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

                             CHAPTER 81-S.F.No. 28 
                  An act relating to commerce; modifying and enacting 
                  the amendments to Articles 3 and 4 of the Uniform 
                  Commercial Code recommended by the National Conference 
                  of Commissioners on Uniform State Laws; amending 
                  Minnesota Statutes 2002, sections 336.3-103; 
                  336.3-106; 336.3-116; 336.3-119; 336.3-305; 336.3-309; 
                  336.3-312; 336.3-416; 336.3-417; 336.3-419; 336.3-602; 
                  336.3-604; 336.3-605; 336.4-104; 336.4-207; 336.4-208; 
                  336.4-212; 336.4-301; 336.4-403. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1
                AMENDMENTS TO UNIFORM COMMERCIAL CODE ARTICLE 3
           Section 1.  Minnesota Statutes 2002, section 336.3-103, is 
        amended to read: 
           336.3-103 [DEFINITIONS.] 
           (a) In this article: 
           (1) "Acceptor" means a drawee who has accepted a draft. 
           (2) "Consumer account" means an account established by an 
        individual primarily for personal, family, or household purposes.
           (3) "Consumer transaction" means a transaction in which an 
        individual incurs an obligation primarily for personal, family, 
        or household purposes. 
           (4) "Drawee" means a person ordered in a draft to make 
        payment. 
           (3) (5) "Drawer" means a person who signs or is identified 
        in a draft as a person ordering payment. 
           (4) (6) "Good faith" means honesty in fact and the 
        observance of reasonable commercial standards of fair dealing. 
           (5) (7) "Maker" means a person who signs or is identified 
        in a note as a person undertaking to pay. 
           (6) (8) "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) (9) "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) (10) "Party" means a party to an instrument. 
           (11) "Principal obligor," with respect to an instrument, 
        means the accommodated party or any other party to the 
        instrument against whom a secondary obligor has recourse under 
        this article. 
           (9) (12) "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) (13) "Prove" with respect to a fact means to meet the 
        burden of establishing the fact (section 336.1-201(8)). 
           (14) "Record" means information that is inscribed on a 
        tangible medium or that is stored in an electronic or other 
        medium and is retrievable in perceivable form. 
           (11) (15) "Remitter" means a person who purchases an 
        instrument from its issuer if the instrument is payable to an 
        identified person other than the purchaser. 
           (16) "Remotely-created item" means an item that is not 
        created by the payor bank and does not bear a handwritten or 
        facsimile signature purporting to be the signature of the drawer.
           (17) "Secondary obligor," with respect to an instrument, 
        means (a) an endorser or an accommodation party, (b) a drawer 
        having the obligation described in section 336.3-414(d), or (c) 
        any other party to the instrument that has recourse against 
        another party to the instrument pursuant to section 336.3-116(b).
           (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. 
           "Account," section 336.4-104. 
           "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. 2.  Minnesota Statutes 2002, section 336.3-106, is 
        amended to read: 
           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 record, or (iii) that rights or obligations with respect 
        to the promise or order are stated in another writing record.  A 
        reference to another writing record 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 record 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. 3.  Minnesota Statutes 2002, section 336.3-116, is 
        amended to read: 
           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. 4.  Minnesota Statutes 2002, section 336.3-119, is 
        amended to read: 
           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 in a record, 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. 
           Sec. 5.  Minnesota Statutes 2002, section 336.3-305, is 
        amended to read: 
           336.3-305 [DEFENSES AND CLAIMS IN RECOUPMENT.] 
           (a) Except as stated in subsection (b) otherwise provided 
        in this section, 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. 
           (e) In a consumer transaction, if law other than this 
        article requires that an instrument include a statement to the 
        effect that the rights of a holder or transferee are subject to 
        a claim or defense that the issuer could assert against the 
        original payee, and the instrument does not include such a 
        statement: 
           (1) the instrument has the same effect as if the instrument 
        included such a statement; 
           (2) the issuer may assert against the holder or transferee 
        all claims and defenses that would have been available if the 
        instrument included such a statement; and 
           (3) the extent to which claims may be asserted against the 
        holder or transferee is determined as if the instrument included 
        such a statement. 
           (f) This section is subject to law other than this article 
        that establishes a different rule for consumer transactions. 
           Sec. 6.  Minnesota Statutes 2002, section 336.3-309, is 
        amended to read: 
           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 
           (1) the person seeking to enforce the instrument (A) was 
        entitled to enforce it the instrument when loss of possession 
        occurred, (ii) or (B) has directly or indirectly acquired 
        ownership of the instrument from a person who was entitled to 
        enforce the instrument when loss of possession occurred; 
           (2) the loss of possession was not the result of a transfer 
        by the person or a lawful seizure,; and 
           (iii) (3) the person cannot reasonably obtain possession of 
        the instrument because the instrument was destroyed, its 
        whereabouts cannot be determined, or it is in the wrongful 
        possession of an unknown person or a person that cannot be found 
        or is not amenable to service of process. 
           (b) A person seeking enforcement of an instrument under 
        subsection (a) must prove the terms of the instrument and the 
        person's right to enforce the instrument.  If that proof is 
        made, section 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. 7.  Minnesota Statutes 2002, section 336.3-312, is 
        amended to read: 
           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 
        in a record 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. 
           Sec. 8.  Minnesota Statutes 2002, section 336.3-416, is 
        amended to read: 
           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; and 
           (6) with respect to a remotely-created item, the person on 
        whose account the item is drawn authorized the issuance of the 
        item in the amount for which the item is drawn.  
           (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.  
           (e) No claim for breach of the warranty in subsection 
        (a)(6) is available against a person to which an item was 
        transferred to the extent that under applicable law (including 
        the applicable choice-of-law principles) the person that 
        transferred the item to that person did not make the warranty in 
        subsection (a)(6). 
           Sec. 9.  Minnesota Statutes 2002, section 336.3-417, is 
        amended to read: 
           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; and 
           (4) with respect to any remotely-created item, the person 
        on whose account the item is drawn authorized the issuance of 
        the item in the amount for which the item is drawn.  
           (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. 
           (g) No claim for breach of the warranty in subsection 
        (a)(4) is available against a person to which an item was 
        transferred to the extent that under applicable law (including 
        the applicable choice-of-law principles) the person that 
        transferred the item to that person did not make the warranty in 
        subsection (a)(4). 
           Sec. 10.  Minnesota Statutes 2002, section 336.3-419, is 
        amended to read: 
           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) If the signature of a party to an instrument is 
        accompanied by words indicating that the party guarantees 
        payment or the signer signs the instrument as an accommodation 
        party in some other manner that does not unambiguously indicate 
        an intention to guarantee collection rather than payment, the 
        signer is obligated to pay the amount due on the instrument to a 
        person entitled to enforce the instrument in the same 
        circumstances as the accommodated party would be obliged, 
        without prior resort to the accommodated party by the person 
        entitled to enforce the instrument. 
           (f) 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.  In proper circumstances, an accommodation party may 
        obtain relief that requires the accommodated party to perform 
        its obligations on the instrument.  An accommodated party who 
        that pays the instrument has no right of recourse against, and 
        is not entitled to contribution from, an accommodation party. 
           Sec. 11.  Minnesota Statutes 2002, section 336.3-602, is 
        amended to read: 
           336.3-602 [PAYMENT.] 
           (a) Subject to subsection (b) (e), 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.  
           (b) Subject to subsection (e), a note is paid to the extent 
        payment is made by or on behalf of a party obliged to pay the 
        note to a person that formerly was entitled to enforce the note 
        only if at the time of the payment the party obliged to pay has 
        not received adequate notification that the note has been 
        transferred and that payment is to be made to the transferee.  A 
        notification is adequate only if it is signed by the transferor 
        or the transferee; reasonably identifies the transferred note; 
        and provides an address at which payments subsequently are to be 
        made.  Upon request, a transferee shall seasonably furnish 
        reasonable proof that the note has been transferred.  Unless the 
        transferee complies with the request, a payment to the person 
        that formerly was entitled to enforce the note is effective for 
        purposes of subsection (c) even if the party obliged to pay the 
        note has received a notification under this paragraph. 
           (c) Subject to subsection (e), to the extent of the a 
        payment under subsections (a) and (b), 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.  
           (d) Subject to subsection (e), a transferee, or any party 
        that has acquired rights in the instrument directly or 
        indirectly from a transferee, including any such party that has 
        rights as a holder in due course, is deemed to have notice of 
        any payment that is made under subsection (b) after the date 
        that the note is transferred to the transferee but before the 
        party obliged to pay the note receives adequate notification of 
        the transfer. 
           (b) (e) The obligation of a party to pay the instrument is 
        not discharged under subsection subsections (a) through (d) 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.  
           (f) As used in this section, "signed," with respect to a 
        record that is not a writing, includes the attachment to or 
        logical association with the record of an electronic symbol, 
        sound, or process with the present intent to adopt or accept the 
        record. 
           Sec. 12.  Minnesota Statutes 2002, section 336.3-604, is 
        amended to read: 
           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 record.  
           (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.  
           (c) In this section, "signed," with respect to a record 
        that is not a writing, includes the attachment to or logical 
        association with the record of an electronic symbol, sound, or 
        process with the present intent to adopt or accept the record. 
           Sec. 13.  Minnesota Statutes 2002, section 336.3-605, is 
        amended to read: 
           336.3-605 [DISCHARGE OF ENDORSERS AND ACCOMMODATION PARTIES 
        SECONDARY OBLIGORS.] 
           (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. 
           (a) If a person entitled to enforce an instrument releases 
        the obligation of a principal obligor in whole or in part, and 
        another party to the instrument is a secondary obligor with 
        respect to the obligation of that principal obligor, the 
        following rules apply: 
           (1) Any obligations of the principal obligor to the 
        secondary obligor with respect to any previous payment by the 
        secondary obligor are not affected.  Unless the terms of the 
        release preserve the secondary obligor's recourse, the principal 
        obligor is discharged, to the extent of the release, from any 
        other duties to the secondary obligor under this article.  
           (2) Unless the terms of the release provide that the person 
        entitled to enforce the instrument retains the right to enforce 
        the instrument against the secondary obligor, the secondary 
        obligor is discharged to the same extent as the principal 
        obligor from any unperformed portion of its obligation on the 
        instrument.  If the instrument is a check and the obligation of 
        the secondary obligor is based on an indorsement of the check, 
        the secondary obligor is discharged without regard to the 
        language or circumstances of the discharge or other release. 
           (3) If the secondary obligor is not discharged under 
        paragraph (2), the secondary obligor is discharged to the extent 
        of the value of the consideration for the release, and to the 
        extent that the release would otherwise cause the secondary 
        obligor a loss. 
           (b) If a person entitled to enforce an instrument grants a 
        principal obligor an extension of the time at which one or more 
        payments are due on the instrument and another party to the 
        instrument is a secondary obligor with respect to the obligation 
        of that principal obligor, the following rules apply: 
           (1) Any obligations of the principal obligor to the 
        secondary obligor with respect to any previous payment by the 
        secondary obligor are not affected.  Unless the terms of the 
        extension preserve the secondary obligor's recourse, the 
        extension correspondingly extends the time for performance of 
        any other duties owed to the secondary obligor by the principal 
        obligor under this article. 
           (2) The secondary obligor is discharged to the extent that 
        the extension would otherwise cause the secondary obligor a loss.
           (3) To the extent that the secondary obligor is not 
        discharged under paragraph (2), the secondary obligor may 
        perform its obligations to a person entitled to enforce the 
        instrument as if the time for payment had not been extended or, 
        unless the terms of the extension provide that the person 
        entitled to enforce the instrument retains the right to enforce 
        the instrument against the secondary obligor as if the time for 
        payment had not been extended, treat the time for performance of 
        its obligations as having been extended correspondingly. 
           (c) If a person entitled to enforce an instrument agrees, 
        with or without consideration, to a modification of the 
        obligation of a principal obligor other than a complete or 
        partial release or an extension of the due date and another 
        party to the instrument is a secondary obligor with respect to 
        the obligation of that principal obligor, the following rules 
        apply: 
           (1) Any obligations of the principal obligor to the 
        secondary obligor with respect to any previous payment by the 
        secondary obligor are not affected.  The modification 
        correspondingly modifies any other duties owed to the secondary 
        obligor by the principal obligor under this article. 
           (2) The secondary obligor is discharged from any 
        unperformed portion of its obligation to the extent that the 
        modification would otherwise cause the secondary obligor a loss. 
           (3) To the extent that the secondary obligor is not 
        discharged under paragraph (2), the secondary obligor may 
        satisfy its obligation on the instrument as if the modification 
        had not occurred, or treat its obligation on the instrument as 
        having been modified correspondingly. 
           (d) If the obligation of a principal obligor is secured by 
        an interest in collateral, another party to the instrument is a 
        secondary obligor with respect to that obligation, and a person 
        entitled to enforce the instrument impairs the value of the 
        interest in collateral, the obligation of the secondary obligor 
        is discharged to the extent of the impairment.  The value of an 
        interest in collateral is impaired to the extent the value of 
        the interest is reduced to an amount less than the amount of the 
        recourse of the secondary obligor, or the reduction in value of 
        the interest causes an increase in the amount by which the 
        amount of the recourse exceeds the value of the interest.  For 
        purposes of this subsection, impairing the value of an interest 
        in collateral includes failure to obtain or maintain perfection 
        or recordation of the interest in collateral, release of 
        collateral without substitution of collateral of equal value or 
        equivalent reduction of the underlying obligation, failure to 
        perform a duty to preserve the value of collateral owed, under 
        Article 9 or other law, to a debtor or other person secondarily 
        liable, and failure to comply with applicable law in disposing 
        of or otherwise enforcing the interest in collateral. 
           (e) A secondary obligor is not discharged under subsection 
        (a)(3), (b), (c), or (d) unless the person entitled to enforce 
        the instrument knows that the person is a secondary obligor or 
        has notice under section 336.3-419(c) that the instrument was 
        signed for accommodation. 
           (f) A secondary obligor is not discharged under this 
        section if the secondary obligor consents to the event or 
        conduct that is the basis of the discharge, or the instrument or 
        a separate agreement of the party provides for waiver of 
        discharge under this section specifically or by general language 
        indicating that parties waive defenses based on suretyship or 
        impairment of collateral.  Unless the circumstances indicate 
        otherwise, consent by the principal obligor to an act that would 
        lead to a discharge under this section constitutes consent to 
        that act by the secondary obligor if the secondary obligor 
        controls the principal obligor or deals with the person entitled 
        to enforce the instrument on behalf of the principal obligor. 
           (g) A release or extension preserves a secondary obligor's 
        recourse if the terms of the release or extension provide that 
        the person entitled to enforce the instrument retains the right 
        to enforce the instrument against the secondary obligor and the 
        recourse of the secondary obligor continues as if the release or 
        extension had not been granted. 
           (h) Except as otherwise provided in subsection (i), a 
        secondary obligor asserting discharge under this section has the 
        burden of persuasion both with respect to the occurrence of the 
        acts alleged to harm the secondary obligor and loss or prejudice 
        caused by those acts.  
           (i) If the secondary obligor demonstrates prejudice caused 
        by an impairment of its recourse, and the circumstances of the 
        case indicate that the amount of loss is not reasonably 
        susceptible of calculation or requires proof of facts that are 
        not ascertainable, it is presumed that the act impairing 
        recourse caused a loss or impairment equal to the liability of 
        the secondary obligor on the instrument.  In that event, the 
        burden of persuasion as to any lesser amount of the loss is on 
        the person entitled to enforce the instrument. 

                                   ARTICLE 2
                AMENDMENTS TO UNIFORM COMMERCIAL CODE ARTICLE 4
           Section 1.  Minnesota Statutes 2002, section 336.4-104, is 
        amended to read: 
           336.4-104 [DEFINITIONS AND INDEX OF DEFINITIONS.] 
           (a) In this article, unless the context otherwise requires: 
           (1) "Account" means any deposit or credit account with a 
        bank, including a demand, time, savings, passbook, share draft, 
        or like account, other than an account evidenced by a 
        certificate of deposit; 
           (2) "Afternoon" means the period of a day between noon and 
        midnight; 
           (3) "Banking day" means that part of any day, excluding 
        Saturday, Sunday, and holidays, on which a bank is open to the 
        public for carrying on substantially all of its banking 
        functions; 
           (4) "Clearinghouse" means an association of banks or other 
        payors regularly clearing items; 
           (5) "Customer" means a person having an account with a bank 
        or for whom a bank has agreed to collect items, including a bank 
        that maintains an account at another bank; 
           (6) "Documentary draft" means a draft to be presented for 
        acceptance or payment if specified documents, certificated 
        securities (section 336.8-102) or instructions for 
        uncertificated securities (section 336.8-102), 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; 
           (9) "Item" means 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; 
           (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; 
           (11) "Settle" means to pay in cash, by clearinghouse 
        settlement, in a charge or credit or by remittance, or otherwise 
        as agreed.  A settlement may be either provisional or final; 
           (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. 
           (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 
           "Presentment notice," section 336.4-110 
           (c) The following definitions in other articles apply to 
        this article: 
           "Acceptance," section 336.3-409 
           "Alteration," section 336.3-407 
           "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 
           "Good faith," section 336.3-103 
           "Holder in due course," section 336.3-302 
           "Instrument," section 336.3-104 
           "Notice of dishonor," section 336.3-503 
           "Order," section 336.3-103 
           "Ordinary care," section 336.3-103 
           "Person entitled to enforce," section 336.3-301 
           "Presentment," section 336.3-501 
           "Promise," section 336.3-103 
           "Prove," section 336.3-103 
           "Record," section 336.3-103 
           "Remotely-created item," section 336.3-103 
           "Teller's check," section 336.3-104 
           "Unauthorized signature," section 336.3-403 
           (d) In addition, article 1 contains general definitions and 
        principles of construction and interpretation applicable 
        throughout this article. 
           Sec. 2.  Minnesota Statutes 2002, section 336.4-207, is 
        amended to read: 
           336.4-207 [TRANSFER WARRANTIES.] 
           (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; and 
           (6) with respect to any remotely-created item, the person 
        on whose account the item is drawn authorized the issuance of 
        the item in the amount for which the item is drawn.  
           (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. 
           (f) No claim for breach in the warranty in subsection 
        (a)(6) is available against a person to which an item was 
        transferred to the extent that under applicable law (including 
        the applicable choice-of-law principles) the person that 
        transferred the item to that person did not make the warranty in 
        subsection (a)(6). 
           Sec. 3.  Minnesota Statutes 2002, section 336.4-208, is 
        amended to read: 
           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; and 
           (4) with respect to any remotely-created item, the person 
        on whose account the item is drawn authorized the issuance of 
        the item in the amount for which the item is drawn.  
           (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. 
           (g) No claim for breach of the warranty in subsection 
        (a)(4) is available against a person to which an item was 
        transferred to the extent that under applicable law (including 
        the applicable choice-of-law principle) the person that 
        transferred the item to that person did not make the warranty in 
        subsection (a)(4). 
           Sec. 4.  Minnesota Statutes 2002, section 336.4-212, is 
        amended to read: 
           336.4-212 [PRESENTMENT BY NOTICE OF ITEM NOT PAYABLE BY, 
        THROUGH, OR AT BANK; LIABILITY OF DRAWER OR ENDORSER.] 
           (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 record providing 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 336.3-501 by the 
        close of the bank's next banking day after it knows of the 
        requirement.  
           (b) If presentment is made by notice and payment, 
        acceptance, or request for compliance with a requirement under 
        section 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 drawer or endorser by sending it notice of the facts. 
           Sec. 5.  Minnesota Statutes 2002, 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.] 
           (a) If a payor bank settles for a demand item other than a 
        documentary draft presented otherwise than for immediate payment 
        over the counter before midnight of the banking day of receipt, 
        the payor bank may revoke the settlement and recover the 
        settlement if, before it has made final payment and before its 
        midnight deadline, it: 
           (1) returns the item; or 
           (2) returns an image of the item, if the party to which the 
        return is made has entered into an agreement to accept an image 
        as a return of the item and the image is returned in accordance 
        with that agreement; or 
           (3) sends written a record providing notice of dishonor or 
        nonpayment if the item is unavailable for return. 
           (b) If a demand item is received by a payor bank for credit 
        on its books, it may return 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 subsection (a).  
           (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.  
           (d) An item is returned: 
           (1) as to an item 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 
        clearinghouse rules; or 
           (2) in all other cases, when it is sent or delivered to the 
        bank's customer or transferor or pursuant to instructions.  
           Sec. 6.  Minnesota Statutes 2002, section 336.4-403, is 
        amended to read: 
           336.4-403 [CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF 
        PROOF OF LOSS.] 
           (a) A customer 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 a time and in a manner that affords the 
        bank a reasonable opportunity to act on it 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.  
           (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 a record within that period.  A 
        stop-payment order may be renewed for additional six-month 
        periods by a writing record given to the bank within a period 
        during which the stop-payment order is effective.  
           (c) The burden of establishing the fact and amount of loss 
        resulting from the payment of an item contrary to a 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. 
           Presented to the governor May 19, 2003 
           Signed by the governor May 22, 2003, 9:40 p.m.