IC 26-1-3.1Chapter 3.1. Negotiable Instruments

IC 26-1-3.1-101Short title

Sec. 101. IC 26-1-3.1 may be cited as Uniform Commercial Code) Negotiable Instruments.As added by P.L.222-1993, SEC.5.

IC 26-1-3.1-102Subject matter

Sec. 102. (a) IC 26-1-3.1 applies to negotiable instruments. It doesnot apply to money, to payment orders governed by IC 26-1-4.1, orto securities governed by IC 26-1-8.1.

(b) If there is conflict between IC 26-1-3.1 and IC 26-1-4 orIC 26-1-9.1, IC 26-1-4, and IC 26-1-9.1 govern.

(c) Regulations of the Board of Governors of the Federal ReserveSystem and operating circulars of the Federal Reserve Bankssupersede any inconsistent provision of IC 26-1-3.1 to the extent ofthe inconsistency.As added by P.L.222-1993, SEC.5. Amended by P.L.247-1995,SEC.4; P.L.57-2000, SEC.27.

IC 26-1-3.1-103Definitions

Sec. 103. (a) In IC 26-1-3.1:(1) "Acceptor" means a drawee who has accepted a draft.(2) "Consumer account" means an account established by anindividual primarily for personal, family, or householdpurposes.(3) "Consumer transaction" means a transaction in which anindividual incurs an obligation primarily for personal, family,or household purposes.(4) "Drawee" means a person ordered in a draft to makepayment.(5) "Drawer" means a person who signs or is identified in adraft as a person ordering payment.(6) "Good faith" means honesty in fact and the observance ofreasonable commercial standards of fair dealing.(7) "Maker" means a person who signs or is identified in a noteas a person undertaking to pay.(8) "Order" means a written instruction to pay money signed bythe person giving the instruction. The instruction may beaddressed to any person, including the person giving theinstruction, or to one (1) or more persons jointly or in thealternative but not in succession. An authorization to pay is notan order unless the person authorized to pay is also instructedto pay.(9) "Ordinary care" in the case of a person engaged in businessmeans observance of reasonable commercial standards

prevailing in the area in which the person is located, withrespect to the business in which the person is engaged. In thecase of a bank that takes an instrument for processing forcollection or payment by automated means, reasonablecommercial standards do not require the bank to examine theinstrument if the failure to examine does not violate the bank'sprescribed procedures and the bank's procedures do not varyunreasonably from general banking usage not disapproved byIC 26-1-3.1 or IC 26-1-4.(10) "Party" means a party to an instrument.(11) "Principal obligor", with respect to an instrument, meansthe accommodated party or any other party to the instrumentagainst whom a secondary obligor has recourse under thisarticle.(12) "Promise" means a written undertaking to pay moneysigned by the person undertaking to pay. An acknowledgmentof an obligation by the obligor is not a promise unless theobligor also undertakes to pay the obligation.(13) "Prove" with respect to a fact means to meet the burden ofestablishing the fact (IC 26-1-1-201(8)).(14) "Remitter" means a person who purchases an instrumentfrom its issuer if the instrument is payable to an identifiedperson other than the purchaser.(15) "Remotely-created consumer item" means an item that isdrawn on a consumer account, is not created by the payor bank,and does not bear a handwritten signature purporting to be thesignature of the drawer.(16) "Secondary obligor", with respect to an instrument, means:

(A) an endorser or an accommodation party;(B) a drawer having the obligation described inIC 26-1-3.1-414(d); or(C) any other party to the instrument that has recourseagainst another party to the instrument underIC 26-1-3.1-116(b).

(b) Other definitions applying to IC 26-1-3.1 and the sections inwhich they appear are:

"Acceptance". IC 26-1-3.1-409."Accommodated party". IC 26-1-3.1-419."Accommodation party". IC 26-1-3.1-419."Alteration". IC 26-1-3.1-407."Anomalous endorsement". IC 26-1-3.1-205."Blank endorsement". IC 26-1-3.1-205."Cashier's check". IC 26-1-3.1-104."Certificate of deposit". IC 26-1-3.1-104."Certified check". IC 26-1-3.1-409."Check". IC 26-1-3.1-104."Consideration". IC 26-1-3.1-303."Draft". IC 26-1-3.1-104."Holder in due course". IC 26-1-3.1-302."Incomplete instrument". IC 26-1-3.1-115.

"Endorsement". IC 26-1-3.1-204."Endorser". IC 26-1-3.1-204."Instrument". IC 26-1-3.1-104."Issue". IC 26-1-3.1-105."Issuer". IC 26-1-3.1-105."Negotiable instrument". IC 26-1-3.1-104."Negotiation". IC 26-1-3.1-201."Note". IC 26-1-3.1-104."Payable at a definite time". IC 26-1-3.1-108."Payable on demand". IC 26-1-3.1-108."Payable to bearer". IC 26-1-3.1-109."Payable to order". IC 26-1-3.1-109."Payment". IC 26-1-3.1-602."Person entitled to enforce". IC 26-1-3.1-301."Presentment". IC 26-1-3.1-501."Reacquisition". IC 26-1-3.1-207."Special endorsement". IC 26-1-3.1-205."Teller's check". IC 26-1-3.1-104."Transfer of an instrument". IC 26-1-3.1-203."Traveler's check". IC 26-1-3.1-104."Value". IC 26-1-3.1-303.

(c) The following definitions in other IC 26-1-4 apply toIC 26-1-3.1:

"Banking day". IC 26-1-4-104."Clearing house". IC 26-1-4-104."Collecting bank". IC 26-1-4-105."Depositary bank". IC 26-1-4-105."Documentary draft". IC 26-1-4-104."Intermediary bank". IC 26-1-4-105."Item". IC 26-1-4-104."Payor bank". IC 26-1-4-105."Suspends payments". IC 26-1-4-104.

(d) In addition, IC 26-1-1 contains general definitions andprinciples of construction and interpretation applicable throughoutIC 26-1-3.1.As added by P.L.222-1993, SEC.5. Amended by P.L.135-2009,SEC.2.

IC 26-1-3.1-104Negotiable instrument

Sec. 104. (a) Except as provided in subsections (c) and (d),"negotiable instrument" means an unconditional promise or order topay a fixed amount of money, with or without interest or othercharges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or firstcomes into possession of a holder;(2) is payable on demand or at a definite time; and(3) does not state any other undertaking or instruction by theperson promising or ordering payment to do any act in additionto the payment of money, but the promise or order may contain:

(A) an undertaking or power to give, maintain, or protectcollateral to secure payment;(B) an authorization or power to the holder to confessjudgment or realize on or dispose of collateral; or(C) a waiver of the benefit of any law intended for theadvantage or protection of an obligor.

(b) "Instrument" means a negotiable instrument.(c) An order that meets all of the requirements of subsection (a),

except subdivision (1), and otherwise falls within the definition of"check" in subsection (f) is a negotiable instrument and a check.

(d) A promise or order other than a check is not an instrument if,at the time it is issued or first comes into possession of a holder, itcontains a conspicuous statement, however expressed, to the effectthat the promise or order is not negotiable or is not an instrumentgoverned by IC 26-1-3.1.

(e) An instrument is a "note" if it is a promise and is a "draft" ifit is an order. If an instrument falls within the definition of both"note" and "draft", a person entitled to enforce the instrument maytreat it as either.

(f) "Check" means:(1) a draft, other than a documentary draft, payable on demandand drawn on a bank; or(2) a cashier's check or teller's check.

An instrument may be a check even though it is described on its faceby another term, such as "money order".

(g) "Cashier's check" means a draft with respect to which thedrawer and drawee are the same bank or branches of the same bank.

(h) "Teller's check" means a draft drawn by a bank:(1) on another bank; or(2) payable at or through a bank.

(i) "Traveler's check" means an instrument that:(1) is payable on demand;(2) is drawn on or payable at or through a bank;(3) is designated by the term "traveler's check" or by asubstantially similar term; and(4) requires, as a condition to payment, a countersignature by aperson whose specimen signature appears on the instrument.

(j) "Certificate of deposit" means an instrument containing anacknowledgment by a bank that a sum of money has been receivedby the bank and a promise by the bank to repay the sum of money. Acertificate of deposit is a note of the bank.As added by P.L.222-1993, SEC.5.

IC 26-1-3.1-105Issue of instrument

Sec. 105. (a) "Issue" means the first delivery of an instrument bythe maker or drawer, whether to a holder or nonholder, for thepurpose of giving rights on the instrument to any person.

(b) An unissued instrument, or an unissued incomplete instrumentthat is completed, is binding on the maker or drawer, but nonissuance

is a defense. An instrument that is conditionally issued or is issuedfor a special purpose is binding on the maker or drawer, but failureof the condition or special purpose to be fulfilled is a defense.

(c) "Issuer" applies to issued and unissued instruments and meansa maker or drawer of an instrument.As added by P.L.222-1993, SEC.5.

IC 26-1-3.1-106Unconditional promise or order

Sec. 106. (a) Except as provided in this section, for the purposesof IC 26-1-3.1-104(a), a promise or order is unconditional unless itstates:

(1) an express condition to payment;(2) that the promise or order is subject to or governed byanother record; or(3) that rights or obligations with respect to the promise ororder are stated in another record.

A reference to another record does not of itself make the promise ororder conditional.

(b) A promise or order is not made conditional:(1) by a reference to another record for a statement of rightswith respect to collateral, prepayment, or acceleration; or(2) because payment is limited to resort to a particular