(810 ILCS 5/3-302) (from Ch. 26, par. 3-302)
Sec. 3-302.
Holder in due course.
(a) Subject to subsection (c) and Section 3-106(d), "holder in due
course" means the holder of an instrument if:
(1) the instrument when issued or negotiated to the |
| holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity, and
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(2) the holder took the instrument (i) for value,
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| (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306, and (vi) without notice that any party has a defense or claim in recoupment stated in Section 3-305(a).
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(b) Notice of discharge of a party, other than discharge in an
insolvency proceeding, is not notice of a defense under subsection (a), but
discharge is effective against a person who became a holder in due course
with notice of the discharge. Public filing or recording of a document
does not of itself constitute notice of a defense, claim in recoupment, or
claim to the instrument.
(c) Except to the extent a transferor or predecessor in interest has
rights as a holder in due course, a person does not acquire rights of a
holder in due course of an instrument taken (i) by legal process or by
purchase at an execution, bankruptcy, or creditor's sale or similar
proceeding, (ii) by purchase as part of a bulk transaction not in the ordinary
course of business of the transferor, or (iii) as the successor in interest
to an estate or other organization.
(d) If, under Section 3-303(a)(1), the promise of performance that is
the consideration for an instrument has been partially performed, the
holder may assert rights as a holder in due course of the instrument only
to the fraction of the amount payable under the instrument equal to the
value of the partial performance divided by the value of the promised
performance.
(e) If (i) the person entitled to enforce an instrument has only a
security interest in the instrument and (ii) the person obliged to pay the
instrument has a defense, claim in recoupment, or claim to the instrument
that may be asserted against the person who granted the security interest,
the person entitled to enforce the instrument may assert rights as a holder
in due course only to an amount payable under the instrument which, at the
time of enforcement of the instrument, does not exceed the amount of the
unpaid obligation secured.
(f) To be effective, notice must be received at a time and in a manner
that gives a reasonable opportunity to act on it.
(g) This Section is subject to any law limiting status as a holder in
due course in particular classes of transactions.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-303) (from Ch. 26, par. 3-303)
Sec. 3-303.
Value and consideration.
(a) An instrument is issued or transferred for value if:
(1) the instrument is issued or transferred for a |
| promise of performance, to the extent the promise has been performed;
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(2) the transferee acquires a security interest or
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| other lien in the instrument other than a lien obtained by judicial proceeding;
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(3) the instrument is issued or transferred as
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| payment of, or as security for, an antecedent claim against any person, whether or not the claim is due;
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(4) the instrument is issued or transferred in
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| exchange for a negotiable instrument; or
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(5) the instrument is issued or transferred in
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| exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument.
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(b) "Consideration" means any consideration sufficient to support a
simple contract. The drawer or maker of an instrument has a defense if the
instrument is issued without consideration. If an instrument is issued for
a promise of performance, the issuer has a defense to the extent
performance of the promise is due and the promise has not been performed.
If an instrument is issued for value as stated in subsection (a), the
instrument is also issued for consideration.
(Source: P.A. 87-582.)
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(810 ILCS 5/3-304) (from Ch. 26, par. 3-304)
Sec. 3-304.
Overdue instrument.
(a) An instrument payable on demand becomes overdue at the earliest of
the following times:
(1) on the day after the day demand for payment is |
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(2) if the instrument is a check, 90 days after its
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(3) if the instrument is not a check, when the
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| instrument has been outstanding for a period of time after its date which is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.
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(b) With respect to an instrument payable at a definite time the
following rules apply:
(1) If the principal is payable in installments and a
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| due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured.
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(2) If the principal is not payable in installments
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| and the due date has not been accelerated, the instrument becomes overdue on the day after the due date.
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(3) If a due date with respect to principal has been
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| accelerated, the instrument becomes overdue on the day after the accelerated due date.
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(c) Unless the due date of principal has been accelerated, an instrument
does not become overdue if there is default in payment of interest but no
default in payment of principal.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-305) (from Ch. 26, par. 3-305)
Sec. 3-305. Defenses and claims in recoupment.
(a) Except as stated in subsection (b), the right to enforce the
obligation of a party to pay an instrument is subject to the
following:
(1) a defense of the obligor based on (i) infancy of |
| the obligor to the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity, or illegality of the transaction which, under the law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings;
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(2) a defense of the obligor stated in another
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| Section of this Article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and
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(3) a claim in recoupment of the obligor against the
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| original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.
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(b) The right of a holder in due course to enforce the obligation of a
party to pay the instrument is subject to defenses of the obligor stated in
subsection (a)(1), but is not subject to defenses of the obligor stated in
subsection (a)(2) or claims in recoupment stated in subsection (a)(3)
against a person other than the holder.
(c) Except as stated in subsection (d), in an action to enforce the
obligation of a party to pay the instrument, the obligor may not assert
against the person entitled to enforce the instrument a defense, claim in
recoupment, or claim to the instrument (Section 3-306) of another person,
but the other person's claim to the instrument may be asserted by the
obligor if the other person is joined in the action and personally asserts
the claim against the person entitled to enforce the instrument. An
obligor is not obliged to pay the instrument if the person seeking
enforcement of the instrument does not have rights of a holder in due
course and the obligor proves that the instrument is a lost or stolen
instrument.
(d) In an action to enforce the obligation of an accommodation party to
pay an instrument, the accommodation party may assert against the person
entitled to enforce the instrument any defense or claim in recoupment under
subsection (a) that the accommodated party could assert against the person
entitled to enforce the instrument, except the defenses of discharge in
insolvency proceedings, infancy, or lack of legal capacity.
(Source: P.A. 97-813, eff. 7-13-12.)
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(810 ILCS 5/3-307) (from Ch. 26, par. 3-307)
Sec. 3-307.
Notice of breach of fiduciary duty.
(a) In this Section:
(1) "Fiduciary" means an agent, trustee, partner, |
| corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument.
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(2) "Represented person" means the principal,
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| beneficiary, partnership, corporation, or other person to whom the duty stated in paragraph (1) is owed.
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(b) If (i) an instrument is taken from a fiduciary for payment or
collection or for value, (ii) the taker has knowledge of the fiduciary
status of the fiduciary, and (iii) the represented person makes a claim to
the instrument or its proceeds on the basis that the transaction of the
fiduciary is a breach of fiduciary duty, the following rules apply:
(1) Notice of breach of fiduciary duty by the
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| fiduciary is notice of the claim of the represented person.
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(2) In the case of an instrument payable to the
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| represented person or the fiduciary, as such, the taker has notice of the breach of fiduciary duty if the instrument is (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.
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(3) If an instrument is issued by the represented
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| person or the fiduciary, as such, and made payable to the fiduciary personally, the taker does not have notice of the breach of fiduciary duty unless the taker knows of the breach of fiduciary duty.
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(4) If an instrument is issued by the represented
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| person or the fiduciary, as such, to the taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.
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(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-310) (from Ch. 26, par. 3-310)
Sec. 3-310.
Effect of instrument on obligation for which taken.
(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 indorser 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.
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(2) In the case of a note, suspension of the
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| 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.
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(3) Except as provided in paragraph (4), if the check
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| 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.
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(4) If the person entitled to enforce the instrument
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| 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.
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(c) If an instrument other than one described in subsection (a) or (b)
is taken for an obligation, the effect is (i) that stated in subsection (a)
if the instrument is one on which a bank is liable as maker or acceptor, or
(ii) that stated in subsection (b) in any other case.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-311) (from Ch. 26, par. 3-311)
Sec. 3-311.
Accord and satisfaction by use of instrument.
(a) If a person against whom a claim is asserted
proves that (i) that person in good faith tendered an instrument to the
claimant as full satisfaction of the claim, (ii) the amount of the claim
was unliquidated or subject to a bona fide dispute, and (iii) the claimant
obtained payment of the instrument, the following subsections apply.
(b) Unless subsection (c) applies, the claim is discharged if the person
against whom the claim is asserted proves that the instrument or an
accompanying written communication contained a conspicuous statement to the
effect that the instrument was tendered as full satisfaction of the claim.
(c) Subject to subsection (d), a claim is not discharged under
subsection (b) if either of the following applies:
(1) The claimant, if an organization, proves that (i) |
| within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and (ii) the instrument or accompanying communication was not received by that designated person, office, or place.
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(2) The claimant, whether or not an organization,
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| proves that within 90 days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with paragraph (1)(i).
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(d) A claim is discharged if the person against whom the claim is
asserted proves that within a reasonable time before collection of the
instrument was initiated, the claimant or an agent of the claimant having
direct responsibility with respect to the disputed obligation knew that the
instrument was tendered in full satisfaction of the claim.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/3-312) (from Ch. 26, par. 3-312)
Sec. 3-312.
Lost, destroyed, or stolen cashier's check, teller's
check, or certified check.
(a) In this Section:
(1) "Check" means a cashier's check, teller's check, |
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(2) "Claimant" means a person who claims the right to
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| receive the amount of a cashier's check, teller's check, or certified check that was lost, destroyed, or stolen.
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(3) "Declaration of loss" means a written statement,
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| made under penalty of perjury, to the effect that (i) the declarer lost possession of a check, (ii) the declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier's check or teller's check, (iii) the loss of possession was not the result of a transfer by the declarer of a lawful seizure, and (iv) the declarer cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
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(4) "Obligated bank" means the issuer of a cashier's
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| check or teller's check or the acceptor of a certified check.
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(b) A claimant may assert a claim to the amount of a check by a
communication to the obligated bank describing the check with reasonable
certainty and requesting payment of the amount of the check, if (i) the
claimant is the drawer or payee of a certified check or the remitter or
payee of a cashier's check or teller's check, (ii) the communication
contains or is accompanied by a declaration of loss of the claimant with
respect to the check, (iii) the communication is received at a time and in
a manner affording the bank a reasonable time to act on it before the check
is paid, and (iv) the claimant provides reasonable identification if
requested by the obligated bank. Delivery of a declaration
of loss is a warranty of the truth of the statements made in the
declaration. If a claim is asserted in compliance with this subsection, the
following rules apply:
(1) The claim becomes enforceable at the later of (i)
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| the time the claim is asserted, or (ii) the 90th day following the date of the check, in the case of a cashier's check or teller's check, or the 90th day following the date of the acceptance, in the case of a certified check.
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(2) Until the claim becomes enforceable, it has no
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| legal effect and the obligated bank may pay the check or, in the case of a teller's check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check.
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(3) If the claim becomes enforceable before the check
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| is presented for payment, the obligated bank is not obliged to pay the check.
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(4) When the claim becomes enforceable, the obligated
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| bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check. Subject to Section 4-302(a)(1), payment to the claimant discharges all liability of the obligated bank with respect to the check.
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(c) If the obligated bank pays the amount of a check to a claimant under
subsection (b)(4) and the check is presented for payment by a person having
rights of a holder in due course, the claimant is obliged to (i) refund the
payment to the obligated bank if the check is paid, or (ii) pay the amount
of the check to the person having rights of a holder in due course if the
check is dishonored.
(d) If a claimant has the right to assert a claim under subsection (b)
and is also a person entitled to enforce a cashier's check, teller's check,
or certified check that is lost, destroyed, or stolen, the claimant may
assert rights with respect to the check either under this Section or
Section 3-309.
(Source: P.A. 87-582; 87-895; 87-1135.)
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