S T A T E   O F   N E W   Y O R K
       ________________________________________________________________________
                                         4608
                              2015-2016 Regular Sessions
                                   I N  S E N A T E
                                    March 30, 2015
                                      ___________
       Introduced  by  Sen.  FARLEY -- read twice and ordered printed, and when
         printed to be committed to the Committee on Judiciary
       AN ACT to amend the uniform commercial code, in relation to  modernizing
         commercial  law in New York state; and to repeal certain provisions of
         such code relating thereto
         THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
       BLY, DO ENACT AS FOLLOWS:
    1    Section  1. Article 3 of the uniform commercial code is REPEALED and a
    2  new article 3 is added to read as follows:
    3                                  ARTICLE 3
    4                           NEGOTIABLE INSTRUMENTS
    5                                   PART 1
    6                     GENERAL PROVISIONS AND DEFINITIONS
    7  SECTION 3--101. SHORT TITLE.
    8    THIS ARTICLE MAY  BE  CITED  AS  UNIFORM  COMMERCIAL  CODE--NEGOTIABLE
    9  INSTRUMENTS.
   10  SECTION 3--102. SUBJECT MATTER.
   11    (A)  THIS ARTICLE APPLIES TO NEGOTIABLE INSTRUMENTS. IT DOES NOT APPLY
   12  TO MONEY, TO PAYMENT ORDERS GOVERNED BY ARTICLE  4A,  OR  TO  SECURITIES
   13  GOVERNED BY ARTICLE 8.
   14    (B)  IF  THERE  IS  CONFLICT  BETWEEN THIS ARTICLE AND ARTICLE 4 OR 9,
   15  ARTICLES 4 AND 9 GOVERN.
   16    (C) REGULATIONS OF THE BOARD  OF  GOVERNORS  OF  THE  FEDERAL  RESERVE
   17  SYSTEM  AND  OPERATING  CIRCULARS OF THE FEDERAL RESERVE BANKS SUPERSEDE
   18  ANY INCONSISTENT PROVISION OF THIS ARTICLE TO THE EXTENT OF  THE  INCON-
   19  SISTENCY.
   20  SECTION 3--103. DEFINITIONS.
   21    (A) IN THIS ARTICLE:
   22    (1) "ACCEPTOR" MEANS A DRAWEE WHO HAS ACCEPTED A DRAFT.
   23    (2)  "CONSUMER  ACCOUNT" MEANS AN ACCOUNT ESTABLISHED BY AN INDIVIDUAL
   24  PRIMARILY FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES.
        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD10173-01-5
       S. 4608                             2
    1    (3) "CONSUMER TRANSACTION" MEANS A TRANSACTION IN WHICH AN  INDIVIDUAL
    2  INCURS  AN  OBLIGATION  PRIMARILY  FOR  PERSONAL,  FAMILY,  OR HOUSEHOLD
    3  PURPOSES.
    4    (4) "DRAWEE" MEANS A PERSON ORDERED IN A DRAFT TO MAKE PAYMENT.
    5    (5) "DRAWER" MEANS A PERSON WHO SIGNS OR IS IDENTIFIED IN A DRAFT AS A
    6  PERSON ORDERING PAYMENT.
    7    (6)  "GOOD  FAITH" MEANS HONESTY IN FACT AND THE OBSERVANCE OF REASON-
    8  ABLE COMMERCIAL STANDARDS OF FAIR DEALING.
    9    (7) "MAKER" MEANS A PERSON WHO SIGNS OR IS IDENTIFIED IN A NOTE  AS  A
   10  PERSON UNDERTAKING TO PAY.
   11    (8)  "ORDER"  MEANS  A  WRITTEN INSTRUCTION TO PAY MONEY SIGNED BY THE
   12  PERSON GIVING THE INSTRUCTION.  THE INSTRUCTION MAY BE ADDRESSED TO  ANY
   13  PERSON,  INCLUDING  THE PERSON GIVING THE INSTRUCTION, OR TO ONE OR MORE
   14  PERSONS JOINTLY OR IN THE ALTERNATIVE BUT NOT IN SUCCESSION. AN AUTHORI-
   15  ZATION TO PAY IS NOT AN ORDER UNLESS THE PERSON  AUTHORIZED  TO  PAY  IS
   16  ALSO INSTRUCTED TO PAY.
   17    (9)  "ORDINARY CARE" IN THE CASE OF A PERSON ENGAGED IN BUSINESS MEANS
   18  OBSERVANCE OF REASONABLE COMMERCIAL STANDARDS, PREVAILING IN THE AREA IN
   19  WHICH THE PERSON IS LOCATED, WITH RESPECT TO THE BUSINESS IN  WHICH  THE
   20  PERSON  IS  ENGAGED.  IN THE CASE OF A BANK THAT TAKES AN INSTRUMENT FOR
   21  PROCESSING FOR COLLECTION OR  PAYMENT  BY  AUTOMATED  MEANS,  REASONABLE
   22  COMMERCIAL  STANDARDS  DO NOT REQUIRE THE BANK TO EXAMINE THE INSTRUMENT
   23  IF THE FAILURE TO EXAMINE DOES NOT VIOLATE THE BANK'S PRESCRIBED  PROCE-
   24  DURES  AND  THE  BANK'S PROCEDURES DO NOT VARY UNREASONABLY FROM GENERAL
   25  BANKING USAGE NOT DISAPPROVED BY THIS ARTICLE OR ARTICLE 4.
   26    (10) "PARTY" MEANS A PARTY TO AN INSTRUMENT.
   27    (11) "PRINCIPAL OBLIGOR," WITH RESPECT TO  AN  INSTRUMENT,  MEANS  THE
   28  ACCOMMODATED  PARTY  OR ANY OTHER PARTY TO THE INSTRUMENT AGAINST WHOM A
   29  SECONDARY OBLIGOR HAS RECOURSE UNDER THIS ARTICLE.
   30    (12) "PROMISE" MEANS A WRITTEN UNDERTAKING TO PAY MONEY SIGNED BY  THE
   31  PERSON  UNDERTAKING  TO PAY.   AN ACKNOWLEDGMENT OF AN OBLIGATION BY THE
   32  OBLIGOR IS NOT A PROMISE UNLESS THE OBLIGOR ALSO UNDERTAKES TO  PAY  THE
   33  OBLIGATION.
   34    (13) "PROVE" WITH RESPECT TO A FACT MEANS TO MEET THE BURDEN OF ESTAB-
   35  LISHING THE FACT (SECTION 1-201(B)(8)).
   36    (14) RESERVED.
   37    (15)  "REMITTER"  MEANS  A PERSON WHO PURCHASES AN INSTRUMENT FROM ITS
   38  ISSUER IF THE INSTRUMENT IS PAYABLE TO AN IDENTIFIED PERSON  OTHER  THAN
   39  THE PURCHASER.
   40    (16) "REMOTELY-CREATED CONSUMER ITEM" MEANS AN ITEM DRAWN ON A CONSUM-
   41  ER  ACCOUNT,  WHICH IS NOT CREATED BY THE PAYOR BANK AND DOES NOT BEAR A
   42  HANDWRITTEN SIGNATURE PURPORTING TO BE THE SIGNATURE OF THE DRAWER.
   43    (17) "SECONDARY OBLIGOR," WITH RESPECT TO AN INSTRUMENT, MEANS (A)  AN
   44  INDORSER  OR  AN ACCOMMODATION PARTY, (B) A DRAWER HAVING THE OBLIGATION
   45  DESCRIBED IN SECTION 3-414(D), OR (C) ANY OTHER PARTY TO THE  INSTRUMENT
   46  THAT  HAS  RECOURSE  AGAINST ANOTHER PARTY TO THE INSTRUMENT PURSUANT TO
   47  SECTION 3-116(B).
   48    (B) OTHER DEFINITIONS APPLYING TO THIS ARTICLE  AND  THE  SECTIONS  IN
   49  WHICH THEY APPEAR ARE:
   50  "ACCEPTANCE". ........................................... SECTION 3--409
   51  "ACCOMMODATED PARTY". ................................... SECTION 3--419
   52  "ACCOMMODATION PARTY". .................................. SECTION 3--419
   53  "ACCOUNT". .............................................. SECTION 4--104
   54  "ALTERATION". ........................................... SECTION 3--407
   55  "ANOMALOUS INDORSEMENT". ................................ SECTION 3--205
   56  "BLANK INDORSEMENT". .................................... SECTION 3--205
       S. 4608                             3
    1  "CASHIER'S CHECK". ...................................... SECTION 3--104
    2  "CERTIFICATE OF DEPOSIT". ............................... SECTION 3--104
    3  "CERTIFIED CHECK". ...................................... SECTION 3--409
    4  "CHECK". ................................................ SECTION 3--104
    5  "CONSIDERATION". ........................................ SECTION 3--303
    6  "DRAFT". ................................................ SECTION 3--104
    7  "HOLDER IN DUE COURSE". ................................. SECTION 3--302
    8  "INCOMPLETE INSTRUMENT". ................................ SECTION 3--115
    9  "INDORSEMENT". .......................................... SECTION 3--204
   10  "INDORSER". ............................................. SECTION 3--204
   11  "INSTRUMENT". ........................................... SECTION 3--104
   12  "ISSUE". ................................................ SECTION 3--105
   13  "ISSUER". ............................................... SECTION 3--105
   14  "NEGOTIABLE INSTRUMENT". ................................ SECTION 3--104
   15  "NEGOTIATION". .......................................... SECTION 3--201
   16  "NOTE". ................................................. SECTION 3--104
   17  "PAYABLE AT A DEFINITE TIME". ........................... SECTION 3--108
   18  "PAYABLE ON DEMAND". .................................... SECTION 3--108
   19  "PAYABLE TO BEARER". .................................... SECTION 3--109
   20  "PAYABLE TO ORDER". ..................................... SECTION 3--109
   21  "PAYMENT". .............................................. SECTION 3--602
   22  "PERSON ENTITLED TO ENFORCE". ........................... SECTION 3--301
   23  "PRESENTMENT". .......................................... SECTION 3--501
   24  "REACQUISITION". ........................................ SECTION 3--207
   25  "SPECIAL INDORSEMENT". .................................. SECTION 3--205
   26  "TELLER'S CHECK". ....................................... SECTION 3--104
   27  "TRANSFER OF INSTRUMENT". ............................... SECTION 3--203
   28  "TRAVELER'S CHECK". ..................................... SECTION 3--104
   29  "VALUE". ................................................ SECTION 3--303
   30    (C) THE FOLLOWING DEFINITIONS IN OTHER ARTICLES APPLY TO THIS ARTICLE:
   31  "BANKING DAY". .......................................... SECTION 4--104
   32  "CLEARING HOUSE". ....................................... SECTION 4--104
   33  "COLLECTING BANK". ...................................... SECTION 4--105
   34  "DEPOSITARY BANK". ...................................... SECTION 4--105
   35  "DOCUMENTARY DRAFT". .................................... SECTION 4--104
   36  "INTERMEDIARY BANK". .................................... SECTION 4--105
   37  "ITEM". ................................................. SECTION 4--104
   38  "PAYOR BANK". ........................................... SECTION 4--105
   39  "SUSPENDS PAYMENTS". .................................... SECTION 4--104
   40    (D) IN ADDITION, ARTICLE 1 CONTAINS GENERAL DEFINITIONS AND PRINCIPLES
   41  OF CONSTRUCTION AND INTERPRETATION APPLICABLE THROUGHOUT THIS ARTICLE.
   42  SECTION 3--104. NEGOTIABLE INSTRUMENT.
   43    (A) EXCEPT AS PROVIDED IN SUBSECTIONS (C) AND (D), "NEGOTIABLE INSTRU-
   44  MENT"  MEANS  AN UNCONDITIONAL PROMISE OR ORDER TO PAY A FIXED AMOUNT OF
   45  MONEY, WITH OR WITHOUT INTEREST OR OTHER CHARGES DESCRIBED IN THE  PROM-
   46  ISE OR ORDER, IF IT:
   47    (1) IS PAYABLE TO BEARER OR TO ORDER AT THE TIME IT IS ISSUED OR FIRST
   48  COMES INTO POSSESSION OF A HOLDER;
   49    (2) IS PAYABLE ON DEMAND OR AT A DEFINITE TIME; AND
   50    (3)  DOES NOT STATE ANY OTHER UNDERTAKING OR INSTRUCTION BY THE PERSON
   51  PROMISING OR ORDERING PAYMENT TO DO ANY ACT IN ADDITION TO  THE  PAYMENT
   52  OF  MONEY,  BUT  THE  PROMISE OR ORDER MAY CONTAIN (I) AN UNDERTAKING OR
   53  POWER TO GIVE, MAINTAIN, OR PROTECT COLLATERAL TO SECURE  PAYMENT,  (II)
   54  AN  AUTHORIZATION  OR POWER TO THE HOLDER TO CONFESS JUDGMENT OR REALIZE
   55  ON OR DISPOSE OF COLLATERAL, OR (III) A WAIVER OF THE BENEFIT OF ANY LAW
   56  INTENDED FOR THE ADVANTAGE OR PROTECTION OF AN OBLIGOR.
       S. 4608                             4
    1    (B) "INSTRUMENT" MEANS A NEGOTIABLE INSTRUMENT.
    2    (C)  AN  ORDER  THAT  MEETS ALL OF THE REQUIREMENTS OF SUBSECTION (A),
    3  EXCEPT PARAGRAPH (1), AND  OTHERWISE  FALLS  WITHIN  THE  DEFINITION  OF
    4  "CHECK" IN SUBSECTION (F) IS A NEGOTIABLE INSTRUMENT AND A CHECK.
    5    (D)  A PROMISE OR ORDER OTHER THAN A CHECK IS NOT AN INSTRUMENT IF, AT
    6  THE TIME IT IS ISSUED OR FIRST COMES INTO POSSESSION  OF  A  HOLDER,  IT
    7  CONTAINS  A CONSPICUOUS STATEMENT, HOWEVER EXPRESSED, TO THE EFFECT THAT
    8  THE PROMISE OR ORDER IS NOT NEGOTIABLE OR IS NOT AN INSTRUMENT  GOVERNED
    9  BY THIS ARTICLE.
   10    (E)  AN  INSTRUMENT IS A "NOTE" IF IT IS A PROMISE AND IS A "DRAFT" IF
   11  IT IS AN ORDER. IF AN INSTRUMENT FALLS WITHIN  THE  DEFINITION  OF  BOTH
   12  "NOTE"  AND  "DRAFT,"  A  PERSON  ENTITLED TO ENFORCE THE INSTRUMENT MAY
   13  TREAT IT AS EITHER.
   14    (F) "CHECK" MEANS (I) A DRAFT, OTHER THAN A DOCUMENTARY DRAFT, PAYABLE
   15  ON DEMAND AND DRAWN ON A BANK OR (II)  A  CASHIER'S  CHECK  OR  TELLER'S
   16  CHECK.  AN  INSTRUMENT MAY BE A CHECK EVEN THOUGH IT IS DESCRIBED ON ITS
   17  FACE BY ANOTHER TERM, SUCH AS "MONEY ORDER."
   18    (G) "CASHIER'S CHECK" MEANS A DRAFT WITH RESPECT TO WHICH  THE  DRAWER
   19  AND DRAWEE ARE THE SAME BANK OR BRANCHES OF THE SAME BANK.
   20    (H)  "TELLER'S  CHECK"  MEANS  A  DRAFT DRAWN BY A BANK (I) ON ANOTHER
   21  BANK, OR (II) PAYABLE AT OR THROUGH A BANK.
   22    (I) "TRAVELER'S CHECK" MEANS AN INSTRUMENT  THAT  (I)  IS  PAYABLE  ON
   23  DEMAND,  (II)  IS  DRAWN  ON  OR  PAYABLE AT OR THROUGH A BANK, (III) IS
   24  DESIGNATED BY THE TERM "TRAVELER'S CHECK" OR BY A SUBSTANTIALLY  SIMILAR
   25  TERM,  AND  (IV) REQUIRES, AS A CONDITION TO PAYMENT, A COUNTERSIGNATURE
   26  BY A PERSON WHOSE SPECIMEN SIGNATURE APPEARS ON THE INSTRUMENT.
   27    (J)  "CERTIFICATE  OF  DEPOSIT"  MEANS  AN  INSTRUMENT  CONTAINING  AN
   28  ACKNOWLEDGMENT  BY  A  BANK THAT A SUM OF MONEY HAS BEEN RECEIVED BY THE
   29  BANK AND A PROMISE BY THE BANK TO REPAY THE SUM OF MONEY. A  CERTIFICATE
   30  OF DEPOSIT IS A NOTE OF THE BANK.
   31  SECTION 3--105. ISSUE OF INSTRUMENT.
   32    (A)  "ISSUE" MEANS THE FIRST DELIVERY OF AN INSTRUMENT BY THE MAKER OR
   33  DRAWER, WHETHER TO A HOLDER OR NONHOLDER,  FOR  THE  PURPOSE  OF  GIVING
   34  RIGHTS ON THE INSTRUMENT TO ANY PERSON.
   35    (B)  AN UNISSUED INSTRUMENT, OR AN UNISSUED INCOMPLETE INSTRUMENT THAT
   36  IS COMPLETED, IS BINDING ON THE MAKER OR DRAWER, BUT  NONISSUANCE  IS  A
   37  DEFENSE.  AN  INSTRUMENT THAT IS CONDITIONALLY ISSUED OR IS ISSUED FOR A
   38  SPECIAL PURPOSE IS BINDING ON THE MAKER OR DRAWER, BUT  FAILURE  OF  THE
   39  CONDITION OR SPECIAL PURPOSE TO BE FULFILLED IS A DEFENSE.
   40    (C)  "ISSUER"  APPLIES  TO ISSUED AND UNISSUED INSTRUMENTS AND MEANS A
   41  MAKER OR DRAWER OF AN INSTRUMENT.
   42  SECTION 3--106. UNCONDITIONAL PROMISE OR ORDER.
   43    (A) EXCEPT AS PROVIDED IN THIS SECTION, FOR THE  PURPOSES  OF  SECTION
   44  3--104(A),  A  PROMISE OR ORDER IS UNCONDITIONAL UNLESS IT STATES (I) AN
   45  EXPRESS CONDITION TO PAYMENT, (II) THAT THE PROMISE OR ORDER IS  SUBJECT
   46  TO  OR  GOVERNED  BY ANOTHER RECORD, OR (III) THAT RIGHTS OR OBLIGATIONS
   47  WITH RESPECT TO THE PROMISE OR ORDER ARE STATED  IN  ANOTHER  RECORD.  A
   48  REFERENCE TO ANOTHER RECORD DOES NOT OF ITSELF MAKE THE PROMISE OR ORDER
   49  CONDITIONAL.
   50    (B)  A  PROMISE OR ORDER IS NOT MADE CONDITIONAL (I) BY A REFERENCE TO
   51  ANOTHER RECORD FOR A STATEMENT OF RIGHTS  WITH  RESPECT  TO  COLLATERAL,
   52  PREPAYMENT,  OR  ACCELERATION,  OR  (II)  BECAUSE  PAYMENT IS LIMITED TO
   53  RESORT TO A PARTICULAR FUND OR SOURCE.
   54    (C) IF A PROMISE OR ORDER REQUIRES, AS A CONDITION TO PAYMENT, A COUN-
   55  TERSIGNATURE BY A PERSON WHOSE SPECIMEN SIGNATURE APPEARS ON THE PROMISE
   56  OR ORDER, THE CONDITION DOES NOT MAKE THE PROMISE OR  ORDER  CONDITIONAL
       S. 4608                             5
    1  FOR  THE  PURPOSES  OF  SECTION  3--104(A). IF THE PERSON WHOSE SPECIMEN
    2  SIGNATURE APPEARS ON AN INSTRUMENT FAILS TO COUNTERSIGN THE  INSTRUMENT,
    3  THE FAILURE TO COUNTERSIGN IS A DEFENSE TO THE OBLIGATION OF THE ISSUER,
    4  BUT  THE  FAILURE  DOES  NOT PREVENT A TRANSFEREE OF THE INSTRUMENT FROM
    5  BECOMING A HOLDER OF THE INSTRUMENT.
    6    (D) IF A PROMISE OR ORDER AT THE TIME IT IS ISSUED OR FIRST COMES INTO
    7  POSSESSION OF A HOLDER CONTAINS  A  STATEMENT,  REQUIRED  BY  APPLICABLE
    8  STATUTORY  OR  ADMINISTRATIVE  LAW,  TO  THE EFFECT THAT THE RIGHTS OF A
    9  HOLDER OR TRANSFEREE ARE SUBJECT TO CLAIMS OR DEFENSES THAT  THE  ISSUER
   10  COULD  ASSERT  AGAINST  THE  ORIGINAL PAYEE, THE PROMISE OR ORDER IS NOT
   11  THEREBY MADE CONDITIONAL FOR THE PURPOSES OF SECTION  3-104(A);  BUT  IF
   12  THE  PROMISE  OR ORDER IS AN INSTRUMENT, THERE CANNOT BE A HOLDER IN DUE
   13  COURSE OF THE INSTRUMENT.
   14  SECTION 3--107. INSTRUMENT PAYABLE IN FOREIGN MONEY.
   15    UNLESS THE INSTRUMENT OTHERWISE PROVIDES, AN  INSTRUMENT  THAT  STATES
   16  THE  AMOUNT PAYABLE IN FOREIGN MONEY MAY BE PAID IN THE FOREIGN MONEY OR
   17  IN AN EQUIVALENT AMOUNT IN  DOLLARS  CALCULATED  BY  USING  THE  CURRENT
   18  BANK-OFFERED  SPOT  RATE  AT  THE  PLACE  OF PAYMENT FOR THE PURCHASE OF
   19  DOLLARS ON THE DAY ON WHICH THE INSTRUMENT IS PAID.
   20  SECTION 3--108. PAYABLE ON DEMAND OR AT DEFINITE TIME.
   21    (A) A PROMISE OR ORDER IS "PAYABLE ON DEMAND" IF IT (I) STATES THAT IT
   22  IS PAYABLE ON DEMAND OR AT SIGHT, OR  OTHERWISE  INDICATES  THAT  IT  IS
   23  PAYABLE  AT  THE  WILL OF THE HOLDER, OR (II) DOES NOT STATE ANY TIME OF
   24  PAYMENT.
   25    (B) A PROMISE OR ORDER IS "PAYABLE AT A DEFINITE TIME" IF IT IS  PAYA-
   26  BLE  ON ELAPSE OF A DEFINITE PERIOD OF TIME AFTER SIGHT OR ACCEPTANCE OR
   27  AT A FIXED DATE OR DATES OR AT A TIME OR TIMES READILY ASCERTAINABLE  AT
   28  THE  TIME  THE  PROMISE  OR  ORDER  IS  ISSUED, SUBJECT TO RIGHTS OF (I)
   29  PREPAYMENT, (II) ACCELERATION, (III) EXTENSION  AT  THE  OPTION  OF  THE
   30  HOLDER,  OR  (IV)  EXTENSION TO A FURTHER DEFINITE TIME AT THE OPTION OF
   31  THE MAKER OR ACCEPTOR OR AUTOMATICALLY UPON OR AFTER A SPECIFIED ACT  OR
   32  EVENT.
   33    (C)  IF  AN  INSTRUMENT, PAYABLE AT A FIXED DATE, IS ALSO PAYABLE UPON
   34  DEMAND MADE BEFORE THE FIXED DATE, THE INSTRUMENT IS PAYABLE  ON  DEMAND
   35  UNTIL  THE FIXED DATE AND, IF DEMAND FOR PAYMENT IS NOT MADE BEFORE THAT
   36  DATE, BECOMES PAYABLE AT A DEFINITE TIME ON THE FIXED DATE.
   37  SECTION 3--109. PAYABLE TO BEARER OR TO ORDER.
   38    (A) A PROMISE OR ORDER IS PAYABLE TO BEARER IF IT:
   39    (1) STATES THAT IT IS PAYABLE TO BEARER OR TO THE ORDER OF  BEARER  OR
   40  OTHERWISE  INDICATES  THAT  THE  PERSON  IN POSSESSION OF THE PROMISE OR
   41  ORDER IS ENTITLED TO PAYMENT;
   42    (2) DOES NOT STATE A PAYEE; OR
   43    (3) STATES THAT IT IS PAYABLE TO OR TO THE ORDER OF CASH OR  OTHERWISE
   44  INDICATES THAT IT IS NOT PAYABLE TO AN IDENTIFIED PERSON.
   45    (B)  A  PROMISE  OR  ORDER THAT IS NOT PAYABLE TO BEARER IS PAYABLE TO
   46  ORDER IF IT IS PAYABLE (I) TO THE ORDER OF AN IDENTIFIED PERSON OR  (II)
   47  TO  AN IDENTIFIED PERSON OR ORDER. A PROMISE OR ORDER THAT IS PAYABLE TO
   48  ORDER IS PAYABLE TO THE IDENTIFIED PERSON.
   49    (C) AN INSTRUMENT PAYABLE TO BEARER MAY BECOME PAYABLE TO  AN  IDENTI-
   50  FIED  PERSON  IF IT IS SPECIALLY INDORSED PURSUANT TO SECTION 3--205(A).
   51  AN INSTRUMENT PAYABLE TO AN IDENTIFIED  PERSON  MAY  BECOME  PAYABLE  TO
   52  BEARER IF IT IS INDORSED IN BLANK PURSUANT TO SECTION 3--205(B).
   53  SECTION 3--110. IDENTIFICATION OF PERSON TO WHOM INSTRUMENT IS PAYABLE.
   54    (A)  THE  PERSON  TO WHOM AN INSTRUMENT IS INITIALLY PAYABLE IS DETER-
   55  MINED BY THE INTENT OF THE PERSON, WHETHER OR  NOT  AUTHORIZED,  SIGNING
   56  AS,  OR  IN  THE  NAME  OR  BEHALF OF, THE ISSUER OF THE INSTRUMENT. THE
       S. 4608                             6
    1  INSTRUMENT IS PAYABLE TO THE PERSON INTENDED BY THE SIGNER EVEN IF  THAT
    2  PERSON IS IDENTIFIED IN THE INSTRUMENT BY A NAME OR OTHER IDENTIFICATION
    3  THAT  IS  NOT THAT OF THE INTENDED PERSON. IF MORE THAN ONE PERSON SIGNS
    4  IN THE NAME OR BEHALF OF THE ISSUER OF AN INSTRUMENT AND ALL THE SIGNERS
    5  DO NOT INTEND THE SAME PERSON AS PAYEE, THE INSTRUMENT IS PAYABLE TO ANY
    6  PERSON INTENDED BY ONE OR MORE OF THE SIGNERS.
    7    (B)  IF  THE SIGNATURE OF THE ISSUER OF AN INSTRUMENT IS MADE BY AUTO-
    8  MATED MEANS, SUCH AS A CHECK-WRITING MACHINE, THE PAYEE OF  THE  INSTRU-
    9  MENT  IS DETERMINED BY THE INTENT OF THE PERSON WHO SUPPLIED THE NAME OR
   10  IDENTIFICATION OF THE PAYEE, WHETHER OR NOT AUTHORIZED TO DO SO.
   11    (C) A PERSON TO WHOM AN INSTRUMENT IS PAYABLE MAY BE IDENTIFIED IN ANY
   12  WAY, INCLUDING BY NAME, IDENTIFYING NUMBER, OFFICE, OR  ACCOUNT  NUMBER.
   13  FOR  THE PURPOSE OF DETERMINING THE HOLDER OF AN INSTRUMENT, THE FOLLOW-
   14  ING RULES APPLY:
   15    (1) IF AN INSTRUMENT IS PAYABLE TO AN ACCOUNT AND THE ACCOUNT IS IDEN-
   16  TIFIED ONLY BY NUMBER, THE INSTRUMENT IS PAYABLE TO THE PERSON  TO  WHOM
   17  THE ACCOUNT IS PAYABLE.  IF AN INSTRUMENT IS PAYABLE TO AN ACCOUNT IDEN-
   18  TIFIED  BY NUMBER AND BY THE NAME OF A PERSON, THE INSTRUMENT IS PAYABLE
   19  TO THE NAMED PERSON, WHETHER OR NOT THAT PERSON  IS  THE  OWNER  OF  THE
   20  ACCOUNT IDENTIFIED BY NUMBER.
   21    (2) IF AN INSTRUMENT IS PAYABLE TO:
   22    (I)  A TRUST, AN ESTATE, OR A PERSON DESCRIBED AS TRUSTEE OR REPRESEN-
   23  TATIVE OF A TRUST OR ESTATE, THE INSTRUMENT IS PAYABLE TO  THE  TRUSTEE,
   24  THE REPRESENTATIVE, OR A SUCCESSOR OF EITHER, WHETHER OR NOT THE BENEFI-
   25  CIARY OR ESTATE IS ALSO NAMED;
   26    (II)  A PERSON DESCRIBED AS AGENT OR SIMILAR REPRESENTATIVE OF A NAMED
   27  OR IDENTIFIED PERSON, THE  INSTRUMENT  IS  PAYABLE  TO  THE  REPRESENTED
   28  PERSON, THE REPRESENTATIVE, OR A SUCCESSOR OF THE REPRESENTATIVE;
   29    (III)  A  FUND OR ORGANIZATION THAT IS NOT A LEGAL ENTITY, THE INSTRU-
   30  MENT IS PAYABLE TO A REPRESENTATIVE OF THE MEMBERS OF THE FUND OR ORGAN-
   31  IZATION; OR
   32    (IV) AN OFFICE OR TO A PERSON DESCRIBED  AS  HOLDING  AN  OFFICE,  THE
   33  INSTRUMENT  IS PAYABLE TO THE NAMED PERSON, THE INCUMBENT OF THE OFFICE,
   34  OR A SUCCESSOR TO THE INCUMBENT.
   35    (D) IF AN INSTRUMENT IS PAYABLE TO TWO OR MORE PERSONS  ALTERNATIVELY,
   36  IT  IS  PAYABLE  TO  ANY  OF  THEM AND MAY BE NEGOTIATED, DISCHARGED, OR
   37  ENFORCED BY ANY OR ALL OF THEM IN POSSESSION OF THE  INSTRUMENT.  IF  AN
   38  INSTRUMENT  IS  PAYABLE  TO TWO OR MORE PERSONS NOT ALTERNATIVELY, IT IS
   39  PAYABLE TO ALL OF THEM AND MAY BE NEGOTIATED,  DISCHARGED,  OR  ENFORCED
   40  ONLY  BY ALL OF THEM. IF AN INSTRUMENT PAYABLE TO TWO OR MORE PERSONS IS
   41  AMBIGUOUS AS TO WHETHER IT IS PAYABLE TO THE PERSONS ALTERNATIVELY,  THE
   42  INSTRUMENT IS PAYABLE TO THE PERSONS ALTERNATIVELY.
   43  SECTION 3--111. PLACE OF PAYMENT.
   44    EXCEPT  AS OTHERWISE PROVIDED FOR ITEMS IN ARTICLE 4, AN INSTRUMENT IS
   45  PAYABLE AT THE PLACE OF PAYMENT STATED IN THE INSTRUMENT. IF NO PLACE OF
   46  PAYMENT IS STATED, AN INSTRUMENT IS PAYABLE AT THE ADDRESS OF THE DRAWEE
   47  OR MAKER STATED IN THE INSTRUMENT. IF NO ADDRESS IS STATED, THE PLACE OF
   48  PAYMENT IS THE PLACE OF BUSINESS OF THE DRAWEE OR MAKER. IF A DRAWEE  OR
   49  MAKER  HAS  MORE THAN ONE PLACE OF BUSINESS, THE PLACE OF PAYMENT IS ANY
   50  PLACE OF BUSINESS OF THE DRAWEE OR MAKER CHOSEN BY THE  PERSON  ENTITLED
   51  TO  ENFORCE THE INSTRUMENT. IF THE DRAWEE OR MAKER HAS NO PLACE OF BUSI-
   52  NESS, THE PLACE OF PAYMENT IS THE RESIDENCE OF THE DRAWEE OR MAKER.
   53  SECTION 3--112. INTEREST.
   54    (A) UNLESS OTHERWISE PROVIDED IN THE INSTRUMENT, (I) AN INSTRUMENT  IS
   55  NOT  PAYABLE  WITH  INTEREST,  AND  (II) INTEREST ON AN INTEREST-BEARING
   56  INSTRUMENT IS PAYABLE FROM THE DATE OF THE INSTRUMENT.
       S. 4608                             7
    1    (B) INTEREST MAY BE STATED IN AN INSTRUMENT AS  A  FIXED  OR  VARIABLE
    2  AMOUNT  OF  MONEY  OR IT MAY BE EXPRESSED AS A FIXED OR VARIABLE RATE OR
    3  RATES. THE AMOUNT OR RATE OF INTEREST MAY BE STATED OR DESCRIBED IN  THE
    4  INSTRUMENT  IN  ANY  MANNER AND MAY REQUIRE REFERENCE TO INFORMATION NOT
    5  CONTAINED IN THE INSTRUMENT. IF AN INSTRUMENT PROVIDES FOR INTEREST, BUT
    6  THE   AMOUNT   OF  INTEREST  PAYABLE  CANNOT  BE  ASCERTAINED  FROM  THE
    7  DESCRIPTION, INTEREST IS PAYABLE AT THE JUDGMENT RATE IN EFFECT  AT  THE
    8  PLACE  OF  PAYMENT  OF  THE  INSTRUMENT  AND  AT THE TIME INTEREST FIRST
    9  ACCRUES.
   10  SECTION 3--113. DATE OF INSTRUMENT.
   11    (A) AN INSTRUMENT MAY BE  ANTEDATED  OR  POSTDATED.  THE  DATE  STATED
   12  DETERMINES  THE  TIME OF PAYMENT IF THE INSTRUMENT IS PAYABLE AT A FIXED
   13  PERIOD AFTER THE DATE. EXCEPT  AS  PROVIDED  IN  SECTION  4--401(C),  AN
   14  INSTRUMENT  PAYABLE  ON  DEMAND  IS  NOT  PAYABLE BEFORE THE DATE OF THE
   15  INSTRUMENT.
   16    (B) IF AN INSTRUMENT IS UNDATED, ITS DATE IS THE DATE OF ITS ISSUE OR,
   17  IN THE CASE OF AN UNISSUED INSTRUMENT, THE  DATE  IT  FIRST  COMES  INTO
   18  POSSESSION OF A HOLDER.
   19  SECTION 3--114. CONTRADICTORY TERMS OF INSTRUMENT.
   20    IF  AN  INSTRUMENT  CONTAINS  CONTRADICTORY  TERMS,  TYPEWRITTEN TERMS
   21  PREVAIL OVER PRINTED TERMS, HANDWRITTEN TERMS  PREVAIL  OVER  BOTH,  AND
   22  WORDS PREVAIL OVER NUMBERS.
   23  SECTION 3--115. INCOMPLETE INSTRUMENT.
   24    (A)  "INCOMPLETE  INSTRUMENT"  MEANS  A SIGNED WRITING, WHETHER OR NOT
   25  ISSUED BY THE SIGNER, THE CONTENTS OF WHICH SHOW AT THE TIME OF  SIGNING
   26  THAT IT IS INCOMPLETE BUT THAT THE SIGNER INTENDED IT TO BE COMPLETED BY
   27  THE ADDITION OF WORDS OR NUMBERS.
   28    (B)  SUBJECT  TO  SUBSECTION  (C),  IF  AN INCOMPLETE INSTRUMENT IS AN
   29  INSTRUMENT UNDER SECTION 3--104, IT MAY BE  ENFORCED  ACCORDING  TO  ITS
   30  TERMS  IF IT IS NOT COMPLETED, OR ACCORDING TO ITS TERMS AS AUGMENTED BY
   31  COMPLETION. IF AN INCOMPLETE  INSTRUMENT  IS  NOT  AN  INSTRUMENT  UNDER
   32  SECTION  3--104,  BUT,  AFTER  COMPLETION,  THE  REQUIREMENTS OF SECTION
   33  3--104 ARE MET, THE INSTRUMENT MAY BE ENFORCED ACCORDING TO ITS TERMS AS
   34  AUGMENTED BY COMPLETION.
   35    (C) IF WORDS OR NUMBERS ARE ADDED TO AN INCOMPLETE INSTRUMENT  WITHOUT
   36  AUTHORITY  OF  THE  SIGNER,  THERE  IS  AN  ALTERATION OF THE INCOMPLETE
   37  INSTRUMENT UNDER SECTION 3--407.
   38    (D) THE BURDEN OF ESTABLISHING THAT WORDS OR NUMBERS WERE ADDED TO  AN
   39  INCOMPLETE  INSTRUMENT  WITHOUT AUTHORITY OF THE SIGNER IS ON THE PERSON
   40  ASSERTING THE LACK OF AUTHORITY.
   41  SECTION 3--116. JOINT AND SEVERAL LIABILITY; CONTRIBUTION.
   42    (A) EXCEPT AS OTHERWISE  PROVIDED  IN  THE  INSTRUMENT,  TWO  OR  MORE
   43  PERSONS WHO HAVE THE SAME LIABILITY ON AN INSTRUMENT AS MAKERS, DRAWERS,
   44  ACCEPTORS, INDORSERS WHO INDORSE AS JOINT PAYEES, OR ANOMALOUS INDORSERS
   45  ARE JOINTLY AND SEVERALLY LIABLE IN THE CAPACITY IN WHICH THEY SIGN.
   46    (B)  EXCEPT  AS  PROVIDED  IN SECTION 3--419(F) OR BY AGREEMENT OF THE
   47  AFFECTED PARTIES, A PARTY HAVING JOINT AND SEVERAL  LIABILITY  WHO  PAYS
   48  THE  INSTRUMENT  IS  ENTITLED  TO RECEIVE FROM ANY PARTY HAVING THE SAME
   49  JOINT AND SEVERAL LIABILITY CONTRIBUTION IN ACCORDANCE  WITH  APPLICABLE
   50  LAW.
   51  SECTION 3--117. OTHER AGREEMENTS AFFECTING INSTRUMENT.
   52    SUBJECT  TO APPLICABLE LAW REGARDING EXCLUSION OF PROOF OF CONTEMPORA-
   53  NEOUS OR PREVIOUS AGREEMENTS, THE OBLIGATION OF A PARTY TO AN INSTRUMENT
   54  TO PAY THE INSTRUMENT MAY BE MODIFIED, SUPPLEMENTED, OR NULLIFIED  BY  A
   55  SEPARATE  AGREEMENT  OF THE OBLIGOR AND A PERSON ENTITLED TO ENFORCE THE
   56  INSTRUMENT, IF THE INSTRUMENT IS ISSUED OR THE OBLIGATION IS INCURRED IN
       S. 4608                             8
    1  RELIANCE ON THE AGREEMENT OR AS PART OF THE SAME TRANSACTION GIVING RISE
    2  TO THE AGREEMENT. TO THE EXTENT AN OBLIGATION IS MODIFIED, SUPPLEMENTED,
    3  OR NULLIFIED BY AN AGREEMENT UNDER THIS  SECTION,  THE  AGREEMENT  IS  A
    4  DEFENSE TO THE OBLIGATION.
    5  SECTION 3--118. STATUTE OF LIMITATIONS.
    6    (A)  EXCEPT  AS  PROVIDED  IN SUBSECTION (E), AN ACTION TO ENFORCE THE
    7  OBLIGATION OF A PARTY TO PAY A NOTE PAYABLE AT A DEFINITE TIME  MUST  BE
    8  COMMENCED  WITHIN  SIX  YEARS  AFTER THE DUE DATE OR DATES STATED IN THE
    9  NOTE OR, IF A DUE DATE IS ACCELERATED, WITHIN SIX YEARS AFTER THE ACCEL-
   10  ERATED DUE DATE.
   11    (B) EXCEPT AS PROVIDED IN SUBSECTION (D) OR (E), IF DEMAND FOR PAYMENT
   12  IS MADE TO THE MAKER OF A NOTE PAYABLE ON DEMAND, AN ACTION  TO  ENFORCE
   13  THE  OBLIGATION  OF A PARTY TO PAY THE NOTE MUST BE COMMENCED WITHIN SIX
   14  YEARS AFTER THE DEMAND. IF NO DEMAND FOR PAYMENT IS MADE TO  THE  MAKER,
   15  AN  ACTION TO ENFORCE THE NOTE IS BARRED IF NEITHER PRINCIPAL NOR INTER-
   16  EST ON THE NOTE HAS BEEN PAID FOR A CONTINUOUS PERIOD OF TEN YEARS.
   17    (C) EXCEPT AS PROVIDED IN SUBSECTION (D), AN  ACTION  TO  ENFORCE  THE
   18  OBLIGATION  OF  A  PARTY TO AN UNACCEPTED DRAFT TO PAY THE DRAFT MUST BE
   19  COMMENCED WITHIN THREE YEARS AFTER DISHONOR OF THE DRAFT  OR  TEN  YEARS
   20  AFTER THE DATE OF THE DRAFT, WHICHEVER PERIOD EXPIRES FIRST.
   21    (D) AN ACTION TO ENFORCE THE OBLIGATION OF THE ACCEPTOR OF A CERTIFIED
   22  CHECK  OR THE ISSUER OF A TELLER'S CHECK, CASHIER'S CHECK, OR TRAVELER'S
   23  CHECK MUST BE COMMENCED WITHIN THREE YEARS AFTER DEMAND FOR  PAYMENT  IS
   24  MADE TO THE ACCEPTOR OR ISSUER, AS THE CASE MAY BE.
   25    (E) AN ACTION TO ENFORCE THE OBLIGATION OF A PARTY TO A CERTIFICATE OF
   26  DEPOSIT  TO  PAY THE INSTRUMENT MUST BE COMMENCED WITHIN SIX YEARS AFTER
   27  DEMAND FOR PAYMENT IS MADE TO THE MAKER, BUT IF THE INSTRUMENT STATES  A
   28  DUE  DATE  AND  THE  MAKER  IS NOT REQUIRED TO PAY BEFORE THAT DATE, THE
   29  SIX-YEAR PERIOD BEGINS WHEN A DEMAND FOR PAYMENT IS IN  EFFECT  AND  THE
   30  DUE DATE HAS PASSED.
   31    (F)  AN ACTION TO ENFORCE THE OBLIGATION OF A PARTY TO PAY AN ACCEPTED
   32  DRAFT, OTHER THAN A CERTIFIED CHECK, MUST BE COMMENCED  (1)  WITHIN  SIX
   33  YEARS  AFTER  THE DUE DATE OR DATES STATED IN THE DRAFT OR ACCEPTANCE IF
   34  THE OBLIGATION OF THE ACCEPTOR IS PAYABLE AT A  DEFINITE  TIME,  OR  (2)
   35  WITHIN  SIX  YEARS AFTER THE DATE OF THE ACCEPTANCE IF THE OBLIGATION OF
   36  THE ACCEPTOR IS PAYABLE ON DEMAND.
   37    (G) UNLESS GOVERNED BY OTHER LAW REGARDING  CLAIMS  FOR  INDEMNITY  OR
   38  CONTRIBUTION,  AN  ACTION (1) FOR CONVERSION OF AN INSTRUMENT, FOR MONEY
   39  HAD AND RECEIVED, OR LIKE ACTION BASED ON CONVERSION, (2) FOR BREACH  OF
   40  WARRANTY,  OR (3) TO ENFORCE AN OBLIGATION, DUTY, OR RIGHT ARISING UNDER
   41  THIS ARTICLE AND NOT GOVERNED BY THIS SECTION MUST BE  COMMENCED  WITHIN
   42  THREE YEARS AFTER THE CAUSE OF ACTION ACCRUES.
   43  SECTION 3--119. NOTICE OF RIGHT TO DEFEND ACTION.
   44    IN  AN  ACTION FOR BREACH OF AN OBLIGATION FOR WHICH A THIRD PERSON IS
   45  ANSWERABLE OVER PURSUANT TO THIS ARTICLE OR ARTICLE 4, THE DEFENDANT MAY
   46  GIVE THE THIRD PERSON NOTICE OF THE LITIGATION  IN  A  RECORD,  AND  THE
   47  PERSON  NOTIFIED MAY THEN GIVE SIMILAR NOTICE TO ANY OTHER PERSON WHO IS
   48  ANSWERABLE OVER. IF THE NOTICE STATES (1) THAT THE PERSON  NOTIFIED  MAY
   49  COME  IN  AND  DEFEND AND (2) THAT FAILURE TO DO SO WILL BIND THE PERSON
   50  NOTIFIED IN AN ACTION LATER BROUGHT BY THE PERSON GIVING THE  NOTICE  AS
   51  TO  ANY  DETERMINATION OF FACT COMMON TO THE TWO LITIGATIONS, THE PERSON
   52  NOTIFIED IS SO BOUND UNLESS AFTER SEASONABLE RECEIPT OF THE  NOTICE  THE
   53  PERSON NOTIFIED DOES COME IN AND DEFEND.
   54                                   PART 2
   55                   NEGOTIATION, TRANSFER, AND INDORSEMENT
   56  SECTION 3--201. NEGOTIATION.
       S. 4608                             9
    1    (A) "NEGOTIATION" MEANS A TRANSFER OF POSSESSION, WHETHER VOLUNTARY OR
    2  INVOLUNTARY,  OF  AN  INSTRUMENT  BY A PERSON OTHER THAN THE ISSUER TO A
    3  PERSON WHO THEREBY BECOMES ITS HOLDER.
    4    (B)  EXCEPT FOR NEGOTIATION BY A REMITTER, IF AN INSTRUMENT IS PAYABLE
    5  TO AN IDENTIFIED PERSON, NEGOTIATION REQUIRES TRANSFER OF POSSESSION  OF
    6  THE  INSTRUMENT  AND  ITS INDORSEMENT BY THE HOLDER. IF AN INSTRUMENT IS
    7  PAYABLE TO BEARER, IT MAY BE NEGOTIATED BY TRANSFER OF POSSESSION ALONE.
    8  SECTION 3--202. NEGOTIATION SUBJECT TO RESCISSION.
    9    (A) NEGOTIATION IS EFFECTIVE EVEN IF OBTAINED (1) FROM  AN  INFANT,  A
   10  CORPORATION  EXCEEDING  ITS POWERS, OR A PERSON WITHOUT CAPACITY, (2) BY
   11  FRAUD, DURESS, OR MISTAKE, OR (3) IN BREACH OF DUTY OR  AS  PART  OF  AN
   12  ILLEGAL TRANSACTION.
   13    (B) TO THE EXTENT PERMITTED BY OTHER LAW, NEGOTIATION MAY BE RESCINDED
   14  OR  MAY  BE  SUBJECT  TO  OTHER  REMEDIES, BUT THOSE REMEDIES MAY NOT BE
   15  ASSERTED AGAINST A SUBSEQUENT HOLDER IN DUE COURSE OR  A  PERSON  PAYING
   16  THE  INSTRUMENT  IN GOOD FAITH AND WITHOUT KNOWLEDGE OF FACTS THAT ARE A
   17  BASIS FOR RESCISSION OR OTHER REMEDY.
   18  SECTION 3--203. TRANSFER OF INSTRUMENT; RIGHTS ACQUIRED BY TRANSFER.
   19    (A) AN INSTRUMENT IS TRANSFERRED WHEN IT  IS  DELIVERED  BY  A  PERSON
   20  OTHER  THAN ITS ISSUER FOR THE PURPOSE OF GIVING TO THE PERSON RECEIVING
   21  DELIVERY THE RIGHT TO ENFORCE THE INSTRUMENT.
   22    (B) TRANSFER OF AN INSTRUMENT, WHETHER OR NOT THE TRANSFER IS A  NEGO-
   23  TIATION,  VESTS IN THE TRANSFEREE ANY RIGHT OF THE TRANSFEROR TO ENFORCE
   24  THE INSTRUMENT, INCLUDING ANY RIGHT AS A HOLDER IN DUE COURSE,  BUT  THE
   25  TRANSFEREE  CANNOT  ACQUIRE RIGHTS OF A HOLDER IN DUE COURSE BY A TRANS-
   26  FER, DIRECTLY OR INDIRECTLY, FROM A HOLDER IN DUE COURSE IF  THE  TRANS-
   27  FEREE ENGAGED IN FRAUD OR ILLEGALITY AFFECTING THE INSTRUMENT.
   28    (C) UNLESS OTHERWISE AGREED, IF AN INSTRUMENT IS TRANSFERRED FOR VALUE
   29  AND  THE TRANSFEREE DOES NOT BECOME A HOLDER BECAUSE OF LACK OF INDORSE-
   30  MENT BY THE TRANSFEROR, THE TRANSFEREE HAS  A  SPECIFICALLY  ENFORCEABLE
   31  RIGHT  TO THE UNQUALIFIED INDORSEMENT OF THE TRANSFEROR, BUT NEGOTIATION
   32  OF THE INSTRUMENT DOES NOT OCCUR UNTIL THE INDORSEMENT IS MADE.
   33    (D) IF A TRANSFEROR PURPORTS TO TRANSFER LESS THAN THE ENTIRE  INSTRU-
   34  MENT,  NEGOTIATION  OF  THE  INSTRUMENT  DOES  NOT OCCUR. THE TRANSFEREE
   35  OBTAINS NO RIGHTS UNDER THIS ARTICLE  AND  HAS  ONLY  THE  RIGHTS  OF  A
   36  PARTIAL ASSIGNEE.
   37  SECTION 3--204. INDORSEMENT.
   38    (A)  "INDORSEMENT"  MEANS  A SIGNATURE, OTHER THAN THAT OF A SIGNER AS
   39  MAKER, DRAWER, OR ACCEPTOR, THAT ALONE OR ACCOMPANIED BY OTHER WORDS  IS
   40  MADE ON AN INSTRUMENT FOR THE PURPOSE OF (1) NEGOTIATING THE INSTRUMENT,
   41  (2)  RESTRICTING  PAYMENT OF THE INSTRUMENT, OR (3) INCURRING INDORSER'S
   42  LIABILITY ON THE INSTRUMENT, BUT REGARDLESS OF THE INTENT OF THE SIGNER,
   43  A SIGNATURE AND ITS ACCOMPANYING WORDS  IS  AN  INDORSEMENT  UNLESS  THE
   44  ACCOMPANYING  WORDS, TERMS OF THE INSTRUMENT, PLACE OF THE SIGNATURE, OR
   45  OTHER CIRCUMSTANCES UNAMBIGUOUSLY INDICATE THAT THE SIGNATURE  WAS  MADE
   46  FOR  A  PURPOSE  OTHER  THAN INDORSEMENT. FOR THE PURPOSE OF DETERMINING
   47  WHETHER A SIGNATURE IS MADE ON AN INSTRUMENT, A  PAPER  AFFIXED  TO  THE
   48  INSTRUMENT IS A PART OF THE INSTRUMENT.
   49    (B) "INDORSER" MEANS A PERSON WHO MAKES AN INDORSEMENT.
   50    (C)  FOR  THE  PURPOSE  OF  DETERMINING  WHETHER  THE TRANSFEREE OF AN
   51  INSTRUMENT IS A HOLDER, AN INDORSEMENT THAT TRANSFERS A SECURITY  INTER-
   52  EST  IN THE INSTRUMENT IS EFFECTIVE AS AN UNQUALIFIED INDORSEMENT OF THE
   53  INSTRUMENT.
   54    (D) IF AN INSTRUMENT IS PAYABLE TO A HOLDER UNDER A NAME THAT  IS  NOT
   55  THE  NAME  OF  THE  HOLDER, INDORSEMENT MAY BE MADE BY THE HOLDER IN THE
   56  NAME STATED IN THE INSTRUMENT OR IN  THE  HOLDER'S  NAME  OR  BOTH,  BUT
       S. 4608                            10
    1  SIGNATURE IN BOTH NAMES MAY BE REQUIRED BY A PERSON PAYING OR TAKING THE
    2  INSTRUMENT FOR VALUE OR COLLECTION.
    3  SECTION 3--205. SPECIAL   INDORSEMENT;   BLANK   INDORSEMENT;  ANOMALOUS
    4                    INDORSEMENT.
    5    (A) IF AN INDORSEMENT IS MADE BY THE HOLDER OF AN INSTRUMENT,  WHETHER
    6  PAYABLE  TO  AN IDENTIFIED PERSON OR PAYABLE TO BEARER, AND THE INDORSE-
    7  MENT IDENTIFIES A PERSON TO WHOM IT MAKES THE INSTRUMENT PAYABLE, IT  IS
    8  A  "SPECIAL INDORSEMENT." WHEN SPECIALLY INDORSED, AN INSTRUMENT BECOMES
    9  PAYABLE TO THE IDENTIFIED PERSON AND  MAY  BE  NEGOTIATED  ONLY  BY  THE
   10  INDORSEMENT  OF  THAT  PERSON.  THE  PRINCIPLES STATED IN SECTION 3--110
   11  APPLY TO SPECIAL INDORSEMENTS.
   12    (B) IF AN INDORSEMENT IS MADE BY THE HOLDER OF AN INSTRUMENT AND IT IS
   13  NOT A SPECIAL INDORSEMENT, IT IS A "BLANK INDORSEMENT." WHEN INDORSED IN
   14  BLANK, AN INSTRUMENT BECOMES PAYABLE TO BEARER AND MAY BE NEGOTIATED  BY
   15  TRANSFER OF POSSESSION ALONE UNTIL SPECIALLY INDORSED.
   16    (C) THE HOLDER MAY CONVERT A BLANK INDORSEMENT THAT CONSISTS ONLY OF A
   17  SIGNATURE  INTO A SPECIAL INDORSEMENT BY WRITING, ABOVE THE SIGNATURE OF
   18  THE INDORSER, WORDS IDENTIFYING THE PERSON TO  WHOM  THE  INSTRUMENT  IS
   19  MADE PAYABLE.
   20    (D)  "ANOMALOUS INDORSEMENT" MEANS AN INDORSEMENT MADE BY A PERSON WHO
   21  IS NOT THE HOLDER OF THE INSTRUMENT. AN ANOMALOUS INDORSEMENT  DOES  NOT
   22  AFFECT THE MANNER IN WHICH THE INSTRUMENT MAY BE NEGOTIATED.
   23  SECTION 3--206. RESTRICTIVE INDORSEMENT.
   24    (A)  AN  INDORSEMENT LIMITING PAYMENT TO A PARTICULAR PERSON OR OTHER-
   25  WISE PROHIBITING FURTHER TRANSFER OR NEGOTIATION OF  THE  INSTRUMENT  IS
   26  NOT  EFFECTIVE TO PREVENT FURTHER TRANSFER OR NEGOTIATION OF THE INSTRU-
   27  MENT.
   28    (B) AN INDORSEMENT STATING A CONDITION TO THE RIGHT OF THE INDORSEE TO
   29  RECEIVE PAYMENT DOES NOT AFFECT THE RIGHT OF THE INDORSEE TO ENFORCE THE
   30  INSTRUMENT. A PERSON PAYING THE INSTRUMENT OR TAKING  IT  FOR  VALUE  OR
   31  COLLECTION  MAY  DISREGARD THE CONDITION, AND THE RIGHTS AND LIABILITIES
   32  OF THAT PERSON ARE NOT  AFFECTED  BY  WHETHER  THE  CONDITION  HAS  BEEN
   33  FULFILLED.
   34    (C)  IF  AN  INSTRUMENT  BEARS AN INDORSEMENT (I) DESCRIBED IN SECTION
   35  4--201(B), OR (II) IN BLANK OR TO A PARTICULAR BANK USING THE WORDS "FOR
   36  DEPOSIT," "FOR COLLECTION," OR  OTHER  WORDS  INDICATING  A  PURPOSE  OF
   37  HAVING  THE  INSTRUMENT  COLLECTED  BY  A BANK FOR THE INDORSER OR FOR A
   38  PARTICULAR ACCOUNT, THE FOLLOWING RULES APPLY:
   39    (1) A PERSON, OTHER THAN A BANK, WHO PURCHASES THE INSTRUMENT WHEN  SO
   40  INDORSED  CONVERTS THE INSTRUMENT UNLESS THE AMOUNT PAID FOR THE INSTRU-
   41  MENT IS RECEIVED BY  THE  INDORSER  OR  APPLIED  CONSISTENTLY  WITH  THE
   42  INDORSEMENT.
   43    (2)  A  DEPOSITARY  BANK THAT PURCHASES THE INSTRUMENT OR TAKES IT FOR
   44  COLLECTION WHEN SO INDORSED CONVERTS THE INSTRUMENT  UNLESS  THE  AMOUNT
   45  PAID  BY  THE  BANK  WITH  RESPECT  TO THE INSTRUMENT IS RECEIVED BY THE
   46  INDORSER OR APPLIED CONSISTENTLY WITH THE INDORSEMENT.
   47    (3) A PAYOR BANK THAT IS ALSO THE DEPOSITARY BANK OR  THAT  TAKES  THE
   48  INSTRUMENT  FOR  IMMEDIATE  PAYMENT OVER THE COUNTER FROM A PERSON OTHER
   49  THAN A COLLECTING BANK CONVERTS THE INSTRUMENT UNLESS  THE  PROCEEDS  OF
   50  THE INSTRUMENT ARE RECEIVED BY THE INDORSER OR APPLIED CONSISTENTLY WITH
   51  THE INDORSEMENT.
   52    (4)  EXCEPT  AS  OTHERWISE  PROVIDED IN PARAGRAPH (3), A PAYOR BANK OR
   53  INTERMEDIARY BANK MAY DISREGARD THE INDORSEMENT AND IS NOT LIABLE IF THE
   54  PROCEEDS OF THE INSTRUMENT ARE NOT RECEIVED BY THE INDORSER  OR  APPLIED
   55  CONSISTENTLY WITH THE INDORSEMENT.
       S. 4608                            11
    1    (D) EXCEPT FOR AN INDORSEMENT COVERED BY SUBSECTION (C), IF AN INSTRU-
    2  MENT  BEARS  AN INDORSEMENT USING WORDS TO THE EFFECT THAT PAYMENT IS TO
    3  BE MADE TO THE INDORSEE AS AGENT, TRUSTEE, OR OTHER  FIDUCIARY  FOR  THE
    4  BENEFIT OF THE INDORSER OR ANOTHER PERSON, THE FOLLOWING RULES APPLY:
    5    (1)  UNLESS THERE IS NOTICE OF BREACH OF FIDUCIARY DUTY AS PROVIDED IN
    6  SECTION 3--307, A PERSON WHO PURCHASES THE INSTRUMENT FROM THE  INDORSEE
    7  OR  TAKES THE INSTRUMENT FROM THE INDORSEE FOR COLLECTION OR PAYMENT MAY
    8  PAY THE PROCEEDS OF PAYMENT OR THE VALUE GIVEN FOR THE INSTRUMENT TO THE
    9  INDORSEE WITHOUT REGARD TO WHETHER THE  INDORSEE  VIOLATES  A  FIDUCIARY
   10  DUTY TO THE INDORSER.
   11    (2)  A  SUBSEQUENT TRANSFEREE OF THE INSTRUMENT OR PERSON WHO PAYS THE
   12  INSTRUMENT IS  NEITHER  GIVEN  NOTICE  NOR  OTHERWISE  AFFECTED  BY  THE
   13  RESTRICTION IN THE INDORSEMENT UNLESS THE TRANSFEREE OR PAYOR KNOWS THAT
   14  THE  FIDUCIARY  DEALT  WITH  THE INSTRUMENT OR ITS PROCEEDS IN BREACH OF
   15  FIDUCIARY DUTY.
   16    (E) THE PRESENCE ON AN INSTRUMENT OF  AN  INDORSEMENT  TO  WHICH  THIS
   17  SECTION  APPLIES  DOES  NOT  PREVENT  A PURCHASER OF THE INSTRUMENT FROM
   18  BECOMING A HOLDER IN DUE COURSE OF THE INSTRUMENT UNLESS  THE  PURCHASER
   19  IS A CONVERTER UNDER SUBSECTION (C) OR HAS NOTICE OR KNOWLEDGE OF BREACH
   20  OF FIDUCIARY DUTY AS STATED IN SUBSECTION (D).
   21    (F)  IN  AN  ACTION  TO  ENFORCE  THE OBLIGATION OF A PARTY TO PAY THE
   22  INSTRUMENT, THE OBLIGOR HAS  A  DEFENSE  IF  PAYMENT  WOULD  VIOLATE  AN
   23  INDORSEMENT TO WHICH THIS SECTION APPLIES AND THE PAYMENT IS NOT PERMIT-
   24  TED BY THIS SECTION.
   25  SECTION 3--207. REACQUISITION.
   26    REACQUISITION OF AN INSTRUMENT OCCURS IF IT IS TRANSFERRED TO A FORMER
   27  HOLDER,  BY NEGOTIATION OR OTHERWISE. A FORMER HOLDER WHO REACQUIRES THE
   28  INSTRUMENT MAY CANCEL  INDORSEMENTS  MADE  AFTER  THE  REACQUIRER  FIRST
   29  BECAME  A  HOLDER  OF  THE  INSTRUMENT.  IF  THE CANCELLATION CAUSES THE
   30  INSTRUMENT TO BE PAYABLE TO THE REACQUIRER OR TO BEARER, THE  REACQUIRER
   31  MAY  NEGOTIATE THE INSTRUMENT. AN INDORSER WHOSE INDORSEMENT IS CANCELED
   32  IS DISCHARGED, AND THE DISCHARGE IS  EFFECTIVE  AGAINST  ANY  SUBSEQUENT
   33  HOLDER.
   34                                   PART 3
   35                         ENFORCEMENT OF INSTRUMENTS
   36  SECTION 3--301. PERSON ENTITLED TO ENFORCE INSTRUMENT.
   37    "PERSON ENTITLED TO ENFORCE" AN INSTRUMENT MEANS (1) THE HOLDER OF THE
   38  INSTRUMENT,  (2) A NONHOLDER IN POSSESSION OF THE INSTRUMENT WHO HAS THE
   39  RIGHTS OF A HOLDER, OR (3) A PERSON NOT IN POSSESSION OF THE  INSTRUMENT
   40  WHO  IS ENTITLED TO ENFORCE THE INSTRUMENT PURSUANT TO SECTION 3--309 OR
   41  3--418(D). A PERSON MAY BE A PERSON ENTITLED TO ENFORCE  THE  INSTRUMENT
   42  EVEN  THOUGH  THE  PERSON  IS  NOT  THE OWNER OF THE INSTRUMENT OR IS IN
   43  WRONGFUL POSSESSION OF THE INSTRUMENT.
   44  SECTION 3--302. HOLDER IN DUE COURSE.
   45    (A) SUBJECT TO SUBSECTION (C) AND SECTION 3--106(D),  "HOLDER  IN  DUE
   46  COURSE" MEANS THE HOLDER OF AN INSTRUMENT IF:
   47    (1)  THE  INSTRUMENT  WHEN ISSUED OR NEGOTIATED TO THE HOLDER DOES NOT
   48  BEAR SUCH APPARENT EVIDENCE OF FORGERY OR ALTERATION OR IS NOT OTHERWISE
   49  SO IRREGULAR OR INCOMPLETE AS TO CALL INTO  QUESTION  ITS  AUTHENTICITY;
   50  AND
   51    (2)  THE HOLDER TOOK THE INSTRUMENT (I) FOR VALUE, (II) IN GOOD FAITH,
   52  (III) WITHOUT NOTICE THAT THE INSTRUMENT IS OVERDUE OR HAS BEEN  DISHON-
   53  ORED  OR  THAT  THERE  IS  AN UNCURED DEFAULT WITH RESPECT TO PAYMENT OF
   54  ANOTHER INSTRUMENT ISSUED AS PART  OF  THE  SAME  SERIES,  (IV)  WITHOUT
       S. 4608                            12
    1  NOTICE  THAT  THE  INSTRUMENT  CONTAINS AN UNAUTHORIZED SIGNATURE OR HAS
    2  BEEN ALTERED,  (V)  WITHOUT  NOTICE  OF  ANY  CLAIM  TO  THE  INSTRUMENT
    3  DESCRIBED  IN SECTION 3--306, AND (VI) WITHOUT NOTICE THAT ANY PARTY HAS
    4  A DEFENSE OR CLAIM IN RECOUPMENT DESCRIBED IN SECTION 3--305(A).
    5    (B)  NOTICE OF DISCHARGE OF A PARTY, OTHER THAN DISCHARGE IN AN INSOL-
    6  VENCY PROCEEDING, IS NOT NOTICE OF A DEFENSE UNDER SUBSECTION  (A),  BUT
    7  DISCHARGE  IS  EFFECTIVE  AGAINST  A  PERSON  WHO BECAME A HOLDER IN DUE
    8  COURSE WITH NOTICE OF THE DISCHARGE. PUBLIC FILING  OR  RECORDING  OF  A
    9  DOCUMENT  DOES  NOT  OF  ITSELF CONSTITUTE NOTICE OF A DEFENSE, CLAIM IN
   10  RECOUPMENT, OR CLAIM TO THE INSTRUMENT.
   11    (C) EXCEPT TO THE EXTENT A TRANSFEROR OR PREDECESSOR IN  INTEREST  HAS
   12  RIGHTS  AS A HOLDER IN DUE COURSE, A PERSON DOES NOT ACQUIRE RIGHTS OF A
   13  HOLDER IN DUE COURSE OF AN INSTRUMENT TAKEN (1) BY LEGAL PROCESS  OR  BY
   14  PURCHASE  IN  AN  EXECUTION,  BANKRUPTCY,  OR CREDITOR'S SALE OR SIMILAR
   15  PROCEEDING, (2) BY PURCHASE AS PART OF A BULK TRANSACTION NOT  IN  ORDI-
   16  NARY  COURSE  OF  BUSINESS OF THE TRANSFEROR, OR (3) AS THE SUCCESSOR IN
   17  INTEREST TO AN ESTATE OR OTHER ORGANIZATION.
   18    (D) IF, UNDER SECTION 3--303(A)(1), THE PROMISE OF PERFORMANCE THAT IS
   19  THE CONSIDERATION FOR AN INSTRUMENT HAS BEEN  PARTIALLY  PERFORMED,  THE
   20  HOLDER  MAY  ASSERT  RIGHTS  AS A HOLDER IN DUE COURSE OF THE INSTRUMENT
   21  ONLY TO THE FRACTION OF THE AMOUNT PAYABLE UNDER THE INSTRUMENT EQUAL TO
   22  THE VALUE OF THE PARTIAL PERFORMANCE DIVIDED BY THE VALUE OF  THE  PROM-
   23  ISED PERFORMANCE.
   24    (E)  IF  (1)  THE  PERSON ENTITLED TO ENFORCE AN INSTRUMENT HAS ONLY A
   25  SECURITY INTEREST IN THE INSTRUMENT AND (2) THE PERSON  OBLIGED  TO  PAY
   26  THE  INSTRUMENT  HAS  A  DEFENSE,  CLAIM  IN RECOUPMENT, OR CLAIM TO THE
   27  INSTRUMENT THAT MAY BE ASSERTED AGAINST THE PERSON WHO GRANTED THE SECU-
   28  RITY INTEREST, THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT MAY  ASSERT
   29  RIGHTS  AS  A  HOLDER  IN DUE COURSE ONLY TO AN AMOUNT PAYABLE UNDER THE
   30  INSTRUMENT WHICH, AT THE TIME OF ENFORCEMENT OF THE INSTRUMENT, DOES NOT
   31  EXCEED THE AMOUNT OF THE UNPAID OBLIGATION SECURED.
   32    (F) TO BE EFFECTIVE, NOTICE MUST BE RECEIVED AT A TIME AND IN A MANNER
   33  THAT GIVES A REASONABLE OPPORTUNITY TO ACT ON IT.
   34    (G) THIS SECTION IS SUBJECT TO ANY LAW LIMITING STATUS AS A HOLDER  IN
   35  DUE COURSE IN PARTICULAR CLASSES OF TRANSACTIONS.
   36  SECTION 3--303. VALUE AND CONSIDERATION.
   37    (A) AN INSTRUMENT IS ISSUED OR TRANSFERRED FOR VALUE IF:
   38    (1)  THE INSTRUMENT IS ISSUED OR TRANSFERRED FOR A PROMISE OF PERFORM-
   39  ANCE, TO THE EXTENT THE PROMISE HAS BEEN PERFORMED;
   40    (2) THE TRANSFEREE ACQUIRES A SECURITY INTEREST OR OTHER LIEN  IN  THE
   41  INSTRUMENT OTHER THAN A LIEN OBTAINED BY JUDICIAL PROCEEDING;
   42    (3) THE INSTRUMENT IS ISSUED OR TRANSFERRED AS PAYMENT OF, OR AS SECU-
   43  RITY  FOR,  AN  ANTECEDENT  CLAIM AGAINST ANY PERSON, WHETHER OR NOT THE
   44  CLAIM IS DUE;
   45    (4) THE INSTRUMENT IS ISSUED OR TRANSFERRED IN EXCHANGE FOR A  NEGOTI-
   46  ABLE INSTRUMENT; OR
   47    (5) THE INSTRUMENT IS ISSUED OR TRANSFERRED IN EXCHANGE FOR THE INCUR-
   48  RING  OF AN IRREVOCABLE OBLIGATION TO A THIRD PARTY BY THE PERSON TAKING
   49  THE INSTRUMENT.
   50    (B) "CONSIDERATION" MEANS ANY CONSIDERATION SUFFICIENT  TO  SUPPORT  A
   51  SIMPLE  CONTRACT.  THE DRAWER OR MAKER OF AN INSTRUMENT HAS A DEFENSE IF
   52  THE INSTRUMENT IS ISSUED WITHOUT  CONSIDERATION.  IF  AN  INSTRUMENT  IS
   53  ISSUED  FOR  A  PROMISE  OF PERFORMANCE, THE ISSUER HAS A DEFENSE TO THE
   54  EXTENT PERFORMANCE OF THE PROMISE IS DUE AND THE PROMISE  HAS  NOT  BEEN
   55  PERFORMED.  IF AN INSTRUMENT IS ISSUED FOR VALUE AS STATED IN SUBSECTION
   56  (A), THE INSTRUMENT IS ALSO ISSUED FOR CONSIDERATION.
       S. 4608                            13
    1  SECTION 3--304. OVERDUE INSTRUMENT.
    2    (A) AN INSTRUMENT PAYABLE ON DEMAND BECOMES OVERDUE AT THE EARLIEST OF
    3  THE FOLLOWING TIMES:
    4    (1) ON THE DAY AFTER THE DAY DEMAND FOR PAYMENT IS DULY MADE;
    5    (2) IF THE INSTRUMENT IS A CHECK, NINETY DAYS AFTER ITS DATE; OR
    6    (3)  IF  THE  INSTRUMENT  IS NOT A CHECK, WHEN THE INSTRUMENT HAS BEEN
    7  OUTSTANDING FOR A PERIOD OF TIME AFTER ITS DATE  WHICH  IS  UNREASONABLY
    8  LONG  UNDER  THE  CIRCUMSTANCES  OF  THE PARTICULAR CASE IN LIGHT OF THE
    9  NATURE OF THE INSTRUMENT AND USAGE OF THE TRADE.
   10    (B) WITH RESPECT TO AN INSTRUMENT  PAYABLE  AT  A  DEFINITE  TIME  THE
   11  FOLLOWING RULES APPLY:
   12    (1) IF THE PRINCIPAL IS PAYABLE IN INSTALLMENTS AND A DUE DATE HAS NOT
   13  BEEN  ACCELERATED, THE INSTRUMENT BECOMES OVERDUE UPON DEFAULT UNDER THE
   14  INSTRUMENT FOR NONPAYMENT OF AN INSTALLMENT, AND THE INSTRUMENT  REMAINS
   15  OVERDUE UNTIL THE DEFAULT IS CURED.
   16    (2)  IF  THE PRINCIPAL IS NOT PAYABLE IN INSTALLMENTS AND THE DUE DATE
   17  HAS NOT BEEN ACCELERATED, THE INSTRUMENT  BECOMES  OVERDUE  ON  THE  DAY
   18  AFTER THE DUE DATE.
   19    (3)  IF A DUE DATE WITH RESPECT TO PRINCIPAL HAS BEEN ACCELERATED, THE
   20  INSTRUMENT BECOMES OVERDUE ON THE DAY AFTER THE ACCELERATED DUE DATE.
   21    (C) UNLESS THE DUE DATE OF PRINCIPAL HAS BEEN ACCELERATED, AN  INSTRU-
   22  MENT  DOES NOT BECOME OVERDUE IF THERE IS DEFAULT IN PAYMENT OF INTEREST
   23  BUT NO DEFAULT IN PAYMENT OF PRINCIPAL.
   24  SECTION 3--305. DEFENSES AND CLAIMS IN RECOUPMENT;  CLAIMS  IN  CONSUMER
   25                    TRANSACTIONS.
   26    (A) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE RIGHT TO ENFORCE
   27  THE OBLIGATION OF A PARTY TO PAY AN INSTRUMENT IS SUBJECT TO THE FOLLOW-
   28  ING:
   29    (1)  A  DEFENSE  OF THE OBLIGOR BASED ON (I) INFANCY OF THE OBLIGOR TO
   30  THE EXTENT IT IS A DEFENSE TO A SIMPLE CONTRACT, (II)  DURESS,  LACK  OF
   31  LEGAL CAPACITY, OR ILLEGALITY OF THE TRANSACTION WHICH, UNDER OTHER LAW,
   32  NULLIFIES  THE  OBLIGATION  OF THE OBLIGOR, (III) FRAUD THAT INDUCED THE
   33  OBLIGOR TO SIGN THE INSTRUMENT WITH  NEITHER  KNOWLEDGE  NOR  REASONABLE
   34  OPPORTUNITY  TO  LEARN  OF ITS CHARACTER OR ITS ESSENTIAL TERMS, OR (IV)
   35  DISCHARGE OF THE OBLIGOR IN INSOLVENCY PROCEEDINGS;
   36    (2) A DEFENSE OF THE OBLIGOR STATED IN ANOTHER SECTION OF THIS ARTICLE
   37  OR A DEFENSE OF THE OBLIGOR THAT WOULD BE AVAILABLE IF THE PERSON  ENTI-
   38  TLED TO ENFORCE THE INSTRUMENT WERE ENFORCING A RIGHT TO PAYMENT UNDER A
   39  SIMPLE CONTRACT; AND
   40    (3) A CLAIM IN RECOUPMENT OF THE OBLIGOR AGAINST THE ORIGINAL PAYEE OF
   41  THE INSTRUMENT IF THE CLAIM AROSE FROM THE TRANSACTION THAT GAVE RISE TO
   42  THE  INSTRUMENT;  BUT THE CLAIM OF THE OBLIGOR MAY BE ASSERTED AGAINST A
   43  TRANSFEREE OF THE INSTRUMENT ONLY TO REDUCE  THE  AMOUNT  OWING  ON  THE
   44  INSTRUMENT AT THE TIME THE ACTION IS BROUGHT.
   45    (B) THE RIGHT OF A HOLDER IN DUE COURSE TO ENFORCE THE OBLIGATION OF A
   46  PARTY TO PAY THE INSTRUMENT IS SUBJECT TO DEFENSES OF THE OBLIGOR STATED
   47  IN  SUBSECTION  (A)(1),  BUT  IS  NOT SUBJECT TO DEFENSES OF THE OBLIGOR
   48  STATED IN SUBSECTION (A)(2) OR CLAIMS IN RECOUPMENT STATED IN SUBSECTION
   49  (A)(3) AGAINST A PERSON OTHER THAN THE HOLDER.
   50    (C) EXCEPT AS STATED IN SUBSECTION (D), IN AN ACTION  TO  ENFORCE  THE
   51  OBLIGATION  OF A PARTY TO PAY THE INSTRUMENT, THE OBLIGOR MAY NOT ASSERT
   52  AGAINST THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT A  DEFENSE,  CLAIM
   53  IN  RECOUPMENT,  OR  CLAIM TO THE INSTRUMENT (SECTION 3--306) OF ANOTHER
   54  PERSON, BUT THE OTHER PERSON'S CLAIM TO THE INSTRUMENT MAY  BE  ASSERTED
   55  BY  THE  OBLIGOR  IF  THE  OTHER  PERSON  IS  JOINED  IN  THE ACTION AND
   56  PERSONALLY ASSERTS THE CLAIM AGAINST THE PERSON ENTITLED TO ENFORCE  THE
       S. 4608                            14
    1  INSTRUMENT.  AN  OBLIGOR  IS  NOT  OBLIGED  TO PAY THE INSTRUMENT IF THE
    2  PERSON SEEKING ENFORCEMENT OF THE INSTRUMENT DOES NOT HAVE RIGHTS  OF  A
    3  HOLDER  IN  DUE  COURSE  AND THE OBLIGOR PROVES THAT THE INSTRUMENT IS A
    4  LOST OR STOLEN INSTRUMENT.
    5    (D)  IN  AN ACTION TO ENFORCE THE OBLIGATION OF AN ACCOMMODATION PARTY
    6  TO PAY AN INSTRUMENT, THE ACCOMMODATION PARTY  MAY  ASSERT  AGAINST  THE
    7  PERSON  ENTITLED  TO  ENFORCE  THE  INSTRUMENT  ANY  DEFENSE OR CLAIM IN
    8  RECOUPMENT UNDER SUBSECTION (A) THAT THE ACCOMMODATED PARTY COULD ASSERT
    9  AGAINST THE PERSON  ENTITLED  TO  ENFORCE  THE  INSTRUMENT,  EXCEPT  THE
   10  DEFENSES  OF  DISCHARGE  IN INSOLVENCY PROCEEDINGS, INFANCY, AND LACK OF
   11  LEGAL CAPACITY.
   12    (E) IN A CONSUMER TRANSACTION, IF LAW OTHER THAN THIS ARTICLE REQUIRES
   13  THAT AN INSTRUMENT INCLUDE A STATEMENT TO THE EFFECT THAT THE RIGHTS  OF
   14  A HOLDER OR TRANSFEREE ARE SUBJECT TO A CLAIM OR DEFENSE THAT THE ISSUER
   15  COULD  ASSERT  AGAINST  THE  ORIGINAL PAYEE, AND THE INSTRUMENT DOES NOT
   16  INCLUDE SUCH A STATEMENT:
   17    (1) THE INSTRUMENT HAS THE SAME EFFECT AS IF THE  INSTRUMENT  INCLUDED
   18  SUCH A STATEMENT;
   19    (2)  THE ISSUER MAY ASSERT AGAINST THE HOLDER OR TRANSFEREE ALL CLAIMS
   20  AND DEFENSES THAT WOULD HAVE BEEN AVAILABLE IF THE  INSTRUMENT  INCLUDED
   21  SUCH A STATEMENT; AND
   22    (3)  THE  EXTENT TO WHICH CLAIMS MAY BE ASSERTED AGAINST THE HOLDER OR
   23  TRANSFEREE IS DETERMINED AS IF THE INSTRUMENT INCLUDED SUCH A STATEMENT.
   24    (F) THIS SECTION IS SUBJECT TO LAW OTHER THAN THIS ARTICLE THAT ESTAB-
   25  LISHES A DIFFERENT RULE FOR CONSUMER TRANSACTIONS.
   26  SECTION 3--306. CLAIMS TO AN INSTRUMENT.
   27    A PERSON TAKING AN INSTRUMENT, OTHER THAN A PERSON HAVING RIGHTS OF  A
   28  HOLDER  IN DUE COURSE, IS SUBJECT TO A CLAIM OF A PROPERTY OR POSSESSORY
   29  RIGHT IN THE INSTRUMENT OR ITS PROCEEDS, INCLUDING A CLAIM TO RESCIND  A
   30  NEGOTIATION  AND  TO  RECOVER  THE  INSTRUMENT OR ITS PROCEEDS. A PERSON
   31  HAVING RIGHTS OF A HOLDER IN DUE COURSE TAKES FREE OF THE CLAIM  TO  THE
   32  INSTRUMENT.
   33  SECTION 3--307. NOTICE OF BREACH OF FIDUCIARY DUTY.
   34    (A) IN THIS SECTION:
   35    (1) "FIDUCIARY" MEANS AN AGENT, TRUSTEE, PARTNER, CORPORATE OFFICER OR
   36  DIRECTOR, OR OTHER REPRESENTATIVE OWING A FIDUCIARY DUTY WITH RESPECT TO
   37  AN INSTRUMENT.
   38    (2)  "REPRESENTED  PERSON"  MEANS THE PRINCIPAL, BENEFICIARY, PARTNER-
   39  SHIP, CORPORATION, OR OTHER PERSON TO WHOM THE DUTY STATED IN  PARAGRAPH
   40  (1) IS OWED.
   41    (B)  IF  (1)  AN  INSTRUMENT  IS TAKEN FROM A FIDUCIARY FOR PAYMENT OR
   42  COLLECTION OR FOR VALUE, (2) THE TAKER HAS KNOWLEDGE  OF  THE  FIDUCIARY
   43  STATUS OF THE FIDUCIARY, AND (3) THE REPRESENTED PERSON MAKES A CLAIM TO
   44  THE  INSTRUMENT OR ITS PROCEEDS ON THE BASIS THAT THE TRANSACTION OF THE
   45  FIDUCIARY IS A BREACH OF FIDUCIARY DUTY, THE FOLLOWING RULES APPLY:
   46    (I) NOTICE OF BREACH OF FIDUCIARY DUTY BY THE FIDUCIARY IS  NOTICE  OF
   47  THE CLAIM OF THE REPRESENTED PERSON.
   48    (II) IN THE CASE OF AN INSTRUMENT PAYABLE TO THE REPRESENTED PERSON OR
   49  THE  FIDUCIARY  AS SUCH, THE TAKER HAS NOTICE OF THE BREACH OF FIDUCIARY
   50  DUTY IF THE INSTRUMENT IS (A) TAKEN IN PAYMENT OF OR AS SECURITY  FOR  A
   51  DEBT  KNOWN  BY  THE TAKER TO BE THE PERSONAL DEBT OF THE FIDUCIARY, (B)
   52  TAKEN IN A TRANSACTION KNOWN BY THE TAKER TO BE FOR THE PERSONAL BENEFIT
   53  OF THE FIDUCIARY, OR (C) DEPOSITED TO AN ACCOUNT OTHER THAN  AN  ACCOUNT
   54  OF THE FIDUCIARY, AS SUCH, OR AN ACCOUNT OF THE REPRESENTED PERSON.
   55    (III)  IF  AN  INSTRUMENT  IS  ISSUED BY THE REPRESENTED PERSON OR THE
   56  FIDUCIARY AS SUCH, AND MADE PAYABLE TO  THE  FIDUCIARY  PERSONALLY,  THE
       S. 4608                            15
    1  TAKER  DOES  NOT  HAVE NOTICE OF THE BREACH OF FIDUCIARY DUTY UNLESS THE
    2  TAKER KNOWS OF THE BREACH OF FIDUCIARY DUTY.
    3    (IV) IF AN INSTRUMENT IS ISSUED BY THE REPRESENTED PERSON OR THE FIDU-
    4  CIARY AS SUCH, TO THE TAKER AS PAYEE, THE TAKER HAS NOTICE OF THE BREACH
    5  OF  FIDUCIARY  DUTY  IF  THE INSTRUMENT IS (A) TAKEN IN PAYMENT OF OR AS
    6  SECURITY FOR A DEBT KNOWN BY THE TAKER TO BE THE PERSONAL  DEBT  OF  THE
    7  FIDUCIARY,  (B)  TAKEN IN A TRANSACTION KNOWN BY THE TAKER TO BE FOR THE
    8  PERSONAL BENEFIT OF THE FIDUCIARY, OR (C) DEPOSITED TO AN ACCOUNT  OTHER
    9  THAN  AN ACCOUNT OF THE FIDUCIARY, AS SUCH, OR AN ACCOUNT OF THE REPRES-
   10  ENTED PERSON.
   11  SECTION 3--308. PROOF OF SIGNATURES AND STATUS AS HOLDER IN DUE COURSE.
   12    (A) IN AN ACTION WITH RESPECT TO AN INSTRUMENT, THE  AUTHENTICITY  OF,
   13  AND  AUTHORITY  TO  MAKE,  EACH  SIGNATURE ON THE INSTRUMENT IS ADMITTED
   14  UNLESS SPECIFICALLY DENIED IN THE PLEADINGS. IF THE VALIDITY OF A SIGNA-
   15  TURE IS DENIED IN THE PLEADINGS, THE BURDEN OF ESTABLISHING VALIDITY  IS
   16  ON  THE  PERSON  CLAIMING  VALIDITY, BUT THE SIGNATURE IS PRESUMED TO BE
   17  AUTHENTIC AND AUTHORIZED UNLESS THE ACTION IS TO ENFORCE  THE  LIABILITY
   18  OF  THE  PURPORTED  SIGNER  AND THE SIGNER IS DEAD OR INCOMPETENT AT THE
   19  TIME OF TRIAL OF THE ISSUE OF VALIDITY OF THE SIGNATURE. IF AN ACTION TO
   20  ENFORCE THE INSTRUMENT IS BROUGHT AGAINST A PERSON  AS  THE  UNDISCLOSED
   21  PRINCIPAL  OF  A  PERSON  WHO  SIGNED  THE  INSTRUMENT AS A PARTY TO THE
   22  INSTRUMENT, THE PLAINTIFF  HAS  THE  BURDEN  OF  ESTABLISHING  THAT  THE
   23  DEFENDANT  IS  LIABLE  ON  THE  INSTRUMENT AS A REPRESENTED PERSON UNDER
   24  SECTION 3--402(A).
   25    (B) IF THE VALIDITY OF SIGNATURES IS ADMITTED OR PROVED AND  THERE  IS
   26  COMPLIANCE  WITH SUBSECTION (A), A PLAINTIFF PRODUCING THE INSTRUMENT IS
   27  ENTITLED TO PAYMENT IF THE PLAINTIFF PROVES ENTITLEMENT TO  ENFORCE  THE
   28  INSTRUMENT  UNDER  SECTION 3--301, UNLESS THE DEFENDANT PROVES A DEFENSE
   29  OR CLAIM IN RECOUPMENT. IF A DEFENSE OR CLAIM IN RECOUPMENT  IS  PROVED,
   30  THE  RIGHT  TO  PAYMENT  OF  THE  PLAINTIFF IS SUBJECT TO THE DEFENSE OR
   31  CLAIM, EXCEPT TO THE EXTENT THE PLAINTIFF PROVES THAT THE PLAINTIFF  HAS
   32  RIGHTS OF A HOLDER IN DUE COURSE WHICH ARE NOT SUBJECT TO THE DEFENSE OR
   33  CLAIM.
   34  SECTION 3--309. ENFORCEMENT OF LOST, DESTROYED, OR STOLEN INSTRUMENT.
   35    (A) A PERSON NOT IN POSSESSION OF AN INSTRUMENT IS ENTITLED TO ENFORCE
   36  THE INSTRUMENT IF:
   37    (1) THE PERSON SEEKING TO ENFORCE THE INSTRUMENT:
   38    (A)  WAS  ENTITLED  TO  ENFORCE THE INSTRUMENT WHEN LOSS OF POSSESSION
   39  OCCURRED; OR
   40    (B) HAS DIRECTLY OR INDIRECTLY ACQUIRED OWNERSHIP  OF  THE  INSTRUMENT
   41  FROM  A  PERSON  WHO WAS ENTITLED TO ENFORCE THE INSTRUMENT WHEN LOSS OF
   42  POSSESSION OCCURRED;
   43    (2) THE LOSS OF POSSESSION WAS NOT THE RESULT OF  A  TRANSFER  BY  THE
   44  PERSON OR A LAWFUL SEIZURE; AND
   45    (3)  THE  PERSON CANNOT REASONABLY OBTAIN POSSESSION OF THE INSTRUMENT
   46  BECAUSE THE INSTRUMENT WAS DESTROYED, ITS WHEREABOUTS CANNOT  BE  DETER-
   47  MINED,  OR  IT  IS  IN THE WRONGFUL POSSESSION OF AN UNKNOWN PERSON OR A
   48  PERSON THAT CANNOT BE FOUND OR IS NOT AMENABLE TO SERVICE OF PROCESS.
   49    (B) A PERSON SEEKING ENFORCEMENT OF AN INSTRUMENT UNDER SUBSECTION (A)
   50  MUST PROVE THE TERMS OF THE INSTRUMENT AND THE PERSON'S RIGHT TO ENFORCE
   51  THE INSTRUMENT. IF THAT PROOF IS MADE, SECTION  3--308  APPLIES  TO  THE
   52  CASE  AS  IF THE PERSON SEEKING ENFORCEMENT HAD PRODUCED THE INSTRUMENT.
   53  THE COURT MAY NOT ENTER JUDGMENT IN FAVOR OF THE PERSON SEEKING ENFORCE-
   54  MENT UNLESS IT FINDS THAT THE PERSON REQUIRED TO PAY THE  INSTRUMENT  IS
   55  ADEQUATELY  PROTECTED AGAINST LOSS THAT MIGHT OCCUR BY REASON OF A CLAIM
       S. 4608                            16
    1  BY ANOTHER PERSON TO ENFORCE THE INSTRUMENT. ADEQUATE PROTECTION MAY  BE
    2  PROVIDED BY ANY REASONABLE MEANS.
    3  SECTION 3--310. EFFECT OF INSTRUMENT ON OBLIGATION FOR WHICH TAKEN.
    4    (A) UNLESS OTHERWISE AGREED, IF A CERTIFIED CHECK, CASHIER'S CHECK, OR
    5  TELLER'S  CHECK IS TAKEN FOR AN OBLIGATION, THE OBLIGATION IS DISCHARGED
    6  TO THE SAME EXTENT DISCHARGE WOULD RESULT IF AN AMOUNT OF MONEY EQUAL TO
    7  THE AMOUNT OF THE INSTRUMENT WERE TAKEN IN PAYMENT  OF  THE  OBLIGATION.
    8  DISCHARGE OF THE OBLIGATION DOES NOT AFFECT ANY LIABILITY THAT THE OBLI-
    9  GOR MAY HAVE AS AN INDORSER OF THE INSTRUMENT.
   10    (B)  UNLESS OTHERWISE AGREED AND EXCEPT AS PROVIDED IN SUBSECTION (A),
   11  IF A NOTE OR AN UNCERTIFIED CHECK IS TAKEN FOR AN OBLIGATION, THE  OBLI-
   12  GATION  IS  SUSPENDED  TO  THE  SAME  EXTENT  THE  OBLIGATION  WOULD  BE
   13  DISCHARGED IF AN AMOUNT OF MONEY EQUAL TO THE AMOUNT OF  THE  INSTRUMENT
   14  WERE TAKEN, AND THE FOLLOWING RULES APPLY:
   15    (1)  IN THE CASE OF AN UNCERTIFIED CHECK, SUSPENSION OF THE OBLIGATION
   16  CONTINUES UNTIL DISHONOR OF THE CHECK OR UNTIL IT IS PAID OR  CERTIFIED.
   17  PAYMENT  OR CERTIFICATION OF THE CHECK RESULTS IN DISCHARGE OF THE OBLI-
   18  GATION TO THE EXTENT OF THE AMOUNT OF THE CHECK.
   19    (2) IN THE CASE OF A NOTE,  SUSPENSION  OF  THE  OBLIGATION  CONTINUES
   20  UNTIL  DISHONOR  OF  THE  NOTE  OR UNTIL IT IS PAID. PAYMENT OF THE NOTE
   21  RESULTS IN DISCHARGE OF THE OBLIGATION TO THE EXTENT OF THE PAYMENT.
   22    (3) EXCEPT AS PROVIDED IN PARAGRAPH (4),  IF  THE  CHECK  OR  NOTE  IS
   23  DISHONORED  AND  THE  OBLIGEE OF THE OBLIGATION FOR WHICH THE INSTRUMENT
   24  WAS TAKEN IS THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT, THE  OBLIGEE
   25  MAY  ENFORCE  EITHER THE INSTRUMENT OR THE OBLIGATION. IN THE CASE OF AN
   26  INSTRUMENT OF A THIRD PERSON WHICH IS NEGOTIATED TO THE OBLIGEE  BY  THE
   27  OBLIGOR,  DISCHARGE OF THE OBLIGOR ON THE INSTRUMENT ALSO DISCHARGES THE
   28  OBLIGATION.
   29    (4) IF THE PERSON ENTITLED TO ENFORCE  THE  INSTRUMENT  TAKEN  FOR  AN
   30  OBLIGATION  IS  A  PERSON  OTHER  THAN  THE OBLIGEE, THE OBLIGEE MAY NOT
   31  ENFORCE THE OBLIGATION TO THE EXTENT THE OBLIGATION IS SUSPENDED. IF THE
   32  OBLIGEE IS THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT BUT  NO  LONGER
   33  HAS  POSSESSION  OF  IT  BECAUSE  IT WAS LOST, STOLEN, OR DESTROYED, THE
   34  OBLIGATION MAY NOT BE ENFORCED TO THE EXTENT OF THE  AMOUNT  PAYABLE  ON
   35  THE  INSTRUMENT,  AND  TO  THAT  EXTENT THE OBLIGEE'S RIGHTS AGAINST THE
   36  OBLIGOR ARE LIMITED TO ENFORCEMENT OF THE INSTRUMENT.
   37    (C) IF AN INSTRUMENT OTHER THAN ONE DESCRIBED IN SUBSECTION (A) OR (B)
   38  IS TAKEN FOR AN OBLIGATION, THE EFFECT IS (1) THAT STATED IN  SUBSECTION
   39  (A)  IF  THE  INSTRUMENT  IS  ONE  ON WHICH A BANK IS LIABLE AS MAKER OR
   40  ACCEPTOR, OR (2) THAT STATED IN SUBSECTION (B) IN ANY OTHER CASE.
   41  SECTION 3--311. ACCORD AND SATISFACTION BY USE OF INSTRUMENT.
   42    (A) IF A PERSON AGAINST WHOM A CLAIM IS ASSERTED PROVES THAT (1)  THAT
   43  PERSON  IN  GOOD  FAITH  TENDERED  AN INSTRUMENT TO THE CLAIMANT AS FULL
   44  SATISFACTION OF THE CLAIM, (2) THE AMOUNT OF THE CLAIM WAS  UNLIQUIDATED
   45  OR SUBJECT TO A BONA FIDE DISPUTE, AND (3) THE CLAIMANT OBTAINED PAYMENT
   46  OF THE INSTRUMENT, THE FOLLOWING SUBSECTIONS APPLY.
   47    (B)  UNLESS  SUBSECTION  (C)  APPLIES,  THE CLAIM IS DISCHARGED IF THE
   48  PERSON AGAINST WHOM THE CLAIM IS ASSERTED PROVES THAT THE INSTRUMENT  OR
   49  AN  ACCOMPANYING WRITTEN COMMUNICATION CONTAINED A CONSPICUOUS STATEMENT
   50  TO THE EFFECT THAT THE INSTRUMENT WAS TENDERED AS FULL  SATISFACTION  OF
   51  THE CLAIM.
   52    (C)  SUBJECT  TO  SUBSECTION  (D),  A  CLAIM  IS  NOT DISCHARGED UNDER
   53  SUBSECTION (B) IF EITHER OF THE FOLLOWING APPLIES:
   54    (1) THE CLAIMANT, IF AN ORGANIZATION, PROVES THAT (I) WITHIN A REASON-
   55  ABLE TIME BEFORE THE TENDER, THE CLAIMANT SENT A  CONSPICUOUS  STATEMENT
   56  TO  THE  PERSON  AGAINST  WHOM THE CLAIM IS ASSERTED THAT COMMUNICATIONS
       S. 4608                            17
    1  CONCERNING DISPUTED DEBTS, INCLUDING  AN  INSTRUMENT  TENDERED  AS  FULL
    2  SATISFACTION  OF  A DEBT, ARE TO BE SENT TO A DESIGNATED PERSON, OFFICE,
    3  OR PLACE, AND (II) THE INSTRUMENT OR ACCOMPANYING COMMUNICATION WAS  NOT
    4  RECEIVED BY THAT DESIGNATED PERSON, OFFICE, OR PLACE.
    5    (2)  THE  CLAIMANT, WHETHER OR NOT AN ORGANIZATION, PROVES THAT WITHIN
    6  NINETY DAYS AFTER PAYMENT  OF  THE  INSTRUMENT,  THE  CLAIMANT  TENDERED
    7  REPAYMENT OF THE AMOUNT OF THE INSTRUMENT TO THE PERSON AGAINST WHOM THE
    8  CLAIM  IS  ASSERTED. THIS PARAGRAPH DOES NOT APPLY IF THE CLAIMANT IS AN
    9  ORGANIZATION THAT SENT A STATEMENT COMPLYING WITH PARAGRAPH (1)(I).
   10    (D) A CLAIM IS DISCHARGED IF THE PERSON  AGAINST  WHOM  THE  CLAIM  IS
   11  ASSERTED  PROVES  THAT WITHIN A REASONABLE TIME BEFORE COLLECTION OF THE
   12  INSTRUMENT WAS INITIATED, THE CLAIMANT, OR  AN  AGENT  OF  THE  CLAIMANT
   13  HAVING  DIRECT  RESPONSIBILITY  WITH RESPECT TO THE DISPUTED OBLIGATION,
   14  KNEW THAT THE INSTRUMENT WAS TENDERED IN FULL SATISFACTION OF THE CLAIM.
   15  SECTION 3--312. LOST, DESTROYED, OR  STOLEN  CASHIER'S  CHECK,  TELLER'S
   16                    CHECK, OR CERTIFIED CHECK.
   17    (A) IN THIS SECTION:
   18    (1)  "CHECK"  MEANS  A  CASHIER'S  CHECK, TELLER'S CHECK, OR CERTIFIED
   19  CHECK.
   20    (2) "CLAIMANT" MEANS A PERSON WHO CLAIMS  THE  RIGHT  TO  RECEIVE  THE
   21  AMOUNT OF A CASHIER'S CHECK, TELLER'S CHECK, OR CERTIFIED CHECK THAT WAS
   22  LOST, DESTROYED, OR STOLEN.
   23    (3)  "DECLARATION  OF  LOSS" MEANS A STATEMENT, MADE IN A RECORD UNDER
   24  PENALTY OF PERJURY, TO THE EFFECT THAT (I) THE DECLARER LOST  POSSESSION
   25  OF  A  CHECK,  (II) THE DECLARER IS THE DRAWER OR PAYEE OF THE CHECK, IN
   26  THE CASE OF A CERTIFIED CHECK, OR THE REMITTER OR PAYEE OF THE CHECK, IN
   27  THE CASE OF A CASHIER'S CHECK OR  TELLER'S  CHECK,  (III)  THE  LOSS  OF
   28  POSSESSION  WAS NOT THE RESULT OF A TRANSFER BY THE DECLARER OR A LAWFUL
   29  SEIZURE, AND (IV) THE DECLARER CANNOT REASONABLY  OBTAIN  POSSESSION  OF
   30  THE  CHECK  BECAUSE  THE  CHECK WAS DESTROYED, ITS WHEREABOUTS CANNOT BE
   31  DETERMINED, OR IT IS IN THE WRONGFUL POSSESSION OF AN UNKNOWN PERSON  OR
   32  A PERSON THAT CANNOT BE FOUND OR IS NOT AMENABLE TO SERVICE OF PROCESS.
   33    (4) "OBLIGATED BANK" MEANS THE ISSUER OF A CASHIER'S CHECK OR TELLER'S
   34  CHECK OR THE ACCEPTOR OF A CERTIFIED CHECK.
   35    (B) A CLAIMANT MAY ASSERT A CLAIM TO THE AMOUNT OF A CHECK BY A COMMU-
   36  NICATION  TO  THE  OBLIGATED  BANK  DESCRIBING THE CHECK WITH REASONABLE
   37  CERTAINTY AND REQUESTING PAYMENT OF THE AMOUNT OF THE CHECK, IF (1)  THE
   38  CLAIMANT  IS THE DRAWER OR PAYEE OF A CERTIFIED CHECK OR THE REMITTER OR
   39  PAYEE OF A CASHIER'S CHECK OR  TELLER'S  CHECK,  (2)  THE  COMMUNICATION
   40  CONTAINS OR IS ACCOMPANIED BY A DECLARATION OF LOSS OF THE CLAIMANT WITH
   41  RESPECT TO THE CHECK, (3) THE COMMUNICATION IS RECEIVED AT A TIME AND IN
   42  A  MANNER  AFFORDING  THE BANK A REASONABLE TIME TO ACT ON IT BEFORE THE
   43  CHECK IS PAID, AND (4) THE CLAIMANT PROVIDES  REASONABLE  IDENTIFICATION
   44  IF REQUESTED BY THE OBLIGATED BANK. DELIVERY OF A DECLARATION OF LOSS IS
   45  A  WARRANTY OF THE TRUTH OF THE STATEMENTS MADE IN THE DECLARATION. IF A
   46  CLAIM IS ASSERTED IN COMPLIANCE  WITH  THIS  SUBSECTION,  THE  FOLLOWING
   47  RULES APPLY:
   48    (1)  THE  CLAIM  BECOMES  ENFORCEABLE AT THE LATER OF (I) THE TIME THE
   49  CLAIM IS ASSERTED, OR (II) THE NINETIETH DAY FOLLOWING THE DATE  OF  THE
   50  CHECK,  IN THE CASE OF A CASHIER'S CHECK OR TELLER'S CHECK, OR THE NINE-
   51  TIETH DAY FOLLOWING THE DATE OF THE ACCEPTANCE, IN THE CASE OF A  CERTI-
   52  FIED CHECK.
   53    (2)  UNTIL  THE  CLAIM BECOMES ENFORCEABLE, IT HAS NO LEGAL EFFECT AND
   54  THE OBLIGATED BANK MAY PAY THE CHECK OR,  IN  THE  CASE  OF  A  TELLER'S
   55  CHECK, MAY PERMIT THE DRAWEE TO PAY THE CHECK. PAYMENT TO A PERSON ENTI-
       S. 4608                            18
    1  TLED TO ENFORCE THE CHECK DISCHARGES ALL LIABILITY OF THE OBLIGATED BANK
    2  WITH RESPECT TO THE CHECK.
    3    (3) IF THE CLAIM BECOMES ENFORCEABLE BEFORE THE CHECK IS PRESENTED FOR
    4  PAYMENT, THE OBLIGATED BANK IS NOT OBLIGED TO PAY THE CHECK.
    5    (4)  WHEN  THE  CLAIM  BECOMES ENFORCEABLE, THE OBLIGATED BANK BECOMES
    6  OBLIGED TO PAY THE AMOUNT OF THE CHECK TO THE CLAIMANT IF PAYMENT OF THE
    7  CHECK HAS NOT BEEN MADE TO A  PERSON  ENTITLED  TO  ENFORCE  THE  CHECK.
    8  SUBJECT  TO  SECTION 4-302(A)(1), PAYMENT TO THE CLAIMANT DISCHARGES ALL
    9  LIABILITY OF THE OBLIGATED BANK WITH RESPECT TO THE CHECK.
   10    (C) IF THE OBLIGATED BANK PAYS THE AMOUNT OF A  CHECK  TO  A  CLAIMANT
   11  UNDER  SUBSECTION  (B)(4)  AND  THE  CHECK IS PRESENTED FOR PAYMENT BY A
   12  PERSON HAVING RIGHTS OF A HOLDER IN DUE COURSE, THE CLAIMANT IS  OBLIGED
   13  TO (1) REFUND THE PAYMENT TO THE OBLIGATED BANK IF THE CHECK IS PAID, OR
   14  (2)  PAY THE AMOUNT OF THE CHECK TO THE PERSON HAVING RIGHTS OF A HOLDER
   15  IN DUE COURSE IF THE CHECK IS DISHONORED.
   16    (D) IF A CLAIMANT HAS THE RIGHT TO ASSERT A CLAIM UNDER SUBSECTION (B)
   17  AND IS ALSO A PERSON ENTITLED TO ENFORCE  A  CASHIER'S  CHECK,  TELLER'S
   18  CHECK,  OR  CERTIFIED  CHECK  WHICH  IS  LOST, DESTROYED, OR STOLEN, THE
   19  CLAIMANT MAY ASSERT RIGHTS WITH RESPECT TO THE CHECK EITHER  UNDER  THIS
   20  SECTION OR SECTION 3--309.
   21                                   PART 4
   22                            LIABILITY OF PARTIES
   23  SECTION 3--401. SIGNATURE.
   24    (A)  A  PERSON  IS  NOT  LIABLE ON AN INSTRUMENT UNLESS (1) THE PERSON
   25  SIGNED THE INSTRUMENT, OR (2) THE PERSON IS REPRESENTED BY AN  AGENT  OR
   26  REPRESENTATIVE WHO SIGNED THE INSTRUMENT AND THE SIGNATURE IS BINDING ON
   27  THE REPRESENTED PERSON UNDER SECTION 3--402.
   28    (B)  A  SIGNATURE  MAY BE MADE (1) MANUALLY OR BY MEANS OF A DEVICE OR
   29  MACHINE, AND (2) BY THE USE OF ANY NAME, INCLUDING A  TRADE  OR  ASSUMED
   30  NAME, OR BY A WORD, MARK, OR SYMBOL EXECUTED OR ADOPTED BY A PERSON WITH
   31  PRESENT INTENTION TO AUTHENTICATE A WRITING.
   32  SECTION 3--402. SIGNATURE BY REPRESENTATIVE.
   33    (A)  IF  A  PERSON  ACTING,  OR PURPORTING TO ACT, AS A REPRESENTATIVE
   34  SIGNS AN INSTRUMENT BY SIGNING EITHER THE NAME OF THE REPRESENTED PERSON
   35  OR THE NAME OF THE SIGNER, THE REPRESENTED PERSON IS BOUND BY THE SIGNA-
   36  TURE TO THE SAME EXTENT THE REPRESENTED PERSON WOULD  BE  BOUND  IF  THE
   37  SIGNATURE WERE ON A SIMPLE CONTRACT. IF THE REPRESENTED PERSON IS BOUND,
   38  THE  SIGNATURE OF THE REPRESENTATIVE IS THE "AUTHORIZED SIGNATURE OF THE
   39  REPRESENTED PERSON" AND THE REPRESENTED PERSON IS LIABLE ON THE  INSTRU-
   40  MENT, WHETHER OR NOT IDENTIFIED IN THE INSTRUMENT.
   41    (B)  IF  A  REPRESENTATIVE  SIGNS THE NAME OF THE REPRESENTATIVE TO AN
   42  INSTRUMENT AND THE SIGNATURE IS AN AUTHORIZED SIGNATURE OF  THE  REPRES-
   43  ENTED PERSON, THE FOLLOWING RULES APPLY:
   44    (1)  IF  THE FORM OF THE SIGNATURE SHOWS UNAMBIGUOUSLY THAT THE SIGNA-
   45  TURE IS MADE ON BEHALF OF THE REPRESENTED PERSON WHO  IS  IDENTIFIED  IN
   46  THE INSTRUMENT, THE REPRESENTATIVE IS NOT LIABLE ON THE INSTRUMENT.
   47    (2)  SUBJECT  TO SUBSECTION (C), IF (I) THE FORM OF THE SIGNATURE DOES
   48  NOT SHOW UNAMBIGUOUSLY THAT THE SIGNATURE IS MADE  IN  A  REPRESENTATIVE
   49  CAPACITY OR (II) THE REPRESENTED PERSON IS NOT IDENTIFIED IN THE INSTRU-
   50  MENT,  THE REPRESENTATIVE IS LIABLE ON THE INSTRUMENT TO A HOLDER IN DUE
   51  COURSE THAT TOOK THE INSTRUMENT WITHOUT NOTICE THAT  THE  REPRESENTATIVE
   52  WAS  NOT  INTENDED  TO  BE LIABLE ON THE INSTRUMENT. WITH RESPECT TO ANY
   53  OTHER PERSON, THE REPRESENTATIVE IS LIABLE ON THE INSTRUMENT UNLESS  THE
   54  REPRESENTATIVE  PROVES  THAT  THE  ORIGINAL  PARTIES  DID NOT INTEND THE
   55  REPRESENTATIVE TO BE LIABLE ON THE INSTRUMENT.
       S. 4608                            19
    1    (C) IF A REPRESENTATIVE SIGNS THE NAME OF THE REPRESENTATIVE AS DRAWER
    2  OF A CHECK WITHOUT INDICATION OF THE REPRESENTATIVE STATUS AND THE CHECK
    3  IS PAYABLE FROM AN ACCOUNT OF THE REPRESENTED PERSON WHO  IS  IDENTIFIED
    4  ON  THE CHECK, THE SIGNER IS NOT LIABLE ON THE CHECK IF THE SIGNATURE IS
    5  AN AUTHORIZED SIGNATURE OF THE REPRESENTED PERSON.
    6  SECTION 3--403. UNAUTHORIZED SIGNATURE.
    7    (A)  UNLESS  OTHERWISE PROVIDED IN THIS ARTICLE OR ARTICLE 4, AN UNAU-
    8  THORIZED SIGNATURE IS INEFFECTIVE EXCEPT AS THE SIGNATURE OF  THE  UNAU-
    9  THORIZED  SIGNER IN FAVOR OF A PERSON WHO IN GOOD FAITH PAYS THE INSTRU-
   10  MENT OR TAKES IT FOR VALUE. AN UNAUTHORIZED SIGNATURE  MAY  BE  RATIFIED
   11  FOR ALL PURPOSES OF THIS ARTICLE.
   12    (B) IF THE SIGNATURE OF MORE THAN ONE PERSON IS REQUIRED TO CONSTITUTE
   13  THE AUTHORIZED SIGNATURE OF AN ORGANIZATION, THE SIGNATURE OF THE ORGAN-
   14  IZATION IS UNAUTHORIZED IF ONE OF THE REQUIRED SIGNATURES IS LACKING.
   15    (C) THE CIVIL OR CRIMINAL LIABILITY OF A PERSON WHO MAKES AN UNAUTHOR-
   16  IZED  SIGNATURE  IS  NOT AFFECTED BY ANY PROVISION OF THIS ARTICLE WHICH
   17  MAKES THE UNAUTHORIZED SIGNATURE EFFECTIVE  FOR  THE  PURPOSES  OF  THIS
   18  ARTICLE.
   19  SECTION 3--404. IMPOSTORS; FICTITIOUS PAYEES.
   20    (A)  IF  AN  IMPOSTOR,  BY  USE OF THE MAILS OR OTHERWISE, INDUCES THE
   21  ISSUER OF AN INSTRUMENT TO ISSUE THE INSTRUMENT TO THE IMPOSTOR, OR TO A
   22  PERSON ACTING IN CONCERT WITH THE IMPOSTOR, BY IMPERSONATING  THE  PAYEE
   23  OF  THE  INSTRUMENT  OR  A  PERSON  AUTHORIZED  TO ACT FOR THE PAYEE, AN
   24  INDORSEMENT OF THE INSTRUMENT BY ANY PERSON IN THE NAME OF THE PAYEE  IS
   25  EFFECTIVE  AS  THE INDORSEMENT OF THE PAYEE IN FAVOR OF A PERSON WHO, IN
   26  GOOD FAITH, PAYS THE INSTRUMENT OR TAKES IT FOR VALUE OR FOR COLLECTION.
   27    (B) IF (1) A PERSON WHOSE INTENT DETERMINES TO WHOM AN  INSTRUMENT  IS
   28  PAYABLE  (SECTION 3--110) DOES NOT INTEND THE PERSON IDENTIFIED AS PAYEE
   29  TO HAVE ANY INTEREST IN THE INSTRUMENT, OR (2) THE PERSON IDENTIFIED  AS
   30  PAYEE OF AN INSTRUMENT IS A FICTITIOUS PERSON, THE FOLLOWING RULES APPLY
   31  UNTIL THE INSTRUMENT IS NEGOTIATED BY SPECIAL INDORSEMENT:
   32    (I) ANY PERSON IN POSSESSION OF THE INSTRUMENT IS ITS HOLDER.
   33    (II)  AN  INDORSEMENT BY ANY PERSON IN THE NAME OF THE PAYEE STATED IN
   34  THE INSTRUMENT IS EFFECTIVE AS THE INDORSEMENT OF THE PAYEE IN FAVOR  OF
   35  A  PERSON  WHO, IN GOOD FAITH, PAYS THE INSTRUMENT OR TAKES IT FOR VALUE
   36  OR FOR COLLECTION.
   37    (C) UNDER SUBSECTION (A) OR (B), AN INDORSEMENT IS MADE IN THE NAME OF
   38  A PAYEE IF (1) IT IS MADE IN A NAME SUBSTANTIALLY SIMILAR TO THAT OF THE
   39  PAYEE OR (2) THE INSTRUMENT, WHETHER OR NOT INDORSED, IS DEPOSITED IN  A
   40  DEPOSITARY BANK TO AN ACCOUNT IN A NAME SUBSTANTIALLY SIMILAR TO THAT OF
   41  THE PAYEE.
   42    (D)  WITH  RESPECT  TO  AN  INSTRUMENT  TO WHICH SUBSECTION (A) OR (B)
   43  APPLIES, IF A PERSON PAYING THE INSTRUMENT OR TAKING IT FOR VALUE OR FOR
   44  COLLECTION FAILS TO EXERCISE ORDINARY  CARE  IN  PAYING  OR  TAKING  THE
   45  INSTRUMENT  AND THAT FAILURE SUBSTANTIALLY CONTRIBUTES TO LOSS RESULTING
   46  FROM PAYMENT OF THE INSTRUMENT, THE PERSON BEARING THE LOSS MAY  RECOVER
   47  FROM  THE  PERSON  FAILING  TO  EXERCISE ORDINARY CARE TO THE EXTENT THE
   48  FAILURE TO EXERCISE ORDINARY CARE CONTRIBUTED TO THE LOSS.
   49  SECTION 3--405. EMPLOYER'S RESPONSIBILITY FOR FRAUDULENT INDORSEMENT  BY
   50          EMPLOYEE.
   51    (A) IN THIS SECTION:
   52    (1)  "EMPLOYEE"  INCLUDES AN INDEPENDENT CONTRACTOR AND EMPLOYEE OF AN
   53  INDEPENDENT CONTRACTOR RETAINED BY THE EMPLOYER.
   54    (2) "FRAUDULENT INDORSEMENT" MEANS (I) IN THE CASE  OF  AN  INSTRUMENT
   55  PAYABLE  TO  THE EMPLOYER, A FORGED INDORSEMENT PURPORTING TO BE THAT OF
   56  THE EMPLOYER, OR (II) IN THE CASE OF AN INSTRUMENT WITH RESPECT TO WHICH
       S. 4608                            20
    1  THE EMPLOYER IS THE ISSUER, A FORGED INDORSEMENT PURPORTING TO  BE  THAT
    2  OF THE PERSON IDENTIFIED AS PAYEE.
    3    (3)  "RESPONSIBILITY"  WITH RESPECT TO INSTRUMENTS MEANS AUTHORITY (I)
    4  TO SIGN OR INDORSE INSTRUMENTS ON BEHALF OF THE EMPLOYER, (II) TO  PROC-
    5  ESS  INSTRUMENTS  RECEIVED BY THE EMPLOYER FOR BOOKKEEPING PURPOSES, FOR
    6  DEPOSIT TO AN ACCOUNT, OR FOR OTHER DISPOSITION,  (III)  TO  PREPARE  OR
    7  PROCESS  INSTRUMENTS  FOR  ISSUE  IN  THE  NAME OF THE EMPLOYER, (IV) TO
    8  SUPPLY INFORMATION DETERMINING THE  NAMES  OR  ADDRESSES  OF  PAYEES  OF
    9  INSTRUMENTS TO BE ISSUED IN THE NAME OF THE EMPLOYER, (V) TO CONTROL THE
   10  DISPOSITION  OF INSTRUMENTS TO BE ISSUED IN THE NAME OF THE EMPLOYER, OR
   11  (VI) TO ACT OTHERWISE WITH  RESPECT  TO  INSTRUMENTS  IN  A  RESPONSIBLE
   12  CAPACITY. "RESPONSIBILITY" DOES NOT INCLUDE AUTHORITY THAT MERELY ALLOWS
   13  AN EMPLOYEE TO HAVE ACCESS TO INSTRUMENTS OR BLANK OR INCOMPLETE INSTRU-
   14  MENT  FORMS THAT ARE BEING STORED OR TRANSPORTED OR ARE PART OF INCOMING
   15  OR OUTGOING MAIL, OR SIMILAR ACCESS.
   16    (B) FOR THE PURPOSE OF DETERMINING THE RIGHTS  AND  LIABILITIES  OF  A
   17  PERSON  WHO,  IN GOOD FAITH, PAYS AN INSTRUMENT OR TAKES IT FOR VALUE OR
   18  FOR COLLECTION, IF AN EMPLOYER ENTRUSTED AN EMPLOYEE WITH RESPONSIBILITY
   19  WITH RESPECT TO THE INSTRUMENT AND THE EMPLOYEE OR A  PERSON  ACTING  IN
   20  CONCERT  WITH THE EMPLOYEE MAKES A FRAUDULENT INDORSEMENT OF THE INSTRU-
   21  MENT, THE INDORSEMENT IS EFFECTIVE AS THE INDORSEMENT OF THE  PERSON  TO
   22  WHOM THE INSTRUMENT IS PAYABLE IF IT IS MADE IN THE NAME OF THAT PERSON.
   23  IF  THE  PERSON  PAYING  THE  INSTRUMENT  OR  TAKING IT FOR VALUE OR FOR
   24  COLLECTION FAILS TO EXERCISE ORDINARY  CARE  IN  PAYING  OR  TAKING  THE
   25  INSTRUMENT  AND THAT FAILURE SUBSTANTIALLY CONTRIBUTES TO LOSS RESULTING
   26  FROM THE FRAUD, THE PERSON BEARING THE LOSS MAY RECOVER FROM THE  PERSON
   27  FAILING  TO EXERCISE ORDINARY CARE TO THE EXTENT THE FAILURE TO EXERCISE
   28  ORDINARY CARE CONTRIBUTED TO THE LOSS.
   29    (C) UNDER SUBSECTION (B), AN INDORSEMENT IS MADE IN THE  NAME  OF  THE
   30  PERSON  TO  WHOM  AN  INSTRUMENT  IS PAYABLE IF (1) IT IS MADE IN A NAME
   31  SUBSTANTIALLY SIMILAR TO THE NAME OF THAT PERSON OR (2) THE  INSTRUMENT,
   32  WHETHER OR NOT INDORSED, IS DEPOSITED IN A DEPOSITARY BANK TO AN ACCOUNT
   33  IN A NAME SUBSTANTIALLY SIMILAR TO THE NAME OF THAT PERSON.
   34  SECTION 3--406. NEGLIGENCE  CONTRIBUTING  TO  FORGED SIGNATURE OR ALTER-
   35                    ATION OF INSTRUMENT.
   36    (A) A PERSON WHOSE FAILURE TO  EXERCISE  ORDINARY  CARE  SUBSTANTIALLY
   37  CONTRIBUTES  TO  AN  ALTERATION  OF  AN INSTRUMENT OR TO THE MAKING OF A
   38  FORGED SIGNATURE ON AN INSTRUMENT IS PRECLUDED FROM ASSERTING THE ALTER-
   39  ATION OR THE FORGERY AGAINST A PERSON  WHO,  IN  GOOD  FAITH,  PAYS  THE
   40  INSTRUMENT OR TAKES IT FOR VALUE OR FOR COLLECTION.
   41    (B) UNDER SUBSECTION (A), IF THE PERSON ASSERTING THE PRECLUSION FAILS
   42  TO  EXERCISE  ORDINARY  CARE IN PAYING OR TAKING THE INSTRUMENT AND THAT
   43  FAILURE SUBSTANTIALLY CONTRIBUTES TO LOSS, THE LOSS IS ALLOCATED BETWEEN
   44  THE PERSON PRECLUDED AND THE PERSON ASSERTING THE  PRECLUSION  ACCORDING
   45  TO  THE  EXTENT  TO  WHICH THE FAILURE OF EACH TO EXERCISE ORDINARY CARE
   46  CONTRIBUTED TO THE LOSS.
   47    (C) UNDER SUBSECTION (A), THE BURDEN OF PROVING  FAILURE  TO  EXERCISE
   48  ORDINARY   CARE  IS  ON  THE  PERSON  ASSERTING  THE  PRECLUSION.  UNDER
   49  SUBSECTION (B), THE BURDEN OF PROVING FAILURE TO EXERCISE ORDINARY  CARE
   50  IS ON THE PERSON PRECLUDED.
   51  SECTION 3--407. ALTERATION.
   52    (A)  "ALTERATION"  MEANS  (1)  AN UNAUTHORIZED CHANGE IN AN INSTRUMENT
   53  THAT PURPORTS TO MODIFY IN ANY RESPECT THE OBLIGATION OF A PARTY, OR (2)
   54  AN UNAUTHORIZED ADDITION OF WORDS OR  NUMBERS  OR  OTHER  CHANGE  TO  AN
   55  INCOMPLETE INSTRUMENT RELATING TO THE OBLIGATION OF A PARTY.
       S. 4608                            21
    1    (B)  EXCEPT  AS PROVIDED IN SUBSECTION (C), AN ALTERATION FRAUDULENTLY
    2  MADE DISCHARGES A PARTY WHOSE OBLIGATION IS AFFECTED BY  THE  ALTERATION
    3  UNLESS THAT PARTY ASSENTS OR IS PRECLUDED FROM ASSERTING THE ALTERATION.
    4  NO  OTHER  ALTERATION  DISCHARGES  A  PARTY,  AND  THE INSTRUMENT MAY BE
    5  ENFORCED ACCORDING TO ITS ORIGINAL TERMS.
    6    (C) A PAYOR BANK OR DRAWEE PAYING A FRAUDULENTLY ALTERED INSTRUMENT OR
    7  A  PERSON  TAKING  IT FOR VALUE, IN GOOD FAITH AND WITHOUT NOTICE OF THE
    8  ALTERATION, MAY ENFORCE  RIGHTS  WITH  RESPECT  TO  THE  INSTRUMENT  (1)
    9  ACCORDING  TO  ITS  ORIGINAL  TERMS, OR (2) IN THE CASE OF AN INCOMPLETE
   10  INSTRUMENT ALTERED BY UNAUTHORIZED COMPLETION, ACCORDING TO ITS TERMS AS
   11  COMPLETED.
   12  SECTION 3--408. DRAWEE NOT LIABLE ON UNACCEPTED DRAFT.
   13    A CHECK OR OTHER DRAFT DOES NOT OF ITSELF OPERATE AS AN ASSIGNMENT  OF
   14  FUNDS  IN  THE  HANDS  OF  THE DRAWEE AVAILABLE FOR ITS PAYMENT, AND THE
   15  DRAWEE IS NOT LIABLE ON THE INSTRUMENT UNTIL THE DRAWEE ACCEPTS IT.
   16  SECTION 3--409. ACCEPTANCE OF DRAFT; CERTIFIED CHECK.
   17    (A) "ACCEPTANCE" MEANS THE DRAWEE'S SIGNED AGREEMENT TO PAY A DRAFT AS
   18  PRESENTED. IT MUST BE WRITTEN ON  THE  DRAFT  AND  MAY  CONSIST  OF  THE
   19  DRAWEE'S  SIGNATURE  ALONE.    ACCEPTANCE  MAY  BE  MADE AT ANY TIME AND
   20  BECOMES EFFECTIVE WHEN NOTIFICATION PURSUANT TO INSTRUCTIONS IS GIVEN OR
   21  THE ACCEPTED DRAFT IS DELIVERED FOR THE PURPOSE OF GIVING RIGHTS ON  THE
   22  ACCEPTANCE TO ANY PERSON.
   23    (B)  A  DRAFT  MAY  BE ACCEPTED ALTHOUGH IT HAS NOT BEEN SIGNED BY THE
   24  DRAWER, IS OTHERWISE INCOMPLETE, IS OVERDUE, OR HAS BEEN DISHONORED.
   25    (C) IF A DRAFT IS PAYABLE AT A FIXED PERIOD AFTER SIGHT AND THE ACCEP-
   26  TOR FAILS TO DATE THE ACCEPTANCE, THE HOLDER MAY COMPLETE THE ACCEPTANCE
   27  BY SUPPLYING A DATE IN GOOD FAITH.
   28    (D) "CERTIFIED CHECK" MEANS A CHECK ACCEPTED BY THE BANK ON  WHICH  IT
   29  IS  DRAWN.  ACCEPTANCE  MAY  BE MADE AS STATED IN SUBSECTION (A) OR BY A
   30  WRITING ON THE CHECK WHICH INDICATES THAT THE CHECK  IS  CERTIFIED.  THE
   31  DRAWEE OF A CHECK HAS NO OBLIGATION TO CERTIFY THE CHECK, AND REFUSAL TO
   32  CERTIFY IS NOT DISHONOR OF THE CHECK.
   33  SECTION 3--410. ACCEPTANCE VARYING DRAFT.
   34    (A)  IF  THE TERMS OF A DRAWEE'S ACCEPTANCE VARY FROM THE TERMS OF THE
   35  DRAFT AS PRESENTED, THE HOLDER MAY REFUSE THE ACCEPTANCE AND  TREAT  THE
   36  DRAFT AS DISHONORED. IN THAT CASE, THE DRAWEE MAY CANCEL THE ACCEPTANCE.
   37    (B)  THE  TERMS OF A DRAFT ARE NOT VARIED BY AN ACCEPTANCE TO PAY AT A
   38  PARTICULAR BANK OR PLACE IN THE UNITED  STATES,  UNLESS  THE  ACCEPTANCE
   39  STATES THAT THE DRAFT IS TO BE PAID ONLY AT THAT BANK OR PLACE.
   40    (C)  IF  THE  HOLDER  ASSENTS  TO AN ACCEPTANCE VARYING THE TERMS OF A
   41  DRAFT, THE OBLIGATION OF EACH DRAWER AND INDORSER THAT DOES NOT EXPRESS-
   42  LY ASSENT TO THE ACCEPTANCE IS DISCHARGED.
   43  SECTION 3--411. REFUSAL TO PAY CASHIER'S CHECKS,  TELLER'S  CHECKS,  AND
   44                    CERTIFIED CHECKS.
   45    (A)  IN  THIS SECTION, "OBLIGATED BANK" MEANS THE ACCEPTOR OF A CERTI-
   46  FIED CHECK OR THE ISSUER OF A CASHIER'S CHECK OR TELLER'S  CHECK  BOUGHT
   47  FROM THE ISSUER.
   48    (B)  IF  THE  OBLIGATED BANK WRONGFULLY (1) REFUSES TO PAY A CASHIER'S
   49  CHECK OR CERTIFIED CHECK, (2) STOPS PAYMENT OF A TELLER'S CHECK, OR  (3)
   50  REFUSES  TO  PAY  A  DISHONORED TELLER'S CHECK, THE PERSON ASSERTING THE
   51  RIGHT TO ENFORCE THE CHECK IS ENTITLED TO COMPENSATION FOR EXPENSES  AND
   52  LOSS  OF  INTEREST  RESULTING FROM THE NONPAYMENT AND MAY RECOVER CONSE-
   53  QUENTIAL DAMAGES IF THE OBLIGATED BANK REFUSES TO  PAY  AFTER  RECEIVING
   54  NOTICE OF PARTICULAR CIRCUMSTANCES GIVING RISE TO THE DAMAGES.
   55    (C)  EXPENSES  OR  CONSEQUENTIAL  DAMAGES UNDER SUBSECTION (B) ARE NOT
   56  RECOVERABLE IF THE REFUSAL OF THE OBLIGATED BANK TO PAY  OCCURS  BECAUSE
       S. 4608                            22
    1  (1)  THE  BANK SUSPENDS PAYMENTS, (2) THE OBLIGATED BANK ASSERTS A CLAIM
    2  OR DEFENSE OF THE BANK THAT IT HAS  REASONABLE  GROUNDS  TO  BELIEVE  IS
    3  AVAILABLE AGAINST THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT, (3) THE
    4  OBLIGATED  BANK  HAS  A  REASONABLE  DOUBT  WHETHER THE PERSON DEMANDING
    5  PAYMENT IS THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT, OR (4) PAYMENT
    6  IS PROHIBITED BY LAW.
    7  SECTION 3--412. OBLIGATION OF ISSUER OF NOTE OR CASHIER'S CHECK.
    8    THE ISSUER OF A NOTE OR CASHIER'S CHECK OR OTHER DRAFT  DRAWN  ON  THE
    9  DRAWER  IS  OBLIGED  TO PAY THE INSTRUMENT (1) ACCORDING TO ITS TERMS AT
   10  THE TIME IT WAS ISSUED OR, IF NOT ISSUED, AT THE TIME IT FIRST CAME INTO
   11  POSSESSION OF A HOLDER, OR  (2)  IF  THE  ISSUER  SIGNED  AN  INCOMPLETE
   12  INSTRUMENT,  ACCORDING TO ITS TERMS WHEN COMPLETED, TO THE EXTENT STATED
   13  IN SECTIONS 3--115 AND 3--407. THE OBLIGATION IS OWED TO A PERSON  ENTI-
   14  TLED TO ENFORCE THE INSTRUMENT OR TO AN INDORSER WHO PAID THE INSTRUMENT
   15  UNDER SECTION 3--415.
   16  SECTION 3--413. OBLIGATION OF ACCEPTOR.
   17    (A)  THE ACCEPTOR OF A DRAFT IS OBLIGED TO PAY THE DRAFT (1) ACCORDING
   18  TO ITS TERMS AT THE TIME IT WAS ACCEPTED,  EVEN  THOUGH  THE  ACCEPTANCE
   19  STATES  THAT  THE  DRAFT  IS PAYABLE "AS ORIGINALLY DRAWN" OR EQUIVALENT
   20  TERMS, (2) IF THE ACCEPTANCE VARIES THE TERMS OF THE DRAFT, ACCORDING TO
   21  THE TERMS OF THE DRAFT AS VARIED, OR (3) IF THE ACCEPTANCE IS OF A DRAFT
   22  THAT IS AN INCOMPLETE INSTRUMENT, ACCORDING TO ITS TERMS WHEN COMPLETED,
   23  TO THE EXTENT STATED IN SECTIONS 3--115 AND 3--407.  THE  OBLIGATION  IS
   24  OWED  TO  A  PERSON ENTITLED TO ENFORCE THE DRAFT OR TO THE DRAWER OR AN
   25  INDORSER WHO PAID THE DRAFT UNDER SECTION 3--414 OR 3--415.
   26    (B) IF THE CERTIFICATION OF A CHECK OR OTHER  ACCEPTANCE  OF  A  DRAFT
   27  STATES  THE AMOUNT CERTIFIED OR ACCEPTED, THE OBLIGATION OF THE ACCEPTOR
   28  IS THAT AMOUNT. IF (1) THE CERTIFICATION OR ACCEPTANCE DOES NOT STATE AN
   29  AMOUNT, (2) THE AMOUNT OF THE INSTRUMENT IS SUBSEQUENTLY RAISED, AND (3)
   30  THE INSTRUMENT IS THEN NEGOTIATED TO A HOLDER IN DUE COURSE,  THE  OBLI-
   31  GATION  OF  THE  ACCEPTOR IS THE AMOUNT OF THE INSTRUMENT AT THE TIME IT
   32  WAS TAKEN BY THE HOLDER IN DUE COURSE.
   33  SECTION 3--414. OBLIGATION OF DRAWER.
   34    (A) THIS SECTION DOES NOT APPLY TO CASHIER'S CHECKS  OR  OTHER  DRAFTS
   35  DRAWN ON THE DRAWER.
   36    (B) IF AN UNACCEPTED DRAFT IS DISHONORED, THE DRAWER IS OBLIGED TO PAY
   37  THE  DRAFT  (1)  ACCORDING TO ITS TERMS AT THE TIME IT WAS ISSUED OR, IF
   38  NOT ISSUED, AT THE TIME IT FIRST CAME INTO POSSESSION OF  A  HOLDER,  OR
   39  (2)  IF  THE  DRAWER  SIGNED  AN INCOMPLETE INSTRUMENT, ACCORDING TO ITS
   40  TERMS WHEN COMPLETED, TO  THE  EXTENT  STATED  IN  SECTIONS  3--115  AND
   41  3--407. THE OBLIGATION IS OWED TO A PERSON ENTITLED TO ENFORCE THE DRAFT
   42  OR TO AN INDORSER WHO PAID THE DRAFT UNDER SECTION 3--415.
   43    (C)  IF  A  DRAFT  IS  ACCEPTED  BY  A BANK, THE DRAWER IS DISCHARGED,
   44  REGARDLESS OF WHEN OR BY WHOM ACCEPTANCE WAS OBTAINED.
   45    (D) IF A DRAFT IS ACCEPTED AND THE ACCEPTOR IS NOT A BANK,  THE  OBLI-
   46  GATION  OF THE DRAWER TO PAY THE DRAFT IF THE DRAFT IS DISHONORED BY THE
   47  ACCEPTOR IS THE SAME AS THE OBLIGATION  OF  AN  INDORSER  UNDER  SECTION
   48  3--415(A) AND (C).
   49    (E) IF A DRAFT STATES THAT IT IS DRAWN "WITHOUT RECOURSE" OR OTHERWISE
   50  DISCLAIMS  LIABILITY  OF  THE DRAWER TO PAY THE DRAFT, THE DRAWER IS NOT
   51  LIABLE UNDER SUBSECTION (B) TO PAY THE DRAFT  IF  THE  DRAFT  IS  NOT  A
   52  CHECK.  A  DISCLAIMER  OF  THE LIABILITY STATED IN SUBSECTION (B) IS NOT
   53  EFFECTIVE IF THE DRAFT IS A CHECK.
   54    (F) IF (1) A CHECK IS NOT PRESENTED FOR PAYMENT OR GIVEN TO A  DEPOSI-
   55  TARY  BANK  FOR  COLLECTION  WITHIN  THIRTY DAYS AFTER ITS DATE, (2) THE
   56  DRAWEE SUSPENDS PAYMENTS AFTER EXPIRATION OF THE THIRTY-DAY PERIOD WITH-
       S. 4608                            23
    1  OUT PAYING THE CHECK, AND (3) BECAUSE OF THE SUSPENSION OF PAYMENTS, THE
    2  DRAWER IS DEPRIVED OF FUNDS MAINTAINED WITH THE DRAWEE TO COVER  PAYMENT
    3  OF  THE  CHECK, THE DRAWER TO THE EXTENT DEPRIVED OF FUNDS MAY DISCHARGE
    4  ITS  OBLIGATION  TO PAY THE CHECK BY ASSIGNING TO THE PERSON ENTITLED TO
    5  ENFORCE THE CHECK THE RIGHTS OF  THE  DRAWER  AGAINST  THE  DRAWEE  WITH
    6  RESPECT TO THE FUNDS.
    7  SECTION 3--415. OBLIGATION OF INDORSER.
    8    (A)  SUBJECT  TO  SUBSECTIONS  (B),  (C),  (D),  (E)  AND  TO  SECTION
    9  3--419(D), IF AN INSTRUMENT IS DISHONORED, AN INDORSER IS OBLIGED TO PAY
   10  THE AMOUNT DUE ON THE INSTRUMENT (1)  ACCORDING  TO  THE  TERMS  OF  THE
   11  INSTRUMENT  AT THE TIME IT WAS INDORSED, OR (2) IF THE INDORSER INDORSED
   12  AN INCOMPLETE INSTRUMENT, ACCORDING TO ITS TERMS WHEN COMPLETED, TO  THE
   13  EXTENT  STATED  IN  SECTIONS  3--115  AND  3--407. THE OBLIGATION OF THE
   14  INDORSER IS OWED TO A PERSON ENTITLED TO ENFORCE THE INSTRUMENT OR TO  A
   15  SUBSEQUENT INDORSER WHO PAID THE INSTRUMENT UNDER THIS SECTION.
   16    (B)  IF  AN  INDORSEMENT  STATES THAT IT IS MADE "WITHOUT RECOURSE" OR
   17  OTHERWISE DISCLAIMS LIABILITY OF  THE  INDORSER,  THE  INDORSER  IS  NOT
   18  LIABLE UNDER SUBSECTION (A) TO PAY THE INSTRUMENT.
   19    (C)  IF  NOTICE  OF  DISHONOR  OF AN INSTRUMENT IS REQUIRED BY SECTION
   20  3--503 AND NOTICE OF DISHONOR COMPLYING WITH THAT SECTION IS  NOT  GIVEN
   21  TO  AN  INDORSER,  THE LIABILITY OF THE INDORSER UNDER SUBSECTION (A) IS
   22  DISCHARGED.
   23    (D) IF A DRAFT IS ACCEPTED BY A BANK AFTER AN INDORSEMENT IS MADE, THE
   24  LIABILITY OF THE INDORSER UNDER SUBSECTION (A) IS DISCHARGED.
   25    (E) IF AN INDORSER OF A CHECK IS LIABLE UNDER SUBSECTION (A)  AND  THE
   26  CHECK  IS  NOT  PRESENTED FOR PAYMENT, OR GIVEN TO A DEPOSITARY BANK FOR
   27  COLLECTION, WITHIN THIRTY DAYS AFTER THE DAY THE INDORSEMENT  WAS  MADE,
   28  THE LIABILITY OF THE INDORSER UNDER SUBSECTION (A) IS DISCHARGED.
   29  SECTION 3--416. TRANSFER WARRANTIES.
   30    (A) A PERSON WHO TRANSFERS AN INSTRUMENT FOR CONSIDERATION WARRANTS TO
   31  THE TRANSFEREE AND, IF THE TRANSFER IS BY INDORSEMENT, TO ANY SUBSEQUENT
   32  TRANSFEREE THAT:
   33    (1) THE WARRANTOR IS A PERSON ENTITLED TO ENFORCE THE INSTRUMENT;
   34    (2) ALL SIGNATURES ON THE INSTRUMENT ARE AUTHENTIC AND AUTHORIZED;
   35    (3) THE INSTRUMENT HAS NOT BEEN ALTERED;
   36    (4)  THE INSTRUMENT IS NOT SUBJECT TO A DEFENSE OR CLAIM IN RECOUPMENT
   37  OF ANY PARTY WHICH CAN BE ASSERTED AGAINST THE WARRANTOR;
   38    (5) THE WARRANTOR  HAS  NO  KNOWLEDGE  OF  ANY  INSOLVENCY  PROCEEDING
   39  COMMENCED  WITH  RESPECT  TO THE MAKER OR ACCEPTOR OR, IN THE CASE OF AN
   40  UNACCEPTED DRAFT, THE DRAWER; AND
   41    (6) WITH RESPECT TO A REMOTELY-CREATED CONSUMER ITEM, THAT THE  PERSON
   42  ON  WHOSE  ACCOUNT THE ITEM IS DRAWN AUTHORIZED THE ISSUANCE OF THE ITEM
   43  IN THE AMOUNT FOR WHICH THE ITEM IS DRAWN.
   44    (B) A PERSON TO WHOM THE WARRANTIES UNDER SUBSECTION (A) ARE MADE  AND
   45  WHO  TOOK THE INSTRUMENT IN GOOD FAITH MAY RECOVER FROM THE WARRANTOR AS
   46  DAMAGES FOR BREACH OF WARRANTY AN AMOUNT EQUAL TO THE LOSS SUFFERED AS A
   47  RESULT OF THE BREACH, BUT NOT MORE THAN THE  AMOUNT  OF  THE  INSTRUMENT
   48  PLUS EXPENSES AND LOSS OF INTEREST INCURRED AS A RESULT OF THE BREACH.
   49    (C)  THE WARRANTIES STATED IN SUBSECTION (A) CANNOT BE DISCLAIMED WITH
   50  RESPECT TO CHECKS. UNLESS NOTICE OF A CLAIM FOR BREACH  OF  WARRANTY  IS
   51  GIVEN  TO THE WARRANTOR WITHIN THIRTY DAYS AFTER THE CLAIMANT HAS REASON
   52  TO KNOW OF THE BREACH AND THE IDENTITY OF THE WARRANTOR,  THE  LIABILITY
   53  OF THE WARRANTOR UNDER SUBSECTION (B) IS DISCHARGED TO THE EXTENT OF ANY
   54  LOSS CAUSED BY THE DELAY IN GIVING NOTICE OF THE CLAIM.
   55    (D)  A  CAUSE  OF  ACTION  FOR  BREACH  OF WARRANTY UNDER THIS SECTION
   56  ACCRUES WHEN THE CLAIMANT HAS REASON TO KNOW OF THE BREACH.
       S. 4608                            24
    1  SECTION 3--417. PRESENTMENT WARRANTIES.
    2    (A)  IF  AN UNACCEPTED DRAFT IS PRESENTED TO THE DRAWEE FOR PAYMENT OR
    3  ACCEPTANCE AND THE DRAWEE PAYS OR ACCEPTS  THE  DRAFT,  (1)  THE  PERSON
    4  OBTAINING  PAYMENT  OR ACCEPTANCE, AT THE TIME OF PRESENTMENT, AND (2) A
    5  PREVIOUS TRANSFEROR OF THE DRAFT, AT THE TIME OF  TRANSFER,  WARRANT  TO
    6  THE DRAWEE MAKING PAYMENT OR ACCEPTING THE DRAFT IN GOOD FAITH THAT:
    7    (I)  THE  WARRANTOR  IS, OR WAS, AT THE TIME THE WARRANTOR TRANSFERRED
    8  THE DRAFT, A PERSON ENTITLED TO  ENFORCE  THE  DRAFT  OR  AUTHORIZED  TO
    9  OBTAIN PAYMENT OR ACCEPTANCE OF THE DRAFT ON BEHALF OF A PERSON ENTITLED
   10  TO ENFORCE THE DRAFT;
   11    (II) THE DRAFT HAS NOT BEEN ALTERED;
   12    (III)  THE WARRANTOR HAS NO KNOWLEDGE THAT THE SIGNATURE OF THE DRAWER
   13  OF THE DRAFT IS UNAUTHORIZED; AND
   14    (IV) WITH RESPECT TO ANY  REMOTELY-CREATED  CONSUMER  ITEM,  THAT  THE
   15  PERSON ON WHOSE ACCOUNT THE ITEM IS DRAWN AUTHORIZED THE ISSUANCE OF THE
   16  ITEM IN THE AMOUNT FOR WHICH THE ITEM IS DRAWN.
   17    (B) A DRAWEE MAKING PAYMENT MAY RECOVER FROM ANY WARRANTOR DAMAGES FOR
   18  BREACH  OF  WARRANTY  EQUAL  TO  THE  AMOUNT PAID BY THE DRAWEE LESS THE
   19  AMOUNT THE DRAWEE RECEIVED OR IS ENTITLED TO  RECEIVE  FROM  THE  DRAWER
   20  BECAUSE  OF  THE PAYMENT. IN ADDITION, THE DRAWEE IS ENTITLED TO COMPEN-
   21  SATION FOR EXPENSES AND LOSS OF INTEREST RESULTING FROM THE BREACH.  THE
   22  RIGHT  OF  THE  DRAWEE  TO  RECOVER DAMAGES UNDER THIS SUBSECTION IS NOT
   23  AFFECTED BY ANY FAILURE OF THE  DRAWEE  TO  EXERCISE  ORDINARY  CARE  IN
   24  MAKING PAYMENT. IF THE DRAWEE ACCEPTS THE DRAFT, BREACH OF WARRANTY IS A
   25  DEFENSE TO THE OBLIGATION OF THE ACCEPTOR. IF THE ACCEPTOR MAKES PAYMENT
   26  WITH  RESPECT TO THE DRAFT, THE ACCEPTOR IS ENTITLED TO RECOVER FROM ANY
   27  WARRANTOR FOR BREACH OF WARRANTY THE AMOUNTS STATED IN THIS SUBSECTION.
   28    (C) IF  A  DRAWEE  ASSERTS  A  CLAIM  FOR  BREACH  OF  WARRANTY  UNDER
   29  SUBSECTION  (A)  BASED ON AN UNAUTHORIZED INDORSEMENT OF THE DRAFT OR AN
   30  ALTERATION OF THE DRAFT, THE WARRANTOR MAY DEFEND BY  PROVING  THAT  THE
   31  INDORSEMENT IS EFFECTIVE UNDER SECTION 3--404 OR 3--405 OR THE DRAWER IS
   32  PRECLUDED  UNDER  SECTION  3--406  OR  4--406 FROM ASSERTING AGAINST THE
   33  DRAWEE THE UNAUTHORIZED INDORSEMENT OR ALTERATION.
   34    (D) IF (1) A DISHONORED DRAFT IS PRESENTED FOR PAYMENT TO  THE  DRAWER
   35  OR AN INDORSER OR (2) ANY OTHER INSTRUMENT IS PRESENTED FOR PAYMENT TO A
   36  PARTY  OBLIGED  TO  PAY THE INSTRUMENT, AND (3) PAYMENT IS RECEIVED, THE
   37  FOLLOWING RULES APPLY:
   38    (I) THE PERSON OBTAINING PAYMENT AND A PRIOR TRANSFEROR OF THE INSTRU-
   39  MENT WARRANT TO THE PERSON MAKING PAYMENT IN GOOD FAITH THAT THE WARRAN-
   40  TOR IS, OR WAS, AT THE TIME THE WARRANTOR TRANSFERRED THE INSTRUMENT,  A
   41  PERSON  ENTITLED  TO  ENFORCE  THE  INSTRUMENT  OR  AUTHORIZED TO OBTAIN
   42  PAYMENT ON BEHALF OF A PERSON ENTITLED TO ENFORCE THE INSTRUMENT.
   43    (II) THE PERSON MAKING PAYMENT MAY  RECOVER  FROM  ANY  WARRANTOR  FOR
   44  BREACH  OF WARRANTY AN AMOUNT EQUAL TO THE AMOUNT PAID PLUS EXPENSES AND
   45  LOSS OF INTEREST RESULTING FROM THE BREACH.
   46    (E) THE WARRANTIES  STATED  IN  SUBSECTIONS  (A)  AND  (D)  CANNOT  BE
   47  DISCLAIMED  WITH  RESPECT TO CHECKS. UNLESS NOTICE OF A CLAIM FOR BREACH
   48  OF WARRANTY IS GIVEN TO THE  WARRANTOR  WITHIN  THIRTY  DAYS  AFTER  THE
   49  CLAIMANT  HAS  REASON  TO  KNOW  OF  THE  BREACH AND THE IDENTITY OF THE
   50  WARRANTOR, THE LIABILITY OF THE WARRANTOR UNDER SUBSECTION (B) OR (D) IS
   51  DISCHARGED TO THE EXTENT OF ANY LOSS  CAUSED  BY  THE  DELAY  IN  GIVING
   52  NOTICE OF THE CLAIM.
   53    (F)  A  CAUSE  OF  ACTION  FOR  BREACH  OF WARRANTY UNDER THIS SECTION
   54  ACCRUES WHEN THE CLAIMANT HAS REASON TO KNOW OF THE BREACH.
   55  SECTION 3--418. PAYMENT OR ACCEPTANCE BY MISTAKE.
       S. 4608                            25
    1    (A) EXCEPT AS PROVIDED IN SUBSECTION (C), IF THE  DRAWEE  OF  A  DRAFT
    2  PAYS  OR  ACCEPTS  THE DRAFT AND THE DRAWEE ACTED ON THE MISTAKEN BELIEF
    3  THAT (1) PAYMENT OF THE DRAFT HAD NOT BEEN STOPPED PURSUANT  TO  SECTION
    4  4--403  OR  (2) THE SIGNATURE OF THE DRAWER OF THE DRAFT WAS AUTHORIZED,
    5  THE  DRAWEE  MAY RECOVER THE AMOUNT OF THE DRAFT FROM THE PERSON TO WHOM
    6  OR FOR WHOSE BENEFIT PAYMENT WAS MADE OR, IN THE CASE OF ACCEPTANCE, MAY
    7  REVOKE THE ACCEPTANCE. RIGHTS OF THE DRAWEE UNDER  THIS  SUBSECTION  ARE
    8  NOT  AFFECTED  BY  FAILURE  OF  THE  DRAWEE TO EXERCISE ORDINARY CARE IN
    9  PAYING OR ACCEPTING THE DRAFT.
   10    (B) EXCEPT AS PROVIDED IN SUBSECTION (C), IF AN  INSTRUMENT  HAS  BEEN
   11  PAID  OR  ACCEPTED  BY MISTAKE AND THE CASE IS NOT COVERED BY SUBSECTION
   12  (A), THE PERSON PAYING OR ACCEPTING MAY, TO THE EXTENT PERMITTED BY  THE
   13  LAW  GOVERNING MISTAKE AND RESTITUTION, (1) RECOVER THE PAYMENT FROM THE
   14  PERSON TO WHOM OR FOR WHOSE BENEFIT PAYMENT WAS MADE OR (2) IN THE  CASE
   15  OF ACCEPTANCE, MAY REVOKE THE ACCEPTANCE.
   16    (C) THE REMEDIES PROVIDED BY SUBSECTION (A) OR (B) MAY NOT BE ASSERTED
   17  AGAINST  A PERSON WHO TOOK THE INSTRUMENT IN GOOD FAITH AND FOR VALUE OR
   18  WHO IN GOOD FAITH CHANGED POSITION IN RELIANCE ON THE PAYMENT OR ACCEPT-
   19  ANCE. THIS SUBSECTION DOES NOT LIMIT REMEDIES PROVIDED BY SECTION 3--417
   20  OR 4--407.
   21    (D) NOTWITHSTANDING SECTION  4--215,  IF  AN  INSTRUMENT  IS  PAID  OR
   22  ACCEPTED  BY  MISTAKE  AND  THE  PAYOR  OR  ACCEPTOR RECOVERS PAYMENT OR
   23  REVOKES ACCEPTANCE UNDER SUBSECTION (A) OR (B), THE INSTRUMENT IS DEEMED
   24  NOT TO HAVE BEEN PAID OR ACCEPTED AND IS TREATED AS DISHONORED, AND  THE
   25  PERSON FROM WHOM PAYMENT IS RECOVERED HAS RIGHTS AS A PERSON ENTITLED TO
   26  ENFORCE THE DISHONORED INSTRUMENT.
   27  SECTION 3--419. INSTRUMENTS SIGNED FOR ACCOMMODATION.
   28    (A)  IF  AN  INSTRUMENT IS ISSUED FOR VALUE GIVEN FOR THE BENEFIT OF A
   29  PARTY TO THE INSTRUMENT ("ACCOMMODATED PARTY") AND ANOTHER PARTY TO  THE
   30  INSTRUMENT  ("ACCOMMODATION PARTY") SIGNS THE INSTRUMENT FOR THE PURPOSE
   31  OF INCURRING LIABILITY ON THE INSTRUMENT WITHOUT BEING A DIRECT  BENEFI-
   32  CIARY OF THE VALUE GIVEN FOR THE INSTRUMENT, THE INSTRUMENT IS SIGNED BY
   33  THE ACCOMMODATION PARTY "FOR ACCOMMODATION."
   34    (B)  AN  ACCOMMODATION PARTY MAY SIGN THE INSTRUMENT AS MAKER, DRAWER,
   35  ACCEPTOR, OR INDORSER AND, SUBJECT TO SUBSECTION (D), IS OBLIGED TO  PAY
   36  THE  INSTRUMENT  IN THE CAPACITY IN WHICH THE ACCOMMODATION PARTY SIGNS.
   37  THE OBLIGATION OF AN ACCOMMODATION PARTY MAY BE ENFORCED NOTWITHSTANDING
   38  ANY STATUTE OF  FRAUDS  AND  WHETHER  OR  NOT  THE  ACCOMMODATION  PARTY
   39  RECEIVES CONSIDERATION FOR THE ACCOMMODATION.
   40    (C)  A PERSON SIGNING AN INSTRUMENT IS PRESUMED TO BE AN ACCOMMODATION
   41  PARTY AND THERE IS NOTICE THAT THE INSTRUMENT  IS  SIGNED  FOR  ACCOMMO-
   42  DATION IF THE SIGNATURE IS AN ANOMALOUS INDORSEMENT OR IS ACCOMPANIED BY
   43  WORDS  INDICATING  THAT THE SIGNER IS ACTING AS SURETY OR GUARANTOR WITH
   44  RESPECT TO THE OBLIGATION OF ANOTHER PARTY TO THE INSTRUMENT. EXCEPT  AS
   45  PROVIDED  IN SECTION 3--605, THE OBLIGATION OF AN ACCOMMODATION PARTY TO
   46  PAY THE INSTRUMENT IS NOT AFFECTED BY THE FACT THAT THE PERSON ENFORCING
   47  THE OBLIGATION HAD NOTICE WHEN THE INSTRUMENT WAS TAKEN BY  THAT  PERSON
   48  THAT THE ACCOMMODATION PARTY SIGNED THE INSTRUMENT FOR ACCOMMODATION.
   49    (D)  IF  THE  SIGNATURE  OF A PARTY TO AN INSTRUMENT IS ACCOMPANIED BY
   50  WORDS INDICATING UNAMBIGUOUSLY THAT THE PARTY IS GUARANTEEING COLLECTION
   51  RATHER THAN PAYMENT OF THE OBLIGATION OF ANOTHER PARTY  TO  THE  INSTRU-
   52  MENT, THE SIGNER IS OBLIGED TO PAY THE AMOUNT DUE ON THE INSTRUMENT TO A
   53  PERSON ENTITLED TO ENFORCE THE INSTRUMENT ONLY IF (1) EXECUTION OF JUDG-
   54  MENT  AGAINST  THE  OTHER  PARTY  HAS BEEN RETURNED UNSATISFIED, (2) THE
   55  OTHER PARTY IS INSOLVENT OR IN AN INSOLVENCY PROCEEDING, (3)  THE  OTHER
       S. 4608                            26
    1  PARTY  CANNOT  BE  SERVED  WITH PROCESS, OR (4) IT IS OTHERWISE APPARENT
    2  THAT PAYMENT CANNOT BE OBTAINED FROM THE OTHER PARTY.
    3    (E)  IF  THE  SIGNATURE  OF A PARTY TO AN INSTRUMENT IS ACCOMPANIED BY
    4  WORDS INDICATING THAT THE PARTY GUARANTEES PAYMENT OR THE  SIGNER  SIGNS
    5  THE  INSTRUMENT AS AN ACCOMMODATION PARTY IN SOME OTHER MANNER THAT DOES
    6  NOT UNAMBIGUOUSLY INDICATE AN INTENTION TO GUARANTEE  COLLECTION  RATHER
    7  THAN PAYMENT, THE SIGNER IS OBLIGED TO PAY THE AMOUNT DUE ON THE INSTRU-
    8  MENT  TO A PERSON ENTITLED TO ENFORCE THE INSTRUMENT IN THE SAME CIRCUM-
    9  STANCES AS THE ACCOMMODATED PARTY WOULD BE OBLIGED, WITHOUT PRIOR RESORT
   10  TO THE ACCOMMODATED PARTY BY THE PERSON ENTITLED TO ENFORCE THE  INSTRU-
   11  MENT.
   12    (F)  AN  ACCOMMODATION  PARTY  WHO  PAYS THE INSTRUMENT IS ENTITLED TO
   13  REIMBURSEMENT FROM THE ACCOMMODATED PARTY AND IS ENTITLED TO ENFORCE THE
   14  INSTRUMENT AGAINST THE ACCOMMODATED PARTY. IN PROPER  CIRCUMSTANCES,  AN
   15  ACCOMMODATION  PARTY  MAY  OBTAIN  RELIEF THAT REQUIRES THE ACCOMMODATED
   16  PARTY TO PERFORM ITS OBLIGATIONS  ON  THE  INSTRUMENT.  AN  ACCOMMODATED
   17  PARTY  THAT PAYS THE INSTRUMENT HAS NO RIGHT OF RECOURSE AGAINST, AND IS
   18  NOT ENTITLED TO CONTRIBUTION FROM, AN ACCOMMODATION PARTY.
   19  SECTION 3--420. CONVERSION OF INSTRUMENT.
   20    (A) THE LAW APPLICABLE TO CONVERSION OF PERSONAL PROPERTY  APPLIES  TO
   21  INSTRUMENTS. AN INSTRUMENT IS ALSO CONVERTED IF IT IS TAKEN BY TRANSFER,
   22  OTHER  THAN  A  NEGOTIATION,  FROM  A PERSON NOT ENTITLED TO ENFORCE THE
   23  INSTRUMENT OR A BANK MAKES  OR  OBTAINS  PAYMENT  WITH  RESPECT  TO  THE
   24  INSTRUMENT  FOR  A  PERSON  NOT  ENTITLED  TO  ENFORCE THE INSTRUMENT OR
   25  RECEIVE PAYMENT. AN ACTION FOR CONVERSION OF AN INSTRUMENT  MAY  NOT  BE
   26  BROUGHT  BY  (1) THE ISSUER OR ACCEPTOR OF THE INSTRUMENT OR (2) A PAYEE
   27  OR INDORSEE WHO DID  NOT  RECEIVE  DELIVERY  OF  THE  INSTRUMENT  EITHER
   28  DIRECTLY OR THROUGH DELIVERY TO AN AGENT OR A CO-PAYEE.
   29    (B)  IN  AN  ACTION  UNDER SUBSECTION (A), THE MEASURE OF LIABILITY IS
   30  PRESUMED TO BE THE AMOUNT PAYABLE ON THE INSTRUMENT,  BUT  RECOVERY  MAY
   31  NOT EXCEED THE AMOUNT OF THE PLAINTIFF'S INTEREST IN THE INSTRUMENT.
   32    (C)  A  REPRESENTATIVE,  OTHER THAN A DEPOSITARY BANK, WHO HAS IN GOOD
   33  FAITH DEALT WITH AN INSTRUMENT OR ITS PROCEEDS ON BEHALF OF ONE WHO  WAS
   34  NOT  THE  PERSON  ENTITLED  TO  ENFORCE  THE INSTRUMENT IS NOT LIABLE IN
   35  CONVERSION TO THAT PERSON BEYOND THE AMOUNT OF ANY PROCEEDS THAT IT  HAS
   36  NOT PAID OUT.
   37                                   PART 5
   38                                  DISHONOR
   39  SECTION 3--501. PRESENTMENT.
   40    (A)  "PRESENTMENT"  MEANS  A  DEMAND  MADE BY OR ON BEHALF OF A PERSON
   41  ENTITLED TO ENFORCE AN INSTRUMENT (1) TO PAY THE INSTRUMENT MADE TO  THE
   42  DRAWEE  OR  A  PARTY  OBLIGED TO PAY THE INSTRUMENT OR, IN THE CASE OF A
   43  NOTE OR ACCEPTED DRAFT PAYABLE AT A BANK, TO THE BANK, OR (2) TO  ACCEPT
   44  A DRAFT MADE TO THE DRAWEE.
   45    (B)  THE  FOLLOWING  RULES  ARE SUBJECT TO ARTICLE 4, AGREEMENT OF THE
   46  PARTIES, AND CLEARING HOUSE RULES AND THE LIKE:
   47    (1) PRESENTMENT MAY BE MADE AT THE PLACE OF PAYMENT OF THE  INSTRUMENT
   48  AND MUST BE MADE AT THE PLACE OF PAYMENT IF THE INSTRUMENT IS PAYABLE AT
   49  A  BANK IN THE UNITED STATES; MAY BE MADE BY ANY COMMERCIALLY REASONABLE
   50  MEANS, INCLUDING AN  ORAL,  WRITTEN,  OR  ELECTRONIC  COMMUNICATION;  IS
   51  EFFECTIVE  WHEN  THE DEMAND FOR PAYMENT OR ACCEPTANCE IS RECEIVED BY THE
   52  PERSON TO WHOM PRESENTMENT IS MADE; AND IS EFFECTIVE IF MADE TO ANY  ONE
   53  OF TWO OR MORE MAKERS, ACCEPTORS, DRAWEES, OR OTHER PAYORS.
   54    (2)  UPON DEMAND OF THE PERSON TO WHOM PRESENTMENT IS MADE, THE PERSON
   55  MAKING PRESENTMENT MUST (I) EXHIBIT THE INSTRUMENT, (II) GIVE REASONABLE
   56  IDENTIFICATION AND, IF PRESENTMENT IS MADE ON BEHALF OF ANOTHER  PERSON,
       S. 4608                            27
    1  REASONABLE  EVIDENCE  OF AUTHORITY TO DO SO, AND (III) SIGN A RECEIPT ON
    2  THE INSTRUMENT FOR ANY PAYMENT MADE OR SURRENDER THE INSTRUMENT IF  FULL
    3  PAYMENT IS MADE.
    4    (3)  WITHOUT DISHONORING THE INSTRUMENT, THE PARTY TO WHOM PRESENTMENT
    5  IS MADE MAY (I) RETURN THE INSTRUMENT FOR LACK OF A  NECESSARY  INDORSE-
    6  MENT,  OR  (II) REFUSE PAYMENT OR ACCEPTANCE FOR FAILURE OF THE PRESENT-
    7  MENT TO COMPLY WITH THE TERMS OF THE INSTRUMENT,  AN  AGREEMENT  OF  THE
    8  PARTIES, OR OTHER APPLICABLE LAW OR RULE.
    9    (4)  THE  PARTY  TO  WHOM PRESENTMENT IS MADE MAY TREAT PRESENTMENT AS
   10  OCCURRING ON THE NEXT BUSINESS DAY AFTER THE DAY OF PRESENTMENT  IF  THE
   11  PARTY  TO  WHOM  PRESENTMENT  IS MADE HAS ESTABLISHED A CUT-OFF HOUR NOT
   12  EARLIER THAN 2 P.M.  FOR  THE  RECEIPT  AND  PROCESSING  OF  INSTRUMENTS
   13  PRESENTED  FOR  PAYMENT  OR ACCEPTANCE AND PRESENTMENT IS MADE AFTER THE
   14  CUT-OFF HOUR.
   15  SECTION 3--502. DISHONOR.
   16    (A) DISHONOR OF A NOTE IS GOVERNED BY THE FOLLOWING RULES:
   17    (1) IF THE NOTE IS PAYABLE  ON  DEMAND,  THE  NOTE  IS  DISHONORED  IF
   18  PRESENTMENT  IS  DULY  MADE TO THE MAKER AND THE NOTE IS NOT PAID ON THE
   19  DAY OF PRESENTMENT.
   20    (2) IF THE NOTE IS NOT PAYABLE ON DEMAND AND IS PAYABLE AT OR  THROUGH
   21  A BANK OR THE TERMS OF THE NOTE REQUIRE PRESENTMENT, THE NOTE IS DISHON-
   22  ORED  IF PRESENTMENT IS DULY MADE AND THE NOTE IS NOT PAID ON THE DAY IT
   23  BECOMES PAYABLE OR THE DAY OF PRESENTMENT, WHICHEVER IS LATER.
   24    (3) IF THE NOTE IS NOT PAYABLE ON DEMAND AND PARAGRAPH  (2)  DOES  NOT
   25  APPLY,  THE  NOTE  IS DISHONORED IF IT IS NOT PAID ON THE DAY IT BECOMES
   26  PAYABLE.
   27    (B) DISHONOR OF AN UNACCEPTED DRAFT OTHER THAN A DOCUMENTARY DRAFT  IS
   28  GOVERNED BY THE FOLLOWING RULES:
   29    (1)  IF A CHECK IS DULY PRESENTED FOR PAYMENT TO THE PAYOR BANK OTHER-
   30  WISE THAN FOR IMMEDIATE PAYMENT OVER THE COUNTER, THE CHECK  IS  DISHON-
   31  ORED  IF THE PAYOR BANK MAKES TIMELY RETURN OF THE CHECK OR SENDS TIMELY
   32  NOTICE OF DISHONOR OR NONPAYMENT UNDER  SECTION  4--301  OR  4--302,  OR
   33  BECOMES ACCOUNTABLE FOR THE AMOUNT OF THE CHECK UNDER SECTION 4--302.
   34    (2)  IF A DRAFT IS PAYABLE ON DEMAND AND PARAGRAPH (1) DOES NOT APPLY,
   35  THE DRAFT IS DISHONORED IF PRESENTMENT FOR PAYMENT IS DULY MADE  TO  THE
   36  DRAWEE AND THE DRAFT IS NOT PAID ON THE DAY OF PRESENTMENT.
   37    (3)  IF A DRAFT IS PAYABLE ON A DATE STATED IN THE DRAFT, THE DRAFT IS
   38  DISHONORED IF (I) PRESENTMENT FOR PAYMENT IS DULY MADE TO THE DRAWEE AND
   39  PAYMENT IS NOT MADE ON THE DAY THE DRAFT BECOMES PAYABLE OR THE  DAY  OF
   40  PRESENTMENT,  WHICHEVER  IS LATER, OR (II) PRESENTMENT FOR ACCEPTANCE IS
   41  DULY MADE BEFORE THE DAY THE DRAFT BECOMES PAYABLE AND THE DRAFT IS  NOT
   42  ACCEPTED ON THE DAY OF PRESENTMENT.
   43    (4) IF A DRAFT IS PAYABLE ON ELAPSE OF A PERIOD OF TIME AFTER SIGHT OR
   44  ACCEPTANCE,  THE  DRAFT  IS  DISHONORED IF PRESENTMENT FOR ACCEPTANCE IS
   45  DULY MADE AND THE DRAFT IS NOT ACCEPTED ON THE DAY OF PRESENTMENT.
   46    (C) DISHONOR OF AN UNACCEPTED DOCUMENTARY DRAFT  OCCURS  ACCORDING  TO
   47  THE  RULES  STATED  IN  SUBSECTIONS  (B)(2),  (3),  AND (4), EXCEPT THAT
   48  PAYMENT OR ACCEPTANCE MAY BE DELAYED WITHOUT  DISHONOR  UNTIL  NO  LATER
   49  THAN THE CLOSE OF THE THIRD BUSINESS DAY OF THE DRAWEE FOLLOWING THE DAY
   50  ON WHICH PAYMENT OR ACCEPTANCE IS REQUIRED BY THOSE PARAGRAPHS.
   51    (D) DISHONOR OF AN ACCEPTED DRAFT IS GOVERNED BY THE FOLLOWING RULES:
   52    (1)  IF  THE  DRAFT  IS  PAYABLE ON DEMAND, THE DRAFT IS DISHONORED IF
   53  PRESENTMENT FOR PAYMENT IS DULY MADE TO THE ACCEPTOR AND  THE  DRAFT  IS
   54  NOT PAID ON THE DAY OF PRESENTMENT.
   55    (2)  IF THE DRAFT IS NOT PAYABLE ON DEMAND, THE DRAFT IS DISHONORED IF
   56  PRESENTMENT FOR PAYMENT IS DULY MADE TO THE ACCEPTOR AND PAYMENT IS  NOT
       S. 4608                            28
    1  MADE  ON THE DAY IT BECOMES PAYABLE OR THE DAY OF PRESENTMENT, WHICHEVER
    2  IS LATER.
    3    (E) IN ANY CASE IN WHICH PRESENTMENT IS OTHERWISE REQUIRED FOR DISHON-
    4  OR  UNDER  THIS SECTION AND PRESENTMENT IS EXCUSED UNDER SECTION 3--504,
    5  DISHONOR OCCURS WITHOUT  PRESENTMENT  IF  THE  INSTRUMENT  IS  NOT  DULY
    6  ACCEPTED OR PAID.
    7    (F)  IF  A  DRAFT IS DISHONORED BECAUSE TIMELY ACCEPTANCE OF THE DRAFT
    8  WAS NOT MADE AND THE PERSON ENTITLED TO DEMAND ACCEPTANCE CONSENTS TO  A
    9  LATE  ACCEPTANCE,  FROM  THE  TIME OF ACCEPTANCE THE DRAFT IS TREATED AS
   10  NEVER HAVING BEEN DISHONORED.
   11  SECTION 3--503. NOTICE OF DISHONOR.
   12    (A) THE OBLIGATION OF AN INDORSER STATED IN SECTION 3--415(A) AND  THE
   13  OBLIGATION  OF  A DRAWER STATED IN SECTION 3--414(D) MAY NOT BE ENFORCED
   14  UNLESS (1) THE INDORSER OR DRAWER IS GIVEN NOTICE  OF  DISHONOR  OF  THE
   15  INSTRUMENT  COMPLYING  WITH  THIS  SECTION  OR (2) NOTICE OF DISHONOR IS
   16  EXCUSED UNDER SECTION 3--504(B).
   17    (B) NOTICE OF DISHONOR MAY BE GIVEN BY ANY PERSON; MAY BE GIVEN BY ANY
   18  COMMERCIALLY REASONABLE MEANS, INCLUDING AN ORAL, WRITTEN, OR ELECTRONIC
   19  COMMUNICATION; AND IS SUFFICIENT IF IT REASONABLY IDENTIFIES THE INSTRU-
   20  MENT AND INDICATES THAT THE INSTRUMENT HAS BEEN DISHONORED  OR  HAS  NOT
   21  BEEN  PAID  OR  ACCEPTED.    RETURN OF AN INSTRUMENT GIVEN TO A BANK FOR
   22  COLLECTION IS SUFFICIENT NOTICE OF DISHONOR.
   23    (C) SUBJECT TO SECTION 3--504(C), WITH RESPECT TO AN INSTRUMENT  TAKEN
   24  FOR  COLLECTION  BY  A COLLECTING BANK, NOTICE OF DISHONOR MUST BE GIVEN
   25  (1) BY THE BANK BEFORE MIDNIGHT OF THE NEXT BANKING  DAY  FOLLOWING  THE
   26  BANKING DAY ON WHICH THE BANK RECEIVES NOTICE OF DISHONOR OF THE INSTRU-
   27  MENT, OR (2) BY ANY OTHER PERSON WITHIN THIRTY DAYS FOLLOWING THE DAY ON
   28  WHICH  THE PERSON RECEIVES NOTICE OF DISHONOR. WITH RESPECT TO ANY OTHER
   29  INSTRUMENT, NOTICE OF DISHONOR MUST BE GIVEN WITHIN THIRTY DAYS  FOLLOW-
   30  ING THE DAY ON WHICH DISHONOR OCCURS.
   31  SECTION 3--504. EXCUSED PRESENTMENT AND NOTICE OF DISHONOR.
   32    (A)  PRESENTMENT FOR PAYMENT OR ACCEPTANCE OF AN INSTRUMENT IS EXCUSED
   33  IF (1) THE PERSON ENTITLED TO PRESENT THE INSTRUMENT CANNOT WITH REASON-
   34  ABLE DILIGENCE MAKE PRESENTMENT, (2) THE MAKER OR ACCEPTOR  HAS  REPUDI-
   35  ATED  AN  OBLIGATION  TO  PAY THE INSTRUMENT OR IS DEAD OR IN INSOLVENCY
   36  PROCEEDINGS, (3) BY THE TERMS  OF  THE  INSTRUMENT  PRESENTMENT  IS  NOT
   37  NECESSARY  TO ENFORCE THE OBLIGATION OF INDORSERS OR THE DRAWER, (4) THE
   38  DRAWER OR  INDORSER  WHOSE  OBLIGATION  IS  BEING  ENFORCED  HAS  WAIVED
   39  PRESENTMENT  OR  OTHERWISE  HAS  NO REASON TO EXPECT OR RIGHT TO REQUIRE
   40  THAT THE INSTRUMENT BE PAID OR ACCEPTED, OR (5)  THE  DRAWER  INSTRUCTED
   41  THE  DRAWEE  NOT  TO PAY OR ACCEPT THE DRAFT OR THE DRAWEE WAS NOT OBLI-
   42  GATED TO THE DRAWER TO PAY THE DRAFT.
   43    (B) NOTICE OF DISHONOR IS EXCUSED IF (1) BY THE TERMS OF  THE  INSTRU-
   44  MENT  NOTICE OF DISHONOR IS NOT NECESSARY TO ENFORCE THE OBLIGATION OF A
   45  PARTY TO PAY THE INSTRUMENT, OR (2) THE PARTY WHOSE OBLIGATION IS  BEING
   46  ENFORCED  WAIVED  NOTICE  OF DISHONOR. A WAIVER OF PRESENTMENT IS ALSO A
   47  WAIVER OF NOTICE OF DISHONOR.
   48    (C) DELAY IN GIVING NOTICE OF DISHONOR IS EXCUSED  IF  THE  DELAY  WAS
   49  CAUSED  BY  CIRCUMSTANCES  BEYOND  THE  CONTROL OF THE PERSON GIVING THE
   50  NOTICE AND THE PERSON GIVING THE NOTICE EXERCISED  REASONABLE  DILIGENCE
   51  AFTER THE CAUSE OF THE DELAY CEASED TO OPERATE.
   52  SECTION 3--505. EVIDENCE OF DISHONOR.
   53    (A)  THE FOLLOWING ARE ADMISSIBLE AS EVIDENCE AND CREATE A PRESUMPTION
   54  OF DISHONOR AND OF ANY NOTICE OF DISHONOR STATED:
   55    (1) A DOCUMENT REGULAR IN FORM AS PROVIDED  IN  SUBSECTION  (B)  WHICH
   56  PURPORTS TO BE A PROTEST;
       S. 4608                            29
    1    (2)  A  PURPORTED  STAMP  OR  WRITING  OF  THE  DRAWEE, PAYOR BANK, OR
    2  PRESENTING BANK ON OR ACCOMPANYING THE INSTRUMENT STATING  THAT  ACCEPT-
    3  ANCE  OR  PAYMENT  HAS  BEEN  REFUSED UNLESS REASONS FOR THE REFUSAL ARE
    4  STATED AND THE REASONS ARE NOT CONSISTENT WITH DISHONOR;
    5    (3)  A  BOOK  OR RECORD OF THE DRAWEE, PAYOR BANK, OR COLLECTING BANK,
    6  KEPT IN THE USUAL COURSE OF BUSINESS WHICH SHOWS DISHONOR, EVEN IF THERE
    7  IS NO EVIDENCE OF WHO MADE THE ENTRY.
    8    (B) A PROTEST IS A CERTIFICATE OF DISHONOR MADE  BY  A  UNITED  STATES
    9  CONSUL  OR VICE CONSUL, OR A NOTARY PUBLIC OR OTHER PERSON AUTHORIZED TO
   10  ADMINISTER OATHS BY THE LAW OF THE PLACE WHERE DISHONOR OCCURS.  IT  MAY
   11  BE  MADE  UPON INFORMATION SATISFACTORY TO THAT PERSON. THE PROTEST MUST
   12  IDENTIFY THE INSTRUMENT AND CERTIFY EITHER  THAT  PRESENTMENT  HAS  BEEN
   13  MADE  OR,  IF  NOT  MADE,  THE  REASON WHY IT WAS NOT MADE, AND THAT THE
   14  INSTRUMENT HAS BEEN  DISHONORED  BY  NONACCEPTANCE  OR  NONPAYMENT.  THE
   15  PROTEST  MAY ALSO CERTIFY THAT NOTICE OF DISHONOR HAS BEEN GIVEN TO SOME
   16  OR ALL PARTIES.
   17                                   PART 6
   18                            DISCHARGE AND PAYMENT
   19  SECTION 3--601. DISCHARGE AND EFFECT OF DISCHARGE.
   20    (A) THE OBLIGATION OF A PARTY TO PAY THE INSTRUMENT IS  DISCHARGED  AS
   21  STATED  IN  THIS  ARTICLE OR BY AN ACT OR AGREEMENT WITH THE PARTY WHICH
   22  WOULD DISCHARGE AN OBLIGATION TO PAY MONEY UNDER A SIMPLE CONTRACT.
   23    (B) DISCHARGE OF THE OBLIGATION OF A PARTY IS NOT EFFECTIVE AGAINST  A
   24  PERSON  ACQUIRING  RIGHTS  OF  A  HOLDER IN DUE COURSE OF THE INSTRUMENT
   25  WITHOUT NOTICE OF THE DISCHARGE.
   26  SECTION 3--602. PAYMENT.
   27    (A) SUBJECT TO SUBSECTION (E), AN INSTRUMENT IS  PAID  TO  THE  EXTENT
   28  PAYMENT  IS  MADE  BY OR ON BEHALF OF A PARTY OBLIGED TO PAY THE INSTRU-
   29  MENT, AND TO A PERSON ENTITLED TO ENFORCE THE INSTRUMENT.
   30    (B) SUBJECT TO SUBSECTION (E), A NOTE IS PAID TO THE EXTENT PAYMENT IS
   31  MADE BY OR ON BEHALF OF A PARTY OBLIGED TO PAY THE NOTE TO A PERSON THAT
   32  FORMERLY WAS ENTITLED TO ENFORCE THE NOTE ONLY IF AT  THE  TIME  OF  THE
   33  PAYMENT  THE PARTY OBLIGED TO PAY HAS NOT RECEIVED ADEQUATE NOTIFICATION
   34  THAT THE NOTE HAS BEEN TRANSFERRED AND THAT PAYMENT IS TO BE MADE TO THE
   35  TRANSFEREE. A NOTIFICATION IS ADEQUATE ONLY  IF  IT  IS  SIGNED  BY  THE
   36  TRANSFEROR  OR  THE  TRANSFEREE;  REASONABLY  IDENTIFIES THE TRANSFERRED
   37  NOTE; AND PROVIDES AN ADDRESS AT WHICH PAYMENTS SUBSEQUENTLY ARE  TO  BE
   38  MADE. UPON REQUEST, A TRANSFEREE SHALL FURNISH REASONABLE PROOF THAT THE
   39  NOTE  HAS  BEEN  TRANSFERRED.  UNLESS  THE  TRANSFEREE COMPLIES WITH THE
   40  REQUEST, A PAYMENT TO THE PERSON THAT FORMERLY WAS ENTITLED  TO  ENFORCE
   41  THE  NOTE  IS EFFECTIVE FOR PURPOSES OF SUBSECTION (C) EVEN IF THE PARTY
   42  OBLIGED TO PAY THE NOTE HAS RECEIVED A  NOTIFICATION  UNDER  THIS  PARA-
   43  GRAPH.
   44    (C)  SUBJECT  TO  SUBSECTION  (E),  TO  THE  EXTENT OF A PAYMENT UNDER
   45  SUBSECTIONS (A) AND (B), THE OBLIGATION OF THE PARTY OBLIGED TO PAY  THE
   46  INSTRUMENT IS DISCHARGED EVEN THOUGH PAYMENT IS MADE WITH KNOWLEDGE OF A
   47  CLAIM TO THE INSTRUMENT UNDER SECTION 3--306 BY ANOTHER PERSON.
   48    (D)  SUBJECT  TO  SUBSECTION  (E), A TRANSFEREE, OR ANY PARTY THAT HAS
   49  ACQUIRED RIGHTS IN THE INSTRUMENT DIRECTLY OR INDIRECTLY FROM  A  TRANS-
   50  FEREE,  INCLUDING  ANY  SUCH  PARTY  THAT  HAS RIGHTS AS A HOLDER IN DUE
   51  COURSE, IS DEEMED TO HAVE NOTICE OF  ANY  PAYMENT  THAT  IS  MADE  UNDER
   52  SUBSECTION (B) AFTER THE DATE THAT THE NOTE IS TRANSFERRED TO THE TRANS-
   53  FEREE  BUT  BEFORE  THE  PARTY OBLIGED TO PAY THE NOTE RECEIVES ADEQUATE
   54  NOTIFICATION OF THE TRANSFER.
   55    (E) THE OBLIGATION OF A PARTY TO PAY THE INSTRUMENT IS NOT  DISCHARGED
   56  UNDER SUBSECTIONS (A) THROUGH (D) IF:
       S. 4608                            30
    1    (1)  A  CLAIM  TO  THE  INSTRUMENT UNDER SECTION 3--306 IS ENFORCEABLE
    2  AGAINST THE PARTY RECEIVING PAYMENT AND (I) PAYMENT IS MADE  WITH  KNOW-
    3  LEDGE  BY  THE PAYOR THAT PAYMENT IS PROHIBITED BY INJUNCTION OR SIMILAR
    4  PROCESS OF A COURT OF COMPETENT JURISDICTION, OR (II) IN THE CASE OF  AN
    5  INSTRUMENT  OTHER  THAN  A CASHIER'S CHECK, TELLER'S CHECK, OR CERTIFIED
    6  CHECK, THE PARTY MAKING PAYMENT ACCEPTED, FROM THE PERSON HAVING A CLAIM
    7  TO THE INSTRUMENT, INDEMNITY AGAINST LOSS RESULTING FROM REFUSAL TO  PAY
    8  THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT; OR
    9    (2)  THE  PERSON  MAKING PAYMENT KNOWS THAT THE INSTRUMENT IS A STOLEN
   10  INSTRUMENT AND PAYS A PERSON IT KNOWS IS IN WRONGFUL POSSESSION  OF  THE
   11  INSTRUMENT.
   12    (F)  AS  USED IN THIS SECTION, "SIGNED," WITH RESPECT TO A RECORD THAT
   13  IS NOT A WRITING, INCLUDES THE ATTACHMENT TO OR LOGICAL ASSOCIATION WITH
   14  THE RECORD OF AN ELECTRONIC SYMBOL, SOUND, OR PROCESS WITH  THE  PRESENT
   15  INTENT TO ADOPT OR ACCEPT THE RECORD.
   16  SECTION 3--603. TENDER OF PAYMENT.
   17    (A) IF TENDER OF PAYMENT OF AN OBLIGATION TO PAY AN INSTRUMENT IS MADE
   18  TO  A PERSON ENTITLED TO ENFORCE THE INSTRUMENT, THE EFFECT OF TENDER IS
   19  GOVERNED BY PRINCIPLES OF LAW APPLICABLE TO TENDER OF  PAYMENT  UNDER  A
   20  SIMPLE CONTRACT.
   21    (B) IF TENDER OF PAYMENT OF AN OBLIGATION TO PAY AN INSTRUMENT IS MADE
   22  TO  A  PERSON  ENTITLED  TO  ENFORCE  THE  INSTRUMENT  AND THE TENDER IS
   23  REFUSED, THERE IS DISCHARGE, TO THE EXTENT OF THE AMOUNT OF THE  TENDER,
   24  OF  THE  OBLIGATION OF AN INDORSER OR ACCOMMODATION PARTY HAVING A RIGHT
   25  OF RECOURSE WITH RESPECT TO THE OBLIGATION TO WHICH THE TENDER RELATES.
   26    (C) IF TENDER OF PAYMENT OF AN AMOUNT DUE ON AN INSTRUMENT IS MADE  TO
   27  A PERSON ENTITLED TO ENFORCE THE INSTRUMENT, THE OBLIGATION OF THE OBLI-
   28  GOR  TO  PAY  INTEREST  AFTER  THE  DUE  DATE  ON THE AMOUNT TENDERED IS
   29  DISCHARGED. IF PRESENTMENT IS REQUIRED WITH RESPECT TO AN INSTRUMENT AND
   30  THE OBLIGOR IS ABLE AND READY TO PAY ON THE DUE DATE AT EVERY  PLACE  OF
   31  PAYMENT  STATED  IN  THE  INSTRUMENT, THE OBLIGOR IS DEEMED TO HAVE MADE
   32  TENDER OF PAYMENT ON THE DUE DATE TO THE PERSON ENTITLED TO ENFORCE  THE
   33  INSTRUMENT.
   34  SECTION 3--604. DISCHARGE BY CANCELLATION OR RENUNCIATION.
   35    (A)  A  PERSON  ENTITLED  TO  ENFORCE  AN  INSTRUMENT, WITH OR WITHOUT
   36  CONSIDERATION, MAY DISCHARGE THE  OBLIGATION  OF  A  PARTY  TO  PAY  THE
   37  INSTRUMENT (1) BY AN INTENTIONAL VOLUNTARY ACT, SUCH AS SURRENDER OF THE
   38  INSTRUMENT TO THE PARTY, DESTRUCTION, MUTILATION, OR CANCELLATION OF THE
   39  INSTRUMENT,  CANCELLATION  OR  STRIKING OUT OF THE PARTY'S SIGNATURE, OR
   40  THE ADDITION OF WORDS TO THE INSTRUMENT INDICATING DISCHARGE, OR (2)  BY
   41  AGREEING  NOT TO SUE OR OTHERWISE RENOUNCING RIGHTS AGAINST THE PARTY BY
   42  A SIGNED RECORD.
   43    (B) CANCELLATION  OR  STRIKING  OUT  OF  AN  INDORSEMENT  PURSUANT  TO
   44  SUBSECTION  (A) DOES NOT AFFECT THE STATUS AND RIGHTS OF A PARTY DERIVED
   45  FROM THE INDORSEMENT.
   46    (C) IN THIS SECTION, "SIGNED," WITH RESPECT TO A RECORD THAT IS NOT  A
   47  WRITING,  INCLUDES  THE  ATTACHMENT  TO  OR LOGICAL ASSOCIATION WITH THE
   48  RECORD OF AN ELECTRONIC SYMBOL,  SOUND,  OR  PROCESS  WITH  THE  PRESENT
   49  INTENT TO ADOPT OR ACCEPT THE RECORD.
   50  SECTION 3--605. DISCHARGE OF SECONDARY OBLIGORS.
   51    (A)  IF  A PERSON ENTITLED TO ENFORCE AN INSTRUMENT RELEASES THE OBLI-
   52  GATION OF A PRINCIPAL OBLIGOR IN WHOLE OR IN PART, AND ANOTHER PARTY  TO
   53  THE  INSTRUMENT IS A SECONDARY OBLIGOR WITH RESPECT TO THE OBLIGATION OF
   54  THAT PRINCIPAL OBLIGOR, THE FOLLOWING RULES APPLY:
   55    (1) ANY OBLIGATIONS OF THE PRINCIPAL OBLIGOR TO THE SECONDARY  OBLIGOR
   56  WITH  RESPECT  TO  ANY PREVIOUS PAYMENT BY THE SECONDARY OBLIGOR ARE NOT
       S. 4608                            31
    1  AFFECTED. UNLESS  THE  TERMS  OF  THE  RELEASE  PRESERVE  THE  SECONDARY
    2  OBLIGOR'S  RECOURSE,  THE PRINCIPAL OBLIGOR IS DISCHARGED, TO THE EXTENT
    3  OF THE RELEASE, FROM ANY OTHER DUTIES TO  THE  SECONDARY  OBLIGOR  UNDER
    4  THIS ARTICLE.
    5    (2)  UNLESS  THE TERMS OF THE RELEASE PROVIDE THAT THE PERSON ENTITLED
    6  TO ENFORCE THE INSTRUMENT RETAINS THE RIGHT TO  ENFORCE  THE  INSTRUMENT
    7  AGAINST  THE  SECONDARY  OBLIGOR, THE SECONDARY OBLIGOR IS DISCHARGED TO
    8  THE SAME EXTENT AS THE PRINCIPAL OBLIGOR FROM ANY UNPERFORMED PORTION OF
    9  ITS OBLIGATION ON THE INSTRUMENT. IF THE INSTRUMENT IS A CHECK  AND  THE
   10  OBLIGATION  OF  THE  SECONDARY OBLIGOR IS BASED ON AN INDORSEMENT OF THE
   11  CHECK, THE  SECONDARY  OBLIGOR  IS  DISCHARGED  WITHOUT  REGARD  TO  THE
   12  LANGUAGE OR CIRCUMSTANCES OF THE DISCHARGE OR OTHER RELEASE.
   13    (3)  IF  THE  SECONDARY OBLIGOR IS NOT DISCHARGED UNDER PARAGRAPH (2),
   14  THE SECONDARY OBLIGOR IS DISCHARGED TO THE EXTENT OF THE  VALUE  OF  THE
   15  CONSIDERATION  FOR THE RELEASE, AND TO THE EXTENT THAT THE RELEASE WOULD
   16  OTHERWISE CAUSE THE SECONDARY OBLIGOR A LOSS.
   17    (B) IF A PERSON ENTITLED TO ENFORCE AN INSTRUMENT GRANTS  A  PRINCIPAL
   18  OBLIGOR  AN  EXTENSION OF THE TIME AT WHICH ONE OR MORE PAYMENTS ARE DUE
   19  ON THE INSTRUMENT AND ANOTHER PARTY TO THE  INSTRUMENT  IS  A  SECONDARY
   20  OBLIGOR  WITH  RESPECT  TO THE OBLIGATION OF THAT PRINCIPAL OBLIGOR, THE
   21  FOLLOWING RULES APPLY:
   22    (1) ANY OBLIGATIONS OF THE PRINCIPAL OBLIGOR TO THE SECONDARY  OBLIGOR
   23  WITH  RESPECT  TO  ANY PREVIOUS PAYMENT BY THE SECONDARY OBLIGOR ARE NOT
   24  AFFECTED. UNLESS THE TERMS  OF  THE  EXTENSION  PRESERVE  THE  SECONDARY
   25  OBLIGOR'S  RECOURSE,  THE EXTENSION CORRESPONDINGLY EXTENDS THE TIME FOR
   26  PERFORMANCE OF ANY OTHER DUTIES OWED TO THE  SECONDARY  OBLIGOR  BY  THE
   27  PRINCIPAL OBLIGOR UNDER THIS ARTICLE.
   28    (2)  THE SECONDARY OBLIGOR IS DISCHARGED TO THE EXTENT THAT THE EXTEN-
   29  SION WOULD OTHERWISE CAUSE THE SECONDARY OBLIGOR A LOSS.
   30    (3) TO THE EXTENT THAT THE SECONDARY OBLIGOR IS NOT  DISCHARGED  UNDER
   31  PARAGRAPH  (2),  THE  SECONDARY OBLIGOR MAY PERFORM ITS OBLIGATIONS TO A
   32  PERSON ENTITLED TO ENFORCE THE INSTRUMENT AS IF THE TIME FOR PAYMENT HAD
   33  NOT BEEN EXTENDED OR, UNLESS THE TERMS OF THE EXTENSION PROVIDE THAT THE
   34  PERSON ENTITLED TO ENFORCE THE INSTRUMENT RETAINS THE RIGHT  TO  ENFORCE
   35  THE  INSTRUMENT AGAINST THE SECONDARY OBLIGOR AS IF THE TIME FOR PAYMENT
   36  HAD NOT BEEN EXTENDED, TREAT THE TIME FOR PERFORMANCE OF ITS OBLIGATIONS
   37  AS HAVING BEEN EXTENDED CORRESPONDINGLY.
   38    (C) IF A PERSON ENTITLED TO ENFORCE  AN  INSTRUMENT  AGREES,  WITH  OR
   39  WITHOUT  CONSIDERATION, TO A MODIFICATION OF THE OBLIGATION OF A PRINCI-
   40  PAL OBLIGOR OTHER THAN A COMPLETE OR PARTIAL RELEASE OR AN EXTENSION  OF
   41  THE  DUE DATE AND ANOTHER PARTY TO THE INSTRUMENT IS A SECONDARY OBLIGOR
   42  WITH RESPECT TO THE OBLIGATION OF THAT PRINCIPAL OBLIGOR, THE  FOLLOWING
   43  RULES APPLY:
   44    (1)  ANY OBLIGATIONS OF THE PRINCIPAL OBLIGOR TO THE SECONDARY OBLIGOR
   45  WITH RESPECT TO ANY PREVIOUS PAYMENT BY THE SECONDARY  OBLIGOR  ARE  NOT
   46  AFFECTED.  THE  MODIFICATION  CORRESPONDINGLY  MODIFIES ANY OTHER DUTIES
   47  OWED TO THE SECONDARY OBLIGOR BY THE PRINCIPAL OBLIGOR UNDER THIS  ARTI-
   48  CLE.
   49    (2)  THE  SECONDARY OBLIGOR IS DISCHARGED FROM ANY UNPERFORMED PORTION
   50  OF ITS OBLIGATION TO THE EXTENT THAT THE  MODIFICATION  WOULD  OTHERWISE
   51  CAUSE THE SECONDARY OBLIGOR A LOSS.
   52    (3)  TO  THE EXTENT THAT THE SECONDARY OBLIGOR IS NOT DISCHARGED UNDER
   53  PARAGRAPH (2), THE SECONDARY OBLIGOR MAY SATISFY ITS OBLIGATION  ON  THE
   54  INSTRUMENT  AS  IF THE MODIFICATION HAD NOT OCCURRED, OR TREAT ITS OBLI-
   55  GATION ON THE INSTRUMENT AS HAVING BEEN MODIFIED CORRESPONDINGLY.
       S. 4608                            32
    1    (D) IF THE OBLIGATION OF A PRINCIPAL OBLIGOR IS SECURED BY AN INTEREST
    2  IN COLLATERAL, ANOTHER PARTY TO THE INSTRUMENT IS  A  SECONDARY  OBLIGOR
    3  WITH  RESPECT  TO  THAT OBLIGATION, AND A PERSON ENTITLED TO ENFORCE THE
    4  INSTRUMENT IMPAIRS THE VALUE OF THE INTEREST IN  COLLATERAL,  THE  OBLI-
    5  GATION  OF  THE  SECONDARY  OBLIGOR  IS  DISCHARGED TO THE EXTENT OF THE
    6  IMPAIRMENT. THE VALUE OF AN INTEREST IN COLLATERAL IS  IMPAIRED  TO  THE
    7  EXTENT  THE  VALUE OF THE INTEREST IS REDUCED TO AN AMOUNT LESS THAN THE
    8  AMOUNT OF THE RECOURSE OF THE SECONDARY OBLIGOR,  OR  THE  REDUCTION  IN
    9  VALUE  OF  THE  INTEREST  CAUSES  AN INCREASE IN THE AMOUNT BY WHICH THE
   10  AMOUNT OF THE RECOURSE EXCEEDS THE VALUE OF THE INTEREST.  FOR  PURPOSES
   11  OF  THIS  SUBSECTION,  IMPAIRING  THE VALUE OF AN INTEREST IN COLLATERAL
   12  INCLUDES FAILURE TO OBTAIN OR MAINTAIN PERFECTION OR RECORDATION OF  THE
   13  INTEREST  IN  COLLATERAL,  RELEASE OF COLLATERAL WITHOUT SUBSTITUTION OF
   14  COLLATERAL OF EQUAL VALUE OR  EQUIVALENT  REDUCTION  OF  THE  UNDERLYING
   15  OBLIGATION,  FAILURE  TO PERFORM A DUTY TO PRESERVE THE VALUE OF COLLAT-
   16  ERAL OWED, UNDER ARTICLE 9 OR OTHER LAW, TO A  DEBTOR  OR  OTHER  PERSON
   17  SECONDARILY LIABLE, AND FAILURE TO COMPLY WITH APPLICABLE LAW IN DISPOS-
   18  ING OF OR OTHERWISE ENFORCING THE INTEREST IN COLLATERAL.
   19    (E)  A  SECONDARY  OBLIGOR IS NOT DISCHARGED UNDER SUBSECTIONS (A)(3),
   20  (B), (C), OR (D) UNLESS THE PERSON ENTITLED TO  ENFORCE  THE  INSTRUMENT
   21  KNOWS THAT THE PERSON IS A SECONDARY OBLIGOR OR HAS NOTICE UNDER SECTION
   22  3--419(C) THAT THE INSTRUMENT WAS SIGNED FOR ACCOMMODATION.
   23    (F)  A  SECONDARY  OBLIGOR IS NOT DISCHARGED UNDER THIS SECTION IF THE
   24  SECONDARY OBLIGOR CONSENTS TO THE EVENT OR CONDUCT THAT IS THE BASIS  OF
   25  THE  DISCHARGE,  OR  THE INSTRUMENT OR A SEPARATE AGREEMENT OF THE PARTY
   26  PROVIDES FOR WAIVER OF DISCHARGE UNDER THIS SECTION SPECIFICALLY  OR  BY
   27  GENERAL LANGUAGE INDICATING THAT PARTIES WAIVE DEFENSES BASED ON SURETY-
   28  SHIP  OR  IMPAIRMENT  OF COLLATERAL.   UNLESS THE CIRCUMSTANCES INDICATE
   29  OTHERWISE, CONSENT BY THE PRINCIPAL OBLIGOR TO AN ACT THAT WOULD LEAD TO
   30  A DISCHARGE UNDER THIS SECTION CONSTITUTES CONSENT TO THAT  ACT  BY  THE
   31  SECONDARY  OBLIGOR IF THE SECONDARY OBLIGOR CONTROLS THE PRINCIPAL OBLI-
   32  GOR OR DEALS WITH THE PERSON  ENTITLED  TO  ENFORCE  THE  INSTRUMENT  ON
   33  BEHALF OF THE PRINCIPAL OBLIGOR.
   34    (G) A RELEASE OR EXTENSION PRESERVES A SECONDARY OBLIGOR'S RECOURSE IF
   35  THE TERMS OF THE RELEASE OR EXTENSION PROVIDE THAT:
   36    (1) THE PERSON ENTITLED TO ENFORCE THE INSTRUMENT RETAINS THE RIGHT TO
   37  ENFORCE THE INSTRUMENT AGAINST THE SECONDARY OBLIGOR; AND
   38    (2)  THE RECOURSE OF THE SECONDARY OBLIGOR CONTINUES AS IF THE RELEASE
   39  OR EXTENSION HAD NOT BEEN GRANTED.
   40    (H) EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION (I), A SECONDARY  OBLI-
   41  GOR  ASSERTING DISCHARGE UNDER THIS SECTION HAS THE BURDEN OF PERSUASION
   42  BOTH WITH RESPECT TO THE OCCURRENCE OF THE  ACTS  ALLEGED  TO  HARM  THE
   43  SECONDARY OBLIGOR AND LOSS OR PREJUDICE CAUSED BY THOSE ACTS.
   44    (I)  IF  THE  SECONDARY  OBLIGOR  DEMONSTRATES  PREJUDICE CAUSED BY AN
   45  IMPAIRMENT OF ITS RECOURSE, AND THE CIRCUMSTANCES OF THE  CASE  INDICATE
   46  THAT  THE AMOUNT OF LOSS IS NOT REASONABLY SUSCEPTIBLE OF CALCULATION OR
   47  REQUIRES PROOF OF FACTS THAT ARE NOT ASCERTAINABLE, IT IS PRESUMED  THAT
   48  THE  ACT  IMPAIRING  RECOURSE  CAUSED  A LOSS OR IMPAIRMENT EQUAL TO THE
   49  LIABILITY OF THE SECONDARY OBLIGOR ON THE INSTRUMENT. IN THAT EVENT, THE
   50  BURDEN OF PERSUASION AS TO ANY LESSER AMOUNT  OF  THE  LOSS  IS  ON  THE
   51  PERSON ENTITLED TO ENFORCE THE INSTRUMENT.
   52    S  2.  Article  4 of the uniform commercial code is REPEALED and a new
   53  article 4 is added to read as follows:
   54                                  ARTICLE 4
   55                         BANK DEPOSITS--COLLECTIONS
       S. 4608                            33
    1                     GENERAL PROVISIONS AND DEFINITIONS
    2                                   PART 1
    3  SECTION 4--101. SHORT TITLE.
    4    THIS  ARTICLE  MAY  BE CITED AS UNIFORM COMMERCIAL CODE--BANK DEPOSITS
    5  AND COLLECTIONS.
    6  SECTION 4--102. APPLICABILITY.
    7    (A) TO THE EXTENT THAT ITEMS WITHIN THIS ARTICLE ARE ALSO WITHIN ARTI-
    8  CLES 3 AND 8, THEY ARE SUBJECT TO THOSE ARTICLES. IF THERE IS  CONFLICT,
    9  THIS ARTICLE GOVERNS ARTICLE 3, BUT ARTICLE 8 GOVERNS THIS ARTICLE.
   10    (B)  THE  LIABILITY OF A BANK FOR ACTION OR NON-ACTION WITH RESPECT TO
   11  AN  ITEM  HANDLED  BY  IT  FOR  PURPOSES  OF  PRESENTMENT,  PAYMENT,  OR
   12  COLLECTION  IS  GOVERNED  BY  THE  LAW  OF  THE  PLACE WHERE THE BANK IS
   13  LOCATED. IN THE CASE OF ACTION OR NON-ACTION BY OR AT A BRANCH OR  SEPA-
   14  RATE OFFICE OF A BANK, ITS LIABILITY IS GOVERNED BY THE LAW OF THE PLACE
   15  WHERE THE BRANCH OR SEPARATE OFFICE IS LOCATED.
   16  SECTION 4--103. VARIATION  BY  AGREEMENT;  MEASURE  OF  DAMAGES;  ACTION
   17                    CONSTITUTING ORDINARY CARE.
   18    (A) THE EFFECT OF THE PROVISIONS OF THIS  ARTICLE  MAY  BE  VARIED  BY
   19  AGREEMENT,  BUT  THE  PARTIES  TO THE AGREEMENT CANNOT DISCLAIM A BANK'S
   20  RESPONSIBILITY FOR ITS LACK OF GOOD FAITH OR FAILURE TO  EXERCISE  ORDI-
   21  NARY  CARE  OR  LIMIT  THE  MEASURE  OF DAMAGES FOR THE LACK OR FAILURE.
   22  HOWEVER, THE PARTIES MAY DETERMINE BY AGREEMENT THE STANDARDS  BY  WHICH
   23  THE  BANK'S  RESPONSIBILITY IS TO BE MEASURED IF THOSE STANDARDS ARE NOT
   24  MANIFESTLY UNREASONABLE.
   25    (B)   FEDERAL   RESERVE   REGULATIONS   AND    OPERATING    CIRCULARS,
   26  CLEARING-HOUSE  RULES,  AND THE LIKE HAVE THE EFFECT OF AGREEMENTS UNDER
   27  SUBSECTION (A), WHETHER OR NOT SPECIFICALLY ASSENTED TO BY  ALL  PARTIES
   28  INTERESTED IN ITEMS HANDLED.
   29    (C)  ACTION  OR  NON-ACTION  APPROVED  BY  THIS ARTICLE OR PURSUANT TO
   30  FEDERAL RESERVE REGULATIONS OR OPERATING CIRCULARS IS  THE  EXERCISE  OF
   31  ORDINARY  CARE  AND,  IN  THE ABSENCE OF SPECIAL INSTRUCTIONS, ACTION OR
   32  NON-ACTION CONSISTENT WITH CLEARING-HOUSE RULES AND THE LIKE OR  WITH  A
   33  GENERAL  BANKING  USAGE  NOT DISAPPROVED BY THIS ARTICLE, IS PRIMA FACIE
   34  THE EXERCISE OF ORDINARY CARE.
   35    (D) THE SPECIFICATION OR APPROVAL OF CERTAIN PROCEDURES BY THIS  ARTI-
   36  CLE  IS NOT DISAPPROVAL OF OTHER PROCEDURES THAT MAY BE REASONABLE UNDER
   37  THE CIRCUMSTANCES.
   38    (E) THE MEASURE OF DAMAGES FOR FAILURE TO EXERCISE  ORDINARY  CARE  IN
   39  HANDLING  AN  ITEM  IS  THE AMOUNT OF THE ITEM REDUCED BY AN AMOUNT THAT
   40  COULD NOT HAVE BEEN REALIZED BY THE EXERCISE OF ORDINARY CARE. IF  THERE
   41  IS  ALSO BAD FAITH IT INCLUDES ANY OTHER DAMAGES THE PARTY SUFFERED AS A
   42  PROXIMATE CONSEQUENCE.
   43  SECTION 4--104. DEFINITIONS AND INDEX OF DEFINITIONS.
   44    (A) IN THIS ARTICLE, UNLESS THE CONTEXT OTHERWISE REQUIRES:
   45    (1) "ACCOUNT" MEANS ANY DEPOSIT OR CREDIT ACCOUNT WITH A BANK, INCLUD-
   46  ING A DEMAND, TIME, SAVINGS, PASSBOOK, SHARE  DRAFT,  OR  LIKE  ACCOUNT,
   47  OTHER THAN AN ACCOUNT EVIDENCED BY A CERTIFICATE OF DEPOSIT;
   48    (2) "AFTERNOON" MEANS THE PERIOD OF A DAY BETWEEN NOON AND MIDNIGHT;
   49    (3)  "BANKING  DAY" MEANS THE PART OF A DAY ON WHICH A BANK IS OPEN TO
   50  THE PUBLIC FOR CARRYING ON SUBSTANTIALLY ALL OF ITS BANKING FUNCTIONS;
   51    (4) "CLEARING HOUSE" MEANS AN ASSOCIATION OF  BANKS  OR  OTHER  PAYORS
   52  REGULARLY CLEARING ITEMS;
   53    (5)  "CUSTOMER"  MEANS  A  PERSON HAVING AN ACCOUNT WITH A BANK OR FOR
   54  WHOM A BANK HAS AGREED TO COLLECT ITEMS, INCLUDING A BANK THAT MAINTAINS
   55  AN ACCOUNT AT ANOTHER BANK;
       S. 4608                            34
    1    (6) "DOCUMENTARY DRAFT" MEANS A DRAFT TO BE PRESENTED  FOR  ACCEPTANCE
    2  OR  PAYMENT  IF  SPECIFIED  DOCUMENTS,  CERTIFICATED SECURITIES (SECTION
    3  8--102) OR INSTRUCTIONS FOR UNCERTIFICATED SECURITIES (SECTION  8--102),
    4  OR OTHER CERTIFICATES, STATEMENTS, OR THE LIKE ARE TO BE RECEIVED BY THE
    5  DRAWEE OR OTHER PAYOR BEFORE ACCEPTANCE OR PAYMENT OF THE DRAFT;
    6    (7)  "DRAFT"  MEANS  A  DRAFT AS DEFINED IN SECTION 3--104 OR AN ITEM,
    7  OTHER THAN AN INSTRUMENT, THAT IS AN ORDER;
    8    (8) "DRAWEE" MEANS A PERSON ORDERED IN A DRAFT TO MAKE PAYMENT;
    9    (9) "ITEM" MEANS AN INSTRUMENT OR A PROMISE  OR  ORDER  TO  PAY  MONEY
   10  HANDLED BY A BANK FOR COLLECTION OR PAYMENT. THE TERM DOES NOT INCLUDE A
   11  PAYMENT ORDER GOVERNED BY ARTICLE 4-A OR A CREDIT OR DEBIT CARD SLIP;
   12    (10)  "MIDNIGHT  DEADLINE"  WITH  RESPECT TO A BANK IS MIDNIGHT ON ITS
   13  NEXT BANKING DAY FOLLOWING THE BANKING DAY  ON  WHICH  IT  RECEIVES  THE
   14  RELEVANT  ITEM  OR  NOTICE  OR  FROM  WHICH  THE  TIME FOR TAKING ACTION
   15  COMMENCES TO RUN, WHICHEVER IS LATER;
   16    (11) "SETTLE" MEANS TO PAY IN CASH, BY CLEARING-HOUSE SETTLEMENT, IN A
   17  CHARGE OR CREDIT OR BY REMITTANCE, OR OTHERWISE AS AGREED. A  SETTLEMENT
   18  MAY BE EITHER PROVISIONAL OR FINAL;
   19    (12) "SUSPENDS PAYMENTS" WITH RESPECT TO A BANK MEANS THAT IT HAS BEEN
   20  CLOSED  BY  ORDER  OF THE SUPERVISORY AUTHORITIES, THAT A PUBLIC OFFICER
   21  HAS BEEN APPOINTED TO TAKE IT OVER, OR THAT IT CEASES OR REFUSES TO MAKE
   22  PAYMENTS IN THE ORDINARY COURSE OF BUSINESS.
   23    (B) OTHER DEFINITIONS APPLYING TO THIS ARTICLE  AND  THE  SECTIONS  IN
   24  WHICH THEY APPEAR ARE:
   25  "AGREEMENT FOR ELECTRONIC PRESENTMENT" ................. SECTION 4--110.
   26  "COLLECTING BANK" ...................................... SECTION 4--105.
   27  "DEPOSITARY BANK" ...................................... SECTION 4--105.
   28  "INTERMEDIARY BANK" .................................... SECTION 4--105.
   29  "PAYOR BANK" ........................................... SECTION 4--105.
   30  "PRESENTING BANK" ...................................... SECTION 4--105.
   31  "PRESENTMENT NOTICE" ................................... SECTION 4--110.
   32    (C) THE FOLLOWING DEFINITIONS IN OTHER ARTICLES APPLY TO THIS ARTICLE:
   33  "ACCEPTANCE" ........................................... SECTION 3--409.
   34  "ALTERATION" ........................................... SECTION 3--407.
   35  "CASHIER'S CHECK" ...................................... SECTION 3--104.
   36  "CERTIFICATE OF DEPOSIT" ............................... SECTION 3--104.
   37  "CERTIFIED CHECK" ...................................... SECTION 3--409.
   38  "CHECK" ................................................ SECTION 3--104.
   39  "CONTROL" .............................................. SECTION 7--106.
   40  "GOOD FAITH" ........................................... SECTION 3--103.
   41  "HOLDER IN DUE COURSE" ................................. SECTION 3--302.
   42  "INSTRUMENT" ........................................... SECTION 3--104.
   43  "NOTICE OF DISHONOR" ................................... SECTION 3--503.
   44  "ORDER" ................................................ SECTION 3--103.
   45  "ORDINARY CARE" ........................................ SECTION 3--103.
   46  "PERSON ENTITLED TO ENFORCE" ........................... SECTION 3--301.
   47  "PRESENTMENT" .......................................... SECTION 3--501.
   48  "PROMISE" .............................................. SECTION 3--103.
   49  "PROVE" ................................................ SECTION 3--103.
   50  "RECORD" ..................................................... RESERVED.
   51  "REMOTELY-CREATED CONSUMER ITEM" ....................... SECTION 3--103.
   52  "TELLER'S CHECK" ....................................... SECTION 3--104.
   53  "UNAUTHORIZED SIGNATURE" ............................... SECTION 3--403.
   54    (D) IN ADDITION, ARTICLE 1 CONTAINS GENERAL DEFINITIONS AND PRINCIPLES
   55  OF CONSTRUCTION AND INTERPRETATION APPLICABLE THROUGHOUT THIS ARTICLE.
   56  SECTION 4--105. DEFINITIONS OF TYPES OF BANKS.
       S. 4608                            35
    1    IN THIS ARTICLE:
    2    (A) [RESERVED]
    3    (B) "DEPOSITARY BANK" MEANS THE FIRST BANK TO TAKE AN ITEM EVEN THOUGH
    4  IT  IS  ALSO  THE PAYOR BANK, UNLESS THE ITEM IS PRESENTED FOR IMMEDIATE
    5  PAYMENT OVER THE COUNTER;
    6    (C) "PAYOR BANK" MEANS A BANK THAT IS THE DRAWEE OF A DRAFT;
    7    (D) "INTERMEDIARY BANK" MEANS A BANK TO WHICH AN ITEM  IS  TRANSFERRED
    8  IN COURSE OF COLLECTION EXCEPT THE DEPOSITARY OR PAYOR BANK;
    9    (E)  "COLLECTING  BANK"  MEANS  A BANK HANDLING AN ITEM FOR COLLECTION
   10  EXCEPT THE PAYOR BANK;
   11    (F) "PRESENTING BANK" MEANS A BANK PRESENTING AN ITEM EXCEPT  A  PAYOR
   12  BANK.
   13  SECTION 4--106. PAYABLE THROUGH OR PAYABLE AT BANK: COLLECTING BANK.
   14    (A)  IF  AN ITEM STATES THAT IT IS "PAYABLE THROUGH" A BANK IDENTIFIED
   15  IN THE ITEM, (1) THE ITEM DESIGNATES THE BANK AS A COLLECTING  BANK  AND
   16  DOES  NOT BY ITSELF AUTHORIZE THE BANK TO PAY THE ITEM, AND (2) THE ITEM
   17  MAY BE PRESENTED FOR PAYMENT ONLY BY OR THROUGH THE BANK.
   18    (B) IF AN ITEM STATES THAT IT IS "PAYABLE AT" A BANK IDENTIFIED IN THE
   19  ITEM, THE ITEM IS EQUIVALENT TO A DRAFT DRAWN ON THE BANK.
   20    (C) IF A DRAFT NAMES A NONBANK DRAWEE AND IT IS UNCLEAR WHETHER A BANK
   21  NAMED IN THE DRAFT IS A CO-DRAWEE OR A COLLECTING BANK, THE  BANK  IS  A
   22  COLLECTING BANK.
   23  SECTION 4--107. SEPARATE OFFICE OF BANK.
   24    A  BRANCH  OR  SEPARATE  OFFICE  OF  A BANK IS A SEPARATE BANK FOR THE
   25  PURPOSE OF COMPUTING THE TIME WITHIN WHICH AND DETERMINING THE PLACE  AT
   26  OR  TO  WHICH  ACTION  MAY  BE TAKEN OR NOTICES OR ORDERS SHALL BE GIVEN
   27  UNDER THIS ARTICLE AND UNDER ARTICLE 3.
   28  SECTION 4--108. TIME OF RECEIPT OF ITEMS.
   29    (A) FOR THE PURPOSE OF ALLOWING TIME TO PROCESS ITEMS, PROVE BALANCES,
   30  AND MAKE THE NECESSARY ENTRIES ON ITS BOOKS TO  DETERMINE  ITS  POSITION
   31  FOR  THE  DAY,  A BANK MAY FIX AN AFTERNOON HOUR OF 2 P.M. OR LATER AS A
   32  CUTOFF HOUR FOR THE HANDLING OF  MONEY  AND  ITEMS  AND  THE  MAKING  OF
   33  ENTRIES ON ITS BOOKS.
   34    (B)  AN  ITEM  OR  DEPOSIT OF MONEY RECEIVED ON ANY DAY AFTER A CUTOFF
   35  HOUR SO FIXED OR AFTER THE CLOSE OF THE BANKING DAY MAY  BE  TREATED  AS
   36  BEING RECEIVED AT THE OPENING OF THE NEXT BANKING DAY.
   37  SECTION 4--109. DELAYS.
   38    (A)  UNLESS  OTHERWISE  INSTRUCTED,  A COLLECTING BANK IN A GOOD FAITH
   39  EFFORT TO SECURE PAYMENT OF A SPECIFIC ITEM DRAWN ON A PAYOR OTHER  THAN
   40  A  BANK,  AND  WITH  OR WITHOUT THE APPROVAL OF ANY PERSON INVOLVED, MAY
   41  WAIVE, MODIFY, OR EXTEND TIME LIMITS IMPOSED OR PERMITTED  BY  THIS  ACT
   42  FOR A PERIOD NOT EXCEEDING TWO ADDITIONAL BANKING DAYS WITHOUT DISCHARGE
   43  OF DRAWERS OR INDORSERS OR LIABILITY TO ITS TRANSFEROR OR A PRIOR PARTY.
   44    (B)  DELAY  BY  A  COLLECTING  BANK  OR  PAYOR BANK BEYOND TIME LIMITS
   45  PRESCRIBED OR PERMITTED BY THIS ACT OR BY INSTRUCTIONS IS EXCUSED IF (1)
   46  THE DELAY IS CAUSED BY INTERRUPTION OF COMMUNICATION OR COMPUTER FACILI-
   47  TIES, SUSPENSION OF PAYMENTS BY ANOTHER BANK, WAR, EMERGENCY CONDITIONS,
   48  FAILURE OF EQUIPMENT, OR OTHER CIRCUMSTANCES BEYOND THE CONTROL  OF  THE
   49  BANK,  AND  (2)  THE  BANK EXERCISES SUCH DILIGENCE AS THE CIRCUMSTANCES
   50  REQUIRE.
   51  SECTION 4--110. ELECTRONIC PRESENTMENT.
   52    (A) "AGREEMENT FOR ELECTRONIC PRESENTMENT" MEANS AN AGREEMENT,  CLEAR-
   53  ING-HOUSE  RULE,  OR  FEDERAL  RESERVE REGULATION OR OPERATING CIRCULAR,
   54  PROVIDING THAT PRESENTMENT OF AN ITEM MAY BE MADE BY TRANSMISSION OF  AN
   55  IMAGE  OF  AN  ITEM  OR  INFORMATION  DESCRIBING  THE ITEM ("PRESENTMENT
   56  NOTICE") RATHER THAN DELIVERY OF THE  ITEM  ITSELF.  THE  AGREEMENT  MAY
       S. 4608                            36
    1  PROVIDE   FOR  PROCEDURES  GOVERNING  RETENTION,  PRESENTMENT,  PAYMENT,
    2  DISHONOR, AND OTHER MATTERS CONCERNING ITEMS SUBJECT TO THE AGREEMENT.
    3    (B) PRESENTMENT OF AN ITEM PURSUANT TO AN AGREEMENT FOR PRESENTMENT IS
    4  MADE WHEN THE PRESENTMENT NOTICE IS RECEIVED.
    5    (C)  IF  PRESENTMENT  IS  MADE  BY  PRESENTMENT NOTICE, A REFERENCE TO
    6  "ITEM" OR "CHECK" IN THIS ARTICLE MEANS THE  PRESENTMENT  NOTICE  UNLESS
    7  THE CONTEXT OTHERWISE INDICATES.
    8  SECTION 4--111. STATUTE OF LIMITATIONS.
    9    AN  ACTION TO ENFORCE AN OBLIGATION, DUTY, OR RIGHT ARISING UNDER THIS
   10  ARTICLE MUST BE COMMENCED WITHIN THREE YEARS AFTER THE CAUSE  OF  ACTION
   11  ACCRUES.
   12                                   PART 2
   13            COLLECTION OF ITEMS: DEPOSITARY AND COLLECTING BANKS
   14  SECTION 4--201. STATUS  OF  COLLECTING  BANK  AS  AGENT  AND PROVISIONAL
   15                    STATUS OF  CREDITS;  APPLICABILITY  OF  ARTICLE;  ITEM
   16                    INDORSED "PAY ANY BANK".
   17    (A)  UNLESS A CONTRARY INTENT CLEARLY APPEARS AND BEFORE THE TIME THAT
   18  A SETTLEMENT GIVEN BY A COLLECTING BANK FOR AN ITEM IS OR BECOMES FINAL,
   19  THE BANK, WITH RESPECT TO AN ITEM, IS AN AGENT OR SUB-AGENT OF THE OWNER
   20  OF THE ITEM AND ANY SETTLEMENT GIVEN FOR THE ITEM IS PROVISIONAL.   THIS
   21  PROVISION  APPLIES  REGARDLESS  OF  THE  FORM  OF INDORSEMENT OR LACK OF
   22  INDORSEMENT AND EVEN THOUGH CREDIT GIVEN FOR  THE  ITEM  IS  SUBJECT  TO
   23  IMMEDIATE  WITHDRAWAL  AS  OF  RIGHT  OR  IS  IN FACT WITHDRAWN; BUT THE
   24  CONTINUANCE OF OWNERSHIP OF AN ITEM BY ITS OWNER AND ANY RIGHTS  OF  THE
   25  OWNER  TO  PROCEEDS  OF  THE  ITEM ARE SUBJECT TO RIGHTS OF A COLLECTING
   26  BANK, SUCH AS THOSE RESULTING FROM OUTSTANDING ADVANCES ON THE ITEM  AND
   27  RIGHTS  OF  RECOUPMENT  OR  SETOFF.  IF  AN ITEM IS HANDLED BY BANKS FOR
   28  PURPOSES OF PRESENTMENT, PAYMENT, COLLECTION, OR  RETURN,  THE  RELEVANT
   29  PROVISIONS  OF  THIS  ARTICLE  APPLY  EVEN  THOUGH ACTION OF THE PARTIES
   30  CLEARLY ESTABLISHES THAT A PARTICULAR BANK HAS PURCHASED THE ITEM AND IS
   31  THE OWNER OF IT.
   32    (B) AFTER AN ITEM HAS BEEN INDORSED WITH THE WORDS "PAY ANY  BANK"  OR
   33  THE  LIKE, ONLY A BANK MAY ACQUIRE THE RIGHTS OF A HOLDER UNTIL THE ITEM
   34  HAS BEEN:
   35    (1) RETURNED TO THE CUSTOMER INITIATING COLLECTION; OR
   36    (2) SPECIALLY INDORSED BY A BANK TO A PERSON WHO IS NOT A BANK.
   37  SECTION 4--202. RESPONSIBILITY FOR COLLECTION  OR  RETURN;  WHEN  ACTION
   38                    TIMELY.
   39    (A) A COLLECTING BANK MUST EXERCISE ORDINARY CARE IN:
   40    (1) PRESENTING AN ITEM OR SENDING IT FOR PRESENTMENT;
   41    (2)  SENDING  NOTICE  OF  DISHONOR  OR NONPAYMENT OR RETURNING AN ITEM
   42  OTHER THAN A DOCUMENTARY DRAFT TO THE BANK'S TRANSFEROR  AFTER  LEARNING
   43  THAT THE ITEM HAS NOT BEEN PAID OR ACCEPTED, AS THE CASE MAY BE;
   44    (3) SETTLING FOR AN ITEM WHEN THE BANK RECEIVES FINAL SETTLEMENT; AND
   45    (4)  NOTIFYING ITS TRANSFEROR OF ANY LOSS OR DELAY IN TRANSIT WITHIN A
   46  REASONABLE TIME AFTER DISCOVERY THEREOF.
   47    (B) A COLLECTING BANK EXERCISES ORDINARY CARE UNDER SUBSECTION (A)  BY
   48  TAKING  PROPER  ACTION BEFORE ITS MIDNIGHT DEADLINE FOLLOWING RECEIPT OF
   49  AN ITEM, NOTICE, OR SETTLEMENT.  TAKING PROPER ACTION WITHIN  A  REASON-
   50  ABLY  LONGER  TIME MAY CONSTITUTE THE EXERCISE OF ORDINARY CARE, BUT THE
   51  BANK HAS THE BURDEN OF ESTABLISHING TIMELINESS.
   52    (C) SUBJECT TO SUBSECTION (A)(1), A BANK IS NOT LIABLE FOR THE  INSOL-
   53  VENCY,  NEGLECT,  MISCONDUCT,  MISTAKE,  OR  DEFAULT  OF ANOTHER BANK OR
   54  PERSON OR FOR LOSS OR DESTRUCTION OF AN ITEM IN THE POSSESSION OF OTHERS
   55  OR IN TRANSIT.
   56  SECTION 4--203. EFFECT OF INSTRUCTIONS.
       S. 4608                            37
    1    SUBJECT TO ARTICLE 3 CONCERNING  CONVERSION  OF  INSTRUMENTS  (SECTION
    2  3-420)  AND  RESTRICTIVE INDORSEMENTS (SECTION 3-206), ONLY A COLLECTING
    3  BANK'S TRANSFEROR CAN GIVE INSTRUCTIONS THAT AFFECT THE BANK OR  CONSTI-
    4  TUTE  NOTICE TO IT, AND A COLLECTING BANK IS NOT LIABLE TO PRIOR PARTIES
    5  FOR  ANY ACTION TAKEN PURSUANT TO THE INSTRUCTIONS OR IN ACCORDANCE WITH
    6  ANY AGREEMENT WITH ITS TRANSFEROR.
    7  SECTION 4--204. METHODS OF SENDING AND PRESENTING; SENDING  DIRECTLY  TO
    8                    PAYOR BANK.
    9    (A)  A COLLECTING BANK SHALL SEND ITEMS BY A REASONABLY PROMPT METHOD,
   10  TAKING INTO CONSIDERATION RELEVANT INSTRUCTIONS, THE NATURE OF THE ITEM,
   11  THE NUMBER OF THOSE ITEMS ON HAND, THE COST OF COLLECTION INVOLVED,  AND
   12  THE METHOD GENERALLY USED BY IT OR OTHERS TO PRESENT THOSE ITEMS.
   13    (B) A COLLECTING BANK MAY SEND:
   14    (1) AN ITEM DIRECTLY TO THE PAYOR BANK;
   15    (2) AN ITEM TO A NONBANK PAYOR IF AUTHORIZED BY ITS TRANSFEROR; AND
   16    (3)  AN  ITEM  OTHER  THAN  DOCUMENTARY  DRAFTS TO A NONBANK PAYOR, IF
   17  AUTHORIZED BY FEDERAL RESERVE REGULATION OR OPERATING  CIRCULAR,  CLEAR-
   18  ING-HOUSE RULE, OR THE LIKE.
   19    (C)  PRESENTMENT MAY BE MADE BY A PRESENTING BANK AT A PLACE WHERE THE
   20  PAYOR BANK OR OTHER PAYOR HAS REQUESTED THAT PRESENTMENT BE MADE.
   21  SECTION 4--205. DEPOSITARY BANK HOLDER OF UNINDORSED ITEM.
   22    IF A CUSTOMER DELIVERS AN ITEM TO A DEPOSITARY BANK FOR COLLECTION:
   23    (A) THE DEPOSITARY BANK BECOMES A HOLDER OF THE ITEM AT  THE  TIME  IT
   24  RECEIVES THE ITEM FOR COLLECTION IF THE CUSTOMER AT THE TIME OF DELIVERY
   25  WAS A HOLDER OF THE ITEM, WHETHER OR NOT THE CUSTOMER INDORSES THE ITEM,
   26  AND,  IF THE BANK SATISFIES THE OTHER REQUIREMENTS OF SECTION 3--302, IT
   27  IS A HOLDER IN DUE COURSE; AND
   28    (B) THE DEPOSITARY BANK WARRANTS TO COLLECTING BANKS, THE  PAYOR  BANK
   29  OR  OTHER  PAYOR, AND THE DRAWER THAT THE AMOUNT OF THE ITEM WAS PAID TO
   30  THE CUSTOMER OR DEPOSITED TO THE CUSTOMER'S ACCOUNT.
   31  SECTION 4--206. TRANSFER BETWEEN BANKS.
   32    ANY AGREED METHOD THAT IDENTIFIES THE TRANSFEROR  BANK  IS  SUFFICIENT
   33  FOR THE ITEM'S FURTHER TRANSFER TO ANOTHER BANK.
   34  SECTION 4--207. TRANSFER WARRANTIES.
   35    (A)  A CUSTOMER OR COLLECTING BANK THAT TRANSFERS AN ITEM AND RECEIVES
   36  A SETTLEMENT OR OTHER CONSIDERATION WARRANTS TO THE  TRANSFEREE  AND  TO
   37  ANY SUBSEQUENT COLLECTING BANK THAT:
   38    (1) THE WARRANTOR IS A PERSON ENTITLED TO ENFORCE THE ITEM;
   39    (2) ALL SIGNATURES ON THE ITEM ARE AUTHENTIC AND AUTHORIZED;
   40    (3) THE ITEM HAS NOT BEEN ALTERED;
   41    (4)  THE  ITEM  IS  NOT  SUBJECT  TO  A DEFENSE OR CLAIM IN RECOUPMENT
   42  (SECTION 3--305(A)) OF ANY  PARTY  THAT  CAN  BE  ASSERTED  AGAINST  THE
   43  WARRANTOR;
   44    (5)  THE  WARRANTOR  HAS  NO  KNOWLEDGE  OF  ANY INSOLVENCY PROCEEDING
   45  COMMENCED WITH RESPECT TO THE MAKER OR ACCEPTOR OR, IN THE  CASE  OF  AN
   46  UNACCEPTED DRAFT, THE DRAWER; AND
   47    (6)  WITH  RESPECT  TO  ANY  REMOTELY-CREATED  CONSUMER ITEM, THAT THE
   48  PERSON ON WHOSE ACCOUNT THE ITEM IS DRAWN AUTHORIZED THE ISSUANCE OF THE
   49  ITEM IN THE AMOUNT FOR WHICH THE ITEM IS DRAWN.
   50    (B) IF AN ITEM IS DISHONORED, A CUSTOMER  OR  COLLECTING  BANK  TRANS-
   51  FERRING  THE  ITEM  AND  RECEIVING  SETTLEMENT OR OTHER CONSIDERATION IS
   52  OBLIGED TO PAY THE AMOUNT DUE ON THE ITEM (I) ACCORDING TO THE TERMS  OF
   53  THE  ITEM AT THE TIME IT WAS TRANSFERRED, OR (II) IF THE TRANSFER WAS OF
   54  AN INCOMPLETE ITEM, ACCORDING TO ITS TERMS WHEN COMPLETED AS  STATED  IN
   55  SECTIONS  3--115  AND  3--407. THE OBLIGATION OF A TRANSFEROR IS OWED TO
   56  THE TRANSFEREE AND TO ANY SUBSEQUENT COLLECTING BANK THAT TAKES THE ITEM
       S. 4608                            38
    1  IN GOOD FAITH. A TRANSFEROR CANNOT DISCLAIM ITS  OBLIGATION  UNDER  THIS
    2  SUBSECTION  BY AN INDORSEMENT STATING THAT IT IS MADE "WITHOUT RECOURSE"
    3  OR OTHERWISE DISCLAIMING LIABILITY.
    4    (C)  A PERSON TO WHOM THE WARRANTIES UNDER SUBSECTION (A) ARE MADE AND
    5  WHO TOOK THE ITEM IN GOOD  FAITH  MAY  RECOVER  FROM  THE  WARRANTOR  AS
    6  DAMAGES FOR BREACH OF WARRANTY AN AMOUNT EQUAL TO THE LOSS SUFFERED AS A
    7  RESULT  OF  THE  BREACH,  BUT  NOT MORE THAN THE AMOUNT OF THE ITEM PLUS
    8  EXPENSES AND LOSS OF INTEREST INCURRED AS A RESULT OF THE BREACH.
    9    (D) THE WARRANTIES STATED IN SUBSECTION (A) CANNOT BE DISCLAIMED  WITH
   10  RESPECT  TO  CHECKS.  UNLESS NOTICE OF A CLAIM FOR BREACH OF WARRANTY IS
   11  GIVEN TO THE WARRANTOR WITHIN THIRTY DAYS AFTER THE CLAIMANT HAS  REASON
   12  TO  KNOW  OF THE BREACH AND THE IDENTITY OF THE WARRANTOR, THE WARRANTOR
   13  IS DISCHARGED TO THE EXTENT OF ANY LOSS CAUSED BY THE  DELAY  IN  GIVING
   14  NOTICE OF THE CLAIM.
   15    (E)  A  CAUSE  OF  ACTION  FOR  BREACH  OF WARRANTY UNDER THIS SECTION
   16  ACCRUES WHEN THE CLAIMANT HAS REASON TO KNOW OF THE BREACH.
   17  SECTION 4--208. PRESENTMENT WARRANTIES.
   18    (A) IF AN UNACCEPTED DRAFT IS PRESENTED TO THE DRAWEE FOR  PAYMENT  OR
   19  ACCEPTANCE  AND  THE  DRAWEE  PAYS  OR ACCEPTS THE DRAFT, (I) THE PERSON
   20  OBTAINING PAYMENT OR ACCEPTANCE, AT THE TIME OF PRESENTMENT, AND (II)  A
   21  PREVIOUS  TRANSFEROR  OF  THE DRAFT, AT THE TIME OF TRANSFER, WARRANT TO
   22  THE DRAWEE THAT PAYS OR ACCEPTS THE DRAFT IN GOOD FAITH THAT:
   23    (1) THE WARRANTOR IS, OR WAS, AT THE TIME  THE  WARRANTOR  TRANSFERRED
   24  THE  DRAFT,  A  PERSON  ENTITLED  TO  ENFORCE THE DRAFT OR AUTHORIZED TO
   25  OBTAIN PAYMENT OR ACCEPTANCE OF THE DRAFT ON BEHALF OF A PERSON ENTITLED
   26  TO ENFORCE THE DRAFT;
   27    (2) THE DRAFT HAS NOT BEEN ALTERED; AND
   28    (3) THE WARRANTOR HAS NO KNOWLEDGE THAT THE SIGNATURE OF THE PURPORTED
   29  DRAWER OF THE DRAFT IS UNAUTHORIZED; AND
   30    (4) WITH RESPECT TO  ANY  REMOTELY-CREATED  CONSUMER  ITEM,  THAT  THE
   31  PERSON ON WHOSE ACCOUNT THE ITEM IS DRAWN AUTHORIZED THE ISSUANCE OF THE
   32  ITEM IN THE AMOUNT FOR WHICH THE ITEM IS DRAWN.
   33    (B)  A  DRAWEE MAKING PAYMENT MAY RECOVER FROM A WARRANTOR DAMAGES FOR
   34  BREACH OF WARRANTY EQUAL TO THE AMOUNT  PAID  BY  THE  DRAWEE  LESS  THE
   35  AMOUNT  THE  DRAWEE  RECEIVED  OR IS ENTITLED TO RECEIVE FROM THE DRAWER
   36  BECAUSE OF THE PAYMENT. IN ADDITION, THE DRAWEE IS ENTITLED  TO  COMPEN-
   37  SATION  FOR EXPENSES AND LOSS OF INTEREST RESULTING FROM THE BREACH. THE
   38  RIGHT OF THE DRAWEE TO RECOVER DAMAGES  UNDER  THIS  SUBSECTION  IS  NOT
   39  AFFECTED  BY  ANY  FAILURE  OF  THE  DRAWEE TO EXERCISE ORDINARY CARE IN
   40  MAKING PAYMENT. IF THE DRAWEE ACCEPTS THE DRAFT (I) BREACH  OF  WARRANTY
   41  IS A DEFENSE TO THE OBLIGATION OF THE ACCEPTOR, AND (II) IF THE ACCEPTOR
   42  MAKES  PAYMENT  WITH  RESPECT  TO THE DRAFT, THE ACCEPTOR IS ENTITLED TO
   43  RECOVER FROM A WARRANTOR FOR BREACH OF WARRANTY THE  AMOUNTS  STATED  IN
   44  THIS SUBSECTION.
   45    (C)  IF  A  DRAWEE  ASSERTS  A  CLAIM  FOR  BREACH  OF  WARRANTY UNDER
   46  SUBSECTION (A) BASED ON AN UNAUTHORIZED INDORSEMENT OF THE DRAFT  OR  AN
   47  ALTERATION  OF  THE  DRAFT, THE WARRANTOR MAY DEFEND BY PROVING THAT THE
   48  INDORSEMENT IS EFFECTIVE UNDER SECTION 3--404 OR 3--405 OR THE DRAWER IS
   49  PRECLUDED UNDER SECTION 3--406 OR  4--406  FROM  ASSERTING  AGAINST  THE
   50  DRAWEE THE UNAUTHORIZED INDORSEMENT OR ALTERATION.
   51    (D)  IF  (I) A DISHONORED DRAFT IS PRESENTED FOR PAYMENT TO THE DRAWER
   52  OR AN INDORSER OR (II) ANY OTHER ITEM IS  PRESENTED  FOR  PAYMENT  TO  A
   53  PARTY  OBLIGED TO PAY THE ITEM, AND THE ITEM IS PAID, THE PERSON OBTAIN-
   54  ING PAYMENT AND A PRIOR TRANSFEROR OF THE ITEM  WARRANT  TO  THE  PERSON
   55  MAKING  PAYMENT IN GOOD FAITH THAT THE WARRANTOR IS, OR WAS, AT THE TIME
   56  THE WARRANTOR TRANSFERRED THE ITEM, A PERSON  ENTITLED  TO  ENFORCE  THE
       S. 4608                            39
    1  ITEM  OR  AUTHORIZED TO OBTAIN PAYMENT ON BEHALF OF A PERSON ENTITLED TO
    2  ENFORCE THE ITEM.   THE PERSON  MAKING  PAYMENT  MAY  RECOVER  FROM  ANY
    3  WARRANTOR FOR BREACH OF WARRANTY AN AMOUNT EQUAL TO THE AMOUNT PAID PLUS
    4  EXPENSES AND LOSS OF INTEREST RESULTING FROM THE BREACH.
    5    (E)  THE  WARRANTIES  STATED  IN  SUBSECTIONS  (A)  AND  (D) CANNOT BE
    6  DISCLAIMED WITH RESPECT TO CHECKS. UNLESS NOTICE OF A CLAIM  FOR  BREACH
    7  OF  WARRANTY  IS  GIVEN  TO  THE  WARRANTOR WITHIN THIRTY DAYS AFTER THE
    8  CLAIMANT HAS REASON TO KNOW OF  THE  BREACH  AND  THE  IDENTITY  OF  THE
    9  WARRANTOR,  THE WARRANTOR IS DISCHARGED TO THE EXTENT OF ANY LOSS CAUSED
   10  BY THE DELAY IN GIVING NOTICE OF THE CLAIM.
   11    (F) A CAUSE OF ACTION  FOR  BREACH  OF  WARRANTY  UNDER  THIS  SECTION
   12  ACCRUES WHEN THE CLAIMANT HAS REASON TO KNOW OF THE BREACH.
   13  SECTION 4--209. ENCODING AND RETENTION WARRANTIES.
   14    (A)  A  PERSON  WHO  ENCODES INFORMATION ON OR WITH RESPECT TO AN ITEM
   15  AFTER ISSUE WARRANTS TO ANY SUBSEQUENT COLLECTING BANK AND TO THE  PAYOR
   16  BANK  OR  OTHER PAYOR THAT THE INFORMATION IS CORRECTLY ENCODED.  IF THE
   17  CUSTOMER OF A DEPOSITARY BANK ENCODES, THAT BANK ALSO MAKES THE  WARRAN-
   18  TY.
   19    (B) A PERSON WHO UNDERTAKES TO RETAIN AN ITEM PURSUANT TO AN AGREEMENT
   20  FOR  ELECTRONIC  PRESENTMENT  WARRANTS TO ANY SUBSEQUENT COLLECTING BANK
   21  AND TO THE PAYOR BANK OR OTHER PAYOR THAT RETENTION AND  PRESENTMENT  OF
   22  THE  ITEM  COMPLY WITH THE AGREEMENT. IF A CUSTOMER OF A DEPOSITARY BANK
   23  UNDERTAKES TO RETAIN AN ITEM, THAT BANK ALSO MAKES THIS WARRANTY.
   24    (C) A PERSON TO WHOM WARRANTIES ARE MADE UNDER THIS SECTION,  AND  WHO
   25  TOOK  THE  ITEM IN GOOD FAITH, MAY RECOVER FROM THE WARRANTOR AS DAMAGES
   26  FOR BREACH OF WARRANTY AN AMOUNT EQUAL TO THE LOSS SUFFERED AS A  RESULT
   27  OF  THE  BREACH, PLUS EXPENSES AND LOSS OF INTEREST INCURRED AS A RESULT
   28  OF THE BREACH.
   29  SECTION 4--210. SECURITY INTEREST OF COLLECTING BANK IN ITEMS,  ACCOMPA-
   30                    NYING DOCUMENTS AND PROCEEDS.
   31    (A)  A  COLLECTING  BANK  HAS  A  SECURITY INTEREST IN AN ITEM AND ANY
   32  ACCOMPANYING DOCUMENTS OR THE PROCEEDS OF EITHER:
   33    (1) IN THE CASE OF AN ITEM DEPOSITED IN AN ACCOUNT, TO THE  EXTENT  TO
   34  WHICH CREDIT GIVEN FOR THE ITEM HAS BEEN WITHDRAWN OR APPLIED;
   35    (2) IN THE CASE OF AN ITEM FOR WHICH IT HAS GIVEN CREDIT AVAILABLE FOR
   36  WITHDRAWAL  AS  OF  RIGHT, TO THE EXTENT OF THE CREDIT GIVEN, WHETHER OR
   37  NOT THE CREDIT IS DRAWN UPON OR THERE IS A RIGHT OF CHARGE-BACK; OR
   38    (3) IF IT MAKES AN ADVANCE ON OR AGAINST THE ITEM.
   39    (B) IF CREDIT GIVEN FOR SEVERAL ITEMS RECEIVED AT ONE TIME OR PURSUANT
   40  TO A SINGLE AGREEMENT IS WITHDRAWN OR  APPLIED  IN  PART,  THE  SECURITY
   41  INTEREST  REMAINS UPON ALL THE ITEMS, ANY ACCOMPANYING DOCUMENTS, OR THE
   42  PROCEEDS OF EITHER. FOR THE PURPOSE OF THIS SECTION, CREDITS FIRST GIVEN
   43  ARE FIRST WITHDRAWN.
   44    (C) RECEIPT BY A COLLECTING BANK OF A FINAL SETTLEMENT FOR AN ITEM  IS
   45  A  REALIZATION  ON ITS SECURITY INTEREST IN THE ITEM, ACCOMPANYING DOCU-
   46  MENTS, AND PROCEEDS. SO LONG AS THE BANK DOES NOT RECEIVE FINAL  SETTLE-
   47  MENT  FOR  THE  ITEM, OR GIVE UP POSSESSION OF THE ITEM OR POSSESSION OR
   48  CONTROL  OF  THE  ACCOMPANYING  DOCUMENTS  FOR   PURPOSES   OTHER   THAN
   49  COLLECTION,  THE  SECURITY  INTEREST  CONTINUES  TO  THAT  EXTENT AND IS
   50  SUBJECT TO ARTICLE 9, BUT:
   51    (1) NO SECURITY AGREEMENT IS NECESSARY TO MAKE THE  SECURITY  INTEREST
   52  ENFORCEABLE (SECTION 9--203(B)(3)(A));
   53    (2) NO FILING IS REQUIRED TO PERFECT THE SECURITY INTEREST; AND
   54    (3)  THE  SECURITY  INTEREST  HAS  PRIORITY OVER CONFLICTING PERFECTED
   55  SECURITY INTERESTS IN THE ITEM, ACCOMPANYING DOCUMENTS, OR PROCEEDS.
       S. 4608                            40
    1  SECTION 4--211. WHEN BANK GIVES VALUE FOR  PURPOSES  OF  HOLDER  IN  DUE
    2                    COURSE.
    3    FOR  PURPOSES  OF  DETERMINING ITS STATUS AS A HOLDER IN DUE COURSE, A
    4  BANK HAS GIVEN VALUE TO THE EXTENT IT HAS  A  SECURITY  INTEREST  IN  AN
    5  ITEM,  IF  THE  BANK OTHERWISE COMPLIES WITH THE REQUIREMENTS OF SECTION
    6  3--302 ON WHAT CONSTITUTES A HOLDER IN DUE COURSE.
    7  SECTION 4--212. PRESENTMENT BY NOTICE OF ITEM NOT PAYABLE  BY,  THROUGH,
    8                    OR AT BANK; LIABILITY OF DRAWER OR INDORSER.
    9    (A) UNLESS OTHERWISE INSTRUCTED, A COLLECTING BANK MAY PRESENT AN ITEM
   10  NOT  PAYABLE BY, THROUGH, OR AT A BANK BY SENDING TO THE PARTY TO ACCEPT
   11  OR PAY A RECORD PROVIDING NOTICE  THAT  THE  BANK  HOLDS  THE  ITEM  FOR
   12  ACCEPTANCE OR PAYMENT. THE NOTICE MUST BE SENT IN TIME TO BE RECEIVED ON
   13  OR  BEFORE  THE  DAY WHEN PRESENTMENT IS DUE, AND THE BANK MUST MEET ANY
   14  REQUIREMENT OF THE PARTY TO ACCEPT OR PAY UNDER SECTION  3--501  BY  THE
   15  CLOSE OF THE BANK'S NEXT BANKING DAY AFTER IT KNOWS OF THE REQUIREMENT.
   16    (B)  IF  PRESENTMENT  IS  MADE  BY  NOTICE AND PAYMENT, ACCEPTANCE, OR
   17  REQUEST FOR COMPLIANCE WITH A REQUIREMENT UNDER SECTION  3--501  IS  NOT
   18  RECEIVED  BY  THE CLOSE OF BUSINESS ON THE DAY AFTER MATURITY OR, IN THE
   19  CASE OF DEMAND ITEMS, BY THE CLOSE OF BUSINESS ON THE THIRD BANKING  DAY
   20  AFTER NOTICE WAS SENT, THE PRESENTING BANK MAY TREAT THE ITEM AS DISHON-
   21  ORED  AND  CHARGE  ANY  DRAWER  OR  INDORSER BY SENDING IT NOTICE OF THE
   22  FACTS.
   23  SECTION 4--213. MEDIUM AND TIME OF SETTLEMENT BY BANK.
   24    (A) WITH RESPECT TO SETTLEMENT BY A  BANK,  THE  MEDIUM  AND  TIME  OF
   25  SETTLEMENT  MAY  BE  PRESCRIBED BY FEDERAL RESERVE REGULATIONS OR CIRCU-
   26  LARS, CLEARING-HOUSE RULES, AND  THE  LIKE,  OR  BY  AGREEMENT.  IN  THE
   27  ABSENCE OF SUCH PRESCRIPTION:
   28    (1)  THE  MEDIUM  OF  SETTLEMENT  IS CASH OR CREDIT TO AN ACCOUNT IN A
   29  FEDERAL RESERVE BANK OF, OR SPECIFIED BY, THE PERSON TO RECEIVE  SETTLE-
   30  MENT; AND
   31    (2) THE TIME OF SETTLEMENT, IS:
   32    (I)  WITH  RESPECT TO TENDER OF SETTLEMENT BY CASH, A CASHIER'S CHECK,
   33  OR TELLER'S CHECK, WHEN THE CASH OR CHECK IS SENT OR DELIVERED;
   34    (II) WITH RESPECT TO TENDER OF SETTLEMENT BY CREDIT IN AN ACCOUNT IN A
   35  FEDERAL RESERVE BANK, WHEN THE CREDIT IS MADE;
   36    (III) WITH RESPECT TO TENDER OF SETTLEMENT BY A CREDIT OR DEBIT TO  AN
   37  ACCOUNT  IN  A BANK, WHEN THE CREDIT OR DEBIT IS MADE OR, IN THE CASE OF
   38  TENDER OF SETTLEMENT BY AUTHORITY TO CHARGE AN ACCOUNT, WHEN THE AUTHOR-
   39  ITY IS SENT OR DELIVERED; OR
   40    (IV) WITH RESPECT TO TENDER OF SETTLEMENT BY A  FUNDS  TRANSFER,  WHEN
   41  PAYMENT  IS MADE PURSUANT TO SECTION 4-A--406(A) TO THE PERSON RECEIVING
   42  SETTLEMENT.
   43    (B) IF THE TENDER OF SETTLEMENT IS  NOT  BY  A  MEDIUM  AUTHORIZED  BY
   44  SUBSECTION (A) OR THE TIME OF SETTLEMENT IS NOT FIXED BY SUBSECTION (A),
   45  NO  SETTLEMENT  OCCURS UNTIL THE TENDER OF SETTLEMENT IS ACCEPTED BY THE
   46  PERSON RECEIVING SETTLEMENT.
   47    (C) IF SETTLEMENT FOR AN ITEM IS MADE BY CASHIER'S CHECK  OR  TELLER'S
   48  CHECK AND THE PERSON RECEIVING SETTLEMENT, BEFORE ITS MIDNIGHT DEADLINE:
   49    (1) PRESENTS OR FORWARDS THE CHECK FOR COLLECTION, SETTLEMENT IS FINAL
   50  WHEN THE CHECK IS FINALLY PAID; OR
   51    (2)  FAILS  TO PRESENT OR FORWARD THE CHECK FOR COLLECTION, SETTLEMENT
   52  IS FINAL AT THE MIDNIGHT DEADLINE OF THE PERSON RECEIVING SETTLEMENT.
   53    (D) IF SETTLEMENT FOR AN ITEM IS MADE BY GIVING  AUTHORITY  TO  CHARGE
   54  THE  ACCOUNT OF THE BANK GIVING SETTLEMENT IN THE BANK RECEIVING SETTLE-
   55  MENT, SETTLEMENT IS FINAL WHEN THE CHARGE IS MADE BY THE BANK  RECEIVING
       S. 4608                            41
    1  SETTLEMENT,  IF  THERE ARE FUNDS AVAILABLE IN THE ACCOUNT FOR THE AMOUNT
    2  OF THE ITEM.
    3  SECTION 4--214. RIGHT  OF CHARGE-BACK OR REFUND; LIABILITY OF COLLECTING
    4                    BANK; RETURN OF ITEM.
    5    (A) IF A COLLECTING BANK HAS  MADE  PROVISIONAL  SETTLEMENT  WITH  ITS
    6  CUSTOMER  FOR  AN  ITEM  AND  FAILS BY REASON OF DISHONOR, SUSPENSION OF
    7  PAYMENTS BY A BANK, OR OTHERWISE, TO RECEIVE  SETTLEMENT  FOR  THE  ITEM
    8  WHICH  IS  OR BECOMES FINAL, THE BANK MAY REVOKE THE SETTLEMENT GIVEN BY
    9  IT, CHARGE BACK THE AMOUNT OF ANY CREDIT  GIVEN  FOR  THE  ITEM  TO  ITS
   10  CUSTOMER'S  ACCOUNT,  OR OBTAIN REFUND FROM ITS CUSTOMER, WHETHER OR NOT
   11  IT IS ABLE TO RETURN THE ITEM, IF BY ITS MIDNIGHT DEADLINE, OR WITHIN  A
   12  LONGER REASONABLE TIME AFTER IT LEARNS THE FACTS, IT RETURNS THE ITEM OR
   13  SENDS  NOTIFICATION  OF  THE  FACTS.  IF THE RETURN OR NOTICE IS DELAYED
   14  BEYOND THE BANK'S MIDNIGHT DEADLINE, OR A LONGER REASONABLE  TIME  AFTER
   15  IT LEARNS THE FACTS, THE BANK MAY REVOKE THE SETTLEMENT, CHARGE BACK THE
   16  CREDIT,  OR  OBTAIN  REFUND  FROM ITS CUSTOMER, BUT IT IS LIABLE FOR ANY
   17  LOSS RESULTING FROM THE DELAY. THESE RIGHTS TO REVOKE, CHARGE BACK,  AND
   18  OBTAIN  REFUND  TERMINATE IF AND WHEN A SETTLEMENT FOR THE ITEM RECEIVED
   19  BY THE BANK IS OR BECOMES FINAL.
   20    (B) A COLLECTING BANK RETURNS AN ITEM WHEN IT IS SENT OR DELIVERED  TO
   21  THE BANK'S CUSTOMER OR TRANSFEROR, OR PURSUANT TO ITS INSTRUCTIONS.
   22    (C)  A  DEPOSITARY  BANK  THAT  IS  ALSO THE PAYOR MAY CHARGE BACK THE
   23  AMOUNT OF AN ITEM TO ITS  CUSTOMER'S  ACCOUNT  OR  OBTAIN  A  REFUND  IN
   24  ACCORDANCE  WITH  THE  SECTION GOVERNING RETURN OF AN ITEM RECEIVED BY A
   25  PAYOR BANK FOR CREDIT ON ITS BOOKS (SECTION 4--301).
   26    (D) THE RIGHT TO CHARGE BACK IS NOT AFFECTED BY:
   27    (1) PREVIOUS USE OF A CREDIT GIVEN FOR THE ITEM; OR
   28    (2) FAILURE BY ANY BANK TO EXERCISE ORDINARY CARE WITH RESPECT TO  THE
   29  ITEM, BUT A BANK SO FAILING REMAINS LIABLE.
   30    (E)  A  FAILURE  TO  CHARGE BACK OR CLAIM REFUND DOES NOT AFFECT OTHER
   31  RIGHTS OF THE BANK AGAINST THE CUSTOMER OR ANY OTHER PARTY.
   32    (F) IF CREDIT IS GIVEN IN DOLLARS AS THE EQUIVALENT OF THE VALUE OF AN
   33  ITEM PAYABLE IN FOREIGN MONEY, THE DOLLAR AMOUNT OF ANY  CHARGE-BACK  OR
   34  REFUND MUST BE CALCULATED ON THE BASIS OF THE BANK-OFFERED SPOT RATE FOR
   35  THE  FOREIGN MONEY PREVAILING ON THE DAY WHEN THE PERSON ENTITLED TO THE
   36  CHARGE-BACK OR REFUND LEARNS THAT IT WILL NOT  RECEIVE  PAYMENT  IN  THE
   37  ORDINARY COURSE.
   38  SECTION 4--215. FINAL  PAYMENT  OF  ITEM BY PAYOR BANK; WHEN PROVISIONAL
   39                    DEBITS AND CREDITS BECOME FINAL; WHEN CERTAIN  CREDITS
   40                    BECOME AVAILABLE FOR WITHDRAWAL.
   41    (A)  AN  ITEM  IS FINALLY PAID BY A PAYOR BANK WHEN THE BANK HAS FIRST
   42  DONE ANY OF THE FOLLOWING:
   43    (1) PAID FOR THE ITEM IN CASH;
   44    (2) SETTLED FOR THE ITEM WITHOUT HAVING A RIGHT TO REVOKE THE  SETTLE-
   45  MENT UNDER STATUTE, CLEARING-HOUSE RULE, OR AGREEMENT; OR
   46    (3)  MADE  A  PROVISIONAL SETTLEMENT FOR THE ITEM AND FAILED TO REVOKE
   47  THE  SETTLEMENT  IN  THE  TIME  AND   MANNER   PERMITTED   BY   STATUTE,
   48  CLEARING-HOUSE RULE, OR AGREEMENT.
   49    (B)  IF  PROVISIONAL SETTLEMENT FOR AN ITEM DOES NOT BECOME FINAL, THE
   50  ITEM IS NOT FINALLY PAID.
   51    (C) IF PROVISIONAL SETTLEMENT FOR AN ITEM BETWEEN THE  PRESENTING  AND
   52  PAYOR  BANKS IS MADE THROUGH A CLEARING HOUSE OR BY DEBITS OR CREDITS IN
   53  AN ACCOUNT BETWEEN THEM, THEN TO THE EXTENT THAT PROVISIONAL  DEBITS  OR
   54  CREDITS  FOR THE ITEM ARE ENTERED IN ACCOUNTS BETWEEN THE PRESENTING AND
   55  PAYOR BANKS, OR BETWEEN THE PRESENTING AND SUCCESSIVE  PRIOR  COLLECTING
       S. 4608                            42
    1  BANKS  SERIATIM, THEY BECOME FINAL UPON FINAL PAYMENT OF THE ITEM BY THE
    2  PAYOR BANK.
    3    (D) IF A COLLECTING BANK RECEIVES A SETTLEMENT FOR AN ITEM WHICH IS OR
    4  BECOMES FINAL, THE BANK IS ACCOUNTABLE TO ITS CUSTOMER FOR THE AMOUNT OF
    5  THE  ITEM  AND  ANY  PROVISIONAL CREDIT GIVEN FOR THE ITEM IN AN ACCOUNT
    6  WITH ITS CUSTOMER BECOMES FINAL.
    7    (E) SUBJECT TO (I) APPLICABLE LAW STATING A TIME FOR  AVAILABILITY  OF
    8  FUNDS,  AND  (II)  ANY RIGHT OF THE BANK TO APPLY THE CREDIT TO AN OBLI-
    9  GATION OF THE CUSTOMER, CREDIT GIVEN BY A BANK FOR AN ITEM IN A  CUSTOM-
   10  ER'S ACCOUNT BECOMES AVAILABLE FOR WITHDRAWAL AS OF RIGHT:
   11    (1)  IF  THE  BANK HAS RECEIVED A PROVISIONAL SETTLEMENT FOR THE ITEM,
   12  WHEN THE SETTLEMENT BECOMES FINAL AND THE BANK HAS HAD A REASONABLE TIME
   13  TO RECEIVE RETURN OF THE ITEM, AND THE ITEM HAS NOT BEEN RECEIVED WITHIN
   14  THAT TIME;
   15    (2) IF THE BANK IS BOTH THE DEPOSITARY BANK AND THE  PAYOR  BANK,  AND
   16  THE  ITEM  IS  FINALLY PAID, AT THE OPENING OF THE BANK'S SECOND BANKING
   17  DAY FOLLOWING RECEIPT OF THE ITEM.
   18    (F) SUBJECT TO APPLICABLE LAW STATING A TIME FOR AVAILABILITY OF FUNDS
   19  AND ANY RIGHT OF A BANK TO APPLY A DEPOSIT TO AN OBLIGATION OF THE DEPO-
   20  SITOR, A DEPOSIT OF MONEY BECOMES AVAILABLE FOR WITHDRAWAL AS  OF  RIGHT
   21  AT  THE  OPENING  OF  THE  BANK'S  NEXT BANKING DAY AFTER RECEIPT OF THE
   22  DEPOSIT.
   23  SECTION 4--216. INSOLVENCY AND PREFERENCE.
   24    (A) IF AN ITEM IS IN, OR COMES INTO THE  POSSESSION  OF,  A  PAYOR  OR
   25  COLLECTING  BANK THAT SUSPENDS PAYMENT AND THE ITEM HAS NOT BEEN FINALLY
   26  PAID, THE ITEM MUST BE RETURNED BY THE RECEIVER, TRUSTEE,  OR  AGENT  IN
   27  CHARGE  OF  THE  CLOSED BANK TO THE PRESENTING BANK OR THE CLOSED BANK'S
   28  CUSTOMER.
   29    (B) IF A PAYOR BANK FINALLY PAYS AN ITEM AND SUSPENDS PAYMENTS WITHOUT
   30  MAKING A SETTLEMENT FOR THE ITEM WITH ITS  CUSTOMER  OR  THE  PRESENTING
   31  BANK  WHICH  SETTLEMENT IS OR BECOMES FINAL, THE OWNER OF THE ITEM HAS A
   32  PREFERRED CLAIM AGAINST THE PAYOR BANK.
   33    (C) IF A PAYOR BANK GIVES, OR A COLLECTING BANK GIVES OR  RECEIVES,  A
   34  PROVISIONAL SETTLEMENT FOR AN ITEM AND THEREAFTER SUSPENDS PAYMENTS, THE
   35  SUSPENSION  DOES NOT PREVENT OR INTERFERE WITH THE SETTLEMENT'S BECOMING
   36  FINAL IF THE FINALITY OCCURS AUTOMATICALLY UPON  THE  LAPSE  OF  CERTAIN
   37  TIME OR THE HAPPENING OF CERTAIN EVENTS.
   38    (D)  IF  A COLLECTING BANK RECEIVES FROM SUBSEQUENT PARTIES SETTLEMENT
   39  FOR AN ITEM, WHICH SETTLEMENT IS OR BECOMES FINAL, AND THE BANK SUSPENDS
   40  PAYMENTS WITHOUT MAKING A SETTLEMENT FOR  THE  ITEM  WITH  ITS  CUSTOMER
   41  WHICH  SETTLEMENT  IS  OR  BECOMES  FINAL,  THE  OWNER OF THE ITEM HAS A
   42  PREFERRED CLAIM AGAINST THE COLLECTING BANK.
   43                                   PART 3
   44                      COLLECTION OF ITEMS: PAYOR BANKS
   45  SECTION 4--301. POSTING; RECOVERY OF PAYMENT BY RETURN OF ITEMS; TIME OF
   46                    DISHONOR; RETURN OF ITEMS BY PAYOR BANK.
   47    (A) IF A PAYOR BANK SETTLES FOR A DEMAND ITEM OTHER THAN A DOCUMENTARY
   48  DRAFT PRESENTED OTHERWISE THAN FOR IMMEDIATE PAYMENT  OVER  THE  COUNTER
   49  BEFORE MIDNIGHT OF THE BANKING DAY OF RECEIPT, THE PAYOR BANK MAY REVOKE
   50  THE  SETTLEMENT  AND RECOVER THE SETTLEMENT IF, BEFORE IT HAS MADE FINAL
   51  PAYMENT AND BEFORE ITS MIDNIGHT DEADLINE, IT
   52    (1) RETURNS THE ITEM;
   53    (2) RETURNS AN IMAGE OF THE ITEM, IF THE PARTY TO WHICH THE RETURN  IS
   54  MADE HAS ENTERED INTO AN AGREEMENT TO ACCEPT AN IMAGE AS A RETURN OF THE
   55  ITEM AND THE IMAGE IS RETURNED IN ACCORDANCE WITH THAT AGREEMENT; OR
       S. 4608                            43
    1    (3)  SENDS  A RECORD PROVIDING NOTICE OF DISHONOR OR NONPAYMENT IF THE
    2  ITEM IS UNAVAILABLE FOR RETURN.
    3    (B)  IF  A  DEMAND  ITEM IS RECEIVED BY A PAYOR BANK FOR CREDIT ON ITS
    4  BOOKS, IT MAY RETURN THE ITEM OR SEND NOTICE OF DISHONOR AND MAY  REVOKE
    5  ANY  CREDIT GIVEN OR RECOVER THE AMOUNT THEREOF WITHDRAWN BY ITS CUSTOM-
    6  ER, IF IT ACTS WITHIN THE TIME LIMIT AND  IN  THE  MANNER  SPECIFIED  IN
    7  SUBSECTION (A).
    8    (C)  UNLESS  PREVIOUS  NOTICE  OF  DISHONOR  HAS BEEN SENT, AN ITEM IS
    9  DISHONORED AT THE TIME WHEN FOR PURPOSES OF DISHONOR IT IS  RETURNED  OR
   10  NOTICE SENT IN ACCORDANCE WITH THIS SECTION.
   11    (D) AN ITEM IS RETURNED:
   12    (1)  AS  TO  AN  ITEM  PRESENTED  THROUGH A CLEARING HOUSE, WHEN IT IS
   13  DELIVERED TO THE PRESENTING OR LAST COLLECTING BANK OR TO  THE  CLEARING
   14  HOUSE  OR  IS SENT OR DELIVERED IN ACCORDANCE WITH CLEARING HOUSE RULES;
   15  OR
   16    (2) IN ALL OTHER CASES, WHEN IT IS SENT OR  DELIVERED  TO  THE  BANK'S
   17  CUSTOMER OR TRANSFEROR OR PURSUANT TO INSTRUCTIONS.
   18  SECTION 4--302. PAYER'S BANK RESPONSIBILITY FOR LATE RETURN OF ITEM.
   19    (A)  IF AN ITEM IS PRESENTED TO AND RECEIVED BY A PAYOR BANK, THE BANK
   20  IS ACCOUNTABLE FOR THE AMOUNT OF:
   21    (1) A DEMAND ITEM, OTHER THAN A DOCUMENTARY  DRAFT,  WHETHER  PROPERLY
   22  PAYABLE  OR  NOT,  IF  THE BANK, IN ANY CASE IN WHICH IT IS NOT ALSO THE
   23  DEPOSITARY BANK, RETAINS THE ITEM BEYOND MIDNIGHT OF THE BANKING DAY  OF
   24  RECEIPT  WITHOUT SETTLING FOR IT OR, WHETHER OR NOT IT IS ALSO THE DEPO-
   25  SITARY BANK, DOES NOT PAY OR RETURN THE ITEM OR SEND NOTICE OF  DISHONOR
   26  UNTIL AFTER ITS MIDNIGHT DEADLINE; OR
   27    (2)  ANY  OTHER  PROPERLY PAYABLE ITEM UNLESS, WITHIN THE TIME ALLOWED
   28  FOR ACCEPTANCE OR PAYMENT OF THAT ITEM, THE BANK EITHER ACCEPTS OR  PAYS
   29  THE ITEM OR RETURNS IT AND ACCOMPANYING DOCUMENTS.
   30    (B)  THE  LIABILITY  OF  A  PAYOR  BANK  TO  PAY  AN  ITEM PURSUANT TO
   31  SUBSECTION (A) IS SUBJECT TO DEFENSES BASED ON BREACH OF  A  PRESENTMENT
   32  WARRANTY  (SECTION  4--208) OR PROOF THAT THE PERSON SEEKING ENFORCEMENT
   33  OF THE LIABILITY PRESENTED OR TRANSFERRED THE ITEM FOR  THE  PURPOSE  OF
   34  DEFRAUDING THE PAYOR BANK.
   35  SECTION 4--303. WHEN  ITEMS SUBJECT TO NOTICE, STOP-PAYMENT ORDER, LEGAL
   36                    PROCESS, OR  SETOFF;  ORDER  IN  WHICH  ITEMS  MAY  BE
   37                    CHANGED OR CERTIFIED.
   38    (A)  ANY  KNOWLEDGE,  NOTICE, OR STOP-PAYMENT ORDER RECEIVED BY, LEGAL
   39  PROCESS SERVED UPON, OR SETOFF EXERCISED BY A PAYOR BANK COMES TOO  LATE
   40  TO TERMINATE, SUSPEND, OR MODIFY THE BANK'S RIGHT OR DUTY TO PAY AN ITEM
   41  OR  TO  CHARGE  ITS  CUSTOMER'S  ACCOUNT  FOR THE ITEM IF THE KNOWLEDGE,
   42  NOTICE, STOP-PAYMENT ORDER, OR LEGAL PROCESS IS RECEIVED OR SERVED AND A
   43  REASONABLE TIME FOR THE BANK TO ACT THEREON EXPIRES  OR  THE  SETOFF  IS
   44  EXERCISED AFTER THE EARLIEST OF THE FOLLOWING:
   45    (1) THE BANK ACCEPTS OR CERTIFIES THE ITEM;
   46    (2) THE BANK PAYS THE ITEM IN CASH;
   47    (3) THE BANK SETTLES FOR THE ITEM WITHOUT HAVING A RIGHT TO REVOKE THE
   48  SETTLEMENT UNDER STATUTE, CLEARING-HOUSE RULE, OR AGREEMENT;
   49    (4)  THE  BANK  BECOMES  ACCOUNTABLE  FOR THE AMOUNT OF THE ITEM UNDER
   50  SECTION 4--302 DEALING WITH THE PAYOR  BANK'S  RESPONSIBILITY  FOR  LATE
   51  RETURN OF ITEMS; OR
   52    (5)  WITH  RESPECT  TO  CHECKS, A CUTOFF HOUR NO EARLIER THAN ONE HOUR
   53  AFTER THE OPENING OF THE NEXT BANKING DAY AFTER THE BANKING DAY ON WHICH
   54  THE BANK RECEIVED THE CHECK AND NO LATER THAN THE  CLOSE  OF  THAT  NEXT
   55  BANKING  DAY OR, IF NO CUTOFF HOUR IS FIXED, THE CLOSE OF THE NEXT BANK-
   56  ING DAY AFTER THE BANKING DAY ON WHICH THE BANK RECEIVED THE CHECK.
       S. 4608                            44
    1    (B) SUBJECT TO SUBSECTION (A), ITEMS MAY BE ACCEPTED, PAID, CERTIFIED,
    2  OR CHARGED TO THE INDICATED ACCOUNT OF ITS CUSTOMER IN ANY ORDER.
    3                                   PART 4
    4              RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER
    5  SECTION 4--401. WHEN BANK MAY CHARGE CUSTOMER'S ACCOUNT.
    6    (A)  A  BANK MAY CHARGE AGAINST THE ACCOUNT OF A CUSTOMER AN ITEM THAT
    7  IS PROPERLY PAYABLE FROM THE ACCOUNT EVEN THOUGH THE CHARGE  CREATES  AN
    8  OVERDRAFT.  AN  ITEM  IS  PROPERLY  PAYABLE  IF  IT IS AUTHORIZED BY THE
    9  CUSTOMER AND IS IN ACCORDANCE WITH ANY AGREEMENT  BETWEEN  THE  CUSTOMER
   10  AND BANK.
   11    (B)  A  CUSTOMER  IS  NOT LIABLE FOR THE AMOUNT OF AN OVERDRAFT IF THE
   12  CUSTOMER NEITHER SIGNED THE ITEM NOR BENEFITED FROM THE PROCEEDS OF  THE
   13  ITEM.
   14    (C)  A  BANK MAY CHARGE AGAINST THE ACCOUNT OF A CUSTOMER A CHECK THAT
   15  IS OTHERWISE PROPERLY PAYABLE FROM THE ACCOUNT, EVEN THOUGH PAYMENT  WAS
   16  MADE  BEFORE THE DATE OF THE CHECK, UNLESS THE CUSTOMER HAS GIVEN NOTICE
   17  TO THE BANK OF THE  POSTDATING  DESCRIBING  THE  CHECK  WITH  REASONABLE
   18  CERTAINTY.  THE  NOTICE  IS  EFFECTIVE  FOR THE PERIOD STATED IN SECTION
   19  4--403(B) FOR STOP-PAYMENT ORDERS, AND MUST BE RECEIVED AT SUCH TIME AND
   20  IN SUCH MANNER AS TO AFFORD THE BANK A REASONABLE OPPORTUNITY TO ACT  ON
   21  IT  BEFORE THE BANK TAKES ANY ACTION WITH RESPECT TO THE CHECK DESCRIBED
   22  IN SECTION 4--303. IF A BANK CHARGES AGAINST THE ACCOUNT OF A CUSTOMER A
   23  CHECK BEFORE THE DATE STATED IN THE NOTICE OF POSTDATING,  THE  BANK  IS
   24  LIABLE  FOR  DAMAGES  FOR  THE LOSS RESULTING FROM ITS ACT. THE LOSS MAY
   25  INCLUDE DAMAGES FOR DISHONOR OF SUBSEQUENT ITEMS UNDER SECTION 4--402.
   26    (D) A BANK THAT IN GOOD FAITH MAKES PAYMENT TO A HOLDER MAY CHARGE THE
   27  INDICATED ACCOUNT OF ITS CUSTOMER ACCORDING TO:
   28    (1) THE ORIGINAL TERMS OF THE ALTERED ITEM; OR
   29    (2) THE TERMS OF THE COMPLETED ITEM, EVEN THOUGH THE  BANK  KNOWS  THE
   30  ITEM  HAS  BEEN COMPLETED UNLESS THE BANK HAS NOTICE THAT THE COMPLETION
   31  WAS IMPROPER.
   32  SECTION 4--402. BANK'S LIABILITY TO CUSTOMER FOR WRONGFUL DISHONOR, TIME
   33                    OF DETERMINING INSUFFICIENT BALANCE OF ACCOUNT.
   34    (A) EXCEPT AS OTHERWISE PROVIDED IN THIS ARTICLE, A PAYOR BANK  WRONG-
   35  FULLY  DISHONORS  AN ITEM IF IT DISHONORS AN ITEM THAT IS PROPERLY PAYA-
   36  BLE, BUT A BANK MAY DISHONOR AN ITEM  THAT  WOULD  CREATE  AN  OVERDRAFT
   37  UNLESS IT HAS AGREED TO PAY THE OVERDRAFT.
   38    (B)  A  PAYOR  BANK  IS LIABLE TO ITS CUSTOMER FOR DAMAGES PROXIMATELY
   39  CAUSED BY THE WRONGFUL DISHONOR OF AN  ITEM.  LIABILITY  IS  LIMITED  TO
   40  ACTUAL  DAMAGES  PROVED  AND MAY INCLUDE DAMAGES FOR AN ARREST OR PROSE-
   41  CUTION OF THE CUSTOMER  OR  OTHER  CONSEQUENTIAL  DAMAGES.  WHETHER  ANY
   42  CONSEQUENTIAL DAMAGES ARE PROXIMATELY CAUSED BY THE WRONGFUL DISHONOR IS
   43  A QUESTION OF FACT TO BE DETERMINED IN EACH CASE.
   44    (C)  A PAYOR BANK'S DETERMINATION OF THE CUSTOMER'S ACCOUNT BALANCE ON
   45  WHICH A DECISION TO DISHONOR FOR INSUFFICIENCY  OF  AVAILABLE  FUNDS  IS
   46  BASED  MAY  BE MADE AT ANY TIME BETWEEN THE TIME THE ITEM IS RECEIVED BY
   47  THE PAYOR BANK AND THE TIME THAT THE PAYOR  BANK  RETURNS  THE  ITEM  OR
   48  GIVES  NOTICE IN LIEU OF RETURN, AND NO MORE THAN ONE DETERMINATION NEED
   49  BE MADE. IF, AT THE ELECTION OF THE PAYOR  BANK,  A  SUBSEQUENT  BALANCE
   50  DETERMINATION  IS  MADE FOR THE PURPOSE OF REEVALUATING THE BANK'S DECI-
   51  SION TO DISHONOR THE ITEM, THE ACCOUNT BALANCE AT THAT TIME IS  DETERMI-
   52  NATIVE  OF  WHETHER  A  DISHONOR FOR INSUFFICIENCY OF AVAILABLE FUNDS IS
   53  WRONGFUL.
   54  SECTION 4--403. CUSTOMER'S RIGHT TO STOP PAYMENT;  BURDEN  OF  PROOF  OF
   55                    LOSS.
       S. 4608                            45
    1    (A)  A  CUSTOMER  OR  ANY  PERSON AUTHORIZED TO DRAW ON THE ACCOUNT IF
    2  THERE IS MORE THAN ONE PERSON MAY STOP PAYMENT OF ANY ITEM DRAWN ON  THE
    3  CUSTOMER'S ACCOUNT OR CLOSE THE ACCOUNT BY AN ORDER TO THE BANK DESCRIB-
    4  ING THE ITEM OR ACCOUNT WITH REASONABLE CERTAINTY RECEIVED AT A TIME AND
    5  IN  A MANNER THAT AFFORDS THE BANK A REASONABLE OPPORTUNITY TO ACT ON IT
    6  BEFORE ANY ACTION BY THE BANK WITH RESPECT  TO  THE  ITEM  DESCRIBED  IN
    7  SECTION  4--303. IF THE SIGNATURE OF MORE THAN ONE PERSON IS REQUIRED TO
    8  DRAW ON AN ACCOUNT, ANY OF THESE PERSONS MAY STOP PAYMENT OR  CLOSE  THE
    9  ACCOUNT.
   10    (B)  A  STOP-PAYMENT  ORDER IS EFFECTIVE FOR SIX MONTHS, BUT IT LAPSES
   11  AFTER FOURTEEN CALENDAR DAYS IF THE ORIGINAL ORDER WAS ORAL AND WAS  NOT
   12  CONFIRMED  IN  A RECORD WITHIN THAT PERIOD.  A STOP-PAYMENT ORDER MAY BE
   13  RENEWED FOR ADDITIONAL SIX-MONTH PERIODS BY A RECORD GIVEN TO  THE  BANK
   14  WITHIN A PERIOD DURING WHICH THE STOP-PAYMENT ORDER IS EFFECTIVE.
   15    (C)  THE  BURDEN OF ESTABLISHING THE FACT AND AMOUNT OF LOSS RESULTING
   16  FROM THE PAYMENT OF AN ITEM CONTRARY TO A STOP-PAYMENT ORDER OR ORDER TO
   17  CLOSE AN ACCOUNT IS ON THE CUSTOMER. THE LOSS FROM PAYMENT  OF  AN  ITEM
   18  CONTRARY  TO  A  STOP-PAYMENT  ORDER MAY INCLUDE DAMAGES FOR DISHONOR OF
   19  SUBSEQUENT ITEMS UNDER SECTION 4--402.
   20  SECTION 4--404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD.
   21    A BANK IS UNDER NO OBLIGATION TO A CUSTOMER HAVING A CHECKING  ACCOUNT
   22  TO  PAY  A  CHECK, OTHER THAN A CERTIFIED CHECK, WHICH IS PRESENTED MORE
   23  THAN SIX MONTHS AFTER ITS DATE, BUT IT MAY CHARGE ITS CUSTOMER'S ACCOUNT
   24  FOR A PAYMENT MADE THEREAFTER IN GOOD FAITH.
   25  SECTION 4--405. DEATH OR INCOMPETENCE OF CUSTOMER.
   26    (A) A PAYOR OR COLLECTING BANK'S AUTHORITY TO ACCEPT, PAY, OR  COLLECT
   27  AN  ITEM  OR  TO  ACCOUNT  FOR  PROCEEDS OF ITS COLLECTION, IF OTHERWISE
   28  EFFECTIVE, IS NOT RENDERED INEFFECTIVE BY INCOMPETENCE OF A CUSTOMER  OF
   29  EITHER BANK EXISTING AT THE TIME THE ITEM IS ISSUED OR ITS COLLECTION IS
   30  UNDERTAKEN IF THE BANK DOES NOT KNOW OF AN ADJUDICATION OF INCOMPETENCE.
   31  NEITHER  DEATH  NOR  INCOMPETENCE OF A CUSTOMER REVOKES THE AUTHORITY TO
   32  ACCEPT, PAY, COLLECT, OR ACCOUNT UNTIL THE BANK KNOWS  OF  THE  FACT  OF
   33  DEATH  OR OF AN ADJUDICATION OF INCOMPETENCE AND HAS REASONABLE OPPORTU-
   34  NITY TO ACT ON IT.
   35    (B) EVEN WITH KNOWLEDGE, A BANK MAY FOR TEN DAYS  AFTER  THE  DATE  OF
   36  DEATH  PAY OR CERTIFY CHECKS DRAWN ON OR BEFORE THAT DATE UNLESS ORDERED
   37  TO STOP PAYMENT BY A PERSON CLAIMING AN INTEREST IN THE ACCOUNT.
   38  SECTION 4--406. CUSTOMER'S DUTY  TO  DISCOVER  AND  REPORT  UNAUTHORIZED
   39                    SIGNATURE OR ALTERATION.
   40    (A)  A BANK THAT SENDS OR MAKES AVAILABLE TO A CUSTOMER A STATEMENT OF
   41  ACCOUNT SHOWING PAYMENT OF ITEMS FOR THE ACCOUNT SHALL EITHER RETURN  OR
   42  MAKE  AVAILABLE TO THE CUSTOMER THE ITEMS PAID OR PROVIDE INFORMATION IN
   43  THE STATEMENT OF ACCOUNT SUFFICIENT TO ALLOW THE CUSTOMER REASONABLY  TO
   44  IDENTIFY  THE  ITEMS  PAID. THE STATEMENT OF ACCOUNT PROVIDES SUFFICIENT
   45  INFORMATION IF THE ITEM IS DESCRIBED BY ITEM NUMBER, AMOUNT, AND DATE OF
   46  PAYMENT.
   47    (B) IF THE ITEMS ARE NOT RETURNED TO THE CUSTOMER, THE PERSON  RETAIN-
   48  ING  THE  ITEMS  SHALL  EITHER  RETAIN  THE  ITEMS  OR, IF THE ITEMS ARE
   49  DESTROYED, MAINTAIN THE CAPACITY TO FURNISH LEGIBLE COPIES OF THE  ITEMS
   50  UNTIL  THE  EXPIRATION  OF  SEVEN  YEARS  AFTER  RECEIPT OF THE ITEMS. A
   51  CUSTOMER MAY REQUEST AN ITEM FROM THE BANK THAT PAID THE ITEM, AND  THAT
   52  BANK  MUST  PROVIDE IN A REASONABLE TIME EITHER THE ITEM OR, IF THE ITEM
   53  HAS BEEN DESTROYED OR IS NOT OTHERWISE OBTAINABLE, A LEGIBLE COPY OF THE
   54  ITEM.
   55    (C) IF A BANK SENDS OR MAKES AVAILABLE A STATEMENT OF ACCOUNT OR ITEMS
   56  PURSUANT TO  SUBSECTION  (A),  THE  CUSTOMER  MUST  EXERCISE  REASONABLE
       S. 4608                            46
    1  PROMPTNESS  IN EXAMINING THE STATEMENT OR THE ITEMS TO DETERMINE WHETHER
    2  ANY PAYMENT WAS NOT AUTHORIZED BECAUSE OF AN ALTERATION OF  AN  ITEM  OR
    3  BECAUSE  A  PURPORTED  SIGNATURE BY OR ON BEHALF OF THE CUSTOMER WAS NOT
    4  AUTHORIZED.  IF,  BASED ON THE STATEMENT OR ITEMS PROVIDED, THE CUSTOMER
    5  SHOULD REASONABLY HAVE DISCOVERED THE UNAUTHORIZED PAYMENT, THE CUSTOMER
    6  MUST PROMPTLY NOTIFY THE BANK OF THE RELEVANT FACTS.
    7    (D) IF THE BANK PROVES THAT THE CUSTOMER FAILED, WITH  RESPECT  TO  AN
    8  ITEM,  TO  COMPLY  WITH THE DUTIES IMPOSED ON THE CUSTOMER BY SUBSECTION
    9  (C), THE CUSTOMER IS PRECLUDED FROM ASSERTING AGAINST THE BANK:
   10    (1) THE CUSTOMER'S UNAUTHORIZED SIGNATURE OR  ANY  ALTERATION  ON  THE
   11  ITEM,  IF  THE BANK ALSO PROVES THAT IT SUFFERED A LOSS BY REASON OF THE
   12  FAILURE; AND
   13    (2) THE CUSTOMER'S UNAUTHORIZED SIGNATURE OR ALTERATION  BY  THE  SAME
   14  WRONGDOER  ON  ANY  OTHER  ITEM  PAID  IN  GOOD FAITH BY THE BANK IF THE
   15  PAYMENT WAS MADE BEFORE THE BANK RECEIVED NOTICE FROM  THE  CUSTOMER  OF
   16  THE UNAUTHORIZED SIGNATURE OR ALTERATION AND AFTER THE CUSTOMER HAD BEEN
   17  AFFORDED  A  REASONABLE  PERIOD  OF  TIME, NOT EXCEEDING THIRTY DAYS, IN
   18  WHICH TO EXAMINE THE ITEM OR STATEMENT OF ACCOUNT AND NOTIFY THE BANK.
   19    (E) IF SUBSECTION (D) APPLIES AND THE CUSTOMER PROVES  THAT  THE  BANK
   20  FAILED TO EXERCISE ORDINARY CARE IN PAYING THE ITEM AND THAT THE FAILURE
   21  SUBSTANTIALLY  CONTRIBUTED  TO  LOSS,  THE LOSS IS ALLOCATED BETWEEN THE
   22  CUSTOMER PRECLUDED AND THE BANK ASSERTING THE  PRECLUSION  ACCORDING  TO
   23  THE  EXTENT  TO  WHICH  THE  FAILURE  OF  THE  CUSTOMER  TO  COMPLY WITH
   24  SUBSECTION (C) AND THE FAILURE OF THE BANK  TO  EXERCISE  ORDINARY  CARE
   25  CONTRIBUTED  TO  THE  LOSS. IF THE CUSTOMER PROVES THAT THE BANK DID NOT
   26  PAY THE ITEM IN GOOD FAITH, THE PRECLUSION UNDER SUBSECTION (D) DOES NOT
   27  APPLY.
   28    (F) WITHOUT REGARD TO CARE OR LACK OF CARE OF EITHER THE  CUSTOMER  OR
   29  THE BANK, A CUSTOMER WHO DOES NOT WITHIN ONE YEAR AFTER THE STATEMENT OR
   30  ITEMS  ARE  MADE AVAILABLE TO THE CUSTOMER (SUBSECTION (A)) DISCOVER AND
   31  REPORT THE CUSTOMER'S UNAUTHORIZED SIGNATURE ON OR ANY ALTERATION ON THE
   32  ITEM IS PRECLUDED FROM  ASSERTING  AGAINST  THE  BANK  THE  UNAUTHORIZED
   33  SIGNATURE OR ALTERATION. IF THERE IS A PRECLUSION UNDER THIS SUBSECTION,
   34  THE  PAYOR  BANK  MAY  NOT  RECOVER FOR BREACH OF WARRANTY UNDER SECTION
   35  4--208 WITH RESPECT TO THE UNAUTHORIZED SIGNATURE OR ALTERATION TO WHICH
   36  THE PRECLUSION APPLIES.
   37  SECTION 4--407. PAYOR BANK'S RIGHT TO SUBROGATION ON IMPROPER PAYMENT.
   38    IF A PAYOR BANK HAS PAID AN ITEM OVER THE ORDER OF THE DRAWER OR MAKER
   39  TO STOP PAYMENT, OR AFTER AN ACCOUNT HAS BEEN CLOSED, OR OTHERWISE UNDER
   40  CIRCUMSTANCES GIVING A BASIS FOR OBJECTION BY THE DRAWER  OR  MAKER,  TO
   41  PREVENT  UNJUST  ENRICHMENT  AND ONLY TO THE EXTENT NECESSARY TO PREVENT
   42  LOSS TO THE BANK BY REASON OF ITS PAYMENT OF THE ITEM, THE PAYOR BANK IS
   43  SUBROGATED TO THE RIGHTS
   44    (1) OF ANY HOLDER IN DUE COURSE ON THE  ITEM  AGAINST  THE  DRAWER  OR
   45  MAKER;
   46    (2) OF THE PAYEE OR ANY OTHER HOLDER OF THE ITEM AGAINST THE DRAWER OR
   47  MAKER  EITHER ON THE ITEM OR UNDER THE TRANSACTION OUT OF WHICH THE ITEM
   48  AROSE; AND
   49    (3) OF THE DRAWER OR MAKER AGAINST THE PAYEE OR ANY  OTHER  HOLDER  OF
   50  THE ITEM WITH RESPECT TO THE TRANSACTION OUT OF WHICH THE ITEM AROSE.
   51                                   PART 5
   52                      COLLECTION OF DOCUMENTARY DRAFTS
   53  SECTION 4--501. HANDLING   OF  DOCUMENTARY  DRAFTS;  DUTY  TO  SEND  FOR
   54                    PRESENTMENT AND TO NOTIFY CUSTOMER OF DISHONOR.
   55    A BANK THAT TAKES A DOCUMENTARY DRAFT FOR COLLECTION SHALL PRESENT  OR
   56  SEND  THE  DRAFT  AND  ACCOMPANYING  DOCUMENTS FOR PRESENTMENT AND, UPON
       S. 4608                            47
    1  LEARNING THAT THE DRAFT HAS NOT BEEN PAID OR  ACCEPTED  IN  DUE  COURSE,
    2  SHALL REASONABLY NOTIFY ITS CUSTOMER OF THE FACT EVEN THOUGH IT MAY HAVE
    3  DISCOUNTED  OR  BOUGHT  THE DRAFT OR EXTENDED CREDIT AVAILABLE FOR WITH-
    4  DRAWAL AS OF RIGHT.
    5  SECTION 4--502. PRESENTMENT OF "ON ARRIVAL" DRAFTS.
    6    IF  A  DRAFT  OR  THE  RELEVANT  INSTRUCTIONS  REQUIRE PRESENTMENT "ON
    7  ARRIVAL", "WHEN GOODS ARRIVE" OR THE LIKE, THE COLLECTING BANK NEED  NOT
    8  PRESENT UNTIL IN ITS JUDGMENT A REASONABLE TIME FOR ARRIVAL OF THE GOODS
    9  HAS  EXPIRED.    REFUSAL  TO  PAY  OR  ACCEPT BECAUSE THE GOODS HAVE NOT
   10  ARRIVED IS NOT DISHONOR; THE BANK MUST  NOTIFY  ITS  TRANSFEROR  OF  THE
   11  REFUSAL  BUT  NEED NOT PRESENT THE DRAFT AGAIN UNTIL IT IS INSTRUCTED TO
   12  DO SO OR LEARNS OF THE ARRIVAL OF THE GOODS.
   13  SECTION 4--503. RESPONSIBILITY OF  PRESENTING  BANK  FOR  DOCUMENTS  AND
   14                    GOODS; REPORT OF REASONS FOR DISHONOR; REFEREE IN CASE
   15                    OF NEED.
   16    UNLESS  OTHERWISE  INSTRUCTED  AND  EXCEPT AS PROVIDED IN ARTICLE 5, A
   17  BANK PRESENTING A DOCUMENTARY DRAFT:
   18    (1) MUST DELIVER THE DOCUMENTS TO THE  DRAWEE  ON  ACCEPTANCE  OF  THE
   19  DRAFT  IF  IT  IS PAYABLE MORE THAN THREE DAYS AFTER PRESENTMENT; OTHER-
   20  WISE, ONLY ON PAYMENT; AND
   21    (2) UPON DISHONOR, EITHER IN THE CASE OF PRESENTMENT FOR ACCEPTANCE OR
   22  PRESENTMENT FOR PAYMENT, MAY  SEEK  AND  FOLLOW  INSTRUCTIONS  FROM  ANY
   23  REFEREE  IN  CASE  OF NEED DESIGNATED IN THE DRAFT OR, IF THE PRESENTING
   24  BANK DOES NOT CHOOSE TO UTILIZE THE  REFEREE'S  SERVICES,  IT  MUST  USE
   25  DILIGENCE  AND  GOOD  FAITH  TO  ASCERTAIN THE REASON FOR DISHONOR, MUST
   26  NOTIFY ITS TRANSFEROR OF THE DISHONOR AND OF THE RESULTS OF  ITS  EFFORT
   27  TO ASCERTAIN THE REASONS THEREFOR, AND MUST REQUEST INSTRUCTIONS.
   28    HOWEVER  THE  PRESENTING  BANK  IS UNDER NO OBLIGATION WITH RESPECT TO
   29  GOODS REPRESENTED BY THE  DOCUMENTS  EXCEPT  TO  FOLLOW  ANY  REASONABLE
   30  INSTRUCTIONS  REASONABLY  RECEIVED;  IT HAS A RIGHT TO REIMBURSEMENT FOR
   31  ANY EXPENSE INCURRED IN FOLLOWING INSTRUCTIONS AND TO PREPAYMENT  OF  OR
   32  INDEMNITY FOR THOSE EXPENSES.
   33  SECTION 4--504. PRIVILEGE OF PRESENTING BANK TO DEAL WITH GOODS; SECURI-
   34                    TY INTEREST FOR EXPENSES.
   35    (A)  A  PRESENTING  BANK THAT, FOLLOWING THE DISHONOR OF A DOCUMENTARY
   36  DRAFT, HAS REASONABLY REQUESTED INSTRUCTIONS BUT DOES NOT  RECEIVE  THEM
   37  WITHIN  A  REASONABLE  TIME  MAY STORE, SELL, OR OTHERWISE DEAL WITH THE
   38  GOODS IN ANY REASONABLE MANNER.
   39    (B) FOR ITS REASONABLE EXPENSES INCURRED BY  ACTION  UNDER  SUBSECTION
   40  (A)  THE  PRESENTING  BANK  HAS A LIEN UPON THE GOODS OR THEIR PROCEEDS,
   41  WHICH MAY BE FORECLOSED IN THE SAME MANNER AS AN UNPAID SELLER'S LIEN.
   42    S 3. This act shall take effect July 1, 2015; provided,  however,  the
   43  applicability  of  Articles  3  and 4 of the Uniform Commercial Code, as
   44  added by sections one and two of this act, is determined by the  follow-
   45  ing rules:
   46    (a)  Such  Articles  3 and 4 of the Uniform Commercial Code apply to a
   47  negotiable instrument, item, or document of title that is issued,  or  a
   48  bailment  that  arises, on or after the effective date of this act. Such
   49  Articles 3 and 4 of the Uniform Commercial Code, as added by  this  act,
   50  do not apply to a negotiable instrument, item, or document of title that
   51  is  issued  or  a bailment that arises before the effective date of this
   52  act even if the negotiable instrument, item, or  document  of  title  or
   53  bailment would be subject to such articles if the negotiable instrument,
   54  item,  or document of title had been issued or bailment had arisen on or
   55  after the effective date of this act.
       S. 4608                            48
    1    (b) Such Articles 3 and 4 of the Uniform Commercial Code do not  apply
    2  to  a right of action that has accrued before the effective date of this
    3  act.