Printable Format84-3-106. Unconditional promise or order. (a) Except as provided in this section, for the purposes of K.S.A. 84-3-104(a), a promise or order is unconditional unless it states (1) an express condition to payment, (2) that the promise or order is subject to or governed by another writing, or (3) 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.
(b) A promise or order is not made conditional (1) by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration, or (2) because payment is limited to resort to a particular fund or source.
(c) 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 K.S.A. 84-3-104(a). 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.
(d) 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 K.S.A. 84-3-104(a); but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.
History: L. 1991, ch. 296, § 6; February 1, 1992.
KANSAS COMMENT, 1996
The text of this section does not vary from the 1995 Official Text. The provision is substantially adopted from the provisions of the previous 84-3-105, with several deletions and modifications. There are fewer conditions and terms which would destroy negotiability under the new provisions, recognizing the commercial practice of using a wide variety of instruments.
Subsection (a). This subsection presumes that any promise (note) or order (draft) is unconditional unless it expressly states a condition, or that it is subject to another document or that rights under the instrument are governed by a different writing. While references to other writings will not destroy negotiability, subjecting the obligations of the instrument to them will.
Subsection (b). References to other writings are permitted regarding rights to collateral or for acceleration, both of which are thereby deemed ancillary to the instrument itself. In a reversal of prior law, payment may be restricted to a certain fund or source without destroying negotiability. Such clauses are deemed to be for the payor's internal purposes, and do not effect the maker's or drawer's obligation, although payment may be preceeded by a dishonor on account of the separate fund.
Subsection (c). This subsection refers to such requirements as those found on traveler's checks and eases any doubts about their being negotiable instruments and their negotiability. Under the provision, there can be holders and holders in due course of the traveler's checks, though the failure of the correct person to countersign the check may be a defense.
Subsection (d). This provision brings consumer paper back under most of the rule of Article 3, despite the provisions required by the Federal Trade Commission regulation in 16 C.F.R. Part 433, providing certainty regarding the status of the parties and the procedures for collection. The consumer is protected by the preservation of claims and defenses by abolishing the status of holder in due course in those transactions.
Revisor's Note:
Former section 84-3-106 was repealed by L. 1991, ch. 296, § 111 and the number reassigned to the current text.