Ark. Code Ann. § 4-3-203 (2026)
Transfer of instrument — Rights acquired by transfer
- An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.
- Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.
- Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.
- If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this chapter and has only the rights of a partial assignee.
History. Acts 1991, No. 572, § 5.
Research References
U. Ark. Little Rock L.J.
Survey—Business Law, 14 U. Ark. Little Rock L.J. 735.
Case Notes
Assignments.
The UCC does not permit assignments of negotiable instruments. McIlroy Bank v. First Nat'l Bank, 252 Ark. 558, 480 S.W.2d 127 (1972) (decision under prior law).
Gifts.
While indorsement of a note payable “to order” is required to negotiate it in favor of one who becomes a holder in due course, a donor's rights in such an instrument may be transferred by gift without indorsement. Brown v. Bell, 291 Ark. 116, 722 S.W.2d 592 (1987) (decision under prior law).
Decedent made an inter vivos gift and delivery of a promissory note to his wife where there was an indorsement on the back of the note in favor of the wife and where the decedent declared “to the world” that he had assigned the note and deed of trust to his wife by recording the assignment to her of the deed of trust. Chalmers v. Chalmers, 327 Ark. 141, 937 S.W.2d 171 (1997).
Indorsement.
Assertion that indorsement was required before a promissory note could be transferred was erroneous, since negotiation of an instrument cannot be equated with mere transfer, as defined in § 4-3-201. Tackett v. First Sav., 306 Ark. 15, 810 S.W.2d 927 (1991) (decision under prior law).
Notice of Defenses.
Where assignor knew that the makers of note had claims against him far in excess of the amount of the note and assignee had notice that payments on the note were overdue at the time he took the note, assignee was not a holder in due course; therefore, the note was subject to the defense by the makers against assignor, and it was proper for the court to allow set-off, cancel and satisfy the note, and dismiss assignee's claim. Richardson v. Girner, 282 Ark. 302, 668 S.W.2d 523 (1984) (decision under prior law).
Rights of Transferees.
Mother became transferee and possessed all the rights of the lender including right to foreclose on the mortgage, when she paid a debt owed by them and secured by a mortgage on their property and received from the lender's wife the unendorsed note and the mortgage. Griffith v. Griffith, 250 Ark. 845, 467 S.W.2d 737 (1971) (decision under prior law).
Cited: UMLIC 2 Funding Corp. v. Butcher, 333 Ark. 442, 970 S.W.2d 211 (1998); Federal Fin. Co. v. Noe, 335 Ark. 78, 983 S.W.2d 107 (1998).