Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Find a Job
  • Home
  • Law, Transactions, & Risk Management
  • Commercial Law: Contract, Payments, Security Interests, & Bankruptcy

Lost Negotiable Instruments - Explained

What happens when the commercial paper is lost?

Written by Jason Gordon

Updated at September 26th, 2021

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What rules apply if a holder of a negotiable instrument loses the instrument?Discussion QuestionPractice QuestionAcademic Research

What rules apply if a holder of a negotiable instrument loses the instrument?

An obligor is generally only obligated to pay the instrument upon presentment. If an instrument is lost and has not been presented to the obligor for payment, the obligor may pay the instrument when the party losing the instrument requests payment (without actual presentment of the instrument). Paying the proper payee of a lost instrument will discharge the obligors duty to pay the instrument, including satisfying the obligor's obligations to other parties who may find the lost instrument. To be entitled to payment of a lost instrument, the payee losing the instrument must prove:

  • Possession - She was in possession and entitled to enforce when instrument was lost;
  • Accidental Loss - The loss was not the result of transfer or lawful seizure;
  • Location Unknown - The instrument's location cannot be determined; and
  • Instrument Terms - She must provide adequate evidence of the terms of instrument.

Even if these condition are met, the payee must provide adequate protection, such as a surety bond, to protect the payor in the event the instrument is wrongfully paid.

Note: State statutory or common law may provide a cause of action against and individual who has no property rights in an instrument but presents a lost instrument for payment. These state law protections are pursuant to property law and not part of the UCC.

Next Article: Overdue Payment of Negotiable Instrument Back to: COMMERCIAL PAPER

Related Topics

  • How does a holder receive payment on a negotiable instrument?
  • Who is potentially liable on (or obligated to pay) a negotiable instrument?
  • When is an individual liable for a representative signing a negotiable instrument?
  • What rules apply if a holder loses a negotiable instrument?
  • When is payment of a negotiable instrument overdue?

Discussion Question

Why do you think the UCC allows for payment of a lost instrument? How do you feel about the obligation to pay a holder who finds lost bearer paper? Should there be additional protections under the UCC for holders who lose commercial paper?

Practice Question

Martin is the payee on a note. The note is negotiable, bearer paper. Martin indorses the paper with the purpose of transferring it to Fran. He somehow loses the paper. What must Martin do to seek payment of the note? Can Fran seek payment? What happens if Jason finds the note and presents it to the maker for payment?

Academic Research


lost negotiable instruments

Was this article helpful?

Yes
No

Related Articles

  • Patent and Latent Ambiguities in a Contract - Explained
  • Cash With Order - Explained
  • Voidable Contract Scenarios - Explained
  • Aleatory Contract - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand