SB 0399

CHAPTER 159

SB 399 - FINAL VERSION

AN ACT regulating demand drafts under the New Hampshire Uniform Commercial Code.

SPONSORS: Sen. Larsen, Dist 15; Sen. Burns, Dist 1; Sen. Fernald, Dist 11; Sen. Johnson, Dist 3; Rep. Spiess, Hills 14

I. Adds demand drafts to the scope of U.C.C. Article 3 by including demand draft in the definition of a negotiable instrument.

II. Expands the transfer warranty of negotiable instruments to include persons who transfer demand drafts and provides a choice of law rule, which ensures that transferees in states where the payor is still liable for payment on a fraudulent draft would not be able to pass that responsibility to a transferor in New Hampshire.

III. Expands the presentment warranty of negotiable instruments to include the warranty of the presenter that the demand draft was created with the authorization of the drawer and provides a choice of law rule, which ensures that transferees in states where the payor is liable for payment on a fraudulent draft would not be able to pass that responsibility to a transferor in New Hampshire.

IV. Mirrors the expansion of the transfer and presentment warranties as applied to banks under U.C.C. Article 4 and provides a similar choice of law rule, which ensures that payor banks in states where the payor bank is liable for payment on a fraudulent draft would not be able to pass that responsibility to a depository bank in New Hampshire.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

AN ACT regulating demand drafts under the New Hampshire Uniform Commercial Code.

Be it Enacted by the Senate and House of Representatives in General Court convened:

159:1 Negotiable Instruments; Definitions; Demand Draft Added. Amend RSA 382-A:3-103(b) to read as follows:

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

159:2 Uniform Commercial Code; Negotiable Instruments; Definition of "Check"; Demand Draft Added. Amend RSA 382-A:3-104(f) to read as follows:

(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, or (iii) a demand draft. An instrument may be a check even though it is described on its face by another term, such as "money order."

159:3 New Subparagraph; Uniform Commercial Code; Negotiable Instruments; Definition of "Demand Draft" Added. Amend RSA 382-A:3-104 by inserting after subparagraph (j) the following new subparagraph:

(k) "Demand draft" means a writing not signed by a customer that is created by a third party under the purported authority of the customer for the purpose of charging the customer's account with a bank. A demand draft shall contain the customer's account number and may contain any or all of the following: (i) the customer's printed or typewritten name, (ii) a notation that the customer authorized the draft, or (iii) the statement "No Signature Required" or words to that effect. A demand draft shall not include a check purportedly drawn by and bearing the signature of a fiduciary, as defined in Section 3-307(a)(1).

159:4 Uniform Commercial Code; Negotiable Instruments; Transfer Warranties. Amend RSA 382-A:3-416 to read as follows:

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

(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[.]; and

(6) if the instrument is a demand draft, creation of the instrument according to the terms on its face was authorized by the person identified as 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.

(e) If the warranty in paragraph (6) of subsection (a) is not given by a transferor under applicable conflict of law rules, then the warranty is not given to that transferor when that transferor is a transferee.

159:5 Uniform Commercial Code; Negotiable Instruments; Presentment Warranties. Amend RSA 382-A:3-417(a) to read as follows:

(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;

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

(4) if the draft is a demand draft, creation of the demand draft according to the terms on its face was authorized by the person identified as drawer.

159:6 New Subparagraphs; Uniform Commercial Code; Negotiable Instruments; Presentment Warranties. Amend RSA 382-A:3-417 by inserting after subparagraph (f) the following new subparagraphs:

(h) If the warranty in paragraph (4) of subsection (a) is not given by a transferor under applicable conflict of law rules, then the warranty is not given to that transferor when that transferor is a transferee.

159:7 Uniform Commercial Code; Bank Deposits and Collections; Transfer Warranties. Amend RSA 382-A:4-207(a) to read as follows:

(a) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:

(4) the item is not subject to a defense or claim in recoupment (Section 3-305(a)) of any party that 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[.]; and

(6) if the item is a demand draft, creation of the item according to the terms on its face was authorized by the person identified as drawer.

159:8 New Subparagraph; Uniform Commercial Code; Bank Deposits and Collections; Transfer Warranties. Amend RSA 382-A:4-207 by inserting after subparagraph (e) the following new subparagraph:

(f) If the warranty in paragraph (6) of subsection (a) is not given by a transferor or collecting bank under applicable conflict of law rules, then the warranty is not given to that transferor when that transferor is a transferee nor to any prior collecting bank of that transferee.

159:9 Uniform Commercial Code; Bank Deposits and Collections; Presentment Warranties. Amend RSA 382-A:4-208(a) to read as follows:

(3) the warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized[.]; and

(4) if the draft is a demand draft, creation of the demand draft according to the terms on its face was authorized by the person identified as drawer.

159:10 New Subparagraphs; Uniform Commercial Code; Bank Deposits and Collections; Presentment Warranties. Amend RSA 382-A:4-208 by inserting after subparagraph (f) the following new subparagraphs: