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(810 ILCS 5/Art.
4 Pt. 2 heading)
PART
2. COLLECTION OF ITEMS: DEPOSITARY AND COLLECTING BANKS
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(810 ILCS 5/4-201) (from Ch. 26,
par. 4-201)
Sec. 4-201. Status of collecting
bank as agent and provisional status of credits; applicability
of Article; item indorsed "pay any bank".
(a) Unless a contrary intent clearly
appears and before the time that a settlement given by a collecting
bank for an item is or becomes final, the bank, with respect
to the item, is an agent or sub-agent of the owner of the
item and any settlement given for the item is provisional. This
provision applies regardless of the form of indorsement or lack
of indorsement and even though credit given for the item is subject
to immediate withdrawal as of right or is in fact withdrawn;
but the continuance of ownership of an item by its owner and
any rights of the owner to proceeds of the item are subject to
rights of a collecting bank, such as those resulting from outstanding
advances on the item and rights of recoupment or setoff. If an
item is handled by banks for purpose of presentment, payment,
collection, or return, the relevant provisions of this Article
apply even though action of the parties clearly establishes that
a particular bank has purchased the item and is the owner of
it.
(b) After an item has been indorsed
with the words "pay any bank" or the like, only a bank
may acquire the rights of a holder until the item has been:
(1) returned
to the customer initiating collection;
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(2)
specially indorsed by a bank to a person who is
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(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-202) (from Ch. 26,
par. 4-202)
Sec. 4-202. Responsibility
for collection or return; when action timely.
(a) A collecting bank must exercise
ordinary care in:
(1) presenting
an item or sending it for presentment;
(2) sending
notice of dishonor or nonpayment or
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returning an item other than a documentary
draft to the bank's transferor after learning that
the item has not been paid or accepted, as the
case may be;
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(3)
settling for an item when the bank receives
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(4)
notifying its transferor of any loss or delay in
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transit within a reasonable time after
discovery thereof.
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(b) A collecting
bank exercises ordinary care under subsection (a) by taking
proper action before its midnight deadline
following receipt of an item, notice, or settlement. Taking
proper action within a reasonably longer time may constitute
the exercise of ordinary care, but the bank has the burden
of establishing timeliness.
(c) Subject to subsection (a) (1),
a bank is not liable for the insolvency, neglect, misconduct, mistake,
or default of another bank or person or for loss or destruction
of an item in the possession of others or in transit.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-203) (from Ch. 26,
par. 4-203)
Sec. 4-203. Effect of instructions.
Subject to Article 3 concerning conversion of instruments (Section
3-420) and restrictive indorsements (Section 3-206),
only a collecting bank's transferor can give instructions which
affect the bank or constitute notice to it, and a collecting
bank is not liable to prior parties for any action taken pursuant
to the instructions or in accordance with any agreement with
its transferor.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-204) (from Ch. 26,
par. 4-204)
Sec. 4-204. Methods of sending
and presenting; sending directly to payor bank.
(a) A collecting bank shall send
items by a reasonably prompt method, taking into consideration
relevant instructions, the nature of the item, the number of
those items on hand, the cost of collection involved, and the
method generally used by it or others to present those items.
(b) A collecting bank may send:
(1) an
item directly to the payor bank;
(2) an
item to a nonbank payor if authorized by its
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(3)
an item other than documentary drafts to a
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nonbank payor, if authorized by Federal
Reserve regulation or operating circular, clearing-house
rule, or the like.
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(c) Presentment
may be made by a presenting bank at a place where the payor
bank or other payor has requested that presentment be made.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-205) (from Ch. 26, par. 4-205)
Sec. 4-205. Depositary bank
holder of unindorsed item. If a customer delivers an item to
a depositary bank for collection:
(1) the depositary bank becomes
a holder of the item at the time it receives the item for collection
if the customer at the time of delivery was a holder of the item,
whether or not the customer indorses the item, and, if the bank
satisfies the other requirements of Section 3-302, it may
be a holder in due course; and
(2) the depositary bank warrants
to collecting banks, the payor bank or other payor, and the drawer
that the amount of the item was paid to the customer or deposited
to the customer's account.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-206) (from Ch. 26, par. 4-206)
Sec. 4-206. Transfer between
banks. Any agreed method that identifies the transferor bank
is sufficient for the item's further transfer to another bank.
(Source: P.A. 87-582.)
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(810 ILCS 5/4-207) (from Ch. 26, par. 4-207)
Sec. 4-207. Transfer warranties.
(a) A customer or collecting bank
that transfers an item and receives a settlement or other consideration
warrants to the transferee and to any subsequent collecting bank
that:
(1) the
warrantor is a person entitled to enforce
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(2)
all signatures on the item are authentic and
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(3)
the item has not been altered;
(4) the
item is not subject to a defense or claim in
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recoupment (Section 3-305(a))
of any party that 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) If an item
is dishonored, a customer or collecting bank transferring
the item and receiving settlement or other consideration
is obliged to pay the amount due on the item (i) according
to the terms of the item at the time it was transferred,
or (ii) if the transfer was of an incomplete item, according
to its terms when completed as stated in Sections 3-115
and 3-407. The obligation of a transferor is owed
to the transferee and to any subsequent collecting bank
that takes the item in good faith. A transferor may not
disclaim its obligation under this subsection by an indorsement
stating that it is made "without recourse" or
otherwise disclaiming liability.
(c) A person to whom the warranties
under subsection (a) are made and who took the item 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 item plus expenses and loss
of interest incurred as a result of the breach.
(d) 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 warrantor is discharged to the
extent of any loss caused by the delay in giving notice of the
claim.
(e) 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.)
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(810 ILCS 5/4-208) (from Ch. 26, par. 4-208)
Sec. 4-208. 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 that
pays or accepts 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
(i) breach of warranty is a defense to the obligation of
the acceptor, and (ii) 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 item is presented for payment to a party obliged to pay the
item, and the item is paid, the person obtaining payment and a
prior transferor of the item warrant to the person making payment
in good faith that the warrantor is or was, at the time the warrantor
transferred the item, a person entitled to enforce the item or
authorized to obtain payment on behalf of a person entitled to
enforce the item. The person making payment may recover from any
warrantor for breach of warranty an amount equal to the amount
paid plus expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections
(a) and (d) 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 warrantor is discharged
to the extent of any loss caused by the delay in giving notice
of the claim.
(f) 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 5/4-209) (from Ch. 26, par. 4-209)
Sec. 4-209. Encoding and
retention warranties.
(a) A person that encodes information
on or with respect to an item after issue warrants to any subsequent
collecting bank and to the payor bank or other payor that the
information is correctly encoded. If the customer of a depositary
bank encodes, that bank also makes the warranty.
(b) A person who undertakes to
retain an item pursuant to an agreement for electronic presentment
warrants to any subsequent collecting bank and to the payor bank
or other payor that retention and presentment of the item comply
with the agreement. If a customer of a depositary bank undertakes
to retain an item, that bank also makes this warranty.
(c) A person to whom warranties
are made under this Section and who took the item 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,
plus expenses and loss of interest incurred as a result of the
breach.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
Sec. 4-210. Security interest
of collecting bank in items, accompanying documents and proceeds.
(a) A collecting bank has a security
interest in an item and any accompanying documents or the proceeds
of either:
(1) in
case of an item deposited in an account, to
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the extent to which credit given for
the item has been withdrawn or applied;
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(2)
in case of an item for which it has given credit
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available for withdrawal as of right,
to the extent of the credit given, whether or not
the credit is drawn upon or there is a right of
charge-back; or
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(3)
if it makes an advance on or against the item.
(b) If credit given for several
items received at one time or pursuant to a single agreement is
withdrawn or applied in part, the security interest remains upon
all the items, any accompanying documents or the proceeds of either.
For the purpose of this Section, credits first given are first
withdrawn.
(c) Receipt by a collecting bank
of a final settlement for an item is a realization on its security
interest in the item, accompanying documents, and proceeds. So
long as the bank does not receive final settlement for the item
or give up possession of the item or accompanying documents for
purposes other than collection, the security interest continues
to that extent and is subject to Article 9, but:
(1) no
security agreement is necessary to make the
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security interest enforceable Section
9-203(b)(3)(A);
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(2)
no filing is required to perfect the security
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(3)
the security interest has priority over
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conflicting perfected security interests
in the item, accompanying documents, or proceeds.
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(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/4-211) (from Ch. 26, par. 4-211)
Sec. 4-211. When bank gives
value for purposes of holder in due course. For purposes of
determining its status as a holder in due course, a bank has
given value to the extent it has a security interest in an
item, if the bank otherwise complies with the requirements
of Section 3-302 on what constitutes a holder in due
course.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-212) (from Ch. 26, par. 4-212)
Sec. 4-212. Presentment by
notice of item not payable by, through, or at bank; liability
of drawer or indorser.
(a) Unless otherwise instructed,
a collecting bank may present an item not payable by, through,
or at a bank by sending to the party to accept or pay a written
notice that the bank holds the item for acceptance or payment.
The notice must be sent in time to be received on or before the
day when presentment is due and the bank must meet any requirement
of the party to accept or pay under Section 3-501 by the
close of the bank's next banking day after it knows of the requirement.
(b) If presentment is made by notice
and payment, acceptance, or request for compliance with a requirement
under Section 3-501 is not received by the close of business
on the day after maturity or, in the case of demand items, by
the close of business on the third banking day after notice was
sent, the presenting bank may treat the item as dishonored and
charge any drawer or indorser by sending it notice of the facts.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-213) (from Ch. 26, par. 4-213)
Sec. 4-213. Medium and time
of settlement by bank.
(a) With respect to settlement
by a bank, the medium and time of settlement may be prescribed
by Federal Reserve regulations or circulars, clearing-house
rules, and the like, or agreement. In the absence of such prescription:
(1) the
medium of settlement is cash or credit to an
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account in a Federal Reserve Bank of
or specified by the person to receive settlement;
and
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(2)
the time of settlement is:
(i)
with respect to tender of settlement by
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cash, a cashier's check, or teller's
check, when the cash or check is sent or delivered;
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(ii)
with respect to tender of settlement by
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credit in an account in a Federal Reserve
Bank, when the credit is made;
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(iii)
with respect to tender of settlement by a
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credit or debit to an account in a bank,
when the credit or debit is made or, in the case
of tender of settlement by authority to charge
an account, when the authority is sent or delivered;
or
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(iv)
with respect to tender of settlement by a
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funds transfer, when payment is made
pursuant to Section 4A-406(a) to the person
receiving settlement.
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(b) If the tender
of settlement is not by a medium authorized by subsection
(a) or the time of settlement is not fixed by subsection
(a), no settlement occurs until the tender of settlement
is accepted by the person receiving settlement.
(c) If settlement for an item is
made by cashier's check or teller's check and the person receiving
settlement, before its midnight deadline:
(1) presents
or forwards the check for collection,
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settlement is final when the check is
finally paid; or
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(2)
fails to present or forward the check for
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