Office of the Revisor of Statutes
Minnesota Session Laws - 1990, Regular Session
Key: (1) language to be deleted (2) new language
Laws of Minnesota 1990
CHAPTER 582-S.F.No. 2064
An act relating to commercial transactions; adopting
an article of the uniform commercial code that governs
funds transfers; amending Minnesota Statutes 1989
Supplement, section 336.1-105; proposing coding for
new law in Minnesota Statutes, chapter 336.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
ARTICLE 4A
FUNDS TRANSFERS
PART 1
SUBJECT MATTER AND DEFINITIONS
Section 1. [336.4A-101] [SHORT TITLE.]
This article may be cited as Uniform Commercial Code--Funds
Transfers.
Sec. 2. [336.4A-102] [SUBJECT MATTER.]
Except as otherwise provided in section 336.4A-108, this
article applies to funds transfers defined in section 336.4A-104.
Sec. 3. [336.4A-103] [PAYMENT ORDER-DEFINITIONS.]
(a) In this article:
(1) "Payment order" means an instruction of a sender to a
receiving bank, transmitted orally, electronically, or in
writing, to pay, or to cause another bank to pay, a fixed or
determinable amount of money to a beneficiary if:
(i) the instruction does not state a condition to payment
to the beneficiary other than time of payment,
(ii) the receiving bank is to be reimbursed by debiting an
account of, or otherwise receiving payment from, the sender, and
(iii) the instruction is transmitted by the sender directly
to the receiving bank or to an agent, funds-transfer system, or
communication system for transmittal to the receiving bank.
(2) "Beneficiary" means the person to be paid by the
beneficiary's bank.
(3) "Beneficiary's bank" means the bank identified in a
payment order in which an account of the beneficiary is to be
credited pursuant to the order or which otherwise is to make
payment to the beneficiary if the order does not provide for
payment to an account.
(4) "Receiving bank" means the bank to which the sender's
instruction is addressed.
(5) "Sender" means the person giving the instruction to the
receiving bank.
(b) If an instruction complying with subsection (a)(1) is
to make more than one payment to a beneficiary, the instruction
is a separate payment order with respect to each payment.
(c) A payment order is issued when it is sent to the
receiving bank.
Sec. 4. [336.4A-104] [FUNDS TRANSFER-DEFINITIONS.]
In this article:
(a) "Funds transfer" means the series of transactions,
beginning with the originator's payment order, made for the
purpose of making payment to the beneficiary of the order. The
term includes any payment order issued by the originator's bank
or an intermediary bank intended to carry out the originator's
payment order. A funds transfer is completed by acceptance by
the beneficiary's bank of a payment order for the benefit of the
beneficiary of the originator's payment order.
(b) "Intermediary bank" means a receiving bank other than
the originator's bank or the beneficiary's bank.
(c) "Originator" means the sender of the first payment
order in a funds transfer.
(d) "Originator's bank" means (i) the receiving bank to
which the payment order of the originator is issued if the
originator is not a bank, or (ii) the originator if the
originator is a bank.
Sec. 5. [336.4A-105] [OTHER DEFINITIONS.]
(a) In this article:
(1) "Authorized account" means a deposit account of a
customer in a bank designated by the customer as a source of
payment of payment orders issued by the customer to the bank.
If a customer does not so designate an account, any account of
the customer is an authorized account if payment of a payment
order from that account is not inconsistent with a restriction
on the use of that account.
(2) "Bank" means a person engaged in the business of
banking and includes a savings bank, savings and loan
association, credit union, and trust company. A branch or
separate office of a bank is a separate bank for purposes of
this article.
(3) "Customer" means a person, including a bank, having an
account with a bank or from whom a bank has agreed to receive
payment orders.
(4) "Funds-transfer business day" of a receiving bank means
the part of a day during which the receiving bank is open for
the receipt, processing, and transmittal of payment orders and
cancellations and amendments of payment orders.
(5) "Funds-transfer system" means a wire transfer network,
automated clearing house, or other communication system of a
clearing house or other association of banks through which a
payment order by a bank may be transmitted to the bank to which
the order is addressed.
(6) "Good faith" means honesty in fact and the observance
of reasonable commercial standards of fair dealing.
(7) "Prove" with respect to a fact means to meet the burden
of establishing the fact (section 336.1-201(8)).
(b) Other definitions applying to the article and the
sections in which they appear:
"Acceptance." Section 336.4A-209.
"Beneficiary." Section 336.4A-103.
"Beneficiary's bank." Section 336.4A-103.
"Executed." Section 336.4A-301.
"Execution date." Section 336.4A-301.
"Funds transfer." Section 336.4A-104.
"Funds-transfer system rule." Section 336.4A-501.
"Intermediary bank." Section 336.4A-104.
"Originator." Section 336.4A-104.
"Originator's bank." Section 336.4A-104.
"Payment by beneficiary's bank to beneficiary." Section
336.4A-405.
"Payment by originator to beneficiary." Section 336.4A-406.
"Payment by sender to receiving bank." Section 336.4A-403.
"Payment date." Section 336.4A-401.
"Payment order." Section 336.4A-103.
"Receiving bank." Section 336.4A-103.
"Security procedure." Section 336.4A-201.
"Sender." Section 336.4A-103.
(c) The following definitions in article 4 apply to this
article:
"Clearing house." Section 336.4-104.
"Item." Section 336.4-104.
"Suspends payments." Section 336.4-104.
(d) In addition, sections 336.1-101 to 336.1-209 contain
general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 6. [336.4A-106] [TIME PAYMENT ORDER IS RECEIVED.]
(a) The time of receipt of a payment order or communication
canceling or amending a payment order is determined by the rules
applicable to receipt of a notice stated in section
336.1-201(27). A receiving bank may fix a cut-off time or times
on a funds-transfer business day for the receipt and processing
of payment orders and communications canceling or amending
payment orders. Different cut-off times may apply to payment
orders, cancellations, or amendments, or to different categories
of payment orders, cancellations, or amendments. A cut-off time
may apply to senders generally or different cut-off times may
apply to different senders or categories of payment orders. If
a payment order or communication canceling or amending a payment
order is received after the close of a funds-transfer business
day or after the appropriate cut-off time on a funds-transfer
business day, the receiving bank may treat the payment order or
communication as received at the opening of the next
funds-transfer business day.
(b) If this article refers to an execution date or payment
date or states a day on which a receiving bank is required to
take action, and the date or day does not fall on a
funds-transfer business day, the next day that is a
funds-transfer business day is treated as the date or day
stated, unless the contrary is stated in this article.
Sec. 7. [336.4A-107] [FEDERAL RESERVE REGULATIONS AND
OPERATING CIRCULARS.]
Regulations of the Board of Governors of the Federal
Reserve System and operating circulars of the Federal Reserve
Banks supersede any inconsistent provision of this article to
the extent of the inconsistency.
Sec. 8. [336.4A-108] [EXCLUSION OF CONSUMER TRANSACTIONS
GOVERNED BY FEDERAL LAW.]
This article does not apply to a funds transfer any part of
which is governed by the Electronic Fund Transfer Act of 1978
(Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. Section
1693 et seq.) as amended from time to time.
PART 2
ISSUE AND ACCEPTANCE OF PAYMENT ORDER
Sec. 9. [336.4A-201] [SECURITY PROCEDURE.]
"Security procedure" means a procedure established by
agreement of a customer and a receiving bank for the purpose of
(i) verifying that a payment order or communication amending or
canceling a payment order is that of the customer, or (ii)
detecting error in the transmission or the content of the
payment order or communication. A security procedure may
require the use of algorithms or other codes, identifying words
or numbers, encryption, callback procedures, or similar security
devices. Comparison of a signature on a payment order or
communication with an authorized specimen signature of the
customer is not by itself a security procedure.
Sec. 10. [336.4A-202] [AUTHORIZED AND VERIFIED PAYMENT
ORDERS.]
(a) A payment order received by the receiving bank is the
authorized order of the person identified as sender if that
person authorized the order or is otherwise bound by it under
the law of agency.
(b) If a bank and its customer have agreed that the
authenticity of payment orders issued to the bank in the name of
the customer as sender will be verified pursuant to a security
procedure, a payment order received by the receiving bank is
effective as the order of the customer, whether or not
authorized, if (i) the security procedure is a commercially
reasonable method of providing security against unauthorized
payment orders, and (ii) the bank proves that it accepted the
payment order in good faith and in compliance with the security
procedure and any written agreement or instruction of the
customer restricting acceptance of payment orders issued in the
name of the customer. The bank is not required to follow an
instruction that violates a written agreement with the customer
or notice of which is not received at a time and in a manner
affording the bank a reasonable opportunity to act on it before
the payment order is accepted.
(c) Commercial reasonableness of a security procedure is a
question of law to be determined by considering the wishes of
the customer expressed to the bank, the circumstances of the
customer known to the bank, including the size, type, and
frequency of payment orders normally issued by the customer to
the bank, alternative security procedures offered to the
customer, and security procedures in general use by customers
and receiving banks similarly situated. A security procedure is
deemed to be commercially reasonable if (i) the security
procedure was chosen by the customer after the bank offered, and
the customer refused, a security procedure that was commercially
reasonable for that customer, and (ii) the customer expressly
agreed in writing to be bound by any payment order, whether or
not authorized, issued in its name and accepted by the bank in
compliance with the security procedure chosen by the customer.
(d) The term "sender" in this article includes the customer
in whose name a payment order is issued if the order is the
authorized order of the customer under subsection (a), or it is
effective as the order of the customer under subsection (b).
(e) This section applies to amendments and cancellations of
payment orders to the same extent it applies to payment orders.
(f) Except as provided in this section and in section
336.4A-203(a)(1), rights and obligations arising under this
section or section 336.4A-203 may not be varied by agreement.
Sec. 11. [336.4A-203] [UNENFORCEABILITY OF CERTAIN
VERIFIED PAYMENT ORDERS.]
(a) If an accepted payment order is not, under section
336.4A.202(a), an authorized order of a customer identified as
sender, but is effective as an order of the customer pursuant to
section 336.4A.202(b), the following rules apply:
(1) By express written agreement, the receiving bank may
limit the extent to which it is entitled to enforce or retain
payment of the payment order.
(2) The receiving bank is not entitled to enforce or retain
payment of the payment order if the customer proves that the
order was not caused, directly or indirectly, by a person (i)
entrusted at any time with duties to act for the customer with
respect to payment orders or the security procedure, or (ii) who
obtained access to transmitting facilities of the customer or
who obtained, from a source controlled by the customer and
without authority of the receiving bank, information
facilitating breach of the security procedure, regardless of how
the information was obtained or whether the customer was at
fault. Information includes any access device, computer
software, or the like.
(b) This section applies to amendments of payment orders to
the same extent it applies to payment orders.
Sec. 12. [336.4A-204] [REFUND OF PAYMENT AND DUTY OF
CUSTOMER TO REPORT WITH RESPECT TO UNAUTHORIZED PAYMENT ORDER.]
(a) If a receiving bank accepts a payment order issued in
the name of its customer as sender which is (i) not authorized
and not effective as the order of the customer under section
336.4A-202, or (ii) not enforceable, in whole or in part,
against the customer under section 336.4A-203, the bank shall
refund any payment of the payment order received from the
customer to the extent the bank is not entitled to enforce
payment and shall pay interest on the refundable amount
calculated from the date the bank received payment to the date
of the refund. However, the customer is not entitled to
interest from the bank on the amount to be refunded if the
customer fails to exercise ordinary care to determine that the
order was not authorized by the customer and to notify the bank
of the relevant facts within a reasonable time not exceeding 90
days after the date the customer received notification from the
bank that the order was accepted or that the customer's account
was debited with respect to the order. The bank is not entitled
to any recovery from the customer on account of a failure by the
customer to give notification as stated in this section.
(b) Reasonable time under subsection (a) may be fixed by
agreement as stated in section 336.1-204(1), but the obligation
of a receiving bank to refund payment as stated in subsection
(a) may not otherwise be varied by agreement.
Sec. 13. [336.4A-205] [ERRONEOUS PAYMENT ORDERS.]
(a) If an accepted payment order was transmitted pursuant
to a security procedure for the detection of error and the
payment order (i) erroneously instructed payment to a
beneficiary not intended by the sender, (ii) erroneously
instructed payment in an amount greater than the amount intended
by the sender, or (iii) was an erroneously transmitted duplicate
of a payment order previously sent by the sender, the following
rules apply:
(1) If the sender proves that the sender or a person acting
on behalf of the sender pursuant to section 336.4A-206 complied
with the security procedure and that the error would have been
detected if the receiving bank had also complied, the sender is
not obliged to pay the order to the extent stated in paragraphs
(2) and (3).
(2) If the funds transfer is completed on the basis of an
erroneous payment order described in clause (i) or (iii) of
subsection (a), the sender is not obliged to pay the order and
the receiving bank is entitled to recover from the beneficiary
any amount paid to the beneficiary to the extent allowed by the
law governing mistake and restitution.
(3) If the funds transfer is completed on the basis of a
payment order described in clause (ii) of subsection (a), the
sender is not obliged to pay the order to the extent the amount
received by the beneficiary is greater than the amount intended
by the sender. In that case, the receiving bank is entitled to
recover from the beneficiary the excess amount received to the
extent allowed by the law governing mistake and restitution.
(b) If (i) the sender of an erroneous payment order
described in subsection (a) is not obliged to pay all or part of
the order, and (ii) the sender receives notification from the
receiving bank that the order was accepted by the bank or that
the sender's account was debited with respect to the order, the
sender has a duty to exercise ordinary care, on the basis of
information available to the sender, to discover the error with
respect to the order and to advise the bank of the relevant
facts within a reasonable time, not exceeding 90 days, after the
bank's notification was received by the sender. If the bank
proves that the sender failed to perform that duty, the sender
is liable to the bank for the loss the bank proves it incurred
as a result of the failure, but the liability of the sender may
not exceed the amount of the sender's order.
(c) This section applies to amendments to payment orders to
the same extent it applies to payment orders.
Sec. 14. [336.4A-206] [TRANSMISSION OF PAYMENT ORDER
THROUGH FUNDS-TRANSFER OR OTHER COMMUNICATION SYSTEM.]
(a) If a payment order addressed to a receiving bank is
transmitted to a funds-transfer system or other third-party
communication system for transmittal to the bank, the system is
deemed to be an agent of the sender for the purpose of
transmitting the payment order to the bank. If there is a
discrepancy between the terms of the payment order transmitted
to the system and the terms of the payment order transmitted by
the system to the bank, the terms of the payment order of the
sender are those transmitted by the system. This section does
not apply to a funds-transfer system of the Federal Reserve
Banks.
(b) This section applies to cancellations and amendments of
payment orders to the same extent it applies to payment orders.
Sec. 15. [336.4A-207] [MISDESCRIPTION OF BENEFICIARY.]
(a) Subject to subsection (b), if, in a payment order
received by the beneficiary's bank, the name, bank account
number, or other identification of the beneficiary refers to a
nonexistent or unidentifiable person or account, no person has
rights as a beneficiary of the order and acceptance of the order
cannot occur.
(b) If a payment order received by the beneficiary's bank
identifies the beneficiary both by name and by an identifying or
bank account number and the name and number identify different
persons, the following rules apply:
(1) Except as otherwise provided in subsection (c), if the
beneficiary's bank does not know that the name and number refer
to different persons, it may rely on the number as the proper
identification of the beneficiary of the order. The
beneficiary's bank need not determine whether the name and
number refer to the same person.
(2) If the beneficiary's bank pays the person identified by
name or knows that the name and number identify different
persons, no person has rights as beneficiary except the person
paid by the beneficiary's bank if that person was entitled to
receive payment from the originator of the funds transfer. If
no person has rights as beneficiary, acceptance of the order
cannot occur.
(c) If (i) a payment order described in subsection (b) is
accepted, (ii) the originator's payment order described the
beneficiary inconsistently by name and number, and (iii) the
beneficiary's bank pays the person identified by number as
permitted by subsection (b)(1), the following rules apply:
(1) If the originator is a bank, the originator is obliged
to pay its order.
(2) If the originator is not a bank and proves that the
person identified by number was not entitled to receive payment
from the originator, the originator is not obliged to pay its
order unless the originator's bank proves that the originator,
before acceptance of the originator's order, had notice that
payment of a payment order issued by the originator might be
made by the beneficiary's bank on the basis of an identifying or
bank account number even if it identifies a person different
from the named beneficiary. Proof of notice may be made by any
admissible evidence. The originator's bank satisfies the burden
of proof if it proves that the originator, before the payment
order was accepted, signed a writing stating the information to
which the notice relates.
(d) In a case governed by subsection (b)(1), if the
beneficiary's bank rightfully pays the person identified by
number and that person was not entitled to receive payment from
the originator, the amount paid may be recovered from that
person to the extent allowed by the law governing mistake and
restitution as follows:
(1) If the originator is obliged to pay its payment order
as stated in subsection (c), the originator has the right to
recover.
(2) If the originator is not a bank and is not obliged to
pay its payment order, the originator's bank has the right to
recover.
Sec. 16. [336.4A-208] [MISDESCRIPTION OF INTERMEDIARY BANK
OR BENEFICIARY'S BANK.]
(a) This subsection applies to a payment order identifying
an intermediary bank or the beneficiary's bank only by an
identifying number.
(1) The receiving bank may rely on the number as the proper
identification of the intermediary or beneficiary's bank and
need not determine whether the number identifies a bank.
(2) The sender is obliged to compensate the receiving bank
for any loss and expenses incurred by the receiving bank as a
result of its reliance on the number in executing or attempting
to execute the order.
(b) This subsection applies to a payment order identifying
an intermediary bank or the beneficiary's bank both by name and
an identifying number if the name and number identify different
persons.
(1) If the sender is a bank, the receiving bank may rely on
the number as the proper identification of the intermediary or
beneficiary's bank if the receiving bank, when it executes the
sender's order, does not know that the name and number identify
different persons. The receiving bank need not determine
whether the name and number refer to the same person or whether
the number refers to a bank. The sender is obliged to
compensate the receiving bank for any loss and expenses incurred
by the receiving bank as a result of its reliance on the number
in executing or attempting to execute the order.
(2) If the sender is not a bank and the receiving bank
proves that the sender, before the payment order was accepted,
had notice that the receiving bank might rely on the number as
the proper identification of the intermediary or beneficiary's
bank even if it identifies a person different from the bank
identified by name, the rights and obligations of the sender and
the receiving bank are governed by subsection (b)(1), as though
the sender were a bank. Proof of notice may be made by any
admissible evidence. The receiving bank satisfies the burden of
proof if it proves that the sender, before the payment order was
accepted, signed a writing stating the information to which the
notice relates.
(3) Regardless of whether the sender is a bank, the
receiving bank may rely on the name as the proper identification
of the intermediary or beneficiary's bank if the receiving bank,
at the time it executes the sender's order, does not know that
the name and number identify different persons. The receiving
bank need not determine whether the name and number refer to the
same person.
(4) If the receiving bank knows that the name and number
identify different persons, reliance on either the name or the
number in executing the sender's payment order is a breach of
the obligation stated in section 336.4A-302(a)(1).
Sec. 17. [336.4A-209] [ACCEPTANCE OF PAYMENT ORDER.]
(a) Subject to subsection (d), a receiving bank other than
the beneficiary's bank accepts a payment order when it executes
the order.
(b) Subject to subsections (c) and (d), a beneficiary's
bank accepts a payment order at the earliest of the following
times:
(1) when the bank (i) pays the beneficiary as stated in
section 336.4A-405(a) or 336.4A-405(b), or (ii) notifies the
beneficiary of receipt of the order or that the account of the
beneficiary has been credited with respect to the order unless
the notice indicates that the bank is rejecting the order or
that funds with respect to the order may not be withdrawn or
used until receipt of payment from the sender of the order;
(2) when the bank receives payment of the entire amount of
the sender's order pursuant to section 336.4A-403(a)(1) or
336.4A-403(a)(2); or
(3) The opening of the next funds-transfer business day of
the bank following the payment date of the order if, at that
time, the amount of the sender's order is fully covered by a
withdrawable credit balance in an authorized account of the
sender or the bank has otherwise received full payment from the
sender, unless the order was rejected before that time or is
rejected within (i) one hour after that time, or (ii) one hour
after the opening of the next business day of the sender
following the payment date if that time is later. If notice of
rejection is received by the sender after the payment date and
the authorized account of the sender does not bear interest, the
bank is obliged to pay interest to the sender on the amount of
the order for the number of days elapsing after the payment date
to the day the sender receives notice or learns that the order
was not accepted, counting that day as an elapsed day. If the
withdrawable credit balance during that period falls below the
amount of the order, the amount of interest payable is reduced
accordingly.
(c) Acceptance of a payment order cannot occur before the
order is received by the receiving bank. Acceptance does not
occur under subsection (b)(2) or (b)(3) if the beneficiary of
the payment order does not have an account with the receiving
bank, the account has been closed, or the receiving bank is not
permitted by law to receive credits for the beneficiary's
account.
(d) A payment order issued to the originator's bank cannot
be accepted until the payment date if the bank is the
beneficiary's bank, or the execution date if the bank is not the
beneficiary's bank. If the originator's bank executes the
originator's payment order before the execution date or pays the
beneficiary of the originator's payment order before the payment
date and the payment order is subsequently canceled pursuant to
section 336.4A-211(b), the bank may recover from the beneficiary
any payment received to the extent allowed by the law governing
mistake and restitution.
Sec. 18. [336.4A-210] [REJECTION OF PAYMENT ORDER.]
(a) A payment order is rejected by the receiving bank by a
notice of rejection transmitted to the sender orally,
electronically, or in writing. A notice of rejection need not
use any particular words and is sufficient if it indicates that
the receiving bank is rejecting the order or will not execute or
pay the order. Rejection is effective when the notice is given
if transmission is by a means that is reasonable in the
circumstances. If notice of rejection is given by a means that
is not reasonable, rejection is effective when the notice is
received. If an agreement of the sender and receiving bank
establishes the means to be used to reject a payment order, (i)
any means complying with the agreement is reasonable and (ii)
any means not complying is not reasonable unless no significant
delay in receipt of the notice resulted from the use of the
noncomplying means.
(b) This subsection applies if a receiving bank other than
the beneficiary's bank fails to execute a payment order despite
the existence on the execution date of a withdrawable credit
balance in an authorized account of the sender sufficient to
cover the order. If the sender does not receive notice of
rejection of the order on the execution date and the authorized
account of the sender does not bear interest, the bank is
obliged to pay interest to the sender on the amount of the order
for the number of days elapsing after the execution date to the
earlier of the day the order is canceled pursuant to section
336.4A-211(d) or the day the sender receives notice or learns
that the order was not executed, counting the final day of the
period as an elapsed day. If the withdrawable credit balance
during that period falls below the amount of the order, the
amount of interest is reduced accordingly.
(c) If a receiving bank suspends payments, all unaccepted
payment orders issued to it are deemed rejected at the time the
bank suspends payments.
(d) Acceptance of a payment order precludes a later
rejection of the order. Rejection of a payment order precludes
a later acceptance of the order.
Sec. 19. [336.4A-211] [CANCELLATION AND AMENDMENT OF
PAYMENT ORDER.]
(a) A communication of the sender of a payment order
canceling or amending the order may be transmitted to the
receiving bank orally, electronically, or in writing. If a
security procedure is in effect between the sender and the
receiving bank, the communication is not effective to cancel or
amend the order unless the communication is verified pursuant to
the security procedure or the bank agrees to the cancellation or
amendment.
(b) Subject to subsection (a), a communication by the
sender canceling or amending a payment order is effective to
cancel or amend the order if notice of the communication is
received at a time and in a manner affording the receiving bank
a reasonable opportunity to act on the communication before the
bank accepts the payment order.
(c) After a payment order has been accepted, cancellation
or amendment of the order is not effective unless the receiving
bank agrees or a funds-transfer system rule allows cancellation
or amendment without agreement of the bank.
(1) With respect to a payment order accepted by a receiving
bank other than the beneficiary's bank, cancellation or
amendment is not effective unless a conforming cancellation or
amendment of the payment order issued by the receiving bank is
also made.
(2) With respect to a payment order accepted by the
beneficiary's bank, cancellation or amendment is not effective
unless the order was issued in execution of an unauthorized
payment order, or because of a mistake by a sender in the funds
transfer which resulted in the issuance of a payment order (i)
that is a duplicate of a payment order previously issued by the
sender, (ii) that orders payment to a beneficiary not entitled
to receive payment from the originator, or (iii) that orders
payment in an amount greater than the amount the beneficiary was
entitled to receive from the originator. If the payment order
is canceled or amended, the beneficiary's bank is entitled to
recover from the beneficiary any amount paid to the beneficiary
to the extent allowed by the law governing mistake and
restitution.
(d) An unaccepted payment order is canceled by operation of
law at the close of the fifth funds-transfer business day of the
receiving bank after the execution date or payment date of the
order.
(e) A canceled payment order cannot be accepted. If an
accepted payment order is canceled, the acceptance is nullified
and no person has any right or obligation based on the
acceptance. Amendment of a payment order is deemed to be
cancellation of the original order at the time of amendment and
issue of a new payment order in the amended form at the same
time.
(f) Unless otherwise provided in an agreement of the
parties or in a funds-transfer system rule, if the receiving
bank, after accepting a payment order, agrees to cancellation or
amendment of the order by the sender or is bound by a
funds-transfer system rule allowing cancellation or amendment
without the bank's agreement, the sender, whether or not
cancellation or amendment is effective, is liable to the bank
for any loss and expenses, including reasonable attorney's fees,
incurred by the bank as a result of the cancellation or
amendment or attempted cancellation or amendment.
(g) A payment order is not revoked by the death or legal
incapacity of the sender unless the receiving bank knows of the
death or of an adjudication of incapacity by a court of
competent jurisdiction and has reasonable opportunity to act
before acceptance of the order.
(h) A funds-transfer system rule is not effective to the
extent it conflicts with subsection (c)(2).
Sec. 20. [336.4A-212] [LIABILITY AND DUTY OF RECEIVING
BANK REGARDING UNACCEPTED PAYMENT ORDER.]
If a receiving bank fails to accept a payment order that it
is obliged by express agreement to accept, the bank is liable
for breach of the agreement to the extent provided in the
agreement or in this article, but does not otherwise have any
duty to accept a payment order or, before acceptance, to take
any action, or refrain from taking action, with respect to the
order except as provided in this article or by express
agreement. Liability based on acceptance arises only when
acceptance occurs as stated in section 336.4A-209, and liability
is limited to that provided in this article. A receiving bank
is not the agent of the sender or beneficiary of the payment
order it accepts, or of any other party to the funds transfer,
and the bank owes no duty to any party to the funds transfer
except as provided in this article or by express agreement.
PART 3
EXECUTION OF SENDER'S PAYMENT ORDER BY RECEIVING BANK
Sec. 21. [336.4A-301] [EXECUTION AND EXECUTION DATE.]
(a) A payment order is "executed" by the receiving bank
when it issues a payment order intended to carry out the payment
order received by the bank. A payment order received by the
beneficiary's bank can be accepted but cannot be executed.
(b) "Execution date" of a payment order means the day on
which the receiving bank may properly issue a payment order in
execution of the sender's order. The execution date may be
determined by instruction of the sender but cannot be earlier
than the day the order is received and, unless otherwise
determined, is the day the order is received. If the sender's
instruction states a payment date, the execution date is the
payment date or an earlier date on which execution is reasonably
necessary to allow payment to the beneficiary on the payment
date.
Sec. 22. [336.4A-302] [OBLIGATIONS OF RECEIVING BANK IN
EXECUTION OF PAYMENT ORDER.]
(a) Except as provided in subsections (b) through (d), if
the receiving bank accepts a payment order pursuant to section
336.4A-209(a), the bank has the following obligations in
executing the order:
(1) The receiving bank is obliged to issue, on the
execution date, a payment order complying with the sender's
order and to follow the sender's instructions concerning (i) any
intermediary bank or funds-transfer system to be used in
carrying out the funds transfer, or (ii) the means by which
payment orders are to be transmitted in the funds transfer. If
the originator's bank issues a payment order to an intermediary
bank, the originator's bank is obliged to instruct the
intermediary bank according to the instruction of the
originator. An intermediary bank in the funds transfer is
similarly bound by an instruction given to it by the sender of
the payment order it accepts.
(2) If the sender's instruction states that the funds
transfer is to be carried out telephonically or by wire transfer
or otherwise indicates that the funds transfer is to be carried
out by the most expeditious means, the receiving bank is obliged
to transmit its payment order by the most expeditious available
means, and to instruct any intermediary bank accordingly. If a
sender's instruction states a payment date, the receiving bank
is obliged to transmit its payment order at a time and by means
reasonably necessary to allow payment to the beneficiary on the
payment date or as soon thereafter as is feasible.
(b) Unless otherwise instructed, a receiving bank executing
a payment order may (i) use any funds-transfer system if use of
that system is reasonable in the circumstances, and (ii) issue a
payment order to the beneficiary's bank or to an intermediary
bank through which a payment order conforming to the sender's
order can expeditiously be issued to the beneficiary's bank if
the receiving bank exercises ordinary care in the selection of
the intermediary bank. A receiving bank is not required to
follow an instruction of the sender designating a funds-transfer
system to be used in carrying out the funds transfer if the
receiving bank, in good faith, determines that it is not
feasible to follow the instruction or that following the
instruction would unduly delay completion of the funds transfer.
(c) Unless subsection (a)(2) applies or the receiving bank
is otherwise instructed, the bank may execute a payment order by
transmitting its payment order by first class mail or by any
means reasonable in the circumstances. If the receiving bank is
instructed to execute the sender's order by transmitting its
payment order by a particular means, the receiving bank may
issue its payment order by the means stated or by any means as
expeditious as the means stated.
(d) Unless instructed by the sender, (i) the receiving bank
may not obtain payment of its charges for services and expenses
in connection with the execution of the sender's order by
issuing a payment order in an amount equal to the amount of the
sender's order less the amount of the charges, and (ii) may not
instruct a subsequent receiving bank to obtain payment of its
charges in the same manner.
Sec. 23. [336.4A-303] [ERRONEOUS EXECUTION OF PAYMENT
ORDER.]
(a) A receiving bank that (i) executes the payment order of
the sender by issuing a payment order in an amount greater than
the amount of the sender's order, or (ii) issues a payment order
in execution of the sender's order and then issues a duplicate
order, is entitled to payment of the amount of the sender's
order under section 336.4A-402(c) if that subsection is
otherwise satisfied. The bank is entitled to recover from the
beneficiary of the erroneous order the excess payment received
to the extent allowed by the law governing mistake and
restitution.
(b) A receiving bank that executes the payment order of the
sender by issuing a payment order in an amount less than the
amount of the sender's order is entitled to payment of the
amount of the sender's order under section 336.4A-402(c) if (i)
that subsection is otherwise satisfied and (ii) the bank
corrects its mistake by issuing an additional payment order for
the benefit of the beneficiary of the sender's order. If the
error is not corrected, the issuer of the erroneous order is
entitled to receive or retain payment from the sender of the
order it accepted only to the extent of the amount of the
erroneous order. This subsection does not apply if the
receiving bank executes the sender's payment order by issuing a
payment order in an amount less than the amount of the sender's
order for the purpose of obtaining payment of its charges for
services and expenses pursuant to instruction of the sender.
(c) If a receiving bank executes the payment order of the
sender by issuing a payment order to a beneficiary different
from the beneficiary of the sender's order and the funds
transfer is completed on the basis of that error, the sender of
the payment order that was erroneously executed and all previous
senders in the funds transfer are not obliged to pay the payment
orders they issued. The issuer of the erroneous order is
entitled to recover from the beneficiary of the order the
payment received to the extent allowed by the law governing
mistake and restitution.
Sec. 24. [336.4A-304] [DUTY OF SENDER TO REPORT
ERRONEOUSLY EXECUTED PAYMENT ORDER.]
If the sender of a payment order that is erroneously
executed as stated in section 336.4A-303 receives notification
from the receiving bank that the order was executed or that the
sender's account was debited with respect to the order, the
sender has a duty to exercise ordinary care to determine, on the
basis of information available to the sender, that the order was
erroneously executed and to notify the bank of the relevant
facts within a reasonable time not exceeding 90 days after the
notification from the bank was received by the sender. If the
sender fails to perform that duty, the bank is not obliged to
pay interest on any amount refundable to the sender under
section 336.4A-402(d) for the period before the bank learns of
the execution error. The bank is not entitled to any recovery
from the sender on account of a failure by the sender to perform
the duty stated in this section.
Sec. 25. [336.4A-305] [LIABILITY FOR LATE OR IMPROPER
EXECUTION OR FAILURE TO EXECUTE PAYMENT ORDER.]
(a) If a funds transfer is completed but execution of a
payment order by the receiving bank in breach of section
336.4A-302 results in delay in payment to the beneficiary, the
bank is obliged to pay interest to either the originator or the
beneficiary of the funds transfer for the period of delay caused
by the improper execution. Except as provided in subsection
(c), additional damages are not recoverable.
(b) If execution of a payment order by a receiving bank in
breach of section 336.4A-302 results in (i) noncompletion of the
funds transfer, (ii) failure to use an intermediary bank
designated by the originator, or (iii) issuance of a payment
order that does not comply with the terms of the payment order
of the originator, the bank is liable to the originator for its
expenses in the funds transfer and for incidental expenses and
interest losses, to the extent not covered by subsection (a),
resulting from the improper execution. Except as provided in
subsection (c), additional damages are not recoverable.
(c) In addition to the amounts payable under subsections
(a) and (b), damages, including consequential damages, are
recoverable to the extent provided in an express written
agreement of the receiving bank.
(d) If a receiving bank fails to execute a payment order it
was obliged by express agreement to execute, the receiving bank
is liable to the sender for its expenses in the transaction and
for incidental expenses and interest losses resulting from the
failure to execute. Additional damages, including consequential
damages, are recoverable to the extent provided in an express
written agreement of the receiving bank, but are not otherwise
recoverable.
(e) Reasonable attorney's fees are recoverable if demand
for compensation under subsection (a) or (b) is made and refused
before an action is brought on the claim. If a claim is made
for breach of an agreement under subsection (d) and the
agreement does not provide for damages, reasonable attorney's
fees are recoverable if demand for compensation under subsection
(d) is made and refused before an action is brought on the claim.
(f) Except as stated in this section, the liability of a
receiving bank under subsections (a) and (b) may not be varied
by agreement.
PART 4
PAYMENT
Sec. 26. [336.4A-401] [PAYMENT DATE.]
"Payment date" of a payment order means the day on which
the amount of the order is payable to the beneficiary by the
beneficiary's bank. The payment date may be determined by
instruction of the sender but cannot be earlier than the day the
order is received by the beneficiary's bank and, unless
otherwise determined, is the day the order is received by the
beneficiary's bank.
Sec. 27. [336.4A-402] [OBLIGATION OF SENDER TO PAY
RECEIVING BANK.]
(a) This section is subject to sections 336.4A-205 and
336.4A-207.
(b) With respect to a payment order issued to the
beneficiary's bank, acceptance of the order by the bank obliges
the sender to pay the bank the amount of the order, but payment
is not due until the payment date of the order.
(c) This subsection is subject to subsection (e) and to
section 336.4A-303. With respect to a payment order issued to a
receiving bank other than the beneficiary's bank, acceptance of
the order by the receiving bank obliges the sender to pay the
bank the amount of the sender's order. Payment by the sender is
not due until the execution date of the sender's order. The
obligation of that sender to pay its payment order is excused if
the funds transfer is not completed by acceptance by the
beneficiary's bank of a payment order instructing payment to the
beneficiary of that sender's payment order.
(d) If the sender of a payment order pays the order and was
not obliged to pay all or part of the amount paid, the bank
receiving payment is obliged to refund payment to the extent the
sender was not obliged to pay. Except as provided in sections
336.4A-204 and 336.4A-304, interest is payable on the refundable
amount from the date of payment.
(e) If a funds transfer is not completed as stated in
subsection (c) and an intermediary bank is obliged to refund
payment as stated in subsection (d) but is unable to do so
because not permitted by applicable law or because the bank
suspends payments, a sender in the funds transfer that executed
a payment order in compliance with an instruction, as stated in
section 336.4A-302(a)(1), to route the funds transfer through
that intermediary bank is entitled to receive or retain payment
from the sender of the payment order that it accepted. The
first sender in the funds transfer that issued an instruction
requiring routing through that intermediary bank is subrogated
to the right of the bank that paid the intermediary bank to
refund as stated in subsection (d).
(f) The right of the sender of a payment order to be
excused from the obligation to pay the order as stated in
subsection (c) or to receive refund under subsection (d) may not
be varied by agreement.
Sec. 28. [336.4A-403] [PAYMENT BY SENDER TO RECEIVING
BANK.]
(a) Payment of the sender's obligation under section
336.4A-402 to pay the receiving bank occurs as follows:
(1) If the sender is a bank, payment occurs when the
receiving bank receives final settlement of the obligation
through a Federal Reserve Bank or through a funds-transfer
system.
(2) If the sender is a bank and the sender (i) credited an
account of the receiving bank with the sender, or (ii) caused an
account of the receiving bank in another bank to be credited,
payment occurs when the credit is withdrawn or, if not
withdrawn, at midnight of the day on which the credit is
withdrawable and the receiving bank learns of that fact.
(3) If the receiving bank debits an account of the sender
with the receiving bank, payment occurs when the debit is made
to the extent the debit is covered by a withdrawable credit
balance in the account.
(b) If the sender and receiving bank are members of a
funds-transfer system that nets obligations multilaterally among
participants, the receiving bank receives final settlement when
settlement is complete in accordance with the rules of the
system. The obligation of the sender to pay the amount of a
payment order transmitted through the funds-transfer system may
be satisfied, to the extent permitted by the rules of the
system, by setting off and applying against the sender's
obligation the right of the sender to receive payment from the
receiving bank of the amount of any other payment order
transmitted to the sender by the receiving bank through the
funds-transfer system. The aggregate balance of obligations
owed by each sender to each receiving bank in the funds-transfer
system may be satisfied, to the extent permitted by the rules of
the system, by setting off and applying against that balance the
aggregate balance of obligations owed to the sender by other
members of the system. The aggregate balance is determined
after the right of setoff stated in the second sentence of this
subsection has been exercised.
(c) If two banks transmit payment orders to each other
under an agreement that settlement of the obligations of each
bank to the other under section 336.4A-402 will be made at the
end of the day or other period, the total amount owed with
respect to all orders transmitted by one bank shall be set off
against the total amount owed with respect to all orders
transmitted by the other bank. To the extent of the setoff,
each bank has made payment to the other.
(d) In a case not covered by subsection (a), the time when
payment of the sender's obligation under section 336.4A-402(b)
or 336.4A-402(c) occurs is governed by applicable principles of
law that determine when an obligation is satisfied.
Sec. 29. [336.4A-404] [OBLIGATION OF BENEFICIARY'S BANK TO
PAY AND GIVE NOTICE TO BENEFICIARY.]
(a) Subject to sections 336.4A-211(e), 336.4A-405(d), and
336.4A-405(e), if a beneficiary's bank accepts a payment order,
the bank is obliged to pay the amount of the order to the
beneficiary of the order. Payment is due on the payment date of
the order, but if acceptance occurs on the payment date after
the close of the funds-transfer business day of the bank,
payment is due on the next funds-transfer business day. If the
bank refuses to pay after demand by the beneficiary and receipt
of notice of particular circumstances that will give rise to
consequential damages as a result of nonpayment, the beneficiary
may recover damages resulting from the refusal to pay to the
extent the bank had notice of the damages, unless the bank
proves that it did not pay because of a reasonable doubt
concerning the right of the beneficiary to payment.
(b) If a payment order accepted by the beneficiary's bank
instructs payment to an account of the beneficiary, the bank is
obliged to notify the beneficiary of receipt of the order before
midnight of the next funds-transfer business day following the
payment date. If the payment order does not instruct payment to
an account of the beneficiary, the bank is required to notify
the beneficiary only if notice is required by the order. Notice
may be given by first class mail or any other means reasonable
in the circumstances. If the bank fails to give the required
notice, the bank is obliged to pay interest to the beneficiary
on the amount of the payment order from the day notice should
have been given until the day the beneficiary learned of receipt
of the payment order by the bank. No other damages are
recoverable. Reasonable attorney's fees are also recoverable if
demand for interest is made and refused before an action is
brought on the claim.
(c) The right of a beneficiary to receive payment and
damages as stated in subsection (a) may not be varied by
agreement or a funds-transfer system rule. The right of a
beneficiary to be notified as stated in subsection (b) may be
varied by agreement of the beneficiary or by a funds-transfer
system rule if the beneficiary is notified of the rule before
initiation of the funds transfer.
Sec. 30. [336.4A-405] [PAYMENT BY BENEFICIARY'S BANK TO
BENEFICIARY.]
(a) If the beneficiary's bank credits an account of the
beneficiary of a payment order, payment of the bank's obligation
under section 336.4A-404(a) occurs when and to the extent (i)
the beneficiary is notified of the right to withdraw the credit,
(ii) the bank lawfully applies the credit to a debt of the
beneficiary, or (iii) funds with respect to the order are
otherwise made available to the beneficiary by the bank.
(b) If the beneficiary's bank does not credit an account of
the beneficiary of a payment order, the time when payment of the
bank's obligation under section 336.4A-404(a) occurs is governed
by principles of law that determine when an obligation is
satisfied.
(c) Except as stated in subsections (d) and (e), if the
beneficiary's bank pays the beneficiary of a payment order under
a condition to payment or agreement of the beneficiary giving
the bank the right to recover payment from the beneficiary if
the bank does not receive payment of the order, the condition to
payment or agreement is not enforceable.
(d) A funds-transfer system rule may provide that payments
made to beneficiaries of funds transfers made through the system
are provisional until receipt of payment by the beneficiary's
bank of the payment order it accepted. A beneficiary's bank
that makes a payment that is provisional under the rule is
entitled to refund from the beneficiary if (i) the rule requires
that both the beneficiary and the originator be given notice of
the provisional nature of the payment before the funds transfer
is initiated, (ii) the beneficiary, the beneficiary's bank and
the originator's bank agreed to be bound by the rule, and (iii)
the beneficiary's bank did not receive payment of the payment
order that it accepted. If the beneficiary is obliged to refund
payment to the beneficiary's bank, acceptance of the payment
order by the beneficiary's bank is nullified and no payment by
the originator of the funds transfer to the beneficiary occurs
under section 336.4A-406.
(e) This subsection applies to a funds transfer that
includes a payment order transmitted over a funds-transfer
system that (i) nets obligations multilaterally among
participants, and (ii) has in effect a loss-sharing agreement
among participants for the purpose of providing funds necessary
to complete settlement of the obligations of one or more
participants that do not meet their settlement obligations. If
the beneficiary's bank in the funds transfer accepts a payment
order and the system fails to complete settlement pursuant to
its rules with respect to any payment order in the funds
transfer, (i) the acceptance by the beneficiary's bank is
nullified and no person has any right or obligation based on the
acceptance, (ii) the beneficiary's bank is entitled to recover
payment from the beneficiary, (iii) no payment by the originator
to the beneficiary occurs under section 336.4A-406, and (iv)
subject to section 336.4A-402(e), each sender in the funds
transfer is excused from its obligation to pay its payment order
under section 336.4A-402(c) because the funds transfer has not
been completed.
Sec. 31. [336.4A-406] [PAYMENT BY ORIGINATOR TO
BENEFICIARY; DISCHARGE OF UNDERLYING OBLIGATION.]
(a) Subject to sections 336.4A-211(e), 336.4A-405(d), and
336.4A-405(e), the originator of a funds transfer pays the
beneficiary of the originator's payment order (i) at the time a
payment order for the benefit of the beneficiary is accepted by
the beneficiary's bank in the funds transfer and (ii) in an
amount equal to the amount of the order accepted by the
beneficiary's bank, but not more than the amount of the
originator's order.
(b) If payment under subsection (a) is made to satisfy an
obligation, the obligation is discharged to the same extent
discharge would result from payment to the beneficiary of the
same amount in money, unless (i) the payment under subsection
(a) was made by a means prohibited by the contract of the
beneficiary with respect to the obligation, (ii) the
beneficiary, within a reasonable time after receiving notice of
receipt of the order by the beneficiary's bank, notified the
originator of the beneficiary's refusal of payment, (iii) funds
with respect to the order were not withdrawn by the beneficiary
or applied to a debt of the beneficiary, and (iv) the
beneficiary would suffer a loss that could reasonably have been
avoided if payment had been made by a means complying with the
contract. If payment by the originator does not result in
discharge under this section, the originator is subrogated to
the rights of the beneficiary to receive payment from the
beneficiary's bank under section 336.4A-404(a).
(c) For the purpose of determining whether discharge of an
obligation occurs under subsection (b), if the beneficiary's
bank accepts a payment order in an amount equal to the amount of
the originator's payment order less charges of one or more
receiving banks in the funds transfer, payment to the
beneficiary is deemed to be in the amount of the originator's
order unless upon demand by the beneficiary the originator does
not pay the beneficiary the amount of the deducted charges.
(d) Rights of the originator or of the beneficiary of a
funds transfer under this section may be varied only by
agreement of the originator and the beneficiary.
PART 5
MISCELLANEOUS PROVISIONS
Sec. 32. [336.4A-501] [VARIATION BY AGREEMENT AND EFFECT
OF FUNDS-TRANSFER SYSTEM RULE.]
(a) Except as otherwise provided in this article, the
rights and obligations of a party to a funds transfer may be
varied by agreement of the affected party.
(b) "Funds-transfer system rule" means a rule of an
association of banks (i) governing transmission of payment
orders by means of a funds-transfer system of the association or
rights and obligations with respect to those orders, or (ii) to
the extent the rule governs rights and obligations between banks
that are parties to a funds transfer in which a Federal Reserve
Bank, acting as an intermediary bank, sends a payment order to
the beneficiary's bank. Except as otherwise provided in this
article, a funds-transfer system rule governing rights and
obligations between participating banks using the system may be
effective even if the rule conflicts with this article and
indirectly affects another party to the funds transfer who does
not consent to the rule. A funds-transfer system rule may also
govern rights and obligations of parties other than
participating banks using the system to the extent stated in
sections 336.4A-404(c), 336.4A-405(d), and 336.4A-507(c).
Sec. 33. [336.4A-502] [CREDITOR PROCESS SERVED ON
RECEIVING BANK; SETOFF BY BENEFICIARY'S BANK.]
(a) As used in this section, "creditor process" means levy,
attachment, garnishment, notice of lien, sequestration, or
similar process issued by or on behalf of a creditor or other
claimant with respect to an account.
(b) This subsection applies to creditor process with
respect to an authorized account of the sender of a payment
order if the creditor process is served on the receiving bank.
For the purpose of determining rights with respect to the
creditor process, if the receiving bank accepts the payment
order the balance in the authorized account is deemed to be
reduced by the amount of the payment order to the extent the
bank did not otherwise receive payment of the order, unless the
creditor process is served at a time and in a manner affording
the bank a reasonable opportunity to act on it before the bank
accepts the payment order.
(c) If a beneficiary's bank has received a payment order
for payment to the beneficiary's account in the bank, the
following rules apply:
(1) The bank may credit the beneficiary's account. The
amount credited may be set off against an obligation owed by the
beneficiary to the bank or may be applied to satisfy creditor
process served on the bank with respect to the account.
(2) The bank may credit the beneficiary's account and allow
withdrawal of the amount credited unless creditor process with
respect to the account is served at a time and in a manner
affording the bank a reasonable opportunity to act to prevent
withdrawal.
(3) If creditor process with respect to the beneficiary's
account has been served and the bank has had a reasonable
opportunity to act on it, the bank may not reject the payment
order except for a reason unrelated to the service of process.
(d) Creditor process with respect to a payment by the
originator to the beneficiary pursuant to a funds transfer may
be served only on the beneficiary's bank with respect to the
debt owed by that bank to the beneficiary. Any other bank
served with the creditor process is not obliged to act with
respect to the process.
Sec. 34. [336.4A-503] [INJUNCTION OR RESTRAINING ORDER
WITH RESPECT TO FUNDS TRANSFER.]
For proper cause and in compliance with applicable law, a
court may restrain (i) a person from issuing a payment order to
initiate a funds transfer, (ii) an originator's bank from
executing the payment order of the originator, or (iii) the
beneficiary's bank from releasing funds to the beneficiary or
the beneficiary from withdrawing the funds. A court may not
otherwise restrain a person from issuing a payment order, paying
or receiving payment of a payment order, or otherwise acting
with respect to a funds transfer.
Sec. 35. [336.4A-504] [ORDER IN WHICH ITEMS AND PAYMENT
ORDERS MAY BE CHARGED TO ACCOUNT; ORDER OF WITHDRAWALS FROM
ACCOUNT.]
(a) If a receiving bank has received more than one payment
order of the sender or one or more payment orders and other
items that are payable from the sender's account, the bank may
charge the sender's account with respect to the various orders
and items in any sequence.
(b) In determining whether a credit to an account has been
withdrawn by the holder of the account or applied to a debt of
the holder of the account, credits first made to the account are
first withdrawn or applied.
Sec. 36. [336.4A-505] [PRECLUSION OF OBJECTION TO DEBIT OF
CUSTOMER'S ACCOUNT.]
If a receiving bank has received payment from its customer
with respect to a payment order issued in the name of the
customer as sender and accepted by the bank, and the customer
received notification reasonably identifying the order, the
customer is precluded from asserting that the bank is not
entitled to retain the payment unless the customer notifies the
bank of the customer's objection to the payment within one year
after the notification was received by the customer.
Sec. 37. [336.4A-506] [RATE OF INTEREST.]
(a) If, under this article, a receiving bank is obliged to
pay interest with respect to a payment order issued to the bank,
the amount payable may be determined (i) by agreement of the
sender and receiving bank, or (ii) by a funds-transfer system
rule if the payment order is transmitted through a
funds-transfer system.
(b) If the amount of interest is not determined by an
agreement or rule as stated in subsection (a), the amount is
calculated by multiplying the applicable Federal Funds rate by
the amount on which interest is payable, and then multiplying
the product by the number of days for which interest is
payable. The applicable Federal Funds rate is the average of
the Federal Funds rates published by the Federal Reserve Bank of
New York for each of the days for which interest is payable
divided by 360. The Federal Funds rate for any day on which a
published rate is not available is the same as the published
rate for the next preceding day for which there is a published
rate. If a receiving bank that accepted a payment order is
required to refund payment to the sender of the order because
the funds transfer was not completed, but the failure to
complete was not due to any fault by the bank, the interest
payable is reduced by a percentage equal to the reserve
requirement on deposits of the receiving bank.
Sec. 38. [336.4A-507] [CHOICE OF LAW.]
(a) The following rules apply unless the affected parties
otherwise agree or subsection (c) applies:
(1) The rights and obligations between the sender of a
payment order and the receiving bank are governed by the law of
the jurisdiction in which the receiving bank is located.
(2) The rights and obligations between the beneficiary's
bank and the beneficiary are governed by the law of the
jurisdiction in which the beneficiary's bank is located.
(3) The issue of when payment is made pursuant to a funds
transfer by the originator to the beneficiary is governed by the
law of the jurisdiction in which the beneficiary's bank is
located.
(b) If the parties described in each paragraph of
subsection (a) have made an agreement selecting the law of a
particular jurisdiction to govern rights and obligations between
each other, the law of that jurisdiction governs those rights
and obligations, whether or not the payment order or the funds
transfer bears a reasonable relation to that jurisdiction.
(c) A funds-transfer system rule may select the law of a
particular jurisdiction to govern (i) rights and obligations
between participating banks with respect to payment orders
transmitted or processed through the system, or (ii) the rights
and obligations of some or all parties to a funds transfer any
part of which is carried out by means of the system. A choice
of law made pursuant to clause (i) is binding on participating
banks. A choice of law made pursuant to clause (ii) is binding
on the originator, other sender, or a receiving bank having
notice that the funds-transfer system might be used in the funds
transfer and of the choice of law by the system when the
originator, other sender, or receiving bank issued or accepted a
payment order. The beneficiary of a funds transfer is bound by
the choice of law if, when the funds transfer is initiated, the
beneficiary has notice that the funds-transfer system might be
used in the funds transfer and of the choice of law by the
system. The law of a jurisdiction selected pursuant to this
subsection may govern, whether or not that law bears a
reasonable relation to the matter in issue.
(d) In the event of inconsistency between an agreement
under subsection (b) and a choice-of-law rule under subsection
(c), the agreement under subsection (b) prevails.
(e) If a funds transfer is made by use of more than one
funds-transfer system and there is inconsistency between
choice-of-law rules of the systems, the matter in issue is
governed by the law of the selected jurisdiction that has the
most significant relationship to the matter in issue.
ARTICLE 2
CONFORMING AMENDMENTS
Section 1. Minnesota Statutes 1989 Supplement, section
336.1-105, is amended to read:
336.1-105 [TERRITORIAL APPLICATION OF THE CHAPTER; PARTIES'
POWER TO CHOOSE APPLICABLE LAW.]
(1) Except as provided hereafter in this section, when a
transaction bears a reasonable relation to this state and also
to another state or nation the parties may agree that the law
either of this state or of such other state or nation shall
govern their rights and duties. Failing such agreement this
chapter applies to transactions bearing an appropriate relation
to this state.
(2) Where one of the following provisions of this chapter
specifies the applicable law, that provision governs and a
contrary agreement is effective only to the extent permitted by
the law (including the conflict of laws rules) so specified:
Rights of creditors against sold goods. Section 336.2-402.
Applicability of the article on leases. Sections
336.2A-105 and 336.2A-106.
Applicability of the article on bank deposits and
collections. Section 336.4-102.
Governing law in the article on funds transfers. Section
336.4A-507.
Bulk transfers subject to the article on bulk transfers.
Section 336.6-102.
Applicability of the article on investment securities.
Section 336.8-106.
Perfection provisions of the article on secured
transactions. Section 336.9-103.
Sec. 2. [EFFECTIVE DATE.]
This act is effective January 1, 1991.
Presented to the governor April 28, 1990
Signed by the governor May 4, 1990, 10:46 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes