(a) Subject to subsection (c) and section 34.1-3-106(d), "holder in due course" means the holder of an instrument if:
(i) The instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and
(ii) The holder took the instrument (1) for value, (2) in good faith, (3) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (4) without notice that the instrument contains an unauthorized signature or has been altered, (5) without notice of any claim to the instrument described in section 34.1-3-306, and (6) without notice that any party has a defense or claim in recoupment described in section 34.1-3-305(a).
(b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (a), but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment, or claim to the instrument.
(c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken (1) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding, (2) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or (3) as the successor in interest to an estate or other organization.
(d) If, under section 34.1-3-303(a)(i), the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.
(e) If (1) the person entitled to enforce an instrument has only a security interest in the instrument and (2) the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
(f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.
(g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.
(a) An instrument is issued or transferred for value if:
(i) The instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;
(ii) The transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;
(iii) The instrument is issued or transferred as payment of, or as security for, an antecedent claim against any person, whether or not the claim is due;
(iv) The instrument is issued or transferred in exchange for a negotiable instrument;
(v) The instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument; or
(vi) The holder is a registered clearing corporation and makes the initial entry of the instrument on its books for the account of a party having a contractual relationship with it.
(b) "Consideration" means any consideration sufficient to support a simple contract. The drawer or maker of an instrument has a defense if the instrument is issued without consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the extent performance of the promise is due and the promise has not been performed. If an instrument is issued for value as stated in subsection (a), the instrument is also issued for consideration.
(a) An instrument payable on demand becomes overdue at the earliest of the following times:
(i) On the day after the day demand for payment is duly made;
(ii) If the instrument is a check, ninety (90) days after its date; or
(iii) If the instrument is not a check, when the instrument has been outstanding for a period of time after its date which is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.
(b) With respect to an instrument payable at a definite time the following rules apply:
(i) If the principal is payable in installments and a due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured;
(ii) If the principal is not payable in installments and the due date has not been accelerated, the instrument becomes overdue on the day after the due date;
(iii) If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.
(c) Unless the due date of principal has been accelerated, an instrument does not become overdue if there is default in payment of interest but no default in payment of principal.
(a) Except as stated in subsection (b), the right to enforce the obligation of a party to pay an instrument is subject to the following:
(i) A defense of the obligor based on (1) infancy of the obligor to the extent it is a defense to a simple contract, (2) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor, (3) 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 (4) discharge of the obligor in insolvency proceedings;
(ii) A defense of the obligor stated in another section of this article 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
(iii) 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.
(b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in subsection (a)(i), but is not subject to defenses of the obligor stated in subsection (a)(ii) or claims in recoupment stated in subsection (a)(iii) against a person other than the holder.
(c) Except as stated in subsection (d), in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument (section 34.1-3-306) of another person, but the other person's claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.
(d) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection
(a) that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.
A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.
(a) In this section:
(i) "Fiduciary" means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument;
(ii) "Represented person" means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in paragraph (i) is owed.
(b) If (1) an instrument is taken from a fiduciary for payment or collection or for value, (2) the taker has knowledge of the fiduciary status of the fiduciary, and (3) the represented person makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:
(i) Notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person;
(ii) In the case of an instrument payable to the represented person or the fiduciary as such, the taker has notice of the breach of fiduciary duty if the instrument is (1) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (2) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (3) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person;
(iii) If an instrument is issued by the represented person or the fiduciary as such, and made payable to the fiduciary personally, the taker does not have notice of the breach of fiduciary duty unless the taker knows of the breach of fiduciary duty;
(iv) If an instrument is issued by the represented person or the fiduciary as such, to the taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is (1) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (2) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (3) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.
34.1-3-308. Proof of signatures and status as holder in due course.
(a) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under section 34.1-3-402(a).
(b) If the validity of signatures is admitted or proved and there is compliance with subsection (a), a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under section 34.1-3-301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.
34.1-3-309. Enforcement of lost, destroyed, or stolen instrument.
(a) A person not in possession of an instrument is entitled to enforce the instrument if (1) the person 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.
(b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, section 34.1-3-308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.
34.1-3-310. Effect of instrument on obligation for which taken.
(a) Unless otherwise agreed, if a certified check, cashier's check, or teller's check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an indorser of the instrument.
(b) Unless otherwise agreed and except as provided in subsection (a), if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:
(i) In the case of an uncertified check, suspension of the obligation continues until dishonor of the check or until it is paid or certified. Payment or certification of the check results in discharge of the obligation to the extent of the amount of the check;
(ii) In the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in discharge of the obligation to the extent of the payment;
(iii) Except as provided in paragraph (iv), if the check or note is dishonored and the obligee of the obligation for which the instrument was taken is the person entitled to enforce the instrument, the obligee may enforce either the instrument or the obligation. In the case of an instrument of a third person which is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation;
(iv) If the person entitled to enforce the instrument taken for an obligation is a person other than the obligee, the obligee may not enforce the obligation to the extent the obligation is suspended. If the obligee is the person entitled to enforce the instrument but no longer has possession of it because it was lost, stolen, or destroyed, the obligation may not be enforced to the extent of the amount payable on the instrument, and to that extent the obligee's rights against the obligor are limited to enforcement of the instrument.
(c) If an instrument other than one described in subsection (a) or (b) is taken for an obligation, the effect is (1) that stated in subsection (a) if the instrument is one on which a bank is liable as maker or acceptor, or (2) that stated in subsection (b) in any other case.
34.1-3-311. Accord and satisfaction by use of instrument.
(a) If a person against whom a claim is asserted proves that (1) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (2) the amount of the claim was unliquidated or subject to a bona fide dispute, and (3) the claimant obtained payment of the instrument, the following subsections apply.
(b) Unless subsection (c) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
(c) Subject to subsection (d), a claim is not discharged under subsection (b) if either of the following applies:
(i) The claimant, if an organization, proves that (1) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and (2) the instrument or accompanying communication was not received by that designated person, office, or place;
(ii) The claimant, whether or not an organization, proves that within ninety (90) days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with paragraph (i).
(d) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.
34.1-3-312. Lost, destroyed or stolen cashier's check, teller's check or certified check.
(a) In this section:
(i) "Check" means a cashier's check, teller's check or certified check;
(ii) "Claimant" means a person who claims the right to receive the amount of a cashier's check, teller's check or certified check that was lost, destroyed or stolen;
(iii) "Declaration of loss" means a 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.
(iv) "Obligated bank" means the issuer of a cashier's check or teller's check or the acceptor of a certified check.
(b) A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check, if:
(i) The claimant is the drawer or payee of a certified check or the remitter or payee of a cashier's check or teller's check;
(ii) The communication contains or is accompanied by a declaration of loss of the claimant with respect to the check;
(iii) The communication is received at a time and in a manner affording the bank a reasonable time to act on it before the check is paid; and
(iv) The claimant provides reasonable identification if requested by the obligated bank.
(c) Delivery of a declaration of loss is a warranty of the truth of the statements made in the declaration. If a claim is asserted in compliance with subsection (b) of this section, the following rules apply:
(i) The claim becomes enforceable at the later of:
(A) The time the claim is asserted;
(B) The ninetieth (90th) day following the date of the check, in the case of a cashier's check or teller's check; or
(C) The ninetieth (90th) day following the date of the acceptance, in the case of a certified check.
(ii) Until the claim becomes enforceable, it has no legal effect and the obligated bank may pay the check or, in the case of a teller's check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check;
(iii) If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check;
(iv) When the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check. Subject to W.S. 34.1-4-302(a)(i), payment to the claimant discharges all liability of the obligated bank with respect to the check.
(d) If the obligated bank pays the amount of a check to a claimant under paragraph (c)(iv) of this section and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to:
(i) Refund the payment to the obligated bank if the check is paid; or
(ii) Pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.
(e) If a claimant has the right to assert a claim under subsection (b) of this section and is also a person entitled to enforce a cashier's check, teller's check or certified check which is lost, destroyed or stolen, the claimant may assert rights with respect to the check either under this section or W.S. 34.1-3-309.
(a) A person is not liable on an instrument unless (1) the person signed the instrument, or (2) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under section 34.1-3-402.
(b) A signature may be made (1) manually or by means of a device or machine, and (2) by the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.
(a) If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the "authorized signature of the represented person" and the represented person is liable on the instrument, whether or not identified in the instrument.
(b) If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, the following rules apply:
(i) If the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument;
(ii) Subject to subsection (c), if (1) the form of the signature does not show unambiguously that the signature is made in a representative capacity or (2) the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument. With respect to any other person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.
(c) If a representative signs the name of the representative as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.
(a) Unless otherwise provided in this article or article 4, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this article.
(b) If the signature of more than one (1) person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one (1) of the required signatures is lacking.
(c) The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this article which makes the unauthorized signature effective for the purposes of this article.
(a) If an impostor, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the impostor, or to a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an indorsement of the instrument by any person in the name of the payee is effective as the indorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(b) If (1) a person whose intent determines to whom an instrument is payable (section 34.1-3-110(a) or (b)) does not intend the person identified as payee to have any interest in the instrument, or (2) the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special indorsement:
(i) Any person in possession of the instrument is its holder;
(ii) An indorsement by any person in the name of the payee stated in the instrument is effective as the indorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(c) Under subsection (a) or (b), an indorsement is made in the name of a payee if (1) it is made in a name substantially similar to that of the payee or (2) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.
(d) With respect to an instrument to which subsection (a) or (b) applies, if a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
34.1-3-405. Employer's responsibility for fraudulent indorsement by employee.
(a) In this section:
(i) "Employee" includes an independent contractor and employee of an independent contractor retained by the employer;
(ii) "Fraudulent indorsement" means (1) in the case of an instrument payable to the employer, a forged indorsement purporting to be that of the employer, or (2) in the case of an instrument with respect to which the employer is the issuer, a forged indorsement purporting to be that of the person identified as payee;
(iii) "Responsibility" with respect to instruments means authority (1) to sign or indorse instruments on behalf of the employer, (2) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition, (3) to prepare or process instruments for issue in the name of the employer, (4) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, (5) to control the disposition of instruments to be issued in the name of the employer, or (6) to act otherwise with respect to instruments in a responsible capacity. "Responsibility" does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.
(b) For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent indorsement of the instrument, the indorsement is effective as the indorsement of the person to whom the instrument is payable if it is made in the name of that person. If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
(c) Under subsection (b), an indorsement is made in the name of the person to whom an instrument is payable if (1) it is made in a name substantially similar to the name of that person or (2) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.
34.1-3-406. Negligence contributing to forged signature or alteration of instrument.
(a) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.
(b) Under subsection (a), if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.
(c) Under subsection (a), the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (b), the burden of proving failure to exercise ordinary care is on the person precluded.
(a) "Alteration" means (1) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or (2) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.
(b) Except as provided in subsection (c), an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.
(c) A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument (1) according to its original terms, or (2) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.
34.1-3-408. Drawee not liable on unaccepted draft.
A check or other draft does not of itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts it.
(a) "Acceptance" means the drawee's signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee's signature alone. Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.
(b) A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.
(c) If a draft is payable at a fixed period after sight and the acceptor fails to date the acceptance, the holder may complete the acceptance by supplying a date in good faith.
(d) "Certified check" means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in subsection (a) or by a writing on the check which indicates that the check is certified. The drawee of a check has no obligation to certify the check, and refusal to certify is not dishonor of the check.
(a) If the terms of a drawee's acceptance vary from the terms of the draft as presented, the holder may refuse the acceptance and treat the draft as dishonored. In that case, the drawee may cancel the acceptance.
(b) The terms of a draft are not varied by an acceptance to pay at a particular bank or place in the United States, unless the acceptance states that the draft is to be paid only at that bank or place.
(c) If the holder assents to an acceptance varying the terms of a draft, the obligation of each drawer and indorser that does not expressly assent to the acceptance is discharged.
34.1-3-411. Refusal to pay cashier's checks, teller's checks, and certified checks.
(a) In this section, "obligated bank" means the acceptor of a certified check or the issuer of a cashier's check or teller's check bought from the issuer.
(b) If the obligated bank wrongfully (1) refuses to pay a cashier's check or certified check, (2) stops payment of a teller's check, or (3) refuses to pay a dishonored teller's check, the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular circumstances giving rise to the damages.
(c) Expenses or consequential damages under subsection (b) are not recoverable if the refusal of the obligated bank to pay occurs because (1) the bank suspends payments, (2) the obligated bank asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument, (3) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument, or (4) payment is prohibited by law.
34.1-3-412. Obligation of issuer of note or cashier's check.
The issuer of a note or cashier's check or other draft drawn on the drawer is obliged to pay the instrument (1) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (2) if the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in sections 34.1-3-115 and 34.1-3-407. The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under section 34.1-3-415.
(a) The acceptor of a draft is obliged to pay the draft (1) according to its terms at the time it was accepted, even though the acceptance states that the draft is payable "as originally drawn" or equivalent terms, (2) if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or (3) if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in sections 34.1-3-115 and 34.1-3-407. The obligation is owed to a person entitled to enforce the draft or to the drawer or an indorser who paid the draft under section 34.1-3-414 or 34.1-3-415.
(b) If the certification of a check or other acceptance of a draft states the amount certified or accepted, the obligation of the acceptor is that amount. If (1) the certification or acceptance does not state an amount, (2) the amount of the instrument is subsequently raised, and (3) the instrument is then negotiated to a holder in due course, the obligation of the acceptor is the amount of the instrument at the time it was taken by the holder in due course.
(a) This section does not apply to cashier's checks or other drafts drawn on the drawer.
(b) If an unaccepted draft is dishonored, the drawer is obliged to pay the draft (1) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (2) if the drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in sections 34.1-3-115 and 34.1-3-407. The obligation is owed to a person entitled to enforce the draft or to an indorser who paid the draft under section 34.1-3-415.
(c) If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.
(d) If a draft is accepted and the acceptor is not a bank, the obligation of the drawer to pay the draft if the draft is dishonored by the acceptor is the same as the obligation of an indorser under section 34.1-3-415(a) and (c).
(e) If a draft states that it is drawn "without recourse" or otherwise disclaims liability of the drawer to pay the draft, the drawer is not liable under subsection (b) to pay the draft if the draft is not a check. A disclaimer of the liability stated in subsection (b) is not effective if the draft is a check.
(f) If (1) a check is not presented for payment or given to a depositary bank for collection within thirty (30) days after its date, (2) the drawee suspends payments after expiration of the thirty (30) day period without paying the check, and (3) because of the suspension of payments, the drawer is deprived of funds maintained with the drawee to cover payment of the check, the drawer to the extent deprived of funds may discharge its obligation to pay the check by assigning to the person entitled to enforce the check the rights of the drawer against the drawee with respect to the funds.
(a) Subject to subsections (b), (c), and (d) and to section 34.1-3-419(d), if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (1) according to the terms of the instrument at the time it was indorsed, or (2) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in sections 34.1-3-115 and 34.1-3-407. The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section.
(b) If an indorsement states that it is made "without recourse" or otherwise disclaims liability of the indorser, the indorser is not liable under subsection (a) to pay the instrument.
(c) If notice of dishonor of an instrument is required by section 34.1-3-503 and notice of dishonor complying with that section is not given to an indorser, the liability of the indorser under subsection (a) is discharged.
(d) If a draft is accepted by a bank after an indorsement is made, the liability of the indorser under subsection (a) is discharged.
(e) If an indorser of a check is liable under subsection
(a) and the check is not presented for payment, or given to a depositary bank for collection, within thirty (30) days after the day the indorsement was made, the liability of the indorser under subsection (a) is discharged.
(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:
(i) The warrantor is a person entitled to enforce the instrument;
(ii) All signatures on the instrument are authentic and authorized;
(iii) The instrument has not been altered;
(iv) The instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor; and
(v) 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.
(b) A person to whom the warranties under subsection (a) are made and who took the instrument in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach.
(c) The warranties stated in subsection (a) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (b) is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(d) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (1) the person obtaining payment or acceptance, at the time of presentment, and (2) 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:
(i) 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;
(ii) The draft has not been altered; and
(iii) The warrantor has no knowledge that the signature of the drawer of the draft is unauthorized.
(b) A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor. If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty under subsection (a) based on an unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under section 34.1-3-404 or 34.1-3-405 or the drawer is precluded under section 34.1-3-406 or 34.1-4-406 from asserting against the drawee the unauthorized indorsement or alteration.
(d) If (1) a dishonored draft is presented for payment to the drawer or an indorser or (2) any other instrument is presented for payment to a party obliged to pay the instrument, and (3) payment is received, the following rules apply:
(i) The person obtaining payment and a prior transferor of the instrument warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the instrument, a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument;
(ii) The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections (a) and (d) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (b) or (d) is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(a) Except as provided in subsection (c), if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that (1) payment of the draft had not been stopped pursuant to section 34.1-4-403 or (2) the signature of the drawer of the draft was authorized, the drawee may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance. Rights of the drawee under this subsection are not affected by failure of the drawee to exercise ordinary care in paying or accepting the draft.
(b) Except as provided in subsection (c), if an instrument has been paid or accepted by mistake and the case is not covered by subsection (a), the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, (1) recover the payment from the person to whom or for whose benefit payment was made or (2) in the case of acceptance, may revoke the acceptance.
(c) The remedies provided by subsection (a) or (b) may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided by section 34.1-3-417 or 34.1-4-407.
(d) Notwithstanding section 34.1-4-215, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under subsection (a) or (b), the instrument is deemed not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.
(a) If an instrument is issued for value given for the benefit of a party to the instrument ("accommodated party") and another party to the instrument ("accommodation party") signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party "for accommodation."
(b) An accommodation party may sign the instrument as maker, drawer, acceptor, or indorser and, subject to subsection (d), is obliged to pay the instrument in the capacity in which the accommodation party signs. The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not the accommodation party receives consideration for the accommodation.
(c) A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous indorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument. Except as provided in section 34.1-3-605, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken by that person that the accommodation party signed the instrument for accommodation.
(d) If the signature of a party to an instrument is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if (1) execution of judgment against the other party has been returned unsatisfied, (2) the other party is insolvent or in an insolvency proceeding, (3) the other party cannot be served with process, or (4) it is otherwise apparent that payment cannot be obtained from the other party.
(e) 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. An accommodated party who pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.
(a) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (1) the issuer or acceptor of the instrument or (2) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.
(b) In an action under subsection (a), the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff's interest in the instrument.
(c) A representative, other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.
(a) "Presentment" means a demand made by or on behalf of a person entitled to enforce an instrument (1) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (2) to accept a draft made to the drawee.
(b) The following rules are subject to article 4, agreement of the parties, and clearing-house rules and the like:
(i) Presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written, or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one (1) of two (2) or more makers, acceptors, drawees, or other payors;
(ii) Upon demand of the person to whom presentment is made, the person making presentment must (1) exhibit the instrument, (2) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (3) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made;
(iii) Without dishonoring the instrument, the party to whom presentment is made may (1) return the instrument for lack of a necessary indorsement, or (2) refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule;
(iv) The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if the party to whom presentment is made has established a cut-off hour not earlier than 2:00 p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cut-off hour.
(a) Dishonor of a note is governed by the following rules:
(i) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment;
(ii) If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later;
(iii) If the note is not payable on demand and paragraph (ii) does not apply, the note is dishonored if it is not paid on the day it becomes payable.
(b) Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:
(i) If a check is duly presented for payment to the payor bank otherwise than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under section 34.1-4-301 or 34.1-4-302, or becomes accountable for the amount of the check under section 34.1-4-302;
(ii) If a draft is payable on demand and paragraph
(i) does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment;
(iii) If a draft is payable on a date stated in the draft, the draft is dishonored if (1) presentment for payment is duly made to the drawee and payment is not made on the day the draft becomes payable or the day of presentment, whichever is later, or (2) presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment;
(iv) If a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.
(c) Dishonor of an unaccepted documentary draft occurs according to the rules stated in subsection (b)(ii), (iii), and (iv), except that payment or acceptance may be delayed without dishonor until no later than the close of the third business day of the drawee following the day on which payment or acceptance is required by those paragraphs.
(d) Dishonor of an accepted draft is governed by the following rules:
(i) If the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment;
(ii) If the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day it becomes payable or the day of presentment, whichever is later.
(e) In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under section 34.1-3-504, dishonor occurs without presentment if the instrument is not duly accepted or paid.
(f) If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.
(a) The obligation of an indorser stated in section 34.1-3-415(a) and the obligation of a drawer stated in section 34.1-3-414(d) may not be enforced unless (1) the indorser or drawer is given notice of dishonor of the instrument complying with this section or (2) notice of dishonor is excused under section 34.1-3-504(b).
(b) Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written, or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor.
(c) Subject to section 34.1-3-504(c), with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given (1) by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument, or (2) by any other person within thirty (30) days following the day on which the person receives notice of dishonor. With respect to any other instrument, notice of dishonor must be given within thirty (30) days following the day on which dishonor occurs.
34.1-3-504. Excused presentment and notice of dishonor.
(a) Presentment for payment or acceptance of an instrument is excused if (1) the person entitled to present the instrument cannot with reasonable diligence make presentment, (2) the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings, (3) by the terms of the instrument presentment is not necessary to enforce the obligation of indorsers or the drawer, (4) the drawer or indorser whose obligation is being enforced has waived presentment or otherwise has no reason to expect or right to require that the instrument be paid or accepted, or (5) the drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.
(b) Notice of dishonor is excused if (1) by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or (2) the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.
(c) Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.
(a) The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:
(i) A document regular in form as provided in subsection (b) which purports to be a protest;
(ii) A purported stamp or writing of the drawee, payor bank, or presenting bank on or accompanying the instrument stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor;
(iii) A book or record of the drawee, payor bank, or collecting bank, kept in the usual course of business which shows dishonor, even if there is no evidence of who made the entry.
(b) A protest is a certificate of dishonor made by a United States consul or vice consul, or a notarial officer or other person authorized to administer oaths by the law of the place where dishonor occurs. It may be made upon information satisfactory to that person. The protest must identify the instrument and certify either that presentment has been made or, if not made, the reason why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been given to some or all parties.
(a) The obligation of a party to pay the instrument is discharged as stated in this article or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.
(b) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.
(a) Subject to subsection (b), an instrument is paid to the extent payment is made (1) by or on behalf of a party obliged to pay the instrument, and (2) to a person entitled to enforce the instrument. To the extent of the payment, 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 34.1-3-306 by another person.
(b) The obligation of a party to pay the instrument is not discharged under subsection (a) if:
(i) A claim to the instrument under section 34.1-3-306 is enforceable against the party receiving payment and (1) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or (2) 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
(ii) 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.
(a) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.
(b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.
(c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.
34.1-3-604. Discharge by cancellation or renunciation.
(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 writing.
(b) Cancellation or striking out of an indorsement pursuant to subsection (a) does not affect the status and rights of a party derived from the indorsement.