Notice of Dishonor

1. Law
2. Georgia Code
3. Commercial Code
4. Negotiable Instruments
5. Dishonor
6. Notice of Dishonor

1. The obligation of an indorser stated in subsection (a) of Code Section 11-3-415 and the obligation of a drawer stated in subsection (d) of Code Section 11-3-414 may not be enforced unless (i) the indorser or drawer is given notice of dishonor of the instrument complying with this Code section; or (ii) notice of dishonor is excused under subsection (b) of Code Section 11-3-504.
2. Notice of dishonor may be given by any person. Notice of dishonor may be given by any commercially reasonable means, including an oral, written, or electronic communication. Notice of dishonor is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor. Upon request of any party to the instrument, the drawee shall provide a statement to the requesting party giving the specific reason for dishonor, and the drawee shall have no additional liability to the drawer as a result of such statement.
3. Subject to subsection (c) of Code Section 11-3-504, with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given (i) by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument; or (ii) by any other person within 30 days following the day on which the person receives notice of dishonor. With respect to any other instrument, notice of dishonor must be given within 30 days following the day on which dishonor occurs.

(Code 1981, §11-3-503, enacted by Ga. L. 1996, p. 1306, § 3.)

Law reviews.

- For article surveying developments in Georgia commercial law from mid-1980 through mid-1981, see 33 Mercer L. Rev. 33 (1981).

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the provisions, decisions under former Code 1933, §§ 14-701 and 14-801 and former Code Section 11-3-508 have been included in the annotations for this Code section.

Drawer and drawee as same legal entity.

- It is not necessary for party suing on draft to show notice of dishonor to drawer where drawer and drawee are same legal entity, and drawer countermanded payment. Harford Mut. Ins. Co. v. Barfield, 105 Ga. App. 266, 124 S.E.2d 294 (1962) (decided under former Code Section11-3-508).

Effect on provisions requiring that notice of dishonor be "sent."

- It is neither logical nor credible that legislature meant to defuse this provision, and to render meaningless other Art. 3 and 4 provisions dealing with discharge of endorser's liability within specific time limits of presentment and nonacceptance by providing that dishonor does not occur until written notice of it is "sent." Clements v. Central Bank, 155 Ga. App. 27, 270 S.E.2d 194 (1980) (decided under former Code Section11-3-508).

Persons who constitute endorsers.

- Where three individual defendants, joined in suit against the maker of promissory note, had placed their signatures on back of instrument without indicating an intention to be bound in capacity other than endorser, they are deemed to be endorsers in legal sense of the word, and are entitled to have note presented to person primarily liable, and, if it is not paid, to notice of dishonor. Massell v. Prudential Ins. Co. of Am., 57 Ga. App. 460, 196 S.E. 115 (1938) (decided under former Code 1933, §§ 14-701 and 14-801).

RESEARCH REFERENCES

Am. Jur. 2d.

- 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 987, 988, 990. 12 Am. Jur. 2d, Bills and Notes, § 361 et seq.

C.J.S.

- 10 C.J.S., Bills and Notes, § 202 et seq.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 3-503.

ALR.

- Insolvency or bankruptcy of party primarily liable on commercial paper, as excusing demand and notice of dishonor, 25 A.L.R. 962; 87 A.L.R. 1394.

Necessity of protest and notice as between coindorsers of negotiable paper, 32 A.L.R. 190.

Right of holder to sue bank in respect of deposit made, for payment of existing obligation other than check, 50 A.L.R. 1012.

Examining directory as sufficient diligence in locating drawer or endorser for purpose of notice of dishonor, 55 A.L.R. 673.

Promise to pay at future time by party to whom presentment is made as excusing notice of dishonor, 62 A.L.R. 295.

Liability of drawer of check as affected by failure to give or delay in giving him notice of its dishonor, 86 A.L.R. 463.

Insolvency or bankruptcy of party primarily liable on commercial paper as excusing demand and notice of dishonor, 87 A.L.R. 1394.

Liability of drawee bank in respect of forged check because of delay in returning it unpaid, 116 A.L.R. 687.

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