PAUL A. CARRUBBA Phone: (601) Watkins Ludlam Winter & Stennis, P.A. A T T O R N E Y S A T L A W

Transcription

1 Presented by: PAUL A. CARRUBBA Phone: (601) Watkins Ludlam Winter & Stennis, P.A. A T T O R N E Y S A T L A W 1

2 Articles 3 & 4 of the UCC Scope and Subject Matter Negotiable Instruments Customer/Bank Relationship Collection Process Variation by Agreement 4-103(a) Provisions May Be Amended Bank Cannot Disclaim Obligation to Exercise Ordinary Care Issuance of a Negotiable Instrument Issuance Required Issue Means First Delivery er 2

3 CHECK COMPONENTS Identification of Person to Whom a Check is Payable Intent of Issuer Issued by Automated Means Intent of the person submitting i the payee name Payee Described by Office, Name, Number Two or More Payees Date of an Instrument Ante Date Post Dated Stale Dated No Date 3

4 CHECK COMPONENTS Contradictory Terms Typewritten Controls Printed Handwritten Controls Both Incomplete Instrument May be Completed as Authorized Is an Alteration if not Completed as Authorized Burden of Proof is on Person Claiming Alteration Alterations Unauthorized Change of the Terms of an Instrument Alters the Obligation of the Parties An Altered Item is Enforceable According to the Original Terms of the Instrument 4

5 PARTIES TO A CHECK C & THEIR GENERAL LIABILITY Drawer Will pay upon dishonor Drawee Is Not Liable on the instrument Indorser Will pay upon dishonor and timely notice Acceptor-Certification Agreement to pay the Instrument Amount Certified should be stated Issuer of a Cashiers and Teller Checks Liability for Refusal to Pay Cashiers Checks

6 DRAWER S SIGNATURE & FORGED SIGNATURE Person is Only Liable Upon Signing an Instrument 3-401(a) Liability May Be Created By a Representative 3-402(a), (c) Form of Signature 3-401(b) May be Made By Device or Machine Mark, Symbol, or Trade Name Signature by Representative 3-402(b) Binds Principal May Create Personal Liability The Principal Must be Shown The Representative Capacity Must be Shown Multiple Signatures 3-403(b) 6

7 INDORSEMENTS Indorsements in General Signature to Negotiate the Instrument Restrict Payment to a Person or for a Specific Purpose Create Indorser Liability Obligation of Indorser Is to Pay If Dishonored and Returned Timely Negotiation i Requiring i Indorsement 3-201(b) 7

8 INDORSEMENTS Types of Indorsement Special Indorsement - Pay to the Order of Blank Indorsement Unrestricted Blank Signature of fp Payee Restrictive Indorsement For Deposit ito Only 8

9 INDORSEMENTS Two or More Payees Joint Payees in the Alternative Any of Them May Negotiate Joint Payees not in the Alternative ti May Only be Negotiated by all of Them Wrong or Misspelled Name 3-204(d) Indorse as Drawn, or Indorse in the Correct tn Name, or Indorse Both Names 9

10 INDORSEMENTS Depositary Bank becomes Holder of Unindorsed Check Warrants Entitled Person Got the Proceeds Transfer and Presentment Warranties 3-416, 4-207, 3-417, Transferor Has Good Title There Are No Forged Indorsements Transferor Has No Knowledge of Forged Drawer Signature No Alterations 10

11 UNAUTHORIZED SIGNATURE & INDORSEMENT Ratification 3-403(a) After-the-fact Authorization The Person Giving the Ratification Had Knowledge of the Facts Ratification Applies to All Checks Negligence Contributing to Forged Signature Negligence Substantially Contributes to the Forged Signature The Bank Exercised Ordinary Care-Reasonable Commercial Standards The Court Will Apply Comparative Negligence 11

12 UNAUTHORIZED SIGNATURE & INDORSEMENT Customer s Duty to Examine Statements and Report Forgery Bank Makes Statement Available Statement Contains Items or Description of Item (date posted, amount, check number) Customer Reports Unauthorized Signature or Alteration Within a Reasonable Time Not to Exceed 30 Days Bank Exercise of Ordinary Care Comparative Negligence Applies 12

13 UNAUTHORIZED SIGNATURES & INDORSEMENTS Conversion of a check Exercise of possession of property of another Payee that did not receive delivery of a check is precluded from making a conversion claim A drawer may not make a conversion claim Recovery may not exceed the amount of interest ti in the instrument t 13

14 UNAUTHORIZED SIGNATURES & INDORSEMENTS Imposter and Fictitious Payees Drawer Induced to issue check in the name of the named payee Intent is not to have person named to have interest in the check Any person in possession is holder Indorsement in the name of the payee is effective Indorsement substantially similar to the named payee Comparative Negligence 14

15 UNAUTHORIZED SIGNATURES & INDORSEMENTS Employer s Responsibility for Fraudulent Indorsement by Employee (including an independent contractor) is Effective e Against the Employer The Employee Must Have Responsibilities Relative to the Check The Indorsement Must Substantially Similar to the Named Payee Court Applies Comparative Negligence 15

16 OTHER PAYMENT ISSUES Properly Payable Items Authorized by Customer Authorized db by Agreement Bank May Pay NSF Items Bank Need Only Make One Determination of Sufficiency of Balance Liability for NSF Items Limited to Party who signs or receives benefit (may be varied by agreement) Legends on Checks May be Binding Unless Bank Contractually Avoids Liability Counterfeit Checks Are Not Properly Payable 16

17 OTHER PAYMENT ISSUES Wrongful Dishonor Dishonor of Properly Payable Item Consequential ld Damages May Be Recovered Punitive Damages Are Not Addressed A Claim for Wrongful Dishonor is Available Only to Bank Customer Bank May Determine the Order of Posting Items Death or Incompetence of Customer Items Valid Until Bank is Notified Bank May Pay Items for Ten Days With Notice Unless Stop Payment Order is Issued By an Interested Party 17

18 CHECK 21 LEGAL ISSUES 18

19 CHECK 21 SUBSTITUTE CHECK WARRANTIES SUBSTITUTE CHECK MEETS LEGAL EQUIVALENCE REQUIREMENTS NO DUPLICATE PAYMENT 19

20 INDEMNITY Indemnity against loss occurred due to receipt of substitute check AMOUNT IN EVENT OF BREACH OF WARRANTY Amount of loss (including costs and expenses) caused by the breach of warranty. AMOUNT IN ABSCENCE OF BREACH OF WARRANTY Amount of loss up to the amount of the check plus interest and expenses. COMPARATIVE NEGLIGENCE EFFECT OF PRODUCING ORIGINAL CHECK OR SUBSTITUTE CHECK SUBROGATION OF RIGHTS In General Recovery Under Warranty Duty of Indemnified Party 20

21 ACCOUNT AGREEMENT NO UNWARRANTED SUBSTITUTE CHECKS WARRANTS GOOD CHECK IMAGE As Depositor for items deposited As Drawer for checks drawn on account BANK NOT OBLIGATED TO RETURN SUBSTITUTE CHECKS WITH STATEMENT BANK MAY PAY ITEM THAT IS NOT A SUBSTITUTE CHECK OR IS NOT LEGAL EQUIVALENT BANK NOT OBLIGATED TO PAY CHECKS OVER THE COUNTER 21

22 Presented by: PAUL A. CARRUBBA Phone: (601) Watkins Ludlam Winter & Stennis, P.A. A T T O R N E Y S A T L A W 22