70A-3-310 - Effect of instrument on obligation for which taken.
70A-3-310. Effect of instrument on obligation for which taken.
(1) Unless otherwise agreed, if a certified check, cashier's check, or teller's check is takenfor an obligation, the obligation is discharged to the same extent discharge would result if anamount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an indorserof the instrument.
(2) Unless otherwise agreed and except as provided in Subsection (1), if a note or anuncertified check is taken for an obligation, the obligation is suspended to the same extent theobligation would be discharged if an amount of money equal to the amount of the instrumentwere taken, and the following rules apply:
(a) In the case of an uncertified check, suspension of the obligation continues untildishonor of the check or until it is paid or certified. Payment or certification of the check resultsin discharge of the obligation to the extent of the amount of the check.
(b) In the case of a note, suspension of the obligation continues until dishonor of the noteor until it is paid. Payment of the note results in discharge of the obligation to the extent of thepayment.
(c) Except as provided in Subsection (2)(d), if the check or note is dishonored and theobligee of the obligation for which the instrument was taken is the person entitled to enforce theinstrument, the obligee may enforce either the instrument or the obligation. In the case of aninstrument of a third person which is negotiated to the obligee by the obligor, discharge of theobligor on the instrument also discharges the obligation.
(d) If the person entitled to enforce the instrument taken for an obligation is a personother than the obligee, the obligee may not enforce the obligation to the extent the obligation issuspended. If the obligee is the person entitled to enforce the instrument but no longer haspossession of it because it was lost, stolen, or destroyed, the obligation may not be enforced tothe extent of the amount payable on the instrument, and to that extent the obligee's rights againstthe obligor are limited to enforcement of the instrument.
(3) If an instrument other than one described in Subsection (1) or (2) is taken for anobligation, the effect is that stated in Subsection (1) if the instrument is one on which a bank isliable as maker or acceptor, or that stated in Subsection (2) in any other case.
Amended by Chapter 324, 2010 General Session