A bank that takes a documentary draft for collection shall present or send the draft and accompanying documents for presentment and, upon learning that the draft has not been paid or accepted in due course, shall seasonably notify its customer of the fact even though it may have discounted or bought the draft or extended credit available for withdrawal as of right.
(Dec. 30, 1963, 77 Stat. 707, Pub. L. 88-243, § 1; Mar. 23, 1995, D.C. Law 10-249, § 2(e), 42 DCR 467.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
This section states the duty of a bank handling a documentary draft for a customer. "Documentary draft" is defined in Section 4-104. The duty stated exists even if the bank has bought the draft. This is because to the customer the draft normally represents an underlying commercial transaction, and if that is not going through as planned the customer should know it promptly.
Reason for 1990 Change [D.C. Law 10-249]
Modified to conform with current drafting practices; no intent to change substance.
Prior Codifications
1981 Ed., § 28:4-501.
1973 Ed., § 28:4-501.
Legislative History of Laws
For legislative history of D.C. Law 10-249, see Historical and Statutory Notes following § 28:4-101.
If a draft or the relevant instructions require presentment "on arrival", "when goods arrive", or the like, the collecting bank need not present until in its judgment a reasonable time for arrival of the goods has expired. Refusal to pay or accept because the goods have not arrived is not dishonor; the bank must notify its transferor of the refusal but need not present the draft again until it is instructed to do so or it learns of the arrival of the goods.
(Dec. 30, 1963, 77 Stat. 707, Pub. L. 88-243, § 1; Mar. 23, 1995, D.C. Law 10-249, § 2(e), 42 DCR 467.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
The section is designed to establish a definite rule for "on arrival" drafts. The term includes not only drafts drawn payable "on arrival" but also drafts forwarded with instructions to present "on arrival." The term refers to the arrival of the relevant goods. Unless a bank has actual knowledge of the arrival of the goods, as for example, when it is the "notify" party on the bill of lading, the section only requires the exercise of such judgment in estimating time as a bank may be expected to have. Commonly the buyer-drawee will want the goods and will therefore call for the documents and take up the draft when they do arrive.
Reason for 1990 Change [D.C. Law 10-249]
Modified to conform with current drafting practices; no intent to change substance.
Prior Codifications
1981 Ed., § 28:4-502.
1973 Ed., § 28:4-502.
Legislative History of Laws
For legislative history of D.C. Law 10-249, see Historical and Statutory Notes following § 28:4-101.
Unless otherwise instructed and except as provided in Article 5, a bank presenting a documentary draft:
(1) Must deliver the documents to the drawee on acceptance of the draft if it is payable more than 3 days after presentment; otherwise, only on payment; and
(2) Upon dishonor, either in the case of presentment for acceptance or presentment for payment, may seek and follow instructions from any referee in case of need designated in the draft or, if the presenting bank does not choose to utilize the referee's services, it must use diligence and good faith to ascertain the reason for dishonor, must notify its transferor of the dishonor and of the results of its effort to ascertain the reasons therefor, and must request instructions. However, the presenting bank is under no obligation with respect to goods represented by the documents except to follow any reasonable instructions seasonably received; it has a right to reimbursement for any expense incurred in following instructions and to prepayment of or indemnity for those expenses.
(Dec. 30, 1963, 77 Stat. 707, Pub. L. 88-243, § 1; Mar. 23, 1995, D.C. Law 10-249, § 2(e), 42 DCR 467.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
1. This section states the rules governing, in the absence of instructions, the duty of the presenting bank in case either of honor or of dishonor of a documentary draft. The section should be read in connection with Section 2-514 on when documents are deliverable on acceptance, when on payment.
2. If the draft is drawn under a letter of credit, Article 5 controls. See Sections 5-109 through 5-114.
Reason for 1990 Change [D.C. Law 10-249]
Modified to conform with current drafting practices; no intent to change substance.
Prior Codifications
1981 Ed., § 28:4-503.
1973 Ed., § 28:4-503.
Legislative History of Laws
For legislative history of D.C. Law 10-249, see Historical and Statutory Notes following § 28:4-101.
(a) A presenting bank that, following the dishonor of a documentary draft, has seasonably requested instructions but does not receive them within a reasonable time may store, sell, or otherwise deal with the goods in any reasonable manner.
(b) For its reasonable expenses incurred by action under subsection (a) of this section, the presenting bank has a lien upon the goods or their proceeds, which may be foreclosed in the same manner as an unpaid seller's lien.
(Dec. 30, 1963, 77 Stat. 708, Pub. L. 88-243, § 1; Mar. 23, 1995, D.C. Law 10-249, § 2(e), 42 DCR 467.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
The section gives the presenting bank, after dishonor, a privilege to deal with the goods in any commercially reasonable manner pending instructions from its transferor and, if still unable to communicate with its principal after a reasonable time, a right to realize its expenditures as if foreclosing on an unpaid seller's lien (Section 2-706). The provision includes situations in which storage of goods or other action becomes commercially necessary pending receipt of any requested instructions, even if the requested instructions are later received.
The "reasonable manner" referred to means one reasonable in the light of business factors and the judgment of a business man.
Reason for 1990 Change [D.C. Law 10-249]
Modified to conform with current drafting practices; no intent to change substance.
Prior Codifications
1981 Ed., § 28:4-504.
1973 Ed., § 28:4-504.
Legislative History of Laws
For legislative history of D.C. Law 10-249, see Historical and Statutory Notes following § 28:4-101.
