Colorado § 4-3-408 - Drawee not liable on unaccepted draft.

§ 4-3-408. Drawee not liable on unaccepted draft.

A check or other draft does not of itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts it.

Source: L. 94: Entire article R&RE, p. 865, § 1, effective January 1, 1995.

Editor's note: This section is similar to former § 4-3-409 as it existed prior to 1994.

ANNOTATION

I. General Consideration.

II. Draft Not an Assignment.

III. Other Liability Not Affected.

I. GENERAL CONSIDERATION.

Annotator's note. The following annotations include cases decided under former provisions similar to this section.

II. DRAFT NOT AN ASSIGNMENT.

The giving of a check does not assign present funds on deposit and does not create drawee liability to the payee unless and until it is accepted by the drawee. Denver Elec. & Neon Serv. Corp. v. Gerald H. Phipps, Inc., 143 Colo. 530, 354 P.2d 618 (1960).

Bank may decline payment. Even where a signature to a check is correct, and all other required indicia appear thereon, still, the bank on which a check is drawn is not liable in action to the drawee thereof and in all legal grace may decline payment of the check. Henderson v. Greeley Nat'l Bank, 111 Colo. 365, 142 P.2d 480 (1943).

Even before the passage of the negotiable instrument law it was ruled that a right of action did not exist in favor of the holder of a check against the drawee bank where there has been no acceptance or promise to pay by the latter in Colo. Nat'l Bank v. Boettcher, (5 Colo. 185 (1879), aff'd, 15 Colo. 16, 24 P. 582 (1890)), and the statute has expressly enacted such. Van Buskirk v. State Bank, 35 Colo. 142, 83 P. 778 (1905).

III. OTHER LIABILITY NOT AFFECTED.

A promise to accept a bill or order made before the bill or order is drawn may be enforced against the party making the promise by one who purchases such bill or order relying upon the faith of the promise, and the drawee cannot avoid liability by proof of a contingent condition precedent where such orders were not drawn in excess of the amount of the promise. McPhee & McGinnity v. Fowler, 36 Colo. 202, 85 P. 421 (1906) (decided under repealed laws antecedent to CSA, C. 112, § 127, negotiable instruments law).