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Minnesota Session Laws - 1992, Regular Session

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1992 

                        CHAPTER 565-S.F.No. 1644 
           An act relating to commerce; regulating negotiable 
          instruments; adopting the revised article 3 of the 
          Uniform Commercial Code with conforming amendments to 
          articles 1 and 4 approved by the American Law 
          Institute and the National Conference of Commissioners 
          on Uniform State Laws; prohibiting certain methods of 
          authorizing electronic fund transfers from consumer 
          accounts; amending Minnesota Statutes 1990, sections 
          336.1-201; 336.1-207; 336.4-101; 336.4-102; 336.4-103; 
          336.4-104; 336.4-105; 336.4-106; 336.4-107; 336.4-108; 
          336.4-201; 336.4-202; 336.4-203; 336.4-204; 336.4-205; 
          336.4-206; 336.4-207; 336.4-208; 336.4-209; 336.4-210; 
          336.4-211; 336.4-212; 336.4-213; 336.4-214; 336.4-301; 
          336.4-302; 336.4-303; 336.4-401; 336.4-402; 336.4-403; 
          336.4-404; 336.4-405; 336.4-406; 336.4-407; 336.4-501; 
          336.4-502; 336.4-503; 336.4-504; and 541.21; proposing 
          coding for new law in Minnesota Statutes, chapter 336; 
          repealing Minnesota Statutes 1990, sections 336.3-101 
          to 336.3-805; and 336.4-109. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                    REVISED ARTICLE 3 OF THE UNIFORM
COMMERCIAL CODE (NEGOTIABLE INSTRUMENTS)
WITH CONFORMING AMENDMENTS TO ARTICLES 1 AND 4
    Section 1.  Minnesota Statutes 1990, section 336.1-201, is 
amended to read: 
    336.1-201 [GENERAL DEFINITIONS.] 
    Subject to additional definitions contained in the 
subsequent articles of this chapter which are applicable to 
specific articles or parts thereof, and unless the context 
otherwise requires, in this chapter: 
    (1) "Action" in the sense of a judicial proceeding includes 
recoupment, counterclaim, setoff, suit in equity and any other 
proceedings in which rights are determined. 
    (2) "Aggrieved party" means a party entitled to resort to a 
remedy. 
    (3) "Agreement" means the bargain of the parties in fact as 
found in their language or by implication from other 
circumstances including course of dealing or usage of trade or 
course of performance as provided in this chapter (sections 
336.1-205 and 336.2-208).  Whether an agreement has legal 
consequences is determined by the provisions of this chapter, if 
applicable; otherwise by the law of contracts (section 
336.1-103).  (Compare "Contract.") 
    (4) "Bank" means any person engaged in the business of 
banking. 
     (5) "Bearer" means the person in possession of an 
instrument, document of title, or certificated security payable 
to bearer or endorsed in blank. 
     (6) "Bill of lading" means a document evidencing the 
receipt of goods for shipment issued by a person engaged in the 
business of transporting or forwarding goods, and includes an 
airbill.  "Airbill" means a document serving for air 
transportation as a bill of lading does for marine or rail 
transportation, and includes an air consignment note or air 
waybill. 
     (7) "Branch" includes a separately incorporated foreign 
branch of a bank. 
     (8) "Burden of establishing" a fact means the burden of 
persuading the triers of fact that the existence of the fact is 
more probable than its nonexistence. 
     (9) "Buyer in ordinary course of business" means a person 
who in good faith and without knowledge that the sale to that 
person is in violation of the ownership rights or security 
interest of a third party in the goods buys in ordinary course 
from a person in the business of selling goods of that kind but 
does not include a pawnbroker.  All persons who sell minerals or 
the like (including oil and gas) at wellhead or minehead shall 
be deemed to be persons in the business of selling goods of that 
kind.  "Buying" may be for cash or by exchange of other property 
or on secured or unsecured credit and includes receiving goods 
or documents of title under a preexisting contract for sale but 
does not include a transfer in bulk or as security for or in 
total or partial satisfaction of a money debt. 
     (10) "Conspicuous":  A term or clause is conspicuous when 
it is so written that a reasonable person against whom it is to 
operate ought to have noticed it.  A printing heading in 
capitals (as:  NONNEGOTIABLE BILL OF LADING) is conspicuous.  
Language in the body of a form is "conspicuous" if it is in 
larger or other contrasting type or color.  But in a telegram 
any stated term is "conspicuous".  Whether a term or clause is 
"conspicuous" or not is for decision by the court. 
     (11) "Contract" means the total legal obligation which 
results from the parties' agreement as affected by this chapter 
and any other applicable rules of law. (Compare "Agreement.") 
     (12) "Creditor" includes a general creditor, a secured 
creditor, a lien creditor and any representative of creditors, 
including an assignee for the benefit of creditors, a trustee in 
bankruptcy, a receiver in equity and an executor or 
administrator of an insolvent debtor's or assignor's estate. 
     (13) "Defendant" includes a person in the position of 
defendant in a cross-action or counterclaim. 
     (14) "Delivery" with respect to instruments, documents of 
title, chattel paper, or certificated securities means voluntary 
transfer of possession. 
     (15) "Document of title" includes bill of lading, dock 
warrant, dock receipt, warehouse receipt or order for the 
delivery of goods, and also any other document which in the 
regular course of business or financing is treated as adequately 
evidencing that the person in possession of it is entitled to 
receive, hold and dispose of the document and the goods it 
covers.  To be a document of title a document must purport to be 
issued by or addressed to a bailee and purport to cover goods in 
the bailee's possession which are either identified or are 
fungible portions of an identified mass. 
    (16) "Fault" means wrongful act, omission or breach. 
    (17) "Fungible" with respect to goods or securities means 
goods or securities of which any unit is, by nature or usage of 
trade, the equivalent of any other like unit.  Goods which are 
not fungible shall be deemed fungible for the purposes of this 
chapter to the extent that under a particular agreement or 
document unlike units are treated as equivalents. 
    (18) "Genuine" means free of forgery or counterfeiting. 
    (19) "Good faith" means honesty in fact in the conduct or 
transaction concerned. 
    (20) "Holder," means a person who is in possession of a 
document of title or an instrument or a certificated investment 
security drawn, issued, or endorsed to that person or that 
person's order or to bearer or in blank with respect to a 
negotiable instrument, means the person in possession if the 
instrument is payable to bearer or, in the case of an instrument 
payable to an identified person, if the identified person is in 
possession.  "Holder," with respect to a document of title, 
means the person in possession if the goods are deliverable to 
bearer or to the order of the person in possession. 
    (21) To "honor" is to pay or to accept and pay, or where a 
credit so engages to purchase or discount a draft complying with 
the terms of the credit. 
    (22) "Insolvency proceedings" includes any assignment for 
the benefit of creditors or other proceedings intended to 
liquidate or rehabilitate the estate of the person involved. 
    (23) A person is "insolvent" who either has ceased to pay 
debts in the ordinary course of business or cannot pay the debts 
as they become due or is insolvent within the meaning of the 
federal bankruptcy law. 
    (24) "Money" means a medium of exchange authorized or 
adopted by a domestic or foreign government as a part of its 
currency and includes a monetary unit of account established by 
an intergovernmental organization or by agreement between two or 
more nations. 
    (25) A person has "notice" of a fact when that person 
    (a)  has actual knowledge of it; or 
    (b)  has received a notice or notification of it; or 
    (c) from all the facts and circumstances known to that 
person at the time in question, has reason to know that it 
exists. 
    A person "knows" or has "knowledge" of a fact when that 
person has actual knowledge of it.  "Discover" or "learn" or a 
word or phrase of similar import refers to knowledge rather than 
to reason to know.  The time and circumstances under which a 
notice or notification may cease to be effective are not 
determined by this chapter. 
     (26) A person "notifies" or "gives" a notice or 
notification to another by taking such steps as may be 
reasonably required to inform the other in ordinary course 
whether or not such other actually comes to know of it.  A 
person "receives" a notice or notification when 
     (a) it comes to that person's attention; or 
     (b) it is duly delivered at the place of business through 
which the contract was made or at any other place held out by 
that person as the place for receipt of such communications. 
     (27) Notice, knowledge or a notice or notification received 
by an organization is effective for a particular transaction 
from the time when it is brought to the attention of the 
individual conducting that transaction, and in any event from 
the time when it would have been brought to the individual's 
attention if the organization had exercised due diligence.  An 
organization exercises due diligence if it maintains reasonable 
routines for communicating significant information to the person 
conducting the transaction and there is reasonable compliance 
with the routines.  Due diligence does not require an individual 
acting for the organization to communicate information unless 
such communication is part of regular duties or unless the 
individual has reason to know of the transaction and that the 
transaction would be materially affected by the information. 
     (28) "Organization" includes a corporation, government or 
governmental subdivision or agency, business trust, estate, 
trust, partnership or association, two or more persons having a 
joint or common interest, or any other legal or commercial 
entity. 
     (29) "Party," as distinct from "third party," means a 
person who has engaged in a transaction or made an agreement 
within this chapter. 
     (30) "Person" includes an individual or an organization 
(see section 336.1-102). 
     (31) "Presumption" or "presumed" means that the trier of 
fact must find the existence of the fact presumed unless and 
until evidence is introduced which would support a finding of 
its nonexistence. 
     (32) "Purchase" includes taking by sale, discount, 
negotiation, mortgage, pledge, lien, issue or re-issue, gift or 
any other voluntary transaction creating an interest in property.
     (33) "Purchaser" means a person who takes by purchase. 
     (34) "Remedy" means any remedial right to which an 
aggrieved party is entitled with or without resort to a tribunal.
     (35) "Representative" includes an agent, an officer of a 
corporation or association, and a trustee, executor or 
administrator of an estate, or any other person empowered to act 
for another. 
     (36) "Rights" includes remedies. 
     (37) "Security interest" means an interest in personal 
property or fixtures which secures payment or performance of an 
obligation.  The retention or reservation of title by a seller 
of goods notwithstanding shipment or delivery to the buyer 
(section 336.2-401) is limited in effect to a reservation of a 
"security interest".  The term also includes any interest of a 
buyer of accounts or chattel paper which is subject to article 
9.  The special property interest of a buyer of goods on 
identification of those goods to a contract for sale under 
section 336.2-401 is not a "security interest," but a buyer may 
also acquire a "security interest" by complying with article 9.  
Unless a consignment is intended as security, reservation of 
title thereunder is not a "security interest," but a consignment 
in any event is subject to the provisions on consignment sales 
(section 336.2-326).  
      Whether a transaction creates a lease or security interest 
is determined by the facts of each case; however, a transaction 
creates a security interest if the consideration the lessee is 
to pay the lessor for the right to possession and use of the 
goods is an obligation for the term of the lease not subject to 
termination by the lessee, and 
      (a) the original term of the lease is equal to or greater 
than the remaining economic life of the goods, 
      (b) the lessee is bound to renew the lease for the 
remaining economic life of the goods or is bound to become the 
owner of the goods, 
      (c) the lessee has an option to renew the lease for the 
remaining economic life of the goods for no additional 
consideration or nominal additional consideration upon 
compliance with the lease agreement, or 
      (d) the lessee has an option to become the owner of the 
goods for no additional consideration or nominal additional 
consideration upon compliance with the lease agreement. 
      A transaction does not create a security interest merely 
because it provides that 
      (a) the present value of the consideration the lessee is 
obligated to pay the lessor for the right to possession and use 
of the goods is substantially equal to or is greater than the 
fair market value of the goods at the time the lease is entered 
into, 
     (b) the lessee assumes risk of loss of the goods, or agrees 
to pay taxes, insurance, filing, recording, or registration 
fees, or service or maintenance costs with respect to the goods, 
      (c) the lessee has an option to renew the lease or to 
become the owner of the goods, 
      (d) the lessee has an option to renew the lease for a fixed 
rent that is equal to or greater than the reasonably predictable 
fair market rent for the use of the goods for the term of the 
renewal at the time the option is to be performed, or 
      (e) the lessee has an option to become the owner of the 
goods for a fixed price that is equal to or greater than the 
reasonably predictable fair market value of the goods at the 
time the option is to be performed. 
      For purposes of this subsection (37): 
      (x) Additional consideration is not nominal if (i) when the 
option to renew the lease is granted to the lessee the rent is 
stated to be the fair market rent for the use of the goods for 
the term of the renewal determined at the time the option is to 
be performed, or (ii) when the option to become the owner of the 
goods is granted to the lessee the price is stated to be the 
fair market value of the goods determined at the time the option 
is to be performed.  Additional consideration is nominal if it 
is less than the lessee's reasonably predictable cost of 
performing under the lease agreement if the option is not 
exercised; 
      (y) "Reasonably predictable" and "remaining economic life 
of the goods" are to be determined with reference to the facts 
and circumstances at the time the transaction is entered into; 
and 
      (z) "Present value" means the amount as of a date certain 
of one or more sums payable in the future, discounted to the 
date certain.  The discount is determined by the interest rate 
specified by the parties if the rate is not manifestly 
unreasonable at the time the transaction is entered into; 
otherwise, the discount is determined by a commercially 
reasonable rate that takes into account the facts and 
circumstances of each case at the time the transaction was 
entered into. 
     (38) "Send" in connection with any writing or notice means 
to deposit in the mail or deliver for transmission by any other 
usual means of communication with postage or cost of 
transmission provided for and properly addressed and in the case 
of an instrument to an address specified thereon or otherwise 
agreed, or if there be none to any address reasonable under the 
circumstances.  The receipt of any writing or notice within the 
time at which it would have arrived if properly sent has the 
effect of a proper sending. 
     (39) "Signed" includes any symbol executed or adopted by a 
party with present intention to authenticate a writing. 
     (40) "Surety" includes guarantor. 
     (41) "Telegram" includes a message transmitted by radio, 
teletype, cable, any mechanical method of transmission, or the 
like. 
    (42) "Term" means that portion of an agreement which 
relates to a particular matter. 
    (43) "Unauthorized" signature or endorsement means one made 
without actual, implied, or apparent authority and includes a 
forgery. 
    (44) "Value":  Except as otherwise provided with respect to 
negotiable instruments and bank collections (sections 336.3-303, 
336.4-208 336.4-210 and 336.4-209 336.211) a person gives 
"value" for rights by acquiring them 
    (a) in return for a binding commitment to extend credit or 
for the extension of immediately available credit whether or not 
drawn upon and whether or not a chargeback is provided for in 
the event of difficulties in collection; or 
    (b) as security for or in total or partial satisfaction of 
a preexisting claim; or 
    (c) by accepting delivery pursuant to a preexisting 
contract for purchase; or 
    (d) generally, in return for any consideration sufficient 
to support a simple contract. 
    (45) "Warehouse receipt" means a receipt issued by a person 
engaged in the business of storing goods for hire. 
    (46) "Written" or "writing" includes printing, typewriting 
or any other intentional reduction to tangible form. 
    Sec. 2.  Minnesota Statutes 1990, section 336.1-207, is 
amended to read: 
    336.1-207 [PERFORMANCE OR ACCEPTANCE UNDER RESERVATION OF 
RIGHTS.] 
    (1) A party who, with explicit reservation of rights, 
performs or promises performance or assents to performance in a 
manner demanded or offered by the other party does not thereby 
prejudice the rights reserved.  Such words as "without 
prejudice," "under protest" or the like are sufficient.  
    (2) Subsection (1) does not apply to an accord and 
satisfaction. 
 UNIFORM COMMERCIAL CODE 
 ARTICLE 3 - NEGOTIABLE INSTRUMENTS 
 PART 1 
 GENERAL PROVISIONS AND DEFINITIONS
    Sec. 3.  [336.3-101] [SHORT TITLE.] 
    This article may be cited as Uniform Commercial 
Code--Negotiable Instruments. 
    Sec. 4.  [336.3-102] [SUBJECT MATTER.] 
    (a) This article applies to negotiable instruments.  It 
does not apply to money, to payment orders governed by article 
4A, or to securities governed by article 8. 
    (b) If there is conflict between this article and article 4 
or 9, articles 4 and 9 govern. 
    (c) Regulations of the board of governors of the federal 
reserve system and operating circulars of the federal reserve 
banks supersede any inconsistent provision of this article to 
the extent of the inconsistency. 
    Sec. 5.  [336.3-103] [DEFINITIONS.] 
    (a) In this article: 
    (1) "Acceptor" means a drawee who has accepted a draft. 
    (2) "Drawee" means a person ordered in a draft to make 
payment. 
    (3) "Drawer" means a person who signs or is identified in a 
draft as a person ordering payment. 
    (4) "Good faith" means honesty in fact and the observance 
of reasonable commercial standards of fair dealing. 
    (5) "Maker" means a person who signs or is identified in a 
note as a person undertaking to pay. 
    (6) "Order" means a written instruction to pay money signed 
by the person giving the instruction.  The instruction may be 
addressed to any person, including the person giving the 
instruction, or to one or more persons jointly or in the 
alternative but not in succession.  An authorization to pay is 
not an order unless the person authorized to pay is also 
instructed to pay. 
    (7) "Ordinary care" in the case of a person engaged in 
business means observance of reasonable commercial standards, 
prevailing in the area in which the person is located, with 
respect to the business in which the person is engaged.  In the 
case of a bank that takes an instrument for processing for 
collection or payment by automated means, reasonable commercial 
standards do not require the bank to examine the instrument if 
the failure to examine does not violate the bank's prescribed 
procedures and the bank's procedures do not vary unreasonably 
from general banking usage not disapproved by this article or 
article 4. 
     (8) "Party" means a party to an instrument. 
     (9) "Promise" means a written undertaking to pay money 
signed by the person undertaking to pay.  An acknowledgment of 
an obligation by the obligor is not a promise unless the obligor 
also undertakes to pay the obligation. 
     (10) "Prove" with respect to a fact means to meet the 
burden of establishing the fact (section 336.1-201(8)). 
    (11) "Remitter" means a person who purchases an instrument 
from its issuer if the instrument is payable to an identified 
person other than the purchaser. 
    (b) Other definitions applying to this article and the 
sections in which they appear are: 
    "Acceptance," section 336.3-409. 
    "Accommodated party," section 336.3-419. 
    "Accommodation party," section 336.3-419. 
    "Alteration," section 336.3-407. 
    "Anomalous endorsement," section 336.3-205.  
    "Blank endorsement," section 336.3-205.  
    "Cashier's check," section 336.3-104. 
    "Certificate of deposit," section 336.3-104. 
    "Certified check," section 336.3-409.  
    "Check," section 336.3-104. 
    "Consideration," section 336.3-303. 
    "Draft," section 336.3-104. 
    "Endorsement," section 336.3-204.  
    "Endorser," section 336.3-204. 
    "Holder in due course," section 336.3-302. 
    "Incomplete instrument," section 336.3-115. 
    "Instrument," section 336.3-104. 
    "Issue," section 336.3-105. 
    "Issuer," section 336.3-105. 
    "Negotiable instrument," section 336.3-104. 
    "Negotiation," section 336.3-201. 
    "Note," section 336.3-104. 
    "Payable at a definite time," section 336.3-108. 
    "Payable on demand," section 336.3-108. 
    "Payable to bearer," section 336.3-109. 
    "Payable to order," section 336.3-109. 
    "Payment," section 336.3-602. 
    "Person entitled to enforce," section 336.3-301. 
    "Presentment," section 336.3-501. 
    "Reacquisition," section 336.3-207. 
    "Special endorsement," section 336.3-205.  
    "Teller's check," section 336.3-104. 
    "Transfer of instrument," section 336.3-203. 
    "Traveler's check," section 336.3-104. 
    "Value," section 336.3-303. 
    (c) The following definitions in other articles apply to 
this article: 
    "Bank," section 336.4-105. 
    "Banking day," section 336.4-104. 
    "Clearinghouse," section 336.4-104. 
    "Collecting bank," section 336.4-105. 
    "Depositary bank," section 336.4-105. 
    "Documentary draft," section 336.4-104. 
    "Intermediary bank," section 336.4-105. 
    "Item," section 336.4-104. 
    "Payor bank," section 336.4-105. 
    "Suspends payments," section 336.4-104. 
    (d) In addition, article 1 contains general definitions and 
principles of construction and interpretation applicable 
throughout this article. 
    Sec. 6.  [336.3-104] [NEGOTIABLE INSTRUMENT.] 
     (a) Except as provided in subsections (c) and (d), 
"negotiable instrument" means an unconditional promise or order 
to pay a fixed amount of money, with or without interest or 
other charges described in the promise or order, if it: 
     (1) is payable to bearer or to order at the time it is 
issued or first comes into possession of a holder; 
    (2) is payable on demand or at a definite time; and 
     (3) does not state any other undertaking or instruction by 
the person promising or ordering payment to do any act in 
addition to the payment of money, but the promise or order may 
contain (i) an undertaking or power to give, maintain, or 
protect collateral to secure payment, (ii) an authorization or 
power to the holder to confess judgment or realize on or dispose 
of collateral, or (iii) a waiver of the benefit of any law 
intended for the advantage or protection of an obligor. 
     (b) "Instrument" means a negotiable instrument. 
     (c) An order that meets all of the requirements of 
subsection (a), except paragraph (1), and otherwise falls within 
the definition of "check" in subsection (f) is a negotiable 
instrument and a check. 
    (d) A promise or order other than a check is not an 
instrument if, at the time it is issued or first comes into 
possession of a holder, it contains a conspicuous statement, 
however expressed, to the effect that the promise or order is 
not negotiable or is not an instrument governed by this article. 
    (e) An instrument is a "note" if it is a promise and is a 
"draft" if it is an order.  If an instrument falls within the 
definition of both "note" and "draft," a person entitled to 
enforce the instrument may treat it as either. 
     (f) "Check" means (i) a draft, other than a documentary 
draft, payable on demand and drawn on a bank or (ii) a cashier's 
check or teller's check.  An instrument may be a check even 
though it is described on its face by another term, such as 
"money order." 
     (g) "Cashier's check" means a draft with respect to which 
the drawer and drawee are the same bank or branches of the same 
bank. 
    (h) "Teller's check" means a draft drawn by a bank (i) on 
another bank, or (ii) payable at or through a bank. 
     (i) "Traveler's check" means an instrument that (i) is 
payable on demand, (ii) is drawn on or payable at or through a 
bank, (iii) is designated by the term "traveler's check" or by a 
substantially similar term, and (iv) requires, as a condition to 
payment, a countersignature by a person whose specimen signature 
appears on the instrument. 
     (j) "Certificate of deposit" means an instrument containing 
an acknowledgment by a bank that a sum of money has been 
received by the bank and a promise by the bank to repay the sum 
of money.  A certificate of deposit is a note of the bank. 
    Sec. 7.  [336.3-105] [ISSUE OF INSTRUMENT.] 
     (a) "Issue" means the first delivery of an instrument by 
the maker or drawer, whether to a holder or nonholder, for the 
purpose of giving rights on the instrument to any person. 
     (b) An unissued instrument, or an unissued incomplete 
instrument that is completed, is binding on the maker or drawer, 
but nonissuance is a defense.  An instrument that is 
conditionally issued or is issued for a special purpose is 
binding on the maker or drawer, but failure of the condition or 
special purpose to be fulfilled is a defense. 
    (c) "Issuer" applies to issued and unissued instruments and 
means a maker or drawer of an instrument. 
    Sec. 8.  [336.3-106] [UNCONDITIONAL PROMISE OR ORDER.] 
    (a) Except as provided in this section, for the purposes of 
section 336.3-104(a), a promise or order is unconditional unless 
it states (i) an express condition to payment, (ii) that the 
promise or order is subject to or governed by another writing, 
or (iii) that rights or obligations with respect to the promise 
or order are stated in another writing.  A reference to another 
writing does not of itself make the promise or order conditional.
    (b) A promise or order is not made conditional (i) by a 
reference to another writing for a statement of rights with 
respect to collateral, prepayment, or acceleration, or (ii) 
because payment is limited to resort to a particular fund or 
source. 
    (c) If a promise or order requires, as a condition to 
payment, a countersignature by a person whose specimen signature 
appears on the promise or order, the condition does not make the 
promise or order conditional for the purposes of section 
336.3-104(a).  If the person whose specimen signature appears on 
an instrument fails to countersign the instrument, the failure 
to countersign is a defense to the obligation of the issuer, but 
the failure does not prevent a transferee of the instrument from 
becoming a holder of the instrument. 
    (d) If a promise or order at the time it is issued or first 
comes into possession of a holder contains a statement, required 
by applicable statutory or administrative law, to the effect 
that the rights of a holder or transferee are subject to claims 
or defenses that the issuer could assert against the original 
payee, the promise or order is not thereby made conditional for 
the purposes of section 336.3-104(a); but if the promise or 
order is an instrument, there cannot be a holder in due course 
of the instrument. 
    Sec. 9.  [336.3-107] [INSTRUMENT PAYABLE IN FOREIGN MONEY.] 
    Unless the instrument otherwise provides, an instrument 
that states the amount payable in foreign money may be paid in 
the foreign money or in an equivalent amount in dollars 
calculated by using the current bank-offered spot rate at the 
place of payment for the purchase of dollars on the day on which 
the instrument is paid. 
    Sec. 10.  [336.3-108] [PAYABLE ON DEMAND OR AT DEFINITE 
TIME.] 
    (a) A promise or order is "payable on demand" if it (i) 
states that it is payable on demand or at sight, or otherwise 
indicates that it is payable at the will of the holder, or (ii) 
does not state any time of payment. 
    (b) A promise or order is "payable at a definite time" if 
it is payable on elapse of a definite period of time after sight 
or acceptance or at a fixed date or dates or at a time or times 
readily ascertainable at the time the promise or order is 
issued, subject to rights of (i) prepayment, (ii) acceleration, 
(iii) extension at the option of the holder, or (iv) extension 
to a further definite time at the option of the maker or 
acceptor or automatically upon or after a specified act or event.
     (c) If an instrument, payable at a fixed date, is also 
payable upon demand made before the fixed date, the instrument 
is payable on demand until the fixed date and, if demand for 
payment is not made before that date, becomes payable at a 
definite time on the fixed date. 
    Sec. 11.  [336.3-109] [PAYABLE TO BEARER OR TO ORDER.] 
     (a) A promise or order is payable to bearer if it: 
     (1) states that it is payable to bearer or to the order of 
bearer or otherwise indicates that the person in possession of 
the promise or order is entitled to payment; 
     (2) does not state a payee; or 
     (3) states that it is payable to or to the order of cash or 
otherwise indicates that it is not payable to an identified 
person. 
     (b) A promise or order that is not payable to bearer is 
payable to order if it is payable (i) to the order of an 
identified person or (ii) to an identified person or order.  A 
promise or order that is payable to order is payable to the 
identified person. 
   (c) An instrument payable to bearer may become payable to 
an identified person if it is specially endorsed pursuant to 
section 336.3-205(a).  An instrument payable to an identified 
person may become payable to bearer if it is endorsed in blank 
pursuant to section 336.3-205(b). 
    Sec. 12.  [336.3-110] [IDENTIFICATION OF PERSON TO WHOM 
INSTRUMENT IS PAYABLE.] 
     (a) The person to whom an instrument is initially payable 
is determined by the intent of the person, whether or not 
authorized, signing as, or in the name or behalf of, the issuer 
of the instrument.  The instrument is payable to the person 
intended by the signer even if that person is identified in the 
instrument by a name or other identification that is not that of 
the intended person.  If more than one person signs in the name 
or behalf of the issuer of an instrument and all the signers do 
not intend the same person as payee, the instrument is payable 
to any person intended by one or more of the signers. 
     (b) If the signature of the issuer of an instrument is made 
by automated means, such as a check-writing machine, the payee 
of the instrument is determined by the intent of the person who 
supplied the name or identification of the payee, whether or not 
authorized to do so. 
     (c) A person to whom an instrument is payable may be 
identified in any way, including by name, identifying number, 
office, or account number.  For the purpose of determining the 
holder of an instrument, the following rules apply: 
     (1) If an instrument is payable to an account and the 
account is identified only by number, the instrument is payable 
to the person to whom the account is payable.  If an instrument 
is payable to an account identified by number and by the name of 
a person, the instrument is payable to the named person, whether 
or not that person is the owner of the account identified by 
number. 
     (2) If an instrument is payable to: 
     (i) a trust, an estate, or a person described as trustee or 
representative of a trust or estate, the instrument is payable 
to the trustee, the representative, or a successor of either, 
whether or not the beneficiary or estate is also named; 
     (ii) a person described as agent or similar representative 
of a named or identified person, the instrument is payable to 
the represented person, the representative, or a successor of 
the representative; 
     (iii) a fund or organization that is not a legal entity, 
the instrument is payable to a representative of the members of 
the fund or organization; or 
     (iv) an office or to a person described as holding an 
office, the instrument is payable to the named person, the 
incumbent of the office, or a successor to the incumbent. 
     (d) If an instrument is payable to two or more persons 
alternatively, it is payable to any of them and may be 
negotiated, discharged, or enforced by any or all of them in 
possession of the instrument.  If an instrument is payable to 
two or more persons not alternatively, it is payable to all of 
them and may be negotiated, discharged, or enforced only by all 
of them.  If an instrument payable to two or more persons is 
ambiguous as to whether it is payable to the persons 
alternatively, the instrument is payable to the persons 
alternatively. 
    Sec. 13.  [336.3-111] [PLACE OF PAYMENT.] 
    Except as otherwise provided for items in article 4, an 
instrument is payable at the place of payment stated in the 
instrument.  If no place of payment is stated, an instrument is 
payable at the address of the drawee or maker stated in the 
instrument.  If no address is stated, the place of payment is 
the place of business of the drawee or maker.  If a drawee or 
maker has more than one place of business, the place of payment 
is any place of business of the drawee or maker chosen by the 
person entitled to enforce the instrument.  If the drawee or 
maker has no place of business, the place of payment is the 
residence of the drawee or maker. 
    Sec. 14.  [336.3-112] [INTEREST.] 
     (a) Unless otherwise provided in the instrument, (i) an 
instrument is not payable with interest, and (ii) interest on an 
interest-bearing instrument is payable from the date of the 
instrument. 
     (b) Interest may be stated in an instrument as a fixed or 
variable amount of money or it may be expressed as a fixed or 
variable rate or rates.  The amount or rate of interest may be 
stated or described in the instrument in any manner and may 
require reference to information not contained in the 
instrument.  If an instrument provides for interest, but the 
amount of interest payable cannot be ascertained from the 
description, interest is payable at the judgment rate in effect 
at the place of payment of the instrument and at the time 
interest first accrues. 
    Sec. 15.  [336.3-113] [DATE OF INSTRUMENT.] 
    (a) An instrument may be antedated or postdated.  The date 
stated determines the time of payment if the instrument is 
payable at a fixed period after date.  Except as provided in 
section 336.4-401(c), an instrument payable on demand is not 
payable before the date of the instrument. 
     (b) If an instrument is undated, its date is the date of 
its issue or, in the case of an unissued instrument, the date it 
first comes into possession of a holder. 
    Sec. 16.  [336.3-114] [CONTRADICTORY TERMS OF INSTRUMENT.] 
     If an instrument contains contradictory terms, typewritten 
terms prevail over printed terms, handwritten terms prevail over 
both, and words prevail over numbers. 
    Sec. 17.  [336.3-115] [INCOMPLETE INSTRUMENT.] 
     (a) "Incomplete instrument" means a signed writing, whether 
or not issued by the signer, the contents of which show at the 
time of signing that it is incomplete but that the signer 
intended it to be completed by the addition of words or numbers. 
     (b) Subject to subsection (c), if an incomplete instrument 
is an instrument under section 336.3-104, it may be enforced 
according to its terms if it is not completed, or according to 
its terms as augmented by completion.  If an incomplete 
instrument is not an instrument under section 336.3-104, but, 
after completion, the requirements of section 336.3-104 are met, 
the instrument may be enforced according to its terms as 
augmented by completion. 
    (c) If words or numbers are added to an incomplete 
instrument without authority of the signer, there is an 
alteration of the incomplete instrument under section 336.3-407. 
    (d) The burden of establishing that words or numbers were 
added to an incomplete instrument without authority of the 
signer is on the person asserting the lack of authority. 
    Sec. 18.  [336.3-116] [JOINT AND SEVERAL LIABILITY; 
CONTRIBUTION.] 
     (a) Except as otherwise provided in the instrument, two or 
more persons who have the same liability on an instrument as 
makers, drawers, acceptors, endorsers who endorse as joint 
payees, or anomalous endorsers are jointly and severally liable 
in the capacity in which they sign. 
    (b) Except as provided in section 336.3-419(e) or by 
agreement of the affected parties, a party having joint and 
several liability who pays the instrument is entitled to receive 
from any party having the same joint and several liability 
contribution in accordance with applicable law. 
     (c) Discharge of one party having joint and several 
liability by a person entitled to enforce the instrument does 
not affect the right under subsection (b) of a party having the 
same joint and several liability to receive contribution from 
the party discharged. 
    Sec. 19.  [336.3-117] [OTHER AGREEMENTS AFFECTING 
INSTRUMENT.] 
    Subject to applicable law regarding exclusion of proof of 
contemporaneous or previous agreements, the obligation of a 
party to an instrument to pay the instrument may be modified, 
supplemented, or nullified by a separate agreement of the 
obligor and a person entitled to enforce the instrument, if the 
instrument is issued or the obligation is incurred in reliance 
on the agreement or as part of the same transaction giving rise 
to the agreement.  To the extent an obligation is modified, 
supplemented, or nullified by an agreement under this section, 
the agreement is a defense to the obligation. 
    Sec. 20.  [336.3-118] [STATUTE OF LIMITATIONS.] 
     (a) Except as provided in subsection (e), an action to 
enforce the obligation of a party to pay a note payable at a 
definite time must be commenced within six years after the due 
date or dates stated in the note or, if a due date is 
accelerated, within six years after the accelerated due date. 
     (b) Except as provided in subsection (d) or (e), if demand 
for payment is made to the maker of a note payable on demand, an 
action to enforce the obligation of a party to pay the note must 
be commenced within six years after the demand.  If no demand 
for payment is made to the maker, an action to enforce the note 
is barred if neither principal nor interest on the note has been 
paid for a continuous period of ten years. 
     (c) Except as provided in subsection (d), an action to 
enforce the obligation of a party to an unaccepted draft to pay 
the draft must be commenced within three years after dishonor of 
the draft or ten years after the date of the draft, whichever 
period expires first. 
    (d) An action to enforce the obligation of the acceptor of 
a certified check or the issuer of a teller's check, cashier's 
check, or traveler's check must be commenced within three years 
after demand for payment is made to the acceptor or issuer, as 
the case may be. 
    (e) An action to enforce the obligation of a party to a 
certificate of deposit to pay the instrument must be commenced 
within six years after demand for payment is made to the maker, 
but if the instrument states a due date and the maker is not 
required to pay before that date, the six-year period begins 
when a demand for payment is in effect and the due date has 
passed. 
    (f) An action to enforce the obligation of a party to pay 
an accepted draft, other than a certified check, must be 
commenced (i) within six years after the due date or dates 
stated in the draft or acceptance if the obligation of the 
acceptor is payable at a definite time, or (ii) within six years 
after the date of the acceptance if the obligation of the 
acceptor is payable on demand. 
    (g) Unless governed by other law regarding claims for 
indemnity or contribution, an action (i) for conversion of an 
instrument, for money had and received, or like action based on 
conversion, (ii) for breach of warranty, or (iii) to enforce an 
obligation, duty, or right arising under this article and not 
governed by this section must be commenced within three years 
after the cause of action accrues. 
    Sec. 21.  [336.3-119] [NOTICE OF RIGHT TO DEFEND ACTION.] 
    In an action for breach of an obligation for which a third 
person is answerable over pursuant to this article or article 4, 
the defendant may give the third person written notice of the 
litigation, and the person notified may then give similar notice 
to any other person who is answerable over.  If the notice 
states (i) that the person notified may come in and defend and 
(ii) that failure to do so will bind the person notified in an 
action later brought by the person giving the notice as to any 
determination of fact common to the two litigations, the person 
notified is so bound unless after seasonable receipt of the 
notice the person notified does come in and defend. 
 PART 2
 NEGOTIATION, TRANSFER, AND ENDORSEMENT
    Sec. 22.  [336.3-201] [NEGOTIATION.] 
    (a) "Negotiation" means a transfer of possession, whether 
voluntary or involuntary, of an instrument by a person other 
than the issuer to a person who thereby becomes its holder. 
    (b) Except for negotiation by a remitter, if an instrument 
is payable to an identified person, negotiation requires 
transfer of possession of the instrument and its endorsement by 
the holder.  If an instrument is payable to bearer, it may be 
negotiated by transfer of possession alone. 
    Sec. 23.  [336.3-202] [NEGOTIATION SUBJECT TO RESCISSION.] 
    (a) Negotiation is effective even if obtained (i) from an 
infant, a corporation exceeding its powers, or a person without 
capacity, (ii) by fraud, duress, or mistake, or (iii) in breach 
of duty or as part of an illegal transaction. 
    (b) To the extent permitted by other law, negotiation may 
be rescinded or may be subject to other remedies, but those 
remedies may not be asserted against a subsequent holder in due 
course or a person paying the instrument in good faith and 
without knowledge of facts that are a basis for rescission or 
other remedy. 
    Sec. 24.  [336.3-203] [TRANSFER OF INSTRUMENT; RIGHTS 
ACQUIRED BY TRANSFER.] 
    (a) An instrument is transferred when it is delivered by a 
person other than its issuer for the purpose of giving to the 
person receiving delivery the right to enforce the instrument. 
    (b) Transfer of an instrument, whether or not the transfer 
is a negotiation, vests in the transferee any right of the 
transferor to enforce the instrument, including any right as a 
holder in due course, but the transferee cannot acquire rights 
of a holder in due course by a transfer, directly or indirectly, 
from a holder in due course if the transferee engaged in fraud 
or illegality affecting the instrument. 
    (c) Unless otherwise agreed, if an instrument is 
transferred for value and the transferee does not become a 
holder because of lack of endorsement by the transferor, the 
transferee has a specifically enforceable right to the 
unqualified endorsement of the transferor, but negotiation of 
the instrument does not occur until the endorsement is made.  
    (d) If a transferor purports to transfer less than the 
entire instrument, negotiation of the instrument does not 
occur.  The transferee obtains no rights under this article and 
has only the rights of a partial assignee. 
    Sec. 25.  [336.3-204] [ENDORSEMENT.] 
    (a) "Endorsement" means a signature, other than that of a 
signer as maker, drawer, or acceptor, that alone or accompanied 
by other words is made on an instrument for the purpose of (i) 
negotiating the instrument, (ii) restricting payment of the 
instrument, or (iii) incurring endorser's liability on the 
instrument, but regardless of the intent of the signer, a 
signature and its accompanying words is an endorsement unless 
the accompanying words, terms of the instrument, place of the 
signature, or other circumstances unambiguously indicate that 
the signature was made for a purpose other than endorsement.  
For the purpose of determining whether a signature is made on an 
instrument, a paper affixed to the instrument is a part of the 
instrument. 
    (b) "Endorser" means a person who makes an endorsement. 
    (c) For the purpose of determining whether the transferee 
of an instrument is a holder, an endorsement that transfers a 
security interest in the instrument is effective as an 
unqualified endorsement of the instrument.  
    (d) If an instrument is payable to a holder under a name 
that is not the name of the holder, endorsement may be made by 
the holder in the name stated in the instrument or in the 
holder's name or both, but signature in both names may be 
required by a person paying or taking the instrument for value 
or collection. 
    Sec. 26.  [336.3-205] [SPECIAL ENDORSEMENT; BLANK 
ENDORSEMENT; ANOMALOUS ENDORSEMENT.] 
    (a) If an endorsement is made by the holder of an 
instrument, whether payable to an identified person or payable 
to bearer, and the endorsement identifies a person to whom it 
makes the instrument payable, it is a "special endorsement."  
When specially endorsed, an instrument becomes payable to the 
identified person and may be negotiated only by the endorsement 
of that person.  The principles stated in section 336.3-110 
apply to special endorsements. 
    (b) If an endorsement is made by the holder of an 
instrument and it is not a special endorsement, it is a "blank 
endorsement."  When endorsed in blank, an instrument becomes 
payable to bearer and may be negotiated by transfer of 
possession alone until specially endorsed. 
    (c) The holder may convert a blank endorsement that 
consists only of a signature into a special endorsement by 
writing, above the signature of the endorser, words identifying 
the person to whom the instrument is made payable. 
    (d) "Anomalous endorsement" means an endorsement made by a 
person who is not the holder of the instrument.  An anomalous 
endorsement does not affect the manner in which the instrument 
may be negotiated. 
    Sec. 27.  [336.3-206] [RESTRICTIVE ENDORSEMENT.] 
    (a) An endorsement limiting payment to a particular person 
or otherwise prohibiting further transfer or negotiation of the 
instrument is not effective to prevent further transfer or 
negotiation of the instrument. 
    (b) An endorsement stating a condition to the right of the 
endorsee to receive payment does not affect the right of the 
endorsee to enforce the instrument.  A person paying the 
instrument or taking it for value or collection may disregard 
the condition, and the rights and liabilities of that person are 
not affected by whether the condition has been fulfilled. 
    (c) If an instrument bears an endorsement (i) described in 
section 336.4-201(b), or (ii) in blank or to a particular bank 
using the words "for deposit," "for collection," or other words 
indicating a purpose of having the instrument collected by a 
bank for the endorser or for a particular account, the following 
rules apply: 
    (1) A person, other than a bank, who purchases the 
instrument when so endorsed converts the instrument unless the 
amount paid for the instrument is received by the endorser or 
applied consistently with the endorsement.  
    (2) A depositary bank that purchases the instrument or 
takes it for collection when so endorsed converts the instrument 
unless the amount paid by the bank with respect to the 
instrument is received by the endorser or applied consistently 
with the endorsement.  
    (3) A payor bank that is also the depositary bank or that 
takes the instrument for immediate payment over the counter from 
a person other than a collecting bank converts the instrument 
unless the proceeds of the instrument are received by the 
endorser or applied consistently with the endorsement.  
    (4) Except as otherwise provided in paragraph (3), a payor 
bank or intermediary bank may disregard the endorsement and is 
not liable if the proceeds of the instrument are not received by 
the endorser or applied consistently with the endorsement.  
    (d) Except for an endorsement covered by subsection (c), if 
an instrument bears an endorsement using words to the effect 
that payment is to be made to the endorsee as agent, trustee, or 
other fiduciary for the benefit of the endorser or another 
person, the following rules apply: 
     (1) Unless there is notice of breach of fiduciary duty as 
provided in section 336.3-307, a person who purchases the 
instrument from the endorsee or takes the instrument from the 
endorsee for collection or payment may pay the proceeds of 
payment or the value given for the instrument to the endorsee 
without regard to whether the endorsee violates a fiduciary duty 
to the endorser. 
    (2) A subsequent transferee of the instrument or person who 
pays the instrument is neither given notice nor otherwise 
affected by the restriction in the endorsement unless the 
transferee or payor knows that the fiduciary dealt with the 
instrument or its proceeds in breach of fiduciary duty. 
    (e) The presence on an instrument of an endorsement to 
which this section applies does not prevent a purchaser of the 
instrument from becoming a holder in due course of the 
instrument unless the purchaser is a converter under subsection 
(c) or has notice or knowledge of breach of fiduciary duty as 
stated in subsection (d). 
    (f) In an action to enforce the obligation of a party to 
pay the instrument, the obligor has a defense if payment would 
violate an endorsement to which this section applies and the 
payment is not permitted by this section. 
    Sec. 28.  [336.3-207] [REACQUISITION.] 
     Reacquisition of an instrument occurs if it is transferred 
to a former holder, by negotiation or otherwise.  A former 
holder who reacquires the instrument may cancel endorsements 
made after the reacquirer first became a holder of the 
instrument.  If the cancellation causes the instrument to be 
payable to the reacquirer or to bearer, the reacquirer may 
negotiate the instrument.  An endorser whose endorsement is 
canceled is discharged, and the discharge is effective against 
any subsequent holder. 
 PART 3
 ENFORCEMENT OF INSTRUMENTS
    Sec. 29.  [336.3-301] [PERSON ENTITLED TO ENFORCE 
INSTRUMENT.] 
    "Person entitled to enforce" an instrument means (i) the 
holder of the instrument, (ii) a nonholder in possession of the 
instrument who has the rights of a holder, or (iii) a person not 
in possession of the instrument who is entitled to enforce the 
instrument pursuant to section 336.3-309 or 336.3-418(d).  A 
person may be a person entitled to enforce the instrument even 
though the person is not the owner of the instrument or is in 
wrongful possession of the instrument. 
    Sec. 30.  [336.3-302] [HOLDER IN DUE COURSE.] 
    (a) Subject to subsection (c) and section 336.3-106(d), 
"holder in due course" means the holder of an instrument if: 
     (1) the instrument when issued or negotiated to the holder 
does not bear such apparent evidence of forgery or alteration or 
is not otherwise so irregular or incomplete as to call into 
question its authenticity; and 
     (2) the holder took the instrument (i) for value, (ii) in 
good faith, (iii) without notice that the instrument is overdue 
or has been dishonored or that there is an uncured default with 
respect to payment of another instrument issued as part of the 
same series, (iv) without notice that the instrument contains an 
unauthorized signature or has been altered, (v) without notice 
of any claim to the instrument described in section 336.3-306, 
and (vi) without notice that any party has a defense or claim in 
recoupment described in section 336.3-305(a). 
    (b) Notice of discharge of a party, other than discharge in 
an insolvency proceeding, is not notice of a defense under 
subsection (a), but discharge is effective against a person who 
became a holder in due course with notice of the discharge.  
Public filing or recording of a document does not of itself 
constitute notice of a defense, claim in recoupment, or claim to 
the instrument. 
    (c) Except to the extent a transferor or predecessor in 
interest has rights as a holder in due course, a person does not 
acquire rights of a holder in due course of an instrument taken 
(i) by legal process or by purchase in an execution, bankruptcy, 
or creditor's sale or similar proceeding, (ii) by purchase as 
part of a bulk transaction not in ordinary course of business of 
the transferor, or (iii) as the successor in interest to an 
estate or other organization. 
    (d) If, under section 336.3-303(a)(1), the promise of 
performance that is the consideration for an instrument has been 
partially performed, the holder may assert rights as a holder in 
due course of the instrument only to the fraction of the amount 
payable under the instrument equal to the value of the partial 
performance divided by the value of the promised performance. 
     (e) If (i) the person entitled to enforce an instrument has 
only a security interest in the instrument and (ii) the person 
obliged to pay the instrument has a defense, claim in 
recoupment, or claim to the instrument that may be asserted 
against the person who granted the security interest, the person 
entitled to enforce the instrument may assert rights as a holder 
in due course only to an amount payable under the instrument 
which, at the time of enforcement of the instrument, does not 
exceed the amount of the unpaid obligation secured. 
    (f) To be effective, notice must be received at a time and 
in a manner that gives a reasonable opportunity to act on it. 
    (g) This section is subject to any law limiting status as a 
holder in due course in particular classes of transactions. 
    Sec. 31.  [336.3-303] [VALUE AND CONSIDERATION.] 
     (a) An instrument is issued or transferred for value if: 
     (1) the instrument is issued or transferred for a promise 
of performance, to the extent the promise has been performed; 
     (2) the transferee acquires a security interest or other 
lien in the instrument other than a lien obtained by judicial 
proceeding; 
     (3) the instrument is issued or transferred as payment of, 
or as security for, an antecedent claim against any person, 
whether or not the claim is due; 
     (4) the instrument is issued or transferred in exchange for 
a negotiable instrument; or 
     (5) the instrument is issued or transferred in exchange for 
the incurring of an irrevocable obligation to a third party by 
the person taking the instrument. 
     (b) "Consideration" means any consideration sufficient to 
support a simple contract.  The drawer or maker of an instrument 
has a defense if the instrument is issued without 
consideration.  If an instrument is issued for a promise of 
performance, the issuer has a defense to the extent performance 
of the promise is due and the promise has not been performed.  
If an instrument is issued for value as stated in subsection 
(a), the instrument is also issued for consideration. 
    Sec. 32.  [336.3-304] [OVERDUE INSTRUMENT.] 
     (a) An instrument payable on demand becomes overdue at the 
earliest of the following times: 
     (1) on the day after the day demand for payment is duly 
made; 
     (2) if the instrument is a check, 90 days after its date; 
or 
     (3) if the instrument is not a check, when the instrument 
has been outstanding for a period of time after its date which 
is unreasonably long under the circumstances of the particular 
case in light of the nature of the instrument and usage of the 
trade. 
     (b) With respect to an instrument payable at a definite 
time the following rules apply: 
     (1) If the principal is payable in installments and a due 
date has not been accelerated, the instrument becomes overdue 
upon default under the instrument for nonpayment of an 
installment, and the instrument remains overdue until the 
default is cured. 
     (2) If the principal is not payable in installments and the 
due date has not been accelerated, the instrument becomes 
overdue on the day after the due date. 
    (3) If a due date with respect to principal has been 
accelerated, the instrument becomes overdue on the day after the 
accelerated due date. 
    (c) Unless the due date of principal has been accelerated, 
an instrument does not become overdue if there is default in 
payment of interest but no default in payment of principal. 
    Sec. 33.  [336.3-305] [DEFENSES AND CLAIMS IN RECOUPMENT.] 
     (a) Except as stated in subsection (b), the right to 
enforce the obligation of a party to pay an instrument is 
subject to the following: 
     (1) a defense of the obligor based on (i) infancy of the 
obligor to the extent it is a defense to a simple contract, (ii) 
duress, lack of legal capacity, or illegality of the transaction 
which, under other law, nullifies the obligation of the obligor, 
(iii) fraud that induced the obligor to sign the instrument with 
neither knowledge nor reasonable opportunity to learn of its 
character or its essential terms, or (iv) discharge of the 
obligor in insolvency proceedings; 
    (2) a defense of the obligor stated in another section of 
this article or a defense of the obligor that would be available 
if the person entitled to enforce the instrument were enforcing 
a right to payment under a simple contract; and 
    (3) a claim in recoupment of the obligor against the 
original payee of the instrument if the claim arose from the 
transaction that gave rise to the instrument; but the claim of 
the obligor may be asserted against a transferee of the 
instrument only to reduce the amount owing on the instrument at 
the time the action is brought. 
    (b) The right of a holder in due course to enforce the 
obligation of a party to pay the instrument is subject to 
defenses of the obligor stated in subsection (a)(1), but is not 
subject to defenses of the obligor stated in subsection (a)(2) 
or claims in recoupment stated in subsection (a)(3) against a 
person other than the holder. 
    (c) Except as stated in subsection (d), in an action to 
enforce the obligation of a party to pay the instrument, the 
obligor may not assert against the person entitled to enforce 
the instrument a defense, claim in recoupment, or claim to the 
instrument (section 336.3-306) of another person, but the other 
person's claim to the instrument may be asserted by the obligor 
if the other person is joined in the action and personally 
asserts the claim against the person entitled to enforce the 
instrument.  An obligor is not obliged to pay the instrument if 
the person seeking enforcement of the instrument does not have 
rights of a holder in due course and the obligor proves that the 
instrument is a lost or stolen instrument. 
    (d) In an action to enforce the obligation of an 
accommodation party to pay an instrument, the accommodation 
party may assert against the person entitled to enforce the 
instrument any defense or claim in recoupment under subsection 
(a) that the accommodated party could assert against the person 
entitled to enforce the instrument, except the defenses of 
discharge in insolvency proceedings, infancy, and lack of legal 
capacity. 
    Sec. 34.  [336.3-306] [CLAIMS TO AN INSTRUMENT.] 
    A person taking an instrument, other than a person having 
rights of a holder in due course, is subject to a claim of a 
property or possessory right in the instrument or its proceeds, 
including a claim to rescind a negotiation and to recover the 
instrument or its proceeds.  A person having rights of a holder 
in due course takes free of the claim to the instrument. 
    Sec. 35.  [336.3-307] [NOTICE OF BREACH OF FIDUCIARY DUTY.] 
    (a) In this section: 
     (1) "Fiduciary" means an agent, trustee, partner, corporate 
officer or director, or other representative owing a fiduciary 
duty with respect to an instrument. 
     (2) "Represented person" means the principal, beneficiary, 
partnership, corporation, or other person to whom the duty 
stated in paragraph (1) is owed. 
     (b) If (i) an instrument is taken from a fiduciary for 
payment or collection or for value, (ii) the taker has knowledge 
of the fiduciary status of the fiduciary, and (iii) the 
represented person makes a claim to the instrument or its 
proceeds on the basis that the transaction of the fiduciary is a 
breach of fiduciary duty, the following rules apply: 
     (1) Notice of breach of fiduciary duty by the fiduciary is 
notice of the claim of the represented person. 
     (2) In the case of an instrument payable to the represented 
person or the fiduciary as such, the taker has notice of the 
breach of fiduciary duty if the instrument is (i) taken in 
payment of or as security for a debt known by the taker to be 
the personal debt of the fiduciary, (ii) taken in a transaction 
known by the taker to be for the personal benefit of the 
fiduciary, or (iii) deposited to an account other than an 
account of the fiduciary, as such, or an account of the 
represented person. 
    (3) If an instrument is issued by the represented person or 
the fiduciary as such, and made payable to the fiduciary 
personally, the taker does not have notice of the breach of 
fiduciary duty unless the taker knows of the breach of fiduciary 
duty. 
    (4) If an instrument is issued by the represented person or 
the fiduciary as such, to the taker as payee, the taker has 
notice of the breach of fiduciary duty if the instrument is (i) 
taken in payment of or as security for a debt known by the taker 
to be the personal debt of the fiduciary, (ii) taken in a 
transaction known by the taker to be for the personal benefit of 
the fiduciary, or (iii) deposited to an account other than an 
account of the fiduciary, as such, or an account of the 
represented person. 
    Sec. 36.  [336.3-308] [PROOF OF SIGNATURES AND STATUS AS 
HOLDER IN DUE COURSE.] 
     (a) In an action with respect to an instrument, the 
authenticity of, and authority to make, each signature on the 
instrument is admitted unless specifically denied in the 
pleadings.  If the validity of a signature is denied in the 
pleadings, the burden of establishing validity is on the person 
claiming validity, but the signature is presumed to be authentic 
and authorized unless the action is to enforce the liability of 
the purported signer and the signer is dead or incompetent at 
the time of trial of the issue of validity of the signature.  If 
an action to enforce the instrument is brought against a person 
as the undisclosed principal of a person who signed the 
instrument as a party to the instrument, the plaintiff has the 
burden of establishing that the defendant is liable on the 
instrument as a represented person under section 336.3-402(a). 
    (b) If the validity of signatures is admitted or proved and 
there is compliance with subsection (a), a plaintiff producing 
the instrument is entitled to payment if the plaintiff proves 
entitlement to enforce the instrument under section 336.3-301, 
unless the defendant proves a defense or claim in recoupment.  
If a defense or claim in recoupment is proved, the right to 
payment of the plaintiff is subject to the defense or claim, 
except to the extent the plaintiff proves that the plaintiff has 
rights of a holder in due course which are not subject to the 
defense or claim. 
    Sec. 37.  [336.3-309] [ENFORCEMENT OF LOST, DESTROYED, OR 
STOLEN INSTRUMENT.] 
    (a) A person not in possession of an instrument is entitled 
to enforce the instrument if (i) the person was in possession of 
the instrument and entitled to enforce it when loss of 
possession occurred, (ii) the loss of possession was not the 
result of a transfer by the person or a lawful seizure, and 
(iii) the person cannot reasonably obtain possession of the 
instrument because the instrument was destroyed, its whereabouts 
cannot be determined, or it is in the wrongful possession of an 
unknown person or a person that cannot be found or is not 
amenable to service of process. 
    (b) A person seeking enforcement of an instrument under 
subsection (a) must prove the terms of the instrument and the 
person's right to enforce the instrument.  If that proof is 
made, section 336.3-308 applies to the case as if the person 
seeking enforcement had produced the instrument.  The court may 
not enter judgment in favor of the person seeking enforcement 
unless it finds that the person required to pay the instrument 
is adequately protected against loss that might occur by reason 
of a claim by another person to enforce the instrument.  
Adequate protection may be provided by any reasonable means. 
    Sec. 38.  [336.3-310] [EFFECT OF INSTRUMENT ON OBLIGATION 
FOR WHICH TAKEN.] 
     (a) Unless otherwise agreed, if a certified check, 
cashier's check, or teller's check is taken for an obligation, 
the obligation is discharged to the same extent discharge would 
result if an amount of money equal to the amount of the 
instrument were taken in payment of the obligation.  Discharge 
of the obligation does not affect any liability that the obligor 
may have as an endorser of the instrument.  
     (b) Unless otherwise agreed and except as provided in 
subsection (a), if a note or an uncertified check is taken for 
an obligation, the obligation is suspended to the same extent 
the obligation would be discharged if an amount of money equal 
to the amount of the instrument were taken, and the following 
rules apply: 
    (1) In the case of an uncertified check, suspension of the 
obligation continues until dishonor of the check or until it is 
paid or certified.  Payment or certification of the check 
results in discharge of the obligation to the extent of the 
amount of the check. 
    (2) In the case of a note, suspension of the obligation 
continues until dishonor of the note or until it is paid.  
Payment of the note results in discharge of the obligation to 
the extent of the payment. 
    (3) Except as provided in paragraph (4), if the check or 
note is dishonored and the obligee of the obligation for which 
the instrument was taken is the person entitled to enforce the 
instrument, the obligee may enforce either the instrument or the 
obligation.  In the case of an instrument of a third person 
which is negotiated to the obligee by the obligor, discharge of 
the obligor on the instrument also discharges the obligation. 
    (4) If the person entitled to enforce the instrument taken 
for an obligation is a person other than the obligee, the 
obligee may not enforce the obligation to the extent the 
obligation is suspended.  If the obligee is the person entitled 
to enforce the instrument but no longer has possession of it 
because it was lost, stolen, or destroyed, the obligation may 
not be enforced to the extent of the amount payable on the 
instrument, and to that extent the obligee's rights against the 
obligor are limited to enforcement of the instrument. 
    (c) If an instrument other than one described in subsection 
(a) or (b) is taken for an obligation, the effect is (i) that 
stated in subsection (a) if the instrument is one on which a 
bank is liable as maker or acceptor, or (ii) that stated in 
subsection (b) in any other case. 
    Sec. 39.  [336.3-311] [ACCORD AND SATISFACTION BY USE OF 
INSTRUMENT.] 
     (a) If a person against whom a claim is asserted proves 
that (i) that person in good faith tendered an instrument to the 
claimant as full satisfaction of the claim, (ii) the amount of 
the claim was unliquidated or subject to a bona fide dispute, 
and (iii) the claimant obtained payment of the instrument, the 
following subsections apply. 
     (b) Unless subsection (c) applies, the claim is discharged 
if the person against whom the claim is asserted proves that the 
instrument or an accompanying written communication contained a 
conspicuous statement to the effect that the instrument was 
tendered as full satisfaction of the claim. 
     (c) Subject to subsection (d), a claim is not discharged 
under subsection (b) if either of the following applies: 
     (1) The claimant, if an organization, proves that (i) 
within a reasonable time before the tender, the claimant sent a 
conspicuous statement to the person against whom the claim is 
asserted that communications concerning disputed debts, 
including an instrument tendered as full satisfaction of a debt, 
are to be sent to a designated person, office, or place, and 
(ii) the instrument or accompanying communication was not 
received by that designated person, office, or place. 
     (2) The claimant, whether or not an organization, proves 
that within 90 days after payment of the instrument, the 
claimant tendered repayment of the amount of the instrument to 
the person against whom the claim is asserted.  This paragraph 
does not apply if the claimant is an organization that sent a 
statement complying with paragraph (1)(i). 
     (d) A claim is discharged if the person against whom the 
claim is asserted proves that within a reasonable time before 
collection of the instrument was initiated, the claimant, or an 
agent of the claimant having direct responsibility with respect 
to the disputed obligation, knew that the instrument was 
tendered in full satisfaction of the claim. 
    Sec. 40.  [336.3-312] [LOST, DESTROYED, OR STOLEN CASHIER'S 
CHECK, TELLER'S CHECK, OR CERTIFIED CHECK.] 
    (a) In this section:  
    (1) "Check" means a cashier's check, teller's check, or 
certified check.  
     (2) "Claimant" means a person who claims the right to 
receive the amount of a cashier's check, teller's check, or 
certified check that was lost, destroyed, or stolen.  
    (3) "Declaration of loss" means a written statement, made 
under penalty of perjury, to the effect that (i) the declarer 
lost possession of a check, (ii) the declarer is the drawer or 
payee of the check, in the case of a certified check, or the 
remitter or payee of the check, in the case of a cashier's check 
or teller's check, (iii) the loss of possession was not the 
result of a transfer by the declarer or a lawful seizure, and 
(iv) the declarer cannot reasonably obtain possession of the 
check because the check was destroyed, its whereabouts cannot be 
determined, or it is in the wrongful possession of an unknown 
person or a person that cannot be found or is not amenable to 
service of process.  
    (4) "Obligated bank" means the issuer of a cashier's check 
or teller's check or the acceptor of a certified check.  
    (b) A claimant may assert a claim to the amount of a check 
by a communication to the obligated bank describing the check 
with reasonable certainty and requesting payment of the amount 
of the check, if (i) the claimant is the drawer or payee of a 
certified check or the remitter or payee of a cashier's check or 
teller's check, (ii) the communication contains or is 
accompanied by a declaration of loss of the claimant with 
respect to the check, (iii) the communication is received at a 
time and in a manner affording the bank a reasonable time to act 
on it before the check is paid, and (iv) the claimant provides 
reasonable identification if requested by the obligated bank.  
Delivery of a declaration of loss is a warranty of the truth of 
the statements made in the declaration.  If a claim is asserted 
in compliance with this subsection, the following rules apply:  
    (1) The claim becomes enforceable at the later of (i) the 
time the claim is asserted, or (ii) the 90th day following the 
date of the check, in the case of a cashier's check or teller's 
check, or the 90th day following the date of the acceptance, in 
the case of a certified check.  
    (2) Until the claim becomes enforceable, it has no legal 
effect and the obligated bank must pay the check or, in the case 
of a teller's check, may permit the drawee to pay the check.  
Payment to a person entitled to enforce the check discharges all 
liability of the obligated bank with respect to the check.  
     (3) If the claim becomes enforceable before the check is 
presented for payment, the obligated bank is not obliged to pay 
the check.  
     (4) When the claim becomes enforceable, the obligated bank 
becomes obliged to pay the amount of the check to the claimant 
if payment of the check has not been made to a person entitled 
to enforce the check.  Subject to section 336.4-302(a)(1), 
payment to the claimant discharges all liability of the 
obligated bank with respect to the check.  
    (c) If the obligated bank pays the amount of a check to a 
claimant under subsection (b)(4) and the check is presented for 
payment by a person having rights of a holder in due course, the 
claimant is obliged to (i) refund the payment to the obligated 
bank if the check is paid, or (ii) pay the amount of the check 
to the person having rights of a holder in due course if the 
check is dishonored.  
    (d) If a claimant has the right to assert a claim under 
subsection (b) and is also a person entitled to enforce a 
cashier's check, teller's check, or certified check which is 
lost, destroyed, or stolen, the claimant may assert rights with 
respect to the check either under this section or section 
336.3-309. 
 PART 4 
 LIABILITY OF PARTIES 
    Sec. 41.  [336.3-401] [SIGNATURE.] 
    (a) A person is not liable on an instrument unless (i) the 
person signed the instrument, or (ii) the person is represented 
by an agent or representative who signed the instrument and the 
signature is binding on the represented person under section 
336.3-402.  
    (b) A signature may be made (i) manually or by means of a 
device or machine, and (ii) by the use of any name, including a 
trade or assumed name, or by a word, mark, or symbol executed or 
adopted by a person with present intention to authenticate a 
writing.  
    Sec. 42.  [336.3-402] [SIGNATURE BY REPRESENTATIVE.] 
    (a) If a person acting, or purporting to act, as a 
representative signs an instrument by signing either the name of 
the represented person or the name of the signer, the 
represented person is bound by the signature to the same extent 
the represented person would be bound if the signature were on a 
simple contract.  If the represented person is bound, the 
signature of the representative is the "authorized signature of 
the represented person" and the represented person is liable on 
the instrument, whether or not identified in the instrument.  
     (b) If a representative signs the name of the 
representative to an instrument and the signature is an 
authorized signature of the represented person, the following 
rules apply:  
     (1) If the form of the signature shows unambiguously that 
the signature is made on behalf of the represented person who is 
identified in the instrument, the representative is not liable 
on the instrument.  
    (2) Subject to subsection (c), if (i) the form of the 
signature does not show unambiguously that the signature is made 
in a representative capacity or (ii) the represented person is 
not identified in the instrument, the representative is liable 
on the instrument to a holder in due course that took the 
instrument without notice that the representative was not 
intended to be liable on the instrument.  With respect to any 
other person, the representative is liable on the instrument 
unless the representative proves that the original parties did 
not intend the representative to be liable on the instrument. 
    (c) If a representative signs the name of the 
representative as drawer of a check without indication of the 
representative status and the check is payable from an account 
of the represented person who is identified on the check, the 
signer is not liable on the check if the signature is an 
authorized signature of the represented person.  
    Sec. 43.  [336.3-403] [UNAUTHORIZED SIGNATURE.] 
    (a) Unless otherwise provided in this article or article 4, 
an unauthorized signature is ineffective except as the signature 
of the unauthorized signer in favor of a person who in good 
faith pays the instrument or takes it for value.  An 
unauthorized signature may be ratified for all purposes of this 
article.  
    (b) If the signature of more than one person is required to 
constitute the authorized signature of an organization, the 
signature of the organization is unauthorized if one of the 
required signatures is lacking.  
    (c) The civil or criminal liability of a person who makes 
an unauthorized signature is not affected by any provision of 
this article which makes the unauthorized signature effective 
for the purposes of this article. 
    Sec. 44.  [336.3-404] [IMPOSTORS; FICTITIOUS PAYEES.] 
    (a) If an impostor, by use of the mails or otherwise, 
induces the issuer of an instrument to issue the instrument to 
the impostor, or to a person acting in concert with the 
impostor, by impersonating the payee of the instrument or a 
person authorized to act for the payee, an endorsement of the 
instrument by any person in the name of the payee is effective 
as the endorsement of the payee in favor of a person who, in 
good faith, pays the instrument or takes it for value or for 
collection.  
     (b) If (i) a person whose intent determines to whom an 
instrument is payable (section 336.3-110(a) or (b)) does not 
intend the person identified as payee to have any interest in 
the instrument, or (ii) the person identified as payee of an 
instrument is a fictitious person, the following rules apply 
until the instrument is negotiated by special endorsement:  
     (1) Any person in possession of the instrument is its 
holder.  
    (2) An endorsement by any person in the name of the payee 
stated in the instrument is effective as the endorsement of the 
payee in favor of a person who, in good faith, pays the 
instrument or takes it for value or for collection.  
    (c) Under subsection (a) or (b), an endorsement is made in 
the name of a payee if (i) it is made in a name substantially 
similar to that of the payee or (ii) the instrument, whether or 
not endorsed, is deposited in a depositary bank to an account in 
a name substantially similar to that of the payee.  
    (d) With respect to an instrument to which subsection (a) 
or (b) applies, if a person paying the instrument or taking it 
for value or for collection fails to exercise ordinary care in 
paying or taking the instrument and that failure substantially 
contributes to loss resulting from payment of the instrument, 
the person bearing the loss may recover from the person failing 
to exercise ordinary care to the extent the failure to exercise 
ordinary care contributed to the loss.  
    Sec. 45.  [336.3-405] [EMPLOYER'S RESPONSIBILITY FOR 
FRAUDULENT ENDORSEMENT BY EMPLOYEE.] 
    (a) In this section:  
    (1) "Employee" includes an independent contractor and 
employee of an independent contractor retained by the employer.  
    (2) "Fraudulent endorsement" means (i) in the case of an 
instrument payable to the employer, a forged endorsement 
purporting to be that of the employer, or (ii) in the case of an 
instrument with respect to which the employer is the issuer, a 
forged endorsement purporting to be that of the person 
identified as payee. 
    (3) "Responsibility" with respect to instruments means 
authority (i) to sign or endorse instruments on behalf of the 
employer, (ii) to process instruments received by the employer 
for bookkeeping purposes, for deposit to an account, or for 
other disposition, (iii) to prepare or process instruments for 
issue in the name of the employer, (iv) to supply information 
determining the names or addresses of payees of instruments to 
be issued in the name of the employer, (v) to control the 
disposition of instruments to be issued in the name of the 
employer, or (vi) to act otherwise with respect to instruments 
in a responsible capacity.  "Responsibility" does not include 
authority that merely allows an employee to have access to 
instruments or blank or incomplete instrument forms that are 
being stored or transported or are part of incoming or outgoing 
mail, or similar access.  
    (b) For the purpose of determining the rights and 
liabilities of a person who, in good faith, pays an instrument 
or takes it for value or for collection, if an employer 
entrusted an employee with responsibility with respect to the 
instrument and the employee or a person acting in concert with 
the employee makes a fraudulent endorsement of the instrument, 
the endorsement is effective as the endorsement of the person to 
whom the instrument is payable if it is made in the name of that 
person.  If the person paying the instrument or taking it for 
value or for collection fails to exercise ordinary care in 
paying or taking the instrument and that failure substantially 
contributes to loss resulting from the fraud, the person bearing 
the loss may recover from the person failing to exercise 
ordinary care to the extent the failure to exercise ordinary 
care contributed to the loss.  
    (c) Under subsection (b), an endorsement is made in the 
name of the person to whom an instrument is payable if (i) it is 
made in a name substantially similar to the name of that person 
or (ii) the instrument, whether or not endorsed, is deposited in 
a depositary bank to an account in a name substantially similar 
to the name of that person.  
    Sec. 46.  [336.3-406] [NEGLIGENCE CONTRIBUTING TO FORGED 
SIGNATURE OR ALTERATION OF INSTRUMENT.] 
    (a) A person whose failure to exercise ordinary care 
substantially contributes to an alteration of an instrument or 
to the making of a forged signature on an instrument is 
precluded from asserting the alteration or the forgery against a 
person who, in good faith, pays the instrument or takes it for 
value or for collection.  
    (b) Under subsection (a), if the person asserting the 
preclusion fails to exercise ordinary care in paying or taking 
the instrument and that failure substantially contributes to 
loss, the loss is allocated between the person precluded and the 
person asserting the preclusion according to the extent to which 
the failure of each to exercise ordinary care contributed to the 
loss.  
    (c) Under subsection (a), the burden of proving failure to 
exercise ordinary care is on the person asserting the preclusion.
Under subsection (b), the burden of proving failure to exercise 
ordinary care is on the person precluded.  
    Sec. 47.  [336.3-407] [ALTERATION.] 
    (a) "Alteration" means (i) an unauthorized change in an 
instrument that purports to modify in any respect the obligation 
of a party, or (ii) an unauthorized addition of words or numbers 
or other change to an incomplete instrument relating to the 
obligation of a party.  
    (b) Except as provided in subsection (c), an alteration 
fraudulently made discharges a party whose obligation is 
affected by the alteration unless that party assents or is 
precluded from asserting the alteration.  No other alteration 
discharges a party, and the instrument may be enforced according 
to its original terms.  
    (c) A payor bank or drawee paying a fraudulently altered 
instrument or a person taking it for value, in good faith and 
without notice of the alteration, may enforce rights with 
respect to the instrument (i) according to its original terms, 
or (ii) in the case of an incomplete instrument altered by 
unauthorized completion, according to its terms as completed.  
    Sec. 48.  [336.3-408] [DRAWEE NOT LIABLE ON UNACCEPTED 
DRAFT.] 
    A check or other draft does not of itself operate as an 
assignment of funds in the hands of the drawee available for its 
payment, and the drawee is not liable on the instrument until 
the drawee accepts it. 
    Sec. 49.  [336.3-409] [ACCEPTANCE OF DRAFT; CERTIFIED 
CHECK.] 
    (a) "Acceptance" means the drawee's signed agreement to pay 
a draft as presented.  It must be written on the draft and may 
consist of the drawee's signature alone.  Acceptance may be made 
at any time and becomes effective when notification pursuant to 
instructions is given or the accepted draft is delivered for the 
purpose of giving rights on the acceptance to any person.  
    (b) A draft may be accepted although it has not been signed 
by the drawer, is otherwise incomplete, is overdue, or has been 
dishonored.  
    (c) If a draft is payable at a fixed period after sight and 
the acceptor fails to date the acceptance, the holder may 
complete the acceptance by supplying a date in good faith.  
    (d) "Certified check" means a check accepted by the bank on 
which it is drawn.  Acceptance may be made as stated in 
subsection (a) or by a writing on the check which indicates that 
the check is certified.  The drawee of a check has no obligation 
to certify the check, and refusal to certify is not dishonor of 
the check. 
    Sec. 50.  [336.3-410] [ACCEPTANCE VARYING DRAFT.] 
    (a) If the terms of a drawee's acceptance vary from the 
terms of the draft as presented, the holder may refuse the 
acceptance and treat the draft as dishonored.  In that case, the 
drawee may cancel the acceptance.  
    (b) The terms of a draft are not varied by an acceptance to 
pay at a particular bank or place in the United States, unless 
the acceptance states that the draft is to be paid only at that 
bank or place.  
    (c) If the holder assents to an acceptance varying the 
terms of a draft, the obligation of each drawer and endorser 
that does not expressly assent to the acceptance is discharged.  
    Sec. 51.  [336.3-411] [REFUSAL TO PAY CASHIER'S CHECKS, 
TELLER'S CHECKS, AND CERTIFIED CHECKS.] 
    (a) In this section, "obligated bank" means the acceptor of 
a certified check or the issuer of a cashier's check or teller's 
check bought from the issuer.  
    (b) If the obligated bank wrongfully (i) refuses to pay a 
cashier's check or certified check, (ii) stops payment of a 
teller's check, or (iii) refuses to pay a dishonored teller's 
check, the person asserting the right to enforce the check is 
entitled to compensation for expenses and loss of interest 
resulting from the nonpayment and may recover consequential 
damages if the obligated bank refuses to pay after receiving 
notice of particular circumstances giving rise to the damages. 
    (c) Expenses or consequential damages under subsection (b) 
are not recoverable if the refusal of the obligated bank to pay 
occurs because (i) the bank suspends payments, (ii) the 
obligated bank asserts a claim or defense of the bank that it 
has reasonable grounds to believe is available against the 
person entitled to enforce the instrument, (iii) the obligated 
bank has a reasonable doubt whether the person demanding payment 
is the person entitled to enforce the instrument, or (iv) 
payment is prohibited by law.  
    Sec. 52.  [336.3-412] [OBLIGATION OF ISSUER OF NOTE OR 
CASHIER'S CHECK.] 
    The issuer of a note or cashier's check or other draft 
drawn on the drawer is obliged to pay the instrument (i) 
according to its terms at the time it was issued or, if not 
issued, at the time it first came into possession of a holder, 
or (ii) if the issuer signed an incomplete instrument, according 
to its terms when completed, to the extent stated in sections 
336.3-115 and 336.3-407.  The obligation is owed to a person 
entitled to enforce the instrument or to an endorser who paid 
the instrument under section 336.3-415. 
    Sec. 53.  [336.3-413] [OBLIGATION OF ACCEPTOR.] 
    (a) The acceptor of a draft is obliged to pay the draft (i) 
according to its terms at the time it was accepted, even though 
the acceptance states that the draft is payable "as originally 
drawn" or equivalent terms, (ii) if the acceptance varies the 
terms of the draft, according to the terms of the draft as 
varied, or (iii) if the acceptance is of a draft that is an 
incomplete instrument, according to its terms when completed, to 
the extent stated in sections 336.3-115 and 336.3-407.  The 
obligation is owed to a person entitled to enforce the draft or 
to the drawer or an endorser who paid the draft under section 
336.3-414 or 336.3-415.  
    (b) If the certification of a check or other acceptance of 
a draft states the amount certified or accepted, the obligation 
of the acceptor is that amount.  If (i) the certification or 
acceptance does not state an amount, (ii) the amount of the 
instrument is subsequently raised, and (iii) the instrument is 
then negotiated to a holder in due course, the obligation of the 
acceptor is the amount of the instrument at the time it was 
taken by the holder in due course.  
    Sec. 54.  [336.3-414] [OBLIGATION OF DRAWER.] 
    (a) This section does not apply to cashier's checks or 
other drafts drawn on the drawer.  
    (b) If an unaccepted draft is dishonored, the drawer is 
obliged to pay the draft (i) according to its terms at the time 
it was issued or, if not issued, at the time it first came into 
possession of a holder, or (ii) if the drawer signed an 
incomplete instrument, according to its terms when completed, to 
the extent stated in sections 336.3-115 and 336.3-407.  The 
obligation is owed to a person entitled to enforce the draft or 
to an endorser who paid the draft under section 336.3-415.  
    (c) If a draft is accepted by a bank, the drawer is 
discharged, regardless of when or by whom acceptance was 
obtained.  
    (d) If a draft is accepted and the acceptor is not a bank, 
the obligation of the drawer to pay the draft if the draft is 
dishonored by the acceptor is the same as the obligation of an 
endorser under section 336.3-415(a) and (c).  
    (e) If a draft states that it is drawn "without recourse" 
or otherwise disclaims liability of the drawer to pay the draft, 
the drawer is not liable under subsection (b) to pay the draft 
if the draft is not a check.  A disclaimer of the liability 
stated in subsection (b) is not effective if the draft is a 
check.  
    (f) If (i) a check is not presented for payment or given to 
a depositary bank for collection within 30 days after its date, 
(ii) the drawee suspends payments after expiration of the 30-day 
period without paying the check, and (iii) because of the 
suspension of payments, the drawer is deprived of funds 
maintained with the drawee to cover payment of the check, the 
drawer to the extent deprived of funds may discharge its 
obligation to pay the check by assigning to the person entitled 
to enforce the check the rights of the drawer against the drawee 
with respect to the funds. 
    Sec. 55.  [336.3-415] [OBLIGATION OF ENDORSER.] 
    (a) Subject to subsections (b), (c), and (d) and to section 
336.3-419(d), if an instrument is dishonored, an endorser is 
obliged to pay the amount due on the instrument (i) according to 
the terms of the instrument at the time it was endorsed, or (ii) 
if the endorser endorsed an incomplete instrument, according to 
its terms when completed, to the extent stated in sections 
336.3-115 and 336.3-407.  The obligation of the endorser is owed 
to a person entitled to enforce the instrument or to a 
subsequent endorser who paid the instrument under this section.  
    (b) If an endorsement states that it is made "without 
recourse" or otherwise disclaims liability of the endorser, the 
endorser is not liable under subsection (a) to pay the 
instrument.  
    (c) If notice of dishonor of an instrument is required by 
section 336.3-503 and notice of dishonor complying with that 
section is not given to an endorser, the liability of the 
endorser under subsection (a) is discharged.  
    (d) If a draft is accepted by a bank after an endorsement 
is made, the liability of the endorser under subsection (a) is 
discharged.  
    (e) If an endorser of a check is liable under subsection 
(a) and the check is not presented for payment, or given to a 
depositary bank for collection, within 30 days after the day the 
endorsement was made, the liability of the endorser under 
subsection (a) is discharged.  
    Sec. 56.  [336.3-416] [TRANSFER WARRANTIES.] 
    (a) A person who transfers an instrument for consideration 
warrants to the transferee and, if the transfer is by 
endorsement, to any subsequent transferee that:  
    (1) the warrantor is a person entitled to enforce the 
instrument; 
    (2) all signatures on the instrument are authentic and 
authorized; 
    (3) the instrument has not been altered; 
    (4) the instrument is not subject to a defense or claim in 
recoupment of any party which can be asserted against the 
warrantor; and 
    (5) the warrantor has no knowledge of any insolvency 
proceeding commenced with respect to the maker or acceptor or, 
in the case of an unaccepted draft, the drawer.  
    (b) A person to whom the warranties under subsection (a) 
are made and who took the instrument in good faith may recover 
from the warrantor as damages for breach of warranty an amount 
equal to the loss suffered as a result of the breach, but not 
more than the amount of the instrument plus expenses and loss of 
interest incurred as a result of the breach. 
    (c) The warranties stated in subsection (a) cannot be 
disclaimed with respect to checks.  Unless notice of a claim for 
breach of warranty is given to the warrantor within 30 days 
after the claimant has reason to know of the breach and the 
identity of the warrantor, the liability of the warrantor under 
subsection (b) is discharged to the extent of any loss caused by 
the delay in giving notice of the claim.  
    (d) A cause of action for breach of warranty under this 
section accrues when the claimant has reason to know of the 
breach.  
    Sec. 57.  [336.3-417] [PRESENTMENT WARRANTIES.] 
    (a) If an unaccepted draft is presented to the drawee for 
payment or acceptance and the drawee pays or accepts the draft, 
(i) the person obtaining payment or acceptance, at the time of 
presentment, and (ii) a previous transferor of the draft, at the 
time of transfer, warrant to the drawee making payment or 
accepting the draft in good faith that:  
    (1) the warrantor is, or was, at the time the warrantor 
transferred the draft, a person entitled to enforce the draft or 
authorized to obtain payment or acceptance of the draft on 
behalf of a person entitled to enforce the draft; 
     (2) the draft has not been altered; and 
     (3) the warrantor has no knowledge that the signature of 
the drawer of the draft is unauthorized.  
    (b) A drawee making payment may recover from any warrantor 
damages for breach of warranty equal to the amount paid by the 
drawee less the amount the drawee received or is entitled to 
receive from the drawer because of the payment.  In addition, 
the drawee is entitled to compensation for expenses and loss of 
interest resulting from the breach.  The right of the drawee to 
recover damages under this subsection is not affected by any 
failure of the drawee to exercise ordinary care in making 
payment.  If the drawee accepts the draft, breach of warranty is 
a defense to the obligation of the acceptor.  If the acceptor 
makes payment with respect to the draft, the acceptor is 
entitled to recover from any warrantor for breach of warranty 
the amounts stated in this subsection.  
    (c) If a drawee asserts a claim for breach of warranty 
under subsection (a) based on an unauthorized endorsement of the 
draft or an alteration of the draft, the warrantor may defend by 
proving that the endorsement is effective under section 
336.3-404 or 336.3-405 or the drawer is precluded under section 
336.3-406 or 336.4-406 from asserting against the drawee the 
unauthorized endorsement or alteration.  
     (d) If (i) a dishonored draft is presented for payment to 
the drawer or an endorser or (ii) any other instrument is 
presented for payment to a party obliged to pay the instrument, 
and (iii) payment is received, the following rules apply:  
     (1) The person obtaining payment and a prior transferor of 
the instrument warrant to the person making payment in good 
faith that the warrantor is, or was, at the time the warrantor 
transferred the instrument, a person entitled to enforce the 
instrument or authorized to obtain payment on behalf of a person 
entitled to enforce the instrument.  
     (2) The person making payment may recover from any 
warrantor for breach of warranty an amount equal to the amount 
paid plus expenses and loss of interest resulting from the 
breach.  
     (e) The warranties stated in subsections (a) and (d) cannot 
be disclaimed with respect to checks.  Unless notice of a claim 
for breach of warranty is given to the warrantor within 30 days 
after the claimant has reason to know of the breach and the 
identity of the warrantor, the liability of the warrantor under 
subsection (b) or (d) is discharged to the extent of any loss 
caused by the delay in giving notice of the claim.  
    (f) A cause of action for breach of warranty under this 
section accrues when the claimant has reason to know of the 
breach. 
    Sec. 58.  [336.3-418] [PAYMENT OR ACCEPTANCE BY MISTAKE.] 
    (a) Except as provided in subsection (c), if the drawee of 
a draft pays or accepts the draft and the drawee acted on the 
mistaken belief that (i) payment of the draft had not been 
stopped pursuant to section 336.4-403 or (ii) the signature of 
the drawer of the draft was authorized, the drawee may recover 
the amount of the draft from the person to whom or for whose 
benefit payment was made or, in the case of acceptance, may 
revoke the acceptance.  Rights of the drawee under this 
subsection are not affected by failure of the drawee to exercise 
ordinary care in paying or accepting the draft.  
    (b) Except as provided in subsection (c), if an instrument 
has been paid or accepted by mistake and the case is not covered 
by subsection (a), the person paying or accepting may, to the 
extent permitted by the law governing mistake and restitution, 
(i) recover the payment from the person to whom or for whose 
benefit payment was made or (ii) in the case of acceptance, may 
revoke the acceptance.  
    (c) The remedies provided by subsection (a) or (b) may not 
be asserted against a person who took the instrument in good 
faith and for value or who in good faith changed position in 
reliance on the payment or acceptance.  This subsection does not 
limit remedies provided by section 336.3-417 or 336.4-407.  
    (d) Notwithstanding section 336.4-215, if an instrument is 
paid or accepted by mistake and the payor or acceptor recovers 
payment or revokes acceptance under subsection (a) or (b), the 
instrument is deemed not to have been paid or accepted and is 
treated as dishonored, and the person from whom payment is 
recovered has rights as a person entitled to enforce the 
dishonored instrument. 
    Sec. 59.  [336.3-419] [INSTRUMENTS SIGNED FOR 
ACCOMMODATION.] 
    (a) If an instrument is issued for value given for the 
benefit of a party to the instrument ("accommodated party") and 
another party to the instrument ("accommodation party") signs 
the instrument for the purpose of incurring liability on the 
instrument without being a direct beneficiary of the value given 
for the instrument, the instrument is signed by the 
accommodation party "for accommodation."  
    (b) An accommodation party may sign the instrument as 
maker, drawer, acceptor, or endorser and, subject to subsection 
(d), is obliged to pay the instrument in the capacity in which 
the accommodation party signs.  The obligation of an 
accommodation party may be enforced notwithstanding any statute 
of frauds and whether or not the accommodation party receives 
consideration for the accommodation.  
     (c) A person signing an instrument is presumed to be an 
accommodation party and there is notice that the instrument is 
signed for accommodation if the signature is an anomalous 
endorsement or is accompanied by words indicating that the 
signer is acting as surety or guarantor with respect to the 
obligation of another party to the instrument.  Except as 
provided in section 336.3-605, the obligation of an 
accommodation party to pay the instrument is not affected by the 
fact that the person enforcing the obligation had notice when 
the instrument was taken by that person that the accommodation 
party signed the instrument for accommodation.  
    (d) If the signature of a party to an instrument is 
accompanied by words indicating unambiguously that the party is 
guaranteeing collection rather than payment of the obligation of 
another party to the instrument, the signer is obliged to pay 
the amount due on the instrument to a person entitled to enforce 
the instrument only if (i) execution of judgment against the 
other party has been returned unsatisfied, (ii) the other party 
is insolvent or in an insolvency proceeding, (iii) the other 
party cannot be served with process, or (iv) it is otherwise 
apparent that payment cannot be obtained from the other party.  
     (e) An accommodation party who pays the instrument is 
entitled to reimbursement from the accommodated party and is 
entitled to enforce the instrument against the accommodated 
party.  An accommodated party who pays the instrument has no 
right of recourse against, and is not entitled to contribution 
from, an accommodation party.  
    Sec. 60.  [336.3-420] [CONVERSION OF INSTRUMENT.] 
    (a) The law applicable to conversion of personal property 
applies to instruments.  An instrument is also converted if it 
is taken by transfer, other than a negotiation, from a person 
not entitled to enforce the instrument or a bank makes or 
obtains payment with respect to the instrument for a person not 
entitled to enforce the instrument or receive payment.  An 
action for conversion of an instrument may not be brought by (i) 
the issuer or acceptor of the instrument or (ii) a payee or 
endorsee who did not receive delivery of the instrument either 
directly or through delivery to an agent or a co-payee. 
    (b) In an action under subsection (a), the measure of 
liability is presumed to be the amount payable on the 
instrument, but recovery may not exceed the amount of the 
plaintiff's interest in the instrument.  
    (c) A representative, other than a depositary bank, who has 
in good faith dealt with an instrument or its proceeds on behalf 
of one who was not the person entitled to enforce the instrument 
is not liable in conversion to that person beyond the amount of 
any proceeds that it has not paid out. 
 PART 5 
 DISHONOR 
    Sec. 61.  [336.3-501] [PRESENTMENT.] 
    (a) "Presentment" means a demand made by or on behalf of a 
person entitled to enforce an instrument (i) to pay the 
instrument made to the drawee or a party obliged to pay the 
instrument or, in the case of a note or accepted draft payable 
at a bank, to the bank, or (ii) to accept a draft made to the 
drawee.  
    (b) The following rules are subject to article 4, agreement 
of the parties, and clearinghouse rules and the like:  
    (1) Presentment may be made at the place of payment of the 
instrument and must be made at the place of payment if the 
instrument is payable at a bank in the United States; may be 
made by any commercially reasonable means, including an oral, 
written, or electronic communication; is effective when the 
demand for payment or acceptance is received by the person to 
whom presentment is made; and is effective if made to any one of 
two or more makers, acceptors, drawees, or other payors.  
    (2) Upon demand of the person to whom presentment is made, 
the person making presentment must (i) exhibit the instrument, 
(ii) give reasonable identification and, if presentment is made 
on behalf of another person, reasonable evidence of authority to 
do so, and (iii) sign a receipt on the instrument for any 
payment made or surrender the instrument if full payment is made.
    (3) Without dishonoring the instrument, the party to whom 
presentment is made may (i) return the instrument for lack of a 
necessary endorsement, or (ii) refuse payment or acceptance for 
failure of the presentment to comply with the terms of the 
instrument, an agreement of the parties, or other applicable law 
or rule.  
    (4) The party to whom presentment is made may treat 
presentment as occurring on the next business day after the day 
of presentment if the party to whom presentment is made has 
established a cutoff hour not earlier than two p.m. for the 
receipt and processing of instruments presented for payment or 
acceptance and presentment is made after the cutoff hour. 
    Sec. 62.  [336.3-502] [DISHONOR.] 
    (a) Dishonor of a note is governed by the following rules:  
    (1) If the note is payable on demand, the note is 
dishonored if presentment is duly made to the maker and the note 
is not paid on the day of presentment.  
    (2) If the note is not payable on demand and is payable at 
or through a bank or the terms of the note require presentment, 
the note is dishonored if presentment is duly made and the note 
is not paid on the day it becomes payable or the day of 
presentment, whichever is later.  
    (3) If the note is not payable on demand and paragraph (2) 
does not apply, the note is dishonored if it is not paid on the 
day it becomes payable.  
     (b) Dishonor of an unaccepted draft other than a 
documentary draft is governed by the following rules:  
    (1) If a check is duly presented for payment to the payor 
bank otherwise than for immediate payment over the counter, the 
check is dishonored if the payor bank makes timely return of the 
check or sends timely notice of dishonor or nonpayment under 
section 336.4-301 or 336.4-302, or becomes accountable for the 
amount of the check under section 336.4-302.  
    (2) If a draft is payable on demand and paragraph (1) does 
not apply, the draft is dishonored if presentment for payment is 
duly made to the drawee and the draft is not paid on the day of 
presentment.  
    (3) If a draft is payable on a date stated in the draft, 
the draft is dishonored if (i) presentment for payment is duly 
made to the drawee and payment is not made on the day the draft 
becomes payable or the day of presentment, whichever is later, 
or (ii) presentment for acceptance is duly made before the day 
the draft becomes payable and the draft is not accepted on the 
day of presentment.  
    (4) If a draft is payable on elapse of a period of time 
after sight or acceptance, the draft is dishonored if 
presentment for acceptance is duly made and the draft is not 
accepted on the day of presentment.  
     (c) Dishonor of an unaccepted documentary draft occurs 
according to the rules stated in subsection (b)(2), (3), and 
(4), except that payment or acceptance may be delayed without 
dishonor until no later than the close of the third business day 
of the drawee following the day on which payment or acceptance 
is required by those paragraphs.  
    (d) Dishonor of an accepted draft is governed by the 
following rules:  
    (1) If the draft is payable on demand, the draft is 
dishonored if presentment for payment is duly made to the 
acceptor and the draft is not paid on the day of presentment.  
    (2) If the draft is not payable on demand, the draft is 
dishonored if presentment for payment is duly made to the 
acceptor and payment is not made on the day it becomes payable 
or the day of presentment, whichever is later.  
    (e) In any case in which presentment is otherwise required 
for dishonor under this section and presentment is excused under 
section 336.3-504, dishonor occurs without presentment if the 
instrument is not duly accepted or paid.  
    (f) If a draft is dishonored because timely acceptance of 
the draft was not made and the person entitled to demand 
acceptance consents to a late acceptance, from the time of 
acceptance the draft is treated as never having been dishonored. 
    Sec. 63.  [336.3-503] [NOTICE OF DISHONOR.] 
    (a) The obligation of an endorser stated in section 
336.3-415(a) and the obligation of a drawer stated in section 
336.3-414(d) may not be enforced unless (i) the endorser or 
drawer is given notice of dishonor of the instrument complying 
with this section or (ii) notice of dishonor is excused under 
section 336.3-504(b).  
    (b) Notice of dishonor may be given by any person; may be 
given by any commercially reasonable means, including an oral, 
written, or electronic communication; and is sufficient if it 
reasonably identifies the instrument and indicates that the 
instrument has been dishonored or has not been paid or 
accepted.  Return of an instrument given to a bank for 
collection is sufficient notice of dishonor.  
    (c) Subject to section 336.3-504(c), with respect to an 
instrument taken for collection by a collecting bank, notice of 
dishonor must be given (i) by the bank before midnight of the 
next banking day following the banking day on which the bank 
receives notice of dishonor of the instrument, or (ii) by any 
other person within 30 days following the day on which the 
person receives notice of dishonor.  With respect to any other 
instrument, notice of dishonor must be given within 30 days 
following the day on which dishonor occurs. 
    Sec. 64.  [336.3-504] [EXCUSED PRESENTMENT AND NOTICE OF 
DISHONOR.] 
    (a) Presentment for payment or acceptance of an instrument 
is excused if (i) the person entitled to present the instrument 
cannot with reasonable diligence make presentment, (ii) the 
maker or acceptor has repudiated an obligation to pay the 
instrument or is dead or in insolvency proceedings, (iii) by the 
terms of the instrument presentment is not necessary to enforce 
the obligation of endorsers or the drawer, (iv) the drawer or 
endorser whose obligation is being enforced has waived 
presentment or otherwise has no reason to expect or right to 
require that the instrument be paid or accepted, or (v) the 
drawer instructed the drawee not to pay or accept the draft or 
the drawee was not obligated to the drawer to pay the draft. 
    (b) Notice of dishonor is excused if (i) by the terms of 
the instrument notice of dishonor is not necessary to enforce 
the obligation of a party to pay the instrument, or (ii) the 
party whose obligation is being enforced waived notice of 
dishonor.  A waiver of presentment is also a waiver of notice of 
dishonor.  
    (c) Delay in giving notice of dishonor is excused if the 
delay was caused by circumstances beyond the control of the 
person giving the notice and the person giving the notice 
exercised reasonable diligence after the cause of the delay 
ceased to operate.  
    Sec. 65.  [336.3-505] [EVIDENCE OF DISHONOR.] 
    (a) The following are admissible as evidence and create a 
presumption of dishonor and of any notice of dishonor stated:  
    (1) a document regular in form as provided in subsection (b)
which purports to be a protest; 
    (2) a purported stamp or writing of the drawee, payor bank, 
or presenting bank on or accompanying the instrument stating 
that acceptance or payment has been refused unless reasons for 
the refusal are stated and the reasons are not consistent with 
dishonor; 
    (3) a book or record of the drawee, payor bank, or 
collecting bank, kept in the usual course of business which 
shows dishonor, even if there is no evidence of who made the 
entry.  
    (b) A protest is a certificate of dishonor made by a United 
States consul or vice consul, or a notary public or other person 
authorized to administer oaths by the law of the place where 
dishonor occurs.  It may be made upon information satisfactory 
to that person.  The protest must identify the instrument and 
certify either that presentment has been made or, if not made, 
the reason why it was not made, and that the instrument has been 
dishonored by nonacceptance or nonpayment.  The protest may also 
certify that notice of dishonor has been given to some or all 
parties. 
 PART 6 
 DISCHARGE AND PAYMENT 
    Sec. 66.  [336.3-601] [DISCHARGE AND EFFECT OF DISCHARGE.] 
    (a) The obligation of a party to pay the instrument is 
discharged as stated in this article or by an act or agreement 
with the party which would discharge an obligation to pay money 
under a simple contract.  
    (b) Discharge of the obligation of a party is not effective 
against a person acquiring rights of a holder in due course of 
the instrument without notice of the discharge.  
    Sec. 67.  [336.3-602] [PAYMENT.] 
    (a) Subject to subsection (b), an instrument is paid to the 
extent payment is made (i) by or on behalf of a party obliged to 
pay the instrument, and (ii) to a person entitled to enforce the 
instrument.  To the extent of the payment, the obligation of the 
party obliged to pay the instrument is discharged even though 
payment is made with knowledge of a claim to the instrument 
under section 336.3-306 by another person.  
    (b) The obligation of a party to pay the instrument is not 
discharged under subsection (a) if:  
    (1) a claim to the instrument under section 336.3-306 is 
enforceable against the party receiving payment and (i) payment 
is made with knowledge by the payor that payment is prohibited 
by injunction or similar process of a court of competent 
jurisdiction, or (ii) in the case of an instrument other than a 
cashier's check, teller's check, or certified check, the party 
making payment accepted, from the person having a claim to the 
instrument, indemnity against loss resulting from refusal to pay 
the person entitled to enforce the instrument; or 
    (2) the person making payment knows that the instrument is 
a stolen instrument and pays a person it knows is in wrongful 
possession of the instrument.  
    Sec. 68.  [336.3-603] [TENDER OF PAYMENT.] 
    (a) If tender of payment of an obligation to pay an 
instrument is made to a person entitled to enforce the 
instrument, the effect of tender is governed by principles of 
law applicable to tender of payment under a simple contract.  
    (b) If tender of payment of an obligation to pay an 
instrument is made to a person entitled to enforce the 
instrument and the tender is refused, there is discharge, to the 
extent of the amount of the tender, of the obligation of an 
endorser or accommodation party having a right of recourse with 
respect to the obligation to which the tender relates.  
    (c) If tender of payment of an amount due on an instrument 
is made to a person entitled to enforce the instrument, the 
obligation of the obligor to pay interest after the due date on 
the amount tendered is discharged.  If presentment is required 
with respect to an instrument and the obligor is able and ready 
to pay on the due date at every place of payment stated in the 
instrument, the obligor is deemed to have made tender of payment 
on the due date to the person entitled to enforce the instrument.
    Sec. 69.  [336.3-604] [DISCHARGE BY CANCELLATION OR 
RENUNCIATION.] 
    (a) A person entitled to enforce an instrument, with or 
without consideration, may discharge the obligation of a party 
to pay the instrument (i) by an intentional voluntary act, such 
as surrender of the instrument to the party, destruction, 
mutilation, or cancellation of the instrument, cancellation or 
striking out of the party's signature, or the addition of words 
to the instrument indicating discharge, or (ii) by agreeing not 
to sue or otherwise renouncing rights against the party by a 
signed writing.  
    (b) Cancellation or striking out of an endorsement pursuant 
to subsection (a) does not affect the status and rights of a 
party derived from the endorsement.  
    Sec. 70.  [336.3-605] [DISCHARGE OF ENDORSERS AND 
ACCOMMODATION PARTIES.] 
    (a) In this section, the term "endorser" includes a drawer 
having the obligation described in section 336.3-414(d).  
    (b) Discharge, under section 336.3-604, of the obligation 
of a party to pay an instrument does not discharge the 
obligation of an endorser or accommodation party having a right 
of recourse against the discharged party.  
    (c) If a person entitled to enforce an instrument agrees, 
with or without consideration, to an extension of the due date 
of the obligation of a party to pay the instrument, the 
extension discharges an endorser or accommodation party having a 
right of recourse against the party whose obligation is extended 
to the extent the endorser or accommodation party proves that 
the extension caused loss to the endorser or accommodation party 
with respect to the right of recourse.  
    (d) If a person entitled to enforce an instrument agrees, 
with or without consideration, to a material modification of the 
obligation of a party other than an extension of the due date, 
the modification discharges the obligation of an endorser or 
accommodation party having a right of recourse against the 
person whose obligation is modified to the extent the 
modification causes loss to the endorser or accommodation party 
with respect to the right of recourse.  The loss suffered by the 
endorser or accommodation party as a result of the modification 
is equal to the amount of the right of recourse unless the 
person enforcing the instrument proves that no loss was caused 
by the modification or that the loss caused by the modification 
was an amount less than the amount of the right of recourse.  
    (e) If the obligation of a party to pay an instrument is 
secured by an interest in collateral and a person entitled to 
enforce the instrument impairs the value of the interest in 
collateral, the obligation of an endorser or accommodation party 
having a right of recourse against the obligor is discharged to 
the extent of the impairment.  The value of an interest in 
collateral is impaired to the extent (i) the value of the 
interest is reduced to an amount less than the amount of the 
right of recourse of the party asserting discharge, or (ii) the 
reduction in value of the interest causes an increase in the 
amount by which the amount of the right of recourse exceeds the 
value of the interest.  The burden of proving impairment is on 
the party asserting discharge.  
     (f) If the obligation of a party is secured by an interest 
in collateral not provided by an accommodation party and a 
person entitled to enforce the instrument impairs the value of 
the interest in collateral, the obligation of any party who is 
jointly and severally liable with respect to the secured 
obligation is discharged to the extent the impairment causes the 
party asserting discharge to pay more than that party would have 
been obliged to pay, taking into account rights of contribution, 
if impairment had not occurred.  If the party asserting 
discharge is an accommodation party not entitled to discharge 
under subsection (e), the party is deemed to have a right to 
contribution based on joint and several liability rather than a 
right to reimbursement.  The burden of proving impairment is on 
the party asserting discharge.  
    (g) Under subsection (e) or (f), impairing value of an 
interest in collateral includes (i) failure to obtain or 
maintain perfection or recordation of the interest in 
collateral, (ii) release of collateral without substitution of 
collateral of equal value, (iii) failure to perform a duty to 
preserve the value of collateral owed, under article 9 or other 
law, to a debtor or surety or other person secondarily liable, 
or (iv) failure to comply with applicable law in disposing of 
collateral.  
    (h) An accommodation party is not discharged under 
subsection (c), (d), or (e) unless the person entitled to 
enforce the instrument knows of the accommodation or has notice 
under section 336.3-419(c) that the instrument was signed for 
accommodation. 
    (i) A party is not discharged under this section if (i) the 
party asserting discharge consents to the event or conduct that 
is the basis of the discharge, or (ii) the instrument or a 
separate agreement of the party provides for waiver of discharge 
under this section either specifically or by general language 
indicating that parties waive defenses based on suretyship or 
impairment of collateral. 
    Sec. 71.  Minnesota Statutes 1990, section 541.21, is 
amended to read: 
    541.21 [COMMITMENTS FOR GAMBLING DEBT VOID.] 
    Every note, bill, bond, mortgage, or other security or 
conveyance in which the whole or any part of the consideration 
shall be for any money or goods won by gambling or playing at 
cards, dice, or any other game whatever, or by betting on the 
sides or hands of any person gambling, or for reimbursing or 
repaying any money knowingly lent or advanced at the time and 
place of such gambling or betting, or lent and advanced for any 
gambling or betting to any persons so gambling or betting, shall 
be void and of no effect as between the parties to the same, and 
as to all persons except such as hold or claim under them in 
good faith, without notice of the illegality of the 
consideration of such contract or conveyance.  The provisions of 
this section shall not apply to pari-mutuel wagering conducted 
under a license issued pursuant to chapters 240 and 349 or 
purchase of tickets in the state lottery under chapter 349A, or 
to gaming activities conducted pursuant to the Indian Gaming 
Regulatory Act, 25 U.S.C. 2701 et seq. 
 CONFORMING AND MISCELLANEOUS AMENDMENTS TO
UNIFORM COMMERCIAL CODE
ARTICLE 4 - BANK DEPOSITS AND COLLECTIONS
    Sec. 72.  Minnesota Statutes 1990, section 336.4-101, is 
amended to read: 
    336.4-101 [SHORT TITLE.] 
    This article shall be known and may be cited as Uniform 
Commercial Code - Bank Deposits and Collections. 
    Sec. 73.  Minnesota Statutes 1990, section 336.4-102, is 
amended to read: 
    336.4-102 [APPLICABILITY.] 
    (1) (a) To the extent that items within this article are 
also within the scope of articles 3 and 8, they are subject to 
the provisions of those articles.  In the event of If there is 
conflict the provisions of, this article govern those of governs 
article 3, but the provisions of article 8 govern those of 
governs this article.  
    (2) (b) The liability of a bank for action or nonaction 
with respect to any an item handled by it for purposes of 
presentment, payment, or collection is governed by the law of 
the place where the bank is located.  In the case of action or 
nonaction by or at a branch or separate office of a bank, its 
liability is governed by the law of the place where the branch 
or separate office is located.  
    Sec. 74.  Minnesota Statutes 1990, section 336.4-103, is 
amended to read: 
    336.4-103 [VARIATION BY AGREEMENT; MEASURE OF DAMAGES; 
CERTAIN ACTION CONSTITUTING ORDINARY CARE.] 
    (1) (a) The effect of the provisions of this article may be 
varied by agreement except that no, but the parties to the 
agreement can cannot disclaim a bank's responsibility for 
its own lack of good faith or failure to exercise ordinary care 
or can limit the measure of damages for such the lack or 
failure; but.  However, the parties may determine by agreement 
determine the standards by which such the bank's responsibility 
is to be measured if such those standards are not manifestly 
unreasonable.  
    (2) (b) Federal reserve regulations and operating letters 
circulars, clearinghouse rules, and the like, have the effect of 
agreements under subsection (1) (a), whether or not specifically 
assented to by all parties interested in items handled.  
    (3) (c) Action or nonaction approved by this article or 
pursuant to federal reserve regulations or operating letters 
constitutes circulars is the exercise of ordinary care and, in 
the absence of special instructions, action or nonaction 
consistent with clearinghouse rules and the like or with a 
general banking usage not disapproved by this article, is prima 
facie constitutes the exercise of ordinary care.  
    (4) (d) The specification or approval of certain procedures 
by this article does is not constitute disapproval of other 
procedures which that may be reasonable under the circumstances. 
    (5) (e) The measure of damages for failure to exercise 
ordinary care in handling an item is the amount of the item 
reduced by an amount which that could not have been realized by 
the use exercise of ordinary care, and where.  If there is 
also bad faith it includes any other damages, if any, suffered 
by the party suffered as a proximate consequence.  
    Sec. 75.  Minnesota Statutes 1990, section 336.4-104, is 
amended to read: 
    336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
    (1) (a) In this article, unless the context otherwise 
requires: 
    (a) (1) "Account" means any deposit or credit account with 
a bank and includes, including a checking, time, interest or 
savings account demand, time, savings, passbook, share draft, or 
like account, other than an account evidenced by a certificate 
of deposit; 
    (b) (2) "Afternoon" means the period of a day between noon 
and midnight; 
    (c) (3) "Banking day" means that the part of any a day 
, excluding Saturday, Sunday and holidays, on which a bank is 
open to the public for carrying on substantially all of its 
banking functions; 
    (d) (4) "Clearinghouse" means any an association of banks 
or other payors regularly clearing items; 
    (e) (5) "Customer" means any a person having an account 
with a bank or for whom a bank has agreed to collect items and 
includes, including a bank carrying that maintains an account 
with at another bank; 
    (f) (6) "Documentary draft" means any negotiable or 
nonnegotiable draft with accompanying documents, securities or 
other papers to be delivered against honor of the a draft to be 
presented for acceptance or payment if specified documents, 
certificated securities (section 336.8-102) or instructions for 
uncertificated securities (section 336.8-308), or other 
certificates, statements, or the like are to be received by the 
drawee or other payor before acceptance or payment of the draft; 
    (7) "Draft" means a draft as defined in section 336.3-104 
or an item, other than an instrument, that is an order; 
    (8) "Drawee" means a person ordered in a draft to make 
payment; 
    (g) (9) "Item" means any instrument for the payment of 
money even though it is not negotiable but does not include 
money an instrument or a promise or order to pay money handled 
by a bank for collection or payment.  The term does not include 
a payment order governed by article 4A or a credit or debit card 
slip; 
    (h) (10) "Midnight deadline" with respect to a bank is 
midnight on its next banking day following the banking day on 
which it receives the relevant item or notice or from which the 
time for taking action commences to run, whichever is later; 
    (i) "Properly payable" includes the availability of funds 
for payment at the time of decision to pay or dishonor; 
    (j) (11) "Settle" means to pay in cash, by clearinghouse 
settlement, in a charge or credit or by remittance, or otherwise 
as instructed agreed.  A settlement may be either provisional or 
final; 
    (k) (12) "Suspends payments" with respect to a bank means 
that it has been closed by order of the supervisory authorities, 
that a public officer has been appointed to take it over, or 
that it ceases or refuses to make payments in the ordinary 
course of business. 
    (2) (b) Other definitions applying to this article and the 
sections in which they appear are: 
    "Agreement for electronic presentment," section 336.4-110 
    "Bank," section 336.4-105 
    "Collecting bank," section 336.4-105 
    "Depositary bank," section 336.4-105 
    "Intermediary bank," section 336.4-105 
    "Payor bank," section 336.4-105 
    "Presenting bank," section 336.4-105 
    "Remitting bank," section 336.4-105 
    "Presentment notice," section 336.4-110 
    (3) (c) The following definitions in other articles apply 
to this article: 
    "Acceptance," section 336.3-410 336.3-409 
    "Alteration," section 336.3-407 
    "Cashier's check," section 336.3-104 
    "Certificate of deposit," section 336.3-104 
    "Certification," section 336.3-411 
    "Certified check," section 336.3-409 
    "Check," section 336.3-104 
    "Draft," section 336.3-104 
    "Good faith," section 336.3-103 
    "Holder in due course," section 336.3-302 
    "Instrument," section 336.3-104 
    "Notice of dishonor," section 336.3-508 336.3-503 
    "Order," section 336.3-103 
    "Ordinary care," section 336.3-103 
    "Person entitled to enforce," section 336.3-301 
    "Presentment," section 336.3-504 336.3-501 
    "Protest," section 336.3-509 
    "Secondary party," section 336.3-102 
    "Promise," section 336.3-103 
    "Prove," section 336.3-103 
    "Teller's check," section 336.3-104 
    "Unauthorized signature," section 336.3-403 
    (4) (d) In addition, article 1 contains general definitions 
and principles of construction and interpretation applicable 
throughout this article. 
    Sec. 76.  Minnesota Statutes 1990, section 336.4-105, is 
amended to read: 
    336.4-105 ["BANK"; "DEPOSITARY BANK"; "INTERMEDIARY BANK"; 
"COLLECTING BANK"; "PAYOR BANK"; "PRESENTING BANK"; "REMITTING 
BANK".] 
    In this article unless the context otherwise requires: 
    (1) "Bank" means a person engaged in the business of 
banking, including a savings bank, savings and loan association, 
credit union, or trust company. 
    (a) (2) "Depositary bank" means the first bank to which 
take an item is transferred for collection even though it is 
also the payor bank;, unless the item is presented for immediate 
payment over the counter. 
    (b) (3) "Payor bank" means a bank by which an item is 
payable as drawn or accepted; that is the drawee of a draft. 
    (c) (4) "Intermediary bank" means any a bank to which an 
item is transferred in course of collection except the 
depositary or payor bank;. 
    (d) (5) "Collecting bank" means any a bank handling the 
an item for collection except the payor bank;. 
    (e) (6) "Presenting bank" means any a bank presenting an 
item except a payor bank;. 
    (f) "Remitting bank" means any payor or intermediary bank 
remitting for an item.  
    Sec. 77.  [336.4-106] [PAYABLE THROUGH OR PAYABLE AT BANK; 
COLLECTING BANK.] 
    (a) If an item states that it is "payable through" a bank 
identified in the item, (i) the item designates the bank as a 
collecting bank and does not by itself authorize the bank to pay 
the item, and (ii) the item may be presented for payment only by 
or through the bank.  
    (b) If an item states that it is "payable at" a bank 
identified in the item, (i) the item designates the bank as a 
collecting bank and does not by itself authorize the bank to pay 
the item, and (ii) the item may be presented for payment only by 
or through the bank.  
    (c) If a draft names a nonbank drawee and it is unclear 
whether a bank named in the draft is a co-drawee or a collecting 
bank, the bank is a collecting bank.  
    Sec. 78.  Minnesota Statutes 1990, section 336.4-106, is 
amended to read: 
    336.4-106 336.4-107 [SEPARATE OFFICE OF A BANK.] 
    A branch or separate office of a bank is a separate bank 
for the purpose of computing the time within which and 
determining the place at or to which action may be taken or 
notices notice or orders shall must be given under this article 
and under article 3.  
    Sec. 79.  Minnesota Statutes 1990, section 336.4-107, is 
amended to read: 
    336.4-107 336.4-108 [TIME OF RECEIPT OF ITEMS.] 
    (1) (a) For the purpose of allowing time to process items, 
prove balances, and make the necessary entries on its books to 
determine its position for the day, a bank may fix an afternoon 
hour of two p.m. or later as a cutoff hour for the handling of 
money and items and the making of entries on its books.  
    (2) Any (b) An item or deposit of money received on any day 
after a cutoff hour so fixed or after the close of the banking 
day may be treated as being received at the opening of the next 
banking day.  
    Sec. 80.  Minnesota Statutes 1990, section 336.4-108, is 
amended to read: 
    336.4-108 336.4-109 [DELAYS.] 
    (1) (a) Unless otherwise instructed, a collecting bank in a 
good faith effort to secure payment may, in the case of a 
specific items item drawn on a payor other than a bank, and with 
or without the approval of any person involved, may waive, 
modify, or extend time limits imposed or permitted by this 
chapter for a period not in excess of an exceeding two 
additional banking day days without discharge of secondary 
parties and without drawers or endorsers or liability to its 
transferor or any a prior party.  
    (2) (b) Delay by a collecting bank or payor bank beyond 
time limits prescribed or permitted by this chapter or by 
instructions is excused if (i) the delay is caused by 
interruption of communication or computer facilities, suspension 
of payments by another bank, war, emergency conditions, failure 
of equipment, or other circumstances beyond the control of the 
bank provided it, and (ii) the bank exercises such diligence as 
the circumstances require.  
    Sec. 81.  [336.4-110] [ELECTRONIC PRESENTMENT.] 
    (a) "Agreement for electronic presentment" means an 
agreement, clearinghouse rule, or Federal Reserve regulation or 
operating circular, providing that presentment of an item may be 
made by transmission of an image of an item or information 
describing the item ("presentment notice") rather than delivery 
of the item itself.  The agreement may provide for procedures 
governing retention, presentment, payment, dishonor, and other 
matters concerning items subject to the agreement. 
    (b) Presentment of an item pursuant to an agreement for 
presentment is made when the presentment notice is received.  
    (c) If presentment is made by presentment notice, a 
reference to "item" or "check" in this article means the 
presentment notice unless the context otherwise indicates. 
    Sec. 82.  [336.4-111] [STATUTE OF LIMITATIONS.] 
    An action to enforce an obligation, duty, or right arising 
under this article must be commenced within three years after 
the cause of action accrues. 
    Sec. 83.  Minnesota Statutes 1990, section 336.4-201, is 
amended to read: 
    336.4-201 [PRESUMPTION AND DURATION OF AGENCY STATUS OF 
COLLECTING BANKS BANK AS AGENT AND PROVISIONAL STATUS OF 
CREDITS; APPLICABILITY OF ARTICLE; ITEM ENDORSED "PAY ANY 
BANK."] 
    (1) (a) Unless a contrary intent clearly appears and prior 
to before the time that a settlement given by a collecting bank 
for an item is or becomes final (subsection (3) of section 
336.4-211 and sections 336.4-212 and 336.4-213), the bank, with 
respect to the item, is an agent or subagent of the owner of the 
item and any settlement given for the item is provisional.  This 
provision applies regardless of the form of endorsement or lack 
of endorsement and even though credit given for the item is 
subject to immediate withdrawal as of right or is in fact 
withdrawn; but the continuance of ownership of an item by its 
owner and any rights of the owner to proceeds of the item are 
subject to rights of a collecting bank, such as those resulting 
from outstanding advances on the item and valid rights of 
recoupment or setoff.  When If an item is handled by banks for 
purposes of presentment, payment and, collection, or return, the 
relevant provisions of this article apply even though action of 
the parties clearly establishes that a particular bank has 
purchased the item and is the owner of it.  
    (2) (b) After an item has been endorsed with the words "pay 
any bank" or the like, only a bank may acquire the rights of a 
holder until the item has been: 
    (a) until the item has been (1) returned to the customer 
initiating collection; or 
    (b) until the item has been (2) specially endorsed by a 
bank to a person who is not a bank.  
    Sec. 84.  Minnesota Statutes 1990, section 336.4-202, is 
amended to read: 
    336.4-202 [RESPONSIBILITY FOR COLLECTION OR RETURN; WHEN 
ACTION SEASONABLE TIMELY.] 
    (1) (a) A collecting bank must use exercise ordinary care 
in: 
    (a) (1) presenting an item or sending it for presentment; 
and 
    (b) (2) sending notice of dishonor or nonpayment or 
returning an item other than a documentary draft to the bank's 
transferor or directly to the depositary bank under subsection 
(2) of section 336.4-212 after learning that the item has not 
been paid or accepted, as the case may be; and 
    (c) (3) settling for an item when the bank receives final 
settlement; and 
    (d) making or providing for any necessary protest; and 
    (e) (4) notifying its transferor of any loss or delay in 
transit within a reasonable time after discovery thereof.  
    (2) A collecting bank taking proper action before its 
midnight deadline following receipt of an item, notice or 
payment acts seasonably; taking proper action within a 
reasonably longer time may be seasonable but the bank has the 
burden of so establishing.  
    (b) A collecting bank exercises ordinary care under 
subsection (a) by taking proper action before its midnight 
deadline following receipt of an item, notice, or settlement.  
Taking proper action within a reasonably longer time may 
constitute the exercise of ordinary care, but the bank has the 
burden of establishing timeliness.  
    (3) (c) Subject to subsection (1)(a) (a)(1), a bank is not 
liable for the insolvency, neglect, misconduct, mistake, or 
default of another bank or person or for loss or destruction of 
an item in the possession of others or in transit or in the 
possession of others.  
    Sec. 85.  Minnesota Statutes 1990, section 336.4-203, is 
amended to read: 
    336.4-203 [EFFECT OF INSTRUCTIONS.] 
    Subject to the provisions of article 3 concerning 
conversion of instruments (section 336.3-419 336.3-420) and the 
provisions of both article 3 and this article concerning 
restrictive endorsements (section 336.3-206), only a collecting 
bank's transferor can give instructions which that affect the 
bank or constitute notice to it, and a collecting bank is not 
liable to prior parties for any action taken pursuant to such 
the instructions or in accordance with any agreement with its 
transferor.  
    Sec. 86.  Minnesota Statutes 1990, section 336.4-204, is 
amended to read: 
    336.4-204 [METHODS OF SENDING AND PRESENTING; SENDING 
DIRECT DIRECTLY TO PAYOR BANK.] 
    (1) (a) A collecting bank must shall send items by a 
reasonably prompt method, taking into consideration any relevant 
instructions, the nature of the item, the number of such those 
items on hand, and the cost of collection involved, and the 
method generally used by it or others to present such those 
items.  
    (2) (b) A collecting bank may send: 
    (a) any (1) an item direct directly to the payor bank; 
    (b) any (2) an item to any a nonbank payor if authorized by 
its transferor; and 
    (c) any (3) an item other than documentary drafts to any a 
nonbank payor, if authorized by federal reserve regulation or 
operating letter circular, clearinghouse rule, or the like.  
    (3) (c) Presentment may be made by a presenting bank at a 
place where the payor bank or other payor has requested that 
presentment be made.  
    Sec. 87.  Minnesota Statutes 1990, section 336.4-205, is 
amended to read: 
    336.4-205 [SUPPLYING MISSING ENDORSEMENT; NO NOTICE FROM 
PRIOR ENDORSEMENT DEPOSITARY BANK HOLDER OF UNENDORSED ITEM.] 
    If a customer delivers an item to a depositary bank for 
collection: 
    (1) A depositary bank which has taken an item for 
collection may supply any endorsement of the customer which is 
necessary to title unless the item contains the words "payee's 
endorsement required" or the like.  In the absence of such a 
requirement a statement placed on the item by the depositary 
bank to the effect that the item was deposited by a customer or 
credited to the customer's account is effective as the 
customer's endorsement. the depositary bank becomes a holder of 
the item at the time it receives the item for collection if the 
customer at the time of delivery was a holder of the item, 
whether or not the customer endorses the item, and, if the bank 
satisfies the other requirements of section 336.3-302, it is a 
holder in due course; and 
    (2) An intermediary bank, or payor bank which is not a 
depositary bank, is neither given notice nor otherwise affected 
by a restrictive endorsement of any person except the bank's 
immediate transferor the depositary bank warrants to collecting 
banks, the payor bank or other payor, and the drawer that the 
amount of the item was paid to the customer or deposited to the 
customer's account. 
    Sec. 88.  Minnesota Statutes 1990, section 336.4-206, is 
amended to read: 
    336.4-206 [TRANSFER BETWEEN BANKS.] 
    Any agreed method which that identifies the transferor bank 
is sufficient for the item's further transfer to another bank.  
    Sec. 89.  Minnesota Statutes 1990, section 336.4-207, is 
amended to read: 
    336.4-207 [WARRANTIES OF CUSTOMER AND COLLECTING BANK ON 
TRANSFER OR PRESENTMENT OF ITEMS; TIME FOR CLAIMS WARRANTIES.] 
    (1) Each customer or collecting bank who obtains payment or 
acceptance of an item and each prior customer and collecting 
bank warrants to the payor bank or other payor who in good faith 
pays or accepts the item that 
    (a)  it has a good title to the item or is authorized to 
obtain payment or acceptance on behalf of one who has a good 
title; and 
    (b)  it has no knowledge that the signature of the maker or 
drawer is unauthorized, except that this warranty is not given 
by any customer or collecting bank that is a holder in due 
course and acts in good faith 
    (i) to a maker with respect to the maker's own signature; 
or 
    (ii) to a drawer with respect to the drawer's own 
signature, whether or not the drawer is also the drawee; or 
    (iii) to an acceptor of an item if the holder in due course 
took the item after the acceptance or obtained the acceptance 
without knowledge that the drawer's signature was unauthorized; 
and 
    (c) the item has not been materially altered, except that 
this warranty is not given by any customer or collecting bank 
that is a holder in due course and acts in good faith 
    (i) to the maker of a note; or 
    (ii) to the drawer of a draft whether or not the drawer is 
also the drawee; or 
    (iii) to the acceptor of an item with respect to an 
alteration made prior to the acceptance if the holder in due 
course took the item after the acceptance, even though the 
acceptance provided "payable as originally drawn" or equivalent 
terms; or 
    (iv) to the acceptor of an item with respect to an 
alteration made after the acceptance. 
    (2) Each customer and collecting bank who transfers an item 
and receives a settlement or other consideration for it warrants 
to its transferee and to any subsequent collecting bank who 
takes the item in good faith that 
    (a)  it has a good title to the item or is authorized to 
obtain payment or acceptance on behalf of one who has a good 
title and the transfer is otherwise rightful; and 
    (b) all signatures are genuine or authorized; and 
    (c) the item has not been materially altered; and 
    (d) no defense of any party is good against it; and 
    (e)  it has no knowledge of any insolvency proceeding 
instituted with respect to the maker or acceptor or the drawer 
of an unaccepted item. 
    In addition each customer and collecting bank so 
transferring an item and receiving a settlement or other 
consideration engages that upon dishonor and any necessary 
notice of dishonor and protest it will take up the item.  
    (3) The warranties and the engagement to honor set forth in 
the two preceding subsections arise notwithstanding the absence 
of endorsement or words of guaranty or warranty in the transfer 
or presentment and a collecting bank remains liable for their 
breach despite remittance to its transferor.  Damages for breach 
of such warranties or engagement to honor shall not exceed the 
consideration received by the customer or collecting bank 
responsible plus finance charges and expenses related to the 
item, if any.  
    (4) Unless a claim for breach of warranty under this 
section is made within a reasonable time after the person 
claiming learns of the breach, the person liable is discharged 
to the extent of any loss caused by the delay in making claim.  
     (a) A customer or collecting bank that transfers an item 
and receives a settlement or other consideration warrants to the 
transferee and to any subsequent collecting bank that:  
    (1) the warrantor is a person entitled to enforce the item; 
     (2) all signatures on the item are authentic and 
authorized; 
     (3) the item has not been altered; 
     (4) the item is not subject to a defense or claim in 
recoupment (section 336.3-305(a)) of any party that can be 
asserted against the warrantor; and 
    (5) the warrantor has no knowledge of any insolvency 
proceeding commenced with respect to the maker or acceptor or, 
in the case of an unaccepted draft, the drawer.  
     (b) If an item is dishonored, a customer or collecting bank 
transferring the item and receiving settlement or other 
consideration is obliged to pay the amount due on the item (i) 
according to the terms of the item at the time it was 
transferred, or (ii) if the transfer was of an incomplete item, 
according to its terms when completed as stated in sections 
336.3-115 and 336.3-407.  The obligation of a transferor is owed 
to the transferee and to any subsequent collecting bank that 
takes the item in good faith.  A transferor cannot disclaim its 
obligation under this subsection by an endorsement stating that 
it is made "without recourse" or otherwise disclaiming liability.
    (c) A person to whom the warranties under subsection (a) 
are made and who took the item in good faith may recover from 
the warrantor as damages for breach of warranty an amount equal 
to the loss suffered as a result of the breach, but not more 
than the amount of the item plus expenses and loss of interest 
incurred as a result of the breach.  
    (d) The warranties stated in subsection (a) cannot be 
disclaimed with respect to checks.  Unless notice of a claim for 
breach of warranty is given to the warrantor within 30 days 
after the claimant has reason to know of the breach and the 
identity of the warrantor, the warrantor is discharged to the 
extent of any loss caused by the delay in giving notice of the 
claim. 
    (e) A cause of action for breach of warranty under this 
section accrues when the claimant has reason to know of the 
breach. 
    Sec. 90.  [336.4-208] [PRESENTMENT WARRANTIES.] 
    (a) If an unaccepted draft is presented to the drawee for 
payment or acceptance and the drawee pays or accepts the draft, 
(i) the person obtaining payment or acceptance, at the time of 
presentment, and (ii) a previous transferor of the draft, at the 
time of transfer, warrant to the drawee that pays or accepts the 
draft in good faith that:  
    (1) the warrantor is, or was, at the time the warrantor 
transferred the draft, a person entitled to enforce the draft or 
authorized to obtain payment or acceptance of the draft on 
behalf of a person entitled to enforce the draft; 
    (2) the draft has not been altered; and 
    (3) the warrantor has no knowledge that the signature of 
the purported drawer of the draft is unauthorized.  
    (b) A drawee making payment may recover from a warrantor 
damages for breach of warranty equal to the amount paid by the 
drawee less the amount the drawee received or is entitled to 
receive from the drawer because of the payment.  In addition, 
the drawee is entitled to compensation for expenses and loss of 
interest resulting from the breach.  The right of the drawee to 
recover damages under this subsection is not affected by any 
failure of the drawee to exercise ordinary care in making 
payment.  If the drawee accepts the draft (i) breach of warranty 
is a defense to the obligation of the acceptor, and (ii) if the 
acceptor makes payment with respect to the draft, the acceptor 
is entitled to recover from a warrantor for breach of warranty 
the amounts stated in this subsection.  
     (c) If a drawee asserts a claim for breach of warranty 
under subsection (a) based on an unauthorized endorsement of the 
draft or an alteration of the draft, the warrantor may defend by 
proving that the endorsement is effective under section 
336.3-404 or 336.3-405 or the drawer is precluded under section 
336.3-406 or 336.4-406 from asserting against the drawee the 
unauthorized endorsement or alteration.  
     (d) If (i) a dishonored draft is presented for payment to 
the drawer or an endorser or (ii) any other item is presented 
for payment to a party obliged to pay the item, and the item is 
paid, the person obtaining payment and a prior transferor of the 
item warrant to the person making payment in good faith that the 
warrantor is, or was, at the time the warrantor transferred the 
item, a person entitled to enforce the item or authorized to 
obtain payment on behalf of a person entitled to enforce the 
item.  The person making payment may recover from any warrantor 
for breach of warranty an amount equal to the amount paid plus 
expenses and loss of interest resulting from the breach.  
    (e) The warranties stated in subsections (a) and (d) cannot 
be disclaimed with respect to checks.  Unless notice of a claim 
for breach of warranty is given to the warrantor within 30 days 
after the claimant has reason to know of the breach and the 
identity of the warrantor, the warrantor is discharged to the 
extent of any loss caused by the delay in giving notice of the 
claim.  
    (f) A cause of action for breach of warranty under this 
section accrues when the claimant has reason to know of the 
breach. 
    Sec. 91.  [336.4-209] [ENCODING AND RETENTION WARRANTIES.] 
    (a) A person who encodes information on or with respect to 
an item after issue warrants to any subsequent collecting bank 
and to the payor bank or other payor that the information is 
correctly encoded.  If the customer of a depositary bank 
encodes, that bank also makes the warranty.  
    (b) A person who undertakes to retain an item pursuant to 
an agreement for electronic presentment warrants to any 
subsequent collecting bank and to the payor bank or other payor 
that retention and presentment of the item comply with the 
agreement.  If a customer of a depositary bank undertakes to 
retain an item, that bank also makes this warranty.  
    (c) A person to whom warranties are made under this section 
and who took the item in good faith may recover from the 
warrantor as damages for breach of warranty an amount equal to 
the loss suffered as a result of the breach, plus expenses and 
loss of interest incurred as a result of the breach. 
    Sec. 92.  Minnesota Statutes 1990, section 336.4-208, is 
amended to read: 
    336.4-208 336.4-210 [SECURITY INTEREST OF COLLECTING BANK 
IN ITEMS, ACCOMPANYING DOCUMENTS, AND PROCEEDS.] 
    (1) (a) A collecting bank has a security interest in an 
item and any accompanying documents or the proceeds of either: 
    (a) (1) in case of an item deposited in an account, to the 
extent to which credit given for the item has been withdrawn or 
applied; 
    (b) (2) in case of an item for which it has given credit 
available for withdrawal as of right, to the extent of the 
credit given, whether or not the credit is drawn upon and 
whether or not there is a right of chargeback; or 
    (c) (3) if it makes an advance on or against the item. 
    (2) When (b) If credit which has been given for several 
items received at one time or pursuant to a single agreement is 
withdrawn or applied in part, the security interest remains upon 
all the items, any accompanying documents or the proceeds of 
either.  For the purpose of this section, credits first given 
are first withdrawn.  
    (3) (c) Receipt by a collecting bank of a final settlement 
for an item is a realization on its security interest in the 
item, accompanying documents, and proceeds.  To the extent and 
So long as the bank does not receive final settlement for the 
item or give up possession of the item or accompanying documents 
for purposes other than collection, the security interest 
continues to that extent and is subject to the provisions of 
article 9 except that, but: 
    (a) (1) no security agreement is necessary to make the 
security interest enforceable (subsection(1)(b) of section 
336.9-203 336.9-203(1)(a)); and 
    (b) (2) no filing is required to perfect the security 
interest; and 
    (c) (3) the security interest has priority over conflicting 
perfected security interests in the item, accompanying 
documents, or proceeds. 
    Sec. 93.  Minnesota Statutes 1990, section 336.4-209, is 
amended to read: 
    336.4-209 336.4-211 [WHEN BANK GIVES VALUE FOR PURPOSES OF 
HOLDER IN DUE COURSE.] 
    For purposes of determining its status as a holder in due 
course, the a bank has given value to the extent that it has a 
security interest in an item provided that, if the bank 
otherwise complies with the requirements of section 336.3-302 on 
what constitutes a holder in due course.  
    Sec. 94.  Minnesota Statutes 1990, section 336.4-210, is 
amended to read: 
    336.4-210 336.4-212 [PRESENTMENT BY NOTICE OF ITEM NOT 
PAYABLE BY, THROUGH, OR AT A BANK; LIABILITY OF SECONDARY 
PARTIES DRAWER OR ENDORSER.] 
    (1) (a) Unless otherwise instructed, a collecting bank may 
present an item not payable by, through, or at a bank by sending 
to the party to accept or pay a written notice that the bank 
holds the item for acceptance or payment.  The notice must be 
sent in time to be received on or before the day when 
presentment is due and the bank must meet any requirement of the 
party to accept or pay under section 336.3-505 336.3-501 by the 
close of the bank's next banking day after it knows of the 
requirement.  
    (2) Where (b) If presentment is made by notice and neither 
honor nor payment, acceptance, or request for compliance with a 
requirement under section 336.3-505 336.3-501 is not received by 
the close of business on the day after maturity or, in the case 
of demand items, by the close of business on the third banking 
day after notice was sent, the presenting bank may treat the 
item as dishonored and charge any secondary party drawer or 
endorser by sending the secondary party it notice of the facts.  
    Sec. 95.  Minnesota Statutes 1990, section 336.4-211, is 
amended to read: 
    336.4-211 336.4-213 [MEDIA OF REMITTANCE; PROVISIONAL AND 
FINAL MEDIUM AND TIME OF SETTLEMENT IN REMITTANCE CASES BY 
BANK.] 
    (1) A collecting bank may take in settlement of an item 
    (a) a check of the remitting bank or of another bank on any 
bank except the remitting bank; or 
    (b) a cashier's check or similar primary obligation of a 
remitting bank which is a member of or clears through a member 
of the same clearinghouse or group as the collecting bank; or 
    (c) appropriate authority to charge an account of the 
remitting bank or of another bank with the collecting bank; or 
    (d) if the item is drawn upon or payable by a person other 
than a bank, a cashier's check, certified check or other bank 
check or obligation. 
    (2) If before its midnight deadline the collecting bank 
properly dishonors a remittance check or authorization to charge 
on itself or presents or forwards for collection a remittance 
instrument of or on another bank which is of a kind approved by 
subsection (1) or has not been authorized by it, the collecting 
bank is not liable to prior parties in the event of the dishonor 
of such check, instrument or authorization. 
    (3) A settlement for an item by means of a remittance 
instrument or authorization to charge is or becomes a final 
settlement as to both the person making and the person receiving 
the settlement 
    (a) if the remittance instrument or authorization to charge 
is of a kind approved by subsection (1) or has not been 
authorized by the person receiving the settlement and in either 
case the person receiving the settlement acts seasonably before 
its midnight deadline in presenting, forwarding for collection 
or paying the instrument or authorization, - at the time the 
remittance instrument or authorization is finally paid by the 
payor by which it is payable; 
    (b) if the person receiving the settlement has authorized 
remittance by a nonbank check or obligation or by a cashier's 
check or similar primary obligation of or a check upon the payor 
or other remitting bank which is not of a kind approved by 
subsection (1) (b), - at the time of the receipt of such 
remittance check or obligation; or 
    (c) if in a case not covered by subparagraphs (a) or (b) 
the person receiving the settlement fails to seasonably present, 
forward for collection, pay or return a remittance instrument or 
authorization to it to charge before its midnight deadline, - at 
such midnight deadline. 
    (a) With respect to settlement by a bank, the medium and 
time of settlement may be prescribed by Federal Reserve 
regulations or circulars, clearinghouse rules, and the like, or 
agreement.  In the absence of such prescription:  
    (1) the medium of settlement is cash or credit to an 
account in a Federal Reserve bank of or specified by the person 
to receive settlement; and 
    (2) the time of settlement, is:  
    (i) with respect to tender of settlement by cash, a 
cashier's check, or teller's check, when the cash or check is 
sent or delivered; 
    (ii) with respect to tender of settlement by credit in an 
account in a Federal Reserve bank, when the credit is made; 
    (iii) with respect to tender of settlement by a credit or 
debit to an account in a bank, when the credit or debit is made 
or, in the case of tender of settlement by authority to charge 
an account, when the authority is sent or delivered; or 
    (iv) with respect to tender of settlement by a funds 
transfer, when payment is made pursuant to section 336.4A-406(a) 
to the person receiving settlement.  
    (b) If the tender of settlement is not by a medium 
authorized by subsection (a) or the time of settlement is not 
fixed by subsection (a), no settlement occurs until the tender 
of settlement is accepted by the person receiving settlement.  
    (c) If settlement for an item is made by cashier's check or 
teller's check and the person receiving settlement, before its 
midnight deadline:  
    (1) presents or forwards the check for collection, 
settlement is final when the check is finally paid; or 
    (2) fails to present or forward the check for collection, 
settlement is final at the midnight deadline of the person 
receiving settlement.  
    (d) If settlement for an item is made by giving authority 
to charge the account of the bank giving settlement in the bank 
receiving settlement, settlement is final when the charge is 
made by the bank receiving settlement if there are funds 
available in the account for the amount of the item. 
    Sec. 96.  Minnesota Statutes 1990, section 336.4-212, is 
amended to read: 
    336.4-212 336.4-214 [RIGHT OF CHARGEBACK OR REFUND; 
LIABILITY OF COLLECTING BANK; RETURN OF ITEM.] 
    (1) (a) If a collecting bank has made provisional 
settlement with its customer for an item and itself fails by 
reason of dishonor, suspension of payments by a bank, or 
otherwise to receive a settlement for the item which is or 
becomes final, the bank may revoke the settlement given by it, 
charge back the amount of any credit given for the item to its 
customer's account, or obtain refund from its customer, whether 
or not it is able to return the items item, if by its midnight 
deadline or within a longer reasonable time after it learns the 
facts it returns the item or sends notification of the 
facts.  If the return or notice is delayed beyond the bank's 
midnight deadline or a longer reasonable time after it learns 
the facts, the bank may revoke the settlement, charge back the 
credit, or obtain refund from its customer, but it is liable for 
any loss resulting from the delay.  These rights to revoke, 
charge back, and obtain refund terminate if and when a 
settlement for the item received by the bank is or becomes final 
(subsection (3) of section 336.4-211 and subsections (2) and (3) 
of section 336.4-213).  
    (2) Within the time and manner prescribed by this section 
and section 336.4-301, an intermediary or payor bank, as the 
case may be, may return an unpaid item directly to the 
depositary bank and may send for collection a draft on the 
depositary bank and obtain reimbursement.  In such case, if the 
depositary bank has received provisional settlement for the 
item, it must reimburse the bank drawing the draft and any 
provisional credits for the item between banks shall become and 
remain final.  
    (b) A collecting bank returns an item when it is sent or 
delivered to the bank's customer or transferor or pursuant to 
its instructions.  
    (3) (c) A depositary bank which that is also the payor may 
charge back the amount of an item to its customer's account or 
obtain refund in accordance with the section governing return of 
an item received by a payor bank for credit on its books 
(section 336.4-301).  
    (4) (d) The right to charge back is not affected by: 
    (a) prior (1) previous use of the a credit given for the 
item; or 
    (b) (2) failure by any bank to exercise ordinary care with 
respect to the item, but any a bank so failing remains liable.  
    (5) (e) A failure to charge back or claim refund does not 
affect other rights of the bank against the customer or any 
other party. 
    (6) (f) If credit is given in dollars as the equivalent of 
the value of an item payable in a foreign currency money, the 
dollar amount of any chargeback or refund shall must be 
calculated on the basis of the buying sight bank-offered spot 
rate for the foreign currency money prevailing on the day when 
the person entitled to the chargeback or refund learns that it 
will not receive payment in ordinary course.  
    Sec. 97.  Minnesota Statutes 1990, section 336.4-213, is 
amended to read: 
    336.4-213 336.4-215 [FINAL PAYMENT OF ITEM BY PAYOR BANK; 
WHEN PROVISIONAL DEBITS AND CREDITS BECOME FINAL; WHEN CERTAIN 
CREDITS BECOME AVAILABLE FOR WITHDRAWAL.] 
    (1) (a) An item is finally paid by a payor bank when the 
bank has first done any of the following, whichever happens 
first: 
    (a) (1) paid the item in cash; or 
    (b) (2) settled for the item without reserving having a 
right to revoke the settlement and without having such right 
under statute, clearinghouse rule, or agreement; or 
    (c) completed the process of posting the item to the 
indicated account of the drawer, maker or other person to be 
charged therewith; or 
    (d) (3) made a provisional settlement for the item and 
failed to revoke the settlement in the time and manner permitted 
by statute, clearinghouse rule, or agreement. 
    Upon a final payment under subparagraphs (b), (c) or (d) 
the payor bank shall be accountable for the amount of the item. 
    (b) If provisional settlement for an item does not become 
final, the item is not finally paid. 
    (2) (c) If provisional settlement for an item between the 
presenting and payor banks is made through a clearinghouse or by 
debits or credits in an account between them, then to the extent 
that provisional debits or credits for the item are entered in 
accounts between the presenting and payor banks or between the 
presenting and successive prior collecting banks seriatim, they 
become final upon final payment of the item by the payor bank. 
    (3) (d) If a collection collecting bank receives a 
settlement for an item which is or becomes final (subsection (3) 
of section 336.4-211, subsection (2) of section 336.4-213), the 
bank is accountable to its customer for the amount of the item 
and any provisional credit given for the item in an account with 
its customer becomes final. 
    (4) (e) Subject to (i) applicable law stating a time for 
availability of funds and (ii) any right of the bank to apply 
the credit to an obligation of the customer, credit given by a 
bank for an item in an a customer's account with its customer 
becomes available for withdrawal as of right: 
    (a) in any case where (1) if the bank has received a 
provisional settlement for the item, when such the settlement 
becomes final and the bank has had a reasonable time to learn 
that the settlement is final receive return of the item and the 
item has not been received within that time; 
    (b) in any case where (2) if the bank is both a the 
depositary bank and a the payor bank, and the item is finally 
paid, at the opening of the bank's second banking day following 
receipt of the item. 
    (5) A deposit of money in a bank is final when made but, 
(f) Subject to applicable law stating a time for availability of 
funds and any right of the a bank to apply the a deposit to an 
obligation of the customer depositor, the a deposit of money 
becomes available for withdrawal as of right at the opening of 
the bank's next banking day following after receipt of the 
deposit. 
    Sec. 98.  Minnesota Statutes 1990, section 336.4-214, is 
amended to read: 
    336.4-214 336.4-216 [INSOLVENCY AND PREFERENCE.] 
    (1) Any (a) If an item is in or coming comes into the 
possession of a payor or collecting bank which that suspends 
payment and which the item is has not been finally 
paid shall, the item must be returned by the receiver, trustee, 
or agent in charge of the closed bank to the presenting bank or 
the closed bank's customer.  
    (2) (b) If a payor bank finally pays an item and suspends 
payments without making a settlement for the item with its 
customer or the presenting bank which settlement is or becomes 
final, the owner of the item has a preferred claim against the 
payor bank.  
    (3) (c) If a payor bank gives or a collecting bank gives or 
receives a provisional settlement for an item and thereafter 
suspends payments, the suspension does not prevent or interfere 
with the settlement settlement's becoming final if such the 
finality occurs automatically upon the lapse of certain time or 
the happening of certain events (subsection (3) of section 
336.4-211, subsections (1) (d), (2) and (3) of section 
336.4-213).  
    (4) (d) If a collecting bank receives from subsequent 
parties settlement for an item, which settlement is or becomes 
final and the bank suspends payments without making a settlement 
for the item with its customer which settlement is or becomes 
final, the owner of the item has a preferred claim against such 
the collecting bank.  
    Sec. 99.  Minnesota Statutes 1990, section 336.4-301, is 
amended to read: 
    336.4-301 [DEFERRED POSTING; RECOVERY OF PAYMENT BY RETURN 
OF ITEMS; TIME OF DISHONOR; RETURN OF ITEMS BY PAYOR BANK.] 
    (1) Where an authorized settlement (a) If a payor bank 
settles for a demand item (other than a documentary draft) 
received by a payor bank presented otherwise than for immediate 
payment over the counter has been made before midnight of the 
banking day of receipt, the payor bank may revoke the settlement 
and recover any payment the settlement if, before it has made 
final payment (subsection (1) of section 336.4-213) and before 
its midnight deadline, it: 
    (a) (1) returns the item; or 
    (b) (2) sends written notice of dishonor or nonpayment if 
the item is held for protest or is otherwise unavailable for 
return. 
    (2) (b) If a demand item is received by a payor bank for 
credit on its books, it may return such the item or send notice 
of dishonor and may revoke any credit given or recover the 
amount thereof withdrawn by its customer, if it acts within the 
time limit and in the manner specified in the preceding 
subsection (a).  
    (3) (c) Unless previous notice of dishonor has been sent, 
an item is dishonored at the time when for purposes of dishonor 
it is returned or notice sent in accordance with this section.  
    (4) (d) An item is returned: 
    (a) (1) as to an item received presented through a 
clearinghouse, when it is delivered to the presenting or last 
collecting bank or to the clearinghouse or is sent or delivered 
in accordance with its clearinghouse rules; or 
    (b) (2) in all other cases, when it is sent or delivered to 
the bank's customer or transferor or pursuant to either's 
instructions.  
    Sec. 100.  Minnesota Statutes 1990, section 336.4-302, is 
amended to read: 
    336.4-302 [PAYOR BANK'S RESPONSIBILITY FOR LATE RETURN OF 
ITEM.] 
    In the absence of a valid defense such as breach of a 
presentment warranty (subsection (1) of section 336.4-207), 
settlement effected or the like, (a) If an item is presented on 
to and received by a payor bank, the bank is accountable for the 
amount of: 
    (a) (1) a demand item, other than a documentary draft, 
whether properly payable or not, if the bank, in any case where 
in which it is not also the depositary bank, retains the item 
beyond midnight of the banking day of receipt without settling 
for it or, regardless of whether or not it is also the 
depositary bank, does not pay or return the item or send notice 
of dishonor until after its midnight deadline; or 
    (b) (2) any other properly payable item unless, within the 
time allowed for acceptance or payment of that item, the bank 
either accepts or pays the item or returns it and accompanying 
documents.  
    (b) The liability of a payor bank to pay an item pursuant 
to subsection (a) is subject to defenses based on breach of a 
presentment warranty (section 336.4-208) or proof that the 
person seeking enforcement of the liability presented or 
transferred the item for the purpose of defrauding the payor 
bank. 
    Sec. 101.  Minnesota Statutes 1990, section 336.4-303, is 
amended to read: 
    336.4-303 [WHEN ITEMS SUBJECT TO NOTICE, STOP STOP-PAYMENT 
ORDER, LEGAL PROCESS, OR SETOFF; ORDER IN WHICH ITEMS MAY BE 
CHARGED OR CERTIFIED.] 
    (1) (a) Any knowledge, notice, or stop stop-payment order 
received by, legal process served upon, or setoff exercised by a 
payor bank, whether or not effective under other rules of 
law comes too late to terminate, suspend, or modify the bank's 
right or duty to pay an item or to charge its customer's account 
for the item, comes too late to so terminate, suspend or modify 
such right or duty if the knowledge, notice, stop stop-payment 
order, or legal process is received or served and a reasonable 
time for the bank to act thereon expires or the setoff is 
exercised after the bank has done any earliest of the following: 
    (a) Accepted or certified (1) the bank accepts or certifies 
the item; 
    (b) Paid (2) the bank pays the item in cash; 
    (c) Settled (3) the bank settles for the item without 
reserving having a right to revoke the settlement and without 
having such right under statute, clearinghouse rule, or 
agreement; 
    (d) Completed the process of posting the item to the 
indicated account of the drawer, maker or other person to be 
charged therewith or otherwise has evidenced by examination of 
such indicated account and by action its decision to pay the 
item; or 
    (e) Become (4) the bank becomes accountable for the amount 
of the item under subsection (1)(d) of section 336.4-213 and 
section 336.4-302 dealing with the payor bank's responsibility 
for late return of items; or 
    (5) with respect to checks, a cutoff hour no earlier than 
one hour after the opening of the next banking day after the 
banking day on which the bank received the check and no later 
than the close of that next banking day or, if no cutoff hour is 
fixed, the close of the next banking day after the banking day 
on which the bank received the check.  
    (2) (b) Subject to the provisions of subsection (1) (a), 
items may be accepted, paid, certified, or charged to the 
indicated account of its customer in any order convenient to the 
bank.  
    Sec. 102.  Minnesota Statutes 1990, section 336.4-401, is 
amended to read: 
    336.4-401 [WHEN BANK MAY CHARGE CUSTOMER'S ACCOUNT.] 
    (1) As against its customer, (a) A bank may charge against 
the customer's account any of a customer an item which that is 
otherwise properly payable from that account even though the 
charge creates an overdraft.  An item is properly payable if it 
is authorized by the customer and is in accordance with any 
agreement between the customer and bank.  
    (b) A customer is not liable for the amount of an overdraft 
if the customer neither signed the item nor benefited from the 
proceeds of the item.  
    (c) A bank may charge against the account of a customer a 
check that is otherwise properly payable from the account, even 
though payment was made before the date of the check, unless the 
customer has given notice to the bank of the postdating 
describing the check with reasonable certainty.  The notice is 
effective for the period stated in section 336.4-403(b) for 
stop-payment orders, and must be received at such time and in 
such manner as to afford the bank a reasonable opportunity to 
act on it before the bank takes any action with respect to the 
check described in section 336.4-303.  If a bank charges against 
the account of a customer a check before the date stated in the 
notice of postdating, the bank is liable for damages for the 
loss resulting from its act.  The loss may include damages for 
dishonor of subsequent items under section 336.4-402. 
    (2) (d) A bank which that in good faith makes payment to a 
holder may charge the indicated account of its customer 
according to: 
    (a) (1) the original tenor terms of the customer's 
altered item; or 
    (b) (2) the tenor terms of the customer's completed item, 
even though the bank knows the item has been completed unless 
the bank has notice that the completion was improper.  
    Sec. 103.  Minnesota Statutes 1990, section 336.4-402, is 
amended to read: 
    336.4-402 [BANK'S LIABILITY TO CUSTOMER FOR WRONGFUL 
DISHONOR; TIME OF DETERMINING INSUFFICIENCY OF ACCOUNT.] 
    (a) Except as otherwise provided in this article, a payor 
bank wrongfully dishonors an item if it dishonors an item that 
is properly payable, but a bank may dishonor an item that would 
create an overdraft unless it has agreed to pay the overdraft.  
    (b) A payor bank is liable to its customer for damages 
proximately caused by the wrongful dishonor of an item.  When 
the dishonor occurs through mistake Liability is limited to 
actual damages proved.  If so proximately caused and proved 
damages may include damages for an arrest or prosecution of the 
customer or other consequential damages.  Whether any 
consequential damages are proximately caused by the wrongful 
dishonor is a question of fact to be determined in each case.  
    (c) A payor bank's determination of the customer's account 
balance on which a decision to dishonor for insufficiency of 
available funds is based may be made at any time between the 
time the item is received by the payor bank and the time that 
the payor bank returns the item or gives notice in lieu of 
return, and no more than one determination need be made.  If, at 
the election of the payor bank, a subsequent balance 
determination is made for the purpose of reevaluating the bank's 
decision to dishonor the item, the account balance at that time 
is determinative of whether a dishonor for insufficiency of 
available funds is wrongful. 
    Sec. 104.  Minnesota Statutes 1990, section 336.4-403, is 
amended to read: 
    336.4-403 [CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF 
PROOF OF LOSS.] 
    (1) (a) A customer may by order to the customer's bank stop 
payment of any item payable for the customer's account but the 
order must be or any person authorized to draw on the account if 
there is more than one person may stop payment of any item drawn 
on the customer's account or close the account by an order to 
the bank describing the item or account with reasonable 
certainty received at such a time and in such a manner as to 
afford that affords the bank a reasonable opportunity to act on 
it prior to before any action by the bank with respect to the 
item described in section 336.4-303.  If the signature of more 
than one person is required to draw on an account, any of these 
persons may stop payment or close the account.  
    (2) An oral order is binding upon the bank only for 14 
calendar days unless confirmed in writing within that period.  A 
written order is effective for only six months unless renewed in 
writing. 
    (b) A stop-payment order is effective for six months, but 
it lapses after 14 calendar days if the original order was oral 
and was not confirmed in writing within that period.  A 
stop-payment order may be renewed for additional six-month 
periods by a writing given to the bank within a period during 
which the stop-payment order is effective.  
    (3) (c) The burden of establishing the fact and amount of 
loss resulting from the payment of an item contrary to a binding 
stop payment stop-payment order or order to close an account is 
on the customer.  The loss from payment of an item contrary to a 
stop-payment order may include damages for dishonor of 
subsequent items under section 336.4-402.  
    Sec. 105.  Minnesota Statutes 1990, section 336.4-404, is 
amended to read: 
    336.4-404 [BANK NOT OBLIGATED OBLIGED TO PAY CHECK MORE 
THAN SIX MONTHS OLD.] 
    A bank is under no obligation to a customer having a 
checking account to pay a check, other than a certified check, 
which is presented more than six months after its date, but it 
may charge its customer's account for a payment made thereafter 
in good faith.  
    Sec. 106.  Minnesota Statutes 1990, section 336.4-405, is 
amended to read: 
    336.4-405 [DEATH OR INCOMPETENCE OF CUSTOMER.] 
    (1) (a) A payor or collecting bank's authority to accept, 
pay, or collect an item or to account for proceeds of its 
collection, if otherwise effective, is not rendered ineffective 
by incompetence of a customer of either bank existing at the 
time the item is issued or its collection is undertaken if the 
bank does not know of an adjudication of incompetence.  Neither 
death nor incompetence of a customer revokes such the authority 
to accept, pay, collect, or account until the bank knows of the 
fact of death or of an adjudication of incompetence and has 
reasonable opportunity to act on it.  
    (2) (b) Even with knowledge, a bank may for ten days after 
the date of death pay or certify checks drawn on or prior to 
before that date unless ordered to stop payment by a person 
claiming an interest in the account.  
    Sec. 107.  Minnesota Statutes 1990, section 336.4-406, is 
amended to read: 
    336.4-406 [CUSTOMER'S DUTY TO DISCOVER AND REPORT 
UNAUTHORIZED SIGNATURE OR ALTERATION.] 
    (1) When (a) A bank that sends or makes available to its 
a customer a statement of account accompanied by showing payment 
of items for the account shall either return or make available 
to the customer the items paid in good faith in support of the 
debit entries or holds or provide information in the 
statement and of account sufficient to allow the customer 
reasonably to identify the items pursuant to a request or 
instructions of its customer or otherwise in a reasonable manner 
makes the statement and items available to the customer, the 
customer must exercise reasonable care and promptness to examine 
the statement and items to discover the customer's unauthorized 
signature or any alteration on an item and must notify the bank 
promptly after discovery thereof paid.  The statement of account 
provides sufficient information if the item is described by item 
number, amount, and date of payment.  
    (b) If the items are not returned to the customer, the 
person retaining the items shall either retain the items or, if 
the items are destroyed, maintain the capacity to furnish 
legible copies of the items until the expiration of seven years 
after receipt of the items.  A customer may request an item from 
the bank that paid the item, and that bank must provide in a 
reasonable time either the item or, if the item has been 
destroyed or is not otherwise obtainable, a legible copy of the 
item.  
    (c) If a bank sends or makes available a statement of 
account or items pursuant to subsection (a), the customer must 
exercise reasonable promptness in examining the statement or the 
items to determine whether any payment was not authorized 
because of an alteration of an item or because a purported 
signature by or on behalf of the customer was not authorized.  
If, based on the statement or items provided, the customer 
should reasonably have discovered the unauthorized payment, the 
customer must promptly notify the bank of the relevant facts.  
    (2) (d) If the bank establishes proves that the customer 
failed, with respect to an item, to comply with the duties 
imposed on the customer by subsection (1) (c), the customer is 
precluded from asserting against the bank: 
    (a) (1) the customer's unauthorized signature or any 
alteration on the item, if the bank also establishes proves that 
it suffered a loss by reason of such the failure; and 
    (b) an (2) the customer's unauthorized signature or 
alteration by the same wrongdoer on any other item paid in good 
faith by the bank after the first item and statement was 
available to the customer for a reasonable period not exceeding 
14 calendar days and before the bank receives notification from 
the customer of any such unauthorized signature or alteration if 
the payment was made before the bank received notice from the 
customer of the unauthorized signature or alteration and after 
the customer had been afforded a reasonable period of time, not 
exceeding 30 days, in which to examine the item or statement of 
account and notify the bank.  
    (3) The preclusion under subsection (2) does not apply if 
the customer establishes lack of ordinary care on the part of 
the bank in paying the item(s). 
    (e) If subsection (d) applies and the customer proves that 
the bank failed to exercise ordinary care in paying the item and 
that the failure substantially contributed to loss, the loss is 
allocated between the customer precluded and the bank asserting 
the preclusion according to the extent to which the failure of 
the customer to comply with subsection (c) and the failure of 
the bank to exercise ordinary care contributed to the loss.  If 
the customer proves that the bank did not pay the item in good 
faith, the preclusion under subsection (d) does not apply. 
    (4) (f) Without regard to care or lack of care of either 
the customer or the bank, a customer who does not within one 
year from the time after the statement and or items are made 
available to the customer (subsection (1) (a)) discover and 
report the customer's unauthorized signature on or any 
alteration on the face or back of the item or does not within 
three years from that time discover and report any unauthorized 
endorsement is precluded from asserting against the bank such 
the unauthorized signature or endorsement or such alteration.  
If there is a preclusion under this subsection, the payor bank 
may not recover for breach of warranty under section 336.4-208 
with respect to the unauthorized signature or alteration to 
which the preclusion applies.  
    (5) If under this section a payor bank has a valid defense 
against a claim of a customer upon or resulting from payment of 
an item and waives or fails upon request to assert the defense 
the bank may not assert against any collecting bank or other 
prior party presenting or transferring the item a claim based 
upon the unauthorized signature or alteration giving rise to the 
customer's claim.  
    Sec. 108.  Minnesota Statutes 1990, section 336.4-407, is 
amended to read: 
    336.4-407 [PAYOR BANK'S RIGHT TO SUBROGATION ON IMPROPER 
PAYMENT.] 
    If a payor bank has paid an item over the stop payment 
order of the drawer or maker to stop payment, or after an 
account has been closed, or otherwise under circumstances giving 
a basis for objection by the drawer or maker, to prevent unjust 
enrichment and only to the extent necessary to prevent loss to 
the bank by reason of its payment of the item, the payor 
bank shall be is subrogated to the rights: 
    (a) (1) of any holder in due course on the item against the 
drawer or maker; and 
    (b) (2) of the payee or any other holder of the item 
against the drawer or maker either on the item or under the 
transaction out of which the item arose; and 
    (c) (3) of the drawer or maker against the payee or any 
other holder of the item with respect to the transaction out of 
which the item arose.  
    Sec. 109.  Minnesota Statutes 1990, section 336.4-501, is 
amended to read: 
    336.4-501 [HANDLING OF DOCUMENTARY DRAFTS; DUTY TO SEND FOR 
PRESENTMENT AND TO NOTIFY CUSTOMER OF DISHONOR.] 
    A bank which that takes a documentary draft for collection 
must shall present or send the draft and accompanying documents 
for presentment and, upon learning that the draft has not been 
paid or accepted in due course must, shall seasonably notify its 
customer of such the fact even though it may have discounted or 
bought the draft or extended credit available for withdrawal as 
of right.  
    Sec. 110.  Minnesota Statutes 1990, section 336.4-502, is 
amended to read: 
    336.4-502 [PRESENTMENT OF "ON ARRIVAL" DRAFTS.] 
    When If a draft or the relevant instructions require 
presentment "on arrival," "when goods arrive" or the like, the 
collecting bank need not present until in its judgment a 
reasonable time for arrival of the goods has expired.  Refusal 
to pay or accept because the goods have not arrived is not 
dishonor; the bank must notify its transferor of such the 
refusal but need not present the draft again until it is 
instructed to do so or learns of the arrival of the goods.  
    Sec. 111.  Minnesota Statutes 1990, section 336.4-503, is 
amended to read: 
    336.4-503 [RESPONSIBILITY OF PRESENTING BANK FOR DOCUMENTS 
AND GOODS; REPORT OF REASONS FOR DISHONOR; REFEREE IN CASE OF 
NEED.] 
    Unless otherwise instructed and except as provided in 
article 5, a bank presenting a documentary draft: 
    (a) (1) must deliver the documents to the drawee on 
acceptance of the draft if it is payable more than three days 
after presentment; otherwise, only on payment; and 
    (b) (2) upon dishonor, either in the case of presentment 
for acceptance or presentment for payment, may seek and follow 
instructions from any referee in case of need designated in the 
draft or, if the presenting bank does not choose to utilize the 
referee's services, it must use diligence and good faith to 
ascertain the reason for dishonor, must notify its transferor of 
the dishonor and of the results of its effort to ascertain the 
reasons therefor, and must request instructions. 
    But However, the presenting bank is under no obligation 
with respect to goods represented by the documents except to 
follow any reasonable instructions seasonably received; it has a 
right to reimbursement for any expense incurred in following 
instructions and to prepayment of or indemnity for such those 
expenses.  
    Sec. 112.  Minnesota Statutes 1990, section 336.4-504, is 
amended to read: 
    336.4-504 [PRIVILEGE OF PRESENTING BANK TO DEAL WITH GOODS; 
SECURITY INTEREST FOR EXPENSES.] 
    (1) (a) A presenting bank which that, following the 
dishonor of a documentary draft, has seasonably requested 
instructions but does not receive them within a reasonable time 
may store, sell, or otherwise deal with the goods in any 
reasonable manner.  
    (2) (b) For its reasonable expenses incurred by action 
under subsection (1) (a), the presenting bank has a lien upon 
the goods or their proceeds, which may be foreclosed in the same 
manner as an unpaid seller's lien.  
    Sec. 113.  [INSTRUCTION TO REVISOR.] 
    (a) If a provision of a section of Minnesota Statutes 
repealed or amended by this act is also amended in the 1992 
regular legislative session by other law, the revisor of 
statutes shall codify the amendment to be part of the recodified 
section.  
    (b) The revisor shall change the references in column A to 
those in Column B wherever they appear in Minnesota Statutes. 
                     A                    B  
                 336.4-208            336.4-210  
                 336.4-209            336.4-211 
                 336.4-210            336.4-212 
                 336.4-211            336.4-213 
                 336.4-212            336.4-214 
                 336.4-213            336.4-215 
                 336.4-214            336.4-216 
    (c) Consistent with the repeal and reenactment of article 3 
of the Uniform Commercial Code by this act, the revisor shall 
change all section references to the former article 3 in 
Minnesota Statutes to the appropriate section references in the 
reenacted article.  The revisor shall also prepare legislation 
to change references for which there is not a simple 
substitution. 
    Sec. 114.  [REPEALER.] 
    (a) Minnesota Statutes 1990, sections 336.3-101; 336.3-102; 
336.3-103; 336.3-104; 336.3-105; 336.3-106; 336.3-107; 
336.3-108; 336.3-109; 336.3-110; 336.3-111; 336.3-112; 
336.3-113; 336.3-114; 336.3-115; 336.3-116; 336.3-117; 
336.3-118; 336.3-119; 336.3-120; 336.3-121; 336.3-122; 
336.3-201; 336.3-202; 336.3-203; 336.3-204; 336.3-205; 
336.3-206; 336.3-207; 336.3-208; 336.3-301; 336.3-302; 
336.3-303; 336.3-304; 336.3-305; 336.3-306; 336.3-307; 
336.3-401; 336.3-402; 336.3-403; 336.3-404; 336.3-405; 
336.3-406; 336.3-407; 336.3-408; 336.3-409; 336.3-410; 
336.3-411; 336.3-412; 336.3-413; 336.3-414; 336.3-415; 
336.3-416; 336.3-417; 336.3-418; 336.3-419; 336.3-501; 
336.3-502; 336.3-503; 336.3-504; 336.3-505; 336.3-506; 
336.3-507; 336.3-508; 336.3-509; 336.3-510; 336.3-511; 
336.3-601; 336.3-602; 336.3-603; 336.3-604; 336.3-605; 
336.3-606; 336.3-701; 336.3-801; 336.3-802; 336.3-803; 
336.3-804; 336.3-805, are repealed. 
    (b) Minnesota Statutes 1990, section 336.4-109, is repealed.
    Presented to the governor April 17, 1992 
    Signed by the governor April 24, 1992, 4:17 p.m.

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