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Current through October 23, 2012
(a) In this article, the term
(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) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(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 article or Article 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 (section 28:1-201(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 article and the sections in which they appear are:
"Acceptance". Section 28:3-409.
"Accommodated party". Section 28:3-419.
"Accommodation party". Section 28:3-419.
"Alteration". Section 28:3-407.
"Anomalous indorsement". Section 28:3-205.
"Blank indorsement". Section 28:3-205.
"Cashier's check". Section 28:3-104.
"Certificate of deposit". Section 28:3-104.
"Certified check". Section 28:3-409.
"Check". Section 28:3-104.
"Consideration". Section 28:3-303.
"Draft". Section 28:3-104.
"Holder in due course". Section 28:3-302.
"Incomplete instrument". Section 28:3-115.
"Indorsement". Section 28:3-204.
"Indorser". Section 28:3-204.
"Instrument". Section 28:3-104.
"Issue". Section 28:3-105.
"Issuer". Section 28:3-105.
"Negotiable instrument". Section 28:3-104.
"Negotiation". Section 28:3-201.
"Note". Section 28:3-104.
"Payable at a definite time". Section 28:3-108.
"Payable on demand". Section 28:3-108.
"Payable to bearer". Section 28:3-109.
"Payable to order". Section 28:3-109.
"Payment". Section 28:3-602.
"Person entitled to enforce". Section 28:3-301.
"Presentment". Section 28:3-501.
"Reacquisition". Section 28:3-207.
"Special indorsement". Section 28:3-205.
"Teller's check". Section 28:3-104.
"Transfer of instrument". Section 28:3-203.
"Traveler's check". Section 28:3-104.
"Value". Section 28:3-303.
(c) The following definitions in other articles apply to this article:
"Bank". Section 28:4-105.
"Banking day". Section 28:4-104.
"Clearing house". Section 28:4-104.
"Collecting bank". Section 28:4-105.
"Depositary bank". Section 28:4-105.
"Documentary draft". Section 28:4-104.
"Intermediary bank". Section 28:4-105.
"Item". Section 28:4-104.
"Payor bank". Section 28:4-105.
"Suspends payments". Section 28:4-104.
(d) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.
(Dec. 30, 1963, 77 Stat. 672, Pub. L. 88-243, § 1; Mar. 23, 1995, D.C. Law 10-249, § 2(d), 42 DCR 467.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
1. Subsection (a) defines some common terms used throughout the Article that were not defined by former Article 3 and adds the definitions of "order" and "promise" found in former Section 3-102(1)(b) and (c).
2. The definition of "order" includes an instruction given by the signer to itself. The most common example of this kind of order is a cashier's check: a draft with respect to which the drawer and drawee are the same bank or branches of the same bank. Former Section 3-118(a) treated a cashier's check as a note. It stated "a draft drawn on the drawer is effective as a note." Although it is technically more correct to treat a cashier's check as a promise by the issuing bank to pay rather than an order to pay, a cashier's check is in the form of a check and it is normally referred to as a check. Thus, revised Article 3 follows banking practice in referring to a cashier's check as both a draft and a check rather than a note. Some insurance companies also follow the practice of issuing drafts in which the drawer draws on itself and makes the draft payable at or through a bank. These instruments are also treated as drafts. The obligation of the drawer of a cashier's check or other draft drawn on the drawer is stated in Section 3-412.
An order may be addressed to more than one person as drawee either jointly or in the alternative. The authorization of alternative drawees follows former Section 3-102(1)(b) and recognizes the practice of drawers, such as corporations issuing dividend checks, who for commercial convenience name a number of drawees, usually in different parts of the country. Section 3- 501(b)(1) provides that presentment may be made to any one of multiple drawees. Drawees in succession are not permitted because the holder should not be required to make more than one presentment. Dishonor by any drawee named in the draft entitles the holder to rights of recourse against the drawer or indorsers.
3. The last sentence of subsection (a)(9) is intended to make it clear that an I.O.U. or other written acknowledgement of indebtedness is not a note unless there is also an undertaking to pay the obligation.
4. Subsection (a)(4) introduces a definition of good faith to apply to Articles 3 and 4. Former Articles 3 and 4 used the definition in Section 1-201(19). The definition in subsection (a)(4) is consistent with the definitions of good faith applicable to Articles 2, 2A, 4, and 4A. The definition requires not only honesty in fact but also "observance of reasonable commercial standards of fair dealing." Although fair dealing is a broad term that must be defined in context, it is clear that it is concerned with the fairness of conduct rather than the care with which an act is performed. Failure to exercise ordinary care in conducting a transaction is an entirely different concept than failure to deal fairly in conducting the transaction. Both fair dealing and ordinary care, which is defined in Section 3-103(a)(7), are to be judged in the light of reasonable commercial standards, but those standards in each case are directed to different aspects of commercial conduct.
5. Subsection (a)(7) is a definition of ordinary care which is applicable not only to Article 3 but to Article 4 as well. See Section 4-104(c). The general rule is stated in the first sentence of subsection (a)(7) and it applies both to banks and to persons engaged in businesses other than banking. Ordinary care means observance of reasonable commercial standards of the relevant business prevailing in the area in which the person is located. The second sentence of subsection (a)(7) is a particular rule limited to the duty of a bank to examine an instrument taken by a bank for processing for collection or payment by automated means. This particular rule applies primarily to Section 4-406 and it is discussed in Comment 4 to that section. Nothing in Section 3-103(a)(7) is intended to prevent a customer from proving that the procedures followed by a bank are unreasonable, arbitrary, or unfair.
6. In subsection (c) reference is made to a new definition of "bank" in amended Article 4.
Prior Codifications
1981 Ed., § 28:3-103.
1973 Ed., § 28:3-102.
Legislative History of Laws
For legislative history of D.C. Law 10-249, see Historical and Statutory Notes following § 28:3-101.
