Appendix: WESTLAW Appendix 91 results (showing 5 best matches)
- Law of Modern Payment Systems and Notes
- relevance of negotiable instruments law to modern payment systems
- If you are researching issues related to modern payment systems, notes, or other commercial law issues, it is important to keep up with recent developments. How can you do this efficiently?
- Suppose you need to gain background information on the relevance of negotiable instruments to modern payment systems.
- KeySearch is a research tool that helps you find cases and secondary sources in a specific area of the law. KeySearch guides you through the selection of terms from a classification system based on the West Key Number System® and then uses the key numbers and their underlying concepts to formulate a query for you. To access KeySearch, click on the toolbar. Then browse the list of topics and subtopics and select a topic or subtopic to search by clicking the hypertext links. For example, to search for cases that discuss an issue related to a holder in due course, click
- Open Chapter
Westlaw® Overview 3 results
- The Law of Modern Payment Systems and Notes,
- Learning how to use these materials effectively will enhance your legal research abilities. To help you coordinate the information in the book with your Westlaw research, this volume contains an appendix listing Westlaw databases, search techniques and sample problems.
- The instructions and features described in this Westlaw overview are based on accessing Westlaw via westlaw.com
- Open Chapter
Chapter 10. UCC Article 4A—Funds Transfers 310 results (showing 5 best matches)
- A funds-transfer system rule may select the law of a particular jurisdiction to govern: (i) rights and obligations between participating banks with respect to payment orders transmitted or processed through the system; or (ii) the rights and obligations of some or all parties to a funds-transfer any part of which is carried out by means of the system. A choice of law made pursuant to clause (ii) is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds-transfer, and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order. The beneficiary of a funds-transfer is bound by the choice of law if, when the funds-transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds-transfer, and of the choice of law by the system. The law of a jurisdiction selected pursuant to this subsection may govern,...
- Portions of this chapter are indebted to: Alvin C. Harrell, UCC Article 4A, 25 O . 293 (2000); Alvin C. Harrell, Wholesale Funds–Transfers–UCC Article 4A, in Joseph J. Norton, Chris Reed, and Ian Walden, Cross–Border Electronic Banking Ch.8 (1995); Alvin C. Harrell, Payment System Issues–UCC Article 4A, Regulations J, S, and D, 50 C . 49 (1996); and Fred H. Miller and Alvin C. Harrell, The Law of Modern Payment Systems and Notes Ch. 10 (2nd ed. 1992).
- More importantly, § 4A–507(c) permits a funds-transfer system to select the law applicable to a payment order processed through the system, and provides that such a selection will be binding on participating banks and the originator, other sender, or a receiving bank with notice. If more than one funds-transfer system is utilized and there is a conflict between the choices made by the two systems, the issue will be governed by the law of that choice that bears the most significant relationship to that issue.
- If the sender and receiving bank are members of a funds-transfer system that provides for netting mutual obligations, payment will occur when final settlement is received pursuant to the rules of that system. Netting is also allowed, by means of setoff, between banks transmitting offsetting payment orders among themselves pursuant to a netting or settlement agreement. Issues regarding finality of payment not otherwise covered by these rules will be decided according to otherwise applicable law.
- As of 1992, the United Nations Commission on International Trade Law (UNCITRAL) Working Group on International Payments prepared a Model Law on International Credit Transfers (“Model Law”). The United States Delegation has concerns about the Model Law, particularly with what they perceive as a degree of incompatibility of the model Law with high-speed electronic systems for the transfer of bank credit. They believe that newly developed high-volume, high-speed, and low-cost electronic banking and clearing systems that are now operative cannot operate fully under the Model Law. In fact, the law could impede, rather than facilitate, international commerce. It should be noted, however, that under Article 18 the choice of law of the parties is binding even if there is no nexus between the rule chosen and the transaction or parties, and Article 4A could be selected. However, in the absence of agreement the law of the receiving bank will apply. The United States position advocating a...
- Open Chapter
Title Page 3 results
Chapter 11. Non–UCC Payment Systems 162 results (showing 5 best matches)
- There are various kinds of payment systems, other than cash, in use today. Some consider letters of credit as a kind of payment system. That view is tenable when one considers a commercial credit that may be used by a seller of goods to obtain payment other than directly from the buyer. However, discussion of the law of letters of credit, even if limited to that contained in UCC Article 5, is beyond the scope of this book. Moreover, as other uses for the credit, such as in the case of a standby credit, are not payment uses, but are more in the nature of an alternative to a guaranty or a secured transaction, the focus in this book is limited to systems for payment (except for the discussion of promissory notes).
- To a large degree, credit card, retail electronic fund transfers, and smart card and electronic check payments presently involve primarily consumer transactions. The Uniform Commercial Code, which governs the negotiable instrument payment system, does not. The federal credit card and retail electronic fund transfer rules focus almost entirely on the consumer-account institution relationship, and do not, except in a few instances, deal with the relationships of the persons through which payment is processed. The UCC, of course, does deal with these other relationships. And, as the discussion indicates, smart card and electronic check payments are governed by little if any specific law, except Regulation E and the UCC rules in Articles 3 and 4 to the extent they apply. Thus, in general, the system involving negotiable instruments and governed by the UCC constitutes a complete set of rules that, though their effect may generally be varied by agreement, ...is no agreement on the... ...the...
- This is not to conclude that the UCC, even given the update of Articles 3 and 4, represents an entirely rational state of the law, nor is it to conclude that different sources of law and rules to govern payment systems do or do not make good sense. The point here is not necessarily to argue that the rules for the different systems, which vary markedly, perhaps should not. Rather, since further reconciliation of those rules presently is unlikely, given the experience with the New Payments Code, it is to recognize that the attorney advising his or her clients must struggle with the differences, as those differences may influence the choice of system use, and certainly will impact on rights and responsibilities for a consummated transaction.
- Perhaps still the most common system for making payment is the system using drafts and checks. This system is the subject of the previous nine chapters of this book and is governed primarily by the Uniform Commercial Code.
- Old § 4–104(1)(g); First United Bank v. Philmont Corp., 533 So.2d 449 (Miss. 1988); Broadway National Bank v. Barton–Russell Corp. 585 N.Y.S.2d 933 (N.Y. Sup. Ct. 1992). The slips, if they are used for more than evidence, normally are truncated at the bank of deposit, and information from them is sent forward to the card issuing bank electronically. In this regard the system essentially is not different than that for truncated checks. Section 4–104(a)(9) now excludes credit card slips from the definition of “item,” and thus leaves them to other governing law and system agreements and rules. Note in any credit card transaction, there will be another agreement in addition to the cardholder agreement. Where the credit card is used to purchase or lease goods, for example, it will be a sale or lease subject to UCC Article 2 or Article 2A. In a three party credit card arrangement, such as a bank credit card, there will also be an agreement between the merchant and the card issuing bank...
- Open Chapter
Preface 3 results
- The treatment of other payment systems generally is less extensive. There is much less statutory and case law, and many of the rules are only in the contracts of the parties. Moreover, development in the field can make discussion in detail soon outdated and one of our goals for the book is to have it represent a degree of permanency. Other works cited are better suited for an in depth discussion as to credit cards and retail funds transfers and some emerging payment methods. However, Article 4A on funds transfers is discussed in detail, as well as some focus on previous law as found in the leading wholesale funds transfer cases. The discussion thus generally familiarizes the reader with these other systems, and permits a comparison between how problems are handled there as opposed to in the check system under the Uniform Commercial Code.
- This book constitutes a current and comprehensive discussion of the law governing promissory notes and drafts and other means of payment, except for cash. Every provision in Articles 3 and 4 of the Uniform Commercial Code is discussed, including significant cases decided under those provisions. In relation to the law before the 1990 revision of and amendments to Articles 3 and 4, significant issues, and cases also are discussed as examples of the operation of the statute, and to show its deficiencies which led to the 1990 changes. Issues on which the present statute is unclear, or which are subject to a difference of opinion, also are discussed. Law beyond the Uniform Commercial Code that is related to matters governed by the Code, particularly in the consumer context, but also including relevant federal law, is at least mentioned, and is discussed in detail where a commercial rule is directly modified, such as in the area of holding in due course. Articles 3 and 4 were recently...
- To the extent this book proves useful, the credit is not all ours. In part credit belongs to many who have taught and helped the authors, and to the families of the authors who have been patient while they were otherwise occupied. Deficiencies, however, are the responsibility of the authors alone.
- Open Chapter
Chapter 8. Article 4: Provisional and Final Payment 635 results (showing 5 best matches)
- Potential solutions for federal and state law interrelationship and preemption problems range from arguments that the entire system should be federalized in order to resolve the conflicts and uncertainties, to proposals that Regulation CC be grafted onto state law as a part of Article 4 in order to create a comprehensive bank collection code as existed for most of the 20th century prior to Regulation CC. There is also precedent for the latter approach in the context of modern consumer protection law, ., the system of deference by federal to state law where the state in question has a qualifying equivalent to the Regulation Z Truth in Lending disclosure requirements.
- Moreover, even where a payor bank is accountable under § 4–302 or has made final payment under § 4–215, it may have the benefit of other theories of recovery, and may be subrogated to the rights of its customer (the drawer of the item) under § 4–407 so as to enable the bank to assert as a defense to liability any other recovery by the asserting party and any rights the bank’s customer may have against the payee or other holder of the item. In effect these theories represent other avenues of defense against liability for accountability or final payment, not specified at §§ 4–302(b) or 3–418. And of course the bank may have other rights, such as common law set-off or recoupment rights, that arise outside of Article 4. Subrogation under § 4–407 in essence constitutes an exception to the general rule, stated at § 4–407 and at § 3–305(c), that no party can assert any claim or defense of another person. The final payment and accountability rules at §§ 4–215 and 4–302 are designed to...
- Comment 2 to § 4–102 notes three “vexatious” conflicts of laws issues that are addressed and resolved by this section: the need to have a single choice of state law for the collection and payment activities of a given bank (rather than, for example, applying the laws of the places where different checks were issued or indorsed); the adoption of essentially a tort theory for choice of law, consistent with the duty of a collecting bank to use ordinary care; and the extension of this choice of law rule to all aspects of the collection process from deposit through forwarding, presentment, payment and remittance or credit of proceeds.
- Fred H. Miller, Expedited Funds Availability and Other Payment System Developments, 42 C 103 (1988) at 103, citing 12 U.S.C. § 4008(c)(1). This article also notes the federalization of payment system issues that results when an insolvent banking institution is taken over by the FDIC and that agency imposes federal rules to supercede the state laws that previously governed the bank’s check collection and processing functions. , text and note 6, citing Federal Deposit Insurance Corporation v. McKnight, 769 F.2d 658 (10th Cir.1985); Miller & Meachem, The FDIC and Other Financial Institution Insurance Agencies as “Super” Holders in Due Course: A Lesson in Self–Pollinated Jurisprudence, 40 O 621 (1987). Subsequent developments have reinforced this and have broadened the preemption of state law by federal banking laws and regulations. , Lofts, Querio, & Jensen, Financial Institutions Receiverships Before and After the Financial Institutions Reform, Recovery and Enforcement Act of 1989, 45 C
- Article 4 governs issues concerning the deposit, collection, and payment of items via the banking system. Even so, it does not govern or control all such matters. For example, in one case a cutting torch was used to rob a bank’s night depository. A customer whose deposit was stolen sued the bank. As a defense, the bank invoked a clause in the deposit contract, providing that the risk was on the customer until the bank began to process the deposit. Because the customer’s deposit had not been processed, the court held that Article 4 did not apply and contract law controlled. Under the terms of the deposit contract, the bank won. at ¶ 8.01, Article 4 is frequently subject to modification by agreement of the parties, clearing-house rules, or federal law.
- Open Chapter
Chapter 1. The Law Governing Methods of Payment and Evidences of Debt 259 results (showing 5 best matches)
- An illustration of the kind of subtle questions that may arise between federal law, other than that involving funds availability, and the UCC and which the attorney who practices in the area of payments law must be alert for, is in connection with the use of a check cashing guarantee card to induce a merchant to accept a check that, when presented for payment, constitutes an overdraft and triggers the operation of a check credit arrangement. The guarantee card on these facts is a credit card for purposes of the federal law that limits liability for the unauthorized use of a credit card to no more than $50. On the other hand, under the UCC an unauthorized check is not properly payable by the drawee and no debit to the ostensible drawer’s account may be made, absent negligence on the part of the ostensible drawer that substantially contributes to the making of the unauthorized signature.
- As to the scope of present Regulation J, 12 CFR §§ 210.3(b) and 210.2(g) (for “items,” subpart A of Regulation J and subpart C of Regulation CC are binding on all parties interested in an item handled by any Reserve Bank), and §§ 210.27(b) and 210.26(c) (for “items” other than subpart A items, subpart B of Regulation J (wire transfers of funds) is binding on transferors, transferees, beneficiaries and other parties interested in the item). As to the scope of Regulation J after January 1, 1991, as to subpart B (funds transfers through Fedwire), § 210.25. It should be noted that whatever the scope of Regulations J and CC at present, under § 609(c) of the Expedited Funds Availability Act, 12 U.S.C. § 4008(c), the Board of Governors of the Federal Reserve System may regulate of the payment system, including the receipt, payment, collection or clearing of checks, and ...of the payment system with respect to checks (emphasis supplied). Nonetheless, doubt about the authority of the...
- Increasingly, because of modern technology, payment may be effected through the transfer of funds, actually debits and credits to accounts, popularly known as funds transfers, wire transfers, or “EFT.” In fact, though there were only 56 million wire transactions in 1980, their dollar amount, because of large institutional transfers by this means, exceeded the amount for checks. Today commercial funds transfers in general run well over $1 trillion dollars per day; in February 1992, almost $860,000,000 was transferred through Fedwire, the Federal Reserve funds transfer system, and in January 1992, some $1,597,000,000 through CHIPS, the clearing house interpayments system of New York banks. There are a number of variants of this general method, including not only the large commercial funds transfers, but also retail debit card transactions, ACH transactions, transactions pursuant to so-called “stored value” or “smart cards,” and so-called electronic checks and coins. Most persons also...
- Note, however, that under law prior to Article 4A, the UCC often was looked to for guidance. Article 4 excludes as “items” payment orders under Article 4A. § 4–104(a)(9). Article 3 excludes payment orders from its scope in § 3–102(a). § 4A–103(a)(1)(iii) also excludes checks from the definition of “payment order.”
- An exception is the provisions of UCC Article 4 discussed later in this book. The alternative payment systems involving funds transfers and credit cards also will be discussed in some detail later.
- Open Chapter
Chapter 3. Rights on Negotiable Instruments 433 results (showing 5 best matches)
- § 3–602(a). A 2002 amendment to § 3–602(b) modifies this rule in the case of a note, and provides a note is paid to the extent payment is made by or on behalf of a party obliged to pay the note to a person that formerly was entitled to enforce the note if at the time of the payment the party obliged to pay has not received adequate notification that the note has been transferred and that payment is to be made to the transferee. Subsection (c) then provides for discharge. See also subsection (d). The intent is to conform the Article 3 rule to the normal rule for contracts. Restatement of Contracts (Second) § 338. While the change erodes one of the aspects of negotiability, the new rule accords with modern practice where notes are seldom examined nor installment payments noted upon them.
- The warranty as to the drawer’s signature in § 3–417(a)(3) normally is not breached as it only is one of no knowledge. Since there is no breach of warranty and payment is final, the drawee, who should recognize its customer’s signature, bears the loss. The continued viability of this analysis is discussed later in this book. Ballen et al., Commercial Paper, Bank Deposits and Collections, and Other Payment Systems, 46 Bus. Law. 1521, at 1541 (1991). Several jurisdictions have also changed this result in the case of so-called “demand drafts” as discussed, , in this book, and an amendment promulgated in 2002 now changes the rule in Article 3 for “demand drafts” drawn on consumer accounts. , § 3–416(a)(6). On the other hand, an unauthorized indorsement or a material alteration will breach the warranties of § 3–417(a)(1) and (2). This permits recovery of payment. A drawee normally has no ability to detect an unauthorized indorsement or a skillful alteration of the instrument.
- There are only a handful of transactions that fall outside of the finality of payment rule. That is why Official Comment 1 to § 3–418 can continue to state the UCC rule is consistent with the rule of even though § 3–418(a) explicitly provides for restitutionary recovery where payment or acceptance occurs by mistake because a stop payment order or forged drawer’s signature is overlooked, to the extent permitted by the law governing mistake and restitution; finality occurs where payment is made or acceptance runs to a person who took the instrument in good faith and for value or a reliance payee.
- these provisions were invoked to deny to a bank as the drawer of a draft by way of defense to its drawer’s liability the claim of the bank’s customer to the draft. The bank had drawn the draft payable to the plaintiff at the request of its customer for the customer to use as a down payment, and had stopped payment on the draft and refunded its customer’s money when the customer called off the transaction with the plaintiff because financing could not be obtained. The court recognized the claim, however, because the customer defended the action on the bank’s behalf. where the payee of a note sued the maker of the note that had been delivered to guarantee payment of the debt of the maker’s travel agency to the payee. The maker was allowed to set up the payment of the note by the travel agency as a defense. Finally, in
- , C. Rohwer & A. Skroki, Contracts in a Nutshell § 12.8 (5th ed. 2000). If the contract contains an agreement by the obligor not to assert any claims or defenses that may exist against the assignor against the assignee if the contract is assigned, the assignee may acquire a status similar to that of a holder in due course. , Chicago City Bank & Trust Co. v. Davidson, 42 Ill.App.3d 386, 1 Ill.Dec. 128, 356 N.E.2d 128 (1976). But although the presence of a “waiver of defenses” clause has the effect of imparting some of the characteristics of negotiability to an otherwise nonnegotiable contract, the holder of the contract is not actually a holder in due course. This rule is codified in the UCC for security agreements in Article 9. ..., under an amendment promulgated in 2002 to 3–305, in a consumer transaction an instrument is treated as if it contained a required statement in accordance with the Federal Trade Commission rule at 16 C.F.R. Part 433, even if it does not, and thus is...
- Open Chapter
Chapter 9. The Bank–Customer Relationship 570 results (showing 5 best matches)
- Under old § 4–303(1)(d), completion of the process of posting was a fourth means to make final payment. Action short of completion of posting could suffice as long as a decision to pay had been made. This rule and old § 4–303(1)(d) was deleted from revised Article 4, eliminating the process of posting (and a related decision to pay) as a means of final payment. A companion revision at § 4–215(a) likewise eliminated the process of posting as a means of determining whether final payment has been made. Old § 4–109, illustrating the process of posting, was also eliminated. These revisions reflect a judgment that the process of posting is too vague a standard to use in defining finality of payment and is unsuitable for a system of automated check collection or electronic presentment. § 4–215, Comment 5; § 4–303, Comment 4; and discussion of final payment,
- The trial court held that the bank (or its receiver) could not refuse payment of the cashier’s checks on the ground that a bank could not stop payment of a cashier’s check under old § 4–303. On appeal the court of appeals stated that a cashier’s check represents an independent, unconditional, primary obligation of the bank, and that this contractual and statutory liability is not countermanded by the bank’s ability to stop or refuse payment upon presentment. In other words, the bank cannot simply refuse to pay at its own discretion, without a further reason. The court also recognized, however, that as against any holder not in due course the bank could assert any defenses that would be available to the bank on a simple contract. There were, then, two requisite elements that permitted the bank successfully to refuse payment of the checks. First, the holder/payee of the checks had dealt directly with the bank through its president, and therefore could not have the immunities of a...
- Postdated checks received attention in the 1990 revisions because automated processing means that banks may not be able to review each check’s date when large volumes of checks are presented. Section 4–401(c) (reproduced in the preceding paragraph) permits the bank to pay a postdated check and to charge the customer’s account, before the date of the check, unless the customer has provided notice to the bank under rules similar to those for stop payment orders. In effect a customer wishing to issue a check, but seeking to postpone payment of the check until a later date, must give the bank notice similar to a stop payment order. Otherwise the bank is entitled to pay the instrument upon presentment regardless of its date. If the customer properly notifies the bank of a postdated check, and the bank nonetheless pays it before the appropriate date, the bank is liable for any resulting loss including damages for wrongful dishonor of other items that are dishonored as a result of...
- If the payment asserted to be wrongful occurs other than because of an overlooked stop payment order, the same § 4–407 analysis as in the stop payment cases should be employed. For example, in
- discussion of stop payment orders, ¶ 9.01, and discussion of wrongful payment, ¶ 9.02. As noted, a major difference is that improper payment of a postdated check may result in premature payment of a lawful debt, depleting the account and resulting in wrongful dishonor of other items. In these circumstances, unlike the stop payment order cases, the bank’s subrogation to the position of the drawer’s creditor may not be very helpful, since it was not the payment itself but the timing of that payment that caused damages to the drawer.
- Open Chapter
Chapter 6. Defenses to and Discharge of Liability on Negotiable Instruments 285 results (showing 5 best matches)
- No discharge will eventuate from a payment or satisfaction if the payment or satisfaction is made other than to the holder of the instrument.Payment to a prior holder generally will not suffice. Because any discharge resulting from payment or satisfaction is only a personal defense, if the original holder has negotiated the instrument without notice to the party liable upon it, that party, except as noted in the case of a note, may have to pay twice if the instrument is not exhibited at the first payment. This point was cogently made in a Florida case under prior law where the maker of notes, who neither required a notation of the payments made on the notes nor demanded their surrender by the original holder, was required to make a second payment in full to a holder in due course to whom the original holder had negotiated the instruments. A similar problem can arise if the drawer of a dishonored check settles with the person to whom the check was given but the check is in the hands...
- Under law prior to the Uniform Commercial Code, in order for a payment to discharge the liability of a party the payment had to be made by the party in good faith and without notice that the title of the holder of the instrument might be defective. This rule put the party to pay in a difficult position because that party normally had no way of knowing whether a claim adverse to the holder’s title was good. The UCC eliminated the requirement that payment be made in good faith and without notice. The liability of any party may be discharged by payment (or other satisfaction) made by or on behalf of the party obligated to pay to the party entitled to enforce the instrument, even though it is made with knowledge of a claim of another person to the instrument.
- A specific example of the defense of discharge is payment or other satisfaction. The contract of a party to a negotiable instrument is to pay money to the holder of the instrument or other person entitled to enforce it. Accordingly, payment of the amount of the instrument in money or in an agreed upon satisfaction to the holder will satisfy the contract and discharge the liability of the party under it. For example, the drawer’s liability on checks will be discharged when payment is made on the drawer’s behalf by the drawee bank. Payment of less than the amount of the instrument, if pursuant to valid agreement, also may fully discharge a party’s liability.
- Payment or satisfaction need not be made by the drawer or maker, or even by an indorser who takes up the instrument. With the consent of the holder, payment or satisfaction may be made by any person, including a stranger to the instrument. This rule therefore rejects, for example, decisions under prior law that an accommodation indorser who pays the instrument cannot recover on it; in this context it reaches the same result as under § 3–419(f). When a person does pay the instrument, the surrender of the instrument to that person gives the person the rights of a transferee, which means the rights of the transferor of the instrument. Thus in one case where a mother paid her son’s note, the court stated that she became a transferee of it vested with all the transferor’s rights including the mortgage securing it.
- § 3–118. The purpose is similar to that articulated in the Official Comment to UCC § 2–725 on the statute of limitations for sales contracts. In Article 3, however, the starting points for the running of the statutes of limitations may be found in the various substantive provisions. Official Comment 1 to § 3–118 and , § 3–412 on the liability of the issuer of a note or a cashier’s check. Section 3–118 is not exhaustive; for example, it leaves the subject of tolling to law outside of Article 3 pursuant to UCC § 1–103(b). Guild v. Meredith Village Sav. Bank, 639 F.2d 25, 30 UCC Rep. Serv. 1021 (1st Cir.1980) (payment of interest tolls statute) and Premier Capital, Inc. v. Gallagher, 144 N.H. 284, 740 A.2d 1047, 39 UCC Rep. Serv. 2d 951 (N.H. 1999) (payments or acknowledgment of liability will toll the statute but will not ordinarily diminish a guarantor’s defense of staleness). ...Md. 510, 620 A.2d 894 (Md. 1993). Another tolling case, but one involving only federal law (... ...the...
- Open Chapter
Chapter 4. Liability on Negotiable Instruments: The Basic Obligors 243 results (showing 5 best matches)
- The contract of the maker is not conditional upon any of dishonor after presentment or notice of dishonor or protest. Accordingly, a demand for payment normally is not necessary to charge the maker of a promissory note, and is not a prerequisite to the institution and maintenance of a suit on the note or other action against the maker. Where the holder wishes to accelerate the debt, however, the absence of a requirement that demand be made upon the maker for payment does not displace any common law rule requiring demand for payment of the past-due installments prior to the exercise of rights under an optional acceleration clause. No demand for payment prior to acceleration is necessary, though, where the instrument contains a provision waiving “presentment for payment, demand, protest, notice thereof and dishonor and diligence in collecting.”
- A number of the cases involve the refusal of the bank to pay at the behest of its customer. The more appropriate analysis of them is that the purchaser of a cashier’s check never has the right to stop payment on it, but the bank, as drawer, may stop payment. When sued by the holder on its drawer’s contract, however, the bank will be unable to use any claim of the purchaser of the instrument in defense unless the purchaser joins the action and asserts the claim (§ 3–305(c)) or the adverse claim procedure under § 3–602(e)(1)(i) is employed, or the holder acquired the instrument by theft or through one who so acquired it, or payment would not be consistent with a restrictive indorsement of the instrument.
- The party to whom presentment is made may require the exhibition of the instrument; reasonable identification of the person making presentment and evidence of the person’s authority to make it if made for another; and that the instrument be indorsed as necessary and be presented for acceptance or payment in accordance with its terms, any applicable agreement or applicable law; or, absent such direction, at any place reasonable in the circumstances, and may require a signed receipt on the instrument for any partial or full payment and its surrender upon full payment. A demand for compliance with any or all of these requirements will not constitute a dishonor, as a failure to comply with any requirement invalidates the presentment and thus due acceptance or payment is not refused.
- § 3–602(a) and (e)(1)(i) and (2). Note where these type of checks are involved, indemnity can no longer justify nonpayment. Thus banks should not take indemnity. If they do, and refuse to pay, the indemnity had better cover their complete exposure to the party seeking payment. If indemnity is taken and payment is made, a bank may be liable under other law for breach of the indemnity agreement. Official Comment to § 3–602.
- Moreover, the drawee is not liable to the holder of a draft even if the drawer has on deposit with the drawee sufficient funds to enable the payment of the draft, or the drawee otherwise owes the drawer more than the amount of the draft. A check or other draft does not of itself operate as an assignment of any funds in the hands of the drawee available for its payment. This is because in a number of states the first assignee of a right to payment prevails over a second assignee even if the latter collects first, and the problem for a drawee that might technically have notice of the assignment, were the UCC rule otherwise, is thus obvious.
- Open Chapter
Chapter 2. Form Requirements for Negotiable Instruments 337 results (showing 5 best matches)
- Under Article 3, the inclusion of the required FTC notice, or a similar one mandated by state law, does not destroy negotiability, only the possibility of holder in due course status. § 3–106(d). However, even beyond these circumstances the complexity of modern commercial notes makes them particularly susceptible to an argument their terms do not meet the requirements for negotiability.
- § 3–106(a) clears away much of this legal underbrush as unnecessary but, again, no change in substance is intended. Official Comment 1 to § 3–106. However, the result is prior law that no longer is expressly reflected in the statute remains relevant. TeleRecovery of Louisiana, Inc. v. Gaulon, 738 So.2d 662 (La.App.1999), , 751 So.2d 224 (La.1999), where the instrument stated the drawer agreed to payment according to the terms of the Credit Payment Agreement previously executed, and the court construed this to be merely a reference to the Credit Payment Agreement and not a condition to payment.
- The form requirements themselves originally were established principally to assure that the terms of the instrument would be certain. Certainty was believed necessary to induce the prospective taker of a negotiable instrument to purchase it because, if the terms of the contract were uncertain, it would be difficult to value the contract, and an asset of undeterminable value is not easily saleable, at least at something approaching par. In the years during which the form requirements were being fashioned, the law wished to promote the free transfer of negotiable instruments because negotiable instruments that passed from hand to hand in payment of debts were used to supplement the otherwise inadequate money supply. Uncertainty as to the amount payable, the time of payment, or, worst of all, whether the instrument was absolutely payable without condition,
- The rules as to certainty bear only on the negotiability of the instrument and do not validate any term which is otherwise illegal or regulated. Thus a stated but usurious rate of interest is not sanctioned, and the enforceability of a provision for the payment of an attorney’s fee on default depends upon other law.
- Overall many circumstances tend to make modern notes not negotiable. Notes taken in conjunction with real estate transactions commonly by their terms are made expressly subject to other agreements, such as mortgages and construction loan contracts, so as to incorporate events of default and other matters. If the promise of the note is thereby made conditional, negotiability is destroyed. The problem is not limited to notes. Drafts and checks are equally open to the possibility of being nonnegotiable. For example, it can be argued that the legend “void after 90 days,” which commonly appears on checks, impermissibly conditions a check’s order with the result that the check is no longer a negotiable instrument. Nevertheless, these instruments generally are treated by the parties and by the bank collection system without regard to their technical lack of negotiability.
- Open Chapter
Summary of Contents 34 results (showing 5 best matches)
- ¶ 11.03 Applicable Law for Selected Other Non–UCC Payment Systems
- Chapter 1. The Law Governing Methods of Payment and Evidences of Debt
- Chapter 11. Non–UCC Payment Systems
- ¶ 8.02 The Payor Bank: Provisional Settlement Versus Final Payment
- ¶ 8.03 Final Payment and the Midnight Deadline for Collecting Banks
- Open Chapter
Table of Contents 217 results (showing 5 best matches)
Chapter 7. Liability and Rights Not on the Instrument of Parties to Negotiable Instruments 222 results (showing 5 best matches)
- Arguments made that the check system should adopt a structure akin to that which governs electronic checks under federal Regulation E ( Clarks’ Bank Deposits and Payments Monthly, Vol. 9, No. 10, March 2001, page 3) to prompt the development of superior technology to prevent check fraud generally have not been accepted to date. Experience in that area, discussed in a later chapter of this book, may however yet inform legal developments for paper checks.
- The parties may agree that the giving of the instrument will constitute a discharge of the underlying obligation. The question is one of fact for the jury, and the burden is on the party asserting that it was intended that the instrument constitute payment. Thus in an Illinois case the court stated that the fact an insurance policy was reinstated upon the receipt of a check without any condition being expressed, when other factors were considered raised the question of whether the check was taken in payment so as to provide insurance coverage even though the check was ultimately dishonored.
- The real problem in many of these cases is that the full settlement check is deposited by a clerk in an organization that does not appreciate the consequences, or is handled by automated means through a lock box arrangement where the offer is never noticed. Current Articles 3 and 1 first adopt the majority position that UCC former § 1–207 does not change the common law. Organizational creditors can protect against inadvertent accord and satisfaction by notifying customers that full satisfaction checks must be sent to a designated location which is set up to deal with the matter, and by proving any check submitted in full satisfaction was not sent there. For creditors who do not wish to periodically notify customers (the notice must be within a “reasonable time” before tender) or set up a special office, where it probably will receive some misdirected checks from customers who do not read carefully, an inadvertent accord and satisfaction can be averted if, once the nature of the...
- § 3–420(a). Payment on a forged indorsement, even though made in good faith, is an exercise of dominion and control over the instrument inconsistent with the rights of the owner and results in liability for conversion. Old § 3–419, Official Comments 2 and 3. Franklin v. Safeco Ins. Co. of Am., 303 Or. 376, 737 P.2d 1231 (Or. 1987) (insurance drafts on which one payee forged indorsements of others and which were paid were not converted by depositary bank as that bank did not “pay on a forged indorsement”). Bursey v. CFX Bank, 145 N.H. 126, 756 A.2d 1001, 42 UCC Rep. Serv. 2d 187 (N.H. 2000) (payment requires more than acceptance by the depositary bank); , 14 Fed.Appx. 120 (2d Cir.2001) (suit against depositary bank for conversion implicitly assumes that bank holds the proceeds of the instrument). This latter analysis is discussed further, ...The formulation under § 3–420(a) precludes such confusion. Old §§ 3–419(1)(a) and (b) also provided that an instrument was converted when a...
- The breach of the warranty of good title or entitlement to enforce the instrument will allow the payor to recover the payment made. the court held that the collecting bank was liable on its warranty of indorsement to the drawee bank, and that the defense that the negligence of the drawer had substantially contributed to the forgery was not available to the collecting bank except through third-party practice. The drawer of the instrument on which an unauthorized indorsement appears may not be charged with the payment. Thus the loss from the unauthorized indorsement will pass down the collection chain until the person who took
- Open Chapter
Chapter 5. Liability on Negotiable Instruments: Accommodation and Agency 86 results (showing 5 best matches)
- A guarantor either guarantees payment or collection, depending on the words used. “Payment guaranteed” or equivalent words added to a signature mean the signer will pay the instrument if it is not paid when due without a need for the holder to resort to another party. Words of guaranty that do not otherwise specify guarantee payment. No words of guaranty added to the signature of a sole maker or acceptor will affect that person’s liability on the instrument as a maker or acceptor, but words of guaranty added to the signature of one of two or more makers or acceptors create a presumption that the signature is for the accommodation of the others. Words of guaranty under old Article 3 waived any necessity of presentment, notice of dishonor, and protest to charge the user; under current Article 3, the user is liable in the capacity in which the signature appears.
- ., Modern Free & Accepted Masons v. Cliff M. Averett, Inc., 118 Ga.App. 641, 165 S.E.2d 166 (Ga.Ct. App.1968) (as no issue as to authority was raised in the pleadings or on trial, the obligation was that of the organization).
- The third and last category relates to promissory notes. Corporate notes commonly are also individually signed by corporate principals in order to enable corporations of weak creditworthiness or minimal capital to obtain credit. Accordingly, where the note of a corporation shows a signature that is not clearly made in a representative capacity, the cases tend to be, and should be, quite rigorous in refusing to disallow individual liability, again unless a clear understanding to the contrary between the original parties can be shown. the president of a corporation was found personally liable on a note that recited the corporation promised to pay, but which was signed in a way that did not evidence his representative capacity. The president introduced parol evidence that he intended to sign as a corporate officer, that the debt was that of the corporation, and that corporate checks for installment payments previously had been accepted. The court stated the necessary showing was that
- § 3–419(c) and Official Comment 4). Note, however, the liability of a guarantor for collection is conditioned on unsatisfied collection. Section 3–419(d). As amended in 2002, § 3–419(e) now also states the liability of a party that guarantees payment.
- § 3–402(b)(2). Thus, in Kroll v. Crest Plastics, Inc., 142 Mich.App. 284, 369 N.W.2d 487 (Mich.Ct.App.1985), even though the signature evidenced representative capacity, parol was admitted when the note stated “we” promise to pay and the corporation was not in existence. In FDIC v. Woodside Construction, Inc., 979 F.2d 172 (9th Cir.1992), the note bore the agent’s signature above the name of the principal followed by the agent’s signature with a designation of representative capacity. The court held the agent personally liable and refused parol evidence to the contrary against the FDIC, which was not the payee. § 3–402(b)(2). In Marek Interior Systems, Inc. v. White, 230 Ga.App. 518, 496 S.E.2d 749 (Ga.Ct.App.1998), the note was signed with the name of the principal followed by the signature of the agent preceded by the word “By” and followed by a line for the agent’s title, but the note read that (names of individuals) promised to pay. The court found ambiguity and allowed...
- Open Chapter
Subject Index 422 results (showing 5 best matches)
Advisory Board 9 results (showing 5 best matches)
- Chancellor, Dean and Distinguished Professor of Law, University of California, Hastings College of the Law
- Professor of Law, University of Michigan Professor of Law, University of San Diego
- Professor of Law, University of California, Berkeley
- Professor of Law, University of Chicago
- Professor of Law, University of Illinois
- Open Chapter
Table of Cases 431 results (showing 5 best matches)
- Modern Free and Accepted Masons of World v. Cliff M. Averett, Inc., 118 Ga. App. 641, 165 S.E.2d 166 (Ga.App. 1968)—
- T.W. Sommer Co. v. Modern Door & Lumber Co., 293 Minn. 264, 198 N.W.2d 278 (Minn.1972)—
- Yukon Nat. Bank v. Modern Builders Supply, Inc., 686 P.2d 307 (Okla.App. Div. 1 1984)—
- American Bank & Trust Co. v. Sunbelt Environmental Systems, Inc., 451 So.2d 1111 (La.App. 1 Cir.1984)—
- Bankers Trust Co. v. Litton Systems, Inc., 599 F.2d 488 (2nd Cir.1979)—
- Open Chapter
Copyright Page 3 results
- West Group has created this publication to provide you with accurate and authoritative information concerning the subject matter covered. However, this publication was not necessarily prepared by persons licensed to practice law in a particular jurisdiction. West Group is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Printed in the United States of America
- registered in the U.S. Patent and Trademark Office.
- Open Chapter
- Publication Date: May 1st, 2003
- ISBN: 9780314260185
- Subject: Commercial Law
- Series: Hornbooks
- Type: Hornbook Treatises
- Description: This book discusses the Uniform Commercial Code (U.C.C.) Articles 3, 4, and 4A in detail. It also explains to what extent provisions and interpretive cases decided prior to the promulgation of Article 4A and prior to the 1990 revision of Articles 3 and 4 are still useful, and why changes made were needed. It discusses issues not generally recognized and treated elsewhere, including the meaning of the new standard of good faith, the relation between "accountability" and "final payment," and consequences of radical truncation.