US Laws, Codes, Statutes & Cases

Chapter 73 — Negotiable Instruments

 

2007 EDITION

 

 

NEGOTIABLE INSTRUMENTS

 

COMMERCIAL TRANSACTIONS

 

GENERAL PROVISIONS

 

73.0101     Short title

 

73.0102     Application of chapter

 

73.0103     Definitions

 

73.0104     Negotiable instrument; other definitions

 

73.0105     Issue of instrument

 

73.0106     Unconditional promise or order

 

73.0107     Instrument payable in foreign money

 

73.0108     Payable on demand or at definite time

 

73.0109     Payable to bearer or to order

 

73.0110     Identification of person to whom instrument is payable

 

73.0111     Place of payment

 

73.0112     Interest

 

73.0113     Date of instrument

 

73.0114     Contradictory terms of instrument

 

73.0115     Incomplete instrument

 

73.0116     Joint and several liability; contribution

 

73.0117     Other agreements affecting instrument

 

73.0118     Statute of limitations

 

73.0119     Notice of right to defend action

 

NEGOTIATION, TRANSFER AND INDORSEMENT

 

73.0201     Negotiation

 

73.0202     Negotiation subject to rescission

 

73.0203     Transfer of instrument; rights acquired by transfer

 

73.0204     Indorsement

 

73.0205     Special indorsement; blank indorsement; anomalous indorsement

 

73.0206     Restrictive indorsement

 

73.0207     Reacquisition

 

ENFORCEMENT OF INSTRUMENTS

 

73.0301     Person entitled to enforce instrument

 

73.0302     Holder in due course

 

73.0303     Value and consideration

 

73.0304     Overdue instrument

 

73.0305     Defenses and claims in recoupment

 

73.0306     Claims to an instrument

 

73.0307     Notice of breach of fiduciary duty

 

73.0308     Proof of signatures and status as holder in due course

 

73.0309     Enforcement of lost, destroyed or stolen instrument

 

73.0310     Effect of instrument on obligation for which taken

 

73.0311     Accord and satisfaction

 

73.0312     Lost, destroyed or stolen cashier’s check, teller’s check or certified check

 

LIABILITY OF PARTIES

 

73.0401     Signature

 

73.0402     Signature by representative

 

73.0403     Unauthorized signature

 

73.0404     Impostors; fictitious payees

 

73.0405     Employer’s responsibility for fraudulent indorsement by employee

 

73.0406     Negligence contributing to forged signature or alteration of instrument

 

73.0407     Alteration

 

73.0408     Drawee not liable on unaccepted draft

 

73.0409     Acceptance of draft; certified check

 

73.0410     Acceptance varying draft

 

73.0411     Refusal to pay cashier’s checks, teller’s checks and certified checks

 

73.0412     Obligation of issuer of note or cashier’s check

 

73.0413     Obligation of acceptor

 

73.0414     Obligation of drawer

 

73.0415     Obligation of indorser

 

73.0416     Transfer warranties

 

73.0417     Presentment warranties

 

73.0418     Payment or acceptance by mistake

 

73.0419     Instruments signed for accommodation

 

73.0420     Conversion of instrument

 

DISHONOR

 

73.0501     Presentment

 

73.0502     Dishonor

 

73.0503     Notice of dishonor

 

73.0504     Excused presentment and notice of dishonor

 

73.0505     Evidence of dishonor

 

DISCHARGE AND PAYMENT

 

73.0601     Discharge and effect of discharge

 

73.0602     Payment

 

73.0603     Tender of payment

 

73.0604     Discharge by cancellation or renunciation

 

73.0605     Discharge of indorsers and accommodation parties

 

73.010, 73.020, 73.030, 73.040, 73.050, 73.060, 73.080, 73.090, 73.100, 73.110, 73.120, 73.130, 73.140, 73.150, 73.160, 73.170, 73.180, 73.190, 73.200 [Repealed by 1961 c.726 §427]

 

GENERAL PROVISIONS

 

      73.0101 Short title. This chapter may be cited as Uniform Commercial Code–Negotiable Instruments. [1993 c.545 §4]

 

      73.0102 Application of chapter. (1) This chapter applies to negotiable instruments. This chapter does not apply to money, to payment orders governed by ORS chapter 74, or to securities governed by ORS chapter 78.

      (2) If there is conflict between this chapter and ORS chapter 74 or 79, ORS chapter 74 or 79 shall govern.

      (3) Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this chapter to the extent of the inconsistency. [1993 c.545 §5; 1995 c.79 §24]

 

      73.0103 Definitions. (1) As used in this chapter:

      (a) “Acceptor” means a drawee who has accepted a draft.

      (b) “Drawee” means a person ordered in a draft to make payment.

      (c) “Drawer” means a person who signs or is identified in a draft as a person ordering payment.

      (d) “Good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing.

      (e) “Maker” means a person who signs or is identified in a note as a person undertaking to pay.

      (f) “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. An authorization to pay is not an order unless the person authorized to pay is also instructed to pay.

      (g) “Ordinary care” in the case of a person engaged in business means observance of reasonable commercial standards, 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 under this chapter or ORS chapter 74.

      (h) “Party” means a party to an instrument.

      (i) “Promise” means a written undertaking to pay money signed by the person undertaking to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation.

      (j) “Prove” with respect to a fact means to meet the burden of establishing the fact as defined in ORS 71.2010 (8).

      (k) “Remitter” means a person who purchases an instrument from the issuer if the instrument is payable to an identified person other than the purchaser.

      (2) Other definitions applying to this chapter and the sections in which they appear are:

 

      “Acceptance”                                            ORS 73.0409

      “Accommodated party”                            ORS 73.0419

      “Accommodation party”                           ORS 73.0419

      “Alteration”                                              ORS 73.0407

      “Anomalous indorsement”                        ORS 73.0205

      “Blank indorsement”                                ORS 73.0205

      “Cashier’s check”                                      ORS 73.0104

      “Certificate of deposit”                            ORS 73.0104

      “Certified check”                                      ORS 73.0409

      “Check”                                                    ORS 73.0104

      “Consideration”                                        ORS 73.0303

      “Demand draft”                                        ORS 73.0104

      “Draft”                                                      ORS 73.0104

      “Holder in due course”                             ORS 73.0302

      “Incomplete instrument”                           ORS 73.0115

      “Indorsement”                                          ORS 73.0204

      “Indorser”                                                 ORS 73.0204

      “Instrument”                                             ORS 73.0104

      “Issue”                                                      ORS 73.0105

      “Issuer”                                                     ORS 73.0105

      “Negotiable instrument”                           ORS 73.0104

      “Negotiation”                                            ORS 73.0201

      “Note”                                                       ORS 73.0104

      “Payable at a definite time”                      ORS 73.0108

      “Payable on demand”                               ORS 73.0108

      “Payable to bearer”                                   ORS 73.0109

      “Payable to order”                                    ORS 73.0109

      “Payment”                                                 ORS 73.0602

      “Person entitled to enforce”                     ORS 73.0301

      “Presentment”                                           ORS 73.0501

      “Reacquisition”                                         ORS 73.0207

      “Special indorsement”                              ORS 73.0205

      “Teller’s check”                                         ORS 73.0104

      “Transfer of instrument”                           ORS 73.0203

      “Traveler’s check”                                     ORS 73.0104

      “Value”                                                     ORS 73.0303

 

      (3) The following definitions in ORS chapter 74 apply to this chapter:

 

      “Bank”                                                      ORS 74.1050

      “Banking day”                                          ORS 74.1040

      “Clearing house”                                       ORS 74.1040

      “Collecting bank”                                     ORS 74.1050

      “Depositary bank”                                    ORS 74.1050

      “Documentary draft”                                ORS 74.1040

      “Intermediary bank”                                 ORS 74.1050

      “Item”                                                       ORS 74.1040

      “Payor bank”                                             ORS 74.1050

      “Suspends payments”                               ORS 74.1040

 

      (4) In addition, ORS chapter 71 contains general definitions and principles of construction and interpretation applicable throughout this chapter. [1993 c.545 §6; 1997 c.822 §1]

 

      73.0104 Negotiable instrument; other definitions. (1) Except as provided in subsections (3) and (4) of this section, “negotiable instrument” means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

      (a) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

      (b) Is payable on demand or at a definite time; and

      (c) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain:

      (A) An undertaking or power to give, maintain or protect collateral to secure payment;

      (B) An authorization or power to the holder to confess judgment or realize on or dispose of collateral; or

      (C) A waiver of the benefit of any law intended for the advantage or protection of an obligor.

      (2) “Instrument” means a negotiable instrument.

      (3) An order that meets all of the requirements of subsection (1) of this section, except subsection (1)(a) of this section, and otherwise falls within the definition of “check” in subsection (6) of this section, is a negotiable instrument and a check.

      (4) 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, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this chapter.

      (5) An instrument is a “note” if it is a promise. An instrument is a “draft” if it is an order. If an instrument falls within the definition of both “note” and “draft,” a person entitled to enforce the instrument may treat it as either.

      (6) “Check” means a draft, other than a documentary draft, payable on demand and drawn on a bank, or a cashier’s check or teller’s check. An instrument may be a check even though it is described on its face by another term, such as “money order.”

      (7) “Cashier’s check” means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.

      (8) “Teller’s check” means a draft drawn by a bank:

      (a) On another bank; or

      (b) Payable at or through a bank.

      (9) “Traveler’s check” means an instrument that:

      (a) Is payable on demand;

      (b) Is drawn on or payable at or through a bank;

      (c) Is designated by the term “traveler’s check” or by a substantially similar term; and

      (d) Requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.

      (10) “Certificate of deposit” means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.

      (11)(a) “Demand draft” means a writing not signed by a customer that is created by a third party under the purported authority of the customer for the purpose of charging the customer’s account with a bank. A demand draft does not include a check drawn by a fiduciary, as defined in ORS 73.0307. A demand draft may contain any or all of the following:

      (A) The customer’s printed or typewritten name or account number;

      (B) A notation that the customer authorized the draft; and

      (C) The statement “No signature required” or words to that effect.

      (b) “Demand draft” shall not include a check purportedly drawn by and bearing the signature of a fiduciary as defined in ORS 73.0307. [1993 c.545 §7; 1997 c.822 §2]

 

      73.0105 Issue of instrument. (1) “Issue” means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.

      (2) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.

      (3) “Issuer” applies to issued and unissued instruments and means a maker or drawer of an instrument. [1993 c.545 §8]

 

      73.0106 Unconditional promise or order. (1) Except as provided in this section, for the purposes of ORS 73.0104 (1), a promise or order is unconditional unless it states an express condition to payment, that the promise or order is subject to or governed by another writing, or that rights or obligations with respect to the promise or order are stated in another writing. A reference to another writing does not of itself make the promise or order conditional.

      (2) A promise or order is not made conditional:

      (a) By a reference to another writing for a statement of rights with respect to collateral, prepayment or acceleration; or

      (b) Because payment is limited to resort to a particular fund or source.

      (3) If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of ORS 73.0104 (1). If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.

      (4) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of ORS 73.0104 (1); but if the promise or order is an instrument, there cannot be a holder in due course of the instrument. [1993 c.545 §9]

 

      73.0107 Instrument payable in foreign money. Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid. [1993 c.545 §10]

 

      73.0108 Payable on demand or at definite time. (1) A promise or order is “payable on demand” if it:

      (a) States that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder; or

      (b) Does not state any time of payment.

      (2) A promise or order is “payable at a definite time” if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order issued, subject to rights of:

      (a) Prepayment;

      (b) Acceleration;

      (c) Extension at the option of the holder; or

      (d) Extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.

      (3) If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date. [1993 c.545 §11]

 

      73.0109 Payable to bearer or to order. (1) A promise or order is payable to bearer if it:

      (a) States that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;

      (b) Does not state a payee; or

      (c) States that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.

      (2) A promise or order that is not payable to bearer is payable to order if it is payable to the order of an identified person or to an identified person or order. A promise order that is payable to order is payable to the identified person.

      (3) An instrument payable to bearer may become payable to an identified person if it is specially indorsed pursuant to ORS 73.0205 (1). An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to ORS 73.0205 (2). [1993 c.545 §12]

 

      73.0110 Identification of person to whom instrument is payable. (1) The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer even if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one person signs in the name or behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one or more of the signers.

      (2) If the signature of the issuer of an instrument is made by automated means, such as a check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.

      (3) A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office or account number. For the purpose of determining the holder of an instrument, the following rules apply:

      (a) If an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable. If an instrument is payable to an account identified by number and by the name of the person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number.

      (b) If an instrument is payable to:

      (A) A trust, and estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named;

      (B) A person described as an agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative;

      (C) A fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or

      (D) An office or to a person described as holding an office, the instrument is payable to the named person, the incumbent of the office, or a successor to the incumbent.

      (4) If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively. [1993 c.545 §13]

 

      73.0111 Place of payment. Except as otherwise provided for items in ORS chapter 74, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the drawee or maker stated in the instrument. If no address is stated, the place of payment is the place of business of the drawee or maker. If a drawee or maker has more than one place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument. If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker. [1993 c.545 §14]

 

      73.0112 Interest. (1) Unless otherwise provided in the instrument:

      (a) An instrument is not payable with interest; and

      (b) Interest on an interest-bearing instrument is payable from the date of the instrument.

      (2) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.

      (3) Nothing in subsection (1)(a) of this section shall affect any right of a holder of a check, draft or order that has been dishonored by nonacceptance or nonpayment or on which the maker or drawer has stopped payment without good cause:

      (a) To collect interest on the debt or obligation for which the check, draft or order was given, pursuant to ORS 82.010; or

      (b) To exercise the remedies provided in ORS 30.701. [1993 c.545 §15; 1999 c.707 §2]

 

      73.0113 Date of instrument. (1) An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after the date. Except as provided in ORS 74.4010 (3), an instrument payable on demand is not payable before the date of the instrument.

      (2) If an instrument is undated, its date is the date of its issue or, in the case of an unissued instrument, the date it first comes into possession of a holder. [1993 c.545 §16]

 

      73.0114 Contradictory terms of instrument. If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers. [1993 c.545 §17]

 

      73.0115 Incomplete instrument. (1) “Incomplete instrument” means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.

      (2) Subject to subsection (3) of this section, if the incomplete instrument is an instrument under ORS 73.0104, it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under ORS 73.0104, but, after completion, the requirements of ORS 73.0104 are met, the instrument may be enforced according to its terms as augmented by completion.

      (3) If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under ORS 73.0407.

      (4) The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority. [1993 c.545 §18]

 

      73.0116 Joint and several liability; contribution. (1) Except as otherwise provided in the instrument, two or more persons who have the same liability on an instrument as makers, drawers, acceptors, indorsers who indorse as joint payees, or anomalous indorsers are jointly and severally liable in the capacity in which they sign.

      (2) Except as provided in ORS 73.0419 (5) or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive, from any party having the same joint and several liability, contribution in accordance with applicable law.

      (3) Discharge of one party having joint and several liability by a person entitled to enforce the instrument does not affect the right under subsection (2) of this section of a party having the same joint and several liability to receive contribution from the party discharged. [1993 c.545 §19]

 

      73.0117 Other agreements affecting instrument. Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented or nullified by an agreement under this section, the agreement is a defense to the obligation. [1993 c.545 §20]

 

      73.0118 Statute of limitations. (1) Except as provided in subsection (5) of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.

      (2) Except as provided in subsection (4) or (5) of this section, if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of 10 years.

      (3) Except as provided in subsection (4) of this section, an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within six years after dishonor of the draft or 10 years after the date of the draft, whichever period expires first.

      (4) An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller’s check, cashier’s check or traveler’s check must be commenced within six years after the demand for payment is made to the acceptor or issuer.

      (5) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six years after demand for payment is made to the maker, but if the instrument states a due date, the six-year period begins when a demand for payment is in effect and the due date has passed.

      (6) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced:

      (a) Within six years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time; or

      (b) Within six years after the date of the acceptance if the obligation of the acceptor is payable on demand.

      (7) Unless governed by other law regarding claims for indemnity or contribution, an action for any of the following must be commenced within six years after the claim for relief accrues:

      (a) Conversion of an instrument, for money had and received, or like action based on conversion;

      (b) Breach of warranty; or

      (c) Enforcement of an obligation, duty or right arising under this chapter and not governed by this section.

      (8) The circumstances under which the running of a limitation period may be tolled shall be determined by other law. [1993 c.545 §21]

 

      73.0119 Notice of right to defend action. In an action for breach of an obligation over which a third person is answerable pursuant to this chapter or ORS chapter 74, the defendant may give the third person written notice of the litigation, and the person notified may then give similar notice to any other person who is answerable. If the notice states that the person notified may come in and defend and that failure to do so will bind the person notified in an action later brought by the person giving notice as to any determination of fact common to the two litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend. [1993 c.545 §22]

 

NEGOTIATION, TRANSFER AND INDORSEMENT

 

      73.0201 Negotiation. (1) “Negotiation” means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.

      (2) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone. [1993 c.545 §23]

 

      73.0202 Negotiation subject to rescission. (1) Negotiation is effective even if obtained:

      (a) From an infant, a corporation exceeding its powers or a person without capacity;

      (b) By fraud, duress or mistake; or

      (c) In breach of duty or as part of an illegal transaction.

      (2) To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy. [1993 c.545 §24]

 

      73.0203 Transfer of instrument; rights acquired by transfer. (1) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.

      (2) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee has engaged in fraud or illegality affecting the instrument.

      (3) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.

      (4) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this chapter and has only the rights of a partial assignee. [1993 c.545 §25]

 

      73.0204 Indorsement. (1) “Indorsement” means a signature, other than that of a signer as maker, drawer or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of negotiating the instrument, restricting payment of the instrument or incurring indorser’s liability on the instrument. Regardless of the intent of the signer, a signature and its accompanying words is an indorsement unless the accompanying words, terms of the instrument, place of the signature or other circumstances unambiguously indicate that the signature was made for a purpose other than indorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.

      (2) “Indorser” means a person who makes an indorsement.

      (3) For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.

      (4) If an instrument is payable to a holder under a name that is not the name of the holder, indorsement may be made by the holder in the name stated in the instrument or in the holder’s name or both, but signature in both names may be required by a person paying or taking the instrument for value or collection. [1993 c.545 §26]

 

      73.0205 Special indorsement; blank indorsement; anomalous indorsement. (1) If an indorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the indorsement identifies a person to whom it makes the instrument payable, it is a “special indorsement.” When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person. The principles stated in ORS 73.0110 apply to special indorsements.

      (2) If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a “blank indorsement.” When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.

      (3) The holder may convert a blank indorsement that consists only of a signature into a special indorsement by writing, above the signature of the indorser, words identifying the person to whom the instrument is made payable.

      (4) “Anomalous indorsement” means an indorsement made by a person who is not the holder of the instrument. An anomalous indorsement does not affect the manner in which the instrument may be negotiated. [1993 c.545 §27]

 

      73.0206 Restrictive indorsement. (1) An indorsement limiting payment to a particular person or otherwise prohibiting further transfer or negotiation of the instrument is not effective to prevent further transfer or negotiation of the instrument.

      (2) An indorsement stating a condition to the right of the indorsee to receive payment does not affect the right of the indorsee to enforce the instrument. A person paying the instrument or taking it for value or collection may disregard the condition, and the rights and liabilities of that person are not affected by whether the condition has been fulfilled.

      (3) If an instrument bears an indorsement described in ORS 74.2010 (2), or in blank or to a particular bank using the words “for deposit,” “for collection” or other words indicating a purpose of having the instrument collected by a bank for the indorser or for a particular account, the following rules apply:

      (a) A person, other than a bank, who purchases the instrument when so indorsed converts the instrument unless the amount paid for the instrument is received by the indorser or applied consistently with the indorsement.

      (b) A depositary bank that purchased the instrument or takes it for collection when so indorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the indorser or applied consistently with the indorsement.

      (c) A payor bank that is also the depositary bank or that takes the instrument for immediate payment over the counter from a person other than a collecting bank converts the instrument unless the proceeds of the instrument are received by the indorser or applied consistently with the indorsement.

      (d) Except as otherwise provided in paragraph (c) of this subsection, a payor bank or intermediary bank may disregard the indorsement and is not liable if the proceeds of the instrument are not received by the indorser or applied consistently with the indorsement.

      (4) Except for an indorsement covered by subsection (3) of this section, if an instrument bears an indorsement using words to the effect that payment is to be made to the indorsee as agent, trustee or other fiduciary for the benefit of the indorser or another person, the following rules apply: