84-3-310. Effect of instrument on obligation for which taken. (a) Unless otherwise agreed, if a certified check, cashier's check or teller's check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an endorser of the instrument.
(b) Unless otherwise agreed and except as provided in subsection (a), if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:
(1) In the case of an uncertified check, suspension of the obligation continues until dishonor of the check or until it is paid or certified. Payment or certification of the check results in discharge of the obligation to the extent of the amount of the check.
(2) In the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in discharge of the obligation to the extent of the payment.
(3) Except as provided in paragraph (4), if the check or note is dishonored and the obligee of the obligation for which the instrument was taken is the person entitled to enforce the instrument, the obligee may enforce either the instrument or the obligation. In the case of an instrument of a third person which is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation.
(4) If the person entitled to enforce the instrument taken for an obligation is a person other than the obligee, the obligee may not enforce the obligation to the extent the obligation is suspended. If the obligee is the person entitled to enforce the instrument but no longer has possession of it because it was lost, stolen or destroyed, the obligation may not be enforced to the extent of the amount payable on the instrument, and to that extent the obligee's rights against the obligor are limited to enforcement of the instrument.
(c) If an instrument other than one described in subsection (a) or (b) is taken for an obligation, the effect is (1) that stated in subsection (a) if the instrument is one on which a bank is liable as maker or acceptor, or (2) that stated in subsection (b) in any other case.
History: L. 1991, ch. 296, ยง 36; February 1, 1992.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official text except that the small roman numerals have been changed to arabic numerals. It is derived from the former 84-3-802 with modifications. Historical case and statutory references may be obtained from the 1965 or 1983 bound Volume 7 of the Kansas Statutes Annotated.
Subsection (a). If bank paper (see 84-3-104(g) and (h), and 83-3-409 for definitions) is used to satisfy an obligation, the obligation is discharged as if it had been paid in cash.
Subsection (b). In most cases an obligation is merely suspended when an instrument such as a check or a note, is taken for an underlying obligation. Thereafter all collection efforts have to be taken through the instrument until it is dishonored. There can not be a suit on the underlying contract until dishonor. If the instrument is paid, both the obligation on the instrument and the obligation on the underlying contract are discharged. If the check or note is dishonored, suit can be brought on the instrument and on the underlying obligation, but suit on the instrument is normally simpler. These rules can be varied by agreement of the parties, the most common being instruments "without recourse," (see 84-3-414(e) and 84-3-415(b)) where the obligee is taking the instrument (and the risk of nonpayment) in satisfaction of the obligation. The instrument will often be discounted to reflect this risk.
Subparagraph (4) refers to situations where the instrument has been lost or stolen. The first sentence refers to situations such as the loss of bearer paper where a new holder may be entitled to enforce the instrument. In such a case, the original holder (the obligee) may not enforce the instrument. The second sentence refers to situations such as the loss of order paper, where the original holder must sue under 84-3-309 on the instrument, and not on the underlying obligation.
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