This website will be unavailable from Friday, April 26, 2024 at 6:00 p.m. through Monday, April 29, 2024 at 7:00 a.m. due to data center maintenance.
79R5926 DWS-F
By: McCall H.B. No. 2232
A BILL TO BE ENTITLED
AN ACT
relating to uniform law on negotiable instruments and bank deposits
and collections.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 3.103(a), Business & Commerce Code, is
amended to read as follows:
(a) In this chapter:
(1) "Acceptor" means a drawee who has accepted a
draft.
(2) "Consumer account" means an account established by
an individual primarily for personal, family, or household
purposes.
(3) "Consumer transaction" means a transaction in
which an individual incurs an obligation primarily for personal,
family, or household purposes.
(4) [(2)] "Drawee" means a person ordered in a draft
to make payment.
(5) [(3)] "Drawer" means a person who signs or is
identified in a draft as a person ordering payment.
(6) [(4)] Reserved.
(7) [(5)] "Maker" means a person who signs or is
identified in a note as a person undertaking to pay.
(8) [(6)] "Order" means a written instruction to pay
money signed by the person giving the instruction. The instruction
may be addressed to any person, including the person giving the
instruction, or to one or more persons jointly or in the alternative
but not in succession. An authorization to pay is not an order
unless the person authorized to pay is also instructed to pay.
(9) [(7)]"Ordinary care" in the case of a person
engaged in business means observance of reasonable commercial
standards, prevailing in the area in which the person is located,
with respect to the business in which the person is engaged. In the
case of a bank that takes an instrument for processing for
collection or payment by automated means, reasonable commercial
standards do not require the bank to examine the instrument if the
failure to examine does not violate the bank's prescribed
procedures and the bank's procedures do not vary unreasonably from
general banking usage not disapproved by this chapter or Chapter 4.
(10) [(8)] "Party" means a party to an instrument.
(11) "Principal obligor," with respect to an
instrument, means the accommodated party or any other party to the
instrument against whom a secondary obligor has recourse under this
chapter.
(12) [(9)] "Promise" means a written undertaking to
pay money signed by the person undertaking to pay. An
acknowledgment of an obligation by the obligor is not a promise
unless the obligor also undertakes to pay the obligation.
(13) [(10)] "Prove" with respect to a fact means to
meet the burden of establishing the fact (Section 1.201(b)(8)).
(14) Reserved.
(15) [(11)] "Remitter" means a person who purchases an
instrument from its issuer if the instrument is payable to an
identified person other than the purchaser.
(16) "Remotely-created item" means an item that is
created by a third party, other than the payor bank, under the
purported authority of the drawer of the item for the purpose of
charging the drawer's account with a bank and that does not bear a
handwritten signature purporting to be the signature of the drawer.
(17) "Secondary obligor," with respect to an
instrument, means (A) an indorser or an accommodation party, (B) a
drawer having the obligation described in Section 3.414(d), or (C)
any other party to the instrument that has recourse against another
party to the instrument pursuant to Section 3.116(b).
SECTION 2. Sections 3.103(b) and (c), Business & Commerce
Code, are amended to read as follows:
(b) Other definitions applying to this chapter and the
sections in which they appear are:"Acceptance" Section 3.409.
"Accommodated party" Section 3.419.
"Accommodation party" Section 3.419.
"Account" Section 4.104.
"Alteration" Section 3.407.
"Anomalous indorsement" Section 3.205.
"Blank indorsement" Section 3.205.
"Cashier's check" Section 3.104.
"Certificate of deposit" Section 3.104.
"Certified check" Section 3.409.
"Check" Section 3.104.
"Consideration" Section 3.303.
"Demand draft" Section 3.104.
"Draft" Section 3.104.
"Holder in due course" Section 3.302.
"Incomplete instrument" Section 3.115
"Indorsement" Section 3.204.
"Indorser" Section 3.204.
"Instrument" Section 3.104.
"Issue" Section 3.105.
"Issuer" Section 3.105.
"Negotiable instrument" Section 3.104.
"Negotiation" Section 3.201.
"Note" Section 3.104.
"Payable at a definite time" Section 3.108.
"Payable on demand" Section 3.108.
"Payable to bearer" Section 3.109.
"Payable to order" Section 3.109.
"Payment" Section 3.602.
"Person entitled to enforce" Section 3.301.
"Presentment" Section 3.501.
"Reacquisition" Section 3.207.
"Special indorsement" Section 3.205.
"Teller's check" Section 3.104.
"Transfer of instrument" Section 3.203.
"Traveler's check" Section 3.104.
"Value" Section 3.303.
(c) The following definitions in other chapters apply to
this chapter: writing], or
(iii) that rights or obligations with respect to the promise or
order are stated in another record [writing]. A reference to
another record [writing] does not of itself make the promise or
order conditional.
(b) A promise or order is not made conditional (i) by a
reference to another record [writing] for a statement of rights
with respect to collateral, prepayment, or acceleration, or (ii)
because payment is limited to resort to a particular fund or source.
SECTION 4. Section 3.119, Business & Commerce Code, is
amended to read as follows:
Sec. 3.119. NOTICE OF RIGHT TO DEFEND ACTION. In an action
for breach of an obligation for which a third person is answerable
over pursuant to this chapter or Chapter 4, the defendant may give
the third person [written] notice of the litigation in a record, and
the person notified may then give similar notice to any other person
who is answerable over. If the notice states (i) that the person
notified may come in and defend, and (ii) that failure to do so will
bind the person notified in an action later brought by the person
giving the notice as to any determination of fact common to the two
litigations, the person notified is so bound unless after
seasonable receipt of the notice the person notified does come in
and defend.
SECTION 5. Section 3.305, Business & Commerce Code, is
amended by amending Subsection (a) and by adding Subsections (e)
and (f) to read as follows:
(a) Except as otherwise provided in this section
[Subsection (b)], the right to enforce the obligation of a party to
pay an instrument is subject to the following:
(1) a defense of the obligor based on:
(A) infancy of the obligor to the extent it is a
defense to a simple contract;
(B) duress, lack of legal capacity, or illegality
of the transaction that, under other law, nullifies the obligation
of the obligor;
(C) fraud that induced the obligor to sign the
instrument with neither knowledge nor reasonable opportunity to
learn of its character or its essential terms; or
(D) discharge of the obligor in insolvency
proceedings;
(2) a defense of the obligor stated in another section
of this chapter or a defense of the obligor that would be available
if the person entitled to enforce the instrument were enforcing a
right to payment under a simple contract; and
(3) a claim in recoupment of the obligor against the
original payee of the instrument if the claim arose from the
transaction that gave rise to the instrument; but the claim of the
obligor may be asserted against a transferee of the instrument only
to reduce the amount owing on the instrument at the time the action
is brought.
(e) In a consumer transaction, if law other than this
chapter requires that an instrument include a statement to the
effect that the rights of a holder or transferee are subject to a
claim or defense that the issuer could assert against the original
payee, and the instrument does not include such a statement:
(1) the instrument has the same effect as if the
instrument included such a statement;
(2) the issuer may assert against the holder or
transferee all claims and defenses that would have been available
if the instrument included such a statement; and
(3) the extent to which claims may be asserted against
the holder or transferee is determined as if the instrument
included such a statement.
If an instrument includes or is deemed to include a statement
under this subsection, a holder or transferee who is liable under
the statement to the issuer, but who is not the seller of the goods
or services, shall be entitled to full indemnity from the seller for
any liability under the statement incurred by the holder or
transferee that results from the issuer's claims or defenses
against the seller, plus reasonable attorney's fees. The provision
in this section for express indemnity does not affect any right of
indemnity, subrogation, or recovery to which a holder or transferee
may be entitled under any rule, written contract, judicial
decision, or other statute. This section is not intended to provide
a holder or transferee indemnity from the seller with respect to the
holder or transferee's direct liability to the issuer for the
holder or transferee's own actionable misconduct unrelated to
derivative liability under the statement.
(f) This section is subject to law other than this chapter
that establishes a different rule for consumer transactions.
SECTION 6. Section 3.309(a), Business & Commerce Code, is
amended to read as follows:
(a) A person who is not in possession of an instrument is
entitled to enforce the instrument if:
(1) the person seeking to enforce the instrument:
(A) was entitled to enforce the instrument when
loss of possession occurred; or
(B) has directly or indirectly acquired
ownership of the instrument from a person who was entitled to
enforce the instrument when loss of possession occurred [was in
possession of the instrument and entitled to enforce it when loss of
possession occurred];
(2) the loss of possession was not the result of a
transfer by the person or a lawful seizure; and
(3) the person cannot reasonably obtain possession of
the instrument because the instrument was destroyed, its
whereabouts cannot be determined, or it is in the wrongful
possession of an unknown person or a person that cannot be found or
is not amenable to service of process.
SECTION 7. Section 3.312(a)(3), Business & Commerce Code,
is amended to read as follows:
(3) "Declaration of loss" means a [written] statement,
made in a record under penalty of perjury, to the effect that:
(A) the declarer lost possession of a check;
(B) the declarer is the drawer or payee of the
check, in the case of a certified check, or the remitter or payee of
the check, in the case of a cashier's check or teller's check;
(C) the loss of possession was not the result of a
transfer by the declarer or a lawful seizure; and
(D) the declarer cannot reasonably obtain
possession of the check because the check was destroyed, its
whereabouts cannot be determined, or it is in the wrongful
possession of an unknown person or a person that cannot be found or
is not amenable to service of process.
SECTION 8. Sections 3.416(a) and (e), Business & Commerce
Code, are amended to read as follows:
(a) A person who transfers an instrument for consideration
warrants to the transferee and, if the transfer is by indorsement,
to any subsequent transferee that:
(1) the warrantor is a person entitled to enforce the
instrument;
(2) all signatures on the instrument are authentic and
authorized;
(3) the instrument has not been altered;
(4) the instrument is not subject to a defense or claim
in recoupment of any party that can be asserted against the
warrantor;
(5) the warrantor has no knowledge of any insolvency
proceeding commenced with respect to the maker or acceptor or, in
the case of an unaccepted draft, the drawer; and
(6) with respect to a remotely-created item, that the
person on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn [if the
instrument is a demand draft, the creation of the instrument
according to the terms on its face was authorized by the person
identified as drawer].
(e) If as to a particular item (1) a transferee (including a
collecting bank) asserts a claim for breach of the warranty in
Subsection (a)(6), but (2) under applicable law (including the
applicable choice-of-law principles) that transferee would not
make a warranty substantially similar to the warranty in Subsection
(a)(6) if such transferee were a transferor, then that transferee
would not receive the warranty in [under] Subsection (a)(6) from
any [is not given by a] transferor [under applicable conflict of law
rules, the warranty is not given to that transferor when that
transferor is a transferee].
SECTION 9. Sections 3.417(a) and (g), Business & Commerce
Code, are amended to read as follows:
(a) If an unaccepted draft is presented to the drawee for
payment or acceptance and the drawee pays or accepts the draft, (i)
the person obtaining payment or acceptance, at the time of
presentment, and (ii) a previous transferor of the draft, at the
time of transfer, warrant to the drawee making payment or accepting
the draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on behalf of
a person entitled to enforce the draft;
(2) the draft has not been altered;
(3) the warrantor has no knowledge that the signature
of the drawer of the draft is unauthorized; and
(4) with respect to a remotely-created item, that the
person on whose account the item is drawn authorized the issuance of
the item in the amount for which the item is drawn [if the
instrument is a demand draft, the creation of the draft according to
the terms on its face was authorized by the person identified as
drawer].
(g) If as to a particular item (1) a transferee (including a
collecting bank) asserts a claim for breach of the warranty in
Subsection (a)(4), but (2) under applicable law (including the
applicable choice-of-law principles) that transferee would not
make a warranty substantially similar to the warranty in Subsection
(a)(4) if such transferee were a transferor, then that transferee
would not receive the warranty in [under] Subsection (a)(4) from
any [is not given by a] transferor [under applicable conflict of law
rules, the warranty is not given to that transferor when that
transferor is a transferee].
SECTION 10. Section 3.419, Business & Commerce Code, is
amended by amending Subsection (e) and by adding Subsection (f) to
read as follows:
(e) If the signature of a party to an instrument is
accompanied by words indicating that the party guarantees payment
or the signer signs the instrument as an accommodation party in some
other manner that does not unambiguously indicate an intention to
guarantee collection rather than payment, the signer is obliged to
pay the amount due on the instrument to a person entitled to enforce
the instrument in the same circumstances as the accommodated party
would be obliged, without prior resort to the accommodated party by
the person entitled to enforce the instrument.
(f) An accommodation party who pays the instrument is
entitled to reimbursement from the accommodated party and is
entitled to enforce the instrument against the accommodated party.
In proper circumstances, an accommodation party may obtain relief
that requires the accommodated party to perform its obligations on
the instrument. An accommodated party that [who] pays the
instrument has no right of recourse against, and is not entitled to
contribution from, an accommodation party.
SECTION 11. Section 3.506, Business & Commerce Code, is
amended to read as follows:
Sec. 3.506. PROCESSING FEE BY HOLDER OF PAYMENT DEVICE
[DISHONORED CHECK]. (a) For purposes of this section, "payment
device" means any check, item, paper or electronic payment, or
other payment device used as a medium for payment.
(b) On return of a payment device [check] to the holder
following dishonor of the payment device [check] by a payor, the
holder, the holder's assignee, agent, or representative, or any
other person retained by the holder to seek collection of the face
value of the dishonored payment device [check] may charge the
drawer or indorser [endorser] a reasonable processing fee of not
more than $30.
(c) [(b)] A person may not charge a processing fee to a
drawer or indorser [endorser] under this section if the fee has been
collected under Article 102.007(e) or 102.0071, Code of Criminal
Procedure. If a processing fee has been collected under this
section and the holder subsequently receives a fee collected under
Article 102.007(e) or 102.0071, Code of Criminal Procedure, the
holder shall immediately refund the fee previously collected from
the drawer or indorser [endorser].
(d) [(c)] Notwithstanding Subtitle B, Title 4, Finance
Code, or any other law, a contract [loan agreement] made under
Subtitle B, Title 4 [Chapter 342], Finance Code, may provide that on
return of a dishonored payment device [check] given in payment
under the contract [agreement], the holder may charge the obligor
under the contract [agreement] the processing fee authorized by
this section, and the fee may be added to the unpaid balance owed
under the contract [agreement]. Interest may not be charged on the
fee during the term of the contract [agreement].
(e) [(d)] This section does not affect any right or remedy
to which the holder of a payment device [check] may be entitled
under any rule, written contract, judicial decision, or other
statute.
SECTION 12. Section 3.602, Business & Commerce Code, is
amended to read as follows:
Sec. 3.602. PAYMENT. (a) Subject to Subsection (e)
[(b)], an instrument is paid to the extent payment is made [(i)] by
or on behalf of a party obliged to pay the instrument, and [(ii)] to
a person entitled to enforce the instrument.
(b) Subject to Subsection (e), a note is paid to the extent
payment is made by or on behalf of a party obliged to pay the note to
a person that formerly was entitled to enforce the note only if at
the time of the payment the party obliged to pay has not received
adequate notification that the note has been transferred and that
payment is to be made to the transferee. A notification is adequate
only if it is signed by the transferor or the transferee, reasonably
identifies the transferred note, and provides an address at which
payments subsequently are to be made. Upon request, a transferee
shall seasonably furnish reasonable proof that the note has been
transferred. Unless the transferee complies with the request, a
payment to the person that formerly was entitled to enforce the note
is effective for purposes of Subsection (c) even if the party
obliged to pay the note has received a notification under this
subsection.
(c) Subject to Subsection (e), to [To] the extent of a [the]
payment under Subsections (a) and (b), the obligation of the party
obliged to pay the instrument is discharged even though payment is
made with knowledge of a claim to the instrument under Section 3.306
by another person.
(d) Subject to Subsection (e), a transferee, or any party
that has acquired rights in the instrument directly or indirectly
from a transferee, including any such party that has rights as a
holder in due course, is deemed to have notice of any payment that
is made under Subsection (b) after the date that the note is
transferred to the transferee but before the party obliged to pay
the note receives adequate notification of the transfer.
(e) [(b)] The obligation of a party to pay the instrument is
not discharged under Subsections [Subsection] (a) through (d) if:
(1) a claim to the instrument under Section 3.306 is
enforceable against the party receiving payment and:
(A) payment is made with knowledge by the payor
that payment is prohibited by injunction or similar process of a
court of competent jurisdiction; or
(B) in the case of an instrument other than a
cashier's check, teller's check, or certified check, the party
making payment accepted, from the person having a claim to the
instrument, indemnity against loss resulting from refusal to pay
the person entitled to enforce the instrument; or
(2) the person making payment knows that the
instrument is a stolen instrument and pays a person it knows is in
wrongful possession of the instrument.
(f) As used in this section, "signed," with respect to a
record that is not a writing, includes the attachment to or logical
association with the record of an electronic symbol, sound, or
process with the present intent to adopt or accept the record.
SECTION 13. Section 3.604, Business & Commerce Code, is
amended by amending Subsection (a) and by adding Subsection (c) to
read as follows:
(a) A person entitled to enforce an instrument, with or
without consideration, may discharge the obligation of a party to
pay the instrument:
(1) by an intentional voluntary act, such as surrender
of the instrument to the party, destruction, mutilation, or
cancellation of the instrument, cancellation or striking out of the
party's signature, or the addition of words to the instrument
indicating discharge; or
(2) by agreeing not to sue or otherwise renouncing
rights against the party by a signed record [writing].
(c) In this section, "signed," with respect to a record that
is not a writing, includes the attachment to or logical association
with the record of an electronic symbol, sound, or process with the
present intent to adopt or accept the record.
SECTION 14. Section 3.605, Business & Commerce Code, is
amended to read as follows:
Sec. 3.605. DISCHARGE OF SECONDARY OBLIGORS [INDORSERS AND
ACCOMMODATION PARTIES]. (a) If a person entitled to enforce an
instrument releases the obligation of a principal obligor in whole
or in part, and another party to the instrument is a secondary
obligor with respect to the obligation of that principal obligor,
the following rules apply:
(1) Any obligations of the principal obligor to the
secondary obligor with respect to any previous payment by the
secondary obligor are not affected. Unless the terms of the release
preserve the secondary obligor's recourse, the principal obligor is
discharged, to the extent of the release, from any other duties to
the secondary obligor under this chapter.
(2) Unless the terms of the release provide that the
person entitled to enforce the instrument retains the right to
enforce the instrument against the secondary obligor, the secondary
obligor is discharged to the same extent as the principal obligor
from any unperformed portion of its obligation on the instrument.
If the instrument is a check and the obligation of the secondary
obligor is based on an indorsement of the check, the secondary
obligor is discharged without regard to the language or
circumstances of the discharge or other release.
(3) If the secondary obligor is not discharged under
Subdivision (2), the secondary obligor is discharged to the extent
of the value of the consideration for the release, and to the extent
that the release would otherwise cause the secondary obligor a
loss.
(b) If a person entitled to enforce an instrument grants a
principal obligor an extension of the time at which one or more
payments are due on the instrument and another party to the
instrument is a secondary obligor with respect to the obligation of
that principal obligor, the following rules apply:
(1) Any obligations of the principal obligor to the
secondary obligor with respect to any previous payment by the
secondary obligor are not affected. Unless the terms of the
extension preserve the secondary obligor's recourse, the extension
correspondingly extends the time for performance of any other
duties owed to the secondary obligor by the principal obligor under
this chapter.
(2) The secondary obligor is discharged to the extent
that the extension would otherwise cause the secondary obligor a
loss.
(3) To the extent that the secondary obligor is not
discharged under Subdivision (2), the secondary obligor may perform
its obligations to a person entitled to enforce the instrument as if
the time for payment had not been extended or, unless the terms of
the extension provide that the person entitled to enforce the
instrument retains the right to enforce the instrument against the
secondary obligor as if the time for payment had not been extended,
treat the time for performance of its obligations as having been
extended correspondingly.
(c) If a person entitled to enforce an instrument agrees,
with or without consideration, to a modification of the obligation
of a principal obligor other than a complete or partial release or
an extension of the due date and another party to the instrument is
a secondary obligor with respect to the obligation of that
principal obligor, the following rules apply:
(1) Any obligations of the principal obligor to the
secondary obligor with respect to any previous payment by the
secondary obligor are not affected. The modification
correspondingly modifies any other duties owed to the secondary
obligor by the principal obligor under this chapter.
(2) The secondary obligor is discharged from any
unperformed portion of its obligation to the extent that the
modification would otherwise cause the secondary obligor a loss.
(3) To the extent that the secondary obligor is not
discharged under Subdivision (2), the secondary obligor may satisfy
its obligation on the instrument as if the modification had not
occurred, or treat its obligation on the instrument as having been
modified correspondingly.
(d) If the obligation of a principal obligor is secured by
an interest in collateral, another party to the instrument is a
secondary obligor with respect to that obligation, and a person
entitled to enforce the instrument impairs the value of the
interest in collateral, the obligation of the secondary obligor is
discharged to the extent of the impairment. The value of an
interest in collateral is impaired to the extent the value of the
interest is reduced to an amount less than the amount of the
recourse of the secondary obligor, or the reduction in value of the
interest causes an increase in the amount by which the amount of the
recourse exceeds the value of the interest. For purposes of this
subsection, impairing the value of an interest in collateral
includes failure to obtain or maintain perfection or recordation of
the interest in collateral, release of collateral without
substitution of collateral of equal value or equivalent reduction
of the underlying obligation, failure to perform a duty to preserve
the value of collateral owed, under Chapter 9 or other law, to a
debtor or other person secondarily liable, and failure to comply
with applicable law in disposing of or otherwise enforcing the
interest in collateral.
(e) A secondary obligor is not discharged under Subsection
(a)(3), (b), (c), or (d) unless the person entitled to enforce the
instrument knows that the person is a secondary obligor or has
notice under Section 3.419(c) that the instrument was signed for
accommodation.
(f) A secondary obligor is not discharged under this section
if the secondary obligor consents to the event or conduct that is
the basis of the discharge, or the instrument or a separate
agreement of the party provides for waiver of discharge under this
section specifically or by general language indicating that parties
waive defenses based on suretyship or impairment of collateral.
Unless the circumstances indicate otherwise, consent by the
principal obligor to an act that would lead to a discharge under
this section constitutes consent to that act by the secondary
obligor if the secondary obligor controls the principal obligor or
deals with the person entitled to enforce the instrument on behalf
of the principal obligor.
(g) A release or extension preserves a secondary obligor's
recourse if the terms of the release or extension provide that the
person entitled to enforce the instrument retains the right to
enforce the instrument against the secondary obligor. The recourse
of the secondary obligor continues as though the release or
extension had not been granted.
(h) Except as otherwise provided in Subsection (i), a
secondary obligor asserting discharge under this section has the
burden of persuasion both with respect to the occurrence of the acts
alleged to harm the secondary obligor and loss or prejudice caused
by those acts.
(i) If the secondary obligor demonstrates prejudice caused
by an impairment of its recourse, and the circumstances of the case
indicate that the amount of loss is not reasonably susceptible of
calculation or requires proof of facts that are not ascertainable,
it is presumed that the act impairing recourse caused a loss or
impairment equal to the liability of the secondary obligor on the
instrument. In that event, the burden of persuasion as to any
lesser amount of the loss is on the person entitled to enforce the
instrument. [In this section, the term "indorser" includes a drawer
having the obligation described in Section 3.414(d).
[(b) Discharge of the obligation of a party to pay an
instrument under Section 3.604 does not discharge the obligation of
an indorser or accommodation party having a right of recourse
against the discharged party.
[(c) If a person entitled to enforce an instrument agrees,
with or without consideration, to an extension of the due date of
the obligation of a party to pay the instrument, the extension
discharges an indorser or accommodation party having a right of
recourse against the party whose obligation is extended to the
extent the indorser or accommodation party proves that the
extension caused loss to the indorser or accommodation party with
respect to the right of recourse.
[(d) If a person entitled to enforce an instrument agrees,
with or without consideration, to a material modification of the
obligation of a party other than an extension of the due date, the
modification discharges the obligation of an indorser or
accommodation party having a right of recourse against the person
whose obligation is modified to the extent the modification causes
loss to the indorser or accommodation party with respect to the
right of recourse. The loss suffered by the indorser or
accommodation party as a result of the modification is equal to the
amount of the right of recourse unless the person enforcing the
instrument proves that no loss was caused by the modification or
that the loss caused by the modification was an amount less than the
amount of the right of recourse.
[(e) If the obligation of a party to pay an instrument is
secured by an interest in collateral and a person entitled to
enforce the instrument impairs the value of the interest in
collateral, the obligation of an indorser or accommodation party
having a right of recourse against the obligor is discharged to the
extent of the impairment. The value of an interest in collateral is
impaired to the extent (i) the value of the interest is reduced to
an amount less than the amount of the right of recourse of the party
asserting discharge, or (ii) the reduction in value of the interest
causes an increase in the amount by which the amount of the right of
recourse exceeds the value of the interest. The burden of proving
impairment is on the party asserting discharge.
[(f) If the obligation of a party is secured by an interest
in collateral not provided by an accommodation party and a person
entitled to enforce the instrument impairs the value of the
interest in collateral, the obligation of any party who is jointly
and severally liable with respect to the secured obligation is
discharged to the extent the impairment causes the party asserting
discharge to pay more than that party would have been obliged to
pay, taking into account rights of contribution, if impairment had
not occurred. If the party asserting discharge is an accommodation
party not entitled to discharge under Subsection (e), the party is
deemed to have a right to contribution based on joint and several
liability rather than a right to reimbursement. The burden of
proving impairment is on the party asserting discharge.
[(g) Under Subsection (e) or (f), impairing value of an
interest in collateral includes:
[(1) failure to obtain or maintain perfection or
recordation of the interest in collateral;
[(2) release of collateral without substitution of
collateral of equal value;
[(3) failure to perform a duty to preserve the value of
collateral owed, under Chapter 9 or other law, to a debtor or surety
or other person secondarily liable; or
[(4) failure to comply with applicable law in
disposing of collateral.
[(h) An accommodation party is not discharged under
Subsection (c), (d), or (e) unless the person entitled to enforce
the instrument knows of the accommodation or has notice under
Section 3.419(c) that the instrument was signed for accommodation.
[(i) A party is not discharged under this section if:
[(1) the party asserting discharge consents to the
event or conduct that is the basis of the discharge; or
[(2) the instrument or a separate agreement of the
party provides for waiver of discharge under this section.]
SECTION 15. Sections 4.104(b) and (c), Business & Commerce
Code, are amended to read as follows:
(b) Other definitions applying to this chapter and the
sections in which they appear are:"Agreement for electronic
presentment" Section 4.110.
if the item is a
demand draft, the creation of the item according to the terms on its
face was authorized by the person identified as drawer].
SECTION 17. Sections 4.208(a) and (g), Business & Commerce
Code, are amended to read as follows:
(a) If an unaccepted draft is presented to the drawee for
payment or acceptance and the drawee pays or accepts the draft, (i)
the person obtaining payment or acceptance, at the time of
presentment, and (ii) a previous transferor of the draft, at the
time of transfer, warrant to the drawee that pays or accepts the
draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on behalf of
a person entitled to enforce the draft;
(2) the draft has not been altered;
(3) the warrantor has no knowledge that the signature
of the purported drawer of the draft is unauthorized; and
(4) with respect to any remotely-created item, that
the person on whose account the item is drawn authorized the
issuance of the item in the amount for which the item is drawn [if
the instrument is a demand draft, the creation of the draft
according to the terms on its face was authorized by the person
identified as drawer].
(g) If as to a particular item (1) a transferee (including a
collecting bank) asserts a claim for breach of the warranty under
Subsection (a)(4), but (2) [is not given by a transferor] under
applicable [conflict of] law (including the applicable
choice-of-law principles) that transferee would not make a warranty
substantially similar to [rules,] the warranty in Subsection (a)(4)
if such [is not given to that transferor when that transferor is a]
transferee were a transferor, then that transferee would not
receive the warranty in Subsection (a)(4) from any transferor.
SECTION 18. Section 4.212(a), Business & Commerce Code, is
amended to read as follows:
(a) Unless otherwise instructed, a collecting bank may
present an item not payable by, through, or at a bank by sending to
the party to accept or pay a record providing [written] notice that
the bank holds the item for acceptance or payment. The notice must
be sent in time to be received on or before the day when presentment
is due, and the bank must meet any requirement of the party to
accept or pay under Section 3.501 by the close of the bank's next
banking day after it knows of the requirement.
SECTION 19. Section 4.301(a), Business & Commerce Code, is
amended to read as follows:
(a) If a payor bank settles for a demand item other than a
documentary draft presented otherwise than for immediate payment
over the counter before midnight of the banking day of receipt, the
payor bank may revoke the settlement and recover the settlement if,
before it has made final payment and before its midnight deadline,
it:
(1) returns the item; [or]
(2) returns an image of the item, if the party to which
the return is made has entered into an agreement to accept an image
as a return of the item, and the image is returned in accordance
with that agreement; or
(3) sends a record providing [written] notice of
dishonor or nonpayment if the item is unavailable for return.
SECTION 20. Section 4.403(b), Business & Commerce Code, is
amended to read as follows:
(b) A stop-payment order is effective for six months and is
binding on the bank only if it is in a [writing,] dated,
authenticated record that [and signed and] describes the item with
certainty. A stop-payment order may be renewed for additional
six-month periods by an authenticated record [a writing] given to
the bank within a period during which the stop-payment order is
effective.
SECTION 21. Section 3.116(c), Business & Commerce Code, is
repealed.
SECTION 22. This Act takes effect September 1, 2005.