> without discharge of
48-20 drawers or indorsers or <secondary parties and without> liability
48-21 to its transferor or a <any> prior party.
48-22 (b) Delay by a collecting bank or payor bank beyond time
48-23 limits prescribed or permitted by this title or by instructions is
48-24 excused if:
48-25 (1) the delay is caused by interruption of
48-26 communication or computer facilities, suspension of payments by
48-27 another bank, war, emergency conditions, failure of equipment, or
48-28 other circumstances beyond the control of the bank; and
48-29 (2) the bank <provided it> exercises such diligence as
48-30 the circumstances require.
48-31 Sec. 4.110. ELECTRONIC PRESENTMENT. (a) "Agreement for
48-32 electronic presentment" means an agreement, clearing-house rule, or
48-33 Federal Reserve regulation or operating circular providing that
48-34 presentment of an item may be made by transmission of an image of
48-35 an item or information describing the item ("presentment notice")
48-36 rather than delivery of the item itself. The agreement may provide
48-37 for procedures governing retention, presentment, payment, dishonor,
48-38 and other matters concerning items subject to the agreement.
48-39 (b) Presentment of an item under an agreement for
48-40 presentment is made when the presentment notice is received.
48-41 (c) If presentment is made by presentment notice, a
48-42 reference to "item" or "check" in this chapter means the
48-43 presentment notice unless the context otherwise indicates.
48-44 Sec. 4.111. STATUTE OF LIMITATIONS. An action to enforce an
48-45 obligation, duty, or right arising under this chapter must be
48-46 commenced within three years after the cause of action accrues.
48-47 SUBCHAPTER B. COLLECTION OF ITEMS: DEPOSITARY AND
48-48 COLLECTING BANKS
48-49 Sec. 4.201. <PRESUMPTION AND DURATION OF AGENCY> STATUS OF
48-50 COLLECTING BANK AS AGENT <BANKS> AND PROVISIONAL STATUS OF CREDITS;
48-51 APPLICABILITY OF CHAPTER; ITEM INDORSED "PAY ANY BANK".
48-52 (a) Unless a contrary intent clearly appears and before <prior to>
48-53 the time that a settlement given by a collecting bank for an item
48-54 is or becomes final, <(Subsection (c) of Section 4.211 and Sections
48-55 4.212 and 4.213)> the bank, with respect to the item, is an agent
48-56 or sub-agent of the owner of the item and any settlement given for
48-57 the item is provisional. This provision applies regardless of the
48-58 form of indorsement or lack of indorsement and even though credit
48-59 given for the item is subject to immediate withdrawal as of right
48-60 or is in fact withdrawn; but the continuance of ownership of an
48-61 item by its owner and any rights of the owner to proceeds of the
48-62 item are subject to rights of a collecting bank, such as those
48-63 resulting from outstanding advances on the item and <valid> rights
48-64 of recoupment or setoff. If <When> an item is handled by banks for
48-65 purposes of presentment, payment, <and> collection, or return, the
48-66 relevant provisions of this chapter apply even though action of the
48-67 parties clearly establishes that a particular bank has purchased
48-68 the item and is the owner of it.
48-69 (b) After an item has been indorsed with the words "pay any
48-70 bank" or the like, only a bank may acquire the rights of a holder
49-1 until the item has been:
49-2 (1) <until the item has been> returned to the customer
49-3 initiating collection; or
49-4 (2) <until the item has been> specially indorsed by a
49-5 bank to a person who is not a bank.
49-6 Sec. 4.202. RESPONSIBILITY FOR COLLECTION OR RETURN; WHEN
49-7 ACTION TIMELY <SEASONABLE>. (a) A collecting bank must exercise
49-8 <use> ordinary care in:
49-9 (1) presenting an item or sending it for presentment;
49-10 <and>
49-11 (2) sending notice of dishonor or non-payment or
49-12 returning an item other than a documentary draft to the bank's
49-13 transferor <or directly to the depositary bank under Subsection (b)
49-14 of Section 4.212> after learning that the item has not been paid or
49-15 accepted, as the case may be; <and>
49-16 (3) settling for an item when the bank receives final
49-17 settlement; and
49-18 (4) <making or providing for any necessary protest;
49-19 and>
49-20 <(5)> notifying its transferor of any loss or delay in
49-21 transit within a reasonable time after discovery thereof.
49-22 (b) A collecting bank exercises ordinary care under
49-23 Subsection (a) by taking proper action before its midnight deadline
49-24 following receipt of an item, notice, or settlement. Taking
49-25 <payment acts seasonably; taking> proper action within a reasonably
49-26 longer time may constitute the exercise of ordinary care, <be
49-27 seasonable> but the bank has the burden of <so> establishing
49-28 timeliness.
49-29 (c) Subject to Subsection (a)(1), a bank is not liable for
49-30 the insolvency, neglect, misconduct, mistake, or default of another
49-31 bank or person or for loss or destruction of an item in the
49-32 possession of others or in transit <or in the possession of
49-33 others>.
49-34 Sec. 4.203. Effect of Instructions. Subject to <the
49-35 provisions of> Chapter 3 concerning conversion of instruments
49-36 (Section 3.420 <3.419>) and <the provisions of both Chapter 3 and
49-37 this chapter concerning> restrictive indorsements (Section 3.206),
49-38 only a collecting bank's transferor can give instructions that
49-39 <which> affect the bank or constitute notice to it, and a
49-40 collecting bank is not liable to prior parties for any action taken
49-41 pursuant to the <such> instructions or in accordance with any
49-42 agreement with its transferor.
49-43 Sec. 4.204. Methods of Sending and Presenting; Sending
49-44 DIRECTLY <Direct> to Payor Bank. (a) A collecting bank shall
49-45 <must> send items by a reasonably prompt method, taking into
49-46 consideration <any> relevant instructions, the nature of the item,
49-47 the number of those <such> items on hand, <and> the cost of
49-48 collection involved, and the method generally used by it or others
49-49 to present those <such> items.
49-50 (b) A collecting bank may send:
49-51 (1) an <any> item directly <direct> to the payor bank;
49-52 (2) an <any> item to a <any> non-bank payor if
49-53 authorized by its transferor; and
49-54 (3) an <any> item other than a documentary draft
49-55 <drafts> to a <any> non-bank payor, if authorized by Federal
49-56 Reserve regulation or operating circular <letter>, clearing-house
49-57 <clearing house> rule, or the like.
49-58 (c) Presentment may be made by a presenting bank at a place
49-59 where the payor bank or other payor has requested that presentment
49-60 be made.
49-61 Sec. 4.205. DEPOSITARY BANK HOLDER OF UNINDORSED ITEM
49-62 <Supplying Missing Indorsement; No Notice from Prior Indorsement>.
49-63 If a customer delivers an item to a depositary bank for collection,
49-64 the depositary bank:
49-65 (1) becomes a holder of the item at the time it
49-66 receives the item for collection if the customer at the time of
49-67 delivery was a holder of the item, whether or not the customer
49-68 indorses the item, and, if the bank satisfies the other
49-69 requirements of Section 3.302, the bank is a holder in due course;
49-70 and
50-1 (2) warrants to collecting banks, the payor bank or
50-2 other payor, and the drawer that the amount of the item was paid to
50-3 the customer or deposited to the customer's account. <(a) A
50-4 depositary bank which has taken an item for collection may supply
50-5 any indorsement of the customer which is necessary to title unless
50-6 the item contains the words "payee's indorsement required" or the
50-7 like. In the absence of such a requirement a statement placed on
50-8 the item by the depositary bank to the effect that the item was
50-9 deposited by a customer or credited to his account is effective as
50-10 the customer's indorsement.>
50-11 <(b) An intermediary bank, or payor bank which is not a
50-12 depositary bank, is neither given notice nor otherwise affected by
50-13 a restrictive indorsement of any person except the bank's immediate
50-14 transferor.>
50-15 Sec. 4.206. TRANSFER BETWEEN BANKS. Any agreed method that
50-16 <which> identifies the transferor bank is sufficient for the item's
50-17 further transfer to another bank.
50-18 Sec. 4.207. TRANSFER WARRANTIES. (a) A customer or
50-19 collecting bank that transfers an item and receives a settlement or
50-20 other consideration warrants to the transferee and to any
50-21 subsequent collecting bank that:
50-22 (1) the warrantor is a person entitled to enforce the
50-23 item;
50-24 (2) all signatures on the item are authentic and
50-25 authorized;
50-26 (3) the item has not been altered;
50-27 (4) the item is not subject to a defense or claim in
50-28 recoupment (Section 3.305(a)) of any party that can be asserted
50-29 against the warrantor; and
50-30 (5) the warrantor has no knowledge of any insolvency
50-31 proceeding commenced with respect to the maker or acceptor or, in
50-32 the case of an unaccepted draft, the drawer.
50-33 (b) If an item is dishonored, a customer or collecting bank
50-34 transferring the item and receiving settlement or other
50-35 consideration is obliged to pay the amount due on the item (i)
50-36 according to the terms of the item at the time it was transferred,
50-37 or (ii) if the transfer was of an incomplete item, according to its
50-38 terms when completed as stated in Sections 3.115 and 3.407. The
50-39 obligation of a transferor is owed to the transferee and to any
50-40 subsequent collecting bank that takes the item in good faith. A
50-41 transferor cannot disclaim its obligation under this subsection by
50-42 an indorsement stating that it is made "without recourse" or
50-43 otherwise disclaiming liability.
50-44 (c) A person to whom the warranties under Subsection (a) are
50-45 made and who took the item in good faith may recover from the
50-46 warrantor as damages for breach of warranty an amount equal to the
50-47 loss suffered as a result of the breach, but not more than the
50-48 amount of the item plus expenses and loss of interest incurred as a
50-49 result of the breach.
50-50 (d) The warranties stated in Subsection (a) cannot be
50-51 disclaimed with respect to checks. Unless notice of a claim for
50-52 breach of warranty is given to the warrantor within 30 days after
50-53 the claimant has reason to know of the breach and the identity of
50-54 the warrantor, the warrantor is discharged to the extent of any
50-55 loss caused by the delay in giving notice of the claim.
50-56 (e) A cause of action for breach of warranty under this
50-57 section accrues when the claimant has reason to know of the breach.
50-58 <WARRANTIES OF CUSTOMER AND COLLECTING BANK ON TRANSFER OR
50-59 PRESENTMENT OF ITEMS; TIME FOR CLAIMS. (a) Each customer or
50-60 collecting bank who obtains payment or acceptance of an item and
50-61 each prior customer and collecting bank warrants to the payor bank
50-62 or other payor who in good faith pays or accepts the item that>
50-63 <(1) he has a good title to the item or is authorized
50-64 to obtain payment or acceptance on behalf of one who has a good
50-65 title; and>
50-66 <(2) he has no knowledge that the signature of the
50-67 maker or drawer is unauthorized, except that this warranty is not
50-68 given by any customer or collecting bank that is a holder in due
50-69 course and acts in good faith>
50-70 <(A) to a maker with respect to the maker's own
51-1 signature; or>
51-2 <(B) to a drawer with respect to the drawer's
51-3 own signature, whether or not the drawer is also the drawee; or>
51-4 <(C) to an acceptor of an item if the holder in
51-5 due course took the item after the acceptance or obtained the
51-6 acceptance without knowledge that the drawer's signature was
51-7 unauthorized; and>
51-8 <(3) the item has not been materially altered, except
51-9 that this warranty is not given by any customer or collecting bank
51-10 that is a holder in due course and acts in good faith>
51-11 <(A) to the maker of a note; or>
51-12 <(B) to the drawer of a draft whether or not the
51-13 drawer is also the drawee; or>
51-14 <(C) to the acceptor of an item with respect to
51-15 an alteration made prior to the acceptance if the holder in due
51-16 course took the item after the acceptance, even though the
51-17 acceptance provided "payable as originally drawn" or equivalent
51-18 terms; or>
51-19 <(D) to the acceptor of an item with respect to
51-20 an alteration made after the acceptance.>
51-21 <(b) Each customer and collecting bank who transfers an item
51-22 and receives a settlement or other consideration for it warrants to
51-23 his transferee and to any subsequent collecting bank who takes the
51-24 item in good faith that>
51-25 <(1) he has a good title to the item or is authorized
51-26 to obtain payment or acceptance on behalf of one who has a good
51-27 title and the transfer is otherwise rightful; and>
51-28 <(2) all signatures are genuine or authorized; and>
51-29 <(3) the item has not been materially altered; and>
51-30 <(4) no defense of any party is good against him; and>
51-31 <(5) he has no knowledge of any insolvency proceeding
51-32 instituted with respect to the maker or acceptor or the drawer of
51-33 an unaccepted item.>
51-34 <In addition each customer and collecting bank so
51-35 transferring an item and receiving a settlement or other
51-36 consideration engages that upon dishonor and any necessary notice
51-37 of dishonor and protest he will take up the item.>
51-38 <(c) The warranties and the engagement to honor set forth in
51-39 the two preceding subsections arise notwithstanding the absence of
51-40 indorsement or words of guaranty or warranty in the transfer or
51-41 presentment and a collecting bank remains liable for their breach
51-42 despite remittance to its transferor. Damages for breach of such
51-43 warranties or engagement to honor shall not exceed the
51-44 consideration received by the customer or collecting bank
51-45 responsible plus finance charges and expenses related to the item,
51-46 if any.>
51-47 <(d) Unless a claim for breach of warranty under this
51-48 section is made within a reasonable time after the person claiming
51-49 learns of the breach, the person liable is discharged to the extent
51-50 of any loss caused by the delay in making claim.>
51-51 Sec. 4.208. PRESENTMENT WARRANTIES. (a) If an unaccepted
51-52 draft is presented to the drawee for payment or acceptance and the
51-53 drawee pays or accepts the draft, (i) the person obtaining payment
51-54 or acceptance, at the time of presentment, and (ii) a previous
51-55 transferor of the draft, at the time of transfer, warrant to the
51-56 drawee that pays or accepts the draft in good faith that:
51-57 (1) the warrantor is, or was, at the time the
51-58 warrantor transferred the draft, a person entitled to enforce the
51-59 draft or authorized to obtain payment or acceptance of the draft on
51-60 behalf of a person entitled to enforce the draft;
51-61 (2) the draft has not been altered; and
51-62 (3) the warrantor has no knowledge that the signature
51-63 of the purported drawer of the draft is unauthorized.
51-64 (b) A drawee making payment may recover from a warrantor
51-65 damages for breach of warranty equal to the amount paid by the
51-66 drawee less the amount the drawee received or is entitled to
51-67 receive from the drawer because of the payment. In addition, the
51-68 drawee is entitled to compensation for expenses and loss of
51-69 interest resulting from the breach. The right of the drawee to
51-70 recover damages under this subsection is not affected by any
52-1 failure of the drawee to exercise ordinary care in making payment.
52-2 If the drawee accepts the draft, breach of warranty is a defense to
52-3 the obligation of the acceptor. If the acceptor makes payment with
52-4 respect to the draft, the acceptor is entitled to recover from a
52-5 warrantor for breach of warranty the amounts stated in this
52-6 subsection.
52-7 (c) If a drawee asserts a claim for breach of warranty under
52-8 Subsection (a) based on an unauthorized indorsement of the draft or
52-9 an alteration of the draft, the warrantor may defend by proving
52-10 that the indorsement is effective under Section 3.404 or 3.405 or
52-11 the drawer is precluded under Section 3.406 or 4.406 from asserting
52-12 against the drawee the unauthorized indorsement or alteration.
52-13 (d) If (i) a dishonored draft is presented for payment to
52-14 the drawer or an indorser, or (ii) any other item is presented for
52-15 payment to a party obliged to pay the item, and the item is paid,
52-16 the person obtaining payment and a prior transferor of the item
52-17 warrant to the person making payment in good faith that the
52-18 warrantor is, or was, at the time the warrantor transferred the
52-19 item, a person entitled to enforce the item or authorized to obtain
52-20 payment on behalf of a person entitled to enforce the item. The
52-21 person making payment may recover from any warrantor for breach of
52-22 warranty an amount equal to the amount paid plus expenses and loss
52-23 of interest resulting from the breach.
52-24 (e) The warranties stated in Subsections (a) and (d) cannot
52-25 be disclaimed with respect to checks. Unless notice of a claim for
52-26 breach of warranty is given to the warrantor within 30 days after
52-27 the claimant has reason to know of the breach and the identity of
52-28 the warrantor, the warrantor is discharged to the extent of any
52-29 loss caused by the delay in giving notice of the claim.
52-30 (f) A cause of action for breach of warranty under this
52-31 section accrues when the claimant has reason to know of the breach.
52-32 Sec. 4.209. ENCODING AND RETENTION WARRANTIES. (a) A
52-33 person who encodes information on or with respect to an item after
52-34 issue warrants to any subsequent collecting bank and to the payor
52-35 bank or other payor that the information is correctly encoded. If
52-36 the customer of a depositary bank encodes, that bank also makes the
52-37 warranty.
52-38 (b) A person who undertakes to retain an item pursuant to an
52-39 agreement for electronic presentment warrants to any subsequent
52-40 collecting bank and to the payor bank or other payor that retention
52-41 and presentment of the item comply with the agreement. If a
52-42 customer of a depositary bank undertakes to retain an item, that
52-43 bank also makes this warranty.
52-44 (c) A person to whom warranties are made under this section
52-45 and who took the item in good faith may recover from the warrantor
52-46 as damages for breach of warranty an amount equal to the loss
52-47 suffered as a result of the breach, plus expenses and loss of
52-48 interest incurred as a result of the breach.
52-49 Sec. 4.210 <4.208>. SECURITY INTEREST OF COLLECTING BANK IN
52-50 ITEMS, ACCOMPANYING DOCUMENTS AND PROCEEDS. (a) A collecting bank
52-51 has a security interest in an item and any accompanying documents
52-52 or the proceeds of either:
52-53 (1) in case of an item deposited in an account, to the
52-54 extent to which credit given for the item has been withdrawn or
52-55 applied;
52-56 (2) in case of an item for which it has given credit
52-57 available for withdrawal as of right, to the extent of the credit
52-58 given, whether or not the credit is drawn upon <and whether> or
52-59 <not> there is a right of charge-back; or
52-60 (3) if it makes an advance on or against the item.
52-61 (b) If <When> credit <which has been> given for several
52-62 items received at one time or pursuant to a single agreement is
52-63 withdrawn or applied in part, the security interest remains upon
52-64 all the items, any accompanying documents, or the proceeds of
52-65 either. For the purpose of this section, credits first given are
52-66 first withdrawn.
52-67 (c) Receipt by a collecting bank of a final settlement for
52-68 an item is a realization on its security interest in the item,
52-69 accompanying documents, and proceeds. So <To the extent and so>
52-70 long as the bank does not receive final settlement for the item or
53-1 give up possession of the item or accompanying documents for
53-2 purposes other than collection, the security interest continues to
53-3 that extent and is subject to <the provisions of> Chapter 9, but:
53-4 <except that>
53-5 (1) no security agreement is necessary to make the
53-6 security interest enforceable (<Subsection (a)(2) of> Section
53-7 9.203(a)(1) <9.203>); <and>
53-8 (2) no filing is required to perfect the security
53-9 interest; and
53-10 (3) the security interest has priority over
53-11 conflicting perfected security interests in the item, accompanying
53-12 documents, or proceeds.
53-13 Sec. 4.211 <4.209>. WHEN BANK GIVES VALUE FOR PURPOSES OF
53-14 HOLDER IN DUE COURSE. For purposes of determining its status as a
53-15 holder in due course, a <the> bank has given value to the extent
53-16 <that> it has a security interest in an item, if <provided that>
53-17 the bank otherwise complies with the requirements of Section 3.302
53-18 on what constitutes a holder in due course.
53-19 Sec. 4.212 <4.210>. PRESENTMENT BY NOTICE OF ITEM NOT
53-20 PAYABLE BY, THROUGH, OR AT A BANK; LIABILITY OF DRAWER OR INDORSER
53-21 <SECONDARY PARTIES>. (a) Unless otherwise instructed, a
53-22 collecting bank may present an item not payable by, through, or at
53-23 a bank by sending to the party to accept or pay a written notice
53-24 that the bank holds the item for acceptance or payment. The notice
53-25 must be sent in time to be received on or before the day when
53-26 presentment is due, and the bank must meet any requirement of the
53-27 party to accept or pay under Section 3.501 <3.505> by the close of
53-28 the bank's next banking day after it knows of the requirement.
53-29 (b) If <Where> presentment is made by notice and payment,
53-30 acceptance, or <neither honor nor> request for compliance with a
53-31 requirement under Section 3.501 <3.505> is not received by the
53-32 close of business on the day after maturity or, in the case of
53-33 demand items, by the close of business on the third banking day
53-34 after notice was sent, the presenting bank may treat the item as
53-35 dishonored and charge any drawer or indorser <secondary party> by
53-36 sending it <him> notice of the facts.
53-37 Sec. 4.213 <4.211>. MEDIUM AND TIME OF SETTLEMENT BY BANK
53-38 <MEDIA OF REMITTANCE; PROVISIONAL AND FINAL SETTLEMENT IN
53-39 REMITTANCE CASES>. (a) With respect to settlement by a bank, the
53-40 medium and time of settlement may be prescribed by Federal Reserve
53-41 regulations or circulars, clearing-house rules, and the like or by
53-42 agreement. In the absence of such a prescription:
53-43 (1) the medium of settlement is cash or credit to an
53-44 account in a Federal Reserve bank of or specified by the person to
53-45 receive settlement; and
53-46 (2) the time of settlement is:
53-47 (A) with respect to tender of settlement by
53-48 cash, a cashier's check, or a teller's check, when the cash or
53-49 check is sent or delivered;
53-50 (B) with respect to tender of settlement by
53-51 credit to an account in a Federal Reserve bank, when the credit is
53-52 made;
53-53 (C) with respect to tender of settlement by a
53-54 credit or debit to an account in a bank, when the credit or debit
53-55 is made or, in the case of tender of settlement by authority to
53-56 charge an account, when the authority is sent or delivered; or
53-57 (D) with respect to tender of settlement by a
53-58 funds transfer, when payment is made pursuant to Section 4A.406(a)
53-59 to the person receiving settlement.
53-60 (b) If the tender of settlement is not by a medium
53-61 authorized by Subsection (a) or the time of settlement is not fixed
53-62 by Subsection (a), a settlement does not occur until the tender of
53-63 settlement is accepted by the person receiving settlement.
53-64 (c) If settlement for an item is made by cashier's check or
53-65 teller's check and the person receiving settlement, before its
53-66 midnight deadline:
53-67 (1) presents or forwards the check for collection,
53-68 settlement is final when the check is finally paid; or
53-69 (2) fails to present or forward the check for
53-70 collection, settlement is final at the midnight deadline of the
54-1 person receiving settlement.
54-2 (d) If settlement for an item is made by giving authority to
54-3 charge the account of the bank giving settlement in the bank
54-4 receiving settlement, settlement is final when the charge is made
54-5 by the bank receiving settlement if there are funds available in
54-6 the account for the amount of the item. <A collecting bank may
54-7 take in settlement of an item>
54-8 <(1) a check of the remitting bank or of another bank
54-9 on any bank except the remitting bank; or>
54-10 <(2) a cashier's check or similar primary obligation
54-11 of a remitting bank which is a member of or clears through a member
54-12 of the same clearing house or group as the collecting bank; or>
54-13 <(3) appropriate authority to charge an account of the
54-14 remitting bank or of another bank with the collecting bank; or>
54-15 <(4) if the item is drawn upon or payable by a person
54-16 other than a bank, a cashier's check, certified check or other bank
54-17 check or obligation.>
54-18 <(b) If before its midnight deadline the collecting bank
54-19 properly dishonors a remittance check or authorization to charge on
54-20 itself or presents or forwards for collection a remittance
54-21 instrument of or on another bank which is of a kind approved by
54-22 Subsection (a) or has not been authorized by it, the collecting
54-23 bank is not liable to prior parties in the event of the dishonor of
54-24 such check, instrument or authorization.>
54-25 <(c) A settlement for an item by means of a remittance
54-26 instrument or authorization to charge is or becomes a final
54-27 settlement as to both the person making and the person receiving
54-28 the settlement>
54-29 <(1) if the remittance instrument or authorization to
54-30 charge is of a kind approved by Subsection (a) or has not been
54-31 authorized by the person receiving the settlement and in either
54-32 case the person receiving the settlement acts seasonably before its
54-33 midnight deadline in presenting, forwarding for collection or
54-34 paying the instrument or authorization,--at the time the remittance
54-35 instrument or authorization is finally paid by the payor by which
54-36 it is payable;>
54-37 <(2) if the person receiving the settlement has
54-38 authorized remittance by a non-bank check or obligation or by a
54-39 cashier's check or similar primary obligation of or a check upon
54-40 the payor or other remitting bank which is not of a kind approved
54-41 by Subsection (a)(2);--at the time of the receipt of such
54-42 remittance check or obligation; or>
54-43 <(3) if in a case not covered by Subdivision (1) or
54-44 (2) the person receiving the settlement fails to seasonably
54-45 present, forward for collection, pay or return a remittance
54-46 instrument or authorization to it to charge before its midnight
54-47 deadline,--at such midnight deadline.>
54-48 Sec. 4.214 <4.212>. RIGHT OF CHARGE-BACK OR REFUND;
54-49 LIABILITY OF COLLECTING BANK; RETURN OF ITEM. (a) If a collecting
54-50 bank has made provisional settlement with its customer for an item
54-51 and <itself> fails by reason of dishonor, suspension of payments by
54-52 a bank, or otherwise to receive <a> settlement for the item that
54-53 <which> is or becomes final, the bank may revoke the settlement
54-54 given by it, charge back the amount of any credit given for the
54-55 item to its customer's account, or obtain refund from its customer,
54-56 whether or not it is able to return the item, <items> if by its
54-57 midnight deadline or within a longer reasonable time after it
54-58 learns the facts it returns the item or sends notification of the
54-59 facts. If the return or notice is delayed beyond the bank's
54-60 midnight deadline or a longer reasonable time after it learns the
54-61 facts, the bank may revoke the settlement, charge back the credit,
54-62 or obtain refund from its customers, but it is liable for any loss
54-63 resulting from the delay. These rights to revoke, charge-back, and
54-64 obtain refund terminate if and when a settlement for the item
54-65 received by the bank is or becomes final <(Subsection (c) of
54-66 Section 4.211 and Subsections (b) and (c) of Section 4.213)>.
54-67 (b) A collecting bank returns an item when it is sent or
54-68 delivered to the bank's customer or transferor or pursuant to its
54-69 instructions. <Within the time and manner prescribed by this
54-70 section and Section 4.301, an intermediary or payor bank, as the
55-1 case may be, may return an unpaid item directly to the depositary
55-2 bank and may send for collection a draft on the depositary bank and
55-3 obtain reimbursement. In such case, if the depositary bank has
55-4 received provisional settlement for the item, it must reimburse the
55-5 bank drawing the draft and any provisional credits for the item
55-6 between banks shall become and remain final.>
55-7 (c) A depositary bank that <which> is also the payor may
55-8 charge-back the amount of an item to its customer's account or
55-9 obtain refund in accordance with the section governing return of an
55-10 item received by a payor bank for credit on its books (Section
55-11 4.301).
55-12 (d) The right to charge-back is not affected by:
55-13 (1) previous <prior> use of a <the> credit given for
55-14 the item; or
55-15 (2) failure by any bank to exercise ordinary care with
55-16 respect to the item, but a <any> bank so failing remains liable.
55-17 (e) A failure to charge-back or claim refund does not affect
55-18 other rights of the bank against the customer or any other party.
55-19 (f) If credit is given in dollars as the equivalent of the
55-20 value of an item payable in <a> foreign money, <currency> the
55-21 dollar amount of any charge-back or refund must <shall> be
55-22 calculated on the basis of the bank-offered spot <buying sight>
55-23 rate for the foreign money <currency> prevailing on the day when
55-24 the person entitled to the charge-back or refund learns that it
55-25 will not receive payment in ordinary course.
55-26 Sec. 4.215 <4.213>. FINAL PAYMENT OF ITEM BY PAYOR BANK;
55-27 WHEN PROVISIONAL DEBITS AND CREDITS BECOME FINAL; WHEN CERTAIN
55-28 CREDITS BECOME AVAILABLE FOR WITHDRAWAL. (a) An item is finally
55-29 paid by a payor bank when the bank has first done any of the
55-30 following<, whichever happens first>:
55-31 (1) paid the item in cash; <or>
55-32 (2) settled for the item without having <reserving> a
55-33 right to revoke the settlement <and without having such right>
55-34 under statute, clearing-house <clearing house> rule, or agreement;
55-35 or
55-36 (3) made a provisional settlement for the item and
55-37 failed to revoke the settlement in the time and manner permitted by
55-38 statute, clearing-house <clearing house> rule, or agreement.
55-39 <Upon a final payment under Subdivisions (2) or (3), the
55-40 payor bank shall be accountable for the amount of the item.>
55-41 (b) If provisional settlement for an item does not become
55-42 final, the item is not finally paid.
55-43 (c) If provisional settlement for an item between the
55-44 presenting and payor banks is made through a clearing house or by
55-45 debits or credits in an account between them, then to the extent
55-46 that provisional debits or credits for the item are entered in
55-47 accounts between the presenting and payor banks or between the
55-48 presenting and successive prior collecting banks seriatim, they
55-49 become final upon final payment of the item by the payor bank.
55-50 (d) <(c)> If a collecting bank receives a settlement for an
55-51 item that <which> is or becomes final, <(Subsection (c) of Section
55-52 4.211, Subsection (b) of Section 4.213)> the bank is accountable to
55-53 its customer for the amount of the item, and any provisional credit
55-54 given for the item in an account with its customer becomes final.
55-55 (e) <(d)> Subject to (i) applicable law stating a time for
55-56 availability of funds, and (ii) any right of the bank to apply the
55-57 credit to an obligation of the customer, credit given by a bank for
55-58 an item in a customer's account <an account with its customer>
55-59 becomes available for withdrawal as of right if the bank:
55-60 (1) <in any case where the bank> has received a
55-61 provisional settlement for the item,--when the <such> settlement
55-62 becomes final and the bank has had a reasonable time to receive
55-63 return of the item and the item has not been received within that
55-64 time <learn that the settlement is final>; or
55-65 (2) <in any case where the bank> is both the <a>
55-66 depositary bank and the <a> payor bank, and the item is finally
55-67 paid,--at the opening of the bank's second banking day following
55-68 receipt of the item.
55-69 (f) Subject to applicable law stating a time for
55-70 availability of funds and <(e) A deposit of money in a bank is
56-1 final when made but, subject to> any right of a <the> bank to apply
56-2 a <the> deposit to an obligation of the depositor <customer>, a
56-3 <the> deposit of money becomes available for withdrawal as of right
56-4 at the opening of the bank's next banking day after <following>
56-5 receipt of the deposit.
56-6 Sec. 4.216 <4.214>. INSOLVENCY AND PREFERENCE. (a) If an
56-7 <Any> item is in or comes <coming> into the possession of a payor
56-8 or collecting bank that <which> suspends payment and the <which>
56-9 item has <is> not been finally paid, the item must <shall> be
56-10 returned by the receiver, trustee, or agent in charge of the closed
56-11 bank to the presenting bank or the closed bank's customer.
56-12 (b) If a payor bank finally pays an item and suspends
56-13 payments without making a settlement for the item with its customer
56-14 or the presenting bank, which settlement is or becomes final, the
56-15 owner of the item has a preferred claim against the payor bank.
56-16 (c) If a payor bank gives or a collecting bank gives or
56-17 receives a provisional settlement for an item and thereafter
56-18 suspends payments, the suspension does not prevent or interfere
56-19 with the settlement's <settlement> becoming final if the <such>
56-20 finality occurs automatically upon the lapse of certain time or the
56-21 happening of certain events <(Subsection (c) of Section 4.211,
56-22 Subsections (a)(4), (b) and (c) of Section 4.213)>.
56-23 (d) If a collecting bank receives from subsequent parties
56-24 settlement for an item, which settlement is or becomes final, and
56-25 the bank suspends payments without making a settlement for the item
56-26 with its customer, which settlement is or becomes final, the owner
56-27 of the item has a preferred claim against the <such> collecting
56-28 bank.
56-29 SUBCHAPTER C. COLLECTION OF ITEMS: PAYOR BANKS
56-30 Sec. 4.301. DEFERRED POSTING; RECOVERY OF PAYMENT BY RETURN
56-31 OF ITEMS; TIME OF DISHONOR; RETURN OF ITEMS BY PAYOR BANK. (a) If
56-32 a payor bank settles <Where an authorized settlement> for a demand
56-33 item <(>other than a documentary draft presented<) received by a
56-34 payor bank> otherwise than for immediate payment over the counter
56-35 <has been made> before midnight of the banking day of receipt, the
56-36 payor bank may revoke the settlement and recover the settlement
56-37 <any payment> if, before it has made final payment <(Subsection (a)
56-38 of Section 4.213)> and before its midnight deadline, it:
56-39 (1) returns the item; or
56-40 (2) sends written notice of dishonor or nonpayment if
56-41 the item is <held for protest or is otherwise> unavailable for
56-42 return.
56-43 (b) If a demand item is received by a payor bank for credit
56-44 on its books, it may return the <such> item or send notice of
56-45 dishonor and may revoke any credit given or recover the amount
56-46 thereof withdrawn by its customer, if it acts within the time limit
56-47 and in the manner specified in Subsection (a) <the preceding
56-48 subsection>.
56-49 (c) Unless previous notice of dishonor has been sent, an
56-50 item is dishonored at the time when for purposes of dishonor it is
56-51 returned or notice sent in accordance with this section.
56-52 (d) An item is returned:
56-53 (1) as to an item presented <received> through a
56-54 clearing house, when it is delivered to the presenting or last
56-55 collecting bank or to the clearing house or is sent or delivered in
56-56 accordance with clearing-house <its> rules; or
56-57 (2) in all other cases, when it is sent or delivered
56-58 to the bank's customer or transferor or pursuant to <his>
56-59 instructions.
56-60 Sec. 4.302. PAYOR BANK'S RESPONSIBILITY FOR LATE RETURN OF
56-61 ITEM. (a) If <In the absence of a valid defense such as breach of
56-62 a presentment warranty (Subsection (a) of Section 4.207),
56-63 settlement effected or the like, if> an item is presented to <on>
56-64 and received by a payor bank, the bank is accountable for the
56-65 amount of:
56-66 (1) a demand item, other than a documentary draft,
56-67 whether properly payable or not, if the bank, in any case in which
56-68 <where> it is not also the depositary bank, retains the item beyond
56-69 midnight of the banking day of receipt without settling for it or,
56-70 <regardless of> whether or not it is also the depositary bank, does
57-1 not pay or return the item or send notice of dishonor until after
57-2 its midnight deadline; or
57-3 (2) any other properly payable item unless, within the
57-4 time allowed for acceptance or payment of that item, the bank
57-5 either accepts or pays the item or returns it and accompanying
57-6 documents.
57-7 (b) The liability of a payor bank to pay an item pursuant to
57-8 Subsection (a) is subject to defenses based on breach of a
57-9 presentment warranty (Section 4.208) or proof that the person
57-10 seeking enforcement of the liability presented or transferred the
57-11 item for the purpose of defrauding the payor bank.
57-12 Sec. 4.303. WHEN ITEMS SUBJECT TO NOTICE, STOP-PAYMENT ORDER
57-13 <STOP-ORDER>, LEGAL PROCESS, OR SETOFF; ORDER IN WHICH ITEMS MAY BE
57-14 CHARGED OR CERTIFIED. (a) Any knowledge, notice, or stop-payment
57-15 order <stop-order> received by, legal process served upon, or
57-16 setoff exercised by a payor bank comes too late<, whether or not
57-17 effective under other rules of law> to terminate, suspend, or
57-18 modify the bank's right or duty to pay an item or to charge its
57-19 customer's account for the item<, comes too late to so terminate,
57-20 suspend or modify such right or duty> if the knowledge, notice,
57-21 stop-payment order, <stop-order> or legal process is received or
57-22 served and <the bank does not have> a reasonable time for the bank
57-23 to act thereon expires <before,> or the setoff is exercised
57-24 after<,> the earliest <happening> of <any of> the following:
57-25 (1) the bank accepts or certifies <has accepted or
57-26 certified> the item;
57-27 (2) the bank pays <has paid> the item in cash;
57-28 (3) the bank settles <has settled> for the item
57-29 without having <reserving> a right to revoke the settlement <and
57-30 without having such right> under statute, clearing-house <clearing
57-31 house> rule, or agreement; <or>
57-32 (4) the bank becomes <has become> accountable for the
57-33 amount of the item under <Subsection (a)(3) of Section 4.213 and>
57-34 Section 4.302 dealing with the payor bank's responsibility for late
57-35 return of items; or
57-36 (5) with respect to checks, a cutoff hour not earlier
57-37 than one hour after the opening of the next banking day after the
57-38 banking day on which the bank received the check and not later than
57-39 the close of that next banking day or, if no cutoff hour is fixed,
57-40 the close of the next banking day after the banking day on which
57-41 the bank received the check.
57-42 (b) Subject to <the provisions of> Subsection (a), items may
57-43 be accepted, paid, certified, or charged to the indicated account
57-44 of a bank's <its> customer in any order <convenient to the bank>
57-45 and before or after the bank's <its> regular banking hours. A bank
57-46 is under no obligation to determine the time of day an item is
57-47 received and without liability may withhold the amount thereof
57-48 pending a determination of the effect, consequence or priority of
57-49 any knowledge, notice, stop-payment order, <stop-order> or legal
57-50 process concerning the same, or interplead such amount and the
57-51 claimants thereto.
57-52 SUBCHAPTER D. RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER
57-53 Sec. 4.401. WHEN BANK MAY CHARGE CUSTOMER'S ACCOUNT. (a) A
57-54 <As against its customer, a> bank may charge against the <his>
57-55 account of a customer an <any> item that <which> is <otherwise>
57-56 properly payable from that account even though the charge creates
57-57 an overdraft. An item is properly payable if it is authorized by
57-58 the customer and is in accordance with any agreement between the
57-59 customer and the bank.
57-60 (b) A customer is not liable for the amount of an overdraft
57-61 if the customer neither signed the item nor benefited from the
57-62 proceeds of the item.
57-63 (c) A bank may charge against the account of a customer a
57-64 check that is otherwise properly payable from the account, even
57-65 though payment was made before the date of the check, unless the
57-66 customer has given notice to the bank of the postdating describing
57-67 the check with reasonable certainty. The notice is effective for
57-68 the period stated in Section 4.403(b) for stop-payment orders and
57-69 must be received at such time and in such manner as to afford the
57-70 bank a reasonable opportunity to act on it before the bank takes
58-1 any action with respect to the check described in Section 4.303.
58-2 If a bank charges against the account of a customer a check before
58-3 the date stated in the notice of postdating, the bank is liable for
58-4 damages for the loss resulting from its act. The loss may include
58-5 damages for dishonor of subsequent items under Section 4.402.
58-6 (d) A bank that <which> in good faith makes payment to a
58-7 holder may charge the indicated account of its customer according
58-8 to:
58-9 (1) the original terms <tenor> of the <his> altered
58-10 item; or
58-11 (2) the terms <tenor> of the <his> completed item,
58-12 even though the bank knows the item has been completed, unless the
58-13 bank has notice that the completion was improper.
58-14 Sec. 4.402. BANK'S LIABILITY TO CUSTOMER FOR WRONGFUL
58-15 DISHONOR; TIME OF DETERMINING INSUFFICIENCY OF ACCOUNT.
58-16 (a) Except as otherwise provided by this chapter, a payor bank
58-17 wrongfully dishonors an item if it dishonors an item that is
58-18 properly payable, but a bank may dishonor an item that would create
58-19 an overdraft unless it has agreed to pay the overdraft.
58-20 (b) A payor bank is liable to its customer for damages
58-21 proximately caused by the wrongful dishonor of an item. Liability
58-22 <When the dishonor occurs through mistake liability> is limited to
58-23 actual damages proved and<. If so proximately caused and proved
58-24 damages> may include damages for an arrest or prosecution of the
58-25 customer or other consequential damages. Whether any consequential
58-26 damages are proximately caused by the wrongful dishonor is a
58-27 question of fact to be determined in each case.
58-28 (c) A payor bank's determination of the customer's account
58-29 balance on which a decision to dishonor for insufficiency of
58-30 available funds is based may be made at any time between the time
58-31 the item is received by the payor bank and the time that the payor
58-32 bank returns the item or gives notice in lieu of return, and no
58-33 more than one determination need be made. If, at the election of
58-34 the payor bank, a subsequent balance determination is made for the
58-35 purpose of reevaluating the bank's decision to dishonor the item,
58-36 the account balance at that time is determinative of whether a
58-37 dishonor for insufficiency of available funds is wrongful.
58-38 Sec. 4.403. CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF
58-39 PROOF OF LOSS. (a) A customer or any person authorized to draw on
58-40 the account if there is more than one person may stop payment of
58-41 any item drawn on the customer's account or close the account by an
58-42 order to the bank describing the item or account with reasonable
58-43 certainty <may by order to his bank stop payment of any item
58-44 payable for his account but the order must be> received at a <such>
58-45 time and in a <such> manner that affords <as to afford> the bank a
58-46 reasonable opportunity to act on it before <prior to> any action by
58-47 the bank with respect to the item described in Section 4.303. If
58-48 the signature of more than one person is required to draw on an
58-49 account, any of those persons may stop payment or close the
58-50 account.
58-51 (b) A stop-payment order is effective for six months and is
58-52 binding on the bank only if it is in writing, dated, and signed and
58-53 describes the item with certainty. A stop-payment order may be
58-54 renewed for additional six-month periods by a writing given to the
58-55 bank within a period during which the stop-payment order is
58-56 effective. <An order is binding upon the bank only if it is in
58-57 writing, dated, signed, and describes the item with certainty. An
58-58 order is effective for only six months unless renewed in writing.>
58-59 (c) The burden of establishing the fact and amount of loss
58-60 resulting from the payment of an item contrary to a stop-payment
58-61 <binding stop payment> order or order to close an account is on the
58-62 customer. The loss from payment of an item contrary to a
58-63 stop-payment order may include damages for dishonor of subsequent
58-64 items under Section 4.402.
58-65 Sec. 4.404. BANK NOT OBLIGATED TO PAY CHECK MORE THAN SIX
58-66 MONTHS OLD. A bank is under no obligation to a customer having a
58-67 checking account to pay a check, other than a certified check, that
58-68 <which> is presented more than six months after its date, but it
58-69 may charge its customer's account for a payment made thereafter in
58-70 good faith.
59-1 Sec. 4.405. DEATH OR INCOMPETENCE OF CUSTOMER. (a) A payor
59-2 or collecting bank's authority to accept, pay, or collect an item
59-3 or to account for proceeds of its collection, if otherwise
59-4 effective, is not rendered ineffective by the incompetence of a
59-5 customer of either bank existing at the time the item is issued or
59-6 its collection is undertaken if the bank does not know of an
59-7 adjudication of incompetence. Neither death nor incompetence of a
59-8 customer revokes the <such> authority to accept, pay, collect, or
59-9 account until the bank knows of the fact of death or of an
59-10 adjudication of incompetence and has reasonable opportunity to act
59-11 on it.
59-12 (b) Even with knowledge, a bank may for 10 days after the
59-13 date of death pay or certify checks drawn on or before <prior to>
59-14 that date unless ordered to stop payment by a person claiming an
59-15 interest in the account.
59-16 Sec. 4.406. CUSTOMER'S DUTY TO DISCOVER AND REPORT
59-17 UNAUTHORIZED SIGNATURE OR ALTERATION. (a) A bank that sends or
59-18 makes available to a customer a statement of account showing
59-19 payment of items for the account shall either return or make
59-20 available to the customer the items paid or provide information in
59-21 the statement of account sufficient to allow the customer
59-22 reasonably to identify the items paid. The statement of account
59-23 provides sufficient information if the item is described by item
59-24 number, amount, and date of payment. If the bank does not return
59-25 the items, it shall provide in the statement of account the
59-26 telephone number that the customer may call to request an item or a
59-27 legible copy of the items pursuant to Subsection (b).
59-28 (b) If the items are not returned to the customer, the
59-29 person retaining the items shall either retain the items or, if the
59-30 items are destroyed, maintain the capacity to furnish legible
59-31 copies of the items until the expiration of seven years after
59-32 receipt of the items. A customer may request an item from the bank
59-33 that paid the item, and that bank must provide in a reasonable time
59-34 either the item or, if the item has been destroyed or is not
59-35 otherwise obtainable, a legible copy of the item. A bank shall
59-36 provide, on request and without charge to the customer, at least
59-37 two items or a legible copy of the items with respect to each
59-38 statement of account sent to the customer.
59-39 (c) If a bank sends or makes available a statement of
59-40 account or items pursuant to Subsection (a), the customer must
59-41 exercise reasonable promptness in examining the statement or the
59-42 items to determine whether any payment was not authorized because
59-43 of an alteration of an item or because a purported signature by or
59-44 on behalf of the customer was not authorized. If, based on the
59-45 statement or items provided, the customer should reasonably have
59-46 discovered the unauthorized payment, the customer must promptly
59-47 notify the bank of the relevant facts. <When a bank sends to its
59-48 customer a statement of account accompanied by items paid in good
59-49 faith in support of the debit entries or holds the statement and
59-50 items pursuant to a request or instructions of its customer or
59-51 otherwise in a reasonable manner makes the statement and items
59-52 available to the customer, the customer must exercise reasonable
59-53 care and promptness to examine the statement and items to discover
59-54 his unauthorized signature or any alteration on an item and must
59-55 notify the bank promptly after discovery thereof.>
59-56 (d) <(b)> If the bank proves <establishes> that the customer
59-57 failed, with respect to an item, to comply with the duties imposed
59-58 on the customer by Subsection (c), <(a)> the customer is precluded
59-59 from asserting against the bank:
59-60 (1) the customer's <his> unauthorized signature or any
59-61 alteration on the item, if the bank also proves <establishes> that
59-62 it suffered a loss by reason of the <such> failure; and
59-63 (2) the customer's <an> unauthorized signature or
59-64 alteration by the same wrongdoer on any other item paid in good
59-65 faith by the bank if the payment was made before the bank received
59-66 notice from the customer of the unauthorized signature or
59-67 alteration and after the customer had been afforded a reasonable
59-68 period of time, not exceeding 30 days, in which to examine the item
59-69 or statement of account and notify the bank. <after the first item
59-70 and statement was available to the customer for a reasonable period
60-1 not exceeding fourteen calendar days and before the bank receives
60-2 notification from the customer of any such unauthorized signature
60-3 or alteration.>
60-4 <(c) The preclusion under Subsection (b) does not apply if
60-5 the customer establishes lack of ordinary care on the part of the
60-6 bank in paying the item(s).>
60-7 (e) If Subsection (d) applies and the customer proves that
60-8 the bank failed to exercise ordinary care in paying the item and
60-9 that the failure contributed to loss, the loss is allocated between
60-10 the customer precluded and the bank asserting the preclusion
60-11 according to the extent to which the failure of the customer to
60-12 comply with Subsection (c) and the failure of the bank to exercise
60-13 ordinary care contributed to the loss. If the customer proves that
60-14 the bank did not pay the item in good faith, the preclusion under
60-15 Subsection (d) does not apply.
60-16 (f) <(d)> Without regard to care or lack of care of either
60-17 the customer or the bank, a customer who does not within one year
60-18 after <from the time> the statement or <and> items are made
60-19 available to the customer (Subsection (a)) discover and report the
60-20 customer's <his> unauthorized signature on or any alteration on the
60-21 <face or back of the> item <or does not within three years from
60-22 that time discover and report any unauthorized indorsement> is
60-23 precluded from asserting against the bank the <such> unauthorized
60-24 signature <or indorsement> or <such> alteration. If there is a
60-25 preclusion under this subsection, the payor bank may not recover
60-26 for breach of warranty under Section 4.208 with respect to the
60-27 unauthorized signature or alteration to which the preclusion
60-28 applies.
60-29 <(e) If under this section a payor bank has a valid defense
60-30 against a claim of a customer upon or resulting from payment of an
60-31 item and waives or fails upon request to assert the defense the
60-32 bank may not assert against any collecting bank or other prior
60-33 party presenting or transferring the item a claim based upon the
60-34 unauthorized signature or alteration giving rise to the customer's
60-35 claim.>
60-36 Sec. 4.407. PAYOR BANK'S RIGHT TO SUBROGATION ON IMPROPER
60-37 PAYMENT. If a payor bank has paid an item over the <stop payment>
60-38 order of the drawer or maker to stop payment, or after an account
60-39 has been closed, or otherwise under circumstances giving a basis
60-40 for objection by the drawer or maker, to prevent unjust enrichment
60-41 and only to the extent necessary to prevent loss to the bank by
60-42 reason of its payment of the item, the payor bank is <shall be>
60-43 subrogated to the rights:
60-44 (1) of any holder in due course on the item against
60-45 the drawer or maker; <and>
60-46 (2) of the payee or any other holder of the item
60-47 against the drawer or maker either on the item or under the
60-48 transaction out of which the item arose; and
60-49 (3) of the drawer or maker against the payee or any
60-50 other holder of the item with respect to the transaction out of
60-51 which the item arose.
60-52 SUBCHAPTER E. COLLECTION OF DOCUMENTARY DRAFTS
60-53 Sec. 4.501. HANDLING OF DOCUMENTARY DRAFTS; DUTY TO SEND FOR
60-54 PRESENTMENT AND TO NOTIFY CUSTOMER OF DISHONOR. A bank that
60-55 <which> takes a documentary draft for collection shall <must>
60-56 present or send the draft and accompanying documents for
60-57 presentment and, upon learning that the draft has not been paid or
60-58 accepted in due course, shall <must> seasonably notify its customer
60-59 of the <such> fact even though it may have discounted or bought the
60-60 draft or extended credit available for withdrawal as of right.
60-61 Sec. 4.502. PRESENTMENT OF "ON ARRIVAL" DRAFTS. If <When> a
60-62 draft or the relevant instructions require presentment "on
60-63 arrival", "when goods arrive", or the like, the collecting bank
60-64 need not present until in its judgment a reasonable time for
60-65 arrival of the goods has expired. Refusal to pay or accept because
60-66 the goods have not arrived is not dishonor; the bank must notify
60-67 its transferor of the <such> refusal but need not present the draft
60-68 again until it is instructed to do so or learns of the arrival of
60-69 the goods.
60-70 Sec. 4.503. RESPONSIBILITY OF PRESENTING BANK FOR DOCUMENTS
61-1 AND GOODS; REPORT OF REASONS FOR DISHONOR; REFEREE IN CASE OF NEED.
61-2 Unless otherwise instructed and except as provided in Chapter 5, a
61-3 bank presenting a documentary draft:
61-4 (1) must deliver the documents to the drawee on
61-5 acceptance of the draft if it is payable more than three days after
61-6 presentment; otherwise, only on payment; and
61-7 (2) upon dishonor, either in the case of presentment
61-8 for acceptance or presentment for payment, may seek and follow
61-9 instructions from any referee in case of need designated in the
61-10 draft or, if the presenting bank does not choose to utilize the
61-11 referee's <his> services, it must use diligence and good faith to
61-12 ascertain the reason for dishonor, must notify its transferor of
61-13 the dishonor and of the results of its effort to ascertain the
61-14 reasons therefor, and must request instructions.
61-15 However, <But> the presenting bank is under no obligation
61-16 with respect to goods represented by the documents except to follow
61-17 any reasonable instructions seasonably received; it has a right to
61-18 reimbursement for any expense incurred in following instructions
61-19 and to prepayment of or indemnity for those <such> expenses.
61-20 Sec. 4.504. PRIVILEGE OF PRESENTING BANK TO DEAL WITH GOODS;
61-21 SECURITY INTEREST FOR EXPENSES. (a) A presenting bank that
61-22 <which>, following the dishonor of a documentary draft, has
61-23 seasonably requested instructions but does not receive them within
61-24 a reasonable time may store, sell, or otherwise deal with the goods
61-25 in any reasonable manner.
61-26 (b) For its reasonable expenses incurred by action under
61-27 Subsection (a) the presenting bank has a lien upon the goods or
61-28 their proceeds, which may be foreclosed in the same manner as an
61-29 unpaid seller's lien.
61-30 SECTION 5. Section 5.103(c), Business & Commerce Code, is
61-31 amended to read as follows:
61-32 (c) Definitions in other chapters applying to this chapter
61-33 and the sections in which they appear are:
61-34 "Accept" or "Acceptance". Section 3.409 <3.410>.
61-35 "Contract for sale". Section 2.106.
61-36 "Draft". Section 3.104.
61-37 "Holder in due course". Section 3.302.
61-38 "Midnight deadline". Section 4.104.
61-39 "Security". Section 8.102.
61-40 SECTION 6. Section 9.203(a), Business & Commerce Code, is
61-41 amended to read as follows:
61-42 (a) Subject to the provisions of Section 4.210 <4.208> on
61-43 the security interest of a collecting bank, Section 8.321 on
61-44 security interests in securities, and Section 9.113 on a security
61-45 interest arising under the chapter on Sales, a security interest is
61-46 not enforceable against the debtor or third parties with respect to
61-47 the collateral and does not attach unless:
61-48 (1) the collateral is in the possession of the secured
61-49 party pursuant to agreement or the debtor has signed a security
61-50 agreement which contains a description of the collateral and in
61-51 addition, when the security interest covers crops growing or to be
61-52 grown or timber to be cut, a description of the land concerned;
61-53 (2) value has been given; and
61-54 (3) the debtor has rights in the collateral.
61-55 SECTION 7. Section 9.302(a), Business & Commerce Code, is
61-56 amended to read as follows:
61-57 (a) A financing statement must be filed to perfect all
61-58 security interests except the following:
61-59 (1) a security interest in collateral in possession of
61-60 the secured party under Section 9.305;
61-61 (2) a security interest temporarily perfected in
61-62 instruments or documents without delivery under Section 9.304 or in
61-63 proceeds for a 10 day period under Section 9.306;
61-64 (3) a security interest created by an assignment of a
61-65 beneficial interest in a trust or a decedent's estate;
61-66 (4) a purchase money security interest in consumer
61-67 goods; but notation on a certificate of title is required for goods
61-68 covered by a statute referred to in Subsection (c)(2); and fixture
61-69 filing is required for priority over conflicting interests in
61-70 fixtures to the extent provided in Section 9.313;
62-1 (5) an assignment of accounts which does not alone or
62-2 in conjunction with other assignments to the same assignee transfer
62-3 a significant part of the outstanding accounts of the assignor;
62-4 (6) a security interest of a collecting bank (Section
62-5 4.210 <4.208>), a security interest in securities (Section 8.321),
62-6 a security interest arising under the Chapter on Sales (see Section
62-7 9.113), or a security interest covered in Subsection (c) of this
62-8 Section; <or>
62-9 (7) an assignment for the benefit of all the creditors
62-10 of the transferor, and subsequent transfers by the assignee
62-11 thereunder; and
62-12 (8) a security interest in oil or gas production or
62-13 their proceeds under Section 9.319 of this code.
62-14 SECTION 8. Section 9.312(a), Business & Commerce Code, is
62-15 amended to read as follows:
62-16 (a) The rules of priority stated in other sections of this
62-17 subchapter and in the following sections shall govern when
62-18 applicable: Section 4.210 <4.208> with respect to the security
62-19 interests of collecting banks in items being collected,
62-20 accompanying documents and proceeds; Section 9.103 on security
62-21 interests related to other jurisdictions; Section 9.114 on
62-22 consignments.
62-23 SECTION 9. (a) This Act does not affect an action or
62-24 proceeding that is commenced or a right that accrues before the
62-25 effective date.
62-26 (b) An action or proceeding that is commenced or a right
62-27 that accrues before the effective date of this Act is governed by
62-28 the law in effect on the date the action or proceeding was
62-29 commenced or the right accrued, and that law is continued in effect
62-30 for that purpose.
62-31 SECTION 10. This Act takes effect January 1, 1996.
62-32 SECTION 11. The importance of this legislation and the
62-33 crowded condition of the calendars in both houses create an
62-34 emergency and an imperative public necessity that the
62-35 constitutional rule requiring bills to be read on three several
62-36 days in each house be suspended, and this rule is hereby suspended.
62-37 * * * * *