CHAPTER 3. NEGOTIABLE INSTRUMENTS

BUSINESS AND COMMERCE CODE

TITLE 1. UNIFORM COMMERCIAL CODE

CHAPTER 3. NEGOTIABLE INSTRUMENTS

SUBCHAPTER A. GENERAL PROVISIONS AND DEFINITIONS

Sec. 3.101. SHORT TITLE. This chapter may be cited as Uniform

Commercial Code-Negotiable Instruments.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.103. DEFINITIONS. (a) In this chapter:

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

(2) Reserved.

(3) "Consumer transaction" means a transaction in which an

individual incurs an obligation primarily for personal, family,

or household purposes.

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

(5) "Drawer" means a person who signs or is identified in a

draft as a person ordering payment.

(6) Reserved.

(7) "Maker" means a person who signs or is identified in a note

as a person undertaking to pay.

(8) "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.

(9) "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.

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

(11) "Principal obligor," with respect to an instrument, means

the accommodated party or any other party to the instrument

against whom a secondary obligor has recourse under this chapter.

(12) "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.

(13) "Prove" with respect to a fact means to meet the burden of

establishing the fact (Section 1.201(b)(8)).

(14) Reserved.

(15) "Remitter" means a person who purchases an instrument from

its issuer if the instrument is payable to an identified person

other than the purchaser.

(16) "Remotely-created item" means an item that is created by a

third party, other than the payor bank, under the purported

authority of the drawer of the item for the purpose of charging

the drawer's account with a bank and that does not bear a

handwritten signature purporting to be the signature of the

drawer.

(17) "Secondary obligor," with respect to an instrument, means

(A) an indorser or an accommodation party, (B) a drawer having

the obligation described in Section 3.414(d), or (C) any other

party to the instrument that has recourse against another party

to the instrument pursuant to Section 3.116(b).

(b) Other definitions applying to this chapter and the sections

in which they appear are:

"Acceptance"

Section 3.409.

"Accommodated party"

Section 3.419.

"Accommodation party"

Section 3.419.

"Account"

Section 4.104.

"Alteration"

Section 3.407.

"Anomalous indorsement"

Section 3.205.

"Blank indorsement"

Section 3.205.

"Cashier's check"

Section 3.104.

"Certificate of deposit"

Section 3.104.

"Certified check"

Section 3.409.

"Check"

Section 3.104.

"Consideration"

Section 3.303.

"Draft"

Section 3.104.

"Holder in due course"

Section 3.302.

"Incomplete instrument"

Section 3.115.

"Indorsement"

Section 3.204.

"Indorser"

Section 3.204.

"Instrument"

Section 3.104.

"Issue"

Section 3.105.

"Issuer"

Section 3.105.

"Negotiable instrument"

Section 3.104.

"Negotiation"

Section 3.201.

"Note"

Section 3.104.

"Payable at a definite time"

Section 3.108.

"Payable on demand"

Section 3.108.

"Payable to bearer"

Section 3.109.

"Payable to order"

Section 3.109.

"Payment"

Section 3.602.

"Person entitled to enforce"

Section 3.301.

"Presentment"

Section 3.501.

"Reacquisition"

Section 3.207.

"Special indorsement"

Section 3.205.

"Teller's check"

Section 3.104.

"Transfer of instrument"

Section 3.203.

"Traveler's check"

Section 3.104.

"Value"

Section 3.303.

(c) The following definitions in other chapters apply to this

chapter:

"Banking day"

Section 4.104.

"Clearing house"

Section 4.104.

"Collecting bank"

Section 4.105.

"Depositary bank"

Section 4.105.

"Documentary draft"

Section 4.104.

"Intermediary bank"

Section 4.105.

"Item"

Section 4.104.

"Payor bank"

Section 4.105.

"Suspends payments"

Section 4.104.

(d) In addition, Chapter 1 contains general definitions and

principles of construction and interpretation applicable

throughout this chapter.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996; Acts 1997, 75th Leg., ch. 131, Sec. 1, eff. Sept. 1, 1997;

Acts 2003, 78th Leg., ch. 542, Sec. 10, eff. Sept. 1, 2003.

Amended by:

Acts 2005, 79th Leg., Ch.

95, Sec. 1, eff. September 1, 2005.

Acts 2005, 79th Leg., Ch.

95, Sec. 2, eff. September 1, 2005.

Acts 2007, 80th Leg., R.S., Ch.

427, Sec. 1, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

427, Sec. 2, eff. September 1, 2007.

Sec. 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:

(A) an undertaking or power to give, maintain, or protect

collateral to secure payment;

(B) an authorization or power to the holder to confess judgment

or realize on or dispose of collateral; or

(C) 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 Subdivision (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:

(1) on another bank; or

(2) payable at or through a bank.

(i) "Traveler's check" means an instrument that:

(1) is payable on demand;

(2) is drawn on or payable at or through a bank;

(3) is designated by the term "traveler's check" or by a

substantially similar term; and

(4) 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.

(k) Repealed by Acts 2007, 80th Leg., R.S., Ch. 427, Sec. 4,

eff. September 1, 2007.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996; Acts 1997, 75th Leg., ch. 131, Sec. 2, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

427, Sec. 4, eff. September 1, 2007.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.106. UNCONDITIONAL PROMISE OR ORDER. (a) Except as

provided in this section, for the purposes of Section 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 record, or (iii) that rights or

obligations with respect to the promise or order are stated in

another record. A reference to another record 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 record 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 Section 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 Section 3.104(a); but if the promise or order is an

instrument, there cannot be a holder in due course of the

instrument.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Amended by:

Acts 2005, 79th Leg., Ch.

95, Sec. 3, eff. September 1, 2005.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.108. PAYABLE ON DEMAND OR AT DEFINITE TIME. (a) A

promise or order is "payable on demand" if it:

(1) states that it is payable on demand or at sight, or

otherwise indicates that it is payable at the will of the holder;

or

(2) 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:

(1) prepayment;

(2) acceleration;

(3) extension at the option of the holder; or

(4) extension to a further definite time at the option of the

maker or acceptor or automatically on or after a specified act or

event.

(c) If an instrument, payable at a fixed date, is also payable

on 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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 Section

3.205(a). An instrument payable to an identified person may

become payable to bearer if it is indorsed in blank pursuant to

Section 3.205(b).

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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:

(A) 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;

(B) 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;

(C) 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

(D) 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.112. INTEREST. (a) Unless otherwise provided in the

instrument:

(1) an instrument is not payable with interest; and

(2) 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, and the instrument shall not by virtue of this sentence

be considered to violate the provisions of Title 4, Finance Code.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996; Acts 1999, 76th Leg., ch. 62, Sec. 7.45, eff. Sept. 1,

1999.

Sec. 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 Section 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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 Section 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 Section 3.104, but, after completion, the

requirements of Section 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 Section 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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 Section 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) Repealed by Acts 2005, 79th Leg., Ch. 95, Sec. 21, eff.

September 1, 2005.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Amended by:

Acts 2005, 79th Leg., Ch.

95, Sec. 21, eff. September 1, 2005.

Sec. 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

by a separate agreement of the obligor and a person entitled to

enforce the instrument, if the instrument is issued or the

obligation is incurred in reliance on the agreement or as part of

the same transaction 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.118. STATUTE OF LIMITATIONS. (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

six years after the due date or dates stated in the note or, if a

due date is accelerated, within six 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 six 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 10 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 10 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 six 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 six-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:

(1) within six 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

(2) within six 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, the following actions must be commenced within

three years after the cause of action accrues:

(1) an action for conversion of an instrument, an action for

money had and received, or like action based on conversion;

(2) an action for breach of warranty; or

(3) an action to enforce an obligation, duty, or right arising

under this chapter and not governed by this section.

(h) This section does not apply to an action involving a real

property lien covered by Section 16.035 or 16.036, Civil Practice

and Remedies Code.

(i) A right of action of a public institution of higher

education or the Texas Higher Education Coordinating Board is not

barred by this section.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996; Acts 1997, 75th Leg., ch. 219, Sec. 4, eff. May 23, 1997;

Acts 2001, 77th Leg., ch. 279, Sec. 1, eff. May 22, 2001.

Sec. 3.119. NOTICE OF RIGHT TO DEFEND ACTION. In an action for

breach of an obligation for which a third person is answerable

over pursuant to this chapter or Chapter 4, the defendant may

give the third person notice of the litigation in a record, and

the person notified may then give similar notice to any other

person who is answerable over. If the notice states (i) that the

person notified may come in and defend, and (ii) that failure to

do so will bind the person notified in an action later brought by

the person giving the notice as to any determination of fact

common to the two litigations, the person notified is so bound

unless after seasonable receipt of the notice the person notified

does come in and defend.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Amended by:

Acts 2005, 79th Leg., Ch.

95, Sec. 4, eff. September 1, 2005.

SUBCHAPTER B. NEGOTIATION, TRANSFER, AND INDORSEMENT

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.202. NEGOTIATION SUBJECT TO RESCISSION. (a) Negotiation

is effective even if obtained:

(1) from an infant, a corporation exceeding its powers, or a

person without capacity;

(2) by fraud, duress, or mistake; or

(3) 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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 Section 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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

Section 4.201(b), or (ii) in blank or to a particular bank using

the words "for deposit" or "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; and

(4) except as otherwise provided in Subdivision (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 Section 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;

and

(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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

SUBCHAPTER C. ENFORCEMENT OF INSTRUMENTS

Sec. 3.301. PERSON ENTITLED TO ENFORCE INSTRUMENT. "Person

entitled to enforce" an instrument means (i) the holder of the

instrument, (ii) a nonholder in possession of the instrument who

has the rights of a holder, or (iii) a person not in possession

of the instrument who is entitled to enforce the instrument

pursuant to Section 3.309 or 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.302. HOLDER IN DUE COURSE. (a) Subject to Subsection

(c) and Section 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:

(A) for value;

(B) in good faith;

(C) 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;

(D) without notice that the instrument contains an unauthorized

signature or has been altered;

(E) without notice of any claim to the instrument described in

Section 3.306; and

(F) without notice that any party has a defense or claim in

recoupment described in Section 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:

(1) by legal process or by purchase in an execution, bankruptcy,

or creditor's sale or similar proceeding;

(2) by purchase as part of a bulk transaction not in ordinary

course of business of the transferor; or

(3) as the successor in interest to an estate or other

organization.

(d) If, under Section 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 that, 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.303. VALUE AND CONSIDERATION. (a) An instrument is

issued or transferred for value if:

(1) the instrument is issued or transferred for a promise of

performance, to the extent the promise has been performed;

(2) the transferee acquires a security interest or other lien in

the instrument other than a lien obtained by judicial proceeding;

(3) the instrument is issued or transferred as payment of, or as

security for, an antecedent claim against any person, whether or

not the claim is due;

(4) the instrument is issued or transferred in exchange for a

negotiable instrument; or

(5) the instrument is issued or transferred in exchange for the

incurring of an irrevocable obligation to a third party by the

person taking the instrument.

(b) "Consideration" means any consideration sufficient to

support a simple contract. The drawer or maker of an instrument

has a defense if the instrument is issued without consideration.

If an instrument is issued for a promise of performance, the

issuer has a defense to the extent performance of the promise is

due and the promise has not been performed. If an instrument is

issued for value as stated in Subsection (a), the instrument is

also issued for consideration.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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 that 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 on

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; and

(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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.305. DEFENSES AND CLAIMS IN RECOUPMENT. (a) Except as

otherwise provided in this section, 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:

(A) infancy of the obligor to the extent it is a defense to a

simple contract;

(B) duress, lack of legal capacity, or illegality of the

transaction that, under other law, nullifies the obligation of

the obligor;

(C) 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

(D) 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 provided 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 (Section 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.

(e) In a consumer transaction, if law other than this chapter

requires that an instrument include a statement to the effect

that the rights of a holder or transferee are subject to a claim

or defense that the issuer could assert against the original

payee, and the instrument does not include such a statement:

(1) the instrument has the same effect as if the instrument

included such a statement;

(2) the issuer may assert against the holder or transferee all

claims and defenses that would have been available if the

instrument included such a statement; and

(3) the extent to which claims may be asserted against the

holder or transferee is determined as if the instrument included

such a statement.

If an instrument includes or is deemed to include a statement

under this subsection, a holder or transferee who is liable under

the statement to the issuer, but who is not the seller of the

goods or services, shall be entitled to full indemnity from the

seller for any liability under the statement incurred by the

holder or transferee that results from the issuer's claims or

defenses against the seller, plus reasonable attorney's fees.

The provision in this section for express indemnity does not

affect any right of indemnity, subrogation, or recovery to which

a holder or transferee may be entitled under any rule, written

contract, judicial decision, or other statute. This section is

not intended to provide a holder or transferee indemnity from the

seller with respect to the holder or transferee's direct

liability to the issuer for the holder or transferee's own

actionable misconduct unrelated to derivative liability under the

statement.

(f) This section is subject to law other than this chapter that

establishes a different rule for consumer transactions.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Amended by:

Acts 2005, 79th Leg., Ch.

95, Sec. 5, eff. September 1, 2005.

Sec. 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.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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 Subdivision (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:

(A) taken in payment of or as security for a debt known by the

taker to be the personal debt of the fiduciary;

(B) taken in a transaction known by the taker to be for the

personal benefit of the fiduciary; or

(C) 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; and

(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:

(A) taken in payment of or as security for a debt known by the

taker to be the personal debt of the fiduciary;

(B) taken in a transaction known by the taker to be for the

personal benefit of the fiduciary; or

(C) deposited to an account other than an account of the

fiduciary, as such, or an account of the represented person.

Amended by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 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 are admitted unless specifically denied in the

pleadings. If the validity of a signature is denied in the

pleadings, the burden of establishing validity is on the person

claiming validity, but the signature is presumed to be authentic

and authorized unless the action is to enforce the liability of

the purported signer and the signer is dead or incompetent at the

time of trial of the issue of validity of the signature. If an

action to enforce the instrument is brought against a person as

the undisclosed principal of a person who signed the instrument

as a party to the instrument, the plaintiff has the burden of

establishing that the defendant is liable on the instrument as a

represented person under Section 3.402(a).

(b) If the validity of signatures is admitted or proved and

there is compliance with Subsection (a), a plaintiff producing

the instrument is entitled to payment if the plaintiff proves

entitlement to enforce the instrument under Section 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 that are not subject to the defense or

claim.

Added by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.309. ENFORCEMENT OF LOST, DESTROYED, OR STOLEN

INSTRUMENT. (a) A person who is not in possession of an

instrument is entitled to enforce the instrument if:

(1) the person seeking to enforce the instrument:

(A) was entitled to enforce the instrument when loss of

possession occurred; or

(B) has directly or indirectly acquired ownership of the

instrument from a person who was entitled to enforce the

instrument when loss of possession occurred;

(2) the loss of possession was not the result of a transfer by

the person or a lawful seizure; and

(3) the person cannot reasonably obtain possession of the

instrument because the instrument was destroyed, its whereabouts

cannot be determined, or it is in the wrongful possession of an

unknown person or a person that cannot be found or is not

amenable to service of process.

(b) A person seeking enforcement of an instrument under

Subsection (a) must prove the terms of the instrument and the

person's right to enforce the instrument. If that proof is made,

Section 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.

Added by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Amended by:

Acts 2005, 79th Leg., Ch.

95, Sec. 6, eff. September 1, 2005.

Sec. 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 Subdivision (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 that

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:

(1) that stated in Subsection (a) if the instrument is one for

which a bank is liable as maker or acceptor; or

(2) that stated in Subsection (b) in any other case.

Added by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.311. ACCORD AND SATISFACTION BY USE OF INSTRUMENT. (a)

Subsections (b)-(d) apply if a person against whom a claim is

asserted proves that:

(1) that person in good faith tendered an instrument to the

claimant as full satisfaction of the claim;

(2) the amount of the claim was unliquidated or subject to a

bona fide dispute; and

(3) the claimant obtained payment of the instrument.

(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:

(A) 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

(B) 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 subdivision does not

apply if the claimant is an organization that sent a statement

complying with Subdivision (1)(A).

(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.

Added by Acts 1995, 74th Leg., ch. 921, Sec. 1, eff. Jan. 1,

1996.

Sec. 3.312. LOST, DESTROYED, OR STOLEN CASHIER'S CHECK, TELLER'S

CHECK, OR CERTIFIED CHECK. (a) In this section:

(1) "Check" means a cashier's check, teller's check, or

certified check.

(2) "Claimant" means a person who claims the right to receive

the amount of a cashier's check, teller's check, or certified

check that was lost, destroyed, or stolen.

(3) "Declaration of loss" means a statement, made in a record

under penalty of perjury, to the effect that:

(A) the declarer lost possession of a check;

(B) the declarer is the drawer or payee of the check, in the

case of a certified check, or the remitter or payee of the check,

in the case of a cashier's check or teller's check;

(C) the loss of possession was not the result of a transfer by

the declarer or a lawful seizure; and

(D) the declarer cannot reasonably obtain possession of the

check because the check was destroyed, its whereabouts cannot be

determined, or it is in the wrongful possession of an unknown

person or a person that cannot be found or is not amenable to

service of process.

(4) "Obligated bank" means the issuer of a cashier's check or

teller's check or the acceptor of a certified check.

(b) A claimant may assert a claim to the amount of a check by a

communication to the obligated bank describing the check with

reasonable certainty and requesting payment of the am