(a) Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of any person involved, may waive, modify or extend time limits imposed or permitted by the Uniform Commercial Code for a period not exceeding two additional banking days without discharge of drawers or indorsers or liability to its transferor or a prior party.

(b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by the Uniform Commercial Code or by instructions is excused if (i) the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment or other circumstances beyond the control of the bank and (ii) the bank exercises such diligence as the circumstances require.

History: 1953 Comp., § 50A-4-108, enacted by Laws 1961, ch. 96, § 4-108; 1978 Comp., § 55-4-108, recompiled as 1978 Comp., § 55-4-109 by Laws 1992, ch. 114, § 164.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

1. Sections 4-202(b), 4-214, 4-301, and 4-302 [55-4-202, 55-4-214, 55-4-301, and 55-4-302 NMSA 1978, respectively] prescribe various time limits for the handling of items. These are the limits of time within which a bank, in fulfillment of its obligation to exercise ordinary care, must handle items entrusted to it for collection or payment. Under Section 4-103 [55-4-103 NMSA 1978] they may be varied by agreement or by Federal Reserve regulations or operating circular, clearing-house rules, or the like. Subsection (a) permits a very limited extension of these time limits. It authorizes a collecting bank to take additional time in attempting to collect drafts drawn on nonbank payors with or without the approval of any interested party. The right of a collecting bank to waive time limits under Subsection (a) does not apply to checks. The two-day extension can only be granted in a good faith effort to secure payment and only with respect to specific items. It cannot be exercised if the customer instructs otherwise. Thus limited the escape provision should afford a limited degree of flexibility in special cases but should not interfere with the overall requirement and objective of speedy collections.

2. An extension granted under Subsection (a) is without discharge of drawers or indorsers. It therefore extends the times for presentment or payment as specified in Article 3.

3. Subsection (b) is another escape clause from time limits. This clause operates not only with respect to time limits imposed by the Article itself but also time limits imposed by special instructions, by agreement or by Federal regulations or operating circulars, clearing-house rules or the like. The latter time limits are "permitted" by the Code. For example, a payor bank that fails to make timely return of a dishonored item may be accountable for the amount of the item. Subsection (b) excuses a bank from this liability when its failure to meet its midnight deadline resulted from, for example, a computer breakdown that was beyond the control of the bank, so long as the bank exercised the degree of diligence that the circumstances required. In Port City State Bank v. American National Bank, 486 F.2d 196 (10th Cir. 1973), the court held that a bank exercised sufficient diligence to be excused under this subsection. If delay is sought to be excused under this subsection, the bank has the burden of proof on the issue of whether it exercised "such diligence as the circumstances require." The subsection is consistent with Regulation CC, Section 229.38(e).

Repeals. — Laws 1992, ch. 114, § 237B repealed former 55-4-109 NMSA 1978, as enacted by Laws 1967, ch. 186, § 1, relating to process of posting, effective July 1, 1992. For provisions of former section, see the 1991 NMSA 1978 on NMOneSource.com.

The 1992 amendment, effective July 1, 1992, substituted letters for numbers in the subsection designations; substituted "the Uniform Commercial Code" for "this act" and made minor stylistic changes throughout the section; in Subsection (a), inserted "drawn on a payor other than a bank", substituted "two additional banking days" for "an additional banking day", and substituted "drawers or indorsers" for "secondary parties"; and, in Subsection (b), inserted the item designations, and inserted "or computer" and "failure of equipment" in item (i).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 10 Am. Jur. 2d Banks § 711.