2006 Ohio Revised Code - 1304.01. (UCC 4-104, 4-105) Definitions.

§ 1304.01. (UCC 4-104, 4-105) Definitions.
 

(A)  As used in sections 1304.01 to 1304.40 of the Revised Code, unless the context requires otherwise: 

(1) "Account" means any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or similar account, other than an account evidenced by a certificate of deposit. 

(2) "Afternoon" means the period of day between noon and midnight. 

(3) "Banking day" means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions. 

(4) "Clearing house" means an association of banks or other payors regularly clearing items. 

(5) "Customer" means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank. 

(6) "Documentary draft" means a draft to be presented for acceptance or payment if specified documents, certified securities or instructions for uncertificated securities as defined in section 1308.01 of the Revised Code, or other certificates, statements, or similar documents are to be received by the drawee or other payor before acceptance or payment of the draft. 

(7) "Draft" means a draft as defined in section 1303.03 of the Revised Code or an item, other than an instrument, that is an order. 

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

(9) "Item" means an instrument or a promise or order to pay money handled by a bank for collection or payment. "Item" does not include a payment order governed by sections 1304.51 to 1304.85 of the Revised Code, a credit slip, or a debit card slip. 

(10) "Midnight deadline," with respect to a bank, is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later. 

(11) "Settle" means to pay in cash, by clearing house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final. 

(12) "Suspends payments" with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over, or that it ceases or refuses to make payments in the ordinary course of business. 

(B)  As used in sections 1304.01 to 1304.40 of the Revised Code: 

(1) "Bank" means a person engaged in the business of banking, including a savings bank, a savings and loan association, a credit union, or a trust company. 

(2) "Depositary bank" means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter. 

(3) "Payor bank" means a bank that is a drawee of a draft. 

(4) "Intermediary bank" means a bank to which an item is transferred in course of collection except the depositary or payor bank. 

(5) "Collecting bank" means a bank handling an item for collection except the payor bank. 

(6) "Presenting bank" means a bank presenting an item except a payor bank. 

(C)  As used in sections 1304.01 to 1304.40 of the Revised Code: 

(1) "Acceptance" and "certified check" have the same meanings as in section 1303.46 of the Revised Code. 

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

(3) "Cashier's check," "certificate of deposit," "check," "instrument," and "teller's check" have the same meanings as in section 1303.03 of the Revised Code. 

(4) "Good faith," "order," "ordinary care," "promise," and "prove" have the same meanings as in section 1303.01 of the Revised Code. 

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

(6) "Notice of dishonor" has the same meaning as in section 1303.63 of the Revised Code. 

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

(8) "Presentment" has the same meaning as in section 1303.61 of the Revised Code. 

(9) "Unauthorized signature" has the same meaning as in section 1303.43 of the Revised Code. 

(D)  The terms and principles of construction and interpretation in sections 1301.01 to 1301.14 of the Revised Code are applicable to sections 1304.01 to 1304.40 of the Revised Code. 
 

HISTORY: 129 v S 5 (Eff 7-1-62); 131 v 425 (Eff 11-4-65); 145 v S 147 (Eff 8-19-94); 147 v H 170. Eff 1-1-98.
 

Analogous to former RC §§ 1105.13, 1301.01(C), repealed 129 v S 5, § 2, eff 7-1-62.

The effective date is set by section 3 of HB 170. 

 

Official Comment

4-104

1. Paragraph (a)(1):  "Account" is defined to include both asset accounts in which a customer has deposited money and accounts from which a customer may draw on a line of credit. The limiting factor is that the account must be in a bank. 

2. Paragraph (a)(3):  "Banking day."  Under this definition that part of a business day when a bank is open only for limited functions, e.g., to receive deposits and cash checks, but with loan, bookkeeping and other departments closed, is not part of a banking day. 

3. Paragraph (a)(4):  "Clearinghouse."  Occasionally express companies, governmental agencies and other nonbanks deal directly with a clearing house; hence the definition does not limit the term to an association of banks. 

4. Paragraph (a)(5):  "Customer."  It is to be noted that this term includes a bank carrying an account with another bank as well as the more typical nonbank customer or depositor. 

5. Paragraph (a)(6):  "Documentary draft" applies even though the documents do not accompany the draft but are to be received by the drawee or other payor before acceptance or payment of the draft. 

6. Paragraph (a)(7):  "Draft" is defined in section 3-104 as a form of instrument.  Since article 4 applies to items that may not fall within the definition of instrument, the term is defined here to include an item that is a written order to pay money, even though the item may not qualify as an instrument. The term "order" is defined in section 3-103. 

7. Paragraph (a)(8):  "Drawee" is defined in section 3-103 in terms of an article 3 draft which is a form of instrument. Here "drawee" is defined in terms of an article 4 draft which includes items that may not be instruments. 

8. Paragraph (a)(9):  "Item" is defined broadly to include an instrument, as defined in section 3-104, as well as promises or orders that may not be within the definition of "instrument."  The terms "promise" and "order" are defined in section 3-103.  A promise is a written undertaking to pay money.  An order is a written instruction to pay money.  But see section 4-110(c).  Since bonds and other investment securities under article 8 may be within the term "instrument" or "promise," they are items and when handled by banks for collection are subject to this article.  See comment 1 to section 4-102.  The functional limitation on the meaning of this term is the willingness of the banking system to handle the instrument, undertaking, or instruction for collection or payment. 

9. Paragraph (a)(10):  "Midnight deadline."  The use of this phrase is an example of the more mechanical approach used in this article.  Midnight is selected as a termination point or time limit to obtain greater uniformity and definiteness than would be possible from other possible terminating points, such as the close of the banking day or business day. 

10. Paragraph (a)(11):  The term "settle" has substantial importance throughout article 4.  In the American Bankers Association Bank Collection Code, in deferred posting statutes, in federal reserve regulations and operating circulars, in clearinghouse rules, in agreements between banks and customers, and in legends on deposit tickets and collection letters, there is repeated reference to "conditional" or "provisional" credits or payments.  Tied in with this concept of credits or payments being in some way tentative, has been a related but somewhat different problem as to when an item is "paid" or "finally paid" either to determine the relative priority of the item as against attachments, stop-payment orders, and the like or in insolvency situations.  There has been extensive litigation in the various states on these problems.  To a substantial extent the confusion, the litigation, and even the resulting court decisions fail to take into account that in the collection process some debits or credits are provisional or tentative, and others are final and that very many debits or credits are provisional or tentative for awhile but later become final. Similarly, some cases fail to recognize that within a single bank, particularly a payor bank, each item goes through a series of processes and that in a payor bank most of these processes are preliminary to the basic act of payment or "final payment." 

The term "settle" is used as a convenient term to characterize a broad variety of conditional, provisional, tentative, and also final payments of items.  Such a comprehensive term is needed because it is frequently difficult or unnecessary to determine whether a particular action is tentative or final or when a particular credit shifts from the tentative class to the final class. Therefor, its use throughout the article indicates that in that particular context it is unnecessary or unwise to determine whether the debit or the credit or the payment is tentative or final.  However, if qualified by the adjective "provisional" its tentative nature is intended, and if qualified by the adjective "final" its permanent nature is intended. 

Examples of the various types of settlement contemplated by the term include payments in cash; the efficient but somewhat complicated process of payment through the adjustment and offsetting of balances through clearing houses; debit or credit entries in accounts between banks; the forwarding of various types of remittance instruments, sometimes to cover a particular item but more frequently to cover an entire group of items received on a particular day. 

11. Paragraph (a)(12):  "Suspends payments."  This term is designed to afford an objective test to determine when a bank is no longer operating as a part of the banking system. 

4-105

1. The definitions in general exclude a bank to which an item is issued, as this bank does not take by transfer except in the particular case covered in which the item is issued to a payee for collection, as in the case in which a corporation is transferring balances from one account to another.  Thus, the definition of "depositary bank" does not include the bank to which a check is made payable if a check is given in payment of a mortgage.  This bank has the status of a payee under article 3 on Negotiable Instruments and not that of a collecting bank. 

2. Paragraph (1):  "Bank" is defined in section 1-201(4) as meaning "any person engaged in the business of banking." The definition in paragraph (1) makes clear that "bank" includes savings banks, savings and loan associations, credit unions, and trust companies, in addition to the commercial banks commonly denoted by use of the term "bank." 

3. Paragraph (2):  A bank that takes an "on us" item for collection, for application to a customer's loan, or first handles the item for other reasons is a depositary bank even though it is also the payor bank.  However, if the holder presents the item for immediate payment over the counter, the payor bank is not a depositary bank. 

4. Paragraph (3):  The definition of "payor bank" is clarified by use of the term "drawee."  That term is defined in section 4-104 as meaning "a person ordered in a draft to make payment."  An "order" is defined in section 3-103 as meaning "a written instruction to pay money . . . .  An authorization to pay is not an order unless the person authorized to pay is also instructed to pay."  The definition of order is incorporated into article 4 by section 4-104(c). Thus a payor bank is one instructed to pay in the item.  A bank does not become a payor bank by being merely authorized to pay or by being given an instruction to pay not contained in the item. 

5. Paragraph (4):  The term "intermediary bank" includes the last bank in the collection process if the drawee is not a bank. Usually the last bank is also a presenting bank.