§ 25-3-310. Effect of instrument on obligation for which taken.
§25‑3‑310. Effect of instrument on obligation for which taken.
(a) Unless otherwiseagreed, if a certified check, cashier's check, or teller's check is taken foran obligation, the obligation is discharged to the same extent discharge wouldresult if an amount of money equal to the amount of the instrument were takenin payment of the obligation. Discharge of the obligation does not affect anyliability that the obligor may have as an indorser of the instrument.
(b) Unless otherwiseagreed and except as provided in subsection (a) of this section, if a note oran uncertified check is taken for an obligation, the obligation is suspended tothe same extent the obligation would be discharged if an amount of money equalto the amount of the instrument were taken, and the following rules apply:
(1) In the case of anuncertified check, suspension of the obligation continues until dishonor of thecheck or until it is paid or certified. Payment or certification of the checkresults in discharge of the obligation to the extent of the amount of thecheck.
(2) In the case of anote, suspension of the obligation continues until dishonor of the note oruntil it is paid. Payment of the note results in discharge of the obligation tothe extent of the payment.
(3) Except as providedin subdivision (4), if the check or note is dishonored and the obligee of theobligation for which the instrument was taken is the person entitled to enforcethe instrument, the obligee may enforce either the instrument or theobligation. In the case of an instrument of a third person which is negotiatedto the obligee by the obligor, discharge of the obligor on the instrument alsodischarges the obligation.
(4) If the personentitled to enforce the instrument taken for an obligation is a person otherthan the obligee, the obligee may not enforce the obligation to the extent theobligation is suspended. If the obligee is the person entitled to enforce theinstrument but no longer has possession of it because it was lost, stolen, ordestroyed, the obligation may not be enforced to the extent of the amountpayable on the instrument, and to that extent the obligee's rights against theobligor are limited to enforcement of the instrument.
(c) If an instrumentother than one described in subsection (a) or (b) of this section is taken foran obligation, the effect is (i) that stated in subsection (a) of this sectionif the instrument is one on which a bank is liable as maker or acceptor, or(ii) that stated in subsection (b) of this section in any other case. (1965,c. 700, s. 1; 1967, c. 562, s. 1; 1995, c. 232, s. 1.)