(a) Subject to subsection (b), an instrument is paid to the extent payment is made by or on behalf of a party obliged to pay the instrument (1) to a person entitled to enforce the instrument or (2) to the assignor in the case of a mortgage debt that is assigned without sufficient notice to the party obliged to pay as provided in section 49-10. 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 section 42a-3-306 by another person.

(b) The obligation of a party to pay the instrument is not discharged under subsection (a) if: (1) A claim to the instrument under section 42a-3-306 is enforceable against the party receiving payment and (i) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or (ii) 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; or (2) the person making payment knows that the instrument is a stolen instrument and pays a person it knows is in wrongful possession of the instrument.

(1959, P.A. 133, S. 3-602; P.A. 91-304, S. 64; P.A. 98-147, S. 2.)

History: P.A. 91-304 entirely replaced former provisions re effect of discharge against a holder in due course with provisions re payment, a restatement of Sec. 42a-3-603(1), revised to 1991; P.A. 98-147 added Subsec. (a)(2) permitting payment to assignor of mortgage debt assigned without sufficient notice to party obliged to pay as provided in Sec. 49-10.

See Sec. 42a-3-601(b) for successor provisions to Sec. 42a-3-602, revised to 1991, re effect of discharge against holder in due course.