§ 28:4-109. Delays.

UNIFORM COMMERCIAL CODE COMMENT

1. Sections 4-202(b), 4-214, 4-301, and 4-302 prescribe various time limits for the handling of items. These are the limits of time within which a bank, in fulfillment of its obligation to exercise ordinary care, must handle items entrusted to it for collection or payment. Under Section 4-103 they may be varied by agreement or by Federal Reserve regulations or operating circular, clearing-house rules, or the like. Subsection (a) permits a very limited extension of these time limits. It authorizes a collecting bank to take additional time in attempting to collect drafts drawn on nonbank payors with or without the approval of any interested party. The right of a collecting bank to waive time limits under subsection (a) does not apply to checks. The two-day extension can only by granted in a good faith effort to secure payment and only with respect to specific items. It cannot be exercised if the customer instructs otherwise. Thus limited the escape provision should afford a limited degree of flexibility in special cases but should not interfere with the overall requirement and objective of speedy collections.

2. An extension granted under subsection (a) is without discharge of drawers or indorsers. It therefore extends the times for presentment or payment as specified in Article 3.

3. Subsection (b) is another escape clause from time limits. This clause operates not only with respect to time limits imposed by the Article itself but also time limits imposed by special instructions, by agreement or by Federal regulations or operating circulars, clearing-house rules or the like. The latter time limits are "permitted" by the Code. For example, a payor bank that fails to make timely return of a dishonored item may be accountable for the amount of the item. Subsection (b) excuses a bank from this liability when its failure to meet its midnight deadline resulted from, for example, a computer breakdown that was beyond the control of the bank, so long as the bank exercised the degree of diligence that the circumstances required. In Port City State Bank v. American National Bank, 486 F.2d 196 (10th Cir. 1973), the court held that a bank exercised sufficient diligence to be excused under this subsection. If delay is sought to be excused under this subsection, the bank has the burden of proof on the issue of whether it exercised "such diligence as the circumstances require." The subsection is consistent with Regulation CC, Section 229.38(e).

Reason for 1990 Change [D.C. Law 10-249]

Subsection (a) is amended to exclude checks and other items drawn on banks from its application so that the provision will not impede the speedy collection of these items. The amended subsection authorizes a collecting bank to take additional time, not in excess of two days, in a good faith effort to collect drafts drawn on nonbank payors with or without the approval of any interested party. The term "secondary parties" is deleted because it is no longer used in Articles 3 and 4. Subsection (b) is amended to make clear that the delay is excused for one of the reasons stated only if the bank exercises such diligence as the circumstances require. With the addition of references to the interruption of computer facilities and the failure of equipment, the permissible reasons for delay enumerated are made to conform to those stated in Regulation CC Section 229.38(e). The other modifications are made to conform with current legislative drafting practices, with no intent to change substance.

Prior Codifications

1981 Ed., § 28:4-109.

1973 Ed., § 28:4-108.

Legislative History of Laws

For legislative history of D.C. Law 10-249, see Historical and Statutory Notes following § 28:4-101.