47-4406

47-4406. Customer's duty to discover and
report unauthorized signature or alteration

A. A bank that sends or makes available to a customer a statement of account
showing payment of items for the account shall either return or make available to the
customer the items paid or provide information in the statement of account sufficient to
allow the customer reasonably to identify the items paid. The statement of account
provides sufficient information if the item is described by item number, amount and date
of payment.

B. If the items are not returned to the customer, the person retaining the items
shall either retain the items or, if the items are destroyed, maintain the capacity to
furnish legible copies of the items until the expiration of seven years after receipt of
the items. A customer may request an item from the bank that paid the item, and that
bank must provide in a reasonable time either the item or, if the item has been destroyed
or is not otherwise obtainable, a legible copy of the item.

C. If a bank sends or makes available a statement of account or items pursuant to
subsection A of this section, the customer must exercise reasonable promptness in
examining the statement or the items to determine whether any payment was not authorized
because of an alteration of an item or because a purported signature by or on behalf of
the customer was not authorized. If, based on the statement or items provided, the
customer should reasonably have discovered the unauthorized payment, the customer must
promptly notify the bank of the relevant facts.

D. If the bank proves that the customer failed, with respect to an item, to comply
with the duties imposed on the customer by subsection C of this section, the customer is
precluded from asserting against the bank:

1. The customer's unauthorized signature or any alteration on the item, if the bank
also proves that it suffered a loss by reason of the failure; and

2. The customer's unauthorized signature or alteration by the same wrongdoer on any
other item paid in good faith by the bank if the payment was made before the bank
received notice from the customer of the unauthorized signature or alteration and after
the customer had been afforded a reasonable period of time, not exceeding thirty days, in
which to examine the item or statement of account and notify the bank.

E. If subsection D of this section applies and the customer proves that the bank
failed to exercise ordinary care in paying the item and that the failure substantially
contributed to loss, the loss is allocated between the customer precluded and the bank
asserting the preclusion according to the extent to which the failure of the customer to
comply with subsection C of this section and the failure of the bank to exercise ordinary
care contributed to the loss. If the customer proves that the bank did not pay the item
in good faith, the preclusion under subsection D of this section does not apply.

F. Without regard to care or lack of care of either the customer or the bank, a
customer who does not within one year after the statement or items are made available to
the customer (subsection A of this section) discover and report the customer's
unauthorized signature on or any alteration on the item is precluded from asserting
against the bank the unauthorized signature or alteration. If there is a preclusion
under this subsection, the payor bank may not recover for breach of warranty under
section 47-4208 with respect to the unauthorized signature or alteration to which the
preclusion applies.