Uniform Commercial Code in a Nutshell by Bradford Stone

Author:Bradford Stone
Language: eng
Format: epub
ISBN: 9780314277442
Publisher: West Academic
Published: 2014-03-14T16:00:00+00:00

5. LIABILITY OF DRAWEE AND ACCEPTOR

A. CONTRACT LIABILITY ON THE DRAFT

(1) Drawee

Assume Drawer issues a check to Payee, who presents it to Drawee Bank for payment. Although there are sufficient funds, Drawee refuses to pay. Does Payee have rights against Drawee? Answer: Drawee is not liable on the instrument until Drawee accepts (certifies) it. § 3–408, see § 3–401(a). But has not Drawee broken its contract of deposit with Drawer wherein Drawee has engaged to honor Drawer’s order if there are sufficient funds, and cannot the check be considered an assignment of Drawer’s rights against Drawee? Answer: Perhaps, as will become apparent in the discussion of wrongful dishonor below at Part Three, D, 3, but (1) this is a separate issue from Drawee’s contract liability on the instrument, and (2) only Drawer (not Payee) has a claim for wrongful dishonor. Further, a check or other draft does not of itself operate as an assignment of funds in the hands of Drawee available for its payment. § 3–408.

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