34.1-2.A-520. Lessee's incidental and consequential damages.
(a) Incidental damages resulting from a lessor's default include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of goods rightfully rejected or goods the acceptance of which is justifiably revoked, any commercially reasonable charges, expenses or commissions in connection with effecting cover, and any other reasonable expense incident to the default.
(b) Consequential damages resulting from a lessor's default include:
(i) Any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
(ii) Injury to person or property proximately resulting from any breach of warranty.
34.1-2.A-521. Lessee's right to specific performance or replevin.
(a) Specific performance may be decreed if the goods are unique or in other proper circumstances.
(b) A decree for specific performance may include any terms and conditions as to payment of the rent, damages, or other relief that the court deems just.
(c) A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like for goods identified to the lease contract if after reasonable effort the lessee is unable to effect cover for those goods or the circumstances reasonably indicate that the effort will be unavailing.
34.1-2.A-522. Lessee's right to goods on lessor's insolvency.
(a) Subject to subsection (b) and even though the goods have not been shipped, a lessee who has paid a part or all of the rent and security for goods identified to a lease contract (section 34.1-2.A-217) on making and keeping good a tender of any unpaid portion of the rent and security due under the lease contract may recover the goods identified from the lessor if the lessor becomes insolvent within ten (10) days after receipt of the first installment of rent and security.
(b) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.
(a) If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a payment when due or repudiates with respect to a part or the whole, then, with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (section 34.1-2.A-510), the lessee is in default under the lease contract and the lessor may:
(i) Cancel the lease contract (section 34.1-2.A-505(a));
(ii) Proceed respecting goods not identified to the lease contract (section 34.1-2.A-524);
(iii) Withhold delivery of the goods and take possession of goods previously delivered (section 34.1-2.A-525);
(iv) Stop delivery of the goods by any bailee (section 34.1-2.A-526);
(v) Dispose of the goods and recover damages (section 34.1-2.A-527), or retain the goods and recover damages (section 34.1-2.A-528), or in a proper case recover rent (section 34.1-2.A-529);
(vi) Exercise any other rights or pursue any other remedies provided in the lease contract.
(b) If a lessor does not fully exercise a right or obtain a remedy to which the lessor is entitled under subsection (a), the lessor may recover the loss resulting in the ordinary course of events from the lessee's default as determined in any reasonable manner, together with incidental damages, less expenses saved in consequence of the lessee's default.
(c) If a lessee is otherwise in default under a lease contract, the lessor may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease. In addition, unless otherwise provided in the lease contract:
(i) If the default substantially impairs the value of the lease contract to the lessor, the lessor may exercise the rights and pursue the remedies provided in subsection (a) or (b); or
(ii) If the default does not substantially impair the value of the lease contract to the lessor, the lessor may recover as provided in subsection (b).
34.1-2.A-524. Lessor's right to identify goods to lease contract.
(a) A lessor aggrieved under section 34.1-2.A-523(a) may:
(i) Identify to the lease contract conforming goods not already identified if at the time the lessor learned of the default they were in the lessor's or the supplier's possession or control; and
(ii) Dispose of goods (section 34.1-2.A-527(a)) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.
(b) If the goods are unfinished, in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization, an aggrieved lessor or the supplier may either complete manufacture and wholly identify the goods to the lease contract or cease manufacture and lease, sell, or otherwise dispose of the goods for scrap or salvage value or proceed in any other reasonable manner.
34.1-2.A-525. Lessor's right to possession of goods.
(a) If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.
(b) After a default by the lessee under the lease contract of the type described in section 34.1-2.A-523(a) or 34.1-2.A-523(c)(i) or, if agreed, after other default by the lessee, the lessor has the right to take possession of the goods. If the lease contract so provides, the lessor may require the lessee to assemble the goods and make them available to the lessor at a place to be designated by the lessor which is reasonably convenient to both parties. Without removal, the lessor may render unusable any goods employed in trade or business, and may dispose of goods on the lessee's premises (section 34.1-2.A-527).
(c) The lessor may proceed under subsection (b) without judicial process if it can be done without breach of the peace or the lessor may proceed by action.
34.1-2.A-526. Lessor's stoppage of delivery in transit or otherwise.
(a) A lessor may stop delivery of goods in the possession of a carrier or other bailee if the lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload, planeload, or larger shipments of express or freight if the lessee repudiates or fails to make a payment due before delivery, whether for rent, security or otherwise under the lease contract, or for any other reason the lessor has a right to withhold or take possession of the goods.
(b) In pursuing its remedies under subsection (a), the lessor may stop delivery until:
(i) Receipt of the goods by the lessee;
(ii) Acknowledgment to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or
(iii) Such an acknowledgment to the lessee by a carrier via reshipment or as a warehouse. (c)(i) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods;
(ii) After notification, the bailee shall hold and deliver the goods according to the directions of the lessor, but the lessor is liable to the bailee for any ensuing charges or damages;
(iii) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
34.1-2.A-527. Lessor's rights to dispose of goods.
(a) After a default by a lessee under the lease contract of the type described in section 34.1-2.A-523(a) or 34.1-2.A-523(c)(i) or after the lessor refuses to deliver or takes possession of goods (section 34.1-2.A-525 or 34.1-2.A-526), or, if agreed, after other default by a lessee, the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale, or otherwise.
(b) Except as otherwise provided with respect to damages liquidated in the lease agreement (section 34.1-2.A-504) or otherwise determined pursuant to agreement of the parties (sections 34.1-1-302 and 34.1-2.A-503), if the disposition is by lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages (1) accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement, (2) the present value, as of the same date, of the total rent for the then remaining lease term of the original lease agreement minus the present value, as of the same date, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement, and (3) any incidental damages allowed under section 34.1-2.A-530, less expenses saved in consequence of the lessee's default.
(c) If the lessor's disposition is by lease agreement that for any reason does not qualify for treatment under subsection (b), or is by sale or otherwise, the lessor may recover from the lessee as if the lessor had elected not to dispose of the goods and section 34.1-2.A-528 governs.
(d) A subsequent buyer or lessee who buys or leases from the lessor in good faith for value as a result of a disposition under this section takes the goods free of the original lease contract and any rights of the original lessee even though the lessor fails to comply with one or more of the requirements of this article.
(e) The lessor is not accountable to the lessee for any profit made on any disposition. A lessee who has rightfully rejected or justifiably revoked acceptance shall account to the lessor for any excess over the amount of the lessee's security interest (section 34.1-2.A-508(e)).
34.1-2.A-528. Lessor's damages for non-acceptance, failure to pay, repudiation, or other default.
(a) Except as otherwise provided with respect to damages liquidated in the lease agreement (section 34.1-2.A-504) or otherwise determined pursuant to agreement of the parties (sections 34.1-1-302 and 34.1-2.A-503), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and the disposition is by lease agreement that for any reason does not qualify for treatment under section 34.1-2.A-527(b), or is by sale or otherwise, the lessor may recover from the lessee as damages for a default of the type described in section 34.1-2.A-523(a) or 34.1-2.A-523(c)(i), or, if agreed, for other default of the lessee, (1) accrued and unpaid rent as of the date of default if the lessee has never taken possession of the goods, or, if the lessee has taken possession of the goods, as of the date the lessor repossesses the goods or an earlier date on which the lessee makes a tender of the goods to the lessor, (2) the present value as of the date determined under clause (1) of the total rent for the then remaining lease term of the original lease agreement minus the present value as of the same date of the market rent at the place where the goods are located computed for the same lease term, and (3) any incidental damages allowed under section 34.1-2.A-530, less expenses saved in consequence of the lessee's default.
(b) If the measure of damages provided in subsection (a) is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under section 34.1-2.A-530, due allowance for costs reasonably incurred and due credit for payments or proceeds of disposition.
(a) After default by the lessee under the lease contract of the type described in section 34.1-2.A-523(a) or 34.1-2.A-523(c)(i) or, if agreed, after other default by the lessee, if the lessor complies with subsection (b), the lessor may recover from the lessee as damages:
(i) For goods accepted by the lessee and not repossessed by or tendered to the lessor, and for conforming goods lost or damaged within a commercially reasonable time after risk of loss passes to the lessee (section 34.1-2.A-219), (1) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (2) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (3) any incidental damages allowed under section 34.1-2.A-530, less expenses saved in consequence of the lessee's default; and
(ii) For goods identified to the lease contract if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that effort will be unavailing, (1) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (2) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (3) any incidental damages allowed under section 34.1-2.A-530, less expenses saved in consequence of the lessee's default.
(b) Except as provided in subsection (c), the lessor shall hold for the lessee for the remaining lease term of the lease agreement any goods that have been identified to the lease contract and are in the lessor's control.
(c) The lessor may dispose of the goods at any time before collection of the judgment for damages obtained pursuant to subsection (a). If the disposition is before the end of the remaining lease term of the lease agreement, the lessor's recovery against the lessee for damages is governed by section 34.1-2.A-527 or 34.1-2.A-528, and the lessor will cause an appropriate credit to be provided against a judgment for damages to the extent that the amount of the judgment exceeds the recovery available pursuant to section 34.1-2.A-527 or 34.1-2.A-528.
(d) Payment of the judgment for damages obtained pursuant to subsection (a) entitles the lessee to the use and possession of the goods not then disposed of for the remaining lease term of and in accordance with the lease agreement.
(e) After a lessee has wrongfully rejected or revoked acceptance of goods, has failed to pay rent then due, or has repudiated (section 34.1-2.A-402), a lessor who is held not entitled to rent under this section must nevertheless be awarded damages for non-acceptance under sections 34.1-2.A-527 and 34.1-2.A-528.
Incidental damages to an aggrieved lessor include any commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the lessee's default, in connection with return or disposition of the goods, or otherwise resulting from the default.
34.1-2.A-531. Standing to sue third parties for injury to goods.
(a) If a third party so deals with goods that have been identified to a lease contract as to cause actionable injury to a party to the lease contract (1) the lessor has a right of action against the third party, and (2) the lessee also has a right of action against the third party if the lessee:
(i) Has a security interest in the goods;
(ii) Has an insurable interest in the goods; or
(iii) Bears the risk of loss under the lease contract or has since the injury assumed that risk as against the lessor and the goods have been converted or destroyed.
(b) If at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the lease contract and there is no arrangement between them for disposition of the recovery, his suit or settlement, subject to his own interest, is as a fiduciary for the other party to the lease contract.
(c) Either party with the consent of the other may sue for the benefit of whom it may concern.
34.1-2.A-532. Lessor's rights to residual interest.
In addition to any other recovery permitted by this article or other law, the lessor may recover from the lessee an amount that will fully compensate the lessor for any loss of or damage to the lessor's residual interest in the goods caused by the default of the lessee.
(a) This article applies to negotiable instruments. It does not apply to money, to payment orders governed by article 4.A, or to securities governed by article 8.
(b) If there is conflict between this article and article 4 or 9, articles 4 and 9 govern.
(c) Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this article to the extent of the inconsistency.
(a) In this article:
(i) "Acceptor" means a drawee who has accepted a draft;
(ii) "Drawee" means a person ordered in a draft to make payment;
(iii) "Drawer" means a person who signs or is identified in a draft as a person ordering payment;
(iv) Reserved;
(v) "Maker" means a person who signs or is identified in a note as a person undertaking to pay;
(vi) "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 (1) 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;
(vii) "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 article or article 4;
(viii) "Party" means a party to an instrument;
(ix) "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;
(x) "Prove" with respect to a fact means to meet the burden of establishing the fact (section 34.1-1-201(b)(viii));
(xi) "Remitter" means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.
(b) Other definitions applying to this article and the sections in which they appear are: "Acceptance" Section 34.1-3-409 "Accommodated party" Section 34.1-3-419 "Accommodation party" Section 34.1-3-419 "Alteration" Section 34.1-3-407 "Anomalous indorsement" Section 34.1-3-205 "Blank indorsement" Section 34.1-3-205 "Cashier's check" Section 34.1-3-104 "Certificate of deposit" Section 34.1-3-104 "Certified check" Section 34.1-3-409 "Check" Section 34.1-3-104 "Consideration" Section 34.1-3-303 "Deposited instrument" Section 34.1-3-901 "Draft" Section 34.1-3-104 "Having control" Section 34.1-3-901 "Holder in due course" Section 34.1-3-302 "Incomplete instrument" Section 34.1-3-115 "Indorsement" Section 34.1-3-204 "Indorser" Section 34.1-3-204 "Instrument" Section 34.1-3-104 "Issue" Section 34.1-3-105 "Issuer" Section 34.1-3-105 "Negotiable instrument" Section 34.1-3-104 "Negotiation" Section 34.1-3-201 "Note" Section 34.1-3-104 "Payable at a definite time" Section 34.1-3-108 "Payable on demand" Section 34.1-3-108 "Payable to bearer" Section 34.1-3-109 "Payable to order" Section 34.1-3-109 "Payment" Section 34.1-3-602 "Person entitled to enforce" Section 34.1-3-301 "Presentment" Section 34.1-3-501 "Reacquisition" Section 34.1-3-207 "Special indorsement" Section 34.1-3-205 "Teller's check" Section 34.1-3-104 "Transfer of instrument" Section 34.1-3-203 "Traveler's check" Section 34.1-3-104 "Value" Section 34.1-3-303
(c) The following definitions in other articles apply to this article: "Bank" Section 34.1-4-105 "Banking day" Section 34.1-4-104 "Clearing corporation" Section 34.1-8-102 "Clearing house" Section 34.1-4-104 "Collecting bank" Section 34.1-4-105 "Custodian bank" Section 34.1-8-102 "Depositary bank" Section 34.1-4-105 "Documentary draft" Section 34.1-4-104 "Foreign clearing corporation" Section 34.1-8-320 "Foreign custodian bank" Section 34.1-8-102 "Intermediary bank" Section 34.1-4-105 "Item" Section 34.1-4-104 "Payor bank" Section 34.1-4-105 "Suspends payments" Section 34.1-4-104
(d) In addition, article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.
(a) Except as provided in subsections (c) and (d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:
(i) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
(ii) Is payable on demand or at a definite time; and
(iii) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (1) an undertaking or power to give, maintain, or protect collateral to secure payment, (2) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (3) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
(b) "Instrument" means a negotiable instrument.
(c) An order that meets all of the requirements of subsection (a), except paragraph (a)(i), and otherwise falls within the definition of "check" in subsection (f) is a negotiable instrument and a check.
(d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this article.
(e) An instrument is a "note" if it is a promise and is a "draft" if it is an order. If an instrument falls within the definition of both "note" and "draft," a person entitled to enforce the instrument may treat it as either.
(f) "Check" means (1) a draft, other than a documentary draft, payable on demand and drawn on a bank or (2) a cashier's check or teller's check. An instrument may be a check even though it is described on its face by another term, such as "money order."
(g) "Cashier's check" means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.
(h) "Teller's check" means a draft drawn by a bank (1) on another bank, or (2) payable at or through a bank.
(j) "Traveler's check" means an instrument that (1) is payable on demand, (2) is drawn on or payable at or through a bank, (3) is designated by the term "traveler's check" or by a substantially similar term, and (4) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.
(k) "Certificate of deposit" means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.
(a) "Issue" means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.
(b) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.
(c) "Issuer" applies to issued and unissued instruments and means a maker or drawer of an instrument.
(a) Except as provided in this section, for the purposes of section 34.1-3-104(a), a promise or order is unconditional unless it states (1) an express condition to payment, (2) that the promise or order is subject to or governed by another writing, or (3) that rights or obligations with respect to the promise or order are stated in another writing. A reference to another writing does not of itself make the promise or order conditional.
(b) A promise or order is not made conditional (1) by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration, or (2) because payment is limited to resort to a particular fund or source.
(c) If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of section 34.1-3-104(a). If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.
(d) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of section 34.1-3-104(a); but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.
Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.
34.1-3-108. Payable on demand or at definite time.
(a) A promise or order is "payable on demand" if it (1) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or (2) does not state any time of payment.
(b) A promise or order is "payable at a definite time" if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of (1) prepayment, (2) acceleration, (3) extension at the option of the holder, or (4) extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.
(c) If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.
(a) A promise or order is payable to bearer if it:
(i) States that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;
(ii) Does not state a payee; or
(iii) States that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.
(b) A promise or order that is not payable to bearer is payable to order if it is payable (1) to the order of an identified person or (2) to an identified person or order. A promise or order that is payable to order is payable to the identified person.
(c) An instrument payable to bearer may become payable to an identified person if it is specially indorsed pursuant to section 34.1-3-205(a). An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to section 34.1-3-205(b).
34.1-3-110. Identification of person to whom instrument is payable.
(a) The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer even if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one (1) person signs in the name or behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one (1) or more of the signers.
(b) If the signature of the issuer of an instrument is made by automated means, such as a check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.
(c) A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office, or account number. For the purpose of determining the holder of an instrument, the following rules apply:
(i) If an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable. If an instrument is payable to an account identified by number and by the name of a person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number;
(ii) If an instrument is payable to:
(A) A trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named;
(B) A person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative;
(C) A fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or
(D) An office or to a person described as holding an office, the instrument is payable to the named person, the incumbent of the office, or a successor to the incumbent.
(d) If an instrument is payable to two (2) or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two (2) or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two (2) or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.
Except as otherwise provided for items in article 4, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the drawee or maker stated in the instrument. If no address is stated, the place of payment is the place of business of the drawee or maker. If a drawee or maker has more than one (1) place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument. If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker.
(a) Unless otherwise provided in the instrument, (1) an instrument is not payable with interest, and (2) interest on an interest-bearing instrument is payable from the date of the instrument.
(b) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.
(a) An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after date. Except as provided in section 34.1-4-401(c), an instrument payable on demand is not payable before the date of the instrument.
(b) If an instrument is undated, its date is the date of its issue or, in the case of an unissued instrument, the date it first comes into possession of a holder.
If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.
(a) "Incomplete instrument" means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.
(b) Subject to subsection (c), if an incomplete instrument is an instrument under section 34.1-3-104, it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under section 34.1-3-104, but, after completion, the requirements of section 34.1-3-104 are met, the instrument may be enforced according to its terms as augmented by completion.
(c) If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under section 34.1-3-407.
(d) The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority.
34.1-3-116. Joint and several liability; contribution.
(a) Except as otherwise provided in the instrument, two (2) or more persons who have the same liability on an instrument as makers, drawers, acceptors, indorsers who indorse as joint payees, or anomalous indorsers are jointly and severally liable in the capacity in which they sign.
(b) Except as provided in section 34.1-3-419(e) or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive from any party having the same joint and several liability contribution in accordance with applicable law.
(c) Discharge of one (1) party having joint and several liability by a person entitled to enforce the instrument does not affect the right under subsection (b) of a party having the same joint and several liability to receive contribution from the party discharged.
34.1-3-117. Other agreements affecting instrument.
Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented, or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented, or nullified by an agreement under this section, the agreement is a defense to the obligation.
(a) Except as provided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six (6) years after the due date or dates stated in the note or, if a due date is accelerated, within six (6) years after the accelerated due date.
(b) Except as provided in subsection (d) or (e), if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six (6) years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten (10) years.
(c) Except as provided in subsection (d), an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three (3) years after dishonor of the draft or ten (10) years after the date of the draft, whichever period expires first.
(d) An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller's check, cashier's check, or traveler's check must be commenced within three (3) years after demand for payment is made to the acceptor or issuer, as the case may be.
(e) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six (6) years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the six (6) year period begins when a demand for payment is in effect and the due date has passed.
(f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced (1) within six (6) years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time, or (2) within six (6) years after the date of the acceptance if the obligation of the acceptor is payable on demand.
(g) Unless governed by other law regarding claims for indemnity or contribution, an action (1) for conversion of an instrument, for money had and received, or like action based on conversion, (2) for breach of warranty, or (3) to enforce an obligation, duty, or right arising under this article and not governed by this section must be commenced within three (3) years after the cause of action accrues.
In an action for breach of an obligation for which a third person is answerable over pursuant to this article or article 4, the defendant may give the third person written notice of the litigation, and the person notified may then give similar notice to any other person who is answerable over. If the notice states (1) that the person notified may come in and defend and (2) 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 (2) litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend.
(a) "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.
(b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
(a) Negotiation is effective even if obtained (1) from an infant, a corporation exceeding its powers, or a person without capacity, (2) by fraud, duress, or mistake, or (3) in breach of duty or as part of an illegal transaction.
(b) To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy.
34.1-3-203. Transfer of instrument; rights acquired by transfer.
(a) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.
(b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.
(c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.
(d) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this article and has only the rights of a partial assignee.
(a) "Indorsement" means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (1) negotiating the instrument, (2) restricting payment of the instrument, or (3) incurring indorser's liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an indorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than indorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.
(b) "Indorser" means a person who makes an indorsement.
(c) For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.
(d) If an instrument is payable to a holder under a name that is not the name of the holder, indorsement may be made by the holder in the name stated in the instrument or in the holder's name or both, but signature in both names may be required by a person paying or taking the instrument for value or collection.
34.1-3-205. Special indorsement; blank indorsement; anomalous indorsement.
(a) If an indorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the indorsement identifies a person to whom it makes the instrument payable, it is a "special indorsement." When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person. The principles stated in section 34.1-3-110 apply to special indorsements.
(b) If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a "blank indorsement." When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.
(c) The holder may convert a blank indorsement that consists only of a signature into a special indorsement by writing, above the signature of the indorser, words identifying the person to whom the instrument is made payable.
(d) "Anomalous indorsement" means an indorsement made by a person who is not the holder of the instrument. An anomalous indorsement does not affect the manner in which the instrument may be negotiated.
(a) An indorsement limiting payment to a particular person or otherwise prohibiting further transfer or negotiation of the instrument is not effective to prevent further transfer or negotiation of the instrument.
(b) An indorsement stating a condition to the right of the indorsee to receive payment does not affect the right of the indorsee to enforce the instrument. A person paying the instrument or taking it for value or collection may disregard the condition, and the rights and liabilities of that person are not affected by whether the condition has been fulfilled.
(c) If an instrument bears an indorsement (1) described in section 34.1-4-201(b), or (2) in blank or to a particular bank using the words "for deposit," "for collection," or other words indicating a purpose of having the instrument collected by a bank for the indorser or for a particular account, the following rules apply:
(i) A person, other than a bank, who purchases the instrument when so indorsed converts the instrument unless the amount paid for the instrument is received by the indorser or applied consistently with the indorsement;
(ii) A depositary bank that purchases the instrument or takes it for collection when so indorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the indorser or applied consistently with the indorsement;
(iii) A payor bank that is also the depositary bank or that takes the instrument for immediate payment over the counter from a person other than a collecting bank converts the instrument unless the proceeds of the instrument are received by the indorser or applied consistently with the indorsement;
(iv) Except as otherwise provided in paragraph (iii), a payor bank or intermediary bank may disregard the indorsement and is not liable if the proceeds of the instrument are not received by the indorser or applied consistently with the indorsement.
(d) Except for an indorsement covered by subsection (c), if an instrument bears an indorsement using words to the effect that payment is to be made to the indorsee as agent, trustee, or other fiduciary for the benefit of the indorser or another person, the following rules apply:
(i) Unless there is notice of breach of fiduciary duty as provided in section 34.1-3-307, a person who purchases the instrument from the indorsee or takes the instrument from the indorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser;
(ii) A subsequent transferee of the instrument or person who pays the instrument is neither given notice nor otherwise affected by the restriction in the indorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.
(e) The presence on an instrument of an indorsement to which this section applies does not prevent a purchaser of the instrument from becoming a holder in due course of the instrument unless the purchaser is a converter under subsection
(c) or has notice or knowledge of breach of fiduciary duty as stated in subsection (d).
(f) In an action to enforce the obligation of a party to pay the instrument, the obligor has a defense if payment would violate an indorsement to which this section applies and the payment is not permitted by this section.
Reacquisition of an instrument occurs if it is transferred to a former holder, by negotiation or otherwise. A former holder who reacquires the instrument may cancel indorsements made after the reacquirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reacquirer or to bearer, the reacquirer may negotiate the instrument. An indorser whose indorsement is cancelled is discharged, and the discharge is effective against any subsequent holder.
34.1-3-301. Person entitled to enforce instrument.
"Person entitled to enforce" an instrument means (1) the holder of the instrument, (2) a nonholder in possession of the instrument who has the rights of a holder, or (3) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 34.1-3-309 or 34.1-3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.