Information > Financial Terms > This page

Negotiable Instruments Law
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

Article 3 Commercial Paper (Continue)

Back to Article 3 Commercial Paper

 Section 3-113.  Seal.

An instrument otherwise negotiable is within this Article even though it is under a seal.

 Section 3-114.  Date, Antedating, Postdating.

(1)  The negotiability of an instrument is not affected by the fact that it is undated, antedated, or postdated.

(2)  Where an instrument is antedated or postdated the time when it is payable is determined by the stated date if the instrument is payable on demand or at a fixed period after date.

(3)  Where the instrument or any signature thereon is dated, the date is presumed to be correct.

 Section 3-115.  Incomplete Instruments.

(1)  When a paper whose contents at the time of signing show that it is intended to become an instrument is signed while still incomplete in any necessary respect, it cannot be enforced until completed, but when it is completed in accordance with authority given it is effective as completed.

(2)  If the completion is unauthorized, the rules as to material alteration apply (Section 3-407), even though the paper was not delivered by the maker or drawer; but the burden of establishing that any completion is unauthorized is on the party so asserting.

 Section 3-116.  Instruments Payable to Two or More Persons.

An instrument payable to the order of two or more persons

(a)  if in the alternative is payable to any one of them and may be negotiated, discharged or enforced by any of them who has possession of it;

(b)  if not in the alternative is payable to all of them and may be negotiated, discharged or enforced only by all of them.

 Section 3-117.  Instruments Payable with Words of Description.

An instrument made payable to a named person with the addition of words describing him

(a) as agent or officer of a specified person is payable to his principal, but the agent or officer may act as if he were the holder;

(b) as any other fiduciary for a specified person or purpose is payable to the payee and may be negotiated, discharged or enforced by him;

(c)  in any other manner is payable to the payee unconditionally and the additional words are without effect on subsequent parties.

 Section 3-118.  Ambiguous Terms and Rules of Construction.

The following rules apply to every instrument:

(a) Where there is doubt whether the instrument is a draft or a note the holder may treat it as either.  A draft drawn on the drawer is effective as a note.

(b)  Handwritten terms control typewritten and printed terms, and typewritten control printed.

(c)  Words control figures except that if the words are ambiguous, figures control.

(d)  Unless otherwise specified, a provision for interest means interest at the judgment rate at the place of payment from the date of the instrument, or if it is undated from the date of issue.

(e)  Unless the instrument otherwise specifies, two or more persons who sign as maker, acceptor or drawer or indorser and as a part of the same transaction are jointly and severally liable even though the instrument contains such words as "I promise to pay."

(f)   Unless otherwise specified, consent to extension authorizes a single extension for not longer than the original period.  A consent to extension, expressed in the instrument, is binding on secondary parties and accommodation makers.  A holder may not exercise his option to extend an instrument over the objection of a maker or acceptor or other party who in accordance with Section 3-604 tenders full payment when the instrument is due.

 Section 3-119.  Other Writings Affecting Instrument.

(1)  As between the obligor and his immediate obligee or any transferee the terms of an instrument may be modified or affected by any other written agreement executed as part of the same transaction, except that a holder in due course is not affected by any limitation of his rights arising out of the separate written agreement if he had no notice of the limitation when he took the instrument.

(2)  A separate agreement does not affect the negotiability of an instrument.

 Section 3-120.  Instruments "Payable Through" Bank.

An instrument which states that it is "payable through" a bank or the like designates that bank as a collecting bank to make presentment but does not of itself authorize the bank to pay the instrument.

 Section 3-121.  Instruments Payable at Bank.

Note:  If this Act is introduced in the Congress of the United States , this section should be omitted.  (States to select either alternative)

Alternative A -

A note or acceptance which states that it is payable at a bank is the equivalent of a draft drawn on the bank payable when it falls due out of any funds of the maker or acceptor in current account or otherwise available for such payment.

Alternative B -

A note or acceptance which states that it is payable at a bank is not of itself an order or authorization to the bank to pay it.

 Section 3-122.  Accrual of Cause of Action.

(1)  A cause of action against a maker or an acceptor accrues:

(a)     in the case of a time instrument on the day after maturity;

(b)     In the case of a demand instrument upon its date or, if no date is stated, on the date of issue.

(2)  A cause of action against the obligor of a demand or time certificate of deposit accrues upon demand, but demand on a time certificate may not be made until on or after the date of maturity.

(3)  A cause of action against a drawer of a draft or an indorser of any instrument accrues upon demand following dishonor of the instrument.  Notice of dishonor is a demand.

(4)  Unless an instrument provides otherwise, interest runs at the rate provided by law for a judgment:

(a)     in the case of a maker, acceptor or other primary obligor of a demand instrument from the date of demand;

(b)     in all other cases from the date of accrual of the cause of action.

 

Continue to Part 2 Transfer and Negotiation 


Back to Information