When is payment on a negotiable instrument overdue?

An instrument is overdue when the obligation to pay arises (upon presentment), but it has not been paid. An overdue instrument may give rise to a cause of action against a maker or drawee for failure to pay; also, it may make the instrument unenforceable as against a payor or drawee. When a negotiable instrument becomes overdue varies depending on whether the instrument is payable on time or on demand. A payable on demand instrument is overdue on the earliest of:

• the day after demand for payment is duly made;

Note: A negotiable demand instrument should be immediately payable. An extended delay in making payment violates the terms of payment.

• for a check, 90 days after its posted date; or

Note: Special rules apply to checks that do not apply to other drafts. A drawee bank is generally protected from liability if it refuses to honor a check that is 90 days past its posted date.

• after a period of time unreasonably long under the circumstances.

Note: With any demand instrument, an extended delay could affect payability of the instrument.

An instruments that is payable at a definite time is overdue the day after the due date for making the whole payment or payment of an installment. If the instrument requires presentment for payment, the instrument would be overdue the day after demand for payment is made. If the note has a clause calling for acceleration of all future payments upon default (such as becoming overdue), the document is overdue after the day established as the accelerated due date.

Note: Default on interest payments on a note does not make the instrument overdue if there is no default in payment of principal and the due date has not been accelerated.

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