Chapter 403

403.601(1) (1) The obligation of a party to pay the instrument is discharged as stated in this chapter or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.

403.601(2) (2) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.

403.601 History History: 1995 a. 449.

403.602 403.602 Payment.

403.602(1) (1) Subject to sub. (2), an instrument is paid to the extent that payment is made by or on behalf of a party obliged to pay the instrument and to a person entitled to enforce the instrument. To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under s. 403.306 by another person.

403.602(2) (2) The obligation of a party to pay the instrument is not discharged under sub. (1) if any of the following applies:

403.602(2)(a) (a) A claim to the instrument under s. 403.306 is enforceable against the party receiving payment and payment is made with knowledge by the payer that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or, in the case of an instrument other than a cashier’s check, teller’s check or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument.

403.602(2)(b) (b) The person making payment knows that the instrument is a stolen instrument and pays a person with knowledge that the person is in wrongful possession of the instrument.

403.602 History History: 1995 a. 449.

403.603 403.603 Tender of payment.

403.603(1) (1) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.

403.603(2) (2) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an endorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.

403.603(3) (3) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is considered to have made tender of payment on the due date to the person entitled to enforce the instrument.

403.603 History History: 1995 a. 449.

403.604 403.604 Discharge by cancellation or renunciation.

403.604(1) (1) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument by doing any of the following:

403.604(1)(a) (a) An intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation or cancellation of the instrument, cancellation or striking out of the party’s signature or the addition of words to the instrument indicating discharge.

403.604(1)(b) (b) Agreeing not to sue or otherwise renouncing rights against the party by a signed writing.

403.604(2) (2) Cancellation or striking out of an endorsement pursuant to sub. (1) (a) does not affect the status and rights of a party derived from the endorsement.

403.604 History History: 1995 a. 449.

403.605 403.605 Discharge of endorsers and accommodation parties.

403.605(1) (1) In this section, “endorser” includes a drawer having the obligation described in s. 403.414 (4).

403.605(2) (2) Discharge, under s. 403.604, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having a right of recourse against the discharged party.

403.605(3) (3) If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an endorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent that the endorser or accommodation party proves that the extension caused loss to the endorser or accommodation party with respect to the right of recourse.

403.605(4) (4) If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an endorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent that the modification causes loss to the endorser or accommodation party with respect to the right of recourse. The loss suffered by the endorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.

403.605(5) (5) If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an endorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent that the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or to the extent that the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.

403.605(6) (6) If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of any party who is jointly and severally liable with respect to the secured obligation is discharged to the extent that the impairment causes the party asserting discharge to pay more than that party would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under sub. (5), the party is considered to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.

403.605(7) (7) Under sub. (5) or (6), impairing value of an interest in collateral includes all of the following:

403.605(7)(a) (a) Failure to obtain or maintain perfection or recordation of the interest in collateral.

403.605(7)(b) (b) Release of collateral without substitution of collateral of equal value.

403.605(7)(c) (c) Failure to perform a duty to preserve the value of collateral owed, under ch. 409 or other law, to a debtor or surety or other person secondarily liable.

403.605(7)(d) (d) Failure to comply with applicable law in disposing of collateral.

403.605(8) (8) An accommodation party is not discharged under sub. (3), (4) or (5) unless the person entitled to enforce the instrument knows of the accommodation or has notice under s. 403.419 (3) that the instrument was signed for accommodation.

403.605(9) (9) A party is not discharged under this section if the party asserting discharge consents to the event or conduct that is the basis of the discharge or if the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral.

403.605 History History: 1995 a. 449.