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S.B. 74 Enrolled
AN ACT RELATING TO UNIFORM COMMERCIAL CODE; DEFINING TERMS;
PROVIDING FOR TRANSFER AND PRESENTMENT; MAKING CONFORMING
AMENDMENTS AND TECHNICAL CHANGES; AND PROVIDING AN EFFECTIVE
DATE.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
70A-3-103, as repealed and reenacted by Chapter 237, Laws of Utah 1993
70A-3-104, as repealed and reenacted by Chapter 237, Laws of Utah 1993
70A-3-416, as repealed and reenacted by Chapter 237, Laws of Utah 1993
70A-3-417, as repealed and reenacted by Chapter 237, Laws of Utah 1993
70A-4-207, as repealed and reenacted by Chapter 237, Laws of Utah 1993
70A-4-208, as repealed and reenacted by Chapter 237, Laws of Utah 1993
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 70A-3-103 is amended to read:
70A-3-103. Definitions.
(1) In this chapter:
(a) "Acceptor" means a drawee who has accepted a draft.
(b) "Drawee" means a person ordered in a draft to make payment.
(c) "Drawer" means a person who signs or is identified in a draft as a person ordering
payment.
(d) "Good faith" means honesty in fact in the conduct or transaction concerned.
(e) "Maker" means a person who signs or is identified in a note as a person undertaking
to pay.
(f) "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.
(g) "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 chapter or Title 70A, Chapter 4, Uniform Commercial Code -- Bank
Deposits and Collections.
(h) "Party" means a party to an instrument.
(i) "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.
(j) "Prove" with respect to a fact means to meet the burden of establishing the fact as defined
in Subsection 70A-1-201(8).
(k) "Remitter" means a person who purchases an instrument from its issuer if the instrument
is payable to an identified person other than the purchaser.
(2) Other definitions applying to this chapter and the sections in which they appear are:
(a) "Acceptance," Section 70A-3-409;
(b) "Accommodated party," Section 70A-3-419;
(c) "Accommodation party," Section 70A-3-419;
(d) "Alteration," Section 70A-3-407;
(e) "Anomalous indorsement," Section 70A-3-205;
(f) "Blank indorsement," Section 70A-3-205;
(g) "Cashier's check," Section 70A-3-104;
(h) "Certificate of deposit," Section 70A-3-104;
(i) "Certified check," Section 70A-3-409;
(j) "Check," Section 70A-3-104;
(k) "Consideration," Section 70A-3-303;
(l) "Demand draft," Section 70A-3-104;
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(3) The following definitions in other chapters apply to this chapter:
(a) "Bank," Section 70A-4-105;
(b) "Banking day," Section 70A-4-104;
(c) "Clearinghouse," Section 70A-4-104;
(d) "Collecting bank," Section 70A-4-105;
(e) "Depositary bank," Section 70A-4-105;
(f) "Documentary draft," Section 70A-4-104;
(g) "Intermediary bank," Section 70A-4-105;
(h) "Item," Section 70A-4-104;
(i) "Payor bank," Section 70A-4-105;
(j) "Suspends payments," Section 70A-4-104[
(4) In addition, Chapter 1 contains general definitions and principles of construction and
interpretation applicable throughout this chapter.
Section 2. Section 70A-3-104 is amended to read:
70A-3-104. Negotiable instrument.
(1) Except as provided in Subsections (3) and (4), "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:
(a) is payable to bearer or to order at the time it is issued or first comes into possession of
a holder;
(b) is payable on demand or at a definite time; and
(c) 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.
(2) "Instrument" means a negotiable instrument.
(3) An order that meets all of the requirements of Subsection (1), except Subsection (1)(a),
and otherwise falls within the definition of "check" in Subsection (6) is a negotiable instrument and
a check.
(4) 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 chapter.
(5) 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.
(6) (a) "Check" means:
(i) a draft, other than a documentary draft, payable on demand and drawn on a bank; [
(ii) a cashier's check or teller's check[
(iii) a demand draft.
(b) An instrument may be a check even though it is described on its face by another term,
such as "money order."
(7) "Cashier's check" means a draft with respect to which the drawer and drawee are the
same bank or branches of the same bank.
(8) "Teller's check" means a draft drawn by a bank either on another bank, or payable at or
through a bank.
(9) "Traveler's check" means an instrument that:
(a) is payable on demand;
(b) is drawn on or payable at or through a bank;
(c) is designated by the term "traveler's check" or by a substantially similar term; and
(d) requires, as a condition to payment, a countersignature by a person whose specimen
signature appears on the instrument.
(10) "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.
(11) (a) "Demand draft" means a writing not signed by a customer that is created by a third
party under the purported authority of the customer for the purpose of charging the customer's
account with a bank.
(b) A demand draft:
(i) shall contain the customer's account number;
(ii) may contain any or all of the following:
(A) the customer's printed or typewritten name;
(B) a notation that the customer authorized the draft; or
(C) the statement "No Signature Required" or words to that effect; and
(iii) may not include a check purportedly drawn by and bearing the signature of a fiduciary,
as defined in Section 70A-3-307.
Section 3. Section 70A-3-416 is amended to read:
70A-3-416. Transfer warranties.
(1) A person who transfers an instrument for consideration warrants to the transferee and,
if the transfer is by indorsement, to any subsequent transferee that:
(a) the warrantor is a person entitled to enforce the instrument;
(b) all signatures on the instrument are authentic and authorized;
(c) the instrument has not been altered;
(d) the instrument is not subject to a defense or claim in recoupment of any party which can
be asserted against the warrantor; [
(e) 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
(f) if the instrument is a demand draft, creation of the instrument according to the terms on
its face was authorized by the person identified as drawer.
(2) A person to whom the warranties under Subsection (1) 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.
(3) The warranties stated in Subsection (1) 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 (2) is discharged to the extent of any loss caused by the delay in giving
notice of the claim.
(4) A cause of action for breach of warranty under this section accrues when the claimant
has reason to know of the breach.
(5) If the warranty in Subsection (1)(f) is not given by a transferor under applicable conflict
of law rules, the warranty is not given to that transferor when that transferor is a transferee.
Section 4. Section 70A-3-417 is amended to read:
70A-3-417. Presentment warranties.
(1) If an unaccepted draft is presented to the drawee for payment or acceptance and the
drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of
presentment, and 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:
(a) 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;
(b) the draft has not been altered; [
(c) the warrantor has no knowledge that the signature of the drawer of the draft is
unauthorized[
(d) if the draft is a demand draft, creation of the demand draft according to the terms on its
face was authorized by the person identified as drawer.
(2) 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.
(3) If a drawee asserts a claim for breach of warranty under Subsection (1) based on an
unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by
proving that the indorsement is effective under Section 70A-3-404 or 70A-3-405, or that the drawer
is precluded under Section 70A-3-406 or 70A-4-406 from asserting against the drawee the
unauthorized indorsement or alteration.
(4) If a dishonored draft is presented for payment to the drawer or an indorser, or any other
instrument is presented for payment to a party obliged to pay the instrument, and payment is
received, the following rules apply:
(a) 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.
(b) 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.
(5) The warranties stated in Subsections (1) and (4) 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 (2) or (4) is discharged to the extent of any loss caused by the delay in
giving notice of the claim.
(6) A cause of action for breach of warranty under this section accrues when the claimant
has reason to know of the breach.
(7) A demand draft is a check, as provided in Section 70A-3-104.
(8) If the warranty in Subsection (1)(d) is not given by a transferor under applicable conflict
of law rules, the warranty is not given to that transferor when the transferor is a transferee.
Section 5. Section 70A-4-207 is amended to read:
70A-4-207. Transfer warranties.
(1) 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:
(a) the warrantor is a person entitled to enforce the item;
(b) all signatures on the item are authentic and authorized;
(c) the item has not been altered;
(d) the item is not subject to a defense or claim in recoupment, Section 70A-3-305, of any
party that can be asserted against the warrantor; [
(e) 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[
(f) if the item is a demand draft, creation of the item according to the terms on its face was
authorized by the person identified as drawer.
(2) 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 according to the terms
of the item at the time it was transferred, or if the transfer was of an incomplete item, according to
its terms when completed as stated in Sections 70A-3-115 and 70A-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 indorsement stating that
it is made "without recourse" or otherwise disclaiming liability.
(3) A person to whom the warranties under Subsection (1) 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.
(4) The warranties stated in Subsection (1) 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.
(5) A cause of action for breach of warranty under this section accrues when the claimant
has reason to know of the breach.
(6) If the warranty in Subsection (1)(f) is not given by a transferor or collecting bank under
applicable conflict of law rules, the warranty is not given to that transferor when that transferor is
a transferee nor to any prior collecting bank of that transferee.
Section 6. Section 70A-4-208 is amended to read:
70A-4-208. Presentment warranties.
(1) If an unaccepted draft is presented to the drawee for payment or acceptance and the
drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of
presentment, and 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:
(a) 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;
(b) the draft has not been altered; [
(c) the warrantor has no knowledge that the signature of the purported drawer of the draft
is unauthorized[
(d) if the draft is a demand draft, creation of the demand draft according to the terms on its
face was authorized by the person identified as drawer.
(2) 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:
(a) breach of warranty is a defense to the obligation of the acceptor; and
(b) 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.
(3) If a drawee asserts a claim for breach of warranty under Subsection (1) based on an
unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by
proving that the indorsement is effective under Section 70A-3-404 or 70A-3-405, or the drawer is
precluded under Section 70A-3-406 or 70A-4-406 from asserting against the drawee the
unauthorized indorsement or alteration.
(4) If a dishonored draft is presented for payment to the drawer or an indorser, or 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.
(5) The warranties stated in Subsections (1) and (4) 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.
(6) A cause of action for breach of warranty under this section accrues when the claimant
has reason to know of the breach.
(7) A demand draft is a check, as provided in Section 70A-3-104.
(8) If the warranty in Subsection (1)(d) is not given by a transferor under applicable conflict
of law rules, the warranty is not given to that transferor when that transferor is a transferee.
Section 7. Effective date.
This act takes effect on July 1, 1998.
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