55-3-601: Discharge and effect of discharge.

(a) The obligation of a party to pay the instrument is discharged as stated in this article or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.

(b) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.

OFFICIAL COMMENTS

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

Subsection (a) replaces subsections (1) and (2) of former Section 3-601. Subsection (b) restates former Section 3-602 [see now 55-3-601 NMSA 1978]. Notice of discharge is not treated as notice of a defense that prevents holder in due course status. Section 3-302(b) [55-3-302 NMSA 1978]. Discharge is effective against a holder in due course only if the holder had notice of the discharge when holder in due course status was acquired. For example, if an instrument bearing a canceled indorsement is taken by a holder, the holder has notice that the indorser has been discharged. Thus, the discharge is effective against the holder even if the holder is a holder in due course.