UNIFORM COMMERCIAL CODE

U.C.C. - ARTICLE 3 - NEGOTIABLE INSTRUMENTS PART 1. GENERAL PROVISIONS AND DEFINITIONS [Table of Con en !" 3-1#1. SHORT TITLE. This Article may be cited as Uniform Commercial Code -- Negotiable Instruments. 3-1#$. SUBJECT MATTER. (a) This Article applies to negotiable instruments. It does not apply to money, to payment orders go erned by Article !A, or to securities go erned by Article ". (b) If there is conflict bet#een this Article and Article ! or $, Articles ! and $ go ern. (c) %egulations of the &oard of 'o ernors of the (ederal %eser e )ystem and operating circulars of the (ederal %eser e &an*s supersede any inconsistent pro ision of this Article to the e+tent of the inconsistency. 3-1#3. DEFINITIONS. (a) In this Article, %1& 'Acceptor' (ean! a )*a+ee +,o ,a! a--e. e) a )*af . %$& 'Consumer ccount' (ean! an a--o/n e! abl0!,e) b1 an 0n)020)/al .*0(a*0l1 fo* .e*!onal3 fa(0l13 o* ,o/!e,ol) ./*.o!e!. %3& 'Consumer tr ns ct!on' (ean! a *an!a- 0on 0n +,0-, an 0n)020)/al 0n-/*! an obl04a 0on .*0(a*0l1 fo* .e*!onal3 fa(0l13 o* ,o/!e,ol) ./*.o!e!. %5& 'Dr "ee' (ean! a .e*!on o*)e*e) 0n a )*af o (a6e .a1(en . %7& 'Dr "er' (ean! a .e*!on +,o !04n! o* 0! 0)en 0f0e) 0n a )*af a! a .e*!on o*)e*0n4 .a1(en . %8& [*e!e*2e)"

%9& 'M #er' (ean! a .e*!on +,o !04n! o* 0! 0)en 0f0e) 0n a no e a! a .e*!on /n)e* a60n4 o .a1. %:& 'Or$er' (ean! a +*0 en 0n! */- 0on o .a1 (one1 !04ne) b1 ,e .e*!on 4020n4 ,e 0n! */- 0on. T,e 0n! */- 0on (a1 be a))*e!!e) o an1 .e*!on3 0n-l/)0n4 ,e .e*!on 4020n4 ,e 0n! */- 0on3 o* o one o* (o*e .e*!on! ;o0n l1 o* 0n ,e al e*na 02e b/ no 0n !/--e!!0on. An a/ ,o*0<a 0on o .a1 0! no an o*)e* /nle!! ,e .e*!on a/ ,o*0<e) o .a1 0! al!o 0n! */- e) o .a1. %=& 'Or$!n r% c re' 0n ,e -a!e of a .e*!on en4a4e) 0n b/!0ne!! (ean! ob!e*2an-e of *ea!onable -o((e*-0al ! an)a*)!3 .*e2a0l0n4 0n ,e a*ea 0n +,0-, ,e .e*!on 0! lo-a e)3 +0 , *e!.e- o ,e b/!0ne!! 0n +,0-, ,e .e*!on 0! en4a4e). In ,e -a!e of a ban6 ,a a6e! an 0n! */(en fo* .*o-e!!0n4 fo* -olle- 0on o* .a1(en b1 a/ o(a e) (ean!3 *ea!onable -o((e*-0al ! an)a*)! )o no *e>/0*e ,e ban6 o e?a(0ne ,e 0n! */(en 0f ,e fa0l/*e o e?a(0ne )oe! no 20ola e ,e ban6@! .*e!-*0be) .*o-e)/*e! an) ,e ban6@! .*o-e)/*e! )o no 2a*1 /n*ea!onabl1 f*o( 4ene*al ban60n4 /!a4e no )0!a..*o2e) b1 ,0! A* 0-le o* A* 0-le 5. %1#& '& rt%' (ean! a .a* 1 o an 0n! */(en . %11& '&r!nc!p ' o('!)or3' +0 , *e!.e- o an 0n! */(en 3 (ean! ,e a--o((o)a e) .a* 1 o* an1 o ,e* .a* 1 o ,e 0n! */(en a4a0n! +,o( a !e-on)a*1 obl04o* ,a! *e-o/*!e /n)e* ,0! a* 0-le. %1$& '&rom!se' (ean! a +*0 en /n)e* a60n4 o .a1 (one1 !04ne) b1 ,e .e*!on /n)e* a60n4 o .a1. An a-6no+le)4(en of an obl04a 0on b1 ,e obl04o* 0! no a .*o(0!e /nle!! ,e obl04o* al!o /n)e* a6e! o .a1 ,e obl04a 0on. %13& '&ro*e' +0 , *e!.e- o a fa- (ean! o (ee ,e b/*)en of e! abl0!,0n4 ,e fa- %Se- 0on 1-$#1%b&%:&&. %15& [*e!e*2e)" %17& 'Rem!tter' (ean! a .e*!on +,o ./*-,a!e! an 0n! */(en f*o( 0 ! 0!!/e* 0f ,e 0n! */(en 0! .a1able o an 0)en 0f0e) .e*!on o ,e* ,an ,e ./*-,a!e*. %18& 'Remote'%-cre te$ consumer !tem' (ean! an 0 e( )*a+n on a -on!/(e* a--o/n 3 +,0-, 0! no -*ea e) b1 ,e .a1o* ban6 an) )oe! no bea* a ,an)+*0 en !04na /*e ./*.o* 0n4 o be ,e !04na /*e of ,e )*a+e*. %19& 'Secon$ r% o('!)or3' +0 , *e!.e- o an 0n! */(en 3 (ean! %a& an 0n)o*!e* o* an a--o((o)a 0on .a* 13 %b& a )*a+e* ,a20n4 ,e obl04a 0on )e!-*0be) 0n Se- 0on 3-515%)&3 o* %-& an1 o ,e* .a* 1 o ,e 0n! */(en ,a ,a! *e-o/*!e a4a0n! ano ,e* .a* 1 o ,e 0n! */(en ./*!/an o Se- 0on 3118%b&.

(b) -ther definitions applying to this Article and the sections in #hich they appear are, 'A--e. an-e' Se- 0on 3-5#= Se- 0on 3-51= Se- 0on 3-51=

'A--o((o)a e) .a* 1' 'A--o((o)a 0on .a* 1' 'A--o/n ' 'Al e*a 0on'

Se- 0on 5-1#5 Se- 0on 3-5#9 Se- 0on 3-$#7

'Ano(alo/! 0n)o*!e(en ' 'Blan6 0n)o*!e(en ' 'Ca!,0e*@! -,e-6'

Se- 0on 3-$#7

Se- 0on 3-1#5 Se- 0on 3-1#5

'Ce* 0f0-a e of )e.o!0 ' 'Ce* 0f0e) -,e-6' 'C,e-6'

Se- 0on 3-5#=

Se- 0on 3-1#5 Se- 0on 3-3#3

'Con!0)e*a 0on' 'D*af '

Se- 0on 3-1#5 Se- 0on 3-3#$ Se- 0on 3-117

'Aol)e* 0n )/e -o/*!e' 'In-o(.le e 0n! */(en ' 'In)o*!e(en ' 'In)o*!e*' 'In! */(en ' 'I!!/e' 'I!!/e*'

Se- 0on 3-$#5

Se- 0on 3-$#5 Se- 0on 3-1#5

Se- 0on 3-1#7 Se- 0on 3-1#7 Se- 0on 3-1#5

'Ne4o 0able 0n! */(en ' 'Ne4o 0a 0on' 'No e'

Se- 0on 3-$#1

Se- 0on 3-1#5

'Pa1able a a )ef0n0 e 0(e' 'Pa1able on )e(an)' 'Pa1able o bea*e*' 'Pa1able o o*)e*' 'Pa1(en '

Se- 0on 3-1#:

Se- 0on 3-1#: Se- 0on 3-1#=

Se- 0on 3-1#=

Se- 0on 3-8#$ Se- 0on 3-3#1

'Pe*!on en 0 le) o enfo*-e' 'P*e!en (en ' 'Rea->/0!0 0on'

Se- 0on 3-7#1 Se- 0on 3-$#9 Se- 0on 3-$#7

'S.e-0al 0n)o*!e(en ' 'Telle*@! -,e-6'

Se- 0on 3-1#5 Se- 0on 3-$#3

'T*an!fe* of 0n! */(en ' 'T*a2ele*@! -,e-6' 'Val/e'

Se- 0on 3-1#5

Se- 0on 3-3#3

(c) The follo#ing definitions in other Articles apply to this Article, 'Ban60n4 )a1' Se- 0on 5-1#5 Se- 0on 5-1#5 Se- 0on 5-1#7 Se- 0on 5-1#7 Se- 0on 5-1#5 Se- 0on 5-1#7

'Clea*0n4 ,o/!e' 'Colle- 0n4 ban6' 'De.o!0 a*1 ban6'

'Do-/(en a*1 )*af ' 'In e*(e)0a*1 ban6' 'I e('

Se- 0on 5-1#5 Se- 0on 5-1#7 Se- 0on 5-1#5

'Pa1o* ban6'

'S/!.en)! .a1(en !'

(d) In addition, Article . contains general definitions and principles of construction and interpretation applicable throughout this Article.

 3-1#5. NE+OTIABLE INSTRUMENT. (a) /+cept as pro ided in subsections (c) and (d), 0 negotiable instrument0 means an unconditional promise or order to pay a fi+ed amount of money, #ith or #ithout interest or other charges described in the promise or order, if it, %1& 0! .a1able o bea*e* o* o o*)e* a ,e 0(e 0 0! 0!!/e) o* f0*! -o(e! 0n o .o!!e!!0on of a ,ol)e*B %$& 0! .a1able on )e(an) o* a a )ef0n0 e 0(eB an) %3& )oe! no ! a e an1 o ,e* /n)e* a60n4 o* 0n! */- 0on b1 ,e .e*!on .*o(0!0n4 o* o*)e*0n4 .a1(en o )o an1 a- 0n a))0 0on o ,e .a1(en of (one13 b/ ,e .*o(0!e o* o*)e* (a1 -on a0n %0& an /n)e* a60n4 o* .o+e* o 402e3 (a0n a0n3 o* .*o e- -olla e*al o !e-/*e .a1(en 3 %00& an a/ ,o*0<a 0on o* .o+e* o ,e ,ol)e* o -onfe!! ;/)4(en o* *eal0<e on o* )0!.o!e of -olla e*al3 o* %000& a +a02e* of ,e benef0 of an1 la+ 0n en)e) fo* ,e a)2an a4e o* .*o e- 0on of an obl04o*. (b) 0Instrument0 means a negotiable instrument. (c) An order that meets all of the re1uirements of subsection (a), e+cept paragraph (.), and other#ise falls #ithin the definition of 0chec*0 in subsection (f) is a negotiable instrument and a chec*. (d) A promise or order other than a chec* is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, ho#e er e+pressed, to the effect that the promise or order is not negotiable or is not an instrument go erned by this Article. (e) An instrument is a 0note0 if it is a promise and is a 0draft0 if it is an order. If an instrument falls #ithin the definition of both 0note0 and 0draft,0 a person entitled to enforce the instrument may treat it as either. (f) 0Check0 means (i) a draft, other than a documentary draft, payable on demand and dra#n on a ban* or (ii) a cashier2s chec* or teller2s chec*. An instrument may be a chec* e en though it is described on its face by another term, such as 0money order.0 (g) 0Cashier's check0 means a draft #ith respect to #hich the dra#er and dra#ee are the same ban* or branches of the same ban*. (h) 0Teller's check0 means a draft dra#n by a ban* (i) on another ban*, or (ii) payable at or through a ban*.

(i) 0Traveler's check0 means an instrument that (i) is payable on demand, (ii) is dra#n on or payable at or through a ban*, (iii) is designated by the term 0tra eler2s chec*0 or by a substantially similar term, and (i ) re1uires, as a condition to payment, a countersignature by a person #hose specimen signature appears on the instrument. (3) 0Certificate of deposit0 means an instrument containing an ac*no#ledgment by a ban* that a sum of money has been recei ed by the ban* and a promise by the ban* to repay the sum of money. A certificate of deposit is a note of the ban*. 3-1#7. ISSUE OF INSTRUMENT. (a) 0Issue0 means the first deli ery of an instrument by the ma*er or dra#er, #hether to a holder or nonholder, for the purpose of gi ing rights on the instrument to any person. (b) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the ma*er or dra#er, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the ma*er or dra#er, but failure of the condition or special purpose to be fulfilled is a defense. (c) 0Issuer0 applies to issued and unissued instruments and means a ma*er or dra#er of an instrument. 3-1#8. UNCONDITIONAL &ROMISE OR ORDER. (a) /+cept as pro ided in this section, for the purposes of )ection 4-.5!(a), a promise or order is unconditional unless it states (i) an e+press condition to payment, (ii) that the promise or order is sub3ect to or go erned by another record, or (iii) that rights or obligations #ith respect to the promise or order are stated in another record. A reference to another record does not of itself ma*e the promise or order conditional. (b) A promise or order is not made conditional (i) by a reference to another record for a statement of rights #ith respect to collateral, prepayment, or acceleration, or (ii) because payment is limited to resort to a particular fund or source. (c) If a promise or order re1uires, as a condition to payment, a countersignature by a person #hose specimen signature appears on the promise or order, the condition does not ma*e the promise or order conditional for the purposes of )ection 4-.5!(a). If the person #hose specimen signature appears on an instrument fails to

countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not pre ent a transferee of the instrument from becoming a holder of the instrument. (d) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, re1uired by applicable statutory or administrati e la#, to the effect that the rights of a holder or transferee are sub3ect to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of )ection 4-.5!(a)6 but if the promise or order is an instrument, there cannot be a holder in due course of the instrument. 3-1#9. INSTRUMENT &A,ABLE IN FOREI+N MONE,. Unless the instrument other#ise pro ides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an e1ui alent amount in dollars calculated by using the current ban*-offered spot rate at the place of payment for the purchase of dollars on the day on #hich the instrument is paid. 3-1#:. &A,ABLE ON DEMAND OR AT DEFINITE TIME. (a) A promise or order is 0payable on demand0 if it (i) states that it is payable on demand or at sight, or other#ise indicates that it is payable at the #ill of the holder, or (ii) does not state any time of payment. (b) A promise or order is 0payable at a definite time0 if it is payable on elapse of a definite period of time after sight or acceptance or at a fi+ed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, sub3ect to rights of (i) prepayment, (ii) acceleration, (iii) e+tension at the option of the holder, or (i ) e+tension to a further definite time at the option of the ma*er or acceptor or automatically upon or after a specified act or e ent. (c) If an instrument, payable at a fi+ed date, is also payable upon demand made before the fi+ed date, the instrument is payable on demand until the fi+ed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fi+ed date. 3-1#=. &A,ABLE TO BEARER OR TO ORDER. (a) A promise or order is payable to bearer if it,

%1& ! a e! ,a 0 0! .a1able o bea*e* o* o ,e o*)e* of bea*e* o* o ,e*+0!e 0n)0-a e! ,a ,e .e*!on 0n .o!!e!!0on of ,e .*o(0!e o* o*)e* 0! en 0 le) o .a1(en B %$& )oe! no ! a e a .a1eeB o* %3& ! a e! ,a 0 0! .a1able o o* o ,e o*)e* of -a!, o* o ,e*+0!e 0n)0-a e! ,a 0 0! no .a1able o an 0)en 0f0e) .e*!on. (b) A promise or order that is not payable to bearer is payable to order if it is payable (i) to the order of an identified person or (ii) to an identified person or order. A promise or order that is payable to order is payable to the identified person. (c) An instrument payable to bearer may become payable to an identified person if it is specially indorsed pursuant to )ection 4758(a). An instrument payable to an identified person may become payable to bearer if it is indorsed in blan* pursuant to )ection 4758(b). 3-11#. IDENTIFICATION OF &ERSON TO -HOM INSTRUMENT IS &A,ABLE. (a) The person to #hom an instrument is initially payable is determined by the intent of the person, #hether or not authori9ed, signing as, or in the name or behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer e en if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one person signs in the name or behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one or more of the signers. (b) If the signature of the issuer of an instrument is made by automated means, such as a chec*-#riting machine, the payee of the instrument is determined by the intent of the person #ho supplied the name or identification of the payee, #hether or not authori9ed to do so. (c) A person to #hom an instrument is payable may be identified in any #ay, including by name, identifying number, office, or account number. (or the purpose of determining the holder of an instrument, the follo#ing rules apply, %1& If an 0n! */(en 0! .a1able o an a--o/n an) ,e a--o/n 0! 0)en 0f0e) onl1 b1 n/(be*3 ,e 0n! */(en 0! .a1able o ,e .e*!on o +,o( ,e a--o/n 0! .a1able. If an 0n! */(en 0! .a1able o an a--o/n 0)en 0f0e) b1

n/(be* an) b1 ,e na(e of a .e*!on3 ,e 0n! */(en 0! .a1able o ,e na(e) .e*!on3 +,e ,e* o* no ,a .e*!on 0! ,e o+ne* of ,e a--o/n 0)en 0f0e) b1 n/(be*. %$& If an 0n! */(en 0! .a1able oC %0& a */! 3 an e! a e3 o* a .e*!on )e!-*0be) a! */! ee o* *e.*e!en a 02e of a */! o* e! a e3 ,e 0n! */(en 0! .a1able o ,e */! ee3 ,e *e.*e!en a 02e3 o* a !/--e!!o* of e0 ,e*3 +,e ,e* o* no ,e benef0-0a*1 o* e! a e 0! al!o na(e)B %00& a .e*!on )e!-*0be) a! a4en o* !0(0la* *e.*e!en a 02e of a na(e) o* 0)en 0f0e) .e*!on3 ,e 0n! */(en 0! .a1able o ,e *e.*e!en e) .e*!on3 ,e *e.*e!en a 02e3 o* a !/--e!!o* of ,e *e.*e!en a 02eB %000& a f/n) o* o*4an0<a 0on ,a 0! no a le4al en 0 13 ,e 0n! */(en 0! .a1able o a *e.*e!en a 02e of ,e (e(be*! of ,e f/n) o* o*4an0<a 0onB o* %02& an off0-e o* o a .e*!on )e!-*0be) a! ,ol)0n4 an off0-e3 ,e 0n! */(en 0! .a1able o ,e na(e) .e*!on3 ,e 0n-/(ben of ,e off0-e3 o* a !/--e!!o* o ,e 0n-/(ben . (d) If an instrument is payable to t#o or more persons alternati ely, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to t#o or more persons not alternati ely, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to t#o or more persons is ambiguous as to #hether it is payable to the persons alternati ely, the instrument is payable to the persons alternati ely. 3-111. &LACE OF &A,MENT. /+cept as other#ise pro ided for items in Article !, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the dra#ee or ma*er stated in the instrument. If no address is stated, the place of payment is the place of business of the dra#ee or ma*er. If a dra#ee or ma*er has more than one place of business, the place of payment is any place of business of the dra#ee or ma*er chosen by the person entitled to enforce the instrument. If the dra#ee or ma*er has no place of business, the place of payment is the residence of the dra#ee or ma*er. 3-11$. INTEREST.

(a) Unless other#ise pro ided in the instrument, (i) an instrument is not payable #ith interest, and (ii) interest on an interest-bearing instrument is payable from the date of the instrument. (b) Interest may be stated in an instrument as a fi+ed or ariable amount of money or it may be e+pressed as a fi+ed or ariable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may re1uire reference to information not contained in the instrument. If an instrument pro ides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the 3udgment rate in effect at the place of payment of the instrument and at the time interest first accrues. 3-113. DATE OF INSTRUMENT. (a) An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fi+ed period after date. /+cept as pro ided in )ection !-!5.(c), an instrument payable on demand is not payable before the date of the instrument. (b) If an instrument is undated, its date is the date of its issue or, in the case of an unissued instrument, the date it first comes into possession of a holder. 3-115. CONTRADICTOR, TERMS OF INSTRUMENT. If an instrument contains contradictory terms, type#ritten terms pre ail o er printed terms, hand#ritten terms pre ail o er both, and #ords pre ail o er numbers. 3-117. INCOM&LETE INSTRUMENT. (a) 0Incomplete instrument0 means a signed #riting, #hether or not issued by the signer, the contents of #hich sho# at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of #ords or numbers. (b) )ub3ect to subsection (c), if an incomplete instrument is an instrument under )ection 4-.5!, it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under )ection 4-.5!, but, after completion, the re1uirements of )ection 4-.5! are met, the instrument may be enforced according to its terms as augmented by completion.

(c) If #ords or numbers are added to an incomplete instrument #ithout authority of the signer, there is an alteration of the incomplete instrument under )ection 4-!5:. (d) The burden of establishing that #ords or numbers #ere added to an incomplete instrument #ithout authority of the signer is on the person asserting the lac* of authority. 3-118. JOINT AND SE.ERAL LIABILIT,/ CONTRIBUTION. (a) /+cept as other#ise pro ided in the instrument, t#o or more persons #ho ha e the same liability on an instrument as ma*ers, dra#ers, acceptors, indorsers #ho indorse as 3oint payees, or anomalous indorsers are 3ointly and se erally liable in the capacity in #hich they sign. (b) /+cept as pro ided in )ection 4-!.$(e) or by agreement of the affected parties, a party ha ing 3oint and se eral liability #ho pays the instrument is entitled to recei e from any party ha ing the same 3oint and se eral liability contribution in accordance #ith applicable la#. 3-119. OTHER A+REEMENTS AFFECTIN+ INSTRUMENT. )ub3ect to applicable la# regarding e+clusion of proof of contemporaneous or pre ious agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented, or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction gi ing rise to the agreement. To the e+tent an obligation is modified, supplemented, or nullified by an agreement under this section, the agreement is a defense to the obligation. 3-11:. STATUTE OF LIMITATIONS. (a) /+cept as pro ided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced #ithin si+ years after the due date or dates stated in the note or, if a due date is accelerated, #ithin si+ years after the accelerated due date. (b) /+cept as pro ided in subsection (d) or (e), if demand for payment is made to the ma*er of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced #ithin si+ years after the demand. If no demand for payment is made to the ma*er, an action to enforce the note is

barred if neither principal nor interest on the note has been paid for a continuous period of .5 years. (c) /+cept as pro ided in subsection (d), an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced #ithin three years after dishonor of the draft or .5 years after the date of the draft, #hiche er period e+pires first. (d) An action to enforce the obligation of the acceptor of a certified chec* or the issuer of a teller2s chec*, cashier2s chec*, or tra eler2s chec* must be commenced #ithin three years after demand for payment is made to the acceptor or issuer, as the case may be. (e) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced #ithin si+ years after demand for payment is made to the ma*er, but if the instrument states a due date and the ma*er is not re1uired to pay before that date, the si+-year period begins #hen a demand for payment is in effect and the due date has passed. (f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified chec*, must be commenced (i) #ithin si+ years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time, or (ii) #ithin si+ years after the date of the acceptance if the obligation of the acceptor is payable on demand. (g) Unless go erned by other la# regarding claims for indemnity or contribution, an action (i) for con ersion of an instrument, for money had and recei ed, or li*e action based on con ersion, (ii) for breach of #arranty, or (iii) to enforce an obligation, duty, or right arising under this Article and not go erned by this section must be commenced #ithin three years after the ;cause of action< accrues. 3-11=. NOTICE OF RI+HT TO DEFEND ACTION. In an action for breach of an obligation for #hich a third person is ans#erable o er pursuant to this Article or Article !, the defendant may gi e the third person notice of the litigation in a record, and the person notified may then gi e similar notice to any other person #ho is ans#erable o er. If the notice states (i) that the person notified may come in and defend and (ii) that failure to do so #ill bind the person notified in an action later brought by the person gi ing the notice as to any determination of fact common to the t#o litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend. PART $. NEGOTIATION3 TRANSFER3 AND INDORSEMENT [Table of Con en !"

 3-$#1. NE+OTIATION. (a) 0Negotiation0 means a transfer of possession, #hether oluntary or in oluntary, of an instrument by a person other than the issuer to a person #ho thereby becomes its holder. (b) /+cept for negotiation by a remitter, if an instrument is payable to an identified person, negotiation re1uires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone. 3-$#$. NE+OTIATION SUBJECT TO RESCISSION. (a) Negotiation is effecti e e en if obtained (i) from an infant, a corporation e+ceeding its po#ers, or a person #ithout capacity, (ii) by fraud, duress, or mista*e, or (iii) in breach of duty or as part of an illegal transaction. (b) To the e+tent permitted by other la#, negotiation may be rescinded or may be sub3ect to other remedies, but those remedies may not be asserted against a subse1uent holder in due course or a person paying the instrument in good faith and #ithout *no#ledge of facts that are a basis for rescission or other remedy. 3-$#3. TRANSFER OF INSTRUMENT/ RI+HTS AC0UIRED B, TRANSFER. (a) An instrument is transferred #hen it is deli ered by a person other than its issuer for the purpose of gi ing to the person recei ing deli ery the right to enforce the instrument. (b) Transfer of an instrument, #hether or not the transfer is a negotiation, ests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot ac1uire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument. (c) Unless other#ise agreed, if an instrument is transferred for alue and the transferee does not become a holder because of lac* of indorsement by the transferor, the transferee has a specifically enforceable right to the un1ualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.

(d) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this Article and has only the rights of a partial assignee. 3-$#5. INDORSEMENT. (a) 0Indorsement0 means a signature, other than that of a signer as ma*er, dra#er, or acceptor, that alone or accompanied by other #ords is made on an instrument for the purpose of (i) negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring indorser2s liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying #ords is an indorsement unless the accompanying #ords, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature #as made for a purpose other than indorsement. (or the purpose of determining #hether a signature is made on an instrument, a paper affi+ed to the instrument is a part of the instrument. (b) 0Indorser0 means a person #ho ma*es an indorsement. (c) (or the purpose of determining #hether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effecti e as an un1ualified indorsement of the instrument. (d) If an instrument is payable to a holder under a name that is not the name of the holder, indorsement may be made by the holder in the name stated in the instrument or in the holder2s name or both, but signature in both names may be re1uired by a person paying or ta*ing the instrument for alue or collection. 3-$#7. S&ECIAL INDORSEMENT/ BLAN1 INDORSEMENT/ ANOMALOUS INDORSEMENT. (a) If an indorsement is made by the holder of an instrument, #hether payable to an identified person or payable to bearer, and the indorsement identifies a person to #hom it ma*es the instrument payable, it is a 0special indorsement.0 =hen specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person. The principles stated in )ection 4-..5 apply to special indorsements. (b) If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a 0blank indorsement.0 =hen indorsed in blan*, an instrument becomes payable to bearer and

may be negotiated by transfer of possession alone until specially indorsed. (c) The holder may con ert a blan* indorsement that consists only of a signature into a special indorsement by #riting, abo e the signature of the indorser, #ords identifying the person to #hom the instrument is made payable. (d) 0Anomalous indorsement0 means an indorsement made by a person #ho is not the holder of the instrument. An anomalous indorsement does not affect the manner in #hich the instrument may be negotiated. 3-$#8. RESTRICTI.E INDORSEMENT. (a) An indorsement limiting payment to a particular person or other#ise prohibiting further transfer or negotiation of the instrument is not effecti e to pre ent further transfer or negotiation of the instrument. (b) An indorsement stating a condition to the right of the indorsee to recei e payment does not affect the right of the indorsee to enforce the instrument. A person paying the instrument or ta*ing it for alue or collection may disregard the condition, and the rights and liabilities of that person are not affected by #hether the condition has been fulfilled. (c) If an instrument bears an indorsement (i) described in )ection !-75.(b), or (ii) in blan* or to a particular ban* using the #ords 0for deposit,0 0for collection,0 or other #ords indicating a purpose of ha ing the instrument collected by a ban* for the indorser or for a particular account, the follo#ing rules apply, %1& A .e*!on3 o ,e* ,an a ban63 +,o ./*-,a!e! ,e 0n! */(en +,en !o 0n)o*!e) -on2e* ! ,e 0n! */(en /nle!! ,e a(o/n .a0) fo* ,e 0n! */(en 0! *e-e02e) b1 ,e 0n)o*!e* o* a..l0e) -on!0! en l1 +0 , ,e 0n)o*!e(en . %$& A )e.o!0 a*1 ban6 ,a ./*-,a!e! ,e 0n! */(en o* a6e! 0 fo* -olle- 0on +,en !o 0n)o*!e) -on2e* ! ,e 0n! */(en /nle!! ,e a(o/n .a0) b1 ,e ban6 +0 , *e!.e- o ,e 0n! */(en 0! *e-e02e) b1 ,e 0n)o*!e* o* a..l0e) -on!0! en l1 +0 , ,e 0n)o*!e(en . %3& A .a1o* ban6 ,a 0! al!o ,e )e.o!0 a*1 ban6 o* ,a a6e! ,e 0n! */(en fo* 0((e)0a e .a1(en o2e* ,e -o/n e* f*o( a .e*!on o ,e* ,an a -olle- 0n4 ban6 -on2e* ! ,e 0n! */(en /nle!! ,e .*o-ee)! of ,e 0n! */(en a*e *e-e02e) b1 ,e 0n)o*!e* o* a..l0e) -on!0! en l1 +0 , ,e 0n)o*!e(en .

%5& E?-e. a! o ,e*+0!e .*o20)e) 0n .a*a4*a., %3&3 a .a1o* ban6 o* 0n e*(e)0a*1 ban6 (a1 )0!*e4a*) ,e 0n)o*!e(en an) 0! no l0able 0f ,e .*o-ee)! of ,e 0n! */(en a*e no *e-e02e) b1 ,e 0n)o*!e* o* a..l0e) -on!0! en l1 +0 , ,e 0n)o*!e(en . (d) /+cept for an indorsement co ered by subsection (c), if an instrument bears an indorsement using #ords to the effect that payment is to be made to the indorsee as agent, trustee, or other fiduciary for the benefit of the indorser or another person, the follo#ing rules apply, %1& Unle!! ,e*e 0! no 0-e of b*ea-, of f0)/-0a*1 )/ 1 a! .*o20)e) 0n Se- 0on 3-3#93 a .e*!on +,o ./*-,a!e! ,e 0n! */(en f*o( ,e 0n)o*!ee o* a6e! ,e 0n! */(en f*o( ,e 0n)o*!ee fo* -olle- 0on o* .a1(en (a1 .a1 ,e .*o-ee)! of .a1(en o* ,e 2al/e 402en fo* ,e 0n! */(en o ,e 0n)o*!ee +0 ,o/ *e4a*) o +,e ,e* ,e 0n)o*!ee 20ola e! a f0)/-0a*1 )/ 1 o ,e 0n)o*!e*. %$& A !/b!e>/en *an!fe*ee of ,e 0n! */(en o* .e*!on +,o .a1! ,e 0n! */(en 0! ne0 ,e* 402en no 0-e no* o ,e*+0!e affe- e) b1 ,e *e! *0- 0on 0n ,e 0n)o*!e(en /nle!! ,e *an!fe*ee o* .a1o* 6no+! ,a ,e f0)/-0a*1 )eal +0 , ,e 0n! */(en o* 0 ! .*o-ee)! 0n b*ea-, of f0)/-0a*1 )/ 1. (e) The presence on an instrument of an indorsement to #hich this section applies does not pre ent a purchaser of the instrument from becoming a holder in due course of the instrument unless the purchaser is a con erter under subsection (c) or has notice or *no#ledge of breach of fiduciary duty as stated in subsection (d). (f) In an action to enforce the obligation of a party to pay the instrument, the obligor has a defense if payment #ould iolate an indorsement to #hich this section applies and the payment is not permitted by this section. 3-$#9. REAC0UISITION. %eac1uisition of an instrument occurs if it is transferred to a former holder, by negotiation or other#ise. A former holder #ho reac1uires the instrument may cancel indorsements made after the reac1uirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reac1uirer or to bearer, the reac1uirer may negotiate the instrument. An indorser #hose indorsement is canceled is discharged, and the discharge is effecti e against any subse1uent holder. PART 3. ENFORCEMENT OF INSTRUMENTS [Table of Con en !" 3-3#1. &ERSON ENTITLED TO ENFORCE INSTRUMENT.

0Person entitled to enforce0 an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument #ho has the rights of a holder, or (iii) a person not in possession of the instrument #ho is entitled to enforce the instrument pursuant to )ection 4-45$ or 4-!."(d). A person may be a person entitled to enforce the instrument e en though the person is not the o#ner of the instrument or is in #rongful possession of the instrument. 3-3#$. HOLDER IN DUE COURSE. (a) )ub3ect to subsection (c) and )ection 4-.5>(d), 0holder in due course0 means the holder of an instrument if, %1& ,e 0n! */(en +,en 0!!/e) o* ne4o 0a e) o ,e ,ol)e* )oe! no bea* !/-, a..a*en e20)en-e of fo*4e*1 o* al e*a 0on o* 0! no o ,e*+0!e !o 0**e4/la* o* 0n-o(.le e a! o -all 0n o >/e! 0on 0 ! a/ ,en 0-0 1B an) %$& ,e ,ol)e* oo6 ,e 0n! */(en %0& fo* 2al/e3 %00& 0n 4oo) fa0 ,3 %000& +0 ,o/ no 0-e ,a ,e 0n! */(en 0! o2e*)/e o* ,a! been )0!,ono*e) o* ,a ,e*e 0! an /n-/*e) )efa/l +0 , *e!.e- o .a1(en of ano ,e* 0n! */(en 0!!/e) a! .a* of ,e !a(e !e*0e!3 %02& +0 ,o/ no 0-e ,a ,e 0n! */(en -on a0n! an /na/ ,o*0<e) !04na /*e o* ,a! been al e*e)3 %2& +0 ,o/ no 0-e of an1 -la0( o ,e 0n! */(en )e!-*0be) 0n Se- 0on 3-3#83 an) %20& +0 ,o/ no 0-e ,a an1 .a* 1 ,a! a )efen!e o* -la0( 0n *e-o/.(en )e!-*0be) 0n Se- 0on 3-3#7%a&. (b) Notice of discharge of a party, other than discharge in an insol ency proceeding, is not notice of a defense under subsection (a), but discharge is effecti e against a person #ho became a holder in due course #ith notice of the discharge. ?ublic filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment, or claim to the instrument. (c) /+cept to the e+tent a transferor or predecessor in interest has rights as a holder in due course, a person does not ac1uire rights of a holder in due course of an instrument ta*en (i) by legal process or by purchase in an e+ecution, ban*ruptcy, or creditor2s sale or similar proceeding, (ii) by purchase as part of a bul* transaction not in ordinary course of business of the transferor, or (iii) as the successor in interest to an estate or other organi9ation. (d) If, under )ection 4-454(a)(.), the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument e1ual to the alue of the partial performance di ided by the alue of the promised performance.

(e) If (i) the person entitled to enforce an instrument has only a security interest in the instrument and (ii) the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the instrument that may be asserted against the person #ho granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument #hich, at the time of enforcement of the instrument, does not e+ceed the amount of the unpaid obligation secured. (f) To be effecti e, notice must be recei ed at a time and in a manner that gi es a reasonable opportunity to act on it. (g) This section is sub3ect to any la# limiting status as a holder in due course in particular classes of transactions. 3-3#3. .ALUE AND CONSIDERATION. (a) An instrument is issued or transferred for alue if, %1& ,e 0n! */(en 0! 0!!/e) o* *an!fe**e) fo* a .*o(0!e of .e*fo*(an-e3 o ,e e? en ,e .*o(0!e ,a! been .e*fo*(e)B %$& ,e *an!fe*ee a->/0*e! a !e-/*0 1 0n e*e! o* o ,e* l0en 0n ,e 0n! */(en o ,e* ,an a l0en ob a0ne) b1 ;/)0-0al .*o-ee)0n4B %3& ,e 0n! */(en 0! 0!!/e) o* *an!fe**e) a! .a1(en of3 o* a! !e-/*0 1 fo*3 an an e-e)en -la0( a4a0n! an1 .e*!on3 +,e ,e* o* no ,e -la0( 0! )/eB %5& ,e 0n! */(en 0! 0!!/e) o* *an!fe**e) 0n e?-,an4e fo* a ne4o 0able 0n! */(en B o* %7& ,e 0n! */(en 0! 0!!/e) o* *an!fe**e) 0n e?-,an4e fo* ,e 0n-/**0n4 of an 0**e2o-able obl04a 0on o a ,0*) .a* 1 b1 ,e .e*!on a60n4 ,e 0n! */(en . (b) 0Consideration0 means any consideration sufficient to support a simple contract. The dra#er or ma*er of an instrument has a defense if the instrument is issued #ithout consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the e+tent performance of the promise is due and the promise has not been performed. If an instrument is issued for alue as stated in subsection (a), the instrument is also issued for consideration. 3-3#5. O.ERDUE INSTRUMENT. (a) An instrument payable on demand becomes o erdue at the earliest of the follo#ing times,

%1& on ,e )a1 af e* ,e )a1 )e(an) fo* .a1(en 0! )/l1 (a)eB %$& 0f ,e 0n! */(en 0! a -,e-63 =# )a1! af e* 0 ! )a eB o* %3& 0f ,e 0n! */(en 0! no a -,e-63 +,en ,e 0n! */(en ,a! been o/ ! an)0n4 fo* a .e*0o) of 0(e af e* 0 ! )a e +,0-, 0! /n*ea!onabl1 lon4 /n)e* ,e -0*-/(! an-e! of ,e .a* 0-/la* -a!e 0n l04, of ,e na /*e of ,e 0n! */(en an) /!a4e of ,e *a)e. (b) =ith respect to an instrument payable at a definite time the follo#ing rules apply, %1& If ,e .*0n-0.al 0! .a1able 0n 0n! all(en ! an) a )/e )a e ,a! no been a--ele*a e)3 ,e 0n! */(en be-o(e! o2e*)/e /.on )efa/l /n)e* ,e 0n! */(en fo* non.a1(en of an 0n! all(en 3 an) ,e 0n! */(en *e(a0n! o2e*)/e /n 0l ,e )efa/l 0! -/*e). %$& If ,e .*0n-0.al 0! no .a1able 0n 0n! all(en ! an) ,e )/e )a e ,a! no been a--ele*a e)3 ,e 0n! */(en be-o(e! o2e*)/e on ,e )a1 af e* ,e )/e )a e. %3& If a )/e )a e +0 , *e!.e- o .*0n-0.al ,a! been a--ele*a e)3 ,e 0n! */(en be-o(e! o2e*)/e on ,e )a1 af e* ,e a--ele*a e) )/e )a e. (c) Unless the due date of principal has been accelerated, an instrument does not become o erdue if there is default in payment of interest but no default in payment of principal. 3-3#7. DEFENSES AND CLAIMS IN RECOU&MENT. (a) /+cept as other#ise pro ided in this section, the right to enforce the obligation of a party to pay an instrument is sub3ect to the follo#ing, %1& a )efen!e of ,e obl04o* ba!e) on %0& 0nfan-1 of ,e obl04o* o ,e e? en 0 0! a )efen!e o a !0(.le -on *a- 3 %00& )/*e!!3 la-6 of le4al -a.a-0 13 o* 0lle4al0 1 of ,e *an!a- 0on +,0-,3 /n)e* o ,e* la+3 n/ll0f0e! ,e obl04a 0on of ,e obl04o*3 %000& f*a/) ,a 0n)/-e) ,e obl04o* o !04n ,e 0n! */(en +0 , ne0 ,e* 6no+le)4e no* *ea!onable o..o* /n0 1 o lea*n of 0 ! -,a*a- e* o* 0 ! e!!en 0al e*(!3 o* %02& )0!-,a*4e of ,e obl04o* 0n 0n!ol2en-1 .*o-ee)0n4!B %$& a )efen!e of ,e obl04o* ! a e) 0n ano ,e* !e- 0on of ,0! A* 0-le o* a )efen!e of ,e obl04o* ,a +o/l) be a2a0lable 0f ,e .e*!on en 0 le) o enfo*-e ,e 0n! */(en +e*e enfo*-0n4 a *04, o .a1(en /n)e* a !0(.le -on *a- B an) %3& a -la0( 0n *e-o/.(en of ,e obl04o* a4a0n! ,e o*040nal .a1ee of ,e 0n! */(en 0f ,e -la0( a*o!e f*o( ,e *an!a- 0on ,a 4a2e *0!e o ,e 0n! */(en B b/ ,e -la0( of ,e obl04o* (a1 be a!!e* e) a4a0n! a

*an!fe*ee of ,e 0n! */(en onl1 o *e)/-e ,e a(o/n o+0n4 on ,e 0n! */(en a ,e 0(e ,e a- 0on 0! b*o/4, . (b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is sub3ect to defenses of the obligor stated in subsection (a)(.), but is not sub3ect to defenses of the obligor stated in subsection (a)(7) or claims in recoupment stated in subsection (a)(4) against a person other than the holder. (c) /+cept as stated in subsection (d), in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument ()ection 445>) of another person, but the other person2s claim to the instrument may be asserted by the obligor if the other person is 3oined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person see*ing enforcement of the instrument does not ha e rights of a holder in due course and the obligor pro es that the instrument is a lost or stolen instrument. (d) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection (a) that the accommodated party could assert against the person entitled to enforce the instrument, e+cept the defenses of discharge in insol ency proceedings, infancy, and lac* of legal capacity. (e) In a consumer transaction, if la# other than this article re1uires that an instrument include a statement to the effect that the rights of a holder or transferee are sub3ect to a claim or defense that the issuer could assert against the original payee, and the instrument does not include such a statement, (.) the instrument has the same effect as if the instrument included such a statement6 (7) the issuer may assert against the holder or transferee all claims and defenses that #ould ha e been a ailable if the instrument included such a statement6 and (4) the e+tent to #hich claims may be asserted against the holder or transferee is determined as if the instrument included such a statement. (f) This section is sub3ect to la# other than this article that establishes a different rule for consumer transactions. 3-3#8. CLAIMS TO AN INSTRUMENT. A person ta*ing an instrument, other than a person ha ing rights of a holder in due course, is sub3ect to a claim of a property or

possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to reco er the instrument or its proceeds. A person ha ing rights of a holder in due course ta*es free of the claim to the instrument. 3-3#9. NOTICE OF BREACH OF FIDUCIAR, DUT,. (a) In this section, %1& 'F!$uc! r%' (ean! an a4en 3 */! ee3 .a* ne*3 -o*.o*a e off0-e* o* )0*e- o*3 o* o ,e* *e.*e!en a 02e o+0n4 a f0)/-0a*1 )/ 1 +0 , *e!.e- o an 0n! */(en . %$& 'Represente$ person' (ean! ,e .*0n-0.al3 benef0-0a*13 .a* ne*!,0.3 -o*.o*a 0on3 o* o ,e* .e*!on o +,o( ,e )/ 1 ! a e) 0n .a*a4*a., %1& 0! o+e). (b) If (i) an instrument is ta*en from a fiduciary for payment or collection or for alue, (ii) the ta*er has *no#ledge of the fiduciary status of the fiduciary, and (iii) the represented person ma*es a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the follo#ing rules apply, %1& No 0-e of b*ea-, of f0)/-0a*1 )/ 1 b1 ,e f0)/-0a*1 0! no 0-e of ,e -la0( of ,e *e.*e!en e) .e*!on. %$& In ,e -a!e of an 0n! */(en .a1able o ,e *e.*e!en e) .e*!on o* ,e f0)/-0a*1 a! !/-,3 ,e a6e* ,a! no 0-e of ,e b*ea-, of f0)/-0a*1 )/ 1 0f ,e 0n! */(en 0! %0& a6en 0n .a1(en of o* a! !e-/*0 1 fo* a )eb 6no+n b1 ,e a6e* o be ,e .e*!onal )eb of ,e f0)/-0a*13 %00& a6en 0n a *an!a- 0on 6no+n b1 ,e a6e* o be fo* ,e .e*!onal benef0 of ,e f0)/-0a*13 o* %000& )e.o!0 e) o an a--o/n o ,e* ,an an a--o/n of ,e f0)/-0a*13 a! !/-,3 o* an a--o/n of ,e *e.*e!en e) .e*!on. %3& If an 0n! */(en 0! 0!!/e) b1 ,e *e.*e!en e) .e*!on o* ,e f0)/-0a*1 a! !/-,3 an) (a)e .a1able o ,e f0)/-0a*1 .e*!onall13 ,e a6e* )oe! no ,a2e no 0-e of ,e b*ea-, of f0)/-0a*1 )/ 1 /nle!! ,e a6e* 6no+! of ,e b*ea-, of f0)/-0a*1 )/ 1. %5& If an 0n! */(en 0! 0!!/e) b1 ,e *e.*e!en e) .e*!on o* ,e f0)/-0a*1 a! !/-,3 o ,e a6e* a! .a1ee3 ,e a6e* ,a! no 0-e of ,e b*ea-, of f0)/-0a*1 )/ 1 0f ,e 0n! */(en 0! %0& a6en 0n .a1(en of o* a! !e-/*0 1 fo* a )eb 6no+n b1 ,e a6e* o be ,e .e*!onal )eb of ,e f0)/-0a*13 %00& a6en 0n a *an!a- 0on 6no+n b1 ,e a6e* o be fo* ,e .e*!onal benef0 of ,e f0)/-0a*13 o* %000& )e.o!0 e) o an a--o/n o ,e* ,an an a--o/n of ,e f0)/-0a*13 a! !/-,3 o* an a--o/n of ,e *e.*e!en e) .e*!on.

 3-3#:. &ROOF OF SI+NATURES AND STATUS AS HOLDER IN DUE COURSE. (a) In an action #ith respect to an instrument, the authenticity of, and authority to ma*e, each signature on the instrument is admitted unless specifically denied in the pleadings. If the alidity of a signature is denied in the pleadings, the burden of establishing alidity is on the person claiming alidity, but the signature is presumed to be authentic and authori9ed unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of alidity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person #ho signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under )ection 4-!57(a). (b) If the alidity of signatures is admitted or pro ed and there is compliance #ith subsection (a), a plaintiff producing the instrument is entitled to payment if the plaintiff pro es entitlement to enforce the instrument under )ection 4-45., unless the defendant pro es a defense or claim in recoupment. If a defense or claim in recoupment is pro ed, the right to payment of the plaintiff is sub3ect to the defense or claim, e+cept to the e+tent the plaintiff pro es that the plaintiff has rights of a holder in due course #hich are not sub3ect to the defense or claim. 3-3#=. ENFORCEMENT OF LOST2 DESTRO,ED2 OR STOLEN INSTRUMENT. (a) A person not in possession of an instrument is entitled to enforce the instrument if, %1& ,e .e*!on !ee60n4 o enfo*-e ,e 0n! */(en %A& +a! en 0 le) o enfo*-e 0 ,e 0n! */(en +,en lo!! of .o!!e!!0on o--/**e)3 o* %B& ,a! )0*e- l1 o* 0n)0*e- l1 a->/0*e) o+ne*!,0. of ,e 0n! */(en f*o( a .e*!on +,o +a! en 0 le) o enfo*-e ,e 0n! */(en +,en lo!! of .o!!e!!0on o--/**e)B %$& ,e lo!! of .o!!e!!0on +a! no ,e *e!/l of a *an!fe* b1 ,e .e*!on o* a la+f/l !e0</*eB an) %3& ,e .e*!on -anno *ea!onabl1 ob a0n .o!!e!!0on of ,e 0n! */(en be-a/!e ,e 0n! */(en +a! )e! *o1e)3 0 ! +,e*eabo/ ! -anno be

)e e*(0ne)3 o* 0 0! 0n ,e +*on4f/l .o!!e!!0on of an /n6no+n .e*!on o* a .e*!on ,a -anno be fo/n) o* 0! no a(enable o !e*20-e of .*o-e!!. (b) A person see*ing enforcement of an instrument under subsection (a) must pro e the terms of the instrument and the person2s right to enforce the instrument. If that proof is made, )ection 4-45" applies to the case as if the person see*ing enforcement had produced the instrument. The court may not enter 3udgment in fa or of the person see*ing enforcement unless it finds that the person re1uired to pay the instrument is ade1uately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Ade1uate protection may be pro ided by any reasonable means. 3-31#. EFFECT OF INSTRUMENT ON OBLI+ATION FOR -HICH TA1EN. (a) Unless other#ise agreed, if a certified chec*, cashier2s chec*, or teller2s chec* is ta*en for an obligation, the obligation is discharged to the same e+tent discharge #ould result if an amount of money e1ual to the amount of the instrument #ere ta*en in payment of the obligation. @ischarge of the obligation does not affect any liability that the obligor may ha e as an indorser of the instrument. (b) Unless other#ise agreed and e+cept as pro ided in subsection (a), if a note or an uncertified chec* is ta*en for an obligation, the obligation is suspended to the same e+tent the obligation #ould be discharged if an amount of money e1ual to the amount of the instrument #ere ta*en, and the follo#ing rules apply, %1& In ,e -a!e of an /n-e* 0f0e) -,e-63 !/!.en!0on of ,e obl04a 0on -on 0n/e! /n 0l )0!,ono* of ,e -,e-6 o* /n 0l 0 0! .a0) o* -e* 0f0e). Pa1(en o* -e* 0f0-a 0on of ,e -,e-6 *e!/l ! 0n )0!-,a*4e of ,e obl04a 0on o ,e e? en of ,e a(o/n of ,e -,e-6. %$& In ,e -a!e of a no e3 !/!.en!0on of ,e obl04a 0on -on 0n/e! /n 0l )0!,ono* of ,e no e o* /n 0l 0 0! .a0). Pa1(en of ,e no e *e!/l ! 0n )0!-,a*4e of ,e obl04a 0on o ,e e? en of ,e .a1(en . %3& E?-e. a! .*o20)e) 0n .a*a4*a., %5&3 0f ,e -,e-6 o* no e 0! )0!,ono*e) an) ,e obl04ee of ,e obl04a 0on fo* +,0-, ,e 0n! */(en +a! a6en 0! ,e .e*!on en 0 le) o enfo*-e ,e 0n! */(en 3 ,e obl04ee (a1 enfo*-e e0 ,e* ,e 0n! */(en o* ,e obl04a 0on. In ,e -a!e of an 0n! */(en of a ,0*) .e*!on +,0-, 0! ne4o 0a e) o ,e obl04ee b1 ,e obl04o*3 )0!-,a*4e of ,e obl04o* on ,e 0n! */(en al!o )0!-,a*4e! ,e obl04a 0on. %5& If ,e .e*!on en 0 le) o enfo*-e ,e 0n! */(en a6en fo* an obl04a 0on 0! a .e*!on o ,e* ,an ,e obl04ee3 ,e obl04ee (a1 no enfo*-e ,e obl04a 0on o ,e e? en ,e obl04a 0on 0! !/!.en)e). If ,e obl04ee 0! ,e .e*!on

en 0 le) o enfo*-e ,e 0n! */(en b/ no lon4e* ,a! .o!!e!!0on of 0 be-a/!e 0 +a! lo! 3 ! olen3 o* )e! *o1e)3 ,e obl04a 0on (a1 no be enfo*-e) o ,e e? en of ,e a(o/n .a1able on ,e 0n! */(en 3 an) o ,a e? en ,e obl04ee@! *04, ! a4a0n! ,e obl04o* a*e l0(0 e) o enfo*-e(en of ,e 0n! */(en . (c) If an instrument other than one described in subsection (a) or (b) is ta*en for an obligation, the effect is (i) that stated in subsection (a) if the instrument is one on #hich a ban* is liable as ma*er or acceptor, or (ii) that stated in subsection (b) in any other case. 3-311. ACCORD AND SATISFACTION B, USE OF INSTRUMENT. (a) If a person against #hom a claim is asserted pro es that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim #as unli1uidated or sub3ect to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the follo#ing subsections apply. (b) Unless subsection (c) applies, the claim is discharged if the person against #hom the claim is asserted pro es that the instrument or an accompanying #ritten communication contained a conspicuous statement to the effect that the instrument #as tendered as full satisfaction of the claim. (c) )ub3ect to subsection (d), a claim is not discharged under subsection (b) if either of the follo#ing applies, %1& T,e -la0(an 3 0f an o*4an0<a 0on3 .*o2e! ,a %0& +0 ,0n a *ea!onable 0(e befo*e ,e en)e*3 ,e -la0(an !en a -on!.0-/o/! ! a e(en o ,e .e*!on a4a0n! +,o( ,e -la0( 0! a!!e* e) ,a -o((/n0-a 0on! -on-e*n0n4 )0!./ e) )eb !3 0n-l/)0n4 an 0n! */(en en)e*e) a! f/ll !a 0!fa- 0on of a )eb 3 a*e o be !en o a )e!04na e) .e*!on3 off0-e3 o* .la-e3 an) %00& ,e 0n! */(en o* a--o(.an10n4 -o((/n0-a 0on +a! no *e-e02e) b1 ,a )e!04na e) .e*!on3 off0-e3 o* .la-e. %$& T,e -la0(an 3 +,e ,e* o* no an o*4an0<a 0on3 .*o2e! ,a +0 ,0n =# )a1! af e* .a1(en of ,e 0n! */(en 3 ,e -la0(an en)e*e) *e.a1(en of ,e a(o/n of ,e 0n! */(en o ,e .e*!on a4a0n! +,o( ,e -la0( 0! a!!e* e). T,0! .a*a4*a., )oe! no a..l1 0f ,e -la0(an 0! an o*4an0<a 0on ,a ,a !en a ! a e(en -o(.l10n4 +0 , .a*a4*a., %1&%0&. (d) A claim is discharged if the person against #hom the claim is asserted pro es that #ithin a reasonable time before collection of the instrument #as initiated, the claimant, or an agent of the claimant ha ing direct responsibility #ith respect to the disputed

obligation, *ne# that the instrument #as tendered in full satisfaction of the claim. 3-31$. LOST2 DESTRO,ED2 OR STOLEN CASHIER3S CHEC12 TELLER3S CHEC12 OR CERTIFIED CHEC1. (a) In this section, %1& 'C4ec#' (ean! a -a!,0e*@! -,e-63 elle*@! -,e-63 o* -e* 0f0e) -,e-6. %$& 'C' !m nt' (ean! a .e*!on +,o -la0(! ,e *04, o *e-e02e ,e a(o/n of a -a!,0e*@! -,e-63 elle*@! -,e-63 o* -e* 0f0e) -,e-6 ,a +a! lo! 3 )e! *o1e)3 o* ! olen. %3& 'Dec' r t!on o5 'oss' (ean! a ! a e(en 3 (a)e 0n a *e-o*) /n)e* .enal 1 of .e*;/*13 o ,e effe- ,a %0& ,e )e-la*e* lo! .o!!e!!0on of a -,e-63 %00& ,e )e-la*e* 0! ,e )*a+e* o* .a1ee of ,e -,e-63 0n ,e -a!e of a -e* 0f0e) -,e-63 o* ,e *e(0 e* o* .a1ee of ,e -,e-63 0n ,e -a!e of a -a!,0e*@! -,e-6 o* elle*@! -,e-63 %000& ,e lo!! of .o!!e!!0on +a! no ,e *e!/l of a *an!fe* b1 ,e )e-la*e* o* a la+f/l !e0</*e3 an) %02& ,e )e-la*e* -anno *ea!onabl1 ob a0n .o!!e!!0on of ,e -,e-6 be-a/!e ,e -,e-6 +a! )e! *o1e)3 0 ! +,e*eabo/ ! -anno be )e e*(0ne)3 o* 0 0! 0n ,e +*on4f/l .o!!e!!0on of an /n6no+n .e*!on o* a .e*!on ,a -anno be fo/n) o* 0! no a(enable o !e*20-e of .*o-e!!. %5& 'O('!) te$ ( n#' (ean! ,e 0!!/e* of a -a!,0e*@! -,e-6 o* elle*@! -,e-6 o* ,e a--e. o* of a -e* 0f0e) -,e-6. (b) A claimant may assert a claim to the amount of a chec* by a communication to the obligated ban* describing the chec* #ith reasonable certainty and re1uesting payment of the amount of the chec*, if (i) the claimant is the dra#er or payee of a certified chec* or the remitter or payee of a cashier2s chec* or teller2s chec*, (ii) the communication contains or is accompanied by a declaration of loss of the claimant #ith respect to the chec*, (iii) the communication is recei ed at a time and in a manner affording the ban* a reasonable time to act on it before the chec* is paid, and (i ) the claimant pro ides reasonable identification if re1uested by the obligated ban*. @eli ery of a declaration of loss is a #arranty of the truth of the statements made in the declaration. If a claim is asserted in compliance #ith this subsection, the follo#ing rules apply, %1& T,e -la0( be-o(e! enfo*-eable a ,e la e* of %0& ,e 0(e ,e -la0( 0! a!!e* e)3 o* %00& ,e =# , )a1 follo+0n4 ,e )a e of ,e -,e-63 0n ,e -a!e of a -a!,0e*@! -,e-6 o* elle*@! -,e-63 o* ,e =# , )a1 follo+0n4 ,e )a e of ,e a--e. an-e3 0n ,e -a!e of a -e* 0f0e) -,e-6. %$& Un 0l ,e -la0( be-o(e! enfo*-eable3 0 ,a! no le4al effe- an) ,e obl04a e) ban6 (a1 .a1 ,e -,e-6 o*3 0n ,e -a!e of a elle*@! -,e-63 (a1

.e*(0 ,e )*a+ee o .a1 ,e -,e-6. Pa1(en o a .e*!on en 0 le) o enfo*-e ,e -,e-6 )0!-,a*4e! all l0ab0l0 1 of ,e obl04a e) ban6 +0 , *e!.eo ,e -,e-6. %3& If ,e -la0( be-o(e! enfo*-eable befo*e ,e -,e-6 0! .*e!en e) fo* .a1(en 3 ,e obl04a e) ban6 0! no obl04e) o .a1 ,e -,e-6. %5& D,en ,e -la0( be-o(e! enfo*-eable3 ,e obl04a e) ban6 be-o(e! obl04e) o .a1 ,e a(o/n of ,e -,e-6 o ,e -la0(an 0f .a1(en of ,e -,e-6 ,a! no been (a)e o a .e*!on en 0 le) o enfo*-e ,e -,e-6. S/b;eo Se- 0on 5-3#$%a&%1&3 .a1(en o ,e -la0(an )0!-,a*4e! all l0ab0l0 1 of ,e obl04a e) ban6 +0 , *e!.e- o ,e -,e-6. (c) If the obligated ban* pays the amount of a chec* to a claimant under subsection (b)(!) and the chec* is presented for payment by a person ha ing rights of a holder in due course, the claimant is obliged to (i) refund the payment to the obligated ban* if the chec* is paid, or (ii) pay the amount of the chec* to the person ha ing rights of a holder in due course if the chec* is dishonored. (d) If a claimant has the right to assert a claim under subsection (b) and is also a person entitled to enforce a cashier2s chec*, teller2s chec*, or certified chec* #hich is lost, destroyed, or stolen, the claimant may assert rights #ith respect to the chec* either under this section or )ection 4-45$. PART 5. LIABILITE OF PARTIES [Table of Con en !" 3-5#1. SI+NATURE. (a) A person is not liable on an instrument unless (i) the person signed the instrument, or (ii) the person is represented by an agent or representati e #ho signed the instrument and the signature is binding on the represented person under )ection 4-!57. (b) A signature may be made (i) manually or by means of a de ice or machine, and (ii) by the use of any name, including a trade or assumed name, or by a #ord, mar*, or symbol e+ecuted or adopted by a person #ith present intention to authenticate a #riting. 3-5#$. SI+NATURE B, RE&RESENTATI.E. (a) If a person acting, or purporting to act, as a representati e signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same e+tent the represented person #ould be bound if the signature #ere on a simple contract. If the represented person is bound, the signature of the representati e is

the 0authori9ed signature of the represented person0 and the represented person is liable on the instrument, #hether or not identified in the instrument. (b) If a representati e signs the name of the representati e to an instrument and the signature is an authori9ed signature of the represented person, the follo#ing rules apply, %1& If ,e fo*( of ,e !04na /*e !,o+! /na(b04/o/!l1 ,a ,e !04na /*e 0! (a)e on be,alf of ,e *e.*e!en e) .e*!on +,o 0! 0)en 0f0e) 0n ,e 0n! */(en 3 ,e *e.*e!en a 02e 0! no l0able on ,e 0n! */(en . %$& S/b;e- o !/b!e- 0on %-&3 0f %0& ,e fo*( of ,e !04na /*e )oe! no !,o+ /na(b04/o/!l1 ,a ,e !04na /*e 0! (a)e 0n a *e.*e!en a 02e -a.a-0 1 o* %00& ,e *e.*e!en e) .e*!on 0! no 0)en 0f0e) 0n ,e 0n! */(en 3 ,e *e.*e!en a 02e 0! l0able on ,e 0n! */(en o a ,ol)e* 0n )/e -o/*!e ,a oo6 ,e 0n! */(en +0 ,o/ no 0-e ,a ,e *e.*e!en a 02e +a! no 0n en)e) o be l0able on ,e 0n! */(en . D0 , *e!.e- o an1 o ,e* .e*!on3 ,e *e.*e!en a 02e 0! l0able on ,e 0n! */(en /nle!! ,e *e.*e!en a 02e .*o2e! ,a ,e o*040nal .a* 0e! )0) no 0n en) ,e *e.*e!en a 02e o be l0able on ,e 0n! */(en . (c) If a representati e signs the name of the representati e as dra#er of a chec* #ithout indication of the representati e status and the chec* is payable from an account of the represented person #ho is identified on the chec*, the signer is not liable on the chec* if the signature is an authori9ed signature of the represented person. 3-5#3. UNAUTHORI6ED SI+NATURE. (a) Unless other#ise pro ided in this Article or Article !, an unauthori9ed signature is ineffecti e e+cept as the signature of the unauthori9ed signer in fa or of a person #ho in good faith pays the instrument or ta*es it for alue. An unauthori9ed signature may be ratified for all purposes of this Article. (b) If the signature of more than one person is re1uired to constitute the authori9ed signature of an organi9ation, the signature of the organi9ation is unauthori9ed if one of the re1uired signatures is lac*ing. (c) The ci il or criminal liability of a person #ho ma*es an unauthori9ed signature is not affected by any pro ision of this Article #hich ma*es the unauthori9ed signature effecti e for the purposes of this Article. 3-5#5. IM&OSTORS/ FICTITIOUS &A,EES.

(a) If an impostor, by use of the mails or other#ise, induces the issuer of an instrument to issue the instrument to the impostor, or to a person acting in concert #ith the impostor, by impersonating the payee of the instrument or a person authori9ed to act for the payee, an indorsement of the instrument by any person in the name of the payee is effecti e as the indorsement of the payee in fa or of a person #ho, in good faith, pays the instrument or ta*es it for alue or for collection. (b) If (i) a person #hose intent determines to #hom an instrument is payable ()ection 4-..5(a) or (b)) does not intend the person identified as payee to ha e any interest in the instrument, or (ii) the person identified as payee of an instrument is a fictitious person, the follo#ing rules apply until the instrument is negotiated by special indorsement, %1& An1 .e*!on 0n .o!!e!!0on of ,e 0n! */(en 0! 0 ! ,ol)e*. %$& An 0n)o*!e(en b1 an1 .e*!on 0n ,e na(e of ,e .a1ee ! a e) 0n ,e 0n! */(en 0! effe- 02e a! ,e 0n)o*!e(en of ,e .a1ee 0n fa2o* of a .e*!on +,o3 0n 4oo) fa0 ,3 .a1! ,e 0n! */(en o* a6e! 0 fo* 2al/e o* fo* -olle- 0on. (c) Under subsection (a) or (b), an indorsement is made in the name of a payee if (i) it is made in a name substantially similar to that of the payee or (ii) the instrument, #hether or not indorsed, is deposited in a depositary ban* to an account in a name substantially similar to that of the payee. (d) =ith respect to an instrument to #hich subsection (a) or (b) applies, if a person paying the instrument or ta*ing it for alue or for collection fails to e+ercise ordinary care in paying or ta*ing the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may reco er from the person failing to e+ercise ordinary care to the e+tent the failure to e+ercise ordinary care contributed to the loss. 3-5#7. EM&LO,ER3S RES&ONSIBILIT, FOR FRAUDULENT INDORSEMENT B, EM&LO,EE. (a) In this section, %1& 'Emp'o%ee' 0n-l/)e! an 0n)e.en)en -on *a- o* an) e(.lo1ee of an 0n)e.en)en -on *a- o* *e a0ne) b1 ,e e(.lo1e*. %$& 'Fr u$u'ent !n$orsement' (ean! %0& 0n ,e -a!e of an 0n! */(en .a1able o ,e e(.lo1e*3 a fo*4e) 0n)o*!e(en ./*.o* 0n4 o be ,a of ,e e(.lo1e*3 o* %00& 0n ,e -a!e of an 0n! */(en +0 , *e!.e- o +,0-, ,e

e(.lo1e* 0! ,e 0!!/e*3 a fo*4e) 0n)o*!e(en ./*.o* 0n4 o be ,a of ,e .e*!on 0)en 0f0e) a! .a1ee. %3& 'Respons!(!'!t%' +0 , *e!.e- o 0n! */(en ! (ean! a/ ,o*0 1 %0& o !04n o* 0n)o*!e 0n! */(en ! on be,alf of ,e e(.lo1e*3 %00& o .*o-e!! 0n! */(en ! *e-e02e) b1 ,e e(.lo1e* fo* boo66ee.0n4 ./*.o!e!3 fo* )e.o!0 o an a--o/n 3 o* fo* o ,e* )0!.o!0 0on3 %000& o .*e.a*e o* .*o-e!! 0n! */(en ! fo* 0!!/e 0n ,e na(e of ,e e(.lo1e*3 %02& o !/..l1 0nfo*(a 0on )e e*(0n0n4 ,e na(e! o* a))*e!!e! of .a1ee! of 0n! */(en ! o be 0!!/e) 0n ,e na(e of ,e e(.lo1e*3 %2& o -on *ol ,e )0!.o!0 0on of 0n! */(en ! o be 0!!/e) 0n ,e na(e of ,e e(.lo1e*3 o* %20& o a- o ,e*+0!e +0 , *e!.e- o 0n! */(en ! 0n a *e!.on!0ble -a.a-0 1. 'Re!.on!0b0l0 1' )oe! no 0n-l/)e a/ ,o*0 1 ,a (e*el1 allo+! an e(.lo1ee o ,a2e a--e!! o 0n! */(en ! o* blan6 o* 0n-o(.le e 0n! */(en fo*(! ,a a*e be0n4 ! o*e) o* *an!.o* e) o* a*e .a* of 0n-o(0n4 o* o/ 4o0n4 (a0l3 o* !0(0la* a--e!!. (b) (or the purpose of determining the rights and liabilities of a person #ho, in good faith, pays an instrument or ta*es it for alue or for collection, if an employer entrusted an employee #ith responsibility #ith respect to the instrument and the employee or a person acting in concert #ith the employee ma*es a fraudulent indorsement of the instrument, the indorsement is effecti e as the indorsement of the person to #hom the instrument is payable if it is made in the name of that person. If the person paying the instrument or ta*ing it for alue or for collection fails to e+ercise ordinary care in paying or ta*ing the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may reco er from the person failing to e+ercise ordinary care to the e+tent the failure to e+ercise ordinary care contributed to the loss. (c) Under subsection (b), an indorsement is made in the name of the person to #hom an instrument is payable if (i) it is made in a name substantially similar to the name of that person or (ii) the instrument, #hether or not indorsed, is deposited in a depositary ban* to an account in a name substantially similar to the name of that person. 3-5#8. NE+LI+ENCE CONTRIBUTIN+ TO FOR+ED SI+NATURE OR ALTERATION OF INSTRUMENT. (a) A person #hose failure to e+ercise ordinary care substantially contributes to an alteration of an instrument or to the ma*ing of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person #ho, in good faith, pays the instrument or ta*es it for alue or for collection. (b) Under subsection (a), if the person asserting the preclusion fails to e+ercise ordinary care in paying or ta*ing the instrument and that

failure substantially contributes to loss, the loss is allocated bet#een the person precluded and the person asserting the preclusion according to the e+tent to #hich the failure of each to e+ercise ordinary care contributed to the loss. (c) Under subsection (a), the burden of pro ing failure to e+ercise ordinary care is on the person asserting the preclusion. Under subsection (b), the burden of pro ing failure to e+ercise ordinary care is on the person precluded. 3-5#9. ALTERATION. (a) 0Alteration0 means (i) an unauthori9ed change in an instrument that purports to modify in any respect the obligation of a party, or (ii) an unauthori9ed addition of #ords or numbers or other change to an incomplete instrument relating to the obligation of a party. (b) /+cept as pro ided in subsection (c), an alteration fraudulently made discharges a party #hose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms. (c) A payor ban* or dra#ee paying a fraudulently altered instrument or a person ta*ing it for alue, in good faith and #ithout notice of the alteration, may enforce rights #ith respect to the instrument (i) according to its original terms, or (ii) in the case of an incomplete instrument altered by unauthori9ed completion, according to its terms as completed. 3-5#:. DRA-EE NOT LIABLE ON UNACCE&TED DRAFT. A chec* or other draft does not of itself operate as an assignment of funds in the hands of the dra#ee a ailable for its payment, and the dra#ee is not liable on the instrument until the dra#ee accepts it. 3-5#=. ACCE&TANCE OF DRAFT/ CERTIFIED CHEC1. (a) 0Acceptance0 means the dra#ee2s signed agreement to pay a draft as presented. It must be #ritten on the draft and may consist of the dra#ee2s signature alone. Acceptance may be made at any time and becomes effecti e #hen notification pursuant to instructions is gi en or the accepted draft is deli ered for the purpose of gi ing rights on the acceptance to any person.

(b) A draft may be accepted although it has not been signed by the dra#er, is other#ise incomplete, is o erdue, or has been dishonored. (c) If a draft is payable at a fi+ed period after sight and the acceptor fails to date the acceptance, the holder may complete the acceptance by supplying a date in good faith. (d) 0Certified check0 means a chec* accepted by the ban* on #hich it is dra#n. Acceptance may be made as stated in subsection (a) or by a #riting on the chec* #hich indicates that the chec* is certified. The dra#ee of a chec* has no obligation to certify the chec*, and refusal to certify is not dishonor of the chec*. 3-51#. ACCE&TANCE .AR,IN+ DRAFT. (a) If the terms of a dra#ee2s acceptance ary from the terms of the draft as presented, the holder may refuse the acceptance and treat the draft as dishonored. In that case, the dra#ee may cancel the acceptance. (b) The terms of a draft are not aried by an acceptance to pay at a particular ban* or place in the United )tates, unless the acceptance states that the draft is to be paid only at that ban* or place. (c) If the holder assents to an acceptance arying the terms of a draft, the obligation of each dra#er and indorser that does not e+pressly assent to the acceptance is discharged. 3-511. REFUSAL TO &A, CASHIER3S CHEC1S2 TELLER3S CHEC1S2 AND CERTIFIED CHEC1S. (a) In this section, 0obligated bank0 means the acceptor of a certified chec* or the issuer of a cashier2s chec* or teller2s chec* bought from the issuer. (b) If the obligated ban* #rongfully (i) refuses to pay a cashier2s chec* or certified chec*, (ii) stops payment of a teller2s chec*, or (iii) refuses to pay a dishonored teller2s chec*, the person asserting the right to enforce the chec* is entitled to compensation for e+penses and loss of interest resulting from the nonpayment and may reco er conse1uential damages if the obligated ban* refuses to pay after recei ing notice of particular circumstances gi ing rise to the damages. (c) /+penses or conse1uential damages under subsection (b) are not reco erable if the refusal of the obligated ban* to pay occurs because (i) the ban* suspends payments, (ii) the obligated ban*

asserts a claim or defense of the ban* that it has reasonable grounds to belie e is a ailable against the person entitled to enforce the instrument, (iii) the obligated ban* has a reasonable doubt #hether the person demanding payment is the person entitled to enforce the instrument, or (i ) payment is prohibited by la#. 3-51$. OBLI+ATION OF ISSUER OF NOTE OR CASHIER3S CHEC1. The issuer of a note or cashier2s chec* or other draft dra#n on the dra#er is obliged to pay the instrument (i) according to its terms at the time it #as issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the issuer signed an incomplete instrument, according to its terms #hen completed, to the e+tent stated in )ections 4-..8 and 4-!5:. The obligation is o#ed to a person entitled to enforce the instrument or to an indorser #ho paid the instrument under )ection 4-!.8. 3-513. OBLI+ATION OF ACCE&TOR. (a) The acceptor of a draft is obliged to pay the draft (i) according to its terms at the time it #as accepted, e en though the acceptance states that the draft is payable 0as originally dra#n0 or e1ui alent terms, (ii) if the acceptance aries the terms of the draft, according to the terms of the draft as aried, or (iii) if the acceptance is of a draft that is an incomplete instrument, according to its terms #hen completed, to the e+tent stated in )ections 4-..8 and 4-!5:. The obligation is o#ed to a person entitled to enforce the draft or to the dra#er or an indorser #ho paid the draft under )ection 4-!.! or 4!.8. (b) If the certification of a chec* or other acceptance of a draft states the amount certified or accepted, the obligation of the acceptor is that amount. If (i) the certification or acceptance does not state an amount, (ii) the amount of the instrument is subse1uently raised, and (iii) the instrument is then negotiated to a holder in due course, the obligation of the acceptor is the amount of the instrument at the time it #as ta*en by the holder in due course. 3-515. OBLI+ATION OF DRA-ER. (a) This section does not apply to cashier2s chec*s or other drafts dra#n on the dra#er. (b) If an unaccepted draft is dishonored, the dra#er is obliged to pay the draft (i) according to its terms at the time it #as issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the dra#er signed an incomplete instrument, according to its terms #hen completed, to the e+tent stated in )ections 4-..8 and

4-!5:. The obligation is o#ed to a person entitled to enforce the draft or to an indorser #ho paid the draft under )ection 4-!.8. (c) If a draft is accepted by a ban*, the dra#er is discharged, regardless of #hen or by #hom acceptance #as obtained. (d) If a draft is accepted and the acceptor is not a ban*, the obligation of the dra#er to pay the draft if the draft is dishonored by the acceptor is the same as the obligation of an indorser under )ection 4-!.8(a) and (c). (e) If a draft states that it is dra#n 0#ithout recourse0 or other#ise disclaims liability of the dra#er to pay the draft, the dra#er is not liable under subsection (b) to pay the draft if the draft is not a chec*. A disclaimer of the liability stated in subsection (b) is not effecti e if the draft is a chec*. (f) If (i) a chec* is not presented for payment or gi en to a depositary ban* for collection #ithin 45 days after its date, (ii) the dra#ee suspends payments after e+piration of the 45-day period #ithout paying the chec*, and (iii) because of the suspension of payments, the dra#er is depri ed of funds maintained #ith the dra#ee to co er payment of the chec*, the dra#er to the e+tent depri ed of funds may discharge its obligation to pay the chec* by assigning to the person entitled to enforce the chec* the rights of the dra#er against the dra#ee #ith respect to the funds. 3-517. OBLI+ATION OF INDORSER. (a) )ub3ect to subsections (b), (c), and (d) and to )ection 4!.$(d), if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it #as indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms #hen completed, to the e+tent stated in )ections 4-..8 and 4-!5:. The obligation of the indorser is o#ed to a person entitled to enforce the instrument or to a subse1uent indorser #ho paid the instrument under this section. (b) If an indorsement states that it is made 0#ithout recourse0 or other#ise disclaims liability of the indorser, the indorser is not liable under subsection (a) to pay the instrument. (c) If notice of dishonor of an instrument is re1uired by )ection 4854 and notice of dishonor complying #ith that section is not gi en to an indorser, the liability of the indorser under subsection (a) is discharged.

(d) If a draft is accepted by a ban* after an indorsement is made, the liability of the indorser under subsection (a) is discharged. (e) If an indorser of a chec* is liable under subsection (a) and the chec* is not presented for payment, or gi en to a depositary ban* for collection, #ithin 45 days after the day the indorsement #as made, the liability of the indorser under subsection (a) is discharged. 3-518. TRANSFER -ARRANTIES. (a) A person #ho transfers an instrument for consideration #arrants to the transferee and, if the transfer is by indorsement, to any subse1uent transferee that, %1& ,e +a**an o* 0! a .e*!on en 0 le) o enfo*-e ,e 0n! */(en B %$& all !04na /*e! on ,e 0n! */(en a*e a/ ,en 0- an) a/ ,o*0<e)B %3& ,e 0n! */(en ,a! no been al e*e)B %5& ,e 0n! */(en 0! no !/b;e- o a )efen!e o* -la0( 0n *e-o/.(en of an1 .a* 1 +,0-, -an be a!!e* e) a4a0n! ,e +a**an o*B an) %7& ,e +a**an o* ,a! no 6no+le)4e of an1 0n!ol2en-1 .*o-ee)0n4 -o((en-e) +0 , *e!.e- o ,e (a6e* o* a--e. o* o*3 0n ,e -a!e of an /na--e. e) )*af 3 ,e )*a+e*B an) %8& +0 , *e!.e- o a *e(o el1--*ea e) -on!/(e* 0 e(3 ,a ,e .e*!on on +,o!e a--o/n ,e 0 e( 0! )*a+n a/ ,o*0<e) ,e 0!!/an-e of ,e 0 e( 0n ,e a(o/n fo* +,0-, ,e 0 e( 0! )*a+n. (b) A person to #hom the #arranties under subsection (a) are made and #ho too* the instrument in good faith may reco er from the #arrantor as damages for breach of #arranty an amount e1ual to the loss suffered as a result of the breach, but not more than the amount of the instrument plus e+penses and loss of interest incurred as a result of the breach. (c) The #arranties stated in subsection (a) cannot be disclaimed #ith respect to chec*s. Unless notice of a claim for breach of #arranty is gi en to the #arrantor #ithin 45 days after the claimant has reason to *no# of the breach and the identity of the #arrantor, the liability of the #arrantor under subsection (b) is discharged to the e+tent of any loss caused by the delay in gi ing notice of the claim.

(d) A ;cause of action< for breach of #arranty under this section accrues #hen the claimant has reason to *no# of the breach. 3-519. &RESENTMENT -ARRANTIES. (a) If an unaccepted draft is presented to the dra#ee for payment or acceptance and the dra#ee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a pre ious transferor of the draft, at the time of transfer, #arrant to the dra#ee ma*ing payment or accepting the draft in good faith that, %1& ,e +a**an o* 0!3 o* +a!3 a ,e 0(e ,e +a**an o* *an!fe**e) ,e )*af 3 a .e*!on en 0 le) o enfo*-e ,e )*af o* a/ ,o*0<e) o ob a0n .a1(en o* a--e. an-e of ,e )*af on be,alf of a .e*!on en 0 le) o enfo*-e ,e )*af B %$& ,e )*af ,a! no been al e*e)B %3& ,e +a**an o* ,a! no 6no+le)4e ,a ,e !04na /*e of ,e )*a+e* of ,e )*af 0! /na/ ,o*0<e)B %5& +0 , *e!.e- o an1 *e(o el1--*ea e) -on!/(e* 0 e(3 ,a ,e .e*!on on +,o!e a--o/n ,e 0 e( 0! )*a+n a/ ,o*0<e) ,e 0!!/an-e of ,e 0 e( 0n ,e a(o/n fo* +,0-, ,e 0 e( 0! )*a+n. (b) A dra#ee ma*ing payment may reco er from any #arrantor damages for breach of #arranty e1ual to the amount paid by the dra#ee less the amount the dra#ee recei ed or is entitled to recei e from the dra#er because of the payment. In addition, the dra#ee is entitled to compensation for e+penses and loss of interest resulting from the breach. The right of the dra#ee to reco er damages under this subsection is not affected by any failure of the dra#ee to e+ercise ordinary care in ma*ing payment. If the dra#ee accepts the draft, breach of #arranty is a defense to the obligation of the acceptor. If the acceptor ma*es payment #ith respect to the draft, the acceptor is entitled to reco er from any #arrantor for breach of #arranty the amounts stated in this subsection. (c) If a dra#ee asserts a claim for breach of #arranty under subsection (a) based on an unauthori9ed indorsement of the draft or an alteration of the draft, the #arrantor may defend by pro ing that the indorsement is effecti e under )ection 4-!5! or 4-!58 or the dra#er is precluded under )ection 4-!5> or !-!5> from asserting against the dra#ee the unauthori9ed indorsement or alteration. (d) If (i) a dishonored draft is presented for payment to the dra#er or an indorser or (ii) any other instrument is presented for payment

to a party obliged to pay the instrument, and (iii) payment is recei ed, the follo#ing rules apply, %1& T,e .e*!on ob a0n0n4 .a1(en an) a .*0o* *an!fe*o* of ,e 0n! */(en +a**an o ,e .e*!on (a60n4 .a1(en 0n 4oo) fa0 , ,a ,e +a**an o* 0!3 o* +a!3 a ,e 0(e ,e +a**an o* *an!fe**e) ,e 0n! */(en 3 a .e*!on en 0 le) o enfo*-e ,e 0n! */(en o* a/ ,o*0<e) o ob a0n .a1(en on be,alf of a .e*!on en 0 le) o enfo*-e ,e 0n! */(en . %$& T,e .e*!on (a60n4 .a1(en (a1 *e-o2e* f*o( an1 +a**an o* fo* b*ea-, of +a**an 1 an a(o/n e>/al o ,e a(o/n .a0) .l/! e?.en!e! an) lo!! of 0n e*e! *e!/l 0n4 f*o( ,e b*ea-,. (e) The #arranties stated in subsections (a) and (d) cannot be disclaimed #ith respect to chec*s. Unless notice of a claim for breach of #arranty is gi en to the #arrantor #ithin 45 days after the claimant has reason to *no# of the breach and the identity of the #arrantor, the liability of the #arrantor under subsection (b) or (d) is discharged to the e+tent of any loss caused by the delay in gi ing notice of the claim. (f) A ;cause of action< for breach of #arranty under this section accrues #hen the claimant has reason to *no# of the breach. 3-51:. &A,MENT OR ACCE&TANCE B, MISTA1E. (a) /+cept as pro ided in subsection (c), if the dra#ee of a draft pays or accepts the draft and the dra#ee acted on the mista*en belief that (i) payment of the draft had not been stopped pursuant to )ection !-!54 or (ii) the signature of the dra#er of the draft #as authori9ed, the dra#ee may reco er the amount of the draft from the person to #hom or for #hose benefit payment #as made or, in the case of acceptance, may re o*e the acceptance. %ights of the dra#ee under this subsection are not affected by failure of the dra#ee to e+ercise ordinary care in paying or accepting the draft. (b) /+cept as pro ided in subsection (c), if an instrument has been paid or accepted by mista*e and the case is not co ered by subsection (a), the person paying or accepting may, to the e+tent permitted by the la# go erning mista*e and restitution, (i) reco er the payment from the person to #hom or for #hose benefit payment #as made or (ii) in the case of acceptance, may re o*e the acceptance. (c) The remedies pro ided by subsection (a) or (b) may not be asserted against a person #ho too* the instrument in good faith and for alue or #ho in good faith changed position in reliance on the

payment or acceptance. This subsection does not limit remedies pro ided by )ection 4-!.: or !-!5:. (d) Not#ithstanding )ection !-7.8, if an instrument is paid or accepted by mista*e and the payor or acceptor reco ers payment or re o*es acceptance under subsection (a) or (b), the instrument is deemed not to ha e been paid or accepted and is treated as dishonored, and the person from #hom payment is reco ered has rights as a person entitled to enforce the dishonored instrument. 3-51=. INSTRUMENTS SI+NED FOR ACCOMMODATION. (a) If an instrument is issued for alue gi en for the benefit of a party to the instrument (0accommodated party0) and another party to the instrument (0accommodation party0) signs the instrument for the purpose of incurring liability on the instrument #ithout being a direct beneficiary of the alue gi en for the instrument, the instrument is signed by the accommodation party 0for accommodation.0 (b) An accommodation party may sign the instrument as ma*er, dra#er, acceptor, or indorser and, sub3ect to subsection (d), is obliged to pay the instrument in the capacity in #hich the accommodation party signs. The obligation of an accommodation party may be enforced not#ithstanding any statute of frauds and #hether or not the accommodation party recei es consideration for the accommodation. (c) A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous indorsement or is accompanied by #ords indicating that the signer is acting as surety or guarantor #ith respect to the obligation of another party to the instrument. /+cept as pro ided in )ection 4>58, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice #hen the instrument #as ta*en by that person that the accommodation party signed the instrument for accommodation. (d) If the signature of a party to an instrument is accompanied by #ords indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if (i) e+ecution of 3udgment against the other party has been returned unsatisfied, (ii) the other party is insol ent or in an insol ency proceeding, (iii) the other party cannot be ser ed #ith process, or

(i ) it is other#ise apparent that payment cannot be obtained from the other party. (e) If the signature of a party to an instrument is accompanied by #ords indicating that the party guarantees payment or the signer signs the instrument as an accommodation party in some other manner that does not unambiguously indicate an intention to guarantee collection rather than payment, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument in the same circumstances as the accommodated party #ould be obliged, #ithout prior resort to the accommodated party by the person entitled to enforce the instrument. (f) An accommodation party #ho pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. In proper circumstances, an accommodation party may obtain relief that re1uires the accommodated party to perform its obligations on the instrument. An accommodated party that pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party. 3-5$#. CON.ERSION OF INSTRUMENT. (a) The la# applicable to con ersion of personal property applies to instruments. An instrument is also con erted if it is ta*en by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a ban* ma*es or obtains payment #ith respect to the instrument for a person not entitled to enforce the instrument or recei e payment. An action for con ersion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee #ho did not recei e deli ery of the instrument either directly or through deli ery to an agent or a co-payee. (b) In an action under subsection (a), the measure of liability is presumed to be the amount payable on the instrument, but reco ery may not e+ceed the amount of the plaintiff2s interest in the instrument. (c) A representati e, other than a depositary ban*, #ho has in good faith dealt #ith an instrument or its proceeds on behalf of one #ho #as not the person entitled to enforce the instrument is not liable in con ersion to that person beyond the amount of any proceeds that it has not paid out. PART 7. DISAONOR [Table of Con en !"

 3-7#1. &RESENTMENT. (a) 0Presentment0 means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the dra#ee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a ban*, to the ban*, or (ii) to accept a draft made to the dra#ee. (b) The follo#ing rules are sub3ect to Article !, agreement of the parties, and clearing-house rules and the li*e, %1& P*e!en (en (a1 be (a)e a ,e .la-e of .a1(en of ,e 0n! */(en an) (/! be (a)e a ,e .la-e of .a1(en 0f ,e 0n! */(en 0! .a1able a a ban6 0n ,e Un0 e) S a e!B (a1 be (a)e b1 an1 -o((e*-0all1 *ea!onable (ean!3 0n-l/)0n4 an o*al3 +*0 en3 o* ele- *on0- -o((/n0-a 0onB 0! effe- 02e +,en ,e )e(an) fo* .a1(en o* a--e. an-e 0! *e-e02e) b1 ,e .e*!on o +,o( .*e!en (en 0! (a)eB an) 0! effe- 02e 0f (a)e o an1 one of +o o* (o*e (a6e*!3 a--e. o*!3 )*a+ee!3 o* o ,e* .a1o*!. %$& U.on )e(an) of ,e .e*!on o +,o( .*e!en (en 0! (a)e3 ,e .e*!on (a60n4 .*e!en (en (/! %0& e?,0b0 ,e 0n! */(en 3 %00& 402e *ea!onable 0)en 0f0-a 0on an)3 0f .*e!en (en 0! (a)e on be,alf of ano ,e* .e*!on3 *ea!onable e20)en-e of a/ ,o*0 1 o )o !o3 an) %000& !04n a *e-e0. on ,e 0n! */(en fo* an1 .a1(en (a)e o* !/**en)e* ,e 0n! */(en 0f f/ll .a1(en 0! (a)e. %3& D0 ,o/ )0!,ono*0n4 ,e 0n! */(en 3 ,e .a* 1 o +,o( .*e!en (en 0! (a)e (a1 %0& *e /*n ,e 0n! */(en fo* la-6 of a ne-e!!a*1 0n)o*!e(en 3 o* %00& *ef/!e .a1(en o* a--e. an-e fo* fa0l/*e of ,e .*e!en (en o -o(.l1 +0 , ,e e*(! of ,e 0n! */(en 3 an a4*ee(en of ,e .a* 0e!3 o* o ,e* a..l0-able la+ o* */le. %5& T,e .a* 1 o +,o( .*e!en (en 0! (a)e (a1 *ea .*e!en (en a! o--/**0n4 on ,e ne? b/!0ne!! )a1 af e* ,e )a1 of .*e!en (en 0f ,e .a* 1 o +,o( .*e!en (en 0! (a)e ,a! e! abl0!,e) a -/ -off ,o/* no ea*l0e* ,an $ ..(. fo* ,e *e-e0. an) .*o-e!!0n4 of 0n! */(en ! .*e!en e) fo* .a1(en o* a--e. an-e an) .*e!en (en 0! (a)e af e* ,e -/ -off ,o/*. 3-7#$. DISHONOR. (a) @ishonor of a note is go erned by the follo#ing rules, %1& If ,e no e 0! .a1able on )e(an)3 ,e no e 0! )0!,ono*e) 0f .*e!en (en 0! )/l1 (a)e o ,e (a6e* an) ,e no e 0! no .a0) on ,e )a1 of .*e!en (en . %$& If ,e no e 0! no .a1able on )e(an) an) 0! .a1able a o* ,*o/4, a ban6 o* ,e e*(! of ,e no e *e>/0*e .*e!en (en 3 ,e no e 0! )0!,ono*e) 0f

.*e!en (en 0! )/l1 (a)e an) ,e no e 0! no .a0) on ,e )a1 0 be-o(e! .a1able o* ,e )a1 of .*e!en (en 3 +,0-,e2e* 0! la e*. %3& If ,e no e 0! no .a1able on )e(an) an) .a*a4*a., %$& )oe! no a..l13 ,e no e 0! )0!,ono*e) 0f 0 0! no .a0) on ,e )a1 0 be-o(e! .a1able. (b) @ishonor of an unaccepted draft other than a documentary draft is go erned by the follo#ing rules, %1& If a -,e-6 0! )/l1 .*e!en e) fo* .a1(en o ,e .a1o* ban6 o ,e*+0!e ,an fo* 0((e)0a e .a1(en o2e* ,e -o/n e*3 ,e -,e-6 0! )0!,ono*e) 0f ,e .a1o* ban6 (a6e! 0(el1 *e /*n of ,e -,e-6 o* !en)! 0(el1 no 0-e of )0!,ono* o* non.a1(en /n)e* Se- 0on 5-3#1 o* 5-3#$3 o* be-o(e! a--o/n able fo* ,e a(o/n of ,e -,e-6 /n)e* Se- 0on 5-3#$. %$& If a )*af 0! .a1able on )e(an) an) .a*a4*a., %1& )oe! no a..l13 ,e )*af 0! )0!,ono*e) 0f .*e!en (en fo* .a1(en 0! )/l1 (a)e o ,e )*a+ee an) ,e )*af 0! no .a0) on ,e )a1 of .*e!en (en . %3& If a )*af 0! .a1able on a )a e ! a e) 0n ,e )*af 3 ,e )*af 0! )0!,ono*e) 0f %0& .*e!en (en fo* .a1(en 0! )/l1 (a)e o ,e )*a+ee an) .a1(en 0! no (a)e on ,e )a1 ,e )*af be-o(e! .a1able o* ,e )a1 of .*e!en (en 3 +,0-,e2e* 0! la e*3 o* %00& .*e!en (en fo* a--e. an-e 0! )/l1 (a)e befo*e ,e )a1 ,e )*af be-o(e! .a1able an) ,e )*af 0! no a--e. e) on ,e )a1 of .*e!en (en . %5& If a )*af 0! .a1able on ela.!e of a .e*0o) of 0(e af e* !04, o* a--e. an-e3 ,e )*af 0! )0!,ono*e) 0f .*e!en (en fo* a--e. an-e 0! )/l1 (a)e an) ,e )*af 0! no a--e. e) on ,e )a1 of .*e!en (en . (c) @ishonor of an unaccepted documentary draft occurs according to the rules stated in subsection (b)(7), (4), and (!), e+cept that payment or acceptance may be delayed #ithout dishonor until no later than the close of the third business day of the dra#ee follo#ing the day on #hich payment or acceptance is re1uired by those paragraphs. (d) @ishonor of an accepted draft is go erned by the follo#ing rules, %1& If ,e )*af 0! .a1able on )e(an)3 ,e )*af 0! )0!,ono*e) 0f .*e!en (en fo* .a1(en 0! )/l1 (a)e o ,e a--e. o* an) ,e )*af 0! no .a0) on ,e )a1 of .*e!en (en . %$& If ,e )*af 0! no .a1able on )e(an)3 ,e )*af 0! )0!,ono*e) 0f .*e!en (en fo* .a1(en 0! )/l1 (a)e o ,e a--e. o* an) .a1(en 0! no (a)e on ,e )a1 0 be-o(e! .a1able o* ,e )a1 of .*e!en (en 3 +,0-,e2e* 0! la e*.

(e) In any case in #hich presentment is other#ise re1uired for dishonor under this section and presentment is e+cused under )ection 4-85!, dishonor occurs #ithout presentment if the instrument is not duly accepted or paid. (f) If a draft is dishonored because timely acceptance of the draft #as not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as ne er ha ing been dishonored. 3-7#3. NOTICE OF DISHONOR. (a) The obligation of an indorser stated in )ection 4-!.8(a) and the obligation of a dra#er stated in )ection 4-!.!(d) may not be enforced unless (i) the indorser or dra#er is gi en notice of dishonor of the instrument complying #ith this section or (ii) notice of dishonor is e+cused under )ection 4-85!(b). (b) Notice of dishonor may be gi en by any person6 may be gi en by any commercially reasonable means, including an oral, #ritten, or electronic communication6 and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. %eturn of an instrument gi en to a ban* for collection is sufficient notice of dishonor. (c) )ub3ect to )ection 4-85!(c), #ith respect to an instrument ta*en for collection by a collecting ban*, notice of dishonor must be gi en (i) by the ban* before midnight of the ne+t ban*ing day follo#ing the ban*ing day on #hich the ban* recei es notice of dishonor of the instrument, or (ii) by any other person #ithin 45 days follo#ing the day on #hich the person recei es notice of dishonor. =ith respect to any other instrument, notice of dishonor must be gi en #ithin 45 days follo#ing the day on #hich dishonor occurs. 3-7#5. E7CUSED &RESENTMENT AND NOTICE OF DISHONOR. (a) ?resentment for payment or acceptance of an instrument is e+cused if (i) the person entitled to present the instrument cannot #ith reasonable diligence ma*e presentment, (ii) the ma*er or acceptor has repudiated an obligation to pay the instrument or is dead or in insol ency proceedings, (iii) by the terms of the instrument presentment is not necessary to enforce the obligation of indorsers or the dra#er, (i ) the dra#er or indorser #hose obligation is being enforced has #ai ed presentment or other#ise has no reason to e+pect or right to re1uire that the instrument be paid or accepted, or ( ) the dra#er instructed the dra#ee not to pay or

accept the draft or the dra#ee #as not obligated to the dra#er to pay the draft. (b) Notice of dishonor is e+cused if (i) by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or (ii) the party #hose obligation is being enforced #ai ed notice of dishonor. A #ai er of presentment is also a #ai er of notice of dishonor. (c) @elay in gi ing notice of dishonor is e+cused if the delay #as caused by circumstances beyond the control of the person gi ing the notice and the person gi ing the notice e+ercised reasonable diligence after the cause of the delay ceased to operate. 3-7#7. E.IDENCE OF DISHONOR. (a) The follo#ing are admissible as e idence and create a presumption of dishonor and of any notice of dishonor stated, %1& a )o-/(en *e4/la* 0n fo*( a! .*o20)e) 0n !/b!e- 0on %b& +,0-, ./*.o* ! o be a .*o e! B %$& a ./*.o* e) ! a(. o* +*0 0n4 of ,e )*a+ee3 .a1o* ban63 o* .*e!en 0n4 ban6 on o* a--o(.an10n4 ,e 0n! */(en ! a 0n4 ,a a--e. an-e o* .a1(en ,a! been *ef/!e) /nle!! *ea!on! fo* ,e *ef/!al a*e ! a e) an) ,e *ea!on! a*e no -on!0! en +0 , )0!,ono*B %3& a boo6 o* *e-o*) of ,e )*a+ee3 .a1o* ban63 o* -olle- 0n4 ban63 6e. 0n ,e /!/al -o/*!e of b/!0ne!! +,0-, !,o+! )0!,ono*3 e2en 0f ,e*e 0! no e20)en-e of +,o (a)e ,e en *1. (b) A protest is a certificate of dishonor made by a United )tates consul or ice consul, or a notary public or other person authori9ed to administer oaths by the la# of the place #here dishonor occurs. It may be made upon information satisfactory to that person. The protest must identify the instrument and certify either that presentment has been made or, if not made, the reason #hy it #as not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been gi en to some or all parties. PART 8. DISCAARGE AND PAEMENT [Table of Con en !" 3-8#1. DISCHAR+E AND EFFECT OF DISCHAR+E. (a) The obligation of a party to pay the instrument is discharged as stated in this Article or by an act or agreement #ith the party #hich

#ould discharge an obligation to pay money under a simple contract. (b) @ischarge of the obligation of a party is not effecti e against a person ac1uiring rights of a holder in due course of the instrument #ithout notice of the discharge. 3-8#$. &A,MENT. (a) )ub3ect to subsection (b), an instrument is paid to the e+tent payment is made (i) by or on behalf of a party obliged to pay the instrument, and (ii) to a person entitled to enforce the instrument. To the e+tent of the payment, the obligation of the party obliged to pay the instrument is discharged e en though payment is made #ith *no#ledge of a claim to the instrument under )ection 4-45> by another person. (b) )ub3ect to subsection (e) a note is paid to the e+tent payment is made by or on behalf of a party obliged to pay the note to a person that formerly #as entitled to enforce the note only if at the time of the payment the party obliged to pay has not recei ed ade1uate notification that the note has been transferred and that payment is to be made to the transferee. A notification is ade1uate only if it is signed by the transferor or the transferee6 reasonably identifies the transferred note6 and pro ides an address at #hich payments subse1uently can be made. Upon re1uest, a transferee shall seasonably furnish reasonable proof that the note has been transferred. Unless the transferee complies #ith the re1uest, a payment to the person that formerly #as entitled to enforce the note is effecti e for purposes of subsection (c) e en if the party obliged to pay the note has recei ed a notification under this paragraph. (c) )ub3ect to subsection (e), to the e+tent of a payment under subsections (a) and (b), the obligation of the party obliged to pay the instrument is discharged e en though payment is made #ith *no#ledge of a claim to the instrument under )ection 4-45> by another person. (d) )ub3ect to subsection (e), a transferee, or any party that has ac1uired rights in the instrument directly or indirectly from a transferee, including any such party that has rights as a holder in due course, is deemed to ha e notice of any payment that is made under subsection (b) after the date that the note is transferred to the transferee but before the party obliged to pay the note recei es ade1uate notification of the transfer.

(e) The obligation of a party to pay the instrument is not discharged under subsections (a) through (d) if, %1& a -la0( o ,e 0n! */(en /n)e* Se- 0on 3-3#8 0! enfo*-eable a4a0n! ,e .a* 1 *e-e020n4 .a1(en an) %0& .a1(en 0! (a)e +0 , 6no+le)4e b1 ,e .a1o* ,a .a1(en 0! .*o,0b0 e) b1 0n;/n- 0on o* !0(0la* .*o-e!! of a -o/* of -o(.e en ;/*0!)0- 0on3 o* %00& 0n ,e -a!e of an 0n! */(en o ,e* ,an a -a!,0e*@! -,e-63 elle*@! -,e-63 o* -e* 0f0e) -,e-63 ,e .a* 1 (a60n4 .a1(en a--e. e)3 f*o( ,e .e*!on ,a20n4 a -la0( o ,e 0n! */(en 3 0n)e(n0 1 a4a0n! lo!! *e!/l 0n4 f*o( *ef/!al o .a1 ,e .e*!on en 0 le) o enfo*-e ,e 0n! */(en B o* %$& ,e .e*!on (a60n4 .a1(en 6no+! ,a ,e 0n! */(en 0! a ! olen 0n! */(en an) .a1! a .e*!on 0 6no+! 0! 0n +*on4f/l .o!!e!!0on of ,e 0n! */(en . (f) As used in this section, 0signed,0 #ith respect to a record that is not a #riting, includes the attachment to or logical association #ith the record of an electronic symbol, sound, or process to or #ith the record #ith the present intent to adopt or accept the record. 3-8#3. TENDER OF &A,MENT. (a) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is go erned by principles of la# applicable to tender of payment under a simple contract. (b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the e+tent of the amount of the tender, of the obligation of an indorser or accommodation party ha ing a right of recourse #ith respect to the obligation to #hich the tender relates. (c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is re1uired #ith respect to an instrument and the obligor is able and ready to pay on the due date at e ery place of payment stated in the instrument, the obligor is deemed to ha e made tender of payment on the due date to the person entitled to enforce the instrument. 3-8#5. DISCHAR+E B, CANCELLATION OR RENUNCIATION. (a) A person entitled to enforce an instrument, #ith or #ithout consideration, may discharge the obligation of a party to pay the

instrument (i) by an intentional oluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or stri*ing out of the party2s signature, or the addition of #ords to the instrument indicating discharge, or (ii) by agreeing not to sue or other#ise renouncing rights against the party by a signed record. (b) Cancellation or stri*ing out of an indorsement pursuant to subsection (a) does not affect the status and rights of a party deri ed from the indorsement. (c) As used in this section, 0signed,0 #ith respect to a record that is not a #riting, includes the attachment to or logical association #ith the record of an electronic symbol, sound, or process to or #ith the record #ith the present intent to adopt or accept the record. 3-8#7. DISCHAR+E OF SECONDAR, OBLI+ORS. (a) If a person entitled to enforce an instrument releases the obligation of a principal obligor in #hole or in part, and another party to the instrument is a secondary obligor #ith respect to the obligation of that principal obligor, the follo#ing rules apply, %1& An1 obl04a 0on! of ,e .*0n-0.al obl04o* o ,e !e-on)a*1 obl04o* +0 , *e!.e- o an1 .*e20o/! .a1(en b1 ,e !e-on)a*1 obl04o* a*e no affe- e). Unle!! ,e e*(! of ,e *elea!e .*e!e*2e ,e !e-on)a*1 obl04o*@! *e-o/*!e3 ,e .*0n-0.al obl04o* 0! )0!-,a*4e)3 o ,e e? en of ,e *elea!e3 f*o( an1 o ,e* )/ 0e! o ,e !e-on)a*1 obl04o* /n)e* ,0! a* 0-le. %$& Unle!! ,e e*(! of ,e *elea!e .*o20)e ,a ,e .e*!on en 0 le) o enfo*-e ,e 0n! */(en *e a0n! ,e *04, o enfo*-e ,e 0n! */(en a4a0n! ,e !e-on)a*1 obl04o*3 ,e !e-on)a*1 obl04o* 0! )0!-,a*4e) o ,e !a(e e? en a! ,e .*0n-0.al obl04o* f*o( an1 /n.e*fo*(e) .o* 0on of 0 ! obl04a 0on on ,e 0n! */(en . If ,e 0n! */(en 0! a -,e-6 an) ,e obl04a 0on of ,e !e-on)a*1 obl04o* 0! ba!e) on an 0n)o*!e(en of ,e -,e-63 ,e !e-on)a*1 obl04o* 0! )0!-,a*4e) +0 ,o/ *e4a*) o ,e lan4/a4e o* -0*-/(! an-e! of ,e )0!-,a*4e o* o ,e* *elea!e. %3& If ,e !e-on)a*1 obl04o* 0! no )0!-,a*4e) /n)e* .a*a4*a., %$&3 ,e !e-on)a*1 obl04o* 0! )0!-,a*4e) o ,e e? en of ,e 2al/e of ,e -on!0)e*a 0on fo* ,e *elea!e3 an) o ,e e? en ,a ,e *elea!e +o/l) o ,e*+0!e -a/!e ,e !e-on)a*1 obl04o* a lo!!. (b) If a person entitled to enforce an instrument grants a principal obligor an e+tension of the time at #hich one or more payments are due on the instrument and another party to the instrument is a secondary obligor #ith respect to the obligation of that principal obligor, the follo#ing rules apply,

%1& An1 obl04a 0on! of ,e .*0n-0.al obl04o* o ,e !e-on)a*1 obl04o* +0 , *e!.e- o an1 .*e20o/! .a1(en b1 ,e !e-on)a*1 obl04o* a*e no affe- e). Unle!! ,e e*(! of ,e e? en!0on .*e!e*2e ,e !e-on)a*1 obl04o*@! *e-o/*!e3 ,e e? en!0on -o**e!.on)0n4l1 e? en)! ,e 0(e fo* .e*fo*(an-e of an1 o ,e* )/ 0e! o+e) o ,e !e-on)a*1 obl04o* b1 ,e .*0n-0.al obl04o* /n)e* ,0! a* 0-le. %$& T,e !e-on)a*1 obl04o* 0! )0!-,a*4e) o ,e e? en ,a ,e e? en!0on +o/l) o ,e*+0!e -a/!e ,e !e-on)a*1 obl04o* a lo!!. %3& To ,e e? en ,a ,e !e-on)a*1 obl04o* 0! no )0!-,a*4e) /n)e* .a*a4*a., %$&3 ,e !e-on)a*1 obl04o* (a1 .e*fo*( 0 ! obl04a 0on! o a .e*!on en 0 le) o enfo*-e ,e 0n! */(en a! 0f ,e 0(e fo* .a1(en ,a) no been e? en)e) o*3 /nle!! ,e e*(! of ,e e? en!0on .*o20)e ,a ,e .e*!on en 0 le) o enfo*-e ,e 0n! */(en *e a0n! ,e *04, o enfo*-e ,e 0n! */(en a4a0n! ,e !e-on)a*1 obl04o* a! 0f ,e 0(e fo* .a1(en ,a) no been e? en)e)3 *ea ,e 0(e fo* .e*fo*(an-e of 0 ! obl04a 0on! a! ,a20n4 been e? en)e) -o**e!.on)0n4l1. (c) If a person entitled to enforce an instrument agrees, #ith or #ithout consideration, to a modification of the obligation of a principal obligor other than a complete or partial release or an e+tension of the due date and another party to the instrument is a secondary obligor #ith respect to the obligation of that principal obligor, the follo#ing rules apply, %1& An1 obl04a 0on! of ,e .*0n-0.al obl04o* o ,e !e-on)a*1 obl04o* +0 , *e!.e- o an1 .*e20o/! .a1(en b1 ,e !e-on)a*1 obl04o* a*e no affe- e). T,e (o)0f0-a 0on -o**e!.on)0n4l1 (o)0f0e! an1 o ,e* )/ 0e! o+e) o ,e !e-on)a*1 obl04o* b1 ,e .*0n-0.al obl04o* /n)e* ,0! a* 0-le. %$& T,e !e-on)a*1 obl04o* 0! )0!-,a*4e) f*o( an1 /n.e*fo*(e) .o* 0on of 0 ! obl04a 0on o ,e e? en ,a ,e (o)0f0-a 0on +o/l) o ,e*+0!e -a/!e ,e !e-on)a*1 obl04o* a lo!!. %3& To ,e e? en ,a ,e !e-on)a*1 obl04o* 0! no )0!-,a*4e) /n)e* .a*a4*a., %$&3 ,e !e-on)a*1 obl04o* (a1 !a 0!f1 0 ! obl04a 0on on ,e 0n! */(en a! 0f ,e (o)0f0-a 0on ,a) no o--/**e)3 o* *ea 0 ! obl04a 0on on ,e 0n! */(en a! ,a20n4 been (o)0f0e) -o**e!.on)0n4l1. (d) If the obligation of a principal obligor is secured by an interest in collateral, another party to the instrument is a secondary obligor #ith respect to that obligation, and a person entitled to enforce the instrument impairs the alue of the interest in collateral, the obligation of the secondary obligor is discharged to the e+tent of the impairment. The alue of an interest in collateral is impaired to the e+tent the alue of the interest is reduced to an amount less than the amount of the recourse of the secondary obligor, or the reduction in alue of the interest causes an increase in the amount

by #hich the amount of the recourse e+ceeds the alue of the interest. (or purposes of this subsection, impairing the alue of an interest in collateral includes failure to obtain or maintain perfection or recordation of the interest in collateral, release of collateral #ithout substitution of collateral of e1ual alue or e1ui alent reduction of the underlying obligation, failure to perform a duty to preser e the alue of collateral o#ed, under Article $ or other la#, to a debtor or other person secondarily liable, and failure to comply #ith applicable la# in disposing of or other#ise enforcing the interest in collateral. (e) A secondary obligor is not discharged under subsection (a)(4), (b), (c), or (d) unless the person entitled to enforce the instrument *no#s that the person is a secondary obligor or has notice under )ection 4-!.$(c) that the instrument #as signed for accommodation. (f) A secondary obligor is not discharged under this section if the secondary obligor consents to the e ent or conduct that is the basis of the discharge, or the instrument or a separate agreement of the party pro ides for #ai er of discharge under this section specifically or by general language indicating that parties #ai e defenses based on suretyship or impairment of collateral. Unless the circumstances indicate other#ise, consent by the principal obligor to an act that #ould lead to a discharge under this section constitutes consent to that act by the secondary obligor if the secondary obligor controls the principal obligor or deals #ith the person entitled to enforce the instrument on behalf of the principal obligor. (g) A release or e+tension preser es a secondary obligor2s recourse if the terms of the release or e+tension pro ide that the person entitled to enforce the instrument retains the right to enforce the instrument against the secondary obligor6 and the recourse of the secondary obligor continues as though the release or e+tension had not been granted. (h) /+cept as other#ise pro ided in subsection (i), a secondary obligor asserting discharge under this section has the burden of persuasion both #ith respect to the occurrence of the acts alleged to harm the secondary obligor and loss or pre3udice caused by those acts. (i) If the secondary obligor demonstrates pre3udice caused by an impairment of its recourse, and the circumstances of the case indicate that the amount of loss is not reasonably susceptible of calculation or re1uires proof of facts that are not ascertainable, it is presumed that the act impairing recourse caused a loss or impairment e1ual to the liability of the secondary obligor on the

instrument. In that e ent, the burden of persuasion as to any lesser amount of the loss is on the person entitled to enforce the instrument.