2020 Georgia Code
Title 11 - Commercial Code
Article 3 - Negotiable Instruments
Part 1 - General Provisions and Definitions
§ 11-3-104. Negotiable Instrument

1. Except as provided in subsections (c) and (d) of this Code 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:
   1. Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
   2. Is payable on demand or at a definite time; and
   3. 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:
2. "Instrument" means a negotiable instrument.
3. An order that meets all of the requirements of subsection (a) of this Code section, except paragraph (1) of subsection (a) of this Code section, and otherwise falls within the definition of "check" in subsection (f) of this Code 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 article.
5. An instrument is a "note" if it is a promise and 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 (i) a draft, other than a documentary draft, payable on demand and drawn on a bank; or (ii) 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 (i) on another bank; or (ii) payable at or through a bank.
9. "Traveler's check" means an instrument that (i) is payable on demand; (ii) is drawn on or payable at or through a bank; (iii) is designated by the term "traveler's check" or by a substantially similar term; and (iv) 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.

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

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

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

(Code 1981, §11-3-104, enacted by Ga. L. 1996, p. 1306, § 3.)

- Pursuant to Code Section 28-9-5, in 1996, semicolons were substituted for commas near the end of subparagraphs (a)(3)(i) and (a)(3)(ii).

- For note, "The Law of Evidence in the Uniform Commercial Code," see 1 Ga. L. Rev. 44 (1966). For note analyzing consumer protection in retail installment contracts with reference to waiver of defenses by purchaser and the denial of holder in due course status to assignee of contract, in light of Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971), see 23 Mercer L. Rev. 673 (1972). For note, "Negotiable Promissory Notes Containing Time and Demand Provisions: The Need for Consistent Interpretation," see 19 Ga. L. Rev. 717 (1984). For comment on Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971), see 8 Ga. St. B.J. 400 (1972).

ANALYSIS

• General Consideration
• Unconditional Promise
• "Order" or "Bearer"
• Checks
• Notes

General Consideration

Editor's notes.

- In light of the similarity of the provisions, decisions under former Code Section 11-3-104 are included in the annotations for this section.

- Intent of this section is that a negotiable instrument carry nothing but simple promise to pay, with certain limited exceptions, and provision in a writing granting to holder powers to waive particular defaults or remedies without waiving others and to require its written consent for any transfer of buyer's obligations, while keeping its own freely transferrable, is not among these exceptions. Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971) (decided under former Code Section11-3-104).

A money order is a negotiable instrument. Kline v. Atlanta Gas Light Co., 246 Ga. App. 172, 538 S.E.2d 93 (2000).

Negotiability demands that instrument bear a definite sum in order that subsequent holders can take and transfer the instrument without plumbing intricacies of individual relationships or payback schemes, so that the instrument is functional equivalent of currency. Cobb Bank & Trust Co. v. American Mfrs. Mut. Ins. Co., 459 F. Supp. 328 (N.D. Ga. 1978), aff'd, 624 F.2d 722 (5th Cir. 1980) (decided under former Code Section 11-3-104).

Recitation of consideration in promissory note is not essential to recovery. Riddick v. Evans, 155 Ga. App. 868, 274 S.E.2d 40 (1980) (decided under former Code Section11-3-104).

Parol evidence may not be used to impose conditions which are not apparent from the face of a note. Bentley v. National Bank, 175 Ga. App. 732, 334 S.E.2d 331 (1985) (decided under former Code Section11-3-104).

- Bank effectively transferred the bank's interest in the promissory notes, deeds to secure debt, guaranties, and other accompanying documents to the holding company so that, whether the holding company was a holder in due course or not, the holding company was the real party in interest here and the trial court properly granted the motion to substitute the party. Hampton Island, LLC v. Asset Holding Co. 5, LLC, 320 Ga. App. 880, 740 S.E.2d 859 (2013).

- In action by payee against maker of note, it is immaterial that conditions were placed on promise to pay sum certain in event of subsequent discovery of errors in accounting, thereby rendering sum uncertain and invalidating it as negotiable paper within requirements of the former provisions of this section, and it shall be enforced in accordance with its terms as between parties to it. Daniels v. Allen, 118 Ga. App. 722, 165 S.E.2d 449 (1968) (decided under former Code Section11-3-106).

- Where note provides for payment of attorney's fees and proper notice of intention to sue is given as required by O.C.G.A. § 13-1-11, they are recoverable. Harrison v. Harrison, 208 Ga. 70, 65 S.E.2d 173 (1951)(decided under former Code 1933, § 14-202) (decided under former Code Section11-3-106).

Cited in Ameritrust Co. v. White, 73 F.3d 1553 (11th Cir. 1996); Provident Bank v. Morequity, Inc., 262 Ga. App. 331, 585 S.E.2d 625 (2003).

Unconditional Promise

Application to guaranties.

- Article 3 does not govern guaranties which are not ancillary to notes or other actionable negotiable instruments; guaranties alone are not negotiable instruments since they are conditional promises to pay a sum certain. Fidelity Nat'l Bank v. Reid, 180 Ga. App. 428, 348 S.E.2d 913 (1986); Panasonic Indus. Co. v. Hall, 197 Ga. App. 860, 399 S.E.2d 733 (1990) (decided under former Code Section11-3-104).

- Where the instrument at issue was not a negotiable note and was expressly never to be enforced against the petitioner individually and personally, the instrument was not a promissory note or any other obligation of insured since it did not contain unconditional promise to pay anything at any determinable future date. American Cas. Co. v. Griffith, 107 Ga. App. 224, 129 S.E.2d 549 (1963) (decided under former Code Section11-3-104).

Writing containing terms not listed in this section or O.C.G.A. § 11-3-112. - If writing contains any promise, order, obligation or power not listed in this section, or O.C.G.A. § 11-3-112, it is not a negotiable instrument and the concept of holder in due course does not apply. Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971) (decided under former Code Section11-3-104).

Bond carrying implied condition that underlying note first be funded is not negotiable under subsection (1)(b) of this section. Cobb Bank & Trust Co. v. American Mfrs. Mut. Ins. Co., 459 F. Supp. 328 (N.D. Ga. 1978), aff'd, 624 F.2d 722 (5th Cir. 1980) (decided under former Code Section 11-3-104).

"Order" or "Bearer"

Absence of language making writing payable to order or bearer.

- Absent language making writing payable to order or bearer, writing is not negotiable instrument. Hall v. Westmoreland, Hall & Bryan, 123 Ga. App. 809, 182 S.E.2d 539 (1971) (decided under former Code Section11-3-104).

Document lacking words of negotiability "order" or "bearer" may not be negotiable instrument in determinations of transfer rights and holder status. Cobb Bank & Trust Co. v. American Mfrs. Mut. Ins. Co., 459 F. Supp. 328 (N.D. Ga. 1978), aff'd, 624 F.2d 722 (5th Cir. 1980) (decided under former Code Section 11-3-104).

Checks

Check defined.

- A check, executed and delivered, is a contract in writing by which drawer contracts with payee that bank will pay to payee amount designated on presentation. Bailey v. Polote, 152 Ga. App. 255, 262 S.E.2d 551 (1979).

A check executed and delivered is a contract in writing by which the drawer contracts with the payee that the bank will pay to the latter on the drawer's order the amount designated on presentation. Mason v. Blayton, 119 Ga. App. 203, 166 S.E.2d 601 (1969) (decided under former Code Section11-3-104).

Defendant's filling out of a loan application with an internet lender for the purchase of a vehicle by falsely using the defendant's father's social security number, which caused the lender to issue a check that was used for the payment of the vehicle, provided sufficient evidence for a conviction under O.C.G.A. § 16-8-3 even though the lender stopped payment prior to purchase; the document received by the defendant from the lender was a "check" within the definition of O.C.G.A. § 11-3-104(f)(1), as it referenced itself in that manner and was drawn on a bank. Scott v. State, 277 Ga. App. 876, 627 S.E.2d 904 (2006).

- Inherent in the definition, a check is a promise to pay which can be taken by the bearer or indorsee and "cashed" or converted on demand into federal reserve notes equalling the value stated on the check. Strickland v. A Mtg. Co., 179 Bankr. 979 (Bankr. N.D. Ga. 1995).

- A check is a written contract to be performed at place where banking house or place of business of person on whom it is drawn is located. Mason v. Blayton, 119 Ga. App. 203, 166 S.E.2d 601 (1969) (decided under former Code Section11-3-104).

- There is little difference between a check and a demand note. Both are acknowledgments of indebtedness and unconditional promises to pay. Mason v. Blayton, 119 Ga. App. 203, 166 S.E.2d 601 (1969) (decided under former Code Section11-3-104).

- On cross-motions for summary judgment in a Fair Labor Standards Act case filed by plaintiff Mexican national agricultural laborers against defendant employers that included a claim for conversion of certain "reimbursement" checks in that the employers directed the laborers to endorse and return the checks, and the employers argued that it was entitled to the returned checks due to the employers paying for bus fares and subsistence and additional transportation expenses in cash, and also argued that the checks were blank, the court agreed with the employers that because the checks were blank, under O.C.G.A. §§ 11-3-104(c) and11-3-420(a), they were valueless, so there would be no damage from converting the checks. Morales-Arcadio v. Shannon Produce Farms, Inc., F. Supp. 2d (S.D. Ga. July 18, 2007).

- Acceptance of check by means of telephone conversation cannot be effective because law requires that acceptance be in writing. Georgia Bank & Trust Co. v. Hadarits, 111 Ga. App. 195, 141 S.E.2d 172, rev'd on other grounds, 221 Ga. 125, 143 S.E.2d 627 (1965) (decided under former Code Section11-3-104).

A check imports a consideration. Mason v. Blayton, 119 Ga. App. 203, 166 S.E.2d 601 (1969) (decided under former Code Section11-3-104).

A check is not a financial statement; it is an evidence of debt. A.G. Edwards & Sons v. Paulk, 25 Bankr. 913 (Bankr. M.D. Ga. 1982); Doug Howle's Paces Ferry Dodge, Inc. v. Ethridge, 80 Bankr. 581 (Bankr. M.D. Ga. 1987); Georgetown Village Apts. v. Fontana, 92 Bankr. 559 (Bankr. M.D. Ga. 1988) (decided under former Code Section 11-3-104).

- A defendant could be found guilty of the issuance of bad checks despite defendant's contention that the checks were not "checks" because they did not contain a "sum certain" until the payee filled in the amount due at the defendant's request. Hutchens v. State, 174 Ga. App. 507, 330 S.E.2d 436 (1985) (decided under former Code Section11-3-104).

- Fact that instrument purporting to be payroll check was not signed by drawer does not prevent it from being a check under this section, since it had most attributes of a check and was used in transaction as a check would ordinarily be used. United States v. Webb, 443 F.2d 308 (5th Cir. 1971) (decided under former Code Section 11-3-104).

- Although theoretically possible, a retail installment contract, or conditional sale contract (or a writing of this nature by whatever name) is not usually a note as defined in this section, but where there is any doubt, presumption is against negotiability. Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971) (decided under former Code Section11-3-104).

- Appellate court erred in reversing a trial court's grant of summary judgment pursuant to O.C.G.A. § 9-11-56 to an auto dealership in a conversion action against a bank, which alleged that the bank deliberately cashed a check after the dealership had placed a stop payment on the check. The law applicable to conversion of personal property applied to instruments pursuant to O.C.G.A. § 11-3-420(a), and checks were one form of instrument included in this provision, O.C.G.A. § 11-3-104(c), (f); therefore, the dealership was not required to establish the existence of specific dollars or coins in order to recover for the conversion of its check and the full value of the intangible rights identified with that check. Decatur Auto Ctr., Inc. v. Wachovia Bank, N.A., 276 Ga. 817, 583 S.E.2d 6 (2003).

- Trial court did not err in granting summary judgment to a bank because the bank acted properly in refusing to honor the cashier's check since the funds were the property of the payee and were within the control of the bank at the time the bank received the garnishment order; thus, O.C.G.A. § 18-4-4 required that the bank pay those funds into the court in the garnishment action and not to the payee. Burrowes v. Bank of Am., N.A., 340 Ga. App. 248, 797 S.E.2d 493 (2017).

Notes

Enforceability of nonnegotiable note as between maker and payee.

- In action by payee against maker of note, it is immaterial that conditions were placed on promise to pay sum certain in event of subsequent discovery of errors in accounting, thereby rendering the sum uncertain and invalidating it as negotiable paper within requirements of this section, and it shall be enforced in accordance with its terms as between parties to it. Daniels v. Allen, 118 Ga. App. 722, 165 S.E.2d 449 (1968) (decided under former Code Section11-3-104).

OPINIONS OF THE ATTORNEY GENERAL

Money order.

- Since essence of commercial paper is negotiability, money order drawn as negotiable instrument is commercial paper. 1962 Op. Att'y Gen. p. 340.

Investing school funds in certificates of deposit issued by institutions other than those covered by O.C.G.A. § 20-2-411. - The phrase "certificates of deposit" as used in O.C.G.A. § 20-2-411 applies to certificates of deposit issued by commercial banks and by federal or state chartered savings and loan associations and investment of school funds in "certificates of deposit" issued by institutions other than those named would present a question of whether such investment was prudent and in exercise of sufficient care and diligence. 1969 Op. Att'y Gen. No. 69-306.

RESEARCH REFERENCES

Am. Jur. 2d.

- 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 653 et seq., 888. 11 Am. Jur. 2d, Bills and Notes, §§ 21 et seq., 44 et seq., 52 et seq., 88, 98, 128 et seq., 217. 17A Am. Jur. 2d, Contracts, §§ 300-302. 50 Am. Jur. 2d, Letters of Credit and Credit Cards, §§ 3, 5, 10, 19. 68A Am. Jur. 2d, Secured Transactions, §§ 14, 55. 69 Am. Jur. 2d, Securities Regulation - State, § 76.

- 10 C.J.S., Bills and Notes, §§ 127, 135 et seq.

- Uniform Commercial Code (U.L.A.) § 3-104.

- Bills and notes: negotiability as affected by provision in relation to interest or discount, 2 A.L.R. 139; 51 A.L.R. 294; 58 A.L.R. 1281.

Effect of verbal order with respect to payment of check or transfer of bank deposit, 2 A.L.R. 175.

Title to commercial paper deposited by the customer of a bank to his account, 11 A.L.R. 1043; 16 A.L.R. 1084; 42 A.L.R. 492; 68 A.L.R. 725; 99 A.L.R. 486.

Writing on the margin or on the back of a bill or a note at the time of its execution as a part thereof, 13 A.L.R. 251; 155 A.L.R. 218.

Reference to extrinsic agreements as affecting negotiability of bill or note, 14 A.L.R. 1126; 33 A.L.R. 1173; 37 A.L.R. 655; 61 A.L.R. 815; 104 A.L.R. 1378.

Negotiability of instrument as affected by incompleteness of the attempt to fix due date, 19 A.L.R. 508.

Absence of revenue stamp as affecting bona fides of purchaser of bill or note, 21 A.L.R. 1125.

Private corporate bonds as negotiable within the meaning of Negotiable Instruments Act, 31 A.L.R. 1390.

Acceleration provision as affecting negotiability, 34 A.L.R. 872; 72 A.L.R. 268.

Negotiability of instrument payable in "current funds," "currency," etc., 36 A.L.R. 1358.

Negotiability of municipal bonds as affected by reference to fund from which they are to be paid, 42 A.L.R. 1027.

Right of holder to sue bank in respect of deposit made, for payment of existing obligation other than check, 50 A.L.R. 1012.

Passing of title to goods by acceptance of draft for purchase price, with warehouse receipt attached, or by transfer of draft with receipt, 55 A.L.R. 1116.

Assignability of nonnegotiable certificate of deposit, 59 A.L.R. 1478.

Necessity that checks be signed by all persons in whose name the deposit stands, 61 A.L.R. 967.

Validity and effect of provision in contract that it shall be regarded as a negotiable instrument, 79 A.L.R. 33.

Liability of endorser of non-negotiable commercial paper, 79 A.L.R. 719.

Negotiability as affected by reservation of obligor's right to anticipate time of payments, 81 A.L.R. 396.

Bank deposit for purpose of meeting certain checks or classes of checks, 86 A.L.R. 375.

Right to insist upon production and surrender of non-negotiable instrument, or upon indemnity bond, as condition of payment, 98 A.L.R. 1489.

Negotiability of bill or note as affected by provision authorizing confession of judgment, 117 A.L.R. 673.

Provision of negotiable instruments law declaring conclusive presumption in favor of holder in due course of valid delivery of negotiable paper as applicable where instrument never had inception by delivery, 123 A.L.R. 1360.

Validity, nature, and enforceability of an instrument which states that a specified sum is owed, but includes no express promise to pay it, 127 A.L.R. 650.

Negotiability of paper as affected by provisions therein relating to future contingent fund or security for its payment, 134 A.L.R. 946.

Construction and application of provision of Uniform Negotiable Instruments Act that waiver embodied in instrument itself is binding upon all parties, 140 A.L.R. 1253.

Conflict between provisions of note and of conditional sale instrument in connection with which note is given, 143 A.L.R. 591.

Recovery back of money paid for bank draft, 153 A.L.R. 393.

Validity of provision in promissory note or other evidence of indebtedness for payment, as attorneys' fees, expenses, and costs of collection, of specified percentage of note, 17 A.L.R.2d 288.

Necessity of introducing evidence to show reasonableness of attorney's fees where promissory note provides for such fees, 18 A.L.R.3d 733.

What constitutes unconditional promise to pay under Uniform Commercial Code § 3-104(1)(b), 88 A.L.R.3d 1100.

Effect on negotiability of instrument, under terms of UCC § 3-104(1), of statements expressly limiting negotiability or transferability, 58 A.L.R.4th 632.

What constitutes undertaking or instruction to do any act in addition to payment of money as limitation on definition of negotiable instrument under UCC § 3-104, 75 A.L.R.5th 559.

What constitutes "fixed amount of money" for purposes of § 3-104 of Uniform Commercial Code providing that negotiable instrument must contain unconditional promise to pay fixed amount of money, 76 A.L.R.5th 289.

When is instrument "payable to bearer or to order" as required to constitute negotiable instrument under Article 3 of the Uniform Commercial Code §§ 3-104(a)(1) and 3-109, 77 A.L.R.5th 523.