Indorser Discharged For Lack Of Notice
Alice indorses a note to Bank. Maker defaults and Bank fails to give Alice timely notice that the note has not been paid. Alice's liability on the indorsement is discharged under UCC § 3-415.
Also known as: notice of non-payment · notices of nonpayment · notice of dishonor
Written by attorneys · grounded in primary & secondary sources — see below
A communication to an indorser or drawer indicating that the instrument has been dishonored or has not been paid. The notice is a prerequisite to enforcing the indorser's or drawer's liability unless excused under UCC § 3-504.
Alice indorses a note to Bank. Maker defaults and Bank fails to give Alice timely notice that the note has not been paid. Alice's liability on the indorsement is discharged under UCC § 3-415.
Drawer issues a check to Payee. Payor bank returns the check unpaid and sends drawer timely notice that the check has not been paid. Payee may enforce drawer's liability under UCC § 3-414.
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Failure to give the required notice of dishonor or nonpayment prevents enforcement of indorser or drawer liability under UCC § 3-415 and § 3-414 unless the delay is excused.
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No. Notice of dishonor or nonpayment under UCC § 3-503 operates independently of any federal bank-collection rules and remains necessary to preserve liability of indorsers and drawers.
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Notice may be given by any commercially reasonable means, including oral, written, or electronic communication, provided it reasonably identifies the instrument and states that it has not been paid or accepted.
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