Chapter 403

403.304 403.304 Overdue instrument.

403.304(1) (1) An instrument payable on demand becomes overdue at the earliest of the following times:

403.304(1)(a) (a) On the day after the day on which demand for payment is duly made.

403.304(1)(b) (b) If the instrument is a check, 90 days after its date.

403.304(1)(c) (c) If the instrument is not a check, when the instrument has been outstanding for a period of time after its date which is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.

403.304(2) (2) With respect to an instrument payable at a definite time the following rules apply:

403.304(2)(a) (a) If the principal is payable in installments and a due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured.

403.304(2)(b) (b) If the principal is not payable in installments and the due date has not been accelerated, the instrument becomes overdue on the day after the due date.

403.304(2)(c) (c) If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.

403.304(3) (3) Unless the due date of principal has been accelerated, an instrument does not become overdue if there is default in payment of interest but no default in payment of principal.

403.304 History History: 1995 a. 449.

403.305 403.305 Defenses and claims in recoupment.

403.305(1) (1) Except as stated in sub. (2), the right to enforce the obligation of a party to pay an instrument is subject to the following:

403.305(1)(a) (a) A defense of the obligor based on any of the following:

403.305(1)(a)1. 1. Infancy of the obligor to the extent that it is a defense to a simple contract.

403.305(1)(a)2. 2. Duress, lack of legal capacity or illegality of the transaction which, under other law, nullifies the obligation of the obligor.

403.305(1)(a)3. 3. Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms.

403.305(1)(a)4. 4. Discharge of the obligor in insolvency proceedings.

403.305(1)(b) (b) A defense of the obligor stated in another section of this chapter or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract.

403.305(1)(c) (c) A claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time that the action is brought.

403.305(2) (2) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in sub. (1) (a), but is not subject to defenses of the obligor stated in sub. (1) (b) or claims in recoupment stated in sub. (1) (c) against a person other than the holder.

403.305(3) (3) Except as stated in sub. (4), in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, a claim in recoupment or a claim to the instrument under s. 403.306 of another person, but the other person’s claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.

403.305(4) (4) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under sub. (1) that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy and lack of legal capacity.

403.305 History History: 1995 a. 449.

403.305 Annotation Extending immediate credit on a deposited check was not contrary to reasonable commercial standards of fair dealing when the account owner had always deposited funds to cover previous overdrafts when alerted to the problem and the bank had no reason to suspect there would be a problem if immediate credit was extended. Consequently, the bank was a holder in due course who had the right to recover its losses from the check’s issuer who had stopped payment. Mid Wisconsin Bank v. Forsgard Trading, Inc. 2003 WI App 186, 266 Wis. 2d 685, 668 N.W.2d 830, 03-0123.

403.306 403.306 Claims to an instrument. A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.

403.306 History History: 1995 a. 449.

403.307 403.307 Notice of breach of fiduciary duty.

403.307(1) (1) In this section:

403.307(1)(a) (a) “Fiduciary” means an agent, trustee, partner, corporate officer or director or other representative owing a fiduciary duty with respect to an instrument.

403.307(1)(b) (b) “Represented person” means the principal, beneficiary, partnership, corporation or other person to whom the duty stated in par. (a) is owed.

403.307(2) (2) If an instrument is taken from a fiduciary for payment or collection or for value, the taker has knowledge of the fiduciary status of the fiduciary and the represented person makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:

403.307(2)(a) (a) Notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person.

403.307(2)(b) (b) In the case of an instrument payable to the represented person or the fiduciary as such, the taker has notice of the breach of fiduciary duty if the instrument is taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary or is taken in a transaction known by the taker to be for the personal benefit of the fiduciary.

403.307(2)(c) (c) If an instrument is issued by the represented person or the fiduciary as such, and made payable to the fiduciary personally, the taker does not have notice of the breach of fiduciary duty unless the taker knows of the breach of fiduciary duty.

403.307(2)(d) (d) If an instrument is issued by the represented person or the fiduciary as such to the taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary or is taken in a transaction known by the taker to be for the personal benefit of the fiduciary.

403.307 History History: 1995 a. 449.

403.308 403.308 Proof of signatures and status as holder in due course.

403.308(1) (1) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or adjudicated incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under s. 403.402 (1).

403.308(2) (2) If the validity of signatures is admitted or proved and there is compliance with sub. (1), a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under s. 403.301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.

403.308 History History: 1995 a. 449; 2005 a. 387.

403.309 403.309 Enforcement of lost, destroyed or stolen instrument.

403.309(1) (1) A person not in possession of an instrument is entitled to enforce the instrument if all of the following apply:

403.309(1)(a) (a) The person was in possession of the instrument and entitled to enforce it when loss of possession occurred.

403.309(1)(b) (b) The loss of possession was not the result of a transfer by the person or a lawful seizure.

403.309(1)(c) (c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

403.309(2) (2) A person seeking enforcement of an instrument under sub. (1) shall prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, s. 403.308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

403.309 History History: 1995 a. 449.

403.310 403.310 Effect of instrument on obligation for which taken.

403.310(1) (1) 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 that 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.

403.310(2) (2) Unless otherwise agreed and except as provided in sub. (1), if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent that the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:

403.310(2)(a) (a) 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.

403.310(2)(b) (b) 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.

403.310(2)(c) (c) Except as provided in par. (d), 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 3rd person which is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation.

403.310(2)(d) (d) 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 that 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.

403.310(3) (3) If an instrument other than one described in sub. (1) or (2) is taken for an obligation, the effect is one of the following:

403.310(3)(a) (a) That stated in sub. (1) if the instrument is one on which a bank is liable as maker or acceptor.

403.310(3)(b) (b) That stated in sub. (2) in any other case.

403.310 History History: 1995 a. 449.

403.311 403.311 Accord and satisfaction by use of instrument.

403.311(1) (1) Subsections (2) to (4) apply if a person against whom a claim is asserted proves that all of the following conditions have been met:

403.311(1)(a) (a) That person in good faith tendered an instrument to the claimant as full satisfaction of the claim.

403.311(1)(b) (b) The amount of the claim was unliquidated or subject to a bona fide dispute.

403.311(1)(c) (c) The claimant obtained payment of the instrument.

403.311(2) (2) Unless sub. (3) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

403.311(3) (3) Subject to sub. (4), a claim is not discharged under sub. (2) if any of the following applies:

403.311(3)(a) (a) The claimant, if an organization, proves that all of the following conditions have been met:

403.311(3)(a)1. 1. Within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office or place.

403.311(3)(a)2. 2. The instrument or accompanying communication was not received by that designated person, office or place.

403.311(3)(b) (b) The claimant, whether or not an organization, proves that within 90 days after payment of the instrument the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with par. (a) 1.

403.311(4) (4) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.

403.311 History History: 1995 a. 449.

403.312 403.312 Lost, destroyed or stolen cashier’s check, teller’s check or certified check.

403.312(1) (1) In this section:

403.312(1)(a) (a) “Check” means a cashier’s check, teller’s check or certified check.

403.312(1)(b) (b) “Claimant” means a person who claims the right to receive the amount of a check that was lost, destroyed or stolen.

403.312(1)(c) (c) “Declaration of loss” means a written statement, made under penalty of perjury, to the effect that the declarer lost possession of a check, that the declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier’s check or teller’s check, that the loss of possession was not the result of a transfer by the declarer or a lawful seizure, and that the declarer cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined or it is in the wrongful possession of an unknown person or of a person that cannot be found or is not amenable to service of process.

403.312(1)(d) (d) “Obligated bank” means the issuer of a cashier’s check or teller’s check or the acceptor of a certified check.

403.312(2) (2) 

403.312(2)(a) (a) A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check if all of the following apply:

403.312(2)(a)1. 1. The claimant is the drawer or payee of a certified check or the remitter or payee of a cashier’s check or teller’s check.

403.312(2)(a)2. 2. The communication contains or is accompanied by a declaration of loss of the claimant with respect to the check.

403.312(2)(a)3. 3. The communication is received at a time and in a manner affording the obligated bank a reasonable time to act on it before the check is paid.

403.312(2)(a)4. 4. The claimant provides reasonable identification if requested by the obligated bank.

403.312(2)(b) (b) Delivery of a declaration of loss is a warranty of the truth of the statements made in the declaration of loss.

403.312(2)(c) (c) If a claim is asserted in compliance with this subsection, the following rules apply:

403.312(2)(c)1. 1. The claim becomes enforceable at the later of the time that the claim is asserted, or the 30th day following the date of the check, in the case of a cashier’s check or teller’s check, or the 30th day following the date of the acceptance, in the case of a certified check.

403.312(2)(c)2. 2. Until the claim becomes enforceable, it has no legal effect and the obligated bank may pay the check or, in the case of a teller’s check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check.

403.312(2)(c)3. 3. If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check.