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Code of Criminal Procedure

Title 10. Commercial Laws

Chapter 1. General Provisions

Part 1. General Provisions

Tit. 10, Art. 1-101. Short titles

(a)  This Title may be cited as the Uniform Commercial Code.

(b)  This Chapter may be cited as Uniform Commercial Code--General Provisions.

Added by Acts 1974, No. 92, §1, eff.  Jan. 1, 1975; Acts 2006, No. 533, §1.

Tit. 10, Art. 1-102. Scope of Chapter

This Chapter applies to a transaction to the extent that it is governed by another Chapter of this Title.

Added by Acts 1974, No. 92, §1, eff.  Jan. 1, 1975 ; Acts 2006, No. 533, §1.

Tit. 10, Art. 1-103. Construction of Uniform Commercial Code to promote its purposes and policies;  applicability of supplemental principles of law

(a)  This Title shall be liberally construed and applied to promote its underlying purposes and policies, which are:

(1)  to simplify, clarify, and modernize the law governing commercial transactions;

(2)  to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and

(3)  to promote uniformity of the law among the various jurisdictions.

(b)  Unless displaced by the particular provisions of this Title, the other laws of Louisiana supplement its provisions.

Added by Acts 1974, No. 92, §1, eff.  Jan. 1, 1975 ; Acts 2006, No. 533, §1.

Tit. 10, Art. 1-104. Construction against implied repeal

This Title being a general law intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.

Added by Acts 1974, No. 92, §1, eff.  Jan. 1, 1975; Acts 2006, No. 533, §1.

Tit. 10, Art. 1-108. Relation to Electronic Signatures in Global and National Commerce Act

This Chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., except that nothing in this Chapter modifies, limits, or supersedes Section 7001(c) of that Act or authorizes electronic delivery of any of the notices described in Section 7003(b) of that Act.

Acts 2006, No. 533, §1.

Part 2. General Definitions and Principles of Interpretation

Tit. 10, Art. 1-201. General definitions

(a)  Unless the context otherwise requires, words or phrases defined in this Section, or in the additional definitions contained in other Chapters of this Title that apply to particular Chapters or Parts thereof, have the meanings stated.

(b)  Subject to definitions contained in other Chapters of this Title that apply to particular Chapters or parts thereof:

(1)  [Reserved.]

(2)  [Reserved.]

(3)  [Reserved.]

(4)  "Bank" means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.

(5)  "Bearer" means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or endorsed in blank.

(6)  "Bill of lading" means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods.  The term does not include a warehouse receipt.

(7)  "Branch" includes a separately incorporated foreign branch of a bank.

(8)  "Burden of establishing" a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.

(9)  "Buyer in ordinary course of business" means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind.  A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices.  A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind.  A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale.  Only a buyer that takes possession of the goods or has a right to obtain delivery of the goods from the seller may be a buyer in ordinary course of business.  "Buyer in ordinary course of business" does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(10)  "Conspicuous," with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it.  Whether a term is "conspicuous" or not is a question of law for the court.  Conspicuous terms include the following:

(A)  a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and

(B)  language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.

(11)  "Consumer" means an individual who enters into a transaction primarily for personal, family, or household purposes.

(12)  [Reserved.]

(13)  "Creditor" includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, and a receiver.

(14)  [Reserved.]

(15)  "Delivery", with respect to an electronic document of title means voluntary transfer of control and with respect to an instrument, a tangible document of title, or chattel paper, means voluntary transfer of possession.

(16)  "Document of title" means a record (i) that in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers and (ii) that purports to be issued by or addressed to a bailee and to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass.  The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods.  An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium.  A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium.  Under this Subsection, "bailee" means a person having possession of goods belonging to another.

(17)  [Reserved.]

(18)  "Fungible goods" means:

(A)  goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or

(B)  goods that by agreement are treated as equivalent.

(19)  "Genuine" means free of forgery or counterfeiting.

(20)  "Good faith", except as otherwise provided in R.S. 10:1-304 and in Chapter 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.

(21)  "Holder" means:

(A)  the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession;

(B)  the person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or

(C)  the person in control of a negotiable electronic document of title.

(22)  "Insolvency proceeding" includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.

(23)  "Insolvent" means:

(A)  having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;

(B)  being unable to pay debts as they become due; or

(C)  being insolvent within the meaning of federal bankruptcy law.

(24)  "Money" means a medium of exchange currently authorized or adopted by a domestic or foreign government.  The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.

(25)  "Organization" means a person other than an individual.

(26)  "Party", as distinguished from "third party", means a person that has engaged in a transaction or made an agreement subject to this Title.

(27)  "Person" means an individual, or any legal or commercial entity, including a corporation, business trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or public corporation.

(28)  "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.

(29)  "Purchase" means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any voluntary transaction creating an interest in property.

(30)  "Purchaser" means a person that takes by purchase.

(31)  "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(32)  "Remedy" means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.

(33)  "Representative" means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate.

(34)  "Right" includes remedy.

(35)  "Security interest" means an interest in personal property or fixtures, created by contract, which secures payment or performance of an obligation.  "Security interest" includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Chapter 9.  The right of a seller or lessor of goods to retain or acquire possession of the goods is not a "security interest," but a seller or lessor may also acquire a "security interest" by complying with Chapter 9.  The retention or reservation of title by a seller of goods notwithstanding perfection of the sale is limited in effect to a reservation of a "security interest."  A lien or privilege created by operation of law is not a "security interest."  Whether a transaction in the form of a lease creates a "security interest" is determined pursuant to R.S. 10:1-203.

(36)  "Send" in connection with a record or notice means:

(A)  to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances; or

(B)  in any other way to cause to be received any record or notice within the time it would have arrived if properly sent under Subparagraph A.

(37)  "Signed" includes using any symbol executed or adopted with present intention to adopt or accept a writing.

(38)  "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(39)  "Surety" includes a guarantor or other secondary obligor.

(40)  "Term" means a portion of an agreement that relates to a particular matter.

(41)  "Unauthorized signature" means a signature made without actual, implied, or apparent authority. The term includes a forgery.

(42)  "Warehouse receipt" means a document of title issued by a person engaged in the business of storing goods for hire.

(43)  "Writing" includes printing, typewriting, or any other intentional reduction to tangible form. "Written" has a corresponding meaning.

Acts 1988, No. 306, §1; Acts 1989, No. 135, §1, eff. Jan. 1, 1990; Acts 1990, No. 1079, §4, eff. Sept. 1, 1990; Acts 1992, No. 1133, §2, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994; Acts 2001, No. 128, §5, eff. July 1, 2001 ; Acts 2006, No. 533, §1; Acts 2009, No. 207, §1, eff. Jan. 1, 2010.

Tit. 10, Art. 1-202. Notice;  knowledge

(a)  Subject to Subsection (f), a person has "notice" of a fact if the person:

(1)  has actual knowledge of it;

(2)  has received a notice or notification of it; or

(3)  from all the facts and circumstances known to the person at the time in question, has reason to know that it exists.

(b)  "Knowledge" means actual knowledge.  "Knows" has a corresponding meaning.

(c)  "Discover," "learn," or words of similar import refer to knowledge rather than to reason to know.

(d)  A person "notifies" or "gives" a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.

(e)  Subject to Subsection (f), a person "receives" a notice or notification when:

(1)  it comes to that person's attention; or

(2)  it is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.

(f)  Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual's attention if the organization had exercised due diligence.  An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines.  Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975 ; Acts 2006, No. 533, §1.

 

Tit. 10, Art. 1-203. Lease distinguished from security interest

(a)  Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.

(b)  A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:

(1)  the original term of the lease is equal to or greater than the remaining economic life of the goods;

(2)  the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;

(3)  the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease; or

(4)  the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease.

(c)  A transaction in the form of a lease does not create a security interest merely because:

(1)  the present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;

(2)  the lessee assumes risk of loss of the goods;

(3)  the lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;

(4)  the lessee has an option to renew the lease or to become the owner of the goods;

(5)  the lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or

(6)  the lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.

(d)  Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease if the option is not exercised.  Additional consideration is not nominal if:

(1)  when the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or

(2)  when the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.

(e)  The "remaining economic life of the goods" and "reasonably predictable" fair market rent, fair market value, or cost of performing under the lease must be determined with reference to the facts and circumstances at the time the transaction is entered into.

Acts 1988, No. 306, §1 ; Acts 2006, No. 533, §1.

Tit. 10, Art. 1-204. Value

Except as otherwise provided in Chapters 3, 4, and 5, a person gives value for rights if the person acquires them:

(1)  in return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;

(2)  as security for, or in total or partial satisfaction of, a preexisting claim;

(3)  by accepting delivery under a preexisting contract for purchase; or

(4)  in return for any consideration sufficient to support a simple contract.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975 ; Acts 2006, No. 533, §1.

 

Tit. 10, Art. 1-205. Reasonable time;  seasonableness

(a)  Whether a time for taking an action required by this Title is reasonable depends on the nature, purpose, and circumstances of the action.

(b)  An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975 ; Acts 2006, No. 533, §1.

Tit. 10, Art. 1-206. Presumptions

Whenever this Title creates a "presumption" with respect to a fact, or provides that a fact is "presumed," the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.

Acts 2006, No. 533, §1.

Part 3. Territorial Applicability and General Rules

Tit. 10, Art. 1-301. Territorial applicability;  parties' power to choose applicable law

(a)  [Reserved]

(b)  This section applies to a transaction to the extent that it is governed by another Chapter of this Title.

(c)  Except as otherwise provided in this Section:

(1)  [Reserved.]

(2)  The effectiveness of an agreement by parties to a transaction that any or all of their rights and obligations are to be determined by the law of this state or of another state or country is governed by the provisions of Book IV of the Louisiana Civil Code.

(d)  In the absence of an agreement effective under Subsection (c), and except as provided in Subsection (g), the rights and obligations of the parties are determined by the law that would be selected by application of Book IV of the Louisiana Civil Code.

(e)  [Reserved.]

(f)  [Reserved.]

(g)  To the extent that this Title governs a transaction, if one of the following provisions of this Title specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:

(1)  [Reserved.]

(2)  [Reserved.]

(3)  R.S. 10:4-102;

(4)  R.S. 10:4A-507;

(5)  R.S. 10:5-116;

(6)  [Reserved.]

(7)  R.S. 10:8-110;

(8)  R.S. 10:9-301 through 9-307.

Acts 2006, No. 533, §1.

Tit. 10, Art. 1-302. Variation by agreement

(a)  Except as otherwise provided in Subsection (b) or elsewhere in this Title, the effect of provisions of this Title may be varied by agreement.

(b)  The obligations of good faith, diligence, reasonableness, and care prescribed by this Title may not be disclaimed by agreement.  The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable.  Whenever this Title requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.

(c)  The presence in certain provisions of this Title of the phrase "unless otherwise agreed", or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this Section.

Acts 2006, No. 533, §1.

Tit. 10, Art. 1-303. Course of performance, course of dealing, and usage of trade

(a)  A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if:

(1)  the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and

(2)  the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

(b)  A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

(c)  A "usage of trade" is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question.  The existence and scope of such a usage must be proved as facts.  If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.

(d)  A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement.  A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.

(e)  Except as otherwise provided in Subsection (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other.  If such a construction is unreasonable:

(1)  express terms prevail over course of performance, course of dealing, and usage of trade;

(2)  course of performance prevails over course of dealing and usage of trade; and

(3)  course of dealing prevails over usage of trade.

(f)  A course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.

(g)  Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.

Acts 2006, No. 533, §1.

 

Tit. 10, Art. 1-304. Obligation of good faith

Every contract or duty within this Title imposes an obligation of good faith in its performance and enforcement.  Under this Section, "good faith" has the meaning with which that term is used in the title on "Conventional Obligations or Contracts" in the Louisiana Civil Code.

Acts 2006, No. 533, §1.

 

Tit. 10, Art. 1-305. Remedies to be liberally administered

(a)  The remedies provided by this Title shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed.

(b)  [Reserved.]

Acts 2006, No. 533, §1.

Tit. 10, Art. 1-307. Prima facie evidence by third-party documents

A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher's or inspector's certificate, consular invoice, or any other document authorized or required by a contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.

Acts 2006, No. 533, §1.

 

Tit. 10, Art. 1-308. Performance or acceptance under reservation of rights

(a)  A party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved.  Such words as "without prejudice", "under protest", or the like are sufficient.

(b)  Subsection (a) does not apply to an accord and satisfaction.

Acts 2006, No. 533, §1.

Tit. 10, Art. 1-309. Option to accelerate at will

A term providing that one party or that party's successor in interest may accelerate payment or performance or require collateral or additional collateral "at will" or "when the party deems itself insecure" or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired.  The burden of establishing lack of good faith is on the party against which the power has been exercised.

Acts 2006, No. 533, §1.

Tit. 10, Art. 1-310. Subordinated obligations

An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated.  Subordination does not create a security interest as against either the common debtor or a subordinated creditor.

Acts 2006, No. 533, §1.

Chapter 3. Negotiable Instruments

Part 1. General Provisions and Definitions

Tit. 10, Art. 3-101. Short title

This Chapter may be cited as Uniform Commercial Code -- Negotiable Instruments.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994; Acts 2006, No. 533, §3.

Tit. 10, Art. 3-102. Subject matter

(a)  This Chapter applies to negotiable instruments.  It does not apply to money, to payment orders governed by Chapter 4A, or to securities governed by Chapter 8.  

(b)  If there is conflict between this Chapter and Chapter 4 or 9, Chapters 4 and 9 govern.  

(c)  Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this Chapter to the extent of the inconsistency.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-103. Definitions

(a)  In this Chapter:

(1)  "Acceptor" means a drawee who has accepted a draft.

(2)  "Drawee" means a person ordered in a draft to make payment.

(3)  "Drawer" means a person who signs or is identified in a draft as a person ordering payment.

(4)  (Reserved)

(5)  "Maker" means a person who signs or is identified in a note as a person undertaking to pay.

(6)  "Order" means a written instruction to pay money signed by the person giving the instruction.  The instruction may be addressed to any person, including the person giving the instruction, or to one or more persons jointly or in the alternative but not in succession.  An authorization to pay is not an order unless the person authorized to pay is also instructed to pay.

(7)  "Ordinary care" in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged.  In the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate the bank's prescribed procedures and the bank's procedures do not vary unreasonably from general banking usage not disapproved by this Chapter or Chapter 4.

(8)  "Party" means a party to an instrument.

(9)  "Promise" means a written undertaking to pay money signed by the person undertaking to pay.  An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation.

(10)  "Prove" with respect to a fact means to meet the burden of establishing the fact (R.S. 10:1-201(b)(8)).

(11)  "Remitter" means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.

(b)  Other definitions applying to this Chapter and the sections in which they appear are:

"Acceptance"

R.S. 10:3-409

"Accommodated party"

R.S. 10:3-419

"Accommodation party"

R.S. 10:3-419

"Alteration"

R.S. 10:3-407

"Anomalous indorsement"

R.S. 10:3-205

"Blank indorsement"

R.S. 10:3-205

"Cashier's check"

R.S. 10:3-104

"Certificate of deposit"

R.S. 10:3-104

"Certified check"

R.S. 10:3-409

"Check"

R.S. 10:3-104

"Consideration"

R.S. 10:3-303

"Draft"

R.S. 10:3-104

"Holder in due course"

R.S. 10:3-302

"Incomplete instrument"

R.S. 10:3-115

"Indorsement"

R.S. 10:3-204

"Indorser"

R.S. 10:3-204

"Instrument"

R.S. 10:3-104

"Issue"

R.S. 10:3-105

"Issuer"

R.S. 10:3-105

"Negotiable instrument"

R.S. 10:3-104

"Negotiation"

R.S. 10:3-201

"Note"

R.S. 10:3-104

"Payable at a definite time"

R.S. 10:3-108

"Payable on demand"

R.S. 10:3-108

"Payable to bearer"

R.S. 10:3-109

"Payable to order"

R.S. 10:3-109

"Payment"

R.S. 10:3-602

"Person entitled to enforce"

R.S. 10:3-301

"Presentment"

R.S. 10:3-501

"Reacquisition"

R.S. 10:3-207

"Special indorsement"

R.S. 10:3-205

"Teller's check"

R.S. 10:3-104

 

"Transfer of instrument"

R.S. 10:3-203

 

"Traveler's check"

R.S. 10:3-104

"Value"

R.S. 10:3-303

(c)  The following definitions in other Chapters apply to this Chapter:

"Bank"

R.S. 10:4-105

"Banking day"

R.S. 10:4-104

"Clearing house"

R.S. 10:4-104

"Collecting bank"

R.S. 10:4-105

"Depositary bank"

R.S. 10:4-105

"Documentary draft"

R.S. 10:4-104

"Intermediary bank"

R.S. 10:4-105

"Item"

R.S. 10:4-104

"Payor bank"

R.S. 10:4-105

"Suspends payments"

R.S. 10:4-104

(d)  In addition, Chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this Chapter.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994; Acts 2006, No. 533, §3.

Tit. 10, Art. 3-104. Negotiable instrument

(a)  Except as provided in Subsections (c) and (d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1)  is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2)  is payable on demand or at a definite time; and

(3)  does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.  

(b)  "Instrument" means a negotiable instrument.  

(c)  An order that meets all of the requirements of Subsection (a), except Paragraph (1), and otherwise falls within the definition of "check" in Subsection (f) is a negotiable instrument and a check.  

(d)  A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this Chapter.

(e)  An instrument is a "note" if it is a promise and is a "draft" if it is an order.  If an instrument falls within the definition of both "note" and "draft," a person entitled to enforce the instrument may treat it as either.  

(f)  "Check" means (i) a draft, other than a documentary draft, payable on demand and drawn on a bank or (ii) a cashier's check or teller's check.  An instrument may be a check even though it is described on its face by another term, such as "money order".  

(g)  "Cashier's check" means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.  

(h)  "Teller's check" means a draft drawn by a bank (i) on another bank, or (ii) payable at or through a bank.  

(i)  "Traveler's check" means an instrument that (i) is payable on demand, (ii) is drawn on or payable at or through a bank, (iii) is designated by the term "traveler's check" or by a substantially similar term, and (iv) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.  

(j)  "Certificate of deposit" means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money.  A certificate of deposit is a note of the bank.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-105. Issue of instrument

(a)  "Issue" means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.  

(b)  An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense.  An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.  

(c)  "Issuer" applies to issued and unissued instruments and means a maker or drawer of an instrument.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-106. Unconditional promise or order

(a)  Except as provided in this Section, for the purposes of R.S. 10:3-104(a), a promise or order is unconditional unless it states (i) an express condition to payment, (ii) that the promise or order is subject to or governed by another writing, or (iii) that rights or obligations with respect to the promise or order are stated in another writing.  A reference to another writing does not of itself make the promise or order conditional.  

(b)  A promise or order is not made conditional (i) by a reference to another writing for a statement of rights with 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 requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of R.S. 10:3-104(a).  If the person whose 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 prevent 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, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject 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 R.S. 10:3-104(a); but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-107. Instrument payable in foreign money

Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-108. Payable on demand or at definite time

(a)  A promise or order is "payable on demand" if it (i) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or (ii) does not state any time of payment.  

(b)  A promise or order is "payable at a definite time" if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of (i) prepayment, (ii) acceleration, (iii) extension at the option of the holder, or (iv) extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.  

(c)  If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-109. Payable to bearer or to order

(a)  A promise or order is payable to bearer if it:

(1)  states that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;

(2)  does not state a payee; or

(3)  states that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.  

(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 R.S. 10:3-205(a).  An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to R.S. 10:3-205(b).  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

 

Tit. 10, Art. 3-110. Identification of person to whom instrument is payable

(a)  The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, 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 even 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 check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.  

(c)  A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office, or account number.  For the purpose of determining the holder of an instrument, the following rules apply:

(1)  If an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable.  If an instrument is payable to an account identified by number and by the name of a person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number.  

(2)  If an instrument is payable to:

(i)  a trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named;

(ii)  a person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative;

(iii)  a fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or

(iv)  an office or to a person described as holding an office, the instrument is payable to the named person, the incumbent of the office, or a successor to the incumbent.  

(d)  If an instrument is payable to two or more persons alternatively, 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 two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them.  If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

 

Tit. 10, Art. 3-111. Place of payment

Except as otherwise provided for items in Chapter 4, 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 drawee or maker stated in the instrument.  If no address is stated, the place of payment is the place of business of the drawee or maker.  If a drawee or maker has more than one place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument.  If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-112. Interest

(a)  Unless otherwise provided in the instrument, (i) an instrument is not payable with 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 fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates.  The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument.  If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 fixed period after date.  Except as provided in R.S. 10:4-401(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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-114. Contradictory terms of instrument

If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-115. Incomplete instrument

(a)  "Incomplete instrument" means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.  

(b)  Subject to Subsection (c), if an incomplete instrument is an instrument under R.S. 10:3-104, 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 R.S. 10:3-104, but, after completion, the requirements of R.S. 10:3-104 are met, the instrument may be enforced according to its terms as augmented by completion.  

(c)  If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under R.S. 10:3-407.  

(d)  The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-116. Joint and several liability;  contribution

(a)  Except as otherwise provided in the instrument, two or more persons who have the same liability on an instrument as makers, drawers, acceptors, indorsers who indorse as joint payees, or anomalous indorsers are jointly and severally liable in the capacity in which they sign.  

(b)  Except as provided in R.S. 10:3-419(e) or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive from any party having the same joint and several liability contribution in accordance with applicable law.  

(c)  Discharge of one party having joint and several liability by a person entitled to enforce the instrument does not affect the right under Subsection (b) of a party having the same joint and several liability to receive contribution from the party discharged.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Tit. 10, Art. 3-117. Other agreements affecting instrument

Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented, or nullified only by a separate written 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 giving rise to the agreement.  To the extent an obligation is modified, supplemented, or nullified by an agreement under this Section, the agreement is a defense to the obligation.  

Acts 1992, No. 1133, §3, eff. July 1, 1993.  Amended by Acts 1993, No. 948, §3, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-118. Prescription

(a)  Except as provided in Subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within five years after the due date or dates stated in the note or, if a due date is accelerated, within five years after the accelerated due date.  

(b)  Except as provided in Subsection (d) or (e), if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within five years after the demand.  If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of five years.  

(c)  Except as provided in Subsection (d), an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three years after dishonor of the draft or five years after the date of the draft, whichever period expires first.  

(d)  An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller's check, cashier's check, or traveler's check must be commenced within 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 within five years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the five-year period begins when 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 check, must be commenced (i) within five 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) within five years after the date of the acceptance if the obligation of the acceptor is payable on demand.  

(g)  Unless governed by other law regarding claims for indemnity or contribution, an action (i) for money had and received, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this Chapter and not governed by this Section must be commenced within three years after the cause of action accrues.  

Acts 1992, No. 1133, §3, eff. July 1, 1993.  Amended by Acts 1993, No. 948, §3, eff. Jan. 1, 1994.  

Part 2. Negotiation, Transfer, and Indorsement

Tit. 10, Art. 3-201. Negotiation

(a)  "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.  

(b)  Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-202. Negotiation subject to rescission

(a)  Negotiation is effective even if obtained (i) from an infant, a corporation exceeding its powers, or a person without capacity, (ii) by fraud, duress, or mistake, or (iii) in breach of duty or as part of an illegal transaction.  

(b)  To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-203. Transfer of instrument;  rights acquired by transfer

(a)  An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.

(b)  Transfer of an instrument, whether or not the transfer is a negotiation, vests 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 acquire 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 otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified 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 Chapter and has only the rights of a partial assignee.

(e)  Donations inter vivos of instruments shall be governed by the provisions of this Chapter notwithstanding any other provision of the Louisiana Civil Code or of any other law of this state, relative to the form of donations inter vivos, to the contrary.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994; Acts 1995, No. 249, §1; Acts 1995, No. 1201, §3, eff. June 29, 1995.

Tit. 10, Art. 3-204. Indorsement

(a)  "Indorsement" 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 indorser's liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an indorsement 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 indorsement.  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)  "Indorser" means a person who makes an indorsement.  

(c)  For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified 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 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-205. Special indorsement;  blank indorsement;  anomalous indorsement

(a)  If an indorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the indorsement identifies a person to whom it makes the instrument payable, it is a "special indorsement." When 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 R.S. 10:3-110 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 "blank indorsement." When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.  

(c)  The holder may convert a blank indorsement that consists only of a signature into a special indorsement by writing, above the signature of the indorser, words identifying the person to whom the instrument is made payable.  

(d)  "Anomalous indorsement" means an indorsement made by a person who is not the holder of the instrument.  An anomalous indorsement does not affect the manner in which the instrument may be negotiated.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-206. Restrictive indorsement

(a)  An indorsement 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 indorsement stating a condition to the right of the indorsee to receive payment does not affect the right of the indorsee 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 indorsement (i) described in R.S. 10:4-201(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 indorser or for a particular account, the following rules apply:

(1)  A person, other than a bank, who purchases the instrument when so indorsed converts the instrument unless the amount paid for the instrument is received by the indorser or applied consistently with the indorsement.  

(2)  A depositary bank that purchases the instrument or takes it for collection when so indorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the indorser or applied consistently with the indorsement.  

(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 indorser or applied consistently with the indorsement.  

(4)  Except as otherwise provided in Paragraph (3), a payor bank or intermediary bank may disregard the indorsement and is not liable if the proceeds of the instrument are not received by the indorser or applied consistently with the indorsement.  

(d)  Except for an indorsement covered by Subsection (c), if an instrument bears an indorsement using words 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 following rules apply:

(1)  Unless there is notice of breach of fiduciary duty as provided in R.S. 10:3-307, a person who purchases the instrument from the indorsee or takes the instrument from the indorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser.  

(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 indorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.  

(e)  The presence on an instrument of an indorsement 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 indorsement to which this Section applies and the payment is not permitted by this Section.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 indorsements 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 indorser whose indorsement is canceled is discharged, and the discharge is effective against any subsequent holder.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Part 3. Enforcement of Instruments

Tit. 10, Art. 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 R.S. 10:3-309 or 10:3-418(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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-302. Holder in due course

(a)  Subject to Subsection (c) and R.S. 10:3-106(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 R.S. 10:3-306, and (vi) without notice that any party has a defense or claim in recoupment described in R.S. 10:3-305(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 R.S. 10:3-303(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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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, or the holder has in good faith changed his position in reliance on it, in which case he is deemed to have given full value for the instrument;

(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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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, 90 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 Chapter 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 (R.S. 10:3-306) 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

 

Tit. 10, Art. 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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, 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 R.S. 10:3-402(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 R.S. 10:3-301, 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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, R.S. 10:3-308 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 indorser 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 90 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-312. Lost, destroyed, or stolen cashier's check, teller's check, certified check, or money order

(a)  In this Section:

(1)  "Check" means a cashier's check, teller's check, certified check, or money order.  

(2)  "Claimant" means a person who claims the right to receive the amount of a cashier's check, teller's check, certified check, or money order 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, teller's check, or money order, (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, teller's check, or money order, 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, teller's check, or money order, (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, teller's check, or money order, 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 R.S. 10:4-302(a)(1), payment to the 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 Subsection (b)(4) 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) and is also a person entitled to enforce a cashier's check, teller's check, certified check, or money order which is lost, destroyed, or stolen, the claimant may assert rights with respect to the check either under this Section or R.S. 10:3-309.  

Acts 1992, No. 1133, §3, eff. July 1, 1993.  Amended by Acts 1993, No. 948, §3, eff. Jan. 1, 1994.  

Part 4. Liability of Parties

Tit. 10, Art. 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 R.S. 10:3-402.  

(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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-403. Unauthorized signature

(a)   Unless otherwise provided in this Chapter or Chapter 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 Chapter.  

(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 Chapter which makes the unauthorized signature effective for the purposes of this Chapter.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 indorsement of the instrument by any person in the name of the payee is effective as the indorsement 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 (R.S. 10:3-110(a) or (b)) 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 indorsement:

(1)  Any person in possession of the instrument is its holder.  

(2)  An indorsement by any person in the name of the payee stated in the instrument is effective as the indorsement 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 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, whether or not indorsed, 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-405. Employer's responsibility for fraudulent indorsement by employee

(a)  In this Section:

(1)  "Employee" includes an independent contractor and employee of an independent contractor retained by the employer.  

(2)  "Fraudulent indorsement" means (i) in the case of an instrument payable to the employer, a forged indorsement 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 indorsement purporting to be that of the person identified as payee.  

(3)  "Responsibility" with respect to instruments means authority (i) to sign or indorse 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 indorsement of the instrument, the indorsement is effective as the indorsement 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 indorsement 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 indorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994

Tit. 10, Art. 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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 indorser that does not expressly assent to the acceptance is discharged.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 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, (iv) payment is prohibited by law, or (v) R.S. 10:3-312 is applicable.  

Acts 1992, No. 1133, §3, eff. July 1, 1993.  Amended by Acts 1993, No. 948, §3, eff. Jan. 1, 1994. 

Tit. 10, Art. 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 R.S. 10:3-115 and 10:3-407.  The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under R.S. 10:3-415.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-413. Obligation of acceptor

(a)  The acceptor of a draft is obliged to pay the draft (i) according to its terms at the time it was accepted, even though the acceptance states that the draft is payable "as originally drawn" or equivalent terms, (ii) if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or (iii) if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in R.S. 10:3-115 and 10:3-407.  The obligation is owed to a person entitled to enforce the draft or to the drawer or an indorser who paid the draft under R.S. 10:3-414 or 10:3-415.  

(b)  If the certification of a check 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 subsequently 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 was taken by the holder in due course.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-414. Obligation of drawer

(a)  This Section does not apply to cashier's checks or other drafts drawn on the drawer.  

(b)  If an unaccepted draft is dishonored, the drawer is obliged to pay the draft (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 drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in R.S. 10:3-115 and 10:3-407.  The obligation is owed to a person entitled to enforce the draft or to an indorser who paid the draft under R.S. 10:3-415.  

(c)  If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.  

(d)  If a draft is accepted and the acceptor is not a bank, the obligation of the drawer to pay the draft if the draft is dishonored by the acceptor is the same as the obligation of an indorser under R.S. 10:3-415(a) and (c).  

(e)  If a draft states that it is drawn "without recourse" or otherwise disclaims liability of the drawer to pay the draft, the drawer is not liable under Subsection (b) to pay the draft if the draft is not a check.  A disclaimer of the liability stated in Subsection (b) is not effective if the draft is a check.  

(f)  If (i) a check is not presented for payment or given to a depositary bank for collection within 30 days after its date, (ii) the drawee suspends payments after expiration of the 30-day period without paying the check, and (iii) because of the suspension of payments, the drawer is deprived of funds maintained with the drawee to cover payment of the check, the drawer to the extent deprived of funds may discharge its obligation to pay the check by assigning to the person entitled to enforce the check the rights of the drawer against the drawee with respect to the funds.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-415. Obligation of indorser

(a)  Subject to Subsections (b), (c), and (d) and to R.S. 10:3-419(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 was indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in R.S. 10:3-115 and 10:3-407.  The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this Section.  

(b)  If an indorsement states that it is made "without recourse" or otherwise 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 required by R.S. 10:3-503 and notice of dishonor complying with that Section is not given to an indorser, the liability of the indorser under Subsection (a) is discharged.  

(d)  If a draft is accepted by a bank after an indorsement is made, the liability of the indorser under Subsection (a) is discharged.  

(e)  If an indorser of a check is liable under Subsection (a) and the check is not presented for payment, or given to a depositary bank for collection, within 30 days after the day the indorsement was made, the liability of the indorser under Subsection (a) is discharged.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

 

Tit. 10, Art. 3-416. Transfer warranties

(a)  A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by indorsement, to any subsequent transferee that:

(1)  the warrantor is a person entitled to enforce the instrument;

(2)  all signatures on the instrument are authentic and authorized;

(3)  the instrument has not been altered;

(4)  the instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor; and

(5)  the warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.  

(b)  A person to whom the warranties under Subsection (a) are made and who took the instrument in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach.  

(c)  The warranties stated in Subsection (a) cannot be disclaimed with respect to checks.  Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under Subsection (b) is discharged to the extent of any loss caused by the delay in giving notice of the claim.  

(d)  A cause of action for breach of warranty under this Section accrues when the claimant has reason to know of the breach.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-417. Presentment warranties

(a)  If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that:

(1)  the warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;

(2)  the draft has not been altered; and

(3)  the warrantor has no knowledge that the signature of the drawer of the draft is unauthorized.  

(b)  A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment.  In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach.  The right of the drawee to recover damages under this Subsection is not affected by any failure of the drawee to exercise ordinary care in making payment.  If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor.  If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this Subsection.  

(c)  If a drawee asserts a claim for breach of warranty under Subsection (a) based on an unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under R.S. 10:3-404 or 10:3-405 or the drawer is precluded under R.S. 10:3-406 or 10:4-406 from asserting against the drawee the unauthorized indorsement or alteration.  

(d)  If (i) a dishonored draft is presented for payment to the drawer or an indorser or (ii) any other instrument is presented for payment to a party obliged to pay the instrument, and (iii) payment is received, the following rules apply:

(1)  The person obtaining payment and a prior transferor of the instrument warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the instrument, a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument.  

(2)  The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.  

(e)  The warranties stated in Subsections (a) and (d) cannot be disclaimed with respect to checks.  Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under Subsection (b) or (d) is discharged to the extent of any loss caused by the delay in giving notice of the claim.  

(f)  A cause of action for breach of warranty under this Section accrues when the claimant has reason to know of the breach.  

Acts 1992, No. 1133, §3, eff. July 1, 1992; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

 

Tit. 10, Art. 3-418. Payment or acceptance by mistake

(a)  Except as provided in Subsection (c), if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that (i) payment of the draft had not been stopped pursuant to R.S. 10:4-403 or (ii) the signature of the drawer of the draft was authorized, the drawee may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance.  Rights of the drawee under this Subsection are not affected by failure of the drawee to exercise ordinary care in paying or accepting the draft.  

(b)  Except as provided in Subsection (c), if an instrument has been paid or accepted by mistake and the case is not covered by Subsection (a), the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, (i) recover the payment from the person to whom or for whose benefit payment was made or (ii) in the case of acceptance, may revoke the acceptance.  

(c)  The remedies provided by Subsection (a) or (b) may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance.  This Subsection does not limit remedies provided by R.S. 10:3-417 or 10:4-407.  

(d)  Notwithstanding R.S. 10:4-215, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under Subsection (a) or (b), the instrument is deemed not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Tit. 10, Art. 3-419. Instruments signed for accommodation

(a)  If an instrument is issued for value given for the benefit of a party to the instrument ("accommodated party") and another party to the instrument ("accommodation party") signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party "for accommodation."

(b)  An accommodation party may sign the instrument as maker, drawer, acceptor, or indorser and, subject to Subsection (d), is obliged to pay the instrument in the capacity in which the accommodation party signs.  The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not the accommodation party receives 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 words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument.  Except as provided in R.S. 10:3-605, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken 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 words 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) execution of judgment against the other party has been returned unsatisfied, (ii) the other party is insolvent or in an insolvency proceeding, (iii) the other party cannot be served with process, or (iv) it is otherwise apparent that payment cannot be obtained from the other party.  

(e)  An accommodation party who pays the instrument is entitled to reimbursement, subrogation, contribution, and indemnification in accordance with the rules dealing with these matters found in the Civil Code Articles on suretyship, and is entitled to enforce the instrument against the accommodated party.  An accommodated party who pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-420. Conversion of instrument

(a)  An instrument is converted when

(i)  a drawee to whom it is delivered for acceptance refuses to return it on demand; or

(ii)  any person to whom it is delivered for payment refuses on demand either to pay or to return it; or

(iii)  it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment.  

(b)  An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or co-payee or (iii) by the drawer.  

(c)  In an action under Subsection (a), the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff's interest in the instrument.  

(d)  A representative other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.  

(e)  Nothing in this Section prevents the owner of an instrument that has been wrongfully taken from him and not negotiated from requiring the drawer or maker to issue a substitute for it.  

(f)  Any action for conversion or an action for replacement under Subsection (e) prescribes in one year.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Part 5. Dishonor

Tit. 10, Art. 3-501. Presentment

(a)  "Presentment" means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.  

(b)  The following rules are subject to Chapter 4, agreement of the parties, and clearing-house rules and the like:

(1)  Presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written, or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one of two or more makers, acceptors, drawees, or other payors.  

(2)  Upon demand of the person to whom presentment is made, the person making presentment must (i) exhibit the instrument, (ii) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (iii) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.  

(3)  Without dishonoring the instrument, the party to whom presentment is made may (i) return the instrument for lack of a necessary indorsement, or (ii) refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule.  

(4)  The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if the party to whom presentment is made has established a cut-off hour not earlier than 2 p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cut-off hour.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

 

Tit. 10, Art. 3-502. Dishonor

(a)  Dishonor of a note is governed by the following rules:

(1)  If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment.  

(2)  If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later.  

(3)  If the note is not payable on demand and Paragraph (2) does not apply, the note is dishonored if it is not paid on the day it becomes payable.

(b)  Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:

(1)  If a check is duly presented for payment to the payor bank otherwise than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under R.S. 10:4-301 or 10:4-302, or becomes accountable for the amount of the check under R.S. 10:4-302.

(2)  If a draft is payable on demand and Paragraph (1) does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment.  

(3)  If a draft is payable on a date stated in the draft, the draft is dishonored if (i) presentment for payment is duly made to the drawee and payment is not made on the day the draft becomes payable or the day of presentment, whichever is later, or (ii) presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment.  

(4)  If a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.  

(c)  Dishonor of an unaccepted documentary draft occurs according to the rules stated in Subsection (b)(2), (3), and (4), except that payment or acceptance may be delayed without dishonor until no later than the close of the third business day of the drawee following the day on which payment or acceptance is required by those Paragraphs.  

(d)  Dishonor of an accepted draft is governed by the following rules:

(1)  If the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment.  

(2) If the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day it becomes payable or the day of presentment, whichever is later.  

(e)  In any case in which presentment is otherwise required for dishonor under this Section and presentment is excused under R.S. 10:3-504, dishonor occurs without presentment if the instrument is not duly accepted or paid.

(f)  If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-503. Notice of dishonor

(a)  The obligation of an indorser stated in R.S. 10:3-415(a) and the obligation of a drawer stated in R.S. 10:3-414(d) may not be enforced unless (i) the indorser or drawer is given notice of dishonor of the instrument complying with this Section or (ii) notice of dishonor is excused under R.S. 10:3-504(b).  

(b)  Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written, or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted.  Return of an instrument given to a bank for collection is sufficient notice of dishonor.  

(c)  Subject to R.S. 10:3-504(c), with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given (i) by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument, or (ii) by any other person within 30 days following the day on which the person receives notice of dishonor.  With respect to any other instrument, notice of dishonor must be given within 30 days following the day on which dishonor occurs.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-504. Excused presentment and notice of dishonor

(a)  Presentment for payment or acceptance of an instrument is excused if (i) the person entitled to present the instrument cannot with reasonable diligence make presentment, (ii) the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings, (iii) by the terms of the instrument presentment is not necessary to enforce the obligation of indorsers or the drawer, (iv) the drawer or indorser whose obligation is being enforced has waived presentment or otherwise has no reason to expect or right to require that the instrument be paid or accepted, or (v) the drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.  

(b)  Notice of dishonor is excused 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 whose obligation is being enforced waived notice of dishonor.  A waiver of presentment is also a waiver of notice of dishonor.  

(c)  Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.  

Tit. 10, Art. 3-505. Evidence of dishonor

(a)  The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:

(1)  a document regular in form as provided in Subsection (b) which purports to be a protest;

(2)  a purported stamp or writing of the drawee, payor bank, or presenting bank on or accompanying the instrument stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor;

(3)  a book or record of the drawee, payor bank, or collecting bank, kept in the usual course of business which shows dishonor, even if there is no evidence of who made the entry.  

(b)  A "protest" is a certificate of dishonor made by a United States consul or vice consul, or a notary public or other person authorized to administer oaths by the law of the place where 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 why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment.  The protest may also certify that notice of dishonor has been given to some or all parties.  

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Part 6. Discharge and Payment

Tit. 10, Art. 3-601. Discharge and effect of discharge

(a)  The obligation of a party to pay the instrument is discharged as stated in this Chapter or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.

(b)  Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Tit. 10, Art. 3-602. Payment

(a)  Subject to Subsection (b), an instrument is paid to the extent 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 extent of the payment, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under R.S. 10:3-306 by another person.

(b)  The obligation of a party to pay the instrument is not discharged under Subsection (a) if:

(1)  a claim to the instrument under R.S. 10:3-306 is enforceable against the party receiving payment and (i) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or (ii) in the case of an instrument other than a cashier's check, teller's check, or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument; or

(2)  the person making payment knows that the instrument is a stolen instrument and pays a person it knows is in wrongful possession of the instrument.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Tit. 10, Art. 3-603. Tender of payment

(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 governed by principles of law 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 extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which 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 required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Tit. 10, Art. 3-604. Discharge by cancellation or renunciation

(a)  A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument (i) by an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party's signature, or the addition of words to the instrument indicating discharge, or (ii) by agreeing not to sue or otherwise renouncing rights against the party by a signed writing.

(b)  Cancellation or striking out of an indorsement pursuant to Subsection (a) does not affect the status and rights of a party derived from the indorsement.

Acts 1992, No. 1133, §3, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994.

Chapter 4. Bank Deposits and Collections
Chapter 4A. Funds Transfers

Part 1. Subject Matter and Definitions

Tit. 10, Art. 4A-101. Short title

This Chapter may be cited as Uniform Commercial Code -- Funds Transfers.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990; Acts 2006, No. 533, §4.

Tit. 10, Art. 4A-102. Subject Matter

Except as otherwise provided in R.S. 10:4A-108, this Chapter applies to funds transfers defined in R.S. 10:4A-104.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-103. Payment Order--Definitions

(a)  In this Chapter:

(1)  "Payment order" means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if:

(i)  the instruction does not state a condition to payment to the beneficiary other than time of payment,

(ii)  the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender, and

(iii)  the instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank.

(2)  "Beneficiary" means the person to be paid by the beneficiary's bank.

(3)  "Beneficiary's bank" means the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.

(4)  "Receiving bank" means the bank to which the sender's instruction is addressed.

(5)  "Sender" means the person giving the instruction to the receiving bank.

(b)  If an instruction complying with Subsection (a)(1) is to make more than one payment to a beneficiary, the instruction is a separate payment order with respect to each payment.

(c)  A payment order is issued when it is sent to the receiving bank.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-104. Funds Transfer--Definitions

In this Chapter:

(a)  "Funds transfer" means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order.  The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order.  A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order.

(b)  "Intermediary bank" means a receiving bank other than the originator's bank or the beneficiary's bank.

(c)  "Originator" means the sender of the first payment order in a funds transfer.

(d)  "Originator's bank" means (i) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or (ii) the originator if the originator is a bank.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-105. Other definitions

(a)  In this Chapter:

(1)  "Authorized account" means a deposit account of a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank. If a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account.

(2)  "Bank" means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.  A branch or separate office of a bank is a separate bank for purposes of this Chapter.

(3)  "Customer" means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders.

(4)  "Funds-transfer business day" of a receiving bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders.

(5)  "Funds-transfer system" means a wire transfer network,  automated clearing house, or other communication system of a clearing house or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed.

(6)  [Reserved.]

(7)  "Prove" with respect to a fact means to meet the burden of establishing the fact (R.S. 10:1-201(b)(8)).

(b)  Other definitions applying to this Chapter and the Sections in which they appear are:

"Acceptance"

R.S. 10:4A-209

"Beneficiary"

R.S. 10:4A-103

"Beneficiary's bank"

R.S. 10:4A-103

"Executed"

R.S. 10:4A-301

"Execution date"

R.S. 10:4A-301

"Funds transfer"

R.S. 10:4A-104

"Funds-transfer system rule"

R.S. 10:4A-501

"Intermediary bank"

R.S. 10:4A-104

"Originator"

R.S. 10:4A-104

"Originator's bank"

R.S. 10:4A-104

"Payment by beneficiary's bank

to beneficiary

R.S. 10:4A-405

"Payment by originator to beneficiary"

R.S. 10:4A-406

"Payment by sender to receiving bank"

R.S. 10:4A-403

"Payment date"

R.S. 10:4A-401

"Payment order"

R.S. 10:4A-103

"Receiving bank"

R.S. 10:4A-103

"Security procedure"

R.S. 10:4A-201

"Sender"

R.S. 10:4A-103

(c)  The following definitions in Chapter 4 apply to this Chapter:

"Clearing house"

R.S. 10:4-104

"Item"

R.S. 10:4-104

"Suspends payments"

R.S. 10:4-104

(d)  In addition Chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this Chapter.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.  Amended by Acts 1993, No. 948, §3, eff. Jan. 1, 1994; Acts 2006, No. 533, §4.

Tit. 10, Art. 4A-106. Time payment order is received

(a)  The time of receipt of a payment order or communication cancelling or amending a payment order is determined by the rules applicable to receipt of a notice stated in R.S. 10:1-202. A receiving bank may fix a cut-off time or times on a funds-transfer business day for the receipt and processing of payment orders and communications cancelling or amending payment orders.  Different cut-off times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments.  A cut-off time may apply to senders generally or different cut-off times may apply to different senders or categories of payment orders.  If a payment order or communication cancelling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cut-off time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day.

(b)  If this Chapter refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in this Chapter.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990; Acts 2006, No. 533, §4.

Tit. 10, Art. 4A-107. Federal reserve regulations and operating circulars

Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this Chapter to the extent of the inconsistency.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-108. Relationship to the federal Electronic Fund Transfer Act

(a)  Except as provided in Subsection (b) of this Section, this Chapter does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act of 1978 (Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. §1693 et seq.) as amended from time to time.

(b)  This Chapter applies to a funds transfer that is a remittance transfer as defined in the Electronic Fund Transfer Act (15 U.S.C. §1693o-1) as amended from time to time, unless the remittance transfer is an electronic fund transfer as defined in the Electronic Fund Transfer Act (15 U.S.C. §1693a) as amended from time to time.

(c)  In a funds transfer to which this Chapter applies, in the event of an inconsistency between an applicable provision of this Chapter and an applicable provision of the Electronic Fund Transfer Act, the provision of the Electronic Fund Transfer Act governs to the extent of the inconsistency.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990; Acts 2014, No. 520, §1.

Part 2. Issue and Acceptance of Payment Order

Tit. 10, Art. 4A-201. Security procedure

"Security procedure" means a procedure established by agreement of a customer and a receiving bank for the purpose of (i) verifying that a payment order or communication amending or cancelling a payment order is that of the customer, or (ii)  detecting error in the transmission or the content of the payment order or communication.  A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, callback procedures, or similar security devices. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-202. Authorized and verified payment orders

(a)  A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency.

(b)  If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if (i) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and (ii) the bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer.  The bank is not required to follow an instruction that violates a written agreement with the customer or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted.

(c)  Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security procedures in general use by customers and receiving bank similarly situated.  A security procedure is deemed to be commercially reasonable if (i) the security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer, and (ii) the customer expressly agreed in writing to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the security procedure chosen by the customer.

(d)  The term "sender" in this Chapter includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under Subsection (a), or it is effective as the order of the customer under Subsection (b).

(e)  This Section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders.

(f)  Except as provided in this Section and in R.S. 10:4A-203(a)(1), rights and obligations arising under this Section or R.S. 10:4A-203 may not be varied by agreement.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-203. Unenforceability of certain verified payment orders

(a)  If an accepted payment order is not, under R.S. 10:4A-202(a), an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to R.S. 10:4A-202(b), the following rules apply:

(1)  By express written agreement, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order.

(2)  The receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was not caused, directly or indirectly, by a person (i) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure, or (ii) who obtained access to transmitting facilities of the customer or who obtained, from a source controlled by the customer and without authority of the receiving bank, information facilitating breach of the security procedure, regardless of how the information was obtained or whether the customer was at fault.  Information includes any access device, computer software, or the like.

(b)  This Section applies to amendments of payment orders to the same extent it applies to payment orders.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-204. Refund of payment and duty of customer to report with respect to unauthorized payment order

(a)  If a receiving bank accepts a payment order issued in the name of its customer as sender which is (i) not authorized and not effective as the order of the customer under R.S. 10:4A-202, or (ii) not enforceable, in whole or in part, against the customer under R.S. 10:4A-203, the bank shall refund any payment of the payment order received from the customer to the extent the bank is not entitled to enforce payment and shall pay interest on the refundable amount calculated from the date the bank received payment to the date of the refund.  However, the customer is not entitled to interest from the bank on the amount to be refunded if the customer fails to exercise ordinary care to determine that the order was not authorized by the customer and to notify the bank of the relevant facts within a reasonable time not exceeding ninety days after the date the customer received notification from the bank that the order was accepted or that the customer's account was debited with respect to the order.  The bank is not entitled to any recovery from the customer on account of a failure by the customer to give notification as stated in this Section.

(b)  Reasonable time under Subsection (a) may be fixed by agreement as stated in R.S. 10:1-302(b), but the obligation of a receiving bank to refund payment as stated in Subsection (a) may not otherwise be varied by agreement.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990; Acts 2006, No. 533, §4.

Tit. 10, Art. 4A-205. Erroneous payment orders

(a)  If an accepted payment order was transmitted pursuant to a security procedure for the detection of error and the payment order (i) erroneously instructed payment to a beneficiary not intended by the sender, (ii) erroneously instructed payment in an amount greater than the amount intended by the sender, or (iii) was an erroneously transmitted duplicate of a payment order previously sent by the sender, the following rules apply:

(1)  If the sender proves that the sender or a person acting on behalf of the sender pursuant to R.S. 10:4A-206 complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obliged to pay the order to the extent stated in Paragraphs (2) and (3).

(2)  If the funds transfer is completed on the basis of an erroneous payment order described in clause (i) or (iii) of Subsection (a), the sender is not obliged to pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.

(3)  If the funds transfer is completed on the basis of a payment order described in clause (ii) of Subsection (a), the sender is not obliged to pay the order to the extent the amount received by the beneficiary is greater than the amount intended by the sender.  In that case, the receiving bank is entitled to recover from the beneficiary the excess amount received to the extent allowed by the law governing mistake and restitution.

(b)  If (i) the sender of an erroneous payment order described in Subsection (a) is not obliged to pay all or part of the order, and (ii) the sender receives notification from the receiving bank that the order was accepted by the bank or that the sender's account was debited with respect to the order, the sender has a duty to exercise ordinary care, on the basis of information available to the sender, to discover the error with respect to the order and to advise the bank of the relevant facts within a reasonable time, not exceeding ninety days, after the bank's notification was received by the sender.  If the bank proves that the sender failed to perform that duty, the sender is liable to the bank for the loss the bank proves it incurred as a result of the failure, but the liability of the sender may not exceed the amount of the sender's order.

(c)  This Section applies to amendments to payment orders to the same extent it applies to payment orders.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-206. Transmission of payment order through funds-transfer or other communication

(a)  If a payment order addressed to a receiving bank is transmitted to a funds-transfer system or other third-party communication system for transmittal to the bank, the system is deemed to be an agent of the sender for the purpose of transmitting the payment order to the bank. If there is a discrepancy between the terms of the payment order transmitted to the system and the terms of the payment order transmitted by the system to the bank, the terms of the payment order of the sender are those transmitted by the system.  This Section does not apply to a funds-transfer system of the Federal Reserve Banks.

(b)  This Section applies to cancellations and amendments of payment orders to the same extent it applies to payment orders.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-207. Misdescription of beneficiary

(a)  Subject to Subsection (b), if, in a payment order received by the beneficiary's bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.

(b)  If a payment order received by the beneficiary's bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:

(1)  Except as otherwise provided in Subsection (c), if the beneficiary's bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order.  The beneficiary's bank need not determine whether the name and number refer to the same person.

(2)  If the beneficiary's bank pays the person identified by the name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary's bank if that person was entitled to receive payment from the originator of the funds transfer.  If no person has rights as beneficiary, acceptance of the order cannot occur.

(c)  If (i) a payment order described in Subsection (b) is accepted, (ii) the originator's payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary's bank pays the person identified by number as permitted by Subsection (b)(1), the following rules apply:

(1)  If the originator is a bank, the originator is obliged to pay its order.

(2)  If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator's bank proves that the originator, before acceptance of the originator's order, had notice that payment of a payment order issued by the originator might be made by the beneficiary's bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary.  Proof of notice may be made by any admissible evidence.  The originator's bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a writing stating the information to which the notice relates.

(d)  In a case governed by Subsection (b)(1), if the beneficiary's bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:

(1)  If the originator is obliged to pay its payment order as stated in Subsection (c), the originator has the right to recover.

(2)  If the originator is not a bank and is not obliged to pay its payment order, the originator's bank has the right to recover.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

 

Tit. 10, Art. 4A-208. Misdescription of intermediary bank or beneficiary's bank

(a)  This Subsection applies to a payment order identifying an intermediary bank or the beneficiary's bank only by an identifying number.

(1)  The receiving bank may rely on the number as the proper identification of the intermediary or beneficiary's bank and need not determine whether the number identifies a bank.

(2)  The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.

(b)  This Subsection applies to a payment order identifying an intermediary bank or the beneficiary's bank both by name and an identifying number if the name and number identify different persons.

(1)  If the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary's bank if the receiving bank, when it executes the sender's order, does not know that the name and number identify different persons.  The receiving bank need not determine whether the name and number refer to the same person or whether the number refers to a bank.  The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.

(2)  If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary's bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by Subsection (b)(1), as though the sender were a bank.  Proof of notice may be made by any admissible evidence.  The receiving bank satisfies the burden of proof if it proves that the sender, before the payment order was accepted, signed a writing stating the information to which the notice relates.

(3)  Regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary or beneficiary's bank if the receiving bank, at the time it executes the sender's order, does not know that the name and number identify different persons.  The receiving bank need not determine whether the name and number refer to the same person.

(4)  If the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender's payment order is a breach of the obligation stated in R.S. 10:4A-302(a)(1).

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-209. Acceptance of payment order

(a)  Subject to Subsection (d), a receiving bank other than the beneficiary's bank accepts a payment order when it executes the order.

(b)  Subject to Subsections (c) and (d), a beneficiary's bank accepts a payment order at the earliest of the following times:

(1)  when the bank (i) pays the beneficiary as stated in R.S. 10:4A-405(a) or 4A-405(b), or (ii) notifies the beneficiary of receipt of the order or that the account of the beneficiary has been credited with respect to the order unless the notice indicates that the bank is rejecting the order or that the funds with respect to the order may not be withdrawn or used until receipt of payment from the sender of the order.

(2)  when the bank receives payment of the entire amount of the sender's order pursuant to R.S. 10:4A-403(a)(1) or 4A-403(a)(2); or

(3)  the opening of the next funds-transfer business day of the bank following the payment date of the order if, at that time, the amount of the sender's order is fully covered by a withdrawable credit balance in an authorized account of the sender or the bank has otherwise received full payment from the sender, unless the order was rejected before that time or is rejected within (i) one hour after that time, or (ii) one hour after the opening of the next business day of the sender following the payment date if that time is later.  If notice of rejection is received by the sender after the payment date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the payment date to the day the sender receives notice or learns that the order was not accepted, counting that day as an elapsed day.  If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest payable is reduced accordingly.

(c)  Acceptance of a payment order cannot occur before the order is received by the receiving bank.  Acceptance does not occur under Subsection (b)(2) or (b)(3) if the beneficiary of the payment order does not have an account with the receiving bank, the account has been closed, or the receiving bank is not permitted by law to receive credits for the beneficiary's account.

(d)  A payment order issued to the originator's bank cannot be accepted until the payment date if the bank is the beneficiary's bank, or the execution date if the bank is not the beneficiary's bank.  If the originator's bank executes the originator's payment order before the execution date or pays the beneficiary of the originator's payment order before the payment date and the payment order is subsequently cancelled pursuant to R.S. 10:4A-211(b), the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution.

(e)  If a receiving bank accepts a payment order and that receiving bank is also the originator's bank for the payment order, that bank may not assess a fee on the payment order's beneficiary solely because the beneficiary does not have an authorized account with the receiving bank.

(f)  The originator's bank shall not charge the beneficiary a fee for making payment pursuant to the originator's instructions; however, the bank may charge the originator a fee for processing the payment.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990; Acts 1997, No. 102, §1, eff. June 11, 1997; Acts 1997, No. 226, §1.

Tit. 10, Art. 4A-210. Rejection of payment order

(a)  A payment order is rejected by the receiving bank by a notice of rejection transmitted to the sender orally, electronically, or in writing.  A notice of rejection need not use any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order.  Rejection is effective when the notice is given if transmission is by means that is reasonable in the circumstances.  If notice of rejection is given by a means that is not reasonable, rejection is effective when the notice is received.  If an agreement of the sender and receiving bank establishes the means to be used to reject a payment order, (i) any means complying with the agreement is reasonable and (ii) any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.

(b)  This Subsection applies if a receiving bank other than the beneficiary's bank fails to execute a payment order despite the existence on the execution date of a withdrawable credit balance in an authorized account of the sender sufficient to cover the order.  If the sender does not receive notice of rejection of the order on the execution date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the execution date to the earlier of the day the order is cancelled pursuant to R.S. 10:4A-211(d) or the day the sender receives notice or learns that the order was not executed, counting the final day of the period as an elapsed day.  If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest is reduced accordingly.

(c)  If a receiving bank suspends payments, all unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments.

(d)  Acceptance of a payment order precludes a later rejection of the order.  Rejection of a payment order precludes a later acceptance of the order.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-211. Cancellation and amendment of payment order

(a)  A communication of the sender of a payment order cancelling or amending the order may be transmitted to the receiving bank orally, electronically, or in writing.  If a security procedure is in effect between the sender and the receiving bank, the communication is not effective to cancel or amend the order unless the communication is verified pursuant to the security procedure or the bank agrees to the cancellation or amendment.

(b)  Subject to Subsection (a), a communication by the sender cancelling or amending a payment order is effective to cancel or amend the order if notice of the communication is received at a time and in a manner affording the receiving bank a reasonable opportunity to act on the communication before the bank accepts the payment order.

(c)  After a payment order has been accepted, cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank.

(1)  With respect to a payment order accepted by a receiving bank other than the beneficiary's bank, cancellation or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made.

(2)  With respect to a payment order accepted by the beneficiary's bank, cancellation or amendment is not effective unless the order was issued in execution of an unauthorized payment order, or because of a mistake by a sender in the funds transfer which resulted in the issuance of a payment order (i) that is a duplicate of a payment order previously issued by the sender, (ii) that orders payment to a beneficiary not entitled to receive payment from the originator, or (iii) that orders payment in an amount greater than the amount the beneficiary was entitled to receive from the originator.  If the payment order is cancelled or amended, the beneficiary's bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.

(d)  An unaccepted payment order is cancelled by operation of law at the close of the fifth funds-transfer business day of the receiving bank after the execution date of payment date of the order.

(e)  A cancelled payment order cannot be accepted.  If an accepted payment order is cancelled, the acceptance is nullified and no person has any right or obligation based on the acceptance.  Amendment of a payment order is deemed to be cancellation of the original order at the time of amendment and issue of a new payment order in the amended form at the same time.

(f)  Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the bank's agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney's fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment.

(g)  A payment order is not revoked by the death or legal incapacity of the sender unless the receiving bank knows of the death or of an adjudication of incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance of the order.

(h)  A funds-transfer system rule is not effective to the extent it conflicts with Subsection (c)(2).

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-212. Liability and duty of receiving bank regarding unaccepted payment order

If a receiving bank fails to accept a payment order that it is obliged by express agreement to accept, the bank is liable for breach of the agreement to the extent provided in the agreement or in this Chapter, but does not otherwise have any duty to accept a payment order or, before acceptance, to take any action, or refrain from taking action, with respect to the order except as provided in this Chapter or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in R.S. 10:4A-209, and liability is limited to that provided in this Chapter.  A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer, and the bank owes no duty to any party to the funds transfer except as provided in this Chapter or by express agreement.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Part 3. Execution of Sender's Payment Order by Receiving Bank

Tit. 10, Art. 4A-301. Execution and execution date

(a)  A payment order is "executed" by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank.  A payment order received by the beneficiary's bank can be accepted but cannot be executed.

(b)  "Execution date" of a payment order means the day on which the receiving bank may properly issue a payment order in execution of the sender's order.  The execution date may be determined by instruction of the sender but cannot be earlier than the day the order is received and, unless otherwise determined, is the day the order is received.  If the sender's instruction states a payment date, the execution date is the payment date or an earlier date on which execution is reasonably necessary to allow payment to the beneficiary on the payment date.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-302. Obligations of receiving bank in execution of payment order

(a)  Except as provided in Subsections (b) through (d), if the receiving bank accepts a payment order pursuant to R.S. 10:4A-209(a), the bank has the following obligations in executing the order:

(1)  The receiving bank is obliged to issue, on the execution date, a payment order complying with the sender's order and to follow the sender's instructions concerning (i) any intermediary bank or funds-transfer system to be used in carrying out the funds transfer, or (ii) the means by which payment orders are to be transmitted in the funds transfer.  If the originator's bank issues a payment order to an intermediary bank, the originator's bank is obliged to instruct the intermediary bank according to the instruction of the originator.  An intermediary bank in the funds transfer is similarly bound by an instruction given to it by the sender of the payment order it accepts.

(2)  If the sender's instruction states that the funds transfer is to be carried out telephonically or by wire transfer or otherwise indicates that the funds transfer is to be carried out by the most expeditious means, the receiving bank is obliged to transmit its payment order by the most expeditious available means, and to instruct any intermediary bank accordingly.  If a sender's instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably necessary to allow payment to the beneficiary on the payment date or as soon thereafter as is feasible.

(b)  Unless otherwise instructed, a receiving bank executing a payment order may (i) use any funds-transfer system if use of that system is reasonable in the circumstances, and (ii) issue a payment order to the beneficiary's bank or to an intermediary bank through which a payment order conforming to the sender's order can expeditiously be issued to the beneficiary's bank if the receiving bank exercises ordinary care in the selection of the intermediary bank.  A receiving bank is not required to follow an instruction of the sender designating a funds-transfer system to be used in carrying out the funds transfer if the receiving bank, in good faith, determines that it is not feasible to follow the instruction or that following the instruction would unduly delay completion of the funds transfer.

(c)  Unless Subsection (a)(2) applies or the receiving bank is otherwise instructed, the bank may execute a payment order by transmitting its payment order by first class mail or by any means reasonable in the circumstances.  If the receiving bank is instructed to execute the sender's order by transmitting its payment order by a particular means, the receiving bank may issue its payment order by means stated or by any means as expeditious as the means stated.

(d)  Unless instructed by the sender, (i) the receiving bank may not obtain payment of its charges for services and expenses in connection with the execution of the sender's order by issuing a payment order in an amount equal to the amount of the sender's order less the amount of the charges, and (ii) may not instruct a subsequent receiving bank to obtain payment of its charges in the same manner.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-303. Erroneous execution of payment order

(a)  A receiving bank that (i) executes the payment order of the sender by issuing a payment order in an amount greater than the amount of the sender's order, or (ii) issues a payment order in execution of the sender's order and then issues a duplicate order, is entitled to payment of the amount of the sender's order under R.S. 10:4A-402(c) if that Subsection is otherwise satisfied.  The bank is entitled to recover from the beneficiary of the erroneous order the excess payment received to the extent allowed by the law governing mistake and restitution.

(b)  A receiving bank that executes the payment order of the sender by issuing a payment order in an amount less than the amount of the sender's order is entitled to payment of the amount of the sender's order under R.S. 10:4A-402(c) if (i) that Subsection is otherwise satisfied and (ii) the bank corrects its mistake by issuing an additional payment order for the benefit of the beneficiary of the sender's order.  If the error is not corrected, the issuer of the erroneous order is entitled to receive or retain payment from the sender of the order it accepted only to the extent of the amount of the erroneous order. This Subsection does not apply if the receiving bank executes the sender's payment order by issuing a payment order in an amount less than the amount of the sender's order for the purpose of obtaining payment of its charges for services and expenses pursuant to instruction of the sender.

(c)  If a receiving bank executes the payment order of the sender by issuing a payment order to a beneficiary different from the beneficiary of the sender's order and the funds transfer is completed on the basis of that error, the sender of the payment order that was erroneously executed and all previous senders in the funds transfer are not obliged to pay the payment orders they issued.  The issuer of the erroneous order is entitled to recover from the beneficiary of the order the payment received to the extent allowed by the law governing mistake and restitution.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-304. Duty of sender to report erroneously executed payment order

If the sender of a payment order that is erroneously executed as stated in R.S. 10:4A-303 receives notification from the receiving bank that the order was executed or that the sender's account was debited with respect to the order, the sender has a duty to exercise ordinary care to determine, on the basis of information available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts within a reasonable time not exceeding ninety days after the notification from the bank was received by the sender.  If the sender fails to perform that duty, the bank is not obliged to pay interest on any amount refundable to the sender under R.S. 10:4A-402(d) for the period before the bank learns of the execution error.  The bank is not entitled to any recovery from the sender on account of a failure by the sender to perform the duty stated in this Section.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-305. Liability for late or improper execution or failure to execute payment order

(a)  If a funds transfer is completed but execution of a payment order by the receiving bank in breach of R.S. 10:4A-302 results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds transfer for the period of delay caused by the improper execution.  Except as provided in Subsection (c), additional damages are not recoverable.

(b)  If execution of a payment order by a receiving bank in breach of R.S. 10:4A-303 results in (i) noncompletion of the funds transfer, (ii) failure to use an intermediary bank designated by the originator, or (iii) issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by Subsection (a), resulting from the improper execution.  Except as provided in Subsection (c), additional damages are not recoverable.

(c)  In addition to the amounts payable under Subsections (a) and (b), damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank.

(d)  If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute.  Additional damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank, but are not otherwise recoverable.

(e)  Reasonable attorney's fees are recoverable if demand for compensation under Subsection (a) or (b) is made and refused before an action is brought on the claim.  If a claim is made for breach of an agreement under Subsection (d) and the agreement does not provide for damages, reasonable attorney's fees are recoverable if demand for compensation under Subsection (d) is made and refused before an action is brought on the claim.

(f)  Except as stated in this Section, the liability of a receiving bank under Subsections (a) and (b) may not be varied by agreement.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Part 4. Payment

Tit. 10, Art. 4A-401. Payment date

"Payment date" of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary's bank.  The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary's bank and, unless otherwise determined, is the day the order is received by the beneficiary's bank.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-402. Obligation of sender to pay receiving bank

(a)  This Section is subject to R.S. 10:4A-205 and 4A-207.

(b)  With respect to a payment order issued to the beneficiary's bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order.

(c)  This Subsection is subject to Subsection (e) and to R.S. 10:4A-303.  With respect to a payment order issued to a receiving bank other than the beneficiary's bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender's order. Payment by the sender is not due until the execution date of the sender's order.  The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary's bank of a payment order instructing payment to the beneficiary of that sender's payment order.

(d)  If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay.  Except as provided in R.S. 10:4A-204 and 4A-304, interest is payable on the refundable amount from the date of payment.

(e)  If a funds transfer is not completed as stated in Subsection (c) and an intermediary bank is obliged to refund payment as stated in Subsection (d) but is unable to do so because not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in R.S. 10:4A-302(a)(1), to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted.  The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in Subsection (d).

(f)  The right of the sender of a payment order to be excused from the obligation to pay the order as stated in Subsection (c) or to receive refund under Subsection (d) may not be varied by agreement.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-403. Payment by sender to receiving bank

(a)  Payment of the sender's obligation under R.S. 10:4A-402 to pay the receiving bank occurs as follows:

(1)  If the sender is a bank, payment occurs when the receiving bank receives final settlement of the obligation through a Federal Reserve Bank or through a funds-transfer system.

(2)  If the sender is a bank and the sender (i) credited an account of the receiving bank with the sender, or (ii) caused an account of the receiving bank in another bank to be credited, payment occurs when the credit is withdrawn or, if not withdrawn, at midnight of the day on which the credit is withdrawable and the receiving bank learns of that fact.

(3)  If the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent the debit is covered by a withdrawable credit balance in the account.

(b)  If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system.  The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender's obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system.  The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system.  The aggregate balance is determined after the right of setoff stated in the second sentence of this Subsection has been exercised.

(c)  If two banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under R.S. 10:4A-402 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank.  To the extent of the setoff, each bank has made payment to the other.

(d)  In a case not covered by Subsection (a), the time when payment of the sender's obligation under R.S. 10:4A-402(b) or 4A-402(c) occurs is governed by applicable principles of law that determine when an obligation is satisfied.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-404. Obligation of beneficiary's bank to pay and give notice to beneficiary

(a)  Subject to R.S. 10:4A-211(e), 4A-405(d), and 4A-405(e), if a beneficiary's bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day.  If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment.

(b)  If a payment order accepted by the beneficiary's bank instructs payment to an account of the beneficiary, the bank is obliged to notify the beneficiary of receipt of the order before midnight of the next funds-transfer business day following the payment date.  If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order.  Notice may be given by first class mail or any other means reasonable in the circumstances.  If the bank fails to give the required notice, the bank is obliged to pay interest to the beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank.  No other damages are recoverable.  Reasonable attorney's fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.

(c)  The right of a beneficiary to receive payment and damages as stated in Subsection (a) may not be varied by agreement or a funds-transfer system rule.  The right of a beneficiary to be notified as stated in Subsection (b) may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-405. Payment by beneficiary's bank to beneficiary

(a)  If the beneficiary's bank credits an account of the beneficiary of a payment order, payment of the bank's obligation under R.S. 10:4A-404(a) occurs when and to the extent (i) the beneficiary is notified of the right to withdraw the credit, (ii) the bank lawfully applies the credit to a debt of the beneficiary, or (iii) funds with respect to the order are otherwise made available to the beneficiary by the bank.

(b)  If the beneficiary's bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank's obligation under R.S. 10:4A-404(a) occurs is governed by principles of law that determine when an obligation is satisfied.

(c)  Except as stated in Subsections (d) and (e), if the beneficiary's bank pays the beneficiary of a payment order under a condition to payment or agreement of the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable.

(d)  A funds-transfer system rule may provide that payments made to beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary's bank of the payment order it accepted.  A beneficiary's bank that makes a payment that is provisional under the rules is entitled to refund from the beneficiary if (i) the rule requires that both the beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated, (ii) the beneficiary, the beneficiary's bank and the originator's bank agreed to be bound by the rules, and (iii) the beneficiary's bank did not receive payment of the payment order that it accepted.  If the beneficiary is obliged to refund payment to the beneficiary's bank, acceptance of the payment order by the beneficiary's bank is nullified and no payment by the originator of the funds transfer to the beneficiary occurs under R.S. 10:4A-406.

(e)  This Subsection applies to a funds transfer that includes a payment order transmitted over a funds-transfer system that (i) nets obligations multilaterally among participants, and (ii) has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one or more participants that do not meet their settlement obligations.  If the beneficiary's bank in the funds transfer accepts a payment order and the system fails to complete settlement pursuant to its rules with respect to any payment order in the funds transfer, (i) the acceptance by the beneficiary's bank is nullified and no person has any right or obligation based on the acceptance, (ii) the beneficiary's bank is entitled to recover payment from the beneficiary, (iii) no payment by the originator to the beneficiary occurs under R.S. 10:4A-406, and (iv) subject to R.S. 10:4A-402(e), each sender in the funds transfer is excused from its obligation to pay its payment order under R.S. 10:4A-402(c) because the funds transfer has not been completed.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-406. Payment by originator to beneficiary;  discharge of underlying obligation

(a)  Subject to R.S. 10:4A-211(e), 4A-405(d), and 4A-405(e), the originator of a funds transfer pays the beneficiary of the originator's payment order (i) at the time a payment order for the benefit of the beneficiary is accepted by the beneficiary's bank in the funds transfer and (ii) in an amount equal to the amount of the order accepted by the beneficiary's bank, but not more than the amount of the originator's order.

(b)  If payment under Subsection (a) is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless (i) the payment under Subsection (a) was made by a means prohibited by the contract of the beneficiary with respect to the obligation, (ii) the beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary's bank, notified the originator of the beneficiary's refusal of the payment, (iii) funds with respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary, and (iv) the beneficiary would suffer a loss that could reasonably have been avoided if payment had been made by a means complying with the contract.  If payment by the originator does not result in discharge under this Section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary's bank under R.S. 10:4A-404(a).

(c)  For the purpose of determining whether discharge of an obligation occurs under Subsection (b), if the beneficiary's bank accepts a payment order in an amount equal to the amount of the originator's payment order less charges of one or more receiving banks in the funds transfer, payment to the beneficiary is deemed to be in the amount of the originator's order unless upon demand by the beneficiary the originator does not pay the beneficiary the amount of the deducted charges.

(d)  Rights of the originator or of the beneficiary of a funds transfer under this Section may be varied only by agreement of the originator and the beneficiary.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Part 5. Miscellaneous Provisions

Tit. 10, Art. 4A-501. Variation by agreement and effect of funds-transfer system rule

(a)  Except as otherwise provided in this Chapter, the rights and obligations of a party to a funds transfer may be varied by agreement of the affected party.

(b)  "Funds-transfer system rule" means a rule of an association of banks (i) governing transmission of payment orders by means of a funds-transfer system of the association or rights and obligations with respect to those orders, or (ii) to the extent the rule governs rights and obligations between banks that are parties to a funds transfer in which a Federal Reserve Bank, acting as an intermediary bank, sends a payment order to the beneficiary's bank.  Except as otherwise provided in this Chapter, a funds-transfer system rule governing rights and obligations between participating banks using the system may be effective even if the rule conflicts with this Chapter and indirectly affects another party to the funds transfer who does not consent to the rule.  A funds-transfer system rule may also govern rights and obligations of parties other than participating banks using the system to the extent stated in R.S. 10:4A-404(c), 4A-405(d), and 4A-507(c).

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-502. Creditor process served on receiving bank;  setoff by beneficiary's bank

(a)  As used in this Section, "creditor process" means levy, attachment, garnishment, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account.

(b)  This Subsection applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the creditor process, if the receiving bank accepts the payment order the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.

(c)  If a beneficiary's bank has received a payment order for payment to the beneficiary's account in the bank, the following rules apply:

(1)  The bank may credit the beneficiary's account.  The amount credited may be set off against an obligation owed by the beneficiary to the bank or may be applied to satisfy creditor process served on the bank with respect to the account.

(2)  The bank may credit the beneficiary's account and allow withdrawal of the amount credited unless creditor process with respect to the account is served at a time and in a manner affording the bank a reasonable opportunity to act to prevent withdrawal.

(3)  If creditor process with respect to the beneficiary's account has been served and the bank has had a reasonable opportunity to act on it, the bank may not reject the payment order except for a reason unrelated to the service of process.

(d)  Creditor process with respect to a payment by the originator to the beneficiary pursuant to a funds transfer may be served only on the beneficiary's bank with respect to the debt owed by that bank to the beneficiary.  Any other bank served with the creditor process is not obliged to act with respect to the process.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-503. Injunction or restraining order with respect to funds transfer

For proper cause and in compliance with applicable law, a court may restrain (i) a person from issuing a payment order to initiate a funds transfer, (ii) an originator's bank from executing the payment order of the originator, or (iii) the beneficiary's bank from releasing funds to the beneficiary or the beneficiary from withdrawing the funds.  A court may not otherwise restrain a person from issuing a payment order, paying or receiving payment of a payment order, or otherwise acting with respect to a funds transfer.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-504. Order in which items and payment orders may be charged to account;  order of withdrawals from account

(a)  If a receiving bank has received more than one payment order of the sender or one or more payment orders and other items that are payable from the sender's account, the bank may charge the sender's account with respect to the various orders and items in any sequence.

(b)  In determining whether a credit to an account has been  withdrawn by the holder of the account or applied to a debt of the holder of the account, credits first made to the account are first withdrawn or applied.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-505. Preclusion of objection to debit of customer's account

If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer's objection to the payment within one year after the notification was received by the customer.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-506. Rate of interest

(a)  If, under this Chapter, a receiving bank is obliged to pay interest with respect to a payment order issued to the bank, the amount payable may be determined (i) by agreement of the sender and receiving bank, or (ii) by a funds-transfer system rule if the payment order is transmitted through a funds-transfer system.

(b)  If the amount of interest is not determined by an agreement or rule as stated in Subsection (a), the amount is calculated by multiplying the applicable Federal Funds rate by the amount on which interest is payable, and then multiplying the product by the number of days for which interest is payable. The applicable Federal Funds rate is the average of the Federal Funds rates published by the Federal Reserve Bank of New York for each of the days for which interest is payable divided by 360.  The Federal Funds rate for any day on which a published rate is not available is the same as the published rate for the next preceding day for which there is a published rate.  If a receiving bank that accepted a payment order is required to refund payment to the sender of the order because the funds transfer was not completed, but the failure to complete was not due to any fault by the bank, the interest payable is reduced by a percentage equal to the reserve requirement on deposits of the receiving bank.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

Tit. 10, Art. 4A-507. Choice of law

(a)  The following rules apply unless the affected parties otherwise agree or Subsection (c) applies:

(1)  The rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located.

(2)  The rights and obligations between the beneficiary's bank and the beneficiary are governed by the law of the jurisdiction in which the beneficiary's bank is located.

(3)  The issue of when payment is made pursuant to a funds transfer by the originator to the beneficiary is governed by the law of the jurisdiction in which the beneficiary's bank is located.

(b)  If the parties described in each Paragraph of Subsection (a) have made an agreement selecting the law of a particular jurisdiction to govern rights and obligations between each other, the law of that jurisdiction governs those rights and obligations, whether or not the payment order or the funds transfer bears a reasonable relation to that jurisdiction.

(c)  A funds-transfer system rule may select the law of a particular jurisdiction to govern (i) rights and obligations between participating banks with respect to payment orders transmitted or processed through the system, or (ii) the rights and obligations of some or all parties to a funds transfer any part of which is carried out by means of the system.  A choice of law made pursuant to clause (i) is binding on participating banks.  A choice of law made pursuant to clause (ii) is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order.  The beneficiary of a funds transfer is bound by the choice of law if, when the funds transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system.  The law of a jurisdiction selected pursuant to this Subsection may govern, whether or not that law bears a reasonable relation to the matter in issue.

(d)  In the event of inconsistency between an agreement under Subsection (b) and a choice-of-law rule under Subsection (c), the agreement under Subsection (b) prevails.

(e)  If a funds transfer is made by use of more than one funds-transfer system and there is inconsistency between choice-of-law rules of the systems, the matter in issue is governed by the law of the selected jurisdiction that has the most significant relationship to the matter in issue.

Added by Acts 1990, No. 1079, §4, eff. Sept. 1, 1990.

 

Chapter 5. Letters of Credit

Tit. 10, Art. 5-101. Short title

This Chapter shall be known and may be cited as Uniform Commercial Code  -- Letters of Credit.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000; Acts 2006, No. 533, §5.

Tit. 10, Art. 5-102. Definitions

(a)  As used in this Chapter:

(1)  "Adviser" means a person who, at the request of the issuer, a confirmor, or another adviser, notifies, or requests another adviser to notify, the beneficiary that a letter of credit has been issued, confirmed, or amended.

(2)  "Applicant" means a person at whose request or for whose account a letter of credit is issued.  The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer.

(3)  "Beneficiary" means a person who under the terms of a letter of credit is entitled to have its complying presentation honored.  The term includes a person to whom drawing rights have been transferred under a transferable letter of credit.

(4)  "Confirmor" means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another.

(5)  "Dishonor" of a letter of credit means failure timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit.

(6)  "Document" means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion (i) which is presented in a written or other medium permitted by the letter of credit, or unless prohibited by the letter of credit, by the standard practice referred to in R.S. 10:5-108(e), and (ii) which is capable of being examined for compliance with the terms and conditions of the letter of credit.  A document may not be oral.

(7)  "Good faith" means honesty in fact in the conduct or transaction concerned.

(8)  "Honor" of a letter of credit means performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value.  Unless the letter of credit otherwise provides, "honor" occurs:

(i)  Upon payment,

(ii)  If the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment, or

(iii)  If the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.

(9)  "Issuer" means a financial institution or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes.

(10)  "Letter of credit" means a definite undertaking that satisfies the requirements of R.S. 10:5-104 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value.

(11)  "Nominated person" means a person whom the issuer (i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (ii) undertakes by agreement or custom and practice to reimburse.

(12)  "Presentation" means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.

(13)  "Presenter" means a person making a presentation as or on behalf of a beneficiary or nominated person.

(14)  "Record" means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form.

(15)  "Successor of a beneficiary" means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator, and receiver.

(b)  Definitions in other Chapters applying to this Chapter and the Sections in which they appear are:

"Accept" or "Acceptance"

R.S. 10:3-409

"Value"

R.S. 10:3-303, 4-211

(c)  Chapter 1 contains certain additional general definitions and principles of construction and interpretation applicable throughout this Chapter.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000; Acts 2006, No. 533, §§5, 9.

 

Tit. 10, Art. 5-103. Scope

(a)  This Chapter applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.

(b)  The statement of a rule in this Chapter does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to person not specified, in this Chapter.

(c)  With the exception of this Subsection, Subsections (a) and (d), R.S. 10:5-102(a)(9) and (10), 5-106(d), and 5-114(d), and except to the extent prohibited in R.S. 10:1-302 and 5-117(d), the effect of this Chapter may be varied by agreement or by a provision stated or incorporated by reference in an undertaking.  A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this Chapter.

(d)  Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975.  Acts 1989, No. 135, §4, eff. Jan. 1, 1990; Acts 1999, No. 171, §1, eff. Jan. 1, 2000 Acts 2006, No. 533, §5.

Tit. 10, Art. 5-104. Formal requirements

A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated (i) by a signature or (ii) in accordance with the agreement of the parties or the standard practice referred to in R.S. 10:5-108(e).

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-105. Consideration

Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-106. Issuance, amendment, cancellation, and duration

(a)  A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary.  A letter of credit is revocable only if it so provides.

(b)  After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmor, and issuer are not affected by an amendment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent.

(c)  If there is no stated expiration date or other provision that determines its duration, a letter of credit expires one year after its stated date of issuance or, if none is stated, after the date on which it is issued.

(d)  A letter of credit that states that it is perpetual expires five years after its stated date of issuance or, if none is stated, after the date on which it is issued.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-107. Confirmor, nominated person, and adviser

(a)  A confirmor is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation.  The confirmor also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmor had issued the letter of credit at the request and for the account of the issuer.

(b)  A nominated person who is not a confirmor is not obligated to honor or otherwise give value for a presentation.

(c)  A person requested to advise may decline to act as an adviser.  An adviser that is not a confirmor is not obligated to honor or give value for a presentation.  An adviser undertakes to the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation, amendment, or advice received by that person and undertakes to the beneficiary to check the apparent authenticity of the request to advise.  Even if the advice is inaccurate, the letter of credit, confirmation, or amendment is enforceable as issued.

(d)  A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under Subsection (c).  The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who so notifies.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-108. Issuer's rights and obligations

(a)  Except as otherwise provided in R.S. 10:5-109, an issuer shall honor a presentation that, as determined by the standard practice referred to in Subsection (e), appears on its face strictly to comply with the terms and conditions of the letter of credit.  Except as otherwise provided in R.S. 10:5-113 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.

(b)  An issuer has a reasonable time after presentation, of at least three days, but not beyond the end of the seventh business day of the issuer after the day of its receipt of documents:

(1)  to honor,

(2)  if the letter of credit provides for honor to be completed more than seven business days after presentation, to accept a draft or incur a deferred obligation, or

(3)  to give notice to the presenter of discrepancies in the presentation.

(c)  Except as otherwise provided in Subsection (d), an issuer is precluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given.

(d)  Failure to give the notice specified in Subsection (b) or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in R.S. 10:5-109(a) or expiration of the letter of credit before presentation.

(e)  An issuer shall observe standard practice of financial institutions that regularly issue letters of credit.  Determination of the issuer's observance of the standard practice is a matter of interpretation for the court.  The court shall offer the parties a reasonable opportunity to present evidence of the standard practice.

(f)  An issuer is not responsible for:

(1)  the performance or nonperformance of the underlying contract, arrangement, or transaction,

(2)  an act or omission of others, or

(3)  observance or knowledge of the usage of a particular trade other than the standard practice referred to in Subsection (e).

(g)  If an undertaking constituting a letter of credit under R.S. 10:5-102(a)(10) contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.

(h)  An issuer that has dishonored a presentation shall return the documents or hold them at the disposal of, and send advice to that effect to, the presenter.

(i)  An issuer that has honored a presentation as permitted or required by this Chapter:

(1)  is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds;

(2)  takes the documents free of claims of the beneficiary or presenter;

(3)  is precluded from asserting a right of recourse on a draft under R.S. 10:3-414 and 3-415;

(4)  except as otherwise provided in R.S. 10:5-110 and 5-117, is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender which are apparent on the face of the presentations; and

(5)  is discharged to the extent of its performance under the letter of credit unless the issuer honored a presentation in which a required signature of a beneficiary was forged.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-109. Fraud and forgery

(a)  If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant:

(1)  the issuer shall honor the presentation, if honor is demanded by (i) a nominated person who has given value in good faith and without notice of forgery or material fraud, (ii) a confirmor who has honored its confirmation in good faith, (iii) a holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person, or (iv) an assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and

(2)  the issuer, acting in good faith, may honor or dishonor the presentation in any other case.

(b)  If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that:

(1)  the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer;

(2)  a beneficiary, issuer, or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted;

(3)  all of the conditions to entitle a person to the relief under the law of this state have been met; and

(4)  on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material fraud and the person demanding honor does not qualify for protection under Subsection (a)(1).

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-110. Warranties

(a)  If its presentation is honored, the beneficiary warrants:

(1)  to the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in R.S. 10:5-109(a); and

(2)  to the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit.

(b)  The warranties in Subsection (a) are in addition to warranties arising under Chapters 3, 4, 7, and 8 because of the presentation or transfer of documents covered by any of those Chapters.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-111. Remedies

(a)  If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation.  If the issuer's obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant's election, recover an amount equal to the value of performance from the issuer.  In either case, the claimant may also recover foreseeable damages for pecuniary loss but not unforeseeable damages, exemplary damages, or damages for nonpecuniary loss.  The claimant is not obligated to take action to avoid damages that might be due from the issuer under this Subsection.  If, although not obligated to do so, the claimant avoids damages, the claimant's recovery from the issuer must be reduced by the amount of damages avoided.  The issuer has the burden of proving the amount of damages avoided.  In the case of repudiation the claimant need not present any document.

(b)  If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover foreseeable damages for pecuniary loss resulting from the breach, but not unforeseeable damages, exemplary damages, or damages for nonpecuniary loss less any amount saved as a result of the breach.

(c)  If an adviser or nominated person other than a confirmor breaches an obligation under this Chapter or an issuer breaches an obligation not covered in Subsection (a) or (b), a person to whom the obligation is owed may recover foreseeable damages for pecuniary loss resulting from the breach, but not unforeseeable damages, exemplary damages, or damages for nonpecuniary loss, less any amount saved as a result of the breach.  To the extent of the confirmation, a confirmor has the liability of an issuer specified in this Subsection and Subsections (a) and (b).

(d)  An issuer, nominated person, or adviser who is found  liable under Subsection (a), (b), or (c) shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date.

(e)  Reasonable attorney fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this Chapter.

(f)  Damages that would otherwise be payable by a party for breach of an obligation under this Chapter may be stipulated by agreement or undertaking, unless the damages stipulated are so manifestly unreasonable as to be contrary to public policy.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975.  Acts 1989, No. 135, §4, eff. Jan. 1, 1990; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-112. Transfer of letter of credit

(a)  Except as otherwise provided in R.S. 10:5-113, unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred.

(b)  Even if a letter of credit provides that it is transferrable, the issuer may refuse to recognize or carry out a transfer if:

(1)  the transfer would violate applicable law; or

(2)  the transferor or transferee has failed to comply with any requirement stated in the letter of credit or any other requirement relating to transfer imposed by the issuer which is within the standard practice referred to in R.S. 10:5-108(e) or is otherwise reasonable under the circumstances.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-113. Transfer by operation of law

(a)  A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor.

(b)  A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in its own name as the disclosed successor of the beneficiary.  Except as otherwise provided in Subsection (e), an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for its predecessor upon compliance with the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the standard practice referred to in R.S. 10:5-108(e) or, in the absence of such a practice, compliance with other reasonable procedures sufficient to protect the issuer.

(c)  An issuer is not obligated to determine whether a purported successor is a successor of a beneficiary or whether the signature of a purported successor is genuine or authorized.

(d)  Honor of a purported successor's apparently complying presentation under Subsection (a) or (b) has the consequences specified in R.S. 10:5-108(i) even if the purported successor is not the successor of a beneficiary.  Documents signed in the name of the beneficiary1 or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary1 are forged documents for the purposes of R.S. 10:5-109.

(e)  An issuer whose rights of reimbursement are not covered by Subsection (d) or substantially similar law and any confirmor or nominated person may decline to recognize a presentation under Subsection (b).

(f)  A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this Section.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975.  Amended by Acts 1979, No. 48, §1; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

1As appears in enrolled bill.

Tit. 10, Art. 5-114. Assignment of proceeds

(a)  In this Section, "proceeds of a letter of credit" means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit.  The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.

(b)  A beneficiary may assign its right to part or all of the proceeds of a letter of credit.  The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit.

(c)  An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.

(d)  An issuer or nominated person has no obligation to give or withhold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor.

(e)  Rights of a transferee beneficiary or nominated person are independent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds.

(f)  Neither the rights recognized by this Section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary, or nominated person.  The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is governed by Chapter 9 of this Title or other law.  Against persons other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by Chapter 9 of this Title or other law.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975.  Acts 1989, No. 135, §4, eff. Jan. 1, 1990; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.

Tit. 10, Art. 5-115. Statute of limitations

An action to enforce a right or obligation arising under this Chapter must be commenced within one year after the expiration date of the relevant letter of credit or one year after the cause of action accrues, whichever occurs later, except an action to enforce an issuer's right of reimbursement under R.S. 10:5-108 must be commenced within five years of the date of its payment of funds.  A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.

Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.