Article 3 — Negotiable Instruments · Section 3-412
This guide covers UCC § 3-412, focusing on the liability of indorsers of negotiable instruments and the conditions under which they are obligated to pay.
Source: U.C.C. § 3-412
An indorser who indorses a negotiable instrument is obliged to pay the instrument according to its terms at the time it was indorsed or, if it is a demand instrument, when it is presented.
UCC § 3-412 outlines the responsibilities of an indorser, emphasizing that endorsers are required to pay the negotiable instrument as promised at the time they endorsed it. If the instrument is a demand note, the payment obligation arises when the instrument is presented for payment.
An indorser is a person or entity that signs a negotiable instrument in order to transfer their rights to another party.
A negotiable instrument is a signed document guaranteeing the payment of a specific amount of money to the bearer or the order of a specified person.
Example 1
A check is endorsed by the payee to a third party; the indorser is liable if the check is not honored.
Example 2
A promissory note is signed by a borrower and endorsed to a lender; the endorser is obligated to ensure payment if the borrower defaults.