By Carona S.B. No. 1162
75R8768 LJR-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the warranties on the transfer or presentment of demand
1-3 drafts.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 3.103(b), Business & Commerce Code, is
1-6 amended to read as follows:
1-7 (b) Other definitions applying to this chapter and the
1-8 sections in which they appear are:
1-9 Acceptance Section 3.409.
1-10 Accommodated party Section 3.419.
1-11 Accommodation party Section 3.419.
1-12 Alteration Section 3.407.
1-13 Anomalous indorsement Section 3.205.
1-14 Blank indorsement Section 3.205.
1-15 Cashier's check Section 3.104.
1-16 Certificate of deposit Section 3.104.
1-17 Certified check Section 3.409.
1-18 Check Section 3.104.
1-19 Consideration Section 3.303.
1-20 Demand draft Section 3.104.
1-21 Draft Section 3.104.
1-22 Holder in due course Section 3.302.
1-23 Incomplete instrument Section 3.115.
1-24 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 and that is created by a third party under the purported
2-25 authority of the customer for the purpose of charging the
2-26 customer's account with a bank. A demand draft does not include a
2-27 check drawn by a fiduciary, as defined in Section 3.307. A demand
3-1 draft may contain any or all of the following:
3-2 (1) the customer's printed or typewritten name or
3-3 account number;
3-4 (2) a notation that the customer authorized the draft;
3-5 and
3-6 (3) the statement "No signature required" or
3-7 "Authorization on file" or words to that effect.
3-8 SECTION 3. Section 3.416, Business & Commerce Code, is
3-9 amended by amending Subsection (a) and adding Subsection (e) to
3-10 read as follows:
3-11 (a) A person who transfers an instrument for consideration
3-12 warrants to the transferee and, if the transfer is by indorsement,
3-13 to any subsequent transferee that:
3-14 (1) the warrantor is a person entitled to enforce the
3-15 instrument;
3-16 (2) all signatures on the instrument are authentic and
3-17 authorized;
3-18 (3) the instrument has not been altered;
3-19 (4) the instrument is not subject to a defense or
3-20 claim in recoupment of any party that can be asserted against the
3-21 warrantor; [and]
3-22 (5) the warrantor has no knowledge of any insolvency
3-23 proceeding commenced with respect to the maker or acceptor or, in
3-24 the case of an unaccepted draft, the drawer; and
3-25 (6) if the instrument is a demand draft, the creation
3-26 of the instrument according to the terms on its face was authorized
3-27 by the person identified as drawer.
4-1 (e) If the warranty under Subsection (a)(6) is not given by
4-2 a transferor under applicable conflict of law rules, the warranty
4-3 is not given to that transferor when that transferor is a
4-4 transferee.
4-5 SECTION 4. Section 3.417, Business & Commerce Code, is
4-6 amended by amending Subsection (a) and adding Subsections (g) and
4-7 (h) to read as follows:
4-8 (a) If an unaccepted draft is presented to the drawee for
4-9 payment or acceptance and the drawee pays or accepts the draft, (i)
4-10 the person obtaining payment or acceptance, at the time of
4-11 presentment, and (ii) a previous transferor of the draft, at the
4-12 time of transfer, warrant to the drawee making payment or accepting
4-13 the draft in good faith that:
4-14 (1) the warrantor is, or was, at the time the
4-15 warrantor transferred the draft, a person entitled to enforce the
4-16 draft or authorized to obtain payment or acceptance of the draft on
4-17 behalf of a person entitled to enforce the draft;
4-18 (2) the draft has not been altered; [and]
4-19 (3) the warrantor has no knowledge that the signature
4-20 of the drawer of the draft is unauthorized; and
4-21 (4) if the instrument is a demand draft, the creation
4-22 of the draft according to the terms on its face was authorized by
4-23 the person identified as drawer.
4-24 (g) A demand draft is a check.
4-25 (h) If the warranty under Subsection (a)(4) is not given by
4-26 a transferor under applicable conflict of law rules, the warranty
4-27 is not given to that transferor when that transferor is a
5-1 transferee.
5-2 SECTION 5. Section 4.207, Business & Commerce Code, is
5-3 amended by amending Subsection (a) and adding Subsection (f) to
5-4 read as follows:
5-5 (a) A customer or collecting bank that transfers an item and
5-6 receives a settlement or other consideration warrants to the
5-7 transferee and to any subsequent collecting bank that:
5-8 (1) the warrantor is a person entitled to enforce the
5-9 item;
5-10 (2) all signatures on the item are authentic and
5-11 authorized;
5-12 (3) the item has not been altered;
5-13 (4) the item is not subject to a defense or claim in
5-14 recoupment (Section 3.305(a)) of any party that can be asserted
5-15 against the warrantor; [and]
5-16 (5) the warrantor has no knowledge of any insolvency
5-17 proceeding commenced with respect to the maker or acceptor or, in
5-18 the case of an unaccepted draft, the drawer; and
5-19 (6) if the item is a demand draft, the creation of the
5-20 item according to the terms on its face was authorized by the
5-21 person identified as drawer.
5-22 (f) If the warranty under Subsection (a)(6) is not given by
5-23 a transferor or collecting bank under applicable conflict of law
5-24 rules, the warranty is not given to that transferor when that
5-25 transferor is a transferee or to any prior collecting bank of that
5-26 transferee.
5-27 SECTION 6. Section 4.208, Business & Commerce Code, is
6-1 amended by amending Subsection (a) and adding Subsections (g) and
6-2 (h) to read as follows:
6-3 (a) If an unaccepted draft is presented to the drawee for
6-4 payment or acceptance and the drawee pays or accepts the draft, (i)
6-5 the person obtaining payment or acceptance, at the time of
6-6 presentment, and (ii) a previous transferor of the draft, at the
6-7 time of transfer, warrant to the drawee that pays or accepts the
6-8 draft in good faith that:
6-9 (1) the warrantor is, or was, at the time the
6-10 warrantor transferred the draft, a person entitled to enforce the
6-11 draft or authorized to obtain payment or acceptance of the draft on
6-12 behalf of a person entitled to enforce the draft;
6-13 (2) the draft has not been altered; [and]
6-14 (3) the warrantor has no knowledge that the signature
6-15 of the purported drawer of the draft is unauthorized; and
6-16 (4) if the instrument is a demand draft, the creation
6-17 of the draft according to the terms on its face was authorized by
6-18 the person identified as drawer.
6-19 (g) A demand draft is a check.
6-20 (h) If the warranty under Subsection (a)(4) is not given by
6-21 a transferor under applicable conflict of law rules, the warranty
6-22 is not given to that transferor when that transferor is a
6-23 transferee.
6-24 SECTION 7. This Act takes effect September 1, 1997.
6-25 SECTION 8. The importance of this legislation and the
6-26 crowded condition of the calendars in both houses create an
6-27 emergency and an imperative public necessity that the
7-1 constitutional rule requiring bills to be read on three several
7-2 days in each house be suspended, and this rule is hereby suspended.