Conditions Precedent to Liability Defined as an event which must occur before liability arises: for a drawer of an unaccepted draft, it is dishonor; for an indorser or a drawer of an accepted draft, it is dishonor and notice of dishonor. Keep in mind that all indorsers and the drawer are discharged by a subsequent acceptance by a bank. Dishonor — Occurs after a proper presentment and a refusal to pay. Return for lack of a proper indorsement is not dishonor. What constitutes dishonor depends on the type of instrument and whether or not presentment is required. • Notes : demand note is dishonored if not paid on the day of presentment; time notes that require presentment or payable by a bank are dishonored if not paid on its due date or presentment date, whichever is later; all other time notes need not be presented and are dishonored if not paid on their due date • Drafts : an unaccepted draft (except checks) that is payable on demand is dishonored if not paid on the day of presentment; a
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