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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)
Part
5 Presentment, Notice of Dishonour and Protest
Section
3-501. When Presentment,
Notice of Dishonour and Protest Necessary or Permissible.
(1)
Unless excused (Section 3-511) presentment is necessary to charge
secondary parties as follows:
(a)
presentment for acceptance is necessary
to charge the drawer and indorsers of a draft where the draft so provides,
or is payable elsewhere than at the residence or place of business of
the drawee, or its date of payment depends upon such presentment.
The holder may at his option present for acceptance any other draft
payable at a stated date;
(b)
presentment for payment is necessary
to charge any indorser.
(c)
In the case of any drawer, the acceptor
of a draft payable at a bank or the maker of a note payable at a bank,
presentment for payment is necessary, but failure to make presentment
discharges such drawer, acceptor or maker only as stated in Section 3-502(1)(b).
(2)
Unless excused (Section 3-511):
(a)
notice of any dishonour is necessary
to charge any indorser;
(b)
in the case of any drawer, the acceptor
of a draft payable at a bank or the maker of a note payable at a bank,
notice of any dishonor is necessary, but failure to give such notice discharges
such drawer, acceptor or maker only as stated in Section 3-502(1)(b).
(3)
Unless excused (Section 3-511), protest of any dishonour is necessary
to charge the drawer and indorsers of any draft which on its face appears
to be drawn or payable outside of the states and territories of the United
States and the District of Columbia.
The holder may at his option make protest of any dishonour of any
other instrument and in the case of a foreign draft may on insolvency
of the acceptor before maturity make protest for better security.
(4)
Notwithstanding any provision of this section, neither presentment
nor notice of dishonour nor protest is necessary to charge an indorser
who has indorsed an instrument after maturity.
Section
3-502. Unexcused Delay:
Discharge.
(1)
Where without excuse any necessary presentment or notice of dishonour
is delayed beyond the time when it is due
(a)
any indorser is discharged; and
(b)
any drawer or the acceptor of a draft
payable at a bank or the maker of a note payable at a bank who, because
the drawee or payor bank becomes insolvent during the delay, is deprived
of funds maintained with the drawer of payor bank to cover the instrument
may discharge his liability by written assignment to the holder of his
rights against the drawee or payor bank in respect of such funds, but
such drawer, acceptor or maker is not otherwise discharged.
(2)
Where without excuse a necessary protest is delayed beyond the
time when it is due, any drawer or indorser is discharged.
Section
3-503. Time of Presentment.
(1)
Unless a different time is expressed in the instrument, the time
for any presentment is determined as follows:
(a)
where an instrument is payable at or
a fixed period after a stated date, any presentment for acceptance must
be made on or before the date it is payable;
(b)
where an instrument is payable after
sight, it must either be presented for acceptance or negotiated within
a reasonable time after date or issue whichever is later;
(c)
where an instrument shows the date on
which it is payable, presentment for payment is due on that date;
(d)
where an instrument is accelerated, presentment
for payment is due within a reasonable time after the acceleration;
(e)
with respect to the liability of any
secondary party presentment for acceptance or payment of any other instrument
is due within a reasonable time after such party becomes liable thereon.
(2)
A reasonable time for presentment is determined by the nature of
the instrument, any usage of banking or trade and the facts of the particular
case. In the case of an uncertified
check which is drawn and payable within the
United States
and which is not a draft drawn by a bank the following
are presumed to be reasonable periods within which to present for payment
or to initiate bank collection:
(a)
with respect to the liability of the
drawer, thirty days after date or issue whichever is later; and
(b)
with respect to the liability of an indorser,
seven days after his indorsement.
(3)
Where any presentment is due on a day which is not a full business
day for either the person making presentment or the party to pay or accept,
presentment is due on the next following day which is a full business
day for both parties.
(4)
Presentment to be sufficient must be made at a reasonable hour,
and if at a bank during its banking day.
Section
3-504. How Presentment
Made.
(1)
Presentment is a demand for acceptance or payment made upon the
maker, acceptor, drawee or other payor by or on behalf of the holder.
(2)
Presentment may be made:
(a)
by mail, in which event the time of presentment
is determined by the time of receipt of the mail; or
(b)
through a clearing house; or
(c)
at the place of acceptance of payment
specified in the instrument or if there be none at the place of business
or residence of the party to accept or pay.
If neither the party to accept or pay nor anyone authorized to
act for him is present or accessible at such place, presentment is excused.
(3)
It may be made:
(a)
to any one of two or more makers, acceptors,
drawees or other payors; or
(b)
to any person who has authority to make
or refuse the acceptance or payment.
(4)
A draft accepted or a note made payable at a bank in the
United States
must be presented at such bank.
(5)
In the cases described in Section 4-210 presentment may be made
in the manner and with the result stated in that section.
Section
3-505. Rights of Party
to Whom Presentment Is Made.
(1)
The party to whom presentment is made may without dishonor require:
(a)
exhibition of the instrument; and
(b)
reasonable identification of the person
making presentment and evidence of his authority to make it if made for
another; and
(c)
that the instrument be produced for acceptance
or payment at a place specified in it, or if there be none at any place
reasonable in the circumstances; and
(d)
a signed receipt on the instrument for
any partial or full payment and its surrender upon full payment.
(2)
Failure to comply with any such requirement invalidates the presentment,
but the person presenting has a reasonable time in which to comply and
the time for acceptance or payment runs from the time of compliance.
Section
3-506. Time Allowed
for Acceptance or Payment.
(1)
Acceptance may be deferred without dishonor until the close of
the next business day following presentment.
The holder may also in a good faith effort to obtain acceptance
and without either dishonor of the instrument or discharge of secondary
parties allow postponement of acceptance for an additional business day.
(2)
Except as a longer time is allowed in the case of documentary drafts
drawn under a letter of credit, and unless an earlier time is agreed to
by the party to pay, payment of an instrument may be deferred without
dishonor pending reasonable examination to determine whether it is properly
payable, but payment must be made in any event before the close of business
on the day of presentment.
Section
3-507. Dishonor; Holder's
Right of Recourse; Term Allowing Re-Presentment.
(1)
An instrument is dishonored when
(a)
a necessary or optional presentment is
duly made and due acceptance or payment is refused or cannot be obtained
within the prescribed time or in case of bank collections the instrument
is seasonably returned by the midnight deadline (Section 4-301); or
(b)
presentment is excused and the instrument
is not duly accepted or paid.
(2)
Subject to any necessary notice of dishonor and protest, the holder
has upon dishonor an immediate right of recourse against the drawers and
indorsers.
(3)
Return of an instrument for lack of proper indorsement is not dishonor.
(4)
A term in a draft or an indorsement thereof allowing a stated time
for re-presentment in the event of any dishonor of the draft by nonacceptance
if a time draft or by nonpayment if a sight draft gives the holder as
against any secondary party bound by the term an option to waive the dishonor
without affecting the liability of the secondary party, and he may present
again up to the end of the stated time.
Section
3-508. Notice of Dishonour.
(1)
Notice of dishonour may be given to any person who may be liable
on the instrument by or on behalf of the holder or any party who has himself
received notice, or any other party who can be compelled to pay the instrument.
In addition an agent or bank in whose hands the instrument is dishonoured
may give notice to his principal or customer or to another agent or bank
from which the instrument was received.
(2)
Any necessary notice must be given by a bank before its
midnight deadline
and by any other person before midnight
of the third business day after dishonour or receipt
of notice of dishonour.
(3)
Notice may be given in any reasonable manner.
It may be oral or written and in any terms which identify the instrument
and state that it has been dishonoured.
A misdescription which does not mislead the party notified does
not vitiate the notice. Sending
the instrument bearing a stamp, ticket or writing, stating that acceptance
or payment has been refused or sending a notice of debit with respect
to the instrument is sufficient.
(4)
Written notice is given when sent although it is not received.
(5)
Notice to one partner is notice to each although the firm has been
dissolved.
(6)
When any party is in insolvency proceedings instituted after the
issue of the instrument, notice may be given either to the party or to
the representative of his estate.
(7)
When any party is dead or incompetent, notice may be sent to his
last known address or given to his personal representative.
(8)
Notice operates for the benefit of all parties who have rights
on the instrument against the party notified.
Section
3-509. Protest; Noting
for Protest.
(1)
A protest is a certificate of dishonour made under the hand and
seal of a United
States consul
or vice consul or a notary public or other person authorized to certify
dishonour by the law of the place where dishonour occurs.
It may be made upon information satisfactory to such person.
(2)
The protest must identify the instrument and certify either that
due presentment has been made or the reason why it is excused and that
the instrument has been dishonoured by nonacceptance or nonpayment.
(3)
The protest may also certify that notice of dishonour has been
given to all parties or to specified parties.
(4)
Subject to subsection (5) any necessary protest is due by the time
that notice of dishonour is due.
(5)
If, before protest is due, an instrument has been noted for protest
by the officer to make protest, the protest may be made at any time thereafter
as of the date of the noting.
Section
3-510. Evidence of Dishonour
and Notice of Dishonour.
The
following are admissible as evidence and create a presumption of dishonour
and of any notice of dishonour therein shown;
(a)
a document regular in form as provided
in the preceding section which purports to be a protest;
(b)
the purported stamp or writing of the
drawee, payor bank or presenting bank on the instrument or accompanying
it stating that acceptance of payment has been refused for reasons consistent
with dishonour;
(c)
any book or record of the drawee, payor
bank or any collecting bank kept in the usual course of business which
shows dishonour, even though there is no evidence of who made the entry.
Section
3-511. Waived or Excused
Presentment, Protest of Notice of Dishonour or Delay Therein.
(1)
Delay in presentment, protest or notice of dishonour is excused
when the party is without notice that it is due or when the delay is caused
by circumstances beyond his control and he exercises reasonable diligence
after the cause of the delay ceases to operate.
(2)
Presentment or notice or protest as the case may be is entirely
excused when
(a)
the party to be charged has waived it
expressly or by implication either before or after it is due; or
(b)
such party has himself dishonoured the
instrument or has countermanded payment or otherwise has no reason to
expect or right to require that the instrument be accepted or paid; or
(c)
by reasonable diligence the presentment
or protest cannot be made or the notice given.
(3)
Presentment is also entirely excused when
(a)
the maker, acceptor or drawee or any
instrument except a documentary draft is dead or in insolvency proceedings
instituted after the issue of the instrument; or
(b)
acceptance or payment is refused but
not for want of proper presentment.
(4)
Where a draft has been dishonoured by nonacceptance, a later presentment
for payment and any notice of dishonour and protest for nonpayment are
excused unless in the meantime the instrument has been accepted.
(5)
A waiver of protest is also a waiver of presentment and of notice
of dishonour even though protest is not required.
(6)
Where a waiver of presentment or notice or protest is embodied
in the instrument itself, it is binding upon all parties; but where it
is written above the signature of an indorser it binds him only.
Continue
to Part 6 Discharge
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