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S.B. 74
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6 AN ACT RELATING TO UNIFORM COMMERCIAL CODE; DEFINING TERMS;
7 PROVIDING FOR TRANSFER AND PRESENTMENT; MAKING CONFORMING
8 AMENDMENTS AND TECHNICAL CHANGES; AND PROVIDING AN EFFECTIVE
9 DATE.
10 This act affects sections of Utah Code Annotated 1953 as follows:
11 AMENDS:
12 70A-3-103, as repealed and reenacted by Chapter 237, Laws of Utah 1993
13 70A-3-104, as repealed and reenacted by Chapter 237, Laws of Utah 1993
14 70A-3-416, as repealed and reenacted by Chapter 237, Laws of Utah 1993
15 70A-3-417, as repealed and reenacted by Chapter 237, Laws of Utah 1993
16 70A-4-207, as repealed and reenacted by Chapter 237, Laws of Utah 1993
17 70A-4-208, as repealed and reenacted by Chapter 237, Laws of Utah 1993
18 Be it enacted by the Legislature of the state of Utah:
19 Section 1. Section 70A-3-103 is amended to read:
20 70A-3-103. Definitions.
21 (1) In this chapter:
22 (a) "Acceptor" means a drawee who has accepted a draft.
23 (b) "Drawee" means a person ordered in a draft to make payment.
24 (c) "Drawer" means a person who signs or is identified in a draft as a person ordering
25 payment.
26 (d) "Good faith" means honesty in fact in the conduct or transaction concerned.
27 (e) "Maker" means a person who signs or is identified in a note as a person undertaking
1 to pay.
2 (f) "Order" means a written instruction to pay money signed by the person giving the
3 instruction. The instruction may be addressed to any person, including the person giving the
4 instruction, or to one or more persons jointly or in the alternative, but not in succession. An
5 authorization to pay is not an order unless the person authorized to pay is also instructed to pay.
6 (g) "Ordinary care" in the case of a person engaged in business means observance of
7 reasonable commercial standards, prevailing in the area in which the person is located, with respect
8 to the business in which the person is engaged. In the case of a bank that takes an instrument for
9 processing for collection or payment by automated means, reasonable commercial standards do
10 not require the bank to examine the instrument if the failure to examine does not violate the bank's
11 prescribed procedures and the bank's procedures do not vary unreasonably from general banking
12 usage not disapproved by this chapter or Title 70A, Chapter 4, Uniform Commercial Code -- Bank
13 Deposits and Collections.
14 (h) "Party" means a party to an instrument.
15 (i) "Promise" means a written undertaking to pay money signed by the person undertaking
16 to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor
17 also undertakes to pay the obligation.
18 (j) "Prove" with respect to a fact means to meet the burden of establishing the fact as
19 defined in Subsection 70A-1-201(8).
20 (k) "Remitter" means a person who purchases an instrument from its issuer if the
21 instrument is payable to an identified person other than the purchaser.
22 (2) Other definitions applying to this chapter and the sections in which they appear are:
23 (a) "Acceptance," Section 70A-3-409;
24 (b) "Accommodated party," Section 70A-3-419;
25 (c) "Accommodation party," Section 70A-3-419;
26 (d) "Alteration," Section 70A-3-407;
27 (e) "Anomalous indorsement," Section 70A-3-205;
28 (f) "Blank indorsement," Section 70A-3-205;
29 (g) "Cashier's check," Section 70A-3-104;
30 (h) "Certificate of deposit," Section 70A-3-104;
31 (i) "Certified check," Section 70A-3-409;
1 (j) "Check," Section 70A-3-104;
2 (k) "Consideration," Section 70A-3-303;
3 (l) "Demand draft," Section 70A-3-104;
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28 (3) The following definitions in other chapters apply to this chapter:
29 (a) "Bank," Section 70A-4-105;
30 (b) "Banking day," Section 70A-4-104;
31 (c) "Clearinghouse," Section 70A-4-104;
1 (d) "Collecting bank," Section 70A-4-105;
2 (e) "Depositary bank," Section 70A-4-105;
3 (f) "Documentary draft," Section 70A-4-104;
4 (g) "Intermediary bank," Section 70A-4-105;
5 (h) "Item," Section 70A-4-104;
6 (i) "Payor bank," Section 70A-4-105;
7 (j) "Suspends payments," Section 70A-4-104[
8 (4) In addition, Chapter 1 contains general definitions and principles of construction and
9 interpretation applicable throughout this chapter.
10 Section 2. Section 70A-3-104 is amended to read:
11 70A-3-104. Negotiable instrument.
12 (1) Except as provided in Subsections (3) and (4), "negotiable instrument" means an
13 unconditional promise or order to pay a fixed amount of money, with or without interest or other
14 charges described in the promise or order, if it:
15 (a) is payable to bearer or to order at the time it is issued or first comes into possession of
16 a holder;
17 (b) is payable on demand or at a definite time; and
18 (c) does not state any other undertaking or instruction by the person promising or ordering
19 payment to do any act in addition to the payment of money, but the promise or order may contain:
20 (i) an undertaking or power to give, maintain, or protect collateral to secure payment;
21 (ii) an authorization or power to the holder to confess judgment or realize on or dispose
22 of collateral; or
23 (iii) a waiver of the benefit of any law intended for the advantage or protection of an
24 obligor.
25 (2) "Instrument" means a negotiable instrument.
26 (3) An order that meets all of the requirements of Subsection (1), except Subsection (1)(a),
27 and otherwise falls within the definition of "check" in Subsection (6) is a negotiable instrument
28 and a check.
29 (4) A promise or order other than a check is not an instrument if, at the time it is issued
30 or first comes into possession of a holder, it contains a conspicuous statement, however expressed,
31 to the effect that the promise or order is not negotiable or is not an instrument governed by this
1 chapter.
2 (5) An instrument is a "note" if it is a promise and is a "draft" if it is an order. If an
3 instrument falls within the definition of both "note" and "draft," a person entitled to enforce the
4 instrument may treat it as either.
5 (6) (a) "Check" means:
6 (i) a draft, other than a documentary draft, payable on demand and drawn on a bank; [
7 (ii) a cashier's check or teller's check[
8 (iii) a demand draft.
9 (b) An instrument may be a check even though it is described on its face by another term,
10 such as "money order."
11 (7) "Cashier's check" means a draft with respect to which the drawer and drawee are the
12 same bank or branches of the same bank.
13 (8) "Teller's check" means a draft drawn by a bank either on another bank, or payable at
14 or through a bank.
15 (9) "Traveler's check" means an instrument that:
16 (a) is payable on demand;
17 (b) is drawn on or payable at or through a bank;
18 (c) is designated by the term "traveler's check" or by a substantially similar term; and
19 (d) requires, as a condition to payment, a countersignature by a person whose specimen
20 signature appears on the instrument.
21 (10) "Certificate of deposit" means an instrument containing an acknowledgment by a
22 bank that a sum of money has been received by the bank and a promise by the bank to repay the
23 sum of money. A certificate of deposit is a note of the bank.
24 (11) (a) "Demand draft" means a writing not signed by a customer that is created by a
25 third party under the purported authority of the customer for the purpose of charging the customer's
26 account with a bank.
27 (b) A demand draft:
28 (i) shall contain the customer's account number;
29 (ii) may contain any or all of the following:
30 (A) the customer's printed or typewritten name;
31 (B) a notation that the customer authorized the draft; or
1 (C) the statement "No Signature Required" or words to that effect; and
2 (iii) may not include a check purportedly drawn by and bearing the signature of a
3 fiduciary, as defined in Section 70A-3-307.
4 Section 3. Section 70A-3-416 is amended to read:
5 70A-3-416. Transfer warranties.
6 (1) A person who transfers an instrument for consideration warrants to the transferee and,
7 if the transfer is by indorsement, to any subsequent transferee that:
8 (a) the warrantor is a person entitled to enforce the instrument;
9 (b) all signatures on the instrument are authentic and authorized;
10 (c) the instrument has not been altered;
11 (d) the instrument is not subject to a defense or claim in recoupment of any party which
12 can be asserted against the warrantor; [
13 (e) the warrantor has no knowledge of any insolvency proceeding commenced with respect
14 to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
15 (f) if the instrument is a demand draft, creation of the instrument according to the terms
16 on its face was authorized by the person identified as drawer.
17 (2) A person to whom the warranties under Subsection (1) are made and who took the
18 instrument in good faith may recover from the warrantor, as damages for breach of warranty, an
19 amount equal to the loss suffered as a result of the breach, but not more than the amount of the
20 instrument plus expenses and loss of interest incurred as a result of the breach.
21 (3) The warranties stated in Subsection (1) cannot be disclaimed with respect to checks.
22 Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the
23 claimant has reason to know of the breach and the identity of the warrantor, the liability of the
24 warrantor under Subsection (2) is discharged to the extent of any loss caused by the delay in giving
25 notice of the claim.
26 (4) A cause of action for breach of warranty under this section accrues when the claimant
27 has reason to know of the breach.
28 (5) If the warranty in Subsection (1)(f) is not given by a transferor under applicable
29 conflict of law rules, the warranty is not given to that transferor when that transferor is a transferee.
30 Section 4. Section 70A-3-417 is amended to read:
31 70A-3-417. Presentment warranties.
1 (1) If an unaccepted draft is presented to the drawee for payment or acceptance and the
2 drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of
3 presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee
4 making payment or accepting the draft in good faith that:
5 (a) the warrantor is, or was, at the time the warrantor transferred the draft, a person entitled
6 to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person
7 entitled to enforce the draft;
8 (b) the draft has not been altered; [
9 (c) the warrantor has no knowledge that the signature of the drawer of the draft is
10 unauthorized[
11 (d) if the draft is a demand draft, creation of the demand draft according to the terms on
12 its face was authorized by the person identified as drawer.
13 (2) A drawee making payment may recover from any warrantor damages for breach of
14 warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled
15 to receive from the drawer because of the payment. In addition, the drawee is entitled to
16 compensation for expenses and loss of interest resulting from the breach. The right of the drawee
17 to recover damages under this subsection is not affected by any failure of the drawee to exercise
18 ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense
19 to the obligation of the acceptor. If the acceptor makes payment with respect to the draft, the
20 acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this
21 subsection.
22 (3) If a drawee asserts a claim for breach of warranty under Subsection (1) based on an
23 unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by
24 proving that the indorsement is effective under Section 70A-3-404 or 70A-3-405, or that the
25 drawer is precluded under Section 70A-3-406 or 70A-4-406 from asserting against the drawee the
26 unauthorized indorsement or alteration.
27 (4) If a dishonored draft is presented for payment to the drawer or an indorser, or any other
28 instrument is presented for payment to a party obliged to pay the instrument, and payment is
29 received, the following rules apply:
30 (a) The person obtaining payment and a prior transferor of the instrument warrant to the
31 person making payment in good faith that the warrantor is, or was, at the time the warrantor
1 transferred the instrument, a person entitled to enforce the instrument or authorized to obtain
2 payment on behalf of a person entitled to enforce the instrument.
3 (b) The person making payment may recover from any warrantor for breach of warranty
4 an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
5 (5) The warranties stated in Subsections (1) and (4) cannot be disclaimed with respect to
6 checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days
7 after the claimant has reason to know of the breach and the identity of the warrantor, the liability
8 of the warrantor under Subsection (2) or (4) is discharged to the extent of any loss caused by the
9 delay in giving notice of the claim.
10 (6) A cause of action for breach of warranty under this section accrues when the claimant
11 has reason to know of the breach.
12 (7) A demand draft is a check, as provided in Section 70A-3-104.
13 (8) If the warranty in Subsection (1)(d) is not given by a transferor under applicable
14 conflict of law rules, the warranty is not given to that transferor when the transferor is a transferee.
15 Section 5. Section 70A-4-207 is amended to read:
16 70A-4-207. Transfer warranties.
17 (1) A customer or collecting bank that transfers an item and receives a settlement or other
18 consideration warrants to the transferee and to any subsequent collecting bank that:
19 (a) the warrantor is a person entitled to enforce the item;
20 (b) all signatures on the item are authentic and authorized;
21 (c) the item has not been altered;
22 (d) the item is not subject to a defense or claim in recoupment, Section 70A-3-305, of any
23 party that can be asserted against the warrantor; [
24 (e) the warrantor has no knowledge of any insolvency proceeding commenced with respect
25 to the maker or acceptor or, in the case of an unaccepted draft, the drawer[
26 (f) if the item is a demand draft, creation of the item according to the terms on its face was
27 authorized by the person identified as drawer.
28 (2) If an item is dishonored, a customer or collecting bank transferring the item and
29 receiving settlement or other consideration is obliged to pay the amount due on the item according
30 to the terms of the item at the time it was transferred, or if the transfer was of an incomplete item,
31 according to its terms when completed as stated in Sections 70A-3-115 and 70A-3-407. The
1 obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes
2 the item in good faith. A transferor cannot disclaim its obligation under this subsection by an
3 indorsement stating that it is made "without recourse" or otherwise disclaiming liability.
4 (3) A person to whom the warranties under Subsection (1) are made and who took the item
5 in good faith may recover from the warrantor, as damages for breach of warranty, an amount equal
6 to the loss suffered as a result of the breach, but not more than the amount of the item plus
7 expenses and loss of interest incurred as a result of the breach.
8 (4) The warranties stated in Subsection (1) cannot be disclaimed with respect to checks.
9 Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the
10 claimant has reason to know of the breach and the identity of the warrantor, the warrantor is
11 discharged to the extent of any loss caused by the delay in giving notice of the claim.
12 (5) A cause of action for breach of warranty under this section accrues when the claimant
13 has reason to know of the breach.
14 (6) If the warranty in Subsection (1)(f) is not given by a transferor or collecting bank under
15 applicable conflict of law rules, the warranty is not given to that transferor when that transferor is
16 a transferee nor to any prior collecting bank of that transferee.
17 Section 6. Section 70A-4-208 is amended to read:
18 70A-4-208. Presentment warranties.
19 (1) If an unaccepted draft is presented to the drawee for payment or acceptance and the
20 drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of
21 presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee
22 that pays or accepts the draft in good faith that:
23 (a) the warrantor is, or was, at the time the warrantor transferred the draft, a person entitled
24 to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person
25 entitled to enforce the draft;
26 (b) the draft has not been altered; [
27 (c) the warrantor has no knowledge that the signature of the purported drawer of the draft
28 is unauthorized[
29 (d) if the draft is a demand draft, creation of the demand draft according to the terms on
30 its face was authorized by the person identified as drawer.
31 (2) A drawee making payment may recover from a warrantor damages for breach of
1 warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled
2 to receive from the drawer because of the payment. In addition, the drawee is entitled to
3 compensation for expenses and loss of interest resulting from the breach. The right of the drawee
4 to recover damages under this subsection is not affected by any failure of the drawee to exercise
5 ordinary care in making payment. If the drawee accepts the draft:
6 (a) breach of warranty is a defense to the obligation of the acceptor; and
7 (b) if the acceptor makes payment with respect to the draft, the acceptor is entitled to
8 recover from a warrantor for breach of warranty the amounts stated in this subsection.
9 (3) If a drawee asserts a claim for breach of warranty under Subsection (1) based on an
10 unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by
11 proving that the indorsement is effective under Section 70A-3-404 or 70A-3-405, or the drawer
12 is precluded under Section 70A-3-406 or 70A-4-406 from asserting against the drawee the
13 unauthorized indorsement or alteration.
14 (4) If a dishonored draft is presented for payment to the drawer or an indorser, or any other
15 item is presented for payment to a party obliged to pay the item, and the item is paid, the person
16 obtaining payment and a prior transferor of the item warrant to the person making payment in good
17 faith that the warrantor is, or was, at the time the warrantor transferred the item, a person entitled
18 to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the
19 item. The person making payment may recover from any warrantor for breach of warranty an
20 amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
21 (5) The warranties stated in Subsections (1) and (4) cannot be disclaimed with respect to
22 checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days
23 after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor
24 is discharged to the extent of any loss caused by the delay in giving notice of the claim.
25 (6) A cause of action for breach of warranty under this section accrues when the claimant
26 has reason to know of the breach.
27 (7) A demand draft is a check as provided in Section 70A-3-104.
28 (8) If the warranty in Subsection (1)(d) is not given by a transferor under applicable
29 conflict of law rules, the warranty is not given to that transferor when that transferor is a transferee.
30 Section 7. Effective date.
31 This act takes effect on July 1, 1998.
Legislative Review Note
as of 10-24-97 10:09 AM
A limited legal review of this bill raises no obvious constitutional or statutory concerns.
Office of Legislative Research and General Counsel
Committee Note
The Business, Labor, and Economic Development Interim Committee recommended this bill.
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