Part 11- Appendix B: Uniform Commercial Code, Note 16

Summary of Appendix B B-57 to B-60: Obligations, Fraudulent Indorsements, and Liability Provisions Effect of Instruments on Obligations (§3-310) 1. Certified, Cashier’s, or Teller’s Checks: o Taking these discharges the underlying obligation to the same extent as if cash were used. o The obligor retains liability as an indorser of the instrument. 2. Uncertified Checks or Notes: o Suspension of the obligation occurs until the check is paid, certified, or dishonored:  Payment discharges the obligation.  Dishonor allows the obligee to enforce the instrument or the original obligation. 3. Other Instruments: o Treated like bank-issued checks or uncertified notes, depending on whether a bank is liable as maker or acceptor. Accord and Satisfaction (§3-311) 1. Discharging Claims with Instruments: o Claims are discharged if a debtor tenders an instrument marked as full payment, and the creditor accepts and cashes it, provided:  The claim is disputed or unliquidated.  The instrument or its communication clearly indicates it was offered as full settlement. 2. Exceptions: o Creditors who designate specific locations for handling disputed payments may reject an accord if the instrument isn’t sent there. o Creditors may void an accord by tendering repayment within 90 days unless prohibited. 3. Knowledge Exception: o A claim is discharged if the creditor knowingly accepts the instrument as full settlement before initiating collection. Lost, Destroyed, or Stolen Checks (§3-312) 1. Claimant’s Rights: A person who loses a cashier’s, teller’s, or certified check may claim the amount if:  They file a verified "declaration of loss."  The bank has reasonable time to act on the claim. o Claims become enforceable after 90 days from issuance (or acceptance for certified checks). 2. Bank’s Liability: o If the check is already paid to a rightful holder, the bank’s obligation is discharged. o If the bank pays the claimant and later pays a holder in due course, the claimant must refund the bank or pay the holder. o Liability of Parties 1. Signatures and Authorization (§3-401, §3-402): o A person is not liable on an instrument unless they signed it or an authorized agent signed on their behalf. o Representatives are not personally liable if the instrument clearly shows their representative capacity. 2. Unauthorized Signatures (§3-403): o Generally ineffective unless ratified. o Parties failing to meet required signature authorizations are considered unauthorized. 3. Impostors and Fictitious Payees (§3-404): o Fraudulent endorsements by impostors or on behalf of fictitious payees are effective if accepted in good faith. 4. Fraudulent Employee Indorsements (§3-405): o Employers bear losses from employees’ fraudulent endorsements if the employee had authority over the instruments. o Banks failing to exercise ordinary care in such cases may share liability. Negligence and Care Standards 1. Contributing to Forgery or Alteration (§3-406): o A person whose negligence leads to forgery or alteration cannot assert these defenses against a good-faith party who took the instrument for value. o Parties that fail to exercise ordinary care in handling the instrument may be liable for resulting losses.