2006 Ohio Revised Code - 1303.01. (UCC 3-103) Definitions.

§ 1303.01. (UCC 3-103) Definitions.
 

(A)  As used in this chapter, unless the context otherwise requires: 

(1) "Acceptor" means a drawee who has accepted a draft. 

(2) "Drawee" means a person ordered in a draft to make payment. 

(3) "Drawer" means a person who signs or is identified in a draft as a person ordering payment. 

(4) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing. 

(5) "Issue" means the first delivery of an instrument by the maker or drawer to a holder or nonholder for the purpose of giving rights of the instrument to any person. 

(6) "Issuer" means a maker or drawer of an issued or unissued instrument. 

(7) "Maker" means a person who signs or is identified in a note as a person undertaking to pay. 

(8) "Order" means a written instruction to pay money signed by the person giving the instruction. The instruction may be addressed to any person, including the person giving the instruction, or to one or more persons jointly or in the alternative but not in succession. "Order" does not mean an authorization to pay unless the person authorized to pay also is instructed to pay. 

(9) "Ordinary care" in the case of a person engaged in business means observance of the reasonable commercial standards that are prevailing in the area in which the person is located with respect to the business in which the person is engaged. In the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate the bank's prescribed procedures, and the bank's procedures do not vary unreasonably from general banking usage not disapproved by this chapter or Chapter 1304. of the Revised Code. 

(10) "Party" means a party to an instrument. 

(11) "Promise" means a written undertaking to pay money that is signed by the person undertaking to pay. "Promise" does not include an acknowledgment of an obligation by the obligor unless the obligor also undertakes to pay the obligation. 

(12) "Prove," with respect to a fact, means to meet the burden of establishing the fact. 

(13) "Remitter" means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser. 

(B)  As used in this chapter: 

(1) "Acceptance" has the same meaning as in section 1303.46 of the Revised Code. 

(2) "Accommodation party" and "accommodated party" have the same meanings as in section 1303.59 of the Revised Code. 

(3) "Alteration" has the same meaning as in section 1303.50 of the Revised Code. 

(4) "Anomalous indorsement," "blank indorsement," and "special indorsement" have the same meanings as in section 1303.25 of the Revised Code. 

(5) "Certificate of deposit," "Cashier's check," "check," "draft," "instrument," "negotiable instrument," "note," "teller's check," and "traveler's check" have the same meanings as in section 1303.03 of the Revised Code. 

(6) "Certified check" has the same meaning as in section 1303.46 of the Revised Code. 

(7) "Consideration" and "value" have the same meanings as in section 1303.33 of the Revised Code. 

(8) "Holder in due course" has the same meaning as in section 1303.32 of the Revised Code. 

(9) "Incomplete instrument" has the same meaning as in section 1303.11 of the Revised Code. 

(10) "Indorsement" and "indorser" have the same meanings as in section 1303.24 of the Revised Code. 

(11) "Negotiation" has the same meaning as in section 1303.21 of the Revised Code. 

(12) "Payable at a definite time" and "payable on demand" have the same meanings as in section 1303.07 of the Revised Code. 

(13) "Payable to bearer" and "payable to order" have the same meanings as in section 1303.10 of the Revised Code. 

(14) "Payment" has the same meaning as in section 1303.67 of the Revised Code. 

(15) "Person entitled to enforce" has the same meaning as in section 1303.31 of the Revised Code. 

(16) "Presentment" has the same meaning as in section 1303.59 of the Revised Code. 

(17) "Reacquisition" has the same meaning as in section 1303.27 of the Revised Code. 

(18) "Transfer of instrument" has the same meaning as in section 1303.22 of the Revised Code. 

(C)  As used in this chapter, "account," "bank," "banking day," "clearing house," "collecting bank," "customer," "depositary bank," "documentary draft," "intermediary bank," "item," "midnight deadline," "payor bank," and "suspends payments" have the same meanings as in section 1304.01 of the Revised Code. 

(D)  The terms and general principles of construction and interpretation set forth in sections 1301.01 to 1301.14 of the Revised Code are applicable to this chapter. 
 

HISTORY: 129 v S 5 (Eff 7-1-62); 130 v 318 (Eff 1-23-63); 145 v S 147. Eff 8-19-94.
 

Not analogous to former RC § 1303.01 (Bureau of Code Revision, 10-1-53), repealed 129 v S 5, § 2, eff 7-1-62.

 

Official Comment

1. Subsection (a) defines some common terms used throughout the article that were not defined by former article 3 and adds the definitions of "order" and "promise" found in former section 3-102(1)(b) and (c). 

2. The definition of "order" includes an instruction given by the signer to itself.  The most common example of this kind of order is a cashier's check: A draft with respect to which the drawer and the drawee are the same bank or branches of the same bank.  Former section 3-118(a) treated a cashier's check as a note.  It stated "a draft drawn on the drawer is effective as a note."  Although it is technically more correct to treat a cashier's check as a promise by the issuing bank to pay rather than an order to pay, a cashier's check is in the form of a check and it is normally referred to as a check. Thus, revised article 3 follows banking practice in referring to a cashier's check as both a draft and a check rather than a note.  Some insurance companies also follow the practice of issuing drafts in which the drawer draws on itself and makes the draft payable at or through a bank. These instruments are also treated as drafts. The obligation of the drawer of a cashier's check or other draft drawn on the drawer is stated in section 3-412. 

An order may be addressed to more than one person as drawee either jointly or in the alternative.  The authorization of alternative drawees follows former section 3-102(1)(b) and recognizes the practice of drawers, such as corporations issuing dividend checks, who for commercial convenience name a number of drawees, usually in different parts of the country. Section 3-501(b)(1) provides that presentment may be made to any one of multiple drawees.  Drawees in succession are not permitted because the holder should not be required to make more than one presentment.  Dishonor by any drawee named in the draft entitles the holder to rights of recourse against the drawer or indorsers. 

3. The last sentence of subsection (a)(9) is intended to make it clear that an I.O.U. or other written acknowledgement of indebtedness is not a note unless there is also an undertaking to pay the obligation. 

4. Subsection (a)(4) introduces a definition of good faith to apply to articles 3 and 4.  Former articles 3 and 4 used the definition in section 1-201(19).  The definition in subsection  (a)(4) is consistent with the definitions of good faith applicable to articles 2, 2A, 4, and 4A.  The definition requires not only honesty in fact, but also "observance of reasonable commercial standards of fair dealing." Although fair dealing is a broad term that must be defined in context, it is clear that it is concerned with the fairness of conduct rather than the care with which an act is performed.  Failure to exercise ordinary care in conducting a transaction is an entirely different concept than failure to deal fairly in conducting the transaction. Both fair dealing and ordinary care, which is defined in section 3-103(a)(7), are to be judged in the light of reasonable commercial standards, but those standards in each case are directed to different aspects of commercial conduct. 

5. Subsection  (a)(7) is a definition of ordinary care which is applicable not only to article 3 but to article 4 as well. See section 4-104(c).  The general rule is stated in the first sentence of subsection (a)(7) and it applies both to banks and to persons engaged in businesses  other than banking. Ordinary care means observance of reasonable commercial standards of the relevant business prevailing in the area in which the person is located.  The second sentence of Subsection (a)(7) is a particular rule limited to the duty of a bank to examine an instrument taken by a bank for processing for collection or payment by automated means.  This particular rule applies primarily to section 4-406 and it is discussed in comment 4 to that section. Nothing in section 3-103(a)(7) is intended to prevent a customer from proving that the procedures followed by a bank are unreasonable, arbitrary, or unfair. 

6. In subsection (c) reference is made to a new definition of "bank" in amended article 4.