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(810 ILCS 5/Art.
3 Pt. 4 heading)
PART
4. LIABILITY OF PARTIES
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(810 ILCS 5/3-401) (from Ch. 26,
par. 3-401)
Sec. 3-401. Signature.
(a) A person is not liable on an
instrument unless (i) the person signed the instrument, or
(ii) the person is represented by an agent or representative
who signed the instrument and the signature is binding on the
represented person under Section 3-402.
(b) A signature may be made (i)
manually or by means of a device or machine, and (ii) by the
use of any name, including any trade or assumed name, or by a
word, mark, or symbol executed or adopted by a person with present
intention to authenticate a writing.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-402) (from Ch. 26,
par. 3-402)
Sec. 3-402. Signature by
representative.
(a) If a person acting, or purporting
to act, as a representative signs an instrument by signing either
the name of the represented person or the name of the signer,
the represented person is bound by the signature to the same
extent the represented person would be bound if the signature
were on a simple contract. If the represented person is bound,
the signature of the representative is the "authorized signature
of the represented person" and the represented person is
liable on the instrument, whether or not identified in the instrument.
(b) If a representative signs the
name of the representative to an instrument and the signature
is an authorized signature of the represented person, the following
rules apply:
(1) If
the form of the signature shows unambiguously
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that the signature is made on behalf
of the represented person who is identified in
the instrument, the representative is not liable
on the instrument.
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(2)
Subject to subsection (c), if (i) the form of
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the signature does not show unambiguously
that the signature is made in a representative
capacity or (ii) the represented person is not
identified in the instrument, the representative
is liable on the instrument to a holder in due
course that took the instrument without notice
that the representative was not intended to be
liable on the instrument. With respect to any other
person, the representative is liable on the instrument
unless the representative proves that the original
parties did not intend the representative to be
liable on the instrument.
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(c) If a representative
signs the name of the representative as drawer of a check
without indication of the representative status and the
check is payable from an account of the represented person
who is identified on the check, the signer is not liable
on the check if the signature is an authorized signature
of the represented person.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-403) (from Ch. 26,
par. 3-403)
Sec. 3-403. Unauthorized
signature.
(a) Unless otherwise provided in
this Article or Article 4, an unauthorized signature is ineffective
except as the signature of the unauthorized signer in favor of
a person who in good faith pays the instrument or takes it for
value. An unauthorized signature may be ratified for all purposes
of this Article.
(b) If the signature of more than
one person is required to constitute the authorized signature
of an organization, the signature of the organization is unauthorized
if one of the required signatures is missing.
(c) The civil or criminal liability
of a person who makes an unauthorized signature is not affected
by any provision of this Article which makes the unauthorized
signature effective for the purposes of this Article.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-404) (from Ch. 26,
par. 3-404)
Sec. 3-404. Impostors; fictitious
payees.
(a) If an impostor, by use of the
mails or otherwise, induces the issuer of an instrument to issue
the instrument to the impostor, or to a person acting in concert
with the impostor, by impersonating the payee of the instrument
or a person authorized to act for the payee, an indorsement of
the instrument by any person in the name of the payee is effective
as the indorsement of the payee in favor of a person who in good
faith, pays the instrument or takes it for value or for collection.
(b) If (i) a person whose intent
determines to whom an instrument is payable (Section 3-110(a)
or (b)) does not intend the person identified as payee to have
any interest in the instrument, or (ii) the person identified
as payee of an instrument is a fictitious person, the following
rules apply until the instrument is negotiated by special indorsement:
(1) Any
person in possession of the instrument is
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(2)
An indorsement by any person in the name of the
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payee stated in the instrument is effective
as the indorsement of the payee in favor of a person
who in good faith, pays the instrument or takes
it for value or for collection.
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(c) Under subsection
(a) or (b), an indorsement is made in the name of a payee
if (i) it is made in a name substantially similar to that
of the payee or (ii) the instrument, whether or not indorsed,
is deposited in a depositary bank to an account in a name
substantially similar to that of the payee.
(d) With respect to an instrument
to which subsection (a) or (b) applies, if a person paying the
instrument or taking it for value or for collection fails to exercise
ordinary care in paying or taking the instrument and that failure
substantially contributes to loss resulting from payment of the
instrument, the person bearing the loss may recover from the person
failing to exercise ordinary care to the extent the failure to
exercise ordinary care contributed to the loss.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-405) (from Ch. 26,
par. 3-405)
Sec. 3-405. Employer responsibility
for fraudulent indorsement by employee.
(a) In this Section:
(1) "Employee" includes
an independent contractor
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and employee of an independent contractor
retained by the employer.
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(2) "Fraudulent
indorsement" means (i) in the case
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of an instrument payable to the employer,
a forged indorsement purporting to be that of the
employer, or (ii) in the case of an instrument
with respect to which the employer is the issuer,
a forged indorsement purporting to be that of the
person identified as payee.
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(3) "Responsibility" with
respect to instruments
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means authority (i) to sign or indorse
instruments on behalf of the employer, (ii) to
process instruments received by the employer for
bookkeeping purposes, for deposit to an account,
or for other disposition, (iii) to prepare or process
instruments for issue in the name of the employer,
(iv) to supply information determining the names
or addresses of payees of instruments to be issued
in the name of the employer, (v) to control the
disposition of instruments to be issued in the
name of the employer, or (vi) to otherwise act
with respect to instruments in a responsible capacity. "Responsibility" does
not include authority that merely allows an employee
to have access to instruments or blank or incomplete
instrument forms that are being stored or transported
or are part of incoming or outgoing mail, or similar
access.
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(b) For the purpose
of determining the rights and liabilities of a person who,
in good faith, pays an instrument or takes it for value
or for collection, if an employer entrusted an employee
with responsibility with respect to the instrument and
the employee or a person acting in concert with the employee
makes a fraudulent indorsement of the instrument, the indorsement
is effective as the indorsement of the person to whom the
instrument is payable if it is made in the name of that
person. If the person paying the instrument or taking it
for value or for collection fails to exercise ordinary
care in paying or taking the instrument and that failure
substantially contributes to loss resulting from the fraud,
the person bearing the loss may recover from the person
failing to exercise ordinary care to the extent the failure
to exercise ordinary care contributed to the loss.
(c) Under subsection (b), an indorsement
is made in the name of the person to whom an instrument is payable
if (i) it is made in a name substantially similar to the name of
that person or (ii) the instrument, whether or not indorsed, is
deposited in a depositary bank to an account in a name substantially
similar to the name of that person.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-406) (from Ch. 26, par. 3-406)
Sec. 3-406. Negligence contributing
to forged signature or alteration of instrument.
(a) A person whose failure to exercise
ordinary care substantially contributes to an alteration of an
instrument or to the making of a forged signature on an instrument
is precluded from asserting the alteration or the forgery against
a person who, in good faith, pays the instrument or takes it
for value or for collection.
(b) Under subsection (a), if the
person asserting the preclusion fails to exercise ordinary care
in paying or taking the instrument and that failure substantially
contributes to loss, the loss is allocated between the person
precluded and the person asserting the preclusion according to
the extent to which the failure of each to exercise ordinary
care contributed to the loss.
(c) Under subsection (a), the burden
of proving failure to exercise ordinary care is on the person
asserting the preclusion. Under subsection (b), the burden of
proving failure to exercise ordinary care is on the person precluded.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-407) (from Ch. 26, par. 3-407)
Sec. 3-407. Alteration.
(a) "Alteration" means
(i) an unauthorized change in an instrument that purports to
modify in any respect the obligation of a party, or (ii) an
unauthorized addition of words or numbers or other change to
an incomplete instrument relating to the obligation of a party.
(b) Except as provided in subsection
(c), an alteration fraudulently made discharges a party whose
obligation is affected by the alteration unless that party assents
or is precluded from asserting the alteration. No other alteration
discharges a party, and the instrument may be enforced according
to its original terms.
(c) A payor bank or drawee paying
a fraudulently altered instrument or a person taking it for value,
in good faith and without notice of the alteration, may enforce
rights with respect to the instrument (i) according to its original
terms, or (ii) in the case of an incomplete instrument altered
by unauthorized completion, according to its terms as completed.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-408) (from Ch. 26, par. 3-408)
Sec. 3-408. Drawee not liable
on unaccepted draft. A check or other draft does not of itself
operate as an assignment of funds in the hands of the drawee
available for its payment, and the drawee is not liable on
the instrument until the drawee accepts it.
(Source: P.A. 87-582.)
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(810 ILCS 5/3-409) (from Ch. 26, par. 3-409)
Sec. 3-409. Acceptance of
draft; certified check.
(a) "Acceptance" means
the drawee's signed agreement to pay a draft as presented. It
must be written on the draft and may consist of the drawee's
signature alone. Acceptance may be made at any time and becomes
effective when notification pursuant to instructions is given
or the accepted draft is delivered for the purpose of giving
rights on the acceptance to any person.
(b) A draft may be accepted although
it has not been signed by the drawer, is otherwise incomplete,
is overdue, or has been dishonored.
(c) If a draft is payable at a
fixed period after sight and the acceptor fails to date the acceptance,
the holder may complete the acceptance by supplying a date in
good faith.
(d) "Certified check" means
a check accepted by the bank on which it is drawn. Acceptance
may be made as stated in subsection (a) or by a writing on the
check which indicates that the check is certified. The drawee
of a check has no obligation to certify the check, and refusal
to certify is not dishonor of the check.
(Source: P.A. 87-582.)
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(810 ILCS 5/3-410) (from Ch. 26, par. 3-410)
Sec. 3-410. Acceptance varying
draft.
(a) If the terms of a drawee's
acceptance vary from the terms of the draft as presented, the
holder may refuse the acceptance and treat the draft as dishonored.
In that case, the drawee may cancel the acceptance.
(b) The terms of a draft are not
varied by an acceptance to pay at a particular bank or place
in the United States, unless the acceptance states that the draft
is to be paid only at that bank or place.
(c) If the holder assents to an
acceptance varying the terms of a draft, the obligation of each
drawer and indorser that does not expressly assent to the acceptance
is discharged.
(Source: P.A. 87-582.)
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(810 ILCS 5/3-411) (from Ch. 26, par. 3-411)
Sec. 3-411. Refusal to pay
cashier's checks, teller's checks, and certified checks.
(a) In this Section, "obligated
bank" means the acceptor of a certified check or the issuer
of a cashier's check or teller's check bought from the issuer.
(b) If the obligated bank wrongfully
(i) refuses to pay a cashier's check or certified check, (ii)
stops payment of a teller's check, or (iii) refuses to pay a
dishonored teller's check, the person asserting the right to
enforce the check is entitled to compensation for expenses and
loss of interest resulting from the nonpayment and may recover
consequential damages if the obligated bank refuses to pay after
receiving notice of particular circumstances giving rise to the
damages.
(c) Expenses or consequential damages
under subsection (b) are not recoverable if the refusal of the
obligated bank to pay occurs because (i) the bank suspends payments,
(ii) the obligated bank asserts a claim or defense of the bank
that it has reasonable grounds to believe is available against
the person entitled to enforce the instrument, (iii) the obligated
bank has a reasonable doubt whether the person demanding payment
is the person entitled to enforce the instrument, or (iv) payment
is prohibited by law.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-412) (from Ch. 26, par. 3-412)
Sec. 3-412. Obligation of
issuer of note or cashier's check. The issuer of a note or
cashier's check or other draft drawn on the drawer is obliged
to pay the instrument (i) according to its terms at the time
it was issued or, if not issued, at the time it first came
into possession of a holder, or (ii) if the issuer signed an
incomplete instrument, according to its terms when completed,
to the extent stated in Sections 3-115 and 3-407.
The obligation is owed to a person entitled to enforce the
instrument or to an indorser who paid the instrument under
Section 3-415.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-413) (from Ch. 26, par. 3-413)
Sec. 3-413. Obligation of
acceptor.
(a) The acceptor of a draft is
obliged to pay the draft (i) according to its terms at the time
it was accepted, even though the acceptance states that the draft
is payable "as originally drawn" or equivalent terms,
(ii) if the acceptance varies the terms of the draft, according
to the terms of the draft as varied, or (iii) if the acceptance
is of a draft that is an incomplete instrument, according to
its terms when completed, to the extent stated in Sections 3-115
and 3-407. The obligation is owed to a person entitled
to enforce the draft or to the drawer or an indorser who paid
the draft under Section 3-414 or 3-415.
(b) If the certification of a check
or other acceptance of a draft states the amount certified or
accepted, the obligation of the acceptor is that amount. If (i)
the certification or acceptance does not state an amount, (ii)
the amount of the instrument is subsequently raised, and (iii)
the instrument is then negotiated to a holder in due course,
the obligation of the acceptor is the amount of the instrument
at the time it was taken by the holder in due course.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-414) (from Ch. 26, par. 3-414)
Sec. 3-414. Obligation of
drawer.
(a) This Section does not apply
to cashier's checks or other drafts drawn on the drawer.
(b) If an unaccepted draft is dishonored,
the drawer is obliged to pay the draft (i) according to its terms
at the time it was issued or, if not issued, at the time it first
came into possession of a holder, or (ii) if the drawer signed
an incomplete instrument, according to its terms when completed
as stated in Sections 3-115 and 3-407. The obligation
is owed to a person entitled to enforce the draft or to an indorser
who paid the draft under Section 3-415.
(c) If a draft is accepted by a
bank, the drawer is discharged, regardless of when or by whom
acceptance was obtained.
(d) If a draft is accepted and
the acceptor is not a bank, the obligation of the drawer to pay
the draft if the draft is dishonored by the acceptor is the same
as the obligation of an indorser under Section 3-415(a)
and (c).
(e) If a draft states that it is
drawn "without recourse" or otherwise disclaims liability
of the drawer to pay the draft, the drawer is not liable under
subsection (b) to pay the draft if the draft is not a check.
A disclaimer of the liability stated in subsection (b) is not
effective if the draft is a check.
(f) If (i) a check is not presented
for payment or given to a depositary bank for collection within
30 days after its date, (ii) the drawee suspends payments after
expiration of the 30-day period without paying the check,
and (iii) because of the suspension of payments, the drawer is
deprived of funds maintained with the drawee to cover payment
of the check, the drawer to the extent deprived of funds may
discharge its obligation to pay the check by assigning to the
person entitled to enforce the check the rights of the drawer
against the drawee with respect to the funds.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-415) (from Ch. 26, par. 3-415)
Sec. 3-415. Obligation of
indorser.
(a) Subject to subsections (b),
(c), and (d) and to Section 3-419(d), if an instrument
is dishonored, an indorser is obliged to pay the amount due on
the instrument (i) according to the terms of the instrument at
the time it was indorsed, or (ii) if the indorser indorsed an
incomplete instrument, according to its terms when completed
to the extent stated in Sections 3-115 and 3-407.
The obligation of the indorser is owed to a person entitled to
enforce the instrument or to a subsequent indorser who paid the
instrument under this Section.
(b) If an indorsement states that
it is made "without recourse" or otherwise disclaims
liability of the indorser, the indorser is not liable under subsection
(a) to pay the instrument.
(c) If notice of dishonor of an
instrument is required by Section 3-503 and notice of dishonor
complying with that Section is not given to an indorser, the
liability of the indorser under subsection (a) is discharged.
(d) If a draft is accepted by a
bank after an indorsement is made, the liability of the indorser
under subsection (a) is discharged.
(e) If an indorser of a check is
liable under subsection (a) and the check is not presented for
payment, or given to a depositary bank for collection, within
30 days after the day the indorsement was made, the liability
of the indorser under subsection (a) is discharged.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-416) (from Ch. 26, par. 3-416)
Sec. 3-416. Transfer warranties.
(a) A person who transfers an instrument
for consideration warrants to the transferee and, if the transfer
is by indorsement, to any subsequent transferee that:
(1) the
warrantor is a person entitled to enforce
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(2)
all signatures on the instrument are authentic
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(3)
the instrument has not been altered,
(4) the
instrument is not subject to a defense or
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claim in recoupment of any party which
can be asserted against the warrantor, and
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(5)
the warrantor has no knowledge of any insolvency
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proceeding commenced with respect to
the maker or acceptor or, in the case of an unaccepted
draft, the drawer.
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(b) A person to
whom the warranties under subsection (a) are made and who
took the instrument in good faith may recover from the
warrantor as damages for breach of warranty an amount equal
to the loss suffered as a result of the breach, but not
more than the amount of the instrument plus expenses and
loss of interest incurred as a result of the breach.
(c) The warranties stated in subsection
(a) cannot be disclaimed with respect to checks. Unless notice
of a claim for breach of warranty is given to the warrantor within
30 days after the claimant has reason to know of the breach and
the identity of the warrantor, the liability of the warrantor under
subsection (b) is discharged to the extent of any loss caused by
the delay in giving notice of the claim.
(d) A cause of action for breach
of warranty under this Section accrues when the claimant has reason
to know of the breach.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-417) (from Ch. 26, par. 3-417)
Sec. 3-417. Presentment warranties.
(a) If an unaccepted draft is presented
to the drawee for payment or acceptance and the drawee pays or
accepts the draft, (i) the person obtaining payment or acceptance,
at the time of presentment, and (ii) a previous transferor of
the draft, at the time of transfer, warrant to the drawee making
payment or accepting the draft in good faith that:
(1) the
warrantor is or was, at the time the
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warrantor transferred the draft, a person
entitled to enforce the draft or authorized to
obtain payment or acceptance of the draft on behalf
of a person entitled to enforce the draft;
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(2)
the draft has not been altered; and
(3) the
warrantor has no knowledge that the
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signature of the purported drawer of
the draft is unauthorized.
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(b) A drawee making
payment may recover from any warrantor damages for breach
of warranty equal to the amount paid by the drawee less
the amount the drawee received or is entitled to receive
from the drawer because of the payment. In addition the
drawee is entitled to compensation for expenses and loss
of interest resulting from the breach. The right of the
drawee to recover damages under this subsection is not
affected by any failure of the drawee to exercise ordinary
care in making payment. If the drawee accepts the draft,
breach of warranty is a defense to the obligation of the
acceptor. If the acceptor makes payment with respect to
the draft, the acceptor is entitled to recover from any
warrantor for breach of warranty the amounts stated in
this subsection.
(c) If a drawee asserts a claim
for breach of warranty under subsection (a) based on an unauthorized
indorsement of the draft or an alteration of the draft, the warrantor
may defend by proving that the indorsement is effective under Section
3-404 or 3-405 or the drawer is precluded under Section
3-406 or 4-406 from asserting against the drawee the
unauthorized indorsement or alteration.
(d) If (i) a dishonored draft is
presented for payment to the drawer or an indorser or (ii) any
other instrument is presented for payment to a party obliged to
pay the instrument, and (iii) payment is received, the following
rules apply:
(1) The
person obtaining payment and a prior
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transferor of the instrument warrant
to the person making payment in good faith that
the warrantor is or was, at the time the warrantor
transferred the instrument, a person entitled to
enforce the instrument or authorized to obtain
payment on behalf of a person entitled to enforce
the instrument.
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(2)
The person making payment may recover from any
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warrantor for breach of warranty an
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