Oregon Statute | Act | Code |Title 08 Commercial Transactions| US Code - US Statute

This chapter may be cited as Uniform
Commercial Code–Negotiable Instruments. [1993 c.545 §4] (1) This chapter applies to
negotiable instruments. This chapter does not apply to money, to payment
orders governed by ORS chapter 74, or to securities governed by ORS
chapter 78.

(2) If there is conflict between this chapter and ORS chapter 74 or
79, ORS chapter 74 or 79 shall govern.

(3) Regulations of the Board of Governors of the Federal Reserve
System and operating circulars of the Federal Reserve Banks supersede any
inconsistent provision of this chapter to the extent of the
inconsistency. [1993 c.545 §5; 1995 c.79 §24] (1) As used in this chapter:

(a) "Acceptor" means a drawee who has accepted a draft.

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

(c) "Drawer" means a person who signs or is identified in a draft
as a person ordering payment.

(d) "Good faith" means honesty in fact and the observance of
reasonable commercial standards of fair dealing.

(e) "Maker" means a person who signs or is identified in a note as
a person undertaking to pay.

(f) "Order" means a written instruction to pay money signed by the
person giving the instruction. The instruction may be addressed to any
person, including the person giving the instruction, or to one or more
persons jointly or in the alternative but not in succession. An
authorization to pay is not an order unless the person authorized to pay
is also instructed to pay.

(g) "Ordinary care" in the case of a person engaged in business
means observance of reasonable commercial standards, prevailing in the
area in which the person is located, with respect to the business in
which the person is engaged. In the case of a bank that takes an
instrument for processing for collection or payment by automated means,
reasonable commercial standards do not require the bank to examine the
instrument if the failure to examine does not violate the bank's
prescribed procedures and the bank's procedures do not vary unreasonably
from general banking usage not disapproved under this chapter or ORS
chapter 74.

(h) "Party" means a party to an instrument.

(i) "Promise" means a written undertaking to pay money signed by
the person undertaking to pay. An acknowledgment of an obligation by the
obligor is not a promise unless the obligor also undertakes to pay the
obligation.

(j) "Prove" with respect to a fact means to meet the burden of
establishing the fact as defined in ORS 71.2010 (8).

(k) "Remitter" means a person who purchases an instrument from the
issuer if the instrument is payable to an identified person other than
the purchaser.

(2) Other definitions applying to this chapter and the sections in
which they appear are:

"Acceptance"                          ORS 73.0409

"Accommodated party"          ORS 73.0419

"Accommodation party"         ORS 73.0419

"Alteration"                             ORS 73.0407

"Anomalous indorsement"      ORS 73.0205

"Blank indorsement"               ORS 73.0205

"Cashier's check"                     ORS 73.0104

"Certificate of deposit"           ORS 73.0104

"Certified check"                    ORS 73.0409

"Check"                                   ORS 73.0104

"Consideration"                       ORS 73.0303

"Demand draft"                      ORS 73.0104

"Draft"                                    ORS 73.0104

"Holder in due course"            ORS 73.0302

"Incomplete instrument"         ORS 73.0115

"Indorsement"                         ORS 73.0204

"Indorser"                                ORS 73.0204

"Instrument"                            ORS 73.0104

"Issue"                                     ORS 73.0105

"Issuer"                                    ORS 73.0105

"Negotiable instrument"          ORS 73.0104

"Negotiation"                          ORS 73.0201

"Note"                                     ORS 73.0104

"Payable at a definite time"    ORS 73.0108

"Payable on demand"              ORS 73.0108

"Payable to bearer"                  ORS 73.0109

"Payable to order"                   ORS 73.0109

"Payment"                               ORS 73.0602

"Person entitled to enforce"    ORS 73.0301

"Presentment"                         ORS 73.0501

"Reacquisition"                       ORS 73.0207

"Special indorsement"             ORS 73.0205

"Teller's check"                        ORS 73.0104

"Transfer of instrument"         ORS 73.0203

"Traveler's check"                    ORS 73.0104

"Value"                                    ORS 73.0303 (3) The following definitions in ORS chapter 74 apply to this
chapter:

"Bank"                                     ORS 74.1050

"Banking day"                         ORS 74.1040

"Clearing house"                     ORS 74.1040

"Collecting bank"                    ORS 74.1050

"Depositary bank"                   ORS 74.1050

"Documentary draft"              ORS 74.1040

"Intermediary bank"                ORS 74.1050

"Item"                                      ORS 74.1040

"Payor bank"                           ORS 74.1050

"Suspends payments"              ORS 74.1040 (4) In addition, ORS chapter 71 contains general definitions and
principles of construction and interpretation applicable throughout this
chapter. [1993 c.545 §6; 1997 c.822 §1] (1) Except as
provided in subsections (3) and (4) of this 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:

(a) Is payable to bearer or to order at the time it is issued or
first comes into possession of a holder;

(b) Is payable on demand or at a definite time; and

(c) 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:

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

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

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

(2) "Instrument" means a negotiable instrument.

(3) An order that meets all of the requirements of subsection (1)
of this section, except subsection (1)(a) of this section, and otherwise
falls within the definition of "check" in subsection (6) of this 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 chapter.

(5) An instrument is a "note" if it is a promise. An instrument 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 a draft, other than a documentary draft, payable
on demand and drawn on a bank, or 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:

(a) On another bank; or

(b) Payable at or through a bank.

(9) "Traveler's check" means an instrument that:

(a) Is payable on demand;

(b) Is drawn on or payable at or through a bank;

(c) Is designated by the term "traveler's check" or by a
substantially similar term; and

(d) 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.

(11)(a) "Demand draft" means a writing not signed by a customer
that is created by a third party under the purported authority of the
customer for the purpose of charging the customer's account with a bank.
A demand draft does not include a check drawn by a fiduciary, as defined
in ORS 73.0307. A demand draft may contain any or all of the following:

(A) The customer's printed or typewritten name or account number;

(B) A notation that the customer authorized the draft; and

(C) The statement "No signature required" or words to that effect.

(b) "Demand draft" shall not include a check purportedly drawn by
and bearing the signature of a fiduciary as defined in ORS 73.0307. [1993
c.545 §7; 1997 c.822 §2] (1) "Issue" means the first delivery
of an instrument by the maker or drawer, whether to a holder or
nonholder, for the purpose of giving rights on the instrument to any
person.

(2) An unissued instrument, or an unissued incomplete instrument
that is completed, is binding on the maker or drawer, but nonissuance is
a defense. An instrument that is conditionally issued or is issued for a
special purpose is binding on the maker or drawer, but failure of the
condition or special purpose to be fulfilled is a defense.

(3) "Issuer" applies to issued and unissued instruments and means a
maker or drawer of an instrument. [1993 c.545 §8] (1) Except as provided in
this section, for the purposes of ORS 73.0104 (1), a promise or order is
unconditional unless it states an express condition to payment, that the
promise or order is subject to or governed by another writing, or that
rights or obligations with respect to the promise or order are stated in
another writing. A reference to another writing does not of itself make
the promise or order conditional.

(2) A promise or order is not made conditional:

(a) By a reference to another writing for a statement of rights
with respect to collateral, prepayment or acceleration; or

(b) Because payment is limited to resort to a particular fund or
source.

(3) If a promise or order requires, as a condition to payment, a
countersignature by a person whose specimen signature appears on the
promise or order, the condition does not make the promise or order
conditional for the purposes of ORS 73.0104 (1). If the person whose
specimen signature appears on an instrument fails to countersign the
instrument, the failure to countersign is a defense to the obligation of
the issuer, but the failure does not prevent a transferee of the
instrument from becoming a holder of the instrument.

(4) If a promise or order at the time it is issued or first comes
into possession of a holder contains a statement, required by applicable
statutory or administrative law, to the effect that the rights of a
holder or transferee are subject to claims or defenses that the issuer
could assert against the original payee, the promise or order is not
thereby made conditional for the purposes of ORS 73.0104 (1); but if the
promise or order is an instrument, there cannot be a holder in due course
of the instrument. [1993 c.545 §9] Unless the instrument
otherwise provides, an instrument that states the amount payable in
foreign money may be paid in the foreign money or in an equivalent amount
in dollars calculated by using the current bank-offered spot rate at the
place of payment for the purchase of dollars on the day on which the
instrument is paid. [1993 c.545 §10] (1) A promise or
order is "payable on demand" if it:

(a) States that it is payable on demand or at sight, or otherwise
indicates that it is payable at the will of the holder; or

(b) Does not state any time of payment.

(2) A promise or order is "payable at a definite time" if it is
payable on elapse of a definite period of time after sight or acceptance
or at a fixed date or dates or at a time or times readily ascertainable
at the time the promise or order issued, subject to rights of:

(a) Prepayment;

(b) Acceleration;

(c) Extension at the option of the holder; or

(d) Extension to a further definite time at the option of the maker
or acceptor or automatically upon or after a specified act or event.

(3) If an instrument, payable at a fixed date, is also payable upon
demand made before the fixed date, the instrument is payable on demand
until the fixed date and, if demand for payment is not made before that
date, becomes payable at a definite time on the fixed date. [1993 c.545
§11] (1) A promise or order is
payable to bearer if it:

(a) States that it is payable to bearer or to the order of bearer
or otherwise indicates that the person in possession of the promise or
order is entitled to payment;

(b) Does not state a payee; or

(c) States that it is payable to or to the order of cash or
otherwise indicates that it is not payable to an identified person.

(2) A promise or order that is not payable to bearer is payable to
order if it is payable to the order of an identified person or to an
identified person or order. A promise order that is payable to order is
payable to the identified person.

(3) An instrument payable to bearer may become payable to an
identified person if it is specially indorsed pursuant to ORS 73.0205
(1). An instrument payable to an identified person may become payable to
bearer if it is indorsed in blank pursuant to ORS 73.0205 (2). [1993
c.545 §12] (1)
The person to whom an instrument is initially payable is determined by
the intent of the person, whether or not authorized, signing as, or in
the name or behalf of, the issuer of the instrument. The instrument is
payable to the person intended by the signer even if that person is
identified in the instrument by a name or other identification that is
not that of the intended person. If more than one person signs in the
name or behalf of the issuer of an instrument and all the signers do not
intend the same person as payee, the instrument is payable to any person
intended by one or more of the signers.

(2) If the signature of the issuer of an instrument is made by
automated means, such as a check-writing machine, the payee of the
instrument is determined by the intent of the person who supplied the
name or identification of the payee, whether or not authorized to do so.

(3) A person to whom an instrument is payable may be identified in
any way, including by name, identifying number, office or account number.
For the purpose of determining the holder of an instrument, the following
rules apply:

(a) If an instrument is payable to an account and the account is
identified only by number, the instrument is payable to the person to
whom the account is payable. If an instrument is payable to an account
identified by number and by the name of the person, the instrument is
payable to the named person, whether or not that person is the owner of
the account identified by number.

(b) If an instrument is payable to:

(A) A trust, and estate, or a person described as trustee or
representative of a trust or estate, the instrument is payable to the
trustee, the representative, or a successor of either, whether or not the
beneficiary or estate is also named;

(B) A person described as an agent or similar representative of a
named or identified person, the instrument is payable to the represented
person, the representative, or a successor of the representative;

(C) A fund or organization that is not a legal entity, the
instrument is payable to a representative of the members of the fund or
organization; or

(D) An office or to a person described as holding an office, the
instrument is payable to the named person, the incumbent of the office,
or a successor to the incumbent.

(4) If an instrument is payable to two or more persons
alternatively, it is payable to any of them and may be negotiated,
discharged or enforced by any or all of them in possession of the
instrument. If an instrument is payable to two or more persons not
alternatively, it is payable to all of them and may be negotiated,
discharged or enforced only by all of them. If an instrument payable to
two or more persons is ambiguous as to whether it is payable to the
persons alternatively, the instrument is payable to the persons
alternatively. [1993 c.545 §13] Except as otherwise provided for items in
ORS chapter 74, an instrument is payable at the place of payment stated
in the instrument. If no place of payment is stated, an instrument is
payable at the address of the drawee or maker stated in the instrument.
If no address is stated, the place of payment is the place of business of
the drawee or maker. If a drawee or maker has more than one place of
business, the place of payment is any place of business of the drawee or
maker chosen by the person entitled to enforce the instrument. If the
drawee or maker has no place of business, the place of payment is the
residence of the drawee or maker. [1993 c.545 §14] (1) Unless otherwise provided in the instrument:

(a) An instrument is not payable with interest; and

(b) Interest on an interest-bearing instrument is payable from the
date of the instrument.

(2) Interest may be stated in an instrument as a fixed or variable
amount of money or it may be expressed as a fixed or variable rate or
rates. The amount or rate of interest may be stated or described in the
instrument in any manner and may require reference to information not
contained in the instrument. If an instrument provides for interest, but
the amount of interest payable cannot be ascertained from the
description, interest is payable at the judgment rate in effect at the
place of payment of the instrument and at the time interest first accrues.

(3) Nothing in subsection (1)(a) of this section shall affect any
right of a holder of a check, draft or order that has been dishonored by
nonacceptance or nonpayment or on which the maker or drawer has stopped
payment without good cause:

(a) To collect interest on the debt or obligation for which the
check, draft or order was given, pursuant to ORS 82.010; or

(b) To exercise the remedies provided in ORS 30.701. [1993 c.545
§15; 1999 c.707 §2] (1) An instrument may be antedated or
postdated. The date stated determines the time of payment if the
instrument is payable at a fixed period after the date. Except as
provided in ORS 74.4010 (3), an instrument payable on demand is not
payable before the date of the instrument.

(2) If an instrument is undated, its date is the date of its issue
or, in the case of an unissued instrument, the date it first comes into
possession of a holder. [1993 c.545 §16] If an instrument
contains contradictory terms, typewritten terms prevail over printed
terms, handwritten terms prevail over both, and words prevail over
numbers. [1993 c.545 §17] (1) "Incomplete instrument" means a
signed writing, whether or not issued by the signer, the contents of
which show at the time of signing that it is incomplete but that the
signer intended it to be completed by the addition of words or numbers.

(2) Subject to subsection (3) of this section, if the incomplete
instrument is an instrument under ORS 73.0104, it may be enforced
according to its terms if it is not completed, or according to its terms
as augmented by completion. If an incomplete instrument is not an
instrument under ORS 73.0104, but, after completion, the requirements of
ORS 73.0104 are met, the instrument may be enforced according to its
terms as augmented by completion.

(3) If words or numbers are added to an incomplete instrument
without authority of the signer, there is an alteration of the incomplete
instrument under ORS 73.0407.

(4) The burden of establishing that words or numbers were added to
an incomplete instrument without authority of the signer is on the person
asserting the lack of authority. [1993 c.545 §18] (1) Except as
otherwise provided in the instrument, two or more persons who have the
same liability on an instrument as makers, drawers, acceptors, indorsers
who indorse as joint payees, or anomalous indorsers are jointly and
severally liable in the capacity in which they sign.

(2) Except as provided in ORS 73.0419 (5) or by agreement of the
affected parties, a party having joint and several liability who pays the
instrument is entitled to receive, from any party having the same joint
and several liability, contribution in accordance with applicable law.

(3) Discharge of one party having joint and several liability by a
person entitled to enforce the instrument does not affect the right under
subsection (2) of this section of a party having the same joint and
several liability to receive contribution from the party discharged.
[1993 c.545 §19] Subject to
applicable law regarding exclusion of proof of contemporaneous or
previous agreements, the obligation of a party to an instrument to pay
the instrument may be modified, supplemented or nullified by a separate
agreement of the obligor and a person entitled to enforce the instrument,
if the instrument is issued or the obligation is incurred in reliance on
the agreement or as part of the same transaction giving rise to the
agreement. To the extent an obligation is modified, supplemented or
nullified by an agreement under this section, the agreement is a defense
to the obligation. [1993 c.545 §20] (1) Except as provided in
subsection (5) of this section, an action to enforce the obligation of a
party to pay a note payable at a definite time must be commenced within
six years after the due date or dates stated in the note or, if a due
date is accelerated, within six years after the accelerated due date.

(2) Except as provided in subsection (4) or (5) of this section, if
demand for payment is made to the maker of a note payable on demand, an
action to enforce the obligation of a party to pay the note must be
commenced within six years after the demand. If no demand for payment is
made to the maker, an action to enforce the note is barred if neither
principal nor interest on the note has been paid for a continuous period
of 10 years.

(3) Except as provided in subsection (4) of this section, an action
to enforce the obligation of a party to an unaccepted draft to pay the
draft must be commenced within six years after dishonor of the draft or
10 years after the date of the draft, whichever period expires first.

(4) An action to enforce the obligation of the acceptor of a
certified check or the issuer of a teller's check, cashier's check or
traveler's check must be commenced within six years after the demand for
payment is made to the acceptor or issuer.

(5) An action to enforce the obligation of a party to a certificate
of deposit to pay the instrument must be commenced within six years after
demand for payment is made to the maker, but if the instrument states a
due date, the six-year period begins when a demand for payment is in
effect and the due date has passed.

(6) An action to enforce the obligation of a party to pay an
accepted draft, other than a certified check, must be commenced:

(a) Within six years after the due date or dates stated in the
draft or acceptance if the obligation of the acceptor is payable at a
definite time; or

(b) Within six years after the date of the acceptance if the
obligation of the acceptor is payable on demand.

(7) Unless governed by other law regarding claims for indemnity or
contribution, an action for any of the following must be commenced within
six years after the claim for relief accrues:

(a) Conversion of an instrument, for money had and received, or
like action based on conversion;

(b) Breach of warranty; or

(c) Enforcement of an obligation, duty or right arising under this
chapter and not governed by this section.

(8) The circumstances under which the running of a limitation
period may be tolled shall be determined by other law. [1993 c.545 §21] In an action for breach
of an obligation over which a third person is answerable pursuant to this
chapter or ORS chapter 74, the defendant may give the third person
written notice of the litigation, and the person notified may then give
similar notice to any other person who is answerable. If the notice
states that the person notified may come in and defend and that failure
to do so will bind the person notified in an action later brought by the
person giving notice as to any determination of fact common to the two
litigations, the person notified is so bound unless after seasonable
receipt of the notice the person notified does come in and defend. [1993
c.545 §22]NEGOTIATION, TRANSFER AND INDORSEMENT (1) "Negotiation" means a transfer of
possession, whether voluntary or involuntary, of an instrument by a
person other than the issuer to a person who thereby becomes its holder.

(2) Except for negotiation by a remitter, if an instrument is
payable to an identified person, negotiation requires transfer of
possession of the instrument and its indorsement by the holder. If an
instrument is payable to bearer, it may be negotiated by transfer of
possession alone. [1993 c.545 §23] (1) Negotiation is
effective even if obtained:

(a) From an infant, a corporation exceeding its powers or a person
without capacity;

(b) By fraud, duress or mistake; or

(c) In breach of duty or as part of an illegal transaction.

(2) To the extent permitted by other law, negotiation may be
rescinded or may be subject to other remedies, but those remedies may not
be asserted against a subsequent holder in due course or a person paying
the instrument in good faith and without knowledge of facts that are a
basis for rescission or other remedy. [1993 c.545 §24] (1) An
instrument is transferred when it is delivered by a person other than its
issuer for the purpose of giving to the person receiving delivery the
right to enforce the instrument.

(2) Transfer of an instrument, whether or not the transfer is a
negotiation, vests in the transferee any right of the transferor to
enforce the instrument, including any right as a holder in due course,
but the transferee cannot acquire rights of a holder in due course by a
transfer, directly or indirectly, from a holder in due course if the
transferee has engaged in fraud or illegality affecting the instrument.

(3) Unless otherwise agreed, if an instrument is transferred for
value and the transferee does not become a holder because of lack of
indorsement by the transferor, the transferee has a specifically
enforceable right to the unqualified indorsement of the transferor, but
negotiation of the instrument does not occur until the indorsement is
made.

(4) If a transferor purports to transfer less than the entire
instrument, negotiation of the instrument does not occur. The transferee
obtains no rights under this chapter and has only the rights of a partial
assignee. [1993 c.545 §25] (1) "Indorsement" means a signature, other
than that of a signer as maker, drawer or acceptor, that alone or
accompanied by other words is made on an instrument for the purpose of
negotiating the instrument, restricting payment of the instrument or
incurring indorser's liability on the instrument. Regardless of the
intent of the signer, a signature and its accompanying words is an
indorsement unless the accompanying words, terms of the instrument, place
of the signature or other circumstances unambiguously indicate that the
signature was made for a purpose other than indorsement. For the purpose
of determining whether a signature is made on an instrument, a paper
affixed to the instrument is a part of the instrument.

(2) "Indorser" means a person who makes an indorsement.

(3) For the purpose of determining whether the transferee of an
instrument is a holder, an indorsement that transfers a security interest
in the instrument is effective as an unqualified indorsement of the
instrument.

(4) If an instrument is payable to a holder under a name that is
not the name of the holder, indorsement may be made by the holder in the
name stated in the instrument or in the holder's name or both, but
signature in both names may be required by a person paying or taking the
instrument for value or collection. [1993 c.545 §26](1) If an indorsement is made by the holder of an
instrument, whether payable to an identified person or payable to bearer,
and the indorsement identifies a person to whom it makes the instrument
payable, it is a "special indorsement." When specially indorsed, an
instrument becomes payable to the identified person and may be negotiated
only by the indorsement of that person. The principles stated in ORS
73.0110 apply to special indorsements.

(2) If an indorsement is made by the holder of an instrument and it
is not a special indorsement, it is a "blank indorsement." When indorsed
in blank, an instrument becomes payable to bearer and may be negotiated
by transfer of possession alone until specially indorsed.

(3) The holder may convert a blank indorsement that consists only
of a signature into a special indorsement by writing, above the signature
of the indorser, words identifying the person to whom the instrument is
made payable.

(4) "Anomalous indorsement" means an indorsement made by a person
who is not the holder of the instrument. An anomalous indorsement does
not affect the manner in which the instrument may be negotiated. [1993
c.545 §27] (1) An indorsement limiting
payment to a particular person or otherwise prohibiting further transfer
or negotiation of the instrument is not effective to prevent further
transfer or negotiation of the instrument.

(2) An indorsement stating a condition to the right of the indorsee
to receive payment does not affect the right of the indorsee to enforce
the instrument. A person paying the instrument or taking it for value or
collection may disregard the condition, and the rights and liabilities of
that person are not affected by whether the condition has been fulfilled.

(3) If an instrument bears an indorsement described in ORS 74.2010
(2), or in blank or to a particular bank using the words "for deposit,"
"for collection" or other words indicating a purpose of having the
instrument collected by a bank for the indorser or for a particular
account, the following rules apply:

(a) A person, other than a bank, who purchases the instrument when
so indorsed converts the instrument unless the amount paid for the
instrument is received by the indorser or applied consistently with the
indorsement.

(b) A depositary bank that purchased the instrument or takes it for
collection when so indorsed converts the instrument unless the amount
paid by the bank with respect to the instrument is received by the
indorser or applied consistently with the indorsement.

(c) A payor bank that is also the depositary bank or that takes the
instrument for immediate payment over the counter from a person other
than a collecting bank converts the instrument unless the proceeds of the
instrument are received by the indorser or applied consistently with the
indorsement.

(d) Except as otherwise provided in paragraph (c) of this
subsection, a payor bank or intermediary bank may disregard the
indorsement and is not liable if the proceeds of the instrument are not
received by the indorser or applied consistently with the indorsement.

(4) Except for an indorsement covered by subsection (3) of this
section, if an instrument bears an indorsement using words to the effect
that payment is to be made to the indorsee as agent, trustee or other
fiduciary for the benefit of the indorser or another person, the
following rules apply:

(a) Unless there is notice of breach of fiduciary duty as provided
in ORS 73.0307, a person who purchases the instrument from the indorsee
or takes the instrument from the indorsee for collection or payment may
pay the proceeds of payment or the value given for the instrument to the
indorsee without regard to whether the indorsee violates a fiduciary duty
to the indorser.

(b) A subsequent transferee of the instrument or person who pays
the instrument is neither given notice nor otherwise affected by the
restriction in the indorsement unless the transferee or payor knows that
the fiduciary dealt with the instrument or its proceeds in breach of
fiduciary duty.

(5) The presence on an instrument of an indorsement to which this
section applies does not prevent a purchaser of the instrument from
becoming a holder in due course of the instrument unless the purchaser is
a converter under subsection (3) of this section or has notice or
knowledge of breach of fiduciary duty as stated in subsection (4) of this
section.

(6) In an action to enforce the obligation of a party to pay the
instrument, the obligor has a defense if payment would violate an
indorsement to which this section applies and the payment is not
permitted by this section. [1993 c.545 §28] Reacquisition of an instrument occurs if it
is transferred to a former holder, by negotiation or otherwise. A former
holder who reacquires the instrument may cancel indorsements made after
the reacquirer first became a holder of the instrument. If the
cancellation causes the instrument to be payable to the reacquirer or to
bearer, the reacquirer may negotiate the instrument. An indorser whose
indorsement is canceled is discharged, and the discharge is effective
against any subsequent holder. [1993 c.545 §29]ENFORCEMENT OF INSTRUMENTS "Person entitled to
enforce" an instrument means the holder of the instrument, a nonholder in
possession of the instrument who has the rights of a holder, or a person
not in possession of the instrument who is entitled to enforce the
instrument pursuant to ORS 73.0309 or 73.0418 (4). A person may be a
person entitled to enforce the instrument even though the person is not
the owner of the instrument or is in wrongful possession of the
instrument. [1993 c.545 §30](1) Subject to ORS 73.0106 (3) and
(4), "holder in due course" means the holder of an instrument if:

(a) The instrument when issued or negotiated to the holder does not
bear such apparent evidence of forgery or alteration or is not otherwise
so irregular or incomplete as to call into question its authenticity; and

(b) The holder took the instrument:

(A) For value;

(B) In good faith;

(C) Without notice that the instrument is overdue or has been
dishonored or that there is an uncured default with respect to payment of
another instrument issued as part of the same series;

(D) Without notice that the instrument contains an unauthorized
signature or has been altered;

(E) Without notice of any claim to the instrument described in ORS
73.0306; and

(F) Without notice that any party has a defense or claim in
recoupment described in ORS 73.0305.

(2) Notice of discharge of a party, other than discharge in an
insolvency proceeding, is not notice of a defense under subsection (1) of
this section, but discharge is effective against a person who became a
holder in due course with notice of the discharge. Public filing or
recording of a document does not of itself constitute notice of a
defense, claim in recoupment or claim to the instrument.

(3) Except to the extent a transferor or predecessor in interest
has rights as a holder in due course, a person does not acquire rights of
a holder in due course of an instrument taken:

(a) By legal process or by purchase in an execution, bankruptcy or
creditor's sale or similar proceeding;

(b) By purchase as part of a bulk transaction not in ordinary
course of business of the transferor; or

(c) As the successor in interest to an estate or other organization.

(4) If, under ORS 73.0303 (1)(a), the promise of performance that
is the consideration for an instrument has been partially performed, the
holder may assert rights as a holder in due course of the instrument only
to the fraction of the amount payable under the instrument equal to the
value of the partial performance divided by the value of the promised
performance.

(5) If the person entitled to enforce an instrument has only a
security interest in the instrument and the person obliged to pay the
instrument has a defense, claim in recoupment or claim to the instrument
that may be asserted against the person who granted the security
interest, the person entitled to enforce the instrument may assert rights
as a holder in due course only to an amount payable under the instrument
which, at the time of enforcement of the instrument, does not exceed the
amount of the unpaid obligation secured.

(6) To be effective, notice must be received at a time and in a
manner that gives a reasonable opportunity to act on it.

(7) This section is subject to any law limiting status as a holder
in due course in particular classes of transactions. [1993 c.545 §31] (1) An instrument is issued or
transferred for value if:

(a) The instrument is issued or transferred for a promise of
performance, to the extent the promise has been performed;

(b) The transferee acquires a security interest or other lien in
the instrument other than a lien obtained by judicial proceeding;

(c) The instrument is issued or transferred as payment of, or as
security for, an antecedent claim against any person, whether or not the
claim is due;

(d) The instrument is issued or transferred in exchange for a
negotiable instrument; or

(e) The instrument is issued or transferred in exchange for the
incurring of an irrevocable obligation to a third party by the person
taking the instrument.

(2) "Consideration" means any consideration sufficient to support a
simple contract. The drawer or maker of an instrument has a defense if
the instrument is issued without consideration. If an instrument is
issued for a promise of performance, the issuer has a defense to the
extent performance of the promise is due and the promise has not been
performed. If an instrument is issued for value as stated in subsection
(1) of this section, the instrument is also issued for consideration.
[1993 c.545 §32] (1) An instrument payable on demand
becomes overdue at the earliest of the following times:

(a) On the day after the day demand for payment is duly made;

(b) If the instrument is a check, 90 days after its date; or

(c) If the instrument is not a check, when the instrument has been
outstanding for a period of time after its date which is unreasonably
long under the circumstances of the particular case in light of the
nature of the instrument and usage of the trade.

(2) With respect to an instrument payable at a definite time, the
following rules apply:

(a) If the principal is payable in installments and a due date has
not been accelerated, the instrument becomes overdue upon default under
the instrument for nonpayment of an installment, and the instrument
remains overdue until the default is cured.

(b) If the principal is not payable in installments and the due
date has not been accelerated, the instrument becomes overdue on the day
after the due date.

(c) If a due date with respect to principal has been accelerated,
the instrument becomes overdue on the day after the accelerated due date.

(3) Unless the due date of principal has been accelerated, an
instrument does not become overdue if there is default in payment of
interest but no default in payment of principal. [1993 c.545 §33] (1) Except as stated in
subsection (2) of this section, the right to enforce the obligation of a
party to pay an instrument is subject to the following:

(a) A defense of the obligor based on:

(A) Infancy of the obligor to the extent it is a defense to a
simple contract;

(B) Duress, lack of legal capacity or illegality of the transaction
which, under other law, nullifies the obligation of the obligor;

(C) Fraud that induced the obligor to sign the instrument with
neither knowledge nor reasonable opportunity to learn of its character or
its essential terms; or

(D) Discharge of the obligor in insolvency proceedings;

(b) A defense of the obligor stated in another section of this
chapter or a defense of the obligor that would be available if the person
entitled to enforce the instrument were enforcing a right to payment
under a simple contract; and

(c) A claim in recoupment of the obligor against the original payee
of the instrument if the claim arose from the transaction that gave rise
to the instrument, but the claim of the obligor may be asserted against a
transferee of the instrument only to reduce the amount owing on the
instrument at the time the action is brought.

(2) The right of a holder in due course to enforce the obligation
of a party to pay the instrument is subject to defenses of the obligor
stated in subsection (1)(a) of this section, but is not subject to
defenses of the obligor stated in subsection (1)(b) of this section or
claims in recoupment stated in subsection (1)(c) of this section against
a person other than the holder.

(3) Except as stated in subsection (4) of this section, in an
action to enforce the obligation of a party to pay the instrument, the
obligor may not assert against the person entitled to enforce the
instrument a defense, claim in recoupment or claim to the instrument of
another person, but the other person's claim to the instrument may be
asserted by the obligor if the other person is joined in the action and
personally asserts the claim against the person entitled to enforce the
instrument. An obligor is not obliged to pay the instrument if the person
seeking enforcement of the instrument does not have rights of a holder in
due course and the obligor proves that the instrument is a lost or stolen
instrument.

(4) In an action to enforce the obligation of an accommodation
party or pay an instrument, the accommodation party may assert against
the person entitled to enforce the instrument any defense or claim in
recoupment under subsection (1) of this section that the accommodated
party could assert against the person entitled to enforce the instrument,
except the defenses of discharge in insolvency proceedings, infancy and
lack of legal capacity. [1993 c.545 §34] A person taking an instrument,
other than a person having rights of a holder in due course, is subject
to a claim of a property or possessory right in the instrument or its
proceeds, including a claim to rescind a negotiation and to recover the
instrument or its proceeds. A person having rights of a holder in due
course takes free of the claim to the instrument. [1993 c.545 §35] (1) In this section:

(a) "Fiduciary" means an agent, trustee, partner, corporate
officer, director or other representative owing a fiduciary duty with
respect to an instrument.

(b) "Represented person" means the principal, beneficiary,
partnership, corporation or other person to whom the duty stated in
paragraph (a) of this subsection is owed.

(2) If an instrument is taken from a fiduciary for payment or
collection or for value, the taker has knowledge of the fiduciary status
of the fiduciary, and the represented person makes a claim to the
instrument or its proceeds on the basis that the transaction of the
fiduciary is a breach of fiduciary duty, the following rules apply:

(a) Notice of breach of fiduciary duty by the fiduciary is notice
of the claim of the represented person.

(b) In the case of an instrument payable to the represented person
or the fiduciary as such, the taker has notice of the breach of fiduciary
duty if the instrument is:

(A) Taken in payment of or as security for a debt known by the
taker to be the personal debt of the fiduciary;

(B) Taken in a transaction known by the taker to be for the
personal benefit of the fiduciary; or

(C) Deposited to an account other than an account of the fiduciary,
as such, or an account of the represented person.

(c) If an instrument is issued by the represented person or the
fiduciary as such, and made payable to the fiduciary personally, the
taker does not have notice of the breach of fiduciary duty unless the
taker knows of the breach of fiduciary duty.

(d) If an instrument is issued by the represented person or the
fiduciary as such, to the taker as payee, the taker has notice of the
breach of fiduciary duty if the instrument is:

(A) Taken in payment of or as security for a debt known by the
taker to be the personal debt of the fiduciary;

(B) Taken in a transaction known by the taker to be for the
personal benefit of the fiduciary; or

(C) Deposited to an account other than an account of the fiduciary,
as such, or an account of the represented person. [1993 c.545 §36] (1)
In an action with respect to an instrument, the authenticity of, and
authority to make, each signature on the instrument is admitted unless
specifically denied in the pleadings. If the validity of a signature is
denied in the pleadings, the burden of establishing validity is on the
person claiming validity, but the signature is presumed to be authentic
and authorized unless the action is to enforce the liability of the
purported signer and the signer is dead or incompetent at the time of
trial of the issue of validity of the signature. If an action to enforce
the instrument is brought against a person as the undisclosed principal
of a person who signed the instrument as a party to the instrument, the
plaintiff has the burden of establishing that the defendant is liable on
the instrument as a represented person under ORS 73.0402 (1).

(2) If the validity of signatures is admitted or proved and there
is compliance with subsection (1) of this section, a plaintiff producing
the instrument is entitled to payment if the plaintiff proves entitlement
to enforce the instrument under ORS 73.0301, unless the defendant proves
a defense or claim in recoupment. If a defense or claim in recoupment is
proved, the right to payment of the plaintiff is subject to the defense
or claim, except to the extent the plaintiff proves that the plaintiff
has rights of a holder in due course that are not subject to the defense
or claim. [1993 c.545 §37] (1) A
person not in possession of an instrument is entitled to enforce the
instrument if:

(a) The person was in possession of the instrument and entitled to
enforce it when loss of possession occurred;

(b) The loss of possession was not the result of a transfer by the
person or a lawful seizure; and

(c) The person cannot reasonably obtain possession of the
instrument because the instrument was destroyed, its whereabouts cannot
be determined, or it is in the wrongful possession of an unknown person
or a person that cannot be found or is not amenable to service of process.

(2) A person seeking enforcement of an instrument under subsection
(1) of this section must prove the terms of the instrument and the
person's right to enforce the instrument. If that proof is made, ORS
73.0205 applies to the case as if the person seeking enforcement had
produced the instrument. The court may not enter judgment in favor of the
person seeking enforcement unless it finds that the person required to
pay the instrument is adequately protected against loss that might occur
by reason of a claim by another person to enforce the instrument.
Adequate protection may be provided by any reasonable means. [1993 c.545
§38] (1)
Unless otherwise agreed, if a certified check, cashier's check or
teller's check is taken for an obligation, the obligation is discharged
to the same extent discharge would result if an amount 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 indorser of the instrument.

(2) Unless otherwise agreed and except as provided in subsection
(1) of this section, if a note or an uncertified check is taken for an
obligation, the obligation is suspended to the same extent the obligation
would be discharged if an amount of money equal to the amount of the
instrument were taken, and the following rules apply:

(a) In the case of an uncertified check, suspension of the
obligation continues until dishonor of the check or until it is paid or
certified. Payment or certification of the check results in 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 note or until it is paid. Payment of the note
results in discharge of the obligation to the extent of the payment.

(c) Except as provided in paragraph (d) of this subsection, if the
check or note is dishonored and the obligee of the obligation for which
the instrument was taken is the person entitled to enforce the
instrument, the obligee may enforce either the instrument or the
obligation. In the case of an instrument of a third person that is
negotiated to the obligee by the obligor, discharge of the obligor on the
instrument also discharges the obligation.

(d) If the person entitled to enforce the instrument taken for an
obligation is a person other than the obligee, the obligee may not
enforce the obligation to the extent the obligation is suspended. If the
obligee is the person entitled to enforce the instrument but no longer
has possession of it because it was lost, stolen or destroyed, the
obligation may not be enforced to the extent of the amount payable on the
instrument, and to that extent the obligee's rights against the obligor
are limited to enforcement of the instrument.

(3) If an instrument other than one described in subsection (1) or
(2) of this section is taken for an obligation, the effect is:

(a) That stated in subsection (1) of this section, if the
instrument is one on which a bank is liable as maker or acceptor; or

(b) That stated in subsection (2) of this section in any other
case. [1993 c.545 §39] The negotiation of an instrument
marked "paid in full," "payment in full," "full payment of a claim" or
words of similar meaning, or the negotiation of an instrument accompanied
by a statement containing such words or words of similar meaning, does
not establish an accord and satisfaction that binds the payee or prevents
the collection of any remaining amount owed upon the underlying
obligation unless the payee personally, or by an officer or employee with
actual authority to settle claims, agrees in writing to accept the amount
stated in the instrument as full payment of the obligation. [1993 c.545
§40; 1997 c.437 §1](1) In this section:

(a) "Check" means a cashier's check, teller's check or certified
check.

(b) "Claimant" means a person who claims the right to receive the
amount of a cashier's check, teller's check or certified check that was
lost, destroyed or stolen.

(c) "Declaration of loss" means a written statement, made under
penalty of perjury, to the effect that:

(A) The declarer lost possession of a check;

(B) The declarer is the drawer or payee of the check, in the case
of a certified check, or the remitter or payee of the check, in the case
of a cashier's check or teller's check;

(C) The loss of possession was not the result of a transfer by the
declarer or a lawful seizure; and

(D) The declarer cannot reasonably obtain possession of the check
because the check was destroyed, its whereabouts cannot be determined, or
it is in the wrongful possession of an unknown person or a person that
cannot be found or is not amenable to service of process.

(d) "Obligated bank" means the issuer of a cashier's check or
teller's check or the acceptor of a certified check.

(2) A claimant may assert a claim to the amount of a check by a
communication to the obligated bank describing the check with reasonable
certainty and requesting payment of the amount of the check, if:

(a) The claimant is the drawer or payee of a certified check or the
remitter or payee of a cashier's check or teller's check;

(b) The communication contains or is accompanied by a declaration
of loss of the claimant with respect to the check;

(c) The communication is received at a time and in a manner
affording the bank a reasonable time to act on it before the check is
paid; and

(d) The claimant provides reasonable identification if requested by
the obligated bank.

(3) Delivery of a declaration of loss is a warranty of the truth of
the statement made in the declaration. If a claim is asserted in
compliance with subsection (2) of this section, the following rules apply:

(a) The claim becomes enforceable at the later of:

(A) The time the claim is asserted; or

(B) The 90th day following the date of the check, in the case of a
cashier's check or teller's check, or the 90th day following the date of
the acceptance, in the case of a certified check.

(b) Until the claim becomes enforceable, it has no legal effect and
the obligated bank may pay the check or, in the case of a teller's check,
may permit the drawee to pay the check. Payment to a person entitled to
enforce the check discharges all liability of the obligated bank with
respect to the check.

(c) If the claim becomes enforceable before the check is presented
for payment, the obligated bank is not obliged to pay the check.

(d) When the claim becomes enforceable, the obligated bank becomes
obliged to pay the amount of the check to the claimant if payment of the
check has not been made to a person entitled to enforce the check.
Subject to ORS 74.3020 (1)(a), payment to the claimant discharges all
liability of the obligated bank with respect to the check.

(4) If the obligated bank pays the amount of a check to a claimant
under subsection (2)(d) of this section, and the check is presented for
payment by a person having rights of a holder in due course, the claimant
is obliged to:

(a) Refund the payment to the obligated bank if the check is paid;
or

(b) Pay the amount of the check to the person having rights of a
holder in due course if the check is dishonored.

(5) If a claimant has the right to assert a claim under subsection
(2) of this section and is also a person entitled to enforce a cashier's
check, teller's check or certified check that is lost, destroyed or
stolen, the claimant may assert rights with respect to the check either
under this section or ORS 73.0309. [1993 c.545 §41]LIABILITY OF PARTIES (1) A person is not liable on an instrument
unless:

(a) The person signed the instrument; or

(b) The person is represented by an agent or representative who
signed the instrument and the signature is binding on the represented
person under ORS 73.0402.

(2) A signature may be made:

(a) Manually or by means of a device or machine; and

(b) By the use of any name, including a trade or assumed name, or
by a word, mark or symbol executed or adopted by a person with present
intention to authenticate a writing. [1993 c.545 §42] (1) If a person acting, or
purporting to act, as a representative signs an instrument by signing
either the name of the represented person or the name of the signer, the
represented person is bound by the signature to the same extent the
represented person would be bound if the signature were on a simple
contract. If the represented person is bound, the signature of the
representative is the "authorized signature of the represented person"
and the represented person is liable on the instrument, whether or not
identified in the instrument.

(2) If a representative signs the name of the representative to an
instrument and the signature is an authorized signature of the
represented person, the following rules apply:

(a) If the form of the signature shows unambiguously that the
signature is made on behalf of the represented person who is identified
in the instrument, the representative is not liable on the instrument.

(b) Subject to subsection (3) of this section, if the form of the
signature does not show unambiguously that the signature is made in a
representative capacity or the represented person is not identified in
the instrument, the representative is liable on the instrument to a
holder in due course that took the instrument without notice that the
representative was not intended to be liable on the instrument. With
respect to any other person, the representative is liable on the
instrument unless the representative proves that the original parties did
not intend the representative to be liable on the instrument.

(3) If a representative signs the name of the representative as
drawer of a check without indication of the representative status and the
check is payable from an account of the represented person who is
identified on the check, the signer is not liable on the check if the
signature is an authorized signature of the represented person. [1993
c.545 §43] (1) Unless otherwise provided in
this chapter or ORS chapter 74, an unauthorized signature is ineffective
except as the signature of the unauthorized signer in favor of a person
who, in good faith, pays the instrument or takes it for value or for
collection. An unauthorized signature may be ratified for all purposes of
this chapter.

(2) If the signature of more than one person is required to
constitute the authorized signature of an organization, the signature of
the organization is unauthorized if one of the required signatures is
lacking.

(3) The civil or criminal liability of a person who makes an
unauthorized signature is not affected by any provision of this chapter
that makes the unauthorized signature effective for the purposes of this
chapter. [1993 c.545 §44] (1) If an impostor, by use of
the mails or otherwise, induces the issuer of an instrument to issue the
instrument to the impostor, or to a person acting in concert with the
impostor, by impersonating the payee of the instrument or a person
authorized to act for the payee, an indorsement of the instrument by any
person in the name of the payee is effective as the indorsement of the
payee in favor of a person who, in good faith, pays the instrument or
takes it for value or for collection.

(2) If a person whose intent determines to whom an instrument is
payable under ORS 73.0110 (1) or (2) does not intend the person
identified as payee to have any interest in the instrument or the person
identified as payee of an instrument is a fictitious person, the
following rules apply until the instrument is negotiated by special
indorsement:

(a) Any person in possession of the instrument is its holder.

(b) An indorsement by any person in the name of the payee stated in
the instrument is effective as the indorsement of the payee in favor of a
person who, in good faith, pays the instrument or takes it for value or
for collection.

(3) Under subsection (1) or (2) of this section, an indorsement is
made in the name of a payee if:

(a) It is made in a name substantially similar to that of the
payee; or

(b) The instrument, whether or not indorsed, is deposited in a
depositary bank to an account in a name substantially similar to that of
the payee.

(4) With respect to an instrument to which subsection (1) or (2) of
this section applies, if a person paying the instrument or taking it for
value or for collection fails to exercise ordinary care in paying or
taking the instrument and that failure substantially contributes to loss
resulting from payment of the instrument, the person bearing the loss may
recover from the person failing to exercise ordinary care to the extent
the failure to exercise ordinary care contributed to the loss. [1993
c.545 §45](1) In this section:

(a) "Employee" includes an independent contractor and employee of
an independent contractor retained by the employer.

(b) "Fraudulent indorsement" means:

(A) In the case of an instrument payable to the employer, a forged
indorsement purporting to be that of the employer; or

(B) In the case of an instrument with respect to which the employer
is the issuer, a forged indorsement purporting to be that of the person
identified as payee.

(c) "Responsibility" with respect to instruments means authority to
sign or indorse instruments on behalf of the employer, to process
instruments received by the employer for bookkeeping purposes, for
deposit to an account, or for other disposition, to prepare or process
instruments for issue in the name of the employer, to supply information
determining the names or addresses of payees of instruments to be issued
in the name of the employer, to control the disposition of instruments to
be issued in the name of the employer, or to act otherwise with respect
to instruments in a responsible capacity. "Responsibility" does not
include authority that merely allows an employee to have access to
instruments or blank or incomplete instrument forms that are being stored
or transported or are part of incoming or outgoing mail, or similar
access.

(2) For the purpose of determining the rights and liabilities of a
person who, in good faith, pays an instrument or takes it for value or
for collection, if an employer entrusted an employee with responsibility
with respect to the instrument and the employee or a person acting in
concert with the employee makes a fraudulent indorsement of the
instrument, the indorsement is effective as the indorsement of the person
to whom the instrument is payable if it is made in the name of that
person. If the person paying the instrument or taking it for value or for
collection fails to exercise ordinary care in paying or taking the
instrument and that failure substantially contributes to loss resulting
from the fraud, the person bearing the loss may recover from the person
failing to exercise ordinary care to the extent the failure to exercise
ordinary care contributed to the loss.

(3) Under subsection (1) of this section, an indorsement is made in
the name of the person to whom an instrument is payable if:

(a) It is made in a name substantially similar to the name of that
person; or

(b) The instrument, whether or not indorsed, is deposited in a
depositary bank to an account in a name substantially similar to the name
of that person. [1993 c.545 §46](1) A person whose failure to exercise ordinary care
substantially contributes to an alteration of an instrument or to the
making of a forged signature on an instrument is precluded from asserting
the alteration or the forgery against a person who, in good faith, pays
the instrument or takes it for value or for collection.

(2) Under subsection (1) of this section, if the person asserting
the preclusion fails to exercise ordinary care in paying or taking the
instrument and that failure substantially contributes to loss, the loss
is allocated between the person precluded and the person asserting the
preclusion according to the extent to which the failure of each to
exercise ordinary care contributed to the loss.

(3) Under subsection (1) of this section, the burden of proving
failure to exercise ordinary care is on the person asserting the
preclusion. Under subsection (2) of this section, the burden of proving
failure to exercise ordinary care is on the person precluded. [1993 c.545
§47] (1) "Alteration" means:

(a) An unauthorized change in an instrument that purports to modify
in any respect the obligation of a party; or

(b) An unauthorized addition of words or numbers or other change to
an incomplete instrument relating to the obligation of a party.

(2) Except as provided in subsection (3) of this section, an
alteration fraudulently made discharges a party whose obligation is
affected by the alteration unless that party assents or is precluded from
asserting the alteration. No other alteration discharges a party, and the
instrument may be enforced according to its original terms.

(3) A payor bank or drawee paying a fraudulently altered instrument
or a person taking it for value or for collection, in good faith and
without notice of the alteration, may enforce rights with respect to the
instrument:

(a) According to its original terms; or

(b) In the case of an incomplete instrument altered by unauthorized
completion, according to its terms as completed. [1993 c.545 §48] A check or other
draft does not of itself operate as an assignment of funds in the hands
of the drawee available for its payment, and the drawee is not liable on
the instrument until the drawee accepts it. [1993 c.545 §49] (1) "Acceptance"
means the drawee's signed agreement to pay a draft as presented. It must
be written on the draft and may consist of the drawee's signature alone.
Acceptance may be made at any time and becomes effective when
notification pursuant to instructions is given or the accepted draft is
delivered for the purpose of giving rights on the acceptance to any
person.

(2) A draft may be accepted although it has not been signed by the
drawer, is otherwise incomplete or has been dishonored.

(3) If a draft is payable at a fixed period after sight and the
acceptor fails to date the acceptance, the holder may complete the
acceptance by supplying a date in good faith.

(4) "Certified check" means a check accepted by the bank on which
it is drawn. Acceptance may be made as stated in subsection (1) of this
section or by a writing on the check that indicates that the check is
certified. The drawee of a check has no obligation to certify the check
and refusal to certify is not dishonor of the check. [1993 c.545 §50] (1) If the terms of a drawee's
acceptance vary from the terms of the draft as presented, the holder may
refuse the acceptance and treat the draft as dishonored. In that case,
the drawee may cancel the acceptance.

(2) The terms of a draft are not varied by an acceptance to pay at
a particular bank or place in the United States, unless the acceptance
states that the draft is to be paid only at that bank or place.

(3) If the holder assents to an acceptance varying the terms of a
draft, the obligation of each drawer and indorser that does not expressly
assent to the acceptance is discharged. [1993 c.545 §51](1) In this section, "obligated bank" means the
acceptor of a certified check or the issuer of a cashier's check or
teller's check bought from the issuer.

(2) If the obligated bank wrongfully refuses to pay a cashier's
check or certified check, stops payment of a teller's check, or refuses
to pay a dishonored teller's check, the person asserting the right to
enforce the check is entitled to compensation for expenses and loss of
interest resulting from the nonpayment and may recover consequential
damages if the obligated bank refuses to pay after receiving notice of
particular circumstances giving rise to the damages.

(3) Expenses or consequential damages under subsection (2) of this
section are not recoverable if the refusal of the obligated bank to pay
occurs because:

(a) The bank suspends payments;

(b) The obligated bank asserts a claim or defense of the bank that
it has reasonable grounds to believe is available against the person
entitled to enforce the instrument;

(c) The obligated bank has a reasonable doubt whether the person
demanding payment is the person entitled to enforce the instrument; or

(d) Payment is prohibited by law. [1993 c.545 §52] The issuer
of a note or cashier's check or other draft drawn on the drawer is
obliged to pay the instrument according to its terms at the time it was
issued or, if not issued, at the time it first came into possession of a
holder, or if the issuer signed an incomplete instrument, according to
its terms when completed, to the extent stated in ORS 73.0115 and
73.0407. The obligation is owed to a person entitled to enforce the
instrument or to an indorser who paid the instrument under ORS 73.0115.
[1993 c.545 §53] (1) The acceptor of a draft is
obligated to pay the draft:

(a) According to its terms at the time it was accepted, even though
the acceptance states that the draft is payable "as originally drawn" or
equivalent terms;

(b) If the acceptance varies the terms of the draft, according to
the terms of the draft as varied; or

(c) If the acceptance is of a draft that is an incomplete
instrument, according to its terms when completed, to the extent stated
in ORS 73.0115 and 73.0407.

(2) The obligation to pay is owed to a person entitled to enforce
the draft or to the drawer or an indorser who paid the draft under ORS
73.0414 or 73.0415.

(3) If the certification of a check or other acceptance of a draft
states the amount certified or accepted, the obligation of the acceptor
is that amount. If the certification or acceptance does not state an
amount, the amount of the instrument is subsequently raised, and the
instrument is then negotiated to a holder in due course, the obligation
of the acceptor is the amount of the instrument at the time it was taken
by the holder in due course. [1993 c.545 §54] (1) This section does not apply to
cashier's checks or other drafts drawn on the drawer.

(2) If an unaccepted draft is dishonored, the drawer is obliged to
pay the draft according to its terms at the time it was issued or, if not
issued, at the time it first came into possession of a holder, or if the
drawer signed an incomplete instrument, according to its terms when
completed, to the extent stated in ORS 73.0115 and 73.0407. The
obligation is owed to a person entitled to enforce the draft or to an
indorser who paid the draft under ORS 73.0415.

(3) If a draft is accepted by a bank, the drawer is discharged,
regardless of when or by whom acceptance was obtained.

(4) If a draft is accepted and the acceptor is not a bank, the
obligation of the drawer to pay a draft if the draft is dishonored by the
acceptor is the same as the obligation of an indorser under ORS 73.0415
(1) and (3).

(5) If a draft states that it is drawn "without recourse" or
otherwise disclaims liability of the drawer to pay the draft, the drawer
is not liable under subsection (2) of this section to pay the draft if
the draft is not a check.

(6) If a check is not presented for payment or given to a
depositary bank for collection within 30 days after its date, the drawee
suspends payments after expiration of the 30-day period without paying
the check, and because of the suspension of payments, the drawer is
deprived of funds maintained with the drawee to cover payment of the
check, the drawer to the extent deprived of funds may discharge its
obligation to pay the check by assigning to the person entitled to
enforce the check the rights of the drawer against the drawee with
respect to the funds. [1993 c.545 §55] (1) Subject to subsections (2), (3)
and (4) of this section and to ORS 73.0419 (4), if an instrument is
dishonored, an indorser is obliged to pay the amount due on the
instrument according to the terms of the instrument at the time it was
indorsed, or if the indorser indorsed an incomplete instrument, according
to its terms when completed, to the extent stated in ORS 73.0115 and
73.0407. The obligation of the indorser is owed to a person entitled to
enforce the instrument or to a subsequent indorser who paid the
instrument under this section.

(2) If an indorsement states that it is made "without recourse" or
otherwise disclaims liability of the indorser, the indorser is not liable
under subsection (1) of this section to pay the instrument.

(3) If notice of dishonor of an instrument is required by ORS
73.0503 and notice of dishonor complying with that section is not given
to an indorser, the liability of the indorser under subsection (1) of
this section is discharged.

(4) If a draft is accepted by a bank after an indorsement is made,
the liability of the indorser under subsection (1) of this section is
discharged.

(5) If an indorser of a check is liable under subsection (1) of
this section and the check is not presented for payment or given to a
depositary bank for collection within 30 days after the day the
indorsement was made, the liability of the indorser under subsection (1)
of this section is discharged. [1993 c.545 §56] (1) A person who transfers an
instrument for consideration warrants to the transferee and, if the
transfer is by indorsement, to any subsequent transferee that:

(a) The warrantor is a person entitled to enforce the instrument;

(b) All signatures on the instrument are authentic and authorized;

(c) The instrument has not been altered;

(d) The instrument is not subject to a defense or claim in
recoupment of any party which can be asserted against the warrantor;

(e) The warrantor has no knowledge of any insolvency proceeding
commenced with respect to the maker or acceptor or, in the case of an
unaccepted draft, the drawer; and

(f) If the instrument is a demand draft, creation of the instrument
according to the terms on its face was authorized by the person
identified as drawer.

(2) A person to whom the warranties under subsection (1) of this
section are made and who took the instrument in good faith may recover
from the warrantor as damages for breach of warranty an amount equal to
the loss suffered as a result of the breach, but not more than the amount
of the instrument plus expenses and loss of interest incurred as a result
of the breach.

(3) The warranties stated in subsection (1) of this section cannot
be disclaimed with respect to checks. Unless notice of a claim for breach
of warranty is given to the warrantor within 30 days after the claimant
has reason to know of the breach and the identity of the warrantor, the
liability of the warrantor under subsection (2) of this section is
discharged to the extent of any loss caused by the delay in giving notice
of the claim.

(4) A claim for relief for breach of warranty under this section
accrues when the claimant has reason to know of the breach.

(5) If the warranty in subsection (1)(f) of this section is not
given by a transferor under applicable conflict of law rules, then the
warranty is not given to that transferor when that transferor is a
transferee. [1993 c.545 §57; 1997 c.822 §3] (1) If an unaccepted draft is
presented to the drawee for payment or acceptance and the drawee pays or
accepts the draft, the person obtaining payment or acceptance, at the
time of presentment, and a previous transferor of the draft, at the time
of transfer, warrant to the drawee making payment or accepting the draft
in good faith that:

(a) The warrantor is, or was, at the time the warrantor transferred
the draft, a person entitled to enforce the draft or authorized to obtain
payment or acceptance of the draft on behalf of a person entitled to
enforce the draft;

(b) The draft has not been altered;

(c) The warrantor has no knowledge that the signature of the drawer
of the draft is unauthorized; and

(d) If the draft is a demand draft, creation of the draft according
to the terms on its face was authorized by the person identified as
drawer.

(2) A drawee making payment may recover from any warrantor damages
for breach of warranty equal to the amount paid by the drawee less the
amount the drawee received or is entitled to receive from the drawer
because of the payment. In addition, the drawee is entitled to
compensation for expenses and loss of interest resulting from the breach.
The right of the drawee to recover damages under this subsection is not
affected by any failure of the drawee to exercise ordinary care in making
payment. If the drawee accepts the draft, breach of warranty is a defense
to the obligation of the acceptor. If the acceptor makes payment with
respect to the draft, the acceptor is entitled to recover from any
warrantor for breach of warranty the amounts stated in this subsection.

(3) If a drawee asserts a claim for breach of warranty under
subsection (1) of this section based on an unauthorized indorsement of
the draft or an alteration of the draft, the warrantor may defend by
proving that the indorsement is effective under ORS 73.0404 or 73.0405 or
the drawer is precluded under ORS 73.0405 or 74.4060 from asserting
against the drawee the unauthorized indorsement or alteration.

(4) If a dishonored draft is presented for payment to the drawer or
an indorser or any other instrument is presented for payment to a party
obliged to pay the instrument, and payment is received, the following
rules apply:

(a) The person obtaining payment and a prior transferor of the
instrument warrant to the person making payment in good faith that the
warrantor is, or was, at the time the warrantor transferred in the
instrument, a person entitled to enforce the instrument or authorized to
obtain payment on behalf of a person entitled to enforce the instrument.

(b) The person making payment may recover from any warrantor for
breach of warranty an amount equal to the amount paid plus expenses and
loss of interest resulting from the breach.

(5) The warranties stated in subsections (1) and (4) of this
section cannot be disclaimed with respect to checks. Unless notice of a
claim for breach of warranty is given to the warrantor within 30 days
after the claimant has reason to know of the breach and the identity of
the warrantor, the liability of the warrantor under subsection (2) or (4)
of this section is discharged to the extent of any loss caused by the
delay in giving notice of the claim.

(6) A claim for relief for breach of warranty under this section
accrues when the claimant has reason to know of the breach.

(7) A demand draft is a check, as defined in ORS 73.0104 (6).

(8) If the warranty in subsection (1)(d) of this section is not
given by a transferor under applicable conflict of law rules, then the
warranty is not given to that transferor when that transferor is a
transferee. [1993 c.545 §58; 1997 c.822 §4] (1) Except as provided in
subsection (3) of this section, if the drawee of a draft pays or accepts
the draft and the drawee acted on the mistaken belief that payment of the
draft had not been stopped pursuant to ORS 73.0403 or the signature of
the drawer of the draft was authorized, the drawee may recover the amount
of the draft from the person to whom or for whose benefit payment was
made or, in the case of acceptance, may revoke the acceptance. Rights of
the drawee under this subsection are not affected by failure of the
drawee to exercise ordinary care in paying or accepting the draft.

(2) Except as provided in subsection (3) of this section, if an
instrument has been paid or accepted by mistake and the case is not
covered by subsection (1) of this section, the person paying or accepting
may, to the extent permitted by the law governing mistake and restitution:

(a) Recover the payment from the person to whom or for whose
benefit payment was made; or

(b) In the case of acceptance, revoke the acceptance.

(3) The remedies provided by subsection (1) or (2) of this section
may not be asserted against a person who took the instrument in good
faith and for value or for collection or who in good faith changed
position in reliance on the payment or acceptance. This subsection does
not limit remedies provided by ORS 73.0417 or 74.4070.

(4) Notwithstanding ORS 74.2150, if an instrument is paid or
accepted by mistake and the payor or acceptor recovers payment or revokes
acceptance under subsection (1) or (2) of this section, the instrument is
deemed not to have been paid or accepted and is treated as dishonored,
and the person from whom payment is recovered has rights as a person
entitled to enforce the dishonored instrument. [1993 c.545 §59] (1) If an instrument
is issued for value given for the benefit of a party to the instrument
("accommodated party") and another party to the instrument
("accommodation party") signs the instrument for the purpose of incurring
liability on the instrument without being a direct beneficiary of the
value given for the instrument, the instrument is signed by the
accommodation party "for accommodation."

(2) An accommodation party may sign the instrument as maker,
drawer, acceptor or indorser and, subject to subsection (4) of this
section, is obliged to pay the instrument in the capacity in which the
accommodation party signs. The obligation of an accommodation party may
be enforced notwithstanding any statute of frauds and whether or not the
accommodation party receives consideration for the accommodation.

(3) A person signing an instrument is presumed to be an
accommodation party and there is notice that the instrument is signed for
accommodation if the signature is an anomalous indorsement or is
accompanied by words indicating that the signer is acting as surety or
guarantor with respect to the obligation of another party to the
instrument. Except as provided in ORS 73.0605, the obligation of an
accommodation party to pay the instrument is not affected by the fact
that the person enforcing the obligation had notice when the instrument
was taken by that person that the accommodation party signed the
instrument for accommodation.

(4) If the signature of a party to an instrument is accompanied by
words indicating unambiguously that the party is guaranteeing collection
rather than payment of the obligation of another party to the instrument,
the signer is obliged to pay the amount due on the instrument to a person
entitled to enforce the instrument only if:

(a) Execution of judgment against the other party has been returned
unsatisfied;

(b) The other party is insolvent or in an insolvency proceeding;

(c) The other party cannot be served with process; or

(d) It is otherwise apparent that payment cannot be obtained from
the other party.

(5) An accommodation party who pays the instrument is entitled to
reimbursement from the accommodated party and is entitled to enforce the
instrument against the accommodated party. An accommodated party who pays
the instrument has no right of recourse against, and is not entitled to
contribution from, an accommodation party. [1993 c.545 §60] (1) The law applicable to
conversion of personal property applies to instruments. An instrument is
also converted if it is taken by transfer, other than a negotiation, from
a person not entitled to enforce the instrument or a bank makes or
obtains payment with respect to the instrument for a person not entitled
to enforce the instrument or receive payment. An action for conversion of
an instrument may not be brought by:

(a) The issuer or acceptor of the instrument; or

(b) A payee or indorsee who did not receive delivery of the
instrument either directly or through delivery to an agent or a co-payee.

(2) In an action under subsection (1) of this section, the measure
of liability is presumed to be the amount payable on the instrument, but
recovery may not exceed the amount of the plaintiff's interest in the
instrument.

(3) A representative, other than a depositary bank, who has in good
faith dealt with an instrument or its proceeds on behalf of one who was
not the person entitled to enforce the instrument is not liable in
conversion to that person beyond the amount of any proceeds that it has
not paid out. [1993 c.545 §61]DISHONOR (1) "Presentment" means a demand made by or on
behalf of a person entitled to enforce an instrument to pay the
instrument made to the drawee or a party obliged to pay the instrument
or, in the case of a note or accepted draft payable at a bank, to the
bank, or to accept a draft made to the drawee.

(2) The following rules are subject to ORS chapter 74, agreement of
the parties, and clearing house rules and the like:

(a) Presentment may be made at the place of payment of the
instrument and shall be made at the place of payment if the instrument is
payable at the bank in the United States, may be made by any commercially
reasonable means, including an oral, written or electronic communication,
is effective when the demand for payment or acceptance is received by the
person to whom presentment is made, and is effective if made to any one
of two or more makers, acceptors, drawees or other payors.

(b) Upon demand of the person to whom presentment is made, the
person making presentment must:

(A) Exhibit the instrument;

(B) Give reasonable identification and, if presentment is made on
behalf of another person, reasonable evidence of authority to do so; and

(C) Sign a receipt on the instrument for any payment made or
surrender the instrument if full payment is made.

(c) Without dishonoring the instrument, the party to whom
presentment is made may:

(A) Return the instrument for lack of a necessary indorsement; or

(B) Refuse payment or acceptance for failure of the presentment to
comply with the terms of the instrument, an agreement of the parties, or
other applicable law or rule.

(d) The party to whom presentment is made may treat presentment as
occurring on the next business day after the day of presentment if the
party to whom presentment is made has established a cut-off hour not
earlier than 2 p.m. for the receipt and processing of instruments
presented for payment or acceptance and presentment is made after the
cut-off hour. [1993 c.545 §62] (1) Dishonor of a note is governed by the
following rules:

(a) If the note is payable on demand, the note is dishonored if
presentment is duly made to the maker and the note is not paid on the day
of presentment.

(b) If the note is not payable on demand and is payable at or
through a bank or the terms of the note required presentment, the note is
dishonored if presentment is duly made and the note is not paid on the
day it becomes payable or the day of presentment, whichever is later.

(c) If the note is not payable on demand and paragraph (b) of this
subsection does not apply, the note is dishonored if it is not paid on
the day it becomes payable.

(2) Dishonor of an unaccepted draft other than a documentary draft
is governed by the following rules:

(a) If a check is duly presented for payment to the payor bank
otherwise than for immediate payment over the counter, the check is
dishonored if the payor bank makes timely return of the check or sends
timely notice of dishonor or nonpayment under ORS 74.3010 or 74.3020, or
becomes accountable for the amount of the check under ORS 74.3020.

(b) If a draft is payable on demand and paragraph (a) of this
subsection does not apply, the draft is dishonored if presentment for
payment is duly made to the drawee and the draft is not paid on the day
of presentment.

(c) If a draft is payable on a date stated in the draft, the draft
is dishonored if:

(A) Presentment for payment is duly made to the drawee and payment
is not made on the day the draft becomes payable or the day of
presentment, whichever is later; or

(B) Presentment for acceptance is duly made before the day the
draft becomes payable and the draft is not accepted on the day of
presentment.

(d) If a draft is payable on elapse of a period of time after sight
or acceptance, the draft is dishonored if presentment for acceptance is
duly made and the draft is not accepted on the day of presentment.

(3) Dishonor of an unaccepted documentary draft occurs according to
the rules stated in subsection (2)(b), (c) and (d) of this section,
except that payment or acceptance may be delayed without dishonor until
no later than the close of the third business day of the drawee following
the day on which payment or acceptance is required by those paragraphs.

(4) Dishonor of an accepted draft is governed by the following
rules:

(a) If the draft is payable on demand, the draft is dishonored if
presentment for payment is duly made to the acceptor and the draft is not
paid on the day of presentment.

(b) If the draft is not payable on demand, the draft is dishonored
if presentment for payment is duly made to the acceptor and payment is
not made on the day it becomes payable or the day of presentment,
whichever is later.

(5) In any case in which presentment is otherwise required for
dishonor under this section and presentment is excused under ORS 73.0504,
dishonor occurs without presentment if the instrument is not duly
accepted or paid.

(6) If a draft is dishonored because timely acceptance of the draft
was not made and the person entitled to demand acceptance consents to a
later acceptance, from the time of acceptance the draft is treated as
never having been dishonored. [1993 c.545 §63] (1) The obligation of an indorser
stated in ORS 73.0415 (1) and the obligation of a drawer stated in ORS
73.0414 (4) may not be enforced unless the indorser or drawer is given
notice of dishonor of the instrument complying with this section or
notice of dishonor is excused under ORS 73.0504 (2).

(2) Notice of dishonor may be given by any person, may be given by
any commercially reasonable means, including an oral, written or
electronic communication, and is sufficient if it reasonably identifies
the instrument and indicates that the instrument has been dishonored or
has not been paid or accepted. Return of an instrument given to a bank
for collection is sufficient notice of dishonor.

(3) Subject to ORS 73.0504 (3), with respect to an instrument taken
for collection by a collecting bank, notice of dishonor must be given by
the bank before midnight of the next banking day following the banking
day on which the bank receives notice of dishonor of the instrument, or
by any other person within 30 days following the day on which the person
receives notice of dishonor. With respect to any other instrument, notice
of dishonor must be given within 30 days following the day on which
dishonor occurs. [1993 c.545 §64] (1) Presentment
for payment or acceptance of an instrument is excused if:

(a) The person entitled to present the instrument cannot with
reasonable diligence make presentment;

(b) The maker or acceptor has repudiated an obligation to pay the
instrument or is dead or in insolvency proceedings;

(c) By the terms of the instrument presentment is not necessary to
enforce the obligation of indorsers or the drawer;

(d) The drawer or indorser whose obligation is being enforced has
waived presentment or otherwise has not reason to expect or right to
require that the instrument be paid or accepted; or

(e) The drawer instructed the drawee not to pay or accept the draft
or the drawee was not obligated to the drawer to pay the draft.

(2) Notice of dishonor is excused if by the terms of the instrument
notice of dishonor is not necessary to enforce the obligation of a party
to pay the instrument, or the party whose obligation is being enforced
waived notice of dishonor. A waiver of presentment is also a waiver of
notice of dishonor.

(3) Delay in giving notice of dishonor is excused if the delay was
caused by circumstances beyond the control of the person giving the
notice and the person giving the notice exercised reasonable diligence
after the cause of the delay ceased to operate. [1993 c.545 §65] (1) The following are admissible as
evidence and create a presumption of dishonor and of any notice of
dishonor stated:

(a) A document regular in form as provided in subsection (2) of
this section which purports to be a protest;

(b) A purported stamp or writing of the drawee, payor bank or
presenting bank on or accompanying the instrument stating that acceptance
or payment has been refused unless reasons for the refusal are stated and
the reasons are not consistent with dishonor; and

(c) A book or record of the drawee, payor bank or collecting bank,
kept in the usual course of business which shows dishonor, even if there
is no evidence of who made the entry.

(2) A protest is a certificate of dishonor made by a United States
consul or vice consul, or a notary public or other person authorized to
administer oaths by the law of the place where dishonor occurs. The
protest may be made upon information satisfactory to that person. The
protest must identify the instrument and certify that either presentment
has been made or, if not made, the reason why it was not made, and that
the instrument has been dishonored by nonacceptance or nonpayment. The
protest may also certify that notice of dishonor has been given to some
or all parties. [1993 c.545 §66]DISCHARGE AND PAYMENT (1) The obligation of a
party to pay the instrument is discharged as stated in this chapter or by
an act or agreement with the party which would discharge an obligation to
pay money under a simple contract.

(2) Discharge of the obligation of a party is not effective against
a person acquiring rights of a holder in due course of the instrument
without notice of the discharge. [1993 c.545 §67] (1) Subject to subsection (2) of this section, an
instrument is paid to the extent payment is made by or on behalf of a
party obliged to pay the instrument, and to a person entitled to enforce
the instrument. To the extent of the payment, the obligation of the party
obliged to pay the instrument is discharged even though payment is made
with knowledge of a claim to the instrument under ORS 73.0306 or by
another person.

(2) The obligation of a party to pay the instrument is not
discharged under subsection (1) of this section if:

(a) A claim to the instrument under ORS 73.0306 is enforceable
against the party receiving payment and:

(A) Payment is made with knowledge of the payor that payment is
prohibited by injunction or similar process or a court of competent
jurisdiction; or

(B) In the case an instrument other than a cashier's check,
teller's check or certified check, the party making payment accepted,
from the person having a claim to the instrument, indemnity against loss
resulting from refusal to pay the person entitled to enforce the
instrument; or

(b) The person making payment knows that the instrument is a stolen
instrument and pays a person it knows is in wrongful possession of the
instrument. [1993 c.545 §68] (1) If tender of payment of an
obligation to pay an instrument is made to a person entitled to enforce
the instrument, the effect of tender is governed by principles of law
applicable to tender of payment under a simple contract.

(2) If tender of payment of an obligation to pay an instrument is
made to a person entitled to enforce the instrument and the tender is
refused, there is discharge, to the extent of the amount of the tender,
of the obligation of an indorser or accommodation party having a right of
recourse with respect to the obligation to which the tender relates.

(3) If tender of payment of an amount due on an instrument is made
to a person entitled to enforce the instrument, the obligation of the
obligor to pay interest after the due date on the amount tendered is
discharged. If presentment is required with respect to an instrument and
the obligor is able and ready to pay on the due date at every place of
payment stated in the instrument, the obligor is deemed to have made
tender of payment on the due date to the person entitled to enforce the
instrument. [1993 c.545 §69] (1) A person
entitled to enforce an instrument, with or without consideration, may
discharge the obligation of a party to pay the instrument:

(a) By an intentional voluntary act, such as surrender of the
instrument to the party, destruction, mutilation, or cancellation of the
instrument, cancellation or striking out of the party's signature, or the
addition of words to the instrument indicating discharge; or

(b) By agreeing not to sue or otherwise renouncing rights against
the party by a signed writing.

(2) Cancellation or striking out of an indorsement pursuant to
subsection (1) of this section does not affect the status and rights of a
party derived from the indorsement. [1993 c.545 §70] (1) In
this section, the term "indorser" includes a drawer having the obligation
described in ORS 73.0414.

(2) Discharge, under ORS 73.0604, of the obligation of a party to
pay an instrument does not discharge the obligation of an indorser or
accommodation party having a right of recourse against the discharged
party.

(3) If a person entitled to enforce an instrument agrees, with or
without consideration, to an extension of the due date of the obligation
of a party to pay the instrument, the extension discharges an indorser or
accommodation party having a right of recourse against the party whose
obligation is extended to the extent the indorser or accommodation party
proves that the extension caused loss to the indorser or accommodation
party with respect to the right of recourse.

(4) If a person entitled to enforce an instrument agrees, with or
without consideration, to a material modification of the obligation of a
party other than an extension of the due date, the modification
discharges the obligation of an indorser or accommodation party having a
right of recourse against the person whose obligation is modified to the
extent the modification causes loss to the indorser or accommodation
party with respect to the right of recourse. The loss suffered by the
indorser or accommodation party as a result of the modification is equal
to the amount of the right of recourse unless the person enforcing the
instrument proves that no loss was caused by the modification or that the
loss caused by the modification was an amount less than the amount of the
right of recourse.

(5) If the obligation of a party to pay an instrument is secured by
an interest in collateral and a person entitled to enforce the instrument
impairs the value of the interest in collateral, the obligation of an
indorser or accommodation party having a right of recourse against the
obligor is discharged to the extent of the impairment. The value of an
interest in collateral is impaired to the extent the value of the
interest is reduced to an amount less than the amount of the right of
recourse of the party asserting discharge, or to the extent the reduction
in value of the interest causes an increase in the amount by which the
amount of the right of recourse exceeds the value of the interest. The
burden of proving impairment is on the party asserting discharge.

(6) If the obligation of a party is secured by an interest in
collateral not provided by an accommodation party and a person entitled
to enforce the instrument impairs the value of the interest in
collateral, the obligation of any party who is jointly and severally
liable with respect to the secured obligation is discharged to the extent
the impairment causes the party asserting discharge to pay more than that
party would have been obliged to pay, taking into account rights of
contribution, if impairment had not occurred. If the party asserting
discharge is an accommodation party not entitled to discharge under
subsection (5) of this section, the party is deemed to have a right to
contribution based on joint and several liability rather than a right to
reimbursement. The burden of proving impairment is on the party asserting
discharge.

(7) Under subsection (5) or (6) of this section, impairing value of
an interest in collateral includes:

(a) Failure to obtain or maintain perfection or recordation of the
interest in collateral;

(b) Release of collateral without substitution of collateral of
equal value;

(c) Failure to perform a duty to preserve the value of collateral
owed, under ORS chapter 79 or other law, to a debtor or surety or other
person secondarily liable; or

(d) Failure to comply with applicable law in disposing of
collateral.

(8) An accommodation party is not discharged under subsection (3),
(4) or (5) of this section unless a person entitled to enforce the
instrument knows of the accommodation or has notice under ORS 73.0419 (3)
that the instrument was signed for accommodation.

(9) A party is not discharged under this section if:

(a) The party asserting discharge consents to the event or conduct
that is the basis of the discharge; or

(b) The instrument or a separate agreement of the party provides
for waiver of discharge under this section either specifically or by
general language indicating that parties waive defenses based on
suretyship or impairment of collateral. [1993 c.545 §71]

_______________

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