Cited. 240 C.
10.
Subsec. (b):
Cited. 240 C. 10.
Sec. 42a-3-204. Endorsement. (a)
"Endorsement" means a signature, other than that of a signer as maker, drawer,
or acceptor, that alone or accompanied by other words is made on an instrument
for the purpose of (i) negotiating the instrument, (ii) restricting payment of
the instrument, or (iii) incurring endorser's liability on the instrument, but
regardless of the intent of the signer, a signature and its accompanying words
is an endorsement unless the accompanying words, terms of the instrument, place
of the signature, or other circumstances unambiguously indicate that the
signature was made for a purpose other than endorsement. For the purpose of
determining whether a signature is made on an instrument, a paper affixed to the
instrument is a part of the
instrument.
(b) "Endorser" means
a person who makes an endorsement.
(c) For the purpose of determining
whether the transferee of an instrument is a holder, an endorsement that
transfers a security interest in the instrument is effective as an unqualified
endorsement of the instrument.
(d) If an instrument is payable to a
holder under a name that is not the name of the holder, endorsement may be made
by the holder in the name stated in the instrument or in the holder's name or
both, but signature in both names may be required by a person paying or taking
the instrument for value or collection.
(1959, P.A. 133,
S. 3-204; P.A. 91-304, S. 23.)
History: P.A.
91-304 entirely replaced former provisions re special and blank endorsements
with provisions re endorsement.
See Sec.
42a-3-205 for successor provisions to Sec. 42a-3-204, revised to 1991, re
special and blank endorsements.
Annotations to
former statutes:
1958 Rev., S. 39-34: Inference of
endorsement drawn from evidence that note was left with holder and credited on
account. 76 C. 126. Little practical distinction between special and blank
endorsement. 81 C. 667.
1958 Rev., S. 39-36: Holder sustained
in writing over blank endorsement parol agreement of guaranty. 6 C. 315.
1958 Rev., S. 39-192: Former law
concerning blank endorsements of nonnegotiable note. 60 C. 416; 66 C. 462; 74 C.
308.
Sec. 42a-3-205. Special endorsement. Blank endorsement. Anomalous
endorsement. (a) If an endorsement is made by the holder
of an instrument, whether payable to an identified person or payable to bearer,
and the endorsement identifies a person to whom it makes the instrument payable,
it is a "special endorsement". When specially endorsed, an instrument becomes
payable to the identified person and may be negotiated only by the endorsement
of that person. The principles stated in section 42a-3-110 apply to special
endorsements.
(b) If an
endorsement is made by the holder of an instrument and is not a special
endorsement, it is a "blank endorsement". When endorsed in blank, an instrument
becomes payable to bearer and may be negotiated by transfer of possession alone
until specially endorsed.
(c) The holder may convert a blank
endorsement that consists only of a signature into a special endorsement by
writing, above the signature of the endorser, words identifying the person to
whom the instrument is made payable.
(d) "Anomalous endorsement" means an
endorsement made by a person who is not the holder of the instrument. An
anomalous endorsement does not affect the manner in which the instrument may be
negotiated.
(1959, P.A. 133,
S. 3-205; P.A. 91-304, S. 24.)
History: P.A.
91-304 entirely replaced former provisions re restrictive endorsements with
provisions re special, blank and anomalous endorsements, a restatement of Sec.
42a-3-204, revised to 1991.
See Sec.
42a-3-206 for successor provisions to Sec. 42a-3-205, revised to 1991, re
restrictive endorsements.
Annotation to
former statute (1958 Rev., S. 39-37):
The fact that an endorsement is
restrictive does not necessarily prevent the endorsee from being a holder in due
course. 147 C. 215.
Annotation to present
section:
Subsec. (d):
Any endorsement by a nonholder is an
anomalous endorsement and does not affect negotiability of the instrument. 68 CA
716.
Sec. 42a-3-206. Restrictive endorsement.
(a) An endorsement limiting payment to a particular person or otherwise
prohibiting further transfer or negotiation of the instrument is not effective
to prevent further transfer or negotiation of the
instrument.
(b) An endorsement
stating a condition to the right of the endorsee to receive payment does not
affect the right of the endorsee to enforce the instrument. A person paying the
instrument or taking it for value or collection may disregard the condition, and
the rights and liabilities of that person are not affected by whether the
condition has been fulfilled.
(c) If an instrument bears an
endorsement (i) described in section 42a-4-201(b), or (ii) in blank or to a
particular bank using the words "for deposit", "for collection", or other words
indicating a purpose of having the instrument collected by a bank for the
endorser or for a particular account, the following rules apply:
(1) A person other than a bank, who
purchases the instrument when so endorsed converts the instrument unless the
amount paid for the instrument is received by the endorser or applied
consistently with the endorsement.
(2) A depositary bank that purchases
the instrument or takes it for collection when so endorsed converts the
instrument unless the amount paid by the bank with respect to the instrument is
received by the endorser or applied consistently with the endorsement.
(3) A payor bank that is also the
depositary bank or that takes the instrument for immediate payment over the
counter from a person other than a collecting bank converts the instrument
unless the proceeds of the instrument are received by the endorser or applied
consistently with the endorsement.
(4) Except as otherwise provided in
paragraph (3), a payor bank or intermediary bank may disregard the endorsement
and is not liable if the proceeds of the instrument are not received by the
endorser or applied consistently with the endorsement.
(d) Except for an endorsement covered
by subsection (c), if an instrument bears an endorsement using words to the
effect that payment is to be made to the endorsee as agent, trustee, or other
fiduciary for the benefit of the endorser or another person, the following rules
apply:
(1) Unless there is notice of breach
of fiduciary duty as provided in section 42a-3-307, a person who purchases the
instrument from the endorsee or takes the instrument from the endorsee for
collection or payment may pay the proceeds of payment or the value given for the
instrument to the endorsee without regard to whether the endorsee violates a
fiduciary duty to the endorser.
(2) A subsequent transferee of the
instrument or person who pays the instrument is neither given notice nor
otherwise affected by the restriction in the endorsement unless the transferee
or payor knows that the fiduciary dealt with the instrument or its proceeds in
breach of fiduciary duty.
(e) The presence of an instrument of
an endorsement to which this section applies does not prevent a purchaser of the
instrument from becoming a holder in due course of the instrument unless the
purchaser is a converter under subsection (c) or has notice or knowledge 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 would violate an endorsement to which this section applies and the
payment is not permitted by this section.
(1959, P.A. 133,
S. 3-206; P.A. 91-304, S. 25.)
History: P.A.
91-304 substantially revised section.
Annotations to
former statute (1958 Rev., S. 39-38):
Effect of endorsement "for collection
and remittance". 76 C. 126; 87 C. 248; 88 C. 202.
Annotation to present
section:
Former Subsec. (4):
Cited. 185 C. 463, 474.
Sec. 42a-3-207. Reacquisition.
Reacquisition of an instrument occurs if it is transferred to a former holder,
by negotiation or otherwise. A former holder who reacquires the instrument may
cancel endorsements made after the reacquirer first became a holder of the
instrument. If the cancellation causes the instrument to be payable to the
reacquirer or to bearer, the reacquirer may negotiate the instrument. An
endorser whose endorsement is cancelled is discharged, and the discharge is
effective against any subsequent holder.
(1959, P.A. 133, S. 3-207;
P.A. 91-304, S. 26.)
History: P.A.
91-304 entirely replaced former provisions re the effectiveness of a negotiation
subject to rescission with provisions re reacquisition of an instrument, a
restatement of Sec. 42a-3-208, revised to 1991.
See Sec.
42a-3-202 for successor provisions to Sec. 42a-3-207, revised to 1991, re
negotiation subject to rescission.
Former Subsec.
(2):
Cited. 208 C. 248, 251.
Sec. 42a-3-208. Reacquisition. Section
42a-3-208 is repealed.
(1959, P.A. 133, S. 3-208;
P.A. 91-304, S. 112.)
See Sec.
42a-3-207 for successor provisions re reacquisition.
PART 3
ENFORCEMENT OF
INSTRUMENTS
Sec. 42a-3-301. Person entitled to enforce instrument. "Person entitled to enforce" an instrument means (i) the holder
of the instrument, (ii) a nonholder in possession of the instrument who has the
rights of a holder, or (iii) a person not in possession of the instrument who is
entitled to enforce the instrument pursuant to section 42a-3-309 or
42a-3-418(d). A person may be a person entitled to enforce the instrument even
though the person is not the owner of the instrument or is in wrongful
possession of the instrument.
(1959, P.A. 133, S. 3-301;
P.A. 91-304, S. 27.)
History: P.A.
91-304 entirely replaced former provisions re rights of a holder to transfer,
negotiate, enforce or discharge an instrument with provisions defining a person
entitled to enforce an instrument.
Annotations to
former statute (1958 Rev., S. 39-52):
Possession of note sufficient to give
prima facie right to sue thereon. 76 C. 132. Note given with conditional bill of
sale may be sued on and right to retake property disregarded. 98 C. 737.
Allegation that plaintiff was "holder" sufficient to establish prima facie right
to sue. 111 C. 630.
Annotations to present
section:
Cited. 238 C. 745.
Cited. 4 CA 376, 381. Cited. 35 CA
326, 331.
Under former negotiable instruments
act, section 39-52, where a note sued on is in the possession of the plaintiff,
he must produce it, as it is the best evidence. 23 CS 346.
Sec. 42a-3-302. Holder in due course. (a)
Subject to subsection (c) and section 42a-3-106(d), "holder in due course" means
the holder of an instrument
if:
(1) The instrument when
issued or negotiated to the holder does not bear such apparent evidence of
forgery or alteration or is not otherwise so irregular or incomplete as to call
into question its authenticity; and
(2) The holder took the instrument
(i) for value, (ii) in good faith, (iii) without notice that the instrument is
overdue or has been dishonored or that there is an uncured default with respect
to payment of another instrument issued as part of the same series, (iv) without
notice that the instrument contains an unauthorized signature or has been
altered, (v) without notice of any claim to the instrument described in section
42a-3-306, and (vi) without notice that any party has a defense or claim in
recoupment described in section 42a-3-305(a).
(b) Notice of discharge of a party,
other than discharge in an insolvency proceeding, is not notice of a defense
under subsection (a), but discharge is effective against a person who became a
holder in due course with notice of the discharge. Public filing or recording of
a document does not of itself constitute notice of a defense, claim in
recoupment or claim to the instrument.
(c) Except to the extent a transferor
or predecessor in interest has rights as a holder in due course, a person does
not acquire rights of a holder in due course of an instrument taken (i) by legal
process or by purchase in an execution, bankruptcy, or creditor's sale or
similar proceeding, (ii) by purchase as part of a bulk transaction not in
ordinary course of business of the transferor, or (iii) as the successor in
interest to an estate or other organization.
(d) If, under section
42a-3-303(a)(1), 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 equal to the value of the partial performance
divided by the value 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 who 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
which, at the time of enforcement of the instrument, does not exceed the amount
of the unpaid obligation secured.
(f) To be effective, notice must be
received at a time and in a manner that gives a reasonable opportunity to act on
it.
(g) This section is subject to any
law limiting status as a holder in due course in particular classes of
transactions.
(1959, P.A. 133,
S. 3-302; P.A. 91-304, S. 28.)
History: P.A.
91-304 substantially revised section.
Annotations to
former statutes:
(1958 Rev., S. 39-1): Bank is
"holder" of note which has been endorsed by it for collection and returned
unpaid. 76 C. 126. Transferee for value not technically a holder where payee did
not endorse. 124 C. 181.
(1958 Rev., S. 39-53): One who takes
note as collateral security is holder in due course; negligence of maker in
again putting notes in circulation after they are once paid. 72 C. 576. Fraud of
defendant, not participated in by one who takes note as collateral security, no
defense to suit by him. 74 C. 200; 77 C. 636. Whether one who takes notes as
collateral security is bona fide holder is question of fact. 78 C. 211; 91 C.
260. Valuable consideration necessary at common law. 82 C. 333. One who takes
note of third person in payment of stock under agreement to collect it and remit
any balance is a holder in due course. Id., 585. Note taken after maturity
cannot make holder one in due course; 88 C. 720; 105 C. 79; even though note has
been fraudulently altered as to time of payment. 89 C. 592. Knowledge of holder
that endorsement was for accommodation does not prevent him from being a holder
in due course nor impair his right to recover against such accommodation
endorser. 92 C. 707. And likewise where note itself is given for accommodation.
97 C. 711. Purchaser of corporate bonds from pledgee before maturity is holder
in due course though he paid less than par. Id., 592. Cited. 111 C. 630; 118 C.
116; 139 C. 539. Doctrine of notice as it affects transactions generally does
not apply to negotiable instruments. 119 C. 371. Bank which gives depositor
draft for amount of account, and later cashes it after account has been
garnisheed, does not become holder in due course. 122 C. 171. Payee who repays
collecting bank after dishonor, not a holder in due course. 131 C. 411. See note
to section 42a-3-408. The fact that an endorsement is restrictive does not
necessarily prevent the endorsee from being a holder in due course. 147 C.
215.
Subsec. (3):
Where real estate developer made
false statements and purchasers in reliance gave negotiable notes, assignee with
knowledge of this fraud held not a holder in due course. 1 CS 176. Where
endorsee of an accommodation promissory note discounted it for payee contrary to
provisions of a collateral agreement of which he had knowledge, held not a
holder in due course. 16 CS 293. Test is not whether the plaintiff was negligent
in acquiring the paper, but whether he acted in good faith. It is not the
failure to inquire but the dishonest purpose which establishes bad faith. 18 CS
16. Consideration paid for a check is a question of good faith and inadequacy of
consideration coupled with suspicious circumstances justifies a finding of bad
faith. 19 CS 407.
Annotations to present
section:
Cited. 182 C. 437, 442. Cited. 187 C.
637, 641. Cited. 207 C. 483, 487, 488. Cited. 240 C. 10.
Cited. 4 CA 102, 105. Trial court
correctly concluded that plaintiff was a holder in due course. 49 CA 563. Note
taken for value where exact amount of note is unknown because purchased in pool
of loans. 51 CA 392.
Former Subsec. (1):
Subdiv. (b): Standard of good faith
is a subjective standard. Evidence admissible to test holder's subjective good
faith discussed. 187 C. 637, 642. Cited. 242 C. 17.
Bank which provisionally credits
deposit against overdrawn account gives "value"; deposit as "value" discussed.
33 CS 641.
Plaintiff bank, payee of note
obtained from defendant consumers in freezer-food sale transaction, was holder
in due course and four cases of prior complaints to bank by others did not
change this rule where there was no complaint by this defendant at or before
time bank took note. 4 Conn. Cir. Ct. 620. Statute does not require endorsement
to be holder in due course but does require one to be "holder". 6 Conn. Cir. Ct.
546.
Former Subsec. (2):
Cited. 242 C. 17.
Former Subsec. (3):
Subdiv. (c) cited. 207 C. 483, 488,
489, 491.
Subsec. (a):
Subdiv. (2)(iii) cited. 231 C. 441,
450.
Sec. 42a-3-303. Value and consideration.
(a) An instrument is issued or transferred for value
if:
(1) The instrument is issued
or transferred for a promise of performance, to the extent the promise has been
performed;
(2) The transferee acquires a
security interest or other lien in the instrument other than a lien obtained by
judicial proceeding;
(3) The instrument is issued or
transferred as payment of, or as security for, an antecedent claim against any
person, whether or not the claim is due;
(4) The instrument is issued or
transferred in exchange for a negotiable instrument; or
(5) The instrument is issued or
transferred in exchange for the incurring of an irrevocable obligation to a
third party by the person taking the instrument.
(b) "Consideration" means any
consideration sufficient to support a simple contract. The drawer or maker of an
instrument has a defense if the instrument is issued without consideration. If
an instrument is issued for a promise of performance, the issuer has a defense
to the extent performance of the promise is due and the promise has not been
performed. If an instrument is issued for value as stated in subsection (a), the
instrument is also issued for consideration.
(1959, P.A. 133,
S. 3-303; P.A. 91-304, S. 29.)
History: P.A.
91-304 substantially revised provisions re when an instrument is issued or
transferred for value and added Subsec. (b) re consideration.
Annotations to
former statutes:
(1958 Rev., S. 39-26): Compromise of
lawsuit is valid consideration. 70 C. 634; 76 C. 126. So is antecedent debt,
whether note taken in payment of or as security for it. 72 C. 581; 94 C. 607.
Services incident to organization of a corporation will sustain note of
corporation. 73 C. 626. Forbearance on request of wife to sue husband good
consideration for her note. 75 C. 91; 93 C. 359. Sale made in another state,
which is valid there but would not be here, is good consideration. 80 C. 509.
Transfer of note of third person in payment for stock, under agreement that
seller shall collect it and remit any balance, is a good consideration. 82 C.
585. Discharge of unliquidated liability good consideration. Id., 600. But
surrender of forged note is not a good consideration. 89 C. 592. Cited. 118 C.
118.
(1958 Rev., S. 39-27): Bona fide
holder for value without notice and in due course may enforce note against maker
without regard to defects of title of prior parties. 118 C. 117.
(1958 Rev., S. 39-28): Endorsement of
note of third party as collateral security gives endorsee a lien on the note. 77
C. 634.
Annotations to present
section:
Cited. 242 C. 17.
Subdiv. (b):
Bank which provisionally credits
deposit against overdrawn account gives "value"; deposit as "value" discussed.
33 CS 641.
Former Subdiv. (c):
Cited. 187 C. 637, 641.
Sec. 42a-3-304. Overdue instrument. (a) An
instrument payable on demand becomes overdue at the earliest of the following
times:
(1) On the day after the
day demand for payment is duly made;
(2) If the instrument is a check,
ninety days after its date; or
(3) If the instrument is not a check,
when the instrument has been outstanding for a period of time after its date
which is unreasonably long under the circumstances of the particular case in
light of the nature of the instrument and usage of the trade.
(b) With respect to an instrument
payable at a definite time the following rules apply:
(1) If the principal is payable in
installments and a due date has not been accelerated, the instrument becomes
overdue upon default under the instrument for nonpayment of an installment, and
the instrument remains overdue until the default is cured.
(2) If the principal is not payable
in installments and the due date has not been accelerated, the instrument
becomes overdue on the day after the due date.
(3) If a due date with respect to
principal has been accelerated, the instrument becomes overdue on the day after
the accelerated due date.
(c) Unless the due date of principal
has been accelerated, an instrument does not become overdue if there is default
in payment of interest but no default in payment of principal.
(1959, P.A. 133,
S. 3-304; P.A. 91-304, S. 30.)
History: P.A.
91-304 substantially revised provisions of former Subsecs. (3) and (4)(f) re
overdue instruments and deleted remainder of former provisions re when the
purchaser has notice of a claim or defense.
See Sec.
42a-3-302(a)(1), 42a-3-302(a)(2)(iii), 42a-3-302(b) and 42a-3-307 for successor
provisions to Sec. 42a-3-304, revised to 1991, re when a purchaser has notice of
a claim or defense.
Annotations to
former statutes:
1958 Rev., S. 39-46: This presumption
(re date of negotiation) is rebuttable. 105 C. 78.
1958 Rev., S. 39-56: Maker of note is
not affected by usurious agreement between payee and pledgee. 91 C. 560. Defense
of usury is personal to debtor and to those in privity with him. Id.,
560.
Cited. 16 CS 293; 18 CS 15.
1958 Rev., S. 39-57: Bad faith must
be more than negligence. 42 C. 146; 54 C. 383; 106 C. 150. No presumption that
endorsee knew of fraud. 71 C. 61; id., 668. Knowledge of officer of bank taking
note as to fraud not imputable to it, when. 72 C. 666; 79 C. 348. Facts
consistent with valid title in endorser not enough to put endorsee on notice. 72
C. 576. If endorsee has knowledge of such facts that his action amounts to bad
faith, he cannot recover. 78 C. 184. Knowledge is question of fact. 91 C. 263.
Inadequacy of consideration as bearing on question of bad faith. 106 C. 150.
Cited. 118 C. 117. No duty on purchaser of note to inquire into purpose for
which it was given, or to maker's or endorser's responsibility, or existence of
possible defenses. 119 C. 371. Bank, which gives depositor draft for amount of
account and later cashes it after account has been garnisheed, is chargeable
with knowledge of defect. 122 C. 171.
Cited. 16 CS 294; 18 CS 15. Notice
does not have to be express from the face of the instrument. 19 CS 124.
Annotations to present
section:
Cited. 182 C. 437, 442.
Where plaintiff bank had no notice of
complaint of defendant as to performance by freezer-food company of underlying
contract at time it bought the note, this defense could not be raised against
plaintiff, a payee holder in due course. 4 Conn. Cir. Ct. 620. Cited. 5 Conn.
Cir. Ct. 413.
Former Subsec. (4):
Former Subdiv. (e) cited. 185 C. 463,
472.
Subsec. (b):
Subdiv. (2) cited. 231 C. 441,
450.
Sec. 42a-3-305. Defenses and claims in recoupment. (a) Except as stated in subsection (b), the right to enforce the
obligation of a party to pay an instrument is subject to the
following:
(1) A defense of the
obligor based on (i) infancy of the obligor to the extent it is a defense to a
simple contract, (ii) duress, lack of legal capacity, or illegality of the
transaction which, under other law, nullifies the obligation of the obligor,
(iii) fraud that induced the obligor to sign the instrument with neither
knowledge nor reasonable opportunity to learn of its character or its essential
terms, or (iv) discharge of the obligor in insolvency proceedings;
(2) A defense of the obligor stated
in another section of this article or a defense of the obligor that would be
available if the person entitled to enforce the instrument were enforcing a
right to payment under a simple contract; and
(3) A claim in recoupment of the
obligor against the original payee of the instrument if the claim arose from the
transaction that gave rise to the instrument; but the claim of the obligor may
be asserted against a transferee of the instrument only to reduce the amount
owing on the instrument at the time the action is brought.
(b) The right of a holder in due
course to enforce the obligation of a party to pay the instrument is subject to
defenses of the obligor stated in subsection (a)(1), but is not subject to
defenses of the obligor stated in subsection (a)(2) or claims in recoupment
stated in subsection (a)(3) against a person other than the holder.
(c) Except 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, as provided in
section 42a-3-306, of another person, but the other person's claim to the
instrument may be asserted by the obligor if the other person is joined 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
seeking enforcement of the instrument does not have rights of a holder in due
course and the obligor proves 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, except the
defenses of discharge in insolvency proceedings, infancy and lack of legal
capacity.
(1959, P.A. 133,
S. 3-305; P.A. 91-304, S. 31; May Sp. Sess. P.A. 92-11, S. 16, 70.)
History: P.A.
91-304 substantially revised section; May Sp. Sess. P.A. 92-11 made a technical
change in Subsec. (c).
See Sec.
42a-3-306 for successor provisions to Sec. 42a-3-305(1), revised to 1991, re
claims to an instrument.
See Sec. 42a-3-601(b) for successor
provisions to Sec. 42a-3-305(2)(e), revised to 1991, re effectiveness of
discharge against a holder in due course.
See Sec. 52-572g re defenses against
holder in due course of instrument in consumer goods credit transaction.
Annotations to
former statute (1958 Rev., S. 39-58):
Holder in due course may enforce
payment against maker who was induced to sign through fraud or
misrepresentation. 47 C. 347; 64 C. 61. Fraud of treasurer of manufacturing
corporation in endorsing notes without authority, no defense. 71 C. 668; 72 C.
576. Fraud, unknown to holder, is no defense. 74 C. 198; 114 C. 699. Right of
holder in due course to sue on accommodation note taken after maturity. 77 C.
634. Certain circumstances indicating lack of good faith on part of foreign bank
attempting to collect drafts from acceptor in this state considered. 82 C. 24.
Holder of note given without consideration as collateral security can enforce
only to extent of debt secured. 91 C. 562. Holder in due course of note jointly
endorsed may sue maker and endorsers jointly or separately. 101 C. 708. Cited.
97 C. 315; 105 C. 79. Applied. 106 C. 149. Quaere whether defense of usury is
available against holder in due course. 126 C. 340. Subsection (2)(c) is a
codification of the common-law definition of fraud in the factum and as such it
seems best that it be adopted for use in case under the negotiable instruments
law. 152 C. 474.
Cited. 18 CS 15.
Annotations to present
section:
Cited. 205 C. 604, 612. Cited. 207 C.
483, 488. Cited. 217 C. 205, 214. Cited. 240 C. 10.
Defendants' failure to read terms of
contracts they signed was real cause for their ignorance of terms of note they
signed payable to plaintiff, a holder in due course, and they had no defense
under subsection (2)(c) of this section when sued thereon. 4 Conn. Cir. Ct.
620.
Former Subsec. (2):
Cited. 187 C. 637, 640. Cited. 189 C.
591, 594.
Subsec. (a):
Subdiv. (2) cited. 231 C. 441,
451.
Sec. 42a-3-306. Claims to an instrument. A
person taking an instrument, other than a person having rights of a holder in
due course, is subject to a claim of a property or possessory right in the
instrument or its proceeds, including a claim to rescind a negotiation and to
recover the instrument or its proceeds. A person having rights of a holder in
due course takes free of the claim to the instrument.
(1959, P.A. 133, S. 3-306;
P.A. 91-304, S. 32.)
History: P.A.
91-304 revised former Subdiv. (a) re the claims to an instrument which a person
not having the rights of a holder in due course is subject to and deleted former
Subdivs. (b), (c) and (d) re the defenses which a person not having the rights
of a holder in due course is subject to.
See Sec.
42a-3-305(a)(2) for successor provisions to Sec. 42a-3-306(b), revised to 1991,
re defenses available in an action on a simple contract.
See Secs. 42a-3-105(b), 42a-3-303(b)
and 42a-3-305(a)(2) for successor provisions to Sec. 42a-3-306(c), revised to
1991, re defenses of want or failure of consideration, nonperformance of any
condition precedent, nondelivery or delivery for a special purpose.
See Sec. 42a-3-305(c) for successor
provisions to Sec. 42a-3-306(d), revised to 1991, re defense that the instrument
was acquired by theft.
Annotations to
former statutes:
(1958 Rev., S. 39-59): Defenses which
may be made do not include matter arising out of collateral transactions. 70 C.
9. Fraudulent alteration and reissuance of note once paid is a defense. 89 C.
594. Defenses that endorsement was to give credit and that receiver taking note
did not act within authority, not available to him individually, where he
endorsed without qualification before delivery to purchaser for value. 124 C.
177. Cited. 139 C. 539.
Cited. 19 CS 124.
(1958 Rev., S. 39-60): Effect of this
provision. 79 C. 348; 80 C. 60; 82 C. 333; 89 C. 128; id., 592; 105 C. 79.
Burden of proof that holder is not a holder in due course is on endorser
contesting liability except when affected by this section. 92 C. 707; 102 C.
624. Position of signature of endorser as showing priority between several
endorsers. 97 C. 315. Burden is on holder bringing action to go forward with
evidence; upon laying in note, burden of going forward shifts to defendant;
burden of proof is at all times on plaintiff. 111 C. 182; 118 C. 115. Allegation
that plaintiff was owner and holder sufficient. Id., Cited. 119 C. 370.
Cited. 18 CS 15; 19 CS 124; id.,
406.
Annotations to present
section:
Waiver of defense clause in consumer
sales contract void as opposed to policy of this section. 158 C. 543. Cited. 207
C. 483, 491. Cited. 217 C. 205, 214. Cited. 240 C. 10.
Cited. 33 CS 641, 644, 645.
Former Subdiv. (b):
Cited. 207 C. 483, 491.
Former Subdiv. (d):
Cited. 205 C. 604. 613.
Sec. 42a-3-307. Notice of breach of fiduciary duty. (a) In this
section:
(1) "Fiduciary" means an
agent, trustee, partner, corporate officer or director, or other representative
owing a fiduciary duty with respect to an instrument.
(2) "Represented person" means the
principal, beneficiary, partnership, limited liability company, corporation, or
other person to whom the duty stated in paragraph (1) is owed.
(b) If (i) an instrument is taken
from a fiduciary for payment or collection or for value, (ii) the taker has
knowledge of the fiduciary status of the fiduciary, and (iii) the represented
person makes a claim to the instrument or its proceeds on the basis that the
transaction of the fiduciary is a breach of fiduciary duty, the following rules
apply:
(1) Notice of breach of fiduciary
duty by the fiduciary is notice of the claim of the represented person.
(2) In the case of an instrument
payable to the represented person or the fiduciary as such, the taker has notice
of the breach of fiduciary duty if the instrument is (i) taken in payment of or
as security for a debt known by the taker to be the personal debt of the
fiduciary, (ii) taken in a transaction known by the taker to be for the personal
benefit of the fiduciary, or (iii) deposited to an account other than an account
of the fiduciary, as such, or an account of the represented person.
(3) If an instrument is issued by the
represented person or the fiduciary as such, and made payable to the fiduciary
personally, the taker does not have notice of the breach of fiduciary duty
unless the taker knows of the breach of fiduciary duty.
(4) If an instrument is issued by the
represented person or the fiduciary as such, to the taker as payee, the taker
has notice of the breach of fiduciary duty if the instrument is (i) taken in
payment of or as security for a debt known by the taker to be the personal debt
of the fiduciary, (ii) taken in a transaction known by the taker to be for the
personal benefit of the fiduciary, or (iii) deposited to an account other than
an account of the fiduciary, as such, or an account of the represented
person.
(1959, P.A. 133,
S. 3-307; P.A. 91-304, S. 33; P.A. 95-79, S. 165, 189.)
History: P.A.
91-304 entirely replaced former provisions re burden of establishing signatures,
defenses and holder in due course status with provisions re notice of breach of
fiduciary duty; P.A. 95-79 redefined "represented person" to include a limited
liability company, effective May 31, 1995.
See Sec.
42a-3-308 for successor provisions to Sec. 42-3-307, revised to 1991, re proof
of signatures, defenses and holder in due course status.
Annotations to
former statute (1958 Rev., S. 39-17):
Understanding that absolute
endorsement was to be without recourse cannot be shown by oral evidence under
this section. 92 C. 592. Proper remedy. Id., 593. This presumption is
rebuttable. 105 C. 78.
Annotations to present
section:
Cited. 230 C. 779, 788.
Cited. 33 CS 641, 644, 645.
Former Subsec. (1):
Special defense was sufficient to put
effectiveness of signature in issue; furthermore, failure to object to evidence
waived any objection of variance or improper pleading; section 52-93 compared.
33 CS 654. Authority of agent to sign note; burden of proof. Id.
Former Subsec. (2):
Cited. 182 C. 530, 531. Cited. 189 C.
591, 594.
Cited. 1 CA 162, 164.
Cited. 6 Conn. Cir. Ct. 547.
Former Subsec. (3):
Cited. 187 C. 637, 640. Cited. 189 C.
591, 594, 597. Cited. 242 C. 17.
Cited. 1 CA 162, 164. Cited. 4 CA
102, 105.
Sec. 42a-3-308. Proof of signatures and status as holder in due
course. (a) In an action with respect to an instrument,
the authenticity of, and authority to make, each signature on the instrument is
admitted unless specifically denied in the pleadings. If the validity of a
signature is denied in the pleadings, the burden of establishing validity is on
the person claiming validity, but the signature is presumed to be authentic and
authorized 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
validity of the signature. If an action to enforce the instrument is brought
against a person as the undisclosed principal of a person who 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 section
42a-3-402(a).
(b) If the validity
of signatures is admitted or proved and there is compliance with subsection (a),
a plaintiff producing the instrument is entitled to payment if the plaintiff
proves entitlement to enforce the instrument under section 42a-3-301, unless the
defendant proves a defense or claim in recoupment. If a defense or claim in
recoupment is proved, the right to payment of the plaintiff is subject to the
defense or claim, except to the extent the plaintiff proves that the plaintiff
has rights of a holder in due course which are not subject to the defense or
claim.
(P.A. 91-304, S.
34.)
Sec. 42a-3-309. Enforcement of lost, destroyed or stolen
instrument. (a) A person not in possession of an
instrument is entitled to enforce the instrument if (i) the person was in
possession of the instrument and entitled to enforce it when loss of possession
occurred, (ii) the loss of possession was not the result of a transfer by the
person or a lawful seizure, and (iii) the person cannot reasonably obtain
possession of the instrument because the instrument was destroyed, its
whereabouts cannot be determined, or it is in the wrongful possession of an
unknown person or a person that cannot be found or is not amenable to service of
process.
(b) A person seeking
enforcement of an instrument under subsection (a) must prove the terms of the
instrument and the person's right to enforce the instrument. If that proof is
made, section 42a-3-308 applies to the case as if the person seeking enforcement
had produced the instrument. The court may not enter judgment in favor of the
person seeking enforcement unless it finds that the person required to pay the
instrument is adequately protected against loss that might occur by reason of a
claim by another person to enforce the instrument. Adequate protection may be
provided by any reasonable means.
(P.A. 91-304, S.
35.)
Cited. 238 C.
745.
Cited. 44 CS 464.
Sec. 42a-3-310. Effect of instrument on obligation for which
taken. (a) Unless otherwise agreed, if a certified
check, cashier's check or teller's check is taken for an obligation, the
obligation is discharged to the same extent discharge would result if an amount
of money equal to the amount of the instrument were taken in payment of the
obligation. Discharge of the obligation does not affect any liability that the
obligor may have as an endorser of the
instrument.
(b) Unless otherwise
agreed and except as provided in subsection (a), if a note or an uncertified
check is taken for an obligation, the obligation is suspended to the same extent
the obligation would be discharged if an amount of money equal to the amount of
the instrument were taken, and the following rules apply:
(1) In the case of an uncertified
check, suspension of the obligation continues until dishonor of the check or
until it is paid or certified. Payment or certification of the check results in
discharge of the obligation to the extent of the amount of the check.
(2) In the case of a note, suspension
of the obligation continues until dishonor of the note or until it is paid.
Payment of the note results in discharge of the obligation to the extent of the
payment.
(3) Except as provided in paragraph
(4), if the check or note is dishonored and the obligee of the obligation for
which the instrument was taken is the person entitled to enforce the instrument,
the obligee may enforce either the instrument or the obligation. In the case of
an instrument of a third person which is negotiated to the obligee by the
obligor, discharge of the obligor on the instrument also discharges the
obligation.
(4) If the person entitled to enforce
the instrument taken for an obligation is a person other than the obligee, the
obligee may not enforce the obligation to the extent the obligation is
suspended. If the obligee is the person entitled to enforce the instrument but
no longer has possession of it because it was lost, stolen, or destroyed, the
obligation may not be enforced to the extent of the amount payable on the
instrument, and to that extent the obligee's rights against the obligor are
limited to enforcement of the instrument.
(c) If an instrument other than one
described in subsection (a) or (b) is taken for an obligation, the effect is (i)
that stated in subsection (a) if the instrument is one on which a bank is liable
as maker or acceptor, or (ii) that stated in subsection (b) in any other
case.
(P.A. 91-304, S.
36.)
Subsec.
(b):
Subdiv. (2) cited. 231 C. 441,
447.
Sec. 42a-3-311. Accord and satisfaction by use of
instrument. (a) If a person against whom a claim is
asserted proves 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 was
unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained
payment of the instrument, the following subsections
apply.
(b) Unless subsection (c)
applies, the claim is discharged if the person against whom the claim is
asserted proves that the instrument or an accompanying written communication
contained a conspicuous statement to the effect that the instrument was tendered
as full satisfaction of the claim.
(c) Subject to subsection (d), a
claim is not discharged under subsection (b) if either of the following
applies:
(1) The claimant, if an organization,
proves that (i) within a reasonable time before the tender, the claimant sent a
conspicuous statement to the person against whom the claim is asserted that
communications concerning disputed debts, including an instrument tendered as
full satisfaction of a debt, are to be sent to a designated person, office, or
place, and (ii) the instrument or accompanying communication was not received by
that designated person, office, or place.
(2) The claimant, whether or not an
organization, proves that within ninety days after payment of the instrument,
the claimant tendered repayment of the amount of the instrument to the person
against whom the claim is asserted. This paragraph does not apply if the
claimant is an organization that sent a statement complying with paragraph
(1)(i).
(d) A claim is discharged if the
person against whom the claim is asserted proves that within a reasonable time
before collection of the instrument was initiated, the claimant, or an agent of
the claimant having direct responsibility with respect to the disputed
obligation, knew that the instrument was tendered in full satisfaction of the
claim.
(P.A. 91-304, S.
37.)
Cited. 236 C.
750, 765.
Subsec. (a):
Defendants' letter stating that the
check was tendered as full satisfaction of their indebtedness had no legal
effect since there was no basis for a good faith dispute about defendants'
indebtedness to plaintiff or about the amount of defendants' indebtedness for
interest. 72 CA 319.
Sec. 42a-3-312. Enforcement of lost, destroyed or stolen cashier's
checks, teller's checks or certified checks. (a) In this
section:
(1) "Check" means a
cashier's check, teller's check or certified check.
(2) "Claimant" means a person who
claims the right to receive the amount of a cashier's check, teller's check or
certified check that was lost, destroyed or stolen.
(3) "Declaration of loss" means a
written statement, made under penalty of perjury, to the effect that (i) the
declarer lost possession of a check, (ii) the declarer is the drawer or payee of
the check, in the case of a certified check, or the remitter or payee of the
check, in the case of a cashier's check or teller's check, (iii) the loss of
possession was not the result of a transfer by the declarer or a lawful seizure
and (iv) the declarer cannot reasonably obtain possession of the check because
the check was destroyed, its whereabouts cannot be determined, or it is in the
wrongful possession of an unknown person or a person that cannot be found or is
not amenable to service of process.
(4) "Obligated bank" means the issuer
of a cashier's check or teller's check or the acceptor of a certified
check.
(b) A claimant may assert a claim to
the amount of a check by a communication to the obligated bank describing the
check with reasonable certainty and requesting payment of the amount of the
check, if (i) the claimant is the drawer or payee of a certified check or the
remitter or payee of a cashier's check or teller's check, (ii) the communication
contains or is accompanied by a declaration of loss of the claimant with respect
to the check, (iii) the communication is received at a time and in a manner
affording the bank a reasonable time to act on it before the check is paid and
(iv) the claimant provides reasonable identification if requested by the
obligated bank. Delivery of a declaration of loss is a warranty of the truth of
the statements made in the declaration. If a claim is asserted in compliance
with this subsection, the following rules apply:
(1) The claim becomes enforceable at
the later of (i) the time the claim is asserted or (ii) the ninetieth day
following the date of the check, in the case of a cashier's check or teller's
check, or the ninetieth day following the date of the acceptance, in the case of
a certified check.
(2) Until the claim becomes
enforceable, it has no legal effect and the obligated bank may pay the check or,
in the case of a teller's check, may permit the drawee to pay the check. Payment
to a person entitled to enforce the check discharges all liability of the
obligated bank with respect to the check.
(3) If the claim becomes enforceable
before the check is presented for payment, the obligated bank is not obliged to
pay the check.
(4) When the claim becomes
enforceable, the obligated bank becomes obliged to pay the amount of the check
to the claimant if payment of the check has not been made to a person entitled
to enforce the check. Subject to section 42a-4-302(a)(1), payment to a claimant
discharges all liability of the obligated bank with respect to the
check.
(c) If the obligated bank pays the
amount of a check to a claimant under subdivision (4) of subsection (b) of this
section and the check is presented for payment by a person having rights of a
holder in due course, the claimant is obliged to (i) refund the payment to the
obligated bank if the check is paid or (ii) pay the amount of the check to the
person having rights of a holder in due course if the check is
dishonored.
(d) If a claimant has the right to
assert a claim under subsection (b) of this section and is also a person
entitled to enforce a cashier's check, teller's check or certified check which
is lost, destroyed or stolen, the claimant may assert rights with respect to the
check either under this section or section 42a-3-309.
(P.A.
94-168.)
PART 4
LIABILITY OF PARTIES
Sec. 42a-3-401. Signature. (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 representative who signed the
instrument and the signature is binding on the represented person under section
42a-3-402.
(b) A signature may be
made (i) manually or by means of a device or machine, and (ii) by the use of any
name, including a trade or assumed name, or by a word, mark, or symbol executed
or adopted by a person with present intention to authenticate a writing.
(1959, P.A. 133,
S. 3-401; P.A. 91-304, S. 38.)
History: P.A.
91-304 replaced numeric Subsec. indicators with alphabetic Subsec. indicators,
amended Subsec. (a) to revise provisions and add provision re signature by agent
or represented person and amended Subsec. (b) to revise provisions and add
provision authorizing a signature to be made manually or by means of a device or
machine.
Cited. 32 CS
178.
Sec. 42a-3-402. Signature by representative. (a) If a person acting, or purporting to act, as a representative
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
extent the represented person would be bound if the signature were on a simple
contract. If the represented person is bound, the signature of the
representative is the "authorized signature of the represented person" and the
represented person is liable on the instrument, whether or not identified in the
instrument.
(b) If a
representative signs the name of the representative to an instrument and the
signature is an authorized signature of the represented person, the following
rules apply:
(1) If the form of the signature
shows unambiguously that the signature is made on behalf of the represented
person who is identified in the instrument, the representative is not liable on
the instrument.
(2) Subject to subsection (c), if (i)
the form of the signature does not show unambiguously that the signature is made
in a representative capacity or (ii) the represented person is not identified in
the instrument, the representative is liable on the instrument to a holder in
due course that took the instrument without notice that the representative was
not intended to be liable on the instrument. With respect to any other person,
the representative is liable on the instrument unless the representative proves
that the original parties did not intend the representative to be liable on the
instrument.
(c) If a representative signs the
name of the representative as drawer of a check without indication of the
representative status and the check is payable from an account of the
represented person who is identified on the check, the signer is not liable on
the check if the signature is an authorized signature of the represented
person.
(1959, P.A. 133,
S. 3-402; P.A. 91-304, S. 39.)
History: P.A.
91-304 entirely replaced former provisions re when a signature is an endorsement
with provisions re signature by a representative, a restatement of Sec.
42a-3-403, revised to 1991.
See Sec.
42a-3-204(a) for successor provisions to Sec. 42a-3-402, revised to 1991, re
when a signature is an endorsement.
Annotations to
former statute (1958 Rev., S. 39-64):
Effect of such endorsement prior to
this act. 66 C. 462; 74 C. 309. This obligation cannot be varied by parol
evidence. 79 C. 626. Applied. 97 C. 315. Cited. 111 C. 631. Liability of
guarantor distinguished from that of endorser. 117 C. 21.
Annotations to present
section:
Cited. 203 C. 394, 405.
Cited. 32 CS 178. Cited. 33 CS 181,
182.
Sec. 42a-3-403. Unauthorized signature.
(a) Unless otherwise provided in this article or article 4, an unauthorized
signature is ineffective except as the signature of the unauthorized signer in
favor of a person who in good faith pays the instrument or takes it for value.
An unauthorized signature may be ratified for all purposes of this
article.
(b) If the signature of
more than one person is required to constitute the authorized signature of an
organization, the signature of the organization is unauthorized if one of the
required signatures is lacking.
(c) The civil or criminal liability
of a person who makes an unauthorized signature is not affected by any provision
of this article which makes the unauthorized signature effective for the
purposes of this article.
(1959, P.A. 133,
S. 3-403; P.A. 91-304, S. 40.)
History: P.A.
91-304 entirely replaced former provisions re signature by authorized
representative with provisions re unauthorized signature, a restatement of Sec.
42a-3-404, revised to 1991, provisions re unauthorized signature of an
organization and provisions re civil or criminal liability, a restatement of
Sec. 42a-3-405(2), revised to 1991.
See Sec.
42a-3-402(a) and (b) for successor provisions to Sec. 42a-3-403, revised to
1991, re signature by authorized representative.
Annotations to
former statute (1958 Rev., S. 39-21):
Scope of admissibility of parol
evidence as to signer's authority and to show relations between signer and
claimed principal. 98 C. 788.
One who signed name of corporation
and then his own name followed by "Pres." held not personally liable. 15 CS 29.
President of corporation who endorsed note held personally liable where it did
not appear that the endorsement was duly authorized. 19 CS 423.
Annotations to present
section:
Cited. 171 C. 63, 69. Cited. 208 C.
248, 252, 253, 255. Cited. 218 C. 162, 165.
Former Subsec. (2):
Cited. 15 CA 90, 93. Subdiv. (a)
cited. 208 C. 248, 250, 251, 253. Subdiv. (b) cited. Id., 248, 250, 252-255.
Cited. 218 C. 162, 167, 168.
Sec. 42a-3-404. Impostors. Fictitious payees. (a) If an impostor, by use of the mails or otherwise, induces the
issuer of an instrument to issue the instrument to the impostor, or to a person
acting in concert with the impostor, by impersonating the payee of the
instrument or a person authorized to act for the payee, an endorsement of the
instrument by any person in the name of the payee is effective as the
endorsement of the payee in favor of a person who, in good faith, pays the
instrument or takes it for value or for
collection.
(b) If (i) a person
whose intent determines to whom an instrument is payable, as provided in
subsection (a) or (b) of section 42a-3-110, does not intend the person
identified as payee to have any interest in the instrument, or (ii) the person
identified as payee of an instrument is a fictitious person, the following rules
apply until the instrument is negotiated by special endorsement:
(1) Any person in possession of the
instrument is its holder.
(2) An endorsement by any person in
the name of the payee stated in the instrument is effective as the endorsement
of the payee in favor of a person who, in good faith, pays the instrument or
takes it for value or for collection.
(c) Under subsection (a) or (b), an
endorsement 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, whether or
not endorsed, is deposited in a depositary bank to an account in a name
substantially similar to that of the payee.
(d) With respect to an instrument to
which subsection (a) or (b) applies, if a person paying the instrument or taking
it for value or for collection fails to exercise ordinary care in paying or
taking the instrument and that failure substantially contributes to loss
resulting from payment of the instrument, the person bearing the loss may
recover from the person failing to exercise ordinary care to the extent the
failure to exercise ordinary care contributed to the loss.
(1959, P.A. 133,
S. 3-404; P.A. 91-304, S. 41; May Sp. Sess. P.A. 92-11, S. 17, 70.)
History: P.A.
91-304 entirely replaced former provisions re unauthorized signatures with
provisions re impostors and fictitious payees, a restatement in part of Sec.
42a-3-405(1)(a) and (b), revised to 1991; May Sp. Sess. P.A. 92-11 made
technical changes in Subsecs. (b) and (c).
See Sec.
42a-3-403(a) for successor provisions to Sec. 42a-3-404, revised to 1991, re
unauthorized signatures.
Annotations to
former statute (1958 Rev., S. 39-24):
Purchaser of note bearing forged
endorsement allowed to recover from seller. 26 C. 23. Effect of forged bill of
lading deposited with draft. 82 C. 227. Surrender of forged note not a good
consideration. 89 C. 592. Payment, by mistake, of a forged instrument by
purported maker does not entitle him to recover sum so paid if, in fact, he owed
it to person to whom it was paid. 92 C. 671. Drawee bank which pays on forged
endorsement of payee's name in ignorance of forgery may recover from presenting
bank. 123 C. 622. Where plaintiff's negligence was cause of loss, it could not
recover even where payee's endorsement was a forgery. 138 C. 298.
Annotations to present
section:
Cited. 171 C. 63, 68. Cited. Id., 63,
71.
Cited. 34 CS 606, 610.
Sec. 42a-3-405. Employer's responsibility for fraudulent
endorsement by employee. (a) In this
section:
(1) "Employee" includes
an independent contractor and employee of an independent contractor retained by
the employer.
(2) "Fraudulent endorsement" means
(i) in the case of an instrument payable to the employer, a forged endorsement
purporting to be that of the employer, or (ii) in the case of an instrument with
respect to which the employer is the issuer, a forged endorsement purporting to
be that of the person identified as payee.
(3) "Responsibility" with respect to
instruments means authority (i) to sign or endorse instruments on behalf of the
employer, (ii) to process instruments received by the employer for bookkeeping
purposes, for deposit to an account, or for other disposition, (iii) to prepare
or process instruments for issue in the name of the employer, (iv) to supply
information determining the names or addresses of payees of instruments to be
issued in the name of the employer, (v) to control the disposition of
instruments to be issued in the name of the employer, or (vi) to act otherwise
with respect to instruments in a responsible capacity. "Responsibility" does not
include authority that merely allows an employee to have access to instruments
or blank or incomplete instrument forms that are being stored or transported or
are part of incoming or outgoing mail, or similar access.
(b) For the purpose of determining
the rights and liabilities of a person who, in good faith, pays an instrument or
takes it for value or for collection, if an employer entrusted an employee with
responsibility with respect to the instrument and the employee or a person
acting in concert with the employee makes a fraudulent endorsement of the
instrument, the endorsement is effective as the endorsement of the person to
whom the instrument is payable if it is made in the name of that person. If the
person paying the instrument or taking it for value or for collection fails to
exercise ordinary care in paying or taking the instrument and that failure
substantially contributes to loss resulting from the fraud, the person bearing
the loss may recover from the person failing to exercise ordinary care to the
extent the failure to exercise ordinary care contributed to the loss.
(c) Under subsection (b), an
endorsement is made in the name of the person to whom an instrument is payable
if (i) it is made in a name substantially similar to the name of that person or
(ii) the instrument, whether or not endorsed, is deposited in a depositary bank
to an account in a name substantially similar to the name of that
person.
(1959, P.A. 133,
S. 3-405; P.A. 91-304, S. 42.)
History: P.A.
91-304 entirely replaced former provisions re impostors and payees having no
interest in the instrument with provisions re responsibility of an employer for
a fraudulent endorsement by an employee, including the revision of former
Subsec. (1)(c) re endorsements made in the name of payees of instruments issued
by the employer.
See Sec.
42a-3-403(c) for successor provisions to Sec. 42a-3-405(2), revised to 1991, re
liability of unauthorized endorser.
See Sec. 42a-3-404(a) and (b)(i) for
successor provisions to Sec. 42a-3-405(1)(a) and (b), revised to 1991, re
impostors and payees with no interest in the instrument.
Former Subsec.
(1):
Subdiv. (b). Drawer is not harmed if
drawee's action on check carries out drawer's purpose. 170 C. 691, 696. Subdiv.
(c). Cited. Id., 691, 697.
Sec. 42a-3-406. Negligence contributing to forged signature or
alteration of instrument. (a) A person whose failure to
exercise ordinary care substantially contributes to an alteration of an
instrument or to the making of a forged signature on an instrument is precluded
from asserting the alteration or the forgery against a person who, in good
faith, pays the instrument or takes it for value or for
collection.
(b) Under subsection
(a), if the person asserting the preclusion fails to exercise ordinary care in
paying or taking the instrument and that failure substantially contributes to
loss, the loss is allocated between the person precluded and the person
asserting the preclusion according to the extent to which the failure of each to
exercise ordinary care contributed to the loss.
(c) Under subsection (a), the burden
of proving failure to exercise ordinary care is on the person asserting the
preclusion. Under subsection (b), the burden of proving failure to exercise
ordinary care is on the person precluded.
(1959, P.A. 133,
S. 3-406; P.A. 91-304, S. 43.)
History: P.A.
91-304 substantially revised former provisions and added Subsec. (b) re
allocation of loss and Subsec. (c) re burden of proof.
Cited. 164 C.
604, 616. "Negligence" in this section means the failure to exercise
"reasonable" and "ordinary" care, i.e. whether a prudent person would have
foreseen the danger of forgery as a result of his action. 167 C. 478. Cited. 170
C. 691, 698, 701, 702. Cited. 187 C. 637, 642. Cited. 242 C. 17.
Cited. 2 CA 110, 112.
Cited. 39 CS 240.
Sec. 42a-3-407. Alteration. (a)
"Alteration" means (i) an unauthorized change in an instrument that purports to
modify in any respect the obligation of a party, or (ii) an unauthorized
addition of words or numbers or other change to an incomplete instrument
relating to the obligation of a
party.
(b) Except as provided in
subsection (c), an alteration fraudulently made discharges a party whose
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 bank or drawee paying a
fraudulently altered instrument or a person taking it for value, in good faith
and without notice of the alteration, may enforce rights with respect to the
instrument (i) according to its original terms, or (ii) in the case of an
incomplete instrument altered by unauthorized completion, according to its terms
as completed.
(1959, P.A. 133,
S. 3-407; P.A. 91-304, S. 44.)
History: P.A.
91-304 substantially revised section and replaced numeric Subsec. indicators
with alphabetic Subsec. indicators.
Annotations to
former statute (1958 Rev., S. 39-125):
Effect of alteration of note which
has been paid so that it may be reissued as not due. 89 C. 594. "Alteration," as
used in statute, implies an intentional act. Accidental obliteration is not an
alteration. 128 C. 248.
Annotations to present
section:
Cited. 156 C. 243. Cited. 202 C. 277,
284, 285. Cited. 233 C. 304, 315. Cited. Id., 352, 359, 361. Cited. 242 C.
17.
Plaintiff bank is holder in due
course of note sold to it by freezer-food company based on contract negotiated
by company with defendant. Defense that note did not have any sum entered on it
when signed by defendants is not available against plaintiff holder in due
course. 4 Conn. Cir. Ct. 620. Cited. Id., 625. Defendant endorser who consented
to insertions and alterations of checks is disqualified from attacking their
validity and his liability thereon. 5 Conn. Cir. Ct. 405.
Subsec. (a) (Formerly Subsec.
(1)):
Cited. 202 C. 277, 285. Former
Subsec. (1) cited. 242 C. 17.
Subsec. (b) (Formerly Subsec.
(2)):
Cited. 202 C. 277, 285. Subdiv. (a)
cited. Id. Former Subsec. (2) cited. 242 C. 17. Former Subsec. (2)(b) cited.
Id.
Subsec. (c) (Formerly Subsec.
(3)):
Cited. 202 C. 277, 285. Former
Subsec. (3) cited. 242 C. 17.
Sec. 42a-3-408. Drawee not liable on unaccepted draft. A check or other draft does not of itself operate as an
assignment of funds in the hands of the drawee available for its payment, and
the drawee is not liable on the instrument until the drawee accepts
it.
(1959,
P.A. 133, S. 3-408; P.A. 91-304, S. 45.)
History: P.A.
91-304 entirely replaced former provisions re lack or failure of consideration
with provisions re liability of a drawee on unaccepted draft, a restatement of
Sec. 42a-3-409(1), revised to 1991.
See Sec.
42a-3-303(b) for successor provisions to Sec. 42a-3-408, revised to 1991, re
consideration.
Annotations to
former statutes:
(1958 Rev., S. 39-25): Nonnegotiable
instrument does not import consideration. 73 C. 572. Check does. 83 C. 528.
Cited. 85 C. 155; 105 C. 79. Promise of husband's creditor to forbear suit, made
to wife at her request, is a sufficient consideration for her note for amount of
debt. 93 C. 359. Furnishing supplies to builder is good consideration for
owner's acceptance of nonnegotiable order on him for supplies previously
furnished. Id., 401. In action by holder of a negotiable instrument, defendant
has burden of showing lack of consideration except as provided in section 39-60.
102 C. 624.
(1958 Rev., S. 39-29): Where failure
of consideration is due to act of maker, he cannot set it up in defense. 73 C.
144. Seal does not preclude defense. 81 C. 678. Note given in part payment for
construction of building is wanting in consideration, if contractor abandons
building and nothing is due him. 82 C. 244. Acceptor of bill of exchange cannot
show want of consideration as a defense. 93 C. 400. If face of note exceeds
amount actually paid, recovery as between parties must be limited to that
amount. 126 C. 556.
Annotations to present
section:
Instrument negotiable in form is
deemed prima facie issued for valuable consideration and burden of proving
absence or failure of same is on defendant. 149 C. 558. Cited. 151 C. 566. Party
asserting lack of consideration has burden of establishing it by preponderance
of the evidence. Id., 606. Cited. 240 C. 10.
Cited. 1 CA 162, 164.
Broker is entitled to his commission
when he has produced customer ready, able and willing to purchase; hence
plaintiff's threat he would not go through with sale and defendant broker would
lose her commission unless she signed note he is now suing her on, was no
consideration for note. 4 Conn. Cir. Ct. 665.
Sec. 42a-3-409. Acceptance of draft. Certified check. (a) "Acceptance" means the drawee's signed agreement to pay a
draft as presented. It must be written on the draft and may consist of the
drawee's signature alone. Acceptance may be made at any time and becomes
effective when notification pursuant to instructions is given or the accepted
draft is delivered for the purpose of giving rights on the acceptance to any
person.
(b) A draft may be
accepted although it has not been signed by the drawer, is otherwise incomplete,
is overdue or has been dishonored.
(c) If a draft is payable at a fixed
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) "Certified check" means a check
accepted by the bank on which it is drawn. Acceptance may be made as stated in
subsection (a) or by a writing on the check which indicates that the check is
certified. The drawee of a check has no obligation to certify the check, and
refusal to certify is not dishonor of the check.
(1959, P.A. 133,
S. 3-409; P.A. 91-304, S. 46.)
History: P.A.
91-304 entirely replaced former provisions re assignment of funds in hands of
drawee and liability of drawee on unaccepted instrument with provisions re
acceptance of a draft, a restatement of Sec. 42a-3-410, revised to 1991, and a
definition of "certified check".
See Sec.
42a-3-408 for successor provisions to Sec. 42a-3-409(1), revised to 1991, re
assignment of funds in hands of drawee and liability of drawee on unaccepted
instrument.
Annotations to
former statute (1958 Rev., S. 39-190):
Cited. 115 C. 22. Check, in
connection with other circumstances showing intention, may operate as an
assignment. 128 C. 480. No right in holder as third party beneficiary.
Id.
Annotation to present
section:
Former Subsec. (1):
Fact that bank has supervised and
assisted credit status of drawer company does not affect its status toward
drawee of checks of company. 5 Conn. Cir. Ct. 393.
Sec. 42a-3-410. Acceptance varying draft.
(a) If the terms of a drawee's acceptance vary from the terms of the draft as
presented, the holder may refuse the acceptance and treat the draft as
dishonored. In that case, the drawee may cancel the
acceptance.
(b) The terms of a
draft are not varied by an acceptance to pay at a particular bank or place in
the United States, unless the acceptance states that the draft is to be paid
only at that bank or place.
(c) If the holder assents to an
acceptance varying the terms of a draft, the obligation of each drawer and
endorser that does not expressly assent to the acceptance is discharged.
(1959, P.A. 133,
S. 3-410; P.A. 91-304, S. 47.)
History: P.A.
91-304 entirely replaced former provisions re acceptance of a draft with
provisions re an acceptance which varies the terms of a draft, a restatement of
Sec. 42a-3-412, revised to 1991.
See Sec.
42a-3-409(a), (b) and (c) for successor provisions to Sec. 42a-3-410, revised to
1991, re acceptance of a draft.
Annotations to
former statute (1958 Rev., S. 39-133):
Oral acceptance was sufficient at
common law. 46 C. 90. Acceptance cannot be made conditional by oral agreement.
71 C. 742; 93 C. 396. "Acceptance" means assumption of an undertaking; it
imports more than an acknowledgment of the physical possession of the paper. 94
C. 566. Implied acceptance is not enough. 128 C. 482.
Annotation to present
section:
Cashier's check, in which issuing
bank is both drawer and drawee, is considered accepted when issued to payee, who
may also be the purchaser, and is equivalent to a negotiable promissory note
payable on demand. 33 CS 641, 644, 645.
Sec. 42a-3-411. Refusal to pay cashier's checks, teller's checks
and certified checks. (a) In this section, "obligated
bank" means the acceptor of a certified check or the issuer of a cashier's check
or teller's check bought from the
issuer.
(b) If the obligated bank
wrongfully (i) refuses to pay a cashier's check or certified check, (ii) stops
payment of a teller's check, or (iii) refuses to pay a dishonored teller's
check, the person asserting the right to enforce the check is entitled to
compensation for expenses and loss of interest resulting from the nonpayment and
may recover consequential damages if the obligated bank refuses to pay after
receiving notice of particular circumstances giving rise to the damages.
(c) Expenses or consequential damages
under subsection (b) are not recoverable if the refusal of the obligated bank to
pay occurs because (i) the bank suspends payments, (ii) the obligated bank
asserts a claim or defense of the bank that it has reasonable grounds to believe
is available against the person entitled to enforce the instrument, (iii) the
obligated bank has a reasonable doubt whether the person demanding payment is
the person entitled to enforce the instrument, or (iv) payment is prohibited by
law.
(1959, P.A. 133,
S. 3-411; P.A. 91-304, S. 48.)
History: P.A.
91-304 entirely replaced former provisions re certification of a check with
provisions re refusal to pay a cashier's check, teller's check or certified
check.
See Secs.
42a-3-409(d), 42a-3-414(c) and 42a-3-415(d) for successor provisions to Sec.
42a-3-411, revised to 1991, re certification of a check.
Sec. 42a-3-412. Obligation of issuer of note or cashier's
check. The issuer of a note or cashier's check or other
draft drawn on the drawer is obliged to pay the instrument (i) according to its
terms at the time it was 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 when completed, to the extent stated in
sections 42a-3-115 and 42a-3-407. The obligation is owed to a person entitled to
enforce the instrument or to an endorser who paid the instrument under section
42a-3-415.
(1959, P.A. 133, S. 3-412;
1963, P.A. 526, S. 5; P.A. 91-304, S. 49.)
History: 1963 act
deleted word "continental" referring to "United States" in Subsec. (2); P.A.
91-304 entirely replaced former provisions re an acceptance which varies the
terms of a draft with provisions re the obligation of the issuer of a note or
cashier's check, a restatement in part of Sec. 42a-3-413(1), revised to
1991.
See Sec.
42a-3-410 for successor provisions to Sec. 42a-3-412, revised to 1991, re an
acceptance which varies the terms of a draft.