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This entry was published on 2018-08-31
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Refund of Payment and Duty of Customer to Report With Respect to Unauthorized Payment Order
Uniform Commercial Code (UCC) CHAPTER 38, ARTICLE 4-A, PART 2
Section 4-A-204. Refund of Payment and Duty of Customer to Report With

Respect to Unauthorized Payment Order.

(1) If a receiving bank accepts a payment order issued in the name of
its customer as sender which is (a) not authorized and not effective as
the order of the customer under Section 4-A-202, or (b) not enforceable,
in whole or in part, against the customer under Section 4-A-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 ninety 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.

(2) Reasonable time under subsection (1) may be fixed by agreement as
stated in subsection (b) of Section 1--302, but the obligation of a
receiving bank to refund payment as stated in subsection (b) may not
otherwise be varied by agreement.