§ 6A-3-206 Restrictive indorsement. –(a) An indorsement limiting payment to a particular person or otherwiseprohibiting further transfer or negotiation of the instrument is not effectiveto prevent further transfer or negotiation of the instrument.
(b) An indorsement stating a condition to the right of theindorsee to receive payment does not affect the right of the indorsee toenforce the instrument. A person paying the instrument or taking it for valueor collection may disregard the condition, and the rights and liabilities ofthat person are not affected by whether the condition has been fulfilled.
(c) If an instrument bears an indorsement (i) described in§ 6A-4-201(b), or (ii) in blank or to a particular bank using the words"for deposit," "for collection," or other words indicating a purpose of havingthe instrument collected by a bank for the indorser or for a particularaccount, the following rules apply:
(1) A person, other than a bank, who purchases the instrumentwhen so indorsed converts the instrument unless the amount paid for theinstrument is received by the indorser or applied consistently with theindorsement.
(2) A depositary bank that purchases the instrument or takesit for collection when so indorsed converts the instrument unless the amountpaid by the bank with respect to the instrument is received by the indorser orapplied consistently with the indorsement.
(3) A payor bank that is also the depositary bank or thattakes the instrument for immediate payment over the counter from a person otherthan a collecting bank converts the instrument unless the proceeds of theinstrument are received by the indorser or applied consistently with theindorsement.
(4) Except as otherwise provided in paragraph (3), a payorbank or intermediary bank may disregard the indorsement and is not liable ifthe proceeds of the instrument are not received by the indorser or appliedconsistently with the indorsement.
(d) Except for an indorsement covered by subsection (c), ifan instrument bears an indorsement using words to the effect that payment is tobe made to the indorsee as agent, trustee, or other fiduciary for the benefitof the indorser or another person, the following rules apply:
(1) Unless there is notice of breach of fiduciary duty asprovided in § 6A-3-307, a person who purchases the instrument from theindorsee or takes the instrument from the indorsee for collection or paymentmay pay the proceeds of payment or the value given for the instrument to theindorsee without regard to whether the indorsee violates a fiduciary duty tothe indorser.
(2) A subsequent transferee of the instrument or person whopays the instrument is neither given notice nor otherwise affected by therestriction in the indorsement unless the transferee or payor knows that thefiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.
(e) The presence on an instrument of an indorsement to whichthis section applies does not prevent a purchaser of the instrument frombecoming a holder in due course of the instrument unless the purchaser is aconverter under subsection (c) or has notice or knowledge of breach offiduciary duty as stated in subsection (d).
(f) In an action to enforce the obligation of a party to paythe instrument, the obligor has a defense if payment would violate anindorsement to which this section applies and the payment is not permitted bythis section.
§ 6A-3-206 Restrictive indorsement. –(a) An indorsement limiting payment to a particular person or otherwiseprohibiting further transfer or negotiation of the instrument is not effectiveto prevent further transfer or negotiation of the instrument.
(b) An indorsement stating a condition to the right of theindorsee to receive payment does not affect the right of the indorsee toenforce the instrument. A person paying the instrument or taking it for valueor collection may disregard the condition, and the rights and liabilities ofthat person are not affected by whether the condition has been fulfilled.
(c) If an instrument bears an indorsement (i) described in§ 6A-4-201(b), or (ii) in blank or to a particular bank using the words"for deposit," "for collection," or other words indicating a purpose of havingthe instrument collected by a bank for the indorser or for a particularaccount, the following rules apply:
(1) A person, other than a bank, who purchases the instrumentwhen so indorsed converts the instrument unless the amount paid for theinstrument is received by the indorser or applied consistently with theindorsement.
(2) A depositary bank that purchases the instrument or takesit for collection when so indorsed converts the instrument unless the amountpaid by the bank with respect to the instrument is received by the indorser orapplied consistently with the indorsement.
(3) A payor bank that is also the depositary bank or thattakes the instrument for immediate payment over the counter from a person otherthan a collecting bank converts the instrument unless the proceeds of theinstrument are received by the indorser or applied consistently with theindorsement.
(4) Except as otherwise provided in paragraph (3), a payorbank or intermediary bank may disregard the indorsement and is not liable ifthe proceeds of the instrument are not received by the indorser or appliedconsistently with the indorsement.
(d) Except for an indorsement covered by subsection (c), ifan instrument bears an indorsement using words to the effect that payment is tobe made to the indorsee as agent, trustee, or other fiduciary for the benefitof the indorser or another person, the following rules apply:
(1) Unless there is notice of breach of fiduciary duty asprovided in § 6A-3-307, a person who purchases the instrument from theindorsee or takes the instrument from the indorsee for collection or paymentmay pay the proceeds of payment or the value given for the instrument to theindorsee without regard to whether the indorsee violates a fiduciary duty tothe indorser.
(2) A subsequent transferee of the instrument or person whopays the instrument is neither given notice nor otherwise affected by therestriction in the indorsement unless the transferee or payor knows that thefiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.
(e) The presence on an instrument of an indorsement to whichthis section applies does not prevent a purchaser of the instrument frombecoming a holder in due course of the instrument unless the purchaser is aconverter under subsection (c) or has notice or knowledge of breach offiduciary duty as stated in subsection (d).
(f) In an action to enforce the obligation of a party to paythe instrument, the obligor has a defense if payment would violate anindorsement to which this section applies and the payment is not permitted bythis section.
§ 6A-3-206 Restrictive indorsement. –(a) An indorsement limiting payment to a particular person or otherwiseprohibiting further transfer or negotiation of the instrument is not effectiveto prevent further transfer or negotiation of the instrument.
(b) An indorsement stating a condition to the right of theindorsee to receive payment does not affect the right of the indorsee toenforce the instrument. A person paying the instrument or taking it for valueor collection may disregard the condition, and the rights and liabilities ofthat person are not affected by whether the condition has been fulfilled.
(c) If an instrument bears an indorsement (i) described in§ 6A-4-201(b), or (ii) in blank or to a particular bank using the words"for deposit," "for collection," or other words indicating a purpose of havingthe instrument collected by a bank for the indorser or for a particularaccount, the following rules apply:
(1) A person, other than a bank, who purchases the instrumentwhen so indorsed converts the instrument unless the amount paid for theinstrument is received by the indorser or applied consistently with theindorsement.
(2) A depositary bank that purchases the instrument or takesit for collection when so indorsed converts the instrument unless the amountpaid by the bank with respect to the instrument is received by the indorser orapplied consistently with the indorsement.
(3) A payor bank that is also the depositary bank or thattakes the instrument for immediate payment over the counter from a person otherthan a collecting bank converts the instrument unless the proceeds of theinstrument are received by the indorser or applied consistently with theindorsement.
(4) Except as otherwise provided in paragraph (3), a payorbank or intermediary bank may disregard the indorsement and is not liable ifthe proceeds of the instrument are not received by the indorser or appliedconsistently with the indorsement.
(d) Except for an indorsement covered by subsection (c), ifan instrument bears an indorsement using words to the effect that payment is tobe made to the indorsee as agent, trustee, or other fiduciary for the benefitof the indorser or another person, the following rules apply:
(1) Unless there is notice of breach of fiduciary duty asprovided in § 6A-3-307, a person who purchases the instrument from theindorsee or takes the instrument from the indorsee for collection or paymentmay pay the proceeds of payment or the value given for the instrument to theindorsee without regard to whether the indorsee violates a fiduciary duty tothe indorser.
(2) A subsequent transferee of the instrument or person whopays the instrument is neither given notice nor otherwise affected by therestriction in the indorsement unless the transferee or payor knows that thefiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.
(e) The presence on an instrument of an indorsement to whichthis section applies does not prevent a purchaser of the instrument frombecoming a holder in due course of the instrument unless the purchaser is aconverter under subsection (c) or has notice or knowledge of breach offiduciary duty as stated in subsection (d).
(f) In an action to enforce the obligation of a party to paythe instrument, the obligor has a defense if payment would violate anindorsement to which this section applies and the payment is not permitted bythis section.
