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KANSAS COMMENT, 1996

The full official text of the UCC, published for the Uniform Laws Commissioners by West Publishing, and the selected commercial statutes pamphlets, available from West and from Foundation Press, as well as from law school book stores, have much useful information on the changes made in the 1990 Official Text, which was adopted by Kansas in 1991. These include a cross reference table showing where individual sections, subsections and paragraphs were moved and which were deleted, and appendices showing conforming amendments to Articles 1 and 4. The present section is derived from the former 84-3-101.

Article 3 is primarily a revision of the Uniform Negotiable Instruments Law (NIL), which was enacted in Kansas in 1911, and comprised chapter 52 of the Kansas statutes prior to 1966. The 1990 revisions to the Official Text were drafted to take into account the increasing use of technology and the growth of paperless transactions. It also addresses the newly developed commercial practices, such as variable rate notes and the status of cashier's checks and money orders.

As the earliest and the most widely enacted of the uniform laws, the NIL was the subject of extensive litigation. In general, it withstood the test of this litigation, as comparison of its provisions with those of article 3 amply demonstrates. Because Article 3 incorporated many of its provisions, the earlier interpretation of its provisions often reveals useful precedent. Inevitably, however, the litigation demonstrated inadequacies, which could readily be divided into three general classes.

First, there had been the usual ambiguities in the NIL. Sometimes these resulted in uniform judicial treatment, sometimes in conflicting judicial treatment. Language modifications and deliberate choice of competing interpretations, aimed at eliminating these ambiguities, are a feature of Article 3.

Second, large bodies of case law grew up dealing with recurrent problems concerning commercial paper for the solution of which the NIL contained either no provision or an inadequate provision. Article 3 codifies much of this case law, as well as redefining certain responsibilities. Examples include 84-3-404, fictitious payees and imposters; 84-3-405, employers' responsibility for fraudulent indorsements and 84-3-406, negligence contributing to a forgery or alteration.

Third, the NIL proved an inadequate vehicle for solving the large and intricate problems raised by the check collection processes, and it was an inconvenient source for determining the negotiability status of such investment paper as corporate or government bonds. A separate article of the Code, Article 4, was developed to codify check collection law and all types of investment paper are under the coverage of Article 8 of the Code. The vast increase in the number of transactions was made possible by the adoption of Articles 3 and 4. The 1989 amendments to Articles 3, 4 and 4A reflect the needs created by increasing use of electronic transfers and the continuing evolution of the collection process.

Litigation under Article 3 of the Kansas UCC has to date not been extensive, though a number of important judicial decisions have come down. The new Article 3 is almost identical to the 1990 Offical Text, and the few nonuniform amendments will be discussed at the appropriate Kansas Comment.

Two general reference works which deal in detail with Article 3 of the UCC are Clark, The Law of Bank Deposits, Collections and Credit Cards (supplemented periodically), and White and Summers, Uniform Commercial Code, both the 4 th ed. Hornbook Series, 1995, a single volume abridged version which is tailored to most courses, and the four volume Practitioner Treatise Series, also published in 1995 and supplemented annually. White and Summers is frequently cited by the courts in their decisions. Warren, Gorham & Lamont Inc. also publishes several treatises on Article 3 analyzing cases and the articles. Two final sources are Anderson's Uniform Commercial Code and Bender's The Uniform Commercial Code Reporting Service. The former is organized by Code section and the latter has every reported case, also arranged by code section.