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(810 ILCS 5/Art.
3 Pt. 2 heading)
PART
2. NEGOTIATION, TRANSFER AND ENDORSEMENT
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(810 ILCS 5/3-201) (from Ch. 26,
par. 3-201)
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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-202) (from Ch. 26,
par. 3-202)
Sec. 3-202. Negotiation subject
to rescission.
(a) Negotiation is effective even
if obtained (i) from an infant, a corporation exceeding its powers,
or a person without capacity, (ii) by fraud, duress, or mistake,
or (iii) 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other law, negotiation may be rescinded or may be subject to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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-203) (from Ch. 26,
par. 3-203)
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, but 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 Article and has only the rights of a partial assignee.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-204) (from Ch. 26,
par. 3-204)
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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-205) (from Ch. 26,
par. 3-205)
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 that is not the holder of the
instrument. An anomalous indorsement does not affect the manner
in which the instrument may be negotiated.
(Source: P.A. 87-582.)
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(810 ILCS 5/3-206) (from Ch. 26,
par. 3-206)
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", "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
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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.
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(2)
A depositary bank that purchases the instrument
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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.
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(3)
A payor bank that is also the depositary bank or
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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.
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(4)
Except as otherwise provided in paragraph (3), a
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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.
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(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
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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.
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(2)
A later transferee of the instrument or person
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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.
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(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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-207) (from Ch. 26,
par. 3-207)
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.
(Source: P.A. 87-582; 87-895; 87-1135.)
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