(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 employe with responsibility with respect to the instrument and the employe or a person acting in concert with the employe makes a fraudulent endorsement of the instrument, the endorsement is effective as the endorsement 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 that the failure to exercise ordinary care contributed to the loss.
(3) Under sub. (2), an endorsement is made in the name of the person to whom an instrument is payable if the endorsement is made in a name substantially similar to the name of that person or if the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.
403.406 Negligence contributing to forged signature or alteration of instrument. (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 sub. (1), 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 sub. (1), the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under sub. (2), the burden of proving failure to exercise ordinary care is on the person precluded.
403.407 Alteration. (1) “Alteration" means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or 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 sub. (3), 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 payer bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument according to its original terms, or, in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.
403.408 Drawee not liable on unaccepted draft. 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.
403.409 Acceptance of draft; certified check.
(1) “Acceptance" means the drawee's signed agreement to pay a draft as presented. The acceptance shall 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, is overdue 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 sub. (1) or by a writing on the check which 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.
403.410 Acceptance varying draft. (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 endorser that does not expressly assent to the acceptance is discharged.
403.411 Refusal to pay cashier's checks, teller's checks and certified checks. (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, wrongfully stops payment of a teller's check or wrongfully 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 sub. (2) are not recoverable if the refusal of the obligated bank to pay occurs because of any of the following:
(a) The bank suspends payments.
(b) The obligated bank asserts a claim or defense of the obligated bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument, including a claim or defense that arises from accepting, in good faith and exercising ordinary care, an instrument as payment for a cashier's check or teller's check, where the instrument accepted as payment for the cashier's check or teller's check was, and the obligated bank was without notice that the instrument was, stolen, forged, drawn on a fictitious account, drawn on an account with insufficient funds, or otherwise fraudulent or worthless.
(c) The obligated bank has a reasonable doubt as to whether the person demanding payment is the person entitled to enforce the instrument.
(d) Payment is prohibited by law.
403.412 Obligation of issuer of note or cashier's check. 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 that it was issued or, if not issued, at the time that 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 ss. 403.115 and 403.407. The obligation is owed to a person entitled to enforce the instrument or to an endorser who paid the instrument under s. 403.415.
403.413 Obligation of acceptor. (1) The acceptor of a draft is obliged to pay the draft according to its terms at the time that it was accepted, even though the acceptance states that the draft is payable “as originally drawn" or equivalent terms, if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in ss. 403.115 and 403.407. The obligation is owed to a person entitled to enforce the draft or to the drawer or an endorser who paid the draft under s. 403.414 or 403.415.
(2) 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 that it was taken by the holder in due course.
403.414 Obligation of drawer. (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 that it was issued or, if not issued, at the time that 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 ss. 403.115 and 403.407. The obligation is owed to a person entitled to enforce the draft or to an endorser who paid the draft under s. 403.415.
(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 the draft if the draft is dishonored by the acceptor is the same as the obligation of an endorser under s. 403.415 (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 sub. (2) to pay the draft if the draft is not a check. A disclaimer of the liability stated in sub. (2) is not effective if the draft is 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.
403.415 Obligation of endorser. (1) Subject to subs. (2) to (5) and to s. 403.419 (4), if an instrument is dishonored, an endorser is obliged to pay the amount due on the instrument according to the terms of the instrument at the time that it was endorsed, or if the endorser endorsed an incomplete instrument, according to its terms when completed, to the extent stated in ss. 403.115 and 403.407. The obligation of the endorser is owed to a person entitled to enforce the instrument or to a subsequent endorser who paid the instrument under this section.
(2) If an endorsement states that it is made “without recourse" or otherwise disclaims liability of the endorser, the endorser is not liable under sub. (1) to pay the instrument.
(3) If notice of dishonor of an instrument is required by s. 403.503 and notice of dishonor complying with that section is not given to an endorser, the liability of the endorser under sub. (1) is discharged.
(4) If a draft is accepted by a bank after an endorsement is made, the liability of the endorser under sub. (1) is discharged.
(5) If an endorser of a check is liable under sub. (1) and the check is not presented for payment, or given to a depositary bank for collection, within 30 days after the day on which the endorsement was made, the liability of the endorser under sub. (1) is discharged.
403.416 Transfer warranties. (1) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by endorsement, to any subsequent transferee that all of the following apply:
(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.
(2) A person to whom the warranties under sub. (1) 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 sub. (1) may not 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 sub. (2) is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(4) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
403.417 Presentment warranties. (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 all of the following apply:
(a) The warrantor is, or was at the time that 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.
(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 that 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 sub. (1) based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under s. 403.404 or 403.405 or the drawer is precluded under s. 403.406 or 404.406 from asserting against the drawee the unauthorized endorsement or alteration.
(4) If a dishonored draft is presented for payment to the drawer or an endorser 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 that the warrantor transferred 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 subs. (1) and (4) may not 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 sub. (2) or (4) is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(6) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
403.418 Payment or acceptance by mistake. (1) Except as provided in sub. (3), 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 s. 404.403 or that 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 sub. (3), if an instrument has been paid or accepted by mistake and the case is not covered by sub. (1), the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, recover the payment from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance.
(3) The remedies provided by sub. (1) or (2) may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided by s. 403.417 or 404.407.
(4) Notwithstanding s. 404.215, if an instrument is paid or accepted by mistake and the payer or acceptor recovers payment or revokes acceptance under sub. (1) or (2), the instrument is considered 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.
403.419 Instruments signed for accommodation. (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 endorser and, subject to sub. (4), 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 endorsement 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 s. 403.605, 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 any of the following occurs:
(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.
(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.
403.420 Conversion of instrument. (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 the issuer or acceptor of the instrument or by a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a copayee.
(2) In an action under sub. (1), 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.
Subchapter V
Dishonor
403.501 Presentment. (1) “Presentment" means a demand made by or on behalf of a person entitled to enforce an instrument to do any of the following:
(a) 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.
(b) Accept a draft made to the drawee.
(2) The following rules are subject to ch. 404, agreement of the parties, and clearinghouse 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 a 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 2 or more makers, acceptors, drawees or other payers.
(b) Upon demand of the person to whom presentment is made, the person making presentment shall do all of the following:
1. Exhibit the instrument.
2. Give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so.
3. 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 return the instrument for lack of a necessary endorsement or 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 cutoff 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 cutoff hour.
403.502 Dishonor. (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 require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day on which it becomes payable or the day of presentment, whichever is later.
(c) If the note is not payable on demand and par. (b) does not apply, the note is dishonored if it is not paid on the day on which it becomes payable.
