Okla. Stat. tit. 12A § 3-415

Current through Laws 2024, c. 453.

Section 3-415 - Obligation of Indorser

(a) Subject to subsections (b), (c), (d), and (e) of this section and to subsection (d) of Section 3-419 of this title, 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 Section 3-115 and 3-407 of this title. 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) of this section to pay the instrument.

(c) If notice of dishonor of an instrument is required by Section 3-503 of this title and notice of dishonor complying with that section is not given to an indorser, the liability of the indorser under subsection (a) of this section is discharged.

(d) If a draft is accepted by a bank after an indorsement is made, the liability of the indorser under subsection (a) of this section is discharged.

(e) If an indorser of a check is liable under subsection (a) of this section and the check is not presented for payment, or given to a depositary bank for collection, within thirty (30) days after the day the indorsement was made, the liability of the indorser under subsection (a) of this section is discharged.

Okla. Stat. tit. 12A, § 3-415

Laws 1961, p. 112, § 3-415; Amended by Laws 1991, SB 25, c. 117, § 78, eff. 1/1/1992; Amended by Laws 1994, HB 2466, c. 46, § 4, eff. 9/1/1994.

Oklahoma Code Comment

1. The indorser of a note or drain is secondarily liable. Under sub section 3-415(a) (but subject to all of sub sections 3-415(b) through (e) and 3-419(d) ) , each indorsee engages to pay the instrument, but only upon certain conditions. These conditions may include timely presentment, dishonor, and timely notice of dishonor. See UCC §§ 3-415(a), (e), 3-501, 3-502, 3-503.

Generally, an indorser will not be liable until the instrument has been (1) presented to the maker or drawee/payor (UCC §§ 3-501, 502), and (2) dishonored (UCC § 3-502), and (3) the indorser has received timed notice of dishonor (UCC § 3-503). UCC § 4-415(a). See Brannon's No. Seven, Inc v. Phelps, 665 P.2d 860 (Okla. Ct. App. 1983); Hart Indus. Supply Co. v. Craig, 405 P.2d 93 (Okla. 1965). Dishonor is defined in Section 3-502 to require prior presentment in most cases. An indorser of a check is not liable unless the check has been presented for payment or deposited within 30 days after the indorsement was made. UCC § 3-414(e). In most other cases, presentment is a prerequisite to dishonor and, hence, to indorser liability, but need not be made within a particular time frame. UCC §§ 3-415(a), 3-501, 3-502. In contrast, a note not payable on demand and not payable at or through a bank is dishonored if not paid when due, without the necessity of presentment. UCC § 3-502(a)(3).

In addition, in order to hold an indorser Cable, notice of dishonor must be given within the time limit set by Section 3-503 . Generally, notice of dishonor must be given within the 30-day limit in sub section 3-503(c) , except that a bank must give notice by its midnight deadline. If notice of dishonor is required under Section 3-503 and is not timely given, the indorser's liability on the instrument is discharged. UCC § 3-415(c). Regarding the impact on the underlying obligation, see Section 3-310 . Prior law permitted an indorser to limit liability and an indorser also could avoid personal liability by signing in a representative capacity. This approach was carried forward in the 1992 UCC revisions in the general language permitting disclaimer of liability (UCC § 3-416 (b)) and in Section 3-402 (signature in a representative capacity). See also Copeland v. Burke, 59 Okla. 219, 158 P. 1162 (1916) (what does not constitute qualified indorsement); Milburn v. Miners' & Citizens' Bank, 101 Okla. 281, 226 P. 42 (1924) (indorser liable as such whether indorser who also attached corporation's name as maker did so with or without authority).

2. See generally F. MILLER & A. HARRELL, THE LAW OF MODERN PAYMENT SYSTEMS AND NOTES 14.03 (2d ed. 1992).