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Payment Systems
South Texas College of Law Houston
Zinnecker, Timothy R.

January 12
Monday, January 12, 2009
9:36 AM
·                    Introduction Notes:
o                         This class will cover non-cash payment systems.
·                    All text in red = class notes taken that day in class.
·                    All text in black = problems and statutes
·                    40-50 MPC
·                    Maybe 1-2 Essay
January 14
Wednesday, January 14, 2009
7:29 AM
Assigned Code Sections:
Sec. 1.102.  SCOPE OF CHAPTER.  
This chapter applies to a transaction to the extent that it is governed by another chapter of this title.
(a)  This title must be liberally construed and applied to promote its underlying purposes and policies, which are:
(1)  to simplify, clarify and modernize the law governing commercial transactions;
(2)  to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and
(3)  to make uniform the law among the various jurisdictions.
(b)  Unless displaced by the particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.
Sec. 1.201 See Above Section – GENERAL DEFINITIONS SECTION
(a)  Except as otherwise provided in Subsection (b) or elsewhere in this title, the effect of provisions of this title may be varied by agreement.
(b)  The obligations of good faith, diligence, reasonableness, and care prescribed by this title may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever this title requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.
(c)  The presence in certain provisions of this title of the phrase “unless otherwise agreed,” or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.
Every contract or duty within this title imposes an obligation of good faith in its performance and enforcement.
Sec. 3.102.  SUBJECT MATTER.  
(a)  This chapter applies to negotiable instruments. It does not apply to money, to payment orders governed by Chapter 4A, or to securities governed by Chapter 8.
(a)  Except as provided in Subsections (c) and (d), “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:
(1)  is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
(2)  is payable on demand or at a definite time; and
(3)  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.
(b)  “Instrument” means a negotiable instrument.
(c)  An order that meets all of the requirements of Subsection (a), except Subdivision (1), and otherwise falls within the definition of “check” in Subsection (f) is a negotiable instrument and a check.
(d)  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.
(e)  An instrument is a “note” if it is a promise and 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.
(f)  “Check” means
(i) a draft, other than a documentary draft, payable on demand and drawn on a bank or
(ii) 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.”
(g)  “Cashier’s check” means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.
(h)  “Teller’s check” means a draft drawn by a bank:
(1)  on another bank; or
(2)  payable at or through a bank.
(i)  “Traveler’s check” means an instrument that:
(1)  is payable on demand;
(2)  is drawn on or payable at or through a bank;
(3)  is designated by the term “traveler’s check” or by a substantially similar term; and
(4)  requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.
(j)  “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.
(k)  Repealed by Acts 2007, 80th Leg., R.S., Ch. 427, Sec. 4, eff. September 1, 2007.
Sec. 3.103.  DEFINITIONS.  
(a)  In this chapter:
(1)  “Acceptor” means a drawee who has accepted a draft.
(2)  Reserved.
(3)  “Consumer transaction” means a transaction in which an individual incurs an obligation primarily for personal, family, or household purposes.
(4)  “Drawee” means a person ordered in a draft to make payment.
(5)  “Drawer” means a person who signs or is identified in a draft as a person ordering payment.
(6)  Reserved.
(7)  “Maker” means a person who

Section 3.205(a). An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to Section 3.205(b).
(a)  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.
(d)  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.
Sec. 3.204.  INDORSEMENT.
(d)  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.
(a)  Except as provided in this section, for the purposes of Section 3.104(a), a promise or order is unconditional unless it states (i) an express condition to payment, (ii) that the promise or order is subject to or governed by another record, or (iii) that rights or obligations with respect to the promise or order are stated in another record.  A reference to another record does not of itself make the promise or order conditional.
(b)  A promise or order is not made conditional (i) by a reference to another record for a statement of rights with respect to collateral, prepayment, or acceleration, or (ii) because payment is limited to resort to a particular fund or source.