Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/ucc/ucc3_1.asc

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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 (i) the person was in possession of
the instrument and entitled to enforce it when loss of possession
occurred, (ii) the loss of possession was not the result of a
transfer by the person or a lawful seizure, and (iii) 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 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.

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:

    (1) 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.

      (2) 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.

      (3) Except as provided m paragraph (4), 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.

     (4) 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 (i) that
stated in subsection (a) if the instrument is one on which a bank
is liable as maker or acceptor, or (ii) that stated in subsection
(b) in any other case.

3-311. Accord and Satisfaction by Use of Instrument.

    (a) If a person against whom a claim is asserted proves that
(i) that person in good faith tendered an instrument to the
claimant as full satisfaction of the claim, (ii) the amount of
the claim was unliquidated or subject to a bona fide dispute, and
(iii) 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:

     (1) The claimant, if an organization, proves that (i) 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 (ii) the
instrument or accompanying communication was not received by that
designated person, office, or place.

/* This section relates to the practice of persons who have notes
which are due to large organizations who send "paid in full"
checks to the organization's lock box. Of course, being good cash
managers, the lock box operators cash all checks at once. This
resulted in several persons getting out of significant debts. If
you will look on your installment loan documentation, and hte
loan is with a large institution, odds are good that you will
find that there is a special office for disputes. */

     (2) The claimant, whether or not an organization, proves
that within 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 (1)(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.

3-312. Lost, Destroyed, or Stolen Cashier's Check, Teller's
Check, or Certified Check.

    (a) In this section:

     (1) "Check" means a cashier's check, teller's check, or
certified check.

     (2) "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.

     (3) "Declaration of loss" means a written statement, made
under penalty of perjury, to the effect that (i) the declarer
lost possession of a check, (ii) 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, (iii) the loss of possession was not the
result of a transfer by the declarer or a lawful seizure, and
(iv) 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.

     (4) "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. 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 this subsection, the following rules apply:

     (1) The claim becomes enforceable at the later of (i) the
time the claim is asserted, or (ii) the 90th day following the
date of the check, in the case of a cashier's check or teller's
check, or the 90th day following the date of the acceptance, in
the case of a certified check.

     (2) 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.

     (3) If the claim becomes enforceable before the check is
presented for payment, the obligated bank is not obliged to pay
the check.

     (4) 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 Section 4-3O2(a)(1), payment to the
claimant discharges all liability of the obligated bank with
respect to the check.

    (c) If the obligated bank pays the amount of a check to a
claimant under subsection (b)(4) 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.

    (d) If a claimant has the right to assert a claim under
subsection (b) 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 Section 3-309.

ARTICLE 3

PART 4

LIABILITY OF PARTIES

 3-401. Signature.

     (a) A person is not liable on an instrument unless (i) the
person signed the instrument, or (ii) the person is represented
by an agent or representative who signed the instrument and the
signature is binding on the represented person under Section 3-
402.

     (b) A signature may be made (i) manually or by means of a
device or machine, and (ii) 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.

 3-402. Signature by Representative.

     (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:

     (1) 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.

     (2) Subject to subsection (c), if (i) the form of the
signature does not show unambiguously that the signature is made
in a representative capacity or (ii) 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.

 3-403. Unauthorized Signature.

     (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 person is required
to constitute the authorized signature of an organization, the
signature of the organization is unauthorized if one 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.

 3-404. Impostors; Fictitious Payees.

     (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 (i) a person whose intent determines to whom an
instrument is payable (Section 3-110(a) or (b)) does not intend
the person identified as payee to have any interest in the
instrument, or (ii) the person identified as payee of an
instrument is a fictitious person, the following rules apply
until the instrument is negotiated by special indorsement:

     (1) Any person in possession of the instrument is its
holder.

     (2) 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 (i) it is made in a name substantially
similar to that of the payee or (ii) 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.

 3-405. Employer's Responsibility for Fraudulent
Indorsement by Employee.

     (a) In this section:

     (1) "Employee" includes an independent contractor and
employee of an independent contractor retained by the employer.

     (2) "Fraudulent indorsement" means (i) in the case of an
instrument payable to the employer, a forged indorsement
purporting to be that of the employer, or (ii) 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.

     (3) "Responsibility" with respect to instruments means
authority (i) to sign or indorse instruments on behalf of the
employer, (ii) to process instruments received by the employer
for bookkeeping purposes, for deposit to an account, or for other
disposition, (iii) to prepare or process instruments for issue in
the name of the employer, (iv) to supply information determining
the names or addresses of payees of instruments to be issued in
the name of the employer, (v) to control the disposition of
instruments to be issued in the name of the employer, or (vi) 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 (i) it is
made in a name substantially similar to the name of that person
or (ii) 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.

 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.

 3-407. Alteration.

     (a) "Alteration" means (i) an unauthorized change in an
instrument that purports to modify in any respect the obligation
of a party, or (ii) 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 (i) according to its original terms, or (ii) in
the case of an incomplete instrument altered by unauthorized
completion, according to its terms as completed.

 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.

 3-409. Acceptance of Draft; Certified Check.

     (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.

 3-410. Acceptance Varying Draft,

     (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 obliga.  tion of each drawer and indorser
that does not expressly assent to the acceptance is discharged.

 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 (i) refuses to pay a
cashier's check or certified check, (ii) stops payment of a
teller's check, or (iii) 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 (i) the bank suspends payments, (ii) 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, (iii) the obligated bank has
a reasonable doubt whether the person demanding payment is the
person entitled to enforce the instrument, or (iv) payment is
prohibited by law.

 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 (i)
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
(ii) if the issuer signed an incomplete instrument, according to
its terms when completed, to the extent stated in Sections 3-115
and 3-407. The obligation is owed to a person entitled to enforce
the instrument or to an indorser who paid the instrument under
Section 3-415.

 3-413. Obligation of Acceptor.

     (a) The acceptor of a draft is obliged to pay the draft
(i) 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, (ii) if the acceptance
varies the terms of the draft, according to the terms of the
draft as varied, or (iii) if the acceptance is of a draft that is
an incomplete instrument, according to its terms when completed,
to the extent stated in Sections 3-115 and 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 3-414 or
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 (i) the certification or
acceptance does not state an amount, (ii) the amount of the
instrument is subsequently raised, and (iii) 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.

 3-414. Obligation of Drawer.

     (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 (i) 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 (ii) if the drawer signed an
incomplete instrument, according to its terms when completed, to
the extent stated in Sections 3-115 and 3-407. The obligation is
owed to a person entitled to enforce the draft or to an indorser
who paid the draft under Section 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 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 (i) a check is not presented for payment or given
to a depositary bank for collection within 30 days after its
date, (ii) the drawee suspends payments after expiration of the
30-day period without paying the check, and (iii) 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.

 3-415. Obligation of Indorser.

     (a) Subject to subsections (b), (c), and (d) and to
Section 3-419(d), if an instrument is dishonored, an indorser is
obliged to pay the amount due on the instrument (i) according to
the terms of the instrument at the time it was indorsed, or (ii)
if the indorser indorsed an incomplete instrument, according to
its terms when completed, to the extent stated in Sections 3-115
and 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 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 30 days after the day the
indorsement was made, the liability of the indorser under
subsection (a) is discharged.

3-416. Transfer Warranties.

     (a) A person who transfers an instrument for consideration
warrants to the transferee and, if is by to any subsequent
transferee that:

     (1) the transfer indorsement is valid;

     (2) all signatures on the instrument are authentic and
authorized;

     (3) the instrument has not been altered;

     (4) the instrument is not subject to a defense or claim in
recoupment of any party which can be asserted against the
warrantor; and

     (5) the warrantor has no knowledge of any insolvency
proceeding commenced with respect to the maker or acceptor or, in
the case of an unaccepted draft, the drawer.

     (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 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 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.

3-417. Presentment Warranties.

     (a) If an unaccepted draft is presented to the drawee for
payment or acceptance or accepts the draft, (i) the person
obtaining payment or acceptance, at the time of transfer, warrant
to the drawee making payment or accepting the draft in
presentment, and (ii) a previous transferor of the draft, at the
good faith that:

     (1) the warrantor is, or was at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on behalf
of a person entitled to enforce the draft;

     (2) the draft has not been altered; and

     (3) 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 3-404 or
3-405 or the drawer is precluded under Section 3-406 or 4A06 from
asserting against the drawee the unauthorized indorsement or
alteration.

     (d) If (i) a dishonored draft is presented for payment to
the drawer or an indorser or (ii) any other instrument is
presented for payment to a party obliged to pay the instrument,
and (iii) payment is received, the following rules apply:

     (1) 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.

     (2) 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
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.

 3-418. Payment or Acceptance by Mistake.

     (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 (i) payment of the draft had not been
stopped pursuant to Section 4-403 or (ii) 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, recover the payment from the person to whom or for
whose benefit payment was made or (ii) 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 3-417 or 4-407.

     (d) Notwithstanding Section 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.

 3-419. Instruments Signed for Accommodation.

     (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."

/* An accomodation maker might be referred to as a "co-signer. */

     (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 or is
accompanied by words indicating that the signer is acting as
surety or with respect to the obligation of another to the
instrument. Except as provided in Section 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 (i) execution of judgment against the other
party has been returned unsatisfied, (ii) the other party is
insolvent or in an insolvency proceeding, (iii) the other party
cannot be served with process, or (iv) 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.

 3-420. Conversion of Instrument.

     (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 (i) the issuer
or acceptor of the instrument or (ii) a payee or indorsee who did
not receive delivery of the instrument either directly or through
delivery to an agent or a copayee.

     (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.


Part 5
DISHONOR
 3-501. Presentment.

     (a) "Presentment" means a demand made by or on behalf of a
person entitled to enforce an instrument (i) 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 (ii) 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:

     (1) 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 of two
or more makers, acceptors, drawees, or other payors.

     (2) Upon demand of the person to whom presentment is made,
the person making presentment must (i) exhibit the instrument,
(ii) give reasonable identification and, if presentment is made
on behalf of another person, reasonable evidence of authority
to do so, and (iii) sign a receipt on the instrument for any
payment made or surrender the instrument if full payment is made.

     (3) Without dishonoring the instrument, the party to whom
presentment is made may (i) return the instrument for lack of a
necessary endorsement, or (ii) 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.

     (4) 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 p.m. for the
receipt and processing of instruments presented for payment or
acceptance and presentment is made after the cut-off hour.

 3-502. Dishonor.

     (a) Dishonor of a note is governed by the following rules:

     (1) 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.

     (2) 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.

     (3) If the note is not payable on demand and paragraph (2)
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:

     (1) 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 4-301 or 4-302, or becomes accountable for the amount of
the check under Section 4-302.

     (2) If a draft is payable on demand and paragraph (1) 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.

     (3) If a draft is payable on a date stated in the draft,
the draft is dishonored if (i) 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
(ii) presentment for acceptance is duly made before the day the
draft becomes payable and the draft is not accepted on the day of
presentment.

     (4) 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)(2), (3), and (4),
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:

     (1) 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.

     (2) 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 date of presentment whichever is later.

(e) In any case in which presentment is otherwise required for
dishonor under this and presentment is excused under Section
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, the draft is  treated
as never having been dishonored.

 3-503. Notice of Dishonor.

     (a) The obligation of an indorser stated in Section
3-415(a) and the obligation of a drawer stated in Section
3-414(d) may not be enforced unless (i) the indorser or drawer is
given notice of dishonor of the instrument complying with this
section or (ii) notice of dishonor is excused under Section
3-504(b).

     (b) Notice of di may be given by any person. may be given in
any commercially reasonable means of communication and is
sufficient if the communication 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 3-504(c) with to an instrument
taken for collection by a collecting bank, notice of dishonor
must be given (i) 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 (ii) by any other person
within 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 30 days following the day on
which dishonor occurs.

 3-504. Excused Presentment and Notice of Dishonor.

     (a) Presentment for payment or acceptance of an instrument
is excused if (i) the person entitled to present the instrument
cannot with reasonable diligence make presentment, (ii) the
maker or acceptor has repudiated an obligation to pay the
instrumentment or is dead or in insolvency proceedings, (iii) by
the terms of the instrument presentment is not necessary to
enforce the obligation of indorsers or the drawer, (iv) 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 (v) 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 (i) by the terms of
the instrument notice of dishonor is not necessary to enforce the
obligation of a party to pay the instrument, or (ii) 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.

 3-505. Evidence of Dishonor.

     (a) The following are admissible as evidence and create a
presumption of dishonor and of any notice of dishonor stated:

     (1) a document regular in form as provided in subsection
(b) which purports to be a protest;

     (2) 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;

     (3) 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 notary public 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.


PART 6
DISCHARGE AND PAYMENT

 3-601. Discharge and Effect of Discharge.

     (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.

 3-602. Payment.

     (a) Subject to subsection (b), an instrument is paid to
the extent payment is made (i) by or on behalf of a party obliged
to pay the instrument, and (ii) to a person entitled to enforce
the instrument. 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 3-30 by another person.

     (b) The obligation of a party to pay the instrument is not
discharged under subsection (a) if:

     (1) a claim to the instrument under Section 3-306 is
enforceable against the party receiving payment and (i) payment
is made with knowledge by the payor that payment is prohibited by
injunction or similar process of a court of competent
jurisdiction, or (ii) in the case of an instrument other than a
cashier's check, teller's check, or certified check, the party
making payment accepted, from the person having a claim to the
instrument, indemnity against loss resulting from refusal to pay
the person entitled to enforce the instrument; or

     (2) the person making payment knows that the instrument is
a stolen instrument  and pays a person it knows is in wrongful
possession of the instrument.

 3-603. Tender of Payment.

     (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 tion 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.

 3604. 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 (i) 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 (ii) 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.

 3-605. Discharge of indorsers and Accommodation Parties.

     (a) In this section, the term "indorser" includes a drawer
having the obligation described in Section 3-414(d).

     (b) Discharge, under Section 3-604, of the obligation of a
party to pay an instrument does not discharge the obligation of
an indorser or accommodation party having a right of recourse
against the discharged party.

     (c) If a person entitled to enforce an instrument agrees,
with or without consideration, to an extension of the due date
of the obligation of a party to pay the instrument, the
extension discharges an indorser or accommodation party having a
right of recourse against the party whose obligation is extended
to the extent the indorser or accommodation party proves that the
extension caused loss to the indorser or accommodation party with
respect to the right of recourse.

     (d) If a person entitled to enforce an instrument agrees,
with or without consideration, to a material modification of
the obligation of a party other than an extension of the due
date, the modification discharges the obligation of an indorser
or accommodation party having a right of recourse against the
person whose obligation is modified to the extent the
modification causes loss to the indorser or accommodation tion
party with respect to the right of recourse. The loss suffered by
the indorser or accommodation party as a result of the
modification is equal to the amount of the right of recourse
unless the person enforcing the instrument proves that no loss
was caused by the modification or that the loss caused by the
modification was an amount less than the amount of the right of
recourse.

     (e) If the obligation of a party to pay an instrument is
secured by an interest in collateral and a person entitled to
enforce the instrument impairs the value of the interest in
collateral, the obligation of an indorser or accommodation party
having a right of recourse against the obligor is discharged to
the extent of the impairment.  The value of an interest in
collateral is impaired to the extent (i) the value of the
interest is reduced to an amount less than the amount of the
right of recourse of the party asserting discharge, or (ii) the
reduction in value of the interest causes an increase in the
amount by which the amount of the right of recourse exceeds the
value of the interest. The burden of proving impairment is on
the party asserting discharge.

     (f) If the obligation of a party is secured by an interest
in collateral not provided by an accommodation party and a person
entitled to enforce the instrument impairs the value of the
interest in collateral, the obligation of any party who is
jointly and severally liable with respect to the secured
obligation is discharged to the extent the impairment causes the
party asserting discharge to pay more than that party would have
been obliged to pay, taking into account rights of contribution,
if impairment had not occurred. If the party asserting discharge
is an accommodation party not entitled to discharge under
subsection (e), the party is deemed to have a right to
contribution based on joint and several liability rather than a
right to reimbursement.  The burden of proving impairment is on
the party asserting discharge.

     (g) Under subsection (e) or (f), impairing value of an
interest in collateral includes (i) failure to obtain or maintain
perfection or recordation of the interest in collateral, (ii)
release of collateral without substitution of collateral of equal
value, (iii) failure to perform a duty to preserve the value of
collateral owed, under Article 9 or other law, to a debtor or
surety or other person secondarily liable, or (iv) failure to
comply with applicable law in disposing of collateral.

     (h) An accommodation party is not discharged under
subsection (c), (d), or unless the person entitled to enforce the
instrument knows of the accommodation or has notice under Section
3-4l9(c) that the instrument was signed for accommodation.

     (i) A party is not discharged under this section if (i) the
party asserting discharge consents to the event or conduct that
is the basis of the discharge, or (ii) the instrument or a
separate agreement of the party provides for waiver of discharge
under this section either specifically or by general language
indicating that parties waive defenses based on suretyship or
impairment of collateral.