47-3310

47-3310. 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 indorser 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.