Uniform Commercial Code, Article 3 — Negotiable Instruments

Editorial note. Article 3 succeeded the Uniform Negotiable Instruments Law (1896), which itself codified the law-merchant doctrine of negotiable paper developed in the English courts of Lord Mansfield and received into American common law. The 1990 Revision was undertaken to modernize the treatment of the holder in due course, to accommodate bank-collection practice, and to coordinate with Articles 4 and 4A.

Editorial note. To codify the law of negotiable instruments; to preserve the distinctive commercial utility of the negotiable instrument (transferability free of latent equities in the hands of a holder in due course); and to coordinate the law of instruments with the law of bank collections (Article 4) and funds transfers (Article 4A).

Editorial note. Applies to negotiable instruments as defined in § 3-104. Excludes money, payment orders governed by Article 4A, and investment securities governed by Article 8.

Editorial note. Article 3 defines the negotiable instrument (§ 3-104), governs its issuance, transfer, and negotiation (§§ 3-201 through 3-207), confers holder-in-due-course status and its consequences (§§ 3-301 through 3-312), and specifies the parties' liability, discharge, and defenses (§§ 3-401 through 3-605).

Editorial note. Article 3 is coordinated with Article 4 (Bank Deposits and Collections), which governs the collection of items through the bank system, and with Article 4A (Funds Transfers), which governs wire transfers. Article 9 governs security interests in instruments as collateral.

Editorial note. The 1990 Revision preserved the classical holder-in-due-course doctrine while adopting objective standards for good faith (§ 3-103(a)(6)) and clarifying the effect of Federal Trade Commission Rule 433 on the holder-in-due-course status of consumer-credit paper.

Editorial note. Article 3 is accompanied by Official Comments authored by the drafters. The Comments trace each section to its statutory antecedents and its case-law origins in the law merchant.

Editorial note. Revised Article 3 has been enacted in every State except New York, which retains the 1962 Official Text. Louisiana has adopted Article 3. State variations exist on the presentment-and-notice provisions and on the treatment of remotely-created checks.

Editorial note. Courts routinely apply Article 3 to actions on notes, checks, and drafts. The holder-in-due-course doctrine (§ 3-302) and the enforcement-by-non-holders provision (§ 3-301) supply the primary framework for note-enforcement litigation, especially in mortgage-foreclosure practice.

Editorial note. Article 3 remains the primary source of the law of promissory notes, including mortgage notes. Its coordination with Article 9 governs the transfer and enforcement of notes secured by real-property collateral. The 2002 Amendments accommodate electronic-check and remotely-created-item practice under Check 21.

Editorial note. See U.C.C. §§ 3-104 (definition); 3-204 (indorsement); 3-301 (person entitled to enforce); 3-302 (holder in due course); 3-308 (proof of signatures and status); 3-309 (enforcement of lost or stolen instrument); 3-418 (payment or acceptance by mistake); Restatement (Third) of Property: Mortgages § 5.4 (mortgage follows the note).

Editorial note. Every mortgage-note enforcement, check-collection dispute, and negotiable-instrument controversy is analyzed first under Article 3. Practitioners must confirm the enacted version in force and any local variations, particularly in New York.