§ 26-1-3.1-310 — Effect of instrument on obligation for which taken

Indiana § 26-1-3.1-310

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 3.1: Negotiable Instruments

Text

(a) Unless otherwise agreed, if a certified
check, cashier's check, or teller's check is taken for an obligation, the
obligation is discharged to the same extent discharge would result if an
amount of money equal to the amount of the instrument were taken in
payment of the obligation. Discharge of the obligation does not affect
any liability that the obligor may have as an endorser of the instrument.
(b) Unless otherwise agreed and except as provided in subsection
(a), if a note or an uncertified check is taken for an obligation, the
obligation is suspended to the same extent the obligation would be
discharged if an amount of money equal to the amount of the
instrument were taken, and the following rules apply:
(1) In the case of an uncertified check, suspension of the
obligation continues until dishonor of the check or until it is paid
or certified. Payment or certification of the check results in
discharge of the obligation to the extent of the amount of the
check.
(2) In the case of a note, suspension of the obligation continues
until dishonor of the note or until it is paid. Payment of the note
results in discharge of the obligation to the extent of the payment.
(3) Except as provided in subdivision (4), if the check or note is
dishonored and the obligee of the obligation for which the
instrument was taken is the person entitled to enforce the
instrument, the obligee may enforce either the instrument or the
obligation. In the case of an instrument of a third person which is
negotiated to the obligee by the obligor, discharge of the obligor
on the instrument also discharges the obligation.
(4) If the person entitled to enforce the instrument taken for an
obligation is a person other than the obligee, the obligee may not
enforce the obligation to the extent the obligation is suspended.
If the obligee is the person entitled to enforce the instrument but
no longer has possession of it because it was lost, stolen, or
destroyed, the obligation may not be enforced to the extent of the
amount payable on the instrument, and to that extent the obligee's
rights against the obligor are limited to enforcement of the
instrument.
(c) If an instrument other than one described in subsection (a) or (b)
is taken for an obligation, the effect is:
(1) that stated in subsection (a) if the instrument is one on which
a bank is liable as maker or acceptor; or
(2) that stated in subsection (b) in any other case.

Legislative History

As added by P.L.222-1993, SEC.5.