AN ACT
1-1 relating to the warranties on the transfer or presentment of demand
1-2 drafts.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsection (b), Section 3.103, Business &
1-5 Commerce Code, is amended to read as follows:
1-6 (b) Other definitions applying to this chapter and the
1-7 sections in which they appear are:
1-8 "Acceptance" Section 3.409.
1-9 "Accommodated party" Section 3.419.
1-10 "Accommodation party" Section 3.419.
1-11 "Alteration" Section 3.407.
1-12 "Anomalous indorsement" Section 3.205.
1-13 "Blank indorsement" Section 3.205.
1-14 "Cashier's check" Section 3.104.
1-15 "Certificate of deposit" Section 3.104.
1-16 "Certified check" Section 3.409.
1-17 "Check" Section 3.104.
1-18 "Consideration" Section 3.303.
1-19 "Demand draft" Section 3.104.
1-20 "Draft" Section 3.104.
1-21 "Holder in due course" Section 3.302.
1-22 "Incomplete instrument" Section 3.115.
1-23 "Indorsement" Section 3.204.
2-1 "Indorser" Section 3.204.
2-2 "Instrument" Section 3.104.
2-3 "Issue" Section 3.105.
2-4 "Issuer" Section 3.105.
2-5 "Negotiable instrument" Section 3.104.
2-6 "Negotiation" Section 3.201.
2-7 "Note" Section 3.104.
2-8 "Payable at a definite time" Section 3.108.
2-9 "Payable on demand" Section 3.108.
2-10 "Payable to bearer" Section 3.109.
2-11 "Payable to order" Section 3.109.
2-12 "Payment" Section 3.602.
2-13 "Person entitled to enforce" Section 3.301.
2-14 "Presentment" Section 3.501.
2-15 "Reacquisition" Section 3.207.
2-16 "Special indorsement" Section 3.205.
2-17 "Teller's check" Section 3.104.
2-18 "Transfer of instrument" Section 3.203.
2-19 "Traveler's check" Section 3.104.
2-20 "Value" Section 3.303.
2-21 SECTION 2. Section 3.104, Business & Commerce Code, is
2-22 amended by adding Subsection (k) to read as follows:
2-23 (k) "Demand draft" means a writing that is not signed by a
2-24 customer, as defined in Section 4.104(a)(5), and that is created by
2-25 a third party under the purported authority of the customer for
3-1 the purpose of charging the customer's account with a bank. A
3-2 demand draft does not include a check drawn by a fiduciary, as
3-3 defined in Section 3.307. A demand draft may contain any or all of
3-4 the following:
3-5 (1) the customer's printed or typewritten name or
3-6 account number;
3-7 (2) a notation that the customer authorized the draft;
3-8 and
3-9 (3) the statement "No signature required,"
3-10 "Authorization on file," "Signature on file," or words to that
3-11 effect.
3-12 SECTION 3. Section 3.416, Business & Commerce Code, is
3-13 amended by amending Subsection (a) and adding Subsection (e) to
3-14 read as follows:
3-15 (a) A person who transfers an instrument for consideration
3-16 warrants to the transferee and, if the transfer is by indorsement,
3-17 to any subsequent transferee that:
3-18 (1) the warrantor is a person entitled to enforce the
3-19 instrument;
3-20 (2) all signatures on the instrument are authentic and
3-21 authorized;
3-22 (3) the instrument has not been altered;
3-23 (4) the instrument is not subject to a defense or
3-24 claim in recoupment of any party that can be asserted against the
3-25 warrantor; [and]
4-1 (5) the warrantor has no knowledge of any insolvency
4-2 proceeding commenced with respect to the maker or acceptor or, in
4-3 the case of an unaccepted draft, the drawer; and
4-4 (6) if the instrument is a demand draft, the creation
4-5 of the instrument according to the terms on its face was authorized
4-6 by the person identified as drawer.
4-7 (e) If the warranty under Subsection (a)(6) is not given by
4-8 a transferor under applicable conflict of law rules, the warranty
4-9 is not given to that transferor when that transferor is a
4-10 transferee.
4-11 SECTION 4. Section 3.417, Business & Commerce Code, is
4-12 amended by amending Subsection (a) and adding Subsection (g) to
4-13 read as follows:
4-14 (a) If an unaccepted draft is presented to the drawee for
4-15 payment or acceptance and the drawee pays or accepts the draft, (i)
4-16 the person obtaining payment or acceptance, at the time of
4-17 presentment, and (ii) a previous transferor of the draft, at the
4-18 time of transfer, warrant to the drawee making payment or accepting
4-19 the draft in good faith that:
4-20 (1) the warrantor is, or was, at the time the
4-21 warrantor transferred the draft, a person entitled to enforce the
4-22 draft or authorized to obtain payment or acceptance of the draft on
4-23 behalf of a person entitled to enforce the draft;
4-24 (2) the draft has not been altered; [and]
4-25 (3) the warrantor has no knowledge that the signature
5-1 of the drawer of the draft is unauthorized; and
5-2 (4) if the instrument is a demand draft, the creation
5-3 of the draft according to the terms on its face was authorized by
5-4 the person identified as drawer.
5-5 (g) If the warranty under Subsection (a)(4) is not given by
5-6 a transferor under applicable conflict of law rules, the warranty
5-7 is not given to that transferor when that transferor is a
5-8 transferee.
5-9 SECTION 5. Section 4.207, Business & Commerce Code, is
5-10 amended by amending Subsection (a) and adding Subsection (f) to
5-11 read as follows:
5-12 (a) A customer or collecting bank that transfers an item and
5-13 receives a settlement or other consideration warrants to the
5-14 transferee and to any subsequent collecting bank that:
5-15 (1) the warrantor is a person entitled to enforce the
5-16 item;
5-17 (2) all signatures on the item are authentic and
5-18 authorized;
5-19 (3) the item has not been altered;
5-20 (4) the item is not subject to a defense or claim in
5-21 recoupment (Section 3.305(a)) of any party that can be asserted
5-22 against the warrantor; [and]
5-23 (5) the warrantor has no knowledge of any insolvency
5-24 proceeding commenced with respect to the maker or acceptor or, in
5-25 the case of an unaccepted draft, the drawer; and
6-1 (6) if the item is a demand draft, the creation of the
6-2 item according to the terms on its face was authorized by the
6-3 person identified as drawer.
6-4 (f) If the warranty under Subsection (a)(6) is not given by
6-5 a transferor or collecting bank under applicable conflict of law
6-6 rules, the warranty is not given to that transferor when that
6-7 transferor is a transferee or to any prior collecting bank of that
6-8 transferee.
6-9 SECTION 6. Section 4.208, Business & Commerce Code, is
6-10 amended by amending Subsection (a) and adding Subsection (g) to
6-11 read as follows:
6-12 (a) If an unaccepted draft is presented to the drawee for
6-13 payment or acceptance and the drawee pays or accepts the draft, (i)
6-14 the person obtaining payment or acceptance, at the time of
6-15 presentment, and (ii) a previous transferor of the draft, at the
6-16 time of transfer, warrant to the drawee that pays or accepts the
6-17 draft in good faith that:
6-18 (1) the warrantor is, or was, at the time the
6-19 warrantor transferred the draft, a person entitled to enforce the
6-20 draft or authorized to obtain payment or acceptance of the draft on
6-21 behalf of a person entitled to enforce the draft;
6-22 (2) the draft has not been altered; [and]
6-23 (3) the warrantor has no knowledge that the signature
6-24 of the purported drawer of the draft is unauthorized; and
6-25 (4) if the instrument is a demand draft, the creation
7-1 of the draft according to the terms on its face was authorized by
7-2 the person identified as drawer.
7-3 (g) If the warranty under Subsection (a)(4) is not given by
7-4 a transferor under applicable conflict of law rules, the warranty
7-5 is not given to that transferor when that transferor is a
7-6 transferee.
7-7 SECTION 7. This Act takes effect September 1, 1997.
7-8 SECTION 8. The importance of this legislation and the
7-9 crowded condition of the calendars in both houses create an
7-10 emergency and an imperative public necessity that the
7-11 constitutional rule requiring bills to be read on three several
7-12 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1162 passed the Senate on
April 17, 1997, by the following vote: Yeas 31, Nays 0.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1162 passed the House on
May 2, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor