Part 11- Appendix B: Uniform Commercial Code, Note 17

Summary of Appendix B B-61 to B-64: Checks, Obligations, Alterations, and Special Liability Rules Acceptance, Certification, and Refusal of Checks 1. Acceptance of Drafts (§3-409): o A drawee accepts a draft by signing it, which may include adding specific terms like a payment location. o Certified checks are checks explicitly accepted by the drawee bank. A bank has no obligation to certify a check, and refusal to certify is not considered dishonor. 2. Varying Terms on Acceptance (§3-410): o A drawee may propose different terms for acceptance. The holder can refuse, treat the draft as dishonored, and cancel the acceptance. o Changing the terms discharges obligations of any party that does not consent to the new terms. 3. Refusal to Pay Checks (§3-411): o Banks refusing to honor cashier’s, teller’s, or certified checks without justification may owe compensation for interest losses, expenses, and possibly consequential damages. o Refusals are excused for reasons like insolvency, legal prohibitions, or reasonable doubts about the claimant's entitlement. Obligations of Parties 1. Issuer’s Obligations (§3-412): o The issuer of a note or cashier’s check must pay the instrument according to its terms when issued or completed, with liability extending to parties enforcing the instrument or paying under endorsement obligations. 2. Drawer’s Obligations (§3-414): o The drawer of an unaccepted draft must pay upon dishonor unless the draft is accepted by a bank, which discharges the drawer's obligation. o If a draft is dishonored by a non-bank acceptor, the drawer has obligations similar to an indorser. 3. Indorser’s Obligations (§3-415): o Indorsers are liable upon dishonor of the instrument, provided notice of dishonor is given unless the indorsement states "without recourse." o If the check is not presented within 30 days, indorser liability is discharged. Transfer and Presentment Warranties 1. Transfer Warranties (§3-416): o Transferors warrant to transferees that:  They are entitled to enforce the instrument.  The instrument is unaltered, all signatures are valid, and there are no known claims or defenses. o For remotely created consumer items, the drawer must have authorized the issuance. 2. Presentment Warranties (§3-417): o Presenters and prior transferors of drafts warrant to drawees:  They are entitled to enforce the draft.  The draft is unaltered, and signatures are authentic. o Damages for breach include recovery of amounts paid, interest, and related expenses. Mistakes and Alterations 1. Mistaken Payments (§3-418): o A drawee can recover payments made by mistake unless the payee accepted the payment in good faith and for value, or changed their position in reliance on it. 2. Alterations (§3-407): o Fraudulent changes to an instrument discharge the party affected unless they consent or are precluded from asserting the alteration. o Altered instruments may still be enforceable in their original terms or as completed if incomplete initially. Accommodation Instruments (§3-419): 1. Accommodation Party Liability: o An accommodation party, who signs without directly benefiting, is liable in the capacity in which they sign (e.g., maker, indorser). o If the accommodation party guarantees payment, they are liable as if they were the accommodated party. o They have rights to reimbursement from the accommodated party. 2. Reimbursement Rights: o Accommodation parties who pay the instrument may enforce it against the accommodated party or seek equitable relief. Key Takeaways:    These sections reinforce the rules governing checks, drafts, and liabilities of involved parties. They establish protections for good-faith actors while holding issuers, drawers, and endorsers accountable for dishonored or altered instruments. Specific provisions address allocation of losses due to fraud, mistake, or negligence, ensuring equitable resolutions in commercial transactions.